Pphe Hotel Group (LSE:PPH) — Introduction and 2021 Full Year Results

0:01 Good morning, ladies and gentlemen, and welcome to the PPHE HOTEL GROUP INTRODUCTION AND twenty twenty one Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like

0:32 to submit the following poll, and I'm sure the company would be most grateful for your participation. And I'd now like to hand over to Daniel Cost, CFO from PPHE HOTEL. Good morning, sir. Thank you very much, Mark. Welcome to this presentation on PPHE HOTEL GROUP. My name is Daniel Kos. I'm the CFO of PPHE. On my left, I have Greg Hagerty, deputy CEO of PPHE. And on my right, I have Robert Henke, head of commercial of PPHE. Just as a small note, we were just informed that we have an scheduled fire alarm at 10:15. We'll try and talk over it as much as possible, but at the moment, it becomes really loud. We will go on mute shortly and then pick up after the fire alarm is is done. Apologies for that in advance.

1:24 So just to start, we are a hospitality company. We're a bit different than others in the industry in a way that we build, we own, and we operate all of our assets. And special about us is that we have our own management platform to do so. And there's a few things that set us apart. The key features of that are that our founders are still very heavily involved in the company as as management, but they also still hold 44% of the shares, which makes them true custodians of capital. And their entrepreneurial DNA is fully embraced by our executive team, and we all have over ten years of tenure with the company. Our business model will give investors exposure to returns across the entire value chain of hospitality real estate. Because with our buy, build, operate model, we build ground up.

2:16 We we develop we redevelop office blocks, and we have a strong capital recycling approach, which is important to say that we have not diluted shareholders since IPO. And we think that our hospitality management platform will give you a growth opportunity. So our focus is primarily on driving equity, growing the NAV. And we do that by building assets, by repositioning assets, but also by excelling operationally. We have a very disciplined capital allocation, and we have certain yield profile that we will present to you later. And our track record on the back of that is a total shareholder return since IPO of 224%, which includes a two year COVID period, and that's based on share price. We are currently trading quite substantially under our net asset value.

3:05 If you look at the net asset value total return, we've been on 350% since IPO. And again, that includes a two year COVID And this is without diluting shareholders. Pre COVID, we were also doing a ten year double digit compounded annual growth rate on revenue and EBITDA. So our strategy is really what makes us different. So we're an integrated developer, owner, and operator, and and real estate really sits at the heart of our strategy. We have a very strong preference for assets with a development potential, such as ground up developments, such as office refurbishment office conversions or tired hotel assets. And we like to have full control over every aspect in that value chain. Our portfolio is very diversified.

3:51 We predominantly focus on Europe, which is the world's largest growth market, and and we have two distinct segments. One is leisure and outdoor, and one is key city center. We have a unique approach to our capital capital structure. It is fully self funded through capital recycling. And when we raise capital, we raise capital at the asset level and not diluting PPHE shareholders. And we do that by raising debt, but we also raise third party equity on our asset on our assets. And as I said, quite special about us is that we have a fully scalable management platform with an exclusive relationship with Relis and hotel group. So usually, REITs or or hospitality land owners, they need third party operators to operate their assets. But we have our own platform.

4:41 And this platform growth is growing as a stand alone value. So we grow it on the back of our own assets, on assets that we jointly own as a majority or a minority, but we also manage third party assets. And the agreements in this platform are typically long term. They provide a fee base that is based on the revenue and the profit of the underlying hotel, providing an upside on hotel trade. So this circle here summarizes what I just said on the previous slide. We typically buy land. We buy an office block. We buy a a a tired hotel, which we then develop or redevelop. We put our own operating people in there, our general management, and our brands, and we create a lot of value. And that value, we typically take out and recycle back into the business, and that's how we grow shareholder value.

5:33 And on this slide, I'm trying to illustrate the capital growth and how this capital recycling works. So you see that since IPO, our total capital structure has grown over 600%. But you can see that the PPHE equity holder element only grew over a 100%, which is mainly retained profits. And that's with our properties at historical cost and book value. And like I just said, we create a lot of value on top of that cost. And the slide on the right side, the horseshoe, reflects that. So you see that the majority of our capital is PPIC shareholder equity representing 40% of the total capital. 17% of the total capital is minority equity. That's what equity raised at the asset level.

6:19 A key characteristic there is that we have protective arrangements on both sides. So we are never stuck with each other. There's always a way to exit the relationship.

6:29 And then if we go to the more debt like structures, 11% of our capital is based of ground rents. So the liability you see there is future ground rent payments. And a key characteristic here is that these are nonrecourse asset backed. They have no covenants, and the majority have a hundred years maturity. And then, obviously, we also have normal mortgage bank debt. Our bank debt is typically nonrecourse and asset backed. Our net bank debt leverage sits at a conservative 33% currently. The cost of debt sits at 3.1, and the average maturity profile is currently five point three years. So with this model, as I said, we've created quite a bit of returns for shareholders.

7:18 And we feel that these are two on this slide, we will present two real estate KPIs to you. On the left side, we have the NAV per share, the EPRA NRP per share. We IPO for £5.50 in 2007. And currently, after COVID, we report a NAV per share of £22.50. And it's important to say that £4.68 of this NAV is not yielding at the moment because in any point of time, we will be building new hotels. So this 4.68 represents hotels that we are currently building or redeveloping, and it represents an excess cash that is there to deploy for further growth. If you go to the right side of the table, this is an important metric. This metric is it's called EPRA, adjusted EPRA earnings. In The US, they call it FFO.

8:07 You can also call it recurring cash flow per share. This metric gives you the the return of the operations less the cost of the capital structure that I just presented to you. And pre COVID, we were doing £1.28 per share on that, and we typically pay out 30% debt in dividends when we are usually, we have a progressive dividend policy.

8:34 If we're on this slide, you know, we we've we've we've had a rough period in the last two years. We think the majority of that is over. We hope and we want to look forward again. So if you look pre COVID, we were reporting a NAV close to £26 per share. Our EPRA earnings were £1.28 per share, and our platform was making 10,000,000 EBITDA. And as you can see in the middle, COVID has affected that. So £22 NAV as we speak and a cash flow loss and a a EBITDA management loss. So we wanna take that forward, and our ambition in the medium term is to bring NAV to £27 per share, to have our cash flow earnings at £1.70 per share and to bring the hospitality platform to 15,000,000 EBITDA. And we're going to do that by focusing on real estate returns, 6% on new acquisitions, 7.5% on new developments, and we do 10% on repositioning CapEx.

9:30 And that is unlevered. So if we put leverage or or capital recycling against that, we hope to achieve double digit returns on our real estate assets. On the right side, you see how we wanna grow the management platform. It's predominantly building scale to our own portfolio, which is either majority, minority owned, or third party owned. So the growth very much coincides with the asset space. Thanks, Daniel. So where are we today? We currently have a portfolio of 48 properties in operation, which is mainly consisting of freehold and long leasehold assets in Europe. Our our strategy is twofold. We have city center hotels, typically in prime city center locations close to main attractions and landmarks as well as corporate offices.

10:19 And then we have the resorts, camping, and building, and outdoor sort of business unit. We currently use a number of commercial brands, mainly in the upper upscale segment of the market. And in Croatia, we have a mid market offering as well predominantly within the camp sites. So in The UK market space, Park Plaza is what people know know us for mainly. We have a significant estate in in London, and I'll touch on that a bit later in the presentation. We have a an art hotel brand, which is upper upscale lifestyle, and we have some exciting pipeline projects within the within that brand, which Greg will touch on in a in a few minutes. We are active in eight countries. So the majority of our properties sit in The UK from a valuation point of view. The Netherlands is an important market where Amsterdam sits at our core, Germany, Serbia, Italy, Hungary, Austria, and Croatia.

11:14 Three of those countries were added in the last two years, so we were very pleased to be entering Serbia and Austria, and more recently, Italy with the acquisition of HOTEL in Rome, which we'll touch on a bit later. The 1,800,000,000 valuation is done by external companies, So several mainly as well as a an entity which is part of UniCredit.

11:38 So moving on to the next slide. This is our geographic spread. So within The UK, we have a number of provincial cities, but the bulk of our states sits in London, where we also have a sort of sizable office and support team in place. In The Netherlands, most of our properties sit in in Amsterdam, and then we have two provincial hotels in Utrecht and Eindhoven. We have hotels in Germany from Berlin to Nuremberg in Cologne, Budapest in in Hungary, more recently in in Belgrade, as I mentioned, and a large concentration of hotels on the Croatian coast in Istia, which is all within driving distance from key tourist markets for our portfolio such as Germany, Austria, and Italy. And we were very pleased to be entering Italy in November last year. On the right, we see our exposure and footprint in London.

12:29 We are one of the largest owner operators in the London market within the upper upscale segment of the of the hotel industry. We have 3,200 rooms in operation in London today with the potential and and development pipeline of another 1,100 rooms. We have two and a half thousand rooms on the South Bank, including our flagship hotel, which is Park Plaza Westminster Bridge that sits opposite the the the the Big Bend and the house of parliament. And we have two exciting projects in the pipeline for Arctotel, one in Hoxton and one in Battersea, which Greg will expand upon. Our offering in London, especially, is very diverse. So we have hotels that cater to different market segments throughout the year. So we're very closely located to some of the main corporate clients in the London market.

13:21 But our room stock and product is also very attractive to the family and leisure market. So throughout the pandemic, we've really been able to shift market segments and drive demand through leisure predominantly, which is currently the leading segment. So we have a lot of family rooms. Most of our hotels have swimming pools and health and leisure facilities. So we're well placed and well recognized particularly in the London market. When we look at the next slide, we see sort of the context of that 1,800,000,000 in value. So nearly 50% of that sits in in The UK, which is on the pie chart on the left, the yellow, is is well over 900,000,000 of the the value sits in The UK, and most of that is London. So Leeds and Nottingham only have a small proportion of this. The next biggest market for us in terms of real estate ownership is The Netherlands, and that's mainly in Amsterdam where we have free hotels in the city center and one at the airport.

14:14 Croatia is a large segment for us with a number of resorts, hotels, and campsites and glamping products. So in the last few years, we've been investing and transforming some of our campsites into glamping offerings, allowing us to command a premium rate and return on those assets. And that's what Daniel referenced as a repositioning project, where we take something that is maybe a bit tired or two star, three star, invest, and then relaunch it as a four star plus offering. And then we have assets in Germany and other markets such as Italy and Serbia. On the right, we see the split between city center and leisure and outdoor. So we are active in 17 cities today with with our properties across the eight markets that I mentioned.

15:04 Yeah. The the operating platform that we have sets us apart from many of our peers. So we have the real estate at the heart of the business, but we also have our own management company. And that management company is a team of specialists in every discipline that one needs to operate a hotel or a hospitality asset. So sales, revenue, HR, accounting, legal, all the back office functions to drive the day to day operation of a hotel is provided by us. So we

15:35 don't need to engage with third party management companies. We have a team of specialists that is located across London, Amsterdam, Berlin, and Vula in our offices there. And, basically, what they do is they deliver the day to day operation and drive the performance of the assets. We do believe there's a lot more scope to grow the platform, and we have some examples where we not only manage PPHE owned assets, but we also manage assets on behalf of our joint venture partners. And we have third party management arrangements where

16:05 we manage properties on behalf of other owners, third party owners. We have a hotel coming online in the second half of this year, which is a pure management agreement as well. And the owner recognized our infrastructure and sort of best in class performance throughout the history of our group. We have our own housekeeping agency in London, which is unique in the marketplace, and that's really helped us to manage through the pandemic whilst we're, obviously, as an industry facing staff shortages.

16:34 We took the decision to insource housekeeping as a preparation for Brexit, and that's been one of our best decisions in in the last few years given the flexibility we now have to move the workforce across the different units. Revenue management is at the heart of our business, so our teams are targeted to really sort of make the most of every single revenue opportunity, be it for food and beverage, restaurant rooms, meeting and events, and so on. We have a a lot of industry recognition throughout the history of the group, and we were very pleased that in 2021, despite the pandemic, we were voted and elected as the best employer in hospitality in The UK. That was awarded by the Cater, which is the leading trade publication in the in The UK.

17:23 And that's a major external recognition for our group. Just before COVID started, we were also awarded the AA HOTEL GROUP of the Year award. So it's not just us talking about how excellent our team has been working throughout the pandemic, but it's also external organization that helps us to position the the business.

17:43 Moving on to the next slide. One of the key drivers of value for us as a management company is the access to Radisson Hotel Group. So we are independent owner operator of hospitality assets, but we utilize the the Park Plaza brands under a exclusive license from Radisson. So Radisson is a well known and very well established hotel company. They have over 1,600 hotels across the world. Under their ownership, which is a Chinese conglomerate, it's actually the second largest hotel group in the world after Marriott. So how and where do we work with them? Basically, under a perpetual and exclusive license, we are the exclusive master franchisee for Europe, Middle East, and Africa to operate and develop Park Plaza branded hotels.

18:30 What that allows us to do, we can market our hotel assets that are Park Plaza branded through Radisson's reservation system, their infrastructure and connectivity towards business travel agents, meeting planners, online travel agents, and basically allowing us to market our product globally. Radisson

18:50 also develops and operates the technology infrastructure to support all of this activity as well as the websites, mobile apps, and the loyalty schemes that are attached to this. So Radisson Rewards is a database currently of 124,000,000 frequent travelers, and we have then the access and ability to market our products to the the members with targeted campaigns offers. In addition, we can leverage the sales teams, sales activities, their global marketing, PR, and buying power. And buying power is a lot of commercial agreements, including reduced commissions with key travel agents and online booking websites for its own.

19:27 This license is unique. These sort of arrangements are not done necessarily in today's marketplace. This is an historic arrangement. And through various ownership changes in in sort of the issue, the Park Plaza brand, Radisson is now the owner of the brand, and we are the owner of the European license, basically.

19:46 We also market our ArthurTel property properties through the same arrangements. So it gives us scope to develop Arthur Tel as a global brand. Greg will take us through the pipeline. We have some exciting Arthur Tel projects in the pipeline, and up to you, Greg. K. Thank you, Robert. So the third area of growth we wanna show you here is our real estate pipeline. The real estate pipeline currently has nine active projects there with over £200,000,000 worth capital deployed within these projects.

20:19 These projects typically are from ground up development, office conversions, or actually reposition portfolios, and there's a selection of them as we can see across there. I will talk about a few of them in a moment. But as well as I talked about the pipeline, we wanna talk a little bit more about the platform and how we're going to recover as we go through in this section. Looking at Ardutell London Battersea, this is our

20:47 imminent opening, which is due to open in q three of twenty twenty two. It's a significant property at Battersea Power Station. It will be our first London Arduttel, which Robert has already alluded to, operates in the upper upscale lifestyle segment. Beautiful property overlooking the power station. It's iconic. It'll be a 164 rooms, and we are really looking forward to that opening. One notable fact about this property for PPHE, it will be our first management contract third party management contract for the Arts hotel brand. So something we're looking forward to operating.

21:27 The second project of note in London is Yardstown London Hodgson. As you can see there, it's a £280,000,000 project. It's already well underway. This is currently at the 24th Floor out of 27th in current development. We see the art cell London Hopson opening in 2024,343 rooms, significant

21:54 office space there also. So it's a mixed use scheme with galleries and media areas. So it's a really exciting property in the tech city of Shoreditch. We have two bounties, which we're gonna portray on there. So it's an exciting project for us significantly. The next imminent opening is the Grand Hotel Brioni in Croatia. This is a beautiful luxury asset class property, which is located overlooking the island of Brioni. It's a 227 room business, a £30,000,000 reposition project here, and we are opening that in April. And as we go through there in terms of a pipeline, a very good example of our repositioning of an asset will be the ARCTEL in Rome, Italy. Earlier this year, we purchased a property in Rome near Via Vento.

22:48 It's currently, you know, an operating and, trading business. However, we will be deploying £10,000,000 worth of CapEx into that business and reposition it as our our hotel in Rome. So significant growth coming through the hotel portfolio there. Thank you. The other area I wanna talk about is the management platform. Now our management platform back in 2019 generated £10,000,000 worth of EBITDA. And what we wanted to say is the future opportunity of that management platform just based off the pipeline coupled with the recovery of the sector, we all have a medium term EBITDA ambition to grow that platform to £15,000,000, albeit through the new openings of what you can see are happening this year and into next, the recovery of the sector, new acquisitions, which we are still currently looking at from a development point of view. Our development team is very active out in the market.

23:46 We are dealing with joint ventures, third party management contracts to grow this area. And what is one thing to note, because of the scale and infrastructure of a PPHE team,

23:57 we don't foresee any upscaling needed, and we should be able to use the tacit knowledge within the business to continue. So as I've already said, what I wanna talk about now is how we are seeing the business, how it is evolving, post COVID, well, not post COVID, but operating out of a COVID environment. As we've seen, it's been, very, you know, dynamic and challenging for the hospitality sector. However, from our point of view, investors can very much benefit from an industry that is recovering from the most most disrupted period ever. With our strategy and our model, we are able to quickly respond to the current market trends, and these have been demonstrated for our performance in 2020 and 2021.

24:43 Trends we are currently seeing is very, strong domestic travel in all of our operating regions, which is dominated by the leisure market currently. We had one of our most successful half terms in February, just gone now, in The UK where we actually had the highest occupancies since COVID and 2019 levels. Corporate travel is still quite uncertain. It is starting to come back to The UK, but it is heavily disrupted. We are getting more and more green shoots in this sector. However, if you we were operating a corporate hotel business alone, we would be finding that a bit challenging. All of our hotels currently are city center hotels, which cater for both leisure and corporate due to our strong locations, which enable us to adapt between segments.

25:39 We have a strong driven leisure market, and we've always actually managed to dominate this market, especially in London and in Amsterdam where Robert's already alluded to, we do cater our businesses towards a family market during those leisure times. But also, our properties have very high end quality food and beverage and leisure. And for example, the most of the London portfolio has swimming pools in the domain, which actually does drive significant demand. The future of travel patterns are remaining unclear. However, we are monitoring them. One thing we can see is there is a return to aviation, especially into The UK market. Aviation patterns are increasing. Crew patterns are increasing within the business, which is very, very promising indeed.

26:29 Also, what we are seeing, there is a change in customer trends towards digitalization. Whilst we knew that this was happening, it's very much been accelerated in COVID. And PPHE in 2020 and 2021 heavily invested in this area. So we are perfectly repositioned to actually manage that transition of digitalization. You can now check-in online, check out online, book a room online, integrate with the food and beverage teams from your bedroom, from your mobile device, as well as being able to change your channel of your television. So it is really, really well progressed indeed. So our digitalization and mobilization strategy, which we did through COVID, we're particularly proud of.

27:18 But one area which is key to note, one thing we do have to bear in mind, and Daniel has already touched on it, the hospitality industry is having the the largest challenge it has ever had with resources. Now what we are seeing is actually in post COVID is actually the true impact of Brexit. Now the situation is normalizing in The UK. We do have a significant amount of changes within our, portfolio in terms of our labor challenges. We as Robert's already alluded to, we have insourced our housekeeping department that has been enabled us to actually manage all of those peaks and troughs of occupancy. It's also allowed us to make sure that our team members are well looked after and maintained.

28:05 And as Robert already mentioned about we did win best employer in hospitality. So that has allowed us to attract talent. I'm not saying it's not without its challenges and cost pressures. However, we are doing as much as we can to mitigate that impact. Okay. Moving on to what's happening for the future and what did we do really in 2021. Okay. In 2021, now looking back, you know, during the the second half of twenty twenty one, it wasn't a a disrupted period both in UK and most notably also in Holland, in our Dutch portfolio, which is just starting to unlock now along with the German portfolio. During this period of minute, we faced, as you're all aware, many government restrictions, but being able to adapt to that, you know, with the agility and flexibility of our management team and actually being well versed with this, we are able to protect our operational results as we went through. However, we did actually have some golden nuggets of business during this impact.

29:09 We will go on mute slightly because of the fire alarm. So we will go on. That's no problem at all. Ladies and gentlemen, as Daniel highlighted at the start of today's presentation, there is a an a scheduled fire alarm, which unfortunately goes these things happen when you have live investor presentation. So please do bear with us. Just a reminder whilst we wait for the alarm to switch off that you can pre submit you can submit your questions. If you just open the Q and A tab on the right hand side of your screen, you'll see the Q and A tab there. And please just simply type in your questions and press send. Of course, as soon as Daniel and the team have gone through the fire alarm, we'll recommence with the presentation. I will come on in the intermittently just to tell you that we're still here and to make sure that you don't think that we've lost connection. So please do bear with us. Thank you.

30:02 Thank you, Mark. I think we have the worst, so, Greg will continue. Perfect. Thank you very much indeed. Back to you, sir. Thanks, Anil. Apologies for that. So, once again, well, I'll start from where I left. We had some golden nuggets of business in the portfolio during 2021. We had two properties, part part of Waterloo and part part of Victoria, which were a 100% allocated to the government quarantine program. And second sales and marketing initiative in 2020, positioning our significant conference and banking hotels here on the South Bank as bubble venues because what we were getting is lots of inquiries about, could you still hold an event for a thousand people, but give it for exclusive use?

30:48 Just one moment, please. Okay. I'm just gonna progress. So one notable bit of business we had actually was for Westminster Bridge in June last year, which was actually the Wimbledon bubble. And when I say the Wimbledon bubble, we actually we're two destinations with the old English tennis club in Wimbledon, and actually Park Plaza Westminster Bridge was the venue where every single player, every single, physiotherapist, all the food and beverage teams, transport, logistical, and office, and actually COVID testing centers for the event were all located at the Park Plaza Westminster Bridge.

31:36 One of the success which we actually did in 2021 was unlocking a £114,000,000 worth of capital. We sold a 49% share of the Park Plaza Riverbank in London and 49% share of a development opportunity in our Ardentar, Hofston. And the positive note to say to this was this was done at the group's, NAF, which was really, really positive indeed. We also did two further strategic expansions. One was a 144 room hotel in Austria. That hotel complements our outdoor sector of strategic areas. And the second one, as I've already alluded to, was the Arduttal Hoxton in Rome. And I've talked a little bit a bit about the pipeline previously, over £200,000,000 worth of capital deployed over London HOGS and Grand Hotel Brioni, what we're doing in Rome and the Bacciat Station.

32:36 So going into the numbers a little bit deeper, we've obviously have been heavily impacted by COVID. So if we look at the property KPIs, we reported a NAV of 22 15 last year. You look at pre COVID, this is down from 26. And if we zoom in a little bit, £3 of that decrease is predominantly caused by the retained losses. In terms of property values, we are still 70 p per share behind property values of 2,019. If we zoom in and to do the details, Croatia is up on its 19 valuations due to the strong season and the heavy investments that we did during COVID. And the city center locations in The UK, The Netherlands, and Germany are still slightly behind on their 2019 valuation.

33:26 Valuations are externally performed by and based on a discounted cash flow. So the more bad news we have behind us, the more we should restore values back to the 2019. You can see that we report an EPRA earnings loss of 24 p, down from the loss of $1.23 in 2020. Although we were operationally profitable, we still had that service that made us cash flow negative. And that's also unfortunately why we have not suggested to pay a final dividend this year. The the significant subsidy is paired with the cash flow loss. We don't think it's appropriate or sustainable. We do, however, review our dividend policy. We know it's very important. So in the moment we're back to cash flow positive territories, we will definitely review our progressive dividend policy again.

34:15 Looking at some operating KPIs, you see that our RevPAR obviously is down substantially from 19. This is mainly caused due to occupancy. If you look on the room rates, we're actually only 10% behind on '19, and that is due to the discounted business that we took in the year. We currently see a trend that room rates are already exceeding 2019. So in terms of our consolidated financial KPIs, it's very difficult to compare two COVID periods, '21 with '20, because the trading dynamics are completely different. In 2020, we had a record January, February, whereas in '21, we were pretty much fully shut for the first five months of the year. Also, traveling in the summer of twenty twenty was much easier because we didn't have all the testing and the quarantine measures, which were there in 2021, which definitely affected our Amsterdam region.

35:09 And if you look at our EBITDA, we were fortunate to report a positive EBITDA of 25,000,000 this year, predominantly contributed by Croatia. In all the months that we had a negative EBITDA, we were supported by all the governments around in our territories, getting payroll support, getting fixed cost subsidies, and getting business rate waivers. K. Thank you, Daniel. So the outlook is that we are well positioned to benefit from the market recovery. As I've already said, all of our markets now are reopened after a COVID restricted period. One bit of fresh information which we could share, the current booking pace in The United Kingdom, which is the the region which has opened up soon opened up first versus Holland and Germany, is now trending at 65% of its booking pace versus 2019, which is very, very positive indeed and encouraging.

36:07 The Netherlands and Germany have just opened, and they're now starting to gain momentum. And as we've already said with our hotel, Brioni opening in Croatia, the demand for Croatia shows strong pent up demand, and we are expected to recover to pre COVID levels. We were starting to see pre COVID levels in, August and September in the Croatian region also. The full year for 2019, however, the recovery is expected by STR and real estate values, is due to be 2024. So the external bodies and people who monitor, you know, the data for hospitality are saying by 2024, we should start to see the recovery to, pre pandemic levels within the, sector.

36:56 So as we've discussed through this presentation, you know, we do wanna discuss with you and give you a summary, but the management team are experienced. They're long standing. They have a proven track record, and we're very proud of them. Number two is our business model. PPHE offers a unique exposure to the full hospitality real estate value chain. Thirdly, we have a strong track record, consistent focus on growing equity value and capital discipline underpins our returns as you've seen. And number four, the industry is regaining momentum, I'm pleased to say. So the industry has been heavily impacted by COVID. It's now regaining momentum. And as you've already seen, we've got strong investment demand for our hotel assets as ever present, especially with the deal we just did in 2021 at pre 19 levels.

37:50 That's it in terms of a presentation from myself, Robert, and Daniel. We're very much happy to answer any questions you may have. That's great. Daniel, Greg, Robert, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of the screen. But just while the company take a few moments to review those questions submitted already, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard. Daniel, Greg, Robert, obviously, have been able to submit questions throughout today's presentation. And I wondered if I may, if I could just hand back to you to open up the Q and A tab. And if I could ask you to read out the questions and give a response where it's appropriate to do so, and I'll pick up from you at the end. Thank you very much, Mark. Yes, sure. I'll read out the first question. What is the planned reinstatement of the dividends?

38:41 As we just presented, our dividends are very much linked to our cash flow. Our cash flow has been negative over the last two years, but has always been positive in the years before. Given that we think most of the COVID period is behind us, we feel we should be back into cash flow territory cash flow positive territories in the in the coming year. And if we are in cash flow positive positive territories, we will review our progressive dividend policy again. I read out another question for for you, Robert. Can you also confirm the relationship with Radisson? Is the license perpetual? Are there and are there targets that need to be achieved? So I'll start with answering that the license is perpetual, it's exclusive, and it's not banned by any, for example, development targets.

39:33 So our hotels operate based on a brand standards manual, and we are way above that brand standards manual. So there's no no real escape within that sort of agreement from a from a Radisson point of view. I just want to emphasize that our benefit is getting access to that system and platform and the marketing power. Radisson is not a property owner. They are a a licensor of brands and management company. So they benefit from our property portfolio in high barrier markets. So we have the benefit in terms of access. They have the benefit that they now have exposure in London, in Amsterdam with very good quality assets without putting any extra capital in. So for their global profile and their global marketing and databases, we offer a value proposition as well, but it's not bound by any any targets as such.

40:28 Next question for Greg. What impact has the Ukrainian situation on PPHE? Well, at present, it's little. We are monitoring it as we go. What we did see was a slight slowdown of booking rhythm when it started. However, as the situation has continued, booking rhythms have started to recover. The only strategic concern we had was monitoring the booking rhythm with Croatia. Not that Croatia is near Ukraine. It's a thousand miles from the border of Ukraine. However, we were just monitoring the booking rhythms and patterns on that region. And at the moment, they seem to be holding. I'll take two questions here. One question is, what discount rate does the company use to get to an per and $0.5.22 pound 15 on the assumption of a full return by 2025?

41:21 All our assumptions have been included in the deck, in the appendices. The discount and cap rates depend obviously on the region that you're in. If you look at key city centers like London and Amsterdam, cap rates are around five and a half percent and discounts discount rates around 8%. If you go to the more Eastern European countries like Croatia, cap rates are between 89%, and the discount rates in the 11 11%. I'll the next question is for Greg. Further to your expansion in Austria and Italy, is the plan to focus in these countries, or would you consider further countries? Why Austria and Italy in the first instance?

42:07 Okay. So I'll answer that from the backwards point of view. So why Austria and Italy? First of all, as as a company, you know, some of our entrepreneurial DNA comes through here. As I said, you know, we are very astute in looking at assets. And as a company, a we make sure that when we look at assets or territories, we wanna make sure we get value. There is a lot of demand for four star upper upscale properties at the moment, and price prices are at a premium. Where we have seen opportunity is in these, Southern European areas. So second of all, we will be looking at other territories. But specifically Italy, there was some opportunity post COVID as a lot of the businesses or hotels in Italy were family run and not dominated by the global players as such. Therefore, post COVID, there was opportunity as these families, etcetera, really wanted to liquidate their assets. And as such, there is some great properties and opportunities on market at the moment for them.

43:14 Typically, if we invest in a region or an area, we do like to have scale. So we are openly looking at areas to grow within these territories because we do if we have one hotel, we may as well grow the infrastructure like we have in London and in Amsterdam. Austria really complements our outdoor strategy. Like we said, we have city center core of our upscale hotels, but one area where we do wanna grow and diversify is that outdoor area and segments. It's a ski hotel. It's all it's, you know, very predominantly, you know, winter business. However, there has been a significant development also for walking, mountain banking, and activity related, stays for our guest, base. So as as we've said, you know, travel trends are changing.

44:07 Guests, are changing in terms of their needs for hotels and businesses. So we very much wanna continue to diversify the portfolio to make sure we actually drive demand and RevPARs all year round and actually make us less sensitive to any future macro environmental impacts. Okay. Next question is for Robert. Can you give some flavor as to the success or otherwise of the glamping upgrades being applied to the Croatian properties? I think this is one where we sort of get very passionate about. What we we have in Croatia is we have eight campsites, and they are beautifully located along the coast. And a prime example of is Arena one ninety nine, which was our first investment in in in a campsite product.

44:55 It'd been operating for many, many years as a true campsite, so people would bring their own camper and and caravan and tent. They would stay there for a few nights. They would sort of pay typically between 40 to €50 a night and would leave. What we've done there because this is a peninsula. We closed off the peninsula, cleared some of the landscaping, and pedestrianized the area, and built an all glamping village. So across Europe, you see many campsites who have caravans, tents, and some glamping tents. But what we wanted to do is offer a full experience. So we introduced a glamping village, which only consists of luxury lodges. So fully self contained units with bathrooms, kitchens, hotel linen that we have in our flagship hotels, Illy Espresso, and the Tesla charging stations, yoga platforms, you name it. It's really spectacular, but what it allowed us to do is build this in a relatively cost effective way. So it's not the cost of building a hotel, but the fact that we we have created a hotel at a much lower cost.

45:57 And, typically, what we charge in the high season now is between $2.50 and €300 a night. So not only that we have a lower cost of investment, we are seeing the significant rate premium uplift from going to from sort of €50 a night to $25,300 a night as a as a key success for us. Next question is, does the company itself regard the 2025 full return assumptions of the valuer as sensible, or is there a lower figure they are using internal projections? To be honest, we are more optimistic. And the valuators, by the way, are targeting '24 as a full return. We are more optimistic. And we are more optimistic looking at today's booking pace. If we're already seeing today a booking pace in The UK, which is a market that recovered or opened up sooner than our other markets, which is already sitting at 65% of '19. If we're looking at Croatia, which is expected to recover fully to 2019, we internally have an assumption that is before 2024 to recover until our 2019 numbers.

47:05 Next question is who is actually undertaking the build redevelopment work? I seem to remember it was an internal related company for many of the projects. Is that still the case? So internally, PPHE has its own development development department. We have our own design department. We have our own project management department. For external contractors, we are using a related party that is related to one of our founders. We obviously we are listed. We're a premium listed company. So we obviously always tender the work, and we're fully transparent towards shareholders whenever we do that. And we give shareholders a vote on these agreements, and our controlling shareholders are not able to vote on that. So even though this is a related party project, the vote is usually always with with our with the with the nonrelated shareholders.

47:58 Our contractor that we work with have always been able to build much more efficient, faster, and cheaper than the ones that we tended for, and that's why we like to work with them. Another question. Do you anticipate any change to the rate of recycling capital in the coming years as investment market for hotels heats up again? If you have more capital, do you have the project pipeline or the capacity to take more development projects? And another three questions in one, would you ever consider going fully capitalized model on the management platform? So let me first start with the amount of projects available and the amount of capital available. We currently see that there's more capital available than there are projects out there. So as you just heard, we have a unique capital approach.

48:50 We sometimes do majority capital. We also do minorities, and we have partners that have enough capital available. So we have enough capital available for our current development line, but also for any new pipeline that we take up. Recycling capital in the in the coming years when the hot hotel market heats up, We are in this industry now for thirty years, and and we've been doing this recycling along the line. So we recycle in cities and in values when it makes sense. We don't particularly look at markets that tend to heat up. I mean, the hotel market has heated up many, many times over the past thirty years. Would you ever consider going fully capital light? We think our strategy has proven itself, particularly due to these last two years of COVID. That strategy worked a lot. Our asset heavy base basically provided us liquidity, and it has always provided us with liquidity to grow the group further. I mean, the 350% growth since IPO, we could have only realized that with assets as a base because that's the basis for recycling capital.

50:02 So we firmly believe in that strategy. We do think that our hospitality management platform will give an extra value to the group, and that's why we today presented that to you. If there are no further questions, I see in this moment. Yep. That's absolutely brilliant. Daniel, thank you very much and to Robert and to Greg for taking the time to manage through those q and a, particularly with the fire alarm as well that you had to navigate your way through. So thanks I once again for your time know investor feedback will be important to you guys, and I will shortly redirect investors to provide you with their thoughts and expectations. But before doing so, if I may, Dan, if I could just ask you for a few closing comments to wrap up with. And then as I said, I'll redirect investors to give you their thoughts. Yeah. So for for dialing in today.

50:49 I I hope we we are you we have the worst behind us in terms of COVID period. We are very optimistic as a management team, looking forward again, and and this is a unique opportunity to step in and regaining momentum in our in our industry. Thank you very much for your attention today. That's great, Daniel, Greg, Robert. Thank you very much indeed for updating investors this afternoon or this morning. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order management could better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of PPHE HOTEL GROUP, we'd like to thank you very much for attending today's presentation, and good morning to you all.