Safestay has slashed annual losses by more than 90 per cent, despite Covid-19 restrictions continuing to keep its hostels closed for much of last year.
The budget accommodation chain posted a loss of £599,000 in 2021 compared to a £7.5million loss the previous year, thanks to the group making a significant profit on the sale of a hostel in Edinburgh.
All the company’s premises were closed for the first three months of the year, before gradually reopening between April and the end of July.
Downturn: The coronavirus pandemic has inflicted significant financial damage on Safestay, which operates 20 hostels across ten European countries
Restrictions were then reimposed following the emergence of the Omicron variant in November, depressing demand for overseas travel and slowing the hospitality sector’s recovery from the pandemic.
Consequently, Safestay’s total yearly revenues were still around two-thirds below their pre-pandemic levels, even though it managed to boost them by a third to £6.4million.
But due to reducing overall staff costs, a lack of goodwill impairments, lower depreciation and amortisation costs, and the £16million divestment of the Edinburgh hostel, the business successfully reduced total losses by 92 per cent.
The AIM-listed business also made a £7.5million profit from the hostel sale and used the proceeds to cut its bank debt by £10.2million to £12.7million and enhance liquidity.
Safestay said its revenues had run in line with management forecasts, at about 81 per cent of 2019 volumes, for the first five months of 2022,
Chairman and founder Larry Lipman said: ‘We are seeing the steady recovery of our market with young travellers and schools once again visiting Europe’s major cities.
‘From our perspective, we always believed this would happen and that our hostels would again demonstrate their appeal to our target customers.
‘Occupancy is increasing at an encouraging pace and at strong average bed rates with bookings for the summer ahead of our internal budget plans. We expect momentum to increase as travel returns to normal conditions.’
Safestay operates 16 hostels across 11 European countries, including four in the UK: Holland Park and Elephant & Castle in London, York and Glasgow; as well as three establishments in Spain.
The company was founded in 2014 by Lipman, a serial entrepreneur who also created the self-storage group Safestore, North London-centred property investor Safeland, which rents venues to Safestay, and office rental specialist Bizspace.
A potential takeover approach was made for the business last year by an unnamed party but failed after certain Safestay shareholders opposed the board’s recommendation to approve the deal.
Safestay shares closed trading 3.57 per cent higher at 14.5p on Monday, although their value has still declined by more than 28 per cent since the start of January.