2008 First Quarter Results

Transcription

1 2008 First Quarter Results Profit & Loss Account (Million Euros) Mar 08 Mar 07 % REVENUES % EXPENSES (ex - Operating leases) % EBITDAR % Rental expenses % EBITDA % Depreciation and amortisation % EBIT % Total financial profit/(loss) (20.2) (17.3) 16.4% Profit/(loss) from equity investments % Continuing EBT % Discontinuing Operations % Profit before taxes and minorities % Net Profit % Net Profit attributable % Highlights Revenues, EBITDA and Net Profit attributable changed by +1.9%, -3.9% and % respectively The results are explained by 1) an early Easter holiday period, 2) the general elections in Spain and, more importantly, 3) the depreciation of the US dollar and British Pound versus the Euro. Good results overshadowed by currency impact in Q1 The appreciation of the Euro versus the US dollar and the British Pound has had a negative impact on Sol Meliá s hotel and Vacation club operations in the Americas and the UK, estimated at 8.0 Mn Euros at the Ebitda level and 6.8 Mn at the Net Profit level. When stripping out the currency effect, RevPAR EBITDA and Net Profit attributable would have increased by 3.7%, 8.4% and 22.5% respectively. This forex effect only has an impact from an accounting standpoint, since the dollars are not sent to Europe but devoted to expansionary capex in the region. Operational Ratios Mar 08 Mar 07 % RevPAR % RevPAR ( ex currency effect) % EBITDAR MARGIN 26,6% 27,1% -59 bp EBITDA MARGIN 21,3% 22,6% -128 bp EBITDA MARGIN (ex-asset rotation) 21,3% 22,3% -104 bp EBT MARGIN 6,6% 8,0% -139 bp NET PROFIT MARGIN 6,1% 7,0% -90 bp Financial Ratios Mar 08 Mar 07 % EBITDA / NET INTEREST 3,2x 3,7x -14,8% EBIT / NET INTEREST 2,0x 2,2x -11,5% Stock Performance /01/ /01/ /01/ /01/ /01/ /02/ /02/ /02/ /02/ /03/ /03/ /03/ /03/ /04/2008 SOL VOLUME SOL LAST IBEX LAST 08/04/ /04/ /04/ /04/ Average Daily Volume 2008 ( ) 8,399, Week High, April 17th Week Low, May 24th 8.18 Market cap May 7th 08 ( 9.69) Mn 1,791 / $ 2,754 Bloomberg: SOL SM ; Reuters: SOL.MC 0 Outlook for future quarters Regarding the summer, the current booking positions for the main European feeder markets UK, Spain and Germany are in line with last year. As far as the US market is concerned, the Company does not perceive any major sign of deceleration in the luxury resort segment for both hotels and the vacation club. Going forward, current trends will be maintained with positive expectations for the Dominican Republic. In the Tryp and Meliá brands, although market conditions have hardened, business travel is growing in Tryp, while in Meliá business group activity remains solid. FTSE4Good Ibex Index Sol Meliá has been included in the FTSE4Good IBEX Sustainability Index, a new responsible investment index which recognises the management policies and systems developed by member companies in environmental, social and ethical matters. This index, the first of its kind in Spain, is the answer to investors growing interest in socially responsible investing in the country. Sustainability is one of the fundamental objectives of the recently announced Sol Meliá Strategic Plan investors.relations@solmelia.com SOL MELIÁ Gremio Toneleros, Palma de Mallorca Tel.:

2 Table of contents 1. Letter from the Co-Vice-Chairman and C.E.O Information on Operations Hotel Performance Sol Melia Vacation Club Leisure Real Estate Income Statement...8

3 1. Letter from the Co-Vice-Chairman and C.E.O. Dear friend, Q1 results skewed by Easter holidays, elections and currencies depreciation 5% underlying RevPAR increase up to April expectations for the summer season robust underlying evolution of the Sol Melia Vacation Club Sol Meliá is pleased to announce the results for the first quarter of The results are negatively impacted by a combination of factors that include 1) the impact of an early Easter holiday (not so positive in March for the resorts due to the less benign weather in comparison with April, while affecting city hotels in March), 2) general elections in Spain and 3) currency depreciations versus the Euro (US dollar and Sterling pound) that overshadow the Company s positive performance in hotels and vacation club in LatAm and the UK. Reported RevPAR up to March decreases by 0.8% while on a constant currency basis, it increases by 3.7%. This latest metric increases by 5% up to April, when eliminating the skew caused by the Easter period. This reflects in a more proper way the underlying performance of the Company for the four-month period. This positive trend continues in May. Going forward, current booking positions point towards a positive summer season of which the Sol and Premium brands are more dependant in Europe and LatAm respectively as far as the UK, Spain and Central Europe feeder markets are concerned. We have less visibility at this stage in our domestic market, but the concerns that arose at the beginning of the year have fortunately become less ominous and mean we are expecting a similar performance to last year. Additionally, the diversification of feeder markets the Company works with would enable us to offset a potential decrease in our domestic clientele, especially thanks to Eastern European countries. These markets Russia, Ukraine and Poland, amongst others have proven to be strong during the winter and expectations for the summer are also promising, with increases of capacity for the summer particularly in Mallorca, the Costa del Sol, Cuba and the Dominican Republic. For about a month now, Sol Meliá has had a sales office in Moscow and has increased its Global Sales team taking care of Eastern markets to five salespeople. As advanced in previous reports, the Company has also confirmed the recovery of the Canary Islands in the first quarter and we expect this trend to be maintained throughout the year. In Meliá and Tryp, the level of Business Travel and Business Groups and Incentives forecasted for the coming quarters will enable the Company to maintain RevPAR growth yet in a tougher economic environment. Additionally, the Company is defining a set of measures to improve hotel performance that principally cover the incorporation of new accounts and business groups, reinforcing our online strategy through solmelia.com (development of microsites and investment in search engines) along with development agreements with partners in the e-commerce area. Regarding the Sol Meliá Vacation Club, the underlying performance is very positive as seen in the evolution of revenues and Ebitda. Both items increase by 9% and 16% respectively in US dollar terms. Once again, currency depreciation means that the profits generated by the business marginally increase compared to The quality of our product and the efficiency of Vacation Club owned marketing programmes are behind this positive performance. The Dominican Republic and, to a lesser extent, Mexico, are largely behind the growth. The Company is not forecasting any change in the general trend. 3

4 As far as the management of Sol Meliá s portfolio of joint ventures is concerned, during the quarter Stein Group International acquired Sol Meliá s 50% stake in Luxury Lifestyle Hotels & Resorts (LLHR), a company that represented 112 franchised hotels and 5,972 rooms as of December This percentage stake was bought by Sol Meliá 3 years ago. With this transaction, totally supported by Sol Meliá, our company no longer forms part of the ownership of LLHR. This has no impact whatsoever at the Ebitda level since the joint venture was consolidated by the Equity method. Within this item its contribution was also not positive. Throughout the quarter, Sol Meliá s development team has signed agreements for the future incorporation of seven establishments within the portfolio in Greece (2), Egypt, Germany and Brazil (2) representing total additional rooms of (2,446) under lease (14%), management (57%) and franchise (29%). I would like to highlight the entrance of Sol Meliá into the Greek market with the future Meliá Athens (161), a lease contract in the centre of the city, and also the franchised Sol Kipriotis (700) on the island of Kos, both to be incorporated later this year. We expect further grow in the country on the back of our aim to have a wider presence in the resort areas of the Mediterranean and the Middle East. Since October 2007, the Escarrer family has increased its participation stake in Sol Melia investing 34 million Euros representing 3.55 million shares at an average price of 9.56 Euros. This represents total confidence of the controlling shareholder in the future evolution of the company at the operating and financial level within a framework of strategic sense. The approval and release of the Strategic Plan is perceived to be one of the stepping-stones of this company in its 52 years of history. We are comfortable we can deliver the agreed commitments in the future. The acquisition of this percentage stake has taken place in a moment of historical low multiples as it is the current. To conclude this letter, we are delighted to point out that Sol Meliá has met the corporate responsibility inclusion criteria for the new FTSE4Good Ibex Index, launched in Madrid last April 11th. Created by FTSE Group and Bolsas y Mercados Españoles, the FTSE4Good Ibex Index is the answer to investors growing interest in socially responsible investing in Spain. In our view, this represents a support to the Sustainability strategic objective included in the Strategic Plan. Best regards, Sebastian Escarrer Co - Vice Chairman and CEO 4

5 2. Information on Operations 2.1. Hotel Performance RevPAR for owned and leased hotels has decreased by 0.8% during the first quarter. The 13% depreciation of the US dollar against the Euro has had an important effect on the Premium brands (74 % rooms in LatAm) and to a lesser extent on the Meliá brand (25% rooms in LatAm). The Sol brand (100% resort; 100% Spain) has increased by 4.8% explained by the effect of the Easter period coming in the month of March when RevPAR went up by 11.1%. The Canary Islands with a +5.5% RevPAR increase is largely behind such evolution. The Tryp brand (100% city; 73% Spain) has gone down by 2.3% explained by the 7.2% RevPAR decrease in March. The Easter holidays affected two working weeks in the month and the general elections have had an impact on business travel to Spanish cities, especially Madrid. Meliá, the most global brand of the Company, (50% Spain; 25% LatAm; 25% EMEA) has seen RevPAR has decreased by 3.7% while +0.8% on a constant exchange rate basis. In the cities, Spanish properties have decreased in a similar way to the Tryp brand and for the same reasons, while in the rest of Europe, Paris has evolved very satisfactorily as shown by its 11.7% increase. In London, the excellent performance of the Meliá White House, as seen in its 9.6% RevPAR increase in Sterling pounds, is overshadowed by the 12% depreciation of the currency. In the resorts, once again, the 8.1% increase in Spain is offset by properties in the Caribbean affected by the US dollar appreciation. Premium brands (74% of the portfolio in the Americas) increases by 11.0% when excluding the currency effect on the back of the excellent positioning of the Company s resorts in the Dominican Republic. Against expectations, Sol Meliá has seen little effect in luxury resorts dependant on US feeder markets. High-end tourists continue to travel and pay good rates. This is also the case for the Sol Meliá Vacation Club. The Company expects this trend to continue on the back of the negotiations made for winter

6 Table 1: Hotel statistics 07 / 06 (RevPAR & A.R.R. in Euros) Owned & Leased Hotels Mar 08 / 2007 Occupancy RevPAR A.R.R. SOL % % 4.8% 7.7% % TRYP % % -2.3% 1.4% % MELIÁ (1) % % -3.7% 0.7% % PREMIUM (2) % % -0.3% 0.5% % INNSIDE % TOTAL (3) % % -0.8% 2.4% % (1) RevPAR and A.R.R. increase by 0.8% and 5.5% respectively when stripping out the US dollar and Sterling Pound currency effect. (2) RevPAR and A.R.R. increase by 11.0% and 12.0% respectively when stripping out the US dollar effect. (3) RevPAR and A.R.R. increase by 3.7% and 7.0% respectively when stripping out the US dollar and Sterling Pound currency effect. Table 2: Breakdown of total room revenues owned / leased hotels 08 / 07 % Increase Mar 08 SOL TRYP MELIÁ PREMIUM INNSIDE TOTAL RevPAR 4.8% -2.3% -3.7% -0.3% N.A. -0.8% Available Rooms -3.0% 7.3% -0.5% 0.2% N.A. 3.1% Room Revenues 1.7% 4.8% -4.2% -0.2% N.A. 2.3% Differences in the number of available rooms within the Sol brand is related to the late opening of 3 seasonal hotels due to refurbishment (Sol Príncipe, Sol Guadalupe and Sol Costa Blanca). In Tryp, the 7.3% increase in available rooms refers to the rebranding of 4 leased properties incorporated with the acquisition of the Innside hotel chain in Germany. 6

7 Table 3: Hotel revenues split 07 / 06 for owned/leased hotels Million Euro Room Revenues F&B and Other Revenues Total Revenues 08 SOL TRYP MELIÁ PREMIUM INNSIDE TOTAL ,1 1,7% 35,5 4,8% 49,3-4,2% 33,4-0,2% 3,4-134,6 2,3% 9,4-4,3% 13,2 11,0% 36,1 3,8% 36,0-8,4% 1,4-96,2 0,4% 22,6-0,9% 48,7 6,4% 85,4-0,9% 69,4-4,6% 4,8-230,9 1,5% In the Sol brand, the decrease of Food and Beverage and Other Revenues is related with the F&B concept and has to do again with the late opening of 3 hotels with high component of this item (Sol Príncipe, Sol Guadalupe and Sol Costa Blanca). In the Tryp Brand, the 11% increase in the Food and Beverage and Other Revenues has to do with the incorporation of 4 Innside hotels to the Tryp brand. These new properties have a higher component of room rentals, included in the item. In Premium the decrease of Food and Beverage and Other Revenues is related with the decrease of the Food and Beverage in the Gran Melia Puerto Rico since the hotel switched from an all-inclusive commercialization to a European package one in May Total revenues in USD increase by 7.6% since 74% of the portfolio is in LatAm. 2.2 Sol Meliá Vacation Club Since the bulk of the Vacation Club operations are based in LatAm, the positive evolution of underlying figures are impacted by the aforementioned Euro appreciation against the US dollar. Nevertheless, the number of weeks sold in the Vacation Club has gone up to 1,055, a 2.2% increase. The response of the North-American clientele (59% of the total) to the SMVC products is still positive since luxury resorts appear not to be suffering much of an impact from the economic slowdown. Total revenues and Ebitda in US dollars have gone up by 9% and 16% while changing by -4.8% and +0.8% when translated into Euros. 2.3 Leisure Real Estate No revenues have been generated in the asset rotation activity versus a 0.9 mn Euros generated in the first quarter

8 3. Income Statement Revenues Total Revenues increased by 1.9% explained by the increase of 1.5% in the owned and leased hotel business. No increase in the Leisure Real Estate derived from the lack of asset sales, nor the Vacation Club which is affected by the currency impact. Management fees represent 12.8 million Euros, a 2.9% decrease. This increase is mainly explained by the disaffiliation of some properties. Excluding the overall perimeter effect, total management fees increase by 4.4%% principally explained by the performance of Cuba and its impact in the Premium and Melia brands together with the Tryp hotels in Brazil. Operating Expenses Total operating expenses increased by 2.7%. This is a consequence of a combination of effects that skew the underlying evolution and push costs up (consolidation of Innside hotels, increased activity of the Sol Caribe Tours tour operator in Cuba, etc) or down (depreciation of US dollar in Company s operations in LatAm) as far the cost analysis is concerned. When excluding these effects along with the hotels under refurbishment in both periods, the underlying cost evolutions represent a +9%, in line with the evolution of revenues. In a like manner, the underlying Ebitda and Operating Profit (Ebit) increase by +10% and 23% on a comparable basis. Rental expenses increase by 17.1% due to the integration of Innside hotels that represent 2.1 mn Euros in the quarter. Excluding this effect rental expenses increase by 0.9% Ordinary Profit / Net Profit Decrease in the Depreciation and amortization item is explained by the transfer of the technological distribution platform to the 50/50 joint venture with Talonotel, Tradyso. This association (Travel Dynamic Solutions - Tradyso) is providing state-of-the-art distribution technology to hotels through call centre, GDS, Internet, or integration with different distribution consortia. Furthermore, Tradyso will operate as a Central Reservation System through specialized call centres and the Internet. This newly created Company aims to provide a technological distribution platform for hotel companies wishing to have access to the latest generation distribution systems. The decrease in profit from Equity investments is also explained by the negative contribution (-0.6 mn Euros in Q1) of the newly created joint-venture Tradyso. This start-up incurred in launch expenses and the great bulk of revenues will be recorded in Q3 when the customers check-in as opposed to linear operating expenses. The joint-venture is evolving above expectations and is forecast to enter into positive profit during the second half of 2008 and to report total-year profit in 2009 Net interest expense increase is explained by the decline in the share of Sol Meliá that is linked with the Equity Swap, affecting in 1 million Euros. Additionally the rise of the 3-month Euribor from 3.7% to 4.6% explains also such increase. 8

9 Table 6: Sol Meliá Consolidated Income Statement Million Euros Mar - 08 Mar - 07 % Hotels Leisure Real Estate Vacation Club Other Revenues Total revenues % Raw Materials (37.7) (37.3) Personnel expenses (95.5) (91.3) Other operating expenses (83.6) (82.5) Total operating expenses (216.8) (211.1) 2.7% EBITDAR % Rental expenses (15.5) (13.2) EBITDA % Depreciation and amortisation (23.5) (26.0) EBIT % Net Interest Expense (16.9) (14.1) Exchange Rate Differences (0.4) 0.2 Other Interest Expense (2.9) (3.5) Total financial profit/(loss) (20.2) (17.3) 16.4% Profit/(loss) from equity investments Continuing Earnings Before Taxes % Discontinuing Operations Profit before taxes and minorities % Taxes (1.7) (2.3) Group net profit/(loss) % Minorities (P)/L 0.3 (0.5) Profit/(loss) of the parent company % 9

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