Year-End Report 1999

Scandic Hotels AB (publ) Year-End Report 1999 The year in brief * Income after net financial items amounted to SEK 372 million (274m), an improvement of 36 per cent. For comparable hotels, the year-on-year improvement was 28 per cent. * Net sales in 1999 amounted to SEK 5,320 million (5,004m), corresponding to an increase of 6 per cent. For comparable hotels, the increase was also 6 per cent. * Operating income amounted to SEK 354 million (308m), corresponding to an operating margin of 6.7 per cent (6.2%). * The cash flow remained strong and stood at SEK 239 million (101m) after investments and financial transactions. The cash flow from current operations totalled SEK 661 million (622m). * Earnings per share rose by 50 per cent to SEK 4.64 (3.10). * A dividend of SEK 2.00 (1.50) is proposed. * A total of 17 new hotels were added to the Group's portfolio during the year, in both Nordic markets and elsewhere. Four of the Group's new hotels are situated in Estonia, which is a new market for Scandic. Operations have been wound up at four hotels. Overall, the chain has boosted its room capacity by 2,055 rooms, corresponding to a growth of 10 per cent. * Since the end of the period, Scandic has reached an agreement regarding the sale of Hotellus to the listed hotel property company Pandox. As settlement for the deal, Scandic will mainly receive shares in Pandox. * In order to achieve a more efficient capital structure, Scandic's Board of Directors has decided to propose to the Annual General Meeting of shareholders that it authorizes the Board to take a decision regarding the buy-back of company shares in order to be able to use the shares that have been bought back to finance future acquisitions and to improve the return on equity and earnings per share. Market developments The market developments in those countries where Scandic operates hotels have generally been positive. In Sweden, there has been very limited capacity growth in the form of new hotels in the market, whilst demand has continued to rise. This has had a positive effect on both occupancy levels and prices. The market in Finland has developed along similar lines as the Swedish market, albeit at a slightly slower rate. In Helsinki, two new hotels opened for business, creating excess supply in the five-star segment and subduing prices and occupancy levels in the city. In Denmark, market growth was weak during the summer months, and this limited growth for the year as a whole. However, a recovery in demand was noted towards the end of the year. Looking to the year as a whole, hotel capacity in the Danish market rose slightly, whilst demand remained unchanged. This combination led to a slight drop in occupancy levels. However, price trends in Denmark have remained positive. The hotel market in Norway has for several years been characterized by rapid growth in capacity in the form of new hotels, particularly in the major cities. At the same time, demand has risen at an even faster rate, resulting in a positive growth in occupancy levels and prices. However, during the last six months of 1999, demand stopped rising, whilst capacity has continued to grow, albeit at a slower rate than before. Occupancy levels in Norway have therefore fallen, but remain high. As the result of the imbalance between supply and demand, prices in Norway have fallen over the past six months. In Estonia, a market in which Scandic started operating on 1 May, demand from international travellers, above all, has risen. At the same time, the competition in Scandic's segment has grown increasingly fierce due to the opening of new hotels and renovation of existing properties. The German market has continued to show positive growth, although the situation can vary considerably from city to city. Overall, demand has risen at a slightly faster rate than capacity, resulting in improvements in occupancy levels and prices. The new regulations introduced during the first quarter, which limit the extent to which value added tax on restaurant services can be deducted for tax purposes, have had an adverse effect on restaurant and conference business. Scandic's other markets have generally experienced positive growth, with the exception of Vienna, where hotel capacity has in the past year risen at a faster rate than demand. Scandic's business operations Scandic has enjoyed positive growth during the year, increasing its market share in all markets. Occupancy levels and room rates have risen for both Nordic and non-Nordic operations. The Swedish business accounts for the strongest growth. The Finnish business, which has now completed its first full year as a subsidiary of the Scandic Group, reported an increase in both market share and revenue per available room, as well as improvements in productivity. Even in Denmark and Norway, where the market climate has been weaker in 1999, Scandic has been able to report positive growth, with rising revenues per available room. Overall, Scandic's occupancy levels for its Nordic operations rose to 62.5 per cent (61.8%). The average room rate for the year was SEK 714. Due to a change in the reporting of breakfast revenues in Sweden, the average room rate reported in 1998 has been revised from SEK 694 to SEK 679. This means that the actual average room rate rose by 5 per cent. Calculated in the same way, the revenue per available room (RevPAR) rose by 6 per cent to SEK 446 (420). For the non-Nordic business, the average room rate amounted to SEK 628 (640) and the RevPAR amounted to SEK 397 (408). Adjusted for non- comparable units, the average room rate amounted to SEK 634 (617) and the RevPAR rose by 2 per cent to SEK 395 (389). In 1999, the Scandic chain added 17 new hotels to its portfolio and wound up operations at 4 hotels. This provided the chain with a further 2,055 rooms, corresponding to a 10 per cent increase in capacity. In Sweden, Scandic has taken over operations at the Swania Hotel in Trollhättan and Ariadne Hotel in Stockholm and, in Jönköping, opened the Portalen Hotel for business. The Group has also wound up operations at two hotels, one in Malmö and one in Fagersta. In Denmark, five hotels have been added to the Scandic chain's portfolio, including one in central Copenhagen, one in Århus, one in Grenå and two in Fredrikshavn. The last three hotels, owned by Stena Line, are operated by Scandic on behalf of the principal. The Group wound up operations at Scandic Hotel Vejen and at a hotel in Fredrikshavn. In Norway, Scandic Hotel Byporten opened for business in May. The hotel, situated close to Oslo's Central Station, has a direct link to the terminal for the new high-speed shuttle to Gardermoen Airport. Another hotel currently under construction in central Oslo is expected to open for business during the autumn of 2000. At the turn of the year, the Inter-Continental and Gateway Hotels in Helsinki changed names to Scandic Hotel Continental and Scandic Hotel Gateway respectively and were incorporated into Scandic's marketing systems. In consequence, the Scandic Hotel Continental is being re- profiled to fit into the volume segment favoured by Scandic as opposed to the over-represented five-star segment to which the hotel previously belonged. Also in the Finnish market, a franchise agreement has been reached with the Savoy Hotel in Mariehamn, which is now being operated under the Scandic brand. Another Scandic Hotel is currently under construction in the very centre of Helsinki. This hotel, which will have 350 rooms, is due to open for business in June 2000. Further, 23 of the 25 independent Finnish restaurants that were included in the acquisition of the Arctia chain were sold off during the first six months of 1999. This was in line with Scandic's strategy to be a dedicated hotel operator. Since the turn of the year, only one smaller restaurant remains. During the year, Scandic acquired 86 per cent of the Finest Hotel Group, an Estonian chain which operates four hotels with a total of 227 rooms. Two of the hotels are situated in Tallinn, one in Otepää and one in Pärnu. The two hotels in Tallinn were renamed as Scandic Hotels in June, whilst the remaining two changed names during the last quarter of the year. In the Benelux region, three new hotels have been added to the Group's portfolio during the last quarter. Two hotels in the Netherlands, in IJmuiden and Nijmegen, and one hotel in Belgium, the Albert Premier Hotel in central Brussels. These hotels are operated on behalf of the principal under management contracts. The hotels in Nijmegen and Brussels will be renamed as Scandic Hotels after refurbishment. The refurbishment of the hotel in Nijmegen is expected to be completed in June 2000, whilst the work at the Albert Premier Hotel is expected to be completed during the last six months of 2001. All of the above-mentioned hotels are leased by Scandic, with the exception of the hotels in Denmark owned by Stena and the three hotels in the Benelux region, which Scandic operates under management contracts. As mentioned previously, the hotel in Mariehamn is a franchise hotel. In January 2000, Scandic signed a lease in respect of a hotel in central Cologne. The hotel is due to open for business in September 2001 and will be operated under the Scandic brand. The hotel is situated near the railway station in direct connection to business districts, shopping areas and restaurants. ------------------------------------------------------------ Please visit for further information The following files are available for download: The full report The full report