Snoozebox has announced a new lease finance package for up to GBP15.6M with SQN Asset Finance Income Fund.
The company said it expects to draw down around GBP10m of the facility in the next quarter, using the funds to increase its level of investment in new hotel room stock and accelerate its growth plans.
Chairman David Morrison said: “Whilst the benefit of the facility will have more of an impact in 2016 than next year, the additional financial muscle of the company will have a notable effect on our ability to capitalise on the strong demand we continue to see.”
Neil Roberts, investment manager, SQN Asset Finance Income Fund Limited, said: “Modular accommodation is an area which we are familiar with and our evaluation concluded that Snoozebox represents an attractive lending proposition, linked to a significant market opportunity.”
The company has also bolstered its senior management team, appointing Kate Ferguson as CFO, joining from the Carbon Neutral Company and James Latham as head of hotels. Latham joins Snoozebox after over 17 years at Whitbread where he held a variety of operational and business development roles, developing and rolling out Whitbread brands.
The announcements were made as the group reported that it had narrowed its first-half loss, reporting a loss of GBP2.3m, against GBP5.1m in the same period last year. The company said it had achieved consistently high occupancy levels, with room rates ranging from GBP160 to GBP330 per night.
Lorcán Ó Murchú, CEO, said: “I believe the progress made in the underlying operating model in the first half of the year, combined with the launch of the Next Generation Portable Hotel in the second half provides a platform on which to transform the performance of the business in 2015 and to scale the business in 2016.”
Shortly prior to the results and funding announcements, Snoozebox confirmed that it had signed a preliminary agreement to provide portable hotels at the 2018 World Cup in Saransk, Russia, allowing it to undertake a feasibility study and further negotiations. According to a report in the Moscow Times, Snoozebox will provide a temporary complex called Snoozebox Football Village, with a series of modified shipping containers providing 2,000 rooms on the shore of the Lukhovka reservoir.
It is also in active discussions for events including 2016 Rio Olympic Games and 2022 World Cup in Qatar.
In December the company announced the results of a strategic review in which it said that, in the UK alone, there were over 10,000 events each year, worth over GBP11bn in sleeping accommodation.
At the time it said that, in order to maintain leadership of this market, it would require investment “on a scale that warrants future funding”, something it has now achieved.
In the near term the company plans to grow the business in the UK and European markets, but is also looking to South America and the Middle East. In addition to events, it is seeing interest from a range of sectors including construction, energy, healthcare and local authorities.
As previously reported in Hotel Analyst, last year saw a tumultuous year for the company, in which it reported a full-year pre-tax loss of GBP4.4m, with founder and CEO Robert Breare stepping down on the day of the announcement.
The results themselves were delayed by auditor BDO, which is thought to have raised concerns over the way some revenues were to be reported. The group said that the shortfall was “related to the requirements for recognition of income under IFRS”.
CFO Chris Upton also resigned, to be replaced by Lorcán Ó Murchú, who moved into the CEO position in February this year.
In the first half of the year the group took the decision to limit the number of events it attended in order to overhaul the operating model and refine service delivery.
The group is not only looking at one-off events, but said that its strategy of long-term deployment for the current generation of Snoozebox hotel rooms meant that it was confident that the existing hotel room stock would be placed on a “semi-permanent” basis by the end of 2014.
The group said that the new hotel rooms were more flexible and efficient than the original stock, which would reduce deployment costs substantially and increase the size, scope and viability of the company’s addressable events market.
Planning permission for a 60 bedroom Snoozebox hotel at the Eden Project, in Cornwall, has been secured. The hotel will be deployed for an initial period of two years and is scheduled to open in October 2014.
In its May 2012 IPO, the group raised GBP12m, which, together with a further placing in the following November that raised GBP8.4m enabled the group to manufacture a total of 578 rooms.
The group offers two different models for those looking to add accommodation at their events; one with a fixed price per room which includes everything from delivery and operation, which sees the user fix the rate and receive all the revenue; and the other where the brand takes space at an event and then returns a guaranteed percentage of the room revenue (with potential for extra from food and beverage).
HA Perspective [by Chris Bown]: Snoozebox was an idea that promised much, but to date appears to have been dogged by a series of one step forward, two steps back moves. Renting out equipment shouldn’t be that complicated, and whether that’s temporary lighting, portable toilets or hotel rooms in boxes, logic suggests there ought to be some common issues – and plenty to copy.
High utilisation, minimum downtime, and shipping and set-up costs that are factored into overheads appear to be the key issues for rental. So Snoozebox’s focus on some longer term contracts appears sensible; but the idea of shipping 2,000 portable rooms to Saransk looks harder to make a business case for.
Closer to home, research suggests that the festivals market will continue to grow, while the music industry has rediscovered live events as a way to recoup revenues lost by the demise of album sales. With ageing hippies now looking for a more comfortable way to enjoy such events, Snoozebox could do worse than teaming up with one of the big boutique brands, to help access more guests with up to GBP330 per night spending power, who prefer Egyptian cotton to a sleeping bag.