CEO comment Q2 2025: Profitable growth

Despite significant geopolitical challenges, the hotel market continued to grow during the second quarter. For Pandox, total revenue and net operating income increased by 15 percent and 25 percent, respectively, primarily driven by strong performance in the Leases business segment.

For the comparable portfolio, in fixed currency, both revenue and net operating income increased by 3 percent for the Group as a whole, reflecting the quality of the portfolio, the hotels’ attractive positions in their respective markets and the effects of recently completed renovations.

In the Leases segment, the recently acquired Dalata properties performed well and made a strong contribution to earnings. At the same time, our hotel properties in Sweden, the UK and Germany outperformed their respective markets, reflecting the strength of the portfolio and the value of our active asset management.

In the Own Operations segment, both revenue and net operating income decreased, primarily due to divestments and a modest negative currency effect of approximately -2 percent.

Cash earnings per share increased by 15 percent, while EPRA NRV per share, including dividends paid, increased by 14 percent on an annual basis, demonstrating continued value creation for shareholders.

Dalata performs well

With the acquisition of Dalata, we have further strengthened our position as one of Europe’s leading hotel property owners. 31 high-quality hotel properties have been added to the portfolio across two of Europe’s most attractive hotel markets – Ireland and the UK. In addition, the conversion of an office property into a hotel is underway in a prime central Edinburgh location.

The Dalata properties performed well during the quarter, generating rental income of MSEK 312 with strong profitability. For the first half of the year, rental income from Dalata amounted to MSEK 533.

Assuming that the corresponding lease agreements had been in place during the comparative period, revenue growth for the Dalata portfolio in the second quarter is estimated at 4 percent in the UK and 3 percent in Ireland. For the first half of the year, growth is estimated at 2 percent in both markets.

The performance is well in line with our expectations and confirms the quality of the acquired portfolio.

Separation and refinancing progressing

The separation of Dalata’s business into a property-owning business and a hotel operating business is progressing at full pace and is expected to be completed during the fourth quarter of 2026. Once the process is completed, Pandox will have an even stronger platform for long-term growth and value creation.

We are engaged in positive discussions with banks regarding the refinancing of our current acquisition financing related to Dalata, replacing it with secured property financing at an indicated substantially lower credit margin. Hopefully, at that point, we can also increase our liquidity reserve.

At the end of the second quarter, our loan-to-value ratio was 52.4 percent, compared with 52.3 percent at the end of the first quarter of 2026. Adjusted for the dividend of MSEK 876 paid in April, the loan-to-value ratio was 51.4 percent.

This reflects a well-positioned portfolio and strong cash flow generation, enabling us to reduce leverage relatively quickly.

Portfolio optimisation enhances return potential

Value-creating acquisitions and investments are important components of Pandox’s business model. Acquisitions drive growth in revenue and earnings in the short term while also providing the foundation for new profitable investments over time. Divestments are also important as they release capital that can be reinvested in properties with higher return potential.

Over the past five years, we have divested a total of seven properties, including Hotel Korpilampi in Own Operations during the second quarter, at a total value equivalent to approximately MSEK 1,600. On average, these divestments have been completed at lower yield requirements than those applied to our project investments within the existing portfolio.

Page 11 of this report provides an overview of our investments and the estimated net operating income contribution expected once stabilised.

As previously communicated, we are opportunistically evaluating the potential for divestments in the Nordic region during 2026, and this process remains ongoing.

The hotel market remains strong

We are now in the midst of the seasonally strongest period of the year. Booking activity remains stable, event calendars are well filled across many of our markets, and demand for both business and leisure travel continues to be robust.

The conflict in the Middle East has so far had a limited impact on travel activity in Europe. Europe continues to be one of the world’s most attractive regions to travel to and within.

During the second quarter, international arrivals to Europe increased, supported by growing intra-regional travel as more Europeans chose to holiday and travel within the region. At the same time, we continue to see stable demand from the US, contributing to a broad and resilient demand picture.

The development confirms the structural strengths of the European hotel market. Limited supply growth, increasing travel demand and Europe’s strong position as a destination create favourable conditions for growth.

A growing hotel market, the acquisition of Dalata and organic growth in the comparable portfolio provide a solid foundation for continued growth in cash earnings in the short term and continued value creation over the long term.