Scandic Interim Report Q2 2019 – Good Demand and Improved Underlying Growth

Second quarter in summary

  • Net sales rose by 2.2% to 4,853 MSEK (4,748), while organic growth was 0.8%. For comparable units, net sales fell by 1.6% due to negative calendar effects, as the Easter holiday fell in April this year. The underlying growth was positive excluding the calendar effects.
  • Adjusted EBITDA totaled 559 MSEK (618), corresponding to a margin of 11.5% (13.0). Profit for the comparable period was impacted positively by 31 MSEK due to the market valuation of forward contracts for electricity.
  • Earnings per share amounted to 1.67 SEK (2.51). Adjusted for the effect of finance leases, earnings per share totaled 2.16 SEK (2.55). Profit for the quarter was negatively impacted by calendar effects.

The first six months in summary

  • Net sales rose by 4.5% to 8,919 MSEK (8,539). Organic growth was 2.5% while net sales for comparable units rose by 0.2%
  • Adjusted EBITDA totaled 719 MSEK (733), corresponding to a margin of 8.1% (8.6). Profit for the comparable period was impacted positively by 38 MSEK due to the market valuation of forward contracts for electricity.
  • The free cash flow improved in the period and amounted to -71 MSEK (-416).
  • During the period, several measures were implemented to further improve profitability, cash flow and market position.
  • Earnings per share amounted to 2.02 SEK (1.12). Excluding the effect of finance leases, earnings per share totaled 3.03 SEK (1.25).

CEO’s comments in summary

I am happy to report an adjusted EBITDA of 719 MSEK (733) for the first six months of the year. This means an underlying improvement, considering a non-recurring item of 38 MSEK in the comparative period. In addition, we improved our free cash flow in the period, partly due to better working capital development and lower capex.

Demand has increased in all markets. In Norway, the effect of increased hotel capacity in Oslo was fully offset by a strong increase in demand in the country as a whole in the period.

It is gratifying that we have started to note effects from several initiatives while the Restel acquisition keeps developing well, both in terms of higher cost efficiency and strengthened market shares.

Measures to strengthen profitability, cash flow and market position

Scandic’s margins have been relatively stable in recent years, despite strong sales growth. We are striving to improve this and have therefore initiated several measures to further strengthen the company’s profitability, cash flow and market position.

  • A review of the portfolio, which we expect will lead to exits of several hotels that are not contributing financially
  • An increased focus on improving profitability in our restaurant and conference operations.
  • Measures to improve the capital efficiency and profitability of our renovation and expansion investments.
  • Increased visibility in the market and increased focus on international customers and distribution.
  • An increase in the company’s digitization rate to improve cost efficiencies and the customer experience.

The pipeline is strong for years to come

Scandic has a strong pipeline comprising 5,180 rooms in total and a rapid renewal rate in our hotel portfolio. During the quarter, we opened the signature hotel Marski by Scandic in central Helsinki, which had been closed for renovations, and we announced the addition of two new hotels, both of which are planned to contribute positively to the margin. In the third quarter, we look forward to opening Scandic Falkoner, a 334-room hotel in the attractive Frederiksberg area of Copenhagen.

Similar market conditions expected in the third quarter

Market conditions are expected to remain stable in the next quarter. For Q3 we expect sales growth for comparable units of between 1 and 2%. In addition, more hotels in operation is expected to contribute approximately 2.5% to net sales.

Jens Mathiesen
President & CEO

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