Revenue and operating net – hotel property operations
Property revenue in the fi rst quarter of 2000 amounted to SEK 74.5 M (64.2). Property expenses excluding depreciation totalled SEK 15.3 M (13.2). The operating net rose by SEK 8.2 M to SEK 59.2 M (51.0). The increase is an effect of rising revenue from revenue- and resultbased lease agreements, renegotiation of leases and the surplus from hotel prop-erties acquired in 1999.
The adjusted direct yield for the period was 9.9 per cent (9.4). The adjusted direct yield including propertyrelated adminis-trative costs was 9.5 per cent (9.1)
Revenue and income
Consolidated income after tax, excluding nonrecurring revenue, improved by SEK 5.6 M compared with the preceding year and amounted to SEK 23.4 M (17.8).
Income after tax for the corresponding period of last year, including nonrecurring revenue of SEK 4.1 M from the sale of properties, totalled SEK 21.9 M. The increase is mainly attributable to an improved operating net in hotel property operations.
Financing and cash flow
Net fi nancial items for the period amount-ed to SEK –20.5 M (–19.0). The Group’s interestbearing liabilities on 31 March 2000 totalled SEK 1,457.8 M (1,340.3). The loan portfolio has a staggered maturity structure and an average fi xed interest period of 2.8 years. The average interest rate on the loans was 5.78 per cent. The mortgaging ratio in the properties was 61 per cent.
Disposable liquid assets, including unutilized overdraft facilities of SEK 50 M (25), amounted to SEK 77.5 M (101.3). The period’s cash fl ow from operating activities before change in working capital and investments was SEK 33.6 M (27.5).
The Pandox Group’s investments during the period, excluding property acquisitions, amounted to SEK 10.8 M and mainly pertained to hotel product improvements in a number of properties.
The hotel market
The new millennium has started on a high note for Pandox. First quarter revenue rose 16 per cent compared with the same period of last year. Growth has been generated by a robust hotel market – which is benefiting Pandox via resultbased leases – profitable acquisitions and increased value of the portfolio.
Demand for hotel rooms has continued to rise. Revenue per available room (REVPAR) in Sweden on a rolling
12-month basis has increased by over 8 per cent.
Pandox active ownership has increased the value of the portfolio, most noticeably in the form of increased revenue from cash fl owenhancing investments and renegotiation of lease agreements. At present, active
ownership of the portfolio accounts for 44 per cent of total revenue growth.
Acquisition of Hotellus
Pandox’s strategy was evaluated during the past year. Based on this work the Board decided to reformulate the strategy to, among other things, extend the geographic strategy to encompass northern Europe. The motive was that a larger geographic area would provide greater scope for continued market growth and a wider spread of risks, and offer better potential to exploit the hotel market business cycle for profi table acquisitions.
In February 2000 an agreement was signed with all of the shareholders in Hotellus International AB for the acquisition of the company including 16 hotel properties, of which 8 are located outside Sweden. Pandox’s pro forma income and cash fl ow per share for 1999 was thus increased by 12 and 7 öre, respectively, compared with the outcome for 1999. The acquisition was carried out at the begin-ning of April and will be consolidated as of the second quarter of 2000.
Through the acquisition of Hotellus, Pandox has obtained a portfolio of prominent and centrally located hotel properties in key hotel markets. The acquisition has created a large pure hotel property company with well known brands and operations in northern Europe. Pandox’s property portfolio as per 1 April, including Hotellus, included 47 hotel properties with a total of 8,494 hotel rooms and combined total fl oor space of 516,292 sq.m. The portfolio is of high quality. The average hotel has 180 rooms, which is more than three times the size of the average hotel in Sweden. A full 98 per cent of hotel operations in the properties are conducted under well known brands, and around 95 per cent are situated in strong, natural hotel locations.
The acquisition has created a solid platform for the reformulated strategy. The revenue structure is strong, with around 55 per cent of revenues generated in inter-national hotel markets such as Stockholm, Gothenburg, Copenhagen, London and Brussels.
Pandox’s market capitalization has signifi cantly increased, creating conditions for greater share liquidity and stronger interest from foreign investors.
Since Hotellus was not consolidated in the first quarter of 2000, Hotellus’s interim report for the fi rst quarter of 2000 has been attached for the sake of completeness, see pp. 6–8.
Integration in progress
The integration of the hotel property portfolios and organizations of Pandox and Hotellus is in full swing. A new organization has been created with focus on growth and cash flowenhancing activities. The majority of positions have been fi lled and additional recruitment is underway. The process of aligning Hotellus’s hotel property portfolio with Pandox’s management systems and work methods has high priority. Work on the Pandox model has been started, strengthening the focus on the most signifi cant issues.
Another key task is to build up knowledge about, and networks in, our new geographic market area. Pandox’s market information system (P@ MIS) is currently being extended to cover all of northern Europe. Another work group is mapping European hotel markets in order to create a basis for strategic decisions about prioritized
locations and collaboration partners. In addition, Pandox’s hotel property index is being supplemented with information about interesting hotel properties.
As part of the international expansion, the company has changed name to Pandox AB.
Income after tax for the year 2000, including Hotellus during nine months, is expected to reach SEK 140 M. This corresponds to earnings per share of SEK 6.24 (5.21) and cash fl ow per share of SEK 9.15 (7.94) calculated on the average number of shares.
Stockholm, 26 April 2000
Interim report January– June 28 August 2000
Interim report January– September 27 October 2000
Year-end report 2000 22 February 2001
The full report including tables can be downloaded from the enclosed link.