Q2 2015 RESULTS BRUSSELS, 23 JULY 2015 WOLFGANG M. NEUMANN, PRESIDENT & CEO KNUT KLEIVEN, DEPUTY PRESIDENT & CFO Park Inn by Radisson Istanbul Ataturk Airport 1 I Q2-2015 Results
Strengthening our position in emerging Turkey - expansion with Park Inn by Radisson to capture mid-scale opportunities Early entry in 1998 with Radisson Blu Bosphorus Hotel, Istanbul Largest upper upscale hotel brand in Istanbul with 6 Radisson Blu in operation (+1 pipeline) First hotel outside Istanbul signed in 2002 First Park Inn hotel signed in 2013 Portfolio tripled over last 5 years from 1,000 to 3,500 rooms in operation & under development 12% of our portfolio and 10% of our fee income in EE 3 7 In Operation Pipeline Radisson Blu 10 hotels 2 hotels Park Inn 1 hotel 5 hotels TOTAL 11 hotels 7 hotels KEY DRIVERS 6 th most visited country in the world, due to its history, tourist attractions and proximity to Europe Geopolitically strategic position between Europe, Middle East & Asia Government making significant infra structure investments (3 rd airport, Bosphorus bridge, Bosphorus tunnel, railway network) and driving export 2 I Q2-2015 Results
Good Q2 results supported by positive trading environment in Western & Eastern Europe, incl. Nordics L/L RevPAR +4.9% ( 77.7) L/L RevPAR growth of +4.9% Rate (+3.0%) and Occupancy (+1.3pp) improved Radisson Blu +4.4%, Park Inn +9.0% Drivers: Most Western European countries (incl. Norway, Denmark), Baltics, and South Africa Revenue +6.8% ( 263.8m) Reported Revenue was 263.8m up by 16.7m or 6.8% L/L Revenue increased by 4.7% ( 11.6m) Additional revenue from two additional leases in Oslo and weaker Euro EBITDA Margin +0.2pp (12.7%) EBITDA margin increased to 12.7% (+0.2pp) EBITDA 33.6m (+ 2.8m or +9.1%) Good flow-through from top-line growth supported by asset management activities EBIT + 1.6m ( 23.0m) EBIT 23.0m (+ 1.6m) EBIT margin 8.7% (+0.06pp) Higher depreciation due to accelerated CapEx 3 I Q2-2015 Results
Norway Sweden Denmark UK France Germany Russia Lithuania Poland UAE Saudi Arabia South Africa % Change Q2 2015 vs. Q2 2014 (local currency) Market development in Q2 strong, especially in Europe NORDICS ROWE EASTERN EUROPE MEAO 30% Occupancy ADR RevPAR 20% 10% 0% 2.9% 3.5% 7.7% 3.6% 3.9% 8.4% 9.7% 17.9% 11.0% 8.9% 6.8% -10% -20% -11.8% -30% Europe sees strong performance (+9.7%) driven by Germany and recovery in Eastern European countries Nordics with positive occupancy performance in all markets (incl. Norway) and rate uplift in Denmark Western European countries show strong RevPAR performance across the board, except Switzerland Russia and other Eastern European countries showing strong recovery Negative RevPAR development in Middle East & Africa impacted by weak performance in UAE, mixed results in Saudi Arabia and Northern Africa but good performance in South Africa 4 I Q2-2015 Results SOURCE: Benchmark Alliance, STR Global
2 nd quarter RevPAR development confirms ongoing positive trend 10% L/L Occupancy L/L Average Room Rate L/L RevPAR 8% 6% 4% 3.0% 2.3% 3.2% 5.6% 5.9% 4.6% 4.2% 5.7% 6.0% 5.9% 5.4% 5.0% 2.7% 3.5% 2.4% 4.9% 2% 0.9% 0% -2% Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 2014 Q4 Q1 Q2 2015 NOTE: Like-for-like: same hotels in operation during same period last year compared at constant exchange rates 3 of 4 regions reported L/L RevPAR growth: ROWE, Eastern Europe and Nordics Strong rate improvement (at constant rate) equally driven by Eastern Europe, MEAO and ROWE Strong occupancy growth in Eastern Europe as situation in Russia stabilizes 5 I Q2-2015 Results
Very strong performance in ROWE and good results across the Nordics NORDICS ROWE L/L Occupancy L/L Average Room Rate L/L RevPAR L/L Occupancy L/L Average Room Rate L/L RevPAR 25% 25% 15% 5% 8.8% 3.8% 2.3% 4.4% 3.9% 3.8% 15% 5% 4.2% 4.8% 5.5% 4.5% 4.9% 4.8% 4.3% 6.2% 7.0% -5% -0.8% -4.0% -2.1% -5% -15% -15% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Norway: Rate driven growth helped by very strong June Denmark: Strong performance, equally driven by rate & occupancy Sweden: Stable performance with slight drop in occupancy but increase in rate UK & Ireland: Continues positive momentum with exceptionally strong rate & occupancy growth in Ireland Germany, Belgium & Netherlands: Strong rate improvement France & Switzerland: Positive occupancy but negative rate development 6 I Q2-2015 Results
Solid improvement in Eastern Europe as situation in Russia stabilizes, while Middle East impacted by weak performance in Saudi Arabia and UAE EASTERN EUROPE MIDDLE EAST & AFRICA L/L Occupancy L/L Average Room Rate L/L RevPAR L/L Occupancy L/L Average Room Rate L/L RevPAR 25% 25% 15% 5% 1.2% 8.4% 6.2% 4.6% 3.3% 11.9% 15% 5% 13.5% 7.8% 8.9% 6.4% 9.6% 9.5% 5.1% 0.1% -5% -2.1% -3.3% -5.5% -5% -6.3% -15% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015-15% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Russia: RevPAR improvement driven by occupancy growth from domestic demand Ukraine: Occupancy improving but from low base Baltics & Poland: Strong rate uplift supported by occ. growth Middle East: Drop in demand in Saudi Arabia and rate pressure in UAE Northern Africa: Rate improving in Egypt, weak demand in Tunisia Southern Africa: Strong occupancy growth in South Africa combined with rate uplift Turkey: Strong demand but at lower rate 7 I Q2-2015 Results
Q2 2015 Strong growth momentum in Q2, YTD well ahead of last year and further exploiting Emerging Market opportunities SIGNINGS Q2 2015 Q2 2014 YTD 2015 YTD 2014 Hotels 15 11 25 17 Rooms 2,500 2,200 4,800 3,200 Radisson Blu Azuri Resort & Spa, Mauritius >90% Emerging Markets >90% Management Contracts >40% Conversions Park Inn Istanbul Atasehir Comments: Geographic expansion to 2 additional countries (Congo, Mauritius) >20% of the signings are in key focus countries (Saudi Arabia and Turkey) 1 st Radisson Red signed in Cape Town, South Africa >40% of signings are conversions of existing hotels 8-12 new signings due to open within next 12-18 months 8 I Q2-2015 Results
Q2 2015 Q2 openings ahead of last year with strong H2 expected OPENINGS Q2 2015 Q2 2014 YTD 2015 YTD 2014 Hotels 6 5 9 11 Rooms 1,200 800 1,400 2,000 Park Inn by Radisson Istanbul Ataturk Airport >35% Key Focus Countries 75% Managed >60% Conversions Park Inn by Radisson Hotel Apartments Al Rigga Comments: >85% of openings branded Park Inn by Radisson 1 exit in Q2 resulting in >900 rooms Net Growth H2 expected to be strong with openings across the regions: Sweden, Iceland, Turkey, Russia, Moldova, Romania, Mauritius, Saudi Arabia, Nigeria, Kenya, Congo, Togo 9 I Q2-2015 Results
Continuous focus on optimising portfolio through pro-active Asset Management Extension of two profitable leases in Norway & Germany In M Upfront cost EBITDA 2013 2012 EBITDA 2014 EBITDA 2015 Exit from 7 leases in France 11.5 1.9 1.9 1.9 Exit from 2 leases in Sweden 0.9 0.8 0.8 0.8 Exit from a committed management contract 0.9 0.9 0.9 2013 Lease restructurings (5) 3.9 5.1 5.1 Exit from one lease 1.9 0.5 2014 Lease restructurings (4) 4.5 4.8 2015 Lease restructurings (2) 0.4 TOTAL 14.3 7.5 13.2 14.4 10 I Q2-2015 Results
2006 2007 2008 2009 2010 2011 2012 2013 2014 Accelerated investments in existing portfolio to capture market share and improve hotels performances Historic CapEx spent 60 50 40 30 20 10 0 4% 6% 5% 4% 3% 5% 5% 6% 7% 7% 6% 5% 4% 3% 2% 1% 0% Increased CapEx deployment over next 2-3 years, after which a normal 5% run rate will apply Timing of CapEx to consider seasonality and market development to limit displacement By 2017, 46% of our leased portfolio will be renovated Nordics: 3,100 rooms ROWE: 4,800 rooms Going forward majority of CapEx plan to be spent on Nordics Majority spent on guest rooms & improvement of guest experience CapEx ( millions) % of Leased Hotel Revenue (in ) 2014 H1 2014 H1 2015 Nordics 22.0m 6.1m 6.6m ROWE 31.6m 10.4m 21.3m TOTAL 53.6m 16.5m 27.9m ROI expectation for CapEx projects: approx. 15% 11 I Q2-2015 Results
Creating a showcase Radisson Red in the European capital: Conversion of Radisson Blu EU Hotel Brussels to Red First Radisson Red opening in April 2016 Renovation period with full closure Dec Mar 2016 Extensive renovation of public facilities and rooms Net impact on 2016 P&L marginal (displacement covered by income uplift) A strategic investment to support Radisson Red launch Strong market interest for Radisson Red, showcase will accelerate growth 2 hotels in pipeline now: Radisson Red Shenyang (China) and Radisson Red Cape Town further signings to be expected in H2 12 I Q2-2015 Results
Park Inn by Radisson Istanbul Ataturk Airport FINANCIAL UPDATE KNUT KLEIVEN, DEPUTY PRESIDENT & CFO 13 I Q2-2015 Results
Q2 Strong Revenue development IN m Q2 2015 vs LY LFL RevPAR (L&M) 77.7 74.0 Revenue 263.8 16.7 EBITDAR 94.8 1.8 EBITDAR Margin % 35.9% -1.7 pp EBITDA 33.6 2.8 EBITDA Margin % 12.7% 0.2 pp EBIT 23.0 1.6 EBIT Margin % 8.7% 0.0 pp Revenue up 6.8% due to 4.9% LFL RevPAR improvement Weakening of Euro 2 new leases in Oslo EBITDAR Margin negatively impacted by weakening of Euro, higher central costs, timing of marketing activities and provisions for bad debt Rent expenses decreased further from 28.5% to 27.4% of leased hotel revenue EBITDA positively impacted by lower net costs for Lyon (closed for renovation) EBIT negatively affected by increase in depreciation costs, reflecting the increase in investments NET INCOME 15.4 1.3 14 I Q2-2015 Results
YTD Good Q2 results significantly contribute to improve overall results IN m YTD June 2015 vs LY LFL RevPAR (L&M) 71.0 68.6 Revenue 480.2 21.7 EBITDAR 155.6 0.9 EBITDAR Margin % 32.4% -1.3 pp EBITDA 32.8 2.7 EBITDA Margin % 6.8% 0.2 pp EBIT 10.6-2.3 EBIT Margin % 2.2% -0.6 pp Revenue up 4.7% due to 3.5% LFL RevPAR improvement Weakening of Euro 2 new leases in Oslo In addition to the Q2 impacts, EBITDAR Margin affected negatively by higher marketing costs due to timing and 2014 release of LTIP provision Rent expenses decreased from 30.0% to 29.1% of leased revenue EBITDA improved by 9.0%, partly due to lower costs than in 2014 related to Lyon EBIT further affected by write down of renovation costs in one hotel in ROWE in Q1 and increase in depreciation NET INCOME 2.0-1.8 15 I Q2-2015 Results
Strong revenue development in the like-for-like portfolio with positive flow-through to EBITDA Q2-2015 vs Q2-2014 Reported Change FX Hotel Exits New Hotels One-offs Change in Central Costs Impact of Change in Marketing Fund L/L Revenue 16.7 4.0-2.5 3.6 0.9 - - 10.7 EBITDAR 1.8 1.2-0.2 1.3-0.8-1.4-1.0 2.7 EBITDA 2.8 0.3 2.8 0.6-0.8-1.4-1.0 2.3 EBIT 1.6 0.1 2.9 0.6-0.5-1.4-1.0 0.9 Q2 comments: The weakening of EUR has positively impacted Revenue by 4.0m but it has little impact on the results Exits of hotels including Lyon had positive impact on the results New hotels contributed 3.6m in revenues and 0.6m on EBIT, including conversion of 2 hotels in Oslo 2014 one-offs negatively impacted revenue with 0.9m (issued credit notes) and EBITDAR with -0.8m (reversals of shortfall guarantees) The increase of central costs reflects the increase of the portfolio in emerging markets The marketing expenses are 1.0m higher than last year, mainly due to timing differences The flow-through to EBITDAR was negatively impacted by weak conversion in Norway and changes in bad debt provisions 16 I Q2-2015 Results
Q2 - Leased Business Positive development due to good RevPAR development and lower net costs for Lyon Leased Revenue, MEUR Nordics Revenue increased by 1m due to improved RevPAR development and two new leases in Oslo, Norway The FX development in Norway had negative impact on Revenue EBIT and EBIT margin was down due to weak conversion in Norway in particular and increased costs for depreciations 250 200 150 100 50 0 NO RoWE Total Q2 2015 Q2 2014 EBIT, MEUR Rest of Western Europe 16 Revenue increased by 11m due to the strong development in RevPAR in most countries Appreciation of GBP vs EUR had a positive impact on Revenue EBIT and EBIT margin increased due to the above mentioned factors and lower net costs for the hotel closed for renovation in Lyon 14 12 10 8 6 4 2 0 NO RoWE Total Q2 2015 Q2 2014 17 I Q2-2015 Results
Q2 - Fee Business Fee revenue is up 14.2% despite challenging RevPAR development in Middle East Fee Revenue, MEUR Rest of Western Europe Fee revenue slightly higher than last year EBIT improved due to revenue increase and lower cost for shortfall guarantees Eastern Europe Fee revenue increase due to strong RevPAR development Q2 2014 EBIT was positively affected by 0.8m reversion of shortfall guarantee EBIT decrease due to changes in provisions for bad debts and shortfall guarantees Middle East, Africa & Others Fee revenue increase due to growth in portfolio and weakening of Euro Q2 2014 revenue negatively impacted by 0.9m credit note (but not EBIT) 35 30 25 20 15 10 5 0 25 20 15 10 5 0-5 NO RoWE EE MEAO Total EBIT, MEUR NO RoWE EE MEAO Total Q2 2015 Q2 2014 Q2 2015 Q2 2014 18 I Q2-2015 Results
Positive change in cash flow from operations H1 2015 vs H1 2014 H1 2015 H1 2014 Cash flow before working capital 25.9 17.7 Change in working capital -3.3-16.9 Cash flow from operating activities 22.6 0.8 Investments -28.6-13.7 Free Cash Flow -6.0-12.9 MEUR Jun 30, 2015 Dec 31, 2014 Balance sheet total 452.9 427.5 Net working capital -48.0-42.3 Net cash (net debt) 24.6 35.5 Equity 216.0 219.4 Strong cash flow before working capital due to improved EBITDA and less cash taxes Change in working capital positive due to changes in accruals and accounts payables Solid step up in renovation of leased hotels The net cash position is positive ( 24.6m) by the end of the quarter. 19 I Q2-2015 Results
Rezidor s focus areas & financial targets FOCUS AREAS EBITDA MARGIN UPLIFT FINANCIAL TARGETS Rezidor s Initiatives Revenue initiatives Profitability Target EBITDA margin of 12% over a business cycle Fee based room growth Cost savings 6-8% Balance Sheet Small positive average net cash position Asset Management / deleveraging CapEx Dividend Policy Approximately one third of annual after-tax income to be distributed to shareholders Assumes RevPAR growth covers inflation 20 I Q2-2015 Results
Q&A Park Inn by Radisson Istanbul Ataturk Airport 21 I Q2-2015 Results