Pandox AB (publ)

Thank you. Welcome to this presentation of Pandox Interim Report for the first quarter, 2024. I'm here together with Lea Nhu, our CEO, and Anne Liljenblom, our CFO. And with us today, we also have Thomas Emanuel, Senior Director at STR. And as most of you know by now, STR is a leading independent research firm focused on the hotel market. And Thomas is here to share STR's view on the market. And the views expressed by STR are completely separate from Pandox. And the presentation is offered only as a service to Pandox stakeholders. And please note also that Pandox Thomas presentation will be held after we have completed our formal earnings presentation, including the Q&A. And before we let Thomas in, Leah and Anneli will present the business update with financial highlights for the first quarter, followed by a Q&A session. So with that, I hand over to Liano, the CEO of Pandox.

Thank you, Anders. And good morning and welcome, everyone. I would like to start this presentation, as last time as well, with a quick overview of our key investment highlights on Pandox. We are active in travel and tourism. It's a global and highly dynamic industry with strong structural growth drivers. Travel and tourism is one of the largest industries in the world, accounting for almost 10% of global GDP. We only invest in hotel properties. We are the largest listed pure hotel property owner in Europe with a unique portfolio of high quality assets. We are an active owner with deep hotel expertise, and we work with all operational models and our focus on creating value across the whole value chain. We have inflation protective revenue streams and minimum guaranteed runs from strong and skilled operators, which provide both upside and stability. We have a high quality project pipeline, which we expect to accelerate our organic earnings and value growth. And we have ambitious ESG targets, including a substantial climate transition program with high ROI. Our property portfolio has an average valuation yield of approximately 6.25%. And with an average interest cost of 4.2, we have a positive yield gap, yield spread of more than 200 basis points. And we only have bank financing with strong and positive lending relationships and low refinancing risk. Our business model is to own, improve, and lease hotel properties to strong hotel operators under long-term revenue-based leases. And we do this through four principal value activities. It is property management, it's property development, portfolio optimization and sustainability. And we are an active and engaged owner based on deep hotel expertise. We have two operational models. We do leases and we have our own operations. In leases, which is our core business, we have stable and predictable cash flows. And our own operation is a unique transformation tool which enables us to take on and develop underperforming assets with an objective to sign new leases. PoundDocs has a strong and well-diversified hotel portfolio. We have 158 hotel properties with approximately 35,600 rooms in 12 countries and 90 cities. And with a property market value of some 71 billion kroner with an average yield of 6.25%. We are divided into two mutually supportive and reinforcing business segments. leases and own operations. And in leases, we lease hotel properties to skilled hotel operators under long revenue-based agreements, often with a minimum guarantee level. And this makes up for some 83% of our property value. And in own operations, we transform and run hotels in the properties we own. And this makes up for some 17% of our property market value. Our focus in our portfolio is on upper mid-market hotels with mostly domestic demand, which is the backbone of the hotel market, regardless of the face of the hotel market. We have also one of the strongest networks of brands and partners in the hotel property industry. And this is important as it ensures efficient operations and revenue management, which maximize the cash flows and property values and a continuous flow of business opportunities. A relative large part of investments it leases is also shared with the tenant, which lowers our risk. Next page. The hotel market was positive in the first quarter, which for funders translated into higher occupancy rates and resilient average prices. This, despite the quarter being seasonally slow, and a negative effect from the timing of Easter. Like for like, total revenues and total net operating income increased by 3% and 4% respectively. The timing of Easter had a negative effect of approximately 2% on total revenues. And I'm pleased that growth in cash earnings and EFRA NRV turned positive in the quarter. Cash earnings increased by 5% and growth in EFRA NRV was a positive 3%. During the quarter, credit markets continue to improve, which is expected to drive both lower credit margins in upcoming refinancing and higher transaction activity in the hotel property market. More generally, it also supports our property valuations. Our financial flexibility is high with an LTV of 47.7% when we adjust for the dividend, which we paid out in April. And our ICR is 2.6 based on the rolling four quarters. We have 100% bank financing, strong relationships, and positive discussions on upcoming refinancing, i.e. our refinancing risk is low. We have now established a new normal and our references to the pandemic are over. Here is the RevPar development level for our business segment leases compared with 2023 last year. The numbers are on a comparable basis under the fixed currency. In the first quarter, RevPar increased by approximately 2% compared with last year. And for the portfolio as a whole, Increased occupancy rates drove most of the improvement while average prices was resilient. More to come on the following page. Here we have a breakdown of the performance for a selection of our countries, regions and cities versus last year. We show average daily rate on the vertical axis and occupancy on the horizontal axis. Thus, orego is the point corresponding to 2023 on both ADR and occupancy. In the boxes, we indicate how much higher or lower revpar is compared with the corresponding period 2023. As you see, in the first quarter, the hotel market, with some variations, developed positively. Revpar increased in most markets, driven by increased ADR, while occupancy was a little bit more dispersed. In terms of REVPAR, the greatest relative improvements took place in Germany and regional Finland, regional Norway, and UK regionals. Thomas Emanuel from SDR will talk more about these underlying trends in the European hotel market later in this course. And with that, I hand over to Anneli Lindblom, our CFO.

Thank you, Lia. So good morning, everyone. We are happy to report good numbers in the first quarter, despite it being a seasonally slower quarter, including a negative effect in March from the timing of the Easter holidays. For the group, like-for-like growth was positive, both in revenues, 3%, and in net operating income with 4%, supported by a positive and active hotel market. The timing of Easter has a negative effect on total revenue of two percentage points, which will be neutralized in the second quarter. The Easter effect was marginally stronger in leases than it was in our own operations. Own operations performed well in the first quarter, supported by an active hotel market in Brussels. Like-for-like growth in revenue was 6%. and in net operating income, 22%. Cash earnings increased by 5% in the quarter, and current tax amounted to minus 45 million, and the efficient tax rate was 18%. During the quarter, we had some special items. First, the 40 million in revenue related to missing rents from previous years for our hotel property at Köln airport, that has been part of a legal process regarding permits. Secondly, 38 on the cost side related to commercial development of our portfolio in UK and Germany. Adjusted for these, the net operating margin in the business segment leases was 86%. So on this slide, We show the change in the main valuation parameters for the total property portfolio year to date. And remember that investment properties are recognized at fair value. According to IFRS, unrealized changes in operating properties are only reported for information purposes, but is included in our EPRA NRV. In the first quarter, 2024, the unrealized changes in value were flat. Marginal changes in yield and cash flow neutralized on a total basis. Currency had a large positive effect in the quarter. And as you know, we have the main part of our hotel properties outside Sweden and denominated in foreign currency. after the quarter we have completed the divestment of our last hotel in montreal and end of period the average valuation yield for investment properties was 6.10 percent and for operating property it was 6.98 percent here we have the average yield the average interest on that and IPRA NRV per share quarterly from just before the pandemic and up until today. Cash flow were adjusted downwards during the pandemic and adjusted upwards when the recovery started after it, both in internal and in our external valuations, while the yield were stable. However, in line with rising market interest rates, yields moved higher starting in the fourth quarter 2022 and through 2023. Despite higher yields and higher market interest rates, EPRA NRV per share has increased compared with 2019 and we have a tangible and positive yield spread. Also growth in EPRA NRV was positive with 3% measured on an annual basis and adjusted for paid dividends. As you can see, the end of the first quarter, the LTV was 46.6% and the ICR on rolling 12 months was 2.6 times. Adjusted for the dividend paid in April, the LTV was 47.7% and remains at the lower end of our policy range while the ICR is resilient. Cash and unutilized credit facilities amounted to 3 billion at the end of the quarter. And please note that we still have unencumbered assets of 3.8 billion as some sort of untapped reserve. And again, Pandox has two sources of financing, equity and bank loans secured by underlying properties. We have no market financing in the form of bonds and we have no external rating requirements. given our business model with focus on hotels and variable rent this has proven to be the most efficient and predictable financing over time on the right we highlight our capital structure at the end of the period based on the closing price of yesterday pandox is valued at the discount to april nrb with 17 percent The financing climate improved further in the first quarter. We refined loans of 3 billion with a three-year maternity and with good credit margins. Out of the 3 billion, more than 2.1 billion was sustainability linked. And all in all, we now have 4.3 billion of our loans sustainability linked. Looking ahead, we have 6.7 billion on debt maturing within one year, and out of this, 3.1 billion in the fourth quarter this year. And as said before, we have strong relations with our banks, and discussions on future refinancing are ongoing and very positive. And based on the discussion we have, we expect lower credit margins in the upcoming refinancing. At the moment, we have 76% of the net debt hedged, which means that the effects of further increase in market rates is relatively low. Some adjustments of existing interest rate swaps has lowered the average fixed rates in this period versus Q4 2023. And with that, I hand back to Liya for some final remarks.