Safestay Regulatory News (SSTY)

29 June 2026

Safestay plc

("Safestay", the "Company" or the "Group")

Final Results

 Improved liquidity and reduced debt alongside strategic progress despite a challenging trading environment

Safestay (AIM: SSTY), the owner and operator of an international brand of contemporary hostels, is pleased to announce its audited final results for the year ended 31 December 2025 (the "Year").

Financial highlights:

1 2024's figures have been restated as set out in Note 12 to these financial statements 

 Strategic and operational highlights:

Post balance sheet events:

Current trading and outlook:

Larry Lipman, Chairman of Safestay, said:

"Against the backdrop of a challenging pan-European trading environment, during 2025 the Board took proactive measures to manage the composition of the portfolio, significantly strengthen the balance sheet, and improve long-term performance. This included the sale of two freehold sites in the UK in Edinburgh and Brighton, whilst continuing to strategically expand the portfolio in attractive locations, with three new hostels added in Italy and Austria.

"Our focus remains on delivering sustainable growth and creating value for shareholders, underpinned by a leading customer proposition. With a strong brand in the European hostel market, well-invested systems and a pipeline of growth opportunities including franchising, we remain confident in Safestay's ability to deliver sustainable growth and shareholder value creation." 

The Company's report and accounts for the year ended 31 December 2025 will be available later today on its website, https://www.safestay.com/investors/ and will be posted to shareholders shortly.

The Company intends to convene its Annual General Meeting in due course and a further announcement will be made regarding the date, time and venue of the meeting.

ENDS

Enquiries

For more information visit our:

Website www.safestay.com

Instagram page www.instagram.com/safestayhostels/

About Safestay PLC

Safestay PLC, one of Europe's largest hostel groups, operates in the exciting and growing hostel segment of the global hospitality market. Worth approximately US$6.53bn in 2026, it is estimated to grow to US$15.25bn by 2034 (The Market Data Forecast, 2025).

Safestay's operational sites of 20 premium hostels and one hotel offer guests both private and shared rooms in destination cities across the UK, Spain, Belgium, Czech Republic, Greece, Italy, Poland, Portugal, Austria and Slovakia.

Safestay's mission at each of its locations is to provide a safe, inclusive, and enjoyable space that caters to the needs of different travellers. Its properties offer first-class locations and thoughtful designs that cater for the different needs of travellers, from digital nomads to backpackers and from families to group travellers.

Safestay's pan-European locations include:

· Kitzbühel Alpine, Austria (Franchise)

· Kitzbühel Centre, Austria (Franchise)

· Brussels Grand Place, Belgium

· Prague Charles Bridge, Czechia

· Athens Monastiraki, Greece

· Naples, Italy

· Pisa Centrale, Italy

· Warsaw Old Town, Poland

· Lisbon Bairro Alto, Portugal

· Bratislava Presidential Palace, Slovakia

· Barcelona Gothic, Spain

· Barcelona Passeig de Gracia, Spain

· Calpe Seafront, Spain (in development)

· Córdoba Mezquita Catedral, Spain

· Madrid Central, Spain

· Brighton, UK

· Edinburgh Cowgate, UK (Franchise)

· London Elephant & Castle, UK

· London Kensington Holland Park, UK

· York Micklegate, UK

Chairman's Statement

Introduction

The Group delivered several important strategic and operational initiatives during 2025 to support progress against its long-term strategy for growth and shareholder value creation. These included proactive management of the portfolio, actions to strengthen the balance sheet, and the openings of the Group's first franchise operations.

However, the sustained challenging trading environment across the Group's European portfolio meant that Group revenue for the year declined to approximately £20.6 million (2024: £23 million). Adjusted EBITDA decreased to approximately £3.7 million (2024: £6.5 million) reflecting the revenue performance as well as inflationary pressures, in particular, higher staff costs across several of the Group's UK and European properties. The Group reported a statutory loss after tax of £10.1 million for the year (2024 restated: loss of £3.5 million), which included goodwill and fixed asset impairment charges of £6.0 million (2024 restated: £3.1 million) and a loss on disposal of assets of £1.4 million.

FY25 overview

During the year, aligned with our strategy to crystallise value for shareholders while supporting sustainable long-term growth, we took actions to improve liquidity and reduce bank debt through the sale and franchise of our Edinburgh freehold property and hostel and the sale and lease back of our Brighton freehold property. These transactions generated cash proceeds and enabled the Group to reduce borrowings, although they also resulted in an accounting loss on disposal of £1.4 million. We also continued to expand our hostel portfolio adding three new properties: one in Naples, Italy and two sites in Kitzbühel, Austria under a franchise model. As a result, at the year end, our portfolio consisted of 22 hostels, including two in development and three operated on a franchise basis (2024: 19 hostels including three in development and zero operated on a franchise basis).

Further to the freehold property sales described above, as well as the award in June 2025 of a Covid-19 related business interruption insurance claim totalling £1.4 million - classified as other operating income - the Group's cash at bank at 31 December 2025 was £2.7 million, a 93% increase year-on-year (2024: £1.4 million), and gross debt, excluding lease liabilities and property finance liabilities, was significantly reduced to £14.1 million (2024: £19.5 million). This should be read alongside the reduction in net assets to £14.4 million (2024 restated: £28.1 million). During the year, impairment charges of £4.0 million (2024 restated: £2.6 million) were recognised in respect of goodwill and £2.0 million (2024: £0.4 million) in relation to fixed assets. The goodwill impairment reflects the reassessment of expected future cash flows following weaker trading performance. In addition, property revaluation losses of £5.7 million (2024: gains of £1.1 million) were recorded against tangible fixed assets. Collectively, these impairment charges and revaluation adjustments had a material impact, significantly reducing net assets.

Given the challenging trading environment described above, total bed nights decreased by 6% to 877,674 (2024: 931,688) and the occupancy rate was 70% (2024: 75.2%). ABR decreased by 6% to £20.06 (2024: £21.43) reflecting the highly competitive pricing environment across the European hostel market. As a result, total RevPAB decreased to £16.43 (2024: £18.56). Forward bookings at 1 January 2026 were £3.1 million (1 January 2025: £4.7 million). Net asset value per share was 22.21p (2024 restated: 43.32p).

For further details of our financial performance during the year, please see the Chief Financial Officer's review set out in the Group's Annual Report. 

Our highly relevant customer proposition

Safestay's European portfolio is located across prime locations within key destination cities. It is these outstanding locations, combined with our steadfast focus on delivering on our mission to provide a safe, inclusive, and enjoyable space for our customers at fantastic value, that underpins our differentiated offer amongst our core customer base of young travellers, families and business travellers.

Safestay operates in the growing hostel segment of the global hospitality market. Worth approximately US$6.53bn in 2026, it is estimated to grow to US$15.25bn by 2034 (The Market Data Forecast, 2025).

To improve our understanding of our customers' priorities, in December 2025 we conducted a survey of a nationally representative sample of 2,000 UK travellers who have either taken a European city break in the past 12 months or plan to go on a European city break in the coming 12 months. The data reinforced the strength and relevance of our customer proposition:

· Location is the key priority: 71% of UK travellers say a prime city-centre location is critical when choosing city-break accommodation, compared with just 7% who prioritise luxury facilities.

· Strong price sensitivity: One in five travellers (22%) target "extreme value", looking to pay less than £49 per person per night for a European city break, while only 12% are willing to spend more than £100.

· Budgets under pressure: Although more than half of travellers (56%) plan to travel more often in 2026, almost a third (29%) expect to spend less - with cheaper accommodation being the main lever.

From this, we understand that location and price remain key drivers for our customers choosing to stay with us. We are confident that the Group is well placed to capitalise on these important drivers of customer preference over the coming years.

Board Updates

In June 2025, Carlos Salas Dual was appointed as Chief Financial Officer, replacing Paul Hingston. Carlos is a Chartered Certified Accountant with extensive experience in senior financial management roles across a range of sectors, most recently acting as Group Financial Controller for Gibraltar-based MH Bland Group of Companies.

Following the year end, in May 2026, Davide Caschili was appointed to the Board as Chief Operating Officer with effect from 10 June 2026, succeeding Peter Zielke, who will step down from his executive responsibilities but will remain on the Board for a period to support an orderly transition. Davide Caschili has more than 25 years of hospitality experience, with a strong track record in hostel and hybrid hospitality operations across the UK, Italy and the US, most recently as Head of Operations UK & Ireland at Edyn Group. On behalf of the Board, I would like to thank Peter for his commitment and significant contributions to Safestay over the last three years.

Ongoing Board Priorities

The Board remains focused on ensuring that Safestay executes its strategy in a disciplined and sustainable manner to create long-term value for all stakeholders, including our shareholders. In support of this objective, the Board continues to prioritise three key areas: Environmental, Social and Governance ("ESG"), People, and Strategic Execution:

ESG

As Safestay continues to grow its European portfolio, the Board remains mindful of the impact our activities have on our people, the environment and the communities in which we operate. We therefore seek to operate our hostels in a way that minimises environmental impact while supporting the local communities that make our destinations vibrant and attractive to travellers.

People

Ensuring that Safestay has the right leadership, culture and organisational capabilities to deliver its strategy remains a core priority for the Board.

Over recent years we have strengthened the senior leadership team and continued to develop the Group's operational infrastructure. A key component of this has been the ongoing development of Safestay's Commercial Hub in Warsaw, which supports the Group's growing portfolio through centralised expertise in areas such as revenue management, marketing and digital services.

Our people remain fundamental to the long-term success of the business and satisfaction of our guests. On behalf of the Board, I would like to thank all Safestay colleagues for their continued commitment and contribution during the year.

Strategic execution

The Board remains focused on executing Safestay's strategy to crystallise value for shareholders while supporting sustainable growth. During 2025, the Group continued to deliver progress despite the challenging trading backdrop across the European hospitality sector. Key developments during the year included selected disposals of UK assets alongside continued expansion of the Group's European portfolio together with the introduction of new capital-light growth initiatives including franchising.

FY26 Current Trading & Outlook

In the year to date, ABR is marginally ahead of the prior year. However, occupancy levels have been impacted by consumer behaviour changes as a result of the conflict in the Middle East as well as by tourist levies introduced in several European destinations, which are increasing the overall cost of travel. 

The Board remains mindful of continuing cost pressures including increased business rates and employment costs in the UK and VAT changes in Europe. Against this backdrop, management remain focused on proactive cost control and pricing optimisation.

The Board also continues to consider various strategic options to deliver sustainable growth and to crystallise value for shareholders, including potential further disposals and/or sale and leasebacks of certain of the Company's properties. 

Looking ahead, the Board remains positive about Safestay's long-term prospects as an established international operator in the significant and fragmented European hostel market.

Larry Lipman Chairman29th June 2026

Business Model

The Safestay business model is to develop and operate a brand of contemporary, well-located hostels in the UK and key tourist cities in Europe. The Safestay brand is positioned at the premium end of the hostel spectrum, appealing to a broad range of guests. Core elements of the model are:

· Development: Expansion is being pursued through a capital‑light strategy, supported by leasehold arrangements, partnerships, and alliances, with contemporary, stylish refurbishments ensuring consistency with the Safestay brand

· Operations: Deploying strong hostel expertise, cost control and technology to drive efficiency and achieve best-in-class operating margins

· Brand: Building Safestay's brand value

· Scale: Building the platform to efficiently add further hostels to the Group

· People: Investing in the right people where automation cannot be adopted; and

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

Operational Review 2025

Through a balanced expansion strategy across key European destinations and a strong focus on maximising revenue through operational excellence, Safestay seeks to create value for all of its stakeholders. In a particularly challenging climate, the business proved both resilient and responsive to macroeconomic pressures, as we focused on strengthening brand recognition, leveraging technology as a platform for growth and progressing a more capital-light operating model.

Resilience in a challenging environment

Price pressures dominated the wider hostel market in 2025, driven by a combination of increased competition from lower-cost long-haul destinations and rising operating costs, including increased business rates and employment costs in the UK, VAT changes in Europe and the introduction of tourist levies in certain destinations, which will increase travel costs for consumers.

Despite these headwinds, management remains focused on proactive cost control and selective pricing adjustments to safeguard profitability while seeking to maintain occupancy and service standards. Safestay also demonstrated relative outperformance compared to global averages. According to Cloudbeds, global hostel Average Daily Rates (ADR) fell by 8.2% between 2024 and 2025. Safestay's ABR declined by 6% to £20.06 (2024: £21.43) across the portfolio. Similarly, while UK hostel occupancy declined by 11.6%, Safestay recorded a significantly smaller reduction of 3.9%, helping to mitigate the decline in RevPAB.

With over 877,000 overnight stays across the portfolio, this performance reflects both the strength of the brand and the effectiveness of operational and strategic interventions during the year - delivered across three core areas of focus.

1. Technology as a platform for growth

Following the implementation of Cloudbeds, a single integrated property management system across the Group, we enhanced our ability to manage pricing, availability, reservations and payments in real time. This centralised platform improved data visibility and consistency across the portfolio, enabling faster and more informed commercial decision-making, supporting dynamic pricing strategies, and reducing operational inefficiencies. This approach, alongside our central booking office in Warsaw, underpinned efforts to drive direct bookings, reduce reliance on third-party online travel agents and protect margins. With a 37.5% direct booking rate, versus a global rate of 26.3%, Safestay retained more revenue per booking than the industry average.

We also implemented a focused search engine optimisation strategy, supported by optimised content and blog activity. By enhancing brand visibility across both traditional and AI-driven search platforms, this investment helped strengthen the booking pipeline in late 2025 - stabilising rates and providing a platform for more assertive pricing into 2026.

Strong early performance this year reflects the success of this approach. As does the entry of the US into the top five source countries for Safestay guests. Following a direct digital marketing campaign in North and South America, the US is now our fifth largest market, demonstrating growing international recognition and the emergence of new demand channels.

2. A carefully considered, capital-light expansion strategy

Alongside disciplined day-to-day cost control - including careful supplier negotiation and a deliberate decision not to reduce headcount - we took strategic action to strengthen the balance sheet and improve capital efficiency. The sale and franchise-back of the Edinburgh property released capital while keeping the asset within the Safestay portfolio. Similarly, the transition of the Brighton property from an ownership to a lease model reduced debt and interest exposure while maintaining brand presence in a key UK destination.

This capital-light approach supports a more flexible and scalable growth model, and enabled our continued expansion across Europe. In June 2025, we signed a 12-year lease for a new 300-bed hostel in Naples, which commenced operations in Q1 2026 and is expected to be fully operational for summer 2026. Located within a converted monastery, the property offers a distinctive customer experience and marks our second site in Italy, a priority market for future growth.

3. Brand strength through new franchisees and partnerships

While well established in the hotel sector, franchising remains relatively underdeveloped within the hostel market and represents a significant opportunity for Safestay. We continued to expand our franchise network this year, signing two new properties in the high-end ski resort of Kitzbühel, Austria. These additions support our move towards an asset-light strategy, while the brand's strength is expected to support demand for franchise partners.

Beyond portfolio growth, we continued to explore partnerships that enhance brand reach and customer access. A new marketing alliance with Zostel in India provides mutual promotional and cross-selling opportunities, with shared service delivery and ethical standards - strengthening Safestay's positioning as a global platform for like-minded travellers.

Chief Financial Officer's review

The challenging trading environment across the Group's European portfolio meant that Group revenue for the year declined to approximately £20.6 million (2024: £23.0 million). Adjusted EBITDA decreased to approximately £3.7 million (2024: £6.5 million) reflecting the revenue performance as well as inflationary pressures, in particular, higher staff costs across several of the Group's UK and European properties and significant pricing pressures on consumers.

Financial Key Performance Indicators

Occupancy is calculated by dividing the number of beds sold over the year by the number of beds available when the hostels were opened during the same period. Occupancy for the year was 70.0% (2024: 75.2%), primarily, reflecting softer demand across several European markets and reduced group bookings in certain locations.

ABR is calculated by dividing room revenues by the number of beds sold over the year. ABR for the year was £20.06 (2024: £21.43). Although ABR was lowered in selected periods to stimulate demand, this was not sufficient to offset the wider market‑driven decline in occupancy.

Revenue

Total revenue for the year ended 31 December 2025 decreased to £20.6 million (2024: £23.0 million including discontinued operations), down 10.5% on the previous year. Revenue from continuing operations decreased by 8.5% to £20.6 million (2024: £22.5 million).

Room revenue was £17.6 million (2024: £20.0 million) and food and beverage and ancillary sales were flat at £3.0 million (2024: £3.0 million).

Sales in the UK business decreased by 6% to £8.5 million (2024: £9.0 million). UK sales accounted for 41% (2024: 39%) of revenue generated by the Group. Sales from our overseas businesses totalled £12.1 million (2024: £14.0 million), representing a 14% decrease year-on-year.

Adjusted EBITDA

The Directors consider that Adjusted EBITDA, a non-statutory measure, provides a key measure of performance since it removes the impact of non-trading activities. These non-trading activities are considered adjusting items. Adjusted EBITDA represents earnings before interest, tax, depreciation, amortisation, and one-off non-recurring adjusting items ("adjusting items"). Following the introduction of IFRS16 from 1 January 2019, rent charges are no longer included in EBITDA as they are shown in lease finance cost and right-of-use depreciation.

Given the challenging trading environment, Adjusted EBITDA fell by 43% in the year to £3.7 million (2024: £6.5 million), total bed nights decreased by 6% to 877,674 (2024: 931,688) and the occupancy rate was 70% (2024: 75%). The Average Bed Rate decreased by 6% to £20.06 (2024: £21.43) reflecting the highly competitive pricing environment. As a result, total Revenue Per Available Bed decreased to £16.43 (2024: £18.56).

A reconciliation of operating (loss) / profit to Adjusted EBITDA has been performed below:

The comparative figures for 2024 presented in the reconciliation table have been restated to reflect the impairment of goodwill of approximately £2.6 million. This adjustment ensures comparability with the current year's presentation. Further details of the restatement are provided in Note 12.

As outlined in the Strategic Report, the Group reported a statutory loss after tax of £10.1 million (2024 restated: £3.5 million), which includes goodwill and fixed asset impairment charges of £6.0 million (2024 restated: £3.1 million). This write-down of approximately £6.0 million represents the principal driver of the loss for the year.

Finance Costs

Finance costs were £3.1 million (2024: £3.4 million) as follows:

The Group recorded finance income of £2,000 (2024: £12,000).

The Group refinanced all of its borrowings in January 2024 into a single £16 million term loan (the "Term Loan") and added a new £2.5 million Revolving Credit Facility ("RCF") to support future growth plans. The Term Loan and RCF are for five years and were provided by existing lender HSBC.

The Term Loan interest rates are £4.4 million at 3.955%, £10 million at SONIA but capped at 4.75% with a floor of 3%, and £1.6 million at SONIA, all with an additional margin of 2.6%. The RCF has a rate of SONIA plus a margin of 2.85%. The Term Loan became repayable at £0.1 million per quarter from March 2025, with the fourth‑quarter repayment leaving the account on 2 January 2026. Interest in both the Term Loan and RCF continues to be payable quarterly. In 2025, the Group also repaid the full £2.5 million Revolving Credit Facility, made a further £1.8 million repayment on the main Term Loan and £1.2 million to Sheldon Pension Fund and Sentpark Capital Limited. Total repayments in the year amounted to £5.5 million. An additional £0.3 million was repaid in January 2026 against the Term Loan.

In addition, the Group has a loan in Germany (£0.1 million) and previously held a loan in relation to the purchase of the freehold property in Brighton, totalling £1.2 million. This Brighton‑related loan was fully repaid in December 2025 following the sale and leaseback of the Brighton property.

Since the introduction of IFRS 16 from 1 January 2019, the Group's hostel leases have been accounted for as lease liabilities. At the lease commencement date, the Group recognises a right‑of‑use asset and a lease liability on the statement of financial position. The rental charge is replaced with interest and depreciation. In 2025, the finance costs include £1.4 million of lease interest (2024: £1.6 million).

Earnings per Share

The Group made a loss after tax of £10.1 million in the year (2024 restated: loss of £3.5 million). Earnings per share for the year were a loss of 15.48p compared to a loss of 5.46p in 2024 (as restated), or a loss of 6.06p from continuing operations. The increased loss is primarily attributable to lower occupancy levels and a reduced ABR, together with an impairment charge of £6.0 million relating to tangible fixed assets and goodwill.

Cash flow, capital expenditure and debt

Net cash inflow from operating activities was £4.5 million (2024: £6.9 million) primarily due to the reduction in ABR, being only partially offset by tight cost control.

The Group had cash balances of £2.7 million at 31 December 2025 (2024: £1.4 million).

Outstanding bank debt at 31st December 2025 was £14.1 million (2024: £19.5 million) and is broken down as follows:

Lease liabilities increased to £27 million (2024: £23.7 million), primarily as a result of lease modifications. In addition, lease modifications were recognised during the year in accordance with the terms of the lease agreements.

The Group also holds a £7.2 million (2024: £7.2m) property finance liability, which forms part of total borrowings. This balance relates to financing secured against Elephant and Castle and remains a material component of the Group's overall debt structure.

The gearing ratio (exclusive of lease liabilities) is 52% (2024: 59%).

Net asset value per share in 2025 was 22.21p (2024: 43.32p).

Going concern

In assessing the going concern position of the Group for the consolidated financial statements for the year ended 31 December 2025, the Directors have considered the Group's cash flow, liquidity, and business activities.

During 2025, the Group recorded Adjusted EBITDA of £3.7 million (2024: £6.5 million).

During 2025, Safestay took significant steps to strengthen its balance sheet and secure long-term operational flexibility through the sale and franchising of its Edinburgh Cowgate property and the sale and leaseback of its Brighton freehold property. The Edinburgh transaction, completed on 1 December 2025, generated £5.35 million in cash proceeds while retaining brand presence under a 10‑year franchise agreement, providing fixed annual income of £75,000 plus performance‑based fees. Similarly, the Brighton transaction delivered £3.125 million in proceeds under a 15‑year leaseback arrangement, with a rent‑free period supporting the Group's £1.0 million investment in converting the property into a 200‑bed hostel scheduled to open in summer 2026. Together, these transactions provided liquidity to repay indebtedness, enhance working capital, and underpin Safestay's ongoing growth ambitions while maintaining operational integration of key assets within its platform.

In May 2026, the Group exchanged contracts for the sale of its Glasgow freehold property for £5.1 million. The transaction forms part of the Group's ongoing strategy to improve cash flow, reduce indebtedness, and strengthen the balance sheet. The net proceeds will be applied towards loan repayments and working capital requirements, thereby enhancing financial resilience. Importantly, this disposal is aligned with the Group's medium and long‑term strategy to expand its footprint across Europe, focusing on asset‑light growth through franchising and leasehold structures.

In June 2026, the Group served notice to terminate its lease at Safestay Berlin Kurfürstendamm ahead of the contractual expiry on 31 December 2026. The Property is operated through Hotel Auberge GmbH, an indirect wholly owned subsidiary of Safestay plc. Following termination of the lease, the Group intends to place Hotel Auberge GmbH into liquidation. Exiting the site now is expected to improve the Group's future cash profile and remove a loss-making operation from the portfolio.

The Board considers that the combination of strengthened liquidity, reduced leverage, and continued operational integration of key assets provides a robust platform to support the Group's going concern assumption and delivery of its strategic ambitions.

As part of their going concern assessment, the Directors have prepared forecasts for a minimum period of twelve months from the date of approval of the financial statements. In addition, certain adverse scenarios have been considered for the purposes of stress and sensitivity testing. Refer to Note 1 for further information on the assumptions and judgements applied.

Upon consideration of this analysis and the principal risks faced by the Group, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, being a period of at least 12 months from the date of this report. Accordingly, the Directors have concluded that it is appropriate to prepare these financial statements on a going concern basis.

Non-financial KPIs

The Board also considers non-financial KPIs when evaluating the performance of the business. The Directors consider Guest Response Scores to be a key metric of the business's performance, guest satisfaction and marketing effectiveness.

The following guest satisfaction metrics are derived from TrustYou, an independent guest feedback platform, and are based on data collected across 18 operational Safestay sites:

While guest recommendation rates declined year‑on‑year, stronger scores in location and value‑for‑money underscore the Group's sustained focus on delivering quality.

The Group is investing targeted capex to bring all sites to premium status, while also enhancing customer service processes to ensure timely handling of complaints and improved guest satisfaction. These measures are expected to mitigate the impact and support recovery in performance.

Principal risks and uncertainties

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

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

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

Business risks

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

A proportion of Safestay's business in the UK comes from Europe, including several school groups. In addition, over 59% of the turnover is generated from hostels located in mainland Europe. The business is therefore exposed to changes in the source market, schools' education and travel policies and any fluctuations arising in the market from the 'Brexit' process and travel restrictions implemented by governments, or school governance bodies.

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

There is also the risk of higher energy and other supply costs. The Company is seeking to mitigate the risk of higher energy costs by engaging a utility broker to help identify opportunities for reducing consumption, and other cost savings are being targeted.

The Group's brand is a key asset, and its value is closely tied to guest experience, service quality, and public perception. There is a risk of reputational damage from operational failures, negative publicity, or brand infringement. To mitigate this, the Group maintains brand standards across all locations, actively monitors guest feedback, and takes prompt action to address issues. Brand assets are also legally protected by registered trademarks.

IT and system risks

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

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

In addition, the Group recognises the growing risk of cyber threats, including phishing attacks, malware, and unauthorised access to systems, which could result in operational disruption, financial loss, or breaches of data privacy.

To mitigate these risks, the Group has implemented multi-factor authentication across key systems, provides staff training to raise awareness of phishing and cyber threats, and conducts simulated phishing tests. Firewalls, anti-malware protection, regular system updates, and data recovery protocols are also in place to support resilience and ensure business continuity.

Property risks

The Group operates hostels across Europe, many under lease agreements, exposing it to risks such as rising rental costs, lease renewals on unfavourable terms and landlord financial stability. Macroeconomic factors and local regulatory changes may also affect property costs and expansion opportunities.

In addition, the Group must maintain its properties to ensure safety, compliance, and guest satisfaction, as failure to do so could lead to increased costs, reputational harm, or regulatory breaches.

To mitigate these risks, the Group conducts thorough due diligence before entering lease agreements, maintains strong landlord relationships, and regularly reviews its property portfolio to ensure alignment with strategic goals. Maintenance is managed through a proactive programme supported by planned capital investment.

Expansion and regulatory risks

Accessing expansion opportunities at the right price and in the right locations is, by its nature, an opportunistic exercise. Whilst the leadership team has a track record in securing properties to support business growth, there can be no guarantee that future opportunities will be secured on acceptable terms. The Board believes that changes in the real estate market, including the potential availability of converted office and retail assets, may create opportunities for the Group over time.

Expansion in new jurisdictions and changes in regulation in countries where Safestay already operates increase the complexity of the Group's compliance obligations when compared with a business operating in a single jurisdiction. Safestay plc is a listed business and as such is bound to a very high level of compliance. The Board is composed of six experienced Non-Executive and Executive Directors who have experience in hospitality and marketing as well as a strong understanding of regulatory and compliance topics. Moreover, the Group works with local law firms in each country where it operates to gain access to local expertise and support local compliance, including in relation to obtaining relevant licences. As opposed to other hospitality sectors, such as the sharing economy or private rental, the hostel sector is built on strong regulation plus existing fundamentals and trade licences, which may reduce the likelihood of sudden regulatory change compared with less regulated accommodation models.

Financial risk

The Group refinanced all its borrowings in January 2024 into a single £16 million Term Loan and added a new £2.5 million Revolving Credit Facility ("RCF") to support future growth plans. The Term Loan and RCF are for five years and were provided by existing lender HSBC.

The Term Loan interest rates are £4.4 million at 3.955% £10 million at SONIA but capped at 4.75% with a floor of 3%, and £1.6 million at SONIA, all with an additional margin of 2.6%. The RCF has a rate of SONIA plus a margin of 2.85%. The Term Loan became repayable at £0.1 million per quarter from March 2025, with the fourth‑quarter repayment leaving the account on 2 January 2026. Interest in both the Term Loan and RCF continues to be payable quarterly. In 2025, the Group also repaid the full £2.5 million Revolving Credit Facility, made a further £1.8 million repayment on the Term Loan and £1.2 million to Sheldon Pension Fund and Sentpark Capital Limited. Total repayments in the year amounted to £5.5 million. An additional £0.3 million was repaid in January 2026 against the Term loan.

Any increases in SONIA or base rate will increase the cost of these loans and therefore impact the net profit of the business (a 0.5% change in interest rate would impact the net profit before tax by £87,975 (2024: £92,475)). Strict financial controls are in place to ensure that monies cannot be expended above the available limits or to breach any banking covenants.

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

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

Brand and customer perception risk

Safestay's brand and financial performance could be adversely affected by negative customer reviews arising from poor service standards or inconsistent guest experiences. The Group mitigates this risk through a strong operational focus on customer service, with particular emphasis on cleanliness, safety and staff training, which are subject to regular internal reviews and audits. Guest feedback is actively monitored across major online booking and review platforms, enabling management to identify issues promptly and implement corrective actions at property level. Ongoing initiatives include enhanced service standards, improved response times to customer feedback, targeted staff training programmes and continuous investment in property maintenance. Management believes these measures support positive guest experiences, protect brand reputation and contribute to improving customer review scores over time.

Financial risk management

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

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

Interest rate risk

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

Liquidity risk

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

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

Foreign currency risk

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

Interest rate risk management

The Group is exposed to interest rate risk on its borrowings and carefully manages its interest rate risk on an ongoing basis. During the year, the Group also repaid the full £2.5 million Revolving Credit Facility, made a further £1.8 million repayment on the Term Loan and £1.2 million to Sheldon Pension Fund and Sentpark Capital Limited.

This risk is mitigated as the Term Loan interest rates are £4.4 million at 3.955%, £10 million at SONIA but capped at 4.75% with a floor of 3% with only £1.6 million subject to changes in SONIA.

Interest rate sensitivity

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

Based on bank borrowings, at 31 December 2025, if interest rates were 0.5% higher or lower and all other variables were held constant, the Group's net profit would increase or decrease by £87,975 (2024: £92,475). This is attributable to the Group's exposure to interest rates on its variable rate borrowings.

Liquidity risk management

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

The Strategic Report was approved by the Board of Directors and signed on its behalf by:

Carlos Salas Dual

Chief Financial Officer

29th June 2026

Consolidated Income Statement for the Year Ended 31 December 2025

Consolidated Statement of Comprehensive Income

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

Consolidated Statement of Financial Position

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

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

2. Segmental analysis

An analysis of the Group's revenue from external customers for each major product and service category is as follows:

Like‑for‑like income represents revenue generated from sites that were operational in both the current and prior year, thereby excluding the impact of acquisitions, disposals, or closures. This measure provides a comparable view of underlying performance by removing year‑on‑year distortions and is presented alongside Total Income for clarity.

The Group recognises income from lease payments from operating leases as income on a straight-line basis over the term of the contract.

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). The CODMs, who monitor the performance of these operating segments as well as deciding on the allocation of resources to them, have been identified as the Executive Directors. Currently the operating segments are the operation of hostel accommodation in the UK and Europe.

An additional material geographical area has been identified in respect of Spain to meet the disclosure requirements of IFRS 8 due to its significance to the Group.

The Group provides a shared services function to its operating segments and reports these activities separately. Management does not consider there to be any other material reporting segments. Management revisit this at each year end.

The most important measures used to evaluate the performance of the business are revenue, EBITDA and adjusted EBITDA, which is the operating profit after excluding depreciation and amortisation, and removing non-recurring expenditure which would otherwise distort the cash generating nature of the segment.

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

3. DISCONtinued operations and liabilities held for sale

Following the classification of the asset group of "Vienna Hotel" as held-for-sale in September 2023, the operational performance was classified as discontinued in 2024. The Hostel formed part of the Europe operating segment. The lease for the Vienna Hotel was surrendered on 31 July 2024.

4. Tax

The Group tax charge is made up as follows:

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

5. PROPERTY, PLANT AND EQUIPMENT