Scandic Reports Q1 2021 Results

First quarter in summary

  • Net sales decreased by 72 percent to 930 MSEK (3,343).
  • Average occupancy dropped to 17.5 percent during the quarter. Levels of activity were particularly low in the larger cities.
  • In all countries, continued restrictions from authorities to reduce the spread of the coronavirus had a strong negative effect on the hotel market.
  • Adjusted EBITDA was -775 MSEK (-174). Results for the quarter were impacted positively by state aid of 247 MSEK and rent discounts of approximately 143 MSEK.
  • Excluding IFRS 16, earnings per share amounted to -4.90 SEK (-37.63).
  • On March 26, Scandic carried out an offering of convertible bonds, which raised 1,609 MSEK in gross proceeds.
  • Agreement to extend existing credit facilities of 6,650 MSEK until December 31, 2023.
  • Scandic Arlandastad, a 150-room hotel, opened in January.

Events after the reporting date

  • The Extraordinary General Meeting held on April 21 passed the Board of Directors’ resolution to issue convertible bonds.
  • On April 14, Scandic announced that it had recruited Fredrik Wetterlundh as Chief Human Resources Officer. Fredrik will start in August.
  • In April, Scandic Grand Central opened in Helsinki.

CEO’s comments in summary

As expected, occupancy remained low during the quarter. Above all, demand in the big cities was affected by the lack of business travelers combined with an almost non-existent range of entertainment where, among other things, restaurants were closed or had limited hours of operation. 

We expect a recovery driven by domestic leisure travelers, when restrictions now are eased as vaccinations reduce infection rates. Just as a year ago, customers are still making decisions at the last minute, with bookings largely taking place in conjunction with announcements of easing of restrictions. Last year, occupancy increased from an extremely low level in April to just over 40 percent in July, and we expect a similar pattern this year. This summer, however, occupancy is expected to be higher than last year, driven by better demand in the big cities. At the beginning of April, occupancy was at about the same level as during the first quarter, but it has since increased slightly and was around 22 percent in the last week. We expect a significant positive effect on demand as the restrictions are eased.

Scandic has developed a hotel offering for broad target groups, which makes us well positioned for recovery. In the years before the pandemic, we saw clear structural growth in leisure travel. We are convinced that this trend will continue when the market stabilizes, and we have a high focus on further adapting our customer offering to it.

Business travel is expected to change to some extent in the future with a higher proportion of digital meetings, and we recently launched hybrid meetings to address this trend. We are seeing a pent-up demand for meetings this autumn among our customers to re-establish relationships within their own organizations and with their customers after a year where many people have been working from home. Although we are naturally affected by any change in meeting behavior, we believe that a relatively large share of domestic business travel will return to pre-pandemic levels. This applies not least for accommodations related to local infrastructure, construction and renovation projects and our leading position as a supplier of accommodations for sports groups.

At the end of March, we carried out an offering of convertible bonds at the same time as we reached agreements with our lenders to extend existing credit facilities until the end of 2023. These measures are expected to cover Scandic’s liquidity needs until the market has normalized and Scandic has a positive cash flow.

Scandic has a strong market position with a well-known and established brand and high customer satisfaction. With a sharply reduced cost level and an efficient operational model, we have the prerequisites for achieving good margins when the market recovers. Given the limited near-term visibility in the market, Scandic will on June 15 publish an update on market conditions.