Scandic’s interim report for the third quarter 2024 – Good quarter, stable bookings and capital returns to shareholders

• Net sales declined by 2.0 percent to 6,182 million SEK (6,307). Organic growth increased by 0.5 percent.
• Average occupancy rate increased to 71.4 percent (71.0).
• Average revenue per available room (RevPAR)
  increased to 941 SEK (933).
• Operating profit totaled 1,155 million SEK (1,251).
• Adjusted EBITDA was 1,077 million SEK (1,173).
• Excluding IFRS 16, earnings per share equaled
  2.98 SEK (3.04).
• Free cash flow was 659 million SEK (899).
• Interest-bearing net debt/adjusted EBITDA amounted to 0.0x on a rolling 12-month basis.

January 1 – September 30, 2024.

• Net sales declined by 0.3 percent to 16,472 million SEK (16,525). Organic growth increased by 0.7 percent.
• Average occupancy rate was 62.5 percent (62.6).
• Average revenue per available room (RevPAR) increased to 811 SEK (797).
• Operating profit totaled 2,209 million SEK (2,283).
• Adjusted EBITDA was 1,951 million SEK (2,115).
• Excluding IFRS 16, earnings per share equaled 4.14 SEK (4.29).
• Free cash flow was 389 million SEK (1,204).

Events during the period

• All remaining convertible bonds were converted into shares.
• Scandic launched a new loyalty program and clarified the ambition to double the number of members by 2030.
• Scandic signed an agreement for a new Scandic Go in Gothenburg and a new Scandic Go in Umeå.
• Scandic signed an agreement for sustainability-linked long-term financing with Nordea, DNB and Svensk Exportkredit.

Events after the reporting date

• The Board of Directors set financial targets for 2025-2027. The target for net debt in relation to adjusted EBITDA was reduced from 2-3x to below 1x. The company’s financial targets for growth and profitability, as well as the dividend policy, were clarified and maintained.
• Scandic announced a share buyback program of approximately 300 million SEK that will be launched in December 2024.
• Scandic announced that the Board will convene an extraordinary general meeting that will take place in December 2024 to decide on an extraordinary dividend of approximately 550 million SEK.
• Scandic prepaid the entire debt of 631 million SEK regarding deferred VAT and social security contributions related to the pandemic years to the Swedish Tax Agency in Sweden.
• Scandic established a partnership with SAS with the ambition of creating an even stronger offering for two of the leading loyalty programs in the Nordic hospitality industry.
• Scandic signed an agreement for a new hotel in Stuttgart and opened a new Scandic Go hotel in Stockholm.

CEO’S COMMENTS

• “Scandic delivered a good quarter and the booking situation is stable. Our new financial targets reflect that we are well positioned for continued solid growth with good profitability and a balanced risk profile. We intend to return to ordinary dividends, and with the convertible loan behind us, we’ve freed up capital that we’ll now return to the shareholders.”
• Scandic delivered a good quarter with revenue in line with last year’s record quarter, and excluding exchange rate effects, growth increased somewhat. We’re operating our hotels with improved efficiency and have taken several important steps forward in our commercial development while our pipeline continues to grow with high-quality hotels.
• Leisure travel was high during the summer, followed by a stable start to the autumn. Development was good in the largest markets, Sweden and Norway, except for a weak event calendar in Gothenburg, where also market capacity has increased over the past year. Although, we expect the market in Gothenburg to normalize with attractive events next summer. Finland delivers a solid result, however, impacted by a challenging market due to a weak economy. Especially in Helsinki, where demand has been further affected by fewer international guests as a result of its proximity to, and closed border with Russia. During the year, we have been optimizing operations to ensure good profitability, and during the third quarter, we carried out a reorganization to further increase cost efficiency. This makes us well-positioned when the market turns.
• Development in Denmark continued to be good, and the somewhat lower revenues were the result of having fewer available rooms compared with the previous year, mainly due to exiting several hotels to optimize our hotel portfolio.
• Revenues were in line with last year’s quarter, despite the challenging market in Finland and Gothenburg, fewer available rooms and exchange rate effects. Restaurant and conference revenues were impacted by the above-mentioned factors as well as the fact that we continued to optimize our operations in Finland from a profitability perspective, for example, by adjusting opening hours. Excluding non-recurring items of -15 million SEK (31), we delivered a good, adjusted EBITDA of 1,092 million SEK (1,142), corresponding to a margin of 17.7 percent (18.1).
• We continue to grow in Germany, and at the beginning of October, an agreement was signed for a new hotel in central Stuttgart, which is expected to open after renovation at the end of next year. During the quarter, we signed agreements for a new Scandic Go in Gothenburg and a new Scandic Go in Umeå, and in October, we also opened our second Scandic Go hotel in Stockholm. There is great interest in Scandic Go and I feel confident in our growth ambitions moving forward.
• During the quarter, we launched a completely redesigned version of our loyalty program, Scandic Friends. Offering more attractive membership benefits and a more personalized digital ecosystem will enable us to create even stronger loyalty and offer more relevant experiences. With about three million members, Scandic Friends is the largest loyalty program in the Nordic hotel market, and we aim to double the number of members by 2030. After the end of quarter, we also announced an exciting new partnership with SAS to create smoother, more personalized travel and hotel experiences for more than 11 million members in two of the largest loyalty programs in the Nordic hospitality industry.
• Scandic has established a strong commercial position and is largely debt-free. To reflect this and our positive view of the future and a more balanced risk profile, the board decided to lower the target for net debt in relation to adjusted EBITDA from 2-3x to below 1x. At the same time, we’ll maintain our current growth and profitability targets as well as the dividend policy. The convertible loan has now been converted, freeing up capital that we will return to shareholders. In addition to the ordinary dividend, the ambition is to return at least 1,200 million SEK to shareholders between 2024 and 2026, either through share buybacks or extraordinary dividends. As a first step, we will launch a share buyback program of approximately 300 million SEK in December. The board will also convene an extraordinary general meeting in December 2024 to resolve on an extraordinary dividend of approximately 550 million SEK.
• In addition, we prepaid the entire debt of 631 million SEK for deferred VAT and social security contributions from the pandemic years to the Swedish Tax Agency.
• We expect a stable fourth quarter with occupancy and room rates in line with the same period last year. Demand in the Nordic hotel market is good and should be impacted positively by more normalized interest rates and the monetary policy measures being implemented to improve purchasing power. During the year, we have also further fortified the company’s commercial and financial position and created good conditions for continued solid growth while maintaining high efficiency and good cost control.

Jens Mathiesen
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 October 30, 2024.