Year-End Report 2000

The year 2000 in brief · Continued strong growth. Room capacity rose by 15 per cent during the year. Agreements have also been signed regarding the take- over/construction of a further 8 hotels. · Sales rose by 14 per cent to SEK 5,971 million (5,253m). · The operating margin was 7.6 per cent (6.7%). · Income after net financial items rose by 24 per cent to SEK 460 million (372m). · Earnings per share rose by 44 per cent to SEK 6.67 (4.64). · There has been a buy-back of shares, corresponding to just under 6 per cent of the total number of shares issued. The Board recommends that the general meeting of shareholders renew its mandate to buy back company shares in 2001. · The Board proposes a dividend of SEK 2.30, corresponding to 34 per cent of the profit after tax. Continued strong growth Scandic has continued to report strong growth. During the year, the company has increased its overall room capacity by 3,585 rooms, corresponding to a net growth of 15 per cent. Agreements have also been signed regarding the take-over/construction of a further eight hotels. Over the past five years, Scandic's room capacity has each year grown at a rate of 10 per cent on average. The aim is to continue growing at a rate equal to or better than this. Growth will be achieved by a continued strengthening of the company's position as market leader in the Nordic region, and by establishing hotel operations under the Scandic brand in areas of northern Europe with a high percentage of Nordic travellers. Non- Nordic chain acquisitions are also a possibility for the future. Priority markets besides the Nordic region are the Baltic states, Poland, Germany, the UK and the Benelux countries. Growth targets and financial targets met by comfortable margin Scandic aims to achieve an operating margin of at least 6 per cent and a return on equity of at least 20 per cent over a business cycle. The company's operating margin was 7.6 per cent (6.7%) and its return on equity was 23.2 per cent (17.7%). The company's target for growth in terms of the number of hotel rooms is 10 per cent per annum. In 2000, the chain gained an additional 3,585 hotel rooms, a net increase in room capacity of 15 per cent. A further 1,633 rooms are currently under construction or due to be taken over in the future as part of agreements already reached. Key ratios Group 2000 1999 · Operating margin, % 7.6 6.7 · Operating margin, excluding 6.5 item affecting comparability, % · Return on capital employed, % 24.2 23.9 · Return on equity, % 23.2 17.7 · Equity ratio, % 49 58 · Earnings per share, SEK1) 6.67 4.64 · Earnings per share after dilution, SEK2) 6.64 1) The number of shares has been calculated on the basis of a weighted average that takes into consideration the new issue of shares effected in connection with the acquisition of Provobis and the buy-back of company shares. 2) With regards taken to Scandic's warrants programme for employees Positive market development Scandic's markets have enjoyed positive development, with the exception of Norway. In all other markets, demand has risen, whilst capacity growth in the form of new hotels has remained low. In Norway, however, a slight fall in demand, due to factors such as structural changes in the oil industry, has been accompanied by growth in hotel room capacity. This has resulted in a decline in occupancy levels and room rates. Scandic's business operations Scandic has enjoyed positive developments in all markets bar Norway. Despite the weaker growth trends in this market, the company has managed to sustain occupancy levels in the Nordic region as a whole and achieved improvements in room rates and RevPAR. Market shares have grown or been successfully defended in all markets. Occupancy levels for Scandic rose to 63.3 per cent (62.8%) and the average room rate rose to SEK 715 (704), corresponding to a 2 per cent increase in the RevPAR to SEK 453 (442). Adjusted to take into account the effects of exchange rate movements, the RevPAR rose by 4 per cent. Occupancy levels for business operations in Nordic markets remained unchanged at 63 per cent, whilst the average room rate rose by 2 per cent to SEK 730 (718). Adjusted to take into account the effects of exchange rate movements, the RevPAR rose by 4 per cent in the Nordic region. For business operations in non-Nordic markets, occupancy levels rose to 65.2 per cent (63.7%), whilst the average room rate was SEK 625 (629). Adjusted to take into account the effects of exchange rate movements, the RevPAR for non-Nordic operations rose by 4 per cent. In June, Scandic acquired Provobis Hotel & Restauranger, comprising 16 hotels and four independent restaurants in Sweden plus a hotel in Turku, Finland. Since the acquisition, the independent restaurants have been sold off. Agreements have also been signed regarding the disposal of five of the hotels. One of these hotels was transferred already during year 2000 while the transfer of the rest of the hotels is due to take place in the first quarter of 2001. The incorporation of the remaining hotels into the chain has proceeded according to plan and all are now operated under the Scandic brand. A restructuring reserve has been allocated to cover costs arising from IT systems, signs, etc. Non-recurring costs arising from training, printed materials, uniforms, etc. have also been charged to the accounts. Despite depreciation in goodwill, the Provobis hotels started to contribute positively to earnings per share already in 2000. More substantial benefits are expected this year and beyond. In addition to the acquisition of Provobis, one hotel in Sweden, one in Denmark, three in Norway and three in Finland have opened for business. The company has wound up operations at two hotels. In 2000 and at the beginning of the current financial year, agreements were signed regarding a further one hotel in Denmark, two in Sweden, two in Germany, one in Vilnius, Lithuania and two in Norway of which one has already been taken over. These hotels are either currently under construction or will be taken over in the future. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/12/20010212BIT00950/bit0001.doc The full report http://www.bit.se/bitonline/2001/02/12/20010212BIT00950/bit0001.pdf The full report