Interim report January-September 1999

Interim report January - September 1999 www.scandic-hotels.com Summary Income after net financial items rose by 23 per cent to SEK 247 million (201m). For comparable units, the increase was 31 per cent. Sales rose by 9 per cent to SEK 3,910 million (3,578m). For comparable units, sales rose by 6 per cent. The cash flow from current operations has been improved by SEK 57 million and stands at SEK 288 million (231m). Twelve new hotels opened for business during the first nine months of the year and the Group wound up operations at three hotels. Since then, a further two hotels have been added to the portfolio. Scandic has also increased its ownership interests in Estonia's Finest Hotel Group from a 51 per cent stake to an 86 per cent shareholding. Earnings per share rose to SEK 2.62 (2.23) based on the number of shares following the 3 for 1 share split that was effected on 3 May 1999. The market During the first six months of the year, those markets in which Scandic operates hotels enjoyed steady growth. The market developments in the past few months have been varied in some of these markets. In Sweden, the market has continued to be characterized by steady growth in demand and low capacity growth, with increasing occupancy levels and room rates. In Norway, where market growth in major cities has previously been strong, weakening demand has been accompanied by continued growth in capacity. Occupancy levels in Norway have therefore fallen slightly during the last quarter. In Oslo, as anticipated, demand growth is currently shifting away from the west of the city towards the new Gardermoen Airport and the city centre. In Denmark, demand during the summer months was less buoyant than the previous year. The market has since recovered, but growth remains slightly lower than before. In Finland, demand has risen, albeit modestly. The opening of two new five- star hotels in Helsinki has limited improvements in occupancy levels and price trends. Scandic's non-Nordic markets have experienced a general growth in demand. Scandic's business operations Scandic has matched or outpaced market growth in the countries where it operates hotels. The slightly weaker trends that have affected markets in Norway, Denmark and Finland in recent months have also affected improvements in Scandic's profitability. In Sweden the trend remains strong. For its Nordic business operations, Scandic's occupancy levels for the nine months rose , compared with the same period of the previous year, by 0.5 per cent to 63.4 per cent (62.9%) and average room rates rose by 4 per cent to SEK 709 (682). This corresponds to a 5 per cent increase in the RevPAR, to SEK 450 (429). Revenues per available room for comparable units in the groups non-Nordic business operations have risen by 8 per cent during the nine months period. Four hotels in Denmark were added to the Group's portfolio at the beginning of the year, including one in central Copenhagen, one in Grenå and two in Frederikshavn. The last three hotels, owned by Stena Line, are operated by Scandic on behalf of the principal. Another hotel in Denmark was added to the chain in August, when Scandic took over hotel operations at the Århus Plaza. Scandic wound up operations at the hotel in Vejen on 31 March. 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 new high- speed shuttle to Gardermoen Airport. Another new hotel is currently being built in central Oslo. Its opening has been postponed until the end of June 2000. Scandic's hotel in western Oslo, which previously benefited from its proximity to the Fornebu Airport, has been adversely affected by the shift in demand towards the new Gardermoen Airport. In Sweden, Scandic has taken over operations at the Swania Hotel in Trollhättan and the Portalen Hotel in Jönköping. On 1 October, Scandic took over operations at Hotel Ariadne in Stockholm. All these hotels have been renamed as Scandic Hotels. The Group has wound up operations at a hotel in Malmö and one in Fagersta. The Hotel InterContinental in Helsinki and the Hotel Gateway at Helsinki Airport, both of which are operated by Scandic, will at the turn of the year be renamed as Scandic Hotel Continental and Scandic Hotel Gateway respectively. In connection with the change of name, the Hotel InterContinental will undergo a market realignment to appeal more to the volume segment favoured by Scandic, instead of the over-represented five-star category in Helsinki, to which it has hitherto belonged. A franchising agreement has been reached with the Hotel Savoy in Mariehamn on the Åland Islands to the effect that the hotel will be operated under the Scandic brand and be incorporated into the Group's marketing system with effect from 22 October. Of the 25 independent restaurants included in the acquisition of the Arctia chain, 23 were sold off during the first half-year, in line with Scandic's strategy to be a dedicated hotel operator. The disposal gave rise to a reduction in both turnover and ongoing earnings. In Germany, demand continues to grow in the majority of cities where Scandic operates hotels. However, new regulations limiting the deductibility of entertainment expenses have had an adverse effect on the sales of restaurant and conference businesses. In April, Scandic acquired 51 per cent of the shares in Estland's Finest Hotel Group and during the third quarter, Scandic increased its ownership interests to 86 per cent. The Finest Hotel Group operates four hotels with a total of 227 rooms in Estonia, including two hotels in Tallinn, one in Otepää and one in Pärnu. The two hotels in Tallinn were renamed as Scandic Hotels and incorporated into the Group's operating and marketing systems in June. The remaining two hotels will be renamed as Scandic Hotels in the final quarter of the year. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/28/19991028BIT00300/bit0001.doc The full report http://www.bit.se/bitonline/1999/10/28/19991028BIT00300/bit0002.pdf The full report