Scandic Hotels Group AB (publ)

Thank you, speaker, and then good morning, everyone, and thank you for joining us for Scandic's first quarter presentation. My name is Jens Mathisen. I'm the CEO of Scandic, and I will walk you through the quarter, the first quarter results here together with Per Christiansen, our CFO. So if you please turn to page two, then we dive into the quarter's highlight. Overall, we had a stable start to the year. The first quarter is seasonally weak, as you know. and accounts for a small portion of the full year. Additionally, the quarter was impacted by significant calendar effects due to the early Easter holidays that falling in March this year compared to April last year. The second quarter has started off good with bookings for May and June in line also with last year. So the underlying demand is very solid. Market occupancy for January and February was higher than last year, and prices continued to develop positively. So altogether, the market conditions are good. The lower net sales and results compared to last year were mainly due to the calendar effects as mentioned. And additionally, we also faced some strikes in Finland. And I also want to highlight that the first quarter last year included a substantial positive one-off compared with almost no one else in this quarter. Supported by a more positive macroeconomic backdrop with inflation and rates coming down, we note a more optimistic sentiment. The interest from property owners is high and we have a lot of ongoing discussions on how we can grow and optimize the portfolio. On that note, highlights in this quarter were the opening of our first hotel in Nuremberg in Germany, and that we signed our second ScandiGo in Finland. I will also give you some more comments to this, of course, later in this presentation. Our digital transformation journey continues as planned. The rollout of the new cloud-based IT solution, the Oracle Hospitality Opera Cloud, will be completed before summer, as earlier announced. And I'm very excited about how we will support our journey going forward with this one as we see great potential for improving the guest experience as well as achieving operational efficiency gains. Lastly, Scandic's financial position is strong with a net debt to adjusted EBITDA ratio of 0.9 times on rolling 12 months. So all in all, a stable start to the year. with a promising outlook. Moving on to some comments on the result in the quarter, please turn to page three, where you can see quarterly adjusted EBITDA development since the first quarter of 2021. We reported an adjusted EBITDA of 33 million Swedish kronor compared to 170 million Swedish for the first quarter last year. This corresponds to an adjusted EBITDA margin of 0.7% compared with 3.8% in the first quarter last year. As mentioned, the lower result is mainly due to the early Easter and strikes in Finland and some one-offs. Additionally, we have a higher pace of development compared to last year. We keep a sharp focus on efficiency and cost control throughout the organization, and we are well-organized and prepared for the upcoming busy spring and summer months. Per will provide further comments on the financial performance later in this presentation. Please turn to page four. Here you can see the market occupancy in the first quarter on both this year and last year in the Nordic countries. In January and February, market occupancy was solid and slightly higher than last year. However, looking at March, it is clear how the early Easter affected occupancy, especially in Sweden and Norway, but also some in Finland. The markets occupancy rate for the first quarter was 52.9% compared with Scandic's occupancy rate at 51.9%. The main reason for the low occupancy in this quarter is totally due to the early Easter. Additionally, we performed better than the market in the first quarter last year, which was an especially strong quarter for us with larger meetings and events due also to pent-up demand from the pandemic. This makes the first quarter of last year a tough comparable quarter. As mentioned earlier, the second quarter has had a good start, and our performance in April will fully offset the Easter effects, and we don't expect this to have any impact on our full-year performance. Market demand is very solid, and the overall booking situation is still good and in line with last year. Domestic and intra-Nordic travel is at high level, and there is still recovery potential in the longer term for intercontinental travel, which actually continues to improve, but from lower levels. We also expect demand for the larger conferences and congresses, to bounce back to pre-pandemic levels, although it is really difficult to estimate exactly when that is fully back. Please turn to page five. This is market data showing average room rates for Sweden, Norway, Finland, and Denmark indexed to the corresponding month in 2019. Prices have continued to develop positively with Scandic's average room rates in the quarter being 2% higher than last year and 15% higher than in the first quarter of 2019. We expect continued positive price development supported by a more positive macroeconomic situation and continued high interest for travel and events. Please turn to page six Here you can see the market's REVPAR development index to the corresponding month, 2019. For the full quarter, REVPAR increased 2.2% in the Nordic markets compared to last year, and by 9.5% compared to the first quarter of 2019. Scandic's REVPAR decreased slightly compared to the first quarter last year, which I also referred to earlier. Please turn to page seven. During the quarter, we announced the signing of our second ScandiGO in Finland, with scheduled opening in late 2025. The hotel offers 144 rooms and it's located in central Oulu, which is northern Finland's largest city. This region is attractive for both leisure and business travelers, and the hotel will serve as a great complement to our existing portfolio in the city. Furthermore, this region lacks hotel opportunities and options in the economy segment. With increasing tourism year-round, Scandic Go is ideally suited for travelers seeking to explore the city and its surrounding landscape. Please turn to page eight. Our journey in Germany continues, and in March we opened Scandic Nuremberg Central, a takeover that we announced in the previous quarter. This hotel has had a promising start and overall our hotels perform well in the German market. Germany is an important growth market for Scandic and I'm confident to say that we note increasing interest and respect for Scandic as a brand in the region. We are step-by-step building our brand and awareness in the market, and we have also recently strengthened our business development organization to capture the growth opportunities we are seeing. Please turn to page 9, where you can see the pipeline. We're making good progress signing new hotels, and by the end of the quarter, we had 2,267 new rooms in the net pipeline. representing around 4% of the portfolio. We continue to optimize the portfolio by leaving hotels with limited potential. During the quarter, we exited two hotels, Scandic Ringsåker with 176 rooms in Norway and Scandic Imitage with 120 rooms in Denmark. Additionally, we have one more planned exit of a hotel in Denmark coming up with 129 rooms. I want to emphasize that we have strict requirements for new deals in terms of expected profitability and returns. We are not making any exceptions when growing the portfolio. So consequently, we may lose negotiations at times, but this approach is important for building an even stronger Scandi with higher margins and return in the future. So please turn to page 11 and I would hand it over to Per to walk you through the financial part.

Thank you Jens and good morning everyone. Let's dive into the financial performance of the quarter. As mentioned, the first quarter is seasonal week and makes a relatively small contribution to the full year. Moreover, the significant calendar effect and lower one-offs make this quarter quite difficult to compare to the same period last year. In total, looking at calendar effects, they were estimated to have a negative impact of net sales by around 4% to 5%. This includes both the Easter effect in March and the leap day effect in February. And the Easter effect had most impact on the largest market in Sweden and Norway, as previously showed by Jens. Additionally, the quarter was further affected by strikes in Finland, and they began in mid-February and ended in the beginning of April. Despite that, Finland actually delivered a quite decent quarter. Net sales amounted to 4.4 billion SEK compared to 4.5 billion SEK same period last year. And looking at the results for the quarter, we reported the adjusted EBITDA of 33 million compared to 170 million last year. And bear in mind, in the first quarter last year, we had a 41% million SEK positive one-off and compared to six million positive one-offs this quarter. Including one-offs, the adjusted EBITDA margin was 0.6% compared to 2.9% last year. At this moment, we don't expect any new one-offs going forward, and I want to remind you that we had a positive one-off effect of 20 million SEK the second quarter last year. The overall higher activity in the company and development pace in Skandik is partly reflected in the higher group cost in this quarter. Please turn to page 12. This slide shows free cash flow per quarter and a rolling 12-month basis. Supported by our strong financial position, we have increased the investment pace to grow and optimize the hotel portfolio. Investments in maintenance increased to 150 million SEK compared to 67 million SEK last year. This is mainly related to ongoing renovations at hotels in Copenhagen, Stockholm and Göteborg. We expect maintenance CapEx to reach under more normalized levels going forward and for the full year in the range of 3% to 4% of net sales. Expansion CapEx increased to 94 million SEK compared to only 17 million last year. The increase was mainly related to the opening of the Scandec nearby central as mentioned by Jens. Working capital. in the first quarter and was further impacted by repayments of variable rents debts from last year of 220 million. And also we expect another 210 million to be paid in rent debts in the second quarter this year. All in all, free cash flow on rolling 12 month amounted to 1.4 billion SEK and for the quarter we reported negative cash flow of 733 million. Lastly, I want to highlight that there is only around 50% of the planned maintenance that is committed, and this gives us quite good financial flexibility going ahead. Please turn to page 13. This is the net debt adjusted EBITDA on rolling 12 months. And at the end of the quarter, our net debt amounted to 2.3 billion SEK. That includes the converted bond of 1.1 billion SEK and just over 700 million SEK in related to deferred VAT payments and social security contributions in Sweden. Including the converted bond, our net debt adjusted to EBITDA ratio was 0.9 times. This is significantly lower than our financial target, which ranges between two to three times. And currently we have a total credit facility of 3.4 billion SEK and we had total availability of liquidity of 2.2 billion SEK at the end of the quarter. This means our financial position is strong and we have high flexibility. And with that, I want to hand over back to Jens for some concluding remarks and outlook.

Thank you, Per. So all in all, we are concluding a stable start to the year, which you see now in page 15 here. I'm optimistic about the overall hotel market and how it looks into this year, 2024, supported by a more positive macroeconomic backdrop, solid travel volumes, and also event calendar. Our performance in April looks promising so far, and we expect to fully compensate for the Easter effects. Bookings for May and June are on par with last year, And for the second quarter, we expect slightly higher occupancy levels and room rates compared with the same quarter last year. So backed by our strong financial position, we will gradually increase investments, as Per also mentioned, in the growth of the portfolio and maintenance, and we will keep a high pace of development, building a stronger Scandic. We will also have a very sharp focus on efficiency and cost control throughout the company, while also ensuring that we are well organized and prepared for the important and busy spring and summer months. I would like to thank you all for joining in and attending this presentation. And we will now open up for the Q&A session. And with that, let's hand it back to you, operator.