Scandic’s interim report Q3 2019 – Improved profitability and increased sales growth

THIRD QUARTER IN SUMMARY

• Net sales rose by 6.6% to 5,195 MSEK (4,874), chiefly due to good demand and more rooms in operation.
• Organic growth was 5.7% whereof net sales for comparable units rose by 3.0%.
• Adjusted EBITDA rose to 823 MSEK (736), which is Scandic’s best quarterly result ever. The improved performance is mainly the result of increased revenues combined with improved cost efficiency.
• The adjusted EBITDA margin was 15.8% (15.1) with an improved margin in Sweden, Norway and Finland.
• Adjusted for the effect of finance leases and items affecting comparability, earnings per share rose to 4.28 SEK (4.01).
• Agreement for a new hotel and conference center in Aarhus harbor with approximately 480 rooms.
• Opening of the hotel and event venue Scandic Falkoner in Copenhagen with 334 rooms.
• During the quarter, two Finnish hotels were exited: Scandic Lahti and Scandic Riihimäki, with 221 rooms in total. 

THE PERIOD IN SUMMARY

• Net sales rose by 5.2% to 14,114 MSEK (13,412) and organic growth was 3.7%. For comparable units, net sales rose by 1.2%.
• The free cash flow improved during the period and amounted to 179 MSEK (-433). The increase is explained by higher results, better working capital development and lower investments.
• Adjusted for the effect of finance leases and items affecting comparability, earnings per share was 5.65 SEK (6.02).

CEO’s comments in summary

Strong quarter for Scandic
 
With increased sales growth combined with improved cost efficiency, we can report our best quarterly result ever with adjusted EBITDA at 823 MSEK (736). Net sales for comparable units increased by 3%, which was clearly a higher rate of increase than in the first half of the year.
 
The long-term trend of increased tourism continued and contributed to growth in demand that more than offset the increase in capacity. In total, demand in the Nordic region grew by just over 5% during the quarter, which is strong given signals of lower global economic growth. It is also gratifying to see positive effects from our increased and more focused market initiatives at the same time as customer satisfaction has improved.
 
Active portfolio management and a strong pipeline
In August, we successfully opened the Scandic Falkoner hotel and event venue in Copenhagen’s Frederiksberg theater district, with high occupancy from day one. During the quarter, we also signed an agreement for a new hotel and conference center in Aarhus, Denmark. We intend to increase portfolio management activity to optimize our profitability and customer offering. During 2019, we will exit a total of four smaller hotels with limited earnings contribution and that have significant renovation needs. 
 
Scandic has a strong pipeline corresponding to 10.6% of the existing portfolio. With a focus on hotels in attractive locations at prioritized destinations, we expect the pipeline to increase Scandic’s profitability over time.
 
Continued focus on profitability and cash flow
Scandic has initiated a number of measures to strengthen profitability and cash flow. We see, for example, potential to improve profitability in our restaurant and conference operations, which is why we are reviewing modes of operation and offerings across the entire business.
 
I would also like to mention our investments, where we have gradually established a more structured way of working. In 2019, we expect that renovation investments’ share of net sales will be somewhat lower than in 2017-2018.
 
Stable markets expected for fourth quarter
We expect relatively stable market conditions in the fourth quarter, with like for like sales growth of 0-1%. In addition, having more rooms in operation is expected to contribute 2% to net sales.
 
Jens Mathiesen
President & CEO

This information is information that Scandic Hotels Group AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 07.30 CET on October 24, 2019.
 
Report presentation October 24, 2019 at 09.00 CET
A presentation of the report will take place at 09.00 CET today, October 24. Scandic’s President & CEO Jens Mathiesen will present the report together with CFO Jan Johansson in a webcast and telephone conference.  Details for participation by telephone: SE: +46850558357   UK: +443333009274. Please call in 5 minutes before the start. The presentation will be held in English. 
 
You can view the webcast at www.scandichotelsgroup.com. The interim report and presentation slides will also be available on the website.

For further information, please contact:
Henrik Vikström, Director Investor Relations
Email: henrik.vikstrom@scandichotels.com
Telephone: +46 70 952 80 06
www.scandichotelsgroup.com

About Scandic Hotels Group
Scandic is the largest hotel company in the Nordic region with 18,000 team members and a network of around 280 hotels in operation and under development in more than 130 destinations. Scandic Friends is the biggest loyalty program in the Nordic hotel sector. Corporate responsibility has always been a part of Scandic’s DNA and Scandic has been a pioneer when it comes to integrating sustainability in all of its operations. Scandic Hotels is listed on Nasdaq Stockholm. www.scandichotelsgroup.com

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