Q2 2014 RESULTS AMSTERDAM, 23 JULY 2014 WOLFGANG M. NEUMANN, PRESIDENT & CEO KNUT KLEIVEN, DEPUTY PRESIDENT & CFO Radisson Blu Hotel, Amsterdam
Timing of Easter and special events negatively impact Q2 earnings RevPAR +2.7% (L/L) Revenue +0.9% (L/L) L/L RevPAR growth of 2.7%, driven mainly by increase in room rates Revenue decreased by 0.7% but L/L Revenue increased by 0.9% EBITDA margin down 1.5pp to 12.5%. Timing of Easter being the most important factor EBIT margin down 1.8pp to 8.7% due to same reason 12.5% EBITDA Margin -1.5pp 21m EBIT - 5m Three Asset Management deals concluded in Q2 Signings of new hotel contracts (2 200 rooms); ahead of last year As the first Hotel Group, Rezidor signed the United Nations CEO Water Mandate 2 I Q2-2014 Results
Underlying RevPAR trends remain positive primarily driven by room rates 10% L/L Occupancy L/L Average Room Rate L/L RevPAR 8% 6% 6.5% 5.6% 5.9% 4.6% 4.2% 5.7% 6.0% 5.9% 5.4% 5.0% 4% 2% 3.0% 2.3% 3.2% 2.7% 0% -2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 Q1 Q2 Q3 Q4 2013 Q1 2014 Q2 Occupancy levels now at same level as during the last peak Q2 negatively impacted by the timing of Easter and related school holidays Increase in Room rates key driver for RevPAR improvement (last 3 quarters) 3 I Q2-2014 Results
Strong RevPAR growth in ROWE and MEAO Nordics impacted by the timing of Easter and Eastern Europe by the unrest in Ukraine / Russia NORDICS REST OF WESTERN EUROPE 25% L/L Occupancy L/L Average Room Rate L/L RevPAR 25% L/L Occupancy L/L Average Room Rate L/L RevPAR 15% 8.8% 15% 5% 0.8% 3.4% 0.7% 3.8% 2.3% 4.4% -0.8% 5% 2.0% 3.6% 2.2% 1.2% 4.2% 4.8% 5.5% 4.9% -5% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014-5% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 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% 8.9% 15% 13.0% 7.9% 13.5% 7.8% 8.9% 6.4% 9.6% 5% 6.1% 5.7% 4.0% 1.2% 6.2% 4.6% -2.1% 5% -5% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014-5% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 4 I Q2-2014 Results
The crises in Ukraine/Russia has limited impact on profitability due to asset light business model Fee income expected to be down by ca 1.5 MEUR for the year Ukraine portfolio 5 hotels (Kiev (2), Donetsk, Alushta, Bukovel) with ca 900 rooms All managed hotels Portfolio represents 1% of Rezidor room stock Occupancy drop of 10% from already low base YTD June RevPAR -14.9% Russian Portfolio 27 hotels and 7,700 rooms 22 managed and 5 franchised hotels 10% of Rezidor room stock Domestic business confidence somewhat weekend Outbound business effected by Rubel depreciation YTD June RevPAR -0.6% Ukraine situation remains fragile Asset light business model hedges financial impact Sanctions have so far had limited impact on our business 5 I Q2-2014 Results
Revenue generating initiatives and synergies with Carlson have powered strong growth in Revenue Generation Index (RGI) YTD May 2014 +1.3% +0.7% 63% of hotels had RGI growth +0.6% 53% of hotels had RGI growth 50% of hotels had RGI growth 6 I Q2-2014 Results
Industry Report: Hotel Room Supply Source: STR Pipeline Outlook June 2014 Europe Existing Supply Middle East & Africa 2% 18% Luxury 8% Luxury 65% 4.4M ROOMS 15% Upper Upscale - Upscale Upper Midscale - Midscale Economy & Unaffiliated 57% 740K ROOMS 11% 24% Upper Upscale - Upscale Upper Midscale - Midscale Economy & Unaffiliated In Planning 30% 7% Luxury 15% 19% Luxury 145K ROOMS 39% Upper Upscale - Upscale Upper Midscale - Midscale 12% 144K ROOMS Upper Upscale - Upscale Upper Midscale - Midscale 24% Economy & Unaffiliated 54% Economy & Unaffiliated
Q2-2014 Q2 and YTD signings above last year and emphasizing strategy SIGNINGS Q2 2014 Q2 2013 YTD 2014 YTD 2013 Hotels 11 11 17 16 Rooms 2,200 1,800 3,200 2,900 Radisson Blu Hotel & Residences, Jeddah Corniche, Saudi Arabia 50% Eastern Europe 100% Fee-based >75% Radisson Blu Radisson Blu Hotel Istanbul Topkapi, Turkey Q2 comments: 70% of the signings of Q2 are new built hotels Key Focus Country: Saudi Arabia (4 properties) Two resorts in Poland and two hotels in Turkey 8 I Q2-2014 Results
Q2-2014 Q2 in line with last year and YTD openings better than last year OPENINGS Q2 2014 Q2 2013 YTD 2014 YTD 2013 Hotels 5 3 11 8 Rooms 800 800 2,000 1,700 Park Inn & Radisson Blu Oslo Alna, Norway >40% Nordics 100% managed >75% Radisson Blu Radisson Blu Mammy Yoko Hotel, Freetown, Sierra Leone Q2 comments: Dual branded property opened in Oslo, Norway Geographic expansion Freetown, Sierra Leone 9 I Q2-2014 Results
Primarily fee-based portfolio with a growing presence in Emerging Markets In operation Q2 2014 In pipeline Q2 2014 Total Portfolio Q2 2014 24% 11% 21% 53% 23% 89% 61% 18% Franchised Leased Managed Franchised Leased Managed Franchised Leased Managed 16% 20% 1% 6% 23% 16% 27% 37% 53% 40% 30% 31% NORD RoWE EE MEAO 342 hotels 76,500 rooms NORD RoWE EE MEAO 91 hotels 19,400 rooms NORD RoWE EE MEAO 433 hotels 95,800 rooms 10 I Q2-2014 Results
Rezidor s Rights Issue of 60 M Successful Board of Directors approved proposed rights issue at AGM in April 2014; successful subscription in June 2014 Major shareholder Carlson supported rights issue from beginning on Also all EC members with shareholding subscribed fully Subscription requests were received for 144% of the total offering The capital raised will allow Rezidor to accelerate strategic and profitability initiatives: Pursue additional opportunities within asset management Continue to invest in its leased hotel portfolio at an accelerated pace Further drive growth with particular emphasis on the emerging markets Rezidor received proceeds of ca 59 M (after transaction costs) 11 I Q2-2014 Results
FINANCIAL UPDATE KNUT KLEIVEN, DEPUTY PRESIDENT & CFO Radisson Blu Hotel, Istanbul Sisli
Q2 negatively impacted by timing of Easter, softer development in Meeting & Events Revenues and lower Management & Franchise fees IN MEUR Q2 2014 vs LY LFL RevPAR (L&M) 77.9 75.8 Revenue 247.1-1.8 EBITDAR 93.0-4.0 EBITDAR Margin % 37.6% -1.4pp EBITDA 30.8-4.1 EBITDA Margin % 12.5% -1.5pp EBIT 21.4-4.8 EBIT Margin % 8.7% -1.8pp Q2 Highlights: LFL RevPAR increased by 2.7 % driven by increase in room rates Timing of Easter had negative impact on revenue of ca. MEUR 7 and MEUR 3.5 on EBITDA Appreciation of EUR, had a MEUR 6 negative impact on revenues and the closure of one hotel in ROWE reduced revenues by ca MEUR 3 Weaker demand of Meetings and Events had also negative impact on revenues Fee Revenue was ca MEUR 5 behind last year. Weak market development in EE, termination payments received last year and the conversion of 2 management agreements to leases being the main reasons Central Cost in line with last year NET INCOME 14.1-3.3 13 I Q2-2014 Results
YTD June 2014 Performance impacted by softer development in revenue and special events IN MEUR YTD June 2014 vs LY YTD Highlights: LFL RevPAR (L&M) 71.8 69.2 Revenue 458.5 2.5 EBITDAR 154.7-0.9 EBITDAR Margin % 33.7% -0.4pp EBITDA 30.1-2.0 EBITDA Margin % 6.6% -0.4pp EBIT 12.9-3.3 EBIT Margin % 2.8% -0.8pp LFL RevPAR is up 3.7 % 2 new leases in CPH have a positive impact on revenue of MEUR 20.8 vs last year. This is offset by the appreciation of EUR and the closure of one hotel for renovation Meetings & Events revenue below last year by 4 % (MEUR 2.8) due to lower demand in general Fee revenue below last year by ca MEUR 5 (all from Q2) Special events had a negative impact on EBITDA of MEUR 4 NET INCOME 3.8-2.4 14 I Q2-2014 Results
Flow-through Q2 2014 vs Q2 2013 Timing of Easter and exits had negative impact on EBITDA of ca MEUR 7.5 Q2-2014 vs Q2-2013 Reported Change FX Exits New Hotels Variance Write Downs 2013-14 Impact of lease restructurings L/L Revenue -1.8-6.0-6.2 12.6 - - -2.2 EBITDAR -4.0-2.7-3.3 5.1 - - -3.1 EBITDA -4.1-1.1-4.0 0.7-1.5-1.2 EBIT -4.8-1.0-3.9 0.7-0.1 1.5-2.0 Exits include one hotel closed for renovation, termination income last year for hotels leaving the system and the exit at the end of 2013 of ownership of a Casino New hotels negatively impacted on EBITDA by guarantee payments of MEUR1.4 in the quarter FX has a negative impact on EBITDA, same as in Q1 15 I Q2-2014 Results
Q2 Leased business Despite negative impacts from the timing of Easter, EBIT improved slightly versus last year Leased Revenue MEUR Nordics: Revenue positively impacted from 2 new leases in Denmark. However timing of Easter and the strengthening of EUR had a negative impact EBITDA negatively impacted by timing of Easter 250 200 150 100 50 0 NO RoWE Total Q2 2014 Q2 2013 Rest of Western Europe: The closure of one hotel for renovation had negative impact on revenue. This was however offset by strong RevPAR growth especially in the UK Despite the closure of above mentioned hotel (where Rezidor continue to pay rent) EBIT improved slightly due to lease restructurings and good RevPAR growth 14 12 10 8 6 4 2 Leased EBIT MEUR Q2 2014 Q2 2013 0 NO RoWE Total 16 I Q2-2014 Results
Q2 Fee Business both revenues and profits had a negative development in the quarter but due to different reasons in each region Nordic: Revenue and profits were reduced due to the conversion of 2 managed hotels to leases and the opening of one managed hotel (with guarantee) Rest of Western Europe: Revenue dropped mainly due to termination payments received last year. EBIT impacted negatively due to the same reason 35 30 25 20 15 10 5 0 Fee Revenue MEUR NO RoWE EE MEAO Total Q2 2014 Q2 2013 Eastern Europe: Revenue is down due to the situation in Russia and Ukraine. EBIT and EBIT-margin improved mainly due to reduction of bad debts and adjustment of a previously booked shortfall guarantee 25 20 15 10 5 Fee EBIT MEUR Q2 2014 Q2 2013 Middle East, Africa & Others: Despite a strong growth in RevPAR, revenue and profits were down due to write down of receivables 0-5 NO RoWE EE MEAO Total 17 I Q2-2014 Results
Cash Flow and Balance Sheet 2014 vs 2013 H1 2014 H1 2013 Cash flow before changes in Working Capital -17.7 21.2 Change in Working Capital -16.9-14.6 Cash flow from operations 0.8 6.6 Investments -13.7-20.6 Free Cash Flow -12.9-14.0 M Jun 30, 2014 Dec 31, 2013 Balance sheet total 432.3 381.7 Net working capital -29.2-48.4 Net cash (debt) 37.1-10.5 Equity 215.0 155.0 Free cash flow improved slightly from the same period last year Both Cash and Equity positively impacted from the Rights Issue 18 I Q2-2014 Results
Financial Targets & Focus Areas 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 19 I Q2-2014 Results
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