Scandic’s interim report Q2 2020 – Recovery at the end of the quarter
Second quarter in summary
- Net sales decreased 86% to 665 MSEK (4,853) as a result of extremely low levels of demand caused by the spread of the coronavirus.
- Occupancy dropped to a historically low level in April but began to increase gradually in May and June. The rate of improvement accelerated in June as the summer vacation started.
- Adjusted EBITDA amounted to -1,138 MSEK (559). The negative effect on results was decreased by significant cost reductions combined with state support.
- Excluding the effects of finance leases and items affecting comparability, earnings per share totaled -11.05 SEK (2.17).
First half summary
- Net sales dropped 55% to 4,008 MSEK (8,919) and adjusted EBITDA was -1,311 MSEK (719).
- Adjusted for the effects of finance leases and items affecting comparability, earnings per share totaled -45.58 SEK (1.37) with a negative material impact from the impairment of intangible assets.
- In June, Scandic carried out a rights issue that contributed approximately 1,700 MSEK. In conjunction with the issue, the Group received credit commitments of 1,150 MSEK. In total, 88 272 918 new shares were issued, and the total number of outstanding shares amounts to 191 257 993 including the shares that were registered in July.
- Including extended credit facility and credit commitments, available liquidity totals 3,600 MSEK.
CEO’s comments in summary
As expected, results for the quarter were extremely negative as a result of our historically low level of activity. Even if we can say that the worst period is probably now behind us, we face huge challenges since the effects of the coronavirus will impact the hotel industry ahead.
After Scandic’s occupancy sank to a record low 6 percent in April, demand has been improving. Occupancy continued to rise as the summer vacation period started, but we’ve seen significant variations in the hotel portfolio. In general, hotels in smaller destinations have had the highest occupancy while in the larger cities, hotels have been impacted by canceled events and restrictions on meetings and travel which has resulted in very weak occupancy.
With available liquidity of 3,600 MSEK, a strong cost focus and a powerful market position in the Nordic region, Scandic is well-equipped for a market recovery, which is a prerequisite for becoming profitable again.
To mitigate the negative effects of the drop in sales, we’ve implemented a number of quick and powerful cost-saving measures. We will also carry out additional cost reductions to compensate for the state aid for furloughed staff that will be reduced over time. As part of this, we were recently forced to give about 1,000 team members in our Norwegian operations notice of termination.
We’re currently in talks with property owners regarding temporary rent reductions for 2020 and have already reached agreements with a number of them. In the longer perspective, we also need to ensure that our lease terms are adapted to market variations and enable acceptable profitability at lower occupancy levels than earlier.
At the end of May, we began reopening the hotels that were temporarily closed due to the coronavirus and at present, hotels corresponding to about 80 percent of our total hotel portfolio are open. Additional openings are planned during the summer and by the end of August, we expect almost all of our hotels to be open.
Bookings have continued to increase but guests act with short lead times. Average occupancy during the first half of July was about 35 percent, which is twice what it was in June but still only half of what is normal in July. We expect occupancy to be around 40 percent during the remainder of the summer vacation period. As we look ahead to the fall, market development will depend largely on how active our corporate customers are.
We now have full focus on steering Scandic through this difficult period so we can further strengthen our market position when the market normalizes. I am convinced that in time, we’ll be able to exceed our EBITDA margin target of 11 percent despite 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 July 17, 2020.
For more information, please contact:
Henrik Vikström, Director Investor Relations, Scandic Hotels Group
Phone: +46 709 52 80 06
Report presentation July 17, 2020 at 09.00 CET
A presentation of the report will take place at 09.00 CET today, July 17. 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: +46850558353, UK: +443333009032.
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 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.