Scandic’s interim report Q1 2020 – Substantial cost reductions & secured financing
First quarter in summary
- Net sales dropped 17.8% to 3,343 MSEK (4,066).
- Net sales grew in January and February but fell dramatically in March due to extremely low levels of activity as a result of the spread of the coronavirus.
- Extensive measures taken to lower cost levels including furlough and terminations of employees.
- Adjusted EBITDA amounted to -174 MSEK (160). Implemented cost reductions helped mitigate the negative effect of low occupancy levels in March.
- Expenses affecting comparability, mainly related to staffing reductions in the company’s Swedish operations, totaled -184 MSEK.
- Revaluation of intangible assets, mainly goodwill, leading to write-down of 2,955 MSEK.
- Non-cash tax expense of around 400 MSEK resulting from the Administrative Court of Finland’s rejection of Scandic’s appeal regarding supplementary taxation for 2007-2017.
- Adjusted for the effect of finance leases and items affecting comparability, earnings per share totaled -36.23 SEK (-0.79), with a material negative impact from the impairment and the tax cost in the quarter.
- On March 16, Scandic’s Board of Directors resolved to withdraw its previous dividend proposal of 3.70 SEK per share due to the company’s dramatically worsened business situation.
Events after the reporting date
- On April 29, Scandic announced a 1,150 MSEK increase in its credit facilities, to 6,650 MSEK in total, and a guaranteed rights issue of 1,750 MSEK with preferential rights for existing shareholders.
CEO’s comments in summary
The first quarter of 2020 was dominated by the coronavirus crisis. The year got off to a good start with sales increasing in both January and February, but from the end of February, we began to notice declining demand with fewer international visitors and travel restrictions among our corporate customers. Subsequently, the government decisions taken to reduce the spread of the coronavirus resulted in an extremely low level of activity that we’ve never experienced before. In March, in principle, our net sales were halved compared to the previous year.
At the end of February, we initiated a series of measures to reduce costs. Excluding rents, we’ve managed to lower costs by just over 70 percent at the beginning of the second quarter mainly due to lower variable costs, staff reductions and measures to lower the general cost level. We have also benefited from targeted state aid including furlough and support to cover fixed costs. We are preparing further measures to compensate for the reduction in state aid over time as it is gradually removed. Our ambition is for Scandic to be profitable at lower occupancy levels than before. Similarly, we will analyze our fixed and guaranteed rent levels to find solutions together with our property owners that will make it profitable to run hotel operations with lower occupancy levels than before.
In April, Scandic’s occupancy rate hit a record low of 6 percent. Both occupancy and the booking trend have improved since mid-April. From the end of May, we plan to gradually reopen more hotels. We expect a gradual increase in occupancy of a few percentage points per month in May and June. When the holiday season starts, we expect further improvement as national tourism flows resume. That said, the level of uncertainty remains high and we are preparing for a slow recovery in demand with continued cost reductions and cash flow enhancing measures determining our success. For 2020, we expect sales to be more than halved compared with 2019.
Result in the quarter was negatively affected by two non-cash items in the form of impairment of intangible assets of around 3 billion SEK and a tax expense of around 400 MSEK related to a tax ruling in Finland. Scandic will appeal the ruling.
On April 29, we announced that we had obtained a financing solution with an extended credit facility and a guaranteed rights issue to secure Scandic’s future liquidity needs while enabling continued development of the company. With the extensive cost-efficiency measures now being implemented, we’re creating very good opportunities in the long term to exceed our EBITDA margin target of 11 percent, even in a market with lower RevPAR levels than last year.
President & CEO
This information is information that Scandic Hotels Group AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 07.30 CET on May 20, 2020.
For more information, please contact:
Henrik Vikström, Director Investor Relations, Scandic Hotels Group
Phone: +46 709 52 80 06
Report presentation May 20, 2020 at 09.00 CET
A presentation of the report will take place at 09.00 CET today, May 20. Scandic’s President & CEO Jens Mathiesen will present the report together with CFO Jan Johansson in a webcast and telephone conference.
Details for participation by telephone: +46850558355, UK:+443333009269 Please call in 5 minutes before the start. The presentation will be held in English.
You can view the webcast at www.scandichotelsgroup.com. The interim report and presentation slides will also be available on the website.
Please call in 5 minutes before the start.
You can view the webcast at scandichotelsgroup.com. The interim report and the presentation slides will also be available on the website.
Please join us to listen and ask questions.
About Scandic Hotels Group
Scandic is the largest hotel company in the Nordic countries with more than 280 hotels, in operation and under development, in more than 130 destinations. The company is the leader when it comes to integrating sustainability in all operations and its award-winning Design for All concept ensures that Scandic hotels are accessible to everyone. Well loved by guests and employees, the Scandic Friends loyalty program is the largest in the Nordic hotel industry and the company is one of the most attractive employers in the region. Scandic Hotels is listed on Nasdaq Stockholm.
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