Pphe Hotel Group (LSE:PPH) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the PPHE HOTEL GROUP LIMITED interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, we'll publish those responses on the investment company platform where it is appropriate to do so.

0:32 Before we begin, we would just like to submit the following poll, and I would now like to play a short introductory video on behalf of the company. Thank you. And I would now like to hand you

2:15 over to the team from PPHE HOTEL GROUP. Robert, good morning, sir. Thanks, Jake. Good morning, everyone.

2:22 Welcome to our half year results presentation. What we showed in the the short video that we've just seen is a snapshot of the developments we've delivered this this first half of the year and what is ahead. We'll talk through all of these projects in a bit more detail as we go through the presentation. But let me first introduce you to Greg Hagerty, co CEO of PPHE HOTEL GROUP, and

2:48 Daniel Koss, c CFO of of our group. My name is Robert Henke. I'm the head of commercial for PPHE. What we'll do today is we'll spend probably twenty, twenty five minutes talking through our our business model in summary and an introduction to the company if you're not familiar with our story. Greg will talk about the highlights that we've seen in the period and the top level financial performance and pipeline, and then Daniel will focus on our financial performance. And at the end of all this, we'll do a q and a where we will hopefully be able to answer as many of the questions that are raised today. So moving on to the first slide of the presentation. So as a company, we are unique in our sector. And what sets us apart from our competitors is that we are an integrated hospitality real estate business with its own management platform.

3:41 So, typically,

3:43 we buy lots of land. We buy hotels. We buy tired hotels. We like opportunities with the development angle. We manage the development process from planning to construction and then opening of the asset. And then after a few years of stabilization, we extract some of the value, reinvest in the new opportunity, and grow our portfolio. We've been doing this for over thirty five years starting with a single property asset in The Netherlands, and we're currently active in eight countries with a property portfolio that's valued each year. And the last valuation of December last year valued the portfolio at £2,200,000,000. Like I said, we also have our own operating company, so it's a fully integrated platform in our business.

4:31 And what it means is that every discipline required to develop, operate, and deliver the commercial success of each property is in our control and in our hands. So it's a full value chain approach. Moving on to next slide. What that gives us is a unique business model because it's not in our in our sector, it's quite traditional to have a hotel owner, an operator, and typically a brand. We have all of this in house. So we give investors in our business exposure to all sides of this this sector, this business. So there are real estate gains with the value increasing typically after development and time progressing and operational returns from our platform. We also have a strong management team running the day to day business that have worked closely with the founding shareholders who are actively involved in the business today and have about 44% of the shares today. So their entrepreneurial DNA sits within the within the business and has been the case for all of the years that we've been active. So this sort of wheel summarizes what I what I walked through. We tend to buy. We then develop. We extract the value, reinvest, and that is basically facilitating the growth of the business through a variety of investment forms.

5:54 Daniel, do you wanna talk about how we fund our our Yes. Sure. So as part of our strategy, we unlock unlock capital on on the back of our assets in in many different ways. We do this by raising regular bank debt, but also raising equity on the back of our assets. And this funding strategy gives us access really to capital on the back of the fair value of of our properties. And it also balances the liquidity and and market risk, which is attached to this capital structure. If you look at our financials, everything is presented at historical cost. So we try to put on on on one page how the balance sheet is when we revalue everything at fair value. Our assets would come down to 2,600,000,000 externally valued by sales yearly. We're about to do that in December this year again. And you'll see that about over 60% of these hotels are in London and Amsterdam.

6:50 If look you at the way how it's funded, about 61% is funded by equity.

6:56 And and in The UK, we have entered for a few hotels into something that's called a ground rent structure whereby we sell the land under a hotel and we lease it back for more than a hundred years. That ground rents are typically fixed on very, very low yields. There's a link to inflation, which is typically capped at 4%, but there's no recourse on this land on on this obligation, and there's no repayment obligation. And then lastly, we have our regular bank debt. All of our debt is fixed rate. We're averaging around the 3.6% level, and we still have a few years in terms of maturity, 30% leverage in terms of bank debt. Thank you.

7:42 So hospitality real estate sits at the core of our business. And as I have said before, we have our own operating platform managing the 51 properties in operation today across these eight markets. Most of our exposure and portfolio sits in Central London, followed by Amsterdam. We have a large portfolio in Croatia on the coast, and then Germany is our fourth largest market. We are also entering new markets and have been to new markets. So we've recently opened in in in Serbia. We are on the verge of opening up in Italy and Rome, and we have hotels in Austria and in Hungary. All of these properties are managed in house, so we have expert teams across every single discipline. And that gives us the opportunity to scale up without a lot of additional expenses in the in the center.

8:32 So, typically, it's a plug and play model, especially in home markets like London and Amsterdam and Croatia where we have the footprint and the the teams available. We also have a strong partnership with the Radisson Hotel Group,

8:45 which basically gives us exclusive rights over using their Park Plaza brand in Europe, Middle East, and Africa. That That is a long standing agreement. And more recently, we've started using some of their other brands such as Radisson Red and Radisson Collection. So that helps us to diversify our brand landscape going from sort of upscale all the way to luxury and lifestyle, and that gives us further scope for new development opportunities. We can tap into the each with our risk and yield profiles.

9:19 Moving on to the performance of the year. Greg, talk us through some of the highlights. Thanks, Robert. Well, we're pleased to announce another record breaking performance both in revenue and EBITDA. This achievement comes despite a strong comparator in 2023 and the challenging macroeconomic and geopolitical issues we are operating in. Our reported numbers are impacted by the ramping up of our assets due to our 300,000,000 pound pipeline nearing completion and several properties in their soft launch phase. However, if we're looking on a like for like revenue, like for like revenue increased by 4.3% to a 187,800,000. Like for like EBITDA rose by 10.9% to 50,200,000.

10:07 Our EBITDA margin improved to 26.7%, thanks to effective cost control, centralized purchasing, and technological implementations. We have seen our business also continue to diversify in 2024, where we start to see a more normalized market segmentation, which we saw pre pandemic, no longer reliant on the leisure demand of 2023. I think what's also worth mentioning is that half one twenty twenty three was exceptional for PPHE, specifically in our South Bank operation sorry, in quarter two,

10:47 in our Southbank operation predominantly driven by the impact of the King's coronation. So replacing that level of business year on year has been incredibly positive for the group. However, as we also now look further into 2024, we have diversified with increased market demand coming from our group segment on our meeting and events.

11:09 So with that in line, this diversification has led to a rise in occupancy of 72% from 69.1 in half twenty twenty three. However, our average rates have decreased by 4.4% resulting in a RevPAR of a 109.9. And as I've already alluded to, some numerous factors relating to that.

11:33 We've made significant progress in delivering our pipeline also. In February, we opened our first Radisson Red property in Belgrade, Serbia. In May, we launched a rooftop restaurant at the Artstel Zagreb following the hotel's opening in q four last year. And in April, we opened our currently largest project we have active at the moment, the Artstel London Hoxton. More about that later. In Berlin, we had a soft opening of the Radisson Red Berlin Cooldown in June and just before the Euro Tournament, which was positive for the hotel. And the hotel is on a track for a full completion in September this year. In Rome, we announced our signature artist, Pietro Rufo,

12:20 and he for the hotel, we are expected to open Rome in winter twenty twenty four later this year. We're also focused on creating shareholder value for our future potential.

12:32 We were pleased to announce that we won our planning appeal in London, securing commission for a mixed use development near Park Place, London Waterloo, which includes a 186 bedroom hotel. As part of our ongoing commitment to shareholder returns, we propose an increase of an interim dividend of 17p per share, up from 16p in 2023, and we launched the share buyback program of up to £4,000,000.

13:03 Moving a little bit more in detail on pipeline progression, this slide summarizes our various projects and potential developments. On the right, we have properties that are still maturing. Their performance is far their performance is far far is promising, and we expect further growth as these hotels settle into their respective markets. In the middle of the hotels that have recently opened or about to open,

13:31 and they are, in this case, Rome, which I've already mentioned, is expected to open later this year. On the left, we provide an overview of our land sites and the remaining upside potential potential of our Croatian portfolio. Additionally, our acquisitions team is fully focused on continuing future growth and opportunities as we speak.

13:56 As we move into a little bit more detail on the Ardstell London Hoxton, we were extremely pleased to soft launch this property in April. We acquired this property back in 2008 with a joint venture partner and navigated through the global financial crisis. We then later bought out our joint venture venture partner to accelerate the project and successfully secured development during the COVID pandemic,

14:27 thanks to our strong banking relationships. We partnered with Cloud Insurance on this £300,000,000 plus project, retaining a controlling stake and securing the long term management agreement on this property. The hotel opened in April, and we've been steadily growing room offerings since then. The Ground Floor, 1st Floor restaurant and bar spaces are now fully open. The art gallery, auditorium, indoor pool, and spa are also operational.

14:57 By the end of q three, we will offer approximately 330 rooms and a bed space on the 24th Floor. By the end of q four, we will complete the remaining premium suites on the Upper Floors and the 25th Floor restaurant and gym and the 26 sorry, the 26th Floor gym.

15:17 In half one next year, we'll launch for coworking space and the additional gym area on this property. Client demand so far has been very strong across all market segments since we started operating. We have secured key corporate accounts and have a potential pipeline of inquiries for operating. We've secured many corporate events for the upper floors and the meeting and event space.

15:43 We have also launched a robust entertainment program called ARPBEAT featuring on the activation of the property, ranging from frequent events from small gathering to large ticketed events. The hotel so far has generated incredibly strong positive PR, and customer feedback has been excellent with a 9.4 review score on booking.com, 4.8 score, on Google, and five out of five on TripAdvisor, and the property is currently ranked 21 out of over 1,200 hotels in London. So currently, we're very, very pleased with the progression of the asset.

16:23 Thank you, Greg. Yeah. So as Greg already alluded to, we reported a total revenue of 191,000,000, which is up 6.1% versus last year.

16:34 If we do that on a like for like basis, so basically taking the two openings, ARTVAL Zagreb and ARTVAL Hockstein out of the equation, we reported a 4.3% increase at 187,800,000. And that growth is despite a flat RevPAR. If you if you look at our RevPAR performance on a like for like basis, we reported the RevPAR of one zero nine point nine, point 3% down versus last year. Most of the revenue growth this year came from a strong meeting and events calendar,

17:08 but also extra trading days in Croatia, and and a leap year benefits the entire portfolio. As I said, RevPAR flat. If you look at the breakdown of of RevPAR, you can see our rates have declined and it's soft softer compared to last year, 4.4%, mainly coming from The UK region where we had quite strong comparables in terms of the coordination that impacts our London hotels impacted our hotels quite substantially.

17:39 We were able, however, to recoup that rate decrease with occupancy increases. Our occupancy increased nearly three percentage points. Just to reiterate, we are still 4.8 percentage points behind pre pandemic levels. So we still have a bit way to go to compensate if if needed.

18:03 EBITDA is up 10.9% on a like for like basis, 50,200,000. If you include the openings, which typically dilute the EBITDA in the first months of openings, we reported an EBITDA of 48.3% 48,300,000.

18:22 As you can see, on a like for like basis, we've been able to achieve margin growth. Our margins went up 160 basis points, reaching a margin of 26.7 versus 25.1 last year. This margin increase mainly came of the result of many cost initiatives that we launched, but also as we already mentioned in the year end, utility price decreases, which are expected to benefit us in the next year also.

18:53 As of this thanks to this EBITDA increase, our adjusted EPRA earnings also went up. The rolling twelve months number came in at £1.24, which is 5.1% up on the reported rolling twelve months number six months ago. And that is despite the negative effect that the openings had. So if I adjust the openings, it's approximately 4p per share, a negative impact on the current reported EPRA earnings.

19:24 EPRA earnings is also the basis for our progressive dividend policy. We typically pay around 30% of EPRA earnings. So this year, we are proposing to increase the interim dividend from 16 to 17p. Robert, if you wanna flick on to three slides later.

19:43 This is just a breakdown of the revenue and EBITDA progression. You can see that revenue was up in every territory, most slow in in The UK as discussed. Luckily, the m and e calendar made up for for for quite a bit. And you can see the EBITDA increases in in every key territory we reported EBITDA increases. Particularly in The UK, you can see that even with the 200,000 revenue increase, we realized 2,200,000 extra EBITDA, thanks to the initiatives that have been launched. On the further end, you can see the openings contributing £3,200,000 in terms of revenue. However, diluting the EBITDA with 2,000,000.

20:28 And then also in the management platform, you can see the EBITDA is down 1,500,000. I can say the majority of that is done due to the investments that we've done to support the openings that we have already done, also the openings that that are still still coming.

20:46 Slide cash flow, Robert. In terms of cash flow, we reported strong operational cash flow of 50,000,000, but also a substantial outflow again this year for CapEx, 53,000,000 in first six months. Of the 53,000,000, around 9,000,000 relates to the maintenance CapEx that we have annually, and the remainder 44,000,000 was invested in the pipeline. That CapEx number is expected to do to go down substantially next year when most of the pipeline is delivered.

21:21 You can also see in the first six months, we paid around £48,000,000 in debt service, ground rights, and unit holder payments. From this 48,000,000, 23,000,000 relates to bank loan repayments, either contractual or voluntary repayments, prepayments, and about 6,000,000 relates to the variable profits that we pay to the unitholders in in Park Plaza Westminster Bridge.

21:49 Slide eight, Robert, you can see our upper upper enough. We didn't do valuations semi annually. In our industry, that doesn't make sense to do it semi annually. You do it annually, and you take into account future cash flows. So if there's no substantial change in future cash flows, it is we do an annual valuation round, really. So a pro and a half reported at £26.24, slightly down from the year end numbers mainly because of the dividend that we've paid and and the foreign exchange really. We will do external valuations again in December of this year whereby whereby we will also include the two newly opened hotels. Greg, over to you for the outlook. Thank you, Daniel.

22:37 So half one, we've seen continued normalization of our business mix and room rates offset by improved occupancy and effective cost control. Excluding the new openings, our like for like performance remains in line with expectations. Our Croatian operations are currently in peak season and trading as expected with good levels of strong last minute bookings. While supply chain issues have delayed the full openings of the Aristotle Hodgson and the Aristotle Rumpiaxo Solutzio, we do still expect positive EBITDA contributions of at least 25,000,000 upon stabilization. The second half of the year, typically our strongest period, has started well, and the board remains confident with the group's outlook.

23:25 I believe we're now happy to take some questions. So with that, Robert, I'll let you drive.

23:33 Thank you. Greg, this has been a tremendous year for the group with the with sort of five new openings in the space of fifteen months. So we have Rome yet to open and Hoxton to to be completed and Berlin. That obviously comes with expectations from shareholders, and I'm looking at some of the questions. There's a question around the opening phasing and stabilization, how long that will take for these properties. Do you wanna give a bit of color how we sort of approach that? Yeah. Usually so when when we open and position a property, especially in a a new area or a new territory, we like to phase the occupancy

24:14 or the rooms of hotel in. One, to make sure we manage and minimize cost burn. So with that in mind, we open up the inventory. We test market demand. And as and when that happens, we open up floor by floor to make sure that we fully bring in assets in the most cost effective way possible. And to make sure, actually, we stress test the operations, making sure that the mechanical engineering,

24:45 the building operates as it should, the efficiencies of the building are operating in line with our forecasted expectations. So it's better we do that in phases. However, when you're looking at a an economic cycle of a hotel, usually, we like a hotel to mature mature and deliver its full potential within thirty six months of operation. So, usually, the third year of operation is one where we see that hotel fully delivering its capability. That's great. Thank you, Greg. Daniel, obviously, the development costs have really impacted our our balance sheet in the last few years.

25:22 We've also been taking on debt to finance some of the construction work. What is your sort of typical debt profile that you would see for for the business? Yeah. So as I alluded to on the capital slide, you know, we're hotels for over thirty years, and you can see the impact our balance. We currently report a net debt of 30%, and that is really because of the approach of not only raising bank debt, but also partnering with others on the equity side, really. So it's not always debt that we assume when when we build.

25:57 In terms of the debt structure, looking at new builds, we typically aim at a 60% loan to cost. I'm saying loan to cost, which is important because typically if a hotel matures and stabilizes, the real value of that hotel is typically higher than the cost, bringing our loan to values down to below 50%, really. Then come refinance. This is really the point in time where we say, you know, has the loan to value come down substantially and the debt price is cheap, we would typically borrow a bit extra and use that money to recycle back into the business. If you look at the cycle where we are currently with interest rates, which are quite quite heavy, it is unlikely we will take extra money out. So we will typically refinance what is there and and pull it over into a new term facility.

26:52 All of our loans are amortizing. So typically, over a period of five or ten years,

26:59 that the majority of of a loan profile, we would have amortized another 15 to 30% already bringing the debt levels down. So as where we are currently, we have 30% net debt. I do not expect that to go off 45% in in the near future. Future. Thank you. That's that's very, very clear. And and then in terms of the the future sort of business, because obviously there's an active pipeline now. There's sites in our in our ownership, new opportunities that are being considered by the acquisitions team. So maybe maybe touch on the projects in our portfolio, in our pipeline, particularly New York. There's a question around New York. We've talked about this pre COVID as a key acquisition for our hotel. It's been on hold since COVID. Where where do you see this project?

27:44 So as you said, yeah, New York, we bought pre COVID in 2018. We partnered with somebody to build a hotel over there in a in a brilliant area in Hudson Yards. Just before COVID, we bought out our partner and intending to build the hotel by ourselves, but then obviously COVID hit. COVID impacted our business plans or our our underwriting quite substantially in two ways. First, the build cost to build in New York and the real estate market as a whole was a a turbulent, to say the least. So asset prices with increased interest went down substantially.

28:29 The cost price we build in the hotel went up substantially, so that's one. And on the second part, also the the the legislation, particularly around unions in in New York, changed over COVID. So the whole underwriting thing changed for us. So we decided over COVID to park this project, and it's still in a pause motives. The project currently is in our books for $30,000,000, which is already down from the acquisition amount. It's in the NAV for $30,000,000. We would like, at this moment in time, we would look to recoup the the the money it's in the in the books for at the moment and not build a hotel. That's the current state. Thank Thank you. You. I think that answers the question. On NAV, Daniel, there's quite a a big discount between sort of the share price currently and the NAV that we report as a business. What's your your view on on the reasons behind that? I think, you know, as a company, it's it's it's weird to see that we are so far on the NAV, particularly, I think, because of such a strong pipeline and results coming.

29:34 I think from, you know, from an output point of view, I think if you screen us, you know, we're not we're not an easy company to understand. We're a complex company to understand. I think now with all the pipeline coming on, the results coming on, I think we're proving that we have a very strong cash flow. I think with refinancing going on, we will prove the valuation of our hotels. I hope that in the future that discount will will disappear. Pre COVID, the discount was substantially less. So I'm hopeful with us proving that we can confirm can perform and that we can prove the underlying value of our assets that that will narrow in the future. So and probably to support sort of that argument, the board has also introduced another share buyback. Yeah. Can you explain a bit more about, you know, the the second buyback in this calendar year that has been launched? Yeah. I I think I saw the question. I appreciate it doesn't, like, substantially move the needle. I think we have to balance the buyback with the liquidity that is out there. So for for us to be able to actually buy back.

30:37 So far, if we would spend the £4,000,000 that we've dedicated, which we expect to spend before the year end, we would have bought back this year 600,000 shares, which is one and a half percent of the outstanding capital. But I think you should really see it as as a a total total shareholder return because on top of the one and a half percent that we bought back in terms of shares, we're also suggesting a dividend increase here. And if correct around earnings progress, also the dividend will go up. So I think should see this as a total shareholder return package. Excellent. Thank you very much. Greg, we've seen some delayed openings, particularly with with Rome and the face opening with HOTEL. And one of the the questions is around the supply chain issues that that we've talked about in the in the messaging. Can you elaborate a bit more on what that sort of means? Yeah. Sure. I think what what it what we have seen is just slightly more delays with bringing some of our, you know, lease furniture and fixed goods coming from, you know, Europe into a v UK and v into Rome.

31:39 Two, Rome has been a complex market to develop in. One, due to litigation issues, dealing with permits, dealing with licenses to operate, understanding the the demolition process. Whilst we do have a significant amount of advisers which support a group through this, it's been a a process of learning as well. So I think coupled with some of the bureaucracy challenges we've had in other territories or new territories to the company, coupled with some of the the the supply chain issues which we've had across Europe, those are the main issues, so to speak.

32:25 So nothing more than that. These are just purely within the the new the new assets and learning new territories. That in mind, we do see Rome opening q four this year. Makes sense. Very good news. Which leads me on to the next question that was raised. Are we looking at maybe opportunities to grow and open up in Paris? First yeah. First of all, Paris is a target market for the company. However, you know, Paris is not new to PPHE. We've been looking at it for many years, as you know, Robert. It's an incredibly expensive market to penetrate. When I say that, we are very disciplined investors.

33:10 You know, we have a certain criteria, which is more, I would say, cautious than some. We like to make sure that we have high levels of incremental rate of return, etcetera, on our investments, and we have good shareholder returns on our investments as well. So our thresholds really to penetrate Paris is very difficult. One, with the procurement of an asset, and two, operating of an asset is also very expensive in certain parts of France. Excellent. Thank you. So it sounds like, you know, similar to sort of New York, there is an appetite for these markets, but the financials and the operating mechanics have to work for us. And I think that sets us apart from some of the the mega brand companies out there today that are sort of growing their portfolios by signing hotels.

34:00 Hospitality real estate is the core driver for us as a business, so the yield profile has to work financially. So we're not driven by flags in the ground. Hence, the exceptional year this year with five hotels, and we're looking to expand, but not at any sort of given cost. Yeah. What you will see is where we are in a territory, we tend to have more than one property. So, logically, looking at the portfolio, you'll see our presence in London. You'll see our presence in Amsterdam. You'll see our presence in Berlin, Croatia in history in Pula. We have one hotel in Rome. You know, the appetite is to continue now with the learning and the skill levels and the teams we have now in place in Rome is to grow our scale within Italy, and we do see opportunities coming about in Italy.

34:46 Excellent. Thank you. That'll be exciting if we can grow our portfolio there. Daniel, there's a question on the the fixed rate debt structure that you referenced, the 100% fixed rate. Can you explain that in a bit? Yeah. So let me clarify. We are not doing a 100% debt. What I'm saying is our debt is bank debt is 30% versus the value, but all of the debt is fixed rate. So we refinance over time, and the the variable rate risk is is is zero as we speak. Also, just coming out of COVID and in 2023, we took forward starting hedges to already fix loans that are due to mature. So our company at the moment has no interest rate risk at the moment. Obviously, upon refinance, then you will have the the the interest rate that is that is there. So I hope that explains the question. Thank you. Greg, I'm gonna go back to what you said earlier about opening up into the new territories and that we like to have more than one hotel in one market. Can you sort of outline what some of the benefits are for having such a concentration in a market?

35:58 Take London as an example where we've opened two hotels in the last year. Yeah. So it's a good question there. Is is London easier to open in? Obviously, have a team. We have an infrastructure. We have relationships. We know developers. We know financing. You know? So from that aspect, we can bring out a a property in if it ticks all of the right boxes for us very quickly. I think, however, one thing to note in London, whilst PPHE has grown significant, I would say we're probably the biggest developer of hotel assets within London recently. You know, it's becoming more and more challenging in London. The planning process is particularly protracted at the moment. We just won a planning appeal recently for our property in Park Plaza next to our property Park Plaza, Waterloo on Westminster Bridge Road. And as I've already said, that's a 886 miss mixed use development scheme, which had planning officer approval ticked every box for the planners, was recommended for approval, but was voted down at committee for reasons which were not really valid.

37:16 It then went to a planning arbitration, you know, on appeal, and we won it. And they you know, we won that appeal within seven days because it was a oven ready scheme, which generated value for the area and economic growth for the area and services. So, however so what I am saying in short, we like to invest in London. We look to invest in London. However, we do second guess it at the moment now, with the current issues within planning. So areas like Italy, certain areas of Croatia or Eastern Europe, you know, it's a lot easier to develop in and a lot quicker to bring a property to market.

38:06 That's great. That makes makes a lot of sense. Albeit that, obviously, longer term, we still have these amazing sites to to develop Yes. I mean, yeah. For market. We are there. We do have a pipeline in London. As I said, Westminster Bridge Road, Hoxton's fully got it open, and we've got a land site on the A 40 next to our Park Royal property, which we are looking at how we can optimize. Excellent. On the on the cap rates, on the discount rates, Daniel, in sort of the external valuations, do they take into account the soft opening and ramping up of of some of these assets? So one element of discount rates is obviously the risk in the cash flow forecast. So the answer is yes, albeit it's not a massive difference. I would say it's probably ten ten, twenty bits in the in the preopening phase versus stabilization.

38:55 It's mainly to do with the certainty of the cash flows of you proving a track record of so if we open a hotel in a new market, that would typically be the case. If we open a hotel on the South Bank where we already know how the trading pattern looks and the risk is less in the in the forward, then then that wouldn't be the case. But it's a it's a smaller But you might be discounted by the following rolling year Yeah. That is sort taken out. But, obviously, valuations are are impacted quite substantially with the ramp up because the cash flows that are coming in the first one, two, three years are substantially lower than the cash flows that are following the the stabilization phase. So you typically see that the massive value grows over the stabilization phase.

39:40 Thank you. That's all very clear. There's a good one there for you, Robert. I'll read it for you. Do you think the overall bal how do you how do you think overall about the balancing between RevPAR versus occupancy, bringing down rates and increased occupancy given fixed costs? Does this not make sense for economic logic? That's a that's a lovely question. I think the answer is is actually somewhere in the middle, to be honest. I think we could fill the hotels every day. Say, if we talk to investors that own, for example, offices, they focus heavily on occupancy. Right? We could fill the hotels a 100% every single day. We choose not to do so for two reasons because rate gives us better profitability.

40:26 Extra euro or pound on the rate is nearly a 100% flow through to the bottom line. Whereas for occupancy, we have all the costs we incur to clean the room, staffing, utilities, water usage, amenities, and so on. So we try to find a balance between rate and occupancy, and how we get to this sort of balance is based on on market demand and also what is sort of our competitive sets pricing position, what is our business on the book level. And I think if you were to look at our business on a on a like for like basis, you'll see that we've grown occupancy by nearly three percentage points year on year. So we have demonstrated we are growing occupancy, but we had to work harder for it. So there has been a stabilization of rates. So it's it's been against a very tough comparable period last We had the the benefits of the King's Coronation and all the pent up demand, the the ledger demand. And maybe what we've seen this year is more of market segments coming back into the into the business, such as groups, meeting and events.

41:31 So it helps us to give a a more evenly spread based business on on which we can yield. So to fully go for occupancy right now is not our desire. We want to go for the most profitable business. So it is that balance between between rates and occupancy. We have about probably four percentage points to go on on an overall basis before we get to sort of 19 levels on a group level. So there's definitely scope, and that's on a consolidated level. It varies by region, but there's definitely more occupancy that we can build into the business. But at the same time, we wanna be protective about the the average rates just to to keep keep the the profitability in in place. Shall I ask the two funding questions here, Robert? So what amount of cash can be released by near near term refinance?

42:16 As I just alluded to, I, at the moment, do not expect a release of extra funds given where the interest environment is. So refinances that are coming up at the moment, I expect to refinance the current maturity. Should interest come down, we can always during the term of a facility, we can always choose to refinance and take out extra cash. But as I said, where the interest rate is currently, we do not expect to release substantial extra money. In terms of the reforms on leasehold and ground rent, the question, any risks at all from talk about reforms. We have a contract. The contract dictates a lease. It dictates the term, which is over a hundred years. So I think on the less lessee side, there is no risk. We have a contract.

43:06 I think on the lessor side, what is expected is that a lot of these leases will be transacted into secondary markets. So it depends on the prices that these leasehold will be transacted, but, obviously, we keep an eye out if that makes sense in terms of in terms of looking to refinance or to buy those leases back. Excellent. Thank you, Daniel. Probably a broader question on on The US market where there is a a reported sort of drop in in in tourism and travel following a phase of growth last year. Do we sort of expect something similar to happen within within our markets? And and if so, would that be a severe impact on us? Yeah. I think I'll answer the second question as well. The US dollar move currently as the dollar is a little bit under pressure versus the sterling and and the euro.

44:00 I US hospitality sector is a very, very wide setting. So I think we are very much city driven, London, Amsterdam, which, yeah, which which are different markets to to begin with. We have shown a rate decline in in London now in the first half. I think it wasn't helpful that particularly leisure dominated months leisure gives us the the high rates, really. The leisure dominated months and early Easter with cold weather, a rainy June, that that that's not helpful. A compare a bit comparable with the coronation last year, that's all not helpful. Going into July and August, we didn't see that trend continuing. I mean, the visibility for our bookings is short. The booking lead time is twelve two to four weeks. So at the moment, in our visibility, we don't see this this downturn.

44:52 Dollar move, so dollar to sterling, dollar to euro, it could impact when the moves are more substantial. So we see if the moves are 1015%, we do see an impact of that. But that's currently not the case. I mean, the dollar did move slightly, but not substantially enough to to start impacting demand. To To add to that, I think as a as a business, we have quite a diverse demograph sort of demographic footprint in our hotels. So we're not exposed to a single market and tend to sort of tailor our approaches to whatever market is at any point in time in a downturn or in an upside cycle. So I think our products and our approach is versatile and flexible enough to to adjust. We also have numerous tools when we look at geographic production. So if you're looking at a market, for example, like America, we look at numerous factors. We have technology which allows us to see actually where booking patterns are coming in. Is that back on last year? Is it the same play point at the same pace as last year? It also looks at the number of flights generated into a region from The US, for example, as a but it could be Australia, for example. But, you know, we can see actually how many air seats are being sold for London from a an area, for example. So we're not seeing a decline.

46:17 What you do see, though, and what is noteworthy in my experience, whenever there is a presidential election, that will see a slowdown of US travelers during this process. So I do actually anticipate a little bit of short term demand weakening from The US when there's an election, but it rebounds very quickly. Great. Thank you very much. Jake, we've we've run out of time. So, hopefully, that was informative session for the audience. Back to you. Perfect. Thank you, Greg, Daniel, Robert. Thank you very much indeed for your presentation and for addressing all of those questions that came in from investors this morning. Greg, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, If I could please just ask you for a few closing comments to wrap up with, that'd be great. Thank you, Jake. Yeah.

47:10 So I think as you've we've demonstrated through the presentation, and actually, this is a a number of presentations we've done on this platform now. We are a well managed and motivated company. We have very strong assets, really well located in key cities, and a very, very well positioned portfolio. We are starting to see normalized trading patterns come back into our business mix, which is positive pre the pandemic. We're starting to get back as business as usual. We're starting to see all of those benefits coming into fruition in our cost base with all of our processes we've been doing to reduce costs for the business and generate profits.

47:57 And I think as you've seen here, looking at our pipeline and where we're going, the new assets are gonna generate a significant amount of EBITDA, potentially 25,000,000 upon stabilization, which obviously impacts shareholder returns. So with all of that in mind, I would like to say thank you very much for listening to us and asking us your questions. And if there's any more questions, as Jake said, on the chat, we'll come back to them in the future. But thank you very much. Perfect, Greg. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of PPHE HOTEL GROUP LIMITED, we would like to thank you for attending today's presentation.

48:50 That now concludes today's session. So good morning to you all.