Year-end report January - December 1999

Year-end report January - December 1999 * Income after tax amounted to SEK 83.4 M (61.5), corresponding to earnings per share, excluding non recurring revenue of SEK 5.21 ( 4.00). * The operating net rose by SEK 31.0 M to SEK 217.8 M (186.8). * The cash flow from operating activities was SEK 119.1 M (96.8), or SEK 7.94 per share (6.46). * The Board proposes a dividend of SEK 2.75 (2.00) per share. * Pandox expands its strategy - acquires Hotellus. Total property revenue for 1999 reached SEK 272.0 M (234,6). The operating net increased by SEK 31.0 M to SEK 217.8 M (186.8). The increase is mainly attributable to acquired hotel properties and the robust hotel market, which generated increased revenue from turnover and income-based lease agreements. Direct yield, adjusted for acquired and divested properties, for the period was 9.6% (9.3). Net financial items amounted to SEK -77.5 M (-71.3). Consolidated income after tax improved by SEK 21.9 M to SEK 83.4 M (61.5). Pandox acquired four hotel properties during the year - Provobis Star Lund, Scandic Hallandia in Halmstad, First Grand Hotel Borås and Quality Hotel Nacka - for a combined acquisition cost of SEK 331 M. A hotel property, the 52-room Hotel Bohème in Gothenburg, and equipment in a hotel operating company was sold for a total capital gain of SEK 5.3 M. Pandox has reached an agreement with the shareholders of Hotellus International AB to acquire the company. For information regarding the acquisition, please refer to todays separate press release. Pandox Board of Directors has decided to expand the current strategy of the company, to include an extension of the geographic strategy to encompass northern Europe. A more detailed account can be found in the year end report. "1999 was another successful year for Pandox. For the fourth consecutive year, our disposable cash flow increased by more than 20%. Income growth has been achieved in a good hotel market through profitable acquisitions and feasible developments in our hotel property portfolio. The prospects for further growth in earnings in 2000 are favourable", says Anders Nissen, Managing Director of Pandox Hotellfastigheter AB. For additional information, contact: Anders Nissen, Managing Director, Pandox Hotellfastigheter, +46-8-506 205 50 Nils Lindberg, Chief Financial Officer, Pandox Hotellfastigheter, +46-8- 506 205 53 Attachment: Full Year-end Report. Year-End Report 1999 Pandox Hotellfastigheter AB (publ), 1 January - 31 December 1999 * Income after tax amounted to SEK 83.4 M (61.5), including non recurring revenue of SEK 5.3 M (1,4), corresponding to earnings per share of SEK 5.21 ( 4.00). * The operating net rose by SEK 31.0 M to SEK 217.8 M (186.8). * The cash flow from operating activities was SEK 119.1 M (96.8), or SEK 7.94 per share (6.46). * The Board proposes a dividend of SEK 2.75 (2.00) per share. Hotel market 1999 The Swedish hotel market continued to develop favourably in 1999. The number of rooms sold increased by 3% to 14.9 million, corresponding to an occupancy rate of 47%. Occupancy growth for large hotels in Pandox prioritised areas exceeded the national average, with an occupancy rate of 62%. Revenue and operating net - property operations Total property revenue for 1999 amounted to SEK 272.0 M (234.6). Property expenses excluding depreciation totalled SEK 54.2 M (47.8). The operating net rose by SEK 31.0 M to SEK 217.8 M (186.8). The increase compared with 1998 is largely attributable to the surplus from hotel properties acquired in 1998 and 1999 and the robust hotel market, which generated increased revenue from turnover and income-based lease agreements. Adjusted for acquired and divested properties, the operating net amounted to SEK 229.2 M (194.6). The adjusted direct yield before administrative costs for the period was 9.6% (9.3). The adjusted direct yield including property-related administrative costs was "9.2% (8.9). Revenue and income - hotel operations As of 1 January 1999 Pandox conducts no hotel operations. In 1998, Pandox operated Hotell Park Astoria in Enköping. Income Consolidated income after tax improved by SEK 21.9 M over the preceding year, and net income for the period was SEK 83.4 M (61.5). The increase in earnings is mainly due to a higher operating net from property operations, and primarily from acquisitions. Net financial items decreased by SEK 6.2 as a result of increased borrowing pertaining to acquired properties. Income was also affected by a capital gain of SEK 4.1 M from the sale of Hotel Bohemé and SEK 1.2 M in proceeds from the acquisition and sale of the hotel operating company and FF&E (Furniture, Fixture amd Equipment) in connection with the Quality Hotel Nacka acquisition. In total, nonrecurring income amounted to SEK 5.3 M (1.4). Financing and cash flow Net financial items in 1999 amounted to SEK -77.5 M (-71.3). The Group's interest-bearing liabilities as per 31 December 1999 totalled SEK 1,463.6 M (1,281.8). The loan portfolio has a distributed maturity structure with an average fixed interest rate of 2.9 years. The average interest rate at year-end was 5.62 per cent. The debt ratio for the properties was 61 per cent. Disposable liquid assets, including unutilised overdraft facilities of SEK 50 M, amounted to SEK 53.9 M (107.9). Cash flow for the period, before change in working capital, was SEK 119.1 M (96.8). Property portfolio In 1999, Pandox acquired four hotel properties. Pandox took over the Provobis Star Hotel in Lund in January, the Scandic Hallandia in Halmstad on 1 April and First Grand Hotel in Borås on 1 July. In September an agreement was signed for the acquisition of Quality Hotel Nacka (formerly Fogg's Hotel) from AMF-p and hotel operations from the previous operator. When the hotel was taken over on 1 October, hotel operations were transferred to Choice Hotels Scandinavia ASA, which assumed tenancy on the same date. During the year, the 52-room Hotell Bohème in Gothenburg was sold for a capital gain of SEK 4.1 M. Pandox property holdings as per 31 December 1999 consist of 31 hotel properties with a combined 4,905 hotel rooms and floor space of 292,069 sq.m. The properties book value including hotel FF&E was SEK 2,393.7 M (2,085.2). Total investments during the period amounted to SEK 28.6 M (22.6) mainly pertaining to hotel product improvements in a number of properties. Pandox expands its strategy Pandox Board of Directors has decided to extend the geographical strategy to include northern Europe. A wider geographical area will provide a better scope for continued market growth and diversification of risk. Furthermore, the business cycle for hotels provides increased opportunities for profitable acquisitions. The Nordic markets are increasingly integrated and the hotel market in these countries is becoming more homogeneous. Several of the major hotel markets in northern Europe, for example Germany and Austria, are in an early growth phase and are expected to expand both faster and for a longer period of time than the Nordic markets. A hotel property company that invests in northern Europe is assumed to attract more interest from foreign investors, thus increasing the liquidity of the Pandox share. The new strategy states that Pandox shall own hotel properties in Stockholm, Gothenburg, Malmö, Swedish regional and university cities, as well as the capitals and other major cities in northern Europe. The hotel properties should be centrally located in major cities with good hotel market growth, as well as other natural locations such as airports and larger convention centres. The hotels should consist of minimum 100 rooms. More than 50 percent of the area should be related to the hotel operation. The hotel operation should be focused on the business and leisure segment. In order to strengthen its focus and increase its future potential, in all establishments outside Sweden, Pandox intends to work with operators that have a strong brand identity. This collaboration will take place under customary contractual forms. During 1999 Pandox working methods were further standardised and documented in order to create a platform for knowledge transfer in preparation for internationalisation. The market communications system is being extended to include all countries in northern Europe. Acquisition of Hotellus International AB Pandox has recahed an agreement with all shareholders of Hotellus International AB to acquire their shares in Hotellus. The acquisition will be financed through a combination of newly issued shares in Pandox and cash. The number of shares in Pandox will increase by 9,900,000 shares and new debt will be raised to finance the cash element, which totals approximately SEK 104 M. Hotellus is a pure hotel property company which owns 16 hotel properties, whereof eight in Sweden, three in Germany, three in Belgium, one in Copenhagen and one in London. The company's geographic strategy encompass northern Europe. Hotellus hotel property portfolio constitutes an excellent platform for the extended strategy and is expected to increase revenue and cash flow of Pandox. For more information concerning the acquisition, please refer to todays press release. Forecast for 2000 The hotel market in Pandox prioritised market segment is expected to maintain continued growth in 2000. Pandox earnings and cash flow per share, on an annual basis, is expected to increase by more than 10 percent, in the year 2000 compared to pro forma 1999, upon completion of the acquisition of Hotellus. CONDENSED CONSOLIDATED INCOME STATEMENT SEK M 199 199 9 8 Property operations Rental revenue 254 218 .0 .5 Other property 18. 16. revenue 0 1 Total property 272 234 revenue .0 .6 Property expenses - - 54. 47. 2 8 Operating net 217 186 .8 .8 Depreciation¹ - - 40. 36. 3 0 Income, property 177 150 operations .5 .8 Hotel operations Operating revenue 0.0 18. 5 Operating 0.0 - expenses² 18. 7 Income, hotel 0.0 - operations 0.2 Gross income 177 150 .5 .6 Administrative - - costs¹ 21. 19. 6 2 Nonrecurring 5.3 1.4 revenue/expenses Operating income 161 132 .2 .8 Net financial - - items 77. 71. 5 3 Income after 83. 61. financial items 7 5 Tax² 0.3 0.0 Income after tax 83. 61. 4 5 ¹ Depreciation of buildings is carried out at 1.5 per cent and amounted to SEK 33.0 M. Total depreciation for the period amounted to SEK 41.0 M, of which property operations accounted for SEK 40.3 M and administrative costs for SEK 0.7 M. (1998 a total of SEK 36.7 M, of which 36.0 M in property operations, SEK 0.2 M in hotel operations and SEK 0.5 M in administrative costs). ² Tax refers to estimated tax in companies acquired during the year. Pandox has substantial loss carryforwards, for which reason no tax expense normally arises. CONDENSED CONSOLIDATED BALANCE SHEET SEK 000s 31 Dec. 31 Dec. 1999 1998 Assets Properties 2,393.7 2,085.2 including equipment Other fixed 14.5 16.5 assets Current assets 17.9 14.6 Liquid assets 3.9 82.9 Total assets 2,430.0 2,199.2 Equity and liabilities Equity 883.6 830.1 Interest-bearing 1,463.6 1,281.8 liabilities Noninterest- 82.8 87.3 bearing liabilities Total equity and 2,430.0 2,199.2 liabilities CONDENSED CONSOLIDATED CASH FLOW STATEMENTS SEK 000s 1999 1998 Income after tax 83.4 61.5 Nonrecurring -5.3 -1.4 income/expenses Depreciation 41.0 36.7 Cash flow from operating activities before change in working capital 119. 96.8 and investments 1 Total change in working -7.7 - capital 172. 0 Cash flow from operating activities after change in working 111. - capital 4 75.2 Total acquisitions, sales - - and investments, net 348. 247. 8 8 Cash flow after - - investments 237. 323. 4 0 Total nonrecurring 5.3 1.4 income/expenses Change in financial fixed 1.4 1.0 assets Change in interest-bearing 181. 203. loans 7 5 New share issue 0.0 204. 5 Dividend - - 30.0 18.8 Total external financing 153. 390. 1 2 The year's change in - 68.6 liquid assets 79.0 KEY RATIOS Property-related key 1999 1998 ratios Book value of properties including equipment, 2,39 2,08 SEK M 3.7 5.2 Total property revenue, 272. 234. SEK M 0 6 Operating net, SEK M 217. 186. 8 8 Adjusted operating net, 229. 194. SEK M 2 6 Direct yield 1, % 9.6 9.3 Direct yield 2, % 9.2 8.9 Financial key ratios Interest coverage 2.05 1.82 ratio, times Return on total 7.0 6.6 capital, % Return on equity, % 9.7 7.6 Equity/assets ratio, % 36.4 37.7 Cash flow from operating activities before change in working 119. 96.8 capital, SEK M 1 Investments, SEK M 28.6 22.6 Property acquisitions, 331 260 SEK M Data per share (SEK) Net income for the 5.56 4.10 period Cash flow 7.94 6.46 Equity 58.9 55.3 0 4 The number of shares after the new share issue in January 1998 is 15,000,000. Financial calendar Annual General 30 March Meeting 2000 Interim report 26 April January - March 2000 Interim report 28 August January - June 2000 Interim report 27 October January - September 2000 Stockholm, 7 February 2000 Anders Nissen Managing Director Definitions Property-related Total management revenue The sum of rental revenue and other property revenue. Operating net Property management revenue minus operating and maintenance costs, property tax, ground rent and other property expenses. Adjusted operating net Operating net adjusted for properties sold and acquired during the year. Direct yield 1 Adjusted operating net in relation to the book value of properties and hotel equipment at the end of the period. The book value of hotel equipment is included in the denominator, since equipment rent is included in the numerator. Direct yield 2 Adjusted operating net including property-related administrative costs in relation to the book value of the properties. Property-related administrative costs The portion of total administrative costs directly related to management and development of the properties. Other administrative costs pertain to central administration and costs for maintaining the company's stock exchange listing. Financial Interest coverage ratio Income after net financial items plus financial expenses, in relation to financial expenses. Return on equity Income after net financial items and paid tax in relation to average equity. Average equity has been adjusted for the new share issue. Return on total capital Income after net financial items plus financial expenses, in relation to average total assets. Equity/assets ratio Equity at the end of the period in relation to total assets. PROPERTY HOLDINGS AS PER 31 DECEMBER 1999 Facility No. of Floor rooms space, sq.m. Scandic Hotel Slussen, 292 18,416 Stockholm Provobis Star Hotel, 269 18,573 Sollentuna1 Radisson SAS Arlandia 334 15,260 Hotel,Arlanda Quality Hotel Nacka 146 10,830 Scandic Hotel, 150 6,955 Upplands-Väsby First Hotel Royal 103 4,900 Star, Älvsjö Total Stockholm 1,294 74,934 Radisson SAS Park 318 21,998 Avenue, Gothenburg Total Gothenburg 318 21,998 Scandic Hotel St. 265 21,485 Jörgen, Malmö First Express, Malmö 101 8,195 Provobis Hotel Kramer, 113 6,913 Malmö Total Malmö 479 36,593 Provobis Star Hotel, 196 15,711 Lund Radisson SAS Hotel, 209 12,166 Luleå Provobis Stora 116 11,378 Hotellet, Jönköping Scandic Hotel Winn, 199 10,580 Karlstad First Grand Hotel, 158 9,593 Borås Radisson SAS Hotel, 177 8,766 Östersund Provobis Billingen 106 7,743 Plaza, Skövde Scandic Hallandia, 133 7,617 Halmstad Quality Grand Hotell, 148 7,524 Kristianstad Radisson SAS Grand 117 6,832 Hotel, Helsingborg First Hotel, Linköping 133 6,540 First Hotel Plaza, 131 5,907 Karlstad First Hotel Linné, 117 5,831 Uppsala Scandic Klarälven, 143 5,694 Karlstad Scandic Hotel, Kalmar 148 5,485 Total regional centres 2,231 127,367 and university towns First Hotel Mora , 135 9,161 Mora Stadshotellet, 84 7,003 Sandviken Sten Stensson Sten, 80 5,833 Eslöv First Hotel Park 134 4,600 Astoria, Enköping Scandic Hotel, 99 3,335 Karlshamn Good Morning Hotell, 51 1,245 Boden Total other locations 588 31,177 Total Pandox 4,905 292,069 1 50%-owned by Pandox. Data refers to the entire property. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/07/20000207BIT00630/bit0001.doc http://www.bit.se/bitonline/2000/02/07/20000207BIT00630/bit0002.pdf