Year-end report January - December 2001

Year-end report January - December 2001 · Income after tax for the year 2001, excluding nonrecurring revenue, totalled SEK 182.2 corresponding to earnings per share of SEK 7.31 (6.90). · Cash flow from operating activities increased to SEK 267.2 (228.2), which corresponds to SEK 10.73 (10.18) per share. · During the year two hotel properties have been acquired and two non strategic hotel properties have been divested. Total property revenue for 2001 amounted to SEK 575.1 M (497.7). The operating net rose by SEK 69.6 M to SEK 478.4 M (408.8). This increase is mainly attributable to the acquisition of Hotellus and hotel properties acquired in 2000 and 2001 as well as a high level of valueadding activities in the hotel property portfolio. For comparable units the increase was 2.0 percent. The adjusted direct yield for the period was 9.6% (9.6). Net financial expense for the period amounted to SEK -178.1 (-150.7). Corporate group income, after tax, exclusive of nonrecurring revenue, for the period improved by SEK 27.4 M and amounted to SEK 182.2 M (154.8). 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 were divested with a capital gain of SEK 8.6 M. These divestments are part of Pandox' strategy to concentrate on ownership in prioritised towns ands cities. As per December 31, 2001 Pandox owned 46 hotel properties with a total of 8 469 rooms and a book value, including hotel inventory, of SEK 5 036.8 M "2001 was another excellent year for Pandox with growth in revenue, income and cash flow. Pandox strategy with a chosen market segment, high quality hotel property portfolio has, together with active ownership and active risk management, had the desired effect to limit the risks in the portfolio", says Anders Nissen, CEO, Pandox AB. 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 Year-end report. Year-end report 2001 Net income for 2001, excluding non-recurring revenue, amounted to SEK 182.2 (154.8) M corresponding to earnings per share of SEK 7.31 (6.90). Cash flow from current operations rose to SEK 267.2 (228.2) M corresponding to SEK 10.73 (10.18) per share. During the year two hotel properties were acquired and two non-strategic hotel properties were sold. The Board of Directors proposes a dividend payment of SEK 4.00 (3.50) per share. Operations and strategy Pandox is a pure hotel property company creating increased cash flow and therefore added value for its shareholders through active ownership and specialist expertise. Pandox' strategy is to own one kind of asset - hotel properties. Its focus is strengthened by a prioritised market segment. Pandox is to own large hotel properties in Stockholm, Gothenburg, Malmö, in Swedish regional and university cities, as well as in capitals and other major cities in northern Europe. The hotel properties should be centrally located in natural and strong locations such as city centres, airports and convention centres. The hotels should be in the upper medium to high price range and focus on the business and leisure segment. The company is cooperating by means of strategic alliances with the most powerful players in the hotel market with well- known brands and developed business methods. Revenues are created by variable lease agreements related to the operators' turnover and income whose growth are stimulated by Pandox' active ownership. As of 31 December 2001, Pandox owned 46 hotel properties with approximately 8,500 rooms and a total area of 511,000 m2. The company has been listed on the OM Stockholm Stock Exchange's O list since 1997. The hotel market in 2001 The hotel business cycle in 2001 shifted from a high growth and peak pattern to pass the peak and is now in various stages of decline and levelling out with certain signs of recovery. After 11 September 2001 all of Pandox' markets in Northern Europe have recorded negative growth. Among other things, this is attributable to the fact that the current economic downturn is affecting large regional cities and capitals. In Sweden most markets recorded a weak but positive growth in RevPAR (average revenue per available room) in 2001. In spite of the weakening hotel market, the number of rooms sold rose by 1.2 per cent to 15.4 million, corresponding to a reduction in occupancy to 47.4 per cent (48.3) due to new capacity. Occupancy in Pandox' prioritised Swedish market segments amounted to 60.7 per cent (62.6) or a reduction of 1.9 per cent. However, the underlying demand has increased by 0.9 percent and the decrease in occupancy is an effect of new capacity. In the international markets where Pandox is represented, both Dortmund and Lübeck saw positive RevPAR growth. Generally, demand in the German market is down due to the economic decline. In the autumn, activity increased in Dortmund's trade fair and conference market which, along with several major sports events, contributed to increased demand for hotel services. The hotel markets in Brussels and London recorded a drop in demand, partly due to the terror attacks in America. Worst hit were the international deluxe hotels, airport hotels and conference hotels on the outskirts of London while business and leisure hotels in good locations were slightly less affected. In the last quarter, RevPAR fell by 30 per cent equally attributable to reduced demand and a drop in average prices. Copenhagen and Antwerp too saw a drop in demand. In Copenhagen it was predominantly the deluxe segment which suffered, while the decline in Antwerp can partly be attributed to an extraordinary 2000 when the city hosted the European Football Championships. To sum up, the changes in the hotel market had a relatively limited effect on Pandox' hotel property portfolio in 2001 thanks to its strategy with a selected market segment which limits the risk in the hotel property portfolio. A major event in Pandox business sphere in 2001 was the acquisition of Scandic by the Hilton Group. Pandox' hotel property portfolio comprised 28 hotels with the Scandic brand name and five hotels marketed under Holiday Inn. Following negotiations with Hilton it was agreed that five of the hotels are to be upgraded and rebranded as Hilton while, for the time being, the other hotels will continue to be operated under the Scandic brand. Revenue and operating net - property operations In 2001, total property revenue amounted to SEK 575.1 (497.7) M. For comparable units, the value growth of the portfolio was 2 per cent. Property costs excluding depreciation amounted to SEK 96.7 (88.9)M. Operating net rose by SEK 69.6 M to SEK 478.4 (408.8) M. This increase is attributable to contributions from the Hotellus acquisition, hotel properties acquired in 2000 and 2001, revenue-boosting investments plus active development of the existing portfolio. Adjusted direct yield before administrative costs amounted to 9.6 (9.6) per cent in the period. Adjusted direct yield including property related administrative costs was 9.3 (9.3) per cent. Revenues and income - hotel operations Revenues from hotel operations are entirely attributable to the former Hotel Albert Premier with 285 rooms in the centre of Brussels. The hotel is operated under a management agreement, which means that the operating company is owned by Pandox, but the hotel is managed by an outside management company. From mid-September 2001 the hotel has been operated by Hilton under the name Hilton Brussels City. Revenues for the period January to December 2001 amounted to SEK 39.7 (28.2) Mwith an income of SEK 0.4 (2.7) M. This positive result was achieved despite the fact that the hotel underwent extensive renovation and development work in this period. Income Group net income rose by SEK 34.1 M on the previous year and income amounted to SEK 190.8 (156.7) M. The improvement was mainly achieved by a growth in income in property operations. Income was given a further boost by nonrecurring revenue of SEK 8.6 M relating to a capital gain from the divestments of two hotel properties. Due to a loss deduction there is in principle no tax payable. Deferred tax calculated for the period amounts to SEK -28.2 (-27.0) M. Income tax is calculated in accordance with the Swedish Financial Accounting Standards Council's recommendation RR:9. Affected comparative figures in the income statement and balance sheet have been adjusted accordingly. Financing and cash flow In 2001 financial net amounted to SEK -178.1 (-150.7) M. The Group's interest-bearing liabilities amounted to SEK 3,178.5 (2,934.7) M as of 31 December 2001. The loan portfolio has a distributed due date structure with an average fixed-interest rate period of 2.3 years. The average interest rate on loans was 5.4 per cent at the end of the year. Financing of the Swedish properties was made in Swedish kronor while foreign properties were essentially financed in local currencies. The properties' mortgaging ratio was 64 per cent. Available liquid funds, including unutilised overdraft facilities of SEK 100 M, amounted to SEK 186.7 (116.4) M. Cash flow before changes in working capital and investments amounted to SEK 267.2 (228.2) M. Investments and divestments The Group's investments, excluding acquisitions of hotel properties, amounted to SEK 149.1 M in 2001. The main part of investments concerned product development in a number of hotel properties with the most extensive investments in Hilton Brussels City and Radisson SAS Arlandia. In 2001 Pandox divested the hotel properties Sten Stensson Sten in Eslöv and Scandic in Karlshamn with a capital gain of SEK 8.6 M. These divestments are part of Pandox' strategy to concentrate on ownership in prioritised towns and cities. Two hotel properties were acquired, namely Mr Chip in Stockholm-Kista and Högvakten in Helsingborg. Combined acquisition costs were SEK 142 M with a direct yield of 9 per cent. The hotel properties' book value, including hotel equipment, reached SEK 5,036.8 (4,784.5) M. Annual General Meeting and dividend The Annual General Meeting will be held on March 21, 2002 at 17.00 in the Auditorium at the Hilton Stockholm Slussen. The Board of Directors proposes a dividend of SEK 4.00 (3.50) per share, corresponding to 55(51) per cent of net income, excluding non recurring revenue, 2001 per share. The complete Annual Report for 2001 will be available at the offices of Pandox AB on Grev Turegatan 44 in Stockholm as of the first week of March, at which time it will also be distributed to the shareholders. Outlook Economic developments in Pandox' market area remain difficult to predict due to prevailing global uncertainties. Following the steep decline in the hotel market in the autumn, the market has now entered a more normal recessionary pattern where there are as yet no stable trends. However, Pandox' focused strategy, selected market segment and high quality hotel property portfolio create continued excellent conditions for further development of the company. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00810/bit0001.doc The full Year-End Report http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00810/bit0001.pdf The full Year-End Report