Q1 2015 RESULTS STOCKHOLM, 24 APRIL 2015 WOLFGANG M. NEUMANN, PRESIDENT & CEO KNUT KLEIVEN, DEPUTY PRESIDENT & CFO Radisson Red Rendering
First Radisson Red signed in EMEA with prominent location in Cape Town kicking off roll-out of the brand across EMEA Radisson Red Roll-Out in EMEA Positioning: lifestyle select Target audience: Millennials + Business rationale: Lower built cost + lower operational costs + high RevPAR = higher return Target locations: Urban locations in primary & secondary markets Project Type: Mainly new built but suitable for conversion Development Target: 20 hotels by 2020 Radisson Red Hotel V&A Waterfront, Cape Town 235 rooms, Redeli & Ouibar, 5 meeting studios Red Face gym, rooftop with pool V&A Waterfront one of Africa s most visited cultural & historical hubs (24 million visitors p.a.) Located next to new world class Zeitz Museum of Contemporary African Art (MOCAA) Opening late 2016 2 I Q1-2015 Results
Q1 results with good top line performance increased costs and write downs impact profitability RevPAR +2.4% (L/L) L/L RevPAR growth of +2.4% Rate (+0.8%) and Occupancy (+1.6%) improved Radisson Blu +1.9%, Park Inn +6.1% Drivers: Key Western European markets, Poland, Baltic States & South Africa Revenue +2.4% ( 216.4m) Reported Revenue was 216m up by 5m or 2.4% L/L Revenue increased by 0.6% ( 1.3m) Additional revenue from two additional leases in Oslo and weaker Euro EBITDA Margin +0.1pp (-0.3%) EBITDA margin increased to -0.3% (+0.1pp) EBITDA - 0.7m (+ 0.1m or +12.5%) Negatively impacted by increase in central costs and higher marketing costs related to timing of marketing activities EBIT - 3.9m (- 12.4m) EBIT - 12.4m (- 3.9m) EBIT margin -5.7% (-1.7pp) Higher depreciation due to accelerated CapEx Direct write down of renovation costs in one leased hotel 3 I Q1-2015 Results
RevPAR (EUR) Global tourism industry is poised for further growth REVPAR DEVELOPMENT BY REGION (TTM) 120 100 Middle East Western Europe Peak Year (TTM) 2015 Mar vs. peak (TTM)* Feb-2009 +2% Jul-2008 +9% 80 60 Northern Europe (incl. UK) Southern Europe Oct-2007 +5% Feb-2008 +1% 40 20 0 Southern Africa Eastern Europe Northern Africa Mar-2011-5% Feb-2008-36% Jan-2011-22% *Not adjusted for inflation SOURCE: STR Global International tourist arrivals reached 1.14bn in 2014 (+4.7%) and are forecasted to grow by 3-4% in 2015 Foreign exchange rate movements contribute to demand shifts Geopolitical situation impacts demand shifts Average rates in Europe expected to increase as many markets operate at high occupancy levels Overheated markets in Middle East to cool off; those in previous distress show signs of improvement 4 I Q1-2015 Results
% Growth Supply growth lags behind demand growth, especially in our emerging markets SUPPLY & DEMAND GROWTH BY REGION Δ Demand vs. Supply Growth Pipeline as % of Existing Occupancy (avg.) Rezidor Markets 3.5% -1.8% 2.2% 3.1% 4.1% 0.2% 2.1% 7.8% 16.9% 3.2% 43.4% 8.3% 15.4% 4.5% 66.2% 59.5% 68.8% 68.8% 56.0% 65.5% 75% Demand growth outpaces supply growth in most markets Pipeline averages 10% of existing supply Supply growth in some mature markets below long-term average (e.g. Germany, France) Middle East facing surge of new openings Lack of quality branded hotels in secondary/tertiary emerging markets SOURCE: STR Global (Nov / Dec data) JLL Hotel Investor Sentiment / Outlook 5 I Q1-2015 Results
Rezidor is in a leading position in Africa with our Radisson Blu brand topping the latest Africa pipeline report The 2015 report published in April showed us being a close 2 nd in terms of number of hotels and number of rooms under development Rank by Hotels Rank by Rooms Group Hotels Group Rooms Change on 2014 1 Marriott 36 2 Carlson Rezidor 32 3 Hilton Worldwide 29 4 Starwood 21 5 Mangalis 17 1 Hilton Worldwide 7,250 18% 2 Carlson Rezidor 6,953 11% 3 Marriott 6,412 22% 4 Starwood 4,623 32% 5 Mangalis 2,329 5% The Radisson Blu brand has the largest number of hotels and rooms under development and Park Inn by Radisson is 4 th in terms of number of hotels Rank by Hotels Brand Hotels 1 Radisson Blu 22 2 Hilton 16 3 Marriott 11 4 Park Inn by Radisson 10 5 Hilton Garden Inn 9 Rank by Rooms Brand Rooms Change on 2014 1 Radisson Blu 5,372 24% 2 Hilton 4,965 5% 3 Marriott 2,316 9% 4 Sheraton 1,862 30% 5 Hilton Garden Inn 1,682 33% 6 I Q1-2015 Results
Norway Sweden Denmark UK France Germany Russia Lithuania Poland UAE Saudi Arabia South Africa % Change Q1 2015 vs. Q1 2014 (local currency) Market development in Q1 strong, especially in Europe NORDICS ROWE EASTERN EUROPE MEAO 30% 20% 10% Occupancy ADR RevPAR 23.0% 4.2% 4.4% 6.8% 7.2% 9.6% 5.8% 0% -10% -20% -4.7% -0.4% -1.1% -4.2% -0.6% -30% Europe sees strong performance (+5.6%) driven by UK & Ireland and recovery in some Eastern European countries Nordics impacted by poor performance in Norway; Sweden & Denmark keeping up Most Western European countries show strong RevPAR performance, France being the exception Russia weak (affected by Olympics) but other Eastern European countries show strong recovery Positive RevPAR growth in Middle East & Africa led by recovery in Northern Africa and good development in South Africa but weaker performance in UAE and Saudi Arabia 7 I Q1-2015 Results SOURCE: Benchmark Alliance, STR Global
1 st quarter RevPAR development confirms ongoing positive trend 10% L/L Occupancy L/L Average Room Rate L/L RevPAR 8% 6.5% 5.7% 6.0% 5.9% 6% 4% 2% 3.0% 2.3% 3.2% 5.6% 5.9% 4.6% 4.2% 5.4% 5.0% 2.7% 3.5% 0.9% 2.4% 0% -2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 2014 Q4 Q1 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: strong ROWE & Eastern Europe, stable MEAO Occupancy increase equally driven by Eastern Europe, MEAO and ROWE Strong rate improvement in ROWE, positive in Nordics (at constant rate) 8 I Q1-2015 Results
Very strong performance in ROWE, Nordics impacted by weaker performance in Norway 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% 0.7% 8.8% 3.8% 2.3% 4.4% 3.9% 15% 5% 1.2% 4.2% 4.8% 5.5% 4.5% 4.9% 4.8% 4.3% 6.2% -5% -0.8% -4.0% -2.1% -5% -15% -15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 Norway: Weak quarter due to Easter and continuous impact of supply increase and cost cutting in oil sector Denmark: Lower occupancy due to business groups Sweden: Strong rate improvement supported by demand increase UK & Ireland: Very strong performance, particularly in Ireland Germany: Strong rate improvement France & Netherlands: Occupancy based RevPAR growth 9 I Q1-2015 Results
Solid improvement in Eastern Europe and Africa, 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% 20.5% 15% 5% 4.0% 1.2% 8.4% 6.2% 4.6% 3.3% 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% -15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015-15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 Russia: Rate & occupancy weaker impacted by Olympics in Q1 2014 and current crisis Ukraine: Strong RevPAR development from a low base due to stabilization of situation Baltics & Poland: Strong demand increase combined with some rate uplift Turkey: Weaker performance due to rate Middle East: Weaker demand in Saudi Arabia and rate pressure in UAE Northern Africa: Egypt with strong RevPAR rebound, Tunisia also improving Southern Africa: Strong occupancy increase in South Africa combined with rate uplift 10 I Q1-2015 Results
Strong first quarter for signings SIGNINGS Q1 2015 Q1 2014 Hotels 10 6 Rooms 2,300 1,000 Radisson Blu Hotel, Yerevan Q1 comments: Mainly management agreements (>90%) >70% in Emerging Markets 3 signings in Saudi Arabia Geographic expansion to 2 additional countries (Togo, Armenia) 6 out of 10 signings to open within 12-18 months Park Inn by Radisson Bucharest Hotel & Residence 11 I Q1-2015 Results
Q1 openings behind last year due to delays in emerging markets OPENINGS Q1 2015 Q1 2014 Hotels 3 6 Rooms 230 1,200 Radisson Blu Resort Jizan Q1 comments: 2 openings in Saudi Arabia and 1 in UAE 100% managed Signing of extension of strategic partnership with SOK for franchise portfolio in Finland (6 hotels) 6 hotels exited with small positive P&L impact Outlook: Strong 6-12 months ahead with key openings: Istanbul, Cape Town, Dubai, Jeddah, Sharm el Sheik, Riyadh, Nairobi Park Inn Dammam 12 I Q1-2015 Results
Two key projects to embrace shifting dynamics of market place and increasing digitalisation of our business environment Revenue Generation A transformation and re-shaping of Rezidor s Revenue Generation engine underpinned by four pillars Online transformation Direct Marketing & Loyalty Transformation Sales Transformation Analytics Transformation Targeting a 70% system contribution by 2020 IT Strategy Joint project together with Carlson to implement a global IT Strategy to fully embrace Information Technologies in an electronically driven world and to enhance the customer experience Deep Dive review conducted and future roadmap recommended 13 I Q1-2015 Results
FINANCIAL UPDATE KNUT KLEIVEN, DEPUTY PRESIDENT & CFO Park Inn by Radisson Cape Town Newlands
Q1 topline results strong but profitability impacted by higher operating expenses, depreciation and one-offs IN m Q1 2015 vs LY LFL RevPAR (L&M) 63.7 61.3 Revenue 216.4 5.0 EBITDAR 60.9-0.8 EBITDAR Margin % 28.1% -1.1pp EBITDA -0.7 0.1 EBITDA Margin % -0.3% 0.1pp EBIT -12.4-3.9 EBIT Margin % -5.7% -1.7pp NET INCOME -13.4-3.1 Revenue up 2.4 % due to 2 new leases in Oslo 1.8% RevPAR improvement Weakening of Euro Flow-through to EBITDAR affected by higher marketing costs due to timing difference and 2014 release of LTIP. Rent expenses decreased further from 31.7% to 31.2% of leased revenue. Some negative impact on EBITDA from the timing of Easter estimated at - 0.5m to - 1m. EBIT further affected by write down of renovation costs in one hotel in ROWE and increase in depreciation. 15 I Q1-2015 Results
Good flow-through in the L/L portfolio Q1-2015 vs Q1-2014 Reported Change FX Hotel Exits New Hotels Variance Write Downs 2014-15 Change in Central Cost Impact of Change in Marketing Fund L/L Revenue 5.0 2.3-1.9 3.3 - - 1.3 EBITDAR -0.8 0.4 0.3 1.1 - -2.4-2.8 2.6 EBITDA 0.1 0.1 1.4 0.5 - -2.4-2.8 3.3 EBIT -3.9-0.2 1.4 0.5-2.6-2.4-2.8 2.2 Q1 comments: The weakening of EUR has positively impacted Revenue by 2.3m but it has little impact on the results Exits of hotels including Lyon had positive impact on the results New hotels contributed 3.3m in revenues and 0.5m on EBIT. Included here are the conversion of two hotels in Oslo, Norway Change in central cost mainly due to release of LTIP in 2014 (- 1.4m) The marketing expenses are 2.8m higher than last year, mainly due to timing differences Write downs in the quarter are 2.6m higher than last year related to a renovation in ROWE 16 I Q1-2015 Results
Q1 - Leased Business Negative development due to current trading in Norway Leased Revenue, MEUR Nordics Revenue decreased by 5m due to weak RevPAR development and reduced demand within F&D, especially in Norway. Timing of Easter had slight negative impact on revenue. This was partly compensated for by conversion of two hotels in Oslo to leases. EBIT and EBIT margin was down due to above mentioned reasons. 200 150 100 50 0 NO RoWE Total Q1 2015 Q1 2014 Rest of Western Europe Revenue increased by 9m due to the strong development in RevPAR in most countries. Appreciation of GBP vs EUR had a positive impact. The increase in EBIT, due to the above mentioned factors, was partly offset by the higher write down of fixed assets. 4 2 0-2 -4-6 -8-10 -12-14 EBIT, MEUR NO RoWE Total Q1 2015 Q1 2014 17 I Q1-2015 Results
Q1 - Fee Business Despite unrest in some key markets and currency fluctuations, fee revenue is up Rest of Western Europe Fee revenue in line with last year EBIT lower than 2014 mainly due to the higher marketing expenses Eastern Europe Fee revenue is lower than last year due to the weakening of the Ruble and the Winter Olympics in Sochi last year. Middle East, Africa & Others The weakening of EUR is the main reason for the increase in Fee revenue and the improvement in EBIT. 30 25 20 15 10 5 0 14 12 10 8 6 4 2 0 Fee Revenue, MEUR NO RoWE EE MEAO Total EBIT, MEUR NO RoWE EE MEAO Total Q1 2015 Q1 2014 Q1 2015 Q1 2014 18 I Q1-2015 Results
Positive change in working capital and increased investments Q1 2015 vs Q1 2014 Q1 2015 Q1 2014 Cash flow before working capital -12.5-9.6 Change in working capital 5.4-2.8 Cash flow from operating activities -7.1-12.4 Investments -14.6-6.1 Free Cash Flow -21.7-18.5 MEUR Mar 31, 2015 Dec 31, 2014 Balance sheet total 441.9 427.5 Net working capital -44.0-42.3 Net cash (net debt) 14.4 35.5 Equity 207.3 219.4 Cash flow before working capital negatively impacted by increased net tax receivables Change in working capital positive due to changes in accruals Solid step up in renovation of leased hotels The net cash position is positive ( 14.4m) by the end of the quarter. 19 I Q1-2015 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 Q1-2015 Results
Q&A Radisson Red Rendering