SkiStar AB (publ)

Welcome to this conference call for SkiStar's second quarter and the half year report. My name is Stefan Sjöstrand, I'm the CEO of the company and I'm sitting here together with my colleague Martin Almgren and I am CFO here at SkiStar. So we will then take you through an agenda for this call and we will start to give you a sort of introduction and especially repetition from our CMD day in October 12th where we presented both new financial targets but also some updates about the company. So let us guide you through that part, then we will go through some highlights from the second quarter, then we will go through some numbers and then we also will look at some outlook and Q&As from your side. So let's start with the introduction. This is numbers from last year and I'm really glad to see that we continue to grow but especially really glad that we continue to have 8 out of 10 satisfied guests and 8 out of 10 satisfied employees. And we continue also our digital journey with continuous purchase online with both ski passes as well as digital check-ins. We stand on a very strong foundation with our people. We employ every year around 2500 young people and we are the largest or one of the largest employer of young people in Scandinavia today which makes us very proud. We have a very strong sustainability foundation and we will come through that later on in the presentation today as well. Very high focus on safe and secure at our ski destinations. If we look into the strategic framework, we have a strong focus on mountain operations and property development and supporting that we have all those free foundations as well as our digitalization and business development. And we are one of the largest players worldwide. We are the fourth largest player and we have just recently seen the results which could be an interesting comparison. We are also a market leader in Scandinavia and we have strengthened our position. Today we have 42% market share and again we are running the five largest winter destinations and also year-round destinations as well with Stockholm Hammarbybacken as the sixth and the interesting jewel in the crown as we used to say. If we then look into the number of ski days, we have an unmatchable position within Scandinavia with our five destinations and five resorts. They are bringing in a lot of ski days with the highest one in Sälen with 1.8 million ski days per year. We are also providing a lot of beds because without those warm beds we will not be as attractive as we are today. So we have around 40,000 beds which we are using every week and we have them circulating in our system as warm beds. We also continue to develop our ski stars destination and also work with attracting strong detailed plans with the municipalities and we will give an update later on into this presentation of how the development has been during this year so far. One of the more interesting slides we presented during the CMD day in October was this slide where we really presented how the different customers look like and how the average spend look like if you look at the customer coming from Sweden, Norway, Denmark or USA for example in this slide. And also the number of average products. This was like an introduction of also showing how we are shifting focus in driving much more international destinations and also after more international guests. And you can also see in today's report which we will guide you through later on how we are now into a successful journey in how to make this transition possible. And during the capital market day we also presented new financial targets Martin. Just

a few comments to this. If we look at the growth, the organic growth over the last 12 months we are right now running at the pace of 5% which is very close to the financial goal of 6. And also the operating margin in the rolling 12 month is strengthening. We had 14% the last financial year, 22-23 and now we have gone up to 16%. So we are moving closer and closer to the goal of 18. And also a comment about our net debt to EBITDA. When we end this quarter, end of February, we have the lowest debt ratio to EBITDA which amounted to 1.2 times at the moment. And the highest debt is during our end of the first quarter in November, December.

Thanks Martin. And now we will start to look into the quarter and I will give you a summary of the quarter here. So a lot of text on this slide but we actually have a lot of things to be proud of. That's why there is so much text and let's continue to say that the strong result is driven by a very high interest for skiing holidays. And we can see it at all destinations and we also started off the season with very good snow conditions. We can also see that the digitalization continues and we continue to grow fast. And we have an increase of online visits with 9%. So we are coming from last year 33 million online visits and now we are increasing with 9. So very strong number. And then if we look into then that the consumer demand, then during this last 12 months there has been a lot of discussions around how will consumer attractiveness continue when we have these tough market conditions. And here we are really glad to see that we are now, we can look into the market downturn in 2008, 2011. And also now that we have a proven result even if it is a recession in the market. You can see it here. We increase now, as I said, the international guests. We increase Danish with 25%. We increase, if I bundle UK, Germany and the Netherlands, we increase 41%. And during the same time we can see that the Swedes, we have loss of 1.5%. And a lot of this is very much connected to the early bookings of the Danes and British guests took actually a lot of bets out of the Swedes as well. So very interesting to see the importance of being early bookings also for Swedes going forward. We are growing. We have an organic growth of 9% in the quarter and we increased operating margin to 42% in the quarter. And that helps us also to have a margin now of 22% accumulated in the first six months. We also have a record high operating profit. We are passing 1 billion and the estimate from the analytics was 1 billion 18. We are delivering 5% above that on the profit. We have a record in ski days. We increased with 9% and we ended up in 4.5 million ski days, which is a lot higher than we also have during the record season during the pandemic. And one of the reasons is very much connected to these international guests who are staying longer and they also are buying longer ski paths. So we can see that this transformation to six to eight days ski paths has helped us to increase from 40% share to 43% share this year. And as you have seen in the report, we are increasing all revenue streams and I'm really especially extra glad to see that the retail growth. And we read and heard here so much about that sports equipment, sports clothing is down and we are actually showing the totally opposite pattern and increase both online and in physical stores with 34%, which is actually growth and growth and growth now for the third year in a row we are growing. And especially we are growing with our own brand equipped, which grow pace with 48% online and 69% in physical stores. And a special extra fun fact is that this year we are actually selling 50,000 pair of goggles, which is I think also very good for brand exposure at a lot of ski helmets in the slopes. And last but not least is that we can really glad to see our guest surveys showing much more satisfied guests and also that our coworkers doing a brilliant job saying hi to all guests, even if it's in the lift or in the reception or where you meet the customers. Really proud. We decided to make a project and trial to see if we could manage to try pilot pilot project with 100% fossil free ski resorts and we have managed. And we are the first in the world managed to transform ski star Hammarbybacken in Stockholm. It's a small ski resort, but the idea with this pilot is to see if it works. And then when we see that it works, we can actually scale it and implement it at other of our destination. And that's why I'm really glad and also proud to our coworkers who have, what to say, really taken this into their hearts and really made it with strong efforts to make it possible. If we just want to show you the digitalization and our movement and as you can see, we have an increased use, like I said, at our digital platforms. Much more sessions, much higher conversion rates. And again, we are increasing them. The total of digital platforms from, for example, 20.3 million last year to 22 now, 9% or close to 10%. And also the users are up seven and a half percent. So also increased conversion rate here. Just mention, I think it's worth mentioning. We decided also a couple of years ago to complete our offer at our ski destinations or winter destinations. And we have completed now this year by making an acquisition of the ski school in Trisill. And that, of course, helps us to completing our offer, not only at the wintertime, also at the summertime since the Trisill guide in Trisill had a very strong summer offer as well. We have increased across country at all destinations as well. We have made an acquisition of the concept store also in, opened up the concept store also in Trisill. Next slide is just to exemplify how we have had the retail growth year over year. And we have a very strong pattern in this, which makes us, of course, extra proud. So now Martin, let's take a deeper guide throughout the numbers and what has happened through the quarter. Thank you,

Stefan. So let's start with the overview and the development of our operating profit for the running 12 months. So we ended up at the profit, operating profit of 730 million. 64 of this comes from exploitation and 666 from our operating part of the business. And the operating part is really growing. And this is the second best so far if we look at what we have done in our history. It's only the year 2021-22, which is better. And it's what's interesting to see also when we increase our operating income with a little bit more than 200 million. And we have been able to get down 126 of those on operating profit. So we have been really, really efficient to convert sales into profit. And one of the things is that we have been more cost efficient and have had a better cost control in some of our costs. Like we said, maintenance, we also talk about marketing costs, energy costs and those kind of external expenses. When we look at costs like merchandise, for example, those costs are of course growing when the volume is growing as well. And also when we look at personnel costs, which has grown mainly due to -SIL-Guide and we also have the, if you remember, we had lower social costs last year, which will now pay full social costs for young people. So looking into the sales, as Stefan mentioned, all different categories are growing except the property development. But you know that property development will come and go little between the quarters. As Stefan said before, we are continuing to work and develop those plans and we are ready to start when we see that the market is there. So I would say no worries about the property development. What is interesting to see is that we grow ski paths with 15% in the quarter. We grow total accommodation. Here you see it both in the accommodation and also in the hotel. But we grow accommodation with 8%, which is an effect of the international guests and the Danish guests. That's where we have the growth, which also spin over to rentals and ski schools and also the retail and shop. So it's really positive to see that we said on the capital market day that international guests, they buy more of our portfolio, which is seen also in the numbers. If we look at the ski school, Trysilguiderna, which stands for 18 out of the 23 million in growth here. So that is one thing I want to highlight. Moving into the half year and looking at the sales categories, you see exactly the same pattern here as in the quarter. And of course, the quarter stands for the majority of the sales. So same pattern here. So I don't mention anything about the half year here. Moving into operating profit by segment. It's really positive to see how we manage to convert the sales into profit when the volume grows. In operating of ski resorts, we grow the profit with 148 million. Looking into the hotel side, which grow the profit with 32% and amounted to 91 million. So we have a positive trend also in our hotel business, which is really positive. And as I said before, the property development is now 30 million less than last year, but mainly due to that we have sales of 107 million in this quarter last year. Moving into the half year, you see exactly the same trend here. So nothing else to comment. Moving on to the last, the summary. I want to just comment on the better cost control that I said. So what really comes down to the increase in operating profit is both the sales growth and some cost efficiency that we have had in the quarter. Looking at our operating cash flow, which grow with a little bit less than 400 million. The majority of course come from the better result, but we have also been a little bit more efficient on our working capital allocation. That part can come and go a little bit between the quarters, but we are continuously working to be more and more efficient with our working capital. And we have a strong balance sheet. We have an equity asset ratio if we exclude IFRX 16, that amounts to 53%. And at the moment, our financial net debt is a little bit less than 1.2 billion, which is in line with this time last year. And you know, we have been the last quarter a little bit higher than previous years. So now the good cash flow we have used to amortize our debt that we have had. And those of you who have been looking into details in the cash flow, you have also seen that we have sold to companies in Hemsedal, which was the project Fjellnäs. So we sold out those two companies with a slightly small loss. And that loss is reported in the financial items due to that we sold leagued entities. Moving in, a few comments about sustainability. We have been working on this. Stefan talked about the 4.5 million skier days, which is an increase of 8-9%. That's really, really strong. Looking into the Fossil Free Ski Resort in Hammarby, that is one project that we are running. But we are also trying to communicate with our customers, with our guests. We have launched a new website and a communication platform together for White Winters. That we give tips to our customers how they can act to work together with the SkiStar to continue the White Winters. And we have launched also in this quarter hours new app, the SkiStar 360 app, which is an updated version over our ski resorts where you also can communicate with other guests. And you can also see what kind of attractions there are on our destinations.

Thank you, Martin. And let's take a short view on the outlook going forward. Like I said in the beginning, we have had very strong winter conditions. And these last three days we have spent time in Sälen, the largest ski resort. It came actually 40 cm snow during Sunday. So of course that gives us extra good snow conditions. But at all ski destinations we have a lot of snow. And that also helps us to end this winter season in a very good manner. We have very strong booking for Easter compared to last year. And now when we are then focusing on filling up Easter and closing the winter season, we are also ramping up for summer as soon as the winter close down. And when we look into the summer we can see that last year we had a large activity in Åre called O-Ringen orientation, who was staying there, which of course pumped up the guest nights. But if we then clean out that activity as such and then look into for example Sälen and Trysil, which is our largest summer destination, beside Åre we can see a strong increase. And also that a lot of guests would like to spend the summer in those summer resorts, where we also have bundled a lot of attractive activities for summer. With you could combine for example trial running, biking, hiking, swimming etc. So a lot of strong bundling offers actually. Then we will continue to work with international guests. We see that the work with them pays off and we will start to shift even more marketing, for example into Danish, to Denmark and to the Danish customers to attract even more there. And our property department, they are as Martin and myself said before, focusing on development of detail plans and we will continue also to make investments and focus in the core business with more lifts, more snow system and also more ski areas. Just to give you a highlight of our booking for Easter, we are up 13% compared to last year. And I really love to show this pattern compared to many other ski resorts. You can see how strong we are across the whole season. We have peaks, yes, over the breaks, winter breaks, week 7, 8, 9. But then if you clean them out, you can also see that we are very stable. The orange pattern here is this year and we are almost above last year in each period, each week, which also signing for a very good end of this winter season and something we are very proud of. Just a short recap also of our developed land and how we work with this strategy. And previously, I'm talking about the years fiscal year 17, 18, etc. and before that, we were very eager to sell out land. Now we have our method, methodology, how we work. And we have no hurry. At the same time, we guide the market between 70 to 90 million a year in gains in property development. And so far, it has been very low. That means, like Martin said, it can shift between quarters. So we have two quarters left of this year. And then let's see how they will fill in what we have guide you through earlier. And then just as an update of how we have increased the pace. So during this year, we have increased the number of completed detailed plans with five percentage units. So we have shifted from ongoing detailed plans into more completed detailed plans, which is, of course, something I'm really glad of. And also, it has been taking some really good decisions in the municipalities of Ore that there will be development of the area called Rödkullen, where we have a lot of ownership of ongoing detailed plans, for example. So we continue to grow the work and we will start to sell out land or build when we feel it's time for doing that. Last but not least, we are really focusing on together for white winters. And we can see that this will be beneficial for us, even though that we are worried for the climate change, like all others are as well. And that's why we have a lot of activities to strengthen our position and also what's going on in societies. And just as both sad and glad picture, the right side of this picture is actually taken from Sladming this weekend, where there will be World Championships next year. And you can see the green areas. And then on the left side, you can see a wonderful picture taken from Skistahore, where we have amazing snow conditions and really ending up for a good end of this winter season. So by that, Martin and I, we would like to open up for Q&A. And yeah, we stop there, Martin.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. Thank you. We will now go to your first question. And your first question comes from the line of Carl Johan Bonnevier from DMV Markets. Please go ahead.

Yes, good morning, Stephen and Martin. Congratulations, first of all, to good operational and financial performance in the quarter. No question about that. A couple of detailed questions for me. First, looking at the ski operations, when you look at what you have delivered in ski days so far this year, do you feel that we are in line for a record season when it comes to the number of ski days when we sum up the fiscal year?

Absolutely, KG, because we are actually stronger than we were during the year of the pandemic. And as you can see now, at the end of the season with a strong booking pattern for the plus 13, we are actually outperforming the weeks ahead as we had during the pandemic season. So it looks like that right now, actually, what we can see in our, what can I say, in the future in the crystal bowl. So, yeah, it looks like that, actually.

Sounds good, sounds good. And when we look at the earlier in the year, you had, you started an efficiency program that you said there was some opportunities to optimize costs and similar kinds of things. Is that what we now see the full effect of it as well in the results or is there more to come there?

I would say we start to see effect of it in the cost program, but also we will see effects coming in the coming years. We have just started up with one new recruitment working with, for example, purchase and how we can continue to optimize that in a better way in the future. So those effects will come later on. We have done some quick fix to start with, and that's what you see in some of the external costs. On the personnel side, we have done more or less what we have said, but we have also grown business like Trisil Gaidena. We have opened up a few new restaurants and we have grown some with some new ski shops and things like that. So that's how it looks at the moment.

Excellent. And when we look at the hotel operations, obviously that was a little of an efficiency project also, particularly during last year. Do you feel that you have now the structure there and the operational performance that you were looking for?

I can start and then Martin maybe will help me. I think first of all, Lina who is operating the hotels has made a fantastic job with her team. And I must say I'm really glad to see that we are now operating the hotels in a much more efficient way. However, Lina is actually saying that there is opportunities for even some more. Then we can also see that the restaurants we are operating right now, we had a slow start in some of them due to rebuilding and reconstruction. So that's why we also see that they can help us and support us going forward. So I think it is the answer to the question is both and KG that we are in a good way. But there is still some more improvement to work on both on top line and on cost. Martin, I don't know if you would like to help

me. No, but Lina has done a good job going through her organization and made some adjustments to have a more efficient organization in line with the sales. So that's a good job that they have done. I would say that is one of the parameters that you see effect of and the growth in the hotel business. And then also we have had good during the winter season, we have had good bookings at our hotels. We see that they are attractive. They are in the middle of the ski resort. So that it's a really good product. With a ski in, ski out

location of course that support.

Excellent. And I noticed when I looked at the CAPEX budget that you were highlighting 330 million for the coming year, which was slightly lower than I would have expected. And maybe just give us an update also where you see maybe CAPEX ending up for this year. And then the capital markets also seem to be going at the slightly more reduced base speed than I was expecting.

Yeah, we have reduced the CAPEX for the coming year a little bit. As we said on the capital market day, we will have a CAPEX that we can finance with our cash flow. So that is one reason behind it. So we are slightly lower pace this year. And also we continue to invest in lifts. We are continuing and hopefully we can do one or two lifts in Åre. We hope that we can do the Lundskårdsliften. And we also looking to start the project in Trysil to prepare for the coming lift there. And then of course we continue to invest in snow optimisation so we can produce snow in a more efficient way. Because that is going to be a crucial fact going forward in the future. I

think just a bit of what Martin said there during the CAPEX investment. We came in three years ago from a very low investment pace in lifts and within snow system etc. Why we decided to increase the pace and now we are flattening out that since we have done some big projects at our resorts. And that of course increase also the customer experience in a good way. Which also help us to continue to take the price we want to take on our ski paths etc.

And if I understand you right Martin, the 330 does that cover both Trysil and Åre projects?

Yes, it does but it's also not a full lift that we are talking about in Trysil. We are doing some preparations this year. So we will set up a small lift and then we will start some preparations. Adjusting the slope, building new snow system and also light to that slope. So we are preparing for another project there.

And in Åre we paid 80% of the lift in three years ago. But we have had problems with permission to build. Where one person has made a... What you call it. But the person has claimed but now we are hopefully getting permission to set this up during this season. After three years delay. So a lot of that is paid already and taken in the capex.

Excellent, perfect and I understand. Thank you very much and all the best out there. Thanks.

Thank you.

Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We will now take the next question. And your next question comes from the line of Stefan Sternholm from Nordaer. Please go ahead.

Hi, can you hear me?

Yes, yes.

Good. A question on international guests. I'm sorry if I missed this figure in your presentation. But you shared some numbers of the increase of international guests. But can you also say how many? What's the share of international guests of the total this year and if you compare that a year back?

Yes, so the Danish guests, they are growing with 25%. And last year they have a share of 19% of the total. Now they have 22% of the total amount. And then if I bundle UK, Germans and Netherlands guests, they are increased with 41%. And they are now coming up to .5% of the total.

I see. And can you also see an increased interest from those international guests to book during the summer? Or is it too early?

The Danish guests we can see that they have an interest. But I think it is a little bit too early Stefan.

Yes, but then the share is substantially lower during the summer time. Danish guests. A long term potential then. Those were my questions.

Thanks. Thank you.

Thank you. There are currently no further questions. I will hand the call back for closing remarks.

Okay, then I would like to say one thank you to all participants for joining this call. And now we are looking forward for an amazing Eastern in the slopes. So I hope to see you all there. Me and Martin, we will be for sure there. See you later.