Scandic Hotels Group AB (publ)

Welcome to the Scandic Hotels Group Q3 Report 2025 presentation. For the first part of the conference call, you will be in listen-only mode. During the questions and answers session, you are able to ask questions by dialing pound key 5 on your telephone keypad. Now I will hand the conference over to the speakers. CEO Jens Mathiessen and CFO Per Christensen, please go ahead.

Thank you very much, Speaker, and good morning, everyone, and thank you for joining us this morning. My name is Jens Mathisen. I'm the CEO of Scandic, and I'm here, as always, together with Per Christiansen, our CFO. Please turn to page two. As you probably understand, we have a packed agenda for today. So we will start with the quarter and some update on that and then give you an update on the acquisition of the latter afterwards. Let's move straight to the highlights of the quarter and please turn to page four. We deliver a strong performance with good growth result and strong cash flow development. Net sales reached 6.4 billion Swedish kronor and excluding negative currency effects, organic growth was over 5% in the quarter. We continue to meet the market with high efficiency and very tight cost control. The Nordic hotel market remained good. Norway once again delivered a very strong quarter with organic growth of close to 10% and improving margins. Sweden performed well and Denmark showed momentum. We are developing Scandic at a good pace and continue to grow our portfolio. We have now launched Scandic's new app, which together with our new website, loyalty program, and the other commercial initiative that we presented at our Capital Market Day marks an important milestone. With all of this, we are building a much stronger commercial platform and are moving past the major investment pace, which means lower investment needs going forward. Looking into the fourth quarter, we expect good market conditions. Bookings are good and in line with last year. And as usual in the autumn, we see an increase in corporate travel and conferences. Lastly, the acquisition of the latter, which I mentioned, is progressing very well. And we will take a closer look at that later in this presentation. Please turn to page 5. We report good results with adjusted EBITDA of almost 1.1 billion Swedish kroner, which was in line with last year. This corresponds to a margin of 17.1%. The slightly lower margin compared with last year was mainly due to currency effects and somewhat higher costs related to the overall higher pace of commercial development. Pierre will give more comments on this later in this presentation. Please turn to page six. You know this page. Here you can see the market occupancy rates for the quarter compared with last year. Overall market development was good with higher occupancy across all countries and each month. Sweden continued to improve and the Norwegian market performed very well. Denmark also performed strongly, supported by growing international tourism to Copenhagen. And in Finland, occupancy was higher, but pricing remained weak due to a soft macro environment and also tough comparables in Finland following a very strong event calendar, especially in July last year. All in all, the Nordic market shows good momentum. Scandic's occupancy rate was around 74% in line with the market. Please turn to page 7. This slide shows market data for average room rates in Sweden, Norway, Finland and Denmark, indexed to the corresponding month in 2019. At fixed currency rates, the market's average room rate grew by 3% year-on-year. Scandic's average rate for the same market declined slightly compared with last year, but when adjusting for currency, our average rate grew by 2%. The slightly lower average rate was mainly due to the weak pricing situation in Finland, where you all know we are holding a large position. It's positive, though, that the demand is there and increasing. And when purchasing prior also the power returns, the market will be able to charge higher prices also in Finland. So overall pricing remains solid, supported by good market conditions. Please turn to page eight. Here you can see the market RevPAR development index to the corresponding month also in 2019. At fixed currency rates, the market RevPAR grew by 7% year-on-year during the quarter and Scandix RevPAR at the same markets increased by 4% compared with last year and 5% at fixed currency rates. This reflects a continued good demand environment across all markets supported by solid occupancy and stable pricing. Please turn to page nine. Here you can see the pipeline. And since the last quarter, we have actually signed agreements for two new hotels in Hamburg, as well as a franchise agreement for a hotel in Norway. In addition, we have decided to open our first ScandiGo in Norway. By the end of the quarter, we had around 3,400 rooms in our net pipeline, corresponding to about 6% of our total portfolio. We continue to grow in a very disciplined way with a well-balanced pipeline in line with our targets. Please turn to page 10. Here you can see our two new hotels and two new projects coming up in Hamburg. The first one is located right in the heart of Hamburg with direct access to the city's main bus terminal and train and subway lines. It will offer 325 rooms and is planned to open in 2028. The second hotel will offer an exclusive experience in downtown Hamburg. Within walking distance of Berliner Tor, it will have 430 rooms and is scheduled to open in 2030. Please turn to page 11. And first, ScandiGo is expanding in Oslo and Norway. We are converting the hotel ScandiGrensen into a ScandiGo, which will open in the first half of 2026. This will be our first ScandiGo in Norway. It's a great location right in the city center. The second project is Scandic Victoria Floor, a new franchise hotel scheduled to open in December this year, 2025. With that, let me hand over to you, Per, and please turn to page 13.

Thank you, Jens, and good morning, everyone. I will now go through the Q3 financials. We saw a good organic growth of 5.3% in the quarter. Norway and Denmark with strong performance and Finland on the other end struggled a little bit with a tougher market situation impacting the pricing. Sweden had a stable performance. EBITDA ended at 1088 million SEK versus 1077 million SEK same quarter last year. We saw some currency headwinds affecting the results and we also had the negative non-recurring item of 15 million previous year. Central and group cost is higher than last year due investments in commercial and IT capabilities. From next year, we expect to have a group cost on somewhat lower level as a percentage of sales. Please turn to page 14. We saw strong operational cash flow in the quarter of 2.3 billion last 12 months, improved working capital and investments in line with plan. Please turn to page 15. We have a very strong financial position, net debt of 62 million, meaning a leverage of zero times. We are well positioned to support the portfolio growth agenda, the acquisition of the Lata Hotel operations, as well as our dividend policy. I will now hand back to you Jens and please turn to page 16.

Thank you, Pierre. As we also mentioned that the Lata acquisition is getting closer to completion and we would like to provide a deep dive focusing on why we actually are doing this and what we can expect from it. So let's please turn to page 18. To give you an update on the whole process, on 11th of September, the shareholders in Dallata voted in favor of this transaction. And subject to a court hearing that is actually in place today, the offer is expected to be completed in the beginning of November. Building on a long-standing partnership, Scandic and Pandox have together established a plan under which Scandic acquires the operation and Pandox acquires the hotel properties of the latter. We see this as a great opportunity to add a well-managed hotel portfolio with strong brands and positions in attractive markets with clear value creation for Scandic already from completion. Once the offer has been completed, a carve-out process will be initiated, expected to be completed during the second half of 2026. During the carve-out process, we will assume operational responsibility for all the 56 hotels under a profitable management agreement. day-to-day operations continuing to be led by the largest current management team supporting continuity in the business scandic will receive a quarterly management fee equal to four percent of the revenue from the largest hotel operations starting from completion date please try to pace 19 On this one, we will move into some of the strategic rationale behind the acquisition. Dallata is a well-run business with strong brands, and I can actually say leading brands in especially the iRent community, strong positions, and operating in the similar segments as we do also with the lease model. The acquisition further gives us a leading position in Ireland from day one and also a very established position in the UK that forms a strong platform for future growth. These are two markets with attractive fundamentals. Furthermore, the acquisition will be highly value-creative for Scandic already from the completion with additional upside potentially post the carve-out and also in the longer term. Please turn to page 20. Next one, we will present the latter in more details, highlighting their market position and their performance. So please turn to page 21. As mentioned, the latter has a leading position in Ireland with around 6,500 rooms in the country, primarily in larger cities such as Dublin, Cork and Belfast. In the UK, the company has also established a solid presence with more than 5,000 rooms with a focus on the larger cities such as London and Manchester. Looking ahead, the pipeline is very attractive with more than two-thirds of planned growth focused on expanding within Ireland and UK. Please turn to page 22. The latter has demonstrated a proven track record of growth, having grown revenues by around 10% per year since 2019, with good margins and estimated profitability in line with Scandi. For the full year 2024, Dallata reported a revenue of 7.5 billion Swedish kronor. 75% of revenues are room revenues with a balanced guest mix of around 55% corporate and 45% leisure. Similar to the markets they operate, they have a solid year-round demand with overall strong occupancy levels. Looking at the portfolio, we have agreed on variable lease agreements with Pandox, which will create an attractive contract mix with rent levels below Scandic's current levels. Altogether, these 56 hotels will have a balanced mix of variable and fixed contracts. In addition, the latter's portfolio is young. and it's well invested and with estimated needs for the maintenance capex below Scandic's current levels. Please turn to page 23. The latter has consistently increased their average room rates over time with occupancy levels around 80%. This translates into attractive REFPA levels developing in a very good pace. Altogether, the latter is a well-run company with a proven track record of growth and profitability with attractive hotel KPIs. Please turn to page 25. On this slide, you see the market data for supply and demand across Ireland and the UK, as well as you see the occupancy rates in Ireland, UK and the Nordics. As you can see, the largest key markets are characterized by attractive supply demands with solid year-round demand. Looking at the demand in Ireland and UK, the markets are back at pre-pandemic levels. Ireland continues to show strong long-term potential, supported by a resilient tourism demand. Meanwhile, the overall hotel market in the UK remains solid with healthy occupancy and room rates. The occupancy rates are also consistently higher than we see in the Nordic throughout the year. Please turn to page 26. As you can see here, both occupancy and average room rates in the largest market have outgrown the Nordics over time. This also holds for REVPAR development. Considering the larger strong presence in these regions, we would get an attractive exposure to these markets from day one. Please turn to page 27. Now I will comment a bit about the value creation of the deals. Please turn to page 28. First of all, we expect the acquisition to be highly EPS creative. with an EPS growth of at least 15% just from the management agreement, and more than 20% following the carve out. This is on a performer basis based on 2024 numbers, excluding any synergies, of course. In addition, the acquisition implies an enterprise value of around six times 2024 EBITDA, which represents a discount compared to Scandic's current valuation. We will maintain a balanced leverage profile with leverage expected to remain below two times EBITDA. Lastly, we will continue to deliver according to the existing 2030 strategy and financial targets that we presented at our Capital Market Day earlier this year, We are fully committed to our financial targets and also the dividend policy. So now back to you Per, please turn to page 30.

Thank you Jens. Let's start off with a brief process overview. As from the completion date early November, Scandic will operate the latest 56 hotels under a management agreement. We will communicate and report the managed fees and related costs in Scandic Interim Reports. A carve-out process of Dalatas Hotel operations will be initiated. Costs to be reported as a non-recurring item affecting comparability. We will report and provide updates related to the process on an ongoing basis throughout the Interim Reports. As you can see in the timeline, the CARVAT process is expected to be completed during the second half of 2026. Please turn to page 31. Under the management agreement, Scandic will receive a fee of 4% of Dalatas revenues, which will be paid out on a quarterly basis. On this slide, we want to explain and illustrate a combined 2024 on pro forma basis and excluding one-offs. Looking at Scandic and Alata's respective 2024 reported numbers, the management agreement would have generated around 300 million SEK in revenue and around 270 million SEK in adjusted EBITDA. The adjusted EBITDA impacts includes a cost associated with operating the management agreement. This cost is expected up to 30 million over a 12 month period. Based on this, the total adjusted EBITDA margin would have increased with around 1% at this point. On the same basis, EPS would have increased by at least 15%, as mentioned by Jens earlier. The management agreement will remain in place until the Carvat process is completed in the second half of 2026. Balance sheet and hotel related KPIs will not be impacted by the management agreement. Please turn to page 32. We expect being able to finalize the Carvat process, acquire the operations and then fully consolidate the business in the second half of 2026. To illustrate the impact of the acquisition, this slide shows an illustration as if the operations would have been acquired for a full year 2024. Based on the combined 2024 reported numbers, revenues would have increased by approximately 7.5 billion SEK with adjusted EBITDA margin that would have been at least in line with Scandic current level. This will translate into earnings per share accretion of at least 20% compared to Scandic standalone. This calculated before taking any potential synergies and costs into account. Furthermore, the purchase price of 500 million euro on a cash and debt-free basis will be paid upon completion of the CARVAT process, meaning the second half of 2026. To conclude, we expect this acquisition to create a lot of value for Scandic shareholders. Scandic financial position is very strong and this means that the position can be done with a very balanced leverage. With that, I would like to hand back to you Jens and please turn to page 33.

Thank you, Per. And now we would like to provide you with some overview on the organization and also the governance structure during the management agreement. Please turn to page 34. During the management period, which Per just mentioned, a clear governance structure will be put in place to ensure consistency. During the management agreement, a steering committee will be established and serve as the primary governance body for Dallata's hotel operations. This committee will include senior leadership representatives from Scandic, Pandox and Dallata. The steering committee will be involved in key business decisions such as corporate development, hotel performance, CapEx topics, and of course also lease agreements. The Lata CEO and management team will continue in their current roles, which will ensure operational continuity and also strong performance. Please turn to page 35. To kind of conclude this section, I would like to summarize it through a couple of important takeaways. please turn to page 36. As mentioned, Dallata holds leading position in its markets. They operate well-known brands in the same segment as Scandic, coupled with a proven track record of profitable growth. Ireland and UK are attractive markets, supported by strong year-round demand, healthy supply demand dynamics, and high occupancy and room rates. This transaction reflects value creating, capital allocation, which an acquisition multiple at a discount to Scandic, where we maintain leverage below two times as Per mentioned, and on a performer basis, an immediate estimated EPS creation of over 15%, increasing to more than 20% post completion. Finally, we have established a robust governance structure based on joint decision-making between Scandic Pandocs and the latter. With that, I will conclude with some closing remarks for Q3 and the transaction before I hand it back to the operator in the Q&A session. So please turn to page 38. We delivered another strong quarter. Scandi continues to perform well with good growth results and cash flows. Our operations are efficient and we maintain disciplined good cost control. Market development was positive across most of the regions and looking ahead, the outlook is good. The booking situation for the fourth quarter is in line with last year, and we expect occupancy to be on par with last year and price levels to be slightly higher. The acquisition of the latter is going well, as you just heard. It's meaning and it's being made at a very attractive valuation. It's expected to contribute positively to earnings from the start and provide a strong platform for continued growth and improved profitability over time. So all in all, Scandic stands on a solid foundation with strong momentum, disciplined operation and record level leverage. With that, let's bring it back to you, operator, and start the Q&A session. Thank you.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Alice Beer from ABG Sundahl Collier. Please go ahead.

Hi, good morning. Thank you for taking my questions. Just firstly on Dalata, Pandocs share that it expects an annual rental income of around 1.2 billion SEK from Dalata. Would you say that the rental agreements for the Dalata hotels are similar to your standing ones with Pandocs and also do the agreements differ between Pandocs and Innspar?

Well, I guess the assumptions around Pandox calculations I'm not fully informed about, but I think it's on the reasonable levels that they're informing. And bear in mind that for the total acquisition, we will have 56 hotels and 31 will be with Pandox. And the structure of those contracts will be similar to the one we have in the Nordics with the revenue-based rent and the fixed minimum. I don't know if that answers your question. And if you look at the other Contract 22 in the market, they are more on a fixed basis with much lower rents than this one, but also with different responsibilities.

Great, thank you. That is a good answer to my question. And then also maybe more on the UK and Ireland market overall. You comment frequently on the Nordic hotel market data. Have you found a suitable provider for UK and Ireland market data and will you start sharing that with us? And then also from what you have seen, does the Lata hotels generally perform in line with the UK-Ireland data or is it less comparable than the Nordics?

Yeah, it's maybe a quarter too early to compare with, you know, the larger with the market. They have a very, very strong position in especially in their home market in Ireland and also where they are. They are definitely leading. But we will come back and share more market dates also on UK Ireland and also the performance of the larger versus that. But we haven't done that for this session.

Okay, great. And then you said that Q4 occupancy is expected to be in line with last year and a bit higher ARR. Could you elaborate a bit on this and why you think that?

Yeah, but we look at business on books and when we look at the business on books, you know, both the first part of the quarter, fourth quarter and the last part, meaning October and December, looks very solid and November more in line with last year. So all in all, looking at those numbers, we expect these things to happen. And like we said, occupancy levels close to in line with last year, but prices slightly higher with normal inflation growth.

Okay, perfect. And then your error growth in the quarter was below the market. Was this only due to Stockholm or could you give it some more color on your performance versus the market and also Why do you think that Stockholm is struggling with prices compared to, for example, Copenhagen?

No, it's not actually linked to Stockholm as such. If you look at Sweden as a whole, we are delivering an all-time high result in the quarter versus last year. So we are having a very strong quarter for Sweden as a whole. You're right, Stockholm was somewhat more flattish, if you may, and Gothenburg has recovered after the high impact of new capacity last year. No, it's more related to actually to Finland. We have a very strong position in Finland. And Finland did have a very weak July compared with last year, where last year was a very strong event calendar with Coldplay, et cetera, big events and concerts, which meant that the prices in the whole market dropped this year versus last year. And that is impacting the total numbers. If you take away Finland, we have growth in line with markets, I would say, in almost all other markets.

Perfect, thank you for elaborating. And then just on the last again, could you share any information about how payment of the acquisition will affect your interest expenses after the carve-out period is over?

I think it's a little bit early to say. I think that the 500 million will be financed with both own cash and with our banks. And I guess it's a little bit too early to say. As you see, we have 62 million in net debt now. So we're coming into this acquisition in a very good position. And then we... We can share that later on when we know exactly the date of it and exactly how it will be. So we will wait on that one.

As you know, we generate quite a lot of cash here. So, of course, depending on the timing, it's also having an impact on the amount of the loans in the end. But day by day, we will have a positive cash flow. And so that's definitely supporting the whole deal in a good way.

Alright, got it. And just a final question for me then. About the buybacks, do you think that it's possible that we will see buybacks in the future?

Yeah, in general, we like buybacks. We like both to have stability in dividend payments. And buyback is a very good tool for creating value once we generate a lot of cash. We always measure what is the best for the shareholders. And this deal with the numbers we have provided you with today shows that this was the best we could do with shareholders' money. And then, of course, then we prioritize that versus buyback. But definitely we could foresee buybacks in the future as well once we get on the other side of this deal.

Great. Thank you. That was all for me.

Thank you.

The next question comes from Artem Prokopets from UBS. Please go ahead.

Good morning, everyone. Thank you for taking my questions. Let me also ask them one by one. So first, I thank you for clarifications on the Dalata deal. wanted to double check. I think Dallata has 13 hotels in the pipeline, including one leased hotel in Madrid. And will it all become a part of the Scandic pipeline?

Yeah, they will all become our pipeline, you can say. So you're totally right. They have like almost nearly 2,000 rooms in the pipeline. Dallata hosts today approximately 12,000 rooms, and they have a pipeline of one thousand nine hundred rooms uh that has has been been at least announced and um and they will all be part of our future pipeline um so so you you're definitely right and it's also important to say that we have we have said this before but it's good for you to know you know we we we do believe that the latter holds two very very strong brands in the home market clayton and maldron we will take over these brands and we will continue working with these two brands that also means in the future it's not clear in all of these hotel openings whether it will open as a scandic or a clayton or a melt runner which brand we will use that's dependent on on the market conditions and looking further ahead once we come into the deal but everything is possible when it comes to these brands but it will be scandic branded hotels thank you thank you a second question on the restaurant and conference revenue uh i think

they declined as percent of room revenue. So they do not seem to recover. Is it perhaps a new norm to spend less on restaurants?

Yeah, I think we have been extremely good during the last, I would say, maybe since pandemic in prioritizing the initiatives we run and opening hours in restaurants and also how much we want to drive the different parts of the whole F&B area. we are very good at at running our our meeting business which is very stable and also our our restaurants and alcada are very prioritized when i i see it say this today we we are much better at finding more efficient alternatives on the shoulder days such as certain marketing on sundays instead of having a full restaurant open we might have a you know a bar solution with food Also, we prioritize how much banqueting we want to run in all the hotels. Some of this is also because of a very clear strategy around the F&B, which, as you know, has a much lower margin than the room side.

Thank you. On costs, last question. Could you perhaps provide any indication of costs growth in 2026? Also, in relation to central functions, I think central function costs declined its share of net sales compared to previous quarter. Do you expect them to remain broadly flat in absolute terms?

I think it's a good question. I think it's a bit too early to say. I guess we have a clear ambition to lower them as a percentage of sales. And of course, we in our cost base also have inflations and salary increases that push the cost up. So at this point, we're not commenting on the absolute terms, but as a percentage of sales, they're certainly going to come down.

Yeah, thank you. Thank you.

The next question comes from Jamie Rollo from Morgan Stanley. Please go ahead.

Thanks. Good morning, everyone. I've got a few questions just on the quarter and then on the latter, so I'll ask them separately as well. The first couple are really follow-ups from the questions just asked. On the food and beverage and other line, that actually grew a percent. in the third quarter, so I appreciate it's been under pressure for some time, but that looked like quite a good result to me. Do you think we're now back to a level where that line can start to grow modestly, or will it continue to decline as we go into more corporate-driven periods from Q4?

Jamie, thank you for the question. And you're right in your assumptions on this one. We did spend, and we have spoken quite a lot on this topic during the last couple of years. I think we have really spent a lot of time in prioritizing and securing that we are more efficient in the F&B area and also This can be almost a marginal diluting if you do this wrong. And I think we have shown throughout the years that we are very good at prioritizing at Scandi. But now we have normalized it. And I believe that we have a lot of initiatives now to start growing. And especially because of what we mentioned, both me and Per today, and you know it since the last many quarters, that we have spent the last couple of years on a lot of initiatives within the commercial area. in order to get a new website, a new app, a new loyalty program, a lot of new backing systems, et cetera, which also makes us much more capable of selling more, doing more ancillary sales, both into the restaurants, but also into the room part. So yes, we would expect this steadily to start growing looking ahead.

Thank you. And on the costs question, the operating costs in the quarter were up nearly 4%. And that was quite a big increase compared to the first half when they were up 1%. Obviously, some of that's connected to what we just talked about with more food and beverage revenue. But I know you won't give guidance on costs next year. But maybe, I mean, maybe talk about margins, excluding Dilata. I mean, should we expect margins next year to come under a little bit of pressure like in the third quarter? Thank you.

But I think it's a mix and pair. You can add a few comments to this as well. I think, first of all, we are kind of concluding most of the commercial initiatives, which of course has an impact on some of the cost level. And if you look at hotel level, there is definitely a shift from even more leisure driven occupancy during the third quarter. meaning more more you you see occupancy is increasing and it is very leisure driven meaning also more guests and more more kids and more people in the in in the hotels and that is of course putting more pressure into certain parts of the business but on the other hand we managed to save hours that shows how how we work with the efficiency uh to to compensate that uh so now we go into a more corporate driven period you can say in in this quarter and the next um so so we expect this to be a bit more normalized and but also the cost level as i said linked to these commercial initiatives they will of course start to to go down a bit now going forward Since we have concluded most of this, we still work on optimizing and we will have more features coming into the app and to the web. So it's not that this job is stopping just by launching a new thing, but it's actually something we will constantly develop, but at a lower, let's say, cost base than what we have seen up to now.

Yeah, and if you look from the other annual on it, I guess we believe that Norway will be quite strong even next year and Sweden will also recover better. There's a lot of initiatives coming from government and relief and people are experiencing a lower interest rate. I think the little bit question mark is of course around Finland for next year, how it will recover and what will be the trigger of the recovery, whether it will be the the macro or whether it will be the stop of the ukrainian war or something else there was an interesting deal yesterday with nvidia buying part of nokia so of course they need some positive news in finland so i think if you if you exclude finland i think we will see a very positive modern development and and i guess the view on finland needs to be added to that to see the total picture thanks

And then I have a few questions on the acquisition, if I may. So first of all, on the UK and Ireland, as you rightly say, very good data on occupancy and REVPAR versus 19. But in the UK, there's been quite a lot of cost pressure, and that seems to be continuing, particularly on the wage front and maybe business rates with the upcoming government autumn budget next month. I'm just wondering what sort of risks you're factoring into your budgets from those inflationary pressures, which seems to be a lot higher in the UK than maybe in the Nordics.

Yeah, but I think as we mentioned, we will operate this on a management fee during the coming period and we will conclude with the planning for next year in the fourth quarter together with the team in the latter. So it's a bit too early to say exactly what the expectation is on the different parts of the region when it comes to next year. When we look at it from outside, it seems that, as you mentioned also, that both Dublin and Ireland is extremely stable. Still a lot of both corporate and leisure, lots of activities. When it comes to UK, I would say certain parts of UK also still has a very high activity level. Maybe it has more been like London that has been a bit flat for a period of time, maybe with the purchasing power also weakening a bit. But also on the other hand here, we're talking five hotels in that market. So I don't think it will have a huge impact on the total numbers for our deal going forward. And we expect London to also normalize and come back very strongly. It has historically been a very, very strong market.

Thanks. And then on the strategy, some might say this is a bit of a departure from the organic growth path you laid out at the CMD, but obviously the numbers are great and it's a great opportunity. But do you think this deal could be a blueprint for the company to expand either in new markets or existing markets in a very quick way in the future, waiting for property companies to come in and they need an operator like yourselves?

I think there will be a lot of opportunities going forward. And Scandic has historically, you know, we started for many, many, many years to concentrate on really fortifying the Nordics and building a stronger platform and position in the Nordics. And we are number one operator in the Nordics. That, of course, gives certain limitations for growth, which also meant that we have for quite a long time been looking at markets outside the Nordics And we, of course, waited with talking about other markets than Germany, especially where we have had our focus. But we also said that we are open to look at alternatives and all the opportunities if they came on. We have been for quite a long time looking at UK and Ireland because we feel it's really strong markets. We think there's a lot of opportunities in that market, high occupancy and prices. So it's all dependent on the mix of leases that we can get in such a market. And this deal is actually marking a huge milestone for Scandic because we, like Per mentioned, we go in with this deal. All the 31 leases that we now make with Pandocs of the 56 will be on almost like Nordic terms. We're talking about turnover-based leases with a guarantee, something which we like because then we have a common interest with Pandocs in continuing to invest in the properties and securing that these properties are delivering well. So I think this is absolutely a good opportunity. With this model, we like to continue to grow. And also, of course, the 22 leases that are on fixed leases are much lower levels. So all in all, both the turnover-based leases and the fixed leases are on lower levels than what you see with Scandic's current portfolio. And that makes this deal extra attractive.

Brilliant. And just finally, quickly, when do you think group leverage will be back to your under one times target?

Well, I think you can calculate it almost. Jamie, I know you're good at this, but you can see when you look at our ability to create a lot of cash, which Pierre also showed you on this one, more than 2 billion in positive cash flow, you can calculate how fast this will come down. We will continue to generate a very, very strong cash flow. And we have also said that we continue with our targets for the CapEx part of Scandic. And we also mentioned that we expect the larger portfolio to be on lower levels than ours due to the fact it's a younger portfolio and it's very well managed hotels. So, of course, for a certain period of time and the years to come, we expect below the target and the percentage that we use on Scandic. And that also creates a lot of cash for that part of the portfolio. Thanks a lot. Thank you, Tim.

The next question comes from Andre Joulard from Deutsche Bank Equity Research. Please go ahead.

Good morning, gentlemen. Two follow-up questions for me, if I may. First one on price renegotiation. Correct me if I'm wrong, but you must be in the middle of the annual renegotiation with corporates. Could you give us more color about what is going on? Secondly, I guess that you are hardly working on the Dalata integration. Could you also give us some more color about potential synergies that you could expect to deliver? and maybe some potential positive effect on the margin that you guide at the moment on a flattish base for next year and the years after. Thank you.

I can start with the first one on the corporate. We have definitely started the corporate contracting period and it's good to see that it's highly stable in the conversations with the corporate accounts. We haven't seen yet that, let's say, a cost focus related to next year. So when we have these conversations, it's clear that we expect... Remember that a lot of the prices are corporates having a discount to the ongoing or running rates, meaning that we can... fluctuate that up and down versus the market's development on prices. That means that we have flexibility during the year. If prices increase more, then we can follow and vice versa. But right now, all sickness, it's early because we still negotiate a lot of maybe approximately 10,000 deals or so being negotiated. And a lot of them are being negotiated as we speak. And it will continue until early Jan. But it seems that it's a very stable environment in these communication with our corporate clients also expecting stability next year. And for the other question.

Yeah, a good question around the synergies of the Lata. Of course, there will be apparent synergies when we come in into, as Jens mentioned before, around certain deals around, for example, the OTA business. Someone will have a better agreement than the other. And there will be also other synergies where we can align and combine the IT environment and get scales from that. And lastly, of course, there will also be possibilities to work in a different way together as a team. And I guess it's a little bit too early to say exactly how that will play out and who will do what. But of course, there is two full organizations today and we could find a way to together work in a smarter way. So I guess that there will be synergies, but we're not guiding on that at this point. The last question I think is related to the margins and I guess, given that the performer we showed you earlier on the slide, it's It's of course expected that the 1 plus 1 will be higher than 2, as Jens said before, but there will be a period of integration and transformation. And after that, you could expect support from these unities into the margin. But right now, we will keep the financial target, as we said, with 11% and 5% growth, as well as leverage below 1 as the first part. And if we change that, we will come back.

Okay, thank you very much. Maybe a follow-up question on the MICE segment. If you're saying that the corporate segment is relatively stable, do you see an improvement on big events, seminars, conventions, and so on, which are also important for the F&B part of your business?

Yeah, I think it's also a very good question because I think we have discussed, you know, quite a lot during the last, maybe since pandemic, how the recovery would be in this segment. And I think meeting business as a whole is absolutely back on pre-pandemic levels or close to being back. The thing that we are still lacking and which I really don't know if that will come back in the level we saw pre-pandemic was kind of the global big congresses where you saw like 15,000 doctors coming to Gothenburg or Copenhagen. You know, we see less of those. They are there, but they are not as big maybe as they used to be and they are not as often. I don't know what we should expect in the future if people would gather these, you know, huge amount of people in a city. But that has not, on a global scale, now I'm not talking about Nordic, I'm talking globally, that has not really recovered to the levels we saw pre-pandemic. And I don't have the answer for whether this, we don't include it in our plans. meaning also that we operate the business without expecting this to happen. And if it happens, it's just an add-on to the results. And they are there, but they are on a lower level than pre-pandemic. And I wonder if that ever comes back on these levels. But the normal mice market is very stable, I would say. And if we would see a growth in the market, we probably also see a slightly smaller growth on the mice segment following that.

Does that mean that in term of ponderation the leisure segment is still slightly above the corporate one and you expect that to continue or not really?

Everything and all trends is absolutely confirming that this will continue. We have seen that during the... I've been with Scandic for more than 17 years and in all that period leisure is kind of in percentage outgrowing the corporate. year on year. And it's not yet on 5050. But it becomes closer and closer. And if this, there's no signals that this would change. And we also, we also incorporate that when when building new hotels, we are much more leisure oriented in securing that we can take our share of that growing segment. So you will be seeing more and more leisure focused hotels with those facilities that are catering for that. So, yes, I would expect that to continue to grow. And it's also individuals versus groups on the leisure side. So much more leisure driven, much more individually driven. And that's what we are catering for.

OK, thank you very much. Thank you.

The next question comes from Raymond K. from Nordia. Please go ahead.

Hello, good morning. A couple of questions for me as well. First one, just a follow-up on a previous question. I'm not sure if I misheard, but on the Scandic brands with relation to the Lata, was I correctly understanding that you said that hotels in the Lata's pipeline could potentially fall under Scandic brand, or did you say that you have plans to change, for example, Clayton and Meldron's brand?

No, thank you for the question, Raymond. No, it's very clear that the current hotels, we have no plan of changing the brands on the current Dallata hotels, meaning that the Claytons and the Meltron that they have in the markets will stay with these brands. We will take over and own these brands as part of the acquisition. Then they have a pipeline. And of course, we will overlook that. For instance, they are Right now, they are opening a hotel in Berlin next year, and that means next summer. That has been created as a Clayton with interior design and look and feel and everything from a Clayton. So that will be opened as a Clayton. But of course, what we will do with a hotel in Madrid coming up later in years to come hasn't been decided yet. That could be a Clayton, that could be a Scandic. So that could be or even a melt run. We are looking to grow with all our brands going forward. And we spend quite a lot of time already together with the Dallata team as a pre-work to this deal going through, you know, to organize ourselves rightly with the different brands. But you should expect to see growth in all the branded segments.

Yeah, that's a very helpful clarification. And then on what you wrote there about the market situation when you look into Q4, occupancy on par with preceding year and price levels to be slightly higher in the fourth quarter. Could you maybe provide some more nuance with respect to each geographic market?

Yeah, I think we keep that on a very, very high level because it's a bit too many details maybe, Raymond. But I think we expect quite a lot of stability in the markets where you have seen this stability. What is a good thing is that we have seen that we have an increase in occupancy in Finland. And especially some of these weak areas like the airport area of Helsinki, as well as Gothenburg last year, has started to recover. So it's two important markets that are starting to recover. And once occupancy is growing, then it's also easier for us to yield on prices. So, of course, we work a lot to start improving prices also in Finland. But it's yet to be seen whether we manage that and whether the market manage that, because the market has been been a bit weak in in finland uh so so it's it's a bit too early to to dare to estimate whether we we managed to to see those results already in q4 or we whether we need to wait a bit for for the beginning of next year before we see it but it has a positive development on occupancy and that's always good that we know that yielding will come

Great. And the final one from me on, I guess it's too early maybe to talk about integration costs with relation to the data, but could you maybe talk a bit about the costs associated with the carve-out process itself and if you see some extraordinary costs during the carve-out period?

I think what we mentioned today is during the management contract we will of course have some costs related to that and that we gave some guidance on the other parts. I think we're still discussing actually how the CARVAT will take place and therefore we're a little bit open in the end date. So there is a variable ways to do it and therefore I think it's too early to talk about the cost related to that. and and also even you know going for even more forward to the integration to that but uh we we will report in every quarter uh how this cost has been developing and i'm not sure whether we will guide on it yet so no okay got it thank you very much i'll get back in line thank you

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

But then we just want to thank you for listening in and for all your very, very valid and good questions. And if you have any more questions, feel free to contact us. You know where we are. And then we wish you a fantastic day out there. Take care.