Consolidated Income Statement for the Year Ended 31 December 2024

 

 

 

				As Restated
	Note	2024		2023
		Total		Total
		£'000		£'000
Revenue	2	22,497		21,493
Cost of sales		(3,939)		(3,846)
Gross profit		18,558		17,647
Administrative expenses		(15,736)		(15,231)
Operating profit		2,822		2,416
Finance income and costs		(3,229)		(3,173)
Loss before tax		(407)		(757)
Tax	4	(875)		(226)
Loss for the year from continuing operations		(1,282)		(983)
Net profit / (loss) from discontinued operations	3	391		(375)
Loss for the financial year attributable to owners of the parent company		(891)		(1,358)
Loss per share from continuing operations		(1.97p)		(1.51p)
Basic profit / (loss) per share from discontinued operations		0.60p		(0.58p)
Diluted loss per share from continuing operations		(1.87p)		(1.44p)
Diluted profit / (loss) per share from discontinued operations		0.57p		(0.55p)

 

 

Consolidated Statement of Comprehensive Income

Year ended 31 December 2024

 

				As Restated
		2024		2023
		£'000		£'000
Loss for the year		(891)		(1,358)
Exchange differences on translating foreign operations		(812)		6
Property revaluation		1,181		3,904
Deferred tax on property revaluation		(1,038)		(171)
Total comprehensive income/(loss) for the year attributable to owners of the parent company		(1,560)		2,381

 

The accompanying accounting policies and notes form an integral part of these financial statements.

 

 

Consolidated Statement of Financial Position

 

				As Restated
		31 December 2024		31 December 2023
Non-current assets	Note	£'000		£'000
Property, plant and equipment (including right of use asset)	5	76,507		73,709
Intangible assets	6	150		71
Goodwill	6	10,383		10,896
Lease assets		143		297
Deferred tax asset		4,392		5,488
Fair Value of Financial Assets		24		-
Total non-current assets		91,599		90,461
Current assets
Inventory		39		26
Trade and other receivables		981		1,054
Lease assets		140		142
Current tax asset		120		134
Cash and cash equivalents		1,430		1,998
Total current assets		2,710		3,354
Total assets		94,309		93,815
Current liabilities
Borrowings	8	(4,164)		(932)
Lease liabilities		(1,815)		(1,793)
Liabilities held for sale		-		(504)
Trade and other payables	7	(5,084)		(4,299)
Current liabilities		(11,063)		(7,528)
Non-current liabilities
Borrowings	8	(22,569)		(22,354)
Lease liabilities	9	(21,891)		(24,250)
Deferred tax liabilities		(8,022)		(7,359)
Total non-current liabilities		(52,482)		(53,963)
Total liabilities		(63,545)		(61,491)
Net assets		30,764		32,324
Equity
Share capital		649		649
Share premium account		23,959		23,959
Other components of equity		21,282		21,951
Retained earnings		(15,126)		(14,235)
Total equity attributable to owners of the parent company		30,764		32,324

 

The accompanying accounting policies and notes form an integral part of these financial statements.

               

Consolidated Statement of Changes in Equity

Year ended 31 December 2024

 

			Other
	Share	Share	Components	Retained	Total
	capital	premium	of Equity	earnings	equity
	£'000	£'000	£'000	£'000	£'000
Balance as at 1 January 2023	647	23,904	18,158	(12,477)	30,232
Prior Year Adjustment (note 25)	-	-	-	(400)	(400)
Balance as at 1 January 2023 (as restated)	647	23,904	18,158	(12,877)	29,832
Comprehensive income
Loss for the year as restated	-	-	-	(1,358)	(1,358)
Other comprehensive income
Movement in translation reserve	-	-	6	-	6
Property revaluation reserve	-	-	3,904	-	3,904
Deferred tax on property revaluation	-	-	(171)	-	(171)
Total comprehensive income			3,739	(1,358)	2,381
Transactions with owners
Issue of shares	2	55	-	-	57
Share based payment charge for the period	-	-	54	-	54
Balance at 31 December 2023 (as restated)	649	23,959	21,951	(14,235)	32,324
Comprehensive income
Loss for the year	-	-	-	(891)	(891)
Other comprehensive income					-
Movement in translation reserve	-	-	(812)	-	(812)
Property revaluation reserve	-	-	1,181	-	1,181
Deferred tax on property revaluation	-	-	(1,038)	-	(1,038)
Balance at 31 December 2024	649	23,959	21,282	(15,126)	30,764

 

 

Consolidated Statement of Cash Flows

Year ended 31 December 2024

				As Restated
		2024		2023
		£'000		£'000
Cash flow from operating activities
Loss for the year		(891)		(1,358)
Tax charge		191		226
Depreciation, amortisation		3,381		3,364
Net finance costs		3,421		3,413
Share based payment charge		-		54
Impairment charges		428		1,028
Profit on sale of fixed assets		(400)		-
(Increase)/decrease in inventories		(12)		(2)
Decrease in lease asset debtor		-		153
Decrease in trade and other receivables		229		253
Increase in trade and other payables		524		993
Cash generated from operations attributable to continuing operations		6,871		8,124
Income tax received/(paid)		(3)		(69)
Total net cash inflow from operating activities		6,868		8,055
Cash flow from investing activities
Purchases of property, plant and equipment		(6,097)		(4,977)
Purchases of intangible assets		(115)		(80)
Interest received		12		35
Total net cash outflow from investing activities		(6,200)		(5,022)
Cash flow from financing activities
Share issue		-		57
Principal elements of lease payments		(3,709)		(3,639)
Interest paid		(1,453)		(1,274)
Loan repayments		(16,029)		(1,000)
Loan received		19,695		-
Fair value movement in financial assets		(24)		-
Total net cash outflow from financing activities		(1,520)		(5,856)
Cash and cash equivalents at beginning of year		2,038		5,226
Net cash flows (used in)/generating from operating, investing and financing activities		(852)		(2,823)
Differences on exchange		244		(365)
Cash and cash equivalents at end of year (including discontinued operations)		1,430		2,038

 

 

Notes to the Consolidated Financial Statements

 

1.    GENERAL INFORMATION

 

Corporate Information

 

Safestay plc, the "Company" together with its subsidiaries, the "Group", is a public limited company, limited by share capital, whose shares are publicly traded on the Alternative Investment Market ("AIM") of the London Stock Exchange and is incorporated in the United Kingdom and registered in England and Wales. The principal activity for the Group is hostel operation. The registered number of the Group is 08866498 and its registered address is 1a Kingsley Way, London, N2 0FW.

 

Statement of Compliance

 

The consolidated financial statements have been prepared in accordance with International Accounting Standards as adopted by the UK ("IFRS") in conformity with the requirements of the Company Act 2006.

 

Basis of preparation

 

The consolidated financial statements have been presented in sterling, prepared under the historical cost convention, except for the revaluation of freehold properties and right of use assets.

The accounting policies have been applied consistently throughout all periods presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 December 2024.

 

Basis of Consolidation

 

The consolidated financial statements incorporate the financial statements of Safestay plc and its subsidiaries. The financial statements of subsidiaries are prepared for the same reporting period as the Parent Company with adjustments made to their financial statements to bring their accounting policies in line with those used by the Group.

 

The financial results of subsidiaries are included in the consolidated financial information from the date that control commences, being where the Group controls more than 50% of a subsidiary's share capital, until the date that control ceases. The consolidated financial information presents the results of the companies within the same group. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial information. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

Judgements made by the Directors in the application of these accounting policies that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next period are discussed below.

 

New standards, amendments and interpretations adopted

 

The following standards are applicable for financial years beginning on/after 1 January 2024:

·    IFRS10 - Sale or contribution of assets between an investor and its associate or joint venture

·    IFRS16 - Lease liability in a sale and leaseback

·    IAS 1 - Classification of liabilities as current or non-current

·    IAS 1 - Non-current liabilities with covenants

·    IAS 12 - International tax reform - pillar two model rules

·    IFRS18 - Presentation and Disclosure in Financial Statements

 

When applied, none of these amendments have a material impact on the Group.

 

New standards, amendments and interpretations issued but not yet effective

 

The following standards are applicable for financial years beginning on/after 1 January 2025:

·    IAS 21 - Lack of Exchangeability

 

The following standards are applicable for financial years beginning on/after 1 January 2026:

·    IFRS 9 and IFRS 7 - Classification and Measurement of Financial Instruments

 

When applied, none of these amendments are expected to have a material impact on the Group.

 

Going concern

 

In assessing the going concern position of the Group for the consolidated financial statements for the year ended 31 December 2024, the Directors have considered the Group's cash flow, liquidity, and business activities.

 

During 2024, the Group recorded an adjusted EBITDA of £6.5m (2023: £6.8m).

 

During 2024, the Group refinanced all its existing borrowings in January 2024 into a single £16.0m Term Loan and added a new £2.5m Revolving Credit Facility ("RCF") to support future growth plans. The new Term Loan and RCF are for five years and were provided by existing lender HSBC. In June 2024, the Group took out a £1.2m loan in relation to Brighton, due to be fully repaid in December 2025. Post year end this was extended from December 2025 to December 2026. Also in April 2025, a new £0.5m RCF was made available for expansion.

 

In June 2025, the Group signed a settlement agreement in relation to a business interruption insurance claim covering the COVID-19 period. The net settlement amount, after deduction of loss assessor fees, totals £1.4m.

 

As part of their going concern assessment, the Directors have prepared forecasts for a minimum period of twelve months from the date of approval of the financial statements. In addition, certain adverse scenarios have been considered for the purposes of stress and sensitivity testing. Refer to Section A of this note for further information on the assumptions and judgements applied.

 

Upon consideration of this analysis and the principal risks faced by the Group, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report based on the forecast prepared. Accordingly, the Directors have concluded that it is appropriate to prepare these financial statements on a going concern basis.

 

In addition, certain adverse scenarios have been considered for the purposes of stress and sensitivity testing.

 

A downside case was considered whereby EBITDA was reduced by 5% for the forecasted period to June 2026. In this scenario, the Group has sufficient liquidity to remain in compliance with its covenant obligations.

 

A severe downside case whereby EBITDA was reduced by 20%. In this scenario, there would not be any expected breaches of the covenant obligations and doesn't factor in any mitigating actions such as reducing labour spend and controllable costs. This severe case was modelled to provide comfort over the Group's headroom on its covenants and is not considered to be a realistic scenario.

 

Upon consideration of this analysis and the principal risks faced by the Group, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, the Directors have concluded that it is appropriate to prepare these financial statements on a going concern basis.

 

(A)  Accounting Policies

 

Revenue

To determine whether to recognise revenue, the Group follows a 5-step process in accordance with IFRS 15

-      Identifying the contract with a customer

-      Identifying the performance obligations

-      Determining the transaction price

-      Allocating the transaction price to the performance obligations

-      Recognising revenue when/as performance obligation(s) are satisfied.

 

Revenue is stated net of VAT and is gross of travel agency commission with the Group being the principal in all third-party booking arrangements. It comprises revenues from overnight hostel accommodation, the sale of ancillary goods and services such as food & beverage and merchandise.

Accommodation and the sale of ancillary goods and services are recognised when provided.

 

In accordance with IFRS 16, the Group accounts for its subleases as operating leases as they do not transfer substantially all the risks and rewards of ownership to the lessee.

 

The Group recognises income from lease payments from operating leases as income on a straight-line basis over the term of the contract.

 

The sale of ancillary goods comprises sales of food, beverages, and merchandise.

 

Deferred income comprises deposits received from customers to guarantee future bookings of accommodation. This is recognised as revenue once the bed has been occupied.

 

There are no significant judgements or estimations made in calculating and recognising revenue.

Revenue is not materially accrued or deferred between one accounting period and the next.

 

Operating segments

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision makers ("CODM"), who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the executive directors. Currently the operating segments are the operation of hostel accommodation in the UK and Europe. An additional geographical area has been identified in respect of Spain as disclosed in note 2.

 

Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated based on tax rates that have been enacted or substantively enacted by the statement of financial position date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

The carrying amount of deferred tax assets are reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled, or the asset is realised based on tax losses enacted or substantively enacted at the statement of financial position date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

 

Foreign currency translation

 

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency').  The consolidated financial statements are presented in Sterling which is the Group's functional currency.

 

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are generally recognised in the income statement.

 

Foreign exchange gains and losses that relate to borrowings are presented in the statement of income statement and within finance costs. All other exchange gains and losses are presented in the statement of profit or loss within administrative expenses.

 

Non-monetary items that are measured at fair-value in a foreign currency are translated using the exchange rates at the date when fair-value was determined. Translation differences on assets or liabilities carried at fair-value are reported as part of the fair-value gain or loss.

 

The results and financial position of foreign operations that have a functional currency different to the presentation currency are translated into the presentation currency as follows:

 

·    assets and liabilities for each statement of financial position are translated using the closing rate at the date of that statement of financial position.

·    income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates.

·    All resulting exchange differences are recognised in other comprehensive income.

 

Goodwill and fair-value adjustments arising on the acquisition of a foreign operation are treated as the assets and liabilities of the foreign operation and translated at the closing rate.

 

Business combinations

 

Acquisitions of subsidiaries and businesses are accounted using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree.  Acquisition costs are expensed as incurred.

 

At the acquisition date, the identifiable assets acquired, and liabilities assumed are recognised at their fair value at the acquisition date.

 

Prior Year Adjustments

 

Prior year adjustments are recognised where changes in accounting policy or misstatements identified in respect of previously reported amounts have a material impact on the prior year comparatives.

 

Assets and liabilities held for sale & discontinued operations

 

Disposal groups are classified as held for sale if their carrying amount will be recovered principally through sale. Assets held in Assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets included in Assets held for sale are not depreciated or amortised. Assets and liabilities classified as held for sale are presented in current assets and current liabilities separately from the other assets and liabilities in the balance sheet.

 

A discontinued operation is a component of the Group that has been disposed of, distributed or is classified as held for sale or distribution and that represents a separate major line of business. The results of discontinued operations are presented separately in the consolidated income statement, the consolidated statement of other comprehensive income and the consolidated statement of cash flows and comparatives are restated on a consistent basis.

 

Deferred Consideration

 

Deferred payments made in relation to acquisitions of subsidiaries and business are accounted for their discounted value in trade and other payable. Any difference between the discounted value and the cash consideration at the time of the payment, is recognised as an interest charge in the income statement.

 

Property, plant and equipment

 

Freehold property and Lease assets are stated at fair value and revalued periodically in accordance with IAS 16 Property Plant and Equipment. Valuation surpluses and deficits arising in the period are included in the statement of Comprehensive Income. All other property, plant and equipment are recognised at historical cost less depreciation and are depreciated over their useful lives. The applicable useful lives are as follows:

 

Fixtures, fittings and equipment	3-5 years
Freehold properties	50 years
Leasehold properties	Term of the lease

 

Land is not depreciated.

 

Leasehold land and buildings relate to property from financing transactions related to Safestay Elephant and Castle. The sale of the property in 2017 was agreed with an institutional buyer in exchange for 150 year geared ground rent leases. The significant risks and rewards of ownership were retained, and the exercise to repurchase these properties is "almost certain". The contract took the legal form of the sale and leasebacks. However, the economic substance of the original transactions in 2017 meant that the lease has historically been treated as owned by Safestay. Therefore, the transactions are classified as leasehold land and buildings.

 

Impairment of property, plant and equipment

 

At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.

 

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease, but a negative revaluation reserve is not created.

 

For revalued assets, where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. Any remaining balance of the reversal of an impairment loss is recognised in the income statement. For assets carried at cost, any reversals of impairments are recognised in the income statement.

 

Goodwill

 

Goodwill represents the future economic benefits arising from a business combination, measured as the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is carried at cost less accumulated impairment losses. A review of the carrying value of goodwill is carried out annually.

 

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units ("CGUs"), or groups of CGUs, that is expected to benefit from the synergies of the combination. The Directors consider each individual hostel to be a separate cash generating unit for impairment purposes and, as explained in note 12 to the financial statements, each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

 

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

 

Intangible assets

 

Costs that are directly attributable to a project's development phase, including capitalised internally developed software, are recognised as intangible assets using the cost model, provided they meet all of the following recognised:

 

• the development costs can be measured reliably

• the project is technically and commercially feasible

• the Group intends to and has sufficient resources to complete the project

• the Group has the ability to use or sell the software, and

• the software will generate probable future economic benefits.

 

Intangible assets acquired in a business combination are recognised at fair value at the acquisition date, which is deemed to be the cost going forward.

 

The leasehold rights and tenancy subleases relate to intangible assets acquired in a business combination as outlined in note 12 of the Annual Report.

 

Assets with a finite useful life are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives as set out above.

 

The following useful lives are applied:

-      10 years for the life of the interest in the head lease

-      13 years for tenancy sublease

-      3 years for website development.

 

Residual values and useful lives are reviewed at each reporting date.

 

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

 

Inventory

 

Inventory is stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price.

 

Financial assets measured at amortised cost

 

Financial assets held at amortised costs are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. These are classified as non-current assets.

 

Financial assets measured at fair value

 

Derivative financial assets are measured at fair value plus transaction costs at the date of initial recognition. Any subsequent movements in fair value are recorded in the income statement. The Group has decided not to apply hedge accounting in relation to these derivative financial assets.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts that are repayable on demand and which form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

 

Trade and other receivables

 

Trade and other receivables are measured at initial recognition at transaction price plus transaction costs and are subsequently measured at amortised cost using the effective interest rate method. The Group recognises lifetime ECL for trade receivables and amounts due on contracts with customers. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors. Management have considered the ECL for trade receivables as immaterial given the majority of sale receipts are obtained prior to the stay.

 

Credit risk

 

The Group assesses impairment on a forward-looking basis using the expected credit loss method and has applied the simplified approach which uses the lifetime expected loss provision for all trade and other receivables. The Group has no significant history of non-payment; as a result, the expected credit losses on financial assets are not material.

 

Financial liabilities

 

The Group classifies its financial liabilities as other financial liabilities. Other financial liabilities are measured at fair value on initial recognition and subsequently measured at amortised cost, using the effective-interest method.

 

Borrowings

 

Borrowings other than bank overdrafts are recognised initially at fair value less attributable transaction costs.  Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings, using the effective interest method.

 

Where there are extension options, management have made an accounting policy choice that these are loan commitments from the holder of the debt instrument that does not need to be separately accounted for.

 

Loan arrangement fees

 

The loan arrangement fees are offset against the loan balance and amortised over the term of the loan to which they relate as part of the effective interest rate calculation.

 

Trade and other payables

 

Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

 

Leases

 

The Group has leases for hostels across Europe. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the statement of financial position as a right-of-use asset and a lease liability. Leases of property generally have a lease term ranging from 5 years to 50 years.

 

For any new property asset contracts entered on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

 

·    the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

·    the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract the Group has the right to direct the use of the identified asset throughout the period of use; and

·    the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purposes the asset is used. In rare cases where all the decisions about how and for what purpose the asset is used are predetermined, the Group has the right to direct the use of the asset if either:

-      The Group has the right to operate the asset; or

-     The Group designed the asset in a way that predetermines how and for what purpose it will be used.

 

Measurement and recognition of leases as a lessee

 

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

 

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate.

 

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.

 

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if the Group changes its assessment of whether it will exercise an extension or termination option.

 

The Group has elected to take the exemption not to recognise right-of-use assets and lease liabilities for short-term lease of machinery that have a lease term of 12 months or less and leases of low-value assets. The Group defines leases of low value assets as being any lease agreement where the total value of payments made across the lease term is less than £10,000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease.

 

On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been included in trade and other payables.

 

Measurement of the Right-of-use Assets

 

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

The Group as a lessor

 

As a lessor the Group classifies its leases as either operating or finance leases.

 

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset and classified as an operating lease if it does not.

 

The Group accounts for its sub leases as finance leases with reference to the right-of-use asset arising from the head lease. The Group has not offset the assets and liabilities of the head lease and sub lease, nor the income and expenditure arising from these contracts. A lease receivable is recognised in the statement of financial position in respect of the net investment in the sub lease. The net investment in the sub lease is assessed annually for any indicators of impairment.

 

Equity

 

The total equity attributable to the equity holders of the parent comprises the following:

 

Share Capital

 

Share capital represents the nominal value of shares issued.

 

Share premium account

 

Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues.

 

Retained earnings

 

Retained earnings represent undistributed cumulative earnings.

 

Equity Instruments

 

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

 

Other Components of Equity

 

Merger reserve

 

Merger reserve represents amounts subscribed for share capital in excess of nominal value exchanged for the shares in the acquisition of a subsidiary company.

 

Revaluation reserve

 

Revaluation reserves represent the increase in fair value of freehold property and leasehold assets over the value at which it was previously carried on the statement of financial position. Any gain from a revaluation is taken to the revaluation reserve. Where it reverses a previous impairment, the impairment is reversed, but any surplus in excess of the amount of the impairment is added to the revaluation reserve.

 

Translation Reserve

 

Translation Reserve comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into presentational currency.

 

Share based payment reserve

 

The equity settled share-based payment reserve arises as the expense of issuing share-based payments is recognised over time. The reserve will fall as share options vest and are exercised but the reserve may equally rise or might see any reduction offset, as new potentially dilutive share options are issued. Balances relating to share options that lapse after they vest are transferred to retained fair value of employee services determined by reference to transfer of instruments granted.

 

The Group has applied the requirements of IFRS 2 Share based payment to share options. The fair value of the share options is determined at the grant date and are expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

 

Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects on non-transferability, exercise restrictions and behavioural considerations.

 

Dividends

 

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

 

Critical accounting judgements and key sources of estimation and uncertainty

 

The fair value of the Group's property is the main area within the financial information where the Directors have exercised significant estimates.

 

Judgements

·    The Group has identified certain costs and income as exceptional in nature in that, without separate disclosure, would distort the reporting of the underlying business. A degree of judgement is required in determining whether certain transactions merit separate presentation to allow shareholders to better understand financial performance in the year, when compared with that of previous years and trends. This is set out in note 5. The value for these costs in the Consolidated Income statement for the year ended 31 December 2024 is £68,000 (2023: £26,000). The value of income classified as exceptional in the Consolidated Income statement for the year ended 31 December 2024 is £365,000 (2023: £nil).

·    Extension options for leases: In accordance with IFRS 16, when the entity has the option to extend a lease, management uses its judgement to determine whether or not an option would be reasonably certain to be exercised. Management considers all facts and circumstances including their past practice and any cost that will be incurred to change the asset if an option to extend is not taken, to help them determine the lease term. Management generally includes extensions when the option to extend can be unilaterally exercised by the tenant provided the hostel under lease is expected to continue to be profitable for the Group after the extension is exercised.

·    The Group has an option to repurchase the leasehold property at Elephant & Castle after 25 years. The Directors have considered whether the option would be exercised and have concluded that for commercial reasons, the option would not be taken. If the option were to be taken, the property finance liability at 31 December 2024 would be £9.0m (2023: £8.7m), and finance charges relating to the liability would total £0.5m (2023: £0.5m).

·    The Group has identified that a portion of the freehold property in Edinburgh has been leased out to a third party. The Directors have considered whether the portion of the property leased out to a third party constitutes investment property under IAS 40. The Directors concluded that due to the specific leasing arrangements with the third party, it was appropriate to consider the space as freehold property. If the treatment were to be considered as investment property, the property would be held at fair value per the valuation report of £3.3m (2023: £1.8m). The fair value gain of £1.5m would be recognised in the income statement. The impact on depreciation would equate to a reduction in depreciation expense of £0.1m per annum.

·    The Group, where the interest rate implicit in the lease cannot be practicably determined, has used the incremental borrowing rate (based on a quoted rate from an external lender as at the date of inception or most recent modification of the lease) instead to calculate the present value of the minimum lease payments. The nature and therefore small changes in the incremental borrowing rate could have a material impact on the financial statements. In 2024 this ranged from 3.6% to 8.4% (2023: from 3.25% to 3.8%). At 31 December 2024, lease liabilities totalled £23.7m (2023: £26.0m) and finance charges relating to lease liabilities for the year totalled £1.6m (2023: 2.0m).

 

Estimates

·    Assessment of impairment of goodwill, property, plant and equipment (including right of use assets) and the ability for the Group to continue as a going concern requires estimation of future cash flows, which are uncertain, discounted to present value which also requires estimation by management. The key assumptions used to calculate the value in use (VIU) to test the goodwill for each cash generating units (CGUs) are detailed in note 12. A Pre-tax discount rate of 12.89% (2023: 9.7%) has been calculated using weighted average cost of capital. An assessment was made on the differing risks between countries in which the hostels operate based on country risks.  Based on the assessment it was concluded that the differences between discount rates between each CGU is not material. The assets are similar in nature, with all CGUs providing the provision of hostel accommodation and therefore similar cashflows and therefore the risk associated with the assets is considered to be consistent between CGUs. As such one discount rate has been utilised for the purposes of performing an impairment review. At 31 December 2024, Goodwill totalled £10.3m (2023: £10.9m) and impairment charges totalled £nil (2023: £0.9m). At 31 December 2024, property plant and equipment (including right of use assets) totalled £76.5m (2023: £73.7m) and impairment charges totalled £0.4m (2023: £0.1m).

·    As outlined in the accounting policy, the financial statements have been prepared under the historical cost convention except for the revaluation of the freehold properties and lease assets (in respect of Elephant and Castle). The Group is required to value properties on a sufficiently regular basis by using open market values to ensure that the carrying value does not differ significantly from their fair values. Valuations are performed by qualified valuers using open market values, which reflect the estimated selling price in an arms-length transaction and includes assumptions of future income levels and trading potential for each hostel as other factors including location and tenure. Key valuation estimates include the discount rate, capitalisation rate, inflation rate, and running yield. Further details can be found in the Valuation Methodology section of note 5. The Group has used external valuations on freehold properties and leased assets under financing transactions, as outlined in note 5. Based on the market data assessed and internal assessment of each property, management does not consider that the fair value differs materially from the carrying value. Management is confident that the carrying value is deemed reasonable at 31^st December 2024.

·    The estimated useful lives which are used to calculate depreciation of property, plant and equipment are based on the length of time these are expected to generate income and be of benefit to the Group. Depreciation methods, useful economic lives and residual values are reviewed at each reporting date and adjusted if appropriate. Property plant and equipment totalled £76.5m at 31 December 2024 (2023: £73.7m) and depreciation charges totalled £3.3m (2023: £3.3m).

·    The Group has recognised deferred tax assets for deductible temporary differences and unused tax losses that it believes are recoverable. The recoverability of recognised deferred tax assets is in part dependent on the Group's ability to generate future taxable profits sufficient to utilise deductible temporary differences and tax losses (before the latter expire). The Directors consider the likelihood that the Group will generate taxable profits is probable, and as such, recognises deferred tax assets related to tax losses in full. Deferred tax assets at 31 December 2024 totalled £4.4m (2023: £5.5m). Deferred tax charges for the year ended 31 December 2024 totalled £0.7m (2023: £0.2m).

 

2.         SEGMENTAL ANALYSIS

 

An analysis of the Group's revenue from external customers for each major product and service category is as follows:

	2024		2023
	£'000		£'000
Hostel accommodation	19,962		20,143
Food and Beverages sales	1,915		1,525
Other income	1,132		822
Total Income	23,009		22,490
Like for like income	21,373		21,485

 

Like-for-like income relates to all turnover less turnover associated with the newly operating properties, Edinburgh and Cordoba as well as discontinued operating segments.

 

The Group recognises income from lease payments from operating leases as income on a straight-line basis over the term of the contract.

 

Operating segments are reporting in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). The CODMs, who monitor the performance of these operating segments as well as deciding on the allocation of resources to them, have been identified as the Executive Directors. Currently the operating segments are the operation of hostel accommodation in the UK and Europe.

 

An additional material geographical area has been identified in respect of Spain to meet the disclosure requirements of IFRS 8 due to its significance to the Group.

 

The Group provides a shared services function to its operating segments and reports these activities separately. Management does not consider there to be any other material reporting segments. Management revisit this at each year end.

 

The most important measures used to evaluate the performance of the business are revenue, EBIDTA and adjusted EBITDA, which is the operating profit after excluding depreciation and amortisation, and removing non-recurring expenditure which would otherwise distort the cash generating nature of the segment.

 

2024	UK	Spain	Europe	Shared services	Discontinued operations	Total
	£'000	£'000	£'000	£'000	£'000s	£'000
Revenue	8,986	5,953	7,540	18	512	23,009
Profit/(loss) before tax	1,355	(456)	324	(1,630)	391	(16)
Add back: Finance income and costs	315	1,066	790	1,058	192	3,421
Add back: Depreciation & Amortisation	623	1,206	1,211	335	6	3,381
EBITDA	2,293	1,816	2,325	(237)	589	6,786
Impairment	-	-	428	-	-	428
Profit on disposal of assets	-	-	-	4	(404)	(400)
Fair value movements of derivatives	-	-	-	13	-	13
Exceptional & Share based payment expense	-	-	(344)	21	26	(297)
Adjusted EBITDA	2,293	1,816	2,409	(199)	211	6,530
Total assets	45,573	16,235	18,120	14,381	-	94,309
Total liabilities	(13,322)	(10,742)	(7,085)	(32,396)	-	(63,545)
2023 as restated		UK	Spain	Europe	Shared services	Total
		£'000	£'000	£'000	£'000	£'000
Revenue		8,270	5,349	8,871	-	22,490
Profit/(loss) before tax (including discontinued operations)		2,252	(448)	(1,269)	(1,667)	(1,132)
Finance income and costs		315	278	493	2,326	3,412
Depreciation & Amortisation		432	1,198	1,195	539	3,364
EBITDA		2,999	1,028	419	1,198	5,644
Impairment		-	-	1,028	-	1,028
Adjusting Items & Share based payment expense		-	-	-	80	80
Adjusted EBITDA		2,999	1,028	1,447	1,278	6,752
Total assets		40,939	15,788	21,253	15,835	93,815
Total liabilities		(11,471)	(11,881)	(7,930)	(30,209)	(61,491)

 

 

 

The Group's non-current assets (other than financial instruments and deferred tax assets) are located into the following geographic regions:

	2024		2023
	£'000		£'000
UK	45,034		40,472
Spain	15,428		14,976
Rest of Europe	17,193		19,650
Shared services	13,944		15,363
Total	91,599		90,461

 

 

3.         DISCONTINUED OPERATIONS AND LIABILITIES HELD FOR SALE

 

Following the classification of the asset group of "Vienna Hotel" as held-for-sale in September 2023, the operational performance was classified as discontinued. The Hostel formed part of the Europe operating segment. The lease for the Vienna Hotel was surrendered on 31 July 2024.

				As Restated
		2024		2023
	Note	£000s		£000s
Revenue		512		996
Cost of sales		(115)		(227)
Gross profit		397		769
Administrative expenses		186		(905)
Operating profit		583		(136)
Finance income and costs		(192)		(239)
Profit/(loss) before tax		391		(375)
Profit/(loss) after tax for discontinuing operations		391		(375)

 

  

		2024			2023
		£000s			£000s
Property plant and equipment (including right-of-use asset)		-			3,884
Trade and other payables		-			(187)
Lease Liabilities		-			(4,291)
Cash and cash equivalents		-			40
Trade and other receivables		-			50
Liabilities held for sale		-			(504)
						As Restated
		2024				2023
Cash flow from operating activities
Loss for the year		1,062				(377)
Tax charge		-				1
Depreciation, amortisation and impairment		7				264
Net finance costs		-				239
(Increase)/decrease in inventories		3				2
Decrease in trade and other receivables		21				(52)
Increase in trade and other payables		(133)				306
Lease modification		(843)				-
Net Cash generated from operations attributable to discontinued operations		117				383

 

Cash flow from investing activities
Purchases of property, plant and equipment		-		(9)
Net cash used in discontinued investing activities		-		(9)
Cash flow from financing activities
Principal elements of lease payments		(293)		(419)
Loan repayments		192		(80)
Net cash used in discontinued financing activities		(101)		(499)
Cash and cash equivalents at beginning of year		40		162
Net cash flows (used in)/generating from operating, investing and financing activities		16		(125)
Differences on exchange		11		3
Cash and cash equivalents at end of year		67		40

 

4.         TAX

 

The Group tax charge is made up as follows:

 

	2024		2023
	£'000		£'000
Current tax
Corporation tax on profits for the year	5		13
Adjustments for corporation tax on prior periods	-		-
Other local taxes	186		38
Total current tax	191		51
Deferred tax	684		96
Adjustments for deferred tax in prior periods	-		79
Effect of increased tax rate on opening balance	-		-
Total tax charge	875		226

 

 

The charge for the year can be reconciled to the loss per the consolidated income statement as follows:

			As Restated
	2024		2023
	£'000		£'000
Loss before tax	(407)		(1,358)
Tax at the standard UK corporation tax rate of 25% (2023: 23.52%)	(102)		(319)
Fixed asset differences	91		43
Adjustment for tax rate differences in foreign jurisdictions	(1)		-
Adjustments for tax on prior periods - deferred tax	174		-
Adjustments for tax on prior periods - deferred tax	175		79
Other tax adjustments, reliefs and transfers	-		-
Remeasurement of deferred tax for changes in tax rates	-		1
Deferred tax not recognised	192		(16)
Factors affecting charge for the period
Non-deductible items and other timing differences	190		417
Chargeable gains/(losses)	-		-
Foreign exchange differences	156		21
Deferred tax eliminated	-		-
Group tax charge	875		226

The Group has a deferred tax liability of £4.8m (2023: £3.3m) related to the potential future gain on property revaluations.

 

The Finance Bill 2021 included legislation to increase the main rate of corporation tax from 19% to 25% from 1 April 2023. This rate change is included above as the Finance Bill 2021 has been substantively enacted.

 

The Finance Bill 2023 includes legislation to implement the Organisation for economic Co-operation and Development ("OECD") Base Erosion and Profit Shifting ("BEPS") Pillar two income inclusion rule ("IIR") in the United Kingdom ("UK"). The legislation introduces a multination top-up tax ("MTUT") and the domestic top-up tax ("DTT") and both will apply to large multination enterprises for accounting periods beginning on or after 31 December 2023. The legislation is not thought to have any impact on the Group tax charge.

 

5.         PROPERTY, PLANT AND EQUIPMENT

 

	Freehold land and buildings	Right of Use Assets	Leasehold land and buildings	Leasehold improve-ments	Fixtures, fittings & equipment	Assets under construction	Total
Cost or Valuation	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2023	12,039	38,540	26,799	4,731	4,179	-	86,288
Transfers	-	-	-	680	(720)	40	-
Reclassification as held for sale	-	(5,246)	-	-	(56)	-	(5,302)
Additions	2,522	-	-	4	337	2,114	4,977
IFRS lease modification	-	323	-	-	-	-	323
Revaluation	2,411	-	221	-	-	-	2,632
Exchange movements	27	(194)	-	24	(32)	-	(175)
At 1 January 2024	16,999	33,423	27,020	5,439	3,708	2,154	88,743
Transfer	2,114	-	-	-	-	(2,114)	-
Additions	2,880	-	-	62	742	2,413	6,097
Disposals	-	-	-	-	(86)	-	(86)
IFRS lease modification	-	151	-	-	-	-	151
Revaluation	1,004	-	-	-	-	-	1,004
Surrender of Vienna Lease	-	-	-	-	(48)	-	(48)
Exchange movements	( 140)	(952)	-	(17)	(195)	-	(1,304)
At 31 December 2024	22,857	32,622	27,020	5,484	4,121	2,453	94,557
Depreciation & Impairment
At 1 January 2023	322	9,076	596	1,277	2,959	-	14,230
Transfer	-	-	-	526	(526)	-	-
Reclassification as held for sale	-	(1,388)	-	-	(30)	-	(1,418)
Charge for the period	169	2,408	185	318	266	-	3,346
Impairment	-	83	-	65	-	-	148
Revaluation	(491)	-	(781)	-	-	-	(1,272)
At 1 January 2024	-	10,179	-	2,186	2,669	-	15,034
Transfers	-	-	-	-	-	-	-
Charge for the period	453	2,054	188	322	328	-	3,345
Disposals	-	-	-	-	(86)	-	(86)
Revaluation	(453)	-	276	-		-	(177)
Impairment	-	235	-	154	39	-	428
Surrender of Vienna Lease	-	-	-	-	(24)	-	(24)
Exchange movements	-	(239)	-	(82)	(149)	-	(470)
At 31 December 2024	-	12,229	464	2,580	2,777	-	18,050
Net book value:
At 31 December 2024	22,857	20,393	26,556	2,904	1,344	2,453	76,507
At 31 December 2023	16,999	23,244	27,020	3,253	1,039	2,154	73,709

 

Freehold properties

 

The freehold values relate to the five following hostels:

·    The £2.8m value of the freehold in York is based on the external valuations as at 31 December 2024 prepared by Cushman and Wakefield.

·    The freehold of the Glasgow property acquired in October 2019 for £3.2m and which has undergone renovation for £0.4m. The £5.5m value of the freehold in Glasgow is based on the external valuations as at 31 December 2024 prepared by Cushman and Wakefield.

·    The £6.7m value of the freehold in Edinburgh is based on the external valuations as at 31 December 2024 prepared by Cushman and Wakefield. The freehold was acquired in December 2023 for £4.3m and underwent refurbishment totalling £1.2m.

·    The hostel in Pisa was acquired in June 2019 for £3.0m, of which £2.3m for the freehold. The £6.2m value of the freehold in Pisa is based on the external valuations as at 31 December 2024 prepared by Cushman and Wakefield.

·    The freehold of the Córdoba property was acquired in May 2024 for £1.7m. The external valuation at 31 December 2024 prepared by Cushman and Wakefield valued the property at £2.1m.

 

If the properties had been accounted for under the historic cost accounting rules, they would have been accounted for as follows:

	2024	2023
	£'000s	£'000s
Historic Cost including Renovations	15,637	10,639
Accumulated Depreciation	(1,313)	(1,012)
	14,324	9,627

 

Details of the revaluation surplus, including the movement during the period, are presented in the Statement of Changes in Equity (SOCIE) on page 64 of the Annual Report.

 

Leasehold, land and buildings

 

The Group has used external valuations on Elephant & Castle. The London Elephant & Castle leasehold was independently valued on 31 December 2024 at £26.8m. The valuation was performed by Cushman and Wakefield. The Group has accounted for the finance transactions as interest-bearing borrowings secured on the original properties held. The historic carrying value is £15.5m, which is the initial value at date of inception of the lease plus £2.5m of additions, less £3.0m of depreciation charges.

 

Leasehold improvements

 

Leasehold improvements comprise the capitalised refurbishment costs incurred by the Group on the leased properties.

 

Valuation process

 

The Group provides information to valuers, including profit and cashflow forecasts along with asset-specific business plans. These independent external valuers hold recognised and relevant and professional qualifications and have recent experience in the location and category of the properties being valued.  The valuers use this and other inputs including market transactions for similar properties to produce valuations. These valuations and the assumptions they have made are then discussed and reviewed with the directors. Cushman & Wakefield were engaged to value properties now valued at £50.1m (including fixtures & fittings).

 

Valuation fees are a fixed amount agreed between the Group and the valuers in advance of the valuation and are not linked to the valuation output.

 

Valuation methodology

 

The value is assessed by adopting the income approach to valuation adopting a discounted cashflow approach.  Under this approach it is assumed that the property is held for a period of 10 years and the net present value of the earnings during this period are added to the exit value which is discounted to present day values.  Adopting an income approach also requires the analysis of comparable transactions in the market to assess the rates of returns investors are prepared to accept at the date of valuation. 

 

The table below provides details of the assumptions used in the valuation of the properties:

 

Location	Discount rate	Capitalisation rate	Inflation rate	Running Yield
Elephant & Castle	9.0%	7.9%	2.5%	6.67% - 7.38%
Glasgow	11.3%	9.3%	2.5%	9.24% - 9.62%
Edinburgh	10.0%	8.0%	2.5%	5.72% - 6.34%
York	11.0%	7.9%	2.5%	8.11% - 9.45%
Pisa	10.0%	8.0%	2.5%	(0.88)% - 9.67%
Cordoba	8.8%	6.8%	2.5%	5.08% - 7.22%

 

Capital Commitments

 

There were no capital commitments at the year-end (2023: £0.7m).

 

6.         INTANGIBLE ASSETS AND GOODWILL

	Website		Goodwill		Total
	£'000		£'000		£'000
Cost
At 1 January 2023	139		13,505		13,644
Additions	80		-		80
Exchange differences	-		(238)		(238)
At 31 December 2023	219		13,267		13,486
Additions	115		-		115
Exchange differences	-		(509)		(509)
At 31 December 2024	334		12,758		13,092
Amortisation and Impairment
At 1 January 2023	130		1,491		1,621
Impairment	-		880		880
Charge for the period	18		-		18
At 31 December 2023	148		2,371		2,519
Write off on Surrender of Vienna Hotel Lease	-		4		4
Charge for the period	36		-		36
At 31 December 2024	184		2,375		2,559
Net book value:
At 31 December 2024	150		10,383		10,533
At 31 December 2023	71		10,896		10,967

 

Goodwill

 

Goodwill in a business combination is allocated to the cash generating units ("CGUs") that are expected to benefit from that business combination.  The Group's CGUs have been defined as each operating hostel. This conclusion is consistent with the approach adopted in previous years and with the operational management of the business.    

 

Impairment

 

Goodwill is not amortised but tested annually for impairment.  The recoverable amount of each CGU is determined from value in use ("VIU") calculations based on future expected cash flows discounted to present value using an appropriate pre-tax discount rate.

 

Goodwill carrying values as at 31 December 2024 are shown below:

 

CGU	2024		2024		2023		2023
	Goodwill		Headroom		Goodwill		Headroom
	£000s		£000s		£000s		£000s
Madrid	2,071		2,329		2,173		-
Paris	11		-		11		-
Gothic	679		2,561		712		1,307
Lisbon	1,266		-		1,328		220
Prague	198		366		207		248
Barcelona Passeig De Gracia	1,577		6,966		1,654		69
Vienna	-		-		5		184
Brussels	1,239		3,828		1,300		2,428
Pisa	743		7,672		779		2,924
Berlin	902		346		947		-
Athens	1,130		732		1,185		550
Warsaw	567		1,798		595		692
	10,383		26,598		10,896		8,622

 

There were no impairment charges relating to goodwill for the year ended 31 December 2024 (2023: £0.9m). Goodwill relating to the Vienna Hotel was written off.

 

The key assumptions used in the VIU calculations for all hostels are based on forecasts approved by management performed for a 5-year period:

 

·    A pre-tax discount rate of 12.89% (2023: 9.7%) was calculated using weighted average cost of capital. An assessment was made on the differing risks between countries in which the hostels operate.  Based on the assessment it was concluded that the differences between discount rates between each CGU are not material. The assets are similar in nature, with all CGUs providing the provision of hostel accommodation and therefore similar cashflows and therefore the risk associated with the assets is considered to be consistent between CGUs. As such one discount rate has been utilised for the purposes of performing an impairment review.

·    Goodwill was assessed for impairment based on the remaining lease term, consistent with the lease term used for the associated right-of-use asset. In addition, an estimated exit value was included, determined by applying a long-term growth rate of 2.0% in perpetuity.

·    The estimated average bed rate, along with revenue and costs, is projected to increase annually by 2.5% in line with assumed inflation.

·    Occupancy is projected to increase by 1% year-on-year over the forecasted period.

·    After the 5-year period, a flat growth rate of 2.5% was applied to the discounted cashflows.

 

Discount Rate

 

The Group calculates a WACC applying local government bond yields and tax rates. For reference the Group WACC for Safestay plc was 12.89% (2023: 9.7%). The discount rate applied to a CGU represents a pre-tax rate that reflects the market assessment of the time value of money as at 31 December 2024 and the risks specific to the CGU.

 

7.         TRADE AND OTHER PAYABLES

			As Restated
	2024		2023
	£'000		£'000
Due in less than one year
Trade payables	484		572
Social security and other taxes	1,176		1,197
Corporation tax	187		-
Other creditors	107		156
Accruals and deferred income	3,130		2,374
	5,084		4,299

 

8.         BORROWINGS

	2024		2023
	£'000		£'000
At amortised cost
Bank and other loans repayable within one year	4,246		1,000
Loan arrangement fees	(85)		(68)
Property Finance Liability	3		-
	4,164		932
Bank and other loans repayable within more than one year	15,595		15,180
Loan arrangement fees	(200)		-
Property Finance Liability	7,174		7,174
	22,569		22,354

 

In January 2024, the Group refinanced its existing borrowings into a single £16m term Loan and added a new £2.5m Revolving Credit Facility ("RCF") to support future growth plans. The new Term Loan and RCF are for 5 years and were provided by the existing lender HSBC.

The Term Loan interest rates are £4.4m at 3.955%, £10.0m at SONIA but capped at 4.75% with a floor of 3.0%, all with an additional margin of 2.6%. The RCF has a rate of SONIA plus a margin of 2.85%. The Term Loan is repayable at £0.1m per quarter from March 2024, together with a final payment at completion. Interest on both the Term Loan and RCF is payable quarterly.

The Term Loan replaced the previous interest only £12.7m facility with HSBC and enabled the repayment of the outstanding Coronavirus Business Interruption Loan Scheme ("CBILS") loan of £3.3m, which carried a significantly higher interest rate.

In addition to the Group refinancing, a supplementary £1.2m loan was obtained from the trustees of the Sheldon Pension Fund and Sentpark Capital Limited in June 2024, in order to facilitate the purchase of a freehold property located in Brighton, United Kingdom. The loan was made to Safe Hostels Limited (a 100% owned subsidiary of Safestay plc) with Safestay plc writing a written guarantee. The interest rate on the loan is 1% per month and is serviced monthly, plus arrangement and exit fees of 1%. This loan has an 18-month term and was initially repayable in December 2025. Post year end, the term of the loan was extended to December 2026.

Non-Current Liabilities with Covenants

As disclosed in note 1, the Group has adopted the amendments to IAS 1 relating to the classification of non-current liabilities with covenants. In accordance with these amendments, the Group provides the following information regarding loan covenants associated with the £16.0m Term Loan and £2.5m RCF:

1. Historical Interest Cover
The Group must maintain a minimum historical interest cover as follows:

Period	Minimum Historical Interest Cover (%)
31 Dec 2024 - 31 Mar 2025	150%
1 Apr 2025 - 30 Jun 2025	150%
1 Jul 2025 - 30 Sep 2025	165%
1 Oct 2025 - 31 Dec 2025	175%

 

2. Loan to Value (LTV)
The Group must ensure that the LTV does not, at any time, exceed 50%.

 

3. Minimum EBITDA
On the specified test dates, the Group must meet the following EBITDA thresholds:

Test Date	Minimum EBITDA
31 Dec 2024	£2,000,000

 

4. Debt Service Cover Ratio (DSCR)
From 31 March 2025, the Group is required to maintain a minimum DSCR of 125% on each Test Date:

	Period Ending	Minimum DSCR (%)
	31 Mar 2025	125
	30 Jun 2025	125
	30 Sep 2025	125
31 Dec 2025			125

 

5. Debt Leverage
The maximum debt leverage ratio allowed under the agreement is:

Relevant Period	Maximum Ratio
12 months to 31 Dec 2024	9:1
12 months to 31 Mar 2025	8:1
12 months to 30 Jun 2025	8:1
12 months to 30 Sep 2025	8:1
12 months to 31 Dec 2025	8:1

 

The Directors have prepared forecasts for a minimum period of twelve months from the date of approval of the financial statements. Based on this they are confident that the covenants in this period will be met and there is sufficient headroom to cover certain adverse scenarios.

After the year-end, the terms of the Group's banking facility were amended, resulting in changes to the historical interest cover and debt leverage ratio covenants. These adjustments were implemented to better reflect current trading conditions and to provide the Group with greater flexibility in managing its obligations.

9.         LEASES

Lease assets are presented in the statement of financial position as follows:

	2024		2023
	£'000		£'000
Current	140		142
Non-current	143		297
Total	283		439

 

The lease asset relates fully to our contract with Casa Suecia where the Group has outsourced, on a revenue share basis, our Madrid food and beverage operations.

This is a contract where Safestay receives the higher of a minimum guaranteed rent or an agreed % of the food and beverage revenue in return for Casa Suecia receiving the profit from this income stream by managing this part of the operation with its own staff. This arrangement commenced in July 2021 and is for an initial five years.

In our lease asset calculations, the Directors have assumed the net profit of Casa Suecia did not exceed the variable threshold.

 

2024
	Minimum lease receipts due
	Within 1 year	1 - 2 years	2 - 3 years	3 - 4 years	4 - 5 years	After 5 years	Total
Lease receipts	149	149		-	-	-	298
Finance income	(9)	(6)		-	-	-	(15)
Net present values	140	143	-	-	-	-	283
2023
	Minimum lease receipts due
	Within 1 year	1 - 2 years	2 - 3 years	3 - 4 years	4 - 5 years	After 5 years	Total
Lease receipts	156	156	153	-	-	-	465
Finance income	(15)	(9)	(3)	-	-	-	(27)
Net present values	141	147	150	-	-	-	438

 

Lease liabilities are presented in the statement of financial position as follows:

	2024		2023
	£'000		£'000
Current	1,815		1,793
Non-current	21,891		24,250
Total	23,706		26,043

 

Total cash outflow for leases for the year ended 31 December 2024 was £3.4m (2023: £3.6m).

The Group has leases for hostels across Europe. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the statement of financial position as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset and any additional consideration is recognised through the income statement. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (note 5).

The hostel in London Kensington Holland Park has a term of 50 years. There is no purchase option in this lease.

Lease payments are generally linked to annual changes in an index (either RPI or CPI). However, the Group has leases in Lisbon and Kensington Holland Park for which a portion of the rentals are linked to revenue. The variable portion of the lease in Lisbon and Kensington Holland Park are accounted for as a variable rent over the period it relates to.

Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over hostels or hotels, the Group must keep those properties in a good state of repair and return the properties in good condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts.

The table below describes the nature of the Group's leasing activities by type of right-of-use asset recognised on balance sheet:

 

Right-of-use asset	No of right-of-use assets leased	Range of remaining term	Average remaining lease term	No of leases with extension options	No of leases with options to purchase	No of leases with variable payments linked to an index	No of leases with termination options
Hostel buildings	11	4 - 40 years	11	9	0	10	0

 

In addition to the above, there is the London Kensington Holland Park lease which ends in 2065. There are no such options as above.

 

There is a short-term lease commitment relating to the commercial hub in Warsaw. The total commitment is £60k (2023: £18k).

 

Lease liabilities

 

The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis of lease liabilities at 31 December 2024 is as follows:

 

2024
	Minimum lease payments due
	Within 1 year	1-5 years	After 5 years	Total
Lease payments	3,085	11,249	21,756	36,090
Finance charges	(1,270)	(3,887)	(7,227)	(12,384)
Net present values	1,815	7,362	14,529	23,706
2023
	Minimum lease payments due
	Within 1 year	1-5 years	After 5 years	Total
Lease payments	3,156	11,740	24,642	39,538
Finance charges	(1,363)	(4,295)	(7,837)	(13,495)
Net present values	1,793	7,445	16,805	26,043

 

10.       ANALYSIS OF NET DEBT

 

		31st December 2023	Cash Flows	Edinburgh Renovation	Acquisition of Brighton & Cordoba		New Loans	Loan Repay -ments	Finance Expenses	31st December 2024
		£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Cash at bank and in hand		1,998	1,187	(1,207)	(3,929)		19,410	(16,029)	-	1,430
Bank and Other Loans		(16,180)	5	-	-	(19,695)		16,029	-	(19,841)
Loan Arrangement Fees		68	(68)	-	-	285		-	-	285
Property Finance Liability		(7,174)	(3)	-	-	-		-	-	(7,177)
Lease Liabilities		(26,043)	3,953	-	-	-		-	(1,616)	(23,706)
	(47,331)		5,074	(1,207)	(3,929)	-		-	(1,616)	(49,009)

11.       Other commitments and guarantees

The bank loan held by the Group of £18.5m is secured against the Group's assets, including freehold properties of £15.0m, leasehold properties totalling £26.8m and trade and other receivables relating to UK properties.

 

In June 2024, the Group took out an additional loan of £1.2m from the trustees of the Sheldon Pension Fund and Sentpark Capital Limited.

 

The Group also has guarantees totalling £1.0m in relation to ongoing leases.

 

12.       PRIOR YEAR RESTATEMENT

During the current year, the Group identified the incorrect accounting treatment of VAT on certain OTA ("Online Travel Agent") commissions. Specifically, where OTAs remitted amounts net of their commission fees, the Group recognised the gross receipts in accordance with IFRS 15 to reflect the appropriate revenue and commission expense. However, the related commission expense had been incorrectly reduced by the applicable local VAT rate, on the assumption that VAT was chargeable and recoverable.

 

It has since been determined that, under EU VAT rules, these OTA services are subject to the  reverse Charge mechanism and therefore no VAT should have been claimed. As a result, the VAT creditor and OTA commission expenses were understated in the previously reported financial statements.

 

In 2021 and 2022, the VAT treatment was correct, however it was determined that the OTA commission expense was understated and as a result there has been an adjustment to Retained Earnings and Trade Receivables. There was also a reclassification between Trade receivables and Trade payables due to this adjustment.

 

Accordingly, the prior year comparatives have been restated to correct this error. The impact of

the restatement is as follows:

 

Income statement	2023 As previously stated £'000	2023 Adjustment £'000	2023 As restated £'000
Cost of Sales	(3,811)	(35)	(3,846)
Loss for the year from continuing operations	(948)	(35)	(983)
Net loss from discontinued operations	(376)	1	(375)
Loss for the year	(1,324)	(34)	(1,358)

  

 

Statement of Financial Position	2023 As previously stated £'000	2023 Adjustment £'000	2023 As restated £'000
Trade and Other Payables	(4,018)	(281)	(4,299)
Liabilities Held for Sale	(506)	2	(504)
Trade and Other Receivables	1,210	(156)	1,054
Retained Earnings brought forward	(12,477)	(400)	(12,877)
Loss for the Year	(1,324)	(34)	(1,358)
Retained Earnings	(13,801)	(434)	(14,235)
Other Components of Equity	21,952	(1)	21,951

 

Statement of Cash Flows	2023 As previously stated £'000	2023 Adjustment £'000	2023 As restated £'000
Decrease in Trade and Other Receivables	136	117	253
Increase in Trade and Other Payables	1,076	(83)	993
Loss for the year	(1,324)	(34)	(1,358)

 

 

These adjustments have been reflected in the restated comparative figures presented in these

financial statements.

 

 

13.       POST BALANCE SHEET EVENTS

In April 2025, the planning permission to convert the Brighton site was approved.

In addition, the maturity of the Group's £1.2m loan has been extended, with full repayment now scheduled for December 2026, as opposed to the original date of December 2025.

In June 2025, the Group signed a settlement agreement in relation to a business interruption insurance claim covering the COVID-19 period. The net settlement amount, after deduction of loss assessor fees, totals £1.4m. This income would typically be recognised within "Other Income" in the Group's consolidated statement of comprehensive income.