1999 First Half results

Transcription

1 1999 First Half results Operations The performance of the Property business for the first half of the year, has improved as compared to that of the first quarter. This is reflected in a cumulative increase in RevPar (Revenue per Available Room) of almost 13% for the semester while the corresponding increase for the first quarter was only 8%. The increases in the RevPars of the European Resort and City Division have been 16.4% and 15.8% respectively for the period, mainly due to substantial increases in A.D.R. s (Average Daily Rate) without damaging occupancy rates, which have even increased. The Americas Division has under-performed the previous year, although the cumulative decrease in RevPar for the semester is lower than that of the first quarter. Economic instability together with the effects of the newest additions (now maturing), have resulted in lower RevPars as compared to the previous year. The Management business evolves satisfactorily with an increase in total management fees of more than 18%. The biggest contributor to such an increase is the Cuban Division thanks to the new units added to the portfolio together with the Croatian management company, which did not exist in the comparative period. Recent Developments Sol Melia has signed an agreement to develop approximately 1,870 new resort rooms plus four residential villas in the south of Tenerife, Spain in the following 4 to 6 years. The total investment amounts to some 43,000 million pesetas and Sol Meliá s stake is 23.75%. The acquisition of the Meliá Mexico Reforma (previously The Crowne Plaza Reforma), the first hotel in Mexico D.F., adds 490 new rooms to Sol Meliá s Latin American portfolio. The total investment is USD 50 million while the forecasted EBITDA for the year 2001 is USD 5.8 million. The price per room amounts to USD 0.10 million. Sol Meliá has recently acquired its first hotel in London, The White House Hotel for BP 52 million (plus BP 9 in refurbishment). This establishment will provide 582 rooms plus 140 apartments to the European City Division. The price paid per room is BP 0.08 million Its estimated EBITDA for the year 2001 is BP 8.5 million. Financial Summary Total revenues have increased by more than 19% for the semester. The EBITDA margin has improved from 25% to 27% Total EBITDA for the group has grown by 27% for the semester and 32% for the second quarter. Net Profit for the semester has increased by 12% due to an increase in the tax rate from 14.4% to 23%, although the portion of the reported fiscal expense that correspond to the cancellation of capitalised fiscal credits is not a cash outflow. The gearing level defined as net debt to market cap. has gone from 14.7 to MAIN VARIABLES (million euros.) 1H99 1H98 % Incr. REVPAR % REVENUE % EBITDA % NET PROFIT % CASH FLOW OP (*) % GEARING (August 4th) Note: includes the proportional part of prepaid taxes for the semester Prospects The Company manages 14 new hotels and owns a further 3 hotels since the beginning of the year. It has signed further agreements with another 36 hotels to be added in the following two years including 2 confirmed acquisitions. There are a further 26 contracts in an advanced stage of negotiation. Prospects for the second half of the year are positive in light of summer season bookings and the forecasted impact of the latest acquisitions on results. Sol Meliá Performance As of December, (*) 1H99 (*) Net Profit (M. euros) EPS CFPS (*) Assuming 57,184,890 shares Stock Performance Jan 4, 99 to Aug. 4th, 99 Average Daily Volume: 5,018,319 euros. Period High euros. Period Low euros. Stock Price August 4th, euros. Number of shares outstanding 57,184,890 Market Capitalisation Aug, 4 th 99 2,173 million euros Close SO L.M C Close 05A ug 38.IBEX Close 05A ug SO L.M C Close 05A ug 38 S O L.M C M A 200, C lose 05A ug 34 SO L.M C, Close.IBEX Daily 18Jan99 07F eb 27F eb 19M ar 08A pr 28A pr 18M ay 07Jun 27Jun 17Jul SO L.M C, Close [M A 200], V olum e D aily 18Jan99 07F eb 27F eb 19M ar 08A pr 28A pr 18M ay 07Jun 27Jun 17Jul ESP FINANCE DEPARTMENT REPORT AVAILABLE IN INTERNET: Gremio Toneleros, 24 Polígono Son Castelló Palma de Majorca Baleares-Spain Tel: (34-71) Fax: (34-71) arancha.sanchez-flor@solmelia.es

2 INDEX Page 1. Letter from the C.F.O Information on Operations 4 3. Consolidated Income Statement 7 4. Consolidated Balance Sheet 9 5. Expansion 12

3 1. Letter from the C.F.O. Dear friend, We are pleased to provide you with our results for the first semester of It must be mentioned that there are five distortions to take into account when analysing the accounts: Firstly, with regards to our latest acquisitions, the M. Reforma accounts have been consolidated from the first of June, while the M. White House accounts have not yet been included. Secondly, the application of the B10 accounting guidelines for countries with high inflation, which allow a monthly update of assets in line with inflation, have resulted in higher depreciation expenses this semester. The application of the same guidelines resulted in a decrease rather than an increase in the first quarter. No other facts distort the comparison between the depreciation expense of the first semester of 1999 with that of Thirdly, the sale of two potential building sites has generated approximately Euro 3 million extraordinary profit in Fourthly, the evolution of the financial expenses has been negatively affected by higher net positive exchange rate difference last year than this year. Fifthly, the applied tax rate for 1999 is 23%, in light of the forecasted cancellation of capitalised fiscal credits for Inmotel for the whole year (which is not cash outflow) while that of 1998 is 14.4% Two of the most outstanding results achieved during this period have been the strong performance of our hotels in Spain, with increases in RevPar (Revenue per Available Room) exceeding expectations and a substantial increase in the consolidated EBITDA; 27% for the semester and more than 32% for the second quarter. The increase in the RevPar in the Spanish Resort Division has been particularly strong; 16%.. In all, the average increase in RevPar of owned hotels is up by almost 13%, higher than the corresponding 8% for the first quarter, thanks to a slightly improved (although still negative) evolution of RevPars in the owned hotels in the Americas. We feel that this improvement is due to more mature new hotels rather than to economic recovery. Accordingly, the increase in EBITDA has been obtained thanks to more mature new units basically the G.M. Caracas hotel, including the apartments, and the M. Tropical (opened in late 1998). The M. Reforma is forecasted to achieve better margins in the future, on consolidation of Sol Meliá s management techniques. To a lesser extent, corporate restructuring after the merger has allowed a certain improvement in margins as compared to the first semester last year. 2

4 This 27% increase in the EBITDA has brought about a 12% increase in net profit due to an increase in financial expenses, amortisation expenses and higher taxes. The management business is performing satisfactorily with an overall increase in management fees charged to third parties of 18%, mostly driven by the new units added in Latin America, including Cuba, Croatia and the good underlying performance of the hotels in Spain. In terms of expansion, Sol Meliá is pleased to announce the acquisition of its first hotel in London, the M. White House, which is an important landmark in the achievement of our expansion objectives in key cities in Europe. The company expects the EBITDA multiple on acquisition to decrease from 9x to 7.1x in the year 2001 after a BP9 million refurbishment plan. Also, the M. Mexico Reforma means a further step in our product diversification strategy aimed at increasing penetration of the Latin American market with city hotels. We think that Sol Meliá`s management can improve hotel performance substantially, so that the expected EBITDA multiple on acquisition goes from 12x to 8.5x in the year Sol Meliá has also signed an agreement to develop approximately 1,870 new resort rooms plus four residential villas in the south of Tenerife, Spain in the coming 4 to 6 years. The total investment amounts to some 43,000 million pesetas and Sol Meliá s stake is 23.75%. As of June 30 th, Sol Meliá manages 253 hotels (with 68,062 rooms), of which 87 (with 25,101 rooms) corresponds to owned hotels. There are further 34 management contracts plus 2 confirmed acquisitions signed to be added in the following two years. Prospects for the summer season are positive. Recently released official tourism statistics quantify the increase in number of tourist arrivals to Spain in 13.6% for the first semester of the year. Besides, we are still capitalising the refurbishment plan carried out in our hotels in the context of a positive and sustainable economic climate in Spain. In general, the consolidation of the accounts of our latest acquisitions will make a difference as compared to last year. As always, we would like to inform you that we would be delighted to provide with any additional information you may require. Best Regards, Óscar Ruiz Chief Financial Officer 3

5 2. Information on Operations 2.1. PROPERTY BUSINESS Spanish hotels have enjoyed spectacular increases in Revpar in both, the resort and business segment, 16.4% and 15.8% respectively. The same variable for the American Division is however 14.6% lower than the previous year, a decrease that is lower than the 22% of the first quarter. The resulting increase in total accumulated RevPar is almost 13%, higher than the corresponding percentage for the first quarter, 8%. Please find attached the hotel room statistics for the owned/leased hotels. Table1: Hotel statistics 99/98 for owned hotels (RevPar & A.D.R. in euros) OWNED HOTELS March99/March98 % OCCUPANCY REVPAR A.D.R. EUROPEAN RESORT % %o/ % 16.4% 13.9% % EUROPEAN CITY % %o/ % 15.8% 12.1% % AMERICA % %o/ % -14.6% 3.2% % TOTAL % %o/ % 12.7% 13.7% % Please find in the following page a breakdown of the component of growth in room revenues at the hotel level for owned or leased hotels. The increase in Room revenues is explained by the increases in RevPar and increases in available rooms. As can be deducted from the table below, such growth in the Resort segment is overwhelmingly driven by the increase in RevPar, quite the opposite to the American Division, in which the recently opened G. M. Caracas, M. Tropical and M. Reforma are driving growth in room revenues. The case for the City segment is a combination of both, the increase in RevPar and the increase in the number of rooms available, the RevPar having the greatest impact. 4

6 Table2: Breakdown of room revenues owned/leased hotels 99/98 % Increase 1H99-1H98 E. RESORT E. CITY AMERICA TOTAL REVPAR 16.4% 15.8% -14.6% 12.7% AVAILABLE ROOMS -1.5% 5.7% 45.2% 6.0% ROOM REVENUES 14.7% 22.4% 24.0% 19.6% Below you will find the split of revenues at the hotel level. In the American Division, new units have improved the increase in revenues obtained in the first quarter. In the European City Division, the increase in Other revenues is explained by a stronger congress and convention activity, reflected in higher revenues from meeting-room rentals. Table3: Hotel revenues split 99/98 for owned/leased hotels 1H99 E. RESORT E. CITY AMERICA TOTAL (millions) 99 %o/ %o/ %o/ %o/98 98 ROOMS % % % % 122 F&B % % % % 80 OTHER REVENUES TOTAL REVENUES 6 2.1% % % % % % % % 218 5

7 2.2. MANAGEMENT BUSINESS Total management fees for third parties have increased by 18% helped by the strong contribution of the newest hotels in the Cuban Divion, MC. La Habana, S.C. Cayo Guillermo, M. Rio de Oro and S.C. Coral. In turn and in spite of the under-performance of the hotels in America, the increase in number of rooms under management in Brazil, Mexico, Argentina, Uruguay, Guatemala and the Dominican Republic, have pushed fees revenues up. In the European Resort, the strong underlying performance of the hotels under management, together with the contribution of the Croatian management contracts, which did not belong to in the first half of 1998, explain the 20.5% increase in management fees. In the European City Division, even when the RevPar has increased by approximately 16%, total management fees are up by only 8.3% because of contracts cancellation, either because of losses or acquisition of hotels previously managed. The Asia-Pacific Division shows signs of recovery, but is still far from its bests. Table4: Management fees of hotels managed for third parties EX-MIA & INMOTEL ACCUMULATED FEES REVENUES (million euros) Jun-99 Incr. 98/97 Jun-98 EUROPEAN RESORT basic % 2.1 incentive % % 3.1 EUROPEAN CITY basic % 2.5 incentive % % 3.4 AMERICA basic % 1.5 incentive % % 4.1 ASIA-PACÍFICO basic % 0.7 incentive % % 1.4 CUBA basic % 2.6 incentive % % 3.9 TOTAL BASIC % 9.5 TOTAL INCENTIVE % 6.4 TOTAL %

8 3. Income Statement Revenues Revenues rose to Euro 304 million at June 30th, 1999 from 254 at June 30th, 1998, an increase of 19.5%. Other revenues include those coming from the services charged to third parties, time sharing business and the Casino. The increase is mostly explained by services charged to the new Cuban hotels, reservations made through Solres and Human Resources subsidies. Operating Expenses Total Operating Expenses have increased by more than 17% for the semester and only 14.7% for the second quarter. This is explained by the lower increase of personnel expenses and other operating expenses in the second quarter as compared to the first quarter, in turn due to corporate restructuring after the merger and more mature recent acquisitions. Other operating expenses include advising and consulting expenses, publicity and rentals. EBITDA Earnings before interest, taxes, depreciation and amortization for the first semester of 1999 is 27% higher than in the first semester of The corresponding percentage for the second quarter is 32%. The increase in profit and loss from equity investments is due to a stronger performance of Agotel, the exploiting company of our hotels in Germany, and Caribotels, the property company of our stakes in two of our mexican hotels. Net Income The financial loss has increased due to higher interest expense (as a result of the increase in debt to finance expansion) and to positive net exchange rate differences in the first semester of 1998, which have not shown up this year: net Euro+2.86M in 1998 versus net 0.9M this year. With regards to amortisation expense, countries with high inflation allow a monthly update of asset in line with inflation for fiscal reasons (they charge taxes on assets). This is known as the B10 accounting guidelines, which have resulted in higher depreciation expense this semester. The application of the same guidelines resulted in a decrease rather than an increase in the first quarter. No other facts distort the comparison between the amortisation expense of the first semester of 1999 with that of Extraordinary profit/(loss) includes the proceeds from the sale of two building site for approximately Euro 3 million. Profit before taxes has increased 27% in the first semester of 1999 as compared to the same period last year. Tax rate has increased from 14.4% to 23% from one semester to the other in light of the forecasted fiscal expenses to be recognised 7

9 by Inmotel as of year end, even when part of it will not be a cash outflow. Even with this increase in tax expenses, total Net Income has grown up by 14.3% before minorities and 12% after minorities. Cash Flow from Operations has increased by 21% adding back the proportionate prepaid taxes for the semester which are not a cash outflow. It has been calculated as the proportion that the profit before taxes of the first semester of 1998 represented over the whole year applied to the prepaid taxes for 1998 and to those forecasted for Table 5 : Sol Meliá Consolidated Income Statement. CUMULATIVE CONSOLIDATED INCOME STATEMENT (million euros) 1H99 1H98. % Incr. Hotel Revenues % Management Fees % Other revenues % Total revenues % Raw Materials (35.5) (32.3) 10.0% Personnel expenses (100.0) (86.6) 15.6% Change in operating provisions (1.5) (1.5) 0.6% Other operating expenses (86.3) (70.1) 23.1% Total operating expenses (223.4) (190.5) 17.3% Profit/(loss) from equity investments % EBITDA % Total financial profit/(loss) (13.2) (6.6) 101.1% Depreciation and amortisation (26.2) (21.1) 24.1% Consolidation Goodwill amortisation (0.9) (0.6) 35.7% Profit/(loss) from ordinary activities % Extraordinary profit/(loss) % Profit before taxes and minorities % Taxes (11.3) (5.6) 102.9% Group net profit/(loss) % Minorities (P)/L (3.7) (2.7) 40.8% Profit/(loss) of the parent company % CASH FLOW FROM OPERATIONS % Note: cash flow includes the proportional part of prepaid taxes for the semester 8

10 4. Balance Sheet Assets Total cash as of June 30th, 1999 amounts to Euro 72 million. The increase of the items Lands and Buildings corresponds to the newest additions, including Euro 25.8 million of the recently added M. Reforma. Other fixed assets have increased accordingly. Intangible assets include Euro million of the goodwill generated in the merger with Inmotel due to the previously owned stake by Sol Meliá on Inmotel, 18.8%. Liabilities & Shareholder s Equity Total net debt has gone to Euro 380 million as of June 30th, 1999 from Euro 319 million as of March 31 st, 1999 to finance the newest additions. The acquisition of the M. Reforma hotel has generated Euro million in First consolidation reserves from companies fully consolidated. 9

11 Table 6 : Consolidated Balance Sheet (million euros) ASSETS 1H99 1Q99 % Incr. Cash on hand at banks C/A with equity affiliates Inventory Trade receivable Other receivable Allowance for doubtful accounts (11.0) (9.7) S/T securities portfolio Other loans Prepaid expenses Holding of own shares CURRENT ASSETS % Goodwill from co. fully consolidated Goodwill from co. equity participated Intangible assets and rights Intangible assets provisions and amorti. (9.6) (9.0) Net intangible fixed assets % Land and buildings Technical installations and machinery Other fixed assets Tangible assets provision and depreci. (391.7) (360.1) Net tangible fixed assets 1, , % Equity Affiliates L/T loans due from affiliates L/T securities portfolio Other loans Provisions (18.1) (18.1) Financial investments % FIXED ASSETS 1, , % Deferred expenses Start-up expenses Shareholders for unpaid capital 0.0 TOTAL ASSETS 1, , % 10

12 Table 6 : Consolidated Balance Sheet (continued) LIABILITIES & S/H.'S EQUITY 1H99 1Q99 % Incr. S/T loans S/T loans due to affiliated cos Trade accounts payable Other payable Prepaid income Operating provisions TOTAL CURRENT LIABILITIES % L/T loans L/T loans due to affiliated cos Other L/T Liabilities TOTAL L/T LIABILITIES % Share capital Share premium Distributable reserves Reserves in companies fully consolidated Reserves in companies equity participated Revaluation Reserves 48.3 Non-distributable reserves Profit/(loss) previous year Differences in conversion of co. fully consoli. 5.1 (2.9) Differences in conversion of co. equity part. 0.0 (0.0) Consolidated profit/(loss) Profit/(loss) attributable to external sharehol. (3.7) (2.4) Interim dividend 0.0 (7.8) TOTAL SHAREHOLDERS' EQUITY % First consol. reserves from co. fully consoli First consol. reserves from co. equity part Deferred income Provisions for risks and expenses MINORITY INTERESTS TOTAL S/H S FUNDS AND LIABILITIES 1, , % 11

13 Table 7. Liquidity Ratios A. SHORT TERM LIQUIDITY 1H99 1Q99 CURRENT RATIO Current Assets/Current Liabil B. LONG TERM LIQUIDITY GEARING RATIO Net debt/shareholders Equity+Net debt 31.3% 29.2% DEBT TO EQUITY RATIO Total liabil/liabil.+shareholders Equity 37.1% 36.3% NET DEBT TO MARKET CAP. at Aug. 4 th, % 14.7% Sol Meliá s gearing has increased due to the increase in net debt needed to finance expansion. 5. Expansion Please find attached a description of the evolution of Sol Meliá s hotel portfolio. Table 8. Expansion plan 31/12/98 ADDITIONS LOSSES 30/06/99 SIGNED HOTELS ROOM HOTELS ROOM HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS EUROPEAN CITY EUROPEAN RESORT AMERICA TOTAL note: includes leases and stakes greater than50% 31/12/98 ADDITIONS LOSSES 30/06/99 SIGNED HOTELS ROOM HOTELS ROOM HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS EUROPEAN CITY M F EUROPEAN RESORT M F AMERICA M F ASIA-PACIFIC M F CUBA M SUBTOTAL M F TOTAL TOTAL GROUP The 3 properties added correspond to the apartments of the Meliá Caracas, the M. Reforma, in Mexico D:F. and the M. White House in London. The management contracts added in America is placed in Buenos Aires. The one in Brazil and the Caribbean, announced in the first quarter has been delayed until later this year. The two additions in Cuba add 886 rooms to the existing 3,574., 12

14 totaling 13 hotels in the island. The new contracts in the European Resort Division are placed in Spain and Tunisia. The ones in the European City Division, are placed in Spain and Portugal. The losses corresponds to the Canarios hotel in Spain. The lost management contracts are two franchised hotels in Indonesia, and three small/associated hotels. As summarized in the table below, as of 30/06/99 Sol Meliá owns, leases manages or franchises 253 hotels with 68,062 rooms. The Company has signed further 36 projects to be added in the following two years. Further 26 are in advanced stage of negotiation. Table 9. Summary expansion plan HOTELS ROOMS 31/12/ ,273 ADDITIONS 14 3,806 LOSSES 7 1,017 30/06/ ,062 SIGNED 36 10,814 NEGOCIATION 26 5,380 13