Safestay Interim Results: Profit Boost from Insurance Claim Masks Underlying Challenges

Safestay H1 2025: solid progress, but pricing pressure bites

Safestay’s interim numbers show a business that is expanding its footprint and investing in tech, but operating against a tough market. Revenue slipped and margins narrowed as hostel pricing across Europe remained highly competitive and costs rose. A one-off insurance payout pushed earnings into the black, masking a weaker underlying picture.

Key numbers investors need to know

Metric (continuing ops)	H1 2025	H1 2024
Revenue	£10.1 million	£10.7 million
Adjusted EBITDA	£2.3 million	£3.2 million
EBITDA margin	23.3%	29.9%
Profit before tax	£591,000	£113,000 loss
Basic EPS (continuing)	0.73p	0.16p
Net cash from operations	£3.4 million	£5.0 million
Cash at bank (30 June)	£1.7 million	£2.2 million
Net asset value per share	47.8p	49.8p
Occupancy	68.2%	70.6%
Average Bed Rate (ABR)	£20.4	£22.1
RevPAB (revenue per available bed)	£16.4	£18.3

Quick jargon buster: EBITDA is earnings before interest, tax, depreciation and amortisation – a proxy for operating cash generation. ABR is the average rate charged per occupied bed. RevPAB measures revenue per bed whether occupied or not, so it blends price and occupancy.

Demand held up, but price cuts dragged revenue

Bed nights actually nudged higher to 415,606 (H1 2024: 412,442), and group bookings remained robust at 22% of accommodation sales (H1 2024: 23%). The issue was price. ABR fell 7.9% to £20.4 as the European hostel market became more aggressive on pricing. With occupancy also down 2.4 percentage points to 68.2%, RevPAB dropped 10.2% to £16.4. That combination pulled revenue down 5.6% to £10.1 million.

Direct and non-commissionable channels accounted for 40.5% of bed nights, equating to £1.54 million or 18% of accommodation revenue. That’s a helpful cushion on distribution costs, even if it slipped from 42.3% last year.

Cost inflation squeezed margins

Adjusted EBITDA fell to £2.3 million, with margin down to 23.3% from 29.9%. Management points to higher staff costs – notably the UK National Living Wage and National Insurance increases, plus above-inflation wage rises in several European markets – as well as inflation in utilities, cleaning and linen. None of that is unique to Safestay, but it does bite harder when room rates are under pressure.

Insurance settlement lifted earnings above the waterline

The headline improvement in EPS to 0.73p and a £591,000 profit before tax were aided by a Covid-19 business interruption insurance settlement of £1.4 million booked as other operating income. Net of a small amount of one-offs, the gain was £1.2 million. It is good cash and reflects past disruption, but it is non-recurring. Strip that out, and the underlying profitability picture is softer than the statutory numbers suggest.

Cash and balance sheet: steady, but watch liquidity

Operating cash generation remained positive at £3.4 million (H1 2024: £5.0 million). Cash at bank was £1.7 million at 30 June, up from £1.4 million at year end but lower than £2.2 million a year ago. Capital expenditure was light at £0.3 million as the Group focused on costs and the pipeline.

Borrowings stood at £4.1 million current and £22.4 million non-current, with quarterly £100,000 term loan repayments starting from March 2025. Total liabilities were £62.4 million and net assets £31.1 million, giving a NAV per share of 47.8p. Liquidity is adequate but tight relative to the debt load, so execution on the busy Q4 opening schedule and pricing stabilisation matter.

Expansion continues: Naples lease and first Austria franchise

Safestay is still in growth mode.

• Naples, Italy – 12-year lease signed on a 300-bed hostel in the Materdei district. Opening expected in Q4 2025.
• Kitzbühel, Austria – first ever franchise agreement covering two properties totalling 70 beds, rebranding to Safestay. Also expected to be operational in Q4 2025. Franchising is capital-light, which can lift returns if demand holds.
• Brighton, UK – planning approval secured for a new 170-bed freehold hostel. About £1.0 million to be invested, targeted opening early 2026.

On the less positive side, a licence review reduced bed numbers in Barcelona, Passeig de Gracia by 51 to 338.

Tech and commercial strategy

The partnership with Cloudbeds – a unified hospitality management platform – should help sharpen pricing, centralise data and streamline operations across the network. In a market where rate management is the battleground, that is strategically useful.

Outlook: full-year revenue to be lower than 2024

Management is frank about current trading. July and August were hit by worsening market conditions and heavy price competition. Even though the second half is normally stronger seasonally, the Company now expects full-year revenue to be lower than in 2024. Forward bookings for the remainder of 2025 are broadly in line with last year, and the Group is using promotions to stimulate demand.

Asset disposals under consideration

Safestay is considering the sale of certain UK freehold assets. No assets, timing or expected proceeds were disclosed. If executed, disposals could reduce leverage, provide growth capital, or crystallise value versus book values. The trade-off is lower owned-bed exposure to future upside.

My take: cautious near term, constructive long term

There is plenty to like structurally – a pan-European footprint, improving direct mix, and a pipeline that includes a capital-light franchise model. However, the H1 story is clear: pricing pressure and cost inflation squeezed margin, and the move back to profit was driven by a one-off insurance receipt. With management guiding to lower full-year revenue, near-term earnings risk sits to the downside unless pricing conditions improve quickly.

What would change the tone? Stronger late-season trading, early proof that Naples and Kitzbühel can open on time into demand, and clarity on any UK asset sales (price versus book, and debt reduction). Conversely, prolonged discounting into 2026 would keep EBITDA under pressure.

What to watch next

• Q4 openings – delivery of Naples and the Austria franchise on time and on budget.
• Pricing discipline – stabilisation in ABR and RevPAB as competition eases.
• Direct booking share – can Safestay push beyond 40.5% to reduce commission costs.
• Asset sale plans – scope, proceeds and use of funds.
• Cost base – impact of wage and utility inflation into 2026.

Bottom line

Safestay is executing on expansion and systems while navigating a cyclical squeeze on rates. The interim profit is welcome but flattered by a £1.4 million insurance claim. If the Group can hold occupancy, rebuild price and bring new sites onstream without stretching the balance sheet, the longer-term opportunity in a fragmented European hostel market remains intact. For now, prudence is sensible until the pricing environment improves.