Scandic Hotels Group AB (publ)

Thank you very much and good morning everyone. And first of all, also thank you all of you for joining Scandic's presentation of the second quarter 2023 on a busy reporting day. My name is Jens Mathisen and I'm the CEO of Scandic. And like was said, together with me, I have Ose Viren, our CFO, and we will take you through the quarter together. Firstly, I would like to start off with wishing everyone at Scandic a happy birthday. Because today, actually, Scandic turns 60 years. It's been six decades since we, on July 14th, 1963, opened our first ESSO motor hotel in Laxå in Sweden. So we have actually gone from one hotel, you could say one roadside hotel, to 269 hotels in operation in six markets. with nearly 56,000 hotel rooms and over 19,000 team members. This is quite an achievement. Therefore, both Åsa and I are maybe a bit extra happy today to present the second quarter on this 60th birthday. With that said, please turn to page two, and we'll jump straight into some highlights of the quarter. I'm very pleased to present another strong quarter. The market development was strong in the quarter and with high demand and continued positive price development. So demand was on high levels from both leisure and corporate in all our markets, and we actually reported an all-time high REF PAR during this quarter. The occupancy rate was 63, which was on par with the second quarter last year, and it was in line with our guidance. We have an average of just over 3% more rooms in operation compared with the second quarter last year, and this means that we sold more rooms than we did last year. I'm of course very proud of how we have met the market commercially, that we run our hotels very efficiently, and that our guests are also very satisfied. We also delivered improved net sales and a strong result which we will talk you through during this call. Our financial position has improved to a strong level and during the year we have actually gradually increased the activity level and launched several initiatives with a commercial and data-driven focus to build a stronger Scandic. This includes initiatives within IT and commercial skill development of employees, initiatives within health and well-being, and also our new brand, ScandiGo. So ultimately, this enables a faster growth and even improved margins. The establishment of ScandiGo, our newly launched brand in the fast-growing economy segment, is underway, and we are keeping a high pace in all our margins to take a leading role in the Nordics. In the beginning of July, we also announced our second signing, which is also in downtown Stockholm, but this time in a part of the city where we don't operate any hotels today. Lastly, we have entered a very busy summer period, and we expect a strong third quarter with high demand and increasing prices. So all in all, this was a strong quarter, and we are well positioned and very excited for a second half of the year. Please move to page 3, where you can see quarterly adjusted EBITDA development since the beginning of 2020. We report an adjusted EBITDA of 772 million Swedish kronor, compared with 1,083,000,000 SEK in the second quarter last year. This is indeed a strong result. As you all know, Q2 last year was heavily impacted by positive one-offs. And since the restrictions eased in 2022, we have continuously recruited and skill-developed more than 8,000 team members in order to meet the higher demand. As I mentioned also, we have gradually ramped up the activity level within Scandic this year, excluding one-offs the adjusted EBITDA margin improved significantly compared with the second quarter of 2019. Altogether, we report a strong result driven by a solid market development in combination with high efficiency. Also, I will, of course, take you through the financial development later in this presentation, but please turn to page 4. Here you can see the monthly market occupancy in the Nordic countries. The market development was solid with high demand from both corporate and leisure. Scandic reported an occupancy rate of 63% in the quarter, which was on par with the second quarter last year. We are now beyond what we say is talking about the pent-up demand, now with five quarters with good demand in a row. Domestic travel and travel between the Nordic countries are at continuing high levels. The lacking occupancy compared to 2019 is explained by lower volumes of intercontinental travelers still. However, this segment continues to recover. During the spring and early summer, the demand for entertainment has been high with concerts, sports events, and other type of events. that contributed positively to both demand and price development. Please turn to page five. This is market data for average room rates for Sweden, Norway, Finland and Denmark, indexed still to the corresponding month in 2019. We continue to see rising room rates well above 2019 levels. Scandic's average average room rate was around 15 to 21 percent above 2019 levels in the second quarter and 8 to 10 percent above 2022 levels. Finland has lacked the other markets but are as well recovering. Please turn to page 6. Here you can see the market REF part development also indexed to corresponding month 2019. The REFPA development was strong in the quarter, with Norway continuing to be the strongest market at levels 20 to 30% above 2019 levels. Scandic reached a new record level with REFPA of 828 Swedish kronor in the quarter, which is compared with 749 Swedish kronor in 2022 and 745 in 2019. On average, we have just over 3% more rooms in the quarter compared to the second quarter in 2022. Please turn to page seven. Last quarter, we announced, I would say finally, re-announced, you can say, Scandi Go, our new brand in the fast-growing economy segment. Our ambition is to take a leading position in the segment, and we keep a high pace to reach this ambition In the beginning of July, we signed our second Scan2Go, a new hotel with 221 compact hotel rooms and space-efficient configuration. This type of property and hotel configuration enables higher share of room revenue and lower capex than a full-service hotel, and it is what we are looking for when in search for new locations and properties. The hotel will open in late summer 2024, so after summer next year, following renovation and technical upgrades, and will be certified according to the Nordic Swarm label after the opening. Please turn to page 8. This was the pipeline at the end of the quarter. With our improved financial position and commercial approach, we keep a high pace to ensure growth while optimizing the portfolio. As the expansion of Scandico continues, we have great interest from partners, landlords, and property owners, and we look forward to bringing more Scandico hotels to our markets. Looking forward to the second half of the year, We are increasing investment for renovations of existing hotels to create even a more competitive portfolio. We are coming from a period, of course, focused very much on building a strong balance sheet, and we can now grow from a position of strength. We are very determined to get back to our targets of a maintenance capex of between 3% and 4% of the turnover. We will continue to optimize our portfolio and add more hotels as well as also exiting hotels with limited potential or low financial performance. We have very few hotels now with low financial performance, but also as we communicated in the first quarter, we will between Q3 this year and Q2 next year exit five hotels with a total of 731 rooms. With that Please turn to page 9, and I would like to pass it over to our CFO, Åsa Viren, to take us through some financial numbers.

Thank you, Jens, and good morning, everyone. Please turn to page 10, then, and we will start off with the financials for the quarter. We deliver a quarter with improved net sales and a strong result. Net sales increased by 8% to 5.7 billion set compared to the second quarter of last year. We report a strong result with an adjusted EBITDA of 772 million SEK corresponding to a margin of 13.6% compared to 20.5% in the second quarter last year. But I want to highlight that Q2 last year included 261 million SEK in one-offs mainly related to governmental support and compensation related to the agreement with the Norwegian state for preparedness for housing of refugees. We had low one-offs of 20 million SEK in this quarter, and the adjusted EBITDA margin excluding one-offs was 13.3% compared to 16.1% in the second quarter of last year. This was also a significant improvement, almost two percentage points compared to Q2 in 2019. We have a strong financial position, and as Jens mentioned in the beginning of this presentation, we have increased the activity level with several initiatives with a commercial and data-driven focus to build a stronger Scandic. And we will, of course, come back today to those initiatives later on this year. This is partly reflected in higher central costs this quarter. In addition to the one-offs, the gap in the results compared with the second quarter loss quarter last year is explained by the ramp up of the organization as we have recruited and trained over 8,000 employees since the restrictions eased in 2022. We are constantly focusing on the operating margin and with a higher pace and more initiatives to further drive our commercial ability, digitalization and of course efficiency. In Q3, we expect one-offs with a positive adjusted EBITDA effect of around 20 million SEK. This is related to housing for refugees in Norway. And I also want to remind you that we had one-offs in the third quarter last year of 76 million SEK. Then please turn to page 11. Free cash flow improved slightly to 306 million SEC, driven by higher turnover, improved results, and lower capex compared to the first half of last year. Q2 itself delivered 664 million SEC, almost tripled compared to 2019, which is very strong. The macroeconomic uncertainty in the beginning of this year held actually back investments, and we had a cautious approach with low capex in the first half year. With the market development during the spring and early summer months and our strong financial position, we plan for higher capex later this year. Working capital was negatively impacted by the previously communicated repayment of variable rent debts for 2022 of about 700 million SEK, and excluding the effect of repaid rent debts, the development of working capital was positive, driven by increased operating liabilities. So please then turn to page 12. And as Jens also mentioned, we have a strong financial position, and we continue to reduce our debt level. Net debt increased to 2.8 billion second quarter and corresponded to a net debt in relation to adjusted EBITDA of 1.1 times on a rolling 12-month basis. This was lower than in the previous quarter where the net debt in relation to adjusted EBITDA amounted to 1.2 times and in line with the debt level at year end of 2022. Net debt included 1.6 billion related to the convertible bond and 841 million related to deferred VAT payments and social security contributions in Sweden. Excluding the convertible bond, net debt in relation to adjusted EBITDA amounted all to 0.5 times. Our available credit facility amounted to 3.2 billion SEK and total available liquidity amounted to 2.7 billion SEK at the end of the quarter. Lastly, the convertible bond has its conversion price of 43.36 Swedish krona and, as you know, matures in October 2024 with a potential dilution of 41.5 million shares. And lastly, please turn to page 13. Here you can see the financial net items and impact from IFRS 16. Including IFRS 16, the reported financial net was minus 503 million SEK. Excluded for IFRS 16, the financial net was minus 72 million SEK. And non-cash convertible interest was minus 42 million. Interest payments on bank loans decreased as a result of our lower debt level. Ultimately, cash financial items amounted to minus 29 million SEK. A lot of figures there. With that said, please turn to page 14 and back to you, Jens, for some final comments and some outlook.

Thank you very much, Åsa. Let's move straight into page 15. Some concluding remarks and also some reflections on the outlook from my side. It is really pleasing to see how we as a company improve and that we have With all these efforts we put in day-to-day, we create very strong results. Looking at the first six months this year compared with 2019, we actually increased the adjusted EBITDA with over 220 million Swedish kronor, and we also improved the margin of 1.1 percentage points from 8.1 to 9.2. So a really strong development when we compare these years. This is really also something that confirms our ambition to build a stronger and more profitable Scandic after the pandemic. Then some outlook. We expect a strong third quarter driven by continued high levels of leisure travel during the summer as well as business travel and meeting gaining momentum in the latter part of the quarter. So based on the current booking situation, we expect occupancy to be on par with the same period last year, but continuing also at higher average prices per room. So with good momentum, we look forward to an eventful summer, and I want to thank all employees for their fantastic commitment in every day's work, and our owners and guests for their trust and belief in Scandi. With that said, back to you, operator, for the Q&A.