Interim Report - nine months ending September 30, 2001

Interim Report - nine months ending September 30, 2001 · Income after tax for the period January - September 2001, excluding nonrecurring revenue, totalled SEK 132.4 M (112.5), corresponding to earnings per share of SEK 5.32 (5.21). · Cash flow from operating activities increased to SEK 197.1 M (164.7), which corresponds to SEK 7.92 (7.63) per share. · Two hotel properties were acquired for a total of SEK 142 M with a yield of 9 per cent and two hotel properties were sold with a capital gain of SEK 8.6 M. Total property revenue for the first nine months of 2001 amounted to SEK 430.3 M (349.3). The operating net rose by SEK 69.4 M to SEK 358.7 M (289.3). This increase is mainly attributable to the acquisition of Hotellus, a good hotel market and a high level of valueadding activities in the hotel property portfolio. For comparable units the increase was 4.3 percent. The adjusted direct yield for the period was 9.6% (9.5). Net financial expense for the period amounted to SEK -136.5 (-104.4). Corporate group income, after tax, exclusive of nonrecurring revenue, for the period improved by SEK 19.9 M and amounted to SEK 132.4 M (112.5). Starting in 2001 the Swedish Financial Accounting Standards Council's recommendation on income tax (RR:9) is applied. All comparative figures in the income statement and balance sheet have been adjusted in accordance with the new accounting principle. During the period the hotel properties Mr. Chip in Stockholm-Kista and Hotel Högvakten in Helsingborg have been acquired for a total cost of SEK 142 M and with a direct yield of 9 per cent. The hotel properties Sten Stensson Sten in Eslöv and Scandic Karlshamn have been sold with a capital gain of SEK 8.6 M. Outlook for 2001 Pandox believes that its focused strategy, the high quality of the portfolio and the chosen market segment will remain an excellent base from which the company can be developed. The downturn in demand, as a consequence of the downturn in the economy, will be distributed unevenly depending on town or city, hotel location and standard and brand name. Pandox market segment is expected to show continued good demand. Pandox income after the first nine months is well in line with the earlier forecast for 2001, which means that the forecast of an income, after tax and exclusive of nonrecurring revenue, of SEK 180 M is maintained. The tax that burdens the income consists mainly of deferred tax as the company has substantial loss deductions. For further information: Anders Nissen, Chief Executive Officer, Pandox, +46-8-506 205 50, +46 70 846 02 02 Nils Lindberg, Chief Financial Officer, Pandox, +46-8-506 205 53 Encl: Complete interim report. Pandox AB (publ) Interim Report January-September 2001 Increased revenue, cash flow and income · Income after tax for the period January to September 2001 amounted to SEK 132.4 M (112.5), excluding nonrecurring items, corresponding to earnings per share of SEK 5.32 (5.21). · Cash flow from operating activities increased to SEK 197.1 M (164.7), which corresponds to SEK 7.92 (7.63) per share. · Two hotel properties were acquired for a total of SEK 142 M with a direct yield of 9 per cent while two other hotel properties were divested for a total of SEK 33 M and a capital gain of SEK 8.6 M. Pandox revenue, cash flow and income continue to grow, with revenue increasing by SEK 81 M compared with the same period last year. Income before tax, excluding nonrecurring items, rose by SEK 23 M while cash flow saw a rise to SEK 197 M. The improved figures were mainly attributable to the acquisition of the Hotellus portfolio on 1 April 2000 but the increase in the value of the hotel property portfolio through active ownership has also been positive and, for comparable units, reached 4.3 per cent. Pandox is one of northern Europe's leading hotel property companies and has been listed on the O-list on the OM Stockholm Stock Exchange since 1997. Pandox' strategy is to focus on ownership of hotel properties in a selected, profitable and growing market segment, i.e. large and centrally located hotels in Stockholm, Gothenburg, Malmö, Swedish regional and university towns and cities as well as capitals and other major cities in northern Europe. At present, Pandox owns 46 hotel properties, comprising around 8,450 rooms and around 75 per cent of revenue is generated by strong international hotel markets, such as Stockholm, Gothenburg, the Öresund region, Brussels and London. Just over 95 per cent of the hotels are situated in strong hotel locations and 98 per cent are operated by well-known brands, like Hilton, Scandic, Radisson SAS and Holiday Inn. The lease structure, which consists of around 85 per cent of turnover-based leases, means that Pandox is linked to the underlying hotel market. An important issue at the moment is to survey and assess the current changes and patterns in the hotel market's business cycle. Just as important is the assessment of future demand to enable us to reduce risks and exploit changes in the market for profitable acquisitions and investments. Demand in the hotel sector is generally created by economic activity i.e. the hotel market's cycles are linked to the development of the GDP. This is a widely accepted fact. However, subsequent factors that may effect the RevPAR (Revenue Per Available Room) development in a specific month are significantly more complex. Factors creating preconditions for occupancy and average rates are local conditions, new capacity in the market, exchange rate changes, how developed a market is with regard to brands and segments, as well as extraordinary events. Changes in demand as a result of the economic downturn and the terrorist attack in New York have, up to now, mainly been attributed to reduced revenue in the higher price segment as well as in the northern European regions which have a high proportion of American tourists. Since Pandox' portfolio has a relatively low exposure to these types of revenue the negative effects have been limited to hotel properties in London and Antwerp. Sweden is Pandox' largest market and the Stockholm market the most important. The hotel market in Stockholm shows continued growth with regard to RevPAR compared with last year. The segment which has been affected the most up to now is the high price segment as well as the hotel market around Arlanda International Airport. Pandox forecasts a decline in the fourth quarter for the whole market while Pandox' selected market segments will perform better in comparison. The hotel market in Brussels continues to be strong and all indications are that developments in 2001 will be no different to the previous year. Demand in Copenhagen is rising while occupancy rates are falling as a result of new capacity. Average prices currently compensate for the falling occupancy rates, resulting in certain growth. The Pandox hotel Scandic Copenhagen with 484 rooms has attained a strong market position and has up to now seen strong growth. Pandox estimates that revenue in the last quarter of this year will be lower compared with the same period in previous years. As a result of its economic downturn, Germany has recorded a gradual fall in demand during 2001. The forecast for the whole year is between - 6 and -8 per cent and the fourth quarter will be the most disappointing. Pandox' three German hotels anticipate a reduction in line with the average. London has seen the worst development: a high proportion of tourists from the US which often belong to the higher price segment, new capacity in the market, a strong pound plus a downturn in the local economy have all made negative contributions to the hotel industry. The development of RevPAR stood at -6.3 per cent for the first eight months compared with the same period last year. For the remainder of the year this figure is expected to fall to between minus15 and minus 20 per cent. Around 7 per cent of Pandox' total income is generated in London. However, Holiday Inn Nelson Dock is expected to see losses slightly above the market average. The most significant event in the existing portfolio in this reporting period is the completion of the former Albert Premier in Brussels. The hotel, located in the centre of Brussels with 287 rooms, was converted from a tourist hotel into an international hotel with high standard during the last 18 months. The hotel's future market position is to compete with hotels in the upper full service segment. In September the hotel also changed its name to Hilton Brussels City which means that it will now be marketed through one of the world's best-known distribution systems. Revenue and operating net - property operations Property revenue for the period January to September 2001 totalled SEK 430.3 M (349.3), an increase of SEK 81.0 M. Operating net increased by SEK 69.4 M to SEK 358.7 M (289.3). The increase was attributable to contributions from the acquisition of Hotellus, positive contributions from hotel properties acquired in 2000, increased rental revenue due to a positive hotel market and active development efforts in the current portfolio. For comparable units, the rate by which the value of the portfolio was increased in the period was 4.3 per cent. Adjusted direct yield in the period, before administrative costs, amounted to 9.6 per cent (9.5). Adjusted direct yield including property-related administrative costs amounted to 9.3 per cent (9.2). Revenue and income - hotel operations Revenue from hotel operations are wholly attributable to the former Hotel Albert Premier, which has 287 rooms and is situated in the centre of Brussels. The hotel is operated through a management agreement, which means that the operator is operating the hotel under the supervision of Pandox. From mid-September the hotel is operated by the Hilton Group under the name Hilton Brussels City. Revenue from hotel operation activities for the period January to September 2001 amounted to SEK 28.1 M with an income of SEK 0.4 M. This positive result was achieved despite the fact that the hotel underwent an extensive refurbishment and development programme in this period. Income Operating income in the period amounted to SEK 301.5 M, an increase of SEK 64.0 M on the previous year. Financial net stood at SEK -136.5 M (- 104.4) and income before tax was SEK 165.0 M (133.1). The improvement is mainly attributable to the acquisition of Hotellus, a fast increase of the value of the portfolio and revenue-boosting investments. Income was also improved by a nonrecurring revenue item of SEK 8.6 M, pertaining to capital gains from the divestment of two hotel properties. Due to loss deductions, no tax liabilities occurred. Calculated deferred tax for the period amounts to SEK -23.8 M (-20.3) resulting in income after tax of SEK 141.0 M (112.5). Financing and cash flow Financial net in the period amounted to SEK -136.5 M (-104.4). The Group's interest-bearing liabilities as of 30 September 2001 amounted to SEK 3,224.4 M (2,955.5). The loan portfolio has a distributed due-date structure with an average fixed-interest rate period of 2.4 years. The average interest rate on loans was 5.76 per cent with a mortgaging ratio of 64 per cent. Available liquid funds, including the unutilised part of an overdraft facility of SEK 100 M (50), amounted to SEK 163.0 M (150.7). Cash flow from operating activities before changes in working capital and investments in the period was SEK197.1 M (164.7). Investments and divestments Pandox Group's investments amounted to SEK 118.4 M in the period. Investments mainly concerned product improvements in a number of hotel properties. The largest investments were made in Radisson SAS Arlandia and Hilton Brussels City. In the period, the hotel properties Sten Stensson Sten in Eslöv and Scandic Karlshamn were divested with a total capital gain of SEK 8.6 M. The divestments are in line with Pandox' strategy to concentrate its ownership on prioritised cities. The Group acquired two hotel properties in the period, namely Mr. Chip in Stockholm-Kista and Högvakten in Helsingborg. Total acquisition costs amounted to SEK 142 M, resulting in a direct yield of 9 per cent. The book value of the hotel properties including hotel equipment was SEK 5,055.0 M (4,634.8). Forecast Pandox believes that its focused strategy, the high quality of the portfolio and the chosen market segment will remain an excellent base from which the company can be developed. The downturn in demand, as a consequence of the downturn in the economy, will be distributed unevenly depending on town or city, hotel location and standard and brand name. Pandox market segment is expected to show continued good demand. Pandox income after the first nine months is well in line with the earlier forecast for 2001, which means that the forecast of an income, after tax and exclusive of nonrecurring revenue, of SEK 180 M is maintained. The tax that burdens the income consists mainly of deferred tax as the company has substantial loss deductions. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/22/20011022BIT00480/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/22/20011022BIT00480/bit0001.pdf The full report