Safestay Annual Report 2022

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FY2022 Annual Report · Safestay

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ANNUAL REPORT 2022STAY IN A NEW KIND OF PLACE

£19.1 million

Total revenues increased to £19.1 million reflecting a return to near normal trading (2021: £6.4 million)

20%

20% increase in average bed rate to £23.63 (2021: £19.70)

£5.9 million

Adjusted EBITDA increased to £5.9 million (2021 loss: £1.0 million)

£5.5 million

EBITDA reduced to £5.5 million
(2021 profit: £7.2 million due to the sales of Barcelona Sea and Edinburgh hostels)

97%

Trading broadly uninterrupted with our 16 premium hostels open for 97% of the year

Contents

Our locations

2022 delivered a 4% revenue upside versus 2019

Our digital strategy

A new kind of Safestay

Chairman’s Statement

Strategic Report

Directors’ Report

Corporate Governance

Independent Auditor’s Report to the Members of Safestay plc

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Company Financial Statements

With the travel and hospitality sector
taking off once again, Safestay has
emerged from the pandemic in a
strong position, maintaining its
reputation as the hostel network of
choice across Europe and delivering
robust growth across categories.

SAFESTAY PLC
2

Our locations

UK
London Kensington Holland Park

London Elephant and Castle

Glasgow Charing Cross

York Micklegate

Portugal
Lisbon Bairro Alto

Belgium
Brussels Grand Place

Spain
Barcelona Gothic

Barcelona Passeig de Gràcia

Madrid Central

REPORT & FINANCIAL STATEMENTS 20223

Today, the Safestay
network extends to
3,251 beds, across 16 sites,
in 14 of Europe’s most
popular destinations.

Germany
Berlin Kurfürstendamm

Poland
Warsaw Old Town

SLOVAKIA
Bratislava Presidential Palace

Czech
Republic
Prague Charles Bridge

Austria

Vienna Margaretenviertel

Italy
Pisa Centrale

Greece
Athens Monastiraki

SAFESTAY PLC4

2022 Delivered a 4% revenue

upside versus 2019

REPORT & FINANCIAL STATEMENTS 20225

This year marked a significant turning point for Safestay, as the business regained much
of its pre-pandemic performance – and in some areas, exceeded it. Considering COVID-19’s
lasting impact on consumer behaviour and travel, this is a fantastic achievement and gives
Safestay a solid ground from which to build back even stronger in 2023.

Navigating legacy challenges and new complexities
Despite a relatively slow start to the year, overall bed nights
were up 175% on 2021. This represents a 3% increase from 2019,
our last ‘normal’ year of trading before COVID-19 hit. Meanwhile,
occupancy across the Safestay network peaked at a strong 72%
in Q2. These achievements are particularly compelling in light of
ongoing Brexit complexity and a newly challenging labour market,
felt most keenly in the UK. Navigating these additional dynamics
required a careful focus on the balance between productivity
and retention, and we were pleased to still deliver a 4% revenue
upside versus 2019, alongside a 5.2% drop in payroll.

While our gaze is fixed firmly on the future, some features
introduced over the pandemic – like enhanced cleaning regimes
and contactless, technology-driven engagements – will remain a
part of the Safestay experience, as we continue to meet evolving
guest expectations.

Location, location, location
From the contemporary creativity of Glasgow down to the ancient
monuments of Italy, our hostels are perfectly positioned to give
the Safestay brand competitive edge. We continue to invest in our
properties to ensure guests enjoy the very best of Safestay – and
the cities we call home. 2022 saw the relaunch of our flagship
food and beverage offerings in Lisbon and Athens, offering guests
an alfresco space to unwind after a busy day sightseeing. We also
revamped The Terrace at our Barcelona Passeig de Gràcia hostel,
partnering with local celebrity DJs to create a buzzing night spot
– with future plans underway to live stream sets via the Safestay
YouTube channel.

With the addition of a complementary hotel-style offering in two
key locations, the greater use of technology and automation, plus
the overhaul of our digital customer journey, Safestay enters 2023
on the front foot.

An unrelenting customer-centric focus,
robust digital strategy and ongoing
investment in guest experience has
seen the business make great strides
forward, as we look ahead to the next
era of Safestay.

SAFESTAY PLC6

2022 Our digital strategy

Our digital strategy
As our hostels began to return to their pre-pandemic occupancy
levels, our digital platforms and marketing played a significant
role in business growth. Most notably, mobile emerged as a
core engagement channel and driver of sales, with 57% of direct
bookers using a mobile device in 2022. This will continue to inform
future marketing strategies and the ongoing optimisation of user
interface design and experience for the coming year.

Extending our digital reach
A number of geographical trends also began to emerge in 2022,
which have both highlighted areas for continued focus and
identified potential new opportunities. In line with expectations
and our footprint, Spain and the UK contributed 11.6% and
10.4% of digital users respectively. However, website metrics
also revealed that 21% of visitors were based in South America,
primarily in Chile and Brazil, with a further 8.4% accessing the
website from the USA. This presents an interesting proposition
for digital marketing teams to explore in 2023, as we continue to
tailor and target our activities to maximise conversion rates.

Overall, the website had 1.4 million visitors in 2022. £2.51 million
was generated via direct digital targeting. In the context of the
post-pandemic hospitality market, this is a strong performance
and gives us a solid base upon which to build in 2023.

Staying social
Social media continued to play a key role in 2022, as we
re-engaged with our digital audiences across core channels.
This went hand in hand with the continuous development and
positioning of our brand, and a consistent, customer-centric
operating model. We continue to adapt to changing social media
dynamics, complementing our 52,000-plus followers on Facebook
and Instagram with a renewed focus on high engagement
channels like YouTube and TikTok.

Embracing emerging technologies
Alongside outward-facing campaigns, investment in digital
systems and processes continues. Enhancements to our online
presence, to include new online check-in functionalities and a fully
mobile-optimised site, began in autumn 2022 – and are due to
complete in Q2 2023. These changes reflect a wider pivot towards
automation, as we look to leverage emerging technologies –
across yield management and customer contact points – to
streamline operations and enhance guest experiences.

REPORT & FINANCIAL STATEMENTS 20227

1.4 million

Website visitors in 2022

£2.51 million

Generated via direct digital targeting

SAFESTAY PLC8

A new kind
of Safestay

REPORT & FINANCIAL STATEMENTS 20229

Experiences as unique as our guests
Like all our Safestay properties, individuality will be key – as we
aim to position our managers as hosts, offering an independent
and highly personalised service in a truly unique location.
Alongside this new offering, we will be strengthening our core
services through the expansion of our Group Booking team, who
will support already rising demand and our upcoming initiatives
to increase shoulder-season occupancy.

Broadening appeal and generating new revenue
streams through the introduction of Safestay hotels
While the Safestay business is built on a strong common
operating platform, the ability to offer individual experiences
across locations is key. We will continue to leverage these
opportunities in 2023 with two of our existing properties,
in Berlin and Vienna, moving towards a hotel offering.

Our Berlin and Vienna properties are ideally situated, and well
structured, to support the transition to a hotel model – with both
already wielding strong appeal among couples. The properties
will offer double or triple rooms, all with en-suite facilities,
complimentary tea and coffee, and the option to add a signature
breakfast. A hotel-standard operating approach and tailored
marketing will help bring this new offering to the market, and
while we will initially aim to broaden our appeal among the
leisure travel demographic, there is an opportunity to add a
new audience to the Safestay fold, in the form of mid-week
corporate travellers.

We’re delighted to be adding
a hotel-style offering to our operation,
as we look to introduce new guests
to the Safestay experience.

SAFESTAY PLC1010

Chairman’s
Statement

Introduction
2022 was a good year for the business and marked the return to near normal trading.
For the first time in two years, the portfolio was allowed to trade freely with all 16 premium
hostels open for 97% of the year. The response from guests was immediate and positive,
reflecting some pent-up demand but also a return to normal travelling patterns. Revenues
increased threefold to £19.1 million and with a 20% increase in average bed rate, the
Group recorded EBITDA of £5.5 million, down from £7.2 million in the prior year. The Group
recorded adjusted EBITDA of £5.9 million up from a £1.0 million loss in the prior year.

We have a mature and well-established hostel portfolio all located
in central parts of Europe’s best known cities which collectively
attract millions of young visitors every year. The pandemic did not
change people’s desire to visit and experience these cities, it only
limited their ability to do so. Now that travel restrictions are lifted,
we are seeing a return to normal trading with young travellers
and other groups, such as families and commercial travellers,
taking advantage of Safestay’s network to stay centrally,
economically and safely in Europe’s leading cities.

Importantly, we entered 2022 in a good financial position having
reduced debt and increased liquidity with the disposal of our
Edinburgh and Barcelona Sea hostels during 2021. This resulted in
gearing reducing to 54% and a strengthened financial position. In
addition, the Group still has a valuable property portfolio with a mix
of freehold and leaseholds across the 16 strong hostel portfolio.

2023 has begun well with trading in the first four months ahead
of budget. The Group is well placed to continue to build on the
performance of the past twelve months, expanding its visitor
base supported by investment in developing a new website
and membership scheme both aimed at increasing the level of
direct sales.

Financial Results

Revenue
Group revenue for the financial year ended 31 December 2022,
increased to £19.1 million, above both the prior year and the last
year before the pandemic with just one more hostel than in 2019
(2021: £6.4m; 2019: £18.4 million).

Room revenue grew to £17.1 million (2021: £4.9 million) and food
& beverage revenue together with ancillary revenue was £2.0
million (2021: £1.3 million).

Adjusted EBITDA
The Directors consider that an adjusted EBITDA provides a key
measure of performance since it removes the impact of the profit
on disposal of the properties, which is not a trading activity, along
with the benefit of rent concessions received. Adjusted EBITDA for
the year to December 2022 was a £5.9 million profit (2021: £1.0m
loss). Adjusted EBITDA represents earnings before interest, tax,
depreciation, amortisation and exceptional items. Following the
introduction of IFRS16 from 1 January 2019, rent charges are no
longer included in EBITDA as they are shown in lease finance and
right-of-use depreciation.

Adjusted EBITDA is as follows:

Operating Profit after exceptional expenses

1,766

3,393

2022
£’000

2021
£’000

Add back:

Depreciation

Right of Use Depreciation

Amortisation

Actual EBITDA

Impairment

Profit on disposal – Edinburgh

Loss on disposal – Barcelona Sea

Exceptional expenses

Rent concessions

Share based payment expense

1,363

2,210

150

1,434

2,243

5,488

7,166

369

(7,511)

554

(1,275)

Adjusted EBITDA

5,900

(994)

REPORT & FINANCIAL STATEMENTS 2022202211

2022 was our first near normal trading year since the start of the
pandemic and it was therefore very pleasing to see that when
allowed to trade, our hostels immediately attracted back a high level
of guests. Looking ahead, if occupancy continues to grow into 2023,
which we believe it will, and we are able to maintain our average bed
rate levels, then the business is in a strong position. Overall, I
believe we are a better business having weathered the pandemic and
we are now back into growth mode from a stronger base both
financially and operationally.

Larry Lipman,
Chairman

SAFESTAY PLC12

2022

Chairman’s
Statement continued...

Finance Costs
Finance costs in 2022 were £2.6 million (2021: £2.7 million)
as follows:

The gearing ratio (exclusive of lease liabilities) is 54%.

Net asset value per share fell to 46p (2021: 47p).

Lease finance

Property financing costs

HSBC debt facility interests

Other finance charges

Finance costs

2022

1,404

191

853

111

2021

1,741

197

695

2,559

2,701

The Group has an ongoing loan facility with HSBC UK Bank plc, which
ends in January 2025. The value of the loan at 31 December 2022 was
£12.7m. The Group also has a £5.0 million government backed CBILS
loan secured for 6 years on 16 December 2020, with repayments
commencing 16 April 2022 reducing the balance to £4.25 million at 31
December 2022.

In addition, the Group has a government backed loan in Austria (£0.1
million). Since the introduction of IFRS 16 from 1 January 2019, our
hostel leases have been accounted for as lease liabilities. At the lease
commencement date, the Group recognises a right-of-use asset and a
lease liability on the statement of financial position. The rental charge
is replaced with interest and depreciation. In 2022, the finance costs
include £1.4 million of lease interest (2021: £1.7 million). The £0 (2021:
£1.3 million) reduction negotiated with our landlords was treated as
rent concessions in administrative expenses in full in the prior year.

Earnings per Share
Basic loss per share for the year ended 31 December 2022 was 0.44p
(2021: loss 0.93p) based on the weighted average number of shares,
64,679,014 (2021: 64,679,014) in issue during the year.

The Group made a £0.3 million net loss in 2022 (2021 loss:
£0.6 million).

Cash flow, capital expenditure and debt
Net cash generated from operations was £6.3 million (2021:
(£1.3) million).

The Group had cash balances of £5.2 million at 31 December 2022
(2021: £4.5 million).

Outstanding bank debt at 31 December 2022 was £17 million
(2021: £18 million). This includes a £12.7 million loan with HSBC
(2021: £12.7 million), minus the £0.1 million amortised loan fees
(2021: £0.1 million), the £5.0 million government backed CBILS
loan received in December 2020 reduced by £0.75 million in 2022,
and the Austrian loan £0.1 million. The lease liabilities amount to
£33 million (2021: £33 million).

The value of freehold and long leasehold properties has not
materially changed in the period.

Operational Review
The business had to relaunch a number of times during the
pandemic according to when governments allowed the hospitality
industry to trade and this varied from country to country. In
2022, the hostels were open for close to 100% of the year during
which momentum built without interruption, resulting in a
strong summer period and better than expected trading in the
traditionally weaker months. It is hard to decipher to what extent
demand in 2022 relates to pent up frustration from those unable
to travel during the pandemic and how much is down to trading
returning to normal. However, given occupancy is still well below
historic averages, we believe the business is simply returning to
normal market conditions.

The business had to be re-set for COVID, with the operational
cost base significantly reduced alongside the sale of two hostels
in Edinburgh and Barcelona which ensured the Group’s financial
security. Furthermore, on 11 March 2022, the landlord of the Holland
Park hostel agreed to a reduction in the base rent of £0.25m per year.

Currently, the portfolio is made up 16 premium hostels, 4 in the
UK and 12 on the continent, together selling 725,778 beds at an
average price of £23.63 per night in 2022.

From nearly a standing start, the hostels performed well overall
in 2022, with the European sites representing 64% of sales
and the UK representing 36%. Elephant & Castle and Glasgow
performed well in the UK with Pisa and Lisbon also being
particularly strong performers on the continent. For the hostel in
Brussels, another strong performer, negotiations around a new
lease are about to commence and there is the potential to take on
extra areas in the building.

The majority of guests have been young travellers with large
groups from colleges and schools only making up 10% of
accommodation revenue whereas historically these made up
around 28% of this revenue. There is a reasonable likelihood
group bookings will improve significantly in 2023 as colleges and
schools were perhaps more cautious to return and take longer to
prepare for trips. In addition, there has been good custom from
young families and single commercial travellers.

Our marketing policy is primarily focused on the digital space
and we intend to launch a new website in June. This is expected
to further drive traffic and direct bookings, particularly from

REPORT & FINANCIAL STATEMENTS 2022individual travellers. Currently, our website is responsible for 14%
of overall sales. The balance of bookings come from Groups and
Online Travel Agencies (‘OTAs’).

Alongside the launch of the new website, the Group is planning a
significant marketing campaign, in part to maximise the investment
in the website, but also to promote a new membership scheme,
encouraging members to take advantage of member only
discounts available across the portfolio. Sarah Whiddett, our new
Non-Executive Director, with her extensive marketing leadership
experience will make a significant contribution to this.

Safestay is positioned at the premium end of the hostel market. In
order to maintain our premium positioning, it is critical that we invest
in maintaining a premium level of quality and feel across the portfolio.
To this end, from 1 January 2023, we have allocated 3% of total
revenues in order to maintain these high standards in our hostels.

We have also decided to brand the Group as Safestay Hostels and
Hotels to be able to attract premium customers to some of our
properties that have superior accommodation equivalent to hotel
rooms. This will allow us to expand our market reach and price points.

We are currently formulating a COVID-19 business interruption
insurance claim, as we believe our policy wording is similar to some
recent successful outcomes for insured parties in our industry.
Whilst a successful claim may result in a material payout to the
Group, at this stage, there can be no certainty of any financially
beneficial outcome.

The Board
Paul Hingston joined the board as CFO and Company Secretary
on 21 February 2022. Paul has extensive leisure and travel
sector experience, most recently he was Group Finance Director
for Starboard Hotels Ltd. Nuno Sacramento resigned from his
position as Chief Operating Officer on 17 June 2022. In November
2022, Peter Zielke was appointed as Chief Operating Officer and
took up the role on 1 February 2023. Peter is a highly experienced
operator with extensive industry experience. Since the year end,
in April 2023, Sarah Whiddett was appointed as a Non-Executive
Director and has over 17 years’ marketing leadership experience.

Outlook
2022 was a good year for our business as it demonstrated the
continued customer appeal of our portfolio of premium hostels.
Our trading results reflected this, with significant increases in
sales and the average price per bed night. The current year has
started strongly, with trading in the first four months significantly
ahead of budget, and this together with careful revenue
management and increased occupancy should result in a good
outcome for this year.

Larry Lipman
Chairman’s
8 June 2023

Officers and professional advisors

Directors
Larry Lipman
Chairman

Paul Hingston
Chief Financial Officer & Company Secretary

Michael Hirst OBE
Non-Executive Director

Paul Cummins
Non-Executive Director

Stephen Moss CBE
Non-Executive Director

Registered Office
1a Kingsley Way
London
N2 0FW

Company Number
8866498

Nominated Adviser and Broker
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY

Corporate Solicitor
Dechert LLP
160 Queen Victoria Street
London EC4V 4QQ

Auditor
CLA Evelyn Partners Limited
14th Floor
103 Colmore Row
Birmingham
B3 3AG

Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL

Bankers
HSBC Bank plc
69 Pall Mall
St James’s
London SW1Y 5EY

SAFESTAY PLC1414

Strategic Report

Principal activity
The principal activity of the Group comprises the operation and
development of high-quality traveller accommodation under the
Safestay brand in properties that are either owned or occupied
on leasehold.

The Business Model
The Safestay business model is to develop and operate a brand of
contemporary hostels in the UK and key tourist cities in Europe.
The Safestay brand is positioned at the premium end of the hostel
spectrum appealing to a broad range of guests. Core elements of
the model are:
— Development: Identifying potential properties in target cities,

acquiring the leasehold or freehold in the properties and their
contemporary, stylish refurbishment to fit with the brand.
— Operational: Deploying a strong hostel expertise and cost

control to achieve best in class operating margins.

— Brand: Building the Safestay brand value.
— Scale: Building the platform to efficiently add further hostels

to the Group.

— People: Investing in the right people where automation cannot

be adopted.

— Guest experience: Providing a comfortable, safe and enjoyable
stay in our hostels for a reasonable price with a focus on
customer satisfaction, a strong community experience and
repeat stays.

Section 172(1) statement
The directors understand the importance of their section 172 duty
and the need to act in a way the directors consider, in good faith,
would be most likely to promote the success of the Group for the
benefit of its members, and in doing so have regard, amongst
other matters to:
— the likely consequences of any decisions in the long term;
— the interests of employees;
— the need to foster business relationships with suppliers,

customers and others;

— the impact of operations on the community and environment;
— the desirability of maintaining a reputation for high standards

of business conduct; and

— the need to act fairly as between members of the Group.

This duty underpins the Board’s decision-making processes and
the Group’s strategic direction, with due consideration given to
the long-term impact of its decisions on shareholders, employees,
customers and wider stakeholders. Practical measures that the
Board takes to ensure the interests of these stakeholders are
reflected in the Board’s decision-making process are as follows:

Customers
Customer engagement levels is a key performance indicator of
our business. We use this customer feedback to continuously
improve our product and level of service in the hostels. The Group
also directly engages with customers via social media to share
information and collect further feedback. This communication
channel was used throughout the pandemic to maintain a close
connection with our customers when the hostels were closed
during the Pandemic.

Employees
Employees are at the heart of the hospitality industry and the
directors know that the long-term success of the Group and
its ability to continue to extend its unique pan-European hostel
network will rely on a strong Group culture, employees’ well-
being, and efficient succession planning. Some Board Meetings
take place in hostels to encourage direct contact between
the Board and the operational teams. Bi-annual meetings are
organised with all managers to share best practice, Group
information and help build a positive culture amongst the teams.

Suppliers
Where possible, the Group forms long-term relationships with
suppliers, so that the Group and its suppliers have a more certain
environment in which to operate. This also applies to landlords of
the 12 hostels operated by the Group under lease agreements.

Shareholders
In addition to the Annual General Meeting, the directors hold
meetings with institutional shareholders following the release
of year end and interim results and remain available for ad hoc
meetings throughout the year. In addition, the executive directors
have participated in shareholder conferences to present their
business and strategy and obtain live and direct feedback from
non-institutional shareholders. The Group website includes
an investor section where shareholders can find all relevant
information and reports.

The Board believes communication with stakeholders helps to
shape and adapt the Group’s strategy and ultimately contributes
to maintaining a high standard of business conduct. The directors
will always assess the consequences of any decision over the long
term. For example, decisions over whether to acquire or develop
new properties follows a rigorous process involving long term
financial assessment and commercial study, all in conjunction
with the funding capabilities of the Group. Similarly, the Group
uses customer satisfaction reports to help allocate the way funds
are deployed under an annual capex improvement programme to
enhance the experience of customers and ultimately safeguard
brand equity.

REPORT & FINANCIAL STATEMENTS 20221515

Strategic Report continued...

The Group complies with the UK’s Quoted Companies Alliance
Corporate Governance code for Small and Mid-Size Quoted
Companies (the “QCA Code”) and further information is publicised
in the investor section of the Group website.
https://www.safestay.com/investors/

2022 was a successful year for the business demonstrating the
continued customer demand for the premium hostel portfolio.
Whilst still yet to return to pre-COVID occupancy levels, the
financial trading performance was very encouraging with sales
increasing above 2019, albeit with one more hostel in 2022.

Engagement with the wider community
The board ensures that decisions made are responsible and
ethical by taking into consideration the wider society external to
the organisation. The Group is committed to contributing to the
community in which it operates as a business. The Group is using
its footprint in each country to encourage local initiatives via the
local management and staff.

The financial position of the business is sound benefiting
from the disposal of two hostels in 2021. The Barcelona Sea
hostel was sold in February 2021 for a £0.7 million consideration,
and the Edinburgh hostel was sold for £16 million in June 2021.
The combination of these disposals and cost saving measures,
has meant the Group had cash balances of £5.2 million, as at
31 December 2022.

Anti-bribery
The Group is committed to the prevention of bribery by those
employed and associated with it and is committed to carrying
out business fairly, honestly and openly, with zero-tolerance
towards bribery. All employees have a responsibility to prevent,
detect and report all instances of bribery as stated in our
employee handbook.

The Group is currently not committed to any future acquisition
projects or development. However, the Group is hoping to
capitalise on this position to seize opportunities and aggregate a
fragmented market.

Social matters
Safestay provided jobs for 226 for people in 2022.

Review of business and future prospects

Key Metrics

Occupancy %

Average Bed Rate

Room Revenues (£'000)

Total Revenues (£'000)

Net cash (used in)/generated
from operations (£’000)

Net assets per share

2022

2021

2019

63.0%

35.0%

77.3%

£23.63

£19.70

£21.40

17,150

19,146

4,901

6,423

15,115

18,379

6,263

(1,323)

5,228

46p

47p

55p

The occupancy is calculated by dividing the number of beds
sold over the period with the number of beds available when
the hostels were opened during the same period. It means that
in 2022 and 2021 the occupancy was calculated specifically for
those days when the hostels were not closed due to the COVID-19
pandemic. The underlying business generated revenues of £19.1
million (2021: £6.4 million; 2019: £18.4 million).

Operating profit was £1.8 million (2021: £3.4 million profit) and
an underlying adjusted EBITDA of £5.9 million (2021: £1.0 million
loss) for the year to 31 December 2022. Actual EBITDA is £5.5
million (2021: £7.2 million) and Loss before Tax is £0.7 million
(2021: profit of £0.7 million). The comparisons are difficult due
to the pandemic leading to the hostels only able to trade on a
limited basis.

The Group operates in 12 different countries and has established
local operating entities in each of the countries where our hostels
are located. This gives us the ability to hire employees locally
and offer them employment contracts and social benefits in full
compliance with each relevant jurisdiction. This also includes
the relevant level of hospitality training as well as mandatory
training courses.

Maintaining a reputation for high standards of
business conduct
The Board is mindful that the continued growth and success
of the Group is dependent upon maintaining high standards of
business conduct, including:
— the ability to successfully compete within the market, to

attract and retain clients, and to service these clients to a
high standard;

— the ability to attract and retain high quality employees;
— the ability to attract investors and to meet their expectations

of good governance and sound business conduct; and

— the ability to meet the Group’s regulatory obligations, and to

meet the expectations of relevant regulatory bodies.

This mindset underpins the formulation of the Group’s strategy
and is evident throughout the Board’s decision-making process.

SAFESTAY PLCSAFESTAY PLC

1616

Strategic Report continued...

Ensuring that members of the Company are
treated fairly
The Board ensures that the Group’s shareholders are treated
equally and fairly, regardless of the size of their shareholding or
their status as a private or institutional shareholder. The Group
provides clear and timely communications to all shareholders in
their chosen communication medium, as well as via the Group’s
website and via a Regulatory News Service. All holders of
Ordinary shares are able to vote at general meetings of the Group.

Environment
The Group is mindful of the importance of reducing environmental
impact wherever possible and has implemented several initiatives
to achieve a sustainable future. The Group intends to continuously
review and increase its efforts in this area. As an example, in all
Safestay properties, we minimise the use of plastics wherever
possible seeking more sustainable alternatives. This enables
us to reduce our environmental footprint and helps us build
a reputation with our guests as it meets their environmental
expectations. We reuse and recycle the plastic we do use.

We are also constantly reviewing our CO2 emissions. We are
committed to reducing Scope 1 and 2 emissions – for example,
in the future, we would like to incorporate water-saving products
in our showers to encourage our guests to be mindful of water
wastage. We will also look to reduce Scope 3 emissions working
only with trusted suppliers. Additionally, we are exploring the
possibility of working with train and other public transport
companies to reduce the carbon footprint of our guests.

We have a unique carbon impact tool which we offer to our
guests. This gives them the opportunity to test their carbon
impact by using an online carbon calculator on our website
with the aim to increase the overall awareness and desire to
act responsively during their journey.

More information is available on our website
at https://www.safestay.com/corporate-social-responsibility/.

Employee diversity
The Group is committed to diverse representation at all levels.
We are mindful that there is still work to be done to achieve
these goals and are looking to make significant progress in our
recruitment, retention and promotion strategies as we emerge
from the pandemic.

The following table reports on the gender diversity of the Group’s
employees at 31 December 2022:

Directors

Senior Managers

Male

Female

Employment of disabled people
It is the policy of the Group to employ disabled persons in
the job suited to their aptitudes, abilities and qualifications
whenever practicable, endeavour to continue to employ those
who become disabled whilst in the Group’s employment and
to provide disabled employees with the same opportunities for
promotion, career development and training as those afforded to
other employees.

Human rights
The Group is committed to respecting human rights within our
business by complying with all relevant laws and regulations.
We prohibit any form of discrimination, forced, trafficked or child
labour and are committed to safe and healthy working conditions
for all individuals, whether employed by the Group directly or by a
supplier in our supply chain.

Legal and ethical conduct
The Group has comprehensive measures to meet its statutory
requirements across all areas of its operation, and those
expected by our customers and employees, as necessary, for
the long-term success of the business. Risks in this area can
occur from corruption, bribery, and human rights abuses,
including discrimination, harassment, and bullying. The Group
has training programmes for all employees. We take a zero-
tolerance approach to bribery and are committed to acting
professionally, fairly and with integrity in all our business dealings
and relationships wherever we operate and implementing and
enforcing effective procedures to counter bribery as documented
in the Group anti-bribery policy signed by the directors.

Principal risks and uncertainties
Management has completed a full review of the risks which may
arise from within or outside the business and may have an impact
on the Group.

The impact of the environment on the Group’s operations has
been assessed and there is a strategy to reduce this risk as
explained in the Environment Section above. No other emerging
risks have been identified at this point. There has been no
identified change in the principal risks and uncertainties.

REPORT & FINANCIAL STATEMENTS 2022

1717

Strategic Report continued...

The principal risks and uncertainties that could potentially have a
material impact on the Group’s performance are presented below.

Business risks
Safestay operates in the hospitality industry which, over the years,
has experienced fluctuations in trading performance. Traditionally,
the hotel sector’s performance has tracked macro-economic
trends, feeling the strain during the economic downturn, and
becoming more buoyant during recovery. The hostel sector,
which leans more heavily on leisure travellers and has a lower
price point, has proved more resilient and has delivered more
robust cash flows through the economic cycle and has quickly
recovered from isolated terror acts which may limit travel in the
short term. The hospitality sector in the UK continues to face
a number of cost headwinds from the National Living Wage,
commodity price inflation, foreign exchange rate fluctuations and
the hangovers from the UK’s departure from the European Union
and the consequences of that.

A proportion of Safestay’s business in the UK comes from
Europe, including several school groups. In addition, over 60%
of the turnover is coming from hostels located in mainland
Europe. The business is therefore highly vulnerable to changes
in the source market, schools’ education, travel policies and any
fluctuations arising in the market from the ‘Brexit’ process and
travel restrictions implemented by the governments, or the school
governance bodies.

Conversely, this balance between the UK and mainland Europe
offers a natural hedging against fluctuations of each local market
and currency where Safestay operates.

Post COVID-19 crisis, the demand in Safestay’s markets has
strengthened, as we expect that the existing supply within the
competitor set will temporarily reduce, until the industry expands
again. However, provision of new supply will increase again with
the opportunity for real estate owners to re-purpose and convert
existing buildings previously used for retail or offices. Safestay’s
defence to such threats is the combination of our premium
locations and high standard of accommodation and operations.
As supply increases, the business’s focus on revenue, customer
service, and sales and marketing activity is key to protect and
grow market share, brand loyalty and reputation.

There is also the risk of higher energy and other supply costs,
but a new utility broker is helping to identify opportunities for
reducing consumption and the growth in the average bed rate has
shown that cost increases can be offset. Also, the cost pressure
on consumers can result in a desire to stay in hostels rather than
budget hotels.

IT and system risks
Safestay’s property management and accounting systems are
deployed via SaaS (software as a service). As such, the Group is
dependent on robust internet connectivity and the resilience of
the provider’s third-party data centre and back-up protocols to
operate. Whilst the arrangement carries risks, these are deemed
to be reduced when compared to an in-house option which would
lead to higher management overhead costs for the business.
Management believes this current arrangement is more suitable
to the business needs as well as being more cost effective due to
the small size of our business. The other systems used are not
deemed to be business critical.

The Group contracts the maintenance of the IT infrastructure
with an external provider and has a cloud based back up system
to secure all data which are not already covered via other SaaS
suppliers. This is a more robust and flexible option compared to
an in-house solution.

Expansion and regulatory risks
Accessing expansion opportunities at the right price and in the
right locations is, by its nature, an opportunistic exercise. Whilst
the leadership team has a track record in securing properties
to support business growth, and the fact that the market should
offer more real estate opportunities in the coming years, there is
no guarantee that future opportunities can be secured, even if it is
expected that the market will offer real estate opportunities when
emerging from the COVID-19 crisis and existing property owners
look for alternatives to office and retail asset classes.

Expansion in new jurisdictions and changes in regulation in
countries where Safestay already operates is creating an
environment where it is more likely to be in regulatory breach
compared to a group which would only trade in one country.
Safestay plc is a listed business and as such is bound to a
very high level of compliance. The Board is composed of seven
experienced non-executive and executive directors who all have
a proven experience in hospitality and strong understanding of
regulatory and compliance topics. Moreover, the Group works
with local law firms in each country where it operates to gain
access to the local expertise and guarantee full local compliance,
notably via the obtention of relevant licenses. As opposed to
other hospitality sectors, such as sharing economy or private
rental, the hostel sector is built on strong regulation plus existing
fundamentals and trade licences, which makes it less likely to
require the introduction of more strict regulations.

SAFESTAY PLCSAFESTAY PLC

1818

Strategic Report continued...

Financial risk
The main £12.7 million facility with HSBC ends in January 2025.
In December 2020, the Group received a £5.0 million CBILS
(Coronavirus Business Interruption Loan Scheme) via HSBC.
The CBILS is being repaid at a rate of £1.0 million per year from
April 2022 until April 2027. The main £12.7 million facility is
interest only from July 2021 following a £10.2 million repayment
after the completion of the Edinburgh hostel disposal on 30 June
2021. These loans provide an efficient base from which to grow
the business at a reduced 2.95% margin over SONIA for the main
facility and 3.99% margin over base rate from year 2 for the
CBILS. The CBILS was interest free in the first year.

Any increases in SONIA or base rate will increase the cost of these
loans and therefore impact the net profit of the business (a 0.5%
change in interest rate would impact the net profit before tax by
£83,000 (2021: £89,000)). Strict financial controls are in place to
ensure that monies cannot be expended above the available limits
or to breach any banking covenants.

A proportion of Safestay’s business comprises group bookings
and there is a risk of booking cancellations which will leave the
hostel with unforeseen beds to sell at relatively short notice.
To offset this risk, all group bookings require a non-refundable
deposit of 10% at time of confirmation and staged payments in
advance of the group arrivals.

Except for a small number of credit sales for which applied credit
limits are verified through external sources, Safestay has a policy
of full payment upfront for guests staying which is the norm for
hostels. As such there are negligible trade receivable risks.

Safestay plc are in the process of starting to refinance the loan
facility, and the Directors are confident of achieving similar terms
on a new facility.

Approved by the Board of Directors and signed on behalf of
the Board.

Larry Lipman
Chairman
8 June 2023

REPORT & FINANCIAL STATEMENTS 2022

1919

Directors’ Report

The directors present their annual report on the affairs of the Company and Group together with the financial statements for the year
ended 31 December 2022.

Directors
The directors who have served in the year to 31 December 2022 were as follows:

Larry Lipman
Paul Hingston (appointed 21 February 2022)
Anson Chan (resigned 18 October 2022)
Michael Hirst OBE
Paul Cummins
Stephen Moss CBE
Nuno Sacramento (resigned 17 June 2022)
Peter Harvey (resigned 21 February 2022)

Directors’ and senior management biographies

Paul Hingston was appointed as Chief Financial
Officer and Company Secretary of Safestay plc on 21
February 2022.

Peter Zielke was appointed as Chief Operating Officer of
Safestay plc in November 2022, taking up the role from
1 February 2023.

Sarah Whiddett was appointed to the board as a non-
executive director during April 2023.

Larry Lipman
Chairman
Larry Lipman has been the main driving force behind the Safestay business
since its establishment. He is responsible for the Group’s strategy and business
development. He has extensive experience of the property market, gained over
thirty years, throughout which he has been the Managing Director of Safeland
plc, where his primary focus is on trading opportunities and the assessment of
potential investments and refurbishment projects. He was also a key executive in
each of Safeland’s previous demergers, including BizSpace and Safestore, and,
in each case, he continued after the demerger to be closely involved with the
growth of those businesses as well as continuing to manage the core businesses
of Safeland.

Paul Hingston
Chief Financial Officer & Company Secretary
Paul Hingston is a KPMG qualified FCA Chief Financial Officer with an MBA.

Significant board level experience in the UK and overseas has involved
operating in a wide variety of sectors including Leisure, Travel, Hospitality,
Aviation and Construction. He was most recently Group Finance Director of
Starboard Hotels Ltd.

In addition to working with operational teams to optimise business performance,
often during periods of rapid growth, Paul has worked extensively on financing
strategy with corporate finance advisers, banks, private equity funds and
other city investors. Paul’s expertise in optimising value from the interaction
of Finance with the other functions of the business has been applied across
a variety of corporate structures including plcs, privately owned and
private equity backed businesses. Additionally, he is the Business Members
Representative on the Management Committee for the Beds, Bucks and Herts
Society of Chartered Accountants.

SAFESTAY PLCSAFESTAY PLC2020

Directors’ Report continued...

Anson Chan
Non-Executive Director
Anson Chan is a respected Hong Kong businessman who has accumulated a
variety of management and investment experiences. Over the years, he has
served as an executive director for his family’s real estate development and
investment business, the Bonds Group of Companies. Before joining his family
business, Mr. Chan was an associate director in a proprietary investments group
for the Japanese investment bank, Nomura International, from 2000 to 2004,
and of AIG Investment Corporation from 1998 to 2000. He was responsible for
developing new investment opportunities in private equity in Greater China.
From 2005 to 2008, he also served as a senior adviser to Elliott Associates, a
leading U.S. based activist investment fund with assets under management in
excess of UK£10 billion.

Michael Hirst OBE
Non-Executive Director
Michael Hirst is the former Chairman of the UK Events Industry Board, advising
Ministers on how to increase the value of international business events held in the
UK. He serves on the Tourism Industry Council, a collaboration between the UK
Government and the tourism industry focusing on improving the tourism sector.
He is an Executive Committee member and past Chairman of the UKEVENTS,
representing Britain’s Events Industry and a director of The Tourism Alliance,
bringing together all the major tourism organisations in the UK.

He is a Director of CP Holdings Ltd, a diversified industrial and services group,
which includes hotels and thermal spas in Central Europe and a service office
business in the UK.

He is a former consultant to CBRE Hotels, the world’s leading hotel experts.
He also advises hospitality and tourism businesses and has acted as an
arbitrator for the International Court of Arbitration in hotel dispute resolution.

Michael Hirst was awarded an OBE for services to tourism in Britain and
awarded the Joint Meetings Industry Council Unity Award, for his significant
contribution to the advancement of the international Meetings Industry. He was
awarded a Lifetime Achievement Award for his distinguished career in hospitality,
leisure and tourism by the International Hotel Investment Forum and recently
awarded a Fellowship by the Event and Visual Communications Association.

He was a board member of the Ladbroke Group plc where he was Chairman
and CEO of Hilton International and voted “Corporate Hotelier of the World” by
HOTELS Magazine.

REPORT & FINANCIAL STATEMENTS 2022

Directors’ Report continued...

2121

Paul Cummins
Non-Executive Director
Paul Cummins is a qualified chartered accountant and is currently Investment
Director of Pyrrho Investments Ltd, Safestay’s largest shareholder. He has
previously worked at Nomura International in both Hong Kong and London
as a proprietary trader, he also worked at KPMG in Hong Kong and BDO in
London. He is currently Chairman of Pacific Jade Holdings Ltd, a Hong Kong
based tax and company secretarial business.

Stephen Moss CBE
Non-Executive Director
Stephen Moss is Chairman of Grosvenor Securities Limited, a Central London
commercial property investment and development company. He is past
Chairman of Bibendum PLB, the leading wine and spirit distributors and, prior
to that, CEO of BCP Airport Parking which he grew to become the UK’s largest
airport car parking booking platform. Stephen founded Springboard in 1990,
a charity which promotes careers in hospitality, leisure and tourism, of which
he remains President, and its board and corporate partners include many
of the UK’s top hotel groups. He is now Chair of London Youth, Chairman
of Trustees of London’s top-ranked comprehensive school and of a leading
demographic and social research think tank. In 1992 he was awarded an MBE
for services to the restaurant industry and, in 2002, a CBE for his contribution
towards education and training.

Nuno Sacramento
Chief Operating Officer
Nuno Sacramento was appointed as Chief Operating Officer on 1st February
2017 and resigned on 17th June 2022. He was responsible for the day-to-day
leadership and general management of the Group. Prior to joining Safestay,
Nuno served as Regional Operations Director for Premier Inn, where he
held various executive and management positions for seventeen years.
Nuno’s responsibilities extended throughout all areas of the organisation
including strategic planning and execution, product development, technology
deployment, and customer and network operations. Before that Nuno worked
for Accor in a number of international roles. Nuno sits on the boards of two
secondary schools and non-profit organisations in London. He received an
MBA from Oxford Brookes and currently participates in various Executive
Leadership programs. He lives in North London with his wife and three
children. In his spare time, he is an outdoor sports enthusiast and tennis
coach. Nuno formally resigned his position on 17th June 2022.

SAFESTAY PLCSAFESTAY PLC

2222

Directors’ Report continued...

Peter Harvey
Chief Financial Officer & Company Secretary
Peter Harvey was the CFO and has many years of experience in the retail, leisure
and hospitality sectors, from both listed organisations including Whitbread plc,
Tatts Group (ASX), Domino’s Pizza (Nordic) and Teva Pharmaceuticals (NASDAQ /
TASE), as well as private organisations including Carlson Group, SH Pratt Group,
Hummus Bros, and Nomura PFG’s Threshers business. Peter formally resigned
his position in February 2022, as the requirements of Safestay did not suit his
personal circumstances long term.

Peter Zielke
Chief Operating Officer
Peter Zielke joined Safestay plc in February 2023. His international hospitality
career spans over 25 years with management and director positions held in
Germany, the UK, Russia, New Zealand and other countries. He started his career
in his hometown Weimar, Germany at renowned Hotel Elephant. Most recently
Director of Operations for the South-UK region for Kew Green Hotels, where
he was in charge of Marriott International and IHG branded properties. He also
gained considerable brand knowledge in previous roles at Hilton and Millennium
& Copthorne Hotels at which he completed various operational strategy reviews.
His expertise in optimising revenue, marketing and operational management
is extremely valuable for Safestay in enhancing its market position. Peter was
Chairman of the Gatwick Hotels Association until March 2023 and a member of
various business focus groups.

Sarah Whiddett
Non-Executive Director
Sarah Whiddett has over 17 years’ leadership experience in Insight, CX and
Marketing. Currently, she is a Strategic Client Partner for Kantar Insights &
Consulting, a leading global data, insight and consultancy agency. Sarah, and
her global matrix team, support clients with their brand strategy, innovation,
creative and media activation, and consumer experience, through a mix of
research, analytics and consultancy services. She was previously Chair and
Director of AURA, the UK’s biggest client-side research networking and events
organisation, and prior to that held numerous leadership positions at food and
drinks wholesaler Bidfood. Alongside these roles, Sarah has been involved in
extensive public speaking and industry engagement, judging multiple industry
awards, speaking at conferences and leading press engagement. Sarah was
a Marketing Academy Scholar 2019 – selected as a group of 30 future leaders
from a group of over 600 applicants, and was selected for the Kantar Women in
Leadership program 2022. Sarah has been enlisted to the Safestay board in 2023
to support Safestay’s growth ambition, utilising her marketing and consumer
insight expertise.

REPORT & FINANCIAL STATEMENTS 2022

2323

Directors’ Report continued...

Directors’ indemnity provisions
The Group has granted an indemnity to each of its directors against liability in respect of proceedings brought by third parties, subject
to the conditions set out in section 234 of the Companies Act 2006. The Company purchases Directors and Officers liability insurance
which gives appropriate cover for any legal action brought against its directors. Such qualifying indemnity provision remains in force
as at the date of approving the Directors’ Report.

Directors’ interests in shares
The following directors directly own share capital of the Company:

Larry Lipman

Stephen Moss

Nuno Sacramento

Michael Hirst

Ordinary shares of 1p each

Fully paid number

Percentage %

346,054

233,988

37,160

97,142

0.5

0.4

0.1

0.2

Larry Lipman also owns one-third of the share capital of Safeland Holdings (2008) Corporation (“SHC”) a corporation incorporated in
Panama and 2% of Safeland plc, a company incorporated in the UK. SHC owned 3,112,484 ordinary shares in the Company, representing
4.8% of the Company’s shares in issue as at 31 December 2022. SHC owned 83.4% of Safeland plc. Safeland plc owned 2,597,334 ordinary
shares of the Company, representing 4.0% of the Company’s shares in issue at 31 December 2022. Anson Chan is not considered to be
independent due to his interest in Pyrrho Investments Limited which is a significant shareholder in the Company, owning 19,025,638
ordinary shares representing 29.4% of the Company’s shares in issue at 31 December 2022.

SAFESTAY PLCSAFESTAY PLC

2424

Directors’ Report continued...

Directors’ interests in options over the equity share capital of the Company at 31 December 2022 were:

Granted

Lapsed

At 31 December 2022

Exercise price

Exercisable from

Exercisable to

Larry Lipman

Michael Hirst

Nuno Sacramento

Paul Hingston
Stephen Moss

396,521
300,000

400,000
37,100
20,900
25,700
25,700
23,900
22,300
22,300
19,700
18,600
20,900
4,600
2,600
3,200
3,200
3,000
2,800
2,800
2,400
2,300
2,600
500,000
100,000
200,000
300,000
46,300
26,100
32,100
32,100
29,800
27,800
27,800
24,600
23,200
400,000
11,200
6,300
7,700
7,700
7,200
6,700
6,700
5,900
5,600
6,300

396,521
300,000

15 p
15 p

15 p
9 p
15 p
13 p
13 p
14 p
15 p
15 p
15 p
15 p
15 p
9 p
15 p
13 p
13 p
14 p
15 p
15 p
15 p
15 p
15 p
15 p
15 p
15 p
15 p
9 p
15 p
13 p
13 p
14 p
15 p
15 p
15 p
15 p
15 p
9 p
15 p
13 p
13 p
14 p
15 p
15 p
15 p
15 p
15 p

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31/12/2031
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31/12/2031
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The options granted in the first 7 months of 2021 were received by the existing directors in exchange for a 40% reduction in their salary
to reduce the operating costs of the Group during the lockdown period.

REPORT & FINANCIAL STATEMENTS 2022

2525

Directors’ Report continued...

Other substantial shareholdings
The Company had been notified of the following shareholdings which constitutes three per cent or more of the total issued ordinary
shares of the Company as at 31 March 2023.

Pyrrho Investment Ltd

BGF Investment Management Ltd

Chelverton Asset Management Ltd

Peter O’Reilly

Bredbury Ltd

Safeland Holdings (2008) Corporation

Safeland plc

Hargreaves Lansdown Asset Management Ltd

Peter Leslie Squire

Ordinary shares of 1p each

Fully paid number

Percentage %

19,025,638

11,791,661

4,361,764

3,902,422

3,129,665

3,112,484

2,597,334

2,482,636

2,000,000

29.42

18.23

6.74

6.03

4.84

4.81

4.02

3.84

3.09

Dividends
The directors have not recommended the payment of a dividend for the year (2021: nil).

Directors’ Responsibilities Statement
The directors are responsible for preparing the Chairman’s Statement, Directors’ Report, Strategic Report, Corporate Governance
report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors are required to prepare
consolidated accounts under UK-adopted International Accounting Standards. Under company law the directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the
Group and the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to:
— select suitable accounting policies and then apply them consistently;
— make judgments and accounting estimates that are reasonable and prudent;
— state whether UK-adopted international accounting standards have been followed, subject to any material departures disclosed

and explained in the financial statements; and

— prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue

in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions
and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.

Conflicts of interest
Under the articles of association of the Company and in accordance with the provisions of the Companies Act 2006 a director must avoid a
situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the Group’s interests. However,
the directors may authorise conflicts and potential conflicts, as they deem appropriate. As a safeguard, only directors who have no interest
in the matter being considered will be able to take the relevant decision, and the directors will be able to impose limits or conditions when
giving authorisation if they think this is appropriate. During the financial period ended 31 December 2022, the directors have authorised no
such conflicts or potential conflicts in accordance with the above procedures.

SAFESTAY PLCSAFESTAY PLC

2626

Directors’ Report continued...

Going concern
The Group is reporting an Adjusted EBITDA profit of £5.9 million in 2022 as the business has recovered strongly from the pandemic and
the hostels have been open for 97% of the year.

The Group started to generate cash from its operations in 2022 to finish with an available cash balance of £5.2 million at 31 December 2022.

The Group received £16.0 million proceeds from the disposal of the Edinburgh hostel which completed on 30 June 2021. Following
completion, the £1 million overdraft facility was removed, and £10.2 million of HSBC debt was repaid. This means the Group now has
a lower gearing of 54%.

Management updates and adjusts the cash forecast for the next 18 months on a monthly basis. The most recent forecast prepared in
April 2023 for the period to 31 December 2024, assumes as a prudent base case that the sales will gradually climb through the summer
months. Sales for the first 4 months of the year are significantly ahead of 2022.

All the covenants of the debt facility for the past year have been satisfied based on interest cover and loan to value with significant headroom.

Safestay plc are in the process of starting to refinance the loan facility of £12.7m that is due to be renewed in January 2025. The Directors
have considered the impact of this and are confident of achieving similar terms on a new facility on the basis of the excellent current
trading performance and the strong cash flow resulting from this that is projected to continue for at least the next two years.

Additionally, the significant headroom on both of the covenants supports this view of the Directors.

Post balance sheet events
— The Group is currently not committed to any future acquisition projects or development.

Statement of disclosure of information to the auditor
The directors confirm that:
— so far as each director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
— the directors have taken all the steps that they ought to have taken as directors to make themselves aware of any relevant audit

information and to establish that the Company’s auditor is aware of that information.

The directors are responsible for preparing the annual report in accordance with applicable law and regulations. Having taken advice from the
Audit Committee, the directors consider the annual report and the financial statements, taken as a whole, provides the information necessary
to assess the Company’s performance, business model and strategy and they are fair, balanced and understandable.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

To the best of our knowledge:
— company and Group financial statements, prepared in accordance with UK-adopted International Accounting Standards, give a
true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in
the consolidation taken as a whole; and

— the Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the
position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.

Exposure to risks
The Strategic Report includes a section discussing the risks and uncertainties which could affect the Group and how the Directors
respond to it.

REPORT & FINANCIAL STATEMENTS 2022

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Directors’ Report continued...

Financial risk management
The Group’s financial instruments comprise bank loans, lease liabilities, cash and cash equivalents, and various items within trade and
other receivables and payables that arise directly from its operations.

The main risks arising from the financial instruments are foreign exchange risk, interest rate risk and liquidity risk. The Board reviews
and agrees policies for managing these risks which are detailed below.

Interest rate risk
The Group’s interest rate risk arises from long-term borrowings. Borrowings at variable rates expose the Group to cash flow interest
rate risk which is partially offset by cash held at variable rates.

Liquidity risk
All of the Group’s long-term bank borrowings are secured on the Group’s property portfolio. If the value of the portfolio were to
fall significantly, the Group risk breaching borrowing covenants. The Board regularly review the Group’s gearing levels, cash flow
projections and associated headroom and ensure that excess banking facilities are available for future use.

The business continued to manage its liquidity risk with the renewal of its debt facility with HSBC on the 13 January 2020 with a new
facility of £12.7m until 2025. In addition, a £5.0m bank CBILs facility was secured for 6 years on 16th December 2020, which is interest
free for the first year increasing to 3.99% above base rate from year 2. Repayment of CBILs facility commenced in April 2022.

The business continues to service this debt and make the interest payments as they fall due. There are no off-balance sheet financing
arrangements or contingent liabilities.

Foreign currency risk
The Group is exposed to foreign currency risk from overseas subsidiaries with group transactions carried out in Euros. Exposures to
currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily denominated in Euros. This risk is
mitigated by each hostel holding a denominated bank account in the country of operation. The Group monitors cashflows and considers
foreign currency risk when making intra-group transfers.

Interest rate risk management
The Group is exposed to interest rate risk on its borrowings. The £12.7 million main facility has an interest rate of 2.95% above SONIA
(Sterling OverNight Index Average). The £5 million CBILS is interest free in year 1 and has an interest rate of 3.99% above base rate
from year 2 until it is fully repaid at the end of year 6. The Group carefully manages its interest rate risk on an ongoing basis.

Interest rate sensitivity
The sensitivity analysis in the paragraph below has been determined based on the exposure to interest rates for all borrowings subject
to interest charges at the statement of financial position date. For floating rate liabilities, the analysis is prepared assuming the amount
of the liability outstanding at the statement of financial position date was outstanding for the whole year. A 0.5% increase or decrease
is used when reporting interest rate risk internally to key management and represents management’s assessment of the reasonably
possible change in interest rates.

Based on bank borrowings, at 31 December 2022, if interest rates were 0.5% higher or (lower) and all other variables were held
constant, the Group’s net profit would increase or decrease by £83,000 (2021: £89,000). This is attributable to the Group’s exposure
to interest rates on its variable rate borrowings.

Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of directors. The Board manages liquidity risk by regularly
reviewing the Group’s gearing levels, cash flow projections and associated headroom and ensuring that excess banking facilities are
available for future use. All of the Group’s long-term bank borrowings are secured on the Group’s property portfolio.

For more details, refer to note 23.

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Directors’ Report continued...

Future Developments
Details of the Group’s future developments are provided within the Strategic Report.

Employees and social matters
The Strategic Report outlines the position of the Company with regard to social, environmental matters and employment of disabled persons.

Auditor
In accordance with section 485 of the Companies Act 2006, Safestay plc will propose that the auditors, CLA Evelyn Partners Limited
(formerly Nexia Smith & Williamson Audit Limited), be reappointed as statutory auditors for the Group for 2023.

Approved by the Board of Directors and signed on behalf of the Board.

Larry Lipman
Chairman
8 June 2023

REPORT & FINANCIAL STATEMENTS 2022

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Directors’ Report continued...

Remuneration committee
The duties of the Remuneration Committee are performed by Stephen Moss and Michael Hirst, with advice being taken from the Board
as a whole in respect of employees who are not directors of the Company. The Committee determines on behalf of the shareholders,
the Company’s policy for the level of remuneration for the executive directors.

Remuneration policy on executive directors’ remuneration
Executive remuneration packages are designed to attract, motivate and retain directors of the high calibre required and to reward them
for enhancing value to shareholders. The performance measurement of the executive directors and the determination of their annual
remuneration package is undertaken by the Committee.

There are three main elements of the remuneration package for executive directors and senior managers:

Basic salary is determined by the Remuneration Committee at the beginning of each year and when an individual changes position
or responsibility. Appropriate salary levels are set by reference to the performance, experience and responsibilities of each
individual concerned and having regard to the prevailing market conditions.

Performance related bonuses are assessed annually and are based on a combination of individual and corporate performances
during the preceding financial year. The Remuneration committee generally favours longer term incentives such as options to
align the remuneration of the management with the objective of the Company, which is expected to continue to grow and reach
full maturity in the coming years.

Share options. A total of 4,767,389 options are issued and not forfeited as at 31 December 2022, of which 3,204,221 for executive
directors. 84% of the options issued are still vesting.

It is the Company’s policy that its executive directors may take up outside directorships where it is considered that the appointment
would not impinge on their employment with the Company. Individuals may retain any remuneration received from such services.

Directors’ service contracts
Larry Lipman has a contract terminable on 6 months’ notice. Stephen Moss and Michael Hirst have contracts terminable by either party upon
three months written notice. Paul Hingston has a service agreement terminated by either party upon three months’ notice, Nuno Sacramento
had the same and Peter Harvey had a contract that required one months’ written notice. Sarah Whiddett and Peter Zielke have a service
agreement terminated by either party upon three months notice.

The directors’ service contracts contain no provision for fixed termination payments.

Share price
The Company has a single class of ordinary shares listed on the AIM market of the London Stock Exchange. High and low prices for the
period were 19.5p and 12.9p respectively and the market price of the shares at 31 December 2022 was 14.5p.

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Directors’ Report continued...

Directors’ emoluments (audited)
The emoluments of the directors of the Company for the period ended 31 December 2022 were as follows:

Name

Executive directors

Larry Lipman

Nuno Sacramento

Peter Harvey

Paul Hingston

Non-executive directors

Michael Hirst

Paul Cummins

Stephen Moss

Total

The comparative for the 31 December 2021 is as follows:

Name

Executive directors

Hervé Deligny

Larry Lipman

Nuno Sacramento

Peter Harvey

Non-executive directors

Anson Chan

Michael Hirst

Paul Cummins

Stephen Moss

Total

Salary and fees
£’000

Pension
£’000

Benefits in kind
£’000

2022 Total
£’000

100

122

364

100

125

369

Salary and fees
£’000

Pension
£’000

Benefits in kind
£’000

2021 Total
£’000

110

332

113

338

Approved by the Board of Directors and signed on behalf of the Board.

Larry Lipman
Chairman
8 June 2023

REPORT & FINANCIAL STATEMENTS 2022

3131

Corporate Governance

Safestay plc is committed to maintaining high standards of corporate governance throughout the Group and to ensuring that all of its
practices are conducted transparently, ethically and efficiently. The Group believes that good governance will result in the continued
success of the Company and improve shareholder value. Therefore, the Group has chosen to formalise its governance policies by
complying with the UK’s Quoted Companies Alliance Corporate Governance code for Small and Mid-Size Quoted Companies (the “QCA
Code”). Full disclosure is available in the investor section of the Company Website https://www.safestay.com/investors/.

Audit Committee report
The Committee provides support to the Board in meeting its statutory responsibilities as set out in the QCA Code. The Board’s view
is that the skills and experience of the Audit Committee members are very much relevant to the Group’s business, as evidenced by
the biographies within the Directors page in the Directors’ report. The Audit Committee also monitors the integrity of the financial
statements of the Group and meets regularly with management and CLA Evelyn Partners Limited (the Group’s external auditors) to
review and monitor the financial reporting process, the statutory audit of the consolidated financial statements, audit procedures, risk
management, internal controls and financial matters.

CLA Evelyn Partners Limited was appointed as external auditor of the Group to conduct the audit of the Group’s financial statements for
the financial year to 31 December 2022 and their re-appointment as auditor for the following financial year will be subject to approval
by shareholders at the 2023 Annual General Meeting. External audit partners are rotated every five years (seven years for subsidiary
companies). The current external audit partner is Stephen Drew. The external auditors present in advance of the year end their
approach to the forthcoming audit and present their findings from the audit following the completion of their work. The Audit Committee
assesses the performance of the external auditors on an annual basis and based on this review the Audit Committee recommends the
appointment, re-appointment or removal of the Group’s external auditors to the Board.

The Audit Committee is chaired by Stephen Moss, with Michael Hirst also part of the Committee.

The Audit Committee meets at least annually with the Group’s external auditors without the other Directors present. The Committee
has a minimum of 2 meetings per year. They review the audit plan at the start of the annual audit. They review the audit findings and
the draft annual accounts before they are submitted to the Board for approval. The Committee generally also meets to follow up the
audit action plan and risk assessment report during the year. The external auditors have unrestricted access to the Audit Committee.
Both the Committee and the Board keep the external auditor’s independence under close scrutiny. The Group also receives a formal
statement of independence and objectivity from the external auditors each year.

Two Audit Committee meetings were held in 2022, these were both attended by Michael Hirst and Stephen Moss, with Paul Hingston
attending in an advisory capacity.

The Audit Committee’s activities and areas of focus during the year were the following:
— key assumptions used in the cash forecast prepared by the directors in relation to the Going Concern note;
— review of the management paper in relation to key assumptions used in the impairment test as at 31 December 2021 under IAS 36; and
— review of the management paper in relation to the valuation of the assets under IAS 16.

Financial reporting
In the preparation of the Groups 2022 financial statements, the committee assessed the accounting principles and policies adopted
and whether management have made appropriate estimates and judgements. The Committee, together with management, identified
significant areas of financial statement risk and judgement as described below:
— revenue recognition;
— property valuation;
— IFRS 16; and
— alternative Performance Measures.

The Committee works with the Management Team to ensure that there are appropriate accounting policies in place and that disclosures
of definitions for alternative performance measures (Adjusted EBITDA) are clearly disclosed with a reconciliation back to IFRS measures.

External Auditors
CLA Evelyn Partners were first appointed as statutory auditors of the Group in 2021 following a tender process carried out in 2021.
Stephen Drew is in his second year of his tenure as senior statutory auditor. The Group complies with the Auditing Practice Board’s
Ethical Standard 3 on audit rotation.

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Corporate Governance continued...

The Quoted Companies Alliance’s Ten Principles of Corporate Governance
1.

Establish a strategy and business model which promote long-term value for shareholders – the Group’s business model is
explained in the Strategic Report.

Seek to understand and meet shareholder needs and expectations – there is continuous communication with shareholders and
the largest shareholder has a seat on the Board of Directors.

Take into account wider stakeholder and social responsibilities and their implications for long-term success – this is explained in
the Section 172(1) statement of the Strategic Report.

Embed effective risk management, considering both opportunities and threats, throughout the organisation – the Group’s risk
management is explained in the risks section of the Strategic Report.

Maintain the board as a well-functioning, balanced team led by the chair – the Board has had a best practices review of their
procedures and follows these.

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities – these are covered in the
Director biographies in the Directors’ report.

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement – the Chairman regularly
evaluates the performance of the Board by assessing whether the reporting is sufficient to analyse the financial/operational
performance of the business and the Group is achieving its strategic objectives. Additionally, there is a rigorous recruitment process
for Directors, including the Nominated Adviser completing due diligence, and Directors all have appropriate notice periods to enable
sufficient time to recruit a replacement.

Promote a corporate culture that is based on ethical values and behaviours – This is detailed in the employees section of the
Section 172(1) statement of the Strategic Report.

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board – this is
covered by the Board’s best practice review.

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant

stakeholders – the Group has continuous communication with shareholders and other stakeholders.

Responsibilities of Non-Executive Directors
All Non-executive Directors are required to devote sufficient time to meet their Board responsibilities and demonstrate commitment to their
role. The time commitment of each Non-Executive Director was considered prior to their appointment to determine that it was appropriate.

Director Board Meeting Attendance
The following table summarises the attendance of the directors for board meetings in 2022:

Paul Cummins

Paul Hingston

Peter Harvey

Michael Hirst

Larry Lipman

Stephen Moss

Nuno Sacramento

By order of the Board.

Larry Lipman
Chairman
08 June 2023

Board Meetings

In Year

Attended

REPORT & FINANCIAL STATEMENTS 2022

3333

Independent Auditor’s Report
to the members of Safestay plc

Opinion
We have audited the financial statements of Safestay plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2022 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive
Income, Consolidated and Company Statement of Financial Position, Consolidated and Company Statement of Changes in Equity,
Consolidated and Company Statement of Cash Flows and the notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted
international accounting standards.

In our opinion, the financial statements:
— give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2022 and of the

Group’s profit for the year then ended;

— have been properly prepared in accordance with UK-adopted international accounting standards; and
— have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Our approach to the audit
Of the Group’s twenty-four reporting components, we subjected fourteen to audits for Group reporting purposes where the extent of our
audit work was based on our assessment of the risk of material misstatement and of the materiality of that component.

The components within the scope of our work covered 86% of Group revenue, 100% of Group profit before tax, and 100% of Group
net assets.

For the remaining ten components, we performed analysis at a Group level to re-examine our assessment that there were no significant
risks of material misstatement within these.

There have been no component auditors used in this engagement.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current period, and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.

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Key audit matter

Description of risk

How the matter was addressed in the audit

Revenue – Group (Note 2)

The Group applies IFRS 15 “Revenue from
Contracts with Customers”.

As part of our procedures we:

Right of use assets and lease liabilities –
Group (Note 11 & 17)

The Group’s activities consist of
the provision of hostel and student
accommodation, the sale of food and
beverages and other ancillary revenues.

A risk exists that the Group is not
recognising revenue in line with IFRS 15,
particularly for those bookings which span
or fall close to the year end.

The Group holds a significant number
of its hostel properties on long term
leasehold contracts.

A risk exists that the appropriate treatment
under IFRS 16 of these leasehold contracts
has not been applied.

The company has negotiated rent deferrals,
reductions, and adjustments during the year.
There is a risk that the list of adjustments
is incomplete and/or the IFRS lease liability
and right of use asset has not been correctly
adjusted. A significant level of judgement
is required to reassess the Incremental
Borrowing Rate (IBR) for these modified
lease agreements.

The company contracts to sub-lease the
food and beverage operations in the Madrid
hostel. The contract includes variable
consideration based on performance.

–

Gained an understanding of the design
and implementation of controls over
revenue recognition which have been
designed by the Group to prevent
and detect fraud and errors in
revenue recognition.

Obtained a complete list of all material
agreements with third party booking
agents and reviewed the key terms of
each contract to confirm the revenue
recognition criteria in accordance with
IFRS 15.

Performed tests of detail on the two
main revenue streams identified:
accommodation and ancillary revenue.

Performed cut-off testing to ensure that
the split between revenue and deferred
revenue for any 2023 bookings made in
2022 has been performed accurately.

As part of our audit procedures we:

–

Obtained the IFRS 16 model and the
underlying calculations for each lease
and checked the mathematical accuracy
of these.

Obtained a copy of any new lease
agreements for each property leased
within the Group and reviewed each
agreement against the inputs into the
IFRS 16 model.

– Using the lease agreements, the lease
liability, right of use asset, depreciation
and interest balance were assessed
against our expected outcome.

–

Obtained all lease modifications which
were agreed during the year. Using
these, the corresponding value of
the lease assets and liabilities were
assessed against our expected outcome.

– Used our internal valuations team to

consider the appropriateness of the IBR
applied to modified lease agreements.

–

Reviewed the IFRS 16 accounting
in respect of the sub-lease in the
Madrid hostel.

REPORT & FINANCIAL STATEMENTS 2022
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Key audit matter

Description of risk

How the matter was addressed in the audit

Carrying value of goodwill – Group (Note 12)

The Group has a significant carrying value
of goodwill arising on the acquisitions of
businesses in prior periods.

An annual impairment review is required
to assess the carrying value of goodwill for
each cash generating unit (CGU).

Management uses a discounted cash flow
model that compares the resulting valuation
to the carrying value for each CGU to assess
if any impairment is required.

There are significant judgements and
assumptions, such as growth rates and
discount factors, used by management in
determining the valuation of goodwill.

As part of our procedures we:

–

Obtained the discounted cash flow models
and the underlying valuations for each
cash flow model and the underlying
valuations for each cash generating unit
and assessed the mathematical accuracy
of these.

Considered the basis of support for
judgements and assumptions made
by management.

Reviewed and challenged management’s
forecasts of future results which
underpins the calculation of the valuations.

Compared historical forecasts
to actual results and assessed
management’s assertions.

Consulted with our internal valuations
team to assess the valuation models and
the appropriateness of the discount factor
and terminal growth rate applied.

Performed sensitivity analyses on key
assumptions used in the calculations.

Going concern – Group (Note 1)

Under IAS 1, management are required to
perform an assessment of the entity’s ability
to continue as a going concern.

Our procedures in relation to going concern
are noted in the Conclusions relating to going
concern section of the audit report.

Due to the significant impact of coronavirus
on the hostel and hospitality sector, an
increased risk will exist over the ability of
the business to continue as a going concern
into the future.

In the prior year, the company was in breach
of its original covenant requirements on its
principal borrowing facility. New covenants
were subsequently negotiated with less
onerous requirements.

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Key audit matter

Description of risk

How the matter was addressed in the audit

Fair value of freehold properties – Group
(Note 11)

The Group owns four freehold properties,
three in the UK and one in Italy.

As part of our procedures we:

–

Considered the key assumptions used
in the external valuation reports for the
three UK properties, corroborating any
key judgements or estimations to other
evidence that had been obtained during
the audit.

Assessing whether based on the
above consideration, any adjustment
is required of the fair value of
these properties.

Considered the assessment prepared
by the directors in respect of the
Pisa property, corroborating any key
judgements or estimations to other
audit evidence that had been obtained,
and assessing whether any adjustment
is required of the fair value of this
property in the circumstances. We
have also reviewed the representation
letter that was provided by the external
valuer to the Directors in respect of
this property.

The Group carries all items of freehold
property at a revalued amount, which
is the fair value of the items at the date
of the revaluation less any subsequent
accumulated depreciation and accumulated
impairment losses.

The fair value assessment is judgemental
and includes assessing the appropriateness
of the key assumptions used in the valuation
by directors and/or external valuers.

Increased occupancy rates and average
bed rates appear to have largely offset the
inflationary pressures and interest rates
rises on the fair value of these properties.

The Lender has obtained an external
valuation for each of the UK properties in the
current reporting period. These valuations
have been shared with the Directors. Based
on these valuations, there has not been a
material movement in fair value since the
previous reporting period.

The Group has not commissioned an
external valuation for the Pisa property in
the current reporting period.

The Directors have considered whether
there has been any material change to the
fair value of the Pisa property, and prepared
their own assessment, which is supported
by advice provided to them by the external
valuer that was engaged in the previous
reporting period.

REPORT & FINANCIAL STATEMENTS 2022
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Key audit matter

Description of risk

How the matter was addressed in the audit

Carrying value of investments in
subsidiaries – Parent company only (Note 4)

The Company has significant balances
relating to investments in subsidiaries.

As part of our audit procedures we:

The investments relate to the acquisitions of
subsidiaries in prior periods.

The carrying value of the investments in
subsidiaries is underpinned by the future
financial performance of the subsidiaries.

–

Considered whether the market
capitalisation of the Group is less
than the carrying value of the
investment balances and therefore
whether this highlighted a potential
impairment indicator.

Challenged assumptions and assertions
made by management in their
assessment of the investment balances
and considered whether the presence of
impairment indicators should result in
an impairment charge.

Reviewed the forecasted results of
the subsidiaries and corroborated
management’s assertions when
reasonably practicable.

Discussed with management the
underlying future and planned activities
of the subsidiaries.

Obtained the discounted cash flow
models and assessed the mathematical
accuracy of each valuation.

Our application of materiality
The materiality for the Group financial statements as a whole (“Group FS materiality”) was set at £1,867k. This has been determined
with reference to the benchmark of the Group’s total assets, which we consider to be one of the principal considerations for members
of the company in assessing the Group’s performance. Group FS materiality represents 2% of the Group’s gross assets. We are required
to consider whether there are one or more particular classes of account balances or transactions, for which misstatements of lesser
amounts than Group FS materiality could reasonably be expected to influence the economic decisions of users taken on the basis of
the financial statements. In the Group financial statements, for transactions and account balances other than the balances to recognise
freehold and leasehold properties, we have determined the specific materiality to be £382k, based on 2% of turnover due to revenue
growth being one of the Group’s key performance indicators.

The materiality for the parent company financial statements as a whole (“parent FS materiality”) was set at £833k. This has been
determined with reference to the benchmark of the parent company’s total assets as it exists only as a holding company for the Group
and carries on no trade in its own right. Parent FS materiality represents 2% of the parent company’s gross assets as presented on
the face of the parent company statement of financial position. Specific performance materiality was also set for the parent company’s
income statement transactions, due to potential misstatements in these particular account transactions being expected to influence the
economic decisions of users taken on the basis of the parent company financial statements. This was set at £382k, to reflect the same
level as the Group financial statements due to the limited transactions in the profit and loss during the financial year.

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Performance materiality for the Group financial statements was set at £1,120k, being 60% of Group FS materiality, and then for transactions
and account balances other than freehold and leasehold properties, we have determined specific performance materiality to be £229k,
being 60% of Group specific materiality, for purposes of assessing the risks of material misstatement and determining the nature, timing
and extent of further audit procedures. We have set it at this amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds Group FS materiality. We judged this level to be appropriate based
on our understanding of the Group and its financial statements, as updated by our risk assessment procedures and our expectation
regarding current period misstatements including considering experience from previous audits. We considered that 60% was appropriate
specifically, due to a combination of the factors, including based on the number of misstatements identified in previous audits, high degree
of estimation in multiple areas of the Group financial statements and some judgemental areas within the Group financial statements.

Performance materiality for the parent company financial statements was set at £567k, being 60% of parent FS materiality, being set at
this level for the same reasons as for the Group performance materiality. For income statement transactions, the specific performance
materiality for the parent company financial statements was set at £229k, being 60% of parent specific materiality.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the Group and parent company’s ability to continue to adopt the going concern basis of
accounting included:
— challenging the assumptions used in the detailed budgets and forecasts prepared by management for the financial years ending 31

December 2023 and 31 December 2024;

— assessing the mathematical accuracy of the detailed budgets and forecasts provided by management;
— considering historical trading performance by comparing recent growth rates of both revenue and operating profit across the

Group’s geographical and market segments;

— challenging the assumptions used by management in their forecasts and budgets, corroborating their judgements to supporting

documentation, including latest market expectations and macroeconomic assumptions;
— comparing the forecast results to those actually achieved in the 2023 financial period so far;
— reviewing bank statements to monitor the cash position of the Group post year end, and obtaining an understanding of significant

expected cash outflows (such as capital expenditure) in the forthcoming 12-month period;

— considering the Group’s funding position and requirements;
— reviewing and challenging management’s calculations suggesting the Group is able to comply with all loan facility covenants in the

12 months from approval of the financial statements; and

— considering the sensitivity of the assumptions and re-assessing headroom after sensitivity.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group and parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.

REPORT & FINANCIAL STATEMENTS 2022
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Other information
The other information comprises the information included in the Report and Financial Statements, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the Report and Financial
Statements. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

— the information given in the strategic report and the directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

— the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
— adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or

— the parent company financial statements are not in agreement with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by law are not made; or
— we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 23, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.

SAFESTAY PLCSAFESTAY PLC
4040

Independent Auditor’s Report continued...
to the members of Safestay plc

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including fraud.

We obtained an understanding of the Group and Parent Company’s legal and regulatory framework, through enquiry of management
concerning their understanding of relevant laws and regulations, focusing on those laws and regulations that have a direct effect on the
determination of material amounts and disclosures in the financial statements. We also drew on our existing understanding of the Group
and Parent Company’s industry and regulation.

We understand that the Group complies with the framework through:
— outsourcing tax compliance to external experts.
— subscribing to relevant updates from external experts and making changes to internal procedures and controls as necessary.
— the directors’ close involvement in the day-to-day running of the business, meaning that any litigation or claims would come to their

attention directly.

In the context of the audit, we considered those laws and regulations which determine the form and content of the financial statements;
which are central to the Group’s ability to conduct is business; and where failure to comply could result in material penalties. We identified
the following laws and regulations as being of significance in the context of the Group:
— The Companies Act 2006 and IFRS in respect of the preparation and presentation of the financial statements.
— UK and European taxation laws.
— Health and Safety at Work Act 1974 and equivalent laws in European jurisdictions.
— The Food Safety Act 1990 and the Food Hygiene Regulations 2013, and equivalent laws in European jurisdictions.
— Environmental Health Regulations.
— Fire Safety Regulations.
— General Data Protection Regulation (GDPR).

The procedures carried out to gain evidence in the above areas included:
— making enquiries of management and reviewing available board meeting minutes; and
— obtaining written management representations that they disclosed to us all known instances of non-compliance or suspected

non-compliance with laws and regulations and accounted for and disclosed all known actual or possible litigation and claims in
the financial statements.

The senior statutory auditor led a discussion with senior members of the engagement team regarding the susceptibility of the entity’s
financial statements to material misstatement, including how fraud might occur. The key areas identified as part of the discussion were:
— the risk that management may be incentivised to overstate revenue, particularly in relation to year end cut off; and
— manipulation of the financial statements to increase revenue and/or profits via fraudulent journal entries.

These areas were communicated to the other members of the engagement team who were not present at the discussion.

REPORT & FINANCIAL STATEMENTS 2022
4141

Independent Auditor’s Report continued...
to the members of Safestay plc

The procedures we carried out to gain evidence in the above areas included:
— testing of revenue transactions close to the year end to underlying documentation to ensure revenue has been recorded in the

correct period; and

— testing of manual journal entries, selected based on specific risk characteristics, including those increasing revenue posted to

unusual accounts.

A further description of our responsibilities is available on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.

Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

Stephen Drew
Senior Statutory Auditor, for and on behalf of

CLA Evelyn Partners Limited
Statutory Auditor
Chartered Accountants

14th Floor
103 Colmore Row
Birmingham
B3 3AG

08 June 2023

SAFESTAY PLCSAFESTAY PLC

4242

Consolidated Income Statement
Year ended 31 December 2022

Revenue

Cost of sales

Gross profit

Administrative expenses:

Administrative expenses

Exceptional items – other operating income

Exceptional items – profit on disposal

Exceptional items – loss on disposal

Exceptional items – costs

Total administrative expenses

Operating profit

Finance costs

Profit/(loss) before tax

Tax

Profit/(loss) for the financial year attributable
to owners of the parent company

Basic profit/(loss) per share

Note

2022
£’000

19,146

(3,142)

16,004

(13,801)

(369)

(14,170)

1,834

(2,557)

(723)

441

(282)

(0.44p)

2021
Continuing
operations
£’000

2021
Discontinued
operations
£’000

2021
Total
£’000

6,423

(1,292)

5,131

613

(132)

481

(565)

(10,432)

7,511

(554)

6,392

6,873

(74)

6,799

1,737

7,511

(554)

(1,738)

3,393

(2,701)

692

5,810

(1,160)

4,650

(9,867)

1,737

(8,130)

(3,480)

(2,627)

(6,107)

218

(1,509)

(1,291)

(5,889)

5,290

(599)

(0.93p)

REPORT & FINANCIAL STATEMENTS 2022

Consolidated Statement
of Comprehensive Income
Year ended 31 December 2022

(Loss) for the year

Items that may be reclassified to profit or loss

Exchange differences on translating foreign operations

Total items that may be reclassified to profit or loss

Items that will not be reclassified to profit or loss

Property revaluation

Deferred tax on property revaluation

Total items that will not be reclassified to profit or loss

Total comprehensive (loss) for the year attributable to owners
of the parent company

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

4343

2021
£’000

(599)

169

5,039

(1,399)

3,640

2022
£’000

(282)

134

(148)

3,210

SAFESTAY PLCSAFESTAY PLC4444

Consolidated Statement of Financial Position
31 December 2022

Non-current assets

Property, plant and equipment (including right of use asset)

Intangible assets

Goodwill

Lease assets

Deferred tax asset

Total non-current assets

Current assets

Stock

Trade and other receivables

Lease assets

Current tax asset

Cash and cash equivalents

Total current assets

Total assets

Current liabilities

Borrowings

Lease liabilities

Trade and other payables

Current liabilities

Non-current liabilities

Borrowings

Lease liabilities

Trade and other payables due in more than one year

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium account

Other components of equity

Retained earnings

Total equity attributable to owners of the parent company

Note

2022
£’000

72,059

12,014

453

1,379

85,914

1,121

139

5,226

6,576

92,490

(925)

(1,764)

(3,128)

(5,817)

(23,101)

(30,450)

(3,364)

(56,915)

(62,732)

29,758

647

23,904

18,417

(13,210)

29,758

2021
£’000

73,609

12,146

562

1,122

87,457

1,227

199

4,482

6,021

93,478

(926)

(1,922)

(2,062)

(4,910)

(24,028)

(31,086)

(7)

(3,314)

(58,435)

(63,345)

30,133

647

23,904

18,510

(12,928)

30,133

The accompanying accounting policies and notes form an integral part of these financial statements.
These financial statements were approved by the Board of Directors and authorised for issue on 31 May 2023.

Signed on behalf of the Board of Directors

Larry Lipman
Chairman
8 June 2023

REPORT & FINANCIAL STATEMENTS 2022

Consolidated Statement of Changes in Equity
31 December 2022

4545

Balance as at 1 January 2021

Comprehensive income

Loss for the year

Other comprehensive income

Property revaluation

Deferred tax on property revaluation

Movement in translation reserve

Total comprehensive income

Transactions with owners

Share based payment charge for the period

Balance at 31 December 2021

Profit for the year

Other comprehensive income

Movement in translation reserve

Total comprehensive income

Transactions with owners

Share based payment charge for the period

Share
Capital
£’000

647

Share
premium
account
£’000

23,904

Other
Components of
Equity
£’000

14,629

Retained
earnings
£’000

(12,329)

Total
equity
£’000

26,851

(599)

5,039

(1,399)

169

3,809

(599)

647

23,904

18,510

(12,928)

(282)

(134)

(282)

5,039

(1,399)

169

3,210

30,133

(282)

(134)

(416)

29,758

Balance at 31 December 2022

647

23,904

18,417

(13,210)

SAFESTAY PLCSAFESTAY PLC4646

Consolidated Statement of Cash Flows
Year ended 31 December 2022

Operating activities

Cash generated from operations

Income tax received/(paid)

Net cash generated/(used in) from operations

Investing activities

Purchases of property, plant and equipment

Purchases of intangible assets

Proceeds on sale of fixed assets

Net cash (used in)/generated from investing activities

Financing activities

Bank loans redeemed

Principal elements of lease payments

Interest paid

Loan repayments

Net cash used in financing activities

Cash and cash equivalents at beginning of year

Net increase in cash and cash equivalents

Cash and cash equivalents at end of year

Note

2022
£’000

6,130

133

6,263

(365)

(5)

–

(370)

2021
£’000

(1,272)

(51)

(1,323)

(307)

16,658

16,351

(10,373)

(3,495)

(656)

(997)

(1,810)

(488)

(5,148)

(12,671)

4,482

744

5,226

2,125

2,357

4,482

REPORT & FINANCIAL STATEMENTS 20224747

Notes to the Consolidated
Financial Statements
31 December 2022

1. ACCOUNTING POLICIES FOR THE GROUP AND COMPANY FINANCIAL STATEMENTS

Safestay plc is listed on the AIM of the London Stock Exchange and was incorporated and is domiciled in the UK.

The Group and Company financial statements have been prepared in accordance with UK-adopted International Accounting Standards
in conformity with the requirements of the Company Act 2006.

The 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 2022.

New standards, amendments and interpretations not yet effective
IAS 12 “Income Taxes” and subsequent amendments have been endorsed by the IASB, EU and the UK. IAS 12, as amended, is effective
for accounting periods beginning on or after 1 January 2023.

The amendments to IAS 12 outline that in certain instances, which may include the initial recognition of a lease or a decommissioning provision,
IFRS requires simultaneous recognition of an asset and liability and consequently, there may be also offsetting temporary differences.

The impact of the changes above on the Group’s reportable segments will depend largely on the extent to which timing differences
arise at different rates on Right of Use assets and Lease Liabilities. The combined impact of the changes is not expected to materially
increase or decrease the profit or loss after tax, with deferred tax assets and liabilities generated on leasehold agreements expected to
largely offset one another.

Going concern
The Group is reporting an Adjusted EBITDA profit of £5.9 million in 2022 as the business has recovered strongly from the pandemic and
the hostels have been open for 97% of the year.

The Group started to generate cash from its operations in 2022 to finish with an available cash balance of £5.2 million at 31
December 2022.

The Group received £16.0 million proceeds from the disposal of the Edinburgh hostel which completed on 30 June 2021. Following completion,
the £1 million overdraft facility was removed, and £10.2 million of HSBC debt was repaid. This means the Group now has a low gearing of 54%.

All the covenants of the debt facility for the past year have been satisfied based on interest cover and loan to value with significant headroom.

Safestay plc are in the process of starting to refinance the loan facility of £12.7m that is due to be renewed in January 2025. The
Directors have considered the impact of this and are confident of achieving similar terms on a new facility on the basis of the excellent
current trading performance and the strong cash flow resulting from this that is projected to continue for at least the next two years.

Additionally, the significant headroom on both of the covenants supports this view of the Directors.

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.

SAFESTAY PLCSAFESTAY PLC4848

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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 is recognised when provided.

Income from the rent of student accommodation is recognised on a straight-line basis over the academic year to which the rent relates.
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.

Government Grants
Monetary resources transferred to the Group by government, government agencies or similar bodies are recognised at fair value, when
the Group is certain that the grant will be received. Grants will be recognised in the profit and loss account on a systematic basis, over
the same period during which the expenses, for which the grant was intended to compensate, are recognised.

Grants relating to employee costs are disclosed in Staff Costs, note 10 of the accounts.

Exceptional Items
The Group separately discloses on the face of the Income Statement items of income or expense which the nature of or amount would,
without separate disclosure, distort the reporting of the underlying business.

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.

REPORT & FINANCIAL STATEMENTS 20224949

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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 the 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 acquire. 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.

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.

SAFESTAY PLCSAFESTAY PLC5050

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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
Freehold properties
Leasehold properties
Land is not depreciated.

3-5 years
50 years
50 years or term of lease if shorter

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.

REPORT & FINANCIAL STATEMENTS 2022

5151

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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.

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.

Stock
Stock 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.

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.

SAFESTAY PLCSAFESTAY PLC5252

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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.

REPORT & FINANCIAL STATEMENTS 20225353

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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.

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.

SAFESTAY PLCSAFESTAY PLC5454

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Other Components of Equity

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

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.

— 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.

REPORT & FINANCIAL STATEMENTS 20225555

Notes to the Consolidated
Financial Statements continued...
31 December 2022

— The Group has incurred tax losses, and therefore a material deferred tax asset has been recognised as these can be carried

forward indefinitely and offset against probable future taxable profits after the market recovers in 2022 and the Group is expected
to generate net profits from 2023 under his forecast model.

Estimates
— The fair-value of the assets and liabilities recognised on the acquisition of an operation or entity is determined using both external

valuations and directors’ valuations. Details of the fair values are set out in the note 24.

— Assessment of impairment of goodwill 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 9.7% (2021: 11.1%) 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.

— 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 property on a
sufficiently regular basis by using open market values to ensure that the carrying value does not differ significantly from the fair value. The
valuation, performed by qualified valuers is based on market observations and estimates on the selling price in an arms-length transaction,
and includes estimates of future income levels and trading potential for each hostel as other factors including location and tenure. See note
11. The Group has used external valuations on freehold properties and leased assets under financing transactions, as outlined in note 11.
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 31st December 2022.

SAFESTAY PLCSAFESTAY PLC5656

Notes to the Consolidated
Financial Statements continued...
31 December 2022

2. SEGMENTAL ANALYSIS

An analysis of the Group’s revenue from external customers for each major product and service category (excluding revenue from
discontinued operations) is as follows:

Hostel accommodation

Food and Beverages sales

Other income

Rental income

Total Income

Like-for-like income

2022
£’000

17,150

1,109

517

370

19,146

2021
£’000

4,901

725

550

247

6,423

5,810

Like-for-like income relates to all turnover less turnover associated with the 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 Group.

Management considers the like-for-like income only for acquisitions and continuing operations that have been operational 12
consecutive months in the prior year.

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 period 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.

Pre-IFRS 16 EBITDA was calculated in the prior period segmental analysis such that the accounts can be understood on a comparable
basis and included for information purposes. As this is the second year since transition, pre-IFRS 16 adjusted EBIDTA is not considered
in the current year.

REPORT & FINANCIAL STATEMENTS 20225757

Total
£’000

19,146

(724)

2,558

3,654

5,488

411

5,900

92,490

Notes to the Consolidated
Financial Statements continued...
31 December 2022

2022

Revenue

Profit/(loss) before tax

Finance costs

Depreciation & Amortisation

EBITDA

Exceptional & Share based payment expense

Rent concessions

Adjusted EBITDA

Total assets

Total liabilities

2021

Revenue

Profit/(loss) before tax

Finance costs

Depreciation & Amortisation

EBITDA

Exceptional & Share based payment expense

Rent concessions

Adjusted EBITDA

Total assets

Total liabilities

UK
£’000

6,864

2,574

191

253

3,018

36,539

(9,164)

UK
£’000

2,422

6,689

271

1,028

7,988

(7,511)

(595)

(118)

34,975

(10,731)

Spain
£’000

4,464

278

1,045

1,324

16,570

Europe
£’000

7,818

1,007

1,370

2,436

25,233

Shared
services
£’000

(4,583)

2,306

987

(1,290)

411

(878)

14,147

(12,088)

(12,672)

(28,808)

(62,732)

Spain
£’000

1,363

(2,279)

618

1,076

(585)

554

(227)

(258)

19,144

(13,432)

Europe
£’000

2,638

(1,169)

539

1,274

644

(453)

191

25,024

(12,461)

Shared
services
£’000

(2,549)

1,273

395

(881)

(809)

14,335

Total
£’000

6,423

692

2,701

3,773

7,166

(6,885)

(1,275)

(994)

93,478

(26,721)

(63,345)

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

Spain

Rest of Europe

Shared services

Total

2022
£’000

36,005

15,636

22,733

11,540

85,914

2021
£’000

35,862

18,102

23,164

10,329

87,457

SAFESTAY PLCSAFESTAY PLC5858

Notes to the Consolidated
Financial Statements continued...
31 December 2022

3. COST OF SALES

Food and drinks

Direct room supplies and sales commissions

Total

4. DISCONTINUED OPERATIONS

2022
£’000

449

2,692

3,142

2021
£’000

341

951

1,292

The Group completed on the disposal of two hostels in 2021. The Barcelona Sea hostel was sold in February 2021 for a loss of £554k
and the Edinburgh hostel was sold in June 2021 for a profit of £7,511k. The Barcelona Sea hostel was in the operating segment of Spain
and the Edinburgh hostel was in the operating segment of UK.

5. ADMINISTRATIVE EXPENSES

Staff costs (see note 10)

Legal and professional fees

Property costs

Depreciation and amortisation

Share option expenses

Other expenses

Exceptional items – other operating income

Grant income

Profit on sale of Edinburgh Hostel

Rent concessions

Exceptional items – costs

Legal and other

Loss on sale of Barcelona Sea Hostel

2022
£’000

5,380

895

513

3,654

3,316

13,800

2022
£’000

369

2021
£’000

3,331

614

482

3,773

2,160

10,432

2021
£’000

462

7,511

1,275

9,248

554

REPORT & FINANCIAL STATEMENTS 2022Notes to the Consolidated
Financial Statements continued...
31 December 2022

6. FINANCE COSTS

Interest on bank overdrafts and loans

Amortised loan arrangement fees

Other interest costs

Interest expense for lease arrangements (note 17)

Property financing costs

Finance income for the period totalled £2k (2021: £1k).

7. LOSS FOR THE FINANCIAL YEAR

5959

2021
£’000

695

1,741

197

2,701

2022
£’000

853

1,404

191

2,559

The audit fees disclosed in 2022 represent the fees payable for the audit for the period ended 31 December 2022 and the non-audit fees
are those incurred in the period.

Profit/(Loss) for the financial period is arrived at after charging:

Depreciation on owned assets

Depreciation of assets under lease liabilities

Amortisation of intangible assets

CLA Evelyn Partners Limited Auditor’s remuneration for audit services

Amounts payable in respect of both audit and non-audit services are set out below:

Fees payable to Company’s auditors for the audit of the Parent Company
and consolidated financial statements:

CLA Evelyn Partners Limited audit of the Group and Company’s annual accounts

CLA Evelyn Partners Limited additional fees relating to first year 2021 audit

CLA Evelyn Partners Limited audit of the subsidiaries’ annual accounts

2022
£’000

1,363

2,210

150

281

2021
£’000

1,434

2,243

119

2022
£’000

2021
£’000

136

116

281

119

SAFESTAY PLCSAFESTAY PLC6060

Notes to the Consolidated
Financial Statements continued...
31 December 2022

8. TAX

The Group tax charge is made up as follows:

Current tax

Corporation tax on profits for the year

Adjustments for corporation tax on prior periods

Other local taxes

Total current tax

Deferred tax

Adjustments for deferred tax in prior periods

Effect of increased tax rate on opening balance

Total tax charge

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

Profit/(loss) before tax

Tax at the standard UK corporation tax rate of 19% (2021: 19%)

Fixed asset differences

Adjustment for tax rate differences in foreign jurisdictions

Adjustments for tax on prior periods

Other tax adjustments, reliefs and transfers

Remeasurement of deferred tax for changes in tax rates

Deferred tax not recognised

Factors affecting charge for the period

Non-deductible items and other timing differences

Chargeable gains/(losses)

Foreign exchange differences

Depreciation in excess of capital allowances

Group tax charge

2022
£’000

(4)

(505)

(441)

2022
£’000

(724)

(137)

(4)

(111)

(26)

(284)

(54)

(441)

2021
£’000

103

(123)

116

724

559

(88)

1,291

2021
£’000

692

131

(154)

(122)

193

(148)

1,155

(1,300)

1,482

1,291

Remeasurement of deferred tax for changes in tax rates is as a result of the UK tax rate being increased to 25% effective 1 April 2023.

The Group has a deferred tax liability of £3.364m as disclosed in note 18 related to the potential future gain on property revaluations.

Included within current tax are adjustments for corporation tax on prior periods of £68k and relates to Group losses.

REPORT & FINANCIAL STATEMENTS 2022Notes to the Consolidated
Financial Statements continued...
31 December 2022

9. LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the following data:

Loss for the period attributable to equity holders of the Company

Weighted average number of ordinary shares (000s) for the purposes of basic loss earnings per share

Effect of dilutive potential ordinary shares (000s)

Weighted average number of ordinary shares (000s) for the purposes of diluted profit/(loss) per share

Basic profit/(loss) per share

The total number of shares in issue as at 31 December 2022 was 64,679,014.

10. STAFF COSTS

The average monthly number of employees (including directors) during the period was:

Hostel operation

Directors

The costs incurred in respect of employees (including directors) were:

Wages and salaries

Social security costs

Pension costs

Total staff costs

6161

2021
£’000

(599)

2021
£’000

64,679

4,537

69,216

(0.93p)

2022
£’000

(282)

2022
£’000

64,679

4,767

69,446

(0.44p)

2022
Number

2021
Number

222

226

2022
£’000

4,680

670

5,380

176

181

2021
£’000

2,925

380

3,331

Government grants claimed by the Group under coronavirus job retention schemes across the Group for 2022 total £0k (2021: £240k).

The remuneration of the directors, who are the key management personnel of the Group, is set out below.

Short term employee benefits

Pension

Share based payment charges

2022
£’000

364

411

2021
£’000

332

410

Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report.

Details of directors share options is provided in the Directors’ Remuneration Report.

SAFESTAY PLCSAFESTAY PLC6262

Notes to the Consolidated
Financial Statements continued...
31 December 2022

11. PROPERTY, PLANT AND EQUIPMENT

Freehold land
and buildings
£’000

Right of use
assets
£’000

Leasehold
land and
buildings
£’000

Leasehold
improvements
£’000

Fixtures,
fittings and
equipment
£’000

Total
£’000

Cost or valuation

At 1 January 2021

Transfers

Additions

Acquired in business combination

Derecognition of sub-leased asset

Disposals

IFRS lease modification

Revaluation

Exchange movements

At 1 January 2022

Transfers

Additions

IFRS lease modification

Exchange movements

At 31 December 2022

Depreciation

At 1 January 2021

Transfers

Charge for the year

Released on disposal

At 1 January 2022

Transfers

Adjustment on transition to IFRS16

Charge for the period

Released on disposal

At 31 December 2022

Net book value:

At 31 December 2022

At 31 December 2021

(13,402)

(201)

(576)

(15,806)

8,411

42,048

41,126

(17)

1,072

(87)

9,484

2,895

(640)

(1,610)

(2,891)

36,907

(280)

1,913

3,967

31,691

(2,895)

12,379

38,540

28,796

285

154

(1)

439

223

662

4,884

2,243

(261)

6,866

2,210

9,076

11,717

9,045

29,465

30,041

2,420

671

(1,094)

1,997

596

2,593

26,203

29,694

5,295

(73)

3,947

100,827

275

307

(640)

(2,891)

5,039

(233)

86,603

365

(280)

1,937

(92)

3,554

305

296

4,179

88,625

2,706

11,092

355

(405)

2,656

302

3,677

(1,775)

12,994

3,572

(54)

4,967

(305)

4,731

797

(1)

254

(14)

1,036

241

1,278

2,957

16,566

3,453

3,931

1,222

898

72,059

73,609

REPORT & FINANCIAL STATEMENTS 20226363

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Fixed asset transfers
As part of an internal review into the fixed asset register, it was identified that a number of assets had been incorrectly classified. In
order to more accurately reflect the nature of the assets, the directors have transferred the assets to the correct asset class.

Freehold properties
The Freehold values relates to the 3 following hostels:
— The £3.5 million value of the freehold in York is based on the external valuations as at 31 December 2021 prepared by Cushman

and Wakefield. The historic cost carrying value is £2.4 million which is the acquisition price in 2014.

— The freehold of the Glasgow property acquired in October 2019 for £3.2 million and which has undergone renovation for £0.4

million. The £4.9 million value of the freehold in Glasgow is based on the external valuations as at 31 December 2021 prepared by
Cushman and Wakefield.

— The hostel in Pisa was acquired in June 2019 for £3 million, of which £2.1 million for the freehold. The £3.5 million value of the

freehold in Pisa is based on the external valuations as at 31 December 2021 prepared by Cushman and Wakefield.

Right of Use Assets
The £36.5 million right of use assets all relate to properties operated by the Group as hostels.

Right of use assets as at 31 December 2021

IFRS 16 lease modification

Exchange differences

Right of use assets as at 2022

36,907

(280)

1,913

38,540

Leasehold, land and buildings
The Group has used external valuations on Elephant & Castle. The London Elephant & Castle leasehold was independently valued on
31 December 2021 at £26.8 million. 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.

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

Valuation process
Initially market values of the properties were believed to have fallen due to the impact of COVID-19. The directors wanted to show that
the values of the properties have recovered post COVID-19 so engaged independent external valuers to determine the market value
of all three freehold properties and the long leasehold property. These independent external valuers hold recognised and relevant
professional qualifications and have recent experience in the location and category of the properties being valued.

The Group provides information to valuers, including profit and cashflow forecasts along with asset-specific business plans. 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 management as well as the directors. Cushman & Wakefield
were engaged to value properties now valued at £38.7m.

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.

SAFESTAY PLCSAFESTAY PLC6464

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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

Elephant & Castle

Glasgow

York

Pisa

12. INTANGIBLE ASSETS AND GOODWILL

Cost

At 1 January 2021

Disposals

At 31 December 2021

Additions

Exchange differences

At 31 December 2022

Amortisation and Impairment

At 1 January 2021

Charge for the period

On disposals

At 31 December 2021

Charge for the period

At 31 December 2022

Net book value:

At 31 December 2022

At 31 December 2021

Discount
rate

Capitalisation
rate

Inflation
rate

Running
Yield

11%

10%

11%

Website
£’000

134

139

116

130

8.50%

Leasehold
Rights
£’000

1,697

(1,697)

818

(890)

3.88% – 7.39%

5.12% – 10.95%

6.27% – 9.78%

6.82% – 10.77%

Goodwill
£’000

15,060

(1,423)

13,637

(131)

13,504

1,491

12,014

12,146

Total
£’000

16,891

(3,120)

13,771

(131)

13,645

2,401

(890)

1,607

1,621

12,023

12,164

Leasehold Rights
Amortisation of leasehold rights is based on a straight-line basis for the term of the lease. Amortisation is taken to the Income
Statement within administrative expenses.

REPORT & FINANCIAL STATEMENTS 20226565

Notes to the Consolidated
Financial Statements continued...
31 December 2022

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 the 31 December 2022 are shown below.

CGU

Madrid

Paris

Gothic

Lisbon

Prague

Barcelona Passeig De Gràcia

Vienna

Brussels

Pisa

Berlin

Athens

Bratislava

Warsaw

Goodwill
carrying value
£'000

2,217

726

1,355

211

1,687

1,326

795

1,015

1,210

897

607

12,014

No impairment has been deemed necessary by Management for the year ended 31 December 2022.

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 11.0% (2021: 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;
— estimated 2023 average bed rate per property has been used as the basis of our assessment to which the Directors’ have applied

an increase of a 7.5% in revenue and a 5% increase in cost relating to inflation for subsequent years;

— no hostels have a shortfall between the recoverable value and carrying value.

SAFESTAY PLCSAFESTAY PLC6666

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Sensitivity analysis
Management have reviewed all the properties and do not consider there to be an impairment.

Headroom between the carrying and recoverable value of an asset is dependent upon sensitivities to the following assumptions (other
than the VIU assumptions outlined above):

Discount Rate
The Group calculates a WACC applying local government bond yields and tax rates. For reference the Group WACC for Safestay plc was
11.0% (2021: 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 2022 and the risks specific to the CGU.

Sensitivity analysis
A sensitivity analysis was performed for the Group of CGUs and Management have concluded that no reasonably possible change in
any of the key assumptions would result in the carrying value of the CGUs to exceeding their recoverable amount.

13. TRADE AND OTHER RECEIVABLES

Trade and other receivables

Other debtors

Prepayments and accrued income

2021
£’000

620

502

1,122

2020
£’000

865

230

132

1,227

Credit risk is the risk that a counterparty does not settle its financial obligation with the Group. At the year end, the Group has assessed
the credit risk on amounts due from suppliers, based on historic experience, meaning that the expected lifetime credit loss was
immaterial. Cash and cash equivalents are also subject to the impairment requirements of IFRS 9 – the identified impairment loss
was none.

14. CASH AND CASH EQUIVALENTS

Cash and cash equivalents

2022
£’000

5,226

2021
£’000

4,482

The directors consider that the carrying amount of cash and cash equivalents approximates their fair value. Cash and cash equivalents
comprise cash.

REPORT & FINANCIAL STATEMENTS 2022Notes to the Consolidated
Financial Statements continued...
31 December 2022

15. TRADE AND OTHER PAYABLES

Due in less than one year

Trade payables

Social security and other taxes

Other creditors

Accruals and deferred income

Due in more than one year

Other payables

16. BORROWINGS

At amortised cost

Bank Loan

Property financing loans

Loan arrangement fees

Loans repayable within one year

Loans repayable after more than one year

6767

2021
£’000

640

107

642

673

2,062

2,069

2021
£’000

18,013

7,078

(137)

24,954

926

24,028

24,954

2022
£’000

663

150

758

1,556

3,128

2022
£’000

17,000

7,088

(62)

24,026

925

23,101

24,026

Included within borrowings is CBILS (Coronavirus Business Interruption Loan Scheme) obtained via HSBC. The Government provide
lenders with a guarantee on each loan, and it may be possible that there is a government grant in the form of the lower rate of interest
than would likely have been payable in the absence of the government guarantee. However, in the absence of further information the
total amounts are disclosed within finance costs. The loan will be repaid at a rate of £1 million per year from April 2022 until April 2027
and the balance at 31 December 2022 is £4.3m. The interest rate is 3.99% margin over base rate from year 2 onwards and is interest
free in the first year.

Property financing loans relate to the sale and leaseback arrangement entered for Elephant & Castle.

At 31st December 2021 a HSBC bank loan was secured against the UK freehold and long leasehold properties. The facility ends in
January 2025 and the interest rate is 2.95% margin over SONIA.

SAFESTAY PLCSAFESTAY PLC6868

Notes to the Consolidated
Financial Statements continued...
31 December 2022

17. LEASES

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

Current

Non-current

Total

2022
£’000

139

453

592

2021
£’000

562

640

The lease asset relates fully to our contract with Casa Suecia where the Group have 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.

Variable lease income relating to performance of Casa Suecia have been excluded from the initial measurement of the lease asset and
any additional consideration received is recognised through the income statement.

2022

Within 1 year

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

After 5 years

Lease receipts

Finance income

Net present values

159

(20)

139

159

(15)

145

159

(9)

150

162

(3)

159

Minimum lease payments due

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

Current

Non-current

Total

2022
£’000

1,770

30,450

32,220

Total

640

(48)

592

2021
£’000

1,922

31,086

33,008

Total cash outflow for leases for the year ended 31 December 2022 was £3.3m (2021: £3.3m).

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 11).

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

REPORT & FINANCIAL STATEMENTS 20226969

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Lease payments are generally linked to annual changes in an index (either RPI or CPI). However, the Group has one lease in Lisbon
which a portion of the rentals are linked to revenue. The variable portion of the lease in Lisbon is 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

Hostel buildings

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

5 – 42 years

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

Lease liabilities
The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis of lease liabilities at 31 December
2022 is as follows:

2022

Lease payments

Finance charges

Net present values

2021

Lease payments

Finance charges

Net present values

Within 1 year

1 – 5 years

After 5 years

Minimum lease payments due

3,345

(1,474)

1,871

13,075

(4,876)

8,199

31,420

(9,271)

22,140

Within 1 year

1 – 5 years

After 5 years

Minimum lease payments due

3,085

(1,163)

1,922

11,915

(3,934)

7,981

32,606

(9,501)

23,105

Total

47,841

(15,621)

32,220

Total

47,606

(14,598)

33,008

The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for
leases of low value assets. The expense incurred for short term and low value leases is £50k (2021: 50k).

SAFESTAY PLCSAFESTAY PLC7070

Notes to the Consolidated
Financial Statements continued...
31 December 2022

18. DEFERRED INCOME TAX

Balance as at 1 January 2021

Recognised in the income statement

Recognised in other comprehensive income

Balance at 31 December 2021

Recognised in the income statement

Recognised in other comprehensive income

Balance at 31 December 2022

Deferred
tax assets
£’000

Deferred
tax liabilities
£’000

2,159

(1,037)

1,122

258

1,379

(1,758)

(157)

(1,399)

(3,314)

(82)

Total
£’000

401

(1,194)

(1,399)

(2,192)

174

(3,364)

(1,985)

The Group has recognised deferred tax assets of £1.4m (2021: £2.2m), which are expected to offset against future profits, in respect of
tax losses. This is on the basis that it is probable that profits will arise in the foreseeable future, enabling the assets to be utilised.

19. EQUITY

Called up share capital

Allotted, issued and fully paid

64,679,014 Ordinary Shares of 1p each as at 1 January 2022 and 31 December 2022

£’000

647

At the 31 December 2022, the ordinary shares rank pari passu. There are no changes to the voting rights of the ordinary shares since
the balance sheet date.

Share premium

At 1 January 2022

At 31 December 2022

£’000

23,904

REPORT & FINANCIAL STATEMENTS 20227171

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Other components of equity

Cost

At 1 January 2021

Share based payment charge

Property revaluation

Deferred tax on property revaluation

Exchange differences on translating foreign operations

At 31 December 2021

Exchange differences on translating foreign operations

Share based payment charge

At 31 December 2022

Merger
reserve
£’000

1,772

Share based
payment
reserve
£’000

Revaluation
reserve
£’000

Translation
reserve
£’000

Total
£’000

438

510

552

12,356

5,039

(1,399)

15,996

14,629

169

232

(136)

5,039

(1,399)

169

18,510

(136)

18,416

SAFESTAY PLCSAFESTAY PLC7272

Notes to the Consolidated
Financial Statements continued...
31 December 2022

20. SHARE BASED PAYMENTS

The Company operates a share-based payments scheme for Directors as outlined in the Directors Remuneration Report. Share options
were awarded as part of longer-term incentives.

The option holder may only exercise the option if, on the date of exercise, the market value targets are achieved.

480,000 share options were granted in the period (2021: 609,000) and the average share price target for options issued in 2022 was 15p
(2021: 15p).

Number of share options outstanding

Grant date

12-May-14

21-May-14

14-Jul-17

21-Jul-17

11-Oct-18

1-Jan-19

26-Jun-19

5-Sep-19

2-Jan-20

31-Oct-20

30-Nov-20

31-Dec-20

31-Jan-21

28-Feb-21

31-Mar-21

30-Apr-21

31-May-21

30-Jun-21

31-Jul-21

14-Apr-22

9-Nov-22

25-Nov-22

Exercise price
per share (pence)

Period within which options
are exercisable

15p

50p

15p

13p

14p

15p

16p

01/01/2024 to 31/12/2031

21/05/2017 to 20/05/2024

01/01/2024 to 31/12/2031

2022

396,521

528,695

132,173

500,000

100,000

500,000

100,000

900,000

186,400

104,900

129,100

119,900

111,900

75,200

66,400

62,700

44,400

400,000

30,000

50,000

2021

396,521

528,695

38,550

250,000

500,000

100,000

500,000

100,000

900,000

186,400

104,900

129,100

119,900

111,900

75,200

66,400

62,700

44,400

4,767,389

4,443,766

REPORT & FINANCIAL STATEMENTS 20227373

Notes to the Consolidated
Financial Statements continued...
31 December 2022

The share options are exercisable at a price equal to the average quoted market price of the Company’s shares on the date of grant.
The share options that have been issued in 2022 have a vesting period to 1 January 2024 and have no minimum price condition.
The options are forfeited if the employee leaves the Group before the options vest. Details of these share options are summarised
in the table below:

During 2022, it was agreed with the Business Growth Fund that Larry Lipman, the Chairman, will waive his 250,000 share options issued
on 14 July 17. He has also agreed that if he exercised any of the remaining share options, he cannot sell these shares for two years.

Brought forward 1 January

Forfeited in the period

Issued in the period

Outstanding at 31 December

Exercisable at end of the period

No options were exercised in the period.

2022

2021

Number of
share options

Weighted average
exercise price

Number of
share options

Weighted average
exercise price

4,443,766

(156,377)

480,000

4,767,389

388,573

18.2p

50.0p

20.9p

19.3p

50.0p

4,634,166

(800,000)

609,600

4,443,766

2,327,789

38.0p

33.6p

15.0p

35.9p

42.8p

The fair value of the share options was calculated using the Black Scholes model. There is a charge of £42k taken though the income
statement (2021: £72k).

The inputs are as follows:

Closing price of Safestay plc

Weighted average share price

Weighted average exercise price

Expected volatility

Average vesting period

Risk free rate

Expected dividend yield

The expected volatility percentage was derived from the quoted share prices since flotation.

2022

15.5p

15.7p

19.3p

52%

2021

19.5p

20.3p

35.9p

35%

2.0 years

7.0 years

1.47%

0.00%

1.28%

0.00%

SAFESTAY PLCSAFESTAY PLC7474

Notes to the Consolidated
Financial Statements continued...
31 December 2022

21. NOTES TO THE CASHFLOW STATEMENT

Profit/(loss) before tax

Adjustments for:

Depreciation of property, plant and equipment and amortisation
and impairment of intangible assets

Profit on disposal of fixed assets

Finance cost

Share based payment charge

Exchange movements

Lease Modifications

Rent concessions

Changes in working capital:

Decrease in inventory

Decrease/(increase) in trade and other receivables

(Decrease) in trade and other payables

Net cash from operating activities

22. RELATED PARTY TRANSACTIONS

2022
£’000

(724)

3,586

2,558

(836)

280

154

1,059

6,130

2021
£’000

693

3,773

(6,957)

2,545

116

(1,275)

549

(800)

(1,272)

The Group has taken advantage of the exemption contained within IAS 24 – ‘Related Party Disclosures’ from the requirement to disclose
transactions between wholly owned Group companies as these have been eliminated on consolidation.

The remuneration of the directors, who are the key management personnel of the Group, is set out below:

Short term employee benefits

Pension

Share based payment charges

2022
£’000

364

411

2021
£’000

332

410

Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report.

Details of the directors’ share options is provided in the Directors’ Remuneration Report and in note 20 of the accounts. The directors’
share options have been audited.

Safestay plc has a common directorship with Safeland plc. In the year, Safestay plc rented premises from Safeland plc on non-
commercial terms. Total rent paid to Safeland plc was £50,000 (2021:£50,000).

Safeland plc has 528,695 share options as at 31 December 2022 (2021: 528,695), valued at £48k.

REPORT & FINANCIAL STATEMENTS 2022

7575

Notes to the Consolidated
Financial Statements continued...
31 December 2022

23. FINANCIAL INSTRUMENTS
Capital management
Total Capital is calculated as equity, as shown in the consolidated statement of financial position, plus debt.

The Board’s policy is to maintain a strong capital base with a view to underpinning investor, creditor and market confidence and
sustaining the future development of the business. Capital consists of ordinary shares, other capital reserves and retained earnings.
To this end, the Board monitors the Group’s performance at both a corporate and individual asset level and sets internal guidelines for
interest cover and gearing.

The executive directors monitor the Group’s current and projected financial position against these guidelines. In order to maintain or
adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.

Share capital

Share premium account

Retained earnings

Merger reserve

Share based payment reserve

Revaluation reserve

Translation reserve

Bank loans

Property financing loans

Lease liabilities

2022
£’000

647

23,904

(13,209)

1,772

551

15,996

17,000

7,088

32,220

2021
£’000

647

23,904

(12,928)

1,772

510

15,996

231

18,007

7,078

33,008

The Group has no externally imposed capital requirements.

Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instruments are disclosed in note 1 to these financial statements and in the tables below:

SAFESTAY PLCSAFESTAY PLC7676

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Categories of financial instruments
At 31 December 2022, the Group held the following financial assets:

Trade and other receivables (note 13)

Cash and cash equivalents (note 14)

At 31 December 2022, the Group held the following financial liabilities:

Bank loans (note 16)

Property financing loans (note 16)

Lease liabilities (note 17)

Trade and other payables (note 15)

2022
£’000

1,187

5,226

6,413

2022
£’000

17,000

7,084

32,220

3,128

59,432

2021
£’000

1,227

4,482

5,709

2021
£’000

18,007

7,078

33,008

2,069

60,162

All financial liabilities are measured at amortised cost.

The carrying amounts of the Group’s bank loans and overdrafts, lease obligations and trade and other payables approximate to their fair value.

Total liabilities

Cash and cash equivalents

Net Debt

2022
£’000

(62,732)

5,226

(57,506)

2021
£’000

(57,962)

4,482

(53,480)

Financial risk management
The Group’s financial instruments comprise bank loans and overdrafts, Lease liabilities, cash and cash equivalents, and various items
within trade and other receivables and payables that arise directly from its operations.

The main risks arising from the financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees policies for
managing these risks which are detailed below.

Interest rate risk
The Group’s interest rate risk arises from long-term borrowings. Borrowings at variable rate expose the Group to cash flow interest rate
risk which is partially offset by cash held at variable rates.

REPORT & FINANCIAL STATEMENTS 20227777

Notes to the Consolidated
Financial Statements continued...
31 December 2022

The business continued to manage its liquidity risk with the renewal of its debt facility with HSBC on the 13 January 2020 with a facility
of £12.7m until 2025. In addition, a £5.0m bank CBILs facility was secured for 6 years on 16th December 2020, which is interest free for
the first year increasing to 3.99% above base rate from year 2. Repayment of CBILs facility commenced in April 2022.

The business continues to service this debt and make the interest payments as they fall due. There are no off-balance sheet financing
arrangements or contingent liabilities.

Foreign currency risk
The Group is exposed to foreign currency risk from overseas subsidiaries with Group transactions carried out in Euros. Exposures to
currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily denominated in Euros.

This risk is mitigated by each hostel holding a denominated bank account in the country of operation. The Group monitors cashflows
and considers foreign currency risk when making intra-group transfers.

Foreign transactions are translated into the functional currency at the exchange rate ruling when the transaction is entered. Foreign
exchange gains and losses resulting from the settlement of such transactions, and from the translation at year end exchange rates,
of monetary assets and liabilities are recognised in the income statement.

The Group have performed a sensitivity analysis to determine the impact of a fluctuation in exchange rate on the business. The Group
have assumed that 10% fluctuation in exchange rate reasonably reflects the change in the currency pair over the last 12 months:

10% Strengthening of Sterling versus the Euro

10% Weakening of Sterling versus the Euro

(117)

129

(1,549)

1,704

315

(346)

Profit before tax
(losses)/gains
2022
£’000

Equity
(losses)/gains
2022
£’000

Profit before tax
(losses)/gains
2021
£’000

Equity
(losses)/gains
2021
£’000

(1,661)

1,827

Interest rate risk management
The Group is exposed to interest rate risk on its borrowings. The £12.7 million main facility has an interest rate of 2.95% above the London
inter-bank offer rate (LIBOR). When the £10.2 million from the Edinburgh sale proceeds was used to reduce the debt in July 2021, LIBOR
was replaced with 2.95% above SONIA. The £5 million CBILS in interest free in year 1 and has an interest rate of 3.99% above base rate
from year 2 until it is fully repaid at the end of year 6. The Group carefully manages its interest rate risk on an ongoing basis.

Interest rate sensitivity
The sensitivity analysis in the paragraph below has been determined based on the exposure to interest rates for all borrowings subject to interest
charges at the statement of financial position date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability
outstanding at the statement of financial position date was outstanding for the whole year. A 0.5% increase or decrease is used when reporting
interest rate risk internally to key management and represents management’s assessment of the reasonably possible change in interest rates.

SAFESTAY PLCSAFESTAY PLC7878

Notes to the Consolidated
Financial Statements continued...
31 December 2022

Liquidity and interest risk analysis
The following tables detail the Group’s remaining contractual maturity for all financial liabilities. The tables have been drawn up based on
the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay including interest.

Variable interest rate borrowings

Property financing borrowings

Trade and other payables

Lease liabilities

Less than
1 year
£’000

1-2 years
£’000

1,379

191

3,124

3,345

8,039

1,577

191

3,345

5,113

3-5 years
£’000

16,659

573

9,729

26,961

Later than
5 years
£’000

10,193

31,420

41,613

Total
£’000

19,615

11,148

3,124

47,839

81,726

The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the
reporting date.

The repayment of the £5 million CBILS started in April 2022. It was agreed with HSBC that the main debt facility would be interest only
from July 2021 after the disposal of Edinburgh, which involved a £10.2 million debt repayment to HSBC.

24. FAIR VALUES OF NON-FINANCIAL ASSETS

The following table shows the levels within the hierarchy of non-financial assets measured at fair value on a recurring basis:

2021

Freehold Property

Leasehold Property

2022

Freehold Property

Leasehold Property

Level 1
£’000

Level 2
£’000

Level 3
£’000

9,484

31,691

41,175

12,471

28,796

41,267

Total
£’000

9,484

31,691

41,175

12,471

28,796

41,267

The Group’s freehold and leasehold property asset is estimated based on appraisals performed by independent, professionally qualified
property valuers. The significant inputs and assumptions are developed in close consultation with management. The valuation process
and fair value changes are reviewed by the directors at each reporting date.

25. BUSINESS COMBINATIONS

See accounting policy in note 1.

REPORT & FINANCIAL STATEMENTS 2022Company Statement of Financial Position
31 December 2022

Non-current assets

Property, plant and equipment

Intangible assets

Investments

Deferred tax asset

Intercompany receivable

Total non-current assets

Current assets

Trade and other receivables

Cash at bank and in hand

Total current assets

Total Assets

Current Liabilities

Loans and overdrafts

Lease liabilities

Trade and other payables

Current Liabilities

Non-current liabilities

Bank loans

Lease liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium account

Merger reserve

Share based payment reserve

Profit and loss account

Equity attributable to the owners of the parent company

Note

2022
£’000

10,072

10,085

19,107

39,272

2,520

2,563

41,836

(925)

(82)

(14,768)

(15,776)

(15,933)

(8,448)

(24,381)

(40,157)

1,678

647

23,904

1,772

551

(25,196)

1,678

7979

2021
£’000

10,311

10,085

17,946

38,360

3,947

4,006

42,366

(932)

(82)

(11,784)

(12,798)

(16,608)

(8,530)

(25,138)

(37,936)

4,430

647

23,904

1,772

510

(22,403)

4,430

As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present its own Income Statement and
Statement of Comprehensive Income account for the year. The Company’s loss for the period was £2,793k (2021: £2,898k).

These financial statements were approved by the Board of Directors and authorised for issue on 08 June 2023.

Larry Lipman
Chairman

SAFESTAY PLCSAFESTAY PLC8080

Company Statement of Changes in Equity
31 December 2022

At 1 January 2021

Comprehensive income

Loss for the year

Total comprehensive loss

Transactions with owners

Share based payment charge for period

At 31 December 2021

Comprehensive income

Loss for the year

Total comprehensive loss

Transactions with owners

Share based payment charge for period

Share
Capital
£’000

647

Share
premium
account
£’000

23,904

Merger
Reserve
£’000

1,772

Share based
payment
reserve
£’000

Profit and
loss account
£’000

438

(19,505)

647

23,904

1,772

510

551

(2,898)

(22,403)

(2,793)

(25,196)

Total
equity
£’000

7,256

(2,898)

4,430

(2,793)

1,678

At 31 December 2022

647

23,904

1,772

REPORT & FINANCIAL STATEMENTS 2022Company Statement of Cash Flows
Year ended 31 December 2022

Loss before tax

Adjustments for:

Finance costs

Finance income

Share based payment charge

Rent concessions

Impairment of investments

Expected credit loss on intercompany balances

Depreciation

Amortisation

Changes in working capital:

(Increase)/decrease in trade and other receivables

(Decrease)/increase in trade and other payables

Income tax paid

Net cash used in operating activities

Investing activities

Interest received

Investment in subsidiaries

Purchase of tangible fixed assets

Purchase of intangible assets

Net cash (outflow) / inflow from investing activities

Financing activities

Proceeds from refinancing transaction

Proceeds from Coronavirus Business Interruption Loan Scheme

Movement in intercompany

Loan repayments

Lease principal payments

Fees on refinancing

Interest paid

Net cash generated / (outflow) from financing activities

Cash and cash equivalents at beginning of year

Net increase in cash and cash equivalents

Cash and cash equivalents at end of year

8181

2022
£’000

(2,793)

2021
£’000

(2,701)

925

346

641

1,271

(153)

(595)

372

(2)

(54)

(810)

(1,624)

(5)

(7)

(9)

1,237

(750)

(500)

(596)

(608)

3,947

(1,427)

2,520

(2)

15,053

(9,990)

(570)

4,493

1,080

2,867

3,947

SAFESTAY PLCSAFESTAY PLC8282

Notes to the Company
Financial Statements
31 December 2022

1. STAFF COSTS

The average monthly number of employees (including Directors) during the period was:

Administration

Directors

The costs incurred in respect of employees (including directors) were:

Wages and salaries

Social security costs

Pension costs

Total staff costs

2022

2021

2022
£’000

691

781

2021
£’000

682

771

Government grants claimed by the company under coronavirus job retention schemes across the company for total 2022 £0k (2021: £78k).

The remuneration of the directors, who are the key management personnel of the Group, is set out below.

Short term employee benefits

Pension

Share based payment charges

2022
£’000

364

411

2021
£’000

332

410

Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report.

Details of directors share options is provided in the Directors’ Remuneration Report.

REPORT & FINANCIAL STATEMENTS 2022Notes to the Company
Financial Statements continued...
31 December 2022

2. PROPERTY, PLANT AND EQUIPMENT

Cost

At 1 January 2021

Additions

IFRS 16 lease modification

At 31 December 2021

Additions

At 31 December 2022

Depreciation

At 1 January 2021

Charge for the year

At 31 December 2021

Charge for the year

At 31 December 2022

Net book value

At 31 December 2022

At 31 December 2021

Right of use
assets buildings
£’000

Leasehold
improvements
£’000

Fixtures, fittings
and equipment
£’000

10,299

(1,431)

8,868

773

205

978

1,062

7,806

7,890

3,149

578

158

736

154

890

2,255

2,413

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

8383

Total
£’000

13,535

(1,431)

12,106

12,112

1,423

372

1,795

246

2,141

10,067

10,311

SAFESTAY PLCSAFESTAY PLC8484

Notes to the Company
Financial Statements continued...
31 December 2022

3. INTANGIBLE ASSETS

Cost

At 1 January 2021

Additions

At 31 December 2021

Additions

At 31 December 2022

Depreciation

At 1 January 2021

Charge for the year

At 31 December 2021

Charge for the year

At 31 December 2022

Net book value

At 31 December 2022

At 31 December 2021

Website
Development
£’000

134

139

116

130

Total
£’000

134

139

116

130

4. INVESTMENT IN SUBSIDIARIES

Significant Accounting Policy
The investment in the Company’s subsidiaries are recorded at cost less provisions for impairment. Carrying values are reviewed for
impairment annually to determine if there is any indication that any of the investments might be impaired. The Company uses forecast
cash flow information and estimates of future growth to assess whether investments are impaired. Impairments are recognised in the
income statement.

Cost

At 1 January 2021

Additions

Impairment of investments

As at 31 December 2021

Additions

Impairment of investments

At 31 December 2022

Net book value

At 31 December 2022

At 31 December 2021

Shares in
subsidiary
undertakings
£’000

10,085

REPORT & FINANCIAL STATEMENTS 20228585

Notes to the Company
Financial Statements continued...
31 December 2022

Shares in subsidiary undertakings

The subsidiaries at 31 December 2022 and their principal activities are as follows:

Direct ownership

WXYZ2 Limited

Investment activities (dormant)

1a Kingsley Way, London, N2 0FW

Safestay (York) Limited

Property owning activities

Safestay (Edinburgh) Limited

Property owning activities

1a Kingsley Way, London, N2 0FW

Safestay (Edinburgh) Hostel Limited

Property owning activities and Hostel operation

1a Kingsley Way, London, N2 0FW

Safestay (Elephant and Castle) Limited

Hostel operation

Safestay (HP) Limited

Hostel operation

Safestay Hostels Madrid SL

Holding company (Spain)

Safestay France SAS

Safestay España S.L

Hostel operation (France)

Hostel operation (Spain)

1a Kingsley Way, London, N2 0FW

Calle Sagasta 22, Madrid 28004

11 Rue de Cambrai, CS 90042, Paris

Street Vigatans 5-9, Barcelona 08003

Equity Point Lisboa Unipessoal Lda.

Hostel operation (Portugal)

Travessa do Fala-So9, Lisbon 1250-109

Equity Point Prague, s.r.o

Hostel operation (Czech Republic)

Ostrovni 131/15, Prague, Nove Mesto 110 00

GELS BVBA

Holding company (Belgium)

Av. Louise 209A, 1050 Brussels

SSD Safestay Deutshcland GmbH

Holding Company (Germany)

Bayreuther Str. 10 in 10789 Berlin

Safestay Italia Srl

Safestay Athens Hostel

Dream Hostel SK sro

Dream Hostel SP zoo

Indirect ownership

Holding Company (Italy)

Hostel operation (Greece)

Hostel operation (Slovakia)

Hostel operation (Poland)

Safestay (York) Hostel Ltd

Hostel operation

U Hostels Albergues Juveniles S.L

Hostel operation (Spain)

Arcadie SA

Safestay Hostel GmbH

Hotel Auberge GmbH

Hpisa srl

Hotel operation (Belgium)

Hotel operation (Austria)

Hostel operation (Germany)

Hostel operation (Italy)

Via Privata Maria Teresa 4, 20123 Milano

Ag.Theklas 10, Monastiraki, 10554 Athens

Leškova 4932/9A, Bratislava 81104

55 Krakowskie Przedmieście Str, Warsaw
00-071

Calle Sagasta 22, Madrid 28004

Rue Grétry 53, 1000 Bruxelles

Schubertring 6, 1010 Wien

Bayreuther Str. 10 in 10789 Berlin

Via Filippo Corridoni No 29, Pisa, CAP 56125

All subsidiaries are incorporated in Great Britain and registered in England and Wales unless otherwise stated. All subsidiaries are
100% owned.

WXYZ2 Limited is considered dormant and therefore not required to prepare or file accounts in accordance with sections 394a and 448a
of the Companies Act 2006.

SAFESTAY PLCSAFESTAY PLC8686

Notes to the Company
Financial Statements continued...
31 December 2022

5. TRADE AND OTHER RECEIVABLES

Due within one year:

Amounts due from subsidiary undertakings

Other debtors

Other receivables and prepayments

Due over one year:

2022
£’000

2021
£’000

Amounts due from subsidiary undertakings

19,107

17,946

Credit risk is the risk that a counterparty does not settle its financial obligation with the Company.

At the year end, the Company has assessed the credit risk on amounts due from subsidiary undertakings. The company has
considered the 12 months expected credit losses on the amounts outstanding and consider that there are sufficient assets to
settle the amounts that are due. Therefore, the Company has considered 12 months expected credit losses and the expected
credit losses are immaterial.

6. TRADE AND OTHER PAYABLES

The amounts due from subsidiary undertakings are repayable on demand but are not expected to be recovered within the next
12 months.

Trade payables

Amounts due to subsidiary undertakings

Other payables

7. BANK AND OTHER FINANCE LOANS

Bank Loan

Loan arrangement fees

2022
£’000

13,808

892

14,768

2022
£’000

16,920

(62)

16,858

2021
£’000

11,409

374

11,784

2021
£’000

17,745

(205)

17,540

Included within borrowings is £5.0 million CBILS (Coronavirus Business Interruption Loan Scheme) obtained via HSBC. The
Government provide lenders with a guarantee on each loan, and it may be possible that there is a government grant in the form
of the lower rate of interest than would likely have been payable in the absence of the government guarantee. However, in the
absence of further information the total amounts are disclosed within finance costs. The loan will be repaid at a rate of £1 million
per year from April 2022 until April 2027. The interest rate is 3.99% margin over base rate from year 2 onwards and is interest
free in the first year.

REPORT & FINANCIAL STATEMENTS 2022

8787

Notes to the Company
Financial Statements continued...
31 December 2022

At 31st December 2021 a HSBC bank loan was secured against the UK freehold and long leasehold properties. The facility ends in
January 2025 and the interest rate is 2.95% margin over SONIA.

Any increases in SONIA or base rate will increase the cost of these loans and therefore impact the net profit of the business (a
0.5% change in interest rate would impact the net profit before tax by £83,000). Strict financial controls are in place to ensure that
monies cannot be expended above the available limits or to breach any banking covenants.

The bank loan is repayable as follows:

Within one year

After more than one year

8. OBLIGATIONS UNDER LEASE LIABILITIES

31 December 2022

Lease payments

Finance charges

Net present values

31 December 2021

Lease payments

Finance charges

Net present values

2022
£’000

925

15,933

16,858

Minimum lease payments due

Within 1 year
£’000

1 to 5 years
£’000

After 5 years
£’000

400

(315)

400

(318)

1,600

(1,226)

374

1,600

(1,240)

360

14,800

(6,728)

8,072

15,200

(7,030)

8,170

2021
£’000

932

16,608

17,540

Total
£’000

16,800

(8,270)

8,530

17,200

(8,588)

8,612

The Company has treated the Holland Park lease as a lease liability in accordance with IFRS 16.

The average effective borrowing rate was 6.55%. The lease is on a fixed repayment basis and no arrangements have been entered into
for contingent rental payments.

The fair value of the Company’s lease obligations is approximately equal to their carrying amount. The Company’s lease liabilities
disclosed above are in sterling.

9. SHARE CAPITAL

Allotted, issued and fully paid

64,679,014 Ordinary Shares of 1p each as at 1 January 2022 and 31 December 2022

£’000

647

At the 31 December 2022, the ordinary shares rank pari passu. There are no changes to the voting rights of the ordinary shares since
the balance sheet date.

SAFESTAY PLCSAFESTAY PLC8888

Notes to the Company
Financial Statements continued...
31 December 2022

10. SHARE PREMIUM

Brought forward at 1 January 2022 and 31 December 2022

11. SHARE BASED PAYMENTS

The Company has granted share options to subscribe for ordinary shares of 1p each, as follows:

Grant date

2-May-14

12-May-14

21-May-14

14-Jul-17

21-Jul-17

11-Oct-18

1-Jan-19

26-Jun-19

5-Sep-19

2-Jan-20

31-Oct-20

30-Nov-20

31-Dec-20

31-Jan-21

28-Feb-21

31-Mar-21

30-Apr-21

31-May-21

30-Jun-21

31-Jul-21

14-Apr-22

9-Nov-22

25-Nov-22

Exercise price per share
(pence)

Period within which options
are exercisable

15p

50p

15p

13p

14p

15p

16p

01/01/2024 to 31/12/2031

21/05/2017 to 20/05/2024

01/01/2024 to 31/12/2031

£’000

23,904

Number of share options outstanding

2022

396,521

528,695

132,173

500,000

100,000

500,000

100,000

900,000

186,400

104,900

129,100

119,900

111,900

75,200

66,400

62,700

44,400

400,000

30,000

50,000

2021

396,521

528,695

38,550

250,000

500,000

100,000

500,000

100,000

900,000

186,400

104,900

129,100

119,900

111,900

75,200

66,400

62,700

44,400

4,767,389

4,443,766

REPORT & FINANCIAL STATEMENTS 20228989

Notes to the Company
Financial Statements continued...
31 December 2022

Brought forward 1 January

Forfeited in the period

Issued in the period

Outstanding at 31 December

Exercisable at end of the period

No options were exercised in the period.

2022

2021

Number of share
options

Weighted average
exercise price

Number of share
options

Weighted average
exercise price

4,443,766

(156,377)

480,000

4,767,389

388,573

18.2p

50.0p

20.9p

19.3p

50.0p

4,634,166

(800,000)

609,600

4,443,766

2,327,789

38.0p

33.6p

15.0p

35.9p

42.8p

The fair value of the share options was calculated using the Black Scholes model. There is a charge of £42k taken though the income
statement (2021: £72k).

Closing price of Safestay plc

Weighted average share price

Weighted average exercise price

Expected volatility

Expected life

Risk free rate

Expected dividend yield

2022

15.5p

15.7p

19.3p

52%

2021

19.5p

20.3p

35.9p

35%

2.0 years

7.0 years

1.47%

0.00%

1.28%

0.00%

The expected volatility percentage was derived from the quoted share prices since flotation.

12. RELATED PARTY TRANSACTIONS

The remuneration of the Company’s directors, who are the key management personnel of the Group, is set out in note 22 of the Group
financial statements. Further information about the remuneration of individual directors and the directors share options is provided in
the Directors’ Remuneration Report.

SAFESTAY PLCSAFESTAY PLC90

Austria
Vienna Margaretenviertel

Belgium
Brussels Grand Place

Czech Republic
Prague Charles Bridge

Germany
Berlin Kurfürstendamm

Greece
Athens Monastiraki

Italy
Pisa Centrale

Portugal
Lisbon Bairro Alto

Poland
Warsaw Old Town

Slovakia
Bratislava Presidential Palace

Spain
Barcelona Gothic
Barcelona Passeig de Gràcia
Madrid Central

UK
London Elephant & Castle
London Kensington Holland Park
Glasgow Charing Cross
York Micklegate

REPORT & FINANCIAL STATEMENTS 2022R

Safestay plc
1a Kingsley Way
London N2 0FW
T: 020 8815 1600

safestay.com