Scandic Hotels Group AB
STO:SHOT
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
36.88
75.9
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good morning. Welcome to the Scandic Hotel Group's conference call. [Operator Instructions] Please note this event is being recorded.
We have with us Jens Mathiesen, President and CEO; and Asa Wiren, CFO. I would now like to turn the conference over to Jens Mathiesen. Please go ahead.
Thank you, operator, and good morning, everyone, and thank you for joining us this morning for our presentation of Scandic's report for the second quarter of 2022.
If you start turning to Page 2, I will take you through the brief summary of the results. As you all know, we did a pre-announcement on the 9th of June due to the surprisingly strong financial development where we said that we expected net sales for the second quarter of SEK 5.2 billion to SEK 5.4 billion and adjusted EBITDA in the range of SEK 1 billion and SEK 1.1 billion. The actual adjusted EBITDA ended up at SEK 1.83 billion, which is the highest quarterly result ever for Scandic.
So there has really been a remarkable improvement from the negative results we saw in Q1 to an all-time high level in the second quarter. This dramatic improvement was driven by a combination of strong hotel market and high efficiency and cost awareness. Our occupancy rose to 63% in the quarter and room rates have continued to improve.
Our RevPAR was fully in line with the levels of the second quarter in 2019, and room rates were actually a bit higher than they were in 2019. We have also had a very busy quarter when it comes to our wholesale portfolio. We have opened 6 hotels with a total net increase of 1,570 rooms in the quarter, and we have prolonged a large number of lease contracts as well.
Please turn to Page 3, where you can see the quarterly adjusted EBITDA development since the beginning of 2019. There was an extreme sequential improvement from the negative result in the third quarter that was impacted by restrictions to more than SEK 1 billion in the second quarter, as mentioned. You can also see that the adjusted EBITDA in the second quarter was almost twice as high as it was in the second quarter of 2019 despite the fact that RevPAR was on the same level.
There is obviously a number of factors behind this strong performance. We have benefited from strong markets, and we have, as you know, had very strong focus on efficiency and cost awareness with a clear ambition to be a more profitable company than we were before. Our total workforce was slightly lower than in 2019 despite high occupancy at our hotels and almost 6% more rooms in operation than we had in the end of the second quarter of 2019.
We did have some extraordinary items that Asa will talk about shortly in a few minutes. But even if you adjust for those, underlying profitability was at an all-time high level.
Please turn to Page 4. Here, you can see market occupancy in the Nordic countries. We have seen a similar pattern in all countries with a very rapid improvement from March and onwards as restrictions were lifted from early in mid-February. This has been a broad-based recovery with strong demand, both within leisure, corporate travel and meetings.
It has been especially pleasing to see a very robust improvement in the big cities where occupancy now on average finally is back from the -- let's say, for the first time since 2019. And Scandic's average occupancy rate was around 55% in April, 65% in May and 70% in June. And based on current bookings, we foresee continued strong occupancy during the remainder of the summer.
Please turn to Page 5. The market continues to see a positive trend in room rates. This shows price development based on market statistics indexed to the corresponding month in 2019. We have seen a positive trend in room rates ever since the low point in April, May 21st -- sorry, '21, and the markets are now above 2019. The increase is significantly above in Norway as you see.
Pricing remains a key priority for us. We need to continue to drive price, especially with the current strong occupancy rates that we are seeing at present. Also, we must make sure that we compensate for the underlying cost inflation, both near term and in a longer perspective, which we are now doing.
Please turn to Page 6. This is market RevPAR, i.e., revenues per available room indexed to the corresponding month in 2019. All in all, markets are above 2019 levels, index 104, with Norway being the strongest market in the Nordics. Finland has lagged the other markets, partly due to the fact that they removed restrictions later and the lacking of the long-haul business still from Asia. RevPAR is driven by higher prices and a bit lower occupancy.
Please turn to Page 7. As we have also mentioned in the beginning, we have strengthened our wholesale portfolio significantly in the quarter with the opening of a number of hotels. We have postponed several of these openings from last year, and we are, of course, very, very happy with the timing of these openings as we have been able to get a flying start with hotel openings in a strong market.
We did, in total, open hotels with 1,974 rooms in the second quarter. So nearly 2,000 new rooms, while we exited 2 hotels. So our net portfolio expanded by 1,570 rooms. We ended the quarter with almost 6% more rooms in operation than we had 3 years ago. If you look at the pictures, you can see Scandic Kiruna in Northern Sweden with 231 rooms that was opened in April, and it replaces the old Scandic Ferrum that was -- that has been closed in the city.
We have also Scandic Goteborg Central in Gothenburg, with 1251 rooms, 2 new hotels in Copenhagen. Scandic's largest ever, Scandic Spectrum with 632 rooms and Scandic Norreport with 100 rooms. You can also see Scandic Oceanhamnen located by the sea in Helsingborg in Southern Sweden with 184 rooms. And the last one shows Scandic Holmenkollen Park, just outside Oslo that was reopened after a total renovation and extension and now with 376 rooms.
Please turn to Page 8. Due to the large number of openings in the previous quarter, our pipeline amounts now to 2,181 rooms. We have, in the past quarter, added 2 hotels to our pipeline. Tromso in Norway, a new hotel with more than 300 rooms that is planned to open in 2025. We have also announced a takeover of a hotel in Horsens in Denmark with 132 rooms that will replace our current hotel in that city that we will exit late this year.
This is, I think, one small example of our ongoing work with the portfolio management in order to optimize our wholesale portfolio, both in terms of customer offering, but certainly also when it comes to profitability. We have a clear ambition to add new hotels to our pipeline and to grow the business over time, but we are not stressed by this. Our main focus has been to ensure that we become as efficient and resilient as possible so that we can grow from a position of strength. And the second quarter really shows the effect from that ambition.
Please turn to Page 9. We have prolonged 25 lease agreements on these contracts during this year at terms that enable good profitability and balanced risk for Scandic. In June, we agreed as part of this with Pandox on the extension of lease contracts for 15 hotels with a total of almost 3,600 rooms at unchanged lease terms. We've also agreed on a renovation program of SEK 700 million until 2027 that will be shared by Pandox. And in relation to this, Pandox will invest in ventilation and heat recovery in several of the hotels that will reduce energy costs and improve our guest satisfaction.
With that, please turn to Page 10. And I will hand it over to Asa, who will take you through our financials.
Thank you, Jens, and good morning, everyone. Let's turn to Page 11, please. And there we can see the financial -- the adjusted EBITDA, which was previously mentioned, that ends up at SEK 1.83 billion with a margin of 20.5% for the quarter.
State aid in the quarter in Finland and other Europe related to historical periods. Our result in Norway included an estimate just above SEK 100 million, which is related to the agreement with the Norwegian state for preparedness for housing of refugees from Ukraine. So approximately SEK 60 million was received in connection with the opening of new hotels. And the underlying margin, which is 15.6% was all-time high level even when we had adjusted for those items that sums up to SEK 261 million.
The main driver is improved occupancy and rate, especially in the big cities, lower cost, higher efficiency and as mentioned, more rooms in operations. The rent rebate amounts to SEK 28 million in the second quarter. For Q2 and Q3, we estimate rent rebates to -- about SEK 15 million per quarter. State aid related to historical periods in other Europe is estimated to SEK 25 million for the third quarter.
And the estimated impact from the Norwegian contracts mentioned signed for July and August, dependent on actual occupancy, which is roughly estimated to about SEK 50 million for Q3. During the quarter, the ramp-up of staff on hotel levels continued with some extra staff due to training. Employees above hotel level continues to be well below 2019 levels. This is very encouraging to see that our efforts to drive rate and efficiency really paid off during the second quarter.
Then please turn to Page 12, where we can see the really strong cash flow for the quarter, which ends up at SEK 1.3 billion despite relatively high investments and it's driven, of course, by the strong underlying result in combination with the positive working capital development. And due to the increased revenue, the variable lease liability increases.
If we then turn to Page 13, one can notice that our net debt fell from SEK 4 billion to SEK 3.3 billion in the quarter. Our credit facility currently amounts to SEK 5,352 million following an amortization of SEK 484 million in the quarter, and our facility expires in December 2023, and there will be no more amortizations according to our bank agreement.
We have a liability as previously mentioned related to deferred VAT and social costs in Sweden that increased by SEK 176 million to SEK 688 million in the quarter. This will be repaid gradually from October this year to April 2027. During the quarter, the liability was reclassified from working capital to net debt, that is net debt increased and working capital decreased by SEK 508 million. This has no impact on the operating cash flow for the quarter. It's only a reclassification. The convertible bond with a conversion price of SEK 43.36 matures in October '24, with a potential dilution of 45.5 million shares.
And then if we finally turn to Page 14. There, we can see our net financial items. The reported financial net was minus SEK 479 million according to IFRS 16. There was an interest expense of SEK 365 million. So the financial net, excluding IFRS 16 is minus SEK 115 million. The noncash convertible interest was minus SEK 37 million and the actual paid financial items were minus SEK 83 million, as you can see on the bottom of the table.
With that said, please turn to Page 15, and I hand it back to you, Jens, for some final comments.
Thank you very much, Asa. And then finally, a few comments on our, I would say, near-term outlook. So please turn to Page 16. We have a very high level of preparedness, I think, for the future challenges such as cost inflation and eventual weakening of the economy if that happens. And we maintain focus on strengthening our resilience to ensure high and stable earnings overall.
Related to the airline strike going on, at this stage, we see no signs of any negative impact from that. So with all that is going on and with the results we have seen in June, we expect based on that current booking pace continued strong wholesale market for the coming months.
And with that, I hand the word back to you, operator.
[Operator Instructions] The first question is from the line of Andre Juillard with Deutsche Bank.
A few questions, if I may. First one is about bookings. When you look at your pipe, where are you versus 2019 in terms of occupancy and prices for the next few months? And do you have any visibility for the autumn, especially regarding the MICE segment? First question.
Second question is about energy and staffing. So we are in an inflation environment. We know that there are some shortages almost everywhere, but could you give us some more color about what you are experiencing for the staffing? And in terms of energy, do you see any risk on that side?
And last question, if I may. Do you see any opportunities in terms of development coming in the market with independent hotels, which could be interested to get some franchise or things like that in your different countries?
Thank you very much for your questions. First of all, when we look at the outlook, as I mentioned, it looks very stable. It looks like we will continue in the coming months with the same level of activity as we have seen in the last period, meaning that it is driven mainly by the domestic traveling, which is very strong and above '19 levels, fairly strong into Nordic levels that are almost on same level and European market that are growing. Still the intercontinental is behind. So we are -- we do not expect either a boom from Asia or U.S. coming in. But we expect that domestic and into Nordic and European to continue to be very stable, which is on -- in total, you can say approximately on levels that are just below on occupancy, what you saw in total '19. But remember that we also have 6% more rooms in operation. But we see prices quite strong and, I would say, way above '19 levels.
So we have a good feeling of that. Also when we look at the bookings on business on books. Actually, we have a solid business on books also when it comes to expectations of both the levels and the pricing for the coming period. When I look at the MICE segment you referred to, I think, of course, you know how this is. Some of the later autumn is too early to predict. But when we look at the first part of it, looking into, for instance, September, September looks very solid. We have a very strong business on the book right now, meaning that we think we will reach the normalized level we also saw in '19 already in this early autumn.
So right now there's no -- nothing indicating that the market is not continuing also when it comes to the meeting segment. So meeting segment has been fairly strong and back to '19 levels during the last month, and we expect that also in the early autumn. When we look at the energy and staffing...
Sorry to interrupt you. Just in terms of segmentation, do you see really a strong driver, both in the leisure and the corporates? Or do you see a stronger trend on the leisure side?
No. I think definitely, it's strong right now in both segments. June was strong in both segments. We have actually seen that corporate traveling has picked up very solidly in May and June. And we also think that a lot of the meeting business that drives the early autumn will, of course, be linked to the meeting segment. So I think you will see the growth in both segments.
We have seen a very strong leisure demand, and that might be pent up as was requested also in general, how much of this is pent up. We really don't know. But that's quite a strong pickup in general. And we expect that trend to continue year-on-year that over time, leisure will outperform corporate like we have seen in the last many years, like 10, 12 years back, we have seen increases of leisure with 5%, 6% before the pandemic on a year-on-year basis, and we saw corporate only with some 3%, 3.5%. And we think that trend will continue after this long pandemic. So it seems that segments are back. It seems that meetings are back, corporates are back, which is very promising, I think.
When you look at the energy, remember that we also mentioned in the Q1 that we have an energy hedge. So we already covered on that one. So we -- what we have announced both in this report and earlier, and also I can add to it if you have further questions, but we have an energy hedge, meaning that we have quite a solid roof on the increases of that one.
When it comes to staffing, it has definitely been a challenge, especially, I would say, in March, April, early May, it was a huge challenge for us because everybody was fighting to get staff in. And we have employed approximately 6,000 team members since 1st of January. So it's a lot of team members coming in to Scandic that needs training and attention and need to get up to speed with our operational model. But I think all of the current Scandic team members have been extremely good at taking these new team members under the wings and making sure that they are getting their training and education into Scandic's operational model as fast as possible. So I think that has gone on.
We are still below '19 levels in total. And that is mainly because of us keeping a very focused eye on securing that we are a bit more efficient than we were pre-pandemic and that we have stayed with far less people above hotel level, which we will continue to do. So we will maintain, let's say, a team member level that are in total below '19 levels when you adjust for everything.
When you look at the developments and opportunities, and if that's the other one was okay for you, if you have added any extra questions to that before I go to development?
Yes, sorry. Just following up on the staffing. Did you see any improvement on the wages, significant improvement or not?
No, we have -- I think in our markets, we have union agreements that are going on for -- and that is which we need to renegotiate, you would say next year, we need to negotiate for all the blue collar workers for -- in Denmark and in Sweden. We have negotiated in Finland, a 1-year agreement with 2 percentage points up. And we have negotiated an agreement in Norway with 3.7% up.
So if you look at the combination of all of this, I think it's fairly stable and might be around 3%. When you look at the -- which is, of course, below cost inflation and inflation in general. So this is something we need to handle next year. And we will be, of course, following what happens with the trends during the autumn of the inflation.
When you look at the white collar workers, we are far less of the white collar people today than we were before. That's also benefiting us. We have taken out quite a lot of managers and securing that the first priority for us is to be there for the guests, and we are a bit more lean in the, let's say, upper levels and headquarters and support offices in the countries than we were before. So even with small increases in salaries with these 3%, 3.5%, we manage that also by being less people. So I think all in all, we are satisfied with the development and see no risk either in the autumn of high cost increases on the salaries.
Development opportunities, absolutely. Our main priority is to secure Scandic being a even more resilient company and get back with some very strong financials, as you have seen today. So we are delivering an extreme strong cash flow, and of course, by that, decreasing debt. And that will continue also in the next quarter. So we -- our focus is to securing a very strong balance sheet. And from that, of course, new opportunities arises in the after-part of that. But right now we have all focused in securing this before signing up a lot of deals. But of course, if something is in front of us, if something is interesting, we will definitely be looking at it.
And I think you will see in the coming years more transactions in general in our segment, as I have also mentioned earlier, because now you see very, very strong trading and of course, other industries that are having issues, then, of course, investors are looking more and more into our industry, which seems to be very solid right now.
Okay. Maybe last question about government help. You've been benefiting in H1 from help in Norway and Sweden. Are you expecting some more helps in H2? Or are we coming to an end on that side?
I think we have only one common lift on that one, which is that we expect something in Germany to come in and the amount was...
SEK 25 million we expect for Q3 related to other Europe or Germany.
And that is it. And so we don't expect anything else from governmental support and which is a good news because we really want to operate the hotels open and not with restrictions and close down. So this is fairly good there.
And one should also bear in mind that these are something that was based on 2021. So we only account for it actually when we get cash in bank.
[Operator Instructions] Again, the next question is from the line of KJ Bonnevier with DNB Markets.
Yes. Congratulations to an exceptional recovery. Sorry, I came in a little late to the call. So maybe you have already answered these questions. And just interested to listen to your reflections about the strong new openings you have had recently and how these hotels have been taken on in the market and what you see?
Thank you very much, and thank you for your comment. Yes, we are also very proud of this fantastic result, all-time high in the quarter. Of course, we are very satisfied with that. And I also think these openings -- these openings are coming in on a very good timing for us in a strong market. And I also think it's big machines in Gothenburg Central has had a flying start. A lot of activities in Gothenburg, a lot of new venues coming up, a lot of meeting business popping into the hotel, and we have also seen a lot of concerts being booked in during the summer and early autumn, which is very normally solid and good for Gothenburg. So that is very good.
And the other -- I think the other hotels, of course, Kiruna was -- we closed down the one we have, and we opened a new one with 60 more rooms. And this has also had a fine start. We actually have had very high occupancy levels and pricing in this hotel. If you look at the Copenhagen, of course, a lot of capacity has come into Copenhagen during the last years. But right now Copenhagen had had a very strong period. And if we look into, you can actually see some of it there when you look at the figures in our contracts and when you give -- get access to market data in Copenhagen, you see high occupancy in Copenhagen, of course, related to a lot of activities.
They have had a huge fares for doctors, 7,000 doctors coming in. They have had 2 or 3 funds. And we've managed to open this hotel right in the middle of that and beginning of that. So we have definitely benefited from that. So also Spectrum and Norreport has had very solid start. So all in all, a very good opening and timing for these openings, and it looks very solid also when I look at the business on books for these new openings. So timing is good for these openings.
I heard in the previous question you alluded to looking at the opportunity of say extending the new room pipeline as it's -- basically, everything you had in the pipeline is more or less down in operation, I guess. How do you see that? I saw you did some portfolio management also in Horsens, in Denmark. Is those the kind of opportunity that you see now that you can maybe get out of a couple of the older properties you have in the portfolio and get into new projects in similar towns? Or is it more an opportunity now to extend, say, total capacity in different regions for you?
I think we will continue to do both. I think we will definitely see that we will continue to, I would say, do our portfolio optimization because we have, I think, I can't give the exact number, but some 10, 11 hotels we have actually left during the last 2 years. And we will continue to look over leaving hotels that are extremely CapEx demanding or underperforming resource-wise or we don't see the right profile for in the future. And we will continue to add like we did in [indiscernible] with strong, nice, bigger hotels in the central locations that are driving both within leisure and meeting segment, what we would see as the future demand.
So I think you will definitely see that we will continue to add to this pipeline. Of course, it's a smaller pipeline now. And for sure, because we have had all our focus, and I think everybody has had the focus for the last 2 years of securing the company through the pandemic. But now that we are coming out of it, we see more and more things popping up. And of course, people are looking -- from the landlord side, they are looking on interest rates and everything. And they also look at what happens with offices and should they stay more into hotels, et cetera. But for sure, we will see some years now ahead of us with a smaller number of hotels coming into the market, which is good, I think, for the recovery overall.
[Operator Instructions] This concludes our question-and-answer session. I would now like to turn the conference back to Jens Mathiesen for any closing comments.
Thank you very much, and thank you all for dialing in, and I wish you all a very good summer and speak to you soon. If you have any further questions, just give us a call. You can call also directly if you have anything else popping up. Otherwise, I wish you all a great, great summer and looking forward to speak to you again.
Thank you.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.