28 February 2019

PPHE HOTEL GROUP LIMITED
("PPHE Hotel Group, "the Group" or the "Company")

Audited Annual Results for the year ended 31 December 2018
Publication of Annual Report & Accounts and Notice of Annual General Meeting

Strong financial performance and excellent progress with real estate investment projects

PPHE Hotel Group, which together with its subsidiaries (the "Group") is an international hospitality real estate group, is pleased to announce its audited annual results for the year ended 31 December 2018.

The Group owns, co-owns and develops hotels, resorts and campsites, operates the Park Plaza^® brand in Europe, the Middle East and Africa and owns and operates the art'otel^® brand globally.

Financial Summary

· Like-for-like¹ revenue increased by 6.0%, as the Group benefited from improved trading across all operating regions and the first full year contributions of Park Plaza London Waterloo and Park Plaza London Park Royal which have continued to mature since fully opening in 2017. Reported total revenue increased by 5.0% to £341.5 million (2017: £325.1 million).

· Like-for-like¹ EBITDA improved by 5.6%. Reported EBITDA increased by 5.5% to £113.2 million (2017: £107.3 million).

· Normalised profit before tax² increased by 17.6% to £37.7 million (2017: £32.1 million).

· Normalised earnings per share were 69 pence (2017: 58 pence), an increase of 11 pence. Reported basic/diluted earnings per share were 90 pence (2017: 57 pence).

· Proposed final dividend of 19 pence per share (2017: 13 pence per share) bringing the total dividend for the year to 35 pence per share (including the interim ordinary dividend of 16 pence per share), an increase of 45.8%.

· In the summer of 2018 our real estate assets were independently valued by Savills at £1.6 billion.

· EPRA NAV per share (post dividend) was up 2.3% at £24.57 and adjusted EPRA earnings per share were up 10.6% to 115 pence (for the 12 months ending 31 December 2018). EPRA NAV per share was up by 3.5% excluding a 29 pence dividend paid in 2018.

¹The like-for-like figures for 31 December 2018 exclude the first two months of operation of Park Plaza London Park Royal. Furthermore, the like-for-like figures for 31 December 2017 exclude the operation of Park Plaza Vondelpark, Amsterdam from August to December (the property is temporarily closed for renovations) and art'otel dresden (the lease of which was terminated on 31 July 2018). The like-for-like EBITDA figures for 31 December 2017 have also been adjusted to reflect the acquired freeholds of art'otel cologne and art'otel berlin kudamm in 2017 (rental costs adjusted to reflect freehold).

²A reconciliation of reported to normalised profit can be found in the Financial Review in the "Profit and Earnings per share" section.

Operational and Corporate highlights

· Significant investment in our hospitality assets. In total we invested over £60 million in our portfolio during 2018. This included multi-million-pound repositioning programmes at Park Plaza Victoria Amsterdam and Park Plaza London Riverbank.

· Croatia's first all-glamping offer, Arena One 99, was launched in June 2018 and delivered encouraging results following opening.

· Further repositioning projects are well underway at Park Plaza Vondelpark, Amsterdam and Park Plaza Sherlock Holmes London, which are due to complete H2 2019.

· Acquired 100% ownership of the development site for art'otel london hoxton. Preliminary construction works commenced and the hotel is due to open in 2022.

· Transferred ordinary shares to the Premium Listing segment of the Main Market of the London Stock Exchange.

Commenting on the results, Boris Ivesha, President and Chief Executive Officer, PPHE Hotel Group said:

"In 2018 we delivered year-on-year revenue and profit growth as we benefited from improved trading across all regions. This was achieved despite significant investments of more than £60 million in our hospitality assets causing five hotels to be partly or fully closed during the year. Our results coupled with our strategic progress reflect the strength of our business model, the appeal of our portfolio as well as our rigorous focus on inspirational service delivery to delight our guests.

"Current trading in 2019 has started well and is in line with the Board's expectations. We are ever mindful of the economic and political headwinds, most notably in light of the UK's impending departure from the European Union but we have made a number of contingency plans and are confident that the Group is well placed to continue creating and delivering strong shareholder value this year and beyond."

Key financial statistics

	Reported in GBP (£)		Like-for-like in GBP¹ (£)
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£341.5 million	£325.1 million	£340.6 million	£321.4 million
EBITDAR	£120.7 million	£116.0 million	£120.8 million	£115.0 million
EBITDA	£113.2 million	£107.3 million	£113.3 million	£107.3 million
EBITDA margin	33.1%	33.0%	33.3%	33.4%
Reported PBT	£46.4 million	£31.7 million	-	-
Normalised PBT	£37.7 million	£32.1 million	-	-
Reported EPS	90p	57p	-	-
Dividend per share	35p	24p	-	-
Occupancy	79.4%	77.3%	79.4%	77.1%
Average room rate	£123.1	£120.2	£123.4	£121.0
RevPAR	£97.7	£92.9	£90	£93.3
Room revenue	£236.6 million	£224.0 million	£235.9 million	£221.1 million
EPRA NAV per share	£24.57	£24.02	-	-
Adjusted EPRA earnings per share	115p	104p	-	-

²A reconciliation of reported to normalised profit can be found in the Financial Review in the "Profit and Earnings per share" section of the annual report

Publication of Annual Report & Accounts and Notice of Annual General Meeting

PPHE Hotel Group Limited will publish later today its annual report and accounts for the year ended 31 December 2018 (the "Annual Report"), including the Notice of Annual General Meeting. These documents shall be available today on the Company's website www.pphe.com.

The Company's Annual General Meeting will be held on 15 May 2019 at 12 noon at 1^st and 2^nd Floors, Elizabeth House, Les Ruettes Brayes, St Peter Port, Guernsey GY1 1EW.

Copies of the Annual Report and Notice of the Annual General Meeting shall be submitted later today to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/nsm

In accordance with Disclosure Guidance and Transparency Rule 6.3.5, the information in the attached Appendix consisting of a Directors' Responsibility Statement, principal risks and uncertainties and related party transactions has been extracted unedited from the Annual Report & Accounts for the year ended 31 December 2018. This material is not a substitute for reading the full Annual Report.

This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the company is Daniel Kos, Chief Financial Officer & Executive Director.

Enquiries:

PPHE Hotel Group Limited

Daniel Kos

Chief Financial Officer & Executive Director

Robert Henke

Executive Vice President of Commercial & Corporate Affairs

Tel: +31 (0)20 717 8600

Hudson Sandler

Wendy Baker / Sophie Lister

Tel: +44 (0)20 7796 4133

Email: [email protected]

Notes to editors

PPHE Hotel Group is an international hospitality real estate company, with a £1.6 billion portfolio of primarily prime freehold and long leasehold assets in Europe.

The Group's guiding principle is to generate attractive returns from operations and long-term capital appreciation.

Through its subsidiaries, jointly controlled entities and associates it owns, co-owns, develops, leases, operates and franchises hospitality real estate. Its 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.

The Group benefits from having an exclusive and perpetual licence from the Radisson Hotel Group, one of the world's largest hotel groups, to develop and operate Park Plaza^® branded hotels and resorts in Europe, the Middle East and Africa. In addition, the Group wholly owns, and operates under, the art'otel^® brand and its Croatian subsidiary owns, and operates under, the Arena Hotels & Apartments^® and Arena Campsites® brands. This multi-brand approach enables the Group to develop and operate properties across several segments of the hospitality market.

The Group is one of the largest owner/operators of hotels in central London and its property portfolio comprises of 38 hotels and resorts in operation, offering a total of approximately 8,800 rooms and 8 campsites, offering approximately 6,000 units. The Group's development pipeline includes two new hotels in London which are expected to add an additional 500 rooms by the end of 2022.

PPHE Hotel Group is a Guernsey registered company and its shares are listed on the Premium Listing segment of the Main Market of the London Stock Exchange. PPHE Hotel Group also holds a controlling ownership interest (51.97% of the share capital) in Arena Hospitality Group, whose shares are listed on the Zagreb Stock Exchange.

Company websites

www.pphe.com

www.arenahospitalitygroup.com

For reservations

www.parkplaza.com

www.artotels.com

www.arenahotels.com

www.arenacampsites.com

For images and logos visit

www.vfmii.com/parkplaza

CHAIRMAN'S STATEMENT

Welcome

We are delighted to announce another year of operational, financial and strategic progress, achieved in a year of significant investment in our portfolio to support future growth against an ever-changing hospitality industry and macro environment.

In 2018, we demonstrated our ability to continually adapt to these challenges exploiting opportunities as they arose. As a result, the Group has once again delivered year-on-year revenue and profit growth.

Key to our continued success and value creation is our hospitality real estate ownership. We own the majority of our property portfolio (hotels, resorts and campsites). This portfolio was independently valued by Savills at £1.6 billion in the summer of 2018.

Our hybrid owner/operator model paired with development is a point of differentiation within the hospitality sector with a clear strategy to drive growth and long-term value. This model gives us full control over the maintenance of our assets, along with the ability to react quickly and invest in them as necessary, enabling us to fully optimise their potential value. We take great pride in the design and hospitality experience we create for our guests and customers.

Repositioning and renovation investment projects

Over the last three years, there has been a significant investment in our property portfolio to transform and reposition some of our existing real estate offering across our key markets.

2018 saw the completion of major repositioning projects at Park Plaza Victoria Amsterdam and Park Plaza London Riverbank, with construction works implemented in phases over several years. By reconfiguring and enhancing the layout of each property (public areas and rooms) to optimise the space, improve the facilities and enhance the guest experience, we have transformed these hotels in their respective markets. In Croatia, Arena One 99 was launched, the country's first all-glamping offer, which delivered encouraging results following opening.

Further repositioning projects - at Park Plaza Vondelpark, Amsterdam, Park Plaza Utrecht, Park Plaza Sherlock Holmes London and Arena Kazela Campsite Medulin are well underway and are due to complete H2 2019.

Renovation has also commenced at Park Plaza Victoria London which is expected to complete in H2 2019.This hotel will remain in operation during the renovation project, albeit with some rooms and facilities temporarily closed. Repositioning projects expected to commence in 2019 include Hotel Brioni and Verudela Beach Resort. We expect to realise the benefits of these investment projects from 2019 onwards.

Corporate activity

2018 marked a significant milestone in our corporate development. In July, our ordinary shares were transferred to the Premium Listing segment of the Main Market of the London Stock Exchange. This move was in line with our strategic goals to broaden our investor base and raise our profile amongst our shareholders. In addition, our Croatian listed subsidiary, Arena Hospitality Group d.d., transferred its listing from the Official Market to the Prime Market of the Zagreb Stock Exchange.

The Group has delivered strong shareholder returns, which reflects our focused strategy of investing in and enhancing our prime property portfolio, creating unique experiences for our guests and creating reliable and recognisable standards across our multi-brand portfolio and international network. This impressive performance highlights the strength of our leadership team, several of whom have been with the business for many years, and our ability to retain and develop talent and nurture the next generation of leaders.

The Board

Our Board is integral to our future and there were several changes to its structure over the year. We welcomed Daniel Kos to the Board on 27 February 2018, following his promotion to Chief Financial Officer. Kevin McAuliffe was appointed Non-Executive Deputy Chairman. Nigel Jones was appointed Senior Independent Director, taking over the role previously performed by Kevin McAuliffe. Chen Moravsky stepped down from the Board this year and I would like to personally thank him for his invaluable contribution to the development of our business.

The Board is committed to and recognises the importance of maintaining a high standard of corporate governance.

I would like to take this opportunity to thank the members of the Board for their guidance and I also thank all our team members for their hard work and commitment during 2018.

Dividend

The Board is proposing a final dividend payment of 19 pence per share, bringing the total ordinary dividend for the year ended 31 December 2018 to 35 pence per share. This is in line with our progressive dividend policy and reflects the Board's confidence in the Group's operations, assets and prospects.

Looking ahead

We take an integrated and entrepreneurial approach to everything we do as we exploit the full potential of our hospitality real estate to create value and profits. Looking ahead for 2019, we will continue to reposition and develop assets within our portfolio as well as focus on our committed development pipeline to deliver future growth. We retain a strong cash position and the Board will continue to consider asset acquisitions to broaden our portfolio and deliver our target returns on investment.

We are currently in advanced negotiations in respect of a joint venture opportunity for the purchase of a hotel development site in New York (approximately 100 keys), which offers an exciting prospect in a new market.

We are well placed to continue our progress and deliver excellent service for which we are renowned while we continue to create long-term value for our shareholders.

Eli Papouchado
Chairman

PRESIDENT & CHIEF EXECUTIVE OFFICER'S STATEMENT

Our results in 2018 coupled with our strategic progress once again reflect the strength of our business model, the appeal of our portfolio and our rigorous focus on performance.

Our business model is focused on real estate ownership and development and international hospitality operations, aimed at continuing to create value for all our stakeholders.

We do this by optimising the value of our existing portfolio, extracting value to fund further long-term sustainable growth, whilst consistently refreshing guest experiences across our properties, maintaining high operational margins and leveraging our scale and operational synergies.

A snapshot of 2018

Key 2018 investment projects

2018 was a year of significant investment in our hospitality assets. In total, we invested more than £60 million in our portfolio during the year. We completed a multi-million-pound repositioning programme at Park Plaza Victoria Amsterdam, our iconic hotel in the centre of Amsterdam, and an extensive programme at Park Plaza London Riverbank to transform the property into a 646-room hotel on London's South Bank. We also undertook several renovation programmes to enhance our guest offer. We opened our first all-glamping campsite in Croatia, Arena One 99, which followed a multi-million-pound investment programme to completely transform an existing campsite.

We made further progress with our development pipeline, acquiring full ownership of the development site for art'otel london hoxton in the first quarter. This is an exciting project which will bring the art'otel lifestyle brand to an area of London which is undergoing regeneration. Preliminary construction works have commenced. The hotel is expected to open in 2022.

Our ongoing investment in our property portfolio gives us the confidence that we can offer all our customers an exceptional experience, whether they are staying at one of our hotels, campsites or resorts, enjoying a meal or drinks in one of our many restaurants and bars, relaxing in one of our spas or attending a function in one of our meeting and conference rooms.

Results

We are pleased to report strong results for 2018. We delivered year-on-year revenue and profit growth despite having five hotels partly or fully closed for major repositioning and refurbishment projects during the year as we benefited from improved trading across all operating regions and the first full-year contributions of Park Plaza London Waterloo and Park Plaza London Park Royal, which have continued to mature since fully opening in 2017. In addition, the results benefited from the reinstatement of full room inventory at Park Plaza Victoria Amsterdam in the summer, following a significant investment programme. Like-for-like total revenue was up by 6.0% and EBITDA was up 5.6%.

Over the summer, our property assets were independently valued by Savills at £1.6 billion. For the first time, we disclosed certain EPRA performance measurements which, taken with our key operational metrics, help investors to analyse and better understand the performance of our property assets. EPRA NAV per share was up 2.3% at £24.57 per share as at 31 December 2018, after dividend payments of 29 pence per share relating to the 2017 final dividend of 13 pence per share and 2018 interim dividend of 16 pence per share. The adjusted EPRA Earnings per share (for the 12 months ending 31 December 2018) were up 10.6% to 115 per share. We will undertake a revaluation exercise on our property assets on an annual basis. Full details of the financial performance are set out in the Financial Review.

Corporate activity

We reached another significant corporate milestone in our journey as a publicly listed company, with the transfer of our ordinary shares to the Premium Listing segment of the FCA's Official List. This move will support our continued growth, raise our profile and potentially facilitate our inclusion in the FTSE Indices. We are already experiencing the benefits of this move, as we explore the opportunities to engage with a wider potential investor base and improve liquidity. The Company is in discussions with certain of its major shareholders with a view to increasing the Company's free float, with the ultimate goal of achieving the free float required for the Company to qualify for FTSE index inclusion.

In the second quarter, we exited a loss-making lease agreement in Dresden, Germany which is expected to have a positive impact on the Group's EBITDA going forward.

Our purpose

We create valuable memories for our guests and value for our assets. Our two-pillar integrated owner/operator business model enables us to drive significant returns by transforming hospitality real estate potential into value and profits through developing, owning and operating those assets. By continuously investing in our existing portfolio we maintain the quality of our properties which adds value to our assets, inspires our team members, and enables us to delight our guests every day through inspirational service and quality products in attractive locations.

Our key sources of value come from:

· Our prime real estate portfolio located in central urban and beachfront resort locations;

· Our passionate and well-trained team members, inspired by our leadership team;

· Our multi-brand approach through which we license, create and drive various international brands which create value in experience, recognition and asset growth;

· Our international network and our long- term partnership with Radisson Hotel Group, which gives us access to its central reservation and distribution systems, powerful online and mobile platforms, global sales, reward programmes with more than 20 million members, marketing initiatives and buying power; and

· Our financial strength, expertise and track record.

Unlike most hospitality businesses, we own the majority of our property portfolio, giving us greater control over our investment strategy, the quality of our property portfolio and operations. Most of these prime assets are centrally located in attractive growth markets, primarily major gateway cities across Europe.

There are four steps to our approach to transforming hospitality real estate potential into value and profits:

· We purchase land and buildings which typically have significant upside potential;

· We develop, re-develop and renovate our owned and acquired assets, drawing on the expertise of our experienced leadership team;

· We improve operating performance by striving for operational excellence and creating significant value at every point in the value chain; and

· We refinance our portfolio and release capital to fund new investments, facilitating the growth of our Group.

Our approach enables us to rapidly adapt to the ever-changing hospitality sector environment. In turn this creates considerable value for all our stakeholders.

Our growth strategy

We have a clear strategy to drive growth and long-term value through our property portfolio and our operations.

In our property portfolio, we take a disciplined, yield-focused approach to capital deployment and look to optimise the value of our existing portfolio and, where appropriate, extract value to fund longer-term sustainable growth.

In our hospitality operations, we are consistently working to deliver a refreshed guest experience across our portfolio and leverage our scale and inter-regional synergies to drive growth and maintain high operating margins.

As well as repositioning and renovating existing properties, our pipeline includes two new hotels in London, which are expected to add approximately a further 500 rooms to the portfolio by the end of 2022.

In addition, the Company continuously identifies and assesses opportunities to extend our property portfolio and our operations across prime locations in attractive destinations, which we believe will offer attractive returns to shareholders. The Company is currently in advanced negotiations around entering into a joint venture for the purchase of a site in New York, on which the Company plans to develop a mixed used scheme, including a 100 key hotel.

In 2018, we identified a substantial number of opportunities for new assets in key cities and resort locations at an international level. We are disciplined when selecting and progressing an investment opportunity, only targeting real estate with significant upside potential which fits our long-term growth strategy and above all creates strong shareholder value. From the new opportunity assets we identified, we went on to evaluate 145 opportunities of which we submitted proposals for approximately 10%.

Further details of the investment programmes and development pipeline are set out in the Financial Review and Business Review on pages 48 to 74 of the annual report.

An update on progress in the period is detailed in the Finance Review on pages 48 to 57.

Inspiring guests

Today's guests expect experiences. We are passionate about creating and delivering unique hospitality experiences in vibrant destinations, whether guests are staying at one of our properties or simply visiting our many restaurants, bars or other facilities.

We aim to create valuable memories for our customers by delighting them every day with beautiful venues and operational excellence.

We are committed to providing exceptional service quality and were delighted that our most recent online reputation score (as measured using ReviewPro's Guest Rating Score) shows that our hard work is paying off. Overall, our online reputation score increased from 85.2% in 2016 (when several repositioning programmes commenced) to 87.3% in 2018. Within this, newly renovated hotels all show an increase in their Guest Rating Score with Park Plaza Victoria Amsterdam up 7.8% and Park Plaza London Riverbank up 6.2% compared to 2016.

Creating centres of excellence

In 2018, several of our restaurants were recognised with a number of accolades, including Time Out Love London Awards for Most Loved Local Music Venue for Primo Bar (at Park Plaza Westminster Bridge London) and Most Loved Local Restaurant for both Chino Latino (at Park Plaza London Riverbank) and Florentine (at Park Plaza London Waterloo).

We now in-source housekeeping services at our UK hotels both to ensure the highest levels of service are met and to provide control over attracting, developing and retaining people in this part of the business. This initiative offers our team members job security, training, career progression and personal development and all the benefits one would expect as a team member of an international hospitality business.

In 2018, we introduced an online energy monitoring tool and the intention is to roll this initiative out across the Group. The benefits are not only commercial but allow us to reduce our carbon footprint.

Developing our people

Our people are at the heart of our business, whether they are managing our hospitality assets or delivering consistent operational excellence across our portfolio.

We are proud to create a high performing culture where engaged team members deliver best in class operations through consistent service delivery.

The Group employs more than 4,100 team members of over 30 different nationalities. Our investment in our team members is reflected in the results of our annual employee survey, which measures engagement levels. In 2018, 93% of eligible team members completed the survey and we are delighted that the engagement index score for the year was 83.6%.

Like others operating in the hospitality sector, having a highly engaged workforce and attracting and retaining the right people is a key priority for us and crucial to our success. To this end, we have various initiatives in place to support our team's career development, to ensure we offer exceptional service to our customers and become a leading employer of choice. These initiatives include our award-winning Learning and Development programme you:niversity.

We work with schools, colleges, key recruitment organisations and charities to support and encourage young people into careers in the hospitality sector and offer a variety of apprenticeships during the year.

Our work in this area was acknowledged when we won the Excellence in Promoting Careers award at the 2018 HR in Hospitality Awards for Excellence 2018.

Being part of our communities

We are committed to making a positive impact in the local communities in which we operate and ensuring that our operations are both ethical and sustainable. We foster positive relationships through job creation, the guest experience we deliver, as well as by fundraising and volunteering partnership activities to support the local community.

In 2018 we supported two charitable initiatives across all properties at an international level: THINK PINK!, a group-wide awareness campaign to support Breast Cancer Awareness Month, and 'Save tomorrow's trees today', supporting World Childhood Foundation and Nottinghamshire Wildlife Trust. In addition to Group-wide initiatives; charity, local community and volunteering projects took place in all our operating regions.

Outside of the financial contributions we make to our local communities via charity initiatives and fundraising, we work with a number of local organisations on a benefit basis. One example is this year we have hosted and supported the International Sound & Film Music Festival held at Park Plaza Histria Pula. The ISFMS festival focuses on the promotion of film sound and music as well as education and each year offers a programme composed of lectures, panels and workshops with international guests, music professionals from around the world. This year, for the first time in Croatia, European Camille Awards for the best film composers were awarded at the festival.

Global marketing capabilities

We have a multi-brand approach to our hospitality property portfolio which is a key driver of value for the Group. This enables us to develop and operate properties across several segments of the hospitality market, and to choose the most appropriate brand for each one in order to maximise returns from our hospitality assets.

The Group has an exclusive perpetual licence from the Radisson Hotel Group, one of the world's largest hotel groups, to develop and operate Park Plaza^® branded hotels and resorts in Europe, the Middle East and Africa. This strategic partnership gives us many benefits, including access to its central reservation and distribution systems, powerful online and mobile platforms, global sales, reward programmes with more than 20 million members, marketing initiatives and buying power.

In addition, we own the art'otel^® lifestyle brand (whose properties we also market through the partnership with the Radisson Hotel Group) and our majority-owned Croatian subsidiary operates several of its properties under the Arena Hotels & Apartments^® and Arena Campsites^® brands, both of which were created and launched in 2018. Arena One 99 opened in summer 2018 and Arena Hotel Holiday is the first property to be marketed under the Arena Hotels & Apartments^® brand.

Our talented leadership team

Our Executive Leadership Team, which includes Daniel Kos, Executive Director and Chief Financial Officer, comprises highly talented professionals with extensive experience and a strong track record of success across the hospitality real estate industry. Each member has worked for PPHE Hotel Group for at least eight years, while several have progressed through the business, demonstrating our long-standing commitment to providing career paths for the development of our future leaders.

Greg Hegarty was appointed Chief Operating Officer in November 2018. Greg has more than 22 years' hospitality experience and has worked at PPHE Hotel Group for more than ten years. He has previously held other senior roles in the business. He now has overall responsibility for delivery of the Group's commercial and operational strategy.

Robert Henke was appointed Executive Vice President Commercial & Corporate Affairs, with responsibility for overseeing all the commercial activities, investor relations, Responsible Business strategy, brand development and management of the Group's strategic partnership with Radisson Hotel Group. Robert joined in 2001, initially developing and leading our central marketing, branding and ecommerce operations.

Jaklien van Sterkenburg continues in her role of Executive Vice President People & Culture | Head of HR to ensure we remain well-placed to attract, engage and retain team members. With more than 20 years of service, she is instrumental in driving our award-winning Learning and Development programmes and talent development and retention initiatives.

Inbar Zilberman continues to lead the Group's multi-jurisdictional legal, corporate governance, insurance, regulatory compliance and corporate finance activities. Inbar was appointed as General Counsel in 2010 and is a key member of the Leadership Team.

Daniel Pedreschi was promoted to Regional General Manager, UK, the largest region in which we operate. Daniel has more than 20 years' experience in the industry; prior to his promotion he was General Manager of Park Plaza Westminster Bridge London.

Nieske van Klinken-Riezebos, Regional General Manager in the Netherlands has more than 25 years' experience in the hospitality industry and is responsible for the operational and commercial success of the six hotels across the region.

Our team members

I would like to personally thank each of our team members for their hard work, which brings life to the strategic and operational goals of the Company, during the year.

We are sincerely grateful for your commitment, professionalism and enthusiasm.

Current trading and outlook

Trading in 2019 has started well and is in line with the Board's expectations. As the year progresses, we expect to capitalise further on the benefits of the repositioning and redevelopment investment programmes completed in 2018.

The economic and political conditions inevitably bring a level of business uncertainty, notably the UK's impending departure from the EU which we are monitoring closely. Where possible, we have put precautionary measures in place, so we can take immediate action if required including, but limited to, a supply chain perspective to ensure we can continue to provide our customers and guests with an excellent experience.

In addition, over the last couple of years we have refinanced our portfolio with fixed interest rate loans with a ten year duration so that we have appropriate funding in place to mitigate any cost pressures.

In the year ahead, we will remain focused on investing in our portfolio and continuing to transform and reposition some of our prime properties in London, Amsterdam and Croatia to enhance the guest experience we offer, while delivering attractive and consistent cash returns for investors.

I am confident that PPHE Hotel Group can continue to create and deliver strong stakeholder value this year and beyond.

Boris Ivesha
President & Chief Executive Officer

CHIEF FINANCIAL OFFICER'S STATEMENT

FINANCIAL REVIEW

Overview 2018

2018 has represented a year of significant investment in our property portfolio, with five hotels partly or fully closed for major repositioning and refurbishment projects. Although these closures have impacted our short-term performance as fewer rooms were available over the period, we achieved a solid financial performance over the year, reporting growth in every region.

Like-for-like¹ total revenue was up 6.0% to £340.6 million and like-for-like¹ EBITDA up 5.6% to £113.3 million. Our reported revenue growth, paired with a 33.1% EBITDA margin, resulted in a normalised profit before tax of £37.7 million, up 17.6% compared with the prior year.

The key themes for 2018 were the maturing performance of our recently opened hotels in London and our ongoing investment programme to develop a new hotel in London and extensively reposition and renovate several properties in the United Kingdom, the Netherlands and Croatia. In total, we invested more than £60 million in these initiatives over the year.

We are pleased to report an EPRA NAV per share of £24.57 and adjusted EPRA earnings per share of 115 pence, reconfirming the value we created for our shareholders through our strategic focus on our owner/operator model, combined with in-house development.

Financial Results

Key financial statistics for the financial year ended 31 December 2018

	Reported in GBP (£)		Like-for-like in GBP¹ (£)
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£341.5 million	£325.1 million	£340.6 million	£321.4 million
EBITDAR	£120.7 million	£116.0 million	£120.8 million	£115.0 million
EBITDA	£113.2 million	£107.3 million	£113.3 million	£107.3 million
EBITDA margin	33.1%	33.0%	33.3%	33.4%
Reported PBT	£46.4 million	£31.7 million	-	-
Normalised PBT	£37.7 million	£32.1 million	-	-
Reported EPS	90p	57p	-	-
Dividend per share	35p	24p	-	-
Occupancy	79.4%	77.3%	79.4%	77.1%
Average room rate	£123.1	£120.2	£123.4	£121.0
RevPAR	£97.7	£92.9	£98.0	£93.3
Room revenue	£236.6 million	£224.0 million	£235.9 million	£221.1 million
EPRA NAV per share	£24.57	£24.02	-	-
Adjusted EPRA earnings per share	115p	104p	-	-

Operations

Revenue

On a like-for-like¹ basis, revenue increased by 6.0% to £340.6 million and reported total revenue was up 5.0% to £341.5 million.

This growth was primarily driven by improved trading across all our operating regions, which was pleasing given the significant impact in the year pertaining to disruptions from ongoing repositioning works at five hotels; Park Plaza Sherlock Holmes London, Park Plaza London Riverbank, Park Plaza Victoria Amsterdam, Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht. All of these properties had full or significant partial closures in the period.

Like-for-like¹ RevPAR was £98.0, an increase of 5.0% (2017: £93.3), reflecting strong RevPAR growth in all regions. Like-for-like¹ RevPAR growth was achieved through a 2.0% increase in average room rate to £123.4 (2017: £121.0). Like-for-like¹ occupancy improved by 230 bps to 79.4% (2017: 77.1%). Notably, the UK region had a strong second half of 2018, which supported RevPAR growth for the year in the region. Overall, reported RevPAR was £97.7 (2017: £92.9), up 5.2%, driven by a 2.5% increase in average room rate and a 210 bps improvement in occupancy.

As a result of the strong RevPAR growth, offset by inventory disruptions, like-for-like¹ room revenue was up 6.7% to £235.9 million (2017: £221.1 million).

Year on year room revenue growth

£ million

Reported 2017

£224.0

United Kingdom

- Like-for-like growth

- Openings*

£6.9
£0.7

The Netherlands

- Like-for-like growth

- Refurbishments**

£3.8

£(1.5)

Germany

- Like-for-like growth

£1.1

Croatia

- Like-for-like growth

£1.6

Reported 2018

£236.6

* Operations of Park Plaza London Park Royal for the first two months of 2018.
** Operations of Park Plaza Vondelpark, Amsterdam from August to December 2017.

EBITDA and EBITDA margin

On a like-for-like¹ basis, EBITDA increased by 5.6% to £113.3 million. Group reported EBITDA increased by 5.5% to £113.2 million and EBITDA margin increased by 15 bps to 33.1%.

The UK region delivered a sustained uplift in performance and EBITDA contribution from Park Plaza London Waterloo and Park Plaza London Park Royal as these hotels continued to mature, and at Park Plaza London Riverbank which benefited from an increased number of rooms following the extension of the hotel and reconfiguration of suites.

Although we are seeing labour related cost pressures in all the markets in which we operate, our cost focused initiatives have enabled us to retain our industry leading margins.

Profit and Earnings per share

Normalised profit before tax increased by 17.6% to £37.7 million (2017: £32.1 million). Normalised profit was positively affected by the increase in EBITDA, however this was offset by an increase in depreciation costs of £1.6 million and higher foreign exchange costs of £1.1 million. Below is a reconciliation table from reported to normalised profit.

Depreciation increased in the year from £34.3 million to £35.9 million, mainly as a result of the related depreciation costs upon opening of repositioned and new hotels. Although depreciation is recorded in accordance with GAAP, 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 disclosed further down in this statement takes into account this 4% instead of the reported non-cash depreciation.

Reported profit before tax increased by £14.7 million to £46.4 million (2017: £31.7 million), up 46.3%. 2018 profit was significantly affected by one-offs, most significant of which was the gain realised on the buyout of our joint venture partner in the art'otel london hoxton project, whereby we have revalued the development site on which the hotel will be built.

	Reconciliation reported to normalised profit
	Year ended 31 Dec 2018 £ million	Year ended 31 Dec 2017 £ million
Reported profit before tax	46.4	31.7
Fair value movements on derivatives recognised in the profit and loss	-	(0.1)
Termination of operating lease	3.1	-
Gain on re-valuation of previously held interest in art'otel london hoxton development	(20.3)	-
Expenses in connection with transfer to Premium listing	1.6	-
Results from marketable securities	0.7	-
Revaluation of finance lease	4.8	-
Refinance costs and expenses (including termination of hedge)	0.3	0.5
Park Plaza Westminster Bridge London fair value adjustment on income swaps and buy back of Income Units	1.0	1.1
Forfeited deposits from rescinded sale contracts of Income Units at Park Plaza Westminster Bridge London to private investors	(0.1)	-
Pre-opening expenses	0.2	0.2
Gain on sale of one building in Park Plaza Vondelpark, Amsterdam	-	(1.3)
Normalised profit before tax¹	37.7	32.1

¹ The normalised earnings per share amount to 69 pence, calculated with 42,335,136 average outstanding shares.

Normalised earnings per share was 69 pence (2017: 58 pence), representing an increase of 19.2%. Reported basic/diluted earnings per share for the period were 90 pence, an increase of 56.5% (2017: 57 pence).

The table below provides some selected data for the Group's reported balance sheet and profit and loss account for the year ended 31 December 2018, prepared in Pound Sterling millions. With this table the Group aims to assist investors in making a further analysis of the Group's performance and capital allocation, separating its excess cash position (to fund further growth), the development projects and the assets of Arena Hospitality Group d.d. This data is additional to the segments that are monitored separately by the Board for resource allocations and performance assessment, which are the segments of the Group.

	PPHE Hotel Group			Arena Hospitality Group⁶		Total
	Trading properties £m	Excess Cash⁴ £m	Non-trading projects³ £m	Trading properties £m	Excess Cash⁴ £m	PPHE Hotel Group Reported £m
Balance Sheet
Book-value properties (excluding Income Units at Park Plaza Westminster Bridge London sold to third parties)¹	828.9	-	77.1	245.6	-	1,151.6
Book value intangible assets	19.5	-	-	1.9	-	21.4
Book value non-consolidated investments	-	-	-	-	-	-
Other long-term assets	17.6	-	-	4.6	-	22.2
Working Capital	(15.3)	-	-	(8.5)	-	(23.8)
Cash and Liquid Investments	44.2	75.0	-	26.7	71.8	217.7
Bank/Institutional loans (short/long term)	(583.9)	-	-	(113.4)	-	(697.3)
Finance lease liability, land concession and other provisions	(187.7)	-	-	(4.3)	-	(192.0)
Deferred profit Income Units in Park Plaza Westminster Bridge London⁵	(10.0)	-	-	-	-	(10.0)
Other Provisions	(6.0)	-	-	(5.3)	-	(11.3)
Total capital consolidated	107.3	75.0	77.1	147.3	71.8	478.5
Minority shareholders	-	-	-	(70.6)	(34.5)	(105.1)
Total capital employed by PPHE Hotel Group shareholders	107.3	75.0	77.1	76.7	37.3	373.4
Normalised profit
Revenue	250.5	-	0.4	90.6	-	341.5
EBITDAR	90.4	-	0.4	29.9	-	120.7
Rental expenses	(3.3)	-	-	(4.2)	-	(7.5)
EBITDA	87.1	-	0.4	25.7	-	113.2
Depreciation	(28.3)	-	-	(7.6)	-	(35.9)
EBIT	58.8	-	0.4	18.1	-	77.3
Interest expenses: banks and institutions	(20.3)	-	-	(3.8)	-	(24.1)
Interest on finance leases	(7.2)	-	-	-	-	(7.2)
Income paid to Income units sold to private investors in Park Plaza Westminster Bridge London	(10.0)	-	-	-	-	(10.0)
Other finance expenses and income	1.5	-	-	0.1	-	1.6
Minority interests	-	-	-	-	-	-
Result from equity investments	-	-	-	0.1	-	0.1
Normalised profit before tax 31 December 2018²	22.8	-	0.4	14.5	-	37.7
Reported tax	0.1	-	-	(3.1)	-	(3.0)
Normalised profit after reported tax	22.9	-	0.4	11.4	-	34.7
Profit attributable to minority shareholders	-	-	-	(5.4)	-	(5.4)
Profit after tax attributable to PPHE Hotel Group shareholders	22.9	-	0.4	6.0	-	29.3

¹ These are stated at cost price less depreciation. The fair value of these properties is substantially higher

² A reconciliation of reported profit to normalised profit is provided on page 50 of the annual report.

³ This contains properties that are in development.

⁴ Excess cash is directly available for further investments and developments.

⁵ This is the book-value of units in Park Plaza Westminster Bridge London netted with the advanced proceeds these investors received in 2010.

⁶ Arena Hospitality Group d.d. is listed on the Zagreb Stock Exchange. The market capitalisation at 31 December 2018 is £211.5 million.

Property

EPRA NAV

In 2018, we started to disclose certain EPRA performance measurements to aid investors in analysing the Group's performance and understanding the value of the Group's assets and its earnings from a property perspective. As a developer, owner and operator of hotels, resorts and campsites, we generate returns by both developing the assets we own and operating all our assets to their best potential.

In June 2018, 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 Zagreb nekretnine Ltd (ZANE) (in respect of properties in Croatia), based on that we have calculated the Group's EPRA net asset value ("EPRA NAV"). We will continue to perform this valuation exercise on an annual basis and provide investors with an EPRA NAV going forward.

The EPRA NAV as at 31 December 2018 which is set out in the table below amounts to £1,053 million, which reflects £24.57 per share. This is up 2.3% on 31 December 2017 and 3.5% when distributed dividends are added back.

The last time all the Group's assets were simultaneously independently valued was in 2010, when the properties were valued as part of the Group's move from the Alternative Investment Market to Standard Segment of the Official List on the Main Market for listed securities of the London Stock Exchange plc. The Group's EPRA NAV at that time amounted to £6.42. Given the EPRA NAV of £24.57 as per 31 December 2018, this represents a Compounded Annual Growth Rate ("CAGR") of 18.3% over the past eight years. Adjusted for dividends this growth equates to 19.6% compounded.

	31 December 2018 £ million	31 December 2017 £ million
NAV per the financial statements	373.5	343.3
Effect of exercise of options	4.7	1.6
Diluted NAV, after the exercise of options¹	378.2	344.9
Includes:
Revaluation of owned properties in operation (net of non-controlling interest)²	655.8	643.9
Revaluation of development property (Aspirations)³	5.4	20.3
Revaluation of the JV interest held in two German properties (net of non-controlling interest)	3.8	3.8
Excludes:
Fair value of financial instruments	(0.4)	(0.3)
Deferred tax	(9.4)	(11.0)
EPRA NAV	1,053.0	1,024.2
Fully diluted number of shares (in thousands)	42,860	42,645
EPRA NAV per share (in £)	24.57	24.02

¹ The fully diluted number of shares is excluding treasury shares but including 522,500 outstanding dilutive options (as at 31 December 2017: 307,000).

² The fair values of the properties determined on the basis of independent external valuations prepared in the summer of 2018. The fair value for the properties as at 31 December 2017 were determined taking the 2018 valuations and deducting the value enhancing investments carried out in 2018.

³ As at 31 December 2017, the Group owned 50% in a joint venture that held a site in Hoxton, London which is under development. The Group announced on 24 January 2018 that it had agreed to purchase the remaining 50% of the site for £35.0 million and on that basis the 50% it held was revalued to £35.0 million, which is reflected as the revaluation as at 31 December 2017. As at 31 December 2018, after the acquisition and revaluation of this asset in the reported NAV (total asset book value at £77.1 million), the development property was independently valued at £82.5 million, which is the basis for the revaluation.

Below is a summary of the valuation criteria of our assets. The property market value, the discount rate and the cap rate have been taken from the independent valuators report.

Location	Number of hotels	Number of rooms/pitches	Property market value (£m)	Average value per room/pitch (£)	Discount rate	Cap rate
United Kingdom
- London¹	6	2,280	920	403,509	7.5%-9.5%	5%-7%
- Provinces	2	365	36	98,630	10.25%-10.75%	8%-8.25%
Netherlands
- Amsterdam	4	850	255.0	299,647	7.25%-8.5%	5.25%-6.5%
- Provinces	2	224	37.0	162,946	8.25%-9%	6.25%-7%
Germany	3	547	96.0	175,868	8.5%-8.75%	6%-6.25%
Croatia
- Hotels and apartments	11	2,721	128.0	48,806	9%-10%	8%-9%
- Campsites	8	5,756	82.0	14,263	10%-11%	9%-10%

¹ Excluding units of the Park Plaza Westminster Bridge London owned by third parties

The Group has a strong track record of acquiring properties which we believe have significant upside potential. We undertake (re)development and redesign of these assets to maximise operational excellence and capital appreciation. Through refinancing these properties, we are able to release capital for new investments, enabling further growth of our Group.

Park Plaza London Waterloo is an excellent example of our business model in action, demonstrating our ability to adapt our approach and seize an opportunity to develop a high-quality hotel and create value for shareholders.

In June 2013, we acquired a redundant building in Waterloo and developed the site into a 494 room hotel which officially opened in June 2017. The total cost of the project (site acquisition, planning consent and construction costs) was £125.0 million (approximately £250,000 per key).

In July 2017, we completed the sale and finance leaseback of Park Plaza London Waterloo. The freehold of the property was sold for £161.5 million and we agreed a 199-year lease at an initial rent of £5.6 million per annum. This remaining leasehold was independently valued at £84.0 million in 2018. Our approach of building and redeveloping this property enabled the Group to create value through a £120.0 million capital appreciation. Currently the Group is in the process of building an art'otel in Hoxton, London.

Capex

In 2018, we continued with our ongoing extensive investment programme in order to upgrade the Group's property portfolio. In total our capex investment in 2018 was more than £60 million and mainly included the extensive repositioning of Park Plaza Victoria Amsterdam, Park Plaza Utrecht and Park Plaza Vondelpark, Amsterdam in the Netherlands, as well as Park Plaza London Riverbank and Park Plaza Sherlock Holmes London in the United Kingdom. In Croatia, we opened the first all-glamping offer, Arena One 99.

In the first quarter, we completed the acquisition of our joint venture partner's 50% interest in the company which holds the freehold interest for the site on which art'otel london hoxton will be built, for a consideration of £35.0 million. We first entered this joint venture in 2008 by investing £11.0 million for a 50% ownership interest. The transaction, which was funded through cash resources, reflects the significant capital appreciation of our initial investment. This is an exciting central London development in an area of regeneration. The Group now has full control over the development site and preliminary construction works have commenced. The total cost of the project is subject to final confirmation of the scheme.

As we enter 2019, further renovation programmes are well underway across several of our hotels in London and the Netherlands with further programmes planned for Germany and Croatia during the year.

We are constantly working on improving our existing portfolio and looking for interesting opportunities to acquire further assets to broaden the Group's portfolio. The diagram below provides a summary of the investments done in the past ten years.

Investment in property split between expansion/redevelopment and maintenance (in £'m)

31 Dec 2008

31 Dec 2009

31 Dec 2010

31 Dec 2011

31 Dec 2012

31 Dec 2013

31 Dec 2014

31 Dec 2015

31 Dec 2016

31 Dec 2017

31 Dec 2018

Maintenance

2.9

2.6

2.9

6.6

4.1

3.4

10.2

8.8

12.2

14.1

21.1

Expansion/Redevelopment

206.2

92.6

240.6

166.8

49.6

23.0

65.6

215.4

97.1

115.5

Maintenance capex profile has historically been 4% of revenue on average.

EPRA earnings and cash flow

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 as 4% of the Group's total revenues, representing the Group's expected average cost to upkeep the real estate in good quality. The basis for calculating the Company's adjusted EPRA earnings of £48.5 million for the 12 months to 31 December 2018 (12 months to 31 December 2017: £43.9 million) and the Company's adjusted EPRA earnings per share of 115 pence (2017: 104 pence) is set out in the table below.

	12 months ended 31 December 2018 £ million	12 months ended 31 December 2017 £ million
Earnings attributed to equity holders of the parent company	38.1	24.3
Depreciation and amortisation expenses	35.9	34.3
Capital gain on divestments	-	(1.4)
Gain on re-measurement of previously held interest in Joint Venture	(20.3)	-
Early close-out costs of debt instrument	0.3	0.6
Changes in fair value of financial instruments	1.0	0.3
Non-controlling interests in respect of the above³	(6.1)	(4.6)
EPRA Earnings	48.9	53.5
Weighted average number of shares (LTM)	42,335,136	42,248,613
EPRA Earnings per share (in pence)	116	126
Company specific adjustments¹:
Capital loss on buy back of income units in Park Plaza Westminster Bridge London previously sold to private investors	0.6	0.7
Termination of operating lease⁴	3.1	-
Revaluation of finance lease⁵	4.8	-
Other non-recurring expenses (including pre-opening expenses)	0.2	0.2
Expenses in connection with transfer to premium listing	1.6	-
Maintenance Capex²	(13.6)	(13.0)
Non-controlling interests in respect of Maintenance Capex³	2.9	2.5
Company adjusted EPRA earnings	48.5	43.9
Company adjusted EPRA earnings per share (in pence)	115	104
Reconciliation company adjusted EPRA earnings to normalised reported profit before tax
Company adjusted EPRA earnings	48.5	43.9
Reported depreciation	(35.9)	(34.3)
Non-controlling interest in respect of reported depreciation	6.0	4.6
Maintenance capex (4% of total revenues)	13.6	13.0
Non-controlling interest on maintenance capex	(2.9)	(2.5)
Profit attributable to non-controlling interest	5.4	5.7
Reported tax	3.0	1.7
Normalised profit before tax	37.7	32.1

¹The "Company specific adjustments" represent adjustments of non-recurring or non-trading items.

² Calculated as 4% of revenues representing the expected average maintenance capital expenditure required in the operating properties.

³ Reflects the share of non-controlling interest in the depreciation and maintenance capex adjustments. Minorities include the non-controlling shareholders in Arena and third-party investors in income units of Park Plaza Westminster Bridge London.

⁴ In March 2018, the Group entered into an agreement to terminate the loss making lease agreement for the 174-room art'otel dresden, effective from 31 July 2018. To exit from this lease, the Group incurred an expense of £3.1 million. This termination will result in a rent reduction and is expected to positively affect the Group's EBITDA by approximately £0.5 million annually.

⁵ Non-cash revaluation of finance lease liability relating to minimum future CPI increases.

Funding

Since the Company's public listing in 2007, it has funded the Group's expansion through a diverse approach, without diluting its shareholders. Alongside traditional bank funding, the Group has used various financing options in order to optimise returns while keeping at comfortable leverage levels, these include sale-and-leaseback finance arrangements, arrangements with unitholders and the SPO of a subsidiary.

Where we have used traditional bank funding, whereby assets are ring fenced into single or Group facilities, the loan to value ratio typically varies between 50% and 65%. The Group has taken the opportunity to sell certain assets, taking a long term finance leaseback, to take advantage of the low interest rate environment and secure long term funding with no amortisation payments. All finance leases, except one, have lease payments that are fixed with annual capped/ collared CPI adjustments. The finance leases, valued on a leasehold basis (i.e. the value of the assets, net of the accounted finance lease liability), have been included in the Group's EPRA NAV.

Arrangements with unitholders involve the sale of individual income units which directly relates to an individual room in a property (a "Unit") to third party investors; these investors pay upfront and receive a contractual right to the future cash flow from the individual Units with no repayment obligation on the Group. The Group raised funds through the sale of Units in its Park Plaza Westminster Bridge London Hotel in London during its construction.

The Group raised funds through the secondary offering in Arena Hospitality Group d.d., its listed subsidiary in Croatia, in 2017, and retained a controlling shareholding.

The Group's total assets represents a value after the deduction of lease liabilities and unit holder liabilities. Accordingly, in the total loan-to-value ("LTV") analysis of the of the Group, management considers the value of the freehold and long leasehold assets (net of these liabilities) compared with its bank funding (ie. excluding the lease and unit holder liabilities), which management believe is the most accurate representation of the Group's total leverage position.

	£'m
Bank financing
Over 5 year debt	627.8
Less than 5 year debt	69.5
Cash	217.7
Net bank debt	479.6

Equity
- Reported	373.5
- Market value restatement	674.8
Equity attributable to shareholders of the Group¹	1,048.3

- Reported	105.1
- Market value restatement²	37.1
Non-controlling interest	142.2
Total Equity	1,190.5

Group's total assets (properties at fair value)	1,670.1

¹ Equity attributable to shareholders of the Group based on ERPRA NAV excluding the £4.7 million effect due to exercise of dilutive options.
² The market value restatement for the equity attributable to non-controlling interest represents the minority's share in the EPRA NAV adjustments.

The Group reported a gross bank debt liability of £697.3 million (31 December 2017: £700.3 million) and net bank debt of £479.6 million (31 December 2017: £408.1 million). Key movements in net bank debt in 2018 included a reduced cash position and liquid investments of £71.6 million, primarily due to the acquisition of the remaining 50% interest in the freehold site in Hoxton in London and the significant capex in our real estate investment programmes. The movement in net debt included redemption payments of £15.1 million and an increased £12.8 million due to the refinance of several loans in the UK now grouped into one new facility.

Below table provides a further break down of the Group's net bank debt position.

Loan maturity profile at 31 December 2018

	Total	1 year	2 years	3 years	4 years	5 years	Thereafter
(£m)	697.3	14.7	13.2	13.2	13.3	15.1	627.8

· Average cost of bank debt 3.1%

· Average maturity of bank debt 7.9 years

· Group average bank interest cover 4.2¹

Key characteristics of debt for operating properties

· Limited to no recourse to the Group

· Asset backed

· Borrowing policy 50-60% loan to value

· Portfolio and single asset loans

· Ten facilities with seven different lenders

· Covenants on performance and value (facility level)

	ICR¹	DSCR²
2017	3.4x	2.2x
2018	4.2x	2.5x

¹ EBITDA, less unitholder and finance lease payments, divided by bank interest.

² EBITDA, less unitholder and finance lease payments, divided by the sum of bank interest and yearly loan redemption.

Acquisitions and development pipeline

The Company continuously identifies and assesses opportunities to extend our property portfolio and our operations across prime locations in attractive destinations, which we believe will offer attractive returns to shareholders.

We have a clear strategy to drive growth and long-term value through our property portfolio and our operations. In our property portfolio, we take a disciplined, yield-focused approach to capital deployment and look to optimise the value of our existing portfolio and, where appropriate, extract value to fund longer-term sustainable growth. The Group takes an integrated and entrepreneurial approach to everything we do and will continue to reposition and develop assets within our portfolio as well as focus on our committed development pipeline to deliver future growth. We retain a strong cash position and we will continue to consider asset acquisitions to broaden our portfolio and deliver our target returns on investment. We are disciplined in selecting and progressing an investment opportunity, only targeting real estate with significant upside potential which fits our long-term growth strategy and above all creates strong shareholder value.

The Group's acquisition criteria include:

- prime location

- attractive geographies, this includes territories where the Group is not currently present

- opportunity to create significant capital value

- risk adjusted accretive IRR's

We are progressing with extensive renovation and repositioning programmes across several of our hotels in the United Kingdom and the Netherlands. In addition, we have also identified several renovation and repositioning opportunities across hotels in Germany and hotels, resorts and campsites in Croatia.

Our current pipeline of new hotels includes two iconic developments in London, both scheduled to open in 2022. These are art'otel london hoxton (wholly-owned) and art'otel london battersea power station (management agreement). While the Group's focus will continue to be on repositioning and developing the Group's existing portfolio and committed pipeline, we are in an unprecedented strong cash position to consider further asset acquisitions to broaden our portfolio.

Shareholder return

Total shareholder return

The Group has created significant value for its shareholders since IPO in 2007, with total shareholder return of 337%¹.

Total shareholder return from the Initial public offering (IPO) in 2007 to 31 December 2018

Investor Returns - per share	Pence
IPO 2007	550

Dividend paid from 12 July 2007 (IPO date) to date	232
Share price at 31 December 2018	1,660
	1,892

Total return	1,342

Source: Bloomberg based on the Company market share price as at 31 December 2018 (1,660 pence)

The table below shows cash returns on our operational assets and our development assets and excess cash. When development projects are operational, the yield of these operational assets will have a positive impact on the implied return.

31 December 2018	Operational assets £'m	Development asset and excess cash £'m	Total £'m
Net assets employed	1,587.6	82.5	1,670.1
Bank financing	(626.4)	146.8	(479.6)
Minority interest	(107.7)	(34.5)	(142.2)
EPRA NAV¹	853.5	194.8	1,048.3
	81.4%	18.6%	100.0%
Recurring adjusted EPRA earnings	48.1	0.4	48.5
Implied return on EPRA NAV	5.6%	0.2%	4.6%
Implied return on company market capitalisation²	9.5%	0.2%	6.9%

¹EPRA NAV excluding the £4.7 million effect due to exercise of dilutive options provided on page 52 of the annual report.
² Company market capitalisation is based on the market share price as at 31 December 2018 (1,660 pence).

Dividend

The Board is proposing a final dividend payment of 19 pence per share (2017: 13 pence per share). When combined with the interim ordinary dividend of 16 pence per share (2017: 11 pence per share) paid to shareholders on 15 October 2018, the total ordinary dividend for the year ended 31 December 2018 to 35 pence per share (2017: 24 pence), an increase of 45.8%.

Subject to shareholder approval at the Annual General Meeting, to be held on 15 May 2019, the dividend will be paid on 20 May 2019 to shareholders on the register at 26 April 2019. The shares will go ex-dividend on 25 April 2019.

The increase in total ordinary dividends for the year is in line with the Group's progressive dividend policy whilst retaining proper and prudent reserves and reflects the Board's continued confidence in the strategy and integrated business model, which is also reflected in the below graph that shows the dividend payments as a percentage of adjusted EPRA Earnings

EPRA earnings per share/dividend - Year to 31 December

	Dividend per share (pence)	Adjusted EPRA earnings per share (pence)	Dividend as % of EPRA earning per share
2013	14	65	22%
2014	19	91	21%
2015	20	96	21%
2016	21	97	22%
2017	24	104	23%
2018	35	115	30%

Looking ahead

2018 was my first year in my new role as Chief Financial Officer & Executive Director and I have been impressed with our team's performance in the year. As we enter 2019, we are closely monitoring the wider macro-economic and geo-political developments to ensure we take precautionary measures where needed and stay focused on delivering our industry leading margins. Following several of years of extensive investments in new and improved properties, we have an excellent opportunity to start reaping the benefits and we have a solid base to further build upon.

We expect our recent investments to continue to mature in 2019 and are excited about the next phase of our repositioning, renovation and new development pipeline. This includes both committed new properties and acquisition opportunities. In 2019, we will also continue to build on our corporate activities from recent years. This includes a consideration by the Company of FTSE index inclusion, for which it needs to meet certain free float criteria. To meet these criteria, the Company is currently in discussions with certain of its major shareholders.

Daniel Kos

Chief Financial Officer & Executive Director

BUSINESS REVIEW

UNITED KINGDOM PERFORMANCE

Property portfolio

The Group has a strong portfolio in London with more than 3,200 rooms in operation, with further properties in Nottingham, Leeds and Cardiff. Hotels with an ownership interest include: Park Plaza Leeds, Park Plaza Nottingham, Park Plaza London Riverbank, Plaza on the River London, Park Plaza Sherlock Holmes London, Park Plaza Victoria London, Park Plaza Westminster Bridge London, Park Plaza London Waterloo, Park Plaza County Hall London¹ and Park Plaza London Park Royal. Park Plaza Cardiff¹ operates under a franchise agreement.

Value of UK property portfolio²

£956 million

¹ 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.

²Independent valuation by Savills in 2018, excluding the development site in Hoxton, London.

Operational performance

Hotel operations	Reported in GBP (£)		Like-for-like in GBP (£)³
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£195.1 million	£185.8 million	£194.3 million	£185.8 million
EBITDAR	£66.8 million	£62.4 million	£66.8 million	£62.4 million
EBITDA	£65.0 million	£60.5 million	£65.0 million	£60.5 million
Occupancy	85.7%	83.2%	85.9%	83.2%
Average room rate	£145.1	£145.8	£145.8	£145.8
RevPAR	£124.4	£121.3	£125.2	£121.3
Room revenue	£140.2 million	£132.6 million	£139.5 million	£132.6 million

³The like-for-like figures for 31 December 2018 exclude the first two months of operation of Park Plaza London Park Royal.

Hotel operations in the UK performed well during the year helped by the maturing of new room inventory at Park Plaza London Waterloo, Park Plaza London Park Royal and Park Plaza London Riverbank.

Trading at several of the Group's London hotels improved during the year following extensive renovation projects driving year-on-year RevPAR growth. In addition, the performance of our London meeting and events business was boosted by the increased room inventory on London's South Bank following completion of the extension at Park Plaza London Riverbank, enabling the Group to host and provide accommodation for larger events.

Total reported revenue increased by 5.0% to £195.1 million. The main contributor for this increase was the additional room inventory at Park Plaza London Waterloo, Park Plaza London Park Royal and Park Plaza London Riverbank. This increase was offset by the reduction in room inventory at Park Plaza Sherlock Holmes London due to the repositioning works currently in progress.

Reported room revenue increased by 5.7% to £140.2 million and on a like-for-like³ basis by 5.2% to £139.5 million, due to the maturing of our recently opened hotels.

Reported EBITDAR grew by 7.0% to £66.8 million and EBITDA increased by 7.5% to £65.0 million, reflecting the improving performance as the new room inventory matures. On a like-for-like³ basis, EBITDAR increased by 7.0% to £66.8 million and EBITDA was up 7.5% to £65.0 million.

Reported RevPAR increased by 2.6% to £124.4, driven by a 250bps increase in occupancy to 85.7%. Average room rate was broadly flat at £145.1 (2017: £145.8). On a like-for-like³ basis, RevPAR was £125.2, up 3.2%.

In London, all the Group's hotels, except Park Plaza London Riverbank and Park Plaza Sherlock Holmes London which were both undergoing significant repositioning work during the period, delivered RevPAR outperformance compared with their competitive sets. Notably, in terms of RevPAR, Park Plaza Westminster Bridge London outperformed its competitive set by almost 30.0%.

Asset management projects

The investment programmes for our London hotels continued during the year, ensuring these properties are well-positioned within the market.

2018 investment projects

One of the most significant projects in London was the major repositioning works at Park Plaza London Riverbank which was completed at the end of 2018, following three years of reconstruction work at the property. During this period, the hotel was fully renovated, all public areas were refurbished, seven additional floors of accommodation have added 185 rooms to the inventory and a new meeting room and a 12th-floor Executive Lounge have been created. The award-winning Chino Latino Restaurant & Bar has been relocated, and now has views across the River Thames, and most recently a spa and swimming pool have been added to the property. There are plans to further improve the landscaping at the front of this hotel in early 2019. In total, we have invested approximately £54.0 million in this repositioning programme over a multi-year period and we expect an unlevered yield on investment of 7% upon maturity.

Following these works, the hotel boasts 646 rooms and, combined, the Group's hotels in London's South Bank area have an unrivalled position, offering a total of more than 2,500 rooms and state of the art conference facilities.

At Park Plaza Victoria London, refurbishment of the lobby area, bar and public spaces commenced as part of a phased refurbishment programme.

The extensive repositioning of Park Plaza Sherlock Holmes London to maximise the property's hospitality potential and capitalise on the local area's growth and high-end development in recent years, is on track. As a result, the hotel's main entrance has been moved from Baker Street to Chiltern Street, all the public areas and rooms will be redesigned and renovated, and the hotel will be relaunched as a boutique lifestyle property. A new concept restaurant has been developed, which will have an entrance separate from that of the hotel. The project is expected to be completed by mid-2019. We expect that our investment in this project will amount to approximately £9.0 million with an unlevered targeted yield of 10% upon maturity.

Development pipeline projects

Preliminary construction works have commenced at the site of art'otel london hoxton, which is located on the border of lively Hoxton and Shoreditch and is close to Old Street and Liverpool Street stations. This is a substantial investment project which is expected to complete in 2022. Estimated investment on current scheme is £180.0 million with an unlevered estimated yield of 7.5% upon maturity.

The pre-opening activities for art'otel london battersea power station have continued. This lifestyle hotel is being developed adjacent to Battersea Power Station and will be managed by the Group upon completion. The hotel is expected to open in 2022.

The United Kingdom hotel market*

In Greater London, demand for hotel rooms continued to outstrip supply, up 4.0% and 2.0% respectively, reflecting London's place as one of the world's most popular cities. RevPAR increased by 3.1% to £124.7, driven by a 1.9% increase in occupancy to 83.3% and a 1.1% increase in average room rate to £149.7.

In Nottingham, the overall market saw RevPAR increase by 4.1% to £53.8, mainly due to a 3.1% increase in occupancy and a 0.9% increase in average room rate.

The Leeds hotel market reported an increase in RevPAR to £60.2, with occupancy up 1.4% and average room rate down by 1.9% respectively.

* STR Global, December 2018

THE NETHERLANDS PERFORMANCE

Property portfolio

The Group is represented in the Netherlands with ownership interests in three hotels in the city centre of Amsterdam and a fourth property located near Amsterdam Airport Schiphol. The portfolio extends to include a hotel each in Utrecht and Eindhoven.

Total value of Dutch property portfolio¹

£291 million

¹Independent valuation by Savills in 2018.

Hotel operations

	Reported in GBP² (£)		Reported in local currency Euro (€)		Like-for-like GBP³		Like-for-like Euro (€)³
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£49.6m million	£47.3 million	€56.0 million	€54.1million	£49.5 million	£45.5 million	€55.9 million	€52.0 million
EBITDAR	£14.2 million	£13.4 million	€16.1 million	€15.3 million	£14.4 million	£12.8 million	€16.3 million	€14.6 million
EBITDA	£14.1 million	£13.3 million	€15.9 million	€15.2 million	£14.2 million	£12.6 million	€16.1 million	€14.5 million
Occupancy	85.7%	85.6%	85.7%	85.6%	85.7%	85.5%	85.7%	85.5%
Average room rate	£122.6	£112.2	€138.4	€128.2	£122.6	£112.2	€138.4	€128.3
RevPAR	£105.0	£96.0	€118.6	€109.7	£105.0	£95.9	€118.6	€109.7
Room revenue	£37.3 million	£35.0 million	€42.1 million	€39.9 million	£37.3 million	£33.4 million	€42.1 million	€38.2 million

² Average exchange rate from Euro to Pound Sterling for the year to December 2018 was 1.13 and for the year to December 2017 was 1.14, representing a 1.2% decrease.

³The like-for-like figures for 31 December 2017 exclude the operation from August until December of Park Plaza Vondelpark, Amsterdam (which is fully closed for renovations).

Operational performance

The region performed well and in line with expectations, despite the significant portfolio investment programmes undertaken and completed during the year, including the repositioning of Park Plaza Victoria Amsterdam and the first phase of repositioning works at Park Plaza Utrecht. In addition, during the second half of 2018, Park Plaza Vondelpark, Amsterdam closed for a complete repositioning, temporarily removing 102 rooms from the inventory.

Whilst these investment programmes had a short-term impact by reducing the number of rooms in operation compared with 2017, the completed repositioning projects are expected to drive longer term growth from 2019 onwards.

In Euros, total revenue increased by 3.5% to €56.0 million, despite the disruptions related to the investment programmes. The main contributor for this increase was the completion of the repositioning at Park Plaza Victoria Amsterdam, however, this increase was offset by the reduction in room inventory at Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht.

RevPAR increased by 8.1% to €118.6, achieved through an 8.0% increase in average room rate to €138.4, and a 10bps increase in occupancy to 85.7%. Room revenue increased by 5.5% to €42.1 million and EBITDAR and EBITDA both increased by 4.8% to €16.1 million and €15.9 million respectively due to the hotel repositioning programmes mentioned above.

In sterling, RevPAR increased by 9.4% to £105.0, driven by a 9.3% increase in average room rates. Also in sterling, EBITDAR increased by 6.0% to £14.2 million and EBITDA was up 6.1% to £14.1 million.

Asset management projects

Four of the Group's six owned and operated hotels in the region underwent significant renovations in the year to reposition them and significantly enhance their offering.

Park Plaza Victoria Amsterdam is a well-known property located in the centre of the city, opposite Amsterdam Centraal Station in the heart of the shopping and dining district. The hotel has undergone extensive renovations to significantly reposition it and ensure that it remains relevant in an ever-changing market. This investment included the complete renovation of all public areas, 298 fully redesigned rooms and nine meeting and event rooms. A new bar, VIC's BAR, has opened, featuring an international cocktail menu, DJ sets and live jazz nights. A new destination restaurant, Carstens, led by a celebrity concept chef, opened in February 2019. Both the restaurant and bar have an entrance separate from the hotel, allowing them to be enjoyed by locals, hotel guests and visitors alike. Since relaunch, Park Plaza Victoria Amsterdam has seen a significant improvement in guest feedback. In total, we have invested approximately £20.0 million in this repositioning project and we expect an unlevered yield on investment of 7% upon maturity.

Park Plaza Vondelpark, Amsterdam, which has 102 rooms, closed for refurbishment in July 2018. It will be completely transformed and repositioned as a boutique, lifestyle hotel. Construction work is underway to reconfigure the public areas, reposition the main entrance from a busy road to a park side location and redesign and refit the guest rooms. When relaunched, the hotel will offer a destination restaurant and bar, accessible by a separate entrance, to attract local residents and tourists as well as our hotel guests. It is expected to reopen in phases during the first half of 2019. We expect that our investment in this project will amount to approximately £8.0 million with an unlevered targeted yield of 10% upon maturity.

At Park Plaza Utrecht, the first phase of construction work to reposition the hotel was completed by the year-end. This involved the renovation of 40 rooms, including the installation of new bathrooms, and the meetings and events space. We expect that our investment in this project will amount to approximately £5.5 million with an unlevered targeted yield of 10% upon maturity.

The second phase of the programme, which involves refurbishing an additional 40 rooms and building an extension to house a new fitness centre, has started and will be completed in 2019.

Park Plaza Amsterdam Airport upgraded its meetings and events facilities, bringing the outdoors indoors, with a new interior design reflecting the hotel's surroundings. The refurbishment was completed in September 2018. The 20 meeting rooms boast natural daylight and feature a new integrated AV system. The theatre-style rooms can accommodate up to 700 delegates.

The Dutch hotel market*

Once again, the overall performance of the Dutch hotel market was driven by its key market, Amsterdam.

For Greater Amsterdam, RevPAR increased by 4.7% to €122.6, driven by a 5.0% increase in average room rate to €150.8, whilst occupancy declined by 0.3% to 81.3%.

Outside of Amsterdam, hotels in Utrecht reported a 9.0% increase in RevPAR to €82.5, as a result of a 5.2% increase in average room rate to €107.5 and a 3.7% improvement in occupancy to 76.7%.

The Eindhoven hotel market saw RevPAR grow by 5.0% to €51.9, reflecting an increase in average room rate and occupancy of 3.0% and 1.9% respectively.

* STR Global, December 2018

GERMANY & HUNGARY PERFORMANCE

Property portfolio

In Germany and Hungary, the Group's portfolio includes four properties in Berlin and one hotel each in Cologne, Nuremberg and Trier in Germany and Budapest in Hungary. Hotels with an ownership interest include: Park Plaza Berlin Kudamm¹, Park Plaza Nuremberg, art'otel berlin mitte¹, art'otel berlin kudamm and art'otel cologne. Park Plaza Wallstreet Berlin Mitte and art'otel budapest operate under operating leases and Park Plaza Trier¹ which operates under a franchise agreement.

¹Revenues 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.

Total value of German property portfolio²

£97 million

² Independent valuation by Savills in 2018

Hotel operations

	Reported in GBP³ (£)		Reported in local currency Euro (€)
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£31.4 million	£30.7 million	€35.5 million	€35.1 million
EBITDAR	£9.0 million	£9.0 million	€10.2 million	€10.3 million
EBITDA	£5.2 million	£4.3 million	€5.9 million	€5.0 million
Occupancy	80.7%	75.4%	80.7%	75.4%
Average room rate	£86.9	£82.5	€98.1	€94.2
RevPAR	£70.1	£62.2	€79.2	€71.1
Room revenue	£25.1 million	£23.9 million	€28.3 million	€27.3 million

	Like-for-like⁴ in GBP (£)		Like-for-like⁴ in local currency Euro (€)
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£31.4 million	£28.8 million	€35.5 million	€32.9 million
EBITDAR	£9.0 million	£8.6 million	€10.2 million	€9.8 million
EBITDA	£5.3 million	£5.0 million	€6.0 million	€5.7 million
Occupancy	80.7%	74.8%	80.7%	74.8%
Average room rate	£86.9	£84.2	€98.1	€96.3
RevPAR	£70.1	£63.0	€79.2	€72.0
Room revenue	£25.1 million	£22.5 million	€28.3 million	€25.8 million

³Average exchange rate from Euro to Pound Sterling for the year to December 2018 was 1.13 and for the year to December 2017 was 1.14, representing a 1.2% decrease.

⁴ The like-for-like figures for 31 December 2017 exclude the operation from August until December of art'otel dresden (the lease of which was terminated on 31 July 2018). Furthermore, the like-for-like comparisons for 2017 exclude rent expenses for art'otel berlin kudamm and art'otel cologne, as the freehold properties were acquired in Q1 2017.

Operational performance

The performance in the region has continued to improve significantly year-on-year. Like-for-like⁴ total revenue (in Euro) increased by 8.0% to €35.5 million and reported total revenue grew by 1.2% to €35.5 million primarily reflecting the improved trading environment and the further maturing of Park Plaza Nuremberg.

Like-for-like⁴ RevPAR increased by 10.0% to €79.2. This was driven by a 590 bps increase in occupancy to 80.7% and a 1.9% increase in average room rate to €98.1.

In sterling, like-for-like⁴ total revenue increased by 9.3% to £31.4 million and reported total revenue by 2.4% to £31.4 million.

Once again, Park Plaza Nuremberg was the main driver of this growth as the hotel, which opened in mid-2016, continues to mature. This hotel benefited from a high volume of fairs and events in the city, many of which only take place every two years.

The Group terminated, by mutual agreement with the owner, its loss-making lease agreement for the 174 room art'otel dresden as at 31 July 2018. The move incurred a termination cost of £3.1 million but this action will result in an overall rent reduction in the region and is expected to boost the Group's EBITDA by approximately £0.5 million annually.

Reported EBITDAR remained unchanged at £9.0 million and like-for-like⁴ EBITDAR (in Euro) increased by 4.0% to €10.2 million. Reported EBITDA improved by an impressive 20.7% to £5.2 million, reflecting the improved performance at several hotels and the maturing of Park Plaza Nuremberg. In addition, the Group benefited from reduced rental expense as a result of the acquisition in 2017 of the freehold interests in art'otel cologne and art'otel berlin kudamm and the termination of the art'otel dresden lease in the second half of 2018.

All the Group's hotels outperformed their competitive set in terms of RevPAR. Notably, Park Plaza Nuremberg reported double digit growth in RevPAR and average room rate.

Asset management projects

During the year, the Group's Croatian subsidiary Arena continued its investment programme to transform operations in Germany and Hungary through asset management initiatives to drive performance in the region and create shareholder value.

At art'otel cologne and art'otel berlin mitte, the development of new wellness areas which included high-end treatment rooms were completed.

At Park Plaza Berlin Kudamm, plans are being finalised for a complete redesign and refurbishment of all rooms and public areas.

In Hungary, the lease for art'otel budapest, which was due to expire in 2020, has been renewed for a further 20 years with effect from 1 January 2019. This hotel continued to perform well in 2018, reporting double digit year-on-year growth.

The German and Hungarian hotel market*

The hotels in Berlin saw RevPAR increase by 6.5% to €78.2, driven by a 4.6% improvement in average room rate. Occupancy increased by 1.9%.

In Cologne, the hotel market reported a decline in RevPAR of 5.0% to €81.8, reflecting an 0.8% increase in occupancy offset by a 5.8% decline in average room rate.

Hotels in Nuremberg benefited from a strong fair and events season, with RevPAR up 15.1% to €77.8, average room rate up 10.2% and a 4.4% improvement in occupancy.

In Budapest, hotels experienced a 7.2% RevPAR increase to €50.4, the result of a 4.7% increase in average room rate and 2.3% increase in occupancy.

* STR Global, December 2018

CROATIA PERFORMANCE

Property portfolio

The Group's subsidiary, Arena Hospitality Group, owns and operates a Croatian portfolio of seven hotels, six resorts and eight campsites, all of which are located in Istria, Croatia's most prominent tourist region. Four of Arena's properties in Croatia are Park Plaza branded, one property is marketed under the Sensimar brand (part of the TUI Group) and 2018 saw the introduction of the Arena Hotels & Apartments and Arena Campsites brands for certain Arena's properties

Total value of property portfolio¹

£210 million

¹ Independent valuation by Zagreb nekretnine Ltd in 2018

Operations

	Reported in GBP² (£)		Reported in local currency HRK
	Year ended 31 Dec 2018	Year ended 31 Dec 2017	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue	£60.2 million	£56.3 million	HRK 503.8 million	HRK 479.8 million
EBITDAR	£19.7 million	£19.7 million	HRK 165.0 million	HRK 168.0 million
EBITDA	£18.6 million	£18.7 million	HRK 155.3 million	HRK 159.1 million
Occupancy	62.4%	61.8%	62.4%	61.8%
Average room rate	£93.9	£92.2	HRK 785.8	HRK 785.6
RevPAR	£58.6	£57.0	HRK 490.4	HRK 485.8
Room revenue	£34.1 million	£32.5 million	HRK 285.1 million	HRK 277.0 million

²Average exchange rate from Croatian Kuna to Pound Sterling for the year to December 2018 was 8.37 and for the year to December 2017 was 8.52 representing a 1.8% decrease.

Operational performance

The Group's operations in Croatia reported year-on-year growth in occupancy, average daily rates and RevPAR, improving on 2017's record performance for the region.

Operations are highly seasonal with the majority of visits occurring between June and September. Most hotels open and commence trading around Easter and then close by mid-October.

That said, trading in the first half of 2018 was strong with good trading in the Easter and Pentecost holidays. The region also benefited during the winter months from good demand for sports-related accommodation at Park Plaza Belvedere Medulin.

The highlight in the second half was the launch of Arena One 99 Glamping, Croatia's first all-glamping offer, which enjoyed a soft opening in June 2018. The site is already award-winning being recognised with Best Glamping and Best Campsite (Croatian Tourist Awards), and it was awarded Croatian Campsite of the Year with Glamping at the Croatian National Tourist Board's Tourist Flower Awards. In 2019, Arena One 99 is expected to continue to mature as it will benefit from its first full season of operations.

Reported total revenue increased by 6.9% to £60.2 million. In Croatian Kuna (HRK), reported revenue was up 5.0% to HRK 503.8 million, reflecting improved trading and the new glamping offer.

RevPAR increased by 0.9% to HRK 490.4, reflecting a modest improvement in average room rate to HRK 785.8 and a 60 bps increase in occupancy to 62.4%.

Reported EBITDA decreased to HRK 155.3 million, reflecting an increase in labour costs during the year and increased expenses for waste management and cleaning services.

Asset management projects

Arena One 99 Glamping was our primary real estate investment project in the year (approximately 8.0 million). It transformed the former Pomer campsite into an all-glamping site with eight types of accommodation. This new campsite, which opened in time for the peak summer season, is the first of its kind to open in Croatia and was well received by guests. It offers well-equipped accommodation with luxury amenities, an outdoor wellness area, beach bars and activity programmes for both adults and children.

At Park Plaza Arena Pula, six accommodation units were added to the inventory following significant renovation. The hotel now has a total of 187 rooms and suites. Prior to refurbishment, these rooms were part of the Verudela Beach & Villas complex. At Park Plaza Histria Pula, a new wellness centre and spa were completed.

Ahead of the 2019 summer season, Arena Kažela Campsite, located on the south part of Medulin, will undergo a significant investment programme to upgrade the site of approximately £14.0 million. The site has been chosen due to its peaceful location close to some of the best beaches in Istria. Guests have immediate access to beaches with areas exclusively for sunbathers. Upon completion of the investment project, Arena Kažela Campsite will offer 152 new, fully equipped premium and family Camping Homes, in addition to more than 1,000 spacious pitches. The new Camping Homes are aimed at the modern traveller, searching for eco-friendly choices when on holiday. Each home features ecological and recycled materials and offers 37 square metres of interior space, more than 25 square metres of covered terrace and 250 square metres of private garden. Apart from the comfortable accommodation, the new facilities are designed to provide a luxurious holiday experience to its guests. Other new facilities will include a new reception, a new central pool with a children's area and a new pool reserved exclusively for luxury Camping Home guests. In addition, a variety of sports and entertainment activities, suitable for both adults and children, will be on offer.

Repositioning projects planned for 2019 include Hotel Brioni (approximately £22.0 million) and Verudela Beach Resort (approximately £8.0 million). Following the planned investment to Hotel Brioni we will rebrand the hotel to Park Plaza Brioni. There are advance plans for refurbishment of the villas at Verudela Beach Resort.

MANAGEMENT AND CENTRAL SERVICES PERFORMANCE

	Reported in GBP (£)
	Year ended 31 Dec 2018	Year ended 31 Dec 2017
Total revenue before elimination	£42.0 million	£42.4 million
Revenues within the consolidated Group	£(36.8) million	£(37.4 million)
External and reported revenue	£5.2 million	£5.0 million
EBITDA	£10.3 million	£10.5 million

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. The segment shows a positive EBITDA as management fees that are charged, both internal and external, exceed the costs in this segment.

Management, Group Central Services and license, sales and marketing fees are calculated as a percentage of revenues and profit, and therefore these are affected by underlying hotel performance.

STATEMENT OF FINANCIAL POSITION

	As at 31 December
	2018 £'000	2017 £'000
Assets
Non-current assets:
Intangible assets	21,463	23,570
Property, plant and equipment	1,270,785	1,158,442
Investment in joint ventures	4,346	18,727
Other non-current assets	18,027	18,828
Restricted deposits and cash	1,884	500
Deferred income tax asset	95	147
	1,316,600	1,220,214
Current assets:
Restricted deposits and cash	3,672	25,561
Inventories	2,481	2,701
Trade receivables	15,324	13,392
Other receivables and prepayments	12,016	12,446
Other current financial assets	4,449	24,711
Cash and cash equivalents	207,660	241,021
	245,602	319,832
Total assets	1,562,202	1,540,046

Equity and liabilities
Equity:
Issued capital
Share premium	130,061	129,878
Treasury shares	(3,636)	(3,636)
Foreign currency translation reserve	23,131	18,816
Hedging reserve	(437)	(302)
Accumulated earnings	224,373	198,589
Attributable to equity holders of the parent	373,492	343,345
Non-controlling interests	105,050	97,593
Total equity	478,542	440,938
Non-current liabilities:
Borrowings	681,981	666,936
Provision for litigation	3,873	3,659
Provision for concession fee on land	4,330	3,591
Financial liability in respect of Income Units sold to private investors	129,151	131,632
Other financial liabilities	188,269	192,792
Deferred income taxes	7,115	7,394
	1,014,719	1,006,004
Current liabilities:
Trade payables	12,162	12,843
Other payables and accruals	41,469	47,314
Borrowings	15,310	32,947
	68,941	93,104
Total liabilities	1,083,660	1,099,108
Total equity and liabilities	1,562,202	1,540,046

The accompanying notes are an integral part of the consolidated financial statements.
Date of approval of the financial statements 27 February 2019. Signed on behalf of the Board by Boris Ivesha and Daniel Kos.

CONSOLIDATED INCOME STATEMENT

	Year ended 31 December
	2018 £'000	2017 £'000
Revenues	341,482	325,118
Operating expenses	(220,775)	(209,092)
EBITDAR	120,707	116,026
Rental expenses	(7,535)	(8,722)
EBITDA	113,172	107,304
Depreciation and amortisation	(35,903)	(34,288)

EBIT	77,269	73,016
Financial expenses	(31,986)	(31,966)
Financial income	1,568	1,815
Other expenses	(10,688)	(1,503)
Other income	20,394	1,351
Net expenses for financial liability in respect of Income Units sold to private investors	(10,318)	(10,666)
Share in result of associate and joint ventures	144	(350)
Profit before tax	46,383	31,697
Income tax expense	(2,951)	(1,748)
Profit for the year	43,432	29,949

Profit attributable to:
Equity holders of the parent	38,052	24,271
Non-controlling interests	5,380	5,678
	43,342	29,949

Basic and diluted earnings per share (in Pound Sterling)	0.90	0.57

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Year ended 31 December
	2018 £'000	2017 £'000
Profit for the year	43,432	29,949
Other comprehensive income (loss) to be recycled through profit and loss in subsequent periods¹:
Profit (loss) from cash flow hedges	(212)	593
Reclassification to the income statement of cash flow hedge results upon discontinuation of hedge accounting	(46)	-
Foreign currency translation adjustments of foreign operations	6,515	9,996
Other comprehensive income	6,257	10,589
Total comprehensive income	49,689	40,538

Total comprehensive income attributable to:
Equity holders of the parent	42,232	33,175
Non-controlling interests	7,457	7,363
	49,689	40,538

¹ There is no other comprehensive income that will not be reclassified to the profit and loss in subsequent periods.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In £'000	Issued capital¹	Share premium	Other reserves	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 2017	-	129,527	-	(3,208)	14,391	(895)	159,814	299,629	30,573	330,202
Profit for the year	-	-	-	-	-	-	24,271	24,271	5,678	29,949
Other comprehensive income for the year	-	-	-	-	8,311	593	-	8,904	1,685	10,589
Total comprehensive income	-	-	-	-	8,311	593	24,271	33,175	7,363	40,538
Issue of shares	-	242	-	-	-	-	-	242	-	242
Share-based payments	-	109	-	-	-	-	-	109	-	109
Purchase of treasury shares	-	-	-	(428)	-	-	-	(428)	-	(428)
Dividend distribution²	-	-	-	-	-	-	(9,290)	(9,290)	-	(9,290)
Transactions with non-controlling interests (note 6)	-	-	-	-	(3,886)	-	23,794	19,908	59,657	79,565
Balance as at 31 December 2017	-	129,878	-	(3,636)	18,816	(302)	198,589	343,345	97,593	440,938
Profit for the year	-	-	-	-	-	-	38,052	38,052	5,380	43,432
Other comprehensive income for the year	-	-	-	-	4,315	(135)	-	4,180	2,077	6,257
Total comprehensive income	-	-	-	-	4,315	(135)	38,052	42,232	7,457	49,689
Share-based payments	-	183	-	-	-	-	-	183	-	183
Dividend distribution²	-	-	-	-	-	-	(12,278)	(12,278)	-	(12,278)
Balance as at 31 December 2018	-	130,061	-	(3,636)	23,131	(437)	224,363	373,482	105,050	478,532

¹ No par value.
² The dividend distribution comprises a final dividend for the year ended 31 December 2017 of 13 pence per share (31 December 2016: 10 pence per share) and an interim dividend of 16 pence per share paid in 2018 (2017: 11 pence per share).

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year ended 31 December
	2018 £'000	2017 £'000
Cash flows from operating activities:
Profit for the year	43,432	29,949
Adjustment to reconcile profit to cash provided by operating activities:
Financial expenses and expenses for financial liability in respect of Income Units sold to private investors	41,625	42,644
Financial income	(1,568)	(1,579)
Income tax charge	2,952	1,748
Loss on buy back of Income Units sold to private investors	601	721
Release of deposit unit holder	(68)	-
Revaluation of finance lease liability	4,822	-
Write off unamortised discount on early repayment of loan	314	-
Capital gain	-	(1,351)
Loss (gain) from marketable securities	679	(124)
Share in results of joint ventures	(144)	350
Gain on re-measurement of previously held interest in joint venture	(20,280)	-
Fair value adjustment of derivatives	-	(112)
Depreciation and amortisation	35,903	34,288
Share-based payments	183	109
	65,019	76,694
Changes in operating assets and liabilities:
Decrease (increase) in inventories	257	(216)
(Increase) in trade and other receivables	(922)	(1,801)
(Decrease) increase in trade and other payables	(5,659)	9,019
	(6,324)	7,002
Cash paid and received during the period for:
Interest paid	(42,778)	(43,323)
Interest received	1,448	203
Taxes (paid) received	(4,183)	(676)
	(45,513)	(43,796)
Net cash provided by operating activities	56,614	69,849
Cash flows from investing activities:
Investments in property, plant and equipment	(67,251)	(107,044)
Purchase of remaining interest in previously held joint venture	(34,549)	-
Proceeds from sale of property	-	7,146
Purchase of Park Plaza County Hall London income units	-	(16,283)
Decrease (increase) in restricted cash	(1,410)	5,375
Decrease (Increase) in marketable securities, net	19,582	(24,586)
Release of restricted deposit	22,000	-
Net cash used in investing activities	(61,628)	(135,392)

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

	Year ended 31 December
	2018 £'000	2017 £'000

Cash flows from financing activities:
Issuance of shares upon exercise of options	-	242
Purchase of treasury shares	-	(428)
Proceeds from loans and borrowings	61,330	42,926
Buy back of Income Units previously sold to private investors	(1,710)	(1,900)
Repayment of loans and borrowings	(78,096)	(133,108)
Net proceeds from transactions with non-controlling interest	-	79,565
Proceeds from sale and leaseback of Park Plaza London Waterloo	-	161,596
Dividend payment	(12,278)	(9,290)
Net cash provided by (used in) financing activities	(30,754)	159,603
Increase (decrease) in cash and cash equivalents	(35,768)	94,060
Net foreign exchange differences	2,407	2,229
Cash and cash equivalents at beginning of year	241,021	144,732
Cash and cash equivalents at end of year	207,660	241,021

Non-cash items:
Outstanding payable on investments in property, plant and equipment	372	958

APPENDIX

Selected notes to consolidated financial statements

Note 1:

a. The consolidated financial statements of PPHE Hotel Group Limited (the 'Company') and its subsidiaries (together the 'Group') for the year ended 31 December 2018 were authorised for issuance in accordance with a resolution of the Directors on 27 February 2019.

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.

On the 30th of July 2018, the UKLA approved the transfer of the listing category of all of the Company's ordinary shares of nil par value from a standard listing (shares) to a premium listing (commercial company) on the Official List of the UKLA in accordance with Listing Rule 5.4A of the Listing Rules.

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 Europe, the Middle East and Africa and owns and operates the art'otel^® brand.

The Group has interests in hotels in the United Kingdom, the Netherlands, Germany, Hungary and hotels, self-catering apartment complexes and campsites in Croatia.

c. Assessment of going concern:

As part of their ongoing responsibilities, the Directors have recently undertaken a thorough review of the Group's cash flow forecast and potential liquidity risks. Detailed budgets and cash flow projections have been prepared for 2019 and 2020 which show that the Group's hotel operations will be cash generative during the period. The Directors have determined that the Company is likely to continue in business for at least 12 months from the date of the consolidated financial statements.

Note 2: Earnings per share

The following reflects the income and share data used in the basic earnings per share computations:

	Year ended 31 December
	2018 £'000	2017 £'000
Profit of equity holders of the parent	38,052	24,271
Weighted average number of ordinary shares outstanding	42,335	42,249

Potentially dilutive instruments 189,428 in 2018 (2017: 127,312) had an immaterial effect on the basic earnings per share.

Note 3 Segments

For management purposes, the Group's activities are divided into Owned Hotel Operations and Management Activities. Owned Hotel Operations are further divided into four reportable segments: the Netherlands, Germany and Hungary, Croatia and the United Kingdom. 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 2018
	The Netherlands £'000	Germany and Hungary £'000	United Kingdom £'000	Croatia £'000	Management and Central Services £'000	Adjustments^* £'000	Consolidated £'000
Revenue
Third party	49,569	31,443	195,092	60,193	5,185	-	341,482
Inter-segment	-	-	-	-	36,823	(36,823)	-
Total revenue	49,569	31,443	195,092	60,193	42,008	(36,823)	341,482
Segment EBITDA	14,091	5,242	65,006	18,558	10,275	-	113,172
Depreciation, amortisation and impairment	-	-	-	-	-	-	(35,903)
Financial expenses	-	-	-	-	-	-	(31,986)
Financial income	-	-	-	-	-	-	1,568
Net expenses for liability in respect of Income Units sold to private investors	-	-	-	-	-	-	(10,318)
Other income, net	-	-	-	-	-	-	9,706
Share in loss of associate and joint ventures	-	-	-	-	-	-	144
Profit before tax	-	-	-	-	-	-	46,383

*consists of inter-company eliminations

The Netherlands
£'000

Germany and Hungary
£'000

United Kingdom
£'000

Croatia

£'000

Adjustments²

£'000

Consolidated
£'000

Geographical information

Non-Current assets¹

206,964

78,066

814,089

167,286

25,843

1,292,248

¹ ^{Non-current assets for this purpose consists of property, plant and equipment and intangible assets.}

^{2 This includes the fixed assets of Management and Central Services and the intangible fixed assets}

	Year ended 31 December 2017
	The Netherlands £'000	Germany and Hungary £'000	United Kingdom £'000	Croatia £'000	Management and holding companies £'000	Adjustments^* £'000	Consolidated £'000
Revenue
Third party	47,323	30,720	185,780	56,303	4,992	-	325,118
Inter-segment	-	-	-	-	37,387	(37,387)	-
Total revenue	47,323	30,720	185,780	56,303	42,379	(37,387)	325,118
Segment EBITDA	13,285	4,345	60,464	18,670	10,540	-	107,304
Depreciation, amortisation and impairment	-	-	-	-	-	-	(34,288)
Financial expenses	-	-	-	-	-	-	(31,966)
Financial income	-	-	-	-	-	-	1,815
Net expenses for liability in respect of Income Units sold to private investors	-	-	-	-	-	-	(10,666)
Other income, net	-	-	-	-	-	-	(152)
Share in loss of associate and joint ventures	-	-	-	-	-	-	(350)
Profit before tax	-	-	-	-	-	-	31,697

^*Consist of inter-company eliminations.

The Netherlands
£'000

Germany and Hungary
£'000

United Kingdom
£'000

Croatia

£'000

Holding companies and

Adjustments²

£'000

Consolidated
£'000

Geographical information

Non-Current assets¹

194,749

77,589

730,026

152,817

26,831

1,182,012

¹ ^{Non-current assets for this purpose consists of property, plant and equipment and intangible assets.}

^{2 This includes the fixed assets of Management and Central Services and the intangible fixed assets}

Note 4: Related parties

Significant other transactions with related parties

a. Balances with related parties

	Year ended 31 December
	2018 £'000	2017 £'000
Loans to joint ventures	4,134	17,582
Short-term receivables	1,605	669
Construction liability WW Gear Construction Limited	372	958

b. Transactions with related parties

	Year ended 31 December
	2018 £'000	2017 £'000
Construction charges - WW Gear Construction Limited		15,908
GC Project Management Limited		3,700
Interest income from jointly controlled entities	92	407

c. Significant other transactions with related parties

(i) Project Management Contracts - The Group actively engages in the development of properties into new hotels and the refurbishment and/or extension of its existing portfolio of hotels. The Group has in the past contracted, and currently contracts, with GC Project Management Limited ("GC"), for project management services in respect of its projects. The Group entered into 6 project management agreements with GC in 2018 for its various projects (the "Project Management Contracts"), each such agreement provides for a capped amount payable by the Group to GC in respect of each such project.

(ii) Pre-Construction and Maintenance Contract - The Group frequently uses 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.

Note 4: Related parties continued

c. Significant other transactions with related parties continued

(iii) Aircraft sale agreement -The Group has from time to time received passenger services from Sunshine Aviation Limited, a member of the Red Sea Group, which owns a business corporate jet (the "Aircraft"). As the Group's operations have expanded in Europe, particularly following the acquisition of Arena, the Group has from time to time hired the Aircraft from the Red Sea Group. The Company entered into an agreement to acquire it for a total consideration of US$2.34 million. Delivery of the Aircraft (and therefore completion of the acquisition) is required to occur on or before 30 June 2019. Prior to completion of the sale, either party is entitled to terminate the sale agreement on notice to the other.

Under the Relationship Agreement entered into between Euro Plaza Holdings B.V ("Euro Plaza"), Eli Papouchado and the Company, transactions between the Company and Euro Plaza (and its associates, which include GC and Sunshine Aviation Limited) are required to be on arm's length terms. The Independent Directors consider that the Project Management Contracts, the Pre-Construction and Maintenance Contract and the Aircraft sale agreement have been entered into on arm's length terms and are in the best interests of the Company and its shareholders as a whole.

(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.

(v) Compensation to key management personnel (Executive and Non-Executive Directors) for the year ended 31 December 2018:

	Base salary and fees £'000	Bonus	Pension contributions £'000	Other benefits £'000	Total £'000
Chairman and Executive Directors	799	61	112	20	992
Non-Executive Directors	219				219
	1,018	61	112	20	1,211

Directors' interests in employee share incentive plan

As at 31 December 2018, the Executive Directors held share options to purchase 125,000 ordinary shares. 66,667 options were fully exercisable with an exercise price of £6.90. No share options were granted to Non-Executive members of the Board.

(vi) Compensation to key management personnel (Executive and Non-Executive Board members) for the year ended 31 December 2017:

	Base salary and fees £'000	Bonus	Pension contributions £'000	Other benefits £'000	Total £'000
Chairman and Executive Directors	773	150	170	289	1,382
Non-Executive Directors	144	-	-	-	144
	917	150	170	289	1,526

Principal risks and uncertainties

Material factors impacting our business

Risk and impact

Mitigation

Grading

Year-on-year

Market Dynamics

The travel industry has changed considerably in recent years as a result of changes in travel patterns, the emergence of low-cost airlines and online travel agents, new technologies, and changes in customer booking behaviour and travel expectations. Difficulties identifying trends and responding to changes in customer demands and preferences (e.g. digital and mobile) could threaten the Group's brand alignment with its customers' expectations.

The Group invests in areas such as connectivity to third parties, distribution and marketing of its products, e-commerce and technology. The Group further mitigates this risk by working closely with Radisson Hotel Group, ensuring that global trends are identified and acted upon in a concerted manner, whilst benefiting from the scale, negotiating power, knowledge and skills that our global partnership brings. Executives and managers regularly attend seminars, workshops and training to ensure that their knowledge is kept up to date.

Medium

Unchanged during the year

Information technology and systems

The Group is reliant on certain technologies and systems for the operation of its business. Any material disruption or slowdown in the Group's information systems, especially any failures relating to its reservation system, could cause valuable information to be lost or operations to be delayed.

In addition, failure of information systems to adequately protect data could result in a potential loss. Difficulty in defining and implementing an enterprise-wide IT and data strategy might impair the Group's ability to achieve its strategic goals.

The Group invests in appropriate IT systems to build as much operational resilience as possible. Furthermore, a variety of security measures are implemented in order to maintain the safety of personal customer information. The Group has also put in place an IT/cyber insurance policy.

High

Unchanged during the year

Hotel industry risks

The Group's operations and their results are subject to a number of factors that could adversely affect the Group's business, many of which are common to the hotel industry and beyond the Group's control, such as global economic uncertainties, political instabilities and an increase in acts of terrorism. The impact of any of these factors may adversely affect management's ability to execute an operating plan to achieve Group's Strategic goals.

Although management continually seeks to identify risks at the earliest opportunity, many of these risks are beyond the control of the Group. The Group has in place contingency and recovery plans to enable it to respond to major incidents or crises and takes steps to minimise these exposures to the greatest extent possible.

High

Unchanged during the year

Fixed operating expenses

The Group's operating expenses, such as personnel costs, the impact of the Living Wage in the United Kingdom, property taxes, operating leases, information technology and telecommunications, are to a large extent fixed. As such, the Group's operating results may be vulnerable to short-term changes in its revenues.

The Group has appropriate management systems in place (such as staff outsourcing) in certain regions which are designed to create flexibility in the operating cost base so as to optimise operating profits in volatile trading conditions.

High

Unchanged during the year

The Group's borrowings

The Group is exposed to a variety of risks associated with the Group's existing bank borrowings and its ability to satisfy debt covenants. Failure to satisfy obligations under any current or future financing arrangements could give rise to default risk and require the Group to refinance its borrowings.

In addition, some of the Group's financing arrangements contain cross-collateralisation and therefore, there is a risk that more than one property may be affected by a default under these financing.

The Group uses debt to partly finance its property investment. By doing so, the Group leverages its investment and is able to acquire properties without raising equity. Leverage magnifies both gains and losses, and therefore the risk of using leverage is that the loss is much greater than it would have been if the investment had not been leveraged. The risk exists that interest expenses and default on debt covenants negatively impact shareholder value and return.

The Group's internal Treasury Management monitor the financial covenants regularly. In addition, as part of the financial planning procedures, a three-year forecast is prepared which incorporates sensitivity tests for meeting the covenants ratio. The Board monitors the Group's funding needs in accordance with future plans.

High

Increased during the year

Compliance with laws

The Group must comply with regulations and legislations in the various jurisdictions where it operates. Exposure is similar to other companies with cross-jurisdictional operations and a global customer base. However, such risks expose the Group to potential: reputational damage; financial penalties; and costs each of which could have a material adverse effect.

The Group has a well-resourced Legal Team which continuously monitors compliance with existing regulations, implements for regular staff training, offers a point of contact to all staff to report a concern or raise a question and regularly reviews their compliance and governance policies and their implementation. Additionally, the General Counsel is in regular consultation with the Board of Directors and Executive Team on any material concerns or changes to compliance strategy to ensure the Board and Executive Committee engagement in compliance matters.

Medium

Increased during the year

Risk and impact

Mitigation

Grading

Year on Year

The Park Plaza^® Hotels & Resorts brand and reservation system

The Group's rights to the Park Plaza Hotels & Resorts brand stem from a territorial licence agreement with Radisson Hotel Group, pursuant to which the Group has the exclusive right to use (and to sub-license others to use) the Park Plaza Hotels & Resorts trademark in 56 countries within the EMEA region.

This agreement also allows the Group to use Radisson Hotel Group's global central reservation system, participate in its various loyalty schemes and have access to global distribution channels connected to its central reservation system. Failure to maintain these rights could adversely affect the Group's brand recognition and its profitability. The Group is also dependent on Radisson Hotel Group to invest in the further development of its global reservation system and associated technologies and infrastructure. The Park Plaza Hotels & Resorts outside of the EMEA region are managed or franchised by Radisson Hotel Group directly, and failure at its end to control and maintain a similar quality level of hotels may have a detrimental effect on the reputation of the Park Plaza brand and the hotels operating under the brand name.

The Group's rights to use the Park Plaza Hotels & Resorts brand and Radisson Hotel Group's central reservation system are in perpetuity. This unique and exclusive partnership is reinforced by the Group's continued focus on operational efficiency and portfolio growth through its intensified cooperation with Radisson Hotel Group. To ensure that the Group's interests are represented, several of its executives and managers participate in collaborative groups initiated by Radisson Hotel Group to discuss, review and optimise the collective performance in areas such as sales, loyalty marketing, brand development, partnerships, e-commerce and distribution.

Low

Decreased during the year

Development projects

The Group has various ongoing development projects which are capital intensive. These development projects may increase the Group's expenses and reduce the Group's cash flows and revenues. If capital expenditures ('capex') exceed the Group's expectations, this excess would have an adverse effect on the Group's available cash. There is a risk that such developments may not be available on favourable terms, that construction may not be completed on schedule or within budget, and that the property market conditions are subject to changes in environmental law and regulations, zoning laws, and other governmental rules and fiscal policies.

The Group tends to enter into fixed price turn-key contracts in respect of its developments in order to minimise the risk of cost overrun. The Group draws on its previous experience in running and managing developments to manage potential development risks.

Medium

Increased during the year

Capital required to maintain product standards

The Group owns and co-owns many of its hotels. As is common in owning hotels, this business model requires capital to maintain the high-quality level of the products and facilities offered. In addition to maintenance costs and capex, the Group may be exposed to disruptions in revenue if hotels are to be (part) closed for product improvements.

The Group focuses heavily on preventative maintenance across its portfolio and employs engineers and technicians to ensure that its hotels are maintained to a high standard. In addition, as part of its operating agreements, the Group has capex reserves for each hotel to invest in medium to large renovations and replacements of technical installations. To minimise short-term revenue displacements due to renovations, the Group develops - prior to undertaking such renovations - detailed renovation planning programmes which take into account factors such as hotel closures, phased approaches, seasonality and demand patterns.

Medium

Unchanged during the year

UK's withdrawal from the European Union ("Brexit")

The success of the Group's business is partially attributable to the efforts and abilities of its workforce, as well as the Group's ability to deliver high quality service levels with the right products and goods delivered on time.

Uncertainty over the Brexit negotiations, a high turnover rate and volatile trading conditions or delays to goods coming into the UK may threaten the consistent delivery of this service level.

The Group has put in place contingency and recovery plans from a supply chain perspective as well as a financing perspective to minimise disruption to Group's UK operations experience in the immediate aftermath of the UK's departure from the EU. There is a level of uncertainty, and many of the factors that could adversely affect the Group's business such as political instabilities are beyond the Group's control but factors in its control such as its ability to continue to recruit and retain talent have been mitigated and appropriate systems are in place for recruitment, reward and compensation and performance management.

Medium

Increased during the year

Foreign exchange rate fluctuations

The exchange rates between the functional currency of the Group's subsidiaries operating inside the Eurozone, and the Croatian Kuna and Pound Sterling (the reporting currency for the purposes of the consolidated financial statements) may fluctuate significantly, affecting the Group's financial results. In addition, the Group may incur a currency transaction risk in the event that one of the Group's companies enters into a transaction using a currency different from its functional currency.

The Group eliminates currency transaction risk by matching commitments, cash flows and debt in the same currency. After due and careful consideration, the Group decided not to hedge this currency risk.

Low

Decreased during the year