PPHE HOTEL GROUPANNUAL REPORT AND ACCOUNTS 2021
CONNECTING OPPORTUNITIES
Highlights
Business highlights
– The Group’s attractive locations and quality and depth of its portfolio have
enabled it to outperform when restrictions were eased
– Successfully secured contracted business in times ofuncertainty and volatility,
including government and essential travel contracts and serving as the host
hotelfor the players and support teams of theWimbledon Championships
– Winner of The Caterer’s 2021 Best Employer in Hospitality Award
– Raised £125.8 million of cash to pursue new growth opportunities by entering
intoa joint venture partnership on two of our London properties
– Progressed our £200m+ development pipeline and repositioning projects and
acquired hotels in Austria (Nassfeld) and Italy (Rome)
– Looking ahead at 2022 with confidence in demand for travel and excitement
forour several new (re)openings
Financial KPIs
1
Operating KPIs
1
Responsible
Business
Total revenue
£141.4m
2020: £101.8m
Adjusted EPRA EPS
(44)p
2020: (123)p
EBITDA
£25.1m
2020: £(10.1)m
Occupancy
30.7%
2020: 28.0%
Average room rate
£117.0
2020: £105.1
RevPAR
£35.9
2020: £29.4
– Linking development
tolearning
– Attracting and retainingtalent
– Increasing diversity in the
workplace
– Increasing our charity
initiatives and volunteering
– Contributing to and investing
in our localcommunity
– Reducing our carbon
footprint
– Conserving water
– Recycling more and
reducingwaste
– Increasing the use of ethically
sourced and eco-friendly
materials
Normalised profit before tax
£(47.5)m
2020: £(89.8)m
Property value
£1.8bn
2020: £1.7bn
EPRA NRV per share
£22.15
2020: £22.08
Learn more – see our
Business review
Our vision
To deliver a best-in-class performance
through building further scale and depth
inour real estate portfolio and growing
theplatform with our integrated
‘Buy,Build, Operate’ model.
Who we are
We are an international hospitality group
with astrongprimerealestate portfolio
consisting of48propertiesunder operation
in eight countries,thattransformsan
asset’s potential into value and profits.
What we do
We have a clear strategy to drive
growthandcreatelong-termvalue while
recognising and developing opportunities
to help our assets reach their full
potential.We delight our guests every
day,throughengaging service and
qualityproducts ininviting places.
How we do it
By valuing our people, being led
byanentrepreneurial Executive
LeadershipTeamandthrough investing
inourportfolio,opportunities with upside
potential and local communities.
Our purpose
Creating valuable
memories for our
guests and value
for our assets,
people and local
communities.
1. Details of Alternative Performance Measures (APMs) can be found in the APM glossary on page 209.
Our
People
Our
Places
Our
Planet
Learn more –
See our Responsible
Business strategy on
pages 74 to 89.
HOLMES HOTEL LONDON
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
3
APPENDICES
Strategic Report
6 About us: creating value
7 Our investment case
10 At a glance
16 Chairman’s statement
18 President and CEO’s review
22 Business model
24 Strategy at a glance
26 Our approach to risk management
35 Viability statement
36 Key performance indicators
38 The traveller in 2022
40 Award-winning hospitality management platform
42 Our pipeline
44 Financial review
58 Business review
68 Stakeholder engagement
74 Responsible business
87 TCFD reporting – A new way to engage
Corporate Governance
90 Introduction to governance
94 Board of Directors
96 Executive Leadership Team
98 Corporate Governance
109 Nomination Committee report
115 Audit Committee report
121 Remuneration report
131 Directors’ report
Financial statements
136 Independent auditors’ report
140 Consolidated statement offinancialposition
141 Consolidated income statement
142 Consolidated statement of comprehensive income
143 Consolidated statement of changes inequity
144 Consolidated statement of
cash flows
146 Notes to consolidated financial statements
Appendices
204 Subsidiaries included intheGroup
207 Jointly controlled entities
207 Current and pipeline projects
208 Glossary
209 APM glossary
210 Contacts
Contents
AWARD-WINNING
HOSPITALITY
MANAGEMENT
PLATFORM
PAGE 40
OUR BRANDS
PAGE 12
ART’OTEL LONDON
HOXTON
PAGE 61
GATEWAY CITIES
PAGE 11
PRESIDENT AND
CEO’SREVIEW
PAGE 20
OUR BUSINESS MODEL
PAGE 22
OUR PIPELINE
PAGE 42
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
We create memorable guest
experiences by owning,developing
and operating hotels and resorts in
dynamic, vibrant cities and leisure
destinations. Our properties are
managed by experienced teams
living our values every day,creating
unique experiences. We create
stakeholdervalue at every step of
the value chainasour properties
provide attractive returnsand
long-termcapital appreciation.
Our
investment
case
Full value
chain approach
Value creation through development,
repositioning, operations and brand
ownership and access; resulting in a
30-year track record of NAV growth
and industry-leading EBITDA margins
Sources of funding
Asset backing used as source of funding, all
growth post 2007 IPO realised without diluting
shareholders
Diversified portfolio
in key cities and
leisurelocations
New and renovated property portfolio of 48
prime assets in operation; consisting of hotels,
resorts and campsites
Planned capex in active
pipeline of £200m+
Attractive projects in London, Pula,
Zagreb and Rome
Independent operator
with brand flexibility
Integrated owner / operator model with access
to global brands, distribution and marketing
Track record of
successfully managing
through the cycles
Experienced developers and operators, with
35 year track record of managing through
economic cycles
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Secure best locations
and control over all aspects
of the hotel design
Value gains through
development and
repositioning
Aligned interests Rental income and value
appreciation
Ensure consistency of
brand standards and
guest service levels are
maintained throughout
the estate
Management agreement to
earn a fee-based income as
a%of revenue and profit
Asset operated under
operational lease
agreement
Asset owner and leased to, or
managed by a third party
Optimise timing to refurbish
and reposition
(Re)finance with
asset backing to
extract value
Sale of asset
Franchise agreement (or the
usage of a brand, income as
a% of revenue)
Reinvest extracted
cash to enable
further growth
Net operating profit from
rooms, food & beverage
Fee-based income as a %
of revenue and profit
Value gains
Source for funding
future growth
PPHE HOTEL GROUP
BUSINESS MODEL
BENEFITS
SHAREHOLDER VALUE
PROPOSITION
TYPICAL ASSET-LIGHT
MODEL ADOPTED BY
LARGE HOTEL GROUPS
TYPICAL ASSET-
HEAVY MODEL
OTHER HOTEL OPERATORS
TOTAL VALUE CHAIN
Site
acquisition
Asset
management
Hotel
ownership
Hotel
operation
Hotel
management
Brand
Development /
repositioning
Extracting
value
Reinvestment /
cash recycling
We have three strategic blocks which
are supported by PPHE’s pillars and
enablers to achieve our vision
Operating across
the value chain
PPHE Hotel Group operates a highly
differentiated business model to
peers, who are increasingly focused
on either the property or operational
aspects of the hotel value chain. With
in-house expertise across the value
chain, PPHE is able to control all
aspects of its guest offering, while
retaining all of the economic upside.
Bycontrast, those offering either an
asset-light or asset-heavy model
relinquish some control of the guest
experience, as well as pay away fees
tothird parties.
We have a framework for our future
strategy which is built across a series of
distinctive strategic blocks, underpinned
by PPHE’s pillars and enablers
To deliver a best-in-class performance through
building further scale and depth in our real
estate portfolio and growing the platform with
our integrated ‘Buy, Build, Operate’ model.
BUSINESS MODEL
OUR
VISION
STRATEGIC BLOCKS
PPHE PILLARS AND ENABLERS
Core,
upper upscale,
city centre
hotels
Leisure
and
outdoor
hospitality
Hospitality
management
platform
Restaurants
and bars
Diversification
of property
portfolio
Non-dilutive
capital
approach
People
and culture
Guest
satisfaction
ESG
Learn more –
see pages 22 and 23
PPHE’s offer
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
REAL ESTATE
213m
932m
274m
87m
253m
United Kingdom
The Netherlands
Germany
Croatia
Other
Under development
2
50m
4
10
6
7
7
United Kingdom 10 hotels, 3,681 rooms
The Netherlands 6 hotels, 1,073 rooms
Germany 7 hotels, 1,106 rooms
Croatia 7 hotels, 6 resorts, 2,769 rooms
Other 4 hotels, 498 rooms
23
5
5
Freehold 23 hotels 7 resorts 6,527 rooms
Long leasehold 5 hotels 1,590 rooms
Managed, operated, leased or franchised
5 hotels 1,010 rooms
We are an integrated hospitality
realestate group with a £1.8bn portfolio
of primarily prime freehold and
long-leasehold assets in Europe
Value split by geography
1
(Excludes managed, operated, leased,
franchised and unconsolidated hotels)
Hotels and resorts by geography
(Includes franchises, excludes campsites
and pipeline)
Hotels and resorts by ownership type
(Includes franchises, excludes campsites)
at a
glance
Countries
8
Total rooms
9,100
Total properties
48
Campsite pitches
5,800
Gateway
cities
London
With a portfolio of seven hotels and
approximately 3,200 rooms in operation
andanother 1,100 rooms at various stages
ofdevelopment, the UK’s capital is the Group’s
most important single market. FromLondon’s
highly popular South Bank to urbanchic
Marylebone, from hipster Hoxton to
thewell-connected Victoria and Park Royal
areas, our hotels are located in highly desirable
and easily accessible locations.
Rome
We are thrilled to be entering Italy, with our
acquisition in 2021 of the historic Londra &
Cargill hotel in the centre of Rome. Located
near Via Veneto and within walking distance of
some ofRome’s main attractions, this hotel will
be completely transformed and will become
the firstart’otel in Italy.
Amsterdam
Our portfolio in the Dutch capital is strong
with three hotels in the city centre and one
hotel located near Amsterdam Airport.
Ourportfolio includes Park Plaza Victoria
Amsterdam, which is located opposite the
main train station and is arguably one of the
best-known hotels in The Netherlands due
toits rich history, and its bold, colourful
andartistic neighbour, the award-winning
art’otel Amsterdam.
Pula
Pula, home to Istria’s main international
airport, serves each year as the starting
pointfor many holidaymakers. Pula is a popular
leisure destination and is not only steeped in
Roman history, it provides easy access to
historic sites, pristine nature and anappealing
coastline. Our portfolio inand around Pula
includes 21 properties, from campsites to luxury
glamping and from self-catering apartments to
premium full-service resorts.
Berlin
We have four hotels in the buzzing German
capital, including two properties in the former
East Berlin (Mitte), close to the Brandenburg
Gate,Tiergarten, Museum Island and cafés
andshops. Our other twohotels are located
inthe west of the city near the famous
Kurfürstendamm, which is often considered
theChamps-Élysées of Berlin and islined
withshops and restaurants.
Zagreb
With our strong presence in and around
Pula,we were keen to secure a property in
the Croatian capital and further build our
property portfolio inkey capital cities in the
Central and Eastern Europe (CEE) region,
adding to our hotels in Belgrade and
Budapest. We are currently converting
aformer office building in the heart of
Zagrebinto the country’s first art’otel.
Budapest
One of Eastern Europe’s first design hotels
when it first opened, our art’otel Budapest is
located on the banks of the Danube providing
stunning views and easy access to the city’s main
attractions. The building combines several
historic former fishermen’s houses with a new
frontage. During 2022 the hotel will undergo an
extensive renovation programme, aligning its
offering with the new generation art’otels.
1 The fair values were determined on the basis of independent external valuations prepared in December 2021
2 Properties under development include: New York, art’otel London Hoxton (London), Westminster Bridge Road (London), Hotel Brioni (Pula) and Zagreb
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APPENDICES
Our brands
HOTELS CAPITAL CITIES / SECONDARY CITIES / CITY CENTRE
HOTELS CAPITAL CITIES / SECONDARY CITIES / CITY CENTRE
art’otel London Hoxton
art’otel
A place to dream and be inspired, art’otel
is a hotel like no other.
A contemporary collection of upper
upscale, lifestyle hotels, each inspired
by a signature artist, forming acultural,
gastronomic and social hub in the most
creative areas of the most interesting cities
attracting international, domestic and
localguests.
The art
art’otel is an arts and premium lifestyle
hotel devoted to creating and presenting
original work. Unlike hotels with décor art,
art’otel invites guests to create art, to
interact with and immerse themselves in
art, not just to view.
The art’otel experience:
– Each art’otel is inspired by a dedicated
signature artist.
– Interactive art discovery programme
with contemporary art, frequent
exhibitions and hosted art tours for
creative escapists.
– Rich, art-led events programme
celebrating arts, fashion and music
forcultural explorers.
New developments
art’otel has several exciting new
developments in its pipeline, including
twoflagship developments in London.
art’otel London Battersea Power Station
isexpected to open in 2022 and art’otel
London Hoxton in 2024. Plans are also
advanced to convert hotels in Rome, Zagreb
and Pula. Signature artists for these
developments are yet to be revealed.
Be bold. Be creative. Be original.
artotel.com
Park Plaza
An upper upscale, contemporary hotel brand
featuring individually designed hotels in
vibrant city-centre locations and select
resort destinations.
Renowned for creating memorable moments,
Park Plaza caters to both leisure and business
travellers with stylish guest rooms and
versatile meeting facilities which are perfectly
complemented by award-winning restaurants
and bars. We present a wide choice of travel
destinations and accommodation options,
from vibrant city-centre hotels to tranquil
beachside resorts, all united by authentic
service and modern, inviting spaces.
Authenticity is at the heart of Park Plaza.
We believe in providing a hotel experience
that is tailored to the individual and their
needs. Our commitment to originality gives
each guest a real experience, all against the
elegant backdrop of a modern space with
leading design. We pride ourselves on
delivering comfort, impeccable service and
the chance to explore a destination like the
locals do through one-of-a-kind dining
experiences. Guests cherish our warm and
vibrant atmosphere, often coupled with live
music and entertainment.
Feel the authentic
parkplaza.com
art’otel London Battersea Power Station
Park Plaza Westminster Bridge London
Park Plaza London RiverbankPark Plaza Vondelpark, Amsterdam
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Our brands
continued
LEISURE AND OUTDOOR RESORTS / CAMPING & GLAMPING / SELF-CATERING LEISURE AND OUTDOOR RESORTS / CAMPING & GLAMPING / SELF-CATERING
Arena One 99 Glamping Camping Home Next - Arena Kažela
Arena Hotels & Apartments
Arena Hotels & Apartments is a collection
ofhotels and self-catering apartment
complexes offering relaxed and comfortable
accommodation within beachfront locations
across the historic settings of Pula and
Medulin in Istria, Croatia.
Arena Hotels & Apartments features
contemporary and warm design/interiors
accompanied by welcoming and friendly
service, offering a holiday full of opportunities
for exploration and relaxation complemented
by a food and drink offering with a touch of
local flavour.
Arena Hotels & Apartments is your destination
host and guide, a home away from home
catering for families, couples and friends.
arenahotels.com
Grand Hotel Brioni
Arena Campsites
Arena Campsites are located in exclusive
beachfront sites across the southern coast of
Istria, Croatia. Situated within close proximity
of the historic towns of Pula and Medulin,
each campsite provides a distinctive offering
and relaxed environment from which guests
can experience Istria’s areas of natural
beauty and enjoy outdoor activities from
April to October.
We have consistently invested in the
portfolio, with significant investments in
repositioning two campsites between 2018
and 2020, relaunching as Arena One 99
Glamping and Arena Grand Kažela
Campsite.
We are excited about our third
repositioning of, and investment in,
ArenaStoja Campsite.
arenacampsites.com
arenaglamping.com
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Chairman’s
statement
Eli Papouchado Chairman
Adapting to new challenges
Reflecting on 2021, I am very humbled by the
adaptability, skill and dedication of our teams
across the business. Their hard work during the
last two years has aided the Group immensely
in navigating through the most difficult trading
conditions ever seen in our industry.
Despite these unprecedented trading
conditions progress has been made against
ourstrategic priorities.
Many of our teams have had to work hard to
rebuild momentum following extended
periods of government-financed support,
such as furlough, but they have come
together stronger than ever, continuing to
welcome our guests where we can and with
the best safety and customer service
possible. Our Executive Leadership in
particular voluntarily signed up to a number
of salary sacrifice schemes, deferments and
waiver of incentives throughout 2020 and
2021. I would like to place on record my
gratitude for our teams and leadership’s
support, commitment and exceptional
efforts during these difficult times.
PPHE hascontinued to make strong progress
throughout the year, and we are proud
thatthe value of our property portfolio
nowstands at £1.8 billion. Our £200+ million
pipeline is robust and includes flagship
developments such as art’otel London
Hoxton and Grand Hotel Brioni Pula,
alongside repositioning projects in Croatia
and Italy. There will be many great openings
to watch out for over the next few years
which we are very excited for, and our
long-term partnership with Clal Insurance
(“Clal”), which unlocked £113.7 million of
equity, has enabled us to pursue further
strategic growth opportunities and will
continue to do so as the pandemic subsides.
Delivering for all stakeholders
We recognise the unique but vital role that
each of our stakeholders plays in the Group’s
success. As such, creating and delivering
value for their benefit is the driving force in all
that we do. This is visible in: our passion for
creating memorable guest experiences; our
commitment to maintaining an open
andconstructive dialogue with investors;
ourprioritisation of the well-being and
development of our team members; and our
willingness to serve the communities in which
we operate. I was pleased to see theprogress
made in our stakeholder engagement
activities over the course of theyear,
particularly the active dialogue maintained
with representatives of independent
shareholders in order to remain guided by
their views and allowing us to adapt our
approach wherever possible in response.
The maintenance of a robust governance
framework is key to the delivery of long-term
sustainable value and has been crucial to
navigating the circumstances of the
pandemic as well as the recovery process.
2021 saw us make a number of important
strides in corporate governance, including
establishing a designated Environmental,
Social and Governance (ESG) Committee to
add necessary rigour and structure to the
manner in which we deliver our governance
goals and delivering our first Task Force on
Climate-related Financial Disclosures (TCFD)
Report, which we welcomed as an
opportunity for meaningful and structured
engagement with the risks and opportunities
presented by climate change, as well as an
advisory vote to shareholders on the
Remuneration Report included in the
financial statements and the Remuneration
Policy applicable as of 2022. The Deputy
Chairman spearheads our corporate
governance strategy, and full details of our
activities this year are set out in his statement
on pages 90 to 135.
Dividend
Having suspended dividend payments in
light of ongoing uncertainty due to
COVID-19, we have continued to review our
policy in line with business performance and
cash flow. Government measures have
continued to restrict travel demand and the
Group has subsequently received
government support during the year across
its different operating regions. The Board is
therefore of the view that it is neither
sustainable nor appropriate to propose a
dividend in respect of 2021. The Board
appreciates the importance of dividends and
will continue to review any future dividend
payments in line with the recovery trajectory
and the business returning to cash flow
positive trading.
Looking ahead
We were heartened to see momentum return
to the business from May 2021 onwards, as
many of our markets opened up, albeit with a
few restrictions, and international travel
resumed. During this period, it was clear that
demand for our high quality, well-located
hotels remained strong. The emergence of
the Omicron variant in November resulted
innew measures being introduced and
demand declining.
We are well-aware that there will continue
tobe industry-wide challenges ahead
throughout this road to recovery.
While uncertainty will continue as individual
markets react to their own evolving situations
that cannot be fully predicted, we will
continue to deliver on our strategy, opening
our doors where we can and delivering the
best experience possible for our customers.
As vaccination and booster programmes
continue to be rolled out in countries all over
the world, I expect that our recovery
willremain strong, as it was in the UK and
Croatia in the second half of this year.
The Board’s optimism for the future is
founded on our proven ability to recover
through challenging times. We are well-
placed to continue to outperform the sector
whenever and wherever restrictions are
eased, as our unique business model, strong
financial position, proven management team,
superior expertise and exciting development
pipeline continue to position us well into
2022 and beyond.
Eli Papouchado
Chairman
PPHE WINS AWARD
ASTOP 6 BEST PLACES
TO WORK
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
President and
CEO’sreview
Boris Ivesha President & Chief Executive Officer
Throughout 2021, we continued to manage
effectively the ongoing challenges presented
by the pandemic and the subsequent
industry-wide uncertainty and disruption this
caused. Once again, our dynamic owner/
operator business model gave us the ability
to adapt to ever-changing market conditions,
underpinned by the Group’s strong financial
position and our well-invested portfolio
following our recent £100+ million investment
programme. The Group is well-positioned to
benefit frommarket recovery.
2021 in review
Trading in the year was challenging in the
first six months as the ongoing pandemic
severely reduced activity levels due to
government-imposed domestic and
international travel restrictions and social-
distancing measures. Consequently, most
ofthe Group’s properties were temporarily
closed or operating at reduced capacity.
During Q2, travel restrictions were
progressively eased across the Group’s
operating markets, to varying degrees and at
varying times. From mid-May in the UK and
from June in Continental Europe, activity
increased gradually, driven primarily by
leisure demand from domestic markets with
bookings characterised by short lead times.
By the end of Q2, the majority of the Group’s
properties were open.
With vaccination programmes across all our
operating markets firmly underway in the
second half of the year, international travel
restrictions were eased, supported by
widespread lateral flow and PCR testing as
well as the introduction of vaccination
passports across Europe. This led to good
trading momentum and revenue generation
in the second half of the year, underpinned by
a strong performance in the UK and Croatia
and our successful room rate-focused
strategy. Additionally, the Group benefited
from sports events, such as the 2020 UEFA
Championships and the Cricket Hundred
Series, going ahead. Corporate travel and
meetings and events demand continued to
grow, and the booking pace improved until
mid-November when demand slowed due to
the spreading of the Omicron variant.
This new variant resulted in governments
temporarily introducing measures.
Once these are again eased we expect to
regain momentum. Against this backdrop, the
revenue performance of several of our
properties outperformed the market.
The Group’s proactive commercial strategy
enabled us to secure contracted group
business, alongside demand generated by
essential stays. Park Plaza Victoria London
and Park Plaza London Waterloo operated
asUK Government quarantine hotels for
partof the year, which supported revenue
generation during a period of low demand.
Park Plaza Westminster Bridge London was
proud to be chosen as the exclusive host
hotel for players and support teams of the
2021 Wimbledon Championships.
Throughout this period of uncertainty for the
hospitality industry, we took pride in our
responsiveness and adaptability to ever-
changing market conditions, which include an
increasingly pressured labour market. While we
are not immune to this well-documented issue,
which spans a number of sectors, our
continuous focus on being an employer of
choice to attract and retain talent has
positioned us strongly in the current labour
market. Furthermore, our decision pre-
pandemic to bring housekeeping services
in-house has helped insulate the Group from
the disruption to operations caused by these
labour shortages. We are delighted that our
efforts in this area have been recognised by
several industry accolades, and throughout the
year, the health and safety of our colleagues,
and all stakeholders, have remained our
priority.
Full details on the Group’s operational
performance by region are set out in the
Business Review.
Improved financial performance
The Group’s overall financial performance
improved year-on-year, reflecting some
recovery in activity levels as the year
progressed, albeit from a low base.
Reported total revenue increased by 38.9%
to £141.4 million (2020: £101.8 million) and
EBITDA improved to £25.1 million
(2020: £(10.1) million), resulting in an EBITDA
margin of 17.7% (2020: (9.9)%).
Once again, key operating metrics
wereimpacted by property closures and
reduced capacity in the first half of the year,
however the Group’s rate-focused strategy
delivered ayear-on-year recovery in average
room rateto £117.0 (2020: £105.1), with a
more gradual improvement in demand
during theyear resulting in occupancy of
30.7% (2020: 28.0%). RevPAR increased by
22.1% to£35.9 (2020: £29.4), 34.6% of the
level reported in FY 2019.
The Group’s financial position remains
strong, with a total consolidated cash
balance of £136.8 million at 31 December
2021 (31 December 2020: £114.2 million).
Our property portfolio was predominantly
valued by Savills and Zane at £1.8 billion as
at 31 December 2021. EPRA NRV per share
increased by 0.3% to £22.15 per share.
The adjusted EPRA earnings per share was
(44) pence (2020: (123) pence).
Full details of the financial performance
areset out in the Financial Review.
Delivering strategic progress
Throughout 2021 we made good progress
against the Group’s long-term growth strategy
while continuing to navigate the ongoing
disruption to operations. The flexibility that our
owner/operator model provides enables the
Board to take a long-term view and gives us
control over the scope and phasing of our
£200+ million development pipeline and
investment projects.
This development pipeline underpins
long-term sustainable growth. Our long-term
partnership with Clal, announced earlier in the
year, has unlocked equity to give the Group
further financial headroom to capitalise on
growth opportunities to the benefit of all
stakeholders, as well as support our recovery.
Development pipeline update
In the UK, construction of the new art’otel
London Hoxton, our largest development
project, continued to plan. The new building
which will comprise a premium lifestyle hotel
and office space is expected to complete
by2024.
art’otel London Battersea Power Station,
which is to be operated by the Group under
a long-term management agreement, is
expected to open during the second half
of2022.
Two further projects are planned in London:
a mixed-use scheme including a 465-room
hotel adjacent to Park Plaza London Park
Royal; and a mixed-use scheme including a
186-room hotel and office space close to our
London South Bank hotels.
“Our recovery is well-
underway and we are
regainingmomentum.
We are building future
value through a pipeline
filled with potential.”
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
18 19
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
President and CEO’s
review continued
RESTAURANTS AND BARS
Arca Amsterdam
In Croatia, the repositioning of Hotel Brioni in
Pula is almost complete. This 227-room,
full-service hotel is expected to relaunch for
the 2022 summer season. In Q4, works started
on the conversion of the Group’s property in
the centre of Zagreb into a luxuryhotel.
As previously announced, we took
thedecision in 2020 to pause and reassess
our development project in New York City.
New hotel acquisitions
In Q4, we announced two strategic
acquisitions which have strengthened our
pipeline, expanded our presence in Europe
and marked our entry into two new and
exciting markets: Austria and Italy.
We acquired the FRANZ Ferdinand Mountain
Resort in Nassfeld, Austria, a strategic fit that
complements our summer leisure business in
Central and Eastern Europe and the DACH
region. This acquisition also builds on the
seasonal synergies which can be achieved due to
the hotel’s proximity to our Croatian operations.
In addition, Austria is one of the Group’s largest
customer markets for our Croatian operations,
and this hotel will help us further raise the
Group’s profile in this important market.
The city of Rome is one of southern Europe’s
key gateway cities and has been a strategic
target for the Group. The acquisition in
November of a 4-star, 101-room property
adds another key capital city to our portfolio.
The site provides the opportunity to
reposition the property and further
bolsterour development pipeline.
Further details about our development
pipeline projects and acquisitions are outlined
on pages 42 and 43.
Our partnership with Radisson
HotelGroup
For more than two decades, PPHE Hotel
Group has had an exclusive perpetual licence
from Radisson Hotel Group (“Radisson”), which
gives the Group the right to develop and
operate Park Plaza branded hotels and resorts
in Europe, the Middle East and Africa.
Radisson is part of the world’s second largest
hotel group by number of rooms. This strategic
partnership gives the Group (including its
wholly owned art’otel brand) access to
Radisson’s state-of-the-art central reservation
and global distribution systems, its global sales
and marketing capabilities, and more than
24 million loyalty programme members.
Employer of choice
Our people and values are at the heart of our
business and at the core of everything we
do. We harness an open, honest, family
values culture across the business, whether
managing our hospitality assets or delivering
consistent operational excellence across our
portfolio. As well as developing this culture,
a key focus has been safeguarding the
well-being of our team members throughout
the pandemic.
We recognise the importance of a strong
employer brand, particularly in the current
recruitment environment, and we have a
strong track record of investing in our
teammembers to attract and retain talent.
Ongoing investment in the development
ofnew technologies to facilitate people
management, learning and development,
communications, and data and analytics,
coupled with our values, strong culture and
industry-leading people initiatives, further
strengthen the Group’s position for
recruitment.
Industry wide, recruitment has become
increasingly challenging across all our
operating markets. We have proactively
enhanced our recruitment approach to
enable the Group to stand out from the
competition. We have bolstered our talent
management and recruitment teams to
ensure we retain talent and recruit new
teammembers. Our recruitment strategy is
centred around talent and brand attraction,
promotion of PPHE Hotel Group as an
employer of choice, showcasing the
Company’s culture, and targeting candidates
via LinkedIn and other social media and
online platforms. We have ensured that our
pay rates remain competitive, and we have
introduced retention bonuses and have
relaunched our ‘recommend a friend’
incentive scheme, through which more
than125 people have joined the Group in
the UK and The Netherlands.
During the year, we recruited more than 1,350
team members across the Group. In London,
we have launched our own centralised
recruitment service and we have
strengthened our partnerships with local job
centres. In the CEE region, we have benefited
from our ability to share team member
resources across our countries of operation.
‘Best Employer in Hospitality’
andotherindustry recognition
We are proud that our ongoing investment
inour people has been recognised through a
number of awards during the year: ‘Best
Employer in Hospitality’ award and ‘Top-6
Best Places to Work in Hospitality’ by leading
UK hospitality trade publication The Caterer;
winner of the ‘Best Management Preparation
Award’ at the HR in Hospitality Awards 2021;
and our team was voted ‘HR team of the Year’
at the HR in Hospitality Awards 2021.
Additionally, in Croatia, the Group’s subsidiary
Arena Hospitality Group d.d. (“Arena”)
wasawarded the national ‘Safe Stay in
Croatia’ label.
In addition to recognition of our business,
wewere delighted that a number of our
people were identified for their talent,
excellence and contribution. This included
Chief Corporate & Legal Officer Inbar
Zilberman, who was featured in ‘Women
toWatch and Role Models for Inclusion in
Hospitality’; Daniel Pedreschi, Regional Vice
President Operations, the UK, was awarded
the coveted Hotelier of the Year at the 2021
Hotel Cateys; and Park Plaza Westminster
Bridge London’s Executive Chef Oliver Ruiz
won the Hotel Chef of the Year (more than
250 covers) Award at the 2021 Hotel Cateys,
a huge achievement against strong
competition.
Committed to creating a memorable
guest experience
We are committed to creating memorable
experiences for all our guests, underpinned
by our high quality, well-invested portfolio of
properties in desirable locations. Our guest
safety and well-being programmes were
onceagain accredited by SGS, a leading
inspection, verification, testing and
certification company.
We have continued to adapt our offer, and the
way we engage with our guests has evolved,
with an acceleration in digitalisation trends
during the pandemic. Digital services and
dedicated Apps for Park Plaza and art’otel
offer guests reduced person-to-person
contact during their stay. These technologies
enable guests to check-in online and have a
digital room key via their smartphone.
Guests also receive a pre-arrival email with
ancillary services to personalise their stays,
including room upgrades, early check-in and
late check-outs, breakfast and dinner options
or special amenities. During their stay,
real-time messaging options through chat or
WhatsApp enable guests to communicate
with our team members, and they are
abletoorder room service online.
Contactless check-out and various new
payment options are available on departure.
Our team members
2021 has been another challenging year
forour team members. We have stayed
connected with our team members to
support their well-being, training and career
development. The internal communications
initiatives we have put in place during the
pandemic, including re-boarding colleagues
as hotels reopened and enhanced learning
and development programmes, have helped
drive engagement and loyalty and have
helped us nurture and support our teams.
On behalf of the Board, I would like to thank
all our team members for their commitment,
professionalism and hard work throughout
the year.
Strategy update
During 2021 we refined our strategy,
intended to guide us through our next phase
of growth by continuing to do what we do
well, taking advantage of opportunities and
continuing to mitigate risks through further
diversification. Our aim is to continue to
focus on upper upscale city centre and
lifestyle hotels and continue our investment
in our leisure and outdoor offering.
In addition, we recognise that our award-
winning hospitality management platform
presents an excellent growth opportunity
through managing hospitality assets for our
joint venture partners and third-party
owners.
Looking ahead
As we have demonstrated throughout the
pandemic, as soon as measures are eased we
are able to capitalise on travel demand,
which at the early stage is predominantly
driven by domestic leisure travel. The New
Year started with restrictions and lockdown
measures in place across all our operating
regions. However, with the impact of the
Omicron variant on hospitalisation rates less
significant than initially feared latein 2021,
governments started easing measures in
January, which immediately resulted in an
increase in new bookings. In the UK, our
most important market, new bookings are
currently trending at 65% of the levels in
2019. We have also seen an increase in
international bookings as travelling between
countries has become easier. We expect
these trends to continue and are confident
that in addition to leisure travel, we will
shortly see a return of corporate travel with
the ‘working-from-home’ guidance now
removed across most of our operating
regions. The number of new meetings and
events enquiries has remained solid
throughout and we expect a particularly
buoyant second half of 2022 inthis segment.
Our well-invested portfolio, our proactive
leadership team and our dedicated and
passionate team members will drive our
recovery as we prepare for the next phase
ofgrowth with several exciting new openings
this year and next.
Boris Ivesha
President & Chief Executive Officer
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
20 21
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Core, upper
upscale,
city-centre
hotels
Leisure and
outdoor
hospitality
Hospitality
management
platform
Creating
stakeholder
value
2
DEVELOP
1
PURCHASE
4
(RE)FINANCE
3
BRAND
Business model
OUR PURPOSE HOW WE CREATE SHAREHOLDER VALUE HOW WE CREATE VALUE THE VALUE WE SHARE
KEY SOURCES OF VALUE
Prime property portfolio
Our real estate portfolio consists of
properties in the heart of strategic gateway
cities and resort destinations.
In-house hospitality management platform
Our expert team of hospitality specialists
manage our own properties as well as those
of third parties.
Our people
Our strong track record of creating
memorable guest experiences is consistently
delivered by our team members.
Multi-brand approach
We select the right brand for each property,
using our own as well as those from the
Radisson Hotel Group.
International network
Our strong international network cultivated
in the past 30 years includes banks,
contractors, suppliers and strategic partners.
Financial strength
Our portfolio has grown from a single
property into a £1.8 billion portfolio without
diluting shareholders, and we enjoy a strong
cash position.
Creating valuable memories
for ourguests and value for
our assets, people and
local communities.
1
We purchase
We typically acquire
properties which we
believe have significant
upside potential
2
We develop
We (re)develop and
redesign our acquired
assets, drawing on the
skillsofour experienced
senior management
team, with specialists
inevery relevant
discipline
3
We brand properties
andimprove operating
performance
We brand properties and
strive for operational
excellence, creating
significant value at every
point in the value chain
4
We (re)finance to fund
further investments
Through refinancing our
properties, weare able
to release capital for new
investments, enabling
the further growth of our
Group
Trust Respect Teamwork Enthusiasm Commitment Care
UNDERPINNED BY
OUR PEOPLE, VALUES
AND CULTURE
The Group’s leadership culture is one of connecting, inspiring,
innovating and empowering, and we foster an environment
based on:
STRATEGIC BLOCKS Team members
We offer rewarding international
employment opportunities for our team
members withcontinuous investment
intraining programmes.
Guests
We offer memorable hospitality experiences
invibrant destinations with our high quality
products andservices.
Investors
Our shareholders benefit from the attractive
industry dynamics ofthemarkets in which
weoperate aswellasour flexible business
model,developments andoperating
skills,inthe form ofprogressive
dividendpayments.
Local communities
We care about our neighbourhoods and
make positivecontributions toour local
communities and thepeoplewhowork
and/or livetherethrough fundraising
activities,employment opportunities,
volunteering and local resourcing
partnerships and charities.
Affiliates
Our partnership with Radisson Hotel
Groupgives us access to global distribution
systems, powerful online and mobile
platforms and global sales, marketing
andbuying power.
Suppliers
As an owner/operator, long-term
sustainability and ethicaloperations are
highon our agenda, including supplychain
management and the development of
long-term relationships with strategic
partners, many ofwhom are local.
RESTAURANTS
AND BARS
NON-DILUTIVE CAPITAL
APPROACH
GUEST
SATISFACTION
DIVERSIFICATION OF
PROPERTY PORTFOLIO
PEOPLE
AND CULTURE
ESG
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
22 23
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
REAL ESTATE
Strategy at a glance
STRATEGIC BLOCKS 2021 PERFORMANCE 2022 PRIORITIES RELATED RISKS AND
OPPORTUNITIES
KPIs
Property:
– Progressed investments in pipeline projects, including art’otel
London Hoxton and Zagreb
– Extended pipeline with acquisition in Rome, Italy
– Submitted planning application to develop new hotel near
WaterlooStation
– Procured renewable energy in the UK, The Netherlands
andGermany
– Continued to maintain Green accreditations
Operations:
– Reopened majority of portfolio post lockdowns
– Revenue generation focus, balancing contracted business
withdriving top line growth from leisure travel
– Reengaged and rebuilt teams
Property:
– Progress development projects in London
andZagreb
– CAPEX allocation for repositioning programmes
in Zagreb, Rome and Budapest
– Pursue new growth opportunities
– Property site visits to review utility use in our hotels
– Environmental assessment of construction sites
to achieve highest standard of certification
Operations:
– Continue to rebuild the teams and overcome
recruitment challenges
– Drive the recovery of all properties
– Focus on mitigating supply chain disruptions
– Continue to drive efficiencies through
technologyimplementations
Property:
– Development project delivery page 31
– Funding and liquidity page 30
– ESG – stakeholder perception page 34
Operations:
– Talent attraction, engagement and retention
page33
– Market dynamics page 29
– Economic climate page 30
– Operational disruption page 32
– Technology disruption page 32
Property:
– Successfully deliver openings and
repositioningprojects
– EPRA NRV
– EPRA EPS
– Net return on shareholder capital
– Disclosure of Scope 1, 2, and 3 carbon emissions
in TCFD report
– Carbon neutrality no later than 2050
Operations:
– EBITDA and EBITDA margin
– RevPAR
– Recruitment and retention
– Employee engagement
– Guest rating score
– Health and safety assessment scores
Property:
– Progressed investments in pipeline projects most notably Grand
Hotel Brioni Pula
– Extended pipeline with acquisition in Nassfeld, Austria
Operations:
– Reopened majority of portfolio post lockdowns
– Revenue generation focus, delivering a strong summer season
inCroatia
– Reengaged and rebuilt teams
– Integrated new property in Nassfeld, Austria
Property:
– Launch Grand Hotel Brioni Pula
– Progress CAPEX investment in third campsite,
Arena Stoja
– Start repositioning programmes for hotels in
Austria and Pula (Hotel Riviera)
– Pursue additional growth opportunities
Operations:
– Continue to rebuild the teams and overcome
recruitment challenges
– Drive the recovery of all properties
– Focus on mitigating supply chain disruptions
– Continue to drive efficiencies through
technologyimplementations
Property:
– Development project delivery page 31
– Funding and liquidity page 30
– ESG – stakeholder perception page 34
Operations:
– Talent attraction, engagement and retention
page 33
– Market dynamics page 29
– Economic climate page 30
– Operational disruption page 32
– Technology disruption page 32
Property:
– Successfully deliver openings and
repositioningprojects
– EPRA NRV
– EPRA EPS
– Net return on shareholder capital
– Disclosure of Scope 1, 2, and 3 carbon emissions
in TCFD report
– Carbon neutrality no later than 2050
Operations:
– EBITDA and EBITDA margin
– RevPAR
– Recruitment and retention
– Employee engagement
– Guest rating score
– Health and safety assessment scores
Operations:
– Continued implementation of digital services including online check
in and check-out, digital key, online ordering, chat and more
– Outperformed on recruitment and managing staff shortages
– Further consolidation of supply chain and leveraging our scale
– Engaged specialist support on carbon emissions strategy
andreporting
– Continued to create safe environments for our team members
andour guests
– Increased engagement with our team members
– Championed diversity and inclusion
– Supported local hospitals and key workers
– Provided education opportunities for local schools and graduates
Operations:
– Opening of art’otel London Battersea Power
Station, managed by the Group
– Continue to integrate Austria and Italy as new
regions for the Group
– Deliver elevated art’otel brand experience and
pipeline projects
– Pursue growth opportunities for the platform
through third party or joint venture management
agreements
– Continue to drive efficiencies for the managed
properties through centralisation and technologies
– Continue development of ESG strategy
– Appoint Responsible Business Ambassadors at
every property
– Continue to drive recruitment programmes to
create jobs and opportunities for local communities
Operations:
– Market dynamics page 29
– Economic climate page 30
– Talent attraction, engagement and retention
page 33
– Operational disruption page 32
– Technology disruption page 32
– Unrestricted cyber attack page 31
– Data privacy page 32
– Health, safety and security page 33
– ESG – stakeholder perception page 34
Operations:
– EBITDA
– Successful launch of new openings
– Growth in portfolio
– Growth in fee-based income through third party
or joint venture management agreements
– Monitoring of gender pay gap for the UK and
TheNetherlands
– Identifying metrics for diversity and inclusion
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
24 25
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
REAL ESTATE
Core, upper
upscale,
city-centre
hotels
Leisure
and
outdoor
hospitality
Hospitality
management
platform
Our approach to
risk management
Our embedded and proactive approach to
risk management continues to help us
navigate the significant challenges we face.
Through our risk management process we
maintain a clear view of our most prominent
threats and look ahead at the emerging risk
trends which could have a notable impact on
our business. The strength of our risk
management programme means leadership
decisions are aligned with our risk appetite
and are made in full awareness of the threats
we face.
The integration of risk management and
routine assessments within each corporate
function allows us greater information at the
leadership level and ensures each function
remains alert to risks and is accountable for
reporting on them on a regular basis,
whether or not their profile has changed.
A solid foundation of risk awareness and
focused risk mitigation has underpinned our
resilience during the COVID-19 pandemic
and supported the proactive response of
ourteams to the various related risk impacts.
In 2021, our leadership team has maintained
itsflexible and proactive approach to the
challenging risk environment. Key actions
during the year have included the strengthening
of our cash position, the rebuilding of our teams
to meet demand during periods of recovery
and upholding the high standards of health and
safety within our hotels and resorts.
Our Risk Reward strategy is aligned to our
strategic objectives and has been updated
and reviewed by the Board during the year.
This year we have demonstrated that our
appetite for taking new opportunities through
acquisitions remains intact. In obtaining Board
approval for acquisitions or development
projects, the capacity of management to
manage or deliver the project and the impact
on the financial stability of the Group are both
key areas of focus.
We are not willing to increase our exposure
in matters of environmental and climate
related risk, and we are committed to
tackling the risks associated with the
transition to a low-carbon economy.
This year we have looked in greater depth
atvarious climate related risk scenarios
toidentify and assess the key threats
toourlong-term objectives.
See our TCFD Report on Page 88.
OUR RISK MANAGEMENT
FRAMEWORK
Our established Enterprise Risk Management
(ERM) framework supports the pursuit of our
objectives through enabling informed and
calculated risk-taking, while protecting our
financial strength and reputation.
The ERM framework defines clear
accountabilities through our risk governance
model and our risk management process.
Our Risk Reward strategy sets the tone for our approach to
risk and articulates the general appetite to risk-taking and
tolerance. Risk appetite is cascaded throughout the Group
through our policies and procedures.
Roles, responsibilities and reporting structure are defined
in a Risk Policy. The Board takes ultimate responsibility for
risk management supported by the Audit Committee who
oversee and advise the Board on the Group’s risk exposure,
risk appetite and future approach to risk.
Current and emerging risk identification, assessment, treatment,
reporting and monitoring including regular functional risk
updates, Executive Leadership Team risk forums, scenario
analysis for key decisions and monitoring of key riskactions.
The output of this process is reviewed and challenged
bytheAudit Committee on a quarterly basis.
Assurance that risks are both identified and well-managed
is obtained from various sources including: Compliance /
Health and Safety Consultants / Internal Audit / External
Audit / Other third party assurance providers
RISK REWARD STRATEGY
RISK GOVERNANCE
RISK MANAGEMENT
PROCESS
RISK ASSURANCE
Report
Treat
Assess
Identify
STRATEGIC OBJECTIVES
RISK-INFORMED DECISIONS
OUR CHANGING ENVIRONMENT –
RISK DRIVERS AND EMERGING
THREATS
We recognise the importance of understanding
the lasting impacts of major events such as the
COVID-19 pandemic and Brexit, as well as
emerging threats like climate change,
economic volatility and political instability, to
ensure we maintain our organisational and
strategic resilience in the years ahead.
Our business model and operations could be
influenced by many external developments
including post Brexit changes to the UK
regulatory environment, potential changes in
tax legislation, long-term shifts in consumer
behaviours following the pandemic, labour
market pressures through restricted
migration, growing pressure on the cost of
living and an increased threat to social
cohesion across our regions and markets.
We will respond proactively to the changing
business environment by focusing on our
strategic pillars such as the diversification of
our property portfolio, our people and
culture, guest satisfaction and our ESG
credentials.
Global disruption
The COVID-19 pandemic has been the
biggest risk event we have experienced,
andthere is potential for further global
orregional disruption through new waves
orvariants of the virus emerging.
The future direction of the pandemic will
determine the severity of our exposure to
many of our principal risks. Global travel
restrictions have a significant impact on market
demand and economic growth. We could see
further disruption through restrictions imposed
on our hotel operations or through supply
chain issues and labour shortages.
Other global conditions such as the conflict in
Eastern Europe could also disrupt some of our
markets through restricted travel and
dampened demand. As events unfold, the
Board will continue to monitor the impact.
We have proven our resilience in the face of
COVID-19, and we are well-prepared for future
disruption, with robust plans in place to address
heightened risk and protect the stability and
future growth potential of our business.
Macro-economic volatility
Volatility of the long-term economic outlook will
also influence our assessment of risk in the year
ahead. Changing macro-economic conditions
with inflationary pressure and slowing growth
could impact the speed of recovery for the
hospitality sector and affect the accessibility of
finance to fund future opportunities.
We take a proactive approach to monitoring
macro-economic factors and act to ensure
we are well-positioned to withstand times
ofstress and maximise our opportunities
asconditions improve.
Climate change
The impact of climate change will emerge
through risks that we are already exposed
to.Increasing physical risks such as flooding,
water stress and rising mean temperatures
across our regions would heighten our
principal risk of operational disruption and
could increase costs.
The global response to climate change could
drive changes in our market over the long
term. Carbon pricing and taxes could see the
cost of international travel increase which may
impact travel patterns from certain market
segments. Our guests’ increased awareness
and concern regarding their individual
environmental footprint could also impact
market dynamics, presenting as both a risk and
an opportunity as more booking decisions
would be influenced by environmental
credentials. This will also be increasingly
important for securing corporate contracts and
new meetings and events business with many
organisations acting to deliver upon net-zero
carbon pledges.
Several of our principal risks could be
exacerbated by government commitments to
reduce carbon emissions which could lead to
further developments and changes in regulation
across travel and tourism, construction and
property management. Funding could also
become increasingly difficult to secure as banks
increase scrutiny on the environmental
credentials and carbon impact of a business as
part of their lending process.
This year we have performed scenario
analysis to improve our understanding of the
various physical and transition risks we face
in respect of climate change as well as any
associated opportunities. The analysis
considered short, medium and long-term
threats under three potential scenarios for
average temperature increases which are
used to assess the risks and to plan and
prioritise any associated mitigating activity.
See our TCFD Report on pages 87 to 89.
With increasing scrutiny on environmental
matters from investors, customers and
partners, this year we have included a new
principal risk regarding stakeholder perception
of the Group in respect of ESG matters.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
26 27
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Almost
Certain
> 90%
Likely
60% < x ≤
90%
Possible
40% < x ≤
60%
Likelihood
Unlikely
10% < x ≤
40%
Very unlikely
< 10%
Minimal Minor Moderate Major Severe
Impact
9
4
9
11
3
5
8
1
1
3
5
6
2
8
6 2
10
10
7
7
11
4
Principal risks and uncertainties
Our residual risk level is decided through an assessment
ofthe likelihood of the risk and its impact should it
materialise. Our assessments are weighted towards impact
to encourage prioritisation of high impact risks. This risk
map shows our assessment of each area of principal risk
before and after risk mitigation.
The tables below detail our principal risks and uncertainties for the year
ahead. These are considered to be the most significant threats to the
achievement of our objectives but are not an exhaustive list of all risks
identified and monitored through our risk management process, which
includes the consolidation of underlying functional and subsidiary risk
registers into a single view of risk reported to the Board.
1
Market dynamics
2
Economic climate
3
Funding and Liquidity
4
Development project
delivery
5
Unrestricted cyber attack
6
Data privacy
7
Technology disruption
8
Operational disruption
9
Health, safety and security
10
Talent attraction,
engagement and retention
11
ESG – stakeholder
perception
MARKET AND MACRO-ECONOMIC ENVIRONMENT
Principal risk description Risk response and actions for 2022 Residual risk
Market dynamics – significant
and prolonged decline in global
travel and market demand
Further waves of COVID-19 with new variants
could continue to impact the hospitality sector
and hinder our recovery to pre-pandemic
levels of revenue and profitability.
There is likely to be continued uncertainty in
demand with continued trends of late bookings
and late cancellations, increasing the challenge
to forecast accurately and manage costs
effectively.
Related strategic blocks, pillars
andenablers:
1
2
3
4
9
How we mitigate and respond to this risk
We have demonstrated our ability to adapt quickly to changing market
conditions throughout the COVID-19 pandemic by identifying new
opportunities for revenue generation and focusing on delivering the highest
standards to our guests.
In the year ahead we will continue to monitor closely and anticipate changes
inmarket dynamics to ensure we remain prepared and respond quickly.
We will do the following:
– Maintain an agile approach to revenue management and marketing tactics,
adapting quickly to changes in the market.
– Introduce new leisure and domestic focused promotional initiatives and
leverage our partnerships for distribution and marketing.
– Price test in line with demand and the wider markets.
– Continue our close collaboration with Radisson Hotel Group and leverage
their reach for promotional campaigns.
– Seek opportunities to add new contracted business and consider potential
bespoke agreements during times of operational restrictions, e.g.
government support, quarantine hotels, NHS contracts, ‘bubble’ hotels
formajor events.
– Drive consistent brand standards across all of our properties.
– Monitor and analyse customer feedback to identify issues quickly
andimproveoperations.
– Drive use of our digital and contactless services such as online check-in/
check-out, digital key, online food ordering and real-time messaging.
– Maintain team member levels to the appropriate scale for the trading
environment and flex our costs based on business levels.
– Continue to secure SGS accreditation for cleanliness and disinfection,
supported with our own programme of brand audits across all hotels.
Very high
Inherent risk
Residual risk
Strategic blocks Strategic pillars and enablers
1
Core, upper upscale City-Centre Hotels
– growth plan and opportunity pipeline
4
Diversification of property portfolio
7
Guest satisfaction – memorable and superior
guest experiences
2
Leisure and outdoor hospitality – further
expand our offering
5
Non-dilutive capital approach –
flexibilityin how we acquire, purchase
ordevelop assets
8
ESG – meaningful ESG impact for the benefit
of all stakeholders
3
Hospitality management platform – diversify
revenue generation through further opening
our expert platform to thirdparties
6
People and culture – entrepreneurial,
people-oriented and creator culture to
underpin growth agenda
9
Restaurants and bars – destination-led
restaurant and bar experience with ambitious
growth plans
Movement from last year
Increased Reduced No change
NEW
Newly
reported
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
MARKET AND MACRO-ECONOMIC ENVIRONMENT CONTINUED
Principal risk description Risk response and actions for 2022 Residual risk
Economic climate – adverse
macro-economic conditions
The macro-economic environment is expected
to remain volatile in 2022, with slowing growth,
global supply chain issues, labour shortages,
energy price increases, other inflationary
pressures and potential interest rate rises.
A prolonged period of stress for the global
economy could contribute to reduced demand
and increased costs, impacting our ability to
protect our revenue and profitability.
Related strategic blocks, pillars
andenablers:
3
5
6
How we mitigate and respond to this risk
Although this external threat remains significant, we have reduced the overall
assessment of the risk compared to last year due to several factors including our
financial stability and strong cash position, our leaner operating model and our
properties holding their value.
We have built our resilience to both economic and market forces through
thefollowing:
– Cash preservation and scenario stress testing.
– Profit protection plans (with operational impact assessed).
– Budgetary control and frequent forecasting across all regions and
propertytypes.
– Regular open/closed scenario analysis to support informed decisions during
the COVID-19 pandemic.
– An adapted business model with more centralised processes to reduce fixed
costs where possible.
– Benchmarking and verification of market pricing in respect of our supply chain
and a policy of sourcing locally where possible.
– Process automation and investment in IT to gain efficiencies.
High
FUNDING AND INVESTMENT CONTINUED
Principal risk description Risk response and actions for 2022 Residual risk
Development project delivery
– disruption to projects
causingdelays or unforeseen
cost increases
Global supply chain concerns and a challenging
labour market driven by both Brexit and the
COVID-19 pandemic could result in potential
increases in our development project costs or
impact the timeline for project delivery.
Related strategic blocks, pillars
andenablers:
1
2
9
How we mitigate and respond to this risk
Although this remains an area of risk requiring close attention we have reduced
the overall assessment to ‘Medium’ with good progress made in 2021 and
pricing largely fixed for key projects.
Our senior leadership team oversees the progress of all key development
projects, supported by our in-house Technical Services team, by closely
monitoring project timelines and costs, holding regular meetings with our key
contractors to identify and tackle any approaching issues which could impact the
overall cost, targeted delivery schedule or the expected quality standards.
Medium
Our approach to risk management
continued
FUNDING AND INVESTMENT
Principal risk description Risk response and actions for 2022 Residual risk
Funding and liquidity – risk of
breaching debt covenants, an
inability to service existing debt
and cash restrictions
The ongoing disruption caused by
COVID-19 means that funding and liquidity risk
will remain a significant risk in the year ahead.
The impact of failing to manage this threat
proactively would be severe, including an
increased risk of cash traps being applied
tohotel-specific loans.
The cost of debt is likely to be under increasing
pressure in the year ahead with economic
conditions potentially leading to interest
raterises.
Related strategic blocks, pillars
andenablers:
5
How we mitigate and respond to this risk
The risk of breaching debt covenants remains very high due to suppressed
revenues caused by the ongoing disruption of COVID-19.
By maintaining strong relations with our lenders we have continued to mitigate
the threat through securing extended debt covenant waivers.
We also strengthened our cash position during the year when we entered into
along-term partnership with Clal Insurance in respect of Park Plaza London
Riverbank and art’otel London Hoxton.
Our key mitigating actions and controls include the following:
– Monthly forward covenant testing with sensitivity and stress modelling.
– Agreed debt covenant waiver extensions with lenders to 2023.
– Robust treasury monitoring and reporting to the Board.
– Proactive and regular liaison with our lenders.
– Fixed interest rates for the majority of our loans.
Our actions and the controls we implement have contained the funding and
liquidity risk, but it will remain a priority while the COVID-19 pandemic
continues to impact our performance. The speed at which the hospitality sector
can return to more normal trading conditions will determine the longevity of
this threat to our business.
Very high
TECHNOLOGY AND INFORMATION SECURITY
Principal risk description Risk response and actions for 2022 Residual risk
Cyber threat – undetected /
unrestricted cyber security
incidents
The Group could be subject to a serious cyber
attack resulting in significant disruption to
operations and financial loss from falling
revenues, cost of recovery and significant fines
in the event of a related data breach.
Related strategic blocks, pillars
andenablers:
3
7
How we mitigate and respond to this risk
As cyber security incidents such as ransomware attacks continue to be a
significant threat, we are focused on strengthening our defences and response
mechanisms to provide us with suitable levels of protection.
During the year we introduced enhanced security controls, new threat
management tools and improved disaster recovery procedures which led to a
slight reduction in our overall assessment of this risk.
Our mitigating actions include the following:
– Implementation of a new threat management solution.
– Team member awareness training.
– Email protection and end-point protection and detection controls.
– Network security systems.
– Network Access Control solution.
– Virtual Private Network (VPN) connections for securing remote connections to
the corporate network.
– IT security policies.
– Incident response plans.
– Third party expert penetration testing.
– Phishing security tests.
– Identity Access Management tool.
– Development of Disaster Recovery procedures and Business Continuity Plans
for key applications.
High
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
TECHNOLOGY AND INFORMATION SECURITY CONTINUED
Principal risk description Risk response and actions for 2022 Residual risk
Data privacy – risk of
databreach
The Group could experience a serious data
privacy breach which could result in investigation,
significant fines in accordancewith the GDPR and
subsequentreputational damage.
Related strategic blocks, pillars
andenablers:
3
7
How we mitigate and respond to this risk
Our mitigating controls reduce the likelihood of a large-scale data privacy breach,
and our processes ensure any incidents are dealt with in compliance with the GDPR.
Our controls include the following:
– Information Security and Data Privacy policies.
– Internal awareness communications and training.
– Breach protocols, reporting hotlines for team members and incident
responseplans.
– Use of third-party experts for technical support when necessary.
– Credit card tokenisation through our payment systems.
– Enhanced technology controls – see Cyber threat risk.
– Process improvements to reduce the threat of data fraud.
High
Technology disruption
A prolonged failure in our core technology
infrastructure could present a significant threat
to the continuation of our business operations,
particularly where failures impact hotel
management and reservation systems.
Related strategic blocks, pillars
andenablers:
3
7
How we mitigate and respond to this risk
The fast-changing digital landscape and rapid roll out of new technologies within
our business during 2021 mean that the risk of disruption from technology
failures remains an area of focus.
Our controls and actions to reduce our risk exposure and build resilience include
the following:
– Core technology infrastructure hosted by third party secure data centre.
– Set-up of back-up and disaster recovery site for core infrastructure.
– Disaster Recovery and Business Continuity Plans for key business applications.
– Roll out of converged networks across our hotels.
Medium
SAFETY & CONTINUITY
Principal risk description Risk response and actions for 2022 Residual risk
Operational disruption
We have experienced significant operational
disruption during the COVID-19 pandemic.
Other global events such as conflict or
environmental disasters could also cause
significant disruption.
We could also experience more localised
disruption to our operations from incidents at our
hotels or in the immediate vicinity, for example
floods, extreme weather, social unrest, conflict,
terrorism.
Related strategic blocks, pillars
andenablers:
3
7
9
How we mitigate and respond to this risk
The volatile nature of the COVID-19 pandemic continues to disrupt operations
with increased team member absence, supply chain pressures and government
restrictions changing frequently across our regions.
Our overall assessment of the risk sees a slight reduction from our most severe
categorisation as we have demonstrated an ability to adapt our business
operations in response to new challenges, and our properties have continued
to operate effectively through the more recent waves of the pandemic.
We continue to manage this threat with the following measures:
– Hotel crisis plans and crisis communications.
– Hotel lockdown procedures.
– Business Continuity Plans.
– Cost control measures to reduce impact of closures and reduced capacity.
– Adapted services to continue operations where possible.
– Remote working capabilities for corporate and regional teams, including
Central Reservations and Customer Support.
– Close monitoring of key supplier stability and regular communications
regarding anticipated demand levels.
– Contingency in place for critical supplies.
High
Our approach to risk management
continued
SAFETY & CONTINUITY CONTINUED
Principal risk description Risk response and actions for 2022 Residual risk
Serious health, safety
andsecurity incidents
The Group could experience significant health
and safety, food safety or physical security
incidents.
A failure to take reasonable steps to prevent
such incidents, or a failure to respond
appropriately, could impact our reputation,
disrupt our operations and result in significant
loss of guest, team member and stakeholder
confidence.
Related strategic blocks, pillars
andenablers:
3
6
7
9
How we mitigate and respond to this risk
We do not accept any actions which would increase our risk profile in respect of
health, safety and security. With the COVID-19 pandemic ongoing we continue
to focus on delivering our enhanced health and safety programmes to provide a
safe stay for our guests and a safe working environment for our team members.
We actively mitigate and respond to this area of risk through the following:
– Regular risk assessments.
– Security and fire safety procedures.
– Health and safety audit programmes including regular COVID-19 related audits
and SGS accreditation for cleanliness and disinfection.
– In-house and supplier food safety audit programme.
– Team member training programmes.
– Incident reporting.
– Hotel crisis plans.
– ‘Reassuring Moments’ and ‘be bold, be creative, be safe’ programmes.
– COVID-19 incident protocol and centralised tracking of identified cases.
– Mental health and well-being training.
– Centralised system for incident reporting.
– Proactive gathering of intelligence and advice on potential security risks
through regular liaison with local police and security services.
Medium
PEOPLE
Principal risk description Risk response and actions for 2022 Residual risk
Talent attraction, engagement
and retention – challenge of
maintaining an engaged and
suitably skilled workforce
Difficulty in attracting, engaging and retaining
team members is a significant matter within the
hospitality sector, driven by the impact of both
COVID-19 and the reduced availability of
labour brought about by Brexit.
Tough labour market conditions could drive up
costs and potentially disrupt our operational
effectiveness.
Related strategic blocks, pillars
andenablers:
3
6
7
9
How we mitigate and respond to this risk
A challenging labour market is expected to persist in 2022 and will remain an
important area of focus. Our proactive approach to mitigate this area of risk
includes the following:
– Boosting our in-house recruitment team.
– Set-up of a new dedicated Hospitality Career Centre (recruitment office)
inLondon.
– Employer brand and talent attraction strategy.
– Optimising and simplifying the candidate experience.
– Social media strategy to increase presence and labour market penetration.
– Exploring opportunities to attract skilled workers from international labour
markets.
– Multi-skilling existing team members to improve the flexibility
ofourworkforce.
– Building a central bank of casual workers available to work across London
andAmsterdam properties.
– Provision of guaranteed hours for certain roles.
– Employee engagement initiatives and retention strategy.
– Pulse employee surveys to measure engagement and identify and address
any areas of concern.
– Increased recognition activity.
– Talent reviews.
– Learning and development strategy with enhanced online learning content.
– Mental health and emotional well-being initiatives.
– New onboarding experience.
High
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Principal risk description Risk response and actions for 2022 Residual risk
ESG stakeholder perception –
negative perception of the
Group with regard to
ESGmatters
Corporate governance and matters of
environmental and social responsibility are
ofsignificant importance to our stakeholders.
Investors and customers prepare detailed
information requests on ESG activities, metrics,
targets and performance. We are expected
tohave detailed knowledge of the ESG
performance of our supply chain.
Customers and employees cite ESG
reputationas a driver of behaviour.
A perception that the Group does not apply
best practice corporate governance principles,
does not suitably mitigate both the physical
and transitional risks of climate change, or does
not act responsibly to protect the environment
and the communities we operate in, could
impact our performance by damaging our
appeal to customers, investors and other
business partners. It could also affect our
ability to retain and attract talent.
Related strategic blocks, pillars
andenablers:
3
6
7
8
How we mitigate and respond to this risk
To strengthen our approach to ESG matters and respond to increasing investor
focus we have established an ESG Committee to develop, monitor and
re-evaluate policies on ESG matters.
Our ongoing mitigating activity include the following:
– Responsible Business Programme (aligned to Radisson Hotel Group).
– Participation in the Radisson Responsible Business Survey.
– Externally certified performance against recognised standards, e.g.
Green Key.
– Climate related risk scenario analysis and reporting (TCFD).
– Initiatives to reduce energy consumption in our properties.
– Active engagement with investors by CEO, Chair and Senior Independent
Director.
– Documentation of Governance practices and procedures to ensure
compliance with Corporate Governance Code (2018) requirements, or
satisfactory explanation thereof.
– Deputy Chairman acting as a dedicated workforce representative.
– Active monitoring of gender pay gap.
Medium
NEW
Our approach to risk management
continued
The COVID-19 pandemic has seen many of
our principal risks triggered or heightened.
Throughout this period of turmoil, we have
prioritised actions and risk responses to
focus on protecting the long-term stability of
the business. The Group has taken steps to
strengthen its liquidity, including waivers of
existing covenants on all its credit facilities
until 2023 and taking additional £76.8 million
of revolving credit facilities, maturing
throughout 2023. Furthermore the Group
entered into a joint venture transaction on
two of its London assets in June 2021, raising
£125.8 million additional liquidity.
The enforced government lockdowns in all
ofour regions have tested our operational
resilience, crisis plans and overall viability
ofthe business. Travel restrictions continue
tohave a volatile impact on demand and
occupancy levels in all our territories.
While the vaccine has proven to be effective
in reducing the number of hospitalisations
and deaths, it is apparent that new strains
ofthe virus continue to hold grip on society
and winter restrictions are again reality.
The current restrictions are anticipated to be
short-term with the western side of the world
discussing treating COVID-19 as an endemic
illness like the flu. The Group anticipates
trading to remain volatile, but it’s well-placed
to handle short-lead bounce backs of
demand. Over the last year the Group’s
hotels have proven to be excellently
positioned to benefit from a recovery, with
the majority of its hotels being located
indesirable city hubs.
The Group will continue to adapt to market
conditions to preserve cash and protect the
Group’s long-term growth prospects.
Ongoing government restrictions currently
provide high volatility to the Group’s results
and therefore significantly impact estimates
and long-term growth planning. As such the
Group’s annual business planning process
has been amended for the coming year
where trading has been forecast on a
bottom-up basis, with high level assumptions
on the easing of government measures,
stopping government support in some
regions and different business segmentation.
To provide guidance through this trading
environment the Group continually monitors
a three-year base case and a downside case
cash flow forecast which takes into
consideration different trading assumptions,
ongoing and planned cash protection
measures and the Company’s long-term
strategy. In assessing the Group’s viability,
the Board carried out arobust assessment of
the current principal and emerging risks
facing the Group, whichcould impact the
strategy, focusing specifically on COVID-19
and the impact thiscould have on future
performance and liquidity of the Group.
Since the start of the COVID-19 pandemic
multiple cash flow forecasts showing
variousscenarios have been modelled and
reviewed by the Board to provide the basis
forstrategic actions taken across the
business. The Directors have considered
detailed cash flow projections for the next
three-year period to 31 December 2024
which are constructed on a base case and a
downside case basis. The base case assumes
a recovery in 2022 with EBITDA levels at
approximately 50% of 2019, the 2023 EBITDA
at 70% of 2019 and returning to 2019 EBITDA
levels in 2024. The downside case assumes
EBITDA for 2022 at 25% of 2019, the 2023
EBITDA at 50% of 2019 and returning to 2019
EBITDA levels in 2024.
Detailed consideration of various third party
market predictions were taken into account
by the Directors in determining the
assumptions used in each scenario. At this
point in time, the Board felt these
assumptions to be a reasonable worst case.
The estimates in both scenarios have a high
degree of uncertainty, mainly with respect
toassumptions on when the pandemic
willbe under control and normal trading
willcommence.
The downside case requires a further
extension of covenant waivers.
Having reviewed both the base case
anddownside case, the Directors have
determined that the Company is likely to
continue in business for the period under
review without implementing any further
protective measures to the operational
structure. Should the pandemic be more
severe and give rise to further government
lockdowns, the Group’s viability will depend
on its access to additional liquidity. The joint
venture transaction in the past year, whereby
the Group raised £125.8 million, shows the
ability of the Group to raise large amounts
ofcash using its balance sheet.
The Board concluded that three years would
be an appropriate timeframe over which to
assess the Group’s longer-term viability, as
this period aligns with the assumed recovery
period and with the limited levels of planning
certainty that can be derived from the
current market conditions. The above
considerations form the basis of the Board’s
assessment of the viability of the Group over
a three-year period to 31 December 2024
while taking account of the Group’s current
position, the principal risks and how these
are managed as detailed in the Strategic
Report, the Group strategy and the Group’s
financial plans and forecasts. Based on this
assessment, the Directors confirm that they
have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due over
the three-year period to 31 December 2024.
Viability statement
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
34 35
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Key performance indicators:
Measuring our progress
FINANCIAL KPIs PROPERTY KPIs
OPERATING KPIs
Total revenue £m
357.7
141.4
101.8
2021
2020
341.5
2019
325.1
2018
2017
KPI definition
Total revenue includes all operating revenue generated by
the Group’s owned and leased hotels, management fees,
franchise fees and marketing fees.
Comment
Revenue showed a recovery and increased by 38.9%
compared to 2020 due to the reopening of most of the hotels
and the uplift of the travel restrictions in the second half of
the year. Revenue in 2021 represents 39.5% of the levels
reported in 2019.
EPRA NRV per share £
25.93
22.15
22.08
2021
2020
24.57*
2019
2018
6.42*
2010
* EPRA NAV in accordance with the previous EPRA
NAV guidelines.
KPI definition
Recognised equity, attributable to the parent company’s
shareholders on a fully diluted basis adjusted to include
properties and other investment interests at fair value and
toexclude certain items not expected to crystallise in a
long-term investment property business model divided
bythe dilutive number of shares.
Comment
EPRA NRV per share which increased by 0.3% was positively
affected by the increase in the revaluation of the properties in
operation due to the recovery in the ‘business’ that was noted
in2021, however it was negatively affected by the loss attributed
to shareholder for the year and foreign exchange differences
Adjusted EPRA EPS Pence
128
(44)
(123)
2021
2020
115
2019
2018
97
2010
104
2017
KPI definition
Shareholders’ earnings from operational activities with the
Company’s specific adjustments. The main adjustments
includes removal of unusual or onetime influences and adding
back the reported depreciation charge, which is based on
assets at historical cost, and replacing it with acharge
calculated as 4% of the Group’s total revenues, representing
the Group’s expected average cost to upkeep the real estate
in good quality. The adjusted shareholders’ earnings from
operational activities are divided by the weighted average
number of ordinary shares outstanding during the year.
Comment
Adjusted EPRA earnings per share improved to a loss of 44
pence per share in line with normalised profit before tax.
EBITDAR £m
124.6
27.6
(9.1)
120.7
116.0
2021
2020
2019
2018
2017
KPI definition
Earnings before interest, tax, depreciation, amortisation and
rental expenses.
Comment
EBITDAR which recovered to £27.6 million was mainly
generated in the second half of 2021 due to the uplift of the
travel restrictions. Operating expenses increased due to the
inflation pressure and shortage of workforce however this
increase was partially offset by the utilisation of the available
Government support schemes throughout the regions.
EBITDA £m
122.9
25.1
(10.1)
2021
2020
113.2
2019
107.3
2018
2017
KPI definition
Earnings before interest, tax, depreciation and amortisation.
Comment
EBITDA which recovered to £25.1 million was mainly
generated in the second half of 2021 due to the uplift of the
travel restrictions. Operating expenses increased due to the
inflation pressure and shortage of workforce however this
increase was partially offset by the utilisation of the available
Government support schemes throughout the regions.
Normalised profit before tax £m
40.7
(47.5)
(89.8)
2021
2020
37.7
2019
32.1
2018
2017
KPI definition
Profit before tax adjusted to remove unusual or one-
timeinfluences.
Comment
Normalised profit before tax which improved to a loss of
£47.5 million was positively affected by the increase in EBITDA
and the decrease in finance costs mainly due to rent waivers
received in the period and foreign exchange differences.
Reported earnings per share Pence
80
(123)
(192)
2021
2020
90
2019
57
2018
2017
KPI definition
Earnings for the year, divided by the weighted average
number of ordinary shares outstanding during the year.
Comment
Reported earnings per share improved to a loss of £1.23 per
share in line with the change in profit.
Occupancy %
80.6
30.7
28.0
2021
2020
79.4
2019
77.3
2018
2017
KPI definition
Total rooms occupied divided by the available rooms.
Comment
Occupancy which was severely impacted by travel restrictions
increased by 270 bps year-on-year. The increase in occupancy
was notable in the UK and Croaria regions however it
decreased in the Netherlands and Germany regions.
Average room rate %
128.5
117.0
105.1
2021
2020
123.1
2019
120.2
2018
2017
KPI definition
Total room revenue divided by the number ofroomssold.
Comment
Average room rate increased by 11.4% and represents 91.1%
of 2019 levels. Average room rate increase was notable across
all of our operating regions with the exception of Germany.
RevPAR
103.6
35.9
29.4
2021
2020
97.7
2019
92.9
2018
2017
KPI definition
Revenue per available room; total roomrevenue divided by
the number ofavailable rooms.
Comment
RevPAR increased by 22.1%, in line with the increase in ADR
and occupancy.
Employee engagement %
84.4
Introduction of pulse surveys
2020
No surveys conducted
83.6
2019
85.4
2018
2017
KPI definition
Previously measured through annual engagement surveys,
team members were encouraged to share feedback about
the Company, their jobs, their team and their manager.
Notwithstanding the high scores achieved, we will be
changing our measurements to be more regular and topical in
the form of pulse surveys.
Comment
Developing a high performing culture, where engaged teams
are empowered to create valuable memories for our guests
and value for our assets is one of our strategic priorities.
During 2021, we have trialled several pulse surveys in the UK
and The Netherlands and will be implementing this approach
across all operating regions during 2022. From 2022 onwards
we will be reporting this new metric. In addition, in the UK
many of our team members participated in surveys from The
Caterer, the UK’s leading hospitality media platform, which
contributed to the Group being recognised as the ‘Best
Employer in Hospitality’.
Guest rating score %
83.6
85.5
2021
2020
Data not indicative
85.4
2019
2018
KPI definition
Guest satisfaction and a strong reputation are paramount to
our long-term success. These are measured through guest
surveys completed by guests and reviews posted online on
travel review websites and booking platforms. The Guest
Rating Score reported is based on guest reviews posted on
external websites.
Comment
Improving the overall guest experience through creating
valuable memories is one of our strategic priorities.
We therefore measure the Guest Rating Score, which is the
online reputation score for our properties and which is based
on review data collected from many of the world’s leading
online travel agencies and review sites. The score is calculated
by an algorithm that generates a score from 0 to 100.
Notwithstanding the lockdown periods, restrictions on travel
and various government measures in place, we have
continued to deliver a strong guest rating score finishing the
year with an 85.5 rating.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
36 37
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
The
traveller
in 2022
The changing face of travel
andhow we adjusted
Throughout history, guest expectations and
behaviour have changed consistently, and
the past two years during the pandemic have
not been an exception. Guests now favour
flexibility over lower prices, cleanliness and
hygiene have taken centre stage, customers
have embraced local and domestic travel
and digitisation and automation have
progressed substantially.
As owner/operators, we have taken a very
proactive stance towards adjusting our
offering accordingly accelerating
investments in technology and continuously
reviewing guest feedback and sentiment.
New target audiences
andevolvingofferings
The domestic markets were always strong for
us in Germany and in the UK but were even
more prevalent during the pandemic. For our
smaller operating markets, such as The
Netherlands and Croatia, neighbouring
markets and destinations within driving
distance became much more important.
As aresult, we changed our focus
accordingly adjusting our marketing
activities, partnering with locally relevant
third parties and localising our offering
andmessaging.
Some of our hotels which usually focus on
corporate travellers were now targeting
leisure travellers and families, adjusting their
services, amenities and messaging to
capture prospective customers.
For our meetings and events hotels we
introduced hybrid meetings and offered
planners flexible booking conditions.
In addition, in collaboration with Radisson
Hotel Group, we offer carbon neutral
meetings.
Operational changes were frequent and in
line with changes in government measures,
while protecting the guest experience.
Our teams have been fully trained in our
robust health and safety standards, which
were created in partnership with expert
consultants, Radisson Hotel Group and
accredited by SGS.
Several years ago, we decided to invest
inour own housekeeping team
(accommodation services) instead of
continuing to use third party agencies for
these services which is pretty much the norm
in the London hospitality market.
It was a bold decision which has proven to
be of great benefit during the recovery
phase. Our team has shown great flexibility
and have worked relentlessly to cope with
the returning demand.
Several of our restaurants and bars now offer
our guests the opportunity to order online
and enjoy our food at their home, through
delivery options or collection. These initiatives
proved particularly popularduring lockdown
and to celebratespecial occasions.
Listening to our guests’ needs
In the second year of the pandemic retaining
flexibility and being able to change or cancel
reservations was still important for our
customers. We have therefore retained very
flexible booking conditions for our guests
and event planners throughout the period.
In addition, recognising the macro
uncertainty, Radisson Rewards members
have seen their loyalty status extended.
We have further centralised our customer
service focused teams, including
reservations, customer service and customer
experience. We have invested, and are
continuing to invest, in robust technology
systems which make interactions with our
customers easy and frictionless while we also
collect valuable insights based onwhichwe
can further improve the guestexperience.
Digitalisation and automation
A significant change we have seen is the
acceleration of digital services in hospitality
which we have fully embraced and we have
implemented many initiatives across our
Group. Our guests now have the choice to
completely self-manage and personalise
their stay, by using our Apps for online
check-in and check-out, using their mobile
phone as a digital key, ordering room service
online, making swimming pool reservations
or asking for that extra pillow through the
real-time messaging options we offer such
asWhatsApp and chat.
Environmental, social
andgovernance
There are plentiful industry reports on the
growing importance of sustainability in the
travel and tourism industry for customers
and other stakeholders. Having a defined
framework of ESG targets enables us to
communicate our ambitions and progress
made to all stakeholder groups. We also
note that the main booking channels and
distribution partners are adding ESG criteria
into their decision-making process for
customers to select and more and more
corporate travel agreements have ESG
mandates. We closely work with regional and
international organisations, from local
councils (for property developments), to
Tourists Boards, accreditation schemes,
Radisson Hotel Group and other stakeholder
groups. For our ESG strategy and progress,
please refer to pages 74 to 89.
The strong appeal
ofthe European
travelmarket
Notwithstanding the turbulent past two
years, we strongly believe in the underlying
strength of the European travel market.
Prior to COVID-19, European international
travel has, apart from some macro-economic
glitches, consistently grown since the 1950s.
While there are an increasing number of
companies and countries committing to
carbon footprint reductions, globalisation
isexpected to continue and we expect the
European travel market to remain strong
post COVID-19. Europe represents the
greatest inbound tourism market accounting
for approximately 50% of all international
travel worldwide.
INTERNATIONAL TOURIST ARRIVALS PER YEAR BY REGION
2019 European international tourist arrivals
1
742.3m
(2010: 487m)
The most visited region:
50.9%
of international arrivals
The biggest region for tourism spend:
€483bn
of international receipts
Strong demand
drivers with growing
market forecasts
1950 20181960 1970 1980 1990 2000 2010
0
200 million
400 million
600 million
800 million
1 billion
1.2 billion
1.4 billion
Africa
Middle East
Asia & Pacific
Americas
Europe
Source: United Nations World Tourism Organization
World Tourism Barometer (2019)
ourworldindata.org/tourism
1 UNWTO, January 2020
EUROPEAN HOTEL MARKET
WORLD’S STRONGEST INTERNATIONAL HOTEL MARKET
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
38 39
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Award-winning
hospitality
management
platform
Our business model consists of
valuecreation through ownership and
development of hospitality real estate
aswellas through our hospitality
managementplatform.
Our expert team of passionate hospitality
professionals located in London, Amsterdam,
Berlin and Pula, collectively manages
48properties across eight countries.
This central team also drives the preopening
activities for the properties in our pipeline.
Properties under the team’s management
range from premium lifestyle hotels to upper
upscale and upscale hotels, conference
hotels, airport hotels, resort hotels, self-
catering apartments, campsites, glamping
and destination restaurants and bars.
Every expertise required to successfully
develop, operate and commercialise
hospitality properties is offered by our
support platform. Included in our services is
the ability to provide access to our brands
aswell as those from strategic partners,
suchas Radisson Hotel Group, which with
itsJin Jiang ownership ranks as the world’s
second largest hotel group.
The multi-billion property portfolio managed
by our team is either owned by PPHE Hotel
Group, owned or part-owned by third parties
or leased from institutional investors.
Asset management and relationship
management with owners is core to our
strategy and we are a trusted fiduciary
partner for multiple joint ventures with global
institutional capital partners.
Our hospitality management platform allows
for further growth of the portfolio and the
Group aims to leverage its scale and grow the
external offering in a ‘plug and play’ manner.
We are expert operators who understand
owners’ needs and have a strong 30-year
track record of delivering outstanding results
– from financial returns for owners, tohigh
ratings for employee engagement and
excellent guest satisfaction scores and online
reviews.
Services we typically provide to owners
include the following:
– Access to brands
– Day-to-day operations
– Asset management and optimisation
– Technical services and renovations
– Legal and administrative support
– People, learning and culture programmes
and initiatives
– Guest experience management and
customer service
– Brand standards and concept
development
– Commercial services, including
distribution, sales and PR and marketing
– Revenue management, analytics and
digital marketing
– Technology solutions, including
contactless services
Our team’s work is recognised internationally
in the form of awards and in 2019–2020 we
were awarded ‘Best Large Hotel Group’ by
the AA in the UK and in 2021 wewon the
prestigious ‘Best Employer in Hospitality’
award from The Caterer, the UK’sleading
hospitality media brand. Further recognition
in the year went to someof our star team
members, including our Executive Chef
Oliver Ruiz at Park Plaza Westminster Bridge
London who was voted ‘Best Chef of the
Year’ (>250 covers) by The Caterer and
Daniel Pedreschi, VP Operations UK, won
‘Hotelier of the Year’, also from The Caterer.
Inbar Zilberman, our Chief Corporate & Legal
Officer, was featured in ‘Women to Watch
and Role Models for Inclusion in Hospitality’.
However, for us, allour team members
deserve praise and recognition for their
outstanding performance during the year.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
40 41
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Our exciting £200+ million pipeline is filled
with potential and ranges from high profile
ground-up development projects to
conversions, and from land sites to existing
hotels with repositioning potential.
Additional repositioning projects are under
review in Berlin, Cologne and Budapest.
2020 20222021
ART’OTEL LONDON HOXTON
ART’OTEL LONDON BATTERSEA POWER STATION*
ART’OTEL IN ZAGREB CITY CENTRE
ARENA STOJA CAMPSITE, PULA
GRAND HOTEL BRIONI PULA
ART’OTEL IN ROME CITY CENTRE
ART’OTEL IN PULA CITY CENTRE
20242023
PROPERTY CONSTRUCTION PROPERTY CONVERSION PROPERTY REPOSITIONING
Our pipeline
ART’OTEL LONDON
BATTERSEA POWER
STATION, UK
ART’OTEL LONDON
HOXTON, UK
LONDON PIPELINE, UK GRAND HOTEL BRIONI
PULA, CROATIA
ART’OTEL IN ZAGREB,
CROATIA
ARENA STOJA CAMPSITE
PULA, CROATIA
ART’OTEL IN ROME, ITALY ART’OTEL IN PULA, CROATIA
LONDON LONDON LONDON PULA ZAGREB PULA ROME PULA
Entering its final stage of
construction, art’otel London
Battersea Power Station represents
the first art’otel opening in the UK’s
capital. Part of the Battersea Power
Station redevelopment scheme, this
iconic premium lifestyle hotel will
offer 164 rooms, an art gallery,
cultural programming, rooftop
garden with swimming pool and
destination restaurant and bar.
Our largest current construction
project, expected to be completed
in H1 2024. Occupying a prime
location in Hoxton, this 27-storey
mixed-use scheme will include a
premium lifestyle art’otel with 343
rooms (including 60 suites), an art
gallery, two original Banksy artwork
pieces, destination restaurants, a bar,
leisure facilities, events space and
5,900m
2
of office space.
The Group has applied for planning to
develop a mixed-use scheme
consisting of a 186-room hotel and
750m
2
of office space. This
development site is located near the
Group’s Park Plaza London Waterloo
property. In addition, the Group has
planning to develop a 465-room hotel
on the site adjacent to its Park Plaza
London Park Royal property for which
itis designing plans.
Following two years of extensive
redevelopment, Grand Hotel Brioni
isset to reopen. The spectacularly
located hotel has been transformed
into a premium resort, consisting
of227 rooms and suites, an infinity
outdoor pool, indoor swimming pool,
several restaurants and bars and
achildren’s club.
Marking the Group’s debut in the
Croatian capital, construction work has
commenced to convert a former office
building into a 118-room premium
lifestyle art’otel. Located in the city
centre, this hotel will offer an art
gallery, a rooftop pool, destination
restaurant, bar and leisure facilities.
Located on a peninsula, offering 360°
views of the Adriatic, Arena Stoja
Campsite will be transformed into an
upper upscale property with a choice
of premium mobile homes and
glamping lodges. Guests will
benefitfrom a newly created
on-siterestaurant, bar and
espressamente illy.
Marking the Group’s entry into Italy,
the historic Londra & Cargill hotel in
the centre of Rome will be transformed
into the Group’s first art’otel in Italy.
Following repositioning, this hotel
willoffer 101 rooms, an art gallery, a
destination restaurant and bar, leisure
facilities and parking.
Located in the centre of Pula, with
itsrich Roman-era history, this hotel
isnear the marina and close to the
Roman amphitheatre. Following
extensive transformation, this art’otel
will offer 80 rooms, an art gallery,
arooftop garden with pool, a
destination restaurant and bar
andleisure facilities.
Total rooms
164
Total rooms
343
Total rooms
651
Total rooms
227
Total rooms
118
Total units
75
Total rooms
101
Total rooms
80
* art’otel London Battersea Power Station is owned by the Battersea Power Station Development Company
and will be operated by the Group under a management agreement, generating fee-based income.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
42 43
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
£m
YEAR-ON-YEAR CASH FLOW
Reported
cash 31.12.20
114.2
Operational
cash flow
(EBITDA and
working capital)
25.7
Investment
in properties
2
and new
acquisitions
(101.8)
Debt service
1
(50.1)
Loan
repayments
70.9
Joint venture
transaction
(40.4)
Other
exceptional
items (including
foreign exchange)
125.8
Undrawn
facilities
76.8
New facilities
and movement
in restricted cash
Reported
cash 31.12.21
136.8(7.5)
1 Including leases and unit holders in Park Plaza Westminster Bridge London
2 £8 million reflects regular CAPEX
Financial
review
Daniel Kos
Chief Financial Officer
& Executive Director
Overview of 2021
For the second consecutive year the Group’s
financial performance was severely impacted
by the COVID-19 pandemic. The first half of
the year was dominated with lockdowns and
travel restrictions in all of our operating
regions, however trading bounced back
quickly in the second half-year due to
pent-up leisure demand. A strong leisure
season caused our Croatian region to reach
93% of its 2019 revenues in the third quarter
of 2021.
Although this was the second time the
Group faced severe lockdown and travel
restrictions, reopening the hotels after
thisperiod has proved more challenging
thanin 2020. Oursignificantly reduced
workforce at reopening, paired with a
challenging labour market, caused staff
shortages in all our operating regions.
Thanks to the dedication and hard work of
our staff we were able to cope with the
demand fluctuations throughout the last six
months of the year. However, as a
consequence of these shortages we are
faced with increased wage inflation in all our
operating regions.
Despite inflationary pressures, the Group
continued to take a highly disciplined
approach to expenditure with a large focus on
further automation and centralisation of back
office functions. Furthermore demand growth
throughout the second half of the year showed
to have a positive drive to ouraverage room
rates, which in some properties were starting
to exceed 2019levels.
During the year we entered into a significant
joint venture transaction, whereby we
divested 49% of two of our London assets
toClal Insurance. With this transaction the
Group was able to raise £125.8 million,
retaining a long-term management contract
and control over the assets. The transaction
was largely done at the latest reported NRV
of the Group. The proceeds are earmarked
to pursue new growth opportunities.
Throughout last year we have been active on
growing and progressing our pipeline, with the
acquisition of two new hotels in Italy and
Austria, the start of the redevelopment of anew
hotel in Zagreb, and we are entering the
completion stages of a two-year redevelopment
ofGrand Hotel Brioni in Pula(Croatia).
With current trading impacted again by new
government restrictions, at the end of the
year the Group’s hotels returned to reduced
occupancy levels, albeit higher than those
experienced in the previous lockdowns of
the pandemic.
Operational Performance
Revenue
The first six months of the year were
dominated by world-wide lockdowns, amid a
vaccine roll out programme. The Group’s
occupancy levels reached a record low in Q1
given these lockdowns and limited essential
worker stays. From May onwards restrictions
were progressively eased across our
operating markets and demand started to
build up during the summer months.
The Group was fortunate to secure an
exclusive agreement for Park Plaza
Westminster Bridge London to act as official
player hotel for the 2021 Wimbledon
Championships; furthermore the Group
secured a contract to operate two hotels
exclusively as part of the UK Government’s
hotel quarantine programme. These three
exclusive contracts provided the UK with
contracted business coming out of a
lockdown period, enabling the Group to
build up a revenue base.
Pipeline growth and a
solid financial position
FINANCIAL RESULTS
Key financial statistics for the financial year ended 31 December 2021.
Year ended
31 December 2021
Year ended
31 December 2020
Total revenue £141.4 million £101.8 million
Room revenue £84.4 million £63.6 million
EBITDAR £27.6 million £(9.1) million
EBITDA £25.1 million £(10.1) million
EBITDA margin 17.7% (9.9)%
Reported PBT £(57.6) million £(94.7) million
Normalised PBT £(47.5) million £(89.8) million
Reported EPS (123)p (192)p
Occupancy 30.7% 28.0%
Average room rate £117.0 £105.1
RevPAR £35.9 £29.4
EPRA NRV per share £22.15 £22.08
Adjusted EPRA earnings per share (44)p (123)p
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
44 45
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Trading in Q3 benefited from pent-up
demand after months of travel restrictions,
particularly in Croatia, where revenue reached
93% of its 2019 levels in Q3. However, from
late autumn demand and consumer sentiment
was again affected by increased infection
rates and enhanced government measures
imposed across Europe to tackle the spread
of the virus, followed by further strict
government restrictions.
After a period of two years trading in a
pandemic, with multiple periods of trading
under strict lockdowns or travel restrictions,
the Group has significant learnings from
booking cycles and trading patterns.
Coming out of a period of government-
restriction period, we notice a less severe
impact to our occupancy compared to other
lockdown periods and a quicker reverse of the
downward booking trends seen after these
restrictions were made.
Reported total revenue for the financial
yearincreased by 38.9% to £141.4 million
(2020: £101.8 million). Revenue recovered
to39.5% of 2019 levels (2019: £357.7 million)
RevPAR was £35.9, up 22.1% (2020: £29.4), and
at34.6% of 2019 levels. Average room rate
increased by 11.4% to £117.0 (2020: £105.1)
andwas at 91.1% of 2019 levels.
Occupancy improved to 30.7%
(2020: 28.0%), reflecting our focus on room
rates. Predominantly the summer season in
Croatia and the Q4 in the UK showed a rate
profile exceeding 2019 on many occasions.
EBITDA, profit and earnings per share
The Group Reported EBITDA is £25.1 million
(2020: £(10.1) million), of which £(14.0) million
relates to the first six months of 2021 and
£39.1 million to the last six months of 2021.
Due to the different periods of lockdown,
comparing trading periods is increasingly
difficult, however the Group believes its third
quarter of 2021 was the least distorted trading-
wise in terms of government restrictions, with an
EBITDA of £33.7 million. This shows a 38.0%
decline when compared tothe ‘COVID-free’
2019 trading period, when the Group delivered
a£54.4 million EBITDA in Q3.
The hospitality industry is currently
experiencing a challenging labour market as
many hospitality workers have left the industry
during the second period of lockdowns in
earlyin 2021, causing staff shortages in all our
operating regions. Besides this, many European
hospitality workers have left the UK during the
pandemic, not being able to return due to a
change in immigration rules, which adds to
the already limited pool of available people.
These staff shortages are causing inflationary
pressures in payroll cost across all operating
regions. The Group is mitigating these
inflationary pressures with the implementation
of automation, process improvement and
centralisation of back office functions.
Similar to 2020, the Group continued
toaccess government support and grants
during periods where government restrictions
were imposed and materially impacted the
Group’s normal trading. These support
schemes helped to manage the fixed costs
within the business during a period of severe
revenue decline. In total, the Group received
£29.7 million (2020: £34.1 million) of financial
support in the year.
Normalised profit before tax improved to
£(47.5) million (2020: £(89.8) million).
Reported profit before tax improved by
£37.1 million to £(57.6) million (2020: £(94.7)
million). Below is a reconciliation table from
reported to normalised profit.
In £ millions
12 months ended
31 December 2021
12 months ended
31 December 2020
Reported (loss) profit before tax (57.6) (94.7)
Net insurance proceeds received in relation to one of the Group’s UK hotels – (10.0)
Execution of the sale and purchase agreement with the Republic of Croatia related to Guest House
Riviera Pula – 1.5
Loss on buy back of units in Park Plaza Westminster Bridge London from private investors 0.5 –
Fair value adjustment on income swaps with private investors of Income Units in Park Plaza
Westminster Bridge London – 0.3
Settlement of legal claim 3.1 –
Results from marketable securities – (0.1)
Revaluation of finance lease 3.6 3.4
Revaluation of Park Plaza County Hall London Income Units (0.6) 2.4
Preopening expenses 0.3 0.6
Capital (profit) loss on disposal of fixed assets (1.0) 1.5
Impairment of property, plant and equipment and right-of-use assets 4.4 5.3
Business combination acquisition costs 1.0 –
Loan prepayment break costs 0.5 –
Revaluation of share appreciation rights (1.7) –
Normalised (loss) profit before tax (47.5) (89.8)
Financial review
continued
Reported basic/diluted earnings per
sharefor the period were (123) pence
(2020:(192)pence).
Depreciation excluding impairment in the
year was £38.9 million (2020: £41.3 million).
Depreciation is recorded in accordance with
IFRS, nevertheless internally we consider
ourongoing average capital expenditure
(CAPEX) over the lifespan of our hotels as a
more relevant measure in determining profit,
which in the hospitality industry is calculated
as approximately 4% of total revenue.
Our EPRA earnings number set out on page
52 is calculated using the 4% rate instead of
the reported non-cash depreciation charge.
CAPEX, acquisitions and pipeline update
While the pandemic continued to cause
operational disruption, we remained focused
on implementing our strategy, progressing
our development pipeline, and expanding our
footprint into new, highly attractive markets.
We progressed planned development
projects, which include a new build hotel in
Shoreditch, London (art’otel London
Hoxton), a repositioning of a hotel on the
Croatian coast (Grand Hotel Brioni) and
anoffice to the hotel conversion in the
citycentre ofZagreb.
In our flagship art’otel London Hoxton
development, the building’s core is now
reaching the17th floor of the total 27 floors.
After expected completion in early 2024, this
mixed-use development will have 343 large
hotel rooms, 5,900m
2
of office space, a spa,
gym, pool and multiple food and beverage
outlets, including a stunning rooftop bar.
The two-year HRK 260 million (£30 million)
repositioning ofGrand Hotel Brioni Pula in
Croatia is nearing its completion and expected
to open before the 2022 season. This luxury
hotel features 227 rooms and is located
ataspectacular location on the
Verudelapeninsula.
Summary of EPRA
Performance indicators
Year ended
31 December 2021
Year ended
31 December 2020
£ million Per Share £ million Per Share
EPRA NRV (Net Reinstatement
Value) 951.2 £22.15 960.8 £22.08
EPRA NTA (Net Tangible Assets) 919.7 £21.42 924.4 £21.24
EPRA NDV (Net Disposal Value) 857.5 £19.97 830.5 £19.08
EPRA earnings (17.5) (41)p (40.6) (96)p
Adjusted EPRA earnings (18.8) (44)p (52.1) (123)p
In Zagreb, interior demolition has started and
works are underway to convert this former
office into a 118-room luxury hotel in the city
centre. This hotel will feature a rooftop pool
that overlooks the entire city.
Throughout the year the Group also
succeeded in acquiring two new hotels.
One hotel is located in Nassfeld, Austria.
This 4-star mountain resort includes 144
rooms and is located directly next to the ski
lifts of the Nassfeld ski area, featuring 110
kilometres of slopes and excellent summer
sports facilities. The hotel was acquired for
£12.8 million and complements the Group’s
leisure and outdoor segment. The resort is
closely located to the Group’s operations in
Croatia and its seasonal operations will
complement each other.
The Group furthermore acquired a 4-star
hotel in Rome. This hotel, acquired for
£28.3 million, has 101 rooms and is located
in a prime central location in the city.
The Group is planning a significant
repositioning of the hotel to an upper
upscale lifestyle offering, with opening
expected in 2023.
Together the above developments total
a£200+ million plus active development
pipeline of hotels in development or
repositioning. Our owner/operator model
enables us to have full control over the
timing of the completion of this pipeline.
Considering the challenging market
conditions, the Group took the decision in
summer 2020 to pause its project in New
York until further notice.
Real estate performance valuations
As a developer, owner and operator of
hotels, resorts and campsites, the Group has
a real estate driven business model.
Returns are generated by both developing
the assets we own and operating our
properties to their full potential, thus driving
increased value for all stakeholders.
Certain EPRA performance measurements
are disclosed to aid investors in analysing the
Group’s performance and understanding the
value of its assets and earnings from a
property perspective.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
46 47
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
The basis for calculating the Company’s EPRA NRV for 31 December 2021 is set out in the table below:
31 December 2021
£ million
EPRA NRV
(Net
Reinstatement
Value)
EPRA NTA
4
(Net Tangible
Assets)
EPRA NDV
(Net Disposal
Value)
NAV per the financial statements 278.5 278.5 278.5
Effect of exercise of options 6.2 6.2 6.2
Diluted NAV, after the exercise of options
1
284.7 284.7 284.7
Includes:
Revaluation of owned properties in operation (net of non-controllinginterest)
2
636.1 636.1 636.1
Revaluation of the JV interest held in two German properties (net of non-
controlling interest) 3.4 3.4 3.4
Fair value of fixed interest rate debt – – (53.7)
Deferred tax on revaluation of properties – – (13.0)
Real estate transfer tax
3
17.2 – –
Excludes:
Fair value of financial instruments (0.4) (0.4) –
Deferred tax (9.4) (9.4) –
Intangibles as per the IFRS balance sheet – 14.3 –
NRV/NTA/NDV 951.2 919.7 857.5
Fully diluted number of shares (in thousands)
1
42,935 42,935 42,935
NRV/NTA/NDV per share (in £) 22.15 21.42 19.97
1 The fully diluted number of shares excludes treasury shares but includes 585,867 outstanding dilutive options (as at 31 December 2020: 1,196,996).
2 The fair values of the properties were determined on the basis of independent external valuations prepared in December 2021. The properties under
development are measured at cost.
3 EPRA NTA and EPRA NDV reflect fair value net of transfer costs. Transfer costs are added back when calculating EPRA NRV.
4 NTA is calculated under the assumption that the Group does not intend to sell any of its properties in the long run.
Financial review
continued
In December 2021, the Group’s properties (with
the exception of operating leases, managed
and franchised properties) were independently
valued by Savills (in respect of properties in The
Netherlands, UK and Germany) and by Zagreb
nekretnine Ltd (Zane) (in respect of properties in
Croatia). Based on their valuations we have
calculated the Group’s EPRA NRV, EPRA NTA
and EPRA NDV.
The EPRA NRV as at 31 December 2021, set
out in the table below, amounts to
£951.2 million, which equates to £22.15 per
share. The EPRA NRV was negatively
impacted by the loss in the year of
£52.1 million and positively impacted by a
revaluation of £82.0 million. The positive
revaluation follows an improved forward
looking cash flow profile, with the
expectation that the worst period of trading
is in the past. In its cash flow forecast, the
independent valuer assumes trading will be
largely in line with 2019 in the year 2024.
Discount and caprates used increased
slightly in some instances, reflecting a higher
inflationary environment and added risk
profile due to the ongoing pandemic.
In the summer of 2021 the Group completed a
joint venture transaction with Clal Insurance,
divesting a non-controlling 49% stake in two
hotels in London. This transaction largely
reflects the values that had been included in the
Group’s EPRA NRV as per 31 December 2020
and reconfirmed the externally valued NRV.
£m
REAL ESTATE PERFORMANCE
NRV as of
31 December 2020
960.8
Revaluation
82.0
Earnings
(26.9)
Foreign currency
translation effects
951.2
NRV as of
31 December 2021
(52.1)
(12.6)
Other movements
1
1 Includes other changes in equity, deferred taxes, and the effects of the exercise of options. The per share movement also includes the dilution effect as a result of
options exercise.
Per Share
£22.08 £1.91 £(1.21) £(0.00) £(0.63) £22.15
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
48 49
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
31 December 2020
£ million
EPRA NRV
(Net
Reinstatement
Value)
EPRA NTA
4
(Net Tangible
Assets)
EPRA NDV
(Net Disposal
Value)
NAV per the financial statements 309.6 309.6 309.6
Effect of exercise of options 13.2 13.2 13.2
Diluted NAV, after the exercise of options
1
322.8 322.8 322.8
Includes:
Revaluation of owned properties in operation (net of non-controlling interest)
2
602.1 602.1 602.1
Revaluation of the JV interest held in two German properties
(net of non-controlling interest) 3.2 3.2 3.2
Fair value of fixed interest rate debt – – (84.5)
Deferred tax on revaluation of properties – – (13.1)
Real estate transfer tax
3
18.6 – –
Excludes:
Fair value of financial instruments (0.7) (0.7) –
Deferred tax (13.4) (13.4) –
Intangibles as per the IFRS balance sheet – 17.8 –
NRV/NTA/NDV 960.8 924.4 830.5
Fully diluted number of shares (in thousands)
1
43,521 43,521 43,521
NRV/NTA/NDV per share (in £) 22.08 21.24 19.08
1 The fully diluted number of shares excludes treasury shares but includes 1,196,996 outstanding dilutive options (as at 31 December 2019: 412,290).
2 The fair values of the properties were determined on the basis of independent external valuations prepared in December 2020. The properties under
development are measured at cost.
3 EPRA NTA and EPRA NDV reflect fair value net of transfer costs. Transfer costs are added back when calculating EPRA NRV.
4 NTA is calculated under the assumption that the Group does not intend to sell any of its properties in the long run.
Below is a summary of the valuation basis of our assets as at 31 December 2021. The property market value, the discount rate and the cap rate
have been taken from the independent valuer’s report.
Region Properties
Property
marketvalue
£million Discount rate Cap rate
United Kingdom
London 6 901.9 7.5% – 9.0% 5.0% – 6.5%
Provinces 2 29.9 9.8% – 10.0% 7.3% – 7.5%
The Netherlands
Amsterdam 4 238.5 8.0% – 9.8% 5.5% – 7.3%
Provinces 2 35.9 9.8% – 9.8% 7.3% – 7.3%
Germany 3 87.2 8.5% – 9.3% 6.0% – 6.8%
Croatia
Hotels and apartments 10 139.7 9.0% – 10.0% 7.0% – 8.0%
Campsites 8 113.4 9.0% – 11.0% 7.0% – 9.0%
Others 3 50.4 6.3% – 9.5% 5.0% – 9.0%
Cash flow and EPRA earnings
2021 is the second consecutive year the Group’s trading is heavily affected by the pandemic. Although the valuations reflect a forward outlook
and expected recovery of the industry, the reported cash flow and earnings look backwards. The Group reported adjusted EPRA earnings of
£(18.8) million (2020: £(52.1) million) and adjusted EPRA earnings per share of (44) pence (2020: (123) pence). These negative earnings are in
sharp contrast to the Groups’ 2019 EPRA earnings of 128 pence per share). In their valuations, valuators assess a return to 2019 trading in 2024.
Financial review
continued
Group’s quarterly cash flow for 2021
£ million
Q1 Q2 Q3 Q4 Total
Operational cash flow (EBITDA and
working capital) (8.2) 3.0 31.7 (0.8) 25.7
Investment in properties and new
acquisitions (10.6) (17.5) (16.2) (57.5) (101.8)
Debt service
3
(9.1) (11.5) (11.5) (18.0) (50.1)
New facilities and movement in
restricted cash 16.4 18.3 8.1 28.1 70.9
Loan repayments – (40.4) – – (40.4)
Joint venture transaction
2
– 125.8 – – 125.8
Other exceptional items (including FX) (2.8) 0.3 (4.5) (0.5) (7.5)
Total cash movement (14.3) 78.0 7.6 (48.7) 22.6
Cash and cash equivalents at beginning
of period 114.2 99.9 177.9 185.5 114.2
Cash and cash equivalents at end of
period 99.9 177.9 185.5 136.8 136.8
Undrawn facilities at end of period
1
69.0 60.0 77.2 76.8 76.8
1 The amount of undrawn facilities as at 31 December 2021 and 30 September 2021 comprise of the £40 million undrawn amount under the CLBILS facility and the
£20 million undrawn amount under the Park Plaza London Waterloo facility and €20 million undrawn amount under the working capital facility entered by Arena on
20 September 2021. The amount of undrawn facilities as at 30 June 2021 comprise of the £40 million undrawn amount under the CLBILS facility and the £20 million
undrawn amount under the Park Plaza London Waterloo facility. The amount of undrawn facilities as at 31 March 2021 comprise of £17.0 million undrawn amount
under the CLBILS facility, £14.8 million undrawn amount under the Park Plaza London Waterloo facility and access to £37.2 million undrawn amount under the art’otel
london hoxton facility which was cancelled due to the Group entering into a joint venture with Clal.
2 Comprise of the £113.7 million cash received as part of entering into a long-term partnership with Clal, including the further cash injection of £12.1 million to fund the
remaining equity commitments of the art’otel london hoxton development project.
3 Including leases, unit holders in Park Plaza Westminster Bridge London.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
50 51
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Financial review
continued
The main adjustment to the normalised profit included in the Group’s financial statements is adding back the IFRS depreciation charge, which is
based on assets at historical cost, and replacing it with a charge calculated at 4% of the Group’s total revenues.
This represents the Group’s expected average cost to maintain the estate in goodquality. The basis for calculating the Company’s 2021
adjusted EPRA earnings is set out in the tablebelow:
Reconciliation of reported earnings to adjusted EPRA earnings
12 months ended
31 December 2021
£ million
12 months ended
31 December 2020
£ million
Earnings attributed to equity holders of the parent company (52.1) (81.7)
Depreciation and amortisation expenses 43.3 46.6
Revaluation of Park Plaza County Hall London Income Units (0.6) 2.4
Changes in fair value of financial instruments (1.7) 0.2
Non-controlling interests in respect of the above
3
(6.4) (8.1)
EPRA earnings (17.5) (40.6)
Weighted average number of shares (LTM) 42,539,340 42,466,006
EPRA earnings per share (in pence) (41) (96)
Company-specific adjustments:
1
Capital loss on buy-back of Income Units in Park Plaza Westminster Bridge London 0.5 –
Remeasurement of lease liability
4
3.6 3.4
Other non-recurring expenses (including preopening expenses)
9
(0.7) 2.0
Loan early repayment break costs
13
(see note 15b) 0.5 –
Business combination acquisition costs
12
1.0 –
Government settlement purchase of Hotel Riviera
7
– 1.5
Settlement of legal claim
6
3.1 –
Adjustment of lease payments
5
(2.3) (2.6)
Insurance settlement
10
– (10.0)
One off tax adjustments
8
(3.6) (1.8)
Maintenance CAPEX
2
(5.7) (4.0)
Non-controlling interests in respect of the above
3
2.3 –
Company adjusted EPRA earnings
1
(18.8) (52.1)
Company adjusted EPRA earnings per share (in pence) (44) (123)
Reconciliation company adjusted EPRA earnings to normalised profit before tax
Company adjusted EPRA earnings (18.8) (52.1)
Reported depreciation
11
(38.9) (41.3)
Non-controlling interest in respect of reported depreciation 6.3 8.1
Maintenance CAPEX
2
5.7 4.0
Non-controlling interest on maintenance CAPEX and the company-specific adjustments (2.3) –
Adjustment of lease payments
5
2.3 2.6
One off tax adjustments
8
3.6 1.8
(Loss)/profit attributable to non-controlling interest (0.4) (12.2)
Reported tax (5.0) (0.7)
Normalised (loss)/profit before tax (47.5) (89.8)
1 The ‘Company-specific adjustments’ represent adjustments of non-recurring or non-trading items.
2 Calculated as 4% of revenues, which represents the expected average maintenance capital expenditure required in the operating properties.
3 Non-controlling interests include the non-controlling shareholders in Arena, third-party investors in income units of Park Plaza Westminster Bridge London and
the non-controlling shareholders in the partnership with Clal that was entered into in June 2021.
4 Non cash revaluation of finance lease liability relating to minimum future CPI/RPI increases.
5 Lease cash payments which are not recorded as an expense in the Group’s income statement due to the implementation of IFRS 16.
6 Relates to a settlement reached in a legal dispute in Croatia (see Note 25a in the annual consolidated financial statements).
7 Execution of the sale and purchase agreement with the Republic of Croatia related to Guest House Riviera Pula (see Note 5d in the annual consolidated
financialstatements).
8 Mainly relates to deferred tax asset recorded in 2021 and investment tax credit received in Croatia in 2020. (see Note 27f in the annual consolidated
financialstatements)
9 Mainly relates to profit and loss on disposal of property, plant and equipment
10 Net insurance proceeds received in relation to one of the Group’s UK hotels.
11 Reported depreciation excluding impairments.
12 Business combination acquisition costs (see Note 3a and 3b in the annual consolidated financial statements).
13 Loan early repayment break costs (see note 15b in the annual consolidated financial statements).
Other EPRA measurements
Given that the Group’s asset portfolio is
comprised of hotels, resorts and campsites
which are also operated by the Group, a few of
EPRA’s performance measurements, which are
relevant to real-estate companies with passive
rental income, have not been disclosed as they
are not relevant or non-existent. Those EPRA
performance measurements include EPRA Net
Initial Yield, EPRA ‘Topped-up’ NIY, EPRA
Vacancy Rate and EPRA Cost Ratios.
Funding
Throughout the pandemic, in the last two
years, all our lenders have again been
supportive by providing additional facilities,
providing waivers on debt covenant testing
and by waiving amortisation obligations.
After reviewing forecast scenarios we have
liaised again with our lenders and agreed
postponement of financial covenant testing
on trading until 2023. The Group is currently
in compliance with respect to all its loan-to-
value covenants.
The Group increased a £30 million revolving
credit facility, backed by the UK Government,
to £40 million (fully undrawn at balance sheet
date), and entered into a €20 million
(£16.8 million) working capital facility in
Croatia (fully undrawn at balance sheet date).
Post balance sheet it extended a €10 million
(£9.1 million) term facility, backed by the
Dutch Government, with one year, now
maturing in August 2024. All these
facilitiesare secured with the Group’s
currentbanking partners.
In addition, the Group signed a new
€10.5 million (£8.8 million) facility to fund the
acquisition in Austria. Post balance it signed
a€25 million mortgage facility to fund the
acquisition and planned refurbishment of
thehotel inRome.
The Group’s total assets (properties at fair
value) represent a value after the deduction
oflease liabilities and unit holder liabilities.
Accordingly, in the total loan-to-value (LTV)
analysis of the Group, management considers
the value of the freehold and long leasehold
assets (net of these liabilities) compared with
its bank funding (i.e. excluding the lease and
unit holder liabilities), which management
believes is the most accurate representation
of the Group’s total leverage position.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
52 53
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
The Group reported a gross bank debt liability of £768.1 million (31 December 2020: £757.4 million) and net bank debt of £618.0 million
(31 December 2020: £636.2 million). This reflects a net bank debt leverage of 33.6% (2020: 37.1%).
£m
NET DEBT
31 December 2020
636.2
Increase in cash
and cash equivalents
(including deposits)
(9.5)
Amortisation
existing facilities
(12.6)
Movement in capitalised
finance expenses and
foreign exchange
618.0
31 December 2021
(40.4)
77.2
Acquisitions
Repayment
of loans
(33.3)
0.4
New facilities
The table below provides a further breakdown of the Group’s bank debt position.
Loan maturity profile at 31 December 2021 (£m)
Total 1 year 2 years 3 years 4 years 5 years Thereafter
£m 768.1 38.8 22.1 16.5 57.0 354.5 279.2
– Average cost of bank debt 3.1%
– Average maturity of bank debt 5.3 years
Key characteristics debt for operating properties
– Limited to no recourse to the Group
– Asset backed
– Borrowing policy 50–65% loan-to-value
– Portfolio and single asset loans
– 24 facilities with 12 different lenders
– Covenants on performance and value (facility level)
Financial review
continued
Net debt leverage reconciliation
£ million
As report in the
annual financial
statement
EPRA NRV
adjustment
EPRA NRV
values
Balance sheet
PP&E 1,236.0 597.8 1,833.8
Right-of-use asset 215.9 (215.9) -
Lease Liabilities (251.6) 251.6 -
Liability to income units in Westminster Bridge hotel (124.6) 124.6 -
Net PP&E 1,075.7 758.1 1,833.8
Intangible assets 14.3 14.3
Investments in Joint ventures 4.3 6.5 10.8
Other assets and liabilities, net (29.1) 11.7 (17.4)
Total assets net of finance leases and excluding cash 1,065.2 776.3 1,841.5
Bank/ institutional loans (short/long term) 768.1 768.1
Cash & cash equivalent and restricted cash (150.1) (150.1)
Net bank Debt 618.0 618.0
Total capital 447.2 776.3 1,223.5
Capital and net debt 1,065.2 776.3 1,841.5
Minority shareholders (168.7) (109.8) (278.5)
Total capital employed PPHE shareholders 896.5 666.5 1,563.0
Gearing ratio 58.0% 33.6%
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
54 55
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Cover ratios
ICR
1
DSCR
2
2021 0.4x 0.2x
2020 (1.2)x (0.4)x
2019 4.4x 2.7x
1 EBITDA, less unitholder and lease payments, divided by bank interest.
2 EBITDA, less unitholder and lease payments, divided by the sum of bank interest and yearly loan redemption.
Other
Long-term partnership with Clal Insurance
(Clal)
In June, the Group entered into a long-term
partnership with Clal, a leading insurance
and long-term savings company, in respect
of Park Plaza London Riverbank and art’otel
London Hoxton. As part of the transaction,
PPHE received £125.8 million in cash and
Clalwas granted 5 million share appreciation
rights (SAR) to have a value upside if the gap
between the Group’s latest reported EPRA
NRV and its current market price narrows
over the maturity period.
The SAR has a seven-year maturity with a
strike price of £16 per share and the upside
iscapped at £21 per share. Clal has also
committed to a further cash injection of
£12.1 million to fund its portion of the
remaining equity commitments of the
art’otel London Hoxton development
project. Clal’s investment, taking into
account existing bank debt and remaining
development costs, is based on a
£263 million property valuation for Park Plaza
London Riverbank and an all-in development
budget cost of £279.3 million for the art’otel
London Hoxton project. These valuations are
in line with the Groups’ reported NRV
inDecember 2020.
The Group remains the majority owner of the
hotels by retaining a 51% controlling stake in
one joint venture company holding (JVCo),
and through its management company has
secured a 20-year hotel management
agreement in respect of both hotels.
Clal became a minority partner and owner of
49% of the shares in JVCo, holding indirectly
the real estate and operations of these two
properties.
This agreement provided the Group with an
opportunity to raise liquidity on the back of
its assets and leverage the equity invested in
those assets, which is part of its strategy to
have innovative ways in raising cash on the
back of its balance sheet. Given the gap in
the share price and the Group’s NRV,
management believes this method of raising
liquidity is in the best interest of the Group.
The additional liquidity will be recycled
intothe business and used to pursue new
growthopportunities and to support
therecovery ahead.
Financial review
continued
Dividend
Given the impact of the government
restrictions due to the pandemic and
theGroup receiving substantial government
support during the year across our operating
regions, the Board is of the view that it is
neither sustainable, nor appropriate to
propose a dividend in respect of the year2021.
The Board appreciates the importance of
dividends and will review dividend payments
during the next half year reporting period, in
line with the recovery trajectory, the receipt of
government support and the business
returning to cash flow positive trading.
Should the analysis on the financial
performance allow, the Board intends to
reinstate its progressive dividend policy.
The recent investments made in progressing
and extending our pipeline should aid the
Group in achieving a positive cash flow
inthenear future.
Daniel Kos
Chief Financial Officer & Executive Director
Park Plaza Westminster Bridge London
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
56 57
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Business
review
Greg Hegarty
Deputy Chief
Executive
Officer&Chief
Operating Officer
What sets us apart is our
strong sense of purpose
In my second year as the Group’s Deputy
CEO and COO I have been immensely
impressed by our team’s flexibility,
commitment and passion shown. We ended
2020 filled with optimism for 2021, driven by
the various vaccine developments which
were widely seen as the way out of the
pandemic. We all hoped that a short period
of lockdown over the 2020/2021 winter
period would allow us to reopen again early
in the New Year.
However, strict measures remained in place
for a prolonged period of time and we were
only able to reopen our UK portfolio fully in
May, and on the continent this was even as
late as June and July. In this interim period,
however, we maintained many of our teams,
made voluntary personal sacrifices and
successfully secured several government
andessential business travel agreements.
Two of our hotels in the UK were included
inthe UK Government’s quarantine hotel
programme, and they delivered an
outstanding performance. Our teams
workedday and night to prepare the hotels
for welcoming guests who were required to
isolate. The hotel teams had to constantly
find a balance between delivering the
contracted set of services and amenities,
which were all geared around minimising
guest contact, and offering a
hospitableenvironment.
As soon as restrictions were eased, demand
returned quickly, driven by strong domestic
leisure markets and several key sports
events, such as the Euros, Cricket and,most
notably, The Championships, Wimbledon,
for which our Park Plaza Westminster Bridge
London was chosen asthe official host hotel
for the players andsupport teams.
When the time came to reopen our
properties to the public, we were ready
andfilled with excitement. Our teams were
expanded in line with demand and fully
trained and reenergised. During these
volatile and uncertain times, we welcomed
back several hundred team members who
“When the time came to reopen our properties
to the public, we were ready and filled with
excitement”
were on furlough (or equivalent support
programmes in The Netherlands or
Germany), we recruited and onboarded
several hundred new team members and
delivered the excellent guest experiences in
which we take enormous pride.
We can reflect on a strong summer for the
UK properties and most notably in our
Croatian portfolio where in July and August
we delivered a record performance.
The momentum experienced in summer
unfortunately didn’t last in continental
Europe as several countries experienced yet
another increase in infections, leading to the
reintroduction of restrictions. The UK started
introducing measures again towards the end
of 2021.
However, two years into the pandemic, every
time measures are lifted we see an
immediate pickup in demand for our
properties. This gives us great confidence
about the future of our industry and the
prospects of our Group. As we entered 2020,
we had just completed a £100 million
investment programme and in 2021 we
continued to invest in our pipeline, we
completed several acquisitions and
upgraded properties. The quality, depth and
locations of our portfolio, the excellent guest
ratings and highly motivated teams will
continue to drive our recovery.
The pandemic, combined with the effects of
Brexit in the UK, has had a significant impact
on the availability of labour in the hospitality
industry. Many hospitality professionals have
pursued other careers and employee
shortages across our sector have been
widely reported. We are not immune to
these trends but have benefited enormously
from our earlier strategic decision to employ
our own accommodation services teams,
reducing our exposure. Our in-house team
has helped us to cope with the peaks in
demand and was able to move between
properties. In addition, our recruitment
teams were extended, and several new
strategies and initiatives were introduced to
increase our talent pool.
In my view, what sets our Group apart is our
strong sense of purpose, which is built
around creating valuable memories for our
guests and value for our assets, people and
local communities. 2021 was another year
where we placed these stakeholders at the
centre of the decisions we made. Our team
members agreed and voted en masse for our
Group to be recognised by The Caterer as
the ‘Best Employer in Hospitality’. In light of
the dramatic changes we have experienced
as hoteliers and the ways we have had to
adjust, I am humbled and feel privileged
tobe working with so much talent.
During 2021 we engaged KPMG to help us
sharpen our overall strategy, ensuring we
continue to do what we do well, and explore
further growth opportunities. Under the
guidance of our Board and leadership team,
we refined our corporate strategy,
identifying strategic pillars and enablers.
Our future focus remains centred around our
owner/operator business model, leveraging
our real estate ownership and expertise
while growing our hospitality management
platform. We are confident about our road
torecovery and are excited about our
pipeline, with several new openings and
repositioning programmes planned for 2022,
2023 and 2024. I invite you to read more
about our performance and various key
developments in each of our operating
markets in the section ahead.
Greg Hegarty
Deputy Chief
Executive Officer &
Chief Operating Officer
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
58 59
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Property portfolio
The Group has a well-invested portfolio
consisting of approximately 3,200 rooms in
operation in the upper upscale segment of
the London hotel market, and approximately
1,100 rooms in its London development
pipeline. Four of the Group’s London hotels
are in the popular South Bank area of
London, with further properties in the busy
Victoria, fashionable Marylebone and
well-connected Park Royal areas. There are
also three properties in the UK regional
citiesof Nottingham, Leeds and Cardiff.
2
The Group has an ownership interest in nine
properties: Park Plaza Westminster Bridge
London, Park Plaza London Riverbank, Park
Plaza London Waterloo, Park Plaza County
Hall London,
2
Park Plaza Victoria London,
Park Plaza London Park Royal, Holmes Hotel
London, Park Plaza Leeds and Park Plaza
Nottingham. Park Plaza Cardiff
2
operates
under a franchise agreement.
Portfolio performance
The quality and location of the Group’s
portfolio in London positioned it well to
benefit from improved activity as restrictions
were eased.
Most of the Group’s hotels in the UK (the
Group’s largest market) were closed from
6 January until 17 May 2021, in line with the
UK Government’s international and domestic
travel restrictions due to the pandemic.
All restaurants and bars within properties
were also closed, significantly impacting
thefirst half performance.
To help mitigate the impact of the property
closures, the Group secured a commercial
agreement with the Department of Health and
Social Care (DHSC) to provide temporary
accommodation for individuals arriving from
‘red-list’ countries. Park Plaza London Waterloo
and Park Plaza Victoria London operated solely
as quarantine hotels from May and July
respectively. The DHSC set the service
requirements to be provided by these hotels
and was responsible for theprovision of medical
and security staff. The hotel team members had
limited contact with guests during their stay.
These agreements ceased in early November
and both hotels reopened to the public.
Furthermore, the Group was very proud to
be selected as the exclusive Official Player
Hotel for the Wimbledon Championships by
the All England Lawn Tennis Club (AELTC).
Park Plaza Westminster Bridge London
accommodated all the players and their
support teams. The hotel provided full-
service hospitality including testing and
recovery centres, gyms, hospitality desks
forplayers and highly tailored nutritional
food and beverage offerings.
Together these commercial agreements
provided the Group with alternative revenue
streams during a period of property closures
and low demand for non-essential stays.
On 17 May restrictions were eased which
allowed the Group’s UK hotels to reopen and
welcome back guests for non-essential
travel. Thereafter, activity levels and booking
pace gradually improved, with demand
primarily generated by domestic leisure
guests. This trading momentum continued
into the second half aided by the return of
international travel, which resulted in both
strong revenue generation and recovery in
average room rates during Q3, in line with
the Group’s rate-driven strategy.
Corporate travel and meetings and events
continued to grow month-by-month in the
second half, albeit demand remained behind
2019 levels, and several events, such as
awards dinners, took place in Q4.
Booking pace slowed down from the second
half of November due to the emerging of the
Omicron variant.
Total reported revenue was £75.3 million
(2020: £56.5 million), 36.3% of 2019
levels.Reported RevPAR was £43.4
(2020: £33.8 million), 32.5% of 2019 levels,
driven by a recovery in average room rate
to£136.2 (2020: £116.6), and occupancy of
31.9% (2020: 29.0%).
Notwithstanding the actions taken, Reported
EBITDAR was £11.7 million (2020: £1.9 million),
and EBITDA was £11.2 million
(2020: £1.5 million). During the period, the
Group benefited from approximately
£12.1 million of support in the form of grants
and business rates relief.
Asset management projects
The Residence at Holmes Hotel London is a
unique self-contained event space, which
was completed and launched during 2021.
This versatile meeting and events space
offers several uniquely designed meeting
rooms which can be booked individually
ortogether, including the use of a private
pantry and billiards room, to host a fully
private function such as team away days
andcollaborative group sessions.
Development pipeline
The Group’s largest pipeline project is the
development of art’otel London Hoxton,
located in one of London’s most exciting
neighbourhoods. This £180+ million
mixed-use scheme will accommodate a
premium lifestyle hotel with 343 rooms and
suites, five floors of office space, as well as
wellness facilities, a gym and swimming pool,
and art gallery space. Construction of the
building has progressed to plan, with
subterranean works and the core structure
complete, and 17 out of 27 floors
constructed. The project is expected to
complete in early 2024.
Two further mixed-use development projects
are planned for London. In west London,
detailed plans are being prepared for the
Group’s site adjacent to Park Plaza London
Park Royal. The plans include a 465-room
hotel, 6,000m² of light industrial space and
3,000m² of state-of-the-art co-working
offices, a gym and swimming pool. The site
benefits from its proximity to London
Heathrow Airport and Wembley Stadium, and
it has easy access to central London via road
and rail. Planning permission was successfully
obtained in late 2020.
Planning applications for the Group’s vacant
freehold site on London’s South Bank (79–87
Westminster Bridge Road) have been
submitted. Subject to obtaining planning,
the Group intends to convert the property
into a new 186 room hotel and approximately
750m
2
earmarked for office space and light
industrial use.
Furthermore, development of art’otel
London Battersea Power Station by the
Battersea Power Station Development
Company is progressing well and the hotel is
expected toopen during the second half of
2022. The hotel will be managed by the
Group under a long-term contract.
The two high-profile London art’otel projects
are part of the Company’s strategic plan to
operate and develop a collection of premium
lifestyle art’otels across existing and new
markets including Amsterdam, London,
Rome and Zagreb.
The UK hotel market*
Following on from a severely disrupted 2020,
COVID-19 continued to negatively affect the
hospitality industry in 2021 with many
countries extending or reimposing
restrictions on domestic and international
travel with the rise of the Omicron variant.
This led to hotels in our markets either
closing completely or having their offerings
severely restricted and therefore affecting
their attractiveness to the limited demand.
This inconsistency in the market has made
performance comparisons, at a hotel
competitor set level, very unpredictable and
unreliable but at a Country/City market data
level, through the STR TRI Report, we can see
the year-on-year changes. Below is based on
full inventory availability versus 2020.
On a full-year basis, the impact on the UK
market was an 80.4% increase in RevPAR
to£40.3, which was the result of a 53.1%
increase in occupancy to 46.8% and a 17.8%
increase in average room rate, to £86.2.
Full-year performance saw London, our main
UK market, improving by 59.7% in RevPAR to
£45.3. Occupancy increased by 46.8% to
37.4% with an increase in average room rate
of 8.8% to £121.0.
* Source: STR European Hotel Review TRI:
December 2021.
Financial performance
Reported in GBP (£)
UK
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Total revenue
£75.3m £56.5m 33.1%
EBITDAR £11.7m £1.9m 505.5%
EBITDA £11.2m £1.5m 665.5%
Occupancy 31.9% 29.0% 290 bps
Average room rate £136.2 £116.6 16.8%
RevPAR £43.4 £33.8 28.5%
Room revenue £49.9m £39.0m 28.2%
EBITDA % 14.9% 2.6% 1,230 bps
Total value of UK property portfolio
1
£932m
2020: £894m
ART’OTEL LONDON
HOXTON
The construction of art’otel London
Hoxton in the heart of London Shoreditch
is progressing well, with external cladding
expected to commence installation in the
first half of 2022. The 27-storey property
will comprise 343 hotel rooms, including
60 long-stay apartments and suites.
PPHE Hotel Group entered into a joint
venture in June 2021 with Clal Insurance,
one of Israel’s leading insurance and
long-term savings companies.
Business review continued
United Kingdom
performance
1. Independent valuation by Savills in December 2021 and excluding the London development sites art’otel London Hoxton and Westminster Bridge Road.
2. Revenues derived from these hotels are accounted for in Management and Holdings and their values and results are excluded from the data provided in this section.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
60 61
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Property portfolio
The Group has an ownership interest in three
hotels in the centre of Amsterdam and a
fourth property located near Amsterdam
Airport Schiphol, and it has two owned
hotels in Utrecht and in Eindhoven.
Portfolio performance
Trading in the year was severely impacted by
extremely low demand due to government
lockdown measures such as travel restrictions,
curfews and the temporary closure of
restaurants, cafés and bars. While hotels
could remain open throughout, the impact
ofrestrictions on demand resulted in the
Group’s hotels being either temporarily
closed or operating at significantly reduced
capacity during the first half. All restaurants
and bars within the properties were closed.
Restrictions were eased from June and
allproperties (apart from one) reopened.
Park Plaza Amsterdam Airport remained
closed all year. As the second half
progressed, restrictions on international
travel were eased, particularly from the UK,
an important source market, which led to
improved booking momentum in the second
half. Nonetheless, demand was primarily
from domestic guests, with the Group’s
regional properties experiencing greater
demand than city-centre locations.
However, in the autumn virus infection rates
began to rise in The Netherlands, resulting
infurther government restrictions such as
coronavirus entry-pass requirements for food
and drink venues and events, and a 5pm
evening curfew from 28 November.
On 18 December a lockdown was
introduced, adversely impacting trading.
Consequently, total revenue in Euros was
€12.1 million (2020: €16.8 million), 19.6% of
2019 levels. RevPAR decreased to €20.8
(2020: €28.0). Average room rate increased to
€128.1 (2020: €110.6). Occupancy reflected
extremely low demand at 16.3% (2020: 25.3%).
EBITDA (in Euros) was €1.2 million
(2020: €(0.1) million), despite the Group’s
continued focus on its cost base and usage
of the government support schemes
available. During the period, the Group
benefited from approximately £6.5 million
(€7.5 million) of payroll support and fixed
costs subsidies.
Asset management projects
The Group’s flagship property, art’otel
Amsterdam, reopened in June. In November, a
brand new restaurant design and concept was
launched in partnership with two Michelin
starred Portuguese chef Henrique Sá Pessoa.
The Group also completed a refurbishment of
a new all-day café, Carsten’s Café Amsterdam,
positioned near the entrance of the hotel.
Due to the measures introduced, both
restaurants have been open for a short
period of time, but when they were they
generated excellent guest reviews and
publicity and we expect that when markets
reopen both will regain momentum.
Asset management projects under
consideration for 2022 include the
redevelopment and launch of the gym,
wellness and swimming pool areas of
ParkPlaza Victoria Amsterdam and
art’otelAmsterdam.
The Netherlands hotel market*
Following on from a severely disrupted 2020,
COVID-19 continued to negatively affect the
hospitality industry in 2021 with many
countries extending or reimposing
restrictions on domestic and international
travel with the rise of the Omicron variant.
This led to hotels in our markets either
closing completely or having their offerings
severely restricted and therefore affecting
their attractiveness to the limited demand.
This inconsistency in the market has
madeperformance comparisons, at a hotel
competitor set level, very unpredictable
andunreliable but at a Country/City market
data level, through the STR TRI Report, we can
see the year-on-year changes. Below is based
on full inventory availability versus 2020.
On a full-year basis, the impact on the Dutch
market was a 11.8% increase in RevPAR to
€29.3, which was the result of a 10.9%
increase in occupancy to 31.1% and a 0.8%
increase in average room rate, to €94.1.
Full-year performance saw Amsterdam, our
main market in the Netherlands, improving
5.3% in RevPAR to €26.4. Occupancy increased
by 7.7% to 25.7% with a reduction in average
room rate of 2.3% to €102.7.
* Source: STR European Hotel Review TRI:
December 2021.
Financial performance
Reported in Pound Sterling
2
(£) Reported in local currency Euro (€)
The Netherlands
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Total revenue £10.4m £14.9m (30.8)% €12.1m €16.8m (28.2)%
EBITDAR £1.1m £0.0m N/A €1.3m €0.0m N/A
EBITDA £1.1m £(0.1)m N/A €1.2m €(0.1)m N/A
Occupancy 16.3% 25.3% (910)bps 16.3% 25.3% (910)bps
Average room rate £109.9 £98.3 11.7% €128.1 €110.6 15.8%
RevPAR £17.9 £24.9 (28.2)% €20.8 €28.0 (25.6)%
Room revenue £7.0m £9.8m (28.4)% €8.2m €11.0m (25.8)%
EBITDA % 10.4% (0.4)% 1,070bps 10.4% (0.4)% (1,070)bps
Total value of the Netherlands property
portfolio
1
£274m
2020: £280m
ART’OTEL AMSTERDAM
ARCA opens at art’otel Amsterdam
Award-winning two Michelin starred
Portuguese chef Henrique Sá Pessoa,
recently named 38th Best Chef in the World,
opened ARCA in November 2021 as his first
restaurant in Europe outside of Lisbon, and
the funkier, more relaxed sister to his other
outposts. ARCA brings a relaxed and
approachable Portuguese sharing plates
concept with modern flavours, Asian
influences and impressive cocktails.
Find ARCA at Amsterdam’s art’otel!
arcaamsterdam.com
Business review continued
The Netherlands
1 Independent valuation by Savills in December 2021.
2 Average exchange rate from Euro to Pound Sterling for the year to December 2021 was 1.17 and for the year to December 2020 was 1.12, representing a 3.6%
increase.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
62 63
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Property portfolio
The Group’s subsidiary, Arena Hospitality
Group d.d. (Arena), owns and operates a
Croatian portfolio of seven hotels, four resorts
and eight campsites, all of which are in Istria,
Croatia’s most prominent tourist region.
Four of Arena’s properties in Croatia are Park
Plaza branded whereas the remainder of their
portfolio operates independently or as part of
the Arena Hotels & Apartments and Arena
Campsites brands. Hotel Brioni was closed
during the season with our repositioning
programme nearing completion and Hotel
Riviera was closed while we are finalising our
redevelopment plans.
Portfolio performance
Operations in Croatia are highly seasonal,
with guest visits mainly occurring from June
to September. Most of the Group’s
properties typically open and commence
trading around the Easter period and close
by late September to mid-October.
In 2021, the opening of the majority of the
Group’s hotels and apartment complexes
was delayed until June due to government
restrictions.
By the end of June, all properties had
reopened and were operating at full
capacity. As travel restrictions were eased
booking activity began to increase, driven by
strong demand from Germany, Austria and
other Central Eastern European countries.
As a service to guests, Arena provided PCR
test locations at several of itsproperties.
As a result of the above, revenue in the third
quarter (peak season) recovered strongly, to
approximately 93% of revenue in the same
period in 2019. This was achieved despite
continued travel restrictions from the UK (an
important source market), and a reduced
number of flights to and from Pula airport.
Notably the financial contribution from the
Group’s campsites, which are high margin,
was greater than in previous years due to
their accessibility by car from surrounding
countries and the customer perceptions of
their safety.
In 2021, total revenue (in Croatian Kuna)
wasHRK 392.2 million (2020: HRK
158.7 million). RevPAR increased to HRK
412.6, reflecting animprovement in
occupancy to 46.6% (2020: 30.4%) and a
16.4% improvement inaverage room rate to
HRK 885.8 (2020: HRK761.1).
The region reported an EBITDA of HRK
127.6 million, up 4,064.1% year-on-year
(2020: HRK 3.1 million). This included the
utilisation of government grants to support
payroll costs and fixed costs subsidies until
July 2021, which amounted to approximately
HRK 23.6 million (£2.7 million).
The Group employs local seasonal
workersand workers from abroad, mainly
neighbouring countries, during the peak
trading period. However, the European
labour market pressures experienced by all
hotel companies made recruit particularly
challenging in the year. To mitigate this,
operations in Croatia were supported by
German and Hungarian team members, and
colleagues took on versatile roles in the
hotels with office staff supporting hotel
operations, such as housekeeping and food
and beverage, during the peak season.
Looking ahead to 2022, the Group has
agreed a partnership with TUI to market the
Arena Hotel Medulin, located on the Istrian
Peninsula, on an exclusive basis under its TUI
Blue Hotel brand. The partnership signals
confidence both in the Group’s proposition
and wider market recovery.
Development projects
The Group’s most significant investment
project in Croatia is the extensive
repositioning of Grand Hotel Brioni in Pula to
an upper upscale 227-room full-service hotel,
at an investment of HRK 260 million
(£30 million). The property, which is located
50 metres from, and with stunning views
over, the Adriatic Sea, will be relaunched for
the 2022 summer season as Grand Hotel
Brioni Pula.
In September, the Group commenced
conversion of its iconic property (under a
45-year lease agreement) in Zagreb city centre
from office space to a premium lifestyle
art’otel. The project is estimated to cost
HRK135 million (£15 million), and the hotel
isexpected to be relaunched in Q4 2022.
The Group is also investing HRK 38 million
(£4 million) in the Arena Stoja Campsite.
The project will besplit into two phases.
Phase one, which is expected to complete in
Q2 2022, will see an investment in 75 new
mobile homes, a new campsite entrance and
Reception, and anew Illy Café.
These investment projects will further
strengthen the Group’s presence in these
attractive locations.
Financial performance
Reported in Pound Sterling
2
(£) Reported in local currency HRK
Croatia
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Total revenue £44.6m £18.7m 138.6% HRK 392.2m HRK 158.7m 147.2%
EBITDAR £16.4m £1.1m 1,381.1% HRK 143.4m HRK 9.4m 1,432.8%
EBITDA £14.6m £0.4m 3,923.6% HRK 127.6m HRK 3.1m 4,064.1%
Occupancy
3
46.6% 30.4% 1,620bps 46.6% 30.4% 1,620bps
Average room
rate
3
£101.0 £89.8 12.5% HRK 885.8 HRK 761.1 16.4%
RevPAR
3
£47.1 £27.3 72.5% HRK 412.6 HRK 231.1 78.5%
Room revenue
3
£21.6m £8.1m 167.7% HRK 189.6m HRK 68.4m 177.0%
EBITDA % 32.6% 1.9% 3,070bps 32.6% 1.9% 3,070bps
Total value of Croatian property portfolio
1
£253m
2020: £243m
GRAND HOTEL BRIONI
The Grand Hotel Brioni Pula is one of the
most highly regarded hotels in Croatia,
enjoying a superb location overlooking the
Istrian Peninsula and seafront promenade.
The 227-room hotel is surrounded by lush
Mediterranean greenery which is typical of
this beautiful stretch of Adriatic coast.
The Grand Hotel Brioni Pula is connected
to the sea via a series of terraced beaches.
Business review continued
Croatia
1 Independent valuation by Zagreb nekretnine Ltd in December 2021 and excluding Hotel Brioni (Pula) and Zagreb which are under development.
2 Average exchange rate from Croatian Kuna to Pound Sterling for the year to December 2021 was 8.77 and for the year to December 2020 was 8.47, representing a
3.5% change.
3 The room revenue, average room rate, occupancy and RevPAR statistics include all accommodation units at hotels and self-catering apartment complexes and
excludes campsite and mobile homes.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
64 65
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Property portfolio
The Group’s portfolio in the region includes
four properties in Berlin and one hotel each
in Cologne, Nuremberg and Trier. Hotels with
an ownership interest include: Park Plaza
Berlin Kudamm
3
, Park Plaza Nuremberg,
art’otel Berlin Mitte
3
, art’otel Berlin Kudamm
and art’otel Cologne. Park Plaza Wallstreet
Berlin Mitte operates under an operating
lease and Park Plaza Trier
3
operates under
afranchise agreement.
Portfolio performance
The region showed varying signs of recovery
as the year progressed, supported by the
markets reopening and the continuation of
vaccination programmes. As restrictions were
eased in the third quarter, the Group saw
good demand for weekend leisure business.
Park Plaza Nuremberg and art’otel Cologne
performed better than the Group’s Berlin
hotels due to a strong domestic leisure
demand for these destinations. Business
travel remained subdued. Rising infection
rates in Germany resulted in the increasing of
restrictions in the autumn and the cancellation
of Christmas markets and fairs which typically
support demand for guest stays.
As demand improved, measures were taken
to mitigate labour constraints, including an
increased focus on recruitment from
international markets, increased recruitment
activity through digital platforms, sharing
resources with Croatia and Hungary and more
housekeeping services were brought in-house
to reduce exposure to third party agencies.
Total revenue was €7.7 million
(2020: €8.7 million). RevPAR was €23.8
(2020: €26.0), due to a sharp fall in occupancy
to 26.5% (2020: 27.1%). Average room rate
reduced by 6.3% to €89.8 (2020: €95.9).
EBITDA was positively impacted as the
Group continued to utilise government
grants to support payroll expenses
(‘Kurzarbeit’ German state scheme) and
received fixed costs subsidies until August
2021, which amounted to €9.8 million
(£8.4 million).
Financial performance
Reported in GBP
2
(£) Reported in local currency Euro (€)
Germany
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Year ended
31 Dec 2021
Year ended
31 Dec 2020 % change
Total revenue £6.6m £7.8m (14.6)% €7.7m €8.7m (11.5)%
EBITDAR £6.7m £(0.3)m N/A €7.8m €(0.3)m N/A
EBITDA £6.7m £(0.3)m N/A €7.8m €(0.3)m N/A
Occupancy 26.5% 27.1% (60)bps 26.5% 27.1% (60)bps
Average room rate £77.1 £85.3 (9.6)% €89.8 €95.9 (6.3)%
RevPAR £20.4 £23.1 (11.5)% €23.8 €26.0 (8.3)%
Room revenue £5.3m £6.0m (11.7)% €6.2m €6.8m (8.5)%
EBITDA % 100.8% (3.3)% 10,410bps 100.8% (3.3)% 10,410bps
Total value of German property portfolio
1
£87m
2020: £87m
Business review continued
Germany
Due to the Group’s recent acquisitions, the
German portfolio will now be reported on a
standalone basis, with the performance of
the Group’sproperties in Austria, Hungary,
Italy and Serbia, reported separately.
In line with the Group’s strategy to expand
its presence across Central, Eastern and
Southern Europe, the Group has had an
exciting 24 months, with new acquisitions
inBelgrade (Serbia), Nassfeld (Austria) and
Rome (Italy).
Rome, Italy
In November 2021 the Group entered the
Italian hotel market with the €33.1 million
(£28.3 million) acquisition of the Londra &
Cargill hotel, a 4-star property in a prime
central location in the city of Rome. Rome is
one of southern Europe’s key gateway capital
cities which offers robust fundamentals for
hotel investment over the medium to long
term. The Group has continued to operate
the hotel, which currently offers 101 rooms
and suites, a restaurant, bar, meeting
Belgrade, Serbia
In December 2020, we completed the
acquisition of 88 Rooms Hotel near the old
town of Belgrade in Serbia. We subsequently
reopened the hotel in May 2021 when the
markets started reopening. During the
period the Group received approximately
£4,300 (DNR 587,105) in payroll grants.
We are currently developing plans
torefurbish and relaunch this hotel
induecourse.
Budapest, Hungary
art’otel Budapest in Hungary was closed
throughout the year (and remains closed)
due to low levels of demand resulting from
government lockdown measures. The Group
utilised a government scheme which
provided 50% payroll support during the
firstfive months of the year at a value of
approximately £39,000 (HUF 16.2 million).
The Group has started to prepare
refurbishment plans for this property in 2021.
German hotel market
The hospitality industry continued to be
negatively affected by the pandemic in 2021,
with hotels in our markets closing completely
or having their offerings severely restricted.
These inconsistencies in the market have
made performance comparisons, at a hotel
competitor set level, unpredictable and
unreliable. However, at a Country/City market
data level, we can see the year-on-year
changes. Below is based on full inventory
availability versus 2020. The impact on the
German market was a 7.0% increase in
RevPAR to €27.6; a result of an 8.1% increase
in occupancy to 30.8% and a 1.0% reduction
in average room rate, to €89.5. Berlin, our
main market in Germany, improved 19.5% in
RevPAR to €28.8. Occupancy increased by
21.2% to 34.6% witha reduction in average
room rate of 1.4% to €83.2.
Other markets
(Italy, Hungary, Serbia andAustria)
facilities and private parking. Plans are being
finalised to reposition theproperty to an
upper upscale lifestyle art’otel and increase
the number of rooms from 101 to 110.
The Group expects to relaunch the hotel in
early 2023.
Nassfeld, Austria
In December 2021, the FRANZ Ferdinand
Mountain Resort Nassfeld in Austria was
acquired for approximately £12.8 million.
The property is superbly located next to the
valley station of the Nassfeld Ski Resort in
Carinthia, providing access to 100 kilometres
of ski slopes. This 4-star hotel offers 144
family rooms, a restaurant, bar, conference
rooms, private car park, wellness and sauna
and children’s facilities. The acquisition also
included a detached property consisting of
21 rooms currently used as employee
accommodation, and asite adjacent to the
hotel, currently in useasa terrace, which is
earmarked for future development of a
swimming pool. The transaction was
completed prior to thestart of winter
season2021/2022.
Reported in GBP (£)
Year ended
31 Dec 2021
Year ended
31 Dec 2020
Total revenue before elimination £18.0m £14.4m
Revenues within the consolidated Group £(14.3)m £(11.6)m
External and reported revenue £3.7m £2.8m
EBITDA £(7.6)m £(11.3)m
Management
and central
services
Our performance
Revenues in this segment are primarily
management, sales, marketing and franchise
fees, and other charges for central services.
These are predominantly charged within
theGroup and therefore eliminated upon
consolidation. For the year ended
31 December 2021, the segment showed
anegative EBITDA as both internally and
externally charged management fees did
notexceed the costs in this segment.
Management, Group Central Services
andlicence, sales and marketing fees are
calculated as a percentage of revenues and
profit, and therefore these are affected by
underlying hotel performance.
1 Independent valuation by Savills in December 2021 with the exception of Park Plaza Wallstreet Berlin Mitte which is measured at book value.
2 Average exchange rate from Euro to Pound Sterling for the year to December 2021 was 1.17 and for the year to December 2020 was 1.12, representing a 3.6%
increase.
3 Revenues derived from these hotels are accounted for in Management and Central Services performance and their values and resultsare excluded from the data
provided inthissection.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
66 67
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Fostering
communication in
all of our business
relationships and
understanding
theviews of all
our stakeholders.
OUR GUESTS
Welcoming back our guests after the
closures at the end of 2020 was our driving
passion for 2021. We understood that
whether we were reconnecting with familiar
faces, or bringing in new clientele, that the
priority was the highest possible standard of
health and safety.
Creating social distancing measures and
other ways of reducing exposure to risk of
infection involved measures to minimise
physical contact as much as possible through
digital services.
Why they matter to us:
We put guests at the heart of everything we do.
Our vision to create great experiences, value
for all our stakeholders, and make a positive
contribution is only possible if we start with our
guests’ needsfirst.
What matters to them:
– Confidence in clean, healthy and safe
facilities.
– Feeling heard and listened to through
multiple communication channels.
– Reliable, consistent excellence across our
diverse locations, with tailoring to the
unique opportunities in each place.
– Providing unique experiences which
guests will remember and may share with
their personal or professional network.
– A personalised approach to each
guest’sstay.
– Confidence that we adjust to guests’
needs when their plans change.
– Rewarding their loyalty.
How we engaged
Creating memories
As we began to reactivate our hotels in
early2021 with the easing of restrictions in
different locations in the UK, Netherlands and
rest of Europe we conducted some exciting
activities in our hotels and offices. This included
‘The Big Welcome’ onboarding programme and
‘Creating Memories’, our new service delivery
programme. Our service delivery programme
has been designed to support our guest-facing
team members to engage and create valuable
memories for our guests. This programme is
also linked to our ‘We are Creators’ culture
programme which is attended by all new
starters who join the Group.
All hotel delivery teams ‘Inspirators’ in the
UK and Netherlands hotels were fully trained
on the content of this programme and
provided all the materials necessary to
facilitate these inspiring sessions in the
hotels. The objectives of the ‘Creating
Memories’ programme were:
– to further embed the ‘We are Creators’
culture to ensure it influences our service
style and standards;
– to integrate our new digital experience so
that our technology developments evolve
and enhance our guest experience;
– to constantly improve our guest
experience; and
– to form part of our ‘Big Welcome’
onboarding programme.
We continued to gain thorough insights from
our guests through our different channels for
receiving feedback and in 2021 we received
43,697 online responses. This valuable
feedback allowed us to ensure continuous
evolution of our offerings and services by:
– creating ‘Go Digital’, our suite of digital
services, allowing a seamless contactless
arrival, in-stay and departure experience
for our guests. These included online
check-in, online ordering of food and
drinks, self-service option for booking
facilities and live guest messaging via
WhatsApp. These initiatives led to the
Group being shortlisted in the
‘Technology innovation – Traveller
experience’ category for the Business
Travel Awards Europe 2021;
– ensuring access and ease-of-use of
ourwebsite and loyalty programme;
– frequently adjusting our booking terms
and cancellation policies;
– renewal of the SGS accreditation obtained
in 2020, as well as additional
accreditations for the owned/managed
category in the UK from the AA ‘COVID
confident’, VisitBritain ‘We are good to go’
and MIA ‘AIM secure’, underwriting our
new health and safety protocols;
– continuing to engage with guests and
team members by regularly sending
newsletters, social media posts and
website updates on changes in local
legislation and health and safety measures;
– receiving updates from our dedicated
guest service team specifically to engage
with guests and gather insights on our
products and services from guest reviews,
surveys and posts on social media; and
– engagement through social media
contests and promotions and real-time
interaction with guests.
OUR INVESTORS
Why they matter to us:
Without our investors, nothing can be
achieved. Ensuring our investors are confident
in our long-term ability to create value and our
short-term ability to respond to crises such as
those created by the COVID-19 pandemic is
critical to delivering our strategy.
Stakeholder
Engagement
OUR TEAM MEMBERS
How we engaged
Investor roadshows
Our leadership team proactively seeks out
investor input through investor roadshows
conducted by Mr. Kos, our Chief Financial
Officer, and Mr. Hegarty, our Deputy Chief
Executive Officer & COO. These are exercises
in gathering feedback from investors that can
be fed back to theBoard. The roadshows
involved discussions of our pipeline and
futuregrowth.
Our investors proactively sought out
information from us on environmental, social
and governance (“ESG”) matters, and we
enjoyed a productive correspondence with
investors directly, and indirectly through
investor information services, to bring more
and more of this information to the market.
Our Senior Independent Director, Nigel
Keen, has also met with investors.
What matters to them:
– Confidence in the business’s leadership.
– A long-term, sustainable strategy for
success.
– Reassurance that the business is an ethical,
responsible channel for growth.
– Reward for confidence during the pandemic.
Why they matter to us:
Our team members are creators ofallour
guests’ experiences. In a challenging year,
with periodic travel restrictions and other
pandemic-related difficulties affecting our
business, investment into our talented team
members demonstrated its value.
As we began 2021 in lockdown, we were still
continuing to adapt to the unprecedented
environment and the pandemic scenario.
The Board’s focus was implementation of plans
and procedures to gradually reopen
ourproperties and create growth opportunities
as the impact of the pandemic began to ease.
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APPENDICES
Stakeholder
Engagement
continued
OUR TEAM MEMBERS CONTINUED
Our enhanced safety protocols are our way
of reassuring team members and guests that
they are looked after and welcome to once
again enjoy our hotelsand services. We were
eagerly looking forward to getting back into
the business of helping create valuable
memories for our guests.
Results of the pulse surveys which measured
engagement were shared andreviewed by
the Board. We chose tohave a different set of
questions tailor-made to the circumstances of
that moment. Results show that team
members felt leadership was really prepared
for (re)opening and were up to the challenge
of managing our new ways of working.
The Board considers site visits the best
means of interacting with our team
members, and engaging them as
stakeholders in the success of the business
overall. Theongoing travel restrictions
inplace during 2021 made this less
practicable. In addition, some sites were
inuse as quarantine hotels for part of the
year, which precluded site visits during
thoseperiods.
What matters to them:
– An inclusive, clean, safe and supportive
work environment.
– A flexible employer that is adaptive to
their needs.
– A fun place to work.
– An employer that takes care of them
during lockdowns.
– Prioritising health, mental and physical.
– Being rewarded for loyalty and dedication.
– Growing with the business through
opportunities for internal promotion and
career progression.
– Developing and learning at work.
– Passion for excellence and giving guests
the best possible experience.
– Feeling respected, valued and heard.
How we engaged:
– Site visits to hotels in London by all
Non-Executive Directors.
– Regular and frequent site visits to all
locations by the Chairman and the Chief
Executive Officer.
– Regular site visits in the Netherlands by
the Chief Financial Officer and Executive
Directors.
– Establishment of a new employee forum in
the UK, and continued engagement with
our Works Council in the Netherlands.
– Reopening and re-engagement
programme ‘The Big Welcome’ to connect
and refresh our relationships with team
members following lockdown.
– Re-boarding programme ‘Welcome Back!’
aimed at enabling our team members to
return confidently to their workplace and
feel engaged, safe and compliant.
Read more about the engagement calendar
ofour Non-Executive Director responsible
forWorkforce Engagement on page 91.
In 2020, we had launched the Responsible
Business communities programme and the
intention was for the Non-Executive Directors
to participate in this programme and work
directly with the newly appointed hotels’
Responsible Business ambassadors for most
ofthe hotels. This initiative has been
rescheduled to 2022 when the pandemic
situation improves. Throughout the period, the
Deputy Chairman has acted as a dedicated
workforce engagement Board member.
This has meant that the Board has received
updates on the welfare of our team members,
and of the success of preserving employment
wherever possible during closedperiods.
Following the disruption caused by the
business closures during the pandemic and
extension granted by the Equality and Human
Rights Commission, UK, and the Government
Equalities Office, UK, in the prior year, the
Group published its gender pay gap report
for2020 in late 2021 and it is available on our
website. Our statutory gender pay gap report
for 2021 will be available on our website.
2021 saw us take advantage of the easing
ofrestrictions in the spring and summer to
increase our engagement levels. We found
new ways of working, brought team
members back from furlough, and we were
very proud of the measures taken to
re-employ team members whom we had
regrettably been forced to make redundant
during the pandemic.
The use of the furlough scheme allowed us
to avoid as many redundancies as possible,
and re-employ staff. In the Netherlands the
NOW scheme supported us in avoiding
redundancies. While scaling up as part of the
reopening and reengagement programme,
‘The Big Welcome’, team members were
approached and re-hired where possible.
To facilitate workforce engagement,we are
introducing new mechanisms
forcommunication up and down the
management chain. An employee forum was
established in the UK region to bring it more
closely into line with other regions with
Works Council representation.
Looking after our people
We delayed redundancy and furlough
decisions until we could make the right
choices with a support strategy and
infrastructure in place to retain our talentand
reassure our people through employment,
deployment, and furlough. From the
beginning, we have had our teams’ safety
and welfare at the heart of everything we do,
including:
– ongoing support for our team members’
health and well-being through our
(free-to-access) employee assistance
programme; and
– increased number of trained mental health
first aiders in the UK.
Keeping connected
Whether our team members were working or
still not able to do so yet, we had made it our
priority to keep in touch with as many as
them as possible throughout, and continued
to do so after they returned with:
– digital weekly newsletters and updates on
our intranet;
– organised show rounds so they felt safe
and confident;
– regular one-to-one check-ins with their
line managers; and
– short and effective pulse surveys
conducted in the UK and Netherlands to
monitor how they are doing and what
more we can do.
Getting back to work
Our priorities of respecting well-being,
safety and mental health have enabled us to
balance business implications and safety
needs to successfully reactivate our hotels
and offices across all our regions:
– In March 2021 we won the Springboard
Award for Excellence and for Best
Management Preparation for our ‘(Re)
Connect & (Re) Create’ programme.
– Our ‘Welcome Back’ programme was
updated and fully activated so that no one
returned to work without the necessary
training and preparation to do so
including:
• carefully crafted protocols and
guidelines to keep team members safe
and secure while at work;
• flexible start times and staggered arrivals
to avoid busy travel times when getting to
work; and
• increased bike storage for those team
members who didn’t want to use public
transport in the UK.
– This hard work on the part of our ‘People &
Culture’ teams was rewarded in the UK by
the 2021 Cateys award for employer of
theyear.
Looking forward
There is no doubt that our future is bright,
exciting and vibrant. Because of everyone’s
contribution throughout 2021, we were in a
strong position to:
– develop our people;
– open new hotels; and
– take on new management contracts and
implement new technologies.
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Stakeholder
Engagement
continued
AFFILIATES
Radisson Hotel Group
We continued to build our long-standing
successful partnership with the Radisson
Hotel Group in 2021. We believe that the
strength of this relationship can and should
be utilised to expand our development
aspirations.
Why they matter to us:
Radisson Hotel Group is a key business
partner. We cooperate in vital infrastructure
such as our central reservation system, the
Radisson Rewards™ loyalty programme and
our online booking presence.
The heart of our collaboration is our
exclusive and perpetual licence to operate
the Park Plaza brand in Europe, the Middle
East and Africa. This complements our other
branding elements, art’otel and Arena.
What matters to them:
– A reliable business partner worthy of
carrying valuable brand assets.
– An affiliate to be proud of.
– An enthusiastic partner in responsible
business.
How we engaged:
All Group hotels were invited to participate
in Radisson’s ‘Responsible Business’ survey
in 2021. This will allow hotels to benefit from
central data upload giving us peer-to-peer
benchmarking accessible through a
‘Responsible Business’ dashboard at the end
of Q1 2022.
As part of the carbon neutral meetings
initiative launched by Radisson Hotel Group,
all meetings booked and held between
18 October 2020 and 31 January 2022 were
carbon negative.
LOCAL COMMUNITIES
Why they matter to us:
Our local communities in which we operate
are vital to our success. We understand that
building lasting relationships with our
neighbours through proactive engagement,
dialogue and support fosters community
growth and attraction to our destinations,
increases asset values and builds
opportunities. We are passionate about
supporting them and in turn being supported
by them.
In a period where restrictions on travel
meant that our hotels were more dependent
on domestic customers, this investment in
our communities showed its value.
What matters to them:
– Providing local employment opportunities
and employing members of the local
community.
– Supporting local institutions and
participating in local initiatives.
– Attracting consumers to local businesses.
– Being a good neighbour by respecting
noise levels and use of shared resources.
– Engaging local suppliers, using locally
sourced products and highlighting local
culture.
– Improving business-to-business
opportunities.
– Attracting investment.
How we engaged
– In the UK, we participated in the NHS
secondment programme and our team
members were working in different roles
to support the NHS.
– In several regions, we provided support to
healthcare workers, such as food and
accommodation.
– Engaged with London schools and
colleges on careers in hospitality.
– In Amsterdam, provided space for
classrooms to allow lessons to be socially
distanced.
For more information on how we engage and
support our local communities, please see the
‘Our Places’ section on pages 79 to 81
SUPPLIERS
Why they matter to us::
Strong, collaborative relationships with our
suppliers allow us to have confidence in
responsible business, and apply consistent
standards across the Group. This gives our
guests what they want, and adds value and
reduces costs to all our stakeholders.
What matters to them:
– Fair and cooperative practices.
– Predictable demand.
– Mutually beneficial terms.
– Commitment to consider responsible
business practices in our ways of working.
How we engaged:
– Ensured orders were split between
suppliers wherever possible to help
sustain the largest number of business
relationships possible.
– Reviewed internal practices and policies,
including updating the Responsible and
Ethical Sourcing Policy.
– Worked to maintain valuable relationships
in a time of uncertainty.
– Maintained supplier relationships and
open dialogue throughout the year.
– Worked with suppliers to pause contracts
while working through the impact of
disrupted supply chains and gently
reactivated contracts as and when both
parties were able to support or it became
a business critical need.
– Worked closely with suppliers on those
contracts which did need to be in place so
that they were able to trade through;
changing delivery days, and changing
frequencies so that we were protecting
our key supplier partners which in turn
protected us.
– Stretched some contracts out over a
longer period of time so that we had
certainty of pricing where possible and
suppliers had certainty of custom,
protecting us and protecting them.
– Ensured that orders were split between
nominated suppliers where possible to
help sustain the largest number of
suppliers as possible.
By making our meetings carbon negative for
this limited period of time, we went above
and beyond our carbon neutral promise.
For more information on carbon negative
meetings, please see ‘Our Planet’ section on
pages 82 to 89.
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APPENDICES
Our People Our Places Our Planet
APPENDICES
Responsible
Business
Inbar Zilberman
Chief Corporate &
Legal Officer
CREATING
INSPIRATIONAL
HOSPITALITY
THESE ASSETS ARE CRITICAL TO OUR LONG-TERM GROWTH AND
DEVELOPMENT AS WELL AS TO OUR IMPACT ON THE WORLD AROUND US
OUR INTANGIBLE SOURCES OF VALUE
Our People:
Our team, guests and the
identity of our brands to
them, our stakeholders and
the relationships we have
with each
Our Places:
Our properties and the
communities that our
properties call home
Our Planet:
Our Planet which provides
for our every need
While the pandemic has presented numerous
obstacles for our business, it has also provided an
opportunity for rebuilding business in a manner
that will foster a brighter tomorrow
As we have navigated our way through this
period of recovery, our actions have been
guided by our Responsible Business goals.
The manner in which we reengaged our team
members, reopened our properties and
reactivated our operations were all informed
by our purpose and goals.
The circumstances of the pandemic and the
need to take difficult but essential steps to
protect the future of the business, gave us a
whole new awareness and appreciation for
the direct impact that our decisions and
business have on Our People, Our Places
and Our Planet. While the pandemic has
presented numerous obstacles for our
business, it has also provided an opportunity
for rebuilding our business in a manner that
will foster a brighter tomorrow.
We were happy to turn a story of regrettably
necessary redundancies during the
pandemic into one of re-employing many of
our team members and creating new
recruitment opportunities in 2021. We were
also aware of the feelings of nervousness
and anxiety that may have existed in the
workforce as they came back to work and
emerged from lockdowns, and we made
significant efforts to ensure that people felt
comfortable performing their roles in our
hotels and offices. This was done through
continuing our comprehensive health and
safety and well-being programme
‘Reassuring Moments’ and a number of new
initiatives aimed at supporting the mental
and physical well-being of our team as well
as continuing to provide training and
inspiring career opportunities aimed at
promoting their development. We utilised a
number of tools to remain in tune with the
views of the workforce which in turn guided
our approach and activities as necessary.
Find out more about these initiatives
onpage77.
We also continued our approach of using
hospitality as a tool to serve the communities
in which we operate. By leveraging our
experience and skills in providing excellent
service and using innovative solutions in the
delivery of this service where necessary, we
were able to: support the NHS as well as
hospitals and key workers across our regions
during their time of need; ensure that mass
events that lift morale in the communities in
which we serve could go ahead within the
challenging context of the pandemic; and
support the government in facilitating
essential travel in a safe manner.
Find out more about how we supported
OurPlaces on page79.
We also formed a new ESG Committee to
whom the new data we collect will be
reported and will help set targets for carbon
reduction, and set the benchmarks by which
our progress will be measured year on year
to hold the business accountable. For the
first time the Group’s owned and managed
hotels across the UK, the Netherlands and
Germany became wholly reliant on electricity
generated from 100% renewable sources,
and we also launched our Task Force on
Climate-related Financial Disclosures
(“TCFD”) reporting (see page 87) .
We welcomed the opportunity of greater
transparency on our carbon emissions and
strategy and for more meaningful
engagement with the risks and opportunities
presented to us by different climate change
scenarios. We were pleased with the
progress made in 2021 refining and further
developing our environmental strategy. For
the first time, the Group’s hotels across the
UK, the Netherlands and Germany became
wholly reliant on electricity generated from
100% renewable source.
Find out more about how we sought to be responsible
stewards of Our Planet on pages 82 to 89.
Our priority is to deliver a long-term,
sustainable business model which adds value
for our stakeholders and society as a whole.
We look forward to continuing to build on
the good work we have done to continue to
create value for Our People, Our Places and
Our Planet.
OUR PEOPLE, OUR
PLACESAND OUR
PLANETAND THE UNITED
NATIONS SUSTAINABLE
DEVELOPMENT GOALS
In order to ensure that our organisational
goals have universal relevance and
significance, we have aligned our Responsible
Business programme to the United Nations
Sustainable Development Goals (“SDGs”).
We relate our activities to all 17 of the SDGs,
but we believe our purpose and values are
most closely related to:
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APPENDICES
Our team members are central to our ability
to satisfy our purpose of creating valuable
memories for our guests. There can be no
denying that the pandemic has been tough
on all of us including our people. As we
reengaged the workforce following
lockdowns and welcomed new team
members, we therefore prioritised taking the
necessary steps to ensure that our people
felt heard, looked-after and fully engaged
with our vision and strategy.
Creating healthy and safe environments
As our team members returned to work,
ensuring our hotels and offices were
COVID-secure so that our people felt
comfortable in carrying out their roles was
atop priority for the Company and was
aprerequisite to achieving our goals. In
April 2021 we launched our specially
designed re-boarding programme,
‘Welcome Back!', aimed at enabling all our
team members across the UK and
Netherlands to return confidently to their
workplace. This included a series of
workshops, tools, materials, communication
and a detailed training plan for all the teams
in the UK and Netherlands.
Under the ‘Reassuring Moments’ programme
which was launched in 2020, we continued
our ongoing efforts to periodically update
health and safety measures and provided
training and protective equipment. In the UK
and Netherlands we also partnered with
local health services to provide
complimentary lateral flow test kits.
In Croatia, Arena organised test sites across
various locations to support guests and team
members should the need arise.
Creating a culture that supports mental and
physical well-being across the organisation is
important to us. We endeavour to promote an
environment where mental health and
physical health issues are treated without
stigma and where everyone feels supported.
As part of this we have continued to invest
ourefforts in growing our mental health first
aiders programme in the UK and currently
have 30 mental health first aiders who are on
hand to assist any team members who may
bestruggling. We have also developed a
programme of activities to support Mental
Health Awareness Week and developed a
mental health awareness training programme.
Meaningful engagement with our people
Staying in tune with the views and
perceptions of our team is essential in order
to take the necessary steps to retain talent
and direct our People & Culture activities.
We utilised pulse surveys to regularly
measure team member satisfaction and
make any necessary adjustments to our
approach following feedback received.
Examples of actions implemented in
response to feedback received included: the
development of an updated training
programme to support ongoing learning and
development; the continued use of company
newsletters (an initiative started during
lockdown) to keep team members informed
on business developments; and the launch of
a team member forum composed of elected
representatives to assist in leadership and
team member communication in the UK and
continuing our partnership with the Works
Council in the Netherlands.
Innovative recruitment
Given the current competition for the labour
pool in the industry, we have had to adopt
an innovative and novel approach in order to
reach our goal of attracting the most
talented employees. An example of how we
leveraged this approach in the Netherlands
was a mass recruitment event held at Park
Plaza Victoria Amsterdam which involved
inviting 46 potential candidates to
participate in interviews held all over the
hotel. Team members welcomed candidates
in the same manner as guests to showcase
the property and our culture with a view to
Our
People
inspiring candidates to join our team. In the
UK, we participated in the ‘Introduction to
Hospitality Recruitment’ event in partnership
with the Department of Works and Pensions
with 700 candidates attending the event, 60
offers made on the day resulting in 42 new
starters to showcase careers in hospitality
atPark Plaza to young people in the
community. In order to connect with new
hires and drive cohesion in our teams
following recruitment, we launched a new
onboarding programme called the ‘Big
Welcome’. This is a new approach that is
designed to create the best possible
experience during the first three months of
employment with a view to attracting and
retaining the best possible talent and
equipping them for long-term success.
Developing and retaining talent
Development and learning is a key element
of our talent retention programme, and it
underpins our success as a Company.
As such, supporting and encouraging team
members to develop and grow their careers
within the business and providing the
necessary opportunities for growth is
apriority for us.
We love developing people and that is why
we have invested in our own internal
apprenticeship academy. The Group’s vision
is to embed an apprenticeship framework
giving us considerable flexibility and control
over how best to train our apprentices,
design our programmes and integrate our
learning and development offering to suit a
wide range of needs. In the Group, we offer
multiple apprenticeship programmes at a
variety of levels.
We also have an undergraduate placement
programme which is an integral part of our
talent development strategy. Our strategic
goal is to develop our talent pipeline for the
future, and this programme has a clear
purpose as a method for growing our
managers of the future.
Our People & Culture team also conducted
periodic talent review meetings to identify
gaps and development opportunities,
identify high performers, promote internal
development and progression and ensure a
healthy talent pipeline. An online personal
development review process was also
launched to begin our journey to a full digital
talent management approach that will
facilitate aligning organisation and
individuals’ objectives, succession planning,
career and personal development.
The process has a focus on a well-being
check, training managers on giving feedback
and listening skills, promoting engagement,
goal-setting to drive ownership, and career
and personal development. To assist with
ongoing talent management, we also
introduced ‘Learn & Grow’, our online
learning and development system, which
allows us to train and develop talent
internally. Learn & Grow promotes self-
directed learning, and encourages team
members to develop career goals and plans
for achieving them.
2021 AWARDS AND
ACHIEVEMENTS
Best Management
Preparation Award at
Springboard Awards for
Excellence
The Caterer Top 6
Best Places to Work in
Hospitality
The Caterer Best
Employer of the Year
HR in Hospitality HR
Team of the Year
OUR GOALS
– Linking development to learning.
– Attracting and retaining talent.
– Increasing diversity in the workplace.
Sustainable Development Goals
Responsible
Business
continued
TRAINING AND DEVELOPMENT
HIGHLIGHTS
Other highlights of our activities aimed
at linking development to learning and
retaining talent included:
Apprenticeship Academy Programmes
established in the UK for all our team
members looking to develop and grow in
the Company and 39 team members
began their apprenticeships during the
pandemic in 2021.
Clinical cleanliness level 3 training
programme provided for our housekeeping
teams. We also offered 50 NCFE-accredited
training courses for all our teams, ranging
from ‘Understanding Data Protection &
Security' and ‘Principles of Team Leading’, to
‘Understanding Behaviour That Challenges'.
Enhanced standard pay for critical
recruitment and retention needs in the UK:
recruitment for key hospitality roles and
pay enhancement was triggered by the low
number of applications to our vacant roles.
We conducted salary analysis comparing
our offering to our competitors.
One-off non-contractual loyalty bonus to
most eligible new team members
employed by the Company on or before
1 July 2021 who remain in employment by
30 June 2022 as a token of our gratitude
for their support and dedication
throughout the pandemic.
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OUR GOALS
– Increasing our charity initiatives and
volunteering.
– Contributions and investments in our
local community.
– Engagement with our local community.
Sustainable Development Goals
APPENDICES
CHAMPIONING DIVERSITY
AND INCLUSION
In our Group, we seek to promote an
environment in which all of our team
members are welcome and free to be
themselves, no matter who they are,
and we pride ourselves in authentic
service that is reflective of the
communities we serve.
We are proud to have a number of role
models for diversity within our Company
whom we actively seek to celebrate and
champion wherever possible.
International Women’s Day 2021
We are proud to share that on International
Women’s Day, Jennifer McCabe, General
Manager of Holmes Hotel, London, joined a
panel discussion which was initiated by the
Baker Street Quarter Partnership. The Panel
features women from the Quarter sharing
their success stories, how they have been
mentored in their careers and how they
continue to develop their skills to keep
moving forward.
Our Chief Corporate & Legal Officer was
featured in the Women to Watch and Role
Models in Hospitality, Travel & Leisure
Index2021.
In our Company, we value diversity and
inclusivity. To celebrate and support the
LGBTQ+ community, we ensure a safe and
inclusive workplace – not just for Pride Month in
June but 365 days a year. We were delighted
that Park Plaza Vondelpark, Amsterdam,
officially became certified by Booking.com as
LGBTQ+ friendly. We are committed to offering
inclusive hospitality and as part of this
certification so we completed training to
become 'Proud Certified'. Park Plaza
Westminster Bridge, London, were proud to
host attendees and nominees of the Pride of
Britain Awards, which included actors,
musicians, Olympians, Paralympians and other
sports personalities. The awards ceremony is an
annual event recognising unsung heroes across
the UK, andis a star-studded event that is
televised nationally.
Our
Places
We recognise that local business, education,
arts, sports and culture are key pillars within our
communities. In line with our purpose, we seek
to support a diverse array of organisations and
charities within these sectors in order to give
back and add value to the communities in
which we operate.
NHS secondment programme
Since the outset of the pandemic, our UK
operations and human resources teams have
collaborated with the UK National Health
Service (“NHS”) to provide support wherever
possible. In 2020 we worked with the NHS to
create a unique secondment programme for
our team members allowing us simultaneously
to support the NHS at a time when it needed
extra resources and to maintain roles which
otherwise would not have been needed while
operations were limited. This initiative
continued into 2021 with 172 team members
seconded to St. Thomas’ Hospital in London to
support the NHS vaccination project in various
roles. We want to thank our colleagues for
their eagerness to lend their talents by
participating in our NHS secondment
programme.
Supporting local hospitals and
helpingourkey workers
The pandemic highlighted how vividly
dependent our communities are on key
workers. We felt it was important to support
them where we could and show our
appreciation for their efforts in keeping key
services running. Park Plaza Westminster Bridge
remained open while the UK was still in
lockdown in the first half of the year, with team
members supporting key workers by providing
them with accommodation services, meals and
laundry services. At a time when staff shortages
in the health sector was an issue, we also
engaged 11 of our team members to provide
support to a clinic in London, including across
front-of-house, housekeeping and the
clinickitchen.
We were also pleased to see our colleagues
in Croatia carry out a series of activities to
help the local community with the pandemic
crisis. Among those activities were
contributing to the purchase of a vehicle by
emergency medical services in Pula and
furniture for anew pathology ward in a local
hospital, aswell as providing
accommodation to doctors and specialists
from local hospitals and clinics at Park Plaza
Verudela and Splendid Resort.
“Working for the NHS has been
apleasant experience for me. I had
to deal with different people so I
developed my human relationships to
a greater level. Also I realised that I
am capable of doing more things than
Ithought, as I have been assigned
to various tasks over the months.
Ilearned that helping others makes
a big difference in their lives and
definitely increased my confidence to
work in a team. Also a positive side
was that Iwas entitled to have some
perksbecause of my NHS badge.
Overall being with the NHS was avery
good experience for me.”
“I was scared to work there in the
beginning, hospitals have always
terrified me. When Istarted to work
there I realised it is nothing to be
afraid of. Ihad the opportunity to
meet and work with some amazing
people. Overall it was a very good
experience and learned a lot.”
“I want to start by thanking the Company
for the opportunity to support with the
NHS during the pandemic. It was a new,
beneficial and unforgettable experience.
It definitely helped me to develop my
skills: especially communication and
listening, innovative thinking, confidence
and the self-belief to try something new.”
Responsible
Business
continued
OTHER AWARDS WON BY
OUR PEOPLE
We are incredibly proud that, not only
did Daniel Pedreschi receive his official
Hotelier of the Year 2021 award in front
of a packed Hotel Cateys audience, but
our very own Olivier Ruiz won Head
Chef of the Year. Olivier heads up the
chef brigade at Park Plaza Westminster
Bridge London, and has been an
incredible asset to PPHE Hotel Group
and Park Plaza.
In order to support inclusion wherever
possible, we also introduced a number
new employee policies on diversity,
stress management and well-being.
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
ANONYMOUS TEAM
MEMBER TESTIMONIALS
APPENDICES
Supporting the travel industry in its time
of need
We were proud to support the UK Government
with its plans to facilitate safe travel for those
needing to travel during the pandemic.
Park Plaza Waterloo and Park Plaza Victoria
London operated as quarantine hotels for
travellers arriving into the UK who were
required to isolate. There was an
unprecedented amount of planning required
to ensure the hotels could participate in the
scheme. This included stringent checks and
inspections in order to assess the suitability of
the hotels against the Government’s
requirements, and the implementation of
complex cross-property food logistics in order
to serve the volume of guests and the security
staff on the sites. In the first week of operation,
the teams at Westminster Bridge and Waterloo
were preparing and serving up to 2000 meals
a day for Park Plaza Waterloo guests and were
able to serve over 350 room service meals
three times a day in Park Plaza Victoria London.
In addition, a full test and trace facility was set
up on site and all staff and associated agency
Wimbledon – Park Plaza
Westminster Bridge London
71%
of all drink orders in the bar
were received via the online
ordering system
200
covers an evening delivered
during dinner service, with
no delays or issues
47%
of all room service orders
were received via the app
Pressure on the operations
team was reduced as a
result, ensuring efficiency
and speed of service
492
guest conversations via
instant messaging, with
each conversation
averaging 2.9 interactions,
resolved on average in 1.55
minutes
“We were allocated this hotel for
quarantine. The staff have been
amazing. Always friendly and helpful.
Our room is very comfortable and has
everything we need. Wi-fi is excellent.
Thefood is plentiful and enjoyable. I
am happy to have quarantined here.”
(Park Plaza London Waterloo guest –
TripAdvisor review)
Responsible
Business
continued
staff were tested daily as they came on shift.
Given the somewhat strange circumstances of
our quarantine guests’ stay at our hotels, our
team members endeavoured to ensure that
each guest was given a particularly warm
welcome and fully briefed on how their stay
would work. We were pleased to see our
efforts recognised by the positive online
reviews received.
Supporting local business
The circumstances of the pandemic have led
to an even greater need for us to foster
acollaborative, flexible and innovative
approach that prioritises the health, safety
and well-being of guests when working with
local businesses. An example of when we
had to channel this approach in a unique and
unprecedented way in order to work with a
key local business to facilitate an event, was
when Park Plaza Westminster Bridge London
was awarded with the opportunity of being
the exclusive host hotel for players and
support teams of the 2021 Wimbledon
Championships. We were proud to have
been chosen, however, given the challenges
of holding a mass international event as the
country emerged from lockdown, we had to
work very closely with the organisers of this
sporting event to create a ‘secure bubble’ to
address the pandemic risks. This included
tailoring our services app and operations
specifically for the event.
Within the London sporting scene, we have
also continued our support of a local rugby
club by sponsoring a board on the rugby
pitch and offering favourable rates at Park
Plaza County Hall during special events.
There are also plans in place by the hotel to
sponsor a youth development team in the
future at the club. In Croatia, Arena
continued with their long-standing initiatives
to help sports clubs, athletes and specifically
athletes with disabilities reach their full
athletic potential. Arena provided support in
the form of financial sponsorship and the use
of sports facilities within our properties. They
also continued with their support of selected
cultural and sports events in Pula such as the
Pula Film Festival, the international maxi
cruiser regatta, the marathon and numerous
musical concerts.
Supporting local people in need
Given the particularly disruptive impact that
the pandemic has had on young people,
during the year we have supported a number
of initiatives benefiting young people as well
as working with students and young people
across the regions to share our expertise and
provide career opportunities. In early 2022
the Group were proud to support a local UK
newspaper’s ‘Step Up Skill Up’ campaign to
tackle youth unemployment in London by
pledging 50 jobs in this fantastic scheme.
In London, we hosted a site visit for interior
design students at the art’otel London
Hoxton development site and also put on
showcases in partnership with Springboard
Charity UK at Park Plaza Westminster Bridge
and Park Plaza County Hall, through which
our teams shared their career journeys and
offered advice to young people interested in
pursuing a career in hospitality. We have also
continued to work with a local academy
school in London by donating laptops and
providing regular work experience
opportunities. We also continued to support
a UK charity benefiting young people leaving
foster or residential care, by supplying them
with a venue for their award ceremony and
hosting their Christmas lunch.
In the Netherlands, Park Plaza Amsterdam
Airport supported a local school in being able
to continue to educate children while observing
social-distancing measures by providing
classroom space for 400 students a day from
March to April 2021. Park Plaza Victoria
Amsterdam and Park Plaza Vondelpark,
Amsterdam, also deployed additional team
members to assist with cleaning and sanitising
duties throughout the day. As a follow up, we
were also in contact with their careers
department to offer work placements to a new
generation of school leavers. We also hosted
internship events at Park Plaza Victoria
Amsterdam to offer job opportunities in the
hotel for hotel school students.
In the German region, team members
participated in a number of grassroots
initiatives in partnership with numerous local
charities, including making contributions to a
charitable organisation to support the
people who were affected by the floods
which destroyed parts of Western Germany
in summer 2021.
As part of our more general efforts to
support those vulnerable members of our
communities who have been particularly
impacted by the pandemic, we were also
pleased to partner with Lambeth Council to
join its annual ‘Helping Hands’ programme in
December 2021. We brought together over
50 of our team members in Park Plaza
Westminster Bridge London to prepare
2,000 hot meals during the Christmas week
for distribution to elderly, vulnerable and
homeless people in Lambeth and other parts
of London.
In response to the crisis in Afghanistan that
unfolded in August 2021, our team members
in Park Plaza Victoria London worked with
several charities who were providing
clothing, toys and other supplies for Afghan
refugees. We provided facilities to sort the
donations and hotel meeting room space for
storage. Our team members also assisted
with sorting through donations and
distributing them to refugees.
As well as providing local hands-on
assistance in the pandemic response, team
members in Croatia were also able to
provide ten, fully equipped mobile homes
from its campsites to impacted communities
within 24 hours of an earthquake striking
Sisak-Moslavina County in July 2021.
Across the regions we also frequently donate
complimentary stays at our hotels as prizes in
charity fundraising galas. We were also
pleased to hear of several grassroots
initiatives spearheaded by team members
who organised bake sales or otherwise
raised money for a charity of choice.
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
OUR GOALS
– Reduce carbon footprint.
– Reduce water usage.
– Reduce waste and recycle more.
– Increase the use of ethically sourced and
eco-friendly materials.
Sustainable Development Goals
APPENDICES
An area of focus
We are aware of the significant impact that
tourism, travel and hospitality can have on
the world around us and the urgency of the
need to neutralise that impact. At a time
when the importance of the development of
sustainable business models and the need
for businesses to reduce their carbon
footprint has become glaringly obvious, we
have sought to sharpen our resolve to
achieving our environmental goals. As a
Company that develops, owns/co-owns and
manages many of our properties, we
recognise that we have a unique opportunity
to integrate sustainability into our business
from the point of development all the way to
day-to-day operations. While progress has
been made, we recognise that there is still
work to be done in structuring our business
in a way that safeguards the planet for future
generations and are committed to doing that
work. We are also reviewing the manner in
which we measure our progress and are
looking at adding structure in this regard.
Our
Planet
Energy and emissions
All locations in UK, the Netherlands and
Germany have 100% renewable power
We are proud to announce that in 2021 the
Group’s owned and managed hotels across
the UK, the Netherlands and Germany are
now reliant on electricity generated from
100% renewable sources. All of these hotels
have 100% of their electricity backed by UK
REGOs, or European GoOs, as applicable,
from a blend of renewable sources including
hydro, wind, solar, biomass and landfill gas.
This is a significant milestone in our journey
towards a more sustainable future.
Energy efficiency: 100% carbon neutral
meetings
We are pleased to be working with Radisson
Hotel Group and First Climate, one of the
world’s largest carbon offset organisations,
on the carbon neutral initiative for meetings.
Pursuant to this initiative, any meeting or
event held at any participating Park Plaza
hotel was 100% carbon neutral at no
additional cost to guests. For each meeting,
the carbon footprint was calculated and then
offset through projects in Europe, Middle
East, Africa, Asia Pacific and the Americas
that combat climate change and contribute
to sustainable development. At the final
quarter of 2021, Radisson also launched a
carbon negative initiative for meetings and
events held up to 31 January 2022 in which
the majority of our hotels participated.
Pursuant to this initiative, double the carbon
emissions produced by a meeting or event
were offset, making them carbon negative.
Energy efficiency measures in our hotels
Heating and cooling represents the majority
of our energy consumption. Continual
improvement of energy efficiency is a key
target for us and our guests and team
members are empowered to participate in
our common goal to reduce energy
consumption. For further details of energy
efficiency measures across our hotels refer to
page 85.
Water stewardship
We currently have no operations or
development projects in countries considered
‘Extremely-high’ or ‘High’ for baseline water
stress, nor in areas considered ‘Extremely-high’
or ‘High’ for overall water risk. Nevertheless,
we recognise that water stress poses a serious
threat to livelihoods and business stability and
we continue to invest in water-efficient
technology and encourage guests to consider
the environment and save water.
The Group’s commitment to reducing water
consumption across the regions continued in
2021. The water conservation measures carried
out in different hotels included: raising
awareness of our 'Save Tomorrow, Today' linen
and towel reuse programme that rewards
guests for opting out of daily linen cleaning
services; ozone cleaning of guest rooms and
introducing a new three-day room cleaning
cycle; use of washable and reusable items
instead of disposable items in guest rooms.
Biodiversity
Biodiversity plays an important role in the
lifespan of a hotel. This ranges across:
restaurant food; wood used in hotel
furniture; spa amenities; green spaces;
andthe conservation of animals and birds
inthe a hotel's public areas and gardens.
Incorporating biodiversity considerations
inplanning and operational decisions for
ahotel and resort is a key factor for the
continued sustainability and conservation
ofthe ecosystems in which we operate.
Hotel for bees
Bees play a critical role in healthy ecosystems
and through their pollination, they are
essential for production. Sadly in recent years,
changes in our environment have meant that
bees are significantly declining in numbers.
Since 2019, Park Plaza London Waterloo,
together with Barnaby Shaw from Bee Urban,
creates a safe haven atop its fourth floor,
giving the bees an opportunity to form
colonies and produce local honey, while
leaving the bees with ample honey to thrive.
Green hotels
In the Holmes Hotel Greenhouse Terrace,
our team members grow fresh herbs, fruit
and vegetables which are available in the
hotel restaurant and 106 Coffee Shop.
Arena participated in the Croatian national
campaign, 'Plant a tree, don’t be a stump',
and donated seedlings for educational
institutions in the Pula area. In this way,
Arena helped reduce the impact of climate
change. As part of this project, local
kindergarten children helped our team
members to plant pine trees in the Arena
One 99 Glamping site in an effort to educate
future generations on the importance of
being responsible stewards of the planet.
GREEN ACCREDITATIONS AND CERTIFICATES
THE NETHERLANDS
Green Globe
Park Plaza Amsterdam Airport
art’otel Amsterdam
Green Key
Gold
Park Plaza Vondelpark, Amsterdam
Gold
Park Plaza Eindhoven
Gold
Park Plaza Utrecht
UK
Green Tourism
Gold
Park Plaza Westminster Bridge London
Gold
Park Plaza County Hall London
Gold
Park Plaza London Waterloo
Gold
Park Plaza London Riverbank
Silver
Park Plaza Victoria London
Gold
Park Plaza Nottingham
Silver
Park Plaza Leeds
Silver
Holmes Hotel London
GERMANY AND HUNGARY
DIN EN ISO 50001:2018
Park Plaza Wallstreet Berlin Mitte
Park Plaza Berlin Kudamm
Park Plaza Nuremberg
art’otel Berlin Mitte
art’otel Berlin Kudamm
art’otel köln
art’otel Budapest
CROATIA
Travelife
Gold
Park Plaza Belvedere
Park Plaza Histria
Hotel Medulin
Blue Flag Beach
Yacht Beach, Park Plaza
Verudela Pula
The Global Sustainable Tourism Council recognises a number of environmental
certification programmes. This gives stakeholders confidence in international recognition
of environmental standards. We are supporters of these initiatives, and maintain
certificates for our properties listed below.
Responsible
Business
continued
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
CORPORATE GOVERNANCEFINANCIAL STATEMENTS
HOTEL
APPENDICES
Waste and use of resources
Our dedicated green team members are
committed to carrying on waste
management and recycling activities in all
our properties. Some examples of waste
management in the hotels and in the
regional offices include: recycling, using
biodegradable straws, promoting online
services (check-in/check-out/mobile key, etc),
reducing physical menus (using QR codes),
making use of digital authorisation of
invoices which reduces the amount of
printing required, implementation of new
systems such as Raet, Dyflexis and Eversign
which reduces paper usage, certified
low-impact paper napkins, minimising food
waste by being more creative in the kitchen
with new recipes, eco-friendly shampoo,
shower gel and other bath products available
in guest rooms, use of bio-degradable
detergents, recycling glass, mixed recycling
and food recycling on property, waste
disposal and reduced pickups constantly
based on occupancy levels, food digester for
food waste disposal, batteries and light
bulbs recycled, no vegetables or meat/fish
products accepted in plastic, all food items
to be delivered in cardboard only, no paper
TV guides in guest rooms (as these are all
available directly in the TVs), reusable
laundry bags in guest rooms and many more.
Sustainable development
UK
For properties in development, sustainability
is key. In the UK, the Group is on-target to
achieve an ‘Excellent’ Building Research
Establishment Environmental Assessment
Method (BREEAM) sustainability rating
forart’otel London Hoxton.
Croatia
In Croatia, in preparation for the
refurbishment of Grand Brioni Hotel, Arena
changed one-and-a-half kilometres of old
water pipes, which supply the Punta
Verudela peninsula. This significant
improvement of infrastructure resulted in
lower water consumption due to better
monitoring and no leakages. As part of that
project, Arena installed one-and-a-half
kilometres of new gas pipes that now supply
the properties located on Punta Verudela
with natural gas. This enabled Arena to use
amore environmentally friendly energy
source for their hotel boiler rooms and
kitchens. These activities reduced our
environmental footprint by reducing
ourenergy consumption.
Responsible
Business
Our Planet
continued
Halogen lights replaced
by LEDS
Dimmed lighting in
public areas at night
E-bikes available
for guests to rent
Fuel-efficient combined
heating and power systems
to conserve power
and energy
Boiler temperatures
reduced by 10 degrees
Fan coil units
in guest rooms
Hybrid air-conditioning
Energy-saving
key cards
Automatic shut-off of lights and
air-conditioning when guests leave rooms
Timed shut-off of bathroom extractors
and minibars
ENERGY EFFICIENCY MEASURES ACROSS OUR HOTELS
Sedum roofing
Triple glazing
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Responsible Business
Our Planet
continued
Changes to the Listing Rules have led to new
ways to engage with our impact on the world
around us. TCFD reporting is now mandatory,
and we are pleased to provide this summary
of our first annual TCFD report, the full
version of which is published on our website.
We have covered in summary all aspects of
our TCFD report here. Where space prevents
us going into further detail, we will make
reference to the full report. We welcome the
opportunity for progress afforded by the new
regime which provides a framework allowing
investors to compare businesses in their
portfolios on an equal footing and facilitates
meaningful engagement with the risks and
opportunities presented to us by different
climate change scenarios. We also welcome
the opportunity to be transparent about how
our business is rising to the generational
challenge of climate change.
This section summarises our climate-related
financial disclosures from the standalone 2021
TCFD Report, published online. Building on
our Responsible Business reporting, TCFD
represents the next step in our journey of
improving our sustainability and transparency
as a business.
The TCFD guidelines set out a framework for
disclosing climate-related risks and
opportunities, split into four core elements:
governance, strategy, risk management and
metrics & targets. Following the
recommended disclosures ensures climate
change considerations are embedded
throughout our business.
The Group has complied with the
requirements of LR 9.8.6R by including
climate-related financial disclosures consistent
with the TCFD recommendations and
recommended disclosures. With regards to
metrics and targets, we are in the process of
setting carbon reduction targets based on an
emissions reduction pathway to reach net zero
by 2050 at the latest. The standalone 2021
TCFD report will be published on our website
GRAND BRIONI
HOTEL
Construction of a new facade on
solid structures, as well as a roof
with thermal insulation and new
aluminium joinery to improve the
physics of the building
Procurement of low-energy
mobile homes, with built-in
thermal insulation of the
facade and roof
SUSTAINABLE DEVELOPMENT
CASE STUDY – REFURBISHMENT OF
ARENA GRAND KAŽELA CAMPSITE
Installation of sanitary fittings with
low water consumption in sanitary
facilities, solid buildings and
mobile homes
Implementation of a
remote water consumption
reading system to control
and reduce losses
Heating/cooling system in
solid buildings and mobile
homes via high-performance
VRF and split systems
Preparation of domestic hot
water in sanitary facilities via
condensing gas boilers, air/water
heat pumps and solar collectors
Reverse osmosis seawater system
for the production of sanitary
water for irrigating green areas
and filling the swimming pool,
with remote monitoring and
control of the operation of the
irrigation and osmosis system to
reduce water consumption
Installation of LED lighting
fixtures in toilets, solid buildings
and mobile homes
Roof with thermal
insulation and new
aluminium joinery to improve
the physics of the building
Implementation of the smart room
system to increase guest comfort
and energy savings
Implementation of a central
monitoring system for the
management of thermo-technical
installations and remote reading of
electric meters for the rational use
of energy
Implementation of a remote water
consumption reading system to
control and reduce losses
Heating/cooling system via
high-efficiency air/water heat
pumps and condensing gas
boilers, with partial recovery of
waste cooling heat for domestic
hot water heating
Forced ventilation via air
chambers with heat recovery
from waste air
Installation of sanitary
fittings with low water
consumption
Installation of LED lighting
fixtures throughout the hotel
with a centralised lighting
management system to
save energy
New facade
SUSTAINABLE DEVELOPMENT
CASE STUDY – GRAND BRIONI
HOTEL, CROATIA
TCFD Reporting –
A new way to engage
by April, providing more granularity on our
climate-related risk management processes.
Overview – Where do we stand with TCFD?
We recognise that climate change is a
complex issue and acknowledge our
responsibility to minimise our impact on the
planet. We have been tracking our energy
use and emissions since 2011 to guide us in
reducing our consumption.
This year we have focused our efforts on
three key areas. First, to understand our
Scope 3 emissions to set carbon emission
reduction targets. Our Scope 3 inventory is
published in our 2021 TCFD report. Second,
to integrate climate risks into our risk
management framework using climate
scenarios to determine the material climate
risks to our operations. Third, to strengthen
our climate-related governance with the first
meetings of our ESG Committee.
Governance – Ensuring accountability and
responsibility for climate-related risks.
At PPHE, the management of climate-related
topics is integrated into our existing
governance structures and processes to ensure
it is part of everything we do. We have a
collaborative governance approach that starts
with our Board and cascades to every aspect
of our business via our executive vice-
presidents, (regional) general managers, hotel
managers and hotel Responsible Business
teams, ultimately reaching all team members.
As with all matters that may present
challenges to our business model, the Board
has overall responsibility for climate-related
issues, including risk management. The Board
has delegated responsibility for developing
and evaluating climate-related policies to the
ESG Committee. The Audit Committee
oversees and advises the Board on the
Group’s risk exposure, risk appetite and future
approach to risk.
Our ESG Committee met for the first time in
2021. It supports the Board by reviewing and
monitoring the processes for setting climate-
related targets and collecting the data and
information required to support the TCFD
reporting and strategy.
The Audit Committee also assists the Board by
monitoring financial and non-financial
climate-related risks. It is responsible for
tracking changes in this area that could alter
the risk profile.
Full details of how climate-related matters are
managed, including Committee members and
Executive Leadership Team roles, are available
in our 2021 TCFD report.
Strategy – Building climate resilience into
our business strategy.
We understand that the way we do business can
significantly impact the world around us and
that we all have an increased level of
responsibility in this area. Assessing our impact
on the world around us is essential to our Board.
The TCFD recommendations will help us better
understand the climate-related risks we face
and inform how we monitor and manage
climate-related risks and opportunities.
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Metrics & targets – Measuring and
managing our climate impact.
This year we calculated our Scope 1, 2 and 3
emissions for PPHE and Arena Hotel Group
available in our separate TCFD report.
Our Scope 3 emissions cover all our emissions
within our value chain, including those from
upstream and downstream activities.
Understanding our total emissions gives us a
strong starting point on our carbon reduction
journey, which is a top priority for the Group in
2022 and beyond. Emissions and energy
performance are the metrics we use to assess
our progress.
We are in the process of setting emission
reduction targets. In 2022, we will commit to
setting at least near-term targets through the
Science Based Targets initiative (SBTi).
We acknowledge the net-zero targets that are in
place in the jurisdictions in which we operate
and aim to align with these ambitions. In 2022,
we will undertake further work to establish
pathways to achieve these targets and to be net
zero by 2050 at the latest.
Our Goals
Emissions:
– Net zero by no later than 2050.
– We are in the process of gathering the
data to set Science Based Targets (SBTs) to
reduce our direct and indirect GHG
emissions (Scope 1 and 2). We plan to
commit to setting SBTs in 2022.
– Understanding our Scope 3 emissions and
working with our suppliers to lower carbon
emissions.
Sites have been identified for detailed
assessment during 2022. These will be
surveyed for upgrading infrastructure to
reduce carbon output
Water:
– Monitoring and managing water use in our
properties to reduce water consumption.
– We are encouraging the use of our ‘Save
Tomorrow, Today’ programme.
Environment:
– Developing a climate policy is the
responsibility of our ESG Committee.
– We reduce our environmental impact by
reducing our waste and optimising how we
use resources.
– We are increasing the use of ethically
sourced and eco-friendly materials across
our properties.
Transitional risks
We identified four transitional risks for which we already have mitigating actions in place,
shown in Table 1. Two other transitional risks were identified, which we are monitoring:
increased regulation and potential cost and disruption from phasing out non-renewable
energy sources.
Table 1: Key climate-related risks to PPHE for which mitigating actions are in place displaying
assessment of residual risk
Transitional risk Timeline Likelihood Financial impact
Negative stakeholder perception if PPHE is
not seen to be doing enough on climate-
related matters Short/ Medium Unlikely Moderate*
Exposure to carbon pricing Short/ Medium Almost Certain Minor**
The increasing influence of climate-related
matters on customer preferences and
market demand Short Almost Certain Minor**
Increased material costs Short/ Medium Almost Certain Minor**
* Moderate – £1.2m - £6m (annual impact)
** Minor - <£1.2m (annual impact)
Physical risks
We identified five potential physical risks to our
hotels and resorts: flash flooding, rising mean
temperatures, water stress, coastal flooding (for
Amsterdam) and forest fires (for Belgrade / Pula).
Rising mean temperatures are almost certain to
happen, but the impact on our operations are
deemed to be low. We will continue to monitor
this. The other risks were not considered likely in
the short-to-medium term. We will continue to
monitor these and implement mitigation actions
as necessary. Existing controls including
insurance and crisis management plans will
continue to be assessed for adequacy.
To ensure we understand the severity of each
risk, we align the identified climate-related
issues with our Enterprise Risk Management
(ERM) programme. An executive or senior
manager is assigned responsibility for each risk
to introduce sufficient mitigation measures, or
to adapt the business to opportunities.
This year we engaged with a third party to
model and identify climate-related risks to our
strategy, objectives, assets and business
operations. The climate modelling considered
physical and transitional risks on both a Group
and site level. Overall, our risk level was low, and
key risks are outlined below. All risks identified
are detailed in our TCFD report.
SECR reporting
In compliance with the UK government Streamlined Energy and Carbon Reporting, UK Scope
1, Scope 2 and Scope 3 emissions, intensity ratio and yearly comparisons are provided below.
Emission Type
Total Volume
(kWh)
Calculated Emissions
(Tonnes of CO
2
e)
Scope 1 (direct) 20,280,122 3,725
Scope 2 (indirect) 23,338,58 4,955
Scope 3 (indirect) N/A N/A
2021 Total 43,618,708 8,680
2020 Total for comparison 39,991,198 8,379
Responsible
Business
Our Planet
continued
The Strategic Report was approved
bythe Executive Leadership Team and
will be reviewed regularly for materiality
and signed on its behalf by Boris Ivesha.
Boris Ivesha
President & Chief Executive Officer
1 CORDEX: Co-ordinated Regional Climate Downscale Experiment – this model applies the methodology to localities of approximately 1,000 x 1,000 km permitting more
localised analysis than global models, and more appropriate to local landscapes.
CLIMADA: a probabilistic climate risk assessment tool. Users can create impact data customised to their own data inputs.
IAM: Integrated Assessment Models are used to evaluate the technological and economic feasibility of climate goals.
We engage external specialists to determine
our carbon emissions to ensure accuracy.
The Greenhouse Gas Protocol is used as the
basis of the calculations for our Scope 1, 2 and 3
emissions. This year, we have calculated our full
carbon balance sheet for the first time, which
includes our upstream and downstream value
chain. This is our first step towards setting
targets according to the standards of the SBTi,
which we plan to submit in 2022.
The chart below compares carbon emissions
between 2021 and 2020 for the PPHE and the
Arena Hotel Group. Scope 1 and 2 emissions
have risen slightly compared to 2020. This is
due to the impact of the pandemic on the
business in the previous year and our gradual
reopening in 2021. Scope 3 was calculated for
the first time in 2021. Full details are available in
our 2021 TCFD report.
9,989.87
Scope 3
9,633.50
6,078.67
Scope 2
1,123.67
Scope 1
3,790.08
928.10
PPHE Arena
Climate scenarios help us assess the future
impacts of potential climate change pathways
on our business. Scenarios enable us to evaluate
our operational resilience to climate-related
issues under a range of uncertainties and future
states. We modelled our climate scenarios
across three potential futures using the
CORDEX, CLIMADA and IAM models .
We modelled climate data for the 16 cities
across Europe where we have hotels.
The scenarios were:
– <2°C by 2100; high levels of transitional
risks but limited physical risks
– 2-3°C by 2100; the highest level of
transitional risks with some physical risks
– >3°C by 2100; limited transitional risks but
the highest level of physical risks.
For each scenario and risk, we assessed how
impacts might change over the short-term
(0–5 years), medium-term (5–10 years) and
long-term (10–15 years). The impacts inform
our internal climate risk framework.
Our analysis determined that climate change
presents four key transitional risks (Table 1).
Full details of our climate-related risks can be
found in our 2021 TCFD report.
Risk management - Embedding climate into
our risk management framework.
We have recognised climate change as a risk
formally since 2019, both as an independent risk
and for its potential to exacerbate several
principal risks. Our well-established risk registry
prioritises each risk based on assessing impact,
likelihood, and mitigation actions.
Enterprise risk assessments are reviewed
quarterly. Assessments and reviews evaluate
the potential financial costs of each risk.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
88 89
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Introduction
to governance
Kevin McAuliffe
Non-Executive
Deputy Chairman
SECTION 172
Companies Act 2006 s.172
The Code incorporates section 172 of the UK
Companies Act 2006, which requires us, as a
matter of good corporate governance and good
corporate citizenship to consider the interests of
identified stakeholder groups in making business
decisions. This duty requires us to ensure
stakeholders are able to have their views and input
taken into consideration, and to consider the likely
impact on stakeholders of business decisions.
The Board’s decisions are guided by what is most
likely to promote the success of the Company in
the long term through creating sustainable value
for shareholders and contributing to wider
society as a whole.
Each Director listed in this corporate governance
section of our report understands their duties,
and acts in a waythat, in their judgment,
promotes the success of the Company for the
benefit of all stakeholders, with due regard to the
varying interests of different stakeholder groups.
Detailed information on how we have discharged
these responsibilities in 2021 canbe found in the
following sections of theReport:
– This corporate governance chapter
– Stakeholder engagement on pages 68 to 73
– Management of principal and emerging risks
on pages 26 to 34
– The summary Task Force on Climate-related
Financial Disclosures (TCFD) report on
pages87 to 89
– Statements from the Chairman and Deputy
Chairman on pages 16 to 17 and 91 to 92
DEAR STAKEHOLDER,
I am pleased to present the Corporate
Governance report for the year ended
31December 2021.
As Deputy Chairman, my role centres around
championing the Company’s onward
progress on its governance journey. I am,
therefore, proud to report that the Group
has remained focused and committed to
delivering strong corporate governance to
preserve the long-term sustainable success
of the Group for the benefit of all of its
stakeholders throughout the highs and lows
of 2021. Governance has formed an intrinsic
part in the infrastructure of our continued
recovery from the effects of the pandemic.
This was evidenced by: the formation of an
ESG Committee to oversee the Group’s ESG
strategy and embed appropriate ESG
policies; the increased frequency of
interaction between the Board and the
Executive Leadership Team and senior
management to provide adequate oversight
of the delivery of strategy; on the delivery of
strategy; the updating of a number of key
policies including the Whistleblowing Policy
and Ethical Sourcing Policy and the active
dialogue maintained with representatives of
independent shareholders throughout the
year which has resulted in our introduction of
an advisory shareholder vote on the
Remuneration report and Remuneration
Policy at the next Annual General Meeting.
This report sets out how we have complied
with and applied the principles and
provisions of the 2018 Corporate
Governance Code (the ‘Code’) throughout
2021 as well as providing a practical view of
our approach to corporate governance
within the operation of our business.
Leadership role
At a time when decisive and innovative
leadership was paramount, the Board
continued to provide the Group with
entrepreneurial leadership within a
framework of prudent and effective controls
enabling risks to be assessed and managed
alongside the strategic aims of the Group.
Monthly business update calls between the
Board, Executive Leadership Team and
senior management assisted with the
effective operation of our business within a
volatile market. Sub-meetings attended by
the Non-Executive Directors directly after
these monthly updates, also provided the
required forum for scrutiny, discussion and
the identification of any necessary further
steps required without the rest of the Board
and Executive Leadership Team present.
Following the appointment of two new
Independent Non-Executive Directors and an
Alternate Director in 2020, the Board’s focus in
2021 was on maintaining continuity and
supporting the Executive Leadership Team
and senior management in the many decisions
they had to make to restore and increase
business activity in a difficult trading and
labour market. Our established governance
policies and protocols served us well,
providing structure during a disruptive period.
Board evaluation
An external review of the Board and its
Committees was carried out by Independent
Audit Limited in 2021. I am pleased to report
that the results of the evaluation were positive
showing that our formalisation of ESG
management was appreciated, as well as
identifying some areas for improvement in
Board resourcing and subsidiary risk
management. Full details of the process and
outcome of the review are set out on page 100.
Board composition
The Nomination Committee keeps
thecombination of skills, experience,
independence and diversity of the Board
under constant review. As part of this year’s
succession planning, we identified that the
Board would benefit from the addition of
another Non-Executive Director to
complement the existing skillset of the Board.
A search is currently ongoing for a Non-
Executive Director with this skillset and OSA
Recruitment, the specialist external search
consultancy assisting with the search, has also
been instructed to take into account the
diversity requirements of the Hampton-
Alexander and Parker Reviews. Further details
can be found on page 103.
Sustainability
We are on a continuing journey of
embedding sustainability into our business
model and recognise that this has become a
moral, strategic and economic necessity. We,
therefore, established a new ESG Committee
this year to oversee our ESG strategy and
TCFD reporting, assist the business in
setting meaningful goals and measure
progress against those goals. All aspects of
our ESG strategy are formulated through the
Our People, Our Places and Our Planet
framework. Full details of the progress we
have made in furthering our goals is set out
on pages 82 to 89.
Shareholder engagement
At the Annual General Meeting held in May
2021, a small number of shareholders heeded
the recommendations of proxy agencies
andvoted against the re-appointment of
Mr Bradley, the Chair of the Nomination
Committee, as a reflection of their concern
forthe length of tenure of the Chairman of
theBoard.
We have maintained an active dialogue with
representatives of independent shareholders
throughout the year in order to remain in tune
with and guided by shareholder views and in
order to adapt our approach wherever
possible in response to issues raised.
Full details of our engagement with
shareholders can be found in our Stakeholder
Engagement section on page 68, and in the
Nomination Committee report on page 109.
We are grateful for our investors’ ongoing
support, and look forward to a continuing
period of active recovery in 2022 to repay
their confidence.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
90 91
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
The Board has every confidence in Mr
Bradley and his Chairmanship of the
Nomination Committee, which has focused
on succession planning during 2021 and
instructed a specialist external recruitment
agency to assist with finding an additional
Non-Executive Director to add further
balance to the Board.
The Board has also taken note of views
expressed at the Annual General Meeting
aswell as in other communications with
shareholders concerning the lack of a right for
the shareholders to vote on the Remuneration
Report and Remuneration Policy contained in
the Company’s annual financial statements and
approved a proposal from the Remuneration
Committee to allow the shareholders to have
an advisory vote on the Remuneration
reportset out on pages 121 to 130 and the
Remuneration Policy relating to 2022 set
outon page 123.
Engagement with shareholders is further
achieved through investor roadshows led by
our Chief Financial Officer, Deputy CEO and
Executive Vice-President Commercial Affairs
throughout the year. Feedback received
during roadshows is reported by Mr Kos to
the Board for discussion at Board meetings,
following which our Senior Independent
Director reaches out to shareholders to
continue the dialogue. In addition, as part of
his role as Senior Independent Director, Mr
Keen meets with shareholders as and when
requested. He is always keen to engage with
shareholders, and would appreciate
receiving any meeting requests.
Workforce engagement
The Board worked very closely with the
Executive Leadership Team on the process of
reengaging the workforce and safeguarding
their mental health as regions emerged from
lockdowns. I was, therefore, delighted tosee
our efforts to support our workforce and
communities throughout the pandemic
acknowledged by a number of industry
recognitions throughout the year.
We are very proud to have been awarded a
selection of workforce-related awards,
including:
– The Cateys 2021 Best Employer Award;
– the ‘Top-6 Best Places to Work in
Hospitality’ by leading UK hospitality
trade publication The Caterer; and
– ‘HR Team of the Year’ at the HR in
Hospitality Awards 2021.
All this success is a reflection of the hard
work that has gone into protecting the safety
and well-being of our team members.
An annual ‘Climate Analysis’, being a formal
and comprehensive study based on a survey
of our people, culture and overall workforce
satisfaction, usually forms a key part of our
annual workforce engagement activities.
However, with a number of team members
still on furlough in Q1 2021, we have instead
relied on: a combination of succinct pulse
surveys aimed at gauging the current
concerns of our team members; UK-based
hotel visits carried out by the Non-Executive
Directors; and feedback received during
themonthly business updates. In the UK,
wealso established a team member forum
ofelected representatives to facilitate
communication between senior management
and team members.
Hotel visits by members of the Board to a
majority of our UK properties formed akey
part of our workforce engagement activities
in 2021. However, the ongoing restrictions
across other regions meant that our planned
schedule of hotel familiarisation visits by
theNon-Executive Directors could not be
fully completed. In order to compensate for
this, we have agreed an enhanced visit
schedule for 2022 covering Croatia,
Germany, Serbia, Austria, Rome and the
Netherlands to be completed when
restrictions permit.
As the nominated Board member
responsible for workforce engagement,
Ihave also been conducting a review of
theeffectiveness of our existing methods
ofworkforce engagement. I am currently in
the process ofreviewing comments from
regional management and working with the
Head ofHuman Resources with a view to
bringing recommendations to the Board in
Q2 of 2022 for an enhanced and more
resilient process reflecting the continued
growth of the Group.
Conclusion
We recognise that sound corporate
governance is imperative to delivering
long-term sustainable value for all of our
stakeholders. This difficult year brought
further assurances that our governance
practices are cemented into the Group’s
culture and working practices.
The integration of the principles ofthe Code
into our business framework continues to
give me confidence that our business is well
equipped to take advantage of future
growth opportunities as and when they arise.
I would like to thank our Board, Executive
Leadership Team, the entire workforce and
all our stakeholders for their commitment
and support during this challenging time.
Kevin McAuliffe
Non-Executive DeputyChairman
Introduction to governance
continued
BOARD’S ACTIVITIES 2021
A. Strategy, operational performance and risks
– Regularly received operational updates from the Executive
Leadership Team
– Regularly reviewed potential growth and development
– Reviewed and approved completion of the joint venture
transaction with Clal Insurance Company Limited in respect
of Park Plaza Riverbank and art’otel London Hoxton
– Reviewed and approved the acquisition of the 4-star
Londra & Cargill Hotel, via the Group’s wholly owned
subsidiary Londra Cargill Parent S.r.l
– Regularly reviewed principal risks
– Reviewed the results of, and evaluated the performance
of,the external audit
– Regularly reviewed the results of, and evaluated the
performance of, the internal audit
B. Financial performance
– Regularly received updates from the Chief Financial
Officer and Head of Internal Audit and Risk
– Regularly reviewed details of the Group’s performance
against budget and the Group’s financial position,
including cash flow forecasts
– Reviewed and approved the full- and half-yearly results
and associated announcements and the trading updates
– Considered interim and final dividend recommendations
and declarations
– Reviewed the pipeline and CAPEX requirements
– Reviewed compliance with banking facilities
C. Succession and talent
– Reviewed and considered management incentive plans
and remuneration policies for Non-Executive Directors,
Executive Directors and senior management
– Reviewed gender balance of the Company and senior
management, and Board Diversity Policy
– Considered succession planning for Board and senior
management
– Regularly reviewed structure, size and composition of the
Board
– Received and considered the results of the review of the
effectiveness of the Board and its composition (including
skills, knowledge, experience and diversity)
D. Stakeholder engagement andgovernance
– Received regular reports from the Chair of each Committee
– Received regular reports and updates from the Company
Secretary and from the Chief Corporate & Legal Officer
– Reviewed governance standards of the Group and its
subsidiaries
– Reviewed and approved formation of the ESG Committee
and approval of the ESG Committee terms of reference
– Reviewed and approved updates to the Committee terms
of reference
– Reviewed and approved updates to the Group’s Code of
Conduct
– Reviewed and approved the UK Gender Pay Gap Report
2020, 2021 and the Modern Slavery Statement 2020–2021
– Reviewed and approved updates to the Group’s
Whistleblowing Policy and routinely reviewed the reports
arising from its operation
– Reviewed and approved updates to the Significant and
Related Party Transactions Policy
– Reviewed and approved updates to the
RemunerationPolicy
– Reviewed Board evaluation report of the external consultant
– Reviewed and approved the Group’s new Human
RightsPolicy
– Reviewed other principal Group policies
– Received regular updates on investor relations and
updates from investor presentations
– Responded to investors collectively in announcements
following votes at the Annual General Meeting, and
individually in exchange of correspondence
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
92 93
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Board of
Directors
BOARD AND COMMITTEE MEMBERSHIP
E A N R
Eli Papouchado
Yoav Papouchado
Alternate Director
Kevin McAuliffe
Nigel Keen
C
Kenneth Bradley
C C
Stephanie Coxon
C
Boris Ivesha
Daniel Kos
ESG Committee Audit Committee
Nomination Committee Remuneration Committee
C
Chair
Non-Executive Chairman
Mr Papouchado has been Chairman of the Group
since its formation. He is a Founder of the Red Sea
Group and acted as its Chairman for over ten years.
Our Chairman brings a wealth of experience in the
construction, design, development, financing,
acquisition and management of leading hotels,
including Park Plaza Westminster Bridge London,
Park Plaza London Riverbank and many others. He
has been involved in the development of hundreds
of thousands of square metres of retail space in
shopping malls and large residential projects in the
USA, Eastern Europe and the Middle East, and
served as Chairman of the Israel Hotel Association.
External appointments: N/A
Board Committees: N/A
Independent: No
Year of first appointment: 2007
Non-Executive Deputy Chairman
Mr McAuliffe is a former member of the Society of
Trust and Estate Practitioners and a Director of
various regulated investment companies. From
1999, he worked with the Carey Group, joining as
Chief Executive in 1999, before serving as its
Chairman until his retirement. He served as Head
of Advisory Services for Paribas International
Private Banking and Managing Director of Paribas
Suisse in Guernsey from 1992 to 1999, and as
Finance Director of Ansbacher Offshore Banking
Group, before being appointed as Chief Executive
Officer of Ansbacher’s Guernsey bank and trust
company business in 1994.
Mr McAuliffe has held posts in three different
departments in the States of Guernsey between
1973 and 1980, and is a member of the Supervisory
Board of the Arena Hospitality Group.
External appointments: Supervisory Board
Member, Arena Hospitality Group;
Director of CKLB International Management
Limited and CM Management Limited.
Board Committees: Nomination Committee
Independent: No
Year of first appointment: 2007
Eli
Papouchado
Kevin
McAuliffe
Alternate Director to
Non-Executive Chairman
Mr Yoav Papouchado is the Chairman of the Red
Sea Group. He is a real estate developer with over
30 years of experience of residential developments
and data centres worldwide. He serves as Deputy
Chairman of the Supervisory Board of the Arena
Hospitality Group, listed on the Zagreb Stock
Exchange, and is President of Gear Construction,
the construction arm of the Red Sea Group.
External appointments: Chairman, Red Sea
Hotels Limited; President, Gear Construction;
Deputy President of the Supervisory Board, Arena
Hospitality Group
Board Committees: N/A
Independent: No
Year of first appointment: 2020
Non-Executive Director
Mr Bradley is a former Guernsey Island Director at
RBS, who focused on corporate banking and
structured finance, and was also Guernsey Island
Director and Chief Country Officer at Barclays
Bank, overseeing their Banking and Fiduciary
business, while having responsibility for businesses
in five other jurisdictions.
External appointments: Director of a Private
Fiduciary Company and a small Finance Company
Board Committees: Nomination Committee (Chair),
Audit Committee, Remuneration Committee, ESG
Committee (Chair)
Independent: Yes
Year of first appointment: 2019
President & Chief Executive Officer
Mr Ivesha has been President of the Group since
1991, and brought the Park Plaza brand to the
group in 1994 in collaboration with the Red Sea
Group, and has been the major influencer in
expanding the Group’s portfolio. He established
the Yamit Hotel, Israel in 1984, and served as its
President. He was director of the Carlton Hotel in
Israel from 1979 to 1984, and the General Manager
of the Royal Horseguards Hotel in London from
1972 to 1979. He is the Chairman of the
Supervisory Board of the Arena Hospitality Group.
External appointments: Chairman of the
Supervisory Board of the Arena Hospitality Group
Board Committees: N/A
Independent: No
Year of first appointment: 2007
Chief Financial Officer
&ExecutiveDirector
Mr Kos has worked with the Group for over ten
years of which the last four years have been as
Chief Financial Officer and Executive Director. As
Chief Financial Officer, Mr Kos is responsible for
the Group’s finance, IT and procurement strategy.
Mr Kos has 20 years of finance experience in the
field of audit and corporate finance and has been
involved in several large complex M&A deals, large
(re)financing projects and several transactions on
the public markets in London and Zagreb. Prior to
joining the Company, Mr Kos held senior
leadership positions within auditing and finance,
including 11 years at internationally recognised
accounting, audit and consulting group Mazars
LLP, focusing on hospitality, real estate and
financial service companies.
Mr Kos is a certified public accountant with
significant international experience across many
different industries.
External appointments: N/A
Board Committees: N/A
Independent: No
Year of first appointment: 2018
Non-Executive Director
Ms Coxon is a Fellow of the Institute of Chartered
Accountants in England and Wales and is a
non-executive director on several London listed
companies. Prior to becoming a Non-Executive
Director, Ms Coxon led the investment trust capital
markets team at PwC for the UK and Channel Islands.
During her time at PwC, Ms Coxon specialised in
advising FTSE 250 and premium London listed
companies on accounting, corporate governance, risk
management and strategic matters.
External appointments: Independent Non-
Executive Director, Apax Global Alpha Limited;
Non-Executive Director, JLEN Environmental Assets
Group Limited; Non-Executive Director, PraxisIFM
Group Limited; Non-Executive Director, International
Public Partnerships Limited
Board Committees: Nomination Committee,
Audit Committee (Chair), Remuneration
Committee, ESG Committee
Independent: Yes
Year of first appointment: 2020
Non-Executive Director & Senior
Independent Director
Mr Keen is a chartered surveyor who previously
served as the Head of Property at Tesco and at the
John Lewis Partnership. He serves the Vistry Group
Plc as the Chair of its Remuneration Committee,
and as a member of both its Audit and Nomination
Committees. He is also a non-executive director
for RG Carter Construction Company and is deputy
chairman of the Maudsley Mental Health Charity.
External appointments: Non-Executive Director,
Vistry Group Plc; Non-Executive Director, RG
Carter; Deputy Chairman, Maudsley Mental
Health Charity
Board Committees: Nomination Committee,
Audit Committee, Remuneration Committee
Independent: Yes
Year of first appointment: 2018
Yoav
papouchado
Kenneth
Bradley
Boris
Ivesha
Daniel
Kos
Stephanie
Coxon
Nigel
Keen
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
94 95
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Executive
Leadership
Team
President &
Chief Executive Officer
Boris has been President and Chief Executive
Officer of PPHE Hotel Group since 1991.
He was responsible for bringing the Park Plaza
brand to the Group in 1994 in collaboration with Eli
Papouchado and the Red Sea Group, and has been
a major influencer in the expansion of the Group’s
international portfolio.
In previous roles, Boris established the Yamit Hotel
in Israel in 1984 and served as its President, and
was Director of the Carlton Hotel in Israel from
1979 until 1984 and General Manager of the Royal
Horseguards Hotel in London from 1972 until 1979.
He is on the Arena Hospitality Group Supervisory
Board as Chairman and was appointed to the
Group Board on 14 June 2007.
Chief Financial Officer
& Executive Director
Daniel has worked with the Group for over ten
years of which the last four years he has been Chief
Financial Officer and Executive Director. As Chief
Financial Officer, Daniel is responsible for the
Group’s finance, IT and procurement strategy.
Daniel has 20 years of finance experience in the
field of audit and corporate finance and has been
involved in several large complex M&A deals, large
(re)financing projects and several transactions on
the public markets in London and Zagreb.
Prior to joining the Company, Daniel held senior
leadership positions within auditing and finance,
including 11 years at internationally recognised
accounting, audit and consulting group Mazars
LLP, focusing on hospitality, real estate and
financial service companies.
Daniel is a certified public accountant with
significant international experience across many
different industries.
Chief Corporate
& Legal Officer
Inbar joined the Group in 2010. Inbar oversees the
Group’s corporate initiatives including acquisitions,
expansions, corporate governance, shareholders’
engagement, and corporate social responsibility
while continuing to lead the multi-jurisdictional legal
and compliance functions necessary for our success.
Inbar brings an expertise in negotiations and deal
execution and has a pivotalrole in developing the
Group’s corporate governance, the move to a
Premium Listing on theMain Market and subsequent
inclusion within the FTSE. In 2021 Inbar featured in
the prestigious Women to Watch and Role Models in
Hospitality, Travel & Leisure Index 2021.
Prior to joining the Group, Inbar was in the
corporate finance team at the law firm Berwin
Leighton Paisner LLP (now Bryan Cave Leighton
Paisner LLP) in London and formerly was a partner
at the Israeli law firm, Bach, Arad, Scharf & Co.
Inbar holds an LLB from Tel Aviv University and an
LLM from the LSE. She is a qualified solicitor in
England, Wales and Israel.
Deputy Chief Executive Officer
& Chief Operating Officer
As Deputy CEO, Greg works alongside the Group’s
President & CEO Boris Ivesha driving the corporate
vision and growth strategy for the Group.
In addition, Greg has overall responsibility for
theday-to-day running of the Group’s operations
while creating and implementing commercial and
operational strategies, which include, but are not
limited to, Operations, People & Culture.
Greg holds a Masters’ Degree in Business
Administration (MBA) and brings over eight years
ofexperience in the hospitality industry including
senior management roles at global brands such
asGLH Hotels and BDL Hotels.
In 2004 Greg won a prestigious Acorn Award,
which recognises the flair and passion of rising
stars in hospitality. In 2005 Greg also won the
prestigious Esprit General Manager of the Year
award and has further shown his commitment to
the industry by becoming a Fellow of the Institute
of Hospitality and a Master Innholder.
Boris
Ivesha
Daniel
Kos
Inbar
Zilberman
Greg
Hegarty
The Executive Leadership Team
meets on a monthly basis and is
chaired by the Deputy Chief
Executive Officer. It has authority to
manage the day-to-day operations
ofthe Group’s businesses, with the
exception of those matters reserved
for the Board, within the financial
limits set by the Board.
The Executive Leadership’s remit includes:
– formulation of strategy and the Group’s
priorities for recommendation to
theBoard;
– performance management in accordance
with strategy and budgets;
– customer engagement, product
development and brand standards;
– construction, maintenance and design;
– asset management and capital investment
(where Board approval is not required);
– procurement and cost efficiency;
– reputation and stakeholder management;
– risk management;
– people, culture, values and sustainability;
– talent and succession;
– information technology and cyber; and
– health and safety.
Executive Vice President
Commercial Affairs
Robert oversees all commercial activities including
Sales, Distribution, Reservations, Customer
Service, Revenue, Digital Marketing and CRM as
well as Brand Marketing, Guest Experience and
Communications (including brand strategy, brand
development, management of the Group’s
strategic partnership with the Radisson Hotel
Group and corporate communications).
He has more than 20 years’ experience in
international hospitality and first joined the Group
in2001, when he was involved in the opening of
theGroup’s hotels in the UK and the successful
implementation of Radisson Hotel Group’s
marketing programmes and systems. He rejoined
the Group in 2007 and since then has significantly
developed the central commercial organisation,
creating and leading a multi-disciplined,
international team of specialists.
Prior to joining PPHE Hotel Group, he held
international marketing positions at Golden Tulip
Worldwide and Hilton Hotels Corporation. He
holds a Bachelor’s Degree in Hotel Management
Business Administration from Hotelschool The
Hague, with a major in Marketing.
Executive Vice President
Acquisitions & Development
Jon joined PPHE Hotel Group in 2021 as Executive
Vice President Acquisitions & Development and,
along with his team, is responsible for the
implementation of the Group’s strategic acquisition
and development strategy.
Jon brings a wealth of experience of over 20 years
working within the hotel real estate and financial
sectors for global hotel businesses such as IHG and
Hilton, and international financial institutions such
as GE, Barclays and RBS Group.
Regional Vice President
Operations, the Netherlands
Michelle has held a number of management
positions at PPHE Hotel Group over a period of 12
years, originally joining as General Manager, Park
Plaza Sherlock Holmes London in 2007.
Michelle moved to the role of General Manager of
sister hotel Park Plaza County Hall London in 2014
and then on to Park Plaza Victoria London in 2016.
Promoted to the newly created role of Vice
President Operations, the Netherlands in 2019,
Michelle oversees all operational, revenue, finance,
marketing and sales strategic objectives for the
region on behalf of six properties. With the newly
acquired Londra & Cargill in Rome, Michelle has
now added this to her portfolio.
Michelle brings a strong operational and
commercial background to the business and
educational qualifications including the highly
acclaimed completion of the General Managers
Programs in strategic management at Cornell
University in the USA; she is Master Innholder and
aholder of the Freedom of the City of London.
Executive Vice President People
&Culture | Head of HR
Jaklien joined the Group in 1995 as Director of
Sales at Park Plaza Victoria Amsterdam, before
being promoted to Regional Director of Sales and
Vice President of People Development and Human
Resources, she also gained operational hotel
experience as an interim Hotel Manager.
Her passion for working with people to achieve
their goals and developing them was instrumental
in Jaklien’s decision to switch to the role of HR
Manager for the hotels in the Benelux region while
simultaneously supervising hotels in Germany and
Hungary. Jaklien then moved onto her role of
Executive Vice President People & Culture | Head
of HR for the Group.
Jaklien began her career with Sofitel Legend The
Grand Amsterdam and has worked for Accor hotels
in senior Sales roles. She is a graduate of the
NHTV, the University of Applied Sciences.
Regional Vice President
Operations, United Kingdom
Daniel oversees all UK hotels, restaurants and bars
in collaboration with each individual General
Manager, as well as focusing on new property
developments and the general PPHE Hotel Group
strategy.
Daniel has been with the Company since 2009,
originally taking the position of Hotel Manager at
Park Plaza Westminster Bridge London and in 2011
he moved to the General Manager position. In
October 2013, Daniel took on the additional role
ofsupporting the Central Reservations Office as
aGeneral Manager alongside his existing
responsibilities.
With over 20 years’ experience, Daniel’s passion
for hospitality and attention for detail have always
been key drivers in his career, striving to find
improvements to always keep ahead of the
competition and enhance our position in the
industry.
Robert
Henke
Jon
Colley
Miahelle
Wells
Jaklien
Van
Sterkenburg
Daniel
Pedreschi
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Corporate governance
STATEMENT OF COMPLIANCE
For the year ended 31 December 2021,
theBoard believes that the Company has
applied all the principles of, and complied
with all provisions of, the Code, except as set
out in this governance statement as required
by the Financial Conduct Authority’s (FCA’s)
Listing Rules (which include the ‘comply or
explain’ requirement).
We comply with corporate governance
requirements pursuant to the FCA’s Disclosure
Guidance and Transparency Rules by virtue of
information included in this governance
section of the Annual Report.
The relevant documents can be found
onlineat:
– www.frc.org.uk, for the Code; and
– ww.handbook.fca.org.uk, for the FCA’s
Disclosure Guidance and Transparency
Rules sourcebook as well as Listing Rules.
DIVISION OF RESPONSIBILITIES
Good corporate governance requires a clear
separation of roles between the Chairman
(including the Deputy Chairman), Senior
Independent Director and Chief Executive.
The roles of each are set out here. Each such
position has separate duties and
accountabilities. Collectively, they ensure
effective communication with stakeholders
and review and agree issues of Group-wide
significance.
DIVISION OF RESPONSIBILITIES
Eli Papouchado
Chairman
Role
Responsible for the leadership of the Group and overall effectiveness of the Board and
for setting the Board’s agenda with a focus on the strategy of the Company. The Chair
also holds the Executive Leadership Team accountable for furthering the interests of
shareholders.
Responsibilities
– Strategic leadership
– Setting the strategic priorities for the Board
– Ensuring long-term value-creation
– Establishing and maintaining a culture of openness and debate
– Setting key Company objectives and ensuring processes to deliver them
– Ensuring long-term viability and sustainable success
– Championing key stakeholders, including workforce and investors
– Regular contact with the Company’s Executive Leadership Team and relevant
functionheads
Boris Ivesha
President & ChiefExecutiveOfficer
Role
The Chief Executive Officer is responsible for the management of the Group and the
implementation of the Board strategy and policy on the Board’s behalf. In discharging
hisresponsibilities, the Chief Executive Officer is advised and assisted by the Executive
Leadership Team and key management functions.
Responsibilities
– Leading and managing the business
– Implementing the strategy and reporting on proposed direction
– Delivering on the key objectives set by the Chairman
– Overseeing the senior management and the talent pipeline
– Appraising the performance of each member of the Executive Leadership Team,
andseeking out training, development and resources where needed
– Carrying out the strategy of the Company and implementing successful approaches
tooperate in line with the strategy, values and purpose of the Company
– Running the business and being the key decision-maker on day-to-day Company business
BOARD RESPONSIBILITIES
Strategy. Define and set the Company’s
strategy for creating value for all stakeholders
and for society as a whole through success
sustainable in the long term.
Culture. Creating and promoting a
guest-focused culture in line with the
strategy, valuing integrity, transparency
andrespect. Creating opportunities for
communities to join teams with strong
prospects of career progression and
personal growth through training,
development, a service mentality
andensuring our team members feel
valued and empowered to succeed.
Performance. Regularly review the
performance of the Group in light of its
business strategy, objectives, business
plans and budgets, and ensure that any
necessary corrective action is taken.
Governance. Oversee resourcing, ensuring
the tools are available for management and
the Group as a wholetomeet its objectives
and measureperformance against them.
Ensure that workforce policies and practices
areboth ethical and consistent with
theCompany’s values and long-term
objectives, that management is capable and
effective and that sound planning is in place.
Monitor the effectiveness of internal
controls, risk management policies
andcompliance with all statutory and
regulatory obligations across our multi-
jurisdictional portfolio.
Sustainability. Regularly review business
strategy to ensure that it remains
appropriate for any cyclical and structural
changes in the industry. Manage risk
andregularly assess the adequacy and
effectiveness of mitigation measures,
oversee controls and ensure commercial
strategy is modelled for resilience and
challenging market conditions.
Stakeholder communications.
Build andmaintain successful relationships
with a wide range of stakeholders,
basedon trust, transparency and mutual
respect. Understand what matters to key
stakeholders. Ensure an open discussion
on objectives and constructive dialogue
with all stakeholder groups.
Kevin McAuliffe
Deputy Chairman
Role
Ensures the appropriate governance structure and functioning of the Board and liaises
with the Executive Leadership Team and key management positions to ensure that the
Board is well-equipped to perform itsduties and effectively carry out its functions.
Responsibilities
– Overseeing corporate governance for the Board and ensuring appropriate and tailored
standards are in force to comply with the Code
– Monitoring the induction programme in place for new Non-Executive Directors
– Ensuring the Directors are receiving and have access to clear and timely information
asneeded to make key decisions
– Overseeing annual Board and Committee evaluations and putting in place a plan to act
onthe results of the evaluation
– Communicating with key stakeholders and independent shareholder groups, with
thesupport ofthe Chief Corporate & Legal Officer and Chief Financial Officer
– Consulting with the Remuneration Committee about executive remuneration
– Appointed the designated Non-Executive Director for workforce engagement
– Appointed as the representative of PPHE Hotel Group on the Supervisory Board of
Arena Hospitality Group, the Company’s listed subsidiary.
Nigel Keen
Senior Independent Director
Role
Provides a sounding board for the Chairman and Deputy Chairman, serving as an
intermediary for otherDirectors, and, where necessary, being available to shareholders
and leading in the performance review of the Deputy Chairman.
Responsibilities
– Challenging the Board where relevant to help in developing proposals on strategy
andobjectives
– Evaluating the effectiveness of the Chairman on behalf ofthe other Directors
– Providing a channel for shareholder feedback on executives and governance issues
inthe Company
– As Chair of the Remuneration Committee ensures, with the Deputy Chairman and the
members of the Remuneration Committee, that there is a clear relationship between
remuneration and performance, measured with clear reference to thelong-term
success of the Company
– As Chair of the Remuneration Committee, is responsible for ensuring that all
remuneration proposals are put before the Committee for approval, and placed
ontheagenda of the next general meeting for an advisory vote by shareholders
– Owns the Remuneration Policy, which is kept updated, and subject to a shareholder
vote once every three years
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Board Composition
As of 31 December 2021, the Company
hadseven Directors, five of whom were
Non-Executives (including the Chairman,
EliPapouchado), three of whom were
considered independent. The Chairman, Eli
Papouchado, is not considered independent
as he is a Red Sea Party (Red Sea Party is
defined for the purposes of the Disclosure
and Transparency Rules at page 133).
For more details see ‘Independence and
tenure ofChairman of the Board’ below).
The two Executive Directors are Boris Ivesha,
President & Chief Executive Officer,
andDaniel Kos, Chief Financial Officer.
Our Board Policies
The Board provides leadership and
oversight. Transparency in methodology
andoutcomes is supported through
documented terms of reference and
policiesdirecting processes. These are:
– Articles of Incorporation
– Board Diversity Policy
– Division of Board Responsibilities:
Non-Executive Directors
– Dealing and Disclosure Policy
– Conflicts of Interest Policy
– Schedules of Matters Reserved for the Board
– Terms of Reference: Audit Committee
– Terms of Reference: Nomination
Committee
– Terms of Reference: Remuneration
Committee
– Terms of Reference: ESG Committee
Governance journey: updating policies
The Board reviews all governance policies
periodically to ensure the policies remain
current and appropriate to the needs of
theBoard and Company. In addition to
thepolicies that are subject to annual
review,during the year the Directors
approved refreshed terms of reference for
the Audit Committee, the Remuneration
Committee and the newly formed ESG
Committee. The terms of reference of the
Nomination Committee were also reviewed
by the Board and there were no changes.
Further, the Significant and Related Party
Transactions Policy, a key part of our
Conflicts of Interest Management controls,
was reviewed and approved.
The Schedule of Matters Reserved to the
Board sets out key duties for the Board:
– Statutory obligations and public disclosure
– Strategic matters and financial reporting
– Oversight of management and personnel
matters
– Risk assessment and management,
including reporting
– Monitoring, governance and control
– Other matters having material effects on
the Company
For more information, see the Audit
Committee report on pages 115 to 120
Exercising oversight and ensuring
adequate time to carry out duties
The Chief Corporate & Legal Officer
andtheCompany Secretary ensure that
Board receives accurate, timely and clear
information which affords members the
ability to have an open, constructive
discussion and debate on material matters
affecting the Group. Board meetings allow
for ample time to discuss and debate
matters. Non-Executive Directors are
required to ensure that they have sufficient
time to meet their Board responsibilities, and
are accountable to the Deputy Chairman for
this. All Committee members are expected
to devote adequate time to consider the
views of relevant stakeholders and all
material information regarding issues falling
within the respective Committee’s remit.
Ms Coxon was appointed to an external
position in International Public Partnerships
Limited, a FTSE 250 listed infrastructure
investment company as a Non-Executive
Director with effect from 01 January 2022 .
Prior to her external appointment the Deputy
Chairman reviewed the appointment, the
time commitment required and assessed
that this appointment would not interfere
with Ms Coxon ability to carry out her role
asAudit Chair, Director or Committee
member. The Deputy Chairman on behalf
ofthe Board approved the same, giving
dueconsideration to the application of
Provision 15 of the Code.
EVALUATION OF DIRECTORS
Board Performance Evaluation
An evaluation of the Board and its
committees is carried out every year and
inevery third year this is conducted by an
external evaluator. In 2019 and 2020, the
evaluation was conducted by the Deputy
Chairman, whilst in 2021 this was conducted
by Independent Audit Limited, who have
noconnection with the Board or members
ofthe Executive Leadership Team and are
therefore completely independent.
Board and Committee Review Cycle
– 2019 Internal Review conducted by
Deputy Chairman
– 2020 Internal Review Conducted by
Deputy Chairman
– 2021 External Review conducted by
Independent Audit Limited
2021 External Review Method
The 2021 Board evaluation review was
conducted by two members of Independent
Audit Limited’s team who reviewed the
minutes of all Board and Committee
meetings held during the year, remotely
attended one full Board meeting, one
meeting of each of the Nomination,
Remuneration and Audit Committees,
andone monthly business update call,
aswell as interviewed each member of
theBoard, the Executive Leadership Team,
and the Company Secretary.
An external review of the Board and its
Committees was carried out by Independent
Audit Limited in 2021 in accordance with our
programme in spite of the logistical challenges
posed by travel restrictions and government-
imposed lockdowns. Unfortunately, as a result
of these restrictions, the usual evaluation
process had to be modified somewhat, and
the evaluation meetings were conducted
virtually rather than in person. However, the
evaluation was helpful in identifying the areas
offocus set out below.
Corporate governance
continued
Identified Focus Area Outcomes
Succession planning
andBoardexperience:
– Review succession plans forChairman
and DeputyChairman
– Consider Non-Executive Directors
taking into account the
recommendation of the Hampton–
Alexander Report
– Consider providing further training to
Executive Leadership Team on Board
best practices
Succession planning has been a continuous area of discussion for the Board and the Nomination Committee in
particular and will continue to be a focus going forwards, for the Chairman, Deputy Chairman and the wider Executive
Leadership Team. Two independent Non-Executive Directors were appointed at the outset of the pandemic and as a
result their induction is still ongoing. The pandemic travel restrictions and the geographically widespread locations of
the Directors prevented us conducting our normal in-person meetings and site visits to the Group’s properties.
As restrictions are being lifted an increased visit programme and meeting schedule is being activated for 2022. In light
of these new recruits, the need to recover from the pandemic and the relatively small size of the Board overall, we
continue to consider it necessary to preserve continuity at leadership level. However, a single appointment or
departure will have a significant effect on Board diversity, and an independent specialist search consultant has been
appointed to recruit an additional independent Non-Executive Director. Instructions to this consultant included a
requirement to take into consideration the recommendation of the Hampton–Alexander andParker reviews.
Our Learning & Development team will integrate further Board training into the training schedule.
Risk management:
– Integrate risk discussions into entire
Board discussion more, andimprove
subsidiaries’ reporting of risks
– Hire further support for the internal
audit function
This has been an area of continuous improvement for the Board in recent years. In 2021, our risk and internal audit
function consolidated underlying functional and subsidiary risk registers into a single view of risk which was then
reported to the Board. An additional recruit joined the Risk and Internal Audit function in January 2022 to
support risk management, and this should provide the necessary resource to further improve subsidiary reporting
of risks.
Board agendas:
– Allow further time for Board meetings
as well as in-person meetings
– Consider having the monthly calls as
virtual meetings
– Consider including further details in
advance papers submitted to the
Board prior to meetings
– Upgrade the Board portal
The pandemic has caused this to be a challenge over the last two years and made the in-person interaction of the
Board during certain periods impossible. On the road to recovery, 2022 is expected to be a year where the Board
is able to resume holding in-person Board meetings and site visits to all properties. The Company Secretary has
been asked to look into the possibility of upgrading the Board portal. The legal team circulates documents
supporting the relevant Board meeting agenda prior to Board meetings (including detailed transaction
summaries as relevant). We are reviewing which additional further standing briefing documents should be
included in future quarterly Board meetings.
ESG:
– Adopt a clear strategy and targets and
engage with stakeholders in a more
proactive manner
In March 2021, we established an ESG Committee to define the Group’s ESG strategy. We have begun TCFD reporting
which includes reporting on strategy, goals, metrics and targets which the ESG Committee will oversee and monitor.
We report on our stakeholder engagement activities for 2021 on pages 68 to 73. Currently, this predominantly
includes active correspondence with representatives, investor roadshows and sharing of subsequent feedback, as
well as meetings with shareholders, when requested. However, we strive for continuous improvement and for
further opportunities to engage. In 2022, with the easing of restrictions, we expect to be able to take advantage
of further opportunities to engage with our shareholder base (the majority of whom are basedoverseas).
Strategy:
– Consider holding another Board
strategy away session in 2022 to
discuss further the evolution of the
Strategy in view of recovery and hold
more structured discussion in Board
meetings against delivery of strategic
objectives.
A further Board strategy away session is planned for 2022. Strategy will continue to be a key area of responsibility
and direction for the Board as we shift our focus from surviving the pandemic and continue the path to recovery
and growth. Strategy remains a standing item on the Board agenda.
Executive retention:
– In light of the challenges of the last
couple of years and requirements
imposed as a result of the government
support schemes taken by the Group,
there is a concern of long-term retention
of the Executive LeadershipTeam
This has been an area of focus for the Remuneration Committee and will continue to be this year. Further details
of incentives aimed at retention are in the Remuneration Committee report and its proposed policy for 2022.
Please refer to pages 121 to 130.
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
For more information, please see the
Nomination Committee report on pages 109
to 114
Resourcing the Board to ensure it meets
its objectives and measures performance
against them
At all times, all Directors have access to the
Chief Corporate & Legal Officer to ensure that
they have appropriate, legally informed advice
on all governance matters. Where necessary,
Directors have access to independent, external
legal advice at the expense of the Company
should they require it in order to discharge
their responsibilities.
The Board carries out its duties with
reference to documented obligations set
outin law, contractual requirements, policies
and terms of reference. The Chief Corporate
& Legal Officer, aided by the Company
Secretary, Carey Commercial Limited,
ensures that the Board is adequately
resourced for effective and efficient function.
Carey Commercial Limited as Company
Secretary ensures that the Board procedures
are complied with at all times, and carries
out responsibilities set out in the Companies
(Guernsey) Law 2008 (as amended or
replaced from time to time).
The Chief Corporate & Legal Officer
oversees Group compliance with law,
practice and procedure and supports the
ESG Committee in the formulation and
execution of the Group’s ESG strategy
andobjectives.
Board meetings – Establishing
andpromoting a culture of debate
anddiversity
The Board values diversity of opinion
anddiffering viewpoints in executing its
responsibilities. The Chairman ensures that
time is made available for all opinions to be
heard. In particular, the Board values a clear
separation of responsibilities between the
Executive Leadership Team and the leadership
provided by the Board. This ensures proper
oversight, informed debate and diversity of
thought. Each member of the Executive
Leadership Team oversees certain defined
departments of the business and reports on
terms of reference which were updated
in2020 as part of this process were also
reviewed by the Board in 2021 and there
have been no changes.
Balance of independent Non-Executive
Directors
The Code dictates that at least half of the
Board, excluding the Chair, be made up of
independent Non-Executive Directors.
After due consideration was given to all
factors that are likely to impair, or appear to
impair, the independent judgment of each
Director, the Board concludes that three of
the four Non-Executive Directors who were
in place during the 2021 year maintained
their independence throughout their
respective tenures: Kenneth Bradley, Nigel
Keen and Stephanie Coxon. The remaining
Non-Executive Director, Kevin McAuliffe, is
not independent within the meaning of the
Code by virtue only of his tenure with the
Board. The Alternate Director and Executive
Board members are not independent.
In 2021, instructions were issued for
recruitment of a further, independent,
Non-Executive Director to be appointed in
Corporate governance
continued
the progress of these areas to the Board as
andwhen relevant. The Company believes that
this structure ensures effective communication
between the Board and the Executive
Leadership Team of the Company’s business,
and that no small group of individuals
dominates the Board’s decision-making.
Any concern expressed by Directors about
the Company or its subsidiaries, or a
proposed action, is recorded in the minutes
of the meeting. No such concerns were
recorded in 2021. Additionally the Senior
Independent Director takes responsibility for
ensuring that all viewpoints are available to
the Board.
Notices and review of any conflicts arising
The notices of Board meetings, agendas
andsupporting documents are formally
circulated to the Board in advance of Board
meetings as part of the Board papers.
Therefore Directors have the opportunity
torequest that any agenda items be added
that they consider appropriate for discussion.
At the beginning of each meeting, each
Director must disclose the nature and extent
of any conflict of interest arising generally or
in relation to any matter to be discussed as
soon as the Director becomes aware of its
existence. Directors must also disclose their
shareholdings and any changes to those that
have occurred.
Conflicts of interest
The Board and all team members are
required to comply with two policies: the
Conflicts of Interest Policy and the Significant
and Related Party Transactions Policy.
These policies are reviewed annually, and
compliance training is regularly refreshed.
The policies require that anyone with a
potential conflict of interest promptly and
without delay observes a formal procedure
for reporting it, and having it reviewed by the
Board with support from the Chief Corporate
& Legal Officer. A Director affected by a
conflict of interest is not permitted to
participate in formal discussions and
decision-making involving the interest at
stake. The Board does not believe there to
beany inherent conflicts of interest other
than ones already disclosed by each Director.
Any statutory duties under Guernsey law that
are in addition to the Conflicts of Interest
Policy are complied with by the Directors.
Annual Committee assessment
Each Board Committee is assessed annually
to ensure that it is functioning in line with the
relevant terms of reference and mandates
setby the Code. In 2019, the Board identified
a need to further review the terms of
reference in line with the Code and began
the process in 2020 which was continued
in2021. In 2021 the Board reviewed and
approved updates to the terms of reference of
the Audit Committee and the Remuneration
Committee and approved the adoption of
the terms of reference of the newly formed
ESG Committee. The Nomination Committee
2022 and the search currently is ongoing
with the professional assistance of the
recruiting firm OSA Recruitment.
The Board believes no one individual or
small group of individuals dominates the
Board’s decision-making.
Non-Executive Directors overseeing
management
The Company believes that the Board has
ample oversight by delegating the role of
overseeing management and scrutinising
their performance to the Chief Executive
who reports on the same to the Board.
The Non-Executive Directors are kept
abreast of management performance by
theChief Executive Officer. In addition,
members of the Executive Leadership Team
had monthly business update calls with the
Non-Executive Directors in 2021 and have
established a permanent forum to ensure
that information-flows and transparency
were well-maintained to enable the Board
the ability to effectively carry out its duties
and make swift decisions. This open
communication between the Non-Executive
Directors and Executive Leadership Team
has been found to be very effective as it
allows the Non-Executive Directors to
engage directly to ensure management
takescorrective actions in a timely manner.
Delegation and communication
betweenthe Board and the
ExecutiveLeadership Team
One significant outcome of the 2020 Board
Evaluation was on the increased interaction
and appropriate delegation of authority
between the Board and Executive
Leadership Team. As a result, in 2021,
monthly business update calls between
theBoard, the Executive Leadership Team
and senior management have taken place.
Sub-meetings attended by the Non-
Executive Directors directly after these
monthly updates also took place.
CULTURE AND VALUES – OUR POLICIES
Refreshed policies
– Code of conduct
– Whistleblowing Policy
– Responsible and
Ethical Sourcing Policy
– Related Party Transaction Policy
New policies
– Human Rights Policy
Policies reviewed
and unchanged
– Anti-bribery and
corruption policies
The aim of refreshing policies is to ensure that they remain current, are adapted to our business and support the desired culture and
behaviours of the Group.
Our policies and procedures aim to set a framework to empower team members to carry out their duties in line with our values and ethos.
While refreshing these policies, our Directors dedicated time to reviewing best-practice developments, assessing performance and
optimising our approach to ensure that our policies and procedures reflect the core values of the Group.
BOARD MEETINGS – PROCEDURES
Standing agenda items
1. Strategy
2. Management updates from
– Executive Directors
– Executive Leadership Team
3. Update on corporate governance
4. Activity reports from Board
Committee Chairs
Non-members in regular attendance
Deputy CEO & Operating Officer
Chief Corporate & Legal Officer
Regular Executive Leadership Team
attendance of Board meetings is part
of our succession plan
We seek to develop talent internally
Updates on corporate governance are
provided by the Deputy Chairman and
the Chief Corporate & Legal Officer
Additional items added to the agenda
when required
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Code of Conduct
Our Board sets the culture of the Company
by identifying the right behaviours and
periodically reviewing the application of
ourCode of Conduct in communicating
ourvalues and behaviours. Our Code of
Conduct was amended in 2021 to
incorporate reference to the Company’s
newHuman Rights Policy. This refreshed
Code of Conduct was approved in August
2021 with the endorsement and support of
our Board of Directors. The Code of Conduct
was guided by our Deputy Chairman, who
plays an integral role in ensuring that the
governance, values and purpose of the
Company are reflected in our business
policies and our approach to Responsible
Business initiatives.
Whistleblowing
The Company updated our Whistleblowing
Policy which was approved by the Board
inthe August Board meeting. The main
updates to the policy were based and, the
newEU Directive on whistleblowing and the
protection of people reporting wrongdoing.
The policy and the infrastructure supporting
it ensure that any team member in any region
has a 24-hour channel to report matters of
concern to them, secure in the knowledge
that any good-faith report will be taken
seriously, treated confidentially and that
theywill be free and safe from any reprisal.
WORKFORCE ENGAGEMENT
Kevin McAuliffe, Non-Executive Deputy
Chairman, has been tasked with gathering
the views of the workforce.
The views of the workforce are then shared
with the Board and considered in the
Remuneration, Nomination and Audit
Committee meetings and when directing
action and strategy on culture.
Workforce engagement
Our team members’ loyalty and dedication
has helped keep us going throughout the
pandemic. They understand our passion to
create the best possible experiences for our
guests. ‘The Big Welcome’ brought back our
furloughed team members and welcomed
new people to our teams, all eager to reopen
our doors and welcome back our guests.
In the UK, we introduced a new team
member forum to maintain strong, two-way
communication between leadership and
team members. This is a quarterly exercise,
and adds a new channel of communication
tothose existing in other regions.
Board site visits
The Non-Executive Directors completed site
visits to Holmes Hotel, Park Plaza London
Riverbank, Park Plaza Westminster Bridge
London and the art’otel London Hoxton
construction site. Due to the pandemic, site
visits were challenging to implement across
all of our properties, and are scheduled to
take placein 2022.
Pulse surveys
Some team members prefer to offer
theirfeedback anonymously, rather
thanface-to-face. Our ‘People & Culture’
team conducted annual pulse surveys.
These pulsesurveys took place after a
period of active recruitment, so included
many new team members as well as those
wehave enthusiastically welcomed back
after the lockdown period. It means we
havebeen able to get multiple perspectives
to help guide our activities.
These pulse surveys took place online on
ananonymous basis and were conducted
byan external partner. The overall responses
to the engagement questions were positive.
Further details of the results are set out on
page 105.
Corporate governance
continued
Values and purpose
Human rights and anti-slavery
The hospitality industry remains
highlyvulnerable to human trafficking,
inlarge partbecause it offers short-term
accommodations to the public.
As a Group we believe that awareness,
training to spot signs of trafficking, and
encouragement to speak-up, are critical
tomitigating the risk of human trafficking.
2021 saw refresher training on identifying
at-risk people and reporting through line
managers or through whistleblower hotlines
in the UK, with future roll out in other regions.
Human rights modules were also introduced
into our new ‘Learn & Grow’ training suite.
Further details of our ‘Learn & Grow’ training
programme are set out on page 77.
The Board also approved a new Human
Rights Policy for the Group in August 2021
which defines the basic standards of human
rights that our Group will adhere to at all
times and which we expect our business
partners to respect. These standards of
human rights also form the basis of our
Responsible and Ethical Sourcing Policy.
Workplace policies
Reflecting its introduction in the Code, the
Board has made more proactive efforts to
oversee and ensure that workforce practices
are consistent with the Company’s values
and support its long-term success. As with
2020, the Board has reviewed a number of
policies and the tools used to integrate them
into the Company culture as set out below.
Anti-bribery and corruption
We remain committed to ensuring our
business is operated ethically, with
transparency and integrity. As part of that
commitment, we continually update and
refresh our anti-bribery and corruption
policies and training.
ESG COMMITTEE
The Board established a new Environmental, Social and Governance
Committee (‘ESG Committee’) in 2021, which is comprised of two
independent Non-Executive Directors, Kenneth Bradley (Chair) and
Stephanie Coxon. The terms of reference of the ESG Committee
canbefound on the Company’s website.
Goal
The aim of the Committee is to
establish aunified view of ESG,
increasing understanding of all three
aspects of environmental, social and
governance, and to promote robust
standards of corporate governance
that integrate all these aspects.
ESG strategy
The ESG Committee meets quarterly
to review the wider ESG agenda, to
ensure we are on track to meet our
external and internal commitments,
and to discuss opportunities to
advance the agenda. In 2021, the
ESGCommittee, supported by our
Chief Corporate & Legal Officer
andthe Head of Compliance, played
an important role in reviewing and
helping to shape our TCFD reporting
and reporting plan and to build on
the Responsible Business programme.
The next goal of the ESG Committee
is to formulate a defined ESG
strategy, to help meet our ESG
targets and oversee TCFD reporting
requirements in 2022 and beyond.
Purpose
The Committee was constituted
bythe Board to:
– assist the Board in defining and
regularly reviewing the Group’s
strategy relating to ESG matters;
– provide oversight of the Group’s
management of ESG matters and
compliance with relevant legal and
regulatory requirements, including
applicable rules and principles of
corporate governance, and
applicable industry standards;
– report on these matters to the
Board in the quarterly Board
meetings and, where appropriate,
make recommendations to the
Board; and
– report as required to the
shareholders ofthe Company
onthe activities and remit of
theCommittee.
Members
Kenneth
Bradley
Chair
Stephanie
Coxon
See the Responsible Business section for
more information on pages 74 to 89
Support
– Chief Corporate
&Legal Officer
– Head of
Compliance
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
104 105
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
BOARD AND COMMITTEE MEETINGS
Board Committees
In accordance with the Code, the Company
has established the following Committees in
order to support the Board and carry out work
on its behalf:
– Nomination Committee
– Audit Committee
– Remuneration Committee
– ESG Committee
Terms of reference for each Board
Committee are available on the
Company’swebsite.
Our Board
Strategy. Purpose. Culture. Communications.
Sets the Strategy, commercial vision, leading with integrity, promoting culture.
Evaluates management, overseeing resources and talent pipeline, engaging with key stakeholders.
Nomination
Committee
Develops. Plans. Evaluates.
Nominates.
Oversees current needs and evaluates, plans for the
future, monitors, advises, nominates candidates.
Report available on pages 109 to 114
Audit
Committee
Transparency. Accuracy.
Monitors. Aligns.
Oversees risk management, internal controls, audit
functions and financial systems.
Report available on pages 115 to 120
Ensures the Board has a balance of skills, knowledge, diversity and experience.
– Board and Committee composition
– Board nominations
– Succession planning for Directors
– Succession planning for senior management
Monitors the integrity of the Group’s financial statements and internal
controls of the Company.
– Monitors and reviews the integrity of the Group’s half-year and full-year
financial results, and the financial reporting process
– Oversees risk management and reviews the effectiveness of the Group’s
systems of internal controls and risks
– Oversees ethics and compliance for the Company
– Reviews the Group’s internal and external audit functions
Remuneration
Committee
Values. Culture.
Talent proposition.
Oversees alignment of remuneration and workforce
policies to the long-term success of the Company and
its values.
Report available on pages 121 to 130
ESG
Committee
Future plans. Safeguards. Sustains
Oversees the approach to sustainability and adding value
for our people, our places and our planet. Responsible for
reviewing the TCFD report, and proposing strategy and
targets to the Board
Responsible for remuneration policy and for setting salary and bonus levels
for senior management and employee benefit structures.
– Remuneration policy
– Sets targets and incentive schemes
– Executive Leadership Team and senior management remuneration review
– TCFD reporting.
– Oversees the Group’s environmental and social impact
– Sustainability and ethics
BOARD AND COMMITTEE MEMBERSHIP
The Board and its Committees areregularly
evaluated on their composition and
effectiveness toensure that they have
awidecombination of relevant skills,
experience and knowledge.
Only Committee members are
entitledtoattend Committee meetings.
However, other Directors, management
andadvisers may beinvited, at the request
of the respective Chair, to provide updates,
information and insights into a particular
matter, answer questions and to assist the
Committee in carrying out its duties.
BOARD AND COMMITTEE MEMBERSHIP
B N A R E
Eli Papouchado
C
Yoav Papouchado Alternate Director
Kevin McAuliffe
Nigel Keen
C
Kenneth Bradley
C C
Stephanie Coxon
C
Boris Ivesha
Daniel Kos
Board of Directors Audit Committee
Nomination Committee Remuneration Committee
ESG Committee
C
Chair
BOARD AND COMMITTEE MEETINGS
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
B B B E B B
A B B B A A
N N B R R
R A N R
R N
E
B
Board
meeting
A
Audit
Committee
meeting
N
Nomination
Committee
meeting
R
Remuneration
Committee
meeting
Annual
General
Meeting
E
ESG
Committee
meeting
B
Ad-hoc
meeting
Corporate governance
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
106 107
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
BOARD AND COMMITTEE MEETINGS ATTENDANCE
If any Director is unable to attend a meeting, they communicate their opinions and comments on the matters to be considered via the
Deputy Chairman or the relevant Committee Chair. Full attendance is provided below.
Board Meetings
Audit Committee
Meetings
Remuneration
Committee Meetings
Nomination
Committee Meetings
ESG Committee
Meetings
Ad-hoc Board
Meetings
Attended
Eligible to
attend Attended
Eligible to
attend Attended
Eligible to
attend Attended
Eligible to
attend Attended
Eligible to
attend Attended
Eligible to
attend
Eli Papouchado 6 6 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Yoav Papouchado
Alternate Director
Kevin McAuliffe 6 6 N/A N/A N/A N/A 4 4 N/A N/A 1 1
Nigel Keen 6 6 4 4 4 4 4 4 N/A N/A N/A N/A
Kenneth Bradley 6 6 4 4 4 4 4 4 2 2 1 1
Stephanie Coxon 6 6 4 4 4 4 4 4 2 2 1 1
Boris Ivesha 6 6 N/A N/A N/A N/A N/A N/A N/A N/A 2 2
Daniel Kos 6 6 N/A N/A N/A N/A N/A N/A 1 1 2 2
BOARD MONITORING CULTURE
The Board takes steps to monitor the culture within the organisation.
The following tools allow the Board to keep abreast of workforce
culture:
– Pulse surveys
– Online guest reviews
– Social media
– Employer review sites
– Compliance training records
– Hotel audits
Data from these sources is available at Board level to monitor the
health of the culture within the business. Aligning culture to the
values and purpose of the business is key to success.
Nomination Committee report
Kenneth Bradley
Chair of the
Nomination Committee
Membership of the Nomination
Committee and meeting attendance
Name of Director
Meetings attended and
eligible to attend
Kenneth Bradley
(Chair) 4/4
Stephanie Coxon 4/4
Kevin McAuliffe 4/4
Nigel Keen 4/4
DEAR STAKEHOLDER,
I welcome the opportunity to report on the
work of the Nomination Committee for 2021.
Our focus this year has been on overseeing
the succession planning programme,
ensuring the talent pipeline is well
developed for tomorrow’s leadership and
leading the process of the annual Board
evaluation.
Our Board succession planning is on target,
with three new appointments made since Q2
2019, my own appointment included, and
two Non-Executive Directors stepping down
from the Board in that same period. We have
also commenced the search for an additional
Non-Executive Director to complement the
skillset of the Board, taking into
consideration the recommendation of the
Hampton–Alexander and Parker reviews.
I was pleased to see that our recent
succession planning activities, combined
with the continuity of experience, industry
knowledge and entrepreneurial flair of the
Board and Executive Leadership Team,
served the business well as it navigated
through the ebbs and flows of the pandemic
recovery process in 2021, while also ensuring
that the Group is well-positioned to
capitalise on future opportunities.
Nomination Committee membership
As of 31 December 2021, the Nomination
Committee is comprised of four Non-
Executive Directors, three of whom are
considered by the Board to be independent.
The independence of the Non-Executive
Directors is reviewed annually. No member
of the Nomination Committee is deemed to
have a personal financial interest in the
matters to be decided.
Corporate governance
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
108 109
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
NOMINATION COMMITTEE’S FOCUS IN 2021
Function Actions in 2021
Board and Committee
composition
– Evaluation of the composition, skills, experience, independence and
diversity of the Board
– Reviewed the results of the Board’s 2020 evaluation
– Instructed an external Board evaluation
– Considered the Committee’s own performance and constitution to
ensure it is operating at maximum effectiveness
– Implemented the requirements of the Board Diversity Policy in
settinginstructions for recruitment of a new Non-Executive Director,
inparticular, instructing that a list of candidates is prepared with the
requirements of the Hampton–Alexander and Parker reviews in mind
– Proposed formation of new ESG Committee and its membership
Board nominations – Engaged an independent specialist external search consultant to assist
with the appointment of an additional Non-Executive Director
– Preparing the criteria and instructions for the appointment of a new
Non-Executive Director and receiving regular updates from the
searchconsultant
– Finalised Director induction process
Succession planning for
Directors and senior
management
– Regularly reviewed and considered succession planning of the Board
level and Executive Leadership Team
– Prepared a roadmap addressing various contingencies
Diversity and talent
development
– Considered gender balance at senior management level and their
directreports
– Reviewed Diversity Policy
– Reviewed long-term nominations and commenced recruitment of a new
Non-Executive Director taking into account the requirements of the
Hampton–Alexander and Parker reviews
Workforce recruitment – Met relevant members of senior management on a monthly basis to
raiseand identify concerns relating to workforce such as recruitment
andtalent retention challenges and how to meet volatile demand
Succession planning programme – Board
After an exceptionally active period of
recruitment of just over two years which saw
the addition of three new Non-Executive
Directors to the Board and two Directors
leaving the Board, the main focus of the
Nomination Committee in 2021 has been on
evaluating the composition and functioning
of the Board in light of the new Board
members as well as road-mapping a
succession plan addressing the Committee’s
short-term, medium-term and long-term
concerns and different contingencies.
Given the regular interaction between
theBoard and the Executive Leadership
Team, the Committee has the required
exposure toevaluate internal candidates
when planning for different succession
eventualities. The Committee’s succession
planning process is aligned with the
Group’sentrepreneurial culture which
fostersthe growth and support of team
members from varying positions within
theCompany through to leadership level
and is, therefore, engineered to produce
internal candidates who may be suitable
forpositions on the Board, as well as
considering external candidates when
appropriate with the assistance of
externalspecialist search consultants.
As informed by the Committee’s succession
plan and its evaluation of the balance of
skillsand diversity on the Board, the
Nomination Committee determined
thattheBoard would benefit from the
appointment of an additional Non-Executive
Director and instructed an independent
specialist external search consultant, OSA
Recruitment, to assist with finding a suitable
candidate. OSA Recruitment have no links to
the Company or any Directors. The instructions
and search criteria prepared by the Committee
specified that any list of candidates must bear
in mind the requirements of the Hampton–
Alexander and Parker reviews, as well as
thepending updates to the Listing Rules
inrelation to diversity in order to curate
adiverse candidate shortlist. The search
remains ongoing.
As an important element of the succession
planning programme, consideration is also
given to the length of service of Board
members. However, given the recent refresh
of the Board, the balance of composition
between the newly appointed and more
tenured members was critical in ensuring the
Company remained focused on long-term
strategy and was able to offer stability and
security during the challenges presented
in2021.
While the consideration of the Code’s
emphasis on tenure remain of fundamental
importance to the Group, the Board is
strongly of the belief that in its current
composition, it has the right combination
ofskills, experience and knowledge and
remains effective and entrepreneurial and
will be further enhanced by the addition of a
new Non-Executive Director once the right
candidate satisfying the Committee’s criteria
is found.
Succession planning programme –
Executive Leadership Team
In consideration of the appointments made to
the Executive Leadership Team in 2019, which
took effect on 1 January 2020, the Board
believes succession planning is effective for
senior management and in keeping with the
spirit of Principle J of the Code. The Chief
Executive Officer, who sits on the Board and
remains in regular discussion with the Board,
directs succession planning at the senior
management level and does so in
coordination with the Chairman, Deputy
Chairman and the Board on the whole.
In directing succession planning, Principle J
is applied to ensure that succession is based
on merit and objective criteria and within this
context promotes diversity of gender, social
and economic backgrounds, cognitive and
personal strengths.
Independence and tenure of the
Chairmanof the Board
The Code recommends that the Chair of
theBoard should not remain in their post
beyond nine years from the date of their
firstappointment (although such time
canbeextended to facilitate effective
succession planning and development
ofadiverse Board) and that the Chair shouldbe
independent on appointment. These provisions
are intended to ensure that the Chair is
independent of management. However, the
Nomination Committee is of the view that Mr
Papouchado’s investment in the long-term
success of the Company allows him to lend a
critical eye to management inan independent
and objective manner andaligns his interests
with those of other shareholders.
The Committee is also of the view that the
presence of a non-independent Chairman on
the Board is mitigated and counterbalanced by
the fact that half of the Board (excluding the
Chairman) is constituted byindependent
Non-Executive Directors as prescribed by the
Code, providing balance to the Board’s
decision-making process andensuring that no
individual is able to dominate decision-making.
Nigel Keen’s role as Senior Independent
Director also acts as a check to maintaining
appropriate governance of the Board,
servingas an intermediary for other
Directors,offering a line of communication
with shareholders and challenging the Board
(including the Chairman) when he deems
necessary. The Committee is of the view
thatthis function, along with Kevin McAuliffe’s
role of Deputy Chairman which primarily
comprises the oversight and progress of
corporate governance for the Board, mitigates
the risks associated with having a Chairman
who is not deemed to be independent.
The Group’s continuing recovery from
theeffects of the pandemic has been
characterised by bouts of progress
combined with volatile demand and
disruptive changes in regulations. In the
context of this environment, the presence
ofexperience and continuity on the Board
has been essential to safeguarding the
resilience of the business and identifying
growth opportunities to support recovery
forthe benefit of shareholders. As well
asproviding much-needed stability, Mr
Papouchado’s rarecombination of expertise
in both real estate and hospitality is uniquely
suited toour business model. In setting the
Company’s purpose, strategy and objectives,
the Board leverages Mr Papouchado’s vision,
wealth of knowledge, network and intuition
earned through his many successes spanning
more than six decades in construction,
design, development, financing, acquisition
and management of leading hotels, retail
spaces, large residential projects and his
leadership as Chairman of the Israel Hotel
Association. The Board (endorsed by the
Committee) believes that these attributes are
an imperative asset to the Group during
thisdelicate period of recovery.
The Board engages in active correspondence
with representatives of independent
shareholders in order to remain in tune
withand guided by shareholder views.
As shown by our recruitment efforts in
recruiting three Non-Executive Directors
inthe past two years in spite of the
unprecedented market conditions, as
wellasthe introduction of a shareholder
advisory vote on our Remuneration report
and Remuneration Policy, we strive to
implement actions to remediate concerns
and enhance Code compliance wherever
possible. However, the Nomination
Committee and the Board as a whole have
given due consideration to Provisions 9 and
19 of the Code, and both categorically and
unanimously agree that Mr Papouchado’s
continuation in the role of Chairman in the
upcoming year will contribute to the
Company’s long-term sustainable success.
The Committee and the Board will keep their
decision to diverge from Provisions 9 and 19
(service of a Chair for a period longer than
nine years) under constant review but
recommend his reappointment as
Chairmanin 2022.
Nomination Committee report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
110 111
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
SUCCESSION PLANNING, DIVERSITY AND BOARD AND COMMITTEE REVIEWS
MARCH 2021 MAY 2021 AUGUST 2021 DECEMBER 2021
ESG Committee
formation
B
Audit Committee
evaluation
B
UK Gender Pay Gap
Report
B
External Board
evaluation
B
Review of Board
evaluation results
B
Audit Committee
evaluation
A
UK Gender Pay Gap
Report
N
Succession planning
discussion
B
Discussion on succession
planning at senior
management level
andBoard level
N
Review of Non-Executive
Directors directorship
terms
B
Gender balance at senior
management level and
reporting employees
N
Audit Committee –
Annual work plan and
2022 objectives
A
Discussion on gender
balance at senior
management level and
reporting employees
N
Report on gender
balance at senior
management level and
reporting employees
N
2021 Board evaluation
process and timing
discussion
N
Succession planning
discussion
N
Review of 2020 Board
evaluation results
N
Review of Non-Executive
Directors directorship
terms
B
Board Diversity Policy
review
N
Nomination Committee
– Performance and
constitution
N
Remuneration Committee
– Performance and
constitution
N
B
Board meeting
A
Audit Committee meeting
N
Nomination Committee meeting
Board induction
The Deputy Chairman, Chair of the
Nomination Committee and Chief Corporate
& Legal Officer are responsible for ensuring
that new appointees to the Board receive
atailored and comprehensive induction
tofamiliarise them with the Company’s
strategic aims, purpose, operations,
regulatory climate, stakeholders, Directors’
duties and governance practices. We tailor
our programme taking into consideration
theDirector’s previous Board experience,
expertise and familiarity with the real estate
and hospitality industries. The induction
process includes two interviews with the
Deputy Chairman before the programme
commences and mid-way to identify anygaps.
One key objective for the Nomination
Committee is to continually improve on
ourBoard induction programme. As a
Boardwe agree that the induction process
should introduce the new appointee to key
stakeholders and the culture of the Board
and the Company as a whole. The induction
also allows new appointees to gain an
appreciation of their role in the success of
the Company, how the Company measures
success and the expectations of all key
stakeholder groups. The induction must be
tailored to the individual Director without
neglecting the key elements of our induction
programme. For that reason, in 2021 the
Committee developed a remote induction
programme on the key features of the
Boardand Director responsibilities with
atailored approach to take into account
theDirector’s experience.
The newly appointed Non-Executive
Directors continued their induction
programmes in 2021 by carrying out
hotelfamiliarisation visits across the UK
hotels(as well as the art’otel London
Hoxtonconstruction site). A more extensive
visitation programme, including visits to
Croatia, Austria, Rome and the Netherlands,
is planned for 2022 to the operations of
theGroup’s newly acquired and newly
refurbished hotels and will give them
furthercontextual understanding when
discharging their responsibilities.
The Committee is also working on a modular
Director training programme for all Directors
of the Group’s subsidiary companies across
the various jurisdictions in order to enhance
corporate governance at subsidiary level.
Board evaluation
The Board evaluates its performance and
considers the tenure of each Director on an
annual basis, and believes that the mix of skills,
experience and length of service is appropriate
to the requirements of the Company. This
feeds into considerations for succession
planning for long-serving Directors.
An external evaluation of the Board is facilitated
by the Committee every three years. As such the
Committee instructed an external consultant to
carry out the 2021 Board evaluation.
During 2021, the Board improved the
frequency of interaction between its
Non-Executive Directors and Executive
Directors which increased the flow of
information to the Non-Executive Directors
and ensured that they were contemporaneously
kept abreast of key business developments,
in turn allowing them to better carry out their
functions in alignment with the goals of the
Group. The Non-Executive Directors also
meet separately allowing them to carry out
their independent functions.
Annual re-election of Directors
As required by the Code, all Directors will
besubject to re-election at the next annual
general meeting.
Diversity
In accordance with Provision 23 of the Code,
the Nomination Committee considers the
gender balance of those in senior management
and their direct reports.
Our Board and Executive Leadership Team
consists of both men and women and
includes talented and committed individuals
whose business experience, geography, age,
gender and ethnicity are varied.
The Committee reviewed the composition
ofthe Board in 2021, and in doing so believes
that there is a depth of diversity with regard
toanumber of characteristics, experience
andskill sets. Gender diversity remains as an
area of improvement at the Board level, and
theCompany is committed to driving progress
in this regard.
The Board maintains a Gender Diversity
Policy which is reviewed annually by the
Nomination Committee and proposed for
annual adoption by the Board. In proposing
the policy, the Nomination Committee
recommends changes where it deems
appropriate in light of the current Board
composition. The diversity policy approval
process is open to discussion and debate.
The Board again considered the benefit of
setting diversity targets in order to close the
gap with regard to gender diversity.
Nomination Committee report
continued
EXTERNAL BOARD EVALUATION
Purpose and process
The purpose of the 2021 review of the Board and Committees was to assess their performance against peers and market standards.
INDEPENDENT
VIEW
– External third
parties provide a
new insight into
improving efficiency
– Performance
benchmarked
against peers and
market standards
IMPROVEMENTS
– We seek constantly
to improve
efficiency
– Internal evaluations
in 2019–2020
– Recommendations
and outcomes
reviewed
SCOPE
– The evaluation
covered the full
scope of the
Boardand each
Committee
OUTCOME
– Recommendations
– Suggestions
– Overall assessment
of Board
effectiveness
CONCLUSION
– View a summary of
the evaluation on
page 101
BOARD EVALUATION
YEAR 1 YEAR 2 YEAR 3
Financial Year 2019
Internal evaluation
Financial Year 2020
Internal evaluation against Year 1
review
Financial Year 2021
External evaluation
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
112 113
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
BOARD
Gender diversity
DIRECT REPORTS TO CHIEF
EXECUTIVE OFFICER
Gender diversity
THEIR DIRECT REPORTS
Gender diversity
Male
Male
Male
Female
Female
Female
86%
63%
70%
14%
37%
30%
As of 31 December 2021, the Board ratio includes all
Executive and Non-Executive Directors (and excludes the
Alternate Directors).
The benefits of diversity are that the Board
isable to provide the Executive Leadership
Team with a wide range of experiences
andperspectives. The more diverse the
background of Board members, the broader
the range of ideas that can bring innovation
to our Company’s mission.
Given that we have a relatively small Board,
we are acutely aware that even an individual
appointment can heavily skew our diversity
balance. We are absolutely committed to
appointing suitable candidates on the basis
ofmerit, with the primary objective of finding
Directors whose skill set best reflects the
needs and nature of the business for the
benefit of our stakeholders. This does not
prevent us from putting the benefits of
diversity at the heart of our search for new
voices within our leadership. The recruitment
process is informed by the recommendations
outlined in the Hampton–Alexander and
Parker reviews as well as the pending updates
to the Listing Rules in relation to diversity.
This means we can be sure that we are
presented with a list of potential recruits
thatincludes the diversity we value.
All appointments are viewed holistically and
in consideration of various factors which are
relevant to any vacancy. In compliance with
Provision 23 of the Code, the Nomination
Committee is tasked with ensuring the
policyon diversity and inclusion links to the
objectives of the Company and Company
Strategy and reviewing how the policy has
been implemented and progressed to
achieve its objectives.
Senior management
The Board and senior management are a
unified voice for the Company’s strategic
growth weaved together by individual
Directors each with their own experience,
skill set, expertise and background.
The diversity and inclusivity of our entire
team are important for us to bring the best
to our business and understand and reflect
the needs and perspectives of our guests
and other key stakeholders. We are fully
committed to respect and deliver fair
treatment for everyone whatever their
background, race, ethnicity, gender or other
protected characteristics (as defined within
the Equality Act 2010) and deliver opportunity
and development for all of our team members,
guests and stakeholders. In accordance with
the Code, the work of the Nomination
Committee includes giving consideration
tothe gender balance of those in senior
management and their direct reports.
Workforce
Where possible, we actively support events
in our community that celebrate diversity
and inclusion. For further details refer to
page 78.
Diversity, in all respects, is of great value
incollective decision-making at every level
of the organisation. Our Diversity Policy,
andindeed our approach to recruiting
newDirectors and other members of the
Executive Leadership Team and setting
upour talent pipeline, supports a culture
ofinclusion and diversity.
Kenneth Bradley
Independent Non-Executive Director
Chair, Nomination Committee
Audit Committee report
Stephanie Coxon
Chair of the
Audit Committee
DEAR STAKEHOLDER,
I am pleased to present the Company’s
AuditCommittee report for 2021. The 2021
financial year was another difficult year for
the Group, and I would like to personally
thank the Executive Leadership Team and
staff for their continued hard work.
The complexities and varied conditions
presented over the course of year required
theAudit Committee to remain agile in its
approach. This involved adapting the internal
auditplans to make sure they aligned with
thekey risks highlighted in the Company’s
riskmanagement system and monitoring
resourcing to enable the internal audit function
to deliver on various assurance programmes.
Starting the year, and following my first
reporting period with the Group, a
comprehensive Audit Committee evaluation
was undertaken. Findings from this
evaluation were built into the objectives of
the Audit Committee for 2021, and these can
be found on page 117. I am pleased to say
that good progress has been made in these
areas and the details will be discussed over
the coming pages.
The Audit Committee directs and oversees
the changes to, and implementation of,
effective risk management measures in
response to the evolution of the business,
itsresources and its strategy. Implementing
effective risk management isabout
accurately identifying risks and maintaining
that oversight to accurately trackthose
changes and being able to effectively
communicate it in a transparent and
digestible manner to all levels of management
within the business. The Audit Committee
uses the risks from the Company’s Enterprise
Risk Management (ERM) system (as set out
on pages 26 to 34) as the main basis to
determine the AuditCommittee’s focus
areas. An area of focus this year has been
working through how the impact of climate
change is to be incorporated into the ERM
system; further details on this can be found
on page 87 to 89.
In line with the 2021 internal audit work plan,
the Audit Committee instructed the Head
ofInternal Audit and Risk to perform work
focused on the following:
– Treasury – to assess the effectiveness of
key controls across cash flow and working
capital management, banking administration,
debt covenant oversight and reporting
– Employee share option scheme
management – to assess the effectiveness
of the steps taken by the Executive
Leadership Team to plan, communicate
andadminister the scheme
– Franchise management – to assess the
current status and effectiveness of the
Company’s franchise management and
oversight arrangements
Nomination Committee report
continued
Membership of the Audit Committee
andmeeting attendance
Name of Director
Meetings attended and
eligible to attend
Stephanie Coxon
(Chair) 4/4
Kenneth Bradley 4/4
Nigel Keen 4/4
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
114 115
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
– GDPR compliance – to assess the existing
framework for ensuring the Company’s
compliance in terms of data governance,
data processing and breach reporting
– Cyber security – setting the scope and
overseeing the third party review of cyber
security through penetration testing of the
Company’s core infrastructure
All these areas were highlighted in the
ERMsystem.
Internal audit has also started their review
ofthe effectiveness of the financial controls
maintained by the Company focusing mainly
on the treasury function. I am pleased to
report that an additional resource was added
to the internal audit team from beginning of
2022 to assist with the internal audit
programme in 2022.
The Audit Committee is also tasked with
safeguarding the quality of our financial
andnon-financial reporting, which is of great
importance to the Audit Committee and the
Board. The Audit Committee has had robust
conversations with senior management and the
external auditors on the continued impact of
the pandemic on the financial statements,
going concern and viability statement. The
Audit Committee has also been working closely
with the ESG Committee to make sure that the
TCFD and broader ESG disclosures are fair,
balanced and understandable in the context
ofthe wider Annual Report and Accounts.
The Audit Committee believes that the robust
risk management processes that we have in
place ensure that the Company is able to
successfully deal with ever-changing
circumstances as we progress towards a
return to pre-pandemic operations.
AUDIT COMMITTEE’S FOCUS IN 2021
Function Actions in 2021
Monitor the Group’s
financial statements
– Reviewed the form and content of the Annual Report and Accounts,
toensure that it is fair, balanced and understandable, and the
associatedannouncements
– Reviewed the Interim Report and Financial Statements for the period
ended 30 June 2021 and the related announcements
Monitor and review the
effectiveness of the Group’s
system of internal controls
and risks
– Received regular updates on the internal audit and enterprise risk
management, including:
• financial control framework
• risk incidents and mitigating actions
– Received regular updates on and reviewed emerging risks
– Updated principal risk schedule and ERM framework
– Conducted internal assessment of the Audit Committee’s performance
to ensure effectiveness
– Set the internal audit plan for FY21 and monitor the progress throughout
the year. Selected deep-dive internal audits over areas highlighted in the
ERM system, e.g. cyber security and data protection
– Monitored and reviewed the effectiveness of internal audit function
– Considered the structure of internal audit and consider the use of data
analytics to assist in this area
– Assess reporting from subsidiaries
Oversee ethical dealings
and compliance for the
Group
– Reviewed Significant and Related Party Transaction Policy
– Reviewed and approved a number of the Group’s updated ethical policies
including its Whistleblowing and Anti-Bribery & Corruption policies
– Reviewed the Policy for the Approval of Non-Audit Services
– Reviewed the financial management information being presented to the
Board to make sure it is fit for purpose
– Met with compliance and governance teams for update on compliance
and governance matters
Review the Group’s external
audit function
– Considered the audit and interim planning report from the external auditor
– Considered the annual and interim findings report from the external auditor
– Regular communications with the external auditor during the audit process
– Met with subsidiary auditors to discuss the status of the subsidiary audits
– Evaluated the performance of the external auditor
– Considered the tenure of the external auditor
– Considered the external auditor’s independence and non-audit services
The composition of the Audit Committee is regularly considered by the Board and the
Nomination Committee. The Board is satisfied that the Audit Committee is properly
structured and can properly discharge its duties, including in light of the nature of the
Group’sbusiness and the sector in which it operates.
Audit Committee schedule and resources
Following the recommendation from the
Audit Committee in 2020, the Audit
Committee meetings are now scheduled a
week ahead of the Board meeting, wherever
possible, to allow for any work arising from
the Audit Committee meeting to be carried
out and reported to the Board as appropriate.
The Audit Committee members had access
to ask questions or request ad-hoc meetings
from the Executive Leadership Team, key
members of the corporate teams, the
external auditors, external auditors of the
subsidiaries and any other member of the
Company as they requested.
The Audit Committee receives monthly
financial, IT and operational performance
updates from the Chief Financial Officer,
Deputy Chief Executive Officer, Chief
Corporate & Legal Officer and the Regional
Vice Presidents.
The Audit Committee Chair also receives
monthly updates on non-financial reporting
areas, such as enterprise risk, internal audit
matters and updates on the financial
controlframework from the Head of Internal
Audit and Risk, who reports directly to the
Audit Committee.
The Audit Committee is satisfied that it
hadaccess to the resources necessary
todischarge its responsibilities in 2021.
Relationship with the Board
The Audit Committee was provided
withadequate time in Board meetings to
resolve any matters of conflict between the
Board and Audit Committee. Had any such
disagreement remained unresolved, the
Audit Committee has the right to report
theissue to the shareholders as part of the
report on its activities in the Annual Report.
Accordingly, the Audit Committee reports
that there were no such unresolved
disagreements and matters presented by the
Audit Committee were discussed in full, and
to resolution at the Board meetings in 2021.
Audit Committee report
continued
ROLE OF THE AUDIT COMMITTEE
The Audit Committee plays a key role in
assisting the Board to:
– observe its responsibility of ensuring
thatthe Group’s financial systems
provide accurate and up-to-date
information on its financial position;
– ensure the Group’s published
consolidated financial statements
andrelated announcements represent
anaccurate and fair reflection of its
financial position;
– manage and monitor the Company’s
risk,both financial and non-financial;
– ensure that appropriate accounting
policies, internal financial controls and
compliance procedures are in place; and
– review and assess the quality of the
external audit process as well as the
external auditor’s independence.
The Audit Committee receives and reviews
information from the Deputy Chief
Executive Officer, the Chief Financial
Officer, the Chief Corporate & Legal
Officer, the Head of Internal Audit and Risk,
the internal legal, compliance, audit and
risk teams and the external auditors
regularly throughout the year in order to
allow it to carry out its functions. Carey
Commercial Limited carries out Company
Secretary services to ensure the Audit
Committee has the policies, processes,
information, time and resources needed
tofunction effectively and efficiently.
TheAudit Committee regularly reports
tothe Board on how it has discharged its
responsibilities.
The Audit Committee’s terms of reference
can be found on the Company’s website.
Effectiveness of the Committee
Following the Audit Committee Chair’s first
reporting period with the Company, a
comprehensive Audit Committee evaluation
was performed by the Audit Committee
Chair to assess the effectiveness of the Audit
Committee and ensure the composition and
work of the Audit Committee complies with
the Code. While it was concluded that the
Audit Committee remained effective, there
were areas of focus identified and built into
the objectives of the Audit Committee.
The focus areas of the Audit Committee
thisyear have been around:
– Financial controls – to understand
thefinancial control environment and
oversee an assurance programme to test
the effectiveness of the controls in place
– External audit – to make sure the Audit
Committee challenged and were
comfortable with the external audit
approach given the continued impact of
the pandemic and external audit work due
to perform around the control environment
– Internal audit plan and resourcing – to
ensure an internal audit plan is set which
aligns to the risks highlighted in the ERM
system and that the internal audit team
have enough resources to deliver the plan.
– Management information – to make
surethis is fit for purpose to allow for
theNon-Executive Directors to make
informed decisions
– ESG – working alongside the ESG
Committee to ensure that the TCFD
reporting, in the accounts are fair,
balanced and understandable and
incorporating the impact of climate
change into the Group’s risk
management system
Relevant skills and experience
The Audit Committee is comprised entirely
of independent Non-Executive Directors,
each having relevant skills and experience
as prescribed by the Code and each
bringing an independent mind-set to
theirrole. The Audit Committee, as a
whole, has the competence relevant
tothesectors in which the Company
operates and the Chair, among others
within the membership, have recent
andrelevant financial experience. For
further details please see the Directors’
biographies on pages 94 to 95.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
116 117
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
External audit and external auditors
Kost Forer Gabbay & Kasierer, a member of
Ernst & Young Global, are the Company’s
external auditors. The Audit Committee
considers the appointment, re-appointment
and removal of the external auditors, reviews
their terms of appointment and negotiates
fees on behalf of the Board prior to making
recommendations through the Board to the
shareholders to consider at each Annual
General Meeting.
The Audit Committee annually assesses, and
reports to the Board on, the independence
and performance of the external auditors
and the quality of the audit process, with a
recommendation on whether to propose to
the shareholders that the external auditor be
re-appointed. Kost Forer Gabbay & Kasierer
were re-appointed for a further tenure of one
year at the Company’s Annual General
Meeting in 2021.
The 2021 external audit will be Kost Forer
Gabbay & Kasierer’s eighth year of
appointment as the Company’s external
auditors (16th year of an Ernst & Young
Global member firm). The Company has a
policy of tendering the external audit at least
every 10 years. The Audit Committee will
keep the need to retender the audit under
continual review, and will consider if such a
retender process should be initiated sooner
than 2024.
Kost Forer Gabbay & Kasierer have
expressed their willingness to continue
inoffice as auditors and a resolution to
re-appoint them for a tenure of one year
willbe proposed at the forthcoming Annual
General Meeting.
Overseeing external auditors
In addition to the Audit Committee
meetingformally with the external auditors,
the Chair of the Audit Committee has met
them informally on four further occasions.
These informal meetings have been held
toensure the Chairman is kept up-to-date
with the progress of their work and that
theirformal reporting meets the Audit
Committee’s needs.
In December 2021, the external auditors
presented their proposed audit plan to
theAudit Committee for discussion.
The objective of this was to ensure that the
focus of their audit aligned to the Group’s
key risks and strategy. The Audit Committee
also arranged for the external auditors to
present their findings to them following
theirannual audit, which provided the
AuditCommittee with a forum to raise
queries and questions. The findings of the
Audit Committee were then discussed with
the Board and other relevant management
functions. Following this analysis, and
additional meetings with the external
auditors, the Audit Committee can confirm
that it is satisfied with the Group’s external
audit functions and the integrity of its
financial and narrative statements.
During the year the Audit Committee have
asked the external auditors to look at two
main areas:
– Business combinations – at the date of
acquisition the external auditors were
consulted to ensure the transaction was
accounted for correctly. The external
auditors liaised with their own technical
department with the terms of each
transaction and confirmed the accounting
treatment used by the Group was in
accordance with IFRS 3.
– TCFD disclosures – we asked the external
auditors to provide specific feedback on
the Group TCFD disclosures included in
this report. The external auditors, using
their ESG specialists, reviewed the TCFD
section and provided feedback which
subsequently was added to the TCFD
report included in these accounts.
When the external auditors present their
findings the Audit Committee request that
management are not present for part of
themeeting to ensure that the External
Auditors are able to speak freely and
shareany views without management
beingpresent. This also allows the Audit
Committee to understand how the external
auditors had been processionally sceptical
intheir procedures and discuss any areas
which theyhave challenged management
on.No concerns were raised by Kost Forer
Gabbay & Kasierer as part of this meeting.
The key audit matters raised by the external
auditors are included in their audit opinion
on pages 136 to 139.
Review of the external auditors
The Audit Committee reviewed the
independence and objectivity of the
externalauditors and reported to the
Boardthat it considered that the external
auditors’ independence and objectivity
weremaintained.
This review included discussions with the
external auditors at various meetings,
reliance on the external auditors’ own
internal controls for compliance with
independence rules and ensuring
compliance with the Non-Audit Services
Policy (as further described below).
When evaluating the independence of the
external auditors, the Audit Committee also
took into consideration the quality of the
audit produced, the constitution of the audit
team being used by Kost Forer Gabbay &
Kasierer, communications between
management and the external audit team
and generally how the external audit team
interacts with and challenges management.
The Audit Committee performed a
comprehensive evaluation on the
performance of the external auditors
duringthe year. The feedback showed an
overall level of satisfaction, however there
was some additional information the Audit
Committee felt would be helpful to receive,
for example; insights around upcoming
corporate governance changes and TCFD
reporting requirements. The audit fees due
to the external auditors amounted to
£268,586 (2020: £249,422).
Policy on engaging external auditor to
supply non-audit services
The Audit Committee monitors the Group’s
relationship with its external auditors
considering what impact the provision of
non-audit services may have on the auditors’
independence and objectivity.
The Company has adopted a policy on
theengagement of the external auditors to
supply non-audit services. The policy sets
out the circumstances and financial limits
within which the auditors may be permitted
to provide certain non-audit services,
whether a tender process is considered
fornon-audit services and any information
which must be considered to ensure that
thenon-audit services do not impair the
objectivity and independence of the auditors.
The policy is in line with the recommendations
set out in the FRC’s Guidance on Audit
Committees (2016) and the requirements of
the FRC’s Revised Ethical Standard (2019).
The Audit Committee regularly reviews this
policy for necessary changes in response to
changes in related standards and regulatory
requirements and monitors compliance with
this policy.
Total non-audit fees amounted to £61,783
(2020: £64,598) consisting of the interim
review of the Group’s half-year financial
results. Although this is considered to be
anon-audit service, the objective of the
interim review is aligned with the audit.
The Audit Committee considered the
provision of the non-audit service during
the2021 year and was comfortable that
thenature and extent of non-audit services
provided did not present a threat to the
external auditors’ objectivity or independence.
Internal audit
The Company has an internal audit and
riskfunction which reports directly to the
Audit Committee Chair. This reporting
lineensures the internal audit function
maintains appropriate independence from
the Executive Leadership Team and senior
management. The Head of Internal Audit
andRisk maintains a dotted line reporting
function to the Chief Financial Officer who
isan Executive Board member.
The Audit Committee has followed the
Financial Reporting Council’s Guidance on
Risk Management, Internal Control and
Related Financial and Business Reporting.
The Audit Committee monitors and reviews
the effectiveness of the internal audit
function and meets with the Head of
InternalAudit and Risk on a monthly basis
toreview the progress of the internal audit
programme, among other things. The Audit
Committee meets with the Head of Internal
Audit and Risk at each Audit Committee
meeting and does so without the presence
of the Board and the Executive Leadership
Team, unless specifically invited by the Chair,
to discuss matters relating to its remit and
any issues arising from the internal audits.
On an annual basis the Audit Committee
meets with the Head of Internal Audit
andRiskto agree the work plan for the
yearahead. The Audit Committee also
reviews whether the Head of Internal
AuditandRisk has the proper resources to
enable him to satisfactorily complete such
work plans. The Audit Committee identified
that additional resource was required in the
internal audit team to meet the internal audit
work plan set out by the Audit Committee.
As a result, a new team member joined
inearly 2022 with a focus on providing
internalaudit assurance over the financial
internal controls.
Throughout the year, the internal auditor
reports on the progress of the internal audit
work plan and action point status. The Audit
Committee regularly reviews reports and
considers the Board’s response to any major
findings, providing support, if necessary, for
any follow-up action required and ensures
that the team obtains free and unrestricted
access to all Group activities, records,
property and personnel necessary to fulfil
itsagreed objectives.
The Audit Committee is satisfied that the
quality, experience and expertise of the
internal audit function was appropriate for
the business.
Looking forward to the future, the internal
audit team are looking at data analytics and
how this can be used to monitor real time
and provide some real insights to the Audit
Committee and the business.
Audit Committee report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
118 119
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Financial controls
At the beginning of 2021 the financial control
framework mapping out all financial controls
across the business had been finalised and
reviewed by the Chief Financial Officer.
During 2021 a self-certification from the
finance functions confirmed that key internal
controls within their area of responsibility
have been operating effectively.
Enterprise Risk Management (ERM)
The Board is responsible for risk
management with guidance from the Audit
Committee. A standing agenda item in every
Audit Committee meeting is consideration of
the Company’s risk register, with the main
focus on key risks.
The Audit Committee monitors the
Company’s risk management system and
controls to review their effectiveness.
The Group’s risk profile and mitigating
activities are also regularly monitored by
theAudit Committee, who are kept apprised
of emerging business risks and concerns.
Informed by these activities, the Group risk
appetite strategy is set by the Board at the
recommendation of the Audit Committee.
Risks which are inherent to all businesses
either by region, standard business activity,
nature of our industry or due to social and
geopolitical causes are also reviewed by
theAudit Committee with the aim of
implementing appropriate controls and
monitoring systems. When reviewing risks,
the Audit Committee takes into account
material external socioeconomic and
geopolitical matters.
The internal audit and risk function continues
to work with the various business functions in
order to formulate: (i) functional level risk
registers; and (ii) an emerging risk profile.
The Audit Committee oversees the ERM
function and continuously reviews and
challenges the output. To ensure the ERM
function’s independence and objectivity,
theHead of Internal Audit and Risk reports
directly to the AuditCommittee.
The Head of Internal Audit and Risk has
worked closely with a third party consultant
on incorporating climate change risks into
the ERM system. This process has been
overseen by the Audit Committee and for
further details on these risks please see the
TCFD report on pages 87 to 89.
The detailed assessment of the principal risk,
emerging risks and uncertainties facing the
Group is included on pages 28 to 34.
Financial reporting
The Audit Committee has reviewed the
Annual Report and Accounts. In its opinion,
taken as a whole, it is fair, balanced and
understandable and provides the
information necessary for stakeholders to
assess the Company’s position and
performance, business model and strategy.
The Audit Committee reviews draft annual
andinterim reports. The Audit Committee
discusses with the Chief Executive Officer,
Deputy Chief Executive Officer, Chief Financial
Officer and external auditors the significant
accounting policies, estimates and judgments
applied in preparing these reports.
The overall responsibility for approving
annual and interim statements and other
governance statements is carried out by the
Board, in accordance with the Schedule of
Matters Reserved for the Board.
In relation to the 2021 Annual Report and
Accounts, the significant issues considered
and where the Audit Committee challenged
the Executive and senior management were
the following:
– Going concern – This continued to be an
area of focus for the Audit Committee.
The Audit Committee considered the
appropriateness of the going concern
assessment and associated judgments
around material uncertainties as disclosed
in Note 1(c) to the financial statements.
– Business combinations – At the time of
each acquisition the Audit Committee
hadrobust conversations with senior
management over the accounting
treatment for the business combination.
Advice was sought from the external
auditors to ensure the business
combinations were accounted for in
accordance with IFRS 3.
– Impairment testing – The Group’s
impairment review requires significant
judgment in estimating the recoverable
amount of its intangible assets, property,
plant and equipment and the IFRS 16
right-of-use asset. The Audit Committee
reviewed a paper prepared by
management which outlines their
approach to impairment reviews.
The Audit Committee had a robust
conversation with the Chief Financial
Officer on the methodology used to
determine the impairment reviews.
– Alternative Performance Measures – The
Audit Committee in reviewing the Annual
Report and Accounts has challenged
management on their use and definitions
of APMs. As a result an APM glossary has
been added at the back of the Annual
Report and Accounts.
– Climate change / ESG – As mentioned
earlier in this report, the Audit Committee
has had in depth conversations with the
Head of Internal Audit and Risk when
overseeing the implementation of climate
change risks into the ERM system.
The Audit Committee had a robust
discussion over the key assumptions and
judgments used in assessing for impairment.
In addition, the other significant issues
generally considered relate to the complexity
of the financial statements due to the size of
the Group and the multiple legal entities.
Stephanie Coxon
Independent Non-Executive Director
Chair, Audit Committee
Audit Committee report
continued
Remuneration report
Nigel Keen
Chair of the Remuneration
Committee
DEAR STAKEHOLDER,
2021 has been yet another challenging year
with the business continuing to operate
under the unprecedented circumstances of
lockdowns and ever-changing restrictions
while also being able to experience certain
periods of recovery along the way. I want to
thank my fellow members of the Board,
Executive Leadership Team and all
employees across the Group for their
continuous efforts and successes during the
past year notwithstanding the challenges.
In 2020, prevailing circumstances at the time
had forced the Group to act swiftly and
effectively to preserve its position by taking
measures to conserve cash, reduce overheads
and realign expenditure in balance with
demand. The Executive Leadership Team
voluntarily entered into a number of salary
sacrifice schemes and waivers of incentives.
The 2020 remuneration incentives have not
been triggered for the 2020 financial year
and the Committee approved a short-term
Remuneration Policy which was applicable
for 2020/2021 (the ‘2020/2021 Policy’).
The purpose of setting a short-term revised
Remuneration Policy was to enable the
Company to utilise remuneration to retain
and motivate its leadership to drive the
strategic vision of the Group successfully
while being considerate to the financial
impact of the pandemic.
While the impact of the pandemic required
usconstantly to adapt our approach to
remuneration policies, the purpose of the
Committee remained to ensure remuneration
policies are in place to support the
sustainability, continuity and success of the
Company. We have also had to rethink what
tools we have at our disposal to encourage
retention and engagement in the face of
financial pressure, government support
schemes and vast market uncertainty.
Membership of the Remuneration
Committee andmeeting attendance
Name of Director
Meetings attended and
eligible to attend
Nigel Keen (Chair) 4/4
Stephanie Coxon 4/4
Kenneth Bradley 4/4
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
120 121
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
APPENDICES
2022 and beyond
During 2021, the Committee and wider Board
invested considerable time in devising the
appropriate Remuneration Policy applicable for
2022–2024 to ensure that the Company is able
to attract, retain and incentivise management
with a framework which supports the long-term
success of the Company and encourages
actions which align with the values, purpose
and culture of the Company. Details of the
proposed Remuneration Policy can be found
below. The Policy is subject to an advisory vote
from shareholders.
For so long as the Group is being supported
by the Dutch NOW scheme in 2022, any
incentives to the Executive Leadership Team
will need to be suspended.
2022 REMUNERATION POLICY
Introduction
In view of recovery, the Committee is
recommending a new Remuneration Policy, in
accordance with the need to update all policies
to maintain alignment to the long-term
interests of the Company and its shareholders,
effective as of 1 January 2022 (the ‘Policy’).
The Board has considered the likely
consequences of the decision in the long term
and has engaged directly with stakeholders in
2021 before proposing the Policy. The Board
has considered the interests of employees,
shareholders and other stakeholders, the
impact of the Company’s operations on the
community and environment and the
Company’s reputation and various social and
corporate governance factors before
proposing the Policy.
The Policy has been crafted in consideration
of the Code as well as secondary legislation
and updated guidelines by major proxy
advisers and governance teams of major
institutional investors as explained in the
2021 Annual Report.
The Company’s approach continues to be
intended to:
– promote the long-term sustainable
success of the Company and support
itsstrategy;
– ensure that the Company’s remuneration
structures are aligned to the Company’s
purpose, strategy and entrepreneurial
culture; and
– provide an appropriate balance to utilise
remuneration to attract, retain and
motivate the Company’s leadership
todrive the strategic vision of the
Groupsuccessfully.
As a Guernsey-incorporated company, the
Company is not subject to the remuneration
reporting regulations that apply to UK
incorporated companies. Nevertheless, the
Committee recognises the importance of
effective corporate governance and we will
therefore continue to operate in line with the
UK remuneration reporting regulations as far
as reasonably possible, and where this does
not contradict our own regulatory
framework. Accordingly, we will be asking
shareholders, at our 2022 Annual General
Meeting, for an advisory vote on this Policy,
which summarises the remuneration
outcomes for 2021 and explains how we
intend to apply the Policy in 2022.
Policy tables
(1) Base salary
Purpose and link to strategy To provide a market competitive salary that will retain, attract and incentivise executives with the right expertise who are
instrumental in driving and growing the business and delivering the Company’s strategic goals.
Operation Salaries in the Group are based on the value of the individual, the level of responsibility, experience and market
conditions. Salaries are reviewed at least annually but not necessarily increased. The Committee may award salary
increases at other times of the year if it considers such an award to be appropriate. In reviewing salaries, salaries are
benchmarked against appropriate comparable organisations and account is taken of significant changes in role, levels
ofpay in the broader workforce, the Group’s performance, inflation and budgets.
Maximum potential value The salary payable to Executive Directors will normally be capped at the upper quartile of the relevant market
benchmark for the role under review. This maximum salary represents the highest end of the range at which the
Committee would expect the base salary to be set, rather than the actual amount to be paid.
There is no separate cap on the annual increase to base salaries. However, the Committee will normally determine the
appropriate level of increase for Executive Directors taking into account the general level of increase for the broader
workforce, but on occasion may need to make a more significant increase to recognise additional responsibilities,
oranincrease in the scale or scope of the role.
Remuneration report
continued
REMUNERATION COMMITTEE’S FOCUS IN 2021
Function Actions in 2021
Remuneration Policy – Reviewed Remuneration Policy
Executive Director and
senior management
remuneration review
– Reviewed Executive Director remuneration
– Reviewed C-suite remuneration
Set targets and incentive
schemes
– Reviewed and considered incentive scheme
Workforce remuneration
andbenefits policies
– Reviewed gender pay gap and pay differential
Role of the Remuneration Committee
The key responsibilities of the Committee
include:
– putting in place and periodically reviewing
the broad policy for the remuneration of
the Chairman, Executive Directors and
senior management to ensure fair and
responsible rewards and incentives with
aclear and proportionate link to corporate
and individual performance;
– within the terms of the policy, determining
the individual remuneration of each
Executive Director and C-suite;
– reviewing remuneration levels and related
policies across the Group especially when
determining salary increases, reviewing
the alignment of incentives and rewards
with culture, taking these into account
when setting the policy for Executive
Director remuneration, and consulting
withthe CEO in setting the levels of
remuneration for the C-suite;
– approving the design of, and determining
targets for and conditions attached to,
anylong-term incentive schemes operated
by the Group, including pension
arrangements, bonuses and other
benefits; and
– the engagement and determining
theindependence of any external
remuneration advice that might be
considered necessary from time totime.
The Committee’s terms of reference are
regularly reviewed to ensure compliance with
the Code and ongoing strategic alignment
with the Company, with the latest updated
terms of reference approved in December
2021 and available on our website.
Committee composition
The Remuneration Committee consists of three
Non-Executive Directors all of whom are
independent. I joined the Committee after
having served on a number of remuneration
committees and having ample experience as
the remuneration committee chair for other
listed companies, ensuring our compliance with
Provision 32 of the Code. There were four
scheduled Committee meetings in 2021; for
information on attendance, please refer to
page 121.
The Deputy Chairman, Chief Executive
Officer, Deputy Chief Executive Officer and
Chief Operating Officer, Chief Financial
Officer and Chief Corporate & Legal Officer
are invited to attend meetings as appropriate
depending on the items on the agenda.
The Committee considers their views when
reviewing the remuneration of Executive
Directors and other senior executives;
however, no Directors are involved in the
consideration of their own remuneration and
only members of the Committee have the
right to vote at Committee meetings.
The Committee seeks independent advice as
appropriate.
Remuneration Policy 2020/2021
During 2020, in light of the challenging
market conditions caused by the pandemic,
the Company had deemed it prudent to
implement the 2020–21 Policy which was
considerate to the financial pressures
sustained by the Group due to the
pandemic. The purpose of the 2020–21
Policy was to enable the Company to utilise
remuneration to attract, retain and motivate
its leadership to drive the strategic vision
ofthe Group successfully while being
considerate to the financial impact of
2020–21, including a new long-term
incentiveplan (the ‘2020 LTIP’).
Alongside the 2020 LTIP, in 2020, a number of
positions undertook voluntary salary sacrifices,
deferments, share options in lieu of salary of
the 2019 bonus and waiver of incentives.
In summer of 2021, following the reopening
of the substantial majority of the Group’s
portfolio, and in conjunction with the
positive trend of trading across regions, the
2019 bonus has been paid to employees.
The Committee then recognised that since the
2020 LTIP was announced, additional guidance
has been issued by the relevant Dutch
authorities in relation to the Dutch furlough
scheme (known as ‘NOW’) which makes it
clearthat the grant of market value options
associated with the Company’s long-term
incentive plan might contravene the conditions
of NOW. As a result, the relevant Executive
Leadership Team has voluntarily agreed to
surrender the awards granted under the 2020
LTIP announced on 12 November 2020.
The Committee had to create a reward
framework which could operate within the
regulatory guidelines of government support
across regions, with the express aim of
retaining and incentivising management who
have been performing under extraordinary
pressure both operationally and mentally for
an extended period of time. With this in mind,
the Committee had approved a pay review in
2021 to the Executive Leadership Team’s base
salaries bringing the base in line with market.
This decision was supported by the report of
the independent remuneration consultant
commissioned in 2019, with the Executive
Leadership Team also foregoing in 2021 all
additional incentives notwithstanding the
improvement in performance and
tradingconditions.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
122 123
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
(5) Long-term share incentive plan
Purpose and link to strategy The LTIP scheme adopted in 2020 allowed for a framework for the award of market value options, salary-related options,
deferred bonus awards and performance share awards to all employees. The long-term and phased vesting of these
awards, along with the ability of the Committee to apply additional holding periods, are designed to: drive and reward
sustainable performance over the long-term; align the interests of executives and shareholders; and support talent
retention.
In particular, the salary-related awards that were offered to key employees in 2020 were aimed at preserving cash flow,
while incentivising key employees to support the Group in its recovery from the pandemic and linking-in with our
succession planning. Prior to the salary-related options being formally offered to the relevant employees, proposals
were discussed with the relevant individuals, providing the opportunity for questions to be answered.
The grant of the market value options in conjunction with the salary-related awards was initiated with a target of
ensuring the executives are motivated, rewarded and incentivised to continue in their roles over the coming three years
of anticipated recovery of the Company and the wider industry from the pandemic.
On 30 June 2021, the Company announced that since the above plan was announced, additional guidance has been
issued by the relevant Dutch authorities in relation to the Dutch furlough scheme (known as ‘NOW’) which makes it clear
that the grant of such market value options might contravene the conditions of NOW. As a result, the relevant key
employees have voluntarily agreed to surrender the awards granted under the 2020 LTIP announced on 12 November 2020.
For as long as the Group benefits from the Dutch governmental support under the NOW scheme, the grant of LTIP
awards is suspended.
Operation The long-term incentive plan allows for the award of the following options which are subject to the rules of the LTIP:
– market value options – options that are linked to the market value of the shares in the Company;
– salary-related options – whereby employees agree to a reduction in their base salary in exchange for the right to acquire
shares at nil-cost. These options normally vest after 12 months subject to an additional six-month holding period;
– performance share awards – options which are granted subject to specified performance targets.
Notwithstanding the extent to which any performance target is satisfied, the number of vested award shares may be
adjusted by the Committee to ensure that the number of vested award shares is appropriate taking into account the
underlying business performance of the Group.
These awards are subject to the rules of the scheme which may include: long-term vesting periods prescribed by the
Committee upon grant; good-leaver and bad-leaver provisions allowing the Committee to exercise discretion as to
when it might be appropriate for an award to vest in spite of the relevant employee leaving the Group; post-vesting
holding periods determined by the Committee at the time of the award; and share capital dilution limits.
The plan allows dividends or dividend equivalents to accrue, subject to the Remuneration Committee’s discretion.
Maximum potential value The aggregate market value (as determined by the Committee at or prior to the award date) of shares in respect of
which performance share awards and/or restricted stock awards are made to an employee in any financial year are
capped at 150% of the employee’s annual base salary at the award date.
Performance metrics The performance measures applied to LTIP awards are reviewed annually to ensure they remain relevant to strategic
priorities and aligned to shareholder interests. Weightings and targets are reviewed and set prior to each award.
Performance measures will include long-term performance targets, of which financial and/or share price-based metrics
will comprise at least two-thirds of the award. Quantifiable non-financial metrics, key to business performance, will be
used for any balance.
Any material changes to the performance measures from year to year would be subject to prior consultation with the
Company’s controlling shareholders.
The Committee may adjust the number of shares realised if it considers such adjustment is justified based on: (a) the
performance of the Company, any business area or team; (b) the conduct, capability or performance of the participant;
or (c) the occurrence of unforeseen events or of events outside the participant’s control.
(2) Benefits
Purpose and link to strategy To provide market competitive benefits consistent with role.
Operation Benefits vary between regions and would typically include annual leave, well-being day, occupational sick pay, health
screening, personal accident insurance, and participation in all employee share schemes. In the UK, these would include
in addition medical insurance and life assurance, and in the Netherlands, car allowances. In line with business
requirements, other expenses may be paid, such as relocation expenses, together with related tax liabilities.
Maximum potential value We do not consider it appropriate to set a maximum benefits value as this may change periodically and by region.
(3) Pensions
Purpose and link to strategy To attract and retain talent by enabling long-term pension saving.
Operation A pension allowance of up to 10% of base salary may be paid for Executive Directors based on length of service and
subject to local rules under place of employment. This may be taken as a contribution to the Group Personal Pension
Plan, as a cash supplement, or a combination of the two.
The Company has taken note of Provision 38 of the Code and is taking advice on the steps needed to use best
endeavours to comply in due course as of the effective date of this provision entering into force.
Maximum potential value Executives can choose to participate in a defined contribution arrangement, or may receive a cash equivalent. A salary
supplement may also be paid as part of a pension allowance arrangement.
(4) Annual bonus plan
Purpose and link to strategy To incentivise and reward the delivery of near-term business targets and objectives.
Operation The annual bonus scheme is a discretionary scheme and is reviewed prior to the start of each financial year to ensure
that it appropriately supports the business strategy. Performance measures and stretching targets are set by the
Committee. Bonuses are normally paid in cash but may also be awarded in deferred share awards. Actual bonus
amounts are determined by assessing performance against the agreed targets typically after year end. The results are
then reviewed by the Committee to ensure that any bonus paid accurately reflects the underlying performance of the
business. Where share awards are granted as part of the annual bonus plan, they are held by the individual for one year
subject to clawback provisions. Circumstances include: a material misstatement, serious misconduct, a material failure
ofrisk management, restatement of prior year results, corporate failure, or serious reputational damage to any
Groupcompany.
Maximum potential value 150% of base salary.
Performance metrics Performance measures are selected to focus executives on strategic priorities, providing alignment with shareholder
interests and are reviewed annually. Weightings and targets are reviewed and set at the start of each financial year.
Financial metrics will comprise at least 50% of the bonus and are likely to include one or more of:
– a profit-based measure; and/or
– a cash-based measure.
Non-financial metrics, key to business performance, will be used for any balance. These may include measures relating
to build quality and customer service. Overall, quantifiable metrics will comprise at least 70% of the bonus.
The Committee may at its discretion adjust the outcome under the formulaic measures where it considers it is
appropriate to do so to better reflect overall Company performance.
Remuneration report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
124 125
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Term and termination
Term and termination
Boris lvesha has a contract which may be terminated on 12 months’ notice by the Group or on six months’ notice by
Boris lvesha.
Daniel Kos has a contract which may be terminated on six months’ notice by the Group or on three months’ notice by
Daniel Kos.
There are provisions for earlier termination by the Group in certain specific circumstances.
Each Non-Executive Director has specific terms of appointment. The Chairman’s letter of appointment provides for
anindefinite term terminable on three months’ prior notice by either side or immediately upon the Board passing a
resolution to remove the Chairman as a Director.
The Non-Executive Directors’ terms of appointment currently end at the Annual General Meeting held in 2024.
All the Non-Executive Directors’ appointment letters (including the Chairman’s) are subject to termination by either
sideon three months’ notice.
Other than salary and benefits in relation to the notice period, the letters of appointment contain provisions for
termination by the Group in certain specific circumstances. The letters of appointment are available for inspection
attheCompany’s registered office.
Terms of appointment
The dates of the Directors’ contracts are as follows:
Director Date of appointment Term of appointment Subject to annual re-election Notice period
Eli Papouchado 26 June 2007 Indefinite Yes 3 months
Boris Ivesha 14 June 2007 Indefinite Yes 12 months from Group; 6 months
from Boris Ivesha to the Group
Daniel Kos 27 February 2018 Indefinite Yes 6 months from Group; 3 months
from Daniel Kos to the Group
Kevin McAuliffe 15 June 2007 Annual General Meeting 2024 Yes 3 months
Ken Bradley 4 September 2019 Annual General Meeting 2024 Yes 3 months
Nigel Keen 20 February 2020 Annual General Meeting 2024 Yes 3 months
Stephanie Coxon 7 August 2020 Annual General Meeting 2024 Yes 3 months
The Executive Directors’ service contracts
donot contain specific provision for
compensation in the event of removal
atanAnnual General Meeting.
In the event of early termination, some
Directors may be eligible for payments in lieu
of notice. When determining exit payments,
the Committee would take account of a
variety of factors, including individual and
business performance, the obligation for the
Director to mitigate loss (for example, by
gaining new employment), the Director’s
length of service and any other relevant
circumstances, such as ill health. A departing
Director may also be entitled to a payment in
respect of statutory rights. The Committee
would distinguish between types of leaver in
respect of incentive plans. ‘Good leavers’
(death, ill health, agreed retirement,
redundancy or any other reason at the
discretion of the Committee) may be
considered for a bonus payment having
completed the full year, and part-year bonus
payments may be paid and LTIP awards may
vest at the usual time taking into account
performance conditions and pro-rating for
time in employment during the performance
period, unless the Committee determines
otherwise. The LTIP rules include discretion, in
exceptional circumstances, for acceleration of
the realisation date and upwards adjustment
to the number of shares to be realised for
‘good leavers’ in such a situation. In all other
leaver circumstances, the Committee would
decide the approach taken, which would
ordinarily mean that leavers would not be
entitled to consideration for a bonus and LTIP
awards would lapse. Any vested LTIP award
that is subject to a holding period at the time
of the executive’s cessation of employment
will not lapse except in the case of the
executive’s gross misconduct. The Committee
reserves the right to make any other
payments in connection with a director’s
cessation of office or employment where the
payments are made in good faith in discharge
of an existing legal obligation (or by way of
damages for breach of such an obligation) or
by way of settlement of any claim arising in
connection with the cessation of a Director’s
office or employment. In addition, the
Committee reserves the right, acting in good
faith, to pay fees for outplacement assistance
and/or the Director’s legal and/or professional
advice fees in connection with his or her
cessation of office or employment.
Notes to the Policy table
The Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative purposes, or
to take account of a change in legislation). As the Company is registered in Guernsey, shareholders’ approval is not required in connection with
the Policy.
The Executive Directors may request, and the Company may grant, salary and bonus sacrifice arrangements.
The LTIP rules permit the substitution or variance of performance conditions to produce a fairer measure of performance as a result of an
unforeseen event or transaction. They include discretions for upwards adjustment to the number of shares to be realised in the event of a
takeover, and scheme of arrangement or voluntary winding up. Non-significant changes to the performance metrics may be made by use of
discretion under the performance conditions. Awards are normally satisfied in shares, although there is flexibility to settle in cash.
The Committee reserves the right to make remuneration payments and payments for loss of office (including exercising any discretions
available to it in connection with such payments) that are not in line with the Policy table set out above where the terms of the payment were
set out and approved prior to the date the Policy came into effect. For these purposes, ‘payments’ include the Committee determining and
paying short-term and long-term incentive awards of variable remuneration.
Non-Executive Directors’ fees
Base fee
The Non-Executive Director fees are decided by the Board in accordance with the Company's articles of incorporation.
This fee is the same for each Non-Executive Director.
Chairman fee
In the case of the Chairman and Deputy Chairman, both receive a set fee which is set by the Remuneration Committee
and agreed by the Board. The Chairman's fee is determined by taking into account the time commitment and
responsibilities of the role, as well as the roleholder's skills, gravitas and qualifications to lead the Board. No Director
may participate in the decision-making relating to their own remuneration.
Additional fees
Non-Executive Directors are paid a set additional fee for being Senior Independent Director, a member of a Board
Committee and for chairing a Board Committee.
This fee is the same for each Non-Executive Director, with exception of the Deputy Chair who attracts an additional fee
for the role and the Senior Independent Director who attracts an additional fee for the role.
Appointment term and
othermatters
The Independent Non-Executive Directors are appointed for a period ending at the Annual General Meeting in 2024
(subject to annual re-election). Non-Executive Directors are not entitled to bonuses, benefits or pension scheme
contributions or to participate in any share scheme operated by the Company.
In addition to any remuneration payable, a Non-Executive Director may be paid reasonable travel, hotel and other
expenses properly incurred in discharging the Director’s duties. Fees cease immediately in the event the Non-Executive
Director ceases to be a Director.
Directors are entitled to the benefits afforded by the Group’s Directors and Officers Insurance.
Maximum potential value
Prescribed by the Articles of Association of the Company.
Remuneration report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
126 127
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Directors’ remuneration table 2021
Director Position
Base salary
and fees
Salary sacrifice
options
Additional
remuneration Annual bonus
Pension
contributions
Retention
award Other benefits Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Boris Ivesha
1
President &
CEO 438,132 312,672
2
– – – – 100,000
3
100,000 – – 16,352 15,795 554,484 428,467
Daniel Kos
1
CFO 314,529
4
267,139
5
46,670
5
9,334
5
–
6
75,000
14
14,574 13,748 – –
7
– – 375,773 365,221
Eli
Papouchado
Non-Executive
Chairman 200,000 150,000
8
– – – – – – – – – – 200,000 150,000
Kevin
McAuliffe
Non-Executive
Deputy
Chairman 100,000 77,500 – – – – – – – – 100,000 77,500
Ken Bradley Non-Executive
Director 55,700 42,083 – – – – – – – – – – 55,700 42,083
Nigel Keen Non-Executive
Director 58,220 37,771
10
58,220 37,771
Stephanie
Coxon
11
Non-Executive
Director 55,700 17,543 – – – – – – – – 55,700 17,543
Nigel Jones
15
Non-Executive
Director – 23,810 – – – – – – – – – – – 23,810
Dawn
Morgan
16
Non-Executive
Director – 33,953 – – – – – – – – – – – 33,953
1,222,281
12
962,471
9
46,670 9,334 – – – 75,000 114,574 113,748 – – 16,352 15,795 1,399,877 1,176,348
Options
Director Number of options
Number vested
as at 31 December 2021 Exercise price
Daniel Kos
13
25,000 25,000 14.3
4308 4,308 0
1. Boris Ivesha and Daniel Kos’ remuneration is denominated in € and converted
to £ at average exchange rate for presentation purposes.
2. Boris Ivesha sacrificed full base salary during Q2 2020.
3. Boris Ivesha’s pension contribution shall be reduced to 10% of his base salary
as of 1 January 2022 to align with senior executives across the workforce.
4. Daniel Kos received a base salary increase in July 2021, bringing his annual
base salary to €525,000. The Executive Leadership Team, including Daniel Kos,
agreed to waive any rights under cash and/or share incentives in 2020–2021 in
connection with the government support received under the NOW scheme in
the Netherlands during these years.
5. In Q2 2020, Daniel Kos sacrificed 20% of his base salary. Daniel further agreed to
exchange 20% of his base salary for 12 months as of 1 November 2020 with nil-cost
options in accordance with the salary option plan (see Note 13 on page 175).
6. Daniel Kos will not be paid an annual bonus in respect of performance and
targets achieved during the 2020 and 2021 financial years.
7. In July 2021, Daniel Kos agreed to waive any and all accrued and prospective
rights in the retention bonus in line with the requirements of the NOW scheme
for executives to forego any incentives beyond the base salary. The retention
scheme was in effect as of accruing an amount of £50,000 cash per year,
payable on the 5th anniversary of joining only if the participant remains in
employment subject to leaver provisions. This scheme has been terminated
and will not be renewed under the Policy.
8. Mr Papouchado sacrificed full salary during Q2 2020.
9. Each Non-Executive Director, who was on the Board during Q2 2020, voluntarily
directed the charitable donation of 50% of their Q2 2020 gross quarterly fees
and 20% of their Q3 2020 and Q4 2020 gross fees to Hospitality Action, a UK
registered charity for the hospitality industry.
10. Nigel Keen was appointed to the Board on 20 February 2020. He, therefore,
voluntarily directed the charitable donation of 50% of their Q2 2020 gross
quarterly fees and 20% of their Q3 and Q4 2020 gross fees to Hospitality Action,
a UK registered charity for the hospitality industry.
11. Stephanie Coxon was appointed to the Board on 7 August 2020.
12. Boris Ivesha, Kevin McAuliffe and Yoav Papouchado are entitled to additional
remuneration for their services on the supervisory board of the Group’s
subsidiary, Arena Hospitality Group, which is not included in the table above.
In 2021, the total fee for Boris’ services amounted to HRK147,368 (£16,807)
(2020: HRK140,560 (£16,591)), the total fee for Kevin McAuliffe’s services
amounted to HRK147,368 (£16,807) (2020: HRK140,560 (£16,591)) and the total
fee for Yoav Papouchado’s services amounted to HRK147,368 (£16,807) (2020:
HRK140,560 (£16,591)). It should be noted that Yoav Papouchado is not
remunerated for his position as an Alternate Director of the Company.
13. In July 2021, Daniel Kos agreed to voluntarily waive his rights in connection with
the grant of 100,000 market value options in October 2020 given the underlying
requirements of the NOW scheme issued in the Netherlands which is further
detailed at Note 4.
14. The annual bonus in 2020 refers to targets achieved over the year 2019.
Daniel Kos agreed to defer payment of this bonus, which eventually paid out in
the summer of 2021.
15. Nigel Jones retired from the Board on 19 May 2020.
16. Dawn Morgan retired from the Board on 30 September 2020.
The appointment of each of the Non-
Executive Directors is for an initial period
ofthree years, which is renewable for
furtherterms, and is terminable by the
Non-Executive Director (as applicable)
ortheCompany on three months’ notice.
No contractual payments would be due on
termination. There are no specific provisions
for compensation on early termination for
the Non-Executive Directors, with the
exception of entitlement to compensation
equivalent to three months’ fees (as applicable)
or, if less, the balance of appointment, in the
event of removal at an Annual General Meeting.
Policy on remuneration on recruitment
Reward packages for new Executive
Directors will be consistent with the above
Remuneration Policy. Fixed remuneration
elements would be paid only from the date
of employment and any bonus will be
pro-rated to reflect the proportion of the
year employed. The maximum level of
variable remuneration is as stated in the
policy table on pages 123 to 125.
The Committee retains discretion to make
appropriate remuneration decisions outside
the standard remuneration policy to meet the
individual circumstances when: (i) an interim
appointment is made to a fill an Executive
Director role on a short-term basis; or (ii)
exceptional circumstances require that the
Chairman or a Non-Executive Director takes
on an executive function on a short-term
basis. For Non-Executive Directors, the Board
would consider the appropriate fees for a new
appointment taking into account the existing
level of fees paid to the Non-Executive
Directors, the experience and ability of the
new Non-Executive Director and the time
commitment and responsibility of the role.
Change of control
All the Company’s share plans contain
provisions relating to change of control.
In general, outstanding awards would
normally vest and become exercisable on a
change of control. Awards will, however, only
vest to the extent that any applicable
performance conditions have been satisfied
at that time and (in the case of performance
share awards and unless the Committee
determines otherwise) a time pro-rata
reduction to reflect the proportion of the
vesting period that has elapsed. Any deferred
bonus shares will be released in full on
change of control.
External directorships
Executive Directors may, if so authorised by
the Board, accept appointments as Non-
Executive Directors of suitable companies
and organisations outside the Group and
retain any associated fees.
Decision-making process followed for the
remuneration policy’s determination,
review and implementation
The Committee has considered the impact of
the pandemic and sacrifice of remuneration
by senior management during the last
24 months and put forward the Policy to an
advisory shareholder vote which is reflective
of the challenging conditions, enhanced
work and responsibility, and the continued
sacrifice, senior management’s roles will
entail. The Committee considers it a key
priority for the future success of the Group
and the ability to unlock shareholder value
that senior management be aligned to the
interests of the Group. These changes
include increases to incentive levels to align
with the adjusted market position as well as
the introduction of other policy measures
sought by institutions and investors, some of
which are developing in the marketplace.
For so long as the Group is being supported
by the Dutch NOW scheme in 2022, any
incentives to the Executive Leadership Team
in respect of 2022 will need to be suspended.
The Committee avoids conflicts of interest
by all of its members being independent
Non-Executive Directors. The Committee’s
terms of reference can be found on the
Group’s website at www.pphe.com, which
contains further details on the independence
of the members of the Committee. While the
Committee receives information from the
Company and advice from its remuneration
advisers, it makes decisions using its own
independent judgment.
Pay and conditions throughout the Group
The pay and conditions of employees
throughout the Group are considered by the
Committee in setting policy for the Executive
Directors and senior management.
The Committee is kept regularly informed on
the pay and benefits provided to employees,
and base salary increase data from the annual
salary review for general staff is considered
when reviewing Executive Directors’ salaries
and those of senior management. The
Committee does not consult with employees
when setting the remuneration policy for the
Executive Directors.
Difference in the Company’s policy on
remuneration of Directors compared to
employees
The policy for the Executive Directors and
C-suite is designed with pay and conditions
throughout the Group in mind.
The Committee believes that some
differences are necessary to reflect
responsibility and provide appropriate focus
and motivation for delivery of the Group’s
strategy. Executive Directors, therefore, have
a higher bonus opportunity than employees
generally to motivate them to achieve
stretching annual targets, and they
participate in the LTIP to provide focus on
long-term sustainable performance.
This approach is designed to provide an
appropriate emphasis on performance-
related pay.
Consideration of shareholder views
The Company is committed to ongoing
dialogue with shareholders and welcomes
feedback on Directors’ remuneration.
Feedback received from meetings during the
year and in relation to the Annual General
Meeting is considered, together with
guidance from shareholder representative
bodies more generally, and taken into
account in the annual review of the policy.
The Committee believes that it has a
responsible approach to Directors’ pay
andthat its policy is appropriate and fit
forpurpose.
Shareholder vote
We will be asking shareholders, at our 2022
Annual General Meeting, for an advisory to
vote on this report, which summarises the
remuneration outcomes for 2021 and
explains how we intend to apply the Policy
in2022.
Remuneration report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
128 129
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Directors’ report
The Directors present their report and the audited
financial statements of the Company for the
year ended 31 December 2021.
The Strategic report and Directors’ report together are the Management report for the purposes of Rule 4.1.8R of the DTR.
The following matters have been included in the Strategic report but are incorporated by reference into this Directors’ report:
Topic Section of the report Page
Fair view of the Company’s business Strategic report 2 to 25
Principal risks and uncertainties Strategic progress in 2020, Our approach to risk management
and principal risks and uncertainties 26 to 34
Strategy Strategic report 24
Business model Our business model 22
Important events impacting the business Strategic report 35 to 36
Likely future developments Our pipeline 42 to 43
Financial key performance indicators Highlights Highlights
Non-financial key performance indicators Stakeholder engagement, Team member engagement 68 to 73
Environmental matters Responsible business 74 to 89
Company’s employees Highlights Highlights
Social, community and human rights issues Responsible business 74 to 81
S172 and relationship with suppliers, customers and others Deputy Chairman’s statement 90 to 92
Greenhouse gas emissions Directors’ report 134
Directors’ induction and training Directors’ induction 112
The following matters have been included in the Corporate Governance report but are incorporated by reference into this Directors’ report:
Gender breakdown of Board and leadership Diversity report 114
Gender pay gap
Our statutory reporting is available on the
Company’s website.
The anomalous circumstances produced by
the pandemic have presented us with a real
challenge in how to report transparently on
our gender pay gap. Fluctuating workforce
patterns created by pandemic conditions,
such as the need to furlough some staff, and
conduct recruitment exercises for others
when travel restrictions eased, provided
both challenges and opportunities to ensure
we are monitoring and paying fair, living
wages to our workforce. We are committed
to leading by example, so ensuring that
senior remuneration is proportionate to the
conditions faced by the workforce.
Nigel Keen
Non-Executive Director
Chair of the Remuneration Committee
Remuneration report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
130 131
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Shareholders with holdings of 5% or more of the Company’s issued share capital (excluding treasury) as at 25 February 2022.
Number of
ordinary shares
Percentage of the
Company’s issued
share capital
1
Eli Papouchado
2
13,760,260 32.35
Boris Ivesha
3
4,636,974 10.90
Aroundtown Property Holdings 4,344,788 10.21
Clal Insurance Enterprises Holdings 3,501,930 8.23
Harel Insurance Investments and Financial Services 2,577,760 6.06
1. Excludes shares held in treasury.
2. Eli Papouchado is deemed to be interested in the ordinary shares held by Euro Plaza, Red Sea Club Limited and A.A. Papo Trust Company Limited.
3. Boris Ivesha (the President and Chief Executive Officer of the Company) is deemed to be interested in 4,636,974 ordinary shares held by Walford which is wholly
owned by Clermont, as trustee of certain trusts established for the benefit of Boris Ivesha and his family.
Controlling shareholders
The Company’s immediate controlling
shareholders are Euro Plaza Holdings B.V.
and Walford Investments Holdings Limited
(‘Walford’). Euro Plaza is ultimately controlled
by Eli Papouchado, acting in his capacity as
trustee of an endowment created under Israeli
law (‘the Endowment’). Walford is ultimately
controlled by Clermont Corporate Services
Limited (‘Clermont’), a professional corporate
trustee in its capacity as trustee of certain
trusts established for the benefit of Boris
Ivesha and his family. As required under Listing
Rule 9.2.2 R(1), the Company has entered into
separate relationship agreements with: (i) Euro
Plaza and Eli Papouchado (acting in his
capacity as trustee of the Endowment); and
(ii)Walford and Clermont, which as a concert
party hold 43.25% of the issued share
capitalof the Company.
The Company has complied with the
undertakings in Listing Rule 6.5.4R and
Listing Rule 9.2.2ADR(1) since admission to
the Premium Listing segment. So far as the
Company is aware, these undertakings have
also been complied with by Euro Plaza, Eli
Papouchado, acting in his capacity as trustee
of the Endowment, Walford and Clermont
since admission.
In accordance with the relationship agreements
entered into the Company’s controlling
shareholders, each of Euro Plaza and Walford
isentitled to appoint representatives to the
Board of the Company. Mr Eli Papouchado
iscleared to be the representative of Euro
Plazaand MrBoris Ivesha is cleared to be the
representative of Watford for these purposes.
DTR disclosures
Eli Papouchado is deemed to be interested in
13,760,260 ordinary shares, which constitutes
32.35% of the issued share capital (excluding
treasury shares) of the Company:
– 12,207,843 ordinary shares held by Euro
Plaza;
– Euro Plaza is an indirect wholly owned
subsidiary of A.P.Y. Investments & Real
Estate Ltd (’APY’). 98% of the shares in
APYare held by Eli Papouchado;
– 22,417 ordinary shares held by Red Sea
Club Limited, a subsidiary of APY; and
– 1,530,000 ordinary shares held by A.A.
Papo Trust Company Limited, which is
wholly owned by Eli Papouchado.
Boris Ivesha is deemed to be interested in
4,636,974 ordinary shares, which constitutes
10.90% of the issued share capital (excluding
treasury shares) of the Company. The shares
are held by Walford which is wholly owned
by Clermont, as trustee of certain trusts
established for the benefit of Boris Ivesha
and his family.
Eli Papouchado, Euro Plaza, APY and A.A.
Papo Trust Company Limited and other
parties related to him (together the ‘Red Sea
Parties’) and Walford, Clermont, Boris Ivesha
and other parties related to him (together the
‘Ivesha Parties’) are a party to a shareholders
agreement dated 14 March 2013 (as amended
from time to time) (the ‘Shareholders
Agreement’). Pursuant to the Shareholders
Agreement, it has been agreed that for so
long as, inter alia, the combined interests of
the Ivesha Parties and the Red Sea Parties in
the Company are not less than 30% and the
Red Sea Parties’ interest in the Company is at
least 20% of the share capital then in issue
(excluding, in both cases, shares held in
treasury), on any shareholder resolution all
shares held by the Ivesha Parties shall be
voted in a manner which is consistent with the
votes cast by, or on behalf of, the Red Sea
Parties in respect of that resolution. As a
result, the Red Sea Parties are all considered
to be interested in the shares in which the
Ivesha Parties are interested.
Article 19 of the Market Abuse Regulation
The interests of each Director disclosed to
the Company under Article 19 of the Market
Abuse Regulation as at the end of the
financial year are set out above and on page
95. There have been no changes in the
interests of each Director in the period
between the end of the financial year and
25 February 2022.
Appointment and replacement
ofDirectors
Pursuant to the Articles, the Board has the
power to appoint any person to be a
Director. At every general meeting, a
minimum of one third of the Directors shall
retire from office. No person, other than a
Director retiring at a general meeting, shall,
unless recommended by the Directors, be
eligible for election at a general meeting as a
Director unless notice has been received
from such person. In accordance with the
Code and good corporate governance
practice, the entire Board will stand for
re-election at the forthcoming Annual
General Meeting.
Pursuant to the Articles, Euro Plaza Holdings
B.V. (’Euro Plaza’) may:
– nominate two Non-Executive Directors to
the Board for so long as Euro Plaza and its
associates directly or indirectly control at
least 30% of the issued shares in the
Company; and
– nominate one Non-Executive Director to
the Board for so long as Euro Plaza and its
associates control at least 10% but less
than 30% of the issued shares of the
Company.
Pursuant to the Articles, Molteno Limited
may nominate one Non-Executive Director
to the Board for so long as Molteno Limited
and its associates directly or indirectly
control at least 10% of the issued shares in
the Company.
The shareholders may, by ordinary
resolution, resolve to remove any Director
before the expiration of his or her period of
office and appoint a replacement Director.
Share capital
The issued share capital of the Company
together with the details of the movements
in the Company’s share capital during the
year are shown in Note 12 to the
consolidated financial statements.
Shares
There is currently only one class of share in
issue (being ordinary shares) which all carry
the same rights as one another. There are no
shares in the Company which carry special
rights with regard to control of the Company.
The following limitations on voting rights of
shareholders apply:
– The Board may suspend the voting rights
attached to any shares owned directly,
indirectly or beneficially by a Non-
Qualified Holder (as defined in the
Articles)
– The Directors may at any time make calls
upon the shareholders in respect of any
unpaid shares. No shareholder is entitled
to vote unless all calls due from him have
been paid
The following deadlines for exercising voting
rights apply:
– A written resolution will state a date by
which the resolution must be passed.
The Law imposes a default lapse date of
28 days from circulation of the written
resolution if no lapse date is specified
– In the case of resolutions passed at
general meetings of shareholders, voting
rights may only be exercised at the time
the resolution is proposed at the meeting
Any arrangements by which the financial
rights to shares are held by a person other
than the registered shareholder would be by
agreement between the shareholder and the
beneficiary. The Company is not obliged to
recognise any such trust arrangements and
shall pay any dividends to the registered
shareholder.
With the prior approval of the shareholders
by ordinary resolution, the Board may
exercise all powers of the Company to allot
and issue, grant rights to subscribe for, or to
convert any securities into, an unlimited
number of shares of each class in the
Company.
Unless such shares are to be wholly or partly
paid otherwise than in cash or are allotted or
issued pursuant to an employee share
scheme, any shares to be allotted and issued
must first be offered to the existing
shareholders on the same or more
favourable terms.
The Company may from time to time acquire
its own shares subject to the requirements of
the Law. The Law requires the prior approval
of any share buy-back by way of ordinary
resolution of the shareholders and a
certification by the Board that the Company
satisfies the solvency test set out in the Law.
Articles
The Articles may be amended at any time by
passing a special resolution of the
shareholders pursuant to the Law. A special
resolution is passed by a majority of not less
than 75% of the votes of the shareholders
entitled to vote and voting in person or by
attorney or by proxy at a meeting or by 75%
of the total voting rights of eligible members
by written resolution.
Substantial share interest
The table provided on page 133 shows
shareholders holding 5% or more of the
issued share capital (excluding treasury
shares) as at 25 February 2022
No further interests have been disclosed to
the Company in accordance with DTR 5 in
the period between the end of the financial
year and 25 February 2022.
Number of issued
shares
44,347,410
Shares held in treasury
by the Group
1,806,643
Number of issued
shares (excluding
treasury)
42,540,767
Directors’ report
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
132 133
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Going concern
The Board believes it is taking all appropriate
steps to support the sustainability and
growth of the Group’s activities. Since the
start of the COVID-19 pandemic multiple
cash flow forecasts showing various
scenarios for the period of 12 months
fromthe date of signing these financial
statements have been reviewed as part
ofthe Group’s three-year forecast to
31 December 2024, as set out on page 35.
In determining the assumptions used in cash
flow forecasts, the Directors considered
various third party market predictions and
considered the current principal and
emerging risks facing the Group while
focusing specifically on COVID-19 and
theimpact this could have on future
performance and liquidity of the Group.
Based on these cash flow forecasts, the
Directors confirm they have a reasonable
expectation that the Group has adequate
resources to continue in operational
existence for at least 12 months from the
date of signing these financial statements.
This, taken together with their conclusions
inNote 1(c) to the consolidated financial
statements, has led the Directors to
conclude that it is appropriate to prepare the
2021 consolidated financial statements on a
going concern basis.
Financial risk management objectives
andpolicies
In addition, Note 31 to the consolidated
financial statements includes the Company’s
objectives, policies and processes for
managing its capital, its financial risk
management objectives, details of its financial
instruments and hedging activities, and its
exposure to credit risk and liquidity risk.
Directors’ responsibilities
The Directors are required to prepare the
Annual Report and the consolidated financial
statements for each financial year to give a
true and fair view of the state of affairs of the
Company and the undertakings included in
the consolidation taken as a whole as at the
end of the financial year, and of the profit or
loss for that year.
In preparing the consolidated financial
statements, the Directors should:
– select suitable accounting policies and
apply them consistently;
– make judgments and estimates that are
reasonable;
– state whether applicable accounting
standards have been followed, subject to
any material departures disclosed and
explained in the consolidated financial
statements; and
– prepare the consolidated financial
statements on a going concern basis
unless it is inappropriate to presume that
the Company will continue in business.
The Directors confirm that they have
complied with the above requirements
inpreparing the consolidated financial
statements. The Directors are responsible
forkeeping proper accounting records which
disclose with reasonable accuracy at any
time the financial position of the Company
and enable them to ensure that the
consolidated financial statements have been
properly prepared in accordance with the
Law. The Directors are responsible for
safeguarding the assets of the Group and
hence for taking reasonable steps for the
prevention and detection of fraud and
otherirregularities.
Directors’ declaration
So far as each of the Directors, who is a
Director at the time the Directors’ report is
approved, is aware, there is no relevant audit
information of which the Company’s auditors
are unaware and each has taken all the steps
he or she ought to have taken as a Director
to make himself or herself aware of any
relevant audit information and to establish
that the Company’s auditors are aware
ofthatinformation.
Directors’ responsibility statement
Each of the directors named on pages 95
and 96 as of the time of the publication,
confirms to the best of his or her
knowledgethat:
(i) the consolidated financial statements,
which have been prepared in accordance
with International Financial Reporting
Standards (IFRS) as adopted by the
European Union, give a true and fair view of
the assets, liabilities, financial position and
profit and loss of the Company and the
undertakings included in the consolidation
taken as a whole;
(ii) the Strategic Report includes a fair review of
the development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face, and provides
information necessary for shareholders to
assess the Company’s performance,
business model and strategies; and
(iii) The Directors consider that the Annual
Report and Accounts, taken as a whole,
arefair, balanced and understandable and
provide the information necessary for
shareholders to assess the Company’s
position and performance, business model
and strategy.
Signed on behalf of the Board by
Boris Ivesha
President & Chief Executive Officer
Daniel Kos
Chief Financial Officer & Executive Director
28 February 2022
Directors’ report
continued
Listing Rule 9.8.4R
The following table is disclosed pursuant to Listing Rule 9.8.4R. The table sets out only those sections of Listing Rule 9.8.4R which are
applicable to the Company. The information required to be disclosed can be located in the Annual Report at the references set out below:
Section Information Location
4 Details of long-term incentive schemes Note 13 to the consolidated financial statements
10 Contracts of significance Notes 14, 15 and 30 to the consolidated financial statements
11 Provision of services by a controlling shareholder Note 30 to the consolidated financial statements
14 Controlling shareholder statement Directors’ report
DTR 7.2.8
The following table is disclosed pursuant to DTR 7.2.8.
Requirement Page
Diversity Policy 110
UK Streamlined Energy and Carbon Reporting
In line with market practice for UK listed businesses, our Streamlined Energy and Carbon Reporting, UK Scope 1, Scope 2 and Scope 3
emissions, intensity ratio and yearly comparisons are provided below.
Total Emission Scope
Emission type
Total volume
(kWh)
Calculated emissions
(tonnes of CO
2
e)
Scope 1 (direct) 20,280,122 3,725
Scope 2 (indirect) 23,338,586 4,955
Scope 3 (indirect) – –
Total 43,618,708 8,680
Emission Year 1 2019–2020 Year 2 2020–2021
Tonnes of CO
2
e 8,379 8,680
Intensity Ratio (tCO
2
/Turnover £m) 148.30 115.27
Quantification and reporting methodology
The organisation has taken guidance from the UK Government Environmental Reporting Guidelines (March 2019), the GHG Reporting Protocol
– Corporate Standard, and from the UK Government GHG Conversion Factors for Company Reporting document for calculating carbon
emissions. Energy usage information (gas and electricity) has been obtained directly from their energy suppliers and half-hourly (HH) data,
where available, for the HH supplies (there was no estimation profiling required). Flat profile estimation techniques were used for one NHH
supply and for all gas supplies for the month of December as data was not available at the time of producing the report. Transport mileage
data was obtained from expense claims submitted for our Company cars. CO
2
e emissions were calculated using the appropriate emission
factors from the UK Government GHG conversion information.
Energy efficiency action
For energy efficiency actions, please see Our Planet section on pages 83 to 86.
Auditors
Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, have expressed their willingness to continue in office as auditors
andaresolution to re-appoint them will be proposed at the forthcoming Annual General Meeting.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
134 135
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Independent auditors’ report to the members
ofPPHE hotel group limited
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of PPHE Hotel Group Limited (the Group), which comprises the consolidated
statement of financial position as at 31 December 2021, and the consolidated income statement, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements:
– give a true and fair view of the financial position of the Group as at 31 December 2021 and of its financial performance and its cash
flows for the year then ended;
– have been properly prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European
Union; and
– have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the ‘Auditor’s responsibilities for the audit of the consolidated financial statements’ section of our report. We are
independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), including the UK FRC’s Ethical Standard as applied to listed public interest 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.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements for the year ended 31 December 2021. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the ‘Auditor’s responsibilities for the audit of the consolidated financial statements’
section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Key audit matters 2021
1. Assessment of liquidity risks
As discussed in Note 1c to the consolidated financial statements, in 2021, COVID-19 continued to cause severe disruption to the global
hospitality sector, with government imposed domestic and international travel restrictions and social distancing measures in place
during the year. Note 1c describes the impact of the pandemic on the Group’s business in 2021 and management’s actions.
We determined that this situation is a significant audit risk due to possible breaches of loan covenants, and due to the effects of
uncertainty of adequate funding on the Group’s assessment of liquidity risk. This assessment is largely based on management
expectations and estimates. The assumptions are affected by subjective elements such as the estimate of expected future cash flows,
forecasted results and margins from operational activities, and the ability to meet financial covenants. These estimates are based on
assumptions, including expectations of future economic and market developments related to the long-term impact of COVID-19.
How our audit addressed the matter
We evaluated the Directors’ assessment of liquidity risk and performed the following procedures:
– We obtained management’s cash flow forecasts used to support the Directors’ liquidity risk assessment and evaluated the key
assumptions in the forecasts and considered whether these were supported by the evidence we obtained, including Board approved
budgets.
– We tested the integrity of the underlying calculations and performed sensitivity analyses on the key drivers of the cash flow forecasts.
– We considered the reasonableness of a severe but plausible downside scenario and the determination of sufficient liquidity
headroom.
– We obtained evidence supporting the Group’s receipt of loan covenant waivers, as necessary, to avoid defaults for a period beyond
at least 12 months from the date of approval of the consolidated financial statements.
– We reviewed the suitability and adequacy of the disclosures in the consolidated financial statements explaining the impact of
COVID-19 on the results of operations, and the Directors’ explanation of their assessment of the liquidity risk that was consistent with
the evidence we obtained.
2. Decentralised operations
As discussed in Notes 1b and 29 to the consolidated financial statements, the Group comprises more than 100 legal entities, grouped
in five reportable segments. The geographical decentralised structure, multiplicity of IT systems and the number of Group entities
(components) increase the complexity of the Group’s control environment and thus, affects our ability as group auditor to obtain an
appropriate level of understanding of these components. Also, in our role as group auditor it is essential that we obtain an appropriate
level of understanding of the significant components in the Group and the audit work performed by the component’s auditors.
How our audit addressed the matter
We have obtained an understanding of the Group’s internal controls, including the centralised monitoring controls that exist at both
Group and segment level. The Group has developed an internal control framework with control activities that are required to be
implemented by the components. Management continually reviews their systems and procedures for improvements and harmonisation
across the Group.
During our audit, we have specifically focused on risks in relation to the decentralised structure and as a result, we have extended our
involvement in audit work performed by the components’ auditors. Among other audit procedures, we organised video conference
calls with components’ auditors. We have also requested components’ auditors to specifically address certain risks and attention areas
defined at group level, by requiring all teams to perform specific audit procedures in order to ensure a consistent approach in areas
that were deemed most relevant from a group audit perspective to mitigate the risks identified by the group auditor. We also
performed tests on consolidation adjustments and manual journal entries, both at Group and component level to obtain an
understanding of significant entries made.
Other information included in the Group’s 2021 Annual Report
Other information consists of the information included in the 2021 Annual Report, other than the consolidated financial statements and
our auditor’s report thereon. Management is responsible for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. 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.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
136 137
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Responsibilities of management and the Audit Committee for the financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS
as adopted by the European Union and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’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
management either intends to liquidate the Group or to cease operations or has no realistic alternative but to do so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 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 consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
– identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
– obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
– evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management;
– conclude, on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern;
– evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation; and
– obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of
the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding
independence and communicated with them all relationships and other matters that may reasonably be thought to bear on our
independence and, where applicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Report on other legal and Regulatory Requirements:
Pursuant to Section 9.8.10 (1) and (2) of the Listing Rules in the United Kingdom, we were engaged to review Management’s statement
pursuant to Section 9.8.6 R (6) of the Listing Rules of the Financial Conduct Authority that relate to provisions 6 and 24 to 29 of the UK
Corporate Governance Code and Management Board’s statement pursuant to Section 9.8.6 R (3) of Listing Rules of the Financial
Conduct Authority in the financial year 2021 Including in the “viability statement” set out on page 35 of the management report and in
the section “Going concern reporting according to the UK Corporate Governance Code” set out on page 135 of the management
report. We have no exceptions to report.
The partner in charge of the audit resulting in this independent auditors’ report is Ronen Kimchi.
RONEN KIMCHI
(For and on behalf of Kost Forer Gabbay & Kasierer, member of Ernst & Young Global)
Tel Aviv, Israel
28 FEBRUARY 2022
Independent auditors’ report to the members
ofPPHE hotel group limited continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
138 139
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note
As at 31 December
2021
£’000
2020
£’000
Assets
Non-current assets:
Intangible assets 4 14,290 17,754
Property, plant and
equipment 5 1,236,000 1,201,358
Right-of-use assets 19 215,921 223,793
Investment in joint ventures 6 4,315 4,741
Other non-current assets 7 16,386 15,958
Restricted deposits and
cash 14(b) 8,121 2,261
Deferred income tax asset 27 10,221 6,724
1,505,254 1,472,589
Current assets:
Restricted deposits and
cash 14(b) 5,204 4,777
Inventories 1,840 2,260
Trade receivables 8 6,811 3,473
Other receivables and
prepayments 9 19,435 8,044
Other current financial
assets 10 22 27
Cash and cash equivalents 11 136,802 114,171
170,114 132,752
Total assets 1,675,368 1,605,341
Consolidated statement of financial position
For the year ended 31 December 2021
Consolidated income statement
For the year ended 31 December 2021
Note
As at 31 December
2021
£’000
2020
£’000
Equity and liabilities
Equity: 12
Issued capital – –
Share premium 131,229 131,389
Treasury shares (3,482) (3,482)
Foreign currency translation
reserve 3,806 20,804
Hedging reserve (434) (703)
Accumulated earnings 147,350 161,587
Attributable to equity
holders of the parent 278,469 309,595
Non-controlling interests 168,742 95,358
Total equity 447,211 404,953
Non-current liabilities:
Borrowings 15 729,284 721,006
Provision for concession fee
on land 16 5,057 5,399
Financial liability in respect
of Income Units sold to
private investors 17 124,551 126,155
Other financial liabilities 18 253,362 244,818
Deferred income taxes 27 7,236 8,472
1,119,490 1,105,850
Current liabilities:
Trade payables 16,650 6,502
Other payables and accruals 20 53,177 51,667
Borrowings 15 38,840 36,369
108,667 94,538
Total liabilities 1,228,157 1,200,388
Total equity and liabilities 1,675,368 1,605,341
The accompanying notes are an integral part of the
consolidated financial statements. Date of approval of the
financial statements 28 February2022. Signed on behalf of the
Board by Boris Ivesha and Daniel Kos.
Boris Ivesha Daniel Kos
President & Chief Executive Officer Chief Financial Officer &
Executive Director
Note
Year ended 31 December
2021
£’000
2020
£’000
Revenues 21 141,377 101,787
Operating expenses 22 (113,808) (110,870)
EBITDAR 27,569 (9,083)
Rental expenses 19 (2,504) (1,004)
EBITDA 25,065 (10,087)
Depreciation and amortisation 4,5,19 (43,283) (46,624)
EBIT (18,218) (56,711)
Financial expenses 23 (31,369) (35,526)
Financial income 24 333 391
Other expenses 25a (9,418) (9,736)
Other income 25b 3,784 10,299
Net expenses for financial liability in respect of Income Units sold to private investors 26 (1,949) (2,579)
Share in results of joint ventures 6 (718) (826)
Loss before tax (57,555) (94,688)
Income tax benefit 27 5,051 724
Loss for the year (52,504) (93,964)
Loss attributable to:
Equity holders of the parent (52,129) (81,731)
Non-controlling interests (375) (12,233)
(52,504) (93,964)
Basic and diluted loss per share (in Pound Sterling) 28 (1.23) (1.92)
The accompanying notes are an integral part of the consolidated financial statements.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
141
APPENDICES
140
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Consolidated statement of changes in equity
For the year ended 31 December 2021
Year ended 31 December
2021
£’000
2020
£’000
Loss for the year (52,504) (93,964)
Other comprehensive income (loss) to be recycled through profit and loss in subsequent periods:*
Loss from cash flow hedges 507 (90)
Foreign currency translation adjustments of foreign operations (23,083) 16,867
Other comprehensive income (loss) (22,576) 16,777
Total comprehensive loss (75,080) (77,187)
Total comprehensive loss attributable to:
Equity holders of the parent (68,858) (69,069)
Non-controlling interests (6,222) (8,118)
(75,080) (77,187)
* There is no other comprehensive income that will not be reclassified to the profit and loss in subsequent periods.
The accompanying notes are an integral part of the consolidated financial statements.
In £’000
Issued
capital
1
Share
premium
Treasury
shares
Foreign
currency
translation
reserve
Hedging
reserve
Accumulated
earnings
Attributable
to equity
holders of
the parent
Non-
controlling
interests
Total
equity
Balance as at
1January 2021 – 131,389 (3,482) 20,804 (703) 161,587 309,595 95,358 404,953
Loss for the year – – – – – (52,129) (52,129) (375) (52,504)
Other
comprehensive
income (loss) for
theyear – – – (16,998) 269 – (16,729) (5,847) (22,576)
Total
comprehensive
income (loss) – – (16,998) 269 (52,129) (68,858) (6,222) (75,080)
Share-based
payments – 1,182 – – – – 1,182 86 1,268
Exercise of options
settled in cash – (1,342) – – – – (1,342) – (1,342)
Transactions with
non-controlling
interests
(see Note 6) – – – – – 37,892 37,892 79,520 117,412
Balance as at
31December 2021 131,229 (3,482) 3,806 (434) 147,350 278,469 168,742 447,211
Balance as at
1January 2020 – 130,260 (3,636) 8,094 (655) 243,233 377,296 103,465 480,761
Loss for the year – – – – – (81,731) (81,731) (12,233) (93,964)
Other
comprehensive
income (loss) for
theyear – – – 12,710 (48) – 12,662 4,115 16,777
Total
comprehensive
income (loss) – – – 12,710 (48) (81,731) (69,069) (8,118) (77,187)
Issue of shares – 870 154 – – – 1,024 – 1,024
Share-based
payments – 259 – – – 85 344 75 419
Transactions with
non-controlling
interests
(see Note 6) – – – – – – – (64) (64)
Balance as at
31December 2020 – 131,389 (3,482) 20,804 (703) 161,587 309,595 95,358 404,953
1 No par value.
The accompanying notes are an integral part of the consolidated financial statements.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
142 143
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Consolidated statement of cash flows
For the year ended 31 December 2021
Note
Year ended 31 December
2021
£’000
2020
£’000
Cash flows from operating activities:
Loss for the year (52,504) (93,964)
Adjustment to reconcile loss to cash provided by operating activities:
Financial expenses and expenses for financial liability in respect of Income Units sold to
privateinvestors 33,318 38,105
Financial income 24 (333) (268)
Income tax benefit 27 (5,051) (724)
Loss on buy-back of Income Units sold to private investors 25 543 –
Re-measurement of lease liability 25 3,565 3,369
Revaluation of Park Plaza County Hall London Units 25 (602) 2,402
Capital loss (gain) on sale of fixed assets, net 25 (996) 1,457
Gain from marketable securities 24 – (123)
Impairment of property, plant and equipment 5 4,424 2,500
Impairment of right-of-use assets 19 – 2,781
Share in results of Joint Ventures 6 718 826
Share appreciation rights revaluation 25,6c(i) (1,750) –
Depreciation and amortisation 4, 5, 19 38,859 41,343
Share-based payments 1,268 419
73,963 92,087
Changes in operating assets and liabilities:
Decrease in inventories 337 143
(Increase) decrease in trade and other receivables (19,167) 13,505
Increase (decrease) in trade and other payables 21,679 (8,529)
2,849 5,119
Cash paid and received during the period for:
Interest paid (33,729) (31,412)
Interest received 316 173
Taxes paid (469) (1,076)
Taxes received – 365
(33,882) (31,950)
Net cash used in operating activities (9,574) (28,708)
Note
Year ended 31 December
2021
£’000
2020
£’000
Cash flows from investing activities:
Investments in property, plant and equipment 5 (58,582) (57,388)
Disposal of property, plant and equipment 1,406 317
Investments in intangible assets 4 (176) (305)
Acquisition of Londra & Cargill in Rome, Italy 3a (28,298) –
Acquisition of Arena Franz Ferdinand, Austria 3b (12,783) –
Acquisition of Hotel 88 Rooms in Belgrade, Serbia 3c – (5,350)
Loan to Joint Venture (400) (583)
Investment in Joint Venture 6 – (2,207)
Increase in restricted cash (6,332) (1,613)
Decrease in marketable securities, net – 5,318
Net cash used in investing activities (105,165) (61,811)
Cash flows from financing activities:
Proceeds from loans and borrowings 53,666 56,948
Buy-back of Income Units previously sold to private investors (1,934) –
Repayment of loans and borrowings (26,653) (7,530)
Repayment of leases (6,825) (1,567)
Net proceeds from transactions with non-controlling interest 124,562 (64)
Exercise of options settled in cash (1,342)
Net cash provided by financing activities 141,474 47,787
Increase (decrease) in cash and cash equivalents 26,735 (42,732)
Net foreign exchange differences (4,104) 3,874
Cash and cash equivalents at beginning of year 114,171 153,029
Cash and cash equivalents at end of year 136,802 114,171
Non-cash items:
Lease additions and lease remeasurement 4,226 15,143
Outstanding payable on investments in property, plant and equipment 3,469 3,918
Issuance of shares for acquisition of art’otel rights – 1,024
The accompanying notes are an integral part of the consolidated financial statements.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
144 145
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 1 General
a. The consolidated financial statements of PPHE Hotel Group Limited (the ‘Company’) and its subsidiaries (together the ‘Group’) for the
year ended 31 December 2021 were authorised for issuance in accordance with a resolution of the Directors on 28 February 2022.
The Company was incorporated in Guernsey on 14 June 2007 and is listed on the Premium Listing segment of the Official List of the
UK Listing Authority (the UKLA) and the shares are traded on the Main Market for listed securities of the London Stock Exchange.
b. Description of the Group business:
The Group is an international hospitality real estate group, which owns, co-owns and develops hotels, resorts and campsites,
operates the Park Plaza
®
brand in EMEA and owns and operates the art’otel
®
brand.
The Group has interests in hotels in the United Kingdom, the Netherlands, Germany, Hungary, Serbia, Italy and Austria and hotels,
self-catering apartment complexes and campsites in Croatia.
c. Assessment of going concern and liquidity:
In 2021, the ongoing challenges presented by the pandemic continued to cause severe disruption to the global hospitality sector,
with government-imposed domestic and international travel restrictions and social distancing measures in place for much of the
year. The Group continued to take proactive measures to conserve cash in 2021. Actions mainly included utilisation of government
support schemes available to the business across its market, such as government job support schemes (amounting to £12.1 million),
reimbursement of fixed costs grants (amounting to £9.6 million) and the business rates holiday in the UK (amounting to saving of
approximately £8 million). Furthermore, capital expenditure requirements for the Group’s development pipeline have been
prioritised, and discretionary spend has been reduced to business-critical investments only. The Board has not recommended a
dividend payment to shareholders and future payments will be aligned to the recovery trajectory and performance of the business.
In 2021, the Group further strengthened its liquidity through raising £125.8 million in cash as part of its joint venture transaction with
Clal (see note 6c(i)) and as at 31 December 2021 the Group continues to hold a strong liquidity position with an overall consolidated
cash balance of £136.8 million. Furthermore, the Group fully repaid the drawn balance under the CLBILS facility and the Waterloo
facility and currently has access to £76.8 million of undrawn facilities. Financial covenant testing of existing facilities have been
postponed, where appropriate, to 2023 (see Note 15c).
Since the start of the COVID-19 pandemic multiple cash flow forecasts showing various scenarios have been modelled and reviewed
by the Board to provide the basis for strategic actions taken across the business. The Directors have considered detailed cash flow
projections for the next three-year period to 31 December 2024 which are constructed on a base case and a downside case basis.
Having reviewed those scenarios together with the Group’s strong cash position and the covenant waivers received, the Directors
have a reasonable expectation that the Company is likely to continue in business for at least 12 months from the date of approval of
the consolidated financial statements without implementing any further protective measures to the operational structure.
Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
Note 2 Summary of significant accounting policies
a. Basis of preparation
The consolidated financial statements of the Group have been prepared on a historical cost basis, except for derivative financial
instruments and investments in marketable securities which are measured at fair value. The consolidated financial statements are
presented in Pound Sterling and all values are rounded to the nearest thousand (£’000) except where otherwise indicated.
Statement of compliance:
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (IFRS) which comprise standards and interpretations issued by the International Accounting Standards Board (IASB) and
International Financial Reporting Standards Interpretations Committee (IFRIC) and adopted by the European Union.
The accounting policies used in preparing the consolidated financial statements for the years ended 31 December 2021 and
2020are set out below. These accounting policies have been consistently applied to the periods presented, except where
otherwiseindicated.
b. Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31December
2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee.
The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent
accounting policies. All inter-company balances and transactions, income and expenses, and profits and losses resulting from
intra-Group transactions are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on
which the Group obtains control, and continue to be consolidated until the date on which such control ceases.
Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately
in the income statement and within equity in the consolidated statement of financial position, separately from parent
shareholders’equity.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest
and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised
at fair value.
c. Significant accounting judgments, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability affected in future periods.
Notes to consolidated financial statements
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
146 147
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 2 Summary of significant accounting policies continued
Judgments
In the process of applying the Group’s accounting policies, management has made the following judgments, which have the
mostsignificant effect on the amounts recognised in the consolidated financial statements.
Acquisition of companies that are not business combinations
At the acquisition date of companies and groups of assets, the Company determines whether the transaction constitutes an
acquisition of a business in a business combination transaction pursuant to IFRS 3. If the acquisition does not constitute a business
as defined in IFRS 3, the cost of purchase is allocated only to the identifiable assets and liabilities of the acquired company on the
basis of their relative fair values at the date of purchase and including any minority interest according to its share of the fair value of
net identifiable assets at the acquisition date.
In determining whether a business was acquired, the Company evaluates whether the acquired integrated set of activities and assets
include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
The following criteria which indicate acquisition of a business are considered: the variety of assets acquired; the extent to which
ancillary services to operate the property are provided; and the complexity of the management of the property.
Estimates and assumptions
The key assumptions made in the consolidated financial statements concerning uncertainties at the reporting date and the critical
estimates computed by the Group for which there is a risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below. The Group bases its assumptions and estimates on parameters available
when the consolidated financial statements are prepared. However, these parameters may change due to market changes or other
circumstances beyond the control of the Group. Such changes are reflected in the assumptions and estimates when they occur.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its
fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from
binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing
of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years
and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the
performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model
as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to
determine the recoverable amount for the different CGUs, are disclosed and further explained in Notes 4 and 5.
Deferred tax assets
Deferred tax assets are recognised for unused carried forward tax losses and temporary differences to the extent that it is probable
that taxable profit will be available against which the losses can be utilised. The amount of deferred tax assets that can be
recognised is based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Additional information is provided in Note 27.
d. Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.
For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree either at fair value
or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are
expensed and included in administrative expenses.
The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a
substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered
substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with
the necessary skills, knowledge or experience to perform that process or it significantly contributes to the ability to continue
producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort or delay in the ability to
continue producing outputs.
Note 2 Summary of significant accounting policies continued
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host contracts of the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in
the acquiree is re-measured to fair value at the acquisition date through profit or loss. Any contingent consideration to be
transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not
re-measured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability
that is a financial instrument and within the scope of IFRS 9 Financial Instruments is measured at fair value with the changes in fair
value recognised in the income statement in accordance with IFRS 9. Other contingent consideration that is not within the scope of
IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised
for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the
assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the
acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating
units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash-generating unit retained.
e. Business combinations involving entities under common control
The Group accounts for business combinations that include entities under common control using the acquisition method provided
that the transaction has substance.
f. Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
The Group’s investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the
investment in an associate or joint venture is carried in the statement of financial position at cost plus post acquisition changes in the
Group’s share of net assets of the associate or joint venture.
The income statement reflects the share of the results of operations of associates and joint ventures. The Group’s share of changes
in other comprehensive income of associates or joint venture is recognised in the statement of comprehensive income. Where there
has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes
and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions
between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
148 149
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 2 Summary of significant accounting policies continued
The aggregate of the Group’s share of profit or loss of an associate or a joint venture is shown on the face of the income statement
outside EBIT and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate and joint ventures are prepared for the same reporting period as the Group.
Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its
investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that
the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the
loss as ‘Share in result of associate and joint ventures’ in the income statement.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any
retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of
significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in the
income statement.
g. Foreign currency translation
The functional currency of the Company is Pound Sterling. The consolidated financial statements are also presented in Pound Sterling.
Each entity of the Group determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency.
Transactions in foreign currencies are initially recorded at the exchange rates prevailing on the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency at the rates prevailing on
the reporting date. Profits and losses arising from exchange differences are included in the income statement.
The assets and liabilities of the entities whose functional currency is not Pound Sterling are translated at exchange rates prevailing
on the reporting date. Income and expense items are translated at the average exchange rates for the period. Equity items are
translated at the historical exchange rates. Exchange differences arising on the translation are recognised in other comprehensive
income and classified as a separate component of equity (foreign currency translation reserve). Such translation differences are
recognised in the income statement in the period in which the entity is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Exchange differences in respect of loans denominated in foreign currency which were granted by the Company to its subsidiaries
are reflected in the foreign currency translation reserve in equity, as these loans are, in substance, a part of the Group’s net
investment in the foreign operation.
The following exchange rates in relation to Pound Sterling were prevailing at reporting dates:
As at 31 December
2021
In Pound
Sterling
2020
In Pound
Sterling
Euro 0.838 0.897
Hungarian Forint 0.002 0.002
Croatian Kuna 0.112 0.119
US Dollar 0.740 0.731
Note 2 Summary of significant accounting policies continued
Percentage increase (decrease) in exchange rates during the year:
As at 31 December
2021
%
2020
%
Euro (6.6) 5.3
Hungarian Forint (6.7) (4.7)
Croatian Kuna (6.3) 4.0
US Dollar 1.2 (3.8)
h. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses.
Intangible assets are amortised using the straight-line method over their estimated useful life and assessed for impairment whenever
there is an indication that the intangibles may be impaired. The amortisation period and the amortisation method are reviewed at
least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the assets are accounted for by changing the amortisation period or method, as appropriate, and are treated
as changes in accounting estimates. The amortisation expense for intangible assets is recognised in the income statement.
Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds
and the carrying amount of the asset and recognised in the income statement when the asset is derecognised.
i. Property, plant and equipment
Property, plant and equipment are measured at cost, less accumulated depreciation and impairment losses. Depreciation is
calculated using the straight-line method, over the shorter of the estimated useful life of the assets or the lease term as follows:
Years
Hotel buildings 50 to 95
Furniture and equipment 2 to 25
The costs of maintaining property, plant and equipment are recognised in the income statement as they are incurred. Costs incurred
that significantly increase the recoverable amount of the asset concerned are added to the asset’s cost as an improvement and
depreciated over the expected useful life of the improvement.
An item of property, plant and equipment, and any significant part initially recognised, is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when
the asset is derecognised.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted
prospectively, if appropriate.
j. Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any
indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. Where it
is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
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Note 2 Summary of significant accounting policies continued
Recoverable amount is the higher of an asset’s fair value less costs of disposal and its 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.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the asset is
considered impaired and the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.
Impairment losses are recognised as an expense immediately.
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 not in excess of the carrying amount that would have been determined had no
impairment loss been previously recognised for the asset (cash-generating unit). A reversal of an impairment loss is recognised as
income immediately.
k. Financial instruments
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and
the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely
payments of principal and interest’ (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require delivery of assets within a timeframe established by regulation or convention in the
marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in two categories:
– financial assets at amortised cost (debt instruments); and
– financial assets at fair value through profit or loss.
Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both of the following conditions are met:
– the financial asset is held within a business model with the objective of holding financial assets in order to collect contractual
cashflows; and
– the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal
amountoutstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include trade receivables and loans to joint ventures.
Note 2 Summary of significant accounting policies continued
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial assets required to be measured at fair value. Financial assets are classified
as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets that are debt instruments may be designated at fair value through profit or loss on initial recognition if doing so
eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in
fair value recognised in the income statement.
This category includes derivative instruments and listed equity investments. Dividends on listed equity investments are recognised
as other income in the income statement when the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is primarily
derecognised (i.e. removed from the Group’s consolidated statement of financial position) when:
– the rights to receive cash flows from the asset have expired; or
– the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the
transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group
hasretained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of financial assets
The Group recognises an allowance for expected credit loss (ECL) for all debt instruments not held at fair value through profit or
loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash
flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial
recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a
12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL).
For trade receivables the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
The Group considers a financial asset to be in default when internal or external information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
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Note 2 Summary of significant accounting policies continued
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, as measured at amortised
cost (loans and borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading
unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the income statement.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of
recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through
profit or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as financial expenses in the income statement.
This category generally applies to interest-bearing loans and borrowings.
Financial liability in respect of Income Units sold to private investors
In 2010, the construction of Park Plaza Westminster Bridge London was completed and the hotel opened to paying customers.
Out of 1,019 rooms, 535 rooms (‘Income Units’) were sold to private investors under a 999-year lease. The sales transactions are
accounted for as an investment scheme in which the investors, in return for the upfront consideration paid for the Income Units,
receive 999 years of net income from a specific revenue-generating portion of an asset (contractual right to a stream of future cash
flows). The amounts received upfront are accounted for as a floating rate financial liability and are being recognised as income over
the term of the lease (i.e. 999 years). Changes in future estimated cash flows from the Income Units are recognised in the period in
which they occur. Since November 2014, the Company has bought back 37 Income Units from private investors. Upon buy-back of a
unit, the financial liability relating to that unit is derecognised and any difference between the purchase price and the liability
derecognised is recorded in profit and loss.
Note 2 Summary of significant accounting policies continued
On completion of each sale of Income Units, the Company, through a wholly owned subsidiary, Marlbray Limited (‘Marlbray’),
entered into income swap agreements for five years with the private investors. The income swap agreements included an obligation
of the investors to assign the right to receive the net income derived from the Income Units to Marlbray and an undertaking by
Marlbray to pay to the investors an annual rent guarantee of approximately 6% of the purchase price for a five-year period
commencing from the date of the completion of the sale. The income swap has been accounted for as a derivative. In 2015, Marlbray
entered into 56 new income swap agreements for a further five years from the expiry date of the original income swap agreements
on the same terms and conditions. In 2020 all the income swap agreements have expired.
The entire hotel is accounted for at cost less accumulated depreciation.
The replacement costs for the Income Units are fully reimbursed by the private investors. An amount of 4% of revenues is paid by the
investors on an annual basis (‘FF&E reserve’) and is accounted for in profit and loss. The difference between the actual depreciation
cost and the FF&E reserve is a timing difference which is recorded in the statement of financial position as a receivable or liability to
the investor in each respective year.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the income statement.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if
there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
l. Inventories
Inventories include china, food and beverages and are valued at the lower of cost and net realisable value. Cost includes purchase
cost on a first-in, first-out basis.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make
thesale.
m. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months
orless.
n. Derivative financial instruments and hedge accounting
As permitted by IFRS 9, the Group has elected to continue to apply the hedge accounting requirements of IAS 39 instead of the
requirements of IFRS 9.
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate
fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to the
income statement.
For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging the exposure to variability in cash flows
that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
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APPENDICES
Notes to consolidated financial statements continued
For the year ended 31 December 2021
Note 2 Summary of significant accounting policies continued
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group
wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the
Group will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the
hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated.
The effective portion of the gain or loss on the hedging instrument in a cash flow hedge is recognised directly in other comprehensive
income, while the ineffective portion is recognised in profit or loss. Amounts taken to other comprehensive income are transferred to the
income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is
recognised.
o. Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.
The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or
services before transferring them to the customer.
Owned, co-owned and leased hotels
Revenues are primarily derived from hotel operations, including the rental of rooms, food and beverage sales and other services
from owned, co-owned and leased hotels operated under the Group’s brand names. Revenue is recognised when rooms are
occupied, food and beverages are sold and services are performed.
Management fees
Management fees are earned from hotels managed by the Group, under long-term contracts with the hotel owner.
Management fees include a base fee, which is generally a percentage of hotel revenue, and an incentive fee, which is based on the
hotel’s profitability. Revenue is recognised when earned and realised or realisable under the terms of the agreement.
Franchise fees
Franchise fees are received in connection with a licence of the Group’s brand names, under long-term contracts with the hotel
owner. The Group charges franchise fees as a percentage of hotel revenue. Revenue is recognised when earned and realised or
realisable under the terms of the agreement.
Marketing fees
Marketing fees are received in connection with the sales and marketing services offered by the Group, under long-term contracts
with the hotel owner. The Group charges marketing fees as a percentage of hotel revenue. Revenue is recognised when earned and
realised or realisable under the terms of the agreement.
Customer loyalty programme
The Group participates in the Radisson Rewards
TM
customer loyalty programme to provide customers with incentives to buy room
nights. This customer loyalty programme is owned and operated by the Radisson Hotel Group and therefore the entity retains no
obligations in respect of the award credits other than to pay the programme operator for the granted award credits. The customers
are entitled to utilise the awards as soon as they are granted.
The Group purchases these award credits from Radisson Hotel Group and issues these to its customers in order to enhance its
customer relationships rather than to earn a margin from the sale of these award credits. The Group concluded that it is acting as
principal in this transaction and, in substance, is earning revenue from supplying these awards to its customers. The Group measures
these revenues at fair value and recognises these gross from the costs of participating in the programme.
Note 2 Summary of significant accounting policies continued
Contract balances
Trade receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e. only the passage of time is
required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an
amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to
the customer, a contract liability (advance payments received) is recognised when the payment is made or the payment is due
(whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
p. Alternative performance measures
EBITDAR
Earnings before interest, tax, depreciation, amortisation, impairment loss and rental expenses, share of associate and exceptional
items presented as other income and expense (EBITDAR) correspond to revenue less cost of revenues (operating expenses).
EBITDAR, together with EBITDA, is used as a key performance indicator.
EBITDA
Earnings before interest, tax, depreciation and amortisation, impairment loss, exceptional items presented as other income and
expense (EBITDA) correspond to gross profit after the operating costs of holding leased hotels.
EBIT
Earnings before interest, tax and exceptional items presented as other income and expense (EBIT) correspond to gross operating
profit after the operating costs of holding both leased and owned assets.
q. Leases
The Group accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a
period of time in exchange for consideration.
The Group as lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of
low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use
the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for
use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets,
asfollows:
Years
Land 50 to 200
Hotel buildings 5 to 95
Offices and storage 1 to 12
Furniture and equipment 2 to 25
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase
option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.
Refer to the accounting policies in section (j), Impairment of non-financial assets.
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APPENDICES
Notes to consolidated financial statements continued
For the year ended 31 December 2021
Note 2 Summary of significant accounting policies continued
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to
be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as rent expenses in the period in which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount
of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the lease payments (e.g.
changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the
assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Other financial liabilities (see Note 18).
Variable lease payments that depend on an index:
On the commencement date, the Company uses the index rate prevailing on the commencement date to calculate the future
leasepayments.
For leases in which the Company is the lessee, the aggregate changes in future lease payments resulting from a change in the index
are discounted (without a change in the discount rate applicable to the lease liability) and recorded as an adjustment of the lease
liability and the right-of-use asset, only when there is a change in the cash flows resulting from the change in the index (that is, when
the adjustment to the lease payments takes effect).
Variable lease payments:
Variable lease payments that do not depend on an index or interest rate but are based on performance or usage are recognised as
an expense as incurred when the Company is the lessee, and are recognised as income as earned when the Company is the lessor.
Lease extension and termination options:
A non-cancellable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that
the extension option will be exercised and the periods covered by a lease termination option when it is reasonably certain that the
termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease
termination option, the Company re-measures the lease liability based on the revised lease term using a revised discount rate as of
the date of the change in expectations. The total change is recognised in the carrying amount of the right-of-use asset until it is
reduced to zero, and any further reductions are recognised in profit or loss.
Lease modifications:
If a lease modification does not reduce the scope of the lease and does not result in a separate lease, the Company re-measures the
lease liability based on the modified lease terms using a revised discount rate as of the modification date and records the change in
the lease liability as an adjustment to the right-of-use asset.
If a lease modification reduces the scope of the lease, the Company recognises a gain or loss arising from the partial or full reduction
of the carrying amount of the right-of-use asset and the lease liability. The Company subsequently re-measures the carrying amount
of the lease liability according to the revised lease terms, at the revised discount rate as of the modification date and records the
change in the lease liability as an adjustment to the right-of-use asset.
Note 2 Summary of significant accounting policies continued
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of furniture and equipment (i.e. those leases
that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
r. Employee benefits
Share-based payments
The Board has adopted a share option plan, under which employees and Directors of the Group receive remuneration in the form of
share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled
transactions).
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are
granted. The fair value is determined by using an appropriate pricing model, further details of which are given in Note 13.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the
number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the
movement in cumulative expense recognised at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional
upon a market or non-vesting condition, which are treated as vesting, irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the
terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification
that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee, as measured at
the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of
either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a
replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
Pension
The Group has a defined contribution pension plan where the employer is liable only for the employer’s part of the contribution
towards an individual’s pension plan.
The Group will have no legal obligation to pay further contributions. The contributions in the defined contribution plan are
recognised as an expense and no additional provision is required in the consolidated financial statements.
s. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the income statement, net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is
recognised as a finance cost.
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APPENDICES
Note 2 Summary of significant accounting policies continued
t. Borrowing costs for qualifying assets
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection
with the borrowing of funds. All other borrowing costs are recognised in the income statement in the period in which they are
incurred.
u. Taxation
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable
temporary differences, except:
– where the deferred tax liability arises from the initial recognition of goodwill or from an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
– in respect of taxable temporary differences associated with investments in subsidiaries, associates and jointly controlled entities,
where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities and changes in them relating to items recognised directly in equity or other comprehensive
income are recognised in equity or other comprehensive income and not in the income statement.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry forward of unused tax losses can be utilised, except:
– when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
– in respect of deductible temporary differences associated with investments in subsidiaries, associates and jointly controlled
entities, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are re-assessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or
the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
v. Treasury shares
Own equity shares held by the Group are recognised at cost and presented as a deduction from equity. Any purchase, sale, issue or
cancellation of treasury shares is recognised directly in equity.
Note 2 Summary of significant accounting policies continued
w. Earnings (loss) per share
Basic earnings (loss) per share amounts are calculated by dividing the net profit (loss) for the year attributable to shareholders of the
parent company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings (loss) per share amounts are calculated by dividing the net profit (loss) for the year by the weighted average number
of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
x. Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods
that the related costs, for which it is intended to compensate. The income from the Government grants is netted off against the
operating expenses account in the income statement.
y. Changes in accounting policies and disclosures
The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after
1 January 2021. Several other amendments and interpretations apply for the first time in 2021, but do not have an impact on the
consolidated financial statements of the Group. The Group has not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
COVID-19 related rent concessions beyond 30 June 2021
Amendment to IFRS 16
On 28 May 2020, the IASB issued COVID-19 Related Rent Concessions – amendment to IFRS 16 Leases. The amendments provide
relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct
consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent
concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments
resulting from the COVID-19 related rent concession the same way it would account for the change under IFRS 16, if the change were
not a lease modification. The amendment was intended to apply until 30 June 2021, but as the impact of the COVID-19 pandemic is
continuing, on 31 March 2021, the IASB extended the period of application of the practical expedient to 30 June 2022.
The amendment applies to annual reporting periods beginning on or after 1 April 2021.
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is
replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:
– A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be
treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest
– Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging
relationship being discontinued
– Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is
designated as a hedge of a risk component
As at 31 December 2021 the Group had two variable interest bearing loans that were linked to the Pound Libor. After the reporting
date those loan agreements were amended to replace the Pound Libor with sterling overnight index average (Sonia) effective from
2022. In line with the above practical expedient those loan amendments will be treated as changes to a floating interest rate.
The Group does not expect the change in rates to have any significant impact on the future cash outflow from those loans.
z. Standards issued but not yet applied
Standards issued but not yet effective, or subject to adoption by the European Union, up to the date of issuance of the consolidated
financial statements are listed below. This listing of standards issued are those that the Group reasonably expects to have an impact
on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when
they become mandatory.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 2 Summary of significant accounting policies continued
The following standards have been issued by the IASB and are not yet effective or are subject to adoption by the European Union:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as
current or non-current. The amendments clarify:
– what is meant by a right to defer settlement;
– that a right to defer must exist at the end of the reporting period;
– that classification is unaffected by the likelihood that an entity will exercise its deferral right; and
– that only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact
its classification.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must be applied
retrospectively. The Group is currently assessing the impact the amendments will have on current practice and whether existing loan
agreements may require renegotiation.
Reference to the Conceptual Framework – Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations – Reference to the Conceptual Framework.
The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial
Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without
significantly changing its requirements.
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising
for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately.
At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by
replacing the reference to the Framework for the Preparation and Presentation of Financial Statements.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively.
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment/Proceeds before Intended Use, which prohibits entities deducting from
the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the
location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity
recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively
to items of property, plant and equipment made available for use on or after beginning of the earliest period presented when the
Group first applies the amendment. The amendment is not expected to have a material impact on the Group.
Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a
contract is onerous or loss-making. The amendments apply a ‘Directly related cost approach’. The costs that relate directly to a
contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities.
General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the
counterparty under the contract.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The amendments are not
expected to have a material impact on the Group.
Note 2 Summary of significant accounting policies continued
IFRS 9 Financial Instruments – Fees in the ’10%’ test for derecognition of financial liabilities
As part of its 2018–2020 annual improvements to IFRS standards process the IASB issued amendment to IFRS 9. The amendment
clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially
different from the terms of the original financial liability. These fees include only those paid or received between the borrower and
the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment
to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first
applies the amendment.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The amendments are not
expected to have a material impact on the Group.
Definition of Accounting Estimates – Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’.
The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the
correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in
accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is
permitted as long as this fact is disclosed.
The amendments are not expected to have a material impact on the Group.
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it
provides guidance and examples to help entities apply materiality judgments to accounting policy disclosures. The amendments aim
to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their
‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how
entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023 with earlier application permitted.
Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the definition of material
to accounting policy information, an effective date for these amendments is not necessary.
The Group is currently assessing the amendments to determine the impact they will have on the Group’s accounting policy
disclosures.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 3 Business combination
a. Acquisition of Londra & Cargill Hotel in Rome, Italy
On 10 November 2021 PPHE Hotel Group, through its wholly owned subsidiary Londra Cargill Parent S.r.l, acquired 100% of the
shares of Società Immobiliare Alessandro De Gasperis S.r.l. which owns and operate the Londra & Cargill Hotel in Rome, Italy (the
‘hotel’). The hotel offers 101 rooms and suites, a restaurant, bar, meeting facilities and private parking and will continue to operate
while the Group finalises its plans to reposition the property as an upper upscale lifestyle hotel. The hotel is expected to be
relaunched in early 2023 after completing the planned repositioning. The purchase price of €33.1 million (£28.3 million) was funded
from the Group’s excess cash position. Transaction costs of £0.5 million were expensed and are included in other expenses in the
consolidated income statement.
The fair values of identifiable assets and liabilities of the hotel at the date of acquisition were as follows:
Fair value
£’000
Property, plant and equipment 33,052
Trade and other receivables 43
Indemnification asset
Trade and other payables (3,784)
Bank loan (483)
Deferred tax liabilities, net (530)
Net assets 28,298
Cash flow on acquisition:
Cash acquired with the subsidiary 8
Cash paid (28,306)
Net cash outflow (28,298)
From the date of acquisition, Società Immobiliare Alessandro De Gasperis S.r.l. contributed £0.2 million of revenue and a loss of
£(0.2) million to loss before tax of the Group. If the combination had taken place at the beginning of the year, the effect on revenues
and profit before tax of the Group would have been immaterial.
b. Acquisition of the FRANZ ferdinand Mountain Resort Hotel in Nassfeld, Austria
On 3 December 2021, Arena Hospitality Group d.d., through its subsidiaries Sugarhill Investments B.V. and ARENA FRANZ
Ferdinand GmbH, acquired the FRANZ ferdinand Mountain Resort Nassfeld, a 4-starhotel in Nassfeld, Austria. The purchase price
of €15.3 million (£12.8 million) was partially funded from Arena’s excess cash and partially by bank debt of €10.5 million (£8.8 million)
with Erste Group Bank AG. Transaction costs of £0.5 million were expensed and are included in other expenses in the consolidated
income statement.
Note 3 Business combination continued
The fair values of identifiable assets and liabilities of the hotel at the date of acquisition were as follows:
Fair value
£’000
Property, plant and equipment 13,155
Inventories 31
Trade and other payables (403)
Net assets 12,783
Cash paid (12,783)
From the date of acquisition, FRANZ ferdinand Mountain Resort Nassfeld contributed £0.3 million of revenue and a loss of £(0.1)
million to loss before tax. If the combination had taken place at the beginning of the year, the effect on revenues and profit before
tax of the Group would have been immaterial.
c. Acquisition of 88 Rooms Hotel in Belgrade, Serbia
On 29 December 2020 Arena Hospitality Group d.d., through its wholly owned subsidiary, successfully completed the acquisition of
88 Rooms Hotel in Belgrade (the ‘hotel’). The transaction value amounted to HRK 45 million (£5.4 million).
The fair values of identifiable assets and liabilities of the hotel at the date of acquisition were as follows:
Fair value
£’000
Property, plant and equipment 5,322
Intangible assets 16
Trade and other receivables 37
Trade and other payables (25)
Net assets 5,350
Cash flow on acquisition:
Cash acquired with the subsidiary 10
Cash paid (5,360)
Net cash outflow (5,350)
If the acquisition had taken place as of 1 January 2020, the effect on prior year revenues and loss before tax of the Group would
have beenimmaterial.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
164 165
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 4 Intangible assets
Park Plaza
®
Hotels &
Resorts
management
rights (a)
1
£’000
Park Plaza
®
Hotels &
Resorts
franchise
rights (a)
2
£’000
art’otel
®
franchise
rights (b)
£’000
Other
intangible
assets (c)
£’000
Total
£’000
Cost:
Balance as at 1 January 2021 21,475 21,954 3,899 3,347 50,675
Adjustment for exchange rate differences (1,412) (1,444) (256) (222) (3,334)
Additions – – – 176 176
Disposals – – – (10) (10)
Balance as at 31 December 2021 20,063 20,510 3,643 3,291 47,507
Accumulated amortisation:
Balance as at 1 January 2021 14,446 14,868 1,866 1,741 32,921
Disposals – – – (10) (10)
Amortisation 1,035 1,042 186 268 2,531
Adjustment for exchange rate differences (974) (1,001) (127) (123) (2,225)
Balance as at 31 December 2021 14,507 14,909 1,925 1,876 33,217
Net book value as at 31 December 2021 5,556 5,601 1,718 1,415 14,290
Cost:
Balance as at 1 January 2020 20,391 20,846 2,532 3,128 46,897
Adjustment for exchange rate differences 1,084 1,108 119 128 2,439
Additions – – 1,248 81 1,329
Disposals – – – (6) (6)
Acquisition of a subsidiary – – – 16 16
Balance as at 31 December 2020 21,475 21,954 3,899 3,347 50,675
Accumulated amortisation:
Balance as at 1 January 2020 12,689 13,084 1,645 1,443 28,861
Disposals – – – (6) (6)
Amortisation 1,072 1,080 132 251 2,535
Adjustment for exchange rate differences 685 704 89 53 1,531
Balance as at 31 December 2020 14,446 14,868 1,866 1,741 32,921
Net book value as at 31 December 2020 7,029 7,086 2,033 1,606 17,754
a. Acquisition of Park Plaza
®
Hotels & Resorts management and franchise rights and lease rights
(1) Management rights – rights held by the Group relating to the management of Park Plaza
®
Hotels & Resorts in Europe, the Middle
East and Africa. The management rights are included in the consolidated financial statements at their fair value as at the date of
acquisition and are being amortised over a 20-year period based on the terms of the existing contracts and management
estimation of their useful life. The remaining amortisation period is 6.5 years.
(2) Franchise rights relating to the brand ‘Park Plaza
®
Hotels & Resorts’ are included in the consolidated financial statements at their
fair value as at the date of acquisition and are being amortised over a 20-year period based on management’s estimation of their
useful life. The remaining amortisation period is 6.5 years.
Note 4 Intangible assets continued
b. Acquisition of art’otel
®
rights
In 2007, the Group acquired from CCS Capital Concept Services Gmbh (the ‘vendor’) the worldwide rights to use the art’otel
®
brand
name for an unlimited period of time. The rights are being amortised over a 20-year period based on management’s estimation of
their useful life. The remaining amortisation period is 6.5 years. In December 2020, the Group acquired certain rights which were
assigned to the vendor under the original agreement for a cash consideration of €0.3 million (£0.2 million) and 80,000 shares of the
Company. The additional rights are amortised based on management’s estimation of their useful life.
c. Other intangible assets
These include the brand name and internal domain obtained in the acquisition of Arena. The rights are being amortised over 20
years based on management’s estimation of their useful life.
d. Impairment
The recoverable amount of the management and franchise rights have been determined based on internal value-in-use calculations.
Management rights – The value-in-use was estimated by applying the income approach. Under the Income Approach, fair value is
dependent on the present value of future economic benefits to be derived from ownership of an asset.
Franchise rights – The value-in-use was estimated by applying the Relief from Royalties Approach, a common and accepted
valuation technique used to estimate the fair market value of franchise rights. This method assumes that if the subject intangible
assets were not already available, a market royalty rate would have to be paid on the development and use of comparable
alternative intangible assets. An assumption of 6% royalty fee saving was used both for the Park Plaza
®
Hotels & Resorts and art’otel
®
franchise rights.
Given the adverse effect that COVID-19 had on the hospitality sector, management assumed that cash flow from management fees
and royalty fee saving will gradually recover during 2022–2023, and returning to 2019 levels in 2024. The discount rate applied to the
cash flow projections for both the management and franchise rights was set at 10% which includes a risk premium on top of the
Group WAAC. Based on this analysis it was concluded that there is no need for impairment.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
166 167
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 5 Property, plant and equipment
Land
£’000
Hotel
buildings
£’000
Property &
assets under
construction
£’000
Income Units
sold to private
investors
1
£’000
Furniture,
fixtures and
equipment
£’000
Total
£’000
Cost:
Balance as at 1 January 2021 353,931 699,516 24,095 138,199 240,865 1,456,606
Additions during the year – 1,750 25,175 363 32,153 59,441
Disposal (77) (1,835) (23) – (375) (2,310)
Acquisition of subsidiaries (Note 3) 6,169 38,443 – – 1,595 46,207
Buy-back of Income Units sold to private
investors 174 1,253 – (1,534) 107 –
Reclassification – 1,998 (1,964) 874 (1,080) (172)
Adjustment for exchange rate differences (11,583) (23,829) (1,558) – (5,136) (42,106)
Balance as at 31 December 2021 348,614 717,296 45,725 137,902 268,129 1,517,666
Accumulated depreciation and
impairment:
Balance as at 1 January 2021 11,043 96,933 – 22,435 124,837 255,248
Provision for depreciation 317 13,922 – 643 14,778 29,660
Disposal – (1,571) – – (329) (1,900)
Reclassification – (12) – 418 (384) 22
Buy-back of Income Units sold to private
investors – 157 – (259) 102 –
Impairment 4,424 – – – – 4,424
Adjustment for exchange rate differences (115) (3,174) – – (2,499) (5,788)
Balance as at 31 December 2021 15,669 106,255 – 23,237 136,505 281,666
Net book value as at 31 December 2021 332,945 611,041 45,725 114,665 131,624 1,236,000
Cost:
Balance as at 1 January 2020 315,743 661,672 14,410 137,789 206,221 1,335,835
Additions during the year 1,034 14,482 10,975 410 34,388 61,289
Disposal – (3,065) – – (2,859) (5,924)
Acquisition of subsidiaries 30,089 4,697 3,826 – 223 38,835
Reclassification 2 5,857 (5,473) – (386) –
Adjustment for exchange rate differences 7,063 15,873 357 – 3,278 26,571
Balance as at 31 December 2020 353,931 699,516 24,095 138,199 240,865 1,456,606
Accumulated depreciation and
impairment:
Balance as at 1 January 2020 7,361 82,706 – 21,278 110,829 222,174
Provision for depreciation 329 13,744 – 1,157 16,149 31,379
Disposal – (1,543) – – (2,607) (4,150)
Reclassification 699 169 – – (868) –
Impairment 2,500 – – – – 2,500
Adjustment for exchange rate differences 154 1,857 – – 1,334 3,345
Balance as at 31 December 2020 11,043 96,933 – 22,435 124,837 255,248
Net book value as at 31 December 2020 342,888 602,583 24,095 115,764 116,028 1,201,358
Note 5 Property, plant and equipment continued
1. This includes 498 rooms (‘Income Units’) (2020: 504) in Park Plaza Westminster Bridge London, for which the cash flows, derived from the net income
generated by these Income Units, were sold to private investors (see Note 2(k)). The proceeds from the purchases have been accounted for as a variable
rate financial liability (see Note 17).
a. For information regarding liens, see Note 14.
b. Impairment
The recoverable amount of property, plant and equipment had been determined based on third party valuations received for
31 December 2021. Given the adverse effect that COVID-19 had on the hospitality sector, the third party valuers assumed that cash
flow from operations will gradually recover during 2022–2023, and returning to 2019 levels in 2024. The discount rates applied to
cash flow projections was determined by the third party valuator and ranges between 7.5%–11%. In 2021, the Group recorded an
impairment loss in respect of one property in the Management and Central Services segment in the amount of £4.4 million, which is
included in depreciation, amortisation and impairment loss.
c. Capitalised borrowing costs
On 7 April 2020 the Group entered into a building contract to develop art’otel London Hoxton on a site located by Old Street,
Rivington Street, Great Eastern Street and Bath Place, London EC1, which is expected to be completed in February 2024 (see Note
30c(i)). The cumulative expenditure for this project as at 31 December 2021 was £66.7 million (2020: £37.1 million).
The amount of borrowing costs capitalised related to this project during the year ended 31 December 2021 was £1.3 million
(2020: £0.6 million). The rate used to determine the amount of borrowing costs eligible for capitalisation was LIBOR +3.55%, which is
the effective interest rate (EIR) of the specific borrowing.
d. Acquisitions:
Acquisition of the remaining interest in the joint venture in New York City
In January 2020 the Group acquired, from its joint venture partner, its 50% interest in W29 Development LLC, a Delaware limited
liability company (the ‘JV company’), for a total consideration of US$3.3 million (£2.2 million) plus associated acquisition costs (see
also Note 6b). As a result, the Company now owns 100% of the JV company and the associated joint venture arrangements have
been terminated. The acquisition, which was funded from the Company’s existing cash resources has been accounted for as an
acquisition of land in the amount of £33.5 million and assumption of related mortgage in the amount of £16.8 million.
Settlement with the Republic of Croatia related to, and the acquisition of, Guest House Hotel Riviera Pula
Arena has been operating Guest House Hotel Riviera (‘Riviera’) in Pula for decades and has been in discussions with the Croatian
Ministry of State Assets to formalise the informal arrangement and acquire the property. Further to legal proceedings initiated by
the Republic of Croatia against Arena for repossession of the property and compensation, Arena received the decision of the
Government of the Republic of Croatia to enter into a proposed settlement offer for the aforementioned court dispute for Riviera.
Based on the settlement entered into on 28 April 2020, Arena compensated the State for the previous use of the property with an
amount of HRK 13.9 million (£1.6 million) and was entitled to buy Riviera as its rightful long-standing possessor. On 2 June 2020,
Arena signed the sale and purchase agreement for Riviera with the Republic of Croatia for an amount of HRK 36.5 million
(£4.4 million). The purchase concludes the ownership status of this hotel.
Note 6 Investment in joint ventures and subsidiaries with significant non-controlling interests
a. Investment in joint ventures
As at 31 December
2021
£’000
2020
£’000
Loans to joint ventures
1
5,222 5,066
Share of net assets under equity method (907) (325)
Investment in joint ventures 4,315 4,741
1 The loans to joint ventures amount include a Euro loan bearing an interest of LIBOR +2.5% per annum which repayment is due on 7 June 2023.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
168 169
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 6 Investment in joint ventures and subsidiaries with significant non-controlling interests continued
The share in net loss amounts to £718 thousand (2020: net loss of £826 thousand).
b. Joint venture agreement in New York City
On 13 March 2019 the Company, through a wholly owned subsidiary, entered into a joint venture agreement with Largo 542 West
29th Street Partners LLC, an affiliate of Largo (‘Largo’), a New York-based real estate development and investment firm, to acquire,
through W29 Owner LLC (the ‘Property Owner’), properties located at 538, 540 and 542 West 29th Street, New York, USA (together
the ‘Property’). PPHE Hotel Group has a 50% interest in the Property Owner.
The consideration paid for the acquisition of the Property was US$42.6 million (£33.3 million) plus associated acquisition and financing
costs of US$2.9 million (£2.3 million) (the ‘Property Acquisition’). The Property Acquisition was partly funded with a US$20.7 million
(£16.2 million) loan (the ‘Loan’) from Bank Hapoalim B.M. (the ‘Lender’). The Loan is secured by a first priority mortgage encumbering
the Property. In addition, Largo and PPHE Hotel Group have delivered certain customary guarantees in favour of the Lender.
The total cash contributed by PPHE Hotel Group and Largo to the joint venture as of the acquisition date was US$17 million
(£13.3 million) and US$7.8 million (£6.1 million), respectively. The extra cash contribution by PPHE Hotel Group of US$9.2 million
(£7.2 million) is considered as a member loan which bears 8% interest.
Under the terms of the joint venture agreement, there was an intention to negotiate a construction agreement between the Property
Owner and Largo as the contractor, provided certain conditions were met prior to the end of February 2020. However, in January 2020 the
Company, through a wholly owned subsidiary, has acquired from Largo its 50% interest in the Property Owner, for a total consideration of
US$3.3 million (£2.2 million) plus associated acquisition costs. As a result, the Company now owns 100% of the Property and the
associated joint venture arrangements have been terminated. The acquisition was funded from the Company’s existing cash resources.
c. Summarised financial information of subsidiary with material non-controlling interests
(i) Long-term partnership for 49% of Park Plaza London Riverbank and art’otel London Hoxton development project
On 23 June 2021 a wholly owned subsidiary of PPHE Hotel Group, entered into a sale and purchase agreement with Clal Insurance
(‘Clal’), one of Israel’s leading insurance and long-term savings companies. As part of this agreement, Clal became a minority partner
and owner of 49% of the shares of Signature Top Ltd, a wholly owned subsidiary of the Group, (‘Signature Top’) which indirectly
holds the real estate and operations of both the 646-room Park Plaza London Riverbank (‘Riverbank’) and the 343-room art’otel
London Hoxton development project (‘Hoxton’), which is scheduled to open in 2024. As part of this agreement the Group has
secured a 20-year hotel management agreement in respect of both hotels.
In addition, Clal was granted 5 million share appreciation rights (SAR) of the Company which has a seven-year maturity with a strike
price of £16 per share and a cap of £21 per share. The SAR will vest as follows:
– 500,000 SAR Units shall vest and become exercisable on the first anniversary of the completion of the sale and purchase
agreement (‘Completion’)
– 500,000 SAR Units shall vest and become exercisable on the date being 18 months after Completion
– The remaining four million SAR Units shall vest and become exercisable on the second anniversary of Completion.
Upon exercise, the Company will have a right to determine whether an amount equal to the SAR Value as of the date of the exercise
will be satisfied by a payment of cash or by the issuance of the Company’s shares.
The SAR instrument, which is included in Level 2 in the fair value hierarchy, was valued on inception by an independent valuer using
the Black–Scholes model. The following lists the inputs used for the fair value measurement:
Dividend yield 0%
Expected volatility of the share price 29.13%
Risk-free interest rate 0.931%
Years to expiration 7 years
Note 6 Investment in joint ventures and subsidiaries with significant non-controlling interests continued
The total price paid by Clal in connection with the transaction amounts to £113.7 million in cash, subject to working capital
adjustments, out of which £7.2 million was allocated to the SAR. In addition, Clal provided further cash injection of £12.1 million to
fund their portion of the remaining equity commitments of the art’otel London Hoxton development project.
The arrangements between the Group and Clal contain customary exit provisions which include a right for Clal to require a sale of
either or both of the companies which own the hotels following seven years from completion or earlier in a change of control of
PPHE and certain events of default. If triggered, such provisions afford the Group a pre-emption right in respect of such companies.
The Group has also given certain guarantees to Clal regarding completion of the art’otel London Hoxton development project.
The Group has assessed this transaction and concluded that the sale of the ownership interest in Signature Top does not trigger a
change of control and should be accounted for as an equity transaction in accordance with IFRS 10 Consolidated Financial
Statements. The excess of consideration received over the carrying amount of the non-controlling interests (net of £1.2 million of
transaction costs) in the amount of £37.9 million is recognised in equity of the parent. The Group has elected to recognise this
amount in accumulated earnings. Furthermore, upon initial recognition the SAR liability in the amount of £7.2 million was classified
as a Financial liability measured at fair value through profit or loss in line with IAS 32 Financial Instruments: Presentation and IFRS 9
Financial Instruments.
As at 31 December 2021, the SAR instrument was valued internally at an amount of £5.4 million using the Black–Scholes model and is
included (net of the current portion in the amount of £0.5 million) in Other financial liabilities in the Group’s consolidated balance
sheet. The following lists the inputs used for the fair value measurement:
Dividend yield 0%
Expected volatility of the share price 38.26%
Risk-free interest rate 0.825%
Years to expiration 6.5 years
The amount of loss and comprehensive loss allocated to the non-controlling interests in 2021 amounts to £2,199 thousand (2020: nil)
and £2,199 thousand (2020: nil) respectively.
Below is selected financial information relating to the long-term partnership with Clal, as of 31 December 2021 and for the six
months ended 31 December 2021.
2021
£’000
Non-current assets 306,046
Current assets 15,891
Non-current liabilities 152,076
Current liabilities 10,327
Revenue 10,723
EBITDA 2,108
Loss for the period (4,488)
Total comprehensive loss (4,488)
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
170 171
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 6 Investment in joint ventures and subsidiaries with significant non-controlling interests continued
(ii) Arena Hospitality Group d.d.
As at 31 December 2021, the Company owned approximately 52.95% (2020: 52.95%) of Arena Hospitality Group d.d. (‘Arena’).The
amount of profit and comprehensive loss allocated to the non-controlling interests in 2021 amounts to £1,824 thousand (2020: loss
of £12,233 thousand) and £4,023 thousand (2020: loss of £8,118 thousand) respectively.
Below is selected financial information relating to Arena, as of 31 December 2021 and 2020, and for the years ended 31 December
2021 and 2020.
As at 31 December
2021
£’000
2020
£’000
Non-current assets 343,051 328,687
Current assets 49,884 55,464
Non-current liabilities 166,841 159,649
Current liabilities 31,458 21,723
Revenue 52,542 28,129
EBITDA 18,642 (2,158)
Profit (loss) for the period 4,115 (26,292)
Total comprehensive loss (8,831) (17,544)
Note 7 Other non-current assets
a. Non-current financial assets
As at 31 December
2021
£’000
2020
£’000
Income Units in Park Plaza County Hall London
1
15,800 15,350
Rent security deposits 346 370
Other non-current assets 240 238
16,386 15,958
1 On 14 July 2017, the Group acquired an ownership interest in Park Plaza County Hall London through its purchase of 44 aparthotel units and the
associated shares in the management company of the hotel, South Bank Hotel Management Company Limited. The purchase price was £16.0 million.
In October 2017 an additional two units were purchased for £0.7 million. Upon initial recognition, the investment was designated in the consolidated
financial statements at fair value through profit and loss. In return for the consideration paid, the Company receives 999 years of net income from
specific revenue-generating units of the hotel (contractual right to a stream of future cash flows). This investment is managed and its performance is
evaluated by the Group management on a fair value basis in accordance with the Group investment strategy. As the cash flows from this investment are
not solely payments of principal and interest, under IFRS 9 the investment is classified and measured at fair value through profit or loss. The fair value of
the Income Units as of the reporting date was £15.8 million based on an independent valuation prepared by Savills using a cap rate of 6%.
Note 8 Trade receivables
a. Composition:
As at 31 December
2021
£’000
2020
£’000
Trade receivables 7,701 4,177
Less – allowance for doubtful debts (890) (704)
6,811 3,473
Trade receivables are non-interest bearing. The Group’s policy provides an average of 30 days’ payment terms.
b. Movements in the allowance for doubtful accounts were as follows:
2021
£’000
As at 1 January 2021 (704)
Write-off 45
Additions (265)
Exchange rate differences 34
As at 31 December 2021 (890)
As at 1 January 2020 (877)
Write-off 243
Additions (42)
Exchange rate differences (28)
As at 31 December 2020 (704)
c. As at 31 December, the ageing analysis of trade receivables is as follows:
2021
Total
£’000
Not past
due
£’000
Past due
< 30 days
£’000
31 to 60 days
£’000
61 to 90 days
£’00
> 90 days
£’000
Trade receivables 7,701 4,326 1,691 636 118 930
Allowance for doubtful debts (890)
2020
Total
£’000
Not past
due
£’000
Past due
< 30 days
£’000
31 to 60 days
£’000
61 to 90 days
£’00
> 90 days
£’000
Trade receivables 4,177 2,702 378 59 69 969
Allowance for doubtful debts (704) (704)
3,473 2,702 378 59 69 265
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
172 173
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 9 Other receivables and prepayments
As at 31 December
2021
£’000
2020
£’000
Prepaid expenses 5,352 5,389
VAT 6,686 1,103
Related parties
1
56 –
Government grants for fixed costs receivables 6,285 –
Others 1,056 1,552
19,435 8,044
1 The amount owed by related parties bears no interest; see Note 30.
Note 10 Other current financial assets
As at 31 December
2021
£’000
2020
£’000
Investment in marketable securities
1
22 27
1 Classified as held for trading.
Note 11 Cash and cash equivalents
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of
between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
Note 12 Equity
a. Share capital
The authorised share capital of the Company is represented by an unlimited number of ordinary shares with no par value.
As at 31 December 2021, the number of ordinary shares issued was 44,347,410 (2020: 44,347,410), 1,808,070 of which were held as
treasury shares (2020: 1,808,070).
The Company’s shares are admitted to the Premium Listing segment of the Official List of the UK Listing Authority and to trading on
the Main Market for listed securities of the London Stock Exchange.
b. Treasury shares
On 29 September 2009, the Company purchased 862,000 of its ordinary shares at a price of 111 pence per share. On 26 October
2011, the Company purchased 800,000 of its ordinary shares at a price of 227 pence per share. On 29 August 2012, the Company
purchased 200,000 of its ordinary shares at a price of 210 pence per share. On 18 October 2017, the Company purchased 41,070 of
its ordinary shares at a price of 1,041 pence per share. On 27 February 2018, the Company issued 15,000 of its ordinary shares from
its treasury account at a price of 1,070 pence per share. On 22 December 2020, the Company issued 80,000 of its ordinary shares
from its treasury account at a price of 1,280 pence per share. The total number of treasury shares is 1,808,070.
c. Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign operations.
Hedging reserve
This reserve comprises the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.
Note 13 Share-based payments
The Company operates two option plans for the benefits of employees of the Group, the first was adopted in 2007 and the second was
adopted in 2020.
2007 Option Plan
The 2007 Plan has two types of options: Option A and Option B. The exercise price of both options will not be less than the closing
price of a share on the dealing day immediately preceding the grant date (as published in the Daily Official List of the London Stock
Exchange). Option A vests over a period of three years from the grant date and Option B vests at the end of three years from the grant
date. Unexercised options expire ten years after the grant date. The plan does not include any performance conditions.
As at 31 December 2021, there were 265,500 options outstanding under the 2007 Option Plan. These options were granted to
employees of the Company in past years. No further grants can be made under this plan.
2020 PPHE Executive Share Option Plan
The Board has adopted a ‘2020 PPHE Executive Share Option Plan’, under which employees of the Company and its subsidiaries receive
remuneration in the form of share-based compensation. The plan has the following principal terms:
a. The plan has four types of options:
• Option A: market value options – options that are linked to the market value of the shares in the Company;
• Option B: salary-related options – whereby employees agree to a reduction in their base salary in exchange for the right to acquire
shares at nil-cost. These options normally vest after 12 months subject to an additional six-month holding period;
• Option C: deferred bonus awards – allowing the award of the number of shares determined by the Remuneration Committee in
lieu of some or all of the annual bonus; and
• Option D: performance share awards – options which are granted subject to specified performance targets. Notwithstanding the
extent to which any performance target is satisfied, the number of vested award shares may be reduced by the Committee to
ensure that the number of vested award shares is appropriate taking into account the underlying business performance of the
Group.
These awards are subject to the rules of the PPHE Executive Incentive Plan 2020 which may include: long-term vesting periods
prescribed by the Committee upon grant; good-leaver and bad-leaver provisions allowing the Committee to exercise discretion as
to when it might be appropriate for an award to vest in spite of the relevant employee leaving the Group; post-vesting holding
periods determined by the Committee at the time of the award; performance conditions; and share capital dilution limits. The plan
allows dividends or dividend equivalents to accrue, subject to the Committee’s discretion.
b. At any time, the total number of shares issued and/or available for grant (in a ten-year period) under the 2007 Share Option Plan, the
2020 PPHE Executive Incentive Plan and under any other employee share scheme which the Company may establish in the future
may not exceed 5% of the Company’s issued share capital at that time.
c. In October 2020, the Remuneration Committee approved the grant of 70,706 salary related options (Option B under the 2020
Option Plan) with a nil exercise price and 714,000 market-value options (Option A under the 2020 Option Plan) with an exercise price
of 1,300 pence (being the closing price on 10 November 2020). In particular, the salary related awards that were offered to key
employees in 2020 were aimed at preserving cash flow, while incentivising key employees to support the Group in its recovery from
the pandemic and linking in with our succession planning. The salary related options have a vesting period of 12 months with a six
months’ holding period. With regard to the market-value share options granted in 2020, 300,000 shall vest in equal tranches, with
33.33% vesting each year for three years and 414,000 shall vest at the end of three years from the grant date.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
174 175
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 13 Share-based payments continued
Movements during the year
The following table illustrates the number (No.) and weighted average exercise prices (EP) of, and movements in, share options during
2020 and 2021:
No. of
options A
(2007
Option Plan)
No. of
options A
(2020
Option Plan))
No. of
options B
(2020
Option Plan) EP
Outstanding as at 1 January 2021 412,290 714,000 70,706 £11.05
Options forfeited during the year (25,000) (13,500) (839) £13.55
Options exercised in the year (121,790) – – £5.70
Options voluntarily waived
1
– (450,000) – 13.00
Outstanding as at 31 December 2021 265,500 250,500 69,867 £10.51
Outstanding as at 1 January 2020 412,290 – – £9.58
Options forfeited during the year – – – –
Options exercised in the year – – – –
Options granted during the year – 714,000 70,706 £11.83
Outstanding as at 31 December 2020 412,290 714,000 70,706 £11.05
1 In 2021, a few of the Group’s employees have agreed to voluntarily waive their rights in connection with the grant of 450,000 options in October 2020
given the underlying requirements of the NOW scheme issued in the Netherlands.
As at 31 December 2021 the number of exercisable options was 335,367 (2020: 352,242) with an EP of £8.64 (2020: £8.30).
The weighted average remaining contractual life for the share options outstanding as at 31 December 2021 is 7.2 years
(2020: 8.5years).
Note 14 Pledges, contingent liabilities and commitments
a. Pledges, collateral and securities
Substantially all of the Group’s assets and all of the rights connected or related to the ownership of the assets (including shares of
subsidiaries and restricted deposits) are pledged in favour of banks and financial institutions as security for loans received. For most
of the loans, specific assets are pledged as the sole security provided.
b. Restricted cash
Under certain facility agreements, funds need to be held in restricted deposit accounts in order to pay the debt service for a
subsequent period. The total deposits held amount to £13.3 million and are presented as restricted in the financial statements.
c. Commitments
(i) Management and franchise agreements
1. The Group entered into a Territorial Licence Agreement (the ‘Master Agreement’) with Radisson Hotel Group (‘Radisson’).
Under the Master Agreement, the Group, among other rights, is granted an exclusive licence to use the brand ‘Park Plaza
®
Hotels & Resorts’ in 56 territories throughout Europe, the Middle East and Africa in perpetuity (the ‘Territory’).
The Master Agreement also allows the Group to use, and license others to use, the Radisson systems within the Territory,
which right includes the right to utilise the Radisson systems’ international marketing and reservations facilities and to receive
other promotional assistance. The Group pays Radisson a fee based on a percentage of the hotels’ gross room revenue.
2. Within the terms of the management agreements, the hotels were granted by the Group a licence allowing them to use,
throughout the term of the management agreements, the ‘Park Plaza
®
Hotels & Resorts’ and ‘art’otel
®
’ brand names.
Note 13 Share-based payments continued
The following lists the inputs to the binomial model used for the fair value measurement of the 714,000 market-value share
options granted:
Dividend yield 0%
Expected volatility of the share prices 38.51%
Risk-free interest rate –0.0412%
Expected life of share options 4.4 years
Weighted average share price at the grant date 1,300.0 pence
Fair value per option 407.0 pence
The following lists the inputs to the binomial model used for the fair value measurement of the 70,706 salary related share
options granted:
Dividend yield 0%
Expected volatility of the share prices 38.51%
Risk-free interest rate –0.0412%
Expected life of share options 4.4 years
Weighted average share price at the grant date 1,300.0 pence
Fair value per option 1,300.0 pence
The expected life of the share options is based on historical data, current expectations and empirical data. It is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility of
similar listed companies over a period similar to the life of the options is indicative of future trends, which may not be reflective of
the actual outcome.
c. The expense arising from equity-settled share-based payment transactions during 2021 was £1,085 thousand
(2020: £259thousand). Total exercisable options at 31 December 2021 amounted to 335,367 (2020: 352,242).
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
176 177
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 14 Pledges, contingent liabilities and commitments continued
3. In March 2019, as part of the joint venture arrangements in relation to art’otel New York, the Company granted certain
guarantees to Bank Hapoalim as lender under the US$22,150,000 facility to W29 Owner LLC, a direct and 100% subsidiary of
the joint venture (W29 Development LLC). Further, the Company, in its capacity as guarantor under the facility, agreed to
indemnify Bank Hapoalim for a breach of certain obligations under the loan agreement as well as for certain environmental
issues in relation to the properties acquired by W29 Owner LLC up to an aggregate amount of US$33,225,000.
This indemnification was a joint and several liability for the Company and the joint venture partner. Following the acquisition of
the 50% membership interest in W29 Development LLC by the Company from its joint venture partner as well as the extension
of the loan facilities, the Company is now the sole guarantor as the joint venture partner was released as part of the acquisition
arrangements.
4. The Company guarantees cost overruns and the practical completion of the art’otel London Hoxton development under the
£180 million construction financing facility agreement granted by Bank Hapoalim B.M .
5. In relation to the long-term partnership with Clal relating to the art’otel London Hoxton development project further detailed
at Note 6, the Company has provided certain guarantees relating to practical completion, cost overruns and delays.
Note 15 Borrowings
The borrowings of the Group are composed as follows:
As at 31 December 2021
€
denominated
£’000
£
denominated
£’000
$
denominated
£’000
HRK
denominated
£’000
Total
£’000
Fixed interest rate 245,709 426,481 – 21,530 693,720
Weighted average interest rate 2.29% 3.61% – 1.94%
Variable interest rate 19,540 43,935 16,381 – 79,856
Weighted average interest rate 1.87% 3.58% 3.50% –
Total 265,249 470,416 16,381 21,530 773,576
Weighted average interest rate 2.26% 3.61% 3.50% 1.94% 3.09%
Maturity analysis 2021
Outstanding
amount Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter
Total borrowings 773,576 39,640 22,893 17,255 57,747 355,328 280,713
Capitalised transaction costs
and other adjustments (5,452) (800) (800) (800) (800) (800) (1,452)
768,124 38,840 22,093 16,455 56,947 354,528 279,261
For securities and pledges, see Note 14.
Note 14 Pledges, contingent liabilities and commitments continued
(ii) Construction contract commitment
As at 31 December 2021, the Group had capital commitments amounting to £128.4 million for the construction of the
development of art’otel London Hoxton.
(iii) Guarantees
1. In January 2013, the Company sold to Red Sea Hotels Limited (‘Red Sea’) all of the Company’s shares in its subsidiary, Leno
Finance Limited (‘Leno’), the company through which the Company owned an interest in the site in Pattaya, Thailand (the
‘Project’), and certain related loans and receivables, for a total consideration of Thai Baht 600 million.
Under the terms of the United Overseas Bank (UOB) credit facilities received for the construction of the Project, the Company
is obliged to provide certain financial support in the event of a cost overrun or funding shortfall in relation to the Project, to
satisfy the payment of unpaid interest or fees until completion of the Project and, in certain circumstances, may be required to
purchase serviced apartments after completion of the Project for a maximum of Thai Baht 600 million to fund any amounts
that are outstanding under the UOB credit facilities. In addition, the Company undertook to take all necessary acts to ensure
the completion of the Project as planned. Red Sea has agreed to indemnify the Company in respect of these continuing
obligations (except for the obligation to purchase serviced apartments after completion where there is a continuing event of
default) and as security Red Sea has pledged the shares held by it in Bali Hai Company Limited (the Thai subsidiary of Leno
that owns and develops the Project) (‘Bali Hai’) and certain affiliated Thai companies.
The sponsor support deed with UOB provides that the Company shall maintain a net gearing ratio (the ratio of (i) any interest-
bearing indebtedness owed to financial institutions or under financial debt instruments of the Company less any cash balances
or cash equivalent instruments maintained by the Company) to (ii) its tangible net worth (total tangible assets less all external
liabilities in respect of money borrowed or raised by the Company) not exceeding 3:1. As at 31 December 2021, the Company
was in compliance with the aforementioned covenants.
The Project encountered planning issues and as a result construction has been halted and the Company has been advised that
the planning issues are unlikely to be resolved and that it is probable that Bali Hai will go into liquidation if such an application
is filed by its creditors. UOB has secured judgment against Bali Hai for repayment of principal and interest. Recently the
Project has been put out for sale on public auction and UOB, who has a first mortgage over the Project, will be entitled to
receive the proceeds of such a sale and apply to liquidate Bali Hai for any shortfall.
UOB has made demand of the Company for certain interest it contends is outstanding. The Company has responded to UOB
and rejected its demands. The Company is working closely with Red Sea to refute UOB’s demands (in respect of any liability
for which the Company would benefit from the Red Sea indemnity). The Company is still waiting to see if and when UOB will
initiate legal proceedings.
As before, the Company continues to believe that, given the Red Sea indemnity in favour of the Company, it is not probable
that any material outflow of resources embodying economic benefits will be required to settle the obligations of the Company
under the sponsor support deed and as such no provision has been included in the accounts.
2. The Company guarantees principal and interest under the €10.7 million (£9.3 million) facility granted by Deutsche
Hypothekenbank AG to ABM Hotel Holding B.V. and PPBK Hotel Holding B.V. (formerly known as ABK Hotel Holding B.V.).
The Company has entered into a counter-guarantee with Arena effective as of 1 January 2018 whereby Arena guarantees the
Company’s obligations under the Company’s guarantee.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
178 179
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 15 Borrowings continued
The facility contains customary debt service cover and loan-to-value financial covenants, applicable following practical completion
of the Hotel, which must be complied with, subject to an ability to cure in certain circumstances through the injection of equity or
prepayment (to the extent necessary) of the facility.
The facility is secured by, among other things, mortgages over the ownership interests in the Site and security over the shares in
certain group companies that own such interests in the Site. The lenders benefits from completion and cost overrun guarantees
provided by the Company.
Waterloo Hotel Holding B.V. financing agreement
On 23 June 2020 Waterloo Hotel Holding B.V., a wholly owned subsidiary of the Company, entered into a three-year, £20 million
financing agreement with Santander UK Plc which bears an interest rate margin of 2.4% plus LIBOR. As at 31 December 2021 the
facility is undrawn.
Guest House Hotel Riviera financing
On 7 July 2020 Arena entered into a new loan agreement with OTP banka d.d. in Croatia for the purchase and refurbishment
ofGuest House Hotel Riviera. The facility is in a total amount of €10 million (£9.1 million), maturing in 2030 at a fixed interest rate
of2.125%.
Park Plaza Hotels Europe B.V. facility
On 7 August 2020 Park Plaza Hotels Europe B.V., a wholly owned subsidiary of the Company, entered into a three-year, €10 million
(£9.1 million), Dutch government backed COVID-19 go-arrangement financing agreement with ABN AMRO Bank N.V. which bears an
interest rate of 2.9% plus EURIBOR per annum. As at 31 December 2021 this facility was fully drawn.
Park Plaza Hotels (UK) Limited facility
On 10 November 2020, Park Plaza Hotels (UK) Limited, a wholly owned subsidiary of the Company, entered into a revolving facility
agreement with Santander UK Plc for up to £30 million pursuant to the Coronavirus Large Business Interruption Loan Scheme
(CLBILS). The facility is provided on a three-year term and bears an interest rate margin on drawn amounts of 2.5% plus LIBOR
during year one, with the margin increasing to 3% in years two and three. On 26 May 2021, Park Plaza Hotels (UK) Limited entered
into an agreement with Santander UK Plc to extend the £30 million CLBILS facility to £40 million under the same terms and
conditions. As at 31 December 2021 the facility is undrawn.
Hotel Brioni Pula financing agreement
On 8 December 2020 Arena entered into a new loan agreement with Erste Banka d.d. and Zagreba ka Banka d.d. in Croatia for the
purpose of financing the refurbishment of Hotel Brioni Pula. The facility is in a total amount of €24 million (£21.5 million), maturing in
2033 at a fixed interest rate of 2.6%. As at 31 December 2021 €20.8 million (£17.5 million) of the loan was drawn.
88 Rooms Hotel in Belgrade, Serbia financing
On 17 December 2020 Arena entered into a new loan agreement with AIK Banka a.d. for the purchase of 88 Rooms Hotel in
Belgrade, Serbia. The facility is in a total amount of €4.2 million (£3.8 million), maturing in 2025 at a fixed interest rate of 4.3%. As at
31 December 2021 the loan was fully drawn.
c. The following financial covenants must be complied with by the relevant Group companies:
(i) Under the two Aareal facilities, for Park Plaza London Riverbank (the ‘Riverbank hotel‘) and all six of the Group’s Dutch hotels
and Grandis (the ‘Dutch hotels and Grandis’), the borrowers must ensure that the aggregate amount of the outstanding
facilities does not exceed 62.2% of the value of the Dutch hotels and Grandis and 60% of the value of the Riverbank hotel as
set out in the most recent valuation (loan-to-value). In addition, the borrowers must ensure that, on each interest payment
date, the Debt Service Coverage Ratio (DSCR) is not less than 115%. In January 2021, the Group received from the bank a
waiver for the DSCR and the loan-to-value covenants until 30 June 2022 (inclusive) with the first test due in July 2022 based on
the results for 30 June 2022. In addition the loan amortisation for 2021 will be deferred to 2022. In December 2021, as part of
the inclusion of Grandis under the Dutch hotels facility, it was agreed that the DSCR covenant will be tested from 30 June 2023
and the loan-to-value will be tested from 30 June 2022 for the Dutch hotels and Grandis. After the reporting period, the
Group received a letter from the bank confirming that the financial covenant testing for Riverbank Hotel will be postponed to
2023 with the first test due in April 2023 based on the results for 31 March 2023.
Note 15 Borrowings continued
As at 31 December 2020
€
denominated
£’000
£
denominated
£’000
$
denominated
£’000
HRK
denominated
£’000
Total
£’000
Fixed interest rate 237,798 420,540 – 26,816 685,154
Weighted average interest rate 2.22% 3.61% – 1.94%
Variable interest rate 21,845 41,550 16,183 – 79,578
Weighted average interest rate 1.83% 3.27% 3.50% –
Total 259,643 462,090 16,183 26,816 764,732
Weighted average interest rate 2.19% 3.58% 3.50% 1.94% 3.05%
Maturity analysis 2020
Outstanding
amount Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter
Total borrowings 764,732 36,969 22,582 25,720 46,042 19,705 613,714
Capitalised transaction costs
and other adjustments (7,357) (600) (600) (600) (600) (600) (4,357)
757,375 36,369 21,982 25,120 45,442 19,105 609,357
For securities and pledges, see Note 14.
b. Finance agreements entered in the period:
Grandis facility
On 25 June 2021, Grandis Netherlands Holding B.V., a wholly owned subsidiary of the Company (‘Grandis’), voluntarily prepaid the loan
facility with Aareal Bank AG (‘Aareal’) which had an outstanding balance of £9.2 million. The break costs of the early prepayment which
amounted to £0.6 million were recorded in other expense in the Group’s consolidated income statement. On 17 December 2021 Grandis
and Aareal signed an agreement to include Grandis under the existing Aareal facility for the Dutch properties. Under this agreement, the
additional facility amount of £16.3 million will mature on 16 June 2026 and will bear a fixed interest rate of 3.3% per annum.
Arena Hospitality Group d.d., Croatia capital financing loan
On 20 September 2021 Arena entered into a new long-term working capital financing loan facility agreement with Zagreba
ka banka
d.d. as part of Hrvatska banka za obnovu i razvitak (HBOR) programme for insurance of liquidity portfolio for exporters related with
COVID-19 measurements. The facility is in a total amount of €20 million (£16.8 million), maturing on 30 June 2025 at a fixed interest
rate of 0.9% per annum. As at 31 December 2021 the facility is undrawn.
FRANZ ferdinand Mountain Resort Hotel in Nassfeld, Austria
On 24 November 2021, ARENA FRANZ Ferdinand GmbH, a wholly owned subsidiary of Arena entered into a €10.5 million
(£8.8 million) facility, maturing in 2033, with Erste Group Bank AG for the purpose of acquiring hotel FRANZ Ferdinand Mountain
Resort in Nassfeld (Austria). As at 31 December 2021 this facility was fully drawn.
PPHE Living Limited financing agreement
On 29 January 2020, PPHE Living Limited, a wholly owned subsidiary of the Company, entered into a five-year loan agreement with
Santander UK Plc of £1.64 million which is secured against the Old Bakery, a property purchased to provide staff accommodation.
The loan is at a fixed rate of 2.25%. As at 31 December 2021 this facility was fully drawn.
art’otel London Hoxton financing
On 7 April 2020, the Group entered into a bilateral loan agreement with Bank Hapoalim B.M. for a facility of up to £180 million to
fund the development of art’otel London Hoxton (the ‘Hotel’) on a site located by Old Street, Rivington Street, Great Eastern Street
and Bath Place, London EC1 (the ‘Site’).
The initial maturity date of the facility is April 2024 with provisions, subject to certain conditions, to extend the facility by two
periods of three years each. The facility bears an initial interest rate margin of 3.55% over LIBOR. The margin decreases to 2.95%
following two consecutive quarters after practical completion of the Hotel. In addition, there is a fee for unutilised amount of 0.25%.
As at 31 December 2021 £38.5 million was drawn from this facility.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
180 181
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 15 Borrowings continued
(viii) Under the loan agreement granted by Santander UK Plc to Park Plaza Hotels (UK) Limited pursuant to the Coronavirus Large
Business Interruption Loan Scheme (the ‘CLBILS Facility’), the borrower must ensure that at all times its tangible net worth
exceeds £300 million. In addition, the borrower must: (i) ensure that the UK borrowings to aggregate UK asset value does not at
any time exceed 60%; (ii) ensure that on each test date, the UK interest cover ratio for the borrower and its subsidiaries is greater
than 1.25 with first test date being 31 December 2021; (iii) in the event that the Waterloo facility referred to above at paragraph
xii is repaid or cancelled, ensure that the aggregate market value of all hotels unencumbered by any security (determined in
accordance with the most recent valuation of such hotels) is at least two times the amount of the total commitments under the
CLBILS Facility; and (iv) maintain minimum liquidity of £3 million at all times. In May 2021, as part of the facility extension to
£40 million, it was agreed that the first date of the financial covenants will be extended to 30 June 2022 (inclusive) with the first
test due in July 2022 based on the results for 30 June 2022. After the reporting period, the first date of the financial covenants
was further extended to 30 March 2023 (inclusive) with the first test due in April 2023 based on the results for 31 March 2023.
(ix) Under the £1.6 million loan granted by Santander UK Plc to PPHE Living Limited dated 29 January 2020, the ICR for each
12-month period must not be less than 125%. In addition, the borrower must ensure that the outstanding loan does not
exceed 65% of the value of the borrower’s freehold property at Acton Lane (based on the most recent valuation).
(x) Under the Deutsche Hypothekenbank AG facility for ACO Hotel Holding B.V. and ABK Hotel Holding B.V., the borrower must
ensure throughout the entire term of the loan that the outstanding amount of the loan does not exceed 70% of the value of
the properties and that the DSCR is not less than 110%. In September 2020, the Group received a letter from the bank
confirming that all financial covenant testing will be postponed to 31 December 2022 and the loan amortisation for Q2–Q3
2020 will be postponed to 31 December 2021.
(xi) Under the Deutsche Hypothekenbank AG facility for Park Plaza Nuremberg, the borrower must ensure throughout the entireterm of
the loan that the outstanding amount of the loan does not exceed 65% of the value of the property and that the DSCR is not less
than 180%. In September 2020, the Group received a letter from the bank confirming that all financial covenant testing will be
postponed to 31 December 2022 and the loan amortisation for Q2–Q3 2020 will be postponed to 31 December 2021.
(xii) Under the Zagreba ka Banka d.d. joint €32.0 million and HRK 205.0 million facilities, the borrower must ensure that at year end,
based on audited standalone financial statements of the borrower, the DSCR is equal to or greater than 120% during the life of
the loan and that the Net Debt/EBITDA (‘net leverage ratio’) is equal to or lower than 5.5 at year end 2019, is equal to or lower
than 5.0 at year end 2020, and is equal to or lower than 4.5 at year end 2021 and for each succeeding calendar year during the
remaining life of the loan. In November 2020, the Group received a letter from the bank confirming waiver of the net leverage
ratio for 2020. In December 2021, the Group received a letter from the bank confirming waiver of the net leverage ratio for 2021.
(xiii) Under the Zagreba ka Banka d.d. €10.0 million and HRK 60.0 million facilities, the borrower must ensure that at year end,
based on audited consolidated financial statements of the borrower, the DSCR is equal to or greater than 120% during the life
of the loan and that the net leverage ratio is equal to or lower than 5.5 at year end 2019, is equal to or lower than 5.0 at year
end 2020, and is equal to or lower than 4.5 at year end 2021 and for each succeeding calendar year during the remaining life
of the loan. Moreover, under the HRK 60 million facility, the amount of the loan cannot exceed 70% of the value of the
properties. In December 2020, the Group received a letter from the bank confirming waiver of the net leverage ratio for 2020.
In December 2021, the Group received a letter from the bank confirming waiver of the net leverage ratio for 2021.
(xiv) Under the Erste Bank €5.0 million and €10.2 million facilities, the borrower must ensure throughout the entire term of the loan
that the interest coverage ratio (ICR) is at least three times EBITDA and net leverage which is equal to or lower than 7.0 at year
end 2022 and equal or lower than 4.5 thereafter. The first covenant test will be based on the annual audited consolidated
financial statements for 2022 and is due by the end of June 2023.
(xv) Under the Erste Banka d.d. and Zagreba ka Banka d.d. facility for the purpose of financing the refurbishment of Hotel Brioni
Pula in the total amount of €24.0 million, the borrower has to comply with the following consolidated covenants, tested once a
year using audited financial statements for the preceding year: DSCR 1, which includes the cash opening balance for the year,
is equal to or greater than 3.0 until 2022 and 3.5 from 2023 onwards. DSCR 2, which excluding cash, is equal or greater than
1.2 throughout the life of the loan. Net leverage ratio is equal to or lower than 4.5, the testing of which starts for the 2023
financial year end and onwards. The amount of the loan cannot exceed 70% of the property used as collateral. The withdrawal
Note 15 Borrowings continued
(ii) Under the AIG Asset Management (Europe) Limited facility for Park Plaza Westminster Bridge London, the borrower must
ensure that the aggregate amount of the outstanding facility does not exceed 70% of the value of the hotel as set out in the
most recent valuation (loan-to-value). In addition, the borrower must ensure that, on each interest payment date, the historical
and projected DSCR are not less than 140%. The floating rate leg of this loan £6.3 million (as at 31 December 2020) has an
associated interest rate cap, hedging the risk of the all-in rate exceeding 3.5%. In January 2021, the Group received from the
bank a waiver for the DSCR and the loan-to-value covenants until 30 April 2022 (inclusive) with the first test due in July 2022
based on the results for 30 June 2022. After the reporting period, the Group received from the bank a waiver for the DSCR
and the loan-to-value covenants until 30 April 2023 (inclusive) with the first test due in July 2023 based on the results for
30 June 2023.
(iii) Under the facility arranged by Cornerstone Real Estate Advisers Europe LLP, a member of the MAFF Mutual Financial Group,
for Park Plaza Victoria London, the borrower must ensure that the aggregate amount of the outstanding facility does not
exceed 75% of the value of the hotel as set out in the most recent valuation (loan-to-value). In addition, the borrower must
ensure that, on each interest payment date, the historical and projected DSCR are not less than 180%. In January 2021, the
Group received from the bank a waiver for the DSCR and the loan-to-value covenants until 19 July 2022 with the first test due
on 20 July 2022 based on the results for 30 June 2022. After the reporting period, the Group received from the bank a waiver
for the DSCR and the loan-to-value covenants until 19 July 2023 (inclusive) with the first test due in July 2023 based on the
results for 30 June 2023.
(iv) Under the Bank Hapoalim Loan for three of the Group’s UK hotels and the 46 units owned within Park Plaza County Hall
London, the borrowers must ensure that the aggregate amount of the outstanding loan does not exceed 65% of the value of
the properties and units secured (loan-to-value). In addition, on each interest payment date, the borrowers must ensure that
the historical debt service cover should be at least 110% from March 2019, rising to 120% following the third anniversary of the
agreement. In June 2020, the Group received a letter from the bank confirming that the historical debt service cover covenant
testing will be postponed to 30 September 2021 and the loan amortisation for Q2–Q3 2020 will be postponed to the
termination date of the loan. After the reporting period, the Group received from the bank a waiver for the DSCR and the
loan-to-value covenants until 30 March 2022 with the first test due on 30 April 2022 based on the results for 31 March 2022.
In addition, it was agreed that the DSCR covenant for 31 March 2022 and 30 June 2022 will be set at 110% and will be tested
over a period of six and nine months respectively. After the reporting period, the Group received from the bank a waiver for
the DSCR covenant until 30 March 2023 (inclusive) with the first test due in April 2023 based on the results for 31 March 2023.
(v) In March 2019, W29 Owner LLC entered into a loan agreement with Bank Hapoalim New York for an amount of
US$22.15 million where PPHE Hotel Group is a guarantor. Under this agreement, PPHE Hotel Group must ensure that it
maintains an aggregate net worth of at least US$33 million and have liquid assets with a market value of at least US$5 million.
In February 2020, the Group exercised the extension option in this facility to extend the maturity date for a year until March
2021. In March 2021 it was agreed with the bank that the maturity date will be extended to September 2021 and in September
2021 the maturity date was further extended to 13 September 2022.
(vi) Under the Bank Hapoalim loan relating to art’otel London Hoxton, the borrower must ensure that the aggregate amount of the
outstanding facility does not exceed 75% of the value of the hotel as set out in the most recent valuation from 7 April 2022
onwards. The borrower must also ensure that the DSCR is not less than 1.2 on each quarter test date starting from either
7 April 2025 or one year after practical completion. Any breach of the aforementioned covenants is subject to an equity cure
option. In addition, on each test date, the total equity of PPHE Hotel Group must not be less than: (i) £150 million; and (ii) 20%
of its asset value.
(vii) Under the £20 million financing agreement entered into by Waterloo Hotel Holding B.V. with Santander UK Plc on 23 June
2020, the borrower must ensure that the amount of the outstanding loan does not exceed 40% of the value of Park Plaza
London Waterloo based on the most recent valuation. The DSCR must also not be less than 125% on each quarter with first
test date being 30 September 2021. In June 2021 the Group received from the bank a waiver for the DSCR until 30 June 2022
(inclusive) with the first test due in July 2022 based on the results for 30 June 2022. After the reporting period, the first date of
the financial covenants was further extended to 30 March 2023 (inclusive) with the first test due in April 2023 based on the
results for 31 March 2023.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
182 183
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 16 Provisions continued
2021
£’000
2020
£’000
Balance as at 1 January 5,399 4,730
Additions – 476
Exchange rate differences (342) 193
Balance as at 31 December 5,057 5,399
Note 17 Financial liability in respect of Income Units sold to private investors
2021
£’000
2020
£’000
Total liability 142,573 143,760
Due from investors for reimbursement of capital expenditure (18,022) (17,605)
124,551 126,155
This liability originated from the proceeds received from the sale to private investors of the future 999-year cash flows, derived from
certain Income Units in Park Plaza Westminster Bridge London. Furthermore, as the investors are required to fund all capital
expenditures (‘CAPEX’) to be made in connection with these rooms, a receivable is recorded in each period for any excess of
depreciation expense over the amounts paid by the investors on account of CAPEX. This receivable is offset from the liability to
theinvestors.
This liability is amortised over the term of the agreement, that being 999 years.
Note 18 Other financial liabilities
As at 31 December
2021
£’000
2020
£’000
Derivative financial instruments 457 879
Lease liabilities (see Note 19) 245,274 243,650
Share appreciation rights (Note 6c(i)) 4,860 –
Other 2,771 289
253,362 244,818
Note 15 Borrowings continued
of the loan is also subject to a deposit of up to €7.0 million, which has a release mechanism embedded subject to certain
defined conditions. The net assets test has to be at least 30%.
(xvi) Under the OTP Banka d.d. facility for the purpose of financing the purchase and subsequent refurbishment of Guest House
Hotel Riviera, Pula, in the total amount of €10.0 million the borrower has to comply with the following standalone covenants,
tested once a year using audited financial statements for the preceding year: net leverage ratio is equal to or lower than 6.0 at
year end 2021 and equal to or lower than 4.5 at year end 2022 and onwards. The net assets test has to be at least 55%.
The loan consists of two equal tranches in the amount of €5.0 million each. The loan has a deposit build up mechanism,
subject to certain conditions. Arena cannot pay dividend until year end 2021 (and in line with the contractual limitations for
entities that used government support during the pandemic) and a dividend basket of HRK 25.0 million until year end 2022.
No limitations on profit distribution thereafter.
(xvii) Under the AIK Banka a.d. facility for the purpose of financing the purchase of 88 Rooms Hotel in Belgrade, Serbia, in the total
amount of €4.2 million the borrower (Arena 88 Rooms Holding d.o.o.) has to ensure that the value of the purchased asset is not
lower by more than 35% when compared to the value of the asset as defined during 2020 by an external reputable valuator.
(xviii) Under the Zagreba
ka banka d.d. loan signed in September 2021 as part of HBOR’s programme for insurance of liquidity portfolio for
exporters related with COVID-19 measurements in amount €20 million (£16.8 million) the borrower must ensure that DSCR is equal or
greater than 3.5 and that the ratio between financial debt and EBITDA is lower than 4.5 starting at December 2023 and onwards.
(xix) Under the Erste Group Bank AG loan signed in November 2021 for the purpose of financing the purchase of hotel FRANZ
ferdinand Mountain Resort in Nassfeld, Austria, in the total amount €10.5 million (£8.8 million) the borrower has to comply with
following standalone covenants: projected DSCR is equal or greater than 1.15 at year end 2021 and historical DSCR is equal or
greater than 1.35 from year end 2023 onwards. The amount of the loan cannot exceed 75% of the property used as collateral
starting year end 2021 to year end 2023 and 65% at the year end 2024 until year end 2026.
As at 31 December 2021, taking into account all the covenant waivers received, the Group is in compliance with all of its bankingcovenants.
Note 16 Provisions
Provision for concession fee on land
In accordance with the provisions of the Tourist and Other Construction Land Not Appraised During the Transition and Privatisation Process Act
from 2010 (TLA), Arena submitted requests to the Republic of Croatia and the relevant municipality for the award of tourist land concessions in
relation to land areas in eight campsites and three tourist resorts in Croatia. The TLA failed to produce the desired impact and to resolve the
issues of the ownership/use of the tourist land. This in turn caused far-reaching consequences in the form of lack of investments into tourist land,
reduced international competitiveness of Croatian tourism due to lack of development and reduced income of the State and local municipalities.
The Croatian Government therefore adopted a new legislation to deal with, inter alia, the so-called tourist land and proprietary relationships
between the owner of such land and the owner of the facilities built thereon. In May 2020, the new Non-Appraised Construction Land Act
(NCLA) replaced the TLA and all initiated requests based on the TLA were suspended. Pursuant to the NCLA, the ownership of the land
underneath the facilities in the campsites that were assessed into the share capital of Arena is now also legally recognised as ownership of Arena,
while the Republic of Croatia will be the sole owner of the other land in the campsites. In respect to the tourist resorts, the ownership of the land
underneath the facilities that have been assessed into the share capital of Arena is now also recognised as ownership of Arena, together with the
land surrounding such facilities that makes (together with the relevant facilities) the technological and functional unity. Tourist land in the tourist
resorts which was not assessed into the share capital of Arena and which serves the standard usage of the resorts shall be owned by a local
municipality. In relation to the land in campsites owned by the Republic of Croatia and the land in tourist reports owned by the local
municipalities, Arena will ex lege be deemed long-term (50 years) lessee and will conclude the lease agreement with the State/local
municipalities once the procedure envisaged by the NCLA will be complete. However, the Government has still not adopted the secondary level
regulation that would govern the rent payable by the lessees for such lease nor have the procedures required for the implementation of the Act
and actual registration of the ownership over the respective part of land in campsites/tourist resorts been completed. This creates uncertainties
in relation to the current and future assets and obligations of Arena. While the TLA was still applicable, Arena paid 50% of the concession fees in
respect of the eight campsites and accrued the remaining 50% until entering into the envisaged concession agreements. As the new NCLA has
not yet set the rules for the rent payable based on the lease agreement, Arena made a conservative assessment of concession fees based on the
most up-to-date available information. In 2021 no additional provision was recorded and the concession fee for the year in the amount of
£1.7 million was recognised in the financial position under Other payables and accruals. There was no payment of concession fee during 2021.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
184 185
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 19 Leases continued
Impairment
The Group performed impairment test in December 2021 for all individual right-of-use assets where there was an indication of possible
loss. Each asset had been tested on Cash Generating Unit level (CGU-level).
The discount rate applied to cash flow projections was 8.5%. Impairment loss has been recognised for the right-of-use asset where
carrying amount exceeded recoverable amount. Based on this analysis it was concluded that there was no impairment. In December
2020 impairment loss in the amount of £2,781 thousand was recorded within Depreciation, amortization and impairment expenses in
the income statement.
Set out below are the carrying amounts of lease liabilities (included under Other financial liabilities and Other payables) and the
movements during the period:
2021
£’000
2020
£’000
As at 1 January 254,044 231,594
Additions – 14,671
Disposals (2,088) (174)
Accretion of interest
1
7,473 9,542
Reclassification (158) –
Payments (13,011) (6,898)
Re-measurement of lease liability recorded in other expenses 3,565 3,369
Re-measurement of lease liability adjusted against right-of-use assets 4,226 –
Exchange rate differences recorded in Profit & Loss 84 2,073
Adjustments for foreign exchange differences (2,517) (133)
As at 31 December 251,618 254,044
Current 6,344 10,394
Non-current 245,274 243,650
1 The amount of borrowing costs capitalised during the year ended 31 December 2021 was £212 thousand (2020: £206 thousand).
Note 19 Leases
Group as a lessee
The Group has lease contracts for various items which mainly includes hotels, including land, offices and storage buildings. Leases of
land have lease terms between 125 and 199 years while hotel buildings, offices and storage have lease terms between 2 and 95 years.
The Group’s obligations under its leases are secured by the lessor’s title to the leased assets.
The Group also has certain leases with lease terms of 12 months or less and leases with low value. The Group applies the ‘short-term
lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Land
£’000
Hotel
buildings
£’000
Offices and
storage
£’000
Furniture,
fixtures and
equipment
£’000
Total
£’000
Cost:
Balance as at 1 January 2021 86,693 130,465 11,045 23,873 252,076
Additions during the year – 212 – – 212
Disposal – – (2,381) – (2,381)
Re-measurement of right-of-use assets 3,261 919 46 – 4,226
Adjustment for exchange rate differences (1,500) (2,564) (70) – (4,134)
Balance as at 31 December 2021 88,454 129,032 8,640 23,873 249,999
Accumulated depreciation and impairment:
Balance as at 1 January 2021 4,934 11,184 1,928 10,236 28,282
Provision for depreciation 461 2,699 1,117 2,390 6,667
Disposal – – (290) – (290)
Adjustment for exchange rate differences (11) (552) (18) – (581)
Balance as at 31 December 2021 5,384 13,331 2,737 12,626 34,078
Net book value as at 31 December 2021 83,070 115,701 5,903 11,247 215,921
Cost:
Balance as at 1 January 2020 85,541 117,965 8,791 23,873 236,170
Additions during the year – 12,612 2,565 – 15,177
Disposal – – (366) – (366)
Re-measurement of right-of-use assets – – – – –
Adjustment for exchange rate differences 1,152 (112) 54 – 1,094
Balance as at 31 December 2020 86,693 130,465 11,044 23,873 252,075
Accumulated depreciation and impairment:
Balance as at 1 January 2020 4,470 4,948 924 7,838 18,180
Provision for depreciation 462 3,406 1,198 2,398 7,464
Impairment – 2,781 – – 2,781
Disposal – – (197) – (197)
Adjustment for exchange rate differences 2 49 3 – 54
Balance as at 31 December 2020 4,934 11,184 1,928 10,236 28,282
Net book value as at 31 December 2020 81,759 119,281 9,116 13,637 223,793
The amount of borrowing costs capitalised during the year ended 31 December 2021 was £212 thousand (2020: £206 thousand).
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
186 187
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 19 Leases continued
As at 31 December
2021
£’000
2020
£’000
Depreciation expense and impairment of right-of-use assets 6,667 10,210
Interest expense on lease liabilities 7,261 9,336
Expense relating to low-value assets and short-term leases (included in operating expenses) 129 220
Expense relating to low-value assets and short-term leases (included in rent expenses) 944 370
Variable lease payments (included in rent expenses) 1,561 634
Total amount recognised in profit or loss 16,562 20,770
The Group had total cash outflows for leases of £15,645 thousand in 2021 (2020: £8,122 thousand).
The following provides information on the Group’s variable lease payments, including the magnitude in relation to fixed payments in
2021 and 2020:
As at 31 December 2021
Fixed
payments
£’000
Variable
payments
£’000
Total
£’000
Fixed rent 12,253 – 12,253
Variable rent with minimum payment 758 5 763
Variable rent only – 1,556 1,556
As at 31 December 2020
Fixed
payments
£’000
Variable
payments
£’000
Total
£’000
Fixed rent 5,859 – 5,859
Variable rent with minimum payment 1,039 (1) 1,038
Variable rent only – 635 635
Note 20 Other payables and accruals
As at 31 December
2021
£’000
2020
£’000
Current portion of lease liabilities 6,344 10,394
Current portion of share appreciation rights (Note 6c(i)) 540 –
Employees 1,666 3,049
VAT and taxes 11,891 11,987
Accrued interest 3,089 3,009
Corporate income taxes 56 541
Accrued expenses 20,252 8,768
Advance payments received 6,021 7,426
Accrued rent 2,458 1,414
Variable income payment to holders of Income Units 860 2,226
Related parties
*
– 2,853
53,177 51,667
* See Note 30.
Note 19 Leases continued
Set below is a split of the lease liabilities, cash payments and effect in the income statement between lease agreements for a period
longer than 40 years (‘long-term leases’) and leases for a period of up to 40 years (‘short-term leases’).
Year ended
31 December 2021
£’000
Total
Long-term
leases (>40)
Short-term
leases (<40)
Lease liabilities 216,204 35,414 251,618
Fixed lease payments 9,176 3,835 13,011
Accretion of interest 7,380 93 7,473
Depreciation 3,611 3,056 6,667
Year ended
31 December 2020
£’000
Total
Long-term
leases (>40)
Short-term
leases (<40)
Lease liabilities 209,926 44,118 254,044
Fixed lease payments 4,742 2,156 6,898
Accretion of interest 8,594 948 9,542
Depreciation 3,731 3,698 7,429
Details regarding certain long-term lease agreements are as below:
(a) On 29 January 2020 the Group through its subsidiary Arena Hospitality Group d.d. (‘Arena’) entered into a 45-year lease for the
development and operation of a contemporary branded hotel in Zagreb, Croatia. The development, which is subject to obtaining
the necessary permits, involves the conversion of an iconic building in a prime location in the historic heart of the city. Once opened,
this 118-room hotel will include a destination restaurant and bar, wellness and spa facilities, fitness centre, event space and parking.
(b) Grandis Netherlands Holding B.V. (‘Grandis’) has a land leasehold interest, expiring in 2095, of Holmes Hotel London. The current
annual rent amounts to £1,140 thousand (subject to ‘open market value’ rent review every five years).
Grandis has an option to extend the lease to a total of 125 years, expiring in 2121. The Company also has an option to terminate the
lease in 2059.
(c) Riverbank Hotel Holding B.V. has a land leasehold interest, expiring in 2125, for Park Plaza London Riverbank, subject to rent review
every five years, based on CPI. A deed of variation of the lease of Park Plaza London Riverbank was entered into on 13 June 2014
under which the rent payable under the lease increased to £1,001 thousand per annum and the tenant was granted a right to renew
the lease for an additional 60 years. At completion of the deed, the landlord paid £5.0 million to Riverbank Hotel Holding B.V., which
is accounted for as part of the long-term lease liability.
(d) On 18 June 2012, Park Royal Hotel Holding B.V. (‘Park Royal’) completed the purchase of the freehold property at 628 Western
Avenue, Park Royal, London (the ‘Site’), which was a development site on one of the main thoroughfares into London, for
£6.0 million. Simultaneously, Park Royal completed the sale of the Site at a price of £7.0 million and the leaseback of the Site at an
initial rent of £306 thousand per year for 170 years.
(e) On 20 July 2017, Waterloo Hotel Holding B.V. completed the sale of Park Plaza London Waterloo for £161.5 million subject to a
leaseback for 199 years. The initial rent of £5.6 million per year will have annual inflation adjustments subject to a cap of 4% and
collar of 2%.
The following are the amounts recognised in profit or loss:
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
188 189
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 24 Financial income
Year ended 31 December
2021
£’000
2020
£’000
Income from Park Plaza County Hall London Units 27 –
Interest on bank deposits 163 132
Gain from marketable securities – 123
Foreign exchange differences, net 42 –
Interest and other financial income from jointly controlled entities (see Note 30(b)) 101 136
333 391
Note 25 Other income and expenses
a. Other expenses
Year ended 31 December
2021
£’000
2020
£’000
Capital loss on buy-back of Income Units previously sold to private investors 543 –
Government settlement purchase of Guest House Hotel Riviera Pula (see Note 5d) – 1,544
Remeasurement of lease liability
1
3,565 3,369
Revaluation of Income Units Park Plaza County Hall London (see Note 7) – 2,402
Loss on disposal of fixed assets
2
436 1,774
Other non-recurring expenses (including preopening expenses) 305 647
Loan early repayment break costs (see Note 15b) 505 –
Business combination acquisition costs (see Notes 3a and 3b) 1,017 –
Arena – legal settlement
3
3,047 –
9,418 9,736
1 This amount represents remeasurement of the Waterloo lease liability based on the 2% collar (see Note 19).
2 Mainly relates to the write-off value of fixed assets due to reconstruction of Hotel Brioni Pula (disposal of asset due to reconstruction).
3 In 2013 Tehnoekologija d.o.o. (TE) initiated a litigation procedure against Arena for the compensation of the investments that TE supposedly had made
in the campsite Kažela, Medulin, between the years 1998 and 2005 when Kažela, Medulin, was operated by TE based on the lease agreement entered
into between Arena and TE. Arena and TE are currently in an advanced stage of reaching a settlement for this long-term litigation which will likely result
in a compensation to TE in the amount of HRK 26 million (£3 million). An accrual for the expected settlement amount was recorded in 2021 under other
payables and accruals.
b. Other income
Year ended 31 December
2021
£’000
2020
£’000
Insurance settlement
1
– 9,982
Revaluation of share appreciation rights (see Note 6c(i)) 1,750 –
Revaluation of Income Units Park Plaza County Hall London (see Note 7) 602 –
Gain on sale of fixed assets 1,432 317
3,784 10,299
1 Net insurance proceeds received in relation to one of the Group’s UK hotels.
Note 21 Revenues
Year ended 31 December
2021
£’000
2020
£’000
Rooms 84,430 63,628
Campsites and mobile homes 16,446 7,815
Food and beverage 27,814 21,050
Minor operating (including room cancellation) 8,277 5,662
Management fee (see Note 14(c)(i)) 529 418
Franchise and reservation fee (see Note 14(c)(i)) 458 819
Marketing fee 156 203
Other 3,267 2,192
141,377 101,787
Note 22 Operating expenses
Year ended 31 December
2021
£’000
2020
£’000
Salaries and related expenses 68,710 74,746
Franchise, reservation and commissions expenses (see Note 14(c)(i)) 12,186 9,255
Food and beverage 8,675 4,923
Insurance and property taxes 10,004 9,841
Utilities 7,736 6,954
Administration costs 3,607 4,569
Maintenance 4,693 4,293
Laundry, linen and cleaning 1,941 1,862
Supplies 2,186 1,704
IT expenses 1,639 1,374
Communication, travel and transport 1,141 1,288
Marketing expenses 1,523 1,374
Government grants payroll (12,079) (24,076)
Government grants fixed costs (9,578) –
Defined contribution pension premiums 3,174 3,121
Other expenses 8,250 9,642
113,808 110,870
Note 23 Financial expenses
Year ended 31 December
2021
£’000
2020
£’000
Interest and other finance expenses on bank loans 24,015 23,408
Interest on lease liabilities 7,261 9,336
Foreign exchange differences, net – 2,395
Expense from Park Plaza County Hall London Units 24 8
Other 69 379
31,369 35,526
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
190 191
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 27 Income taxes continued
The above deferred taxes have been set off when they relate to the same jurisdictions and presented in the consolidated financial
statements as follows:
As at 31 December
2021
£’000
2020
£’000
Deferred tax assets 10,221 6,724
Deferred tax liabilities (7,236) (8,472)
2,985 (1,748)
c. Reconciliation between tax benefit (expense) and the product of accounting profit multiplied by the Group’s tax rate is
asfollows:
Year ended 31 December
2021
£’000
2020
£’000
Profit before income taxes (57,555) (94,688)
Expected tax at the tax rate of the United Kingdom 19% (2020: 19%) 10,936 17,991
Adjustments in respect of:
Effects of other tax rates 2,594 2,771
Non-deductible expenses (8,269) (7,496)
Utilisation of carried forward losses and temporary differences for which deferred tax assets were not
previously recorded 291 338
Temporary differences for which no deferred tax asset was recorded (211) (1,762)
Non-taxable income 114 (202)
Unrecognised current year tax losses (5,299) (12,351)
Recognition of deferred tax asset 3,634 964
Recognition of investment tax credit (see Note 27(f)) – 1,104
Other differences (including change in tax rate) 1,261 (633)
Income tax benefit (expense) reported in the income statement 5,051 724
d. Tax laws applicable to the Group companies:
(i) The Company is subject to taxation under the laws of Guernsey. The Company is therefore taxed at the standard rate of 0%.
(ii) Foreign subsidiaries are subject to income taxes in their country of domicile in respect of their income, as follows:
1. Taxation in The Netherlands: corporate income tax rate is 25%.
2. Taxation in The United Kingdom: corporate income tax rate for domiciled companies and for non-domiciled companies is 19%
(2020: 19%).
3. Taxation in Germany: aggregated corporate tax rate and trade income rate 29.7%.
4. Taxation in Hungary: corporate income tax rate 9%.
5. Taxation in Croatia: corporate income tax rate 18%.
Note 26 Net expenses for financial liability in respect of Income Units sold to private investors
Year ended 31 December
2021
£’000
2020
£’000
Guaranteed return (see Note 2(k)) – 565
Variable return (see Note 2(k)) 2,567 2,646
Reimbursement of depreciation expenses (see Note 2(k)) (618) (942)
Change in expected cash flow income swaps – 310
1,949 2,579
Note 27 Income taxes
a. Tax benefit (expense) included in the income statement
Year ended 31 December
2021
£’000
2020
£’000
Current taxes (350) (458)
Adjustments in respect of current income tax of previous year 61 (626)
Deferred taxes 5,340 1,808
5,051 724
b. The following are the major deferred tax (liabilities) and assets recognised by the Group and changes therein during the
period:
Tax loss carry
forward and
timing
difference on
provisions
£’000
Property,
plant and
equipment and
intangible
assets
£’000
Tax
incentives
£’000
Total
£’000
Balance as at 1 January 2021 4,208 (11,999) 6,043 (1,748)
Amounts charged to income statement 3,962 1,378 – 5,340
Amount recognised in business combination (see Note 3(a)) 378 (908) – (530)
Adjustments for exchange rate differences (214) 520 (383) (77)
Balance as at 31 December 2021 8,334 (11,009) 5,660 2,985
Balance as at 1 January 2020 2,851 (10,324) 4,726 (2,747)
Amounts charged to income statement 955 (251) 1,104 1,808
Change in tax rate 47 (757) (710)
Reclassification 292 (292)
Adjustments for exchange rate differences 63 (375) 213 (99)
Balance as at 31 December 2020 4,208 (11,999) 6,043 (1,748)
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
192 193
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 29 Segments
For management purposes, the Group’s activities are divided into Owned Hotel Operations and Management Activities (for further
details see Note 14(c)(i)). Owned Hotel Operations are further divided into four reportable segments: the Netherlands, Germany,
Croatia and the United Kingdom. Other includes individual hotels in Hungary, Serbia, Italy and Austria. The operating results of each of
the aforementioned segments are monitored separately for the purpose of resource allocations and performance assessment.
Segment performance is evaluated based on EBITDA, which is measured on the same basis as for financial reporting purposes in the
consolidated income statement.
Year ended 31 December 2021
The
Netherlands
£’000
Germany
£’000
United
Kingdom
£’000
Croatia
£’000
Other
1
£’000
Management
and Central
Services £’000
Adjustments
2
£’000
Consolidated
£’000
Revenue
Third party 10,352 6,618 75,277 44,618 853 3,659 141,377
Inter-segment 14,308 (14,308)
Total revenue 10,352 6,618 75,277 44,618 853 17,967 (14,308) 141,377
Segment EBITDA 1,071 6,671 11,221 14,556 (853) (7,601) 25,065
Depreciation,
amortisation and
impairment (43,283)
Financial expenses (31,369)
Financial income 333
Net expenses for
liability in respect of
Income Units sold to
private investors (1,949)
Other income
(expenses), net (5,634)
Share in result of joint
ventures (718)
Profit before tax (57,555)
1. Includes art’otel Budapest in Hungary, 88 Rooms Hotel in Belgrade, Serbia, Londra & Cargill Hotel in Rome, Italy, FRANZ Ferdinand Mountain Resort in
Nassfeld, Austria.
2. Consist of inter-company eliminations.
The
Netherlands
£’000
Germany
£’000
United
Kingdom
£’000
Croatia
£’000
Other
£’000
Adjustments
2
£’000
Consolidated
£’000
Geographical information
Non-current assets
1
188,701 71,402 869,324 217,779 64,442 53,878 1,465,526
1 Non-current assets for this purpose consists of property, plant and equipment, right-of-use assets and intangible assets.
2 This includes the non-current assets of Management and Central Services.
Note 27 Income taxes continued
Corporate tax rate in the UK – In March 2021, the UK Government adopted the Spring Budget 2021 which included an increase in
the UK corporate tax rate from 19% to 25% from 1 April 2023.
Corporate tax rate in the Netherlands – In 2020, under the 2021 tax plan which was adopted on 15 December 2020 it was decided
that the reduction in corporate income tax rate to 21.7% will be cancelled and the tax rate will remain at 25%. In 2021, under the
2022 tax plan which was adopted on 21 December 2021, it was decided that the corporate income tax rate will increase to 25.8%
starting 1 January 2022.
e. Losses carried forward for tax purposes
The Group has carried forward losses for tax purposes estimated at approximately £200.8 million (2020: £184.9 million). The Group
did not establish deferred tax assets in respect of losses amounting to £161.5 million (2020: £166.2 million) which may be carried
forward indefinitely.
The carried forward losses relate to individual companies in the Group, each in its own tax jurisdiction. When analysing the recovery
of these losses the Group assesses the likelihood that these losses can be utilised against future trading profits. In this analysis the
Group concluded that for the majority of these companies it is not highly likely that future profits will be achieved that can be offset
against these losses, mainly due to the nature of their trade (i.e. holding companies or tax exempt activities). Based on this uncertain
profitability, the Company determined that it could not recognise deferred tax assets for the majority of the losses. The Company is
performing this analysis on an ongoing basis.
f. Tax incentives
In May 2019, based on confirmation from the Ministry of Economy and pursuant to the Investment Promotion and Development of
Investment Climate Act in Croatia, Arena became eligible to claim incentive allowances. Investments eligible for incentives are
investments done in Arena One 99 Glamping Campsite, Arena Grand Kažela Campsite, Hotel Brioni, Verudela Beach self-catering
apartment complexes, among others.
Arena has the right to use the investment tax credits until 2028. The execution of the investment project is subject to supervision by
the relevant institutions throughout the period of use of the tax credits and Arena will need to present regular annual reports to the
tax authority in which it will evidence that the conditions for the use of the tax credits are met. In 2020 Arena recognised a deferred
tax asset in relation to the investments that took place in 2020 with a total amount of HRK 9.5 million (£1.1 million).
During 2021 Arena continued to invest in its properties however since the total expected tax credit exceeds the expected future tax
liability in the periods that the tax credit can be utilised, no additional deferred tax asset was recognised.
Note 28 Earnings per share
The following reflects the income and share data used in the basic earnings per share computations:
Year ended 31 December
2021
£’000
2020
£’000
Loss attributable to equity holders of the parent (52,129) (81,731)
Weighted average number of ordinary shares outstanding 42,539 42,466
Potentially dilutive instruments 177,027 in 2021 are not considered, since their effect is antidilutive (increase of loss per share)
(2020: 140,140 were not considered, since their effect is antidilutive).
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
194 195
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 30 Related parties continued
b. Transactions with related parties
As at 31 December
2021
£’000
2020
£’000
Cost of transactions with GC Project Management Limited (60) (2,784)
Cost of transactions with Gear Construction UK Limited (27,735) (13,527)
Rent income from sub-lease of office space 173 –
Interest income from jointly controlled entities 101 95
c. Significant other transactions with related parties
(i) Construction of the art’otel London Hoxton – Following the approval by the independent shareholders, on 7 April 2020 the
Group entered into a building contract with Gear Construction UK Limited (‘Gear’) for the design and construction of the art’otel
London Hoxton hotel on a ‘turn-key’ basis (the ‘building contract’). Under the building contract Gear assumes the responsibility
for the design and construction of the main works for the design and build of art’otel London Hoxton for a lump sum of
£160 million (exclusive of VAT) (the ‘Contract Sum’).
On top of the Contract Sum, the Group is entitled to novate certain existing contracts relating to the project to Gear at cost
subject to a cap of £5.1 million (exclusive of VAT). Gear is required to complete the works to be executed under the building
contract by 2024.
Gear’s obligations and liabilities under the building contract are supported by a corporate guarantee from Red Sea Hotels
Limited, an associate of Euro Plaza Holdings B.V. and therefore a related party of the Company, in the amount of 10% of the
Contract Sum (the ‘corporate guarantee’). The corporate guarantee expires on the later of: (i) the expiry of the two-year defects
rectification period which follows practical completion of the works; and (ii) the issue of the latent defect insurer’s approval or
final technical audit report.
As part of entering into the building contract, the Hoxton Project Management Agreement dated 21 June 2018 was terminated.
(ii) Sub-lease of office space – A member of the Group has agreed to sub-lease a small area of office space to members or affiliates
of the Red Sea Group at its County Hall corporate office in London. The rent payable by the Red Sea Group to PPHE Hotel Group
is based on the cost at which the landlord is leasing such space to PPHE Hotel Group.
(iii) Pre-Construction and Maintenance Contract – The Group frequently uses GC Project Management Limited (GC) to undertake
preliminary assessment services, including appraisal work, and provide initial estimates of the construction costs. Further, GC
provides ad-hoc maintenance work when required to the Group’s various sites. Accordingly, the Group has entered into an
agreement with GC for the provision of pre-construction and maintenance services by GC to the Group for a fixed annual retainer
of £60,000.
(iv) Transactions in the ordinary course of business, in connection with the use of hotel facilities (such as overnight room stays and
food and beverages) are being charged at market prices. These transactions occur occasionally.
Summary of the remuneration for Executive and Non-Executive Directors for the year ended 31 December 2021:
Base salary
and fees
£’000
Salary
sacrifice
options
£’000
Bonus
£’000
Pension
contributions
£’000
Other
benefits
£’000
Total
£’000
Chairman and Executive Directors 953 47 – 115 16 1,131
Non-Executive Directors 269 – – – – 269
1,222 47 – 115 16 1,400
Note 29 Segments continued
Year ended 31 December 2020
The
Netherlands
£’000
Germany
£’000
United
Kingdom
£’000
Croatia
£’000
Other
1
£’000
Management
and Central
Services £’000
Adjustments
2
£’000
Consolidated
£’000
Revenue
Third party 14,948 7,750 56,544 18,729 1,056 2,760 101,787
Inter-segment 11,633 (11,633) –
Total revenue 14,948 7,750 56,544 18,729 1,056 14,393 (11,633) 101,787
Segment EBITDA (54) (255) 1,466 362 (295) (11,312) – (10,087)
Depreciation,
amortisation
and impairment (46,624)
Financial expenses (35,526)
Financial income 391
Net expenses for
liability in respect of
Income Units sold to
private investors (2,579)
Other expenses, net 563
Share in result of joint
ventures (826)
Profit before tax (94,688)
1. Includes art’otel Budapest in Hungary and 88 Rooms Hotel in Belgrade, Serbia.
2. Consist of inter-company eliminations.
The
Netherlands
£’000
Germany
£’000
United
Kingdom
£’000
Croatia
£’000
Other
£’000
Adjustments
2
£’000
Consolidated
£’000
Geographical information
Non-current assets
1
207,844 79,053 854,517 216,532 19,937 65,022 1,442,905
1 Non-current assets for this purpose consists of property, plant and equipment, right-of-use assets and intangible assets.
2 This includes the non-current assets of Management and Central Services.
Note 30 Related parties
a. Balances with related parties
As at 31 December
2021
£’000
2020
£’000
Loans to joint ventures (see Note 6a) 5,222 5,066
Short-term receivables 56 –
Short-term payable – (88)
Payable to GC Project Management Limited (50) (903)
Payable to Gear Construction UK Limited (1,082) (1,862)
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
196 197
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 31 Financial instruments risk management objectives and policies continued
Changes in financial liabilities arising from financing activities
As at
1 January
2020
£’000
Cash flows
£’000
Re-
measurement
through profit
and loss
£’000
Re-
measurement
against
right-of-
use assets
£’000
Foreign
exchange
movement
£’000
New leases/
loans, net
£’00
Other
£’000
As at 31
December
2020
£’000
Non-current interest-
bearing loans and
borrowings 664,345 (7,530) – 12,353 54,267 (3,718) 1,289 721,006
Non-current lease
liability 227,998 (1,461) 3,369 (180) 13,552 (1,700) 2,072 243,650
Financial liability in
respect of Income Units
sold to private investors 126,704 – – – – – (549) 126,155
Derivative financial
instruments 674 – – 42 – – 164 880
Current interest-
bearing loans and
borrowings 13,916 – – (173) 19,508 3,718 (600) 36,369
Current lease liability
1
3,596 (107) – 47 – 6,857 – 10,393
1,037,233 (9,098) 3,369 12,089 87,327 5,157 2,376 1,138,453
1 Includes accrued interest on deferred lease payments.
The main risks arising from the Group’s financial instruments are cash flow interest rate risk, credit risk and liquidity risk. The Board of
Directors reviews and agrees on policies for managing each of these risks which are summarised below. The Group’s accounting
policies in relation to derivatives are set out in Note 2.
a. Interest rate risk
The Group’s exposure to the risk for changes in market interest rates relates primarily to the Group’s long-term debt obligations with
a floating interest rate.
The Group’s policy is to manage its interest costs using fixed-rate debt. To manage its interest costs, the Group enters into interest rate swaps, in
which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by
reference to an agreed-upon notional principal amount. Furthermore, the Group uses fixed interest rate debts. For this reason the Group’s cash
flow is not sensitive to possible changes in market interest rates. Possible changes in interest rates do, however, affect the Group’s equity as the
fair value of the swap agreements changes with interest rate changes. These swaps are designated to hedge underlying debt obligations.
The fair value of the swaps of the Group as at 31 December 2021 amounts to a liability of £457 thousand (2020: liability of £879 thousand).
The Group uses short-term deposits (weekly and monthly) for cash balances held in banks.
b. Credit risk
The Group trades only with recognised, creditworthy third parties. It has policies in place to ensure that sales are made to customers
with an appropriate credit history. The Company’s policies ensure that sales to customers are settled through advance payments, in
cash or by major credit cards (individual customers). Since the Group trades only with recognised third parties, there is no
requirement for collateral for debts with third parties. Furthermore, the Group has no dependency on any of its customers.
The receivable balances are monitored on an ongoing basis. Management monitors the collection of receivables through credit
meetings and weekly reports on individual balances of receivables. The maximum credit exposure equals the carrying amount of the
trade receivables and other receivables since a loss allowance for expected credit losses is recorded in respect of all trade and other
receivables. The result of these actions is that the Group’s exposure to bad debts is not significant.
Note 30 Related parties continued
Summary of the remuneration for Executive and Non-Executive Directors for the year ended 31 December 2020:
Base salary
and fees
£’000
Salary
sacrifice
options
£’000
Bonus
£’000
Pension
contributions
£’000
Other
benefits
£’000
Total
1
£’000
Chairman and Executive Directors 730 9 75
1
114 16 944
Non-Executive Directors 232 – – – – 232
962 9 75 114 16 1,176
1 An Executive Director is entitled to a bonus of £75,000 in respect of 2019 financial year which is subject to leaver provisions. This bonus was not paid in 2020.
Directors’ interests in employee share incentive plan
As at 31 December 2021, the Executive Directors held share options to purchase 29,308 ordinary shares (2020: 179,308). 25,000 options
were fully exercisable with an exercise price of £14.30 (2020: 16,667) and 4,308 options were fully exercisable with a £nil exercise price
(2020: 718). No share options were granted to Non-Executive Directors of the Board.
Note 31 Financial instruments risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, and marketable securities comprise bank borrowings, cash and cash
equivalents and restricted deposits. The main purpose of these financial instruments is to finance the Group’s operations. The Group
has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
Changes in financial liabilities arising from financing activities
As at
1 January
2021
£’000
Cash flows
£’000
Re-
measurement
through
profit and
loss
£’000
Re-
measurement
against
right-of-
use assets
£’000
Foreign
exchange
movement
£’000
New leases/
loans, net
£’000
Other
£’000
As at 31
December
2021
£’000
Non-current interest-
bearing loans and
borrowings 721,006 – – – (18,013) 38,886 (12,595) 729,284
Non-current lease
liability 243,650 – 3,565 4,226 (2,250) (2,088) (1,829) 245,274
Financial liability in
respect of Income Units
sold to private investors 126,155 (1,390) – – – – (214) 124,551
Derivative financial
instruments 880 – – – (53) – (370) 457
Non-current Share
appreciation rights – 6,435 (1,575) – – – – 4,860
Current Share
appreciation rights – 715 (175) – – – – 540
Current interest-
bearing loans and
borrowings 36,369 (9,486) – – (844) (2,388) 15,189 38,840
Current lease liability
1
10,393 (6,825) – – (267) – 3,043 6,344
1,138,453 (10,551) 1,815 4,226 (21,427) 34,410 3,224 1,150,150
1 Includes accrued interest on deferred lease payments.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
198 199
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 31 Financial instruments risk management objectives and policies continued
d. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital
ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. The Group
monitors capital using a gearing ratio, which is net bank debt divided by total capital plus net bank debt. The Group’s policy is to
keep the gearing ratio between 50% and 60%. The Group includes within net bank debt interest-bearing bank loans and
borrowings, less cash and cash equivalents and other liquid assets. Capital includes equity less the hedging reserve.
2021
£’000
2020
£’000
Interest-bearing bank loans and borrowings 768,124 757,375
Less – cash and cash equivalents (136,802) (114,171)
Less – long-term restricted cash (8,121) (2,261)
Less – short-term restricted cash (5,204) (4,777)
Less – investments in marketable securities (22) (27)
Net debt 617,975 636,139
Equity 447,211 404,953
Hedging reserve 434 703
Total capital 447,645 405,656
Capital and net debt 1,065,620 1,041,795
Gearing ratio 58.0% 61.1%
e. Fair value of financial instruments
The fair values of the financial assets and liabilities are included in the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were
used to estimate the fair values:
The fair values of cash and cash equivalents, trade receivables, trade payables, and other current assets and liabilities approximate
their carrying amounts largely due to the short-term maturities of these instruments. The fair value of floating interest rate liabilities
also approximate their carrying amount as the periodic changes in interest rates reflect the movement in market rates.
The fair value of loans from banks and other financial liabilities is estimated by discounting future cash flows using rates currently
available for debt on similar terms, credit risk and remaining maturities.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by a valuation technique
based on the lowest level input that is significant to the fair value so determined:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have significant effect on the recorded fair value are observable, either directly
or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
Note 31 Financial instruments risk management objectives and policies continued
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents and investment
in securities, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the
carrying amount of these instruments. The Group has limited concentration risk in respect of its cash at banks.
c. Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and
bank loans. The Group’s policy is to arrange medium-term bank facilities to finance its construction operation and then to convert
them into long-term borrowings when required.
Despite the impact of COVID-19 on trading cash flows, the Group continues to hold a strong liquidity position with an overall
consolidated cash balance of £136.8 million as at 31 December 2021 and undrawn cash facilities of £76.8 million (for further details
see Note 1).
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December 2021 and 2020 based on
contractual undiscounted payments.
As at 31 December 2021
Less than
3 months
£’000
3 to 12
months
£’000
Year 2
£’000
Year 3 to 5
£’000
> 5 years
£’000
Total
£’000
Interest-bearing loans and borrowings
1
15,863 47,249 46,130 492,447 299,642 901,331
Financial liability in respect of Income Units sold
to private investors
2
493 1,477 9,198 39,420 124,551 175,139
Derivative financial instruments 57 171 229 – – 457
Lease liability
3
3,653 18,019 12,962 36,170 605,497 676,301
Trade payables 16,650 – – – – 16,650
Other liabilities 23,097 24,035 4,860 – 16,304 68,296
59,813 90,951 73,379 568,037 1,045,994 1,838,174
As at 31 December 2020
Less than
3 months
£’000
3 to 12
months
£’000
Year 2
£’000
Year 3 to 5
£’000
> 5 years
£’000
Total
£’000
Interest-bearing loans and borrowings
1
15,039 44,779 45,318 155,888 638,367 899,391
Financial liability in respect of Income Units sold
to private investors
2
– 1,970 9,198 39,420 126,155 176,743
Derivative financial instruments 110 330 439 – – 879
Lease liability
3
3,239 9,786 13,015 39,363 609,724 675,127
Trade payables 6,502 – – – – 6,502
Other liabilities 22,392 18,671 – – 12,331 53,394
47,282 75,536 67,970 234,671 1,386,577 1,812,036
1 See Note 15 for further information.
2 Presented according to discounted amount due to the variability of the payments over the balance of the 999-year term.
3 Lease liability includes four leases with upward rent reviews based on future market rates in one lease and changes in the Consumer Prices Index (CPI)/
retail price index (RPI) in the other lease and, thus, future payments have been estimated using current market rentals and current United Kingdom-
based CPIs/RPIs, respectively, except Park Plaza London Waterloo where the amounts included 50 years of future payments regarding the lease of Park
Plaza London Waterloo instead of 199 years as stated in the lease agreement. Also, the amounts do not take into account the collar of 2%. The Group’s
management believes that the amount included in the above table reflects the relevant cash flow risks to which the Group would be reasonably
exposed in the ordinary course of business.
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
200 201
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
Note 31 Financial instruments risk management objectives and policies continued
During 2021 and 2020, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of
Level 3 fair value measurements.
The carrying amounts and fair values of the Group’s financial instruments other than those whose carrying amount approximates
their fair value are as follows:
Carrying amount 31 December Fair value 31 December
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Financial liabilities
Bank borrowings 768,124 757,375 784,167 792,521
Note 32 Subsequent events
After the balance sheet date Londra Cargill Parent S.r.l, a wholly owned subsidiary of the Company, entered into a €25 million
(£21 million) facility with UniCredit S.p.A. maturing in 2026 (the ‘Facility’). The Facility consists of two tranches: Tranche A in the amount
of €17.25 million is available for immediate drawdown upon signing the facility agreement and Tranche B in the amount of €7.75 million
will be available for drawdown upon completion of the hotel refurbishment and meeting certain conditions.
Note 31 Financial instruments risk management objectives and policies continued
Fair value of investments in marketable securities is derived from quoted market prices in active markets. A market is regarded as
active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or
regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level
1. The Group enters into derivative financial instruments with financial institutions with investment grade credit ratings.
Derivatives are valued using valuation techniques for swap models, using present value calculations. The models incorporate various
inputs, including the credit quality of counterparties, and interest rate curves. The Group also granted share appreciation rights
(SAR) of the Company to Clal (see Note 6c) which is valued by using the Black–Scholes model. In addition, the Group also holds 46
Income Units in Park Plaza County Hall London which were valued by external valuator using a discounted cash flow technique.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
As at 31 December 2021, the Group held the following financial instruments measured at fair value:
Liabilities
31 December
2021
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Interest rate swaps used for hedging 457 – 457 –
Share appreciation rights 5,400 – 5,400 –
Assets
31 December
2021
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Investments in marketable securities 22 22 – –
Income Units in Park Plaza County Hall London 15,800 – 15,800 –
As at 31 December 2020, the Group held the following financial instruments measured at fair value:
Liabilities
31 December
2020
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Interest rate swaps used for hedging 879 – 879 –
Assets
31 December
2020
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Investments in marketable securities 27 27 – –
Income Units in Park Plaza County Hall London 15,350 – 15,350 –
Notes to consolidated financial statements continued
For the year ended 31 December 2021
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
202 203
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
APPENDICES
204 Subsidiaries included in the Group
206 Jointly controlled entities
207 Current renovation, repositioning and pipeline projects
208 Glossary
210 Contacts
Subsidiaries included in the Group
Name of company Principal activity
Country of
incorporation
Direct and
indirect
holdings %
1 Westminster Bridge Plaza Management Company Limited Hotel operation United Kingdom 51.2
A40 Data Centre B.V. Holding company Netherlands 100
A40 Office B.V. Holding company Netherlands 100
ABK Hotel Holding B.V. Holding company Netherlands 52.95
ACO Hotel Holding B.V. Holding company Netherlands 52.95
Amsterdam Airport Hotel Holding B.V.
(formerly known as Victoria Schiphol Holding B.V.) Holding company Netherlands 100
Amsterdam Airport Hotel Operator B.V. Holding company Netherlands 100
Arena 88 Rooms Holding d.o.o. Hotel operation Serbia 52.95
ARENA FRANZ Ferdinand GmbH Hotel company Austria 52.95
Arena Hospitality Group d.d. Hotel operation Croatia 52.95
Arena Hospitality Management d.o.o. Management Croatia 52.95
art’amsterdam Hotel Operator B.V. Hotel operation Netherlands 100
art’otel Berlin City Center West GmbH Hotel operation Germany 52.95
art’otel köln betriebsgesellschaft mbH Hotel operation Germany 52.95
Art’otel (I.L.) Management Services Limited Holding company Israel 100
Aspirations (Limited) Holding company Guernsey 51
Bora B.V. (formerly known as WH/DMREF Bora B.V.) Holding company Netherlands 100
Bora Finco B.V. Holding company Netherlands 100
County Hall Hotel Holdings B.V. (formerly known as PPHE Arena Holding B.V.) Holding company Netherlands 100
Dvadeset Osam d.o.o. (formerly known as W2005/Dvadeset Osam d.o.o.) Holding company Croatia 52.95
Eindhoven Hotel Operator B.V. Hotel operation Netherlands 100
Euro Sea Hotels N.V. Holding company Netherlands 100
Germany Real Estate B.V. Holding company Netherlands 52.95
Golden Wall Investments Limited Finance company British Virgin Islands 100
Grandis Netherlands Holding B.V. Holding company Netherlands 100
Hotel Club Construction B.V. (formerly Hotel Maastricht B.V.) Holding company Netherlands 100
Hotel Leeds Holding B.V. Holding company Netherlands 100
Hotel Nottingham Holding B.V. Holding company Netherlands 100
Hoxton Hotel Operator Limited Hotel operation United Kingdom 51
Leeds Hotel Operator Limited (formerly Nottingham Park Plaza Hotel Operator Limited) Hotel operation United Kingdom 100
Leno Investment Limited Holding company Guernsey 100
Londra Cargill Parent S.r.l. Holding company Italy 100
Marlbray Limited Holding company United Kingdom 100
Mazurana d.o.o. Holding company Croatia 52.95
North Lambeth Holding B.V. Holding company Netherlands 100
Name of company Principal activity
Country of
incorporation
Direct and
indirect
holdings %
Nottingham Hotel Operator Limited Hotel operation United Kingdom 100
Oaks Restaurant Operator Limited Hotel operation United Kingdom 100
Park Plaza Berlin Hotelbetriebsgesellschaft mbH (in liquidation) Hotel operation Germany 52.95
Park Plaza County Hall London Ltd Holding company United Kingdom 11.50
Park Plaza Germany Holdings GmbH Holding company Germany 52.95
Park Plaza Hospitality Services (UK) Limited Hotel operation United Kingdom 100
Park Plaza Hotels (Germany) Services GmbH Hotel operation Germany 52.95
Park Plaza Hotels (UK) Limited Holding company United Kingdom 100
Park Plaza Hotels (UK) Services Limited Management United Kingdom 100
Park Plaza Hotels Berlin Wallstrasse GmbH Hotel operation Germany 52.95
Park Plaza Hotels Europe (Germany) B.V. Holding company Netherlands 100
Park Plaza Hotels Europe B.V. Management Netherlands 100
Park Plaza Hotels Europe Holdings B.V. Holding company Netherlands 100
Park Plaza Nürnberg GmbH Hotel operation Germany 52.95
Park Royal Hotel Holding B.V. (formerly known as Club A40 Holding B.V.) Holding company Netherlands 100
Park Royal Hotel Operator Limited (formerly known as Club A40 Hotel Operator Limited) Hotel operation United Kingdom 100
Parkvondel Hotel Holding B.V. Holding company Netherlands 100
Parkvondel Hotel Operator B.V. Hotel operation Netherlands 100
Parkvondel Hotel Real Estate B.V. Holding company Netherlands 100
PPHE Art Holding B.V. Holding company Netherlands 100
PPHE Coop B.V. Holding company Netherlands 100
PPHE Germany B.V. Holding company Netherlands 100
PPHE Germany Holdings GmbH Holding company Germany 52.95
PPHE Headco Limited Holding company United Kingdom 100
PPHE Holdings Limited Holding company United Kingdom 100
PPHE Hotel Group Limited Holding company Guernsey 100
PPHE Hoxton B.V. Holding company Netherlands 51
PPHE Living Limited Holding company United Kingdom 100
PPHE Management (Croatia) B.V. Holding company Netherlands 100
PPHE Netherlands B.V. (formerly Maastricht Hotel Holding B.V.) Holding company Netherlands 100
PPHE NL Region B.V. Holding company Netherlands 100
PPHE Nürnberg Operator Hotelbetriebsgesellschaft mbH Hotel operation Germany 52.95
PPHE Support Services Limited Hotel operation United Kingdom 100
PPHE UK Holding B.V. (formerly Club Euro Hotels B.V.) Holding company Netherlands 100
PPHE USA B.V. Holding company Netherlands 100
PPHE USA Holding B.V. Holding company Netherlands 100
PPHE West 29th Street USA Inc Holding company Delaware 100
PPWL Parent B.V. Holding company Netherlands 100
Riverbank Hotel Holding B.V. Holding company Netherlands 51
Riverbank Hotel Operator Limited Hotel operation United Kingdom 51
Sherlock Holmes Hotel Shop Limited Hotel operation United Kingdom 100
Sherlock Holmes Park Plaza Limited Hotel operation United Kingdom 100
Appendices
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAPPENDICES
204 205
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Name of company Principal activity
Country of
incorporation
Direct and
indirect
holdings %
Signature Sub BV (new company) Holding company Netherlands 51
Signature Top Ltd (new company) Holding company United Kingdom 51
Società Immobiliare Alessandro De Gasperis S.r.l. Operation Italy 100
South Bank Hotel Management Company Ltd Holding company United Kingdom 11.50
Suf Holding B.V. Holding company Netherlands 100
Sugarhill Investments B.V. Holding company Netherlands 52.95
SW Szállodaüzemeltetö Kft Hotel operation Hungary 52.95
The Mandarin Hotel B.V. Holding company Netherlands 100
TOZI Restaurant Operator Limited Holding operation United Kingdom 100
Ulika d.o.o. Holding company Croatia 52.95
Utrecht Hotel Holding B.V. Holding company Netherlands 100
Utrecht Hotel Operator B.V. Hotel operation Netherlands 100
Victoria Amsterdam Hotel Holding B.V. Holding company Netherlands 100
Victoria Amsterdam Hotel Operator B.V. Hotel operation Netherlands 100
Victoria London (Real Estate) B.V. Holding company Netherlands 100
Victoria London B.V. (formerly known as Club Luton Hotel Holding B.V. and Club
Ealing Hotel Holding B.V.) Holding company Netherlands 100
Victoria Monument B.V. Holding company Netherlands 100
Victoria Park Plaza Operator Limited Hotel operation United Kingdom 100
W29 Development LLC Holding company Delaware 100
W29 Owner LLC Holding company Delaware 100
Waterloo Hotel Holding B.V. (formerly known as Hercules House Holding B.V.) Holding company Netherlands 100
Waterloo Hotel Operator Limited (formerly known as Hercules House Operator Limited) Hotel operation United Kingdom 100
Westminster Bridge Hotel Operator Limited Hotel operation United Kingdom 100
Westminster Bridge London (Real Estate) B.V. Holding company Netherlands 100
Westminster Bridge London B.V. Holding company Netherlands 100
Jointly controlled entities
Name of company Principal Activity
Country of
incorporation
Direct and
indirect
holdings %
art’otel berlin mitte/Park Plaza Betriebsgesellschaft mbH
1
Hotel operation Germany 50
Park Plaza Betriebsgesellschaft mbH
1
Hotel operation Germany 50
PPBK Hotel Holding B.V. (formerly known as ABK Hotel Holding B.V.)
1
Holding company Netherlands 50
ABM Hotel Holding B.V.
1
Holding company Netherlands 50
1 Indirectly held through Arena Hospitality Group d.d.
Current renovation, repositioning and pipeline projects
Project Location Scope Status
Grand Hotel Brioni, Pula Istria, Croatia Repositioning Opening Q2 2022
art’otel London Battersea Power Station* London, United Kingdom New development Expected to open 2022
art’otel London Hoxton London, United Kingdom New development Expected to open 2024
art’otel in New York City New York City, United States New development Temporarily paused
88 Rooms Hotel Belgrade, Serbia Repositioning In design process
Hotel Zagreb Zagreb, Croatia New development Expected to open 2022
Guest House Hotel Riviera, Pula Istria, Croatia Repositioning In design process
FRANZ ferdinand Mountain Resort Nassfeld, Austria Repositioning In design process
Development site Park Royal London London, United Kingdom New development In design process
Development site Westminster Bridge Road, London London, United Kingdom New development Planning submitted
art’otel Budapest Budapest, Hungary Renovation Expected to complete Q2
2022
Londra & Cargill Hotel, Rome Rome, Italy Repositioning In design process
* Management contract.
Appendices
continued
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAPPENDICES
206 207
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Adjusted Excluding the effect of exceptional items and any relevant tax.
Annual General
Meeting
The Annual General Meeting of PPHE Hotel Group
on17 May2022.
Annual Report and
Accounts
The Annual Report of PPHE Hotel Group in relation tothe year
ended 31 December 2021.
Arena Campsites Are located in eight beachfront sites across the southern coast
of Istria, Croatia. They operate under the Arena Hospitality
Group umbrella, of which PPHE Hotel Group is a controlling
shareholder. www.arenacampsites.com
Arena Hospitality
Group
Arena Hospitality Group is also referred to as Arena and is one
of the most dynamic hospitality groups in Central and Eastern
Europe, currently offering a portfolio of 30 owned, co-owned,
leased and managed properties with more than 10,000 rooms
and accommodation units in Croatia, Germany, Hungary, Serbia
and Austria. PPHE Hotel Group has a controlling ownership
interest in Arena Hospitality Group.
www.arenahospitalitygroup.com.
Arena Hotels &
Apartments
A collection of hotels and self-catering apartment complexes
offering relaxed and comfortable accommodation within
beachfront locations across the historical settings of Pula and
Medulin in Istria, Croatia. They operate under the Arena
Hospitality Group umbrella, of which PPHE Hotel Group is a
controlling shareholder.
art’otel
®
A lifestyle collection of hotels that fuse exceptional architectural
style with art-inspired interiors, located in cosmopolitan centres
across Europe. PPHE Hotel Group is owner of the art’otel
®
brand
worldwide. www.artotel.com
Board Eli Papouchado (Non-Executive Chairman), Yoav Papouchado
(Alternate Director), Boris Ivesha (President & Chief Executive
Officer), Daniel Kos (Chief Financial Officer & Executive
Director), Kevin McAuliffe (Non-Executive Deputy Chairman),
Nigel Keen (Non-Executive Director & Senior Independent
Director), Kenneth Bradley (Non-Executive Director), Stephanie
Coxon (Non-Executive Director).
Capital
expenditure
Purchases of property, plant and equipment, intangible assets,
associate and joint venture investments, and other financial
assets.
Company PPHE Hotel Group Limited, a Guernsey incorporated Company
listed on the Main Market of the London Stock Exchange plc.
Derivatives Financial instruments used to reduce risk, the price of which is
derived from an underlying asset, index or rate.
Direct channels Methods of booking hotel rooms (both digital and voice) not
involving third party intermediaries.
Dividend per share Proposed/approved dividend for the year divided by the
weighted average number of outstanding shares after dilution at
the end of the period.
Employee
engagement
survey
We ask our team members to participate in a survey to measure
employee engagement.
EPRA (European
Public Real Estate
Association)
The EPRA reporting metrics analyse performance (value, profit
and cash flow) given that we have full ownership of the majority
of our properties.
EPS Earnings per share.
EU The European Union.
Euro/€ The currency of the European Economic and Monetary Union.
Exceptional items Items that are disclosed separately because of their size or
nature.
Exchange rates The exchange rates used were obtained from the local national
banks website.
FF&E Furniture, fittings and equipment.
Franchise A form of business organisation in which a company which already
has a successful product or service (the franchisor) enters into a
continuing contractual relationship with other businesses
(franchisees) operating under the franchisor’s trade name and
usually with the franchisor’s guidance, in exchange for a fee.
Franchisee An owner who uses a brand under licence from PPHE Hotel Group.
Goodwill The difference between the consideration given for a business
and the total of the fair values of the separable assets and
liabilities comprising that business.
GRS Guest Rating Score is the online reputation score used by
ReviewPro – an industry leader in guest intelligence solutions.
Guernsey The Island of Guernsey.
Hotel revenue Revenue from all revenue-generating activity undertaken by
managed and owned and leased hotels, including room nights,
food and beverage sales.
Income Units Cash flows derived from the net income generated by rooms in
Park Plaza Westminster Bridge London, which have been sold to
private investors.
Like-for-like Results achieved through operations that are comparable with
the operations of the previous year. Current years’ reported
results are adjusted to have an equivalent comparison with
previous years’ results in the same period, with similar
seasonality and the same set of hotels.
Like-for-like hotels
including
renovation
Like-for-like hotels plus hotels under renovation during the
current and/or previous financial year compared.
LSE London Stock Exchange. PPHE Hotel Group’s shares are traded
on the Premium Listing segment of the Official List of the UK
Listing Authority.
Number of
properties
Number of owned hotel properties at the end of the period.
Number of rooms Number of rooms in owned hotel properties at the end of the period.
Online travel
agent
Online companies whose websites permit consumers to book
various travel related services directly over the Internet.
parkplaza.com Brand website for Park Plaza
®
Hotels & Resorts.
Park Plaza Hotel One hotel from the Park Plaza
®
Hotels & Resorts brand.
Park Plaza
®
Hotels&Resorts
Upper upscale hotel brand. PPHE Hotel Group is master
franchisee of the Park Plaza
®
Hotels & Resorts brand owned by
Radisson Hotel Group. PPHE Hotel Group has the exclusive right
to develop the brand across 56 countries in Europe, the Middle
East and Africa. parkplaza.com
Pipeline Hotels/rooms that will enter the PPHE Hotel Group system at a
future date.
Pound Sterling/£ The currency of the United Kingdom.
PPHE Hotel Group PPHE Hotel Group is also referred to as the Group and is an
international hospitality real estate group. Through its
subsidiaries, jointly controlled entities and associates, the Group
owns, co-owns, develops, leases, operates and franchises
hospitality real estate. The Group’s primary focus is full-service
upscale, upper upscale and lifestyle hotels in major gateway
cities and regional centres, as well as hotel, resort and campsite
properties in select resort destinations.
Radisson Hotel
Group
Created in early 2018, one of the largest hotel companies in the
world. Hotel brands owned by Radisson Hotel Group are
Radisson Collection™, Radisson Blu
®
, Radisson
®
, Radisson
RED®, Radisson Individuals, Park Plaza
®
, Park Inn
®
by Radisson,
Country Inn & Suites
®
by Radisson, and Prizeotel. The portfolio
of Radisson Hotel Group includes more than 1,400 hotels in
operation and under development, located across 115 countries
and territories, operating under global hotel brands. Jin Jiang
International Holdings is the majority shareholder of Radisson
Hotel Group. www.radissonhotelgroup.com
Radisson
Rewards
TM
The hotel rewards programme of Radisson Hotel Group,
including Park Plaza
®
Hotels & Resorts and art’otel
®
.
The programme is owned by Radisson Hotel Group.
Gold Points
®
is the name of the currency earned through the
Radisson Rewards
TM
programme. www.radissonrewards.com
Responsible
Business
PPHE Hotel Group’s Responsible Business strategy is a genuine,
active and responsible commitment to our environment and society.
Room count Number of rooms franchised, managed, owned or leased by
PPHE Hotel Group.
Subsidiary A company over which the Group exercises control.
Weighted average
number of shares
outstanding
during theyear
The weighted average number of outstanding shares taking into
account changes in the number of shares outstanding during the
year.
Working capital The sum of inventories, receivables and payables of a trading
nature, excluding financing and taxation items.
Alternative Performance Measures
In order to aid stakeholders and investors in analysing the Group’s performance and
understanding the value of its assets and earnings from a property perspective, the
Group have disclosed the following Alternative Performance Measures which are
commonly used in the Real Estate and the Hospitality sectors.
Adjusted EPRA
earnings
EPRA earnings with the Company’s specific adjustments.
The main adjustments includes removal of unusual or onetime
influences and adding back the reported depreciation charge,
which is based on assets at historical cost, and replacing it with a
charge calculated as 4% of the Group’s total revenues,
representing the Group’s expected average cost to upkeep the
real estate in good quality.
Adjusted EPRA
earnings per share
Adjusted EPRA earnings divided by the weighted average
number of ordinary shares outstanding during the year.
ARR Average room rate. Total room revenue divided by number of
rooms sold.
Average room rate
(ARR)
Total room revenue divided by the number of rooms sold.
Basic earnings per
ordinary share
Profit available for PPHE Hotel Group equity holders divided by
the weighted average number of ordinary shares in issue during
the year.
Compound Annual
Growth Rate
– CAGR
Annual growth rate over a period of years, calculated on the
basis that each year’s growth is compounded, that is, the
amount of growth in each year is included in the following year’s
number, which in turn grows further.
DSCR EBITDA, less net expenses for financial liability in respect of
Income Units sold to private investors and lease payments,
divided by the sum of interest on bank loans and yearly bank
loans redemption.
Earnings (loss) per
share
Basic earnings (loss) per share amounts are calculated by dividing
the net profit (loss) for the year by the weighted average number
of ordinary shares outstanding during the year. Diluted earnings
(loss) per share amounts are calculated by dividing the net profit
(loss) for the year by the weighted average number of ordinary
shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion
of all the dilutive potential ordinary shares into ordinary shares.
EBIT Earnings before interest and tax.
EBITDA Earnings before interest, tax, depreciation and amortisation.
EBITDA margin EBITDA divided by total revenue.
EBITDAR Revenue less cost of revenues (operating expenses). EBITDAR,
together with EBITDA, is used as a key management indicator.
EPRA earnings Shareholders’ earnings from operational activities adjusted to
remove changes in fair value of financial instruments and
reported depreciation.
EPRA earnings per
share
EPRA earnings divided by the weighted average number of
ordinary shares outstanding during the year.
EPRA Net asset
value (EPRA NAV)
Recognised equity, attributable to the parent company’s
shareholders, including reversal of derivatives, deferred tax
asset for derivatives, deferred tax liabilities related to the
properties and revaluation of operating properties.
EPRA Net
Re-instatement
Value (EPRA NRV)
Recognised equity, attributable to the parent company’s
shareholders on a fully diluted basis adjusted to include
properties and other investment interests at fair value and to
exclude certain items not expected to crystallise in a long-term
investment property business model.
EPRA Net
Re-instatement
Value (EPRA NRV)
per share
EPRA NRV divided by the fully diluted number of shares at the
end of the period.
EPRA Net Disposal
Value (EPRA NDV)
Recognised equity, attributable to the parent company’s
shareholders on a fully diluted basis adjusted to include
properties, other investment interests, deferred tax, financial
instruments and fixed interest rate debt at disposal value.
EPRA Net Tangible
Assets (EPRA NTA)
Recognised equity, attributable to the parent company’s
shareholders on a fully diluted basis adjusted to include
properties and other investment interests at fair value and to
exclude intangible assets and certain items not expected to
crystallise based on the Company’s expectations for investment
property disposals in the future.
EPRA Net Tangible
Assets (EPRA NTA)
per share
EPRA NTA divided by the fully diluted number of shares at the
end of the period.
Gearing ratio Net bank debt divided by the sum of total equity and net bank
debt.
Interest Cover
ratio (ICR)
EBITDA, less net expenses for financial liability in respect of
Income Units sold to private investors and lease payments,
divided by interest on bank loans.
Loan-to-value ratio Interest-bearing liabilities after deducting cash and cash
equivalents as a percentage of the properties’ market value at
the end of the period.
Market
capitalisation
The value attributed to a listed Company by multiplying its share
price by the number of shares in issue.
Market share The amount of total sales of an item or group of products by a
company in a particular market. It is often shown as a
percentage, and is a good indicator of performance compared
to competitors in the same market sector.
Net debt Borrowings less cash and cash equivalents long-term and
short-term restricted cash, including the exchange element of
the fair value of currency swaps hedging the borrowings.
Normalised profit
before tax
Profit before tax adjusted to remove unusual or onetime
influences.
Occupancy Total occupied rooms divided by net available rooms or RevPAR
divided by ARR.
RevPAR Revenue per available room. Total rooms revenue divided by net
available rooms or ARR x occupancy %.
Glossary
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAPPENDICES
208 209
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
Directors
Eli Papouchado (Non-Executive Chairman)
Yoav Papouchado (Alternate Director)
Boris lvesha (President & Chief Executive Officer)
Daniel Kos (Chief Financial Officer & Executive Director)
Kevin McAuliffe (Non-Executive Deputy Chairman)
Nigel Keen (Non-Executive Director & Senior IndependentDirector)
Kenneth Bradley (Non-Executive Director)
Stephanie Coxon (Non-Executive Director)
PPHE Hotel Group
Motion Building
Floor 9
Radarweg 60
1043 NT Amsterdam
The Netherlands
T: +31 (0)20 717 8602
F: +31 (0)20 717 8699
E: dkos@pphe.com
pphe.com
Contacts
Daniel Kos (Chief Financial Officer & Executive Director)
Inbar Zilberman (Chief Corporate & Legal Officer)
Robert Henke (Executive Vice President Commercial Affairs)
Administrator
Carey Commercial Limited
1st and 2nd Floors
Elizabeth House
Les Ruettes Brayes
St. Peter Port
Guernsey GY1 1EW
Channel lslands
Auditors to the Company and reportingaccountants
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road
Tel-Aviv 6492102
Israel
Legal advisers to the Company astoGuernsey law
Carey Olsen (Guernsey) LLP
Carey House
P.O. Box 98
Les Banques
St. Peter Port
Guernsey GY1 4BZ
Channel lslands
Registered Office
1st and 2nd Floors
Elizabeth House
Les Ruettes Brayes
St. Peter Port
Guernsey GY1 1EW
Channel lslands
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey GY2 4LH
Channel Islands
Company Secretary
Carey Commercial Limited
1st and 2nd Floors
Elizabeth House
Les Ruettes Brayes
St. Peter Port
Guernsey GY1 1EW
Channel lslands
Financial advisers and brokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Berenberg
60 Threadneedle Street
London EC2R 8HP
United Kingdom
Public relations
Hudson Sandler LLP
25 Charterhouse Square
London EC1M 6AE
United Kingdom
Useful links
Company websites
pphe.com
arenahospitalitygroup.com
For reservations
parkplaza.com
artotel.com
arenahotels.com
arenacampsites.com
Strategic partner
radissonhotelgroup.com
Forward-looking statements
This document may contain certain “forward-looking statements” which reflect the Company’s and/or the
Directors’ currentviews with respect to financial performance, business strategy and future plans, both with
respect to the Group and the sectors and industries in which the Group operates. Statements which include
the words “expects”, “intends”, “plans”, “believes”, “projects”, “anticipates”, “will”, “targets”, “aims”, “may”,
“would”, “could”, “continue” and similar statements are of a future or forward-looking nature. All forward-
looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be
important factors that could cause the Group’s actual results to differ materially from those indicated in these
statements. Any forward-looking statements in this document reflect the Group’s current views with respect to
future events and are subject to risks, uncertainties and assumptions relating to the Group’s operations, results
ofoperations and growth strategy. These forward-looking statements speak only as of the date on which they
are made. Subject to any legal or regulatory obligations, the Company undertakes no obligation publicly to
update or review or revise any forward-looking statement, whether as a result of new information, future
developments or otherwise. All subsequent written and oral forward-looking statements attributable to the
Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph.
Nothing in this document should be considered as a profit forecast.
Contacts
Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
210
ANNUAL REPORT AND ACCOUNTS 2021 PPHE HOTEL GROUP
PPHE Hotel Group
Motion Building
Floor 9
Radarweg 60
1043 NT Amsterdam, The Netherlands
T: +31 (0)20 717 8602
E: info@pphe.com
pphe.com
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