Accor Sa

Thank you for standing by. My name is Ellie and I will be your conference operator for today. At this time, I would like to welcome you to the Accor 2023 Half Year Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, please press the star and the number one on your telephone keypad. Thank you. I'd now like to hand you over to Martine Guerreau, Group CFO. Martine, you may now start the session.

Thank you. And good morning, ladies and gentlemen. Thank you for joining us on this call, which is my first earnings call as a CFO for ACO. So let's just dive right into the presentation, our first half results. I'm going to start with the financials on slide three of the presentation. So we are very pleased with the performance in the first half. We've seen continued solid growth momentum and strong earnings and cash flow. Our rest part is up a very healthy 38% versus prior, and that's on a like-for-like basis in the first half, and 25% in the second quarter, which is also very solid. And as compared to 2019, we actually saw an acceleration of the growth in the second quarter. Our pricing momentum continues, contributing about two-thirds of the overall REFBI growth, with occupancy gains contributing for about one-third. Our net unique growth actually accelerated this quarter, reaching 3.5% when you measure it over the last 12 months, and that was driven both by a higher number of openings as well as low returns. And this translated into group revenue of 2.4 billion, which is an increase of 35% versus prior, again, on a like-for-like basis. Now, moving to earnings and cash flow, we delivered strong earnings and cash flow in the first half. Our EBITDA more than doubled versus last year to $447 million. And services to owners was positive in the first half. which is in line with the STO guidance we shared with you during the capital markets day. Recurring free cash flow also significantly improved versus prior to 157 million, primarily driven by EBITDA growth. And that was partially offset by higher working capital reflecting the higher activity. And I remind everyone that we do have a seasonal working capital with H1 being much lower than H2 because of working capital. So in light of these results, we have raised the four-year guidance for EBITDA to $930 to $970 million for 2023. So let's dive in, starting with REF PAR, which is presented on slide four, which is well-balanced across both divisions. And we've shown in red the contribution of rates and in blue the contribution of occupancy to the growth in REF PARs. So starting on the left, premium mid-scale and economy division posted a REFAR growth of 26% in the quarter versus prior year. And as you can see, that's driven by strong pricing gains and occupancy, which is actually not close to 2019 levels. Moving to the region, Europe and North Africa, REFAR was up 20% in the second quarter versus prior year. And just to give you a bit of color on some of our key markets, France remained strong. with large inflows of international leisure and business guests in Paris for large events. So we had the Bourget Airshow, Vivatech, and of course, Roland-Garros. Now, to note that riots in early July did not have a significant impact on our summer booking thus far. In the UK, we saw a very, very balanced performance across London and the province. And Germany, we were pleased to improve significantly in the second quarter, and is actually now back above 2019 levels. Now moving to MES-PAC, second quarter was up 37%, REF PAR versus last year. Really, really good performance in Middle East Africa, despite difficult comps, particularly in Saudi Arabia. Growth in the Pacific is in line with the previous quarters, which is encouraging considering that Australia recovered earlier, as you may recall. Southeast Asia and India is well above 2019, notably in large cities, and that's supported by the return of international business guests. And in China, we've seen a strong acceleration despite what is still a very limited flight capacity in this region. So moving to the Americas, which, as you know, is dominated by South America for premium mid-scale and economy, the REF part in the second quarter was up 24%. with stable occupancy as the region recovered faster than the other regions. And Brazil, which is our main market in this region, occupancy is slightly above 2019s and rates are significantly better. And I will now move to luxury and lifestyle on the right. So we posted a rest part growth in the quarter of 24% versus prior with, as you can see here, balance, pretty balanced across occupancy and rates gains. The growth in this segment is in line with the growth in PM&E, and that is good because you may recall that, again, that segment recovered faster. So luxury, second quarter REF PAR was up 25% versus the second quarter. Luxury accounts for about actually slightly over 70% of the room revenue of the division, and it's mainly Fairmont and Sofitel. And as we saw in PM&E, the region ME and ASPAC was a key contributor to the growth. Our brands have a very strong presence in this region. And finally, lifestyle, second quarter REF PAR was up 20% versus last year. And like for luxury, lifestyle had recovered somewhat faster in 2022. But to note that REF PAR is now twice, more than twice the level of 2019. And this is actually driven by the resorts component of our lifestyle portfolio. Speaking of portfolio, let's move now to slide five, where we see the breakdown of our hotel portfolio by division with premium mid-scale and economy on the left side of the slide and luxury and lifestyle on the right. So as indicated in my introduction, overall net unit growth for the group accelerated to 3.5% in the second quarter, again, on an LTM basis. and was well-balanced across both divisions. The majority of openings came from conversions, which demonstrates the strength of the Accor brand portfolio. Premium mid-scale and economy portfolio grew by, net portfolio grew by 3.6% over the last one month, driven by MEA-ASPEC and China, which demonstrates the strong recovery and momentum in these regions. Luxury and lifestyle portfolio grew by 3.4% over the last 12 months, driven primarily by Ennismore, which, as you know, is our lifestyle brand. We do expect the growth to pick up material in the second half based on the planned openings for luxury and lifestyle. Total pipeline is 217,000 rooms, notably driven by PM&E, which benefited from strong signings in the quarter. And you can see our fee per room. is in line with the guidance that we shared with you at the CMD and to know the 1 to 3 ratio in favor of luxury and lifestyle. Overall, we confirm our annual net unique growth guidance between 2 and 3%, bearing in mind that in the last 12 months, no compensation of 3.5%, it does embark a strong second half of 2022. And that effect will subside as we lap over those two quarters. I will now move to slide six with the revenue breakdown by segment. So the group revenue, again, reached 2.4 billion in the first half, up 35% on a like-for-like basis. On a reported basis, you see the growth is a bit higher at 39% due to the consolidation of Paris Society, which sits in the hotel assets and other segments and which we acquired at the end of last year. For premium meat scale and economy, like-for-like revenue growth is 34% versus prior year with a revenue of $1.4 billion. Management and franchise revenue was up a very healthy 39%, which is well above REVPAR, thanks to a strong recovery in incentive fees. And we're actually very pleased with that strong growth in incentive fees in the first half. And this demonstrates the solid operational performance of the hotels across really all regions and segments. Now, services to owners also grew slightly faster than Red Park. And finally, hotel assets and others was up 24%, which is primarily driven by Australia. And again, the recovery took place earlier in this region, hence the somewhat lower growth in this activity. Turning to luxury and lifestyles, Like-for-like revenue was up 40% in the first half to reach slightly over $1 billion. Management and franchise revenue was up 58%, again, significantly outperforming the REFPAR growth, driven, again, by the very significant growth in incenting fees. Services to owners in line with REFPAR and hotel and assets on a reported basis mainly reflects the acquisition of Marist Society. So let's take a closer look at M&F fees on slide seven. For premium mid-scale and economy, all the regions are delivering solid growth with ME-ASPAC leading the pack, if I may say, with 68% growth in the first half. Growth in luxury and lifestyle M&F fees was also very strong at 58%, with both activities growing well above REVPAR and, again, driven by the growth in incentive fees. The share of incentive fees within M&F is actually now back to 2019 levels. So I will now turn to slide 8. As, again, in the introduction, the group's overall EBITDA in the first half more than doubled versus last year, reaching $447 million, and it's really The combination of strong recovery in M&F EBITDA, driven by solid growth in both divisions, and cost discipline on services to owners, which led to a positive 21 million EBITDA for STO, as compared to an 87 million loss in 2022. Regarding premium mid-scale and economy, EBITDA is up 71% on a like-for-like basis to 330 million, M&S EBITDA is up 33%. FTO EBITDA is back in positive territory, again, after being negative last year due to the step-up in marketing efforts that we did to support the rebound of travel. And as for hotel assets and other, EBITDA slight decreases is related to cost pressure we've seen in our Australian operations. Turning to luxury and lifestyle, EBITDA more than doubled. to 174 million in H1, driving about 50% of the growth in EBITDA for the group. M&S EBITDA jumped by 76% like for like with very solid operating leverage. For STO, I'll make the same comment as for PM&E, which with EBITDA slightly positive as well. And as for hotel assets and other, again, EBITDA mainly reflects the acquisition of Paris Society. And finally, to point that we have held our holding cost, the cost for the holdings, flat to prior year. So moving on to the rest of the income statement on slide nine, we achieved a net profit of 248 million in the first half versus 32 million in the prior year. Now, I'm not going to go through all the elements of the income statement, just point out a few highlights. And I'll start with the share of net profit of Associates and GEV, which turned positive at 9 million versus a loss of 27 million in prior year. And this improvement essentially stems from our 30% share in AccorInvest. With the recovery of the European activity, AccorInvest reported a significant result improvement as well. Our non-recurring items were essentially not material in the first half. Net financial expenses benefited from Higher interest income and cash equivalents, but was negatively impacted by non-cash items, which included FX and change in fair value of investment. Speaking about cash flow, I'll now move to slide 10. The recurring free cash flow reached 157 million in the first half, as compared to 41 million in prior year, and it's really mainly driven by the growth in EBITDA. So the main highlights on cash flow, I point out three. First one, the cash cost of net debt decreased to 28 million, and that's, again, mainly due to higher interest income, as you know, over 90% of our debt is fixed. Recurring investments slightly increased to 80 million in the first half. For the full year, we continue to plan a level of around 200 million for recurring investments, and that really reflects the group's acceleration in the development of luxury and lifestyle, which requires higher key money. And finally, the working capital change is negative $88 million versus a negative $25 million last year, and that really reflects the strong growth in the business. And as I pointed out, our working capital is seasonal, our recurring pre-cash flow is seasonal, and we do expect this working capital impact to reverse in the second half. Finally, MedDebt reaches $1. 0.8 billion slide increase versus December 2022. And this is due to some one-off items essentially, such as the FIFO advance report, sorry, advance reversal, advance payment reversal and the pre-context arbitration. So to close this presentation before I turn the floor back to you, let us move to slide 11 with the key takeaways of the first half. As I just shared with you, we had a solid momentum in the second quarter, and we expect a sound demand this summer, which is on the back of high comps. We had also a good summer last year. And so with this backdrop and taking into consideration the current macroeconomic uncertainties, we have raised our guidance for the full year of 2023. The growth in RESPAR is now expected as the top end of the 15% to 20% range. And our consolidated EBITDA is now expected between 930 and 970 million for the full year. So I thank you for your attention, and I will now open the floor for questions.

Hello, everyone. If you'd like to ask a question, please press the star button and number one on your keypad. We have our first question coming from Vicky. from Barclays. Please, your line is now open. Yeah, morning, Martine.