Significant Progress in Implementing the Strategic Plan PARIS,
August 28 /PRNewswire-FirstCall/ -- - Solid first-half revenue
performance: up 5.2% like-for-like(1), up 11.8% in Services and up
5.1% in Hotels - Improvement in operating margin: 0.8 points
like-for-like, particularly a strong increase in Services (up 1.1
pt) - Operating profit before tax and non-recurring items: EUR393
million, up 16.0% like-for-like and 25.0% like-for-like and
excluding the impact of the return to shareholders - Sharp
improvement in profitability: ROCE(2) of 14.5%, vs. 12.8% at
June-end 2007 - Full-year target for operating profit before tax
and non-recurring items: between EUR910 million and EUR930 million,
up 16.0% like-for-like and excluding the impact of the return to
shareholders At a time of transformation The Group's first-half
2008 results reflect the impact of the strategic initiatives
deployed since early 2006. Disposals of non-strategic businesses
and restructuring of real estate to improve profitability To
refocus the Group on its two core Hotels and Services businesses, a
number of non-strategic assets have been sold, for a total of
EUR1.4 billion. As part of the Hotels business' "Asset Right"
strategy, hotel ownership structures have been changed in a
commitment to improving return on capital employed and reducing
earnings volatility. This process has generated nearly EUR4 billion
since 2005. This strategy has also benefited Accor shareholders,
who have had EUR2.4 billion returned to them since 2006 in the form
of share buybacks and special dividends. This transformation has
one-off impacts on interim results: - Revenue declined 6.2% (EUR249
million) year-on-year, due to a loss of 12.6% (EUR507 million) in
revenue from asset disposals. - Operating profit before tax and
non-recurring items rose by 3.6% as reported, reduced by 4% (EUR14
million) due to asset sales and 9% (EUR35 million) due to the
return to shareholders. On a like-for-like basis, operating profit
before tax and non-recurring items increased by 16.0%, and by 25.0%
excluding the impact on financial expense of the return to
shareholders. - Net profit stood at EUR310 million versus EUR596
million in first-half 2007, a 48.0% decline that primarily
reflected the EUR255 million decrease in capital gains. This
transformation has long-term positive impacts on Group performance:
- Operating margin, improved by 1.6 points over the period. -
Return on capital employed, at 14.5% at June 30, 2008, has improved
by 1.7 points since June 30, 2007. The Group has disposed of EUR749
million in US Economy Hotels assets and EUR653 million in
non-strategic assets, while at the same time focusing on higher
return businesses like Economy Hotels in Europe, with a 22.8% ROCE,
and Services, with a 21.0% ROCE at June 30, 2008. - A less cyclical
Group: Accor is now relying on the two businesses - Economy hotels
in Europe and Services - that are low cyclical businesses and
account for nearly 70% of EBIT compared to 44% in 2001. Those two
activities proved strong resilience during the last cycle
(2001-2003). In first half 2008, their combined margin improved by
1.0 point. As a result of those transformations, the full-year
target is to report profit before tax and non-recurring items of
between EUR910 million and EUR930 million, reflecting a 16%
increase in profit before tax for the year (like-for-like and
excluding the impact of the return to shareholders) which takes
into account a more uncertain economic environment. Anticipating an
economic environment that might remain difficult in 2009, Accor
will implement an EUR75-million cost savings plan over 2009 and
2010, covering particularly corporate overheads, organization of
head offices in Latin America and the United States, marketing
expenditure, purchasing, and new IT projects. High quality
first-half 2008 results (in EUR millions) H1 2007 H1 2008 % Change
% Change reported Like-for-like Revenue 4,015 3,766 -6.2% +5.2%
EBITDAR 1,095 1,088 -0.6% +7.9% EBITDAR margin 27.3% 28.9% +1.6 pts
+0.8 pts Operating profit before tax 379 393 +3.6% +16.0% and
non-recurring items Net profit, Group share 596 310 -48.0% ROCE
12.8% 14.5% +1.7 pts Consolidated revenue totaled EUR3,766 million
for the first six months of 2008, up 5.2% like-for-like but down
6.2% as reported due to the large number of asset disposals in
2007. EBITDAR amounted to EUR1,088 million, up 7.9% like-for-like
compared with first-half 2007. A favorable economic environment in
the first half and the impact of the Dynamic Pricing policy, as
well as sustained demand in the Services business, helped lift
EBITDAR margin 1.6 points as reported (0.8 points like-for-like) to
28.9% of revenue. Services Services delivered a good set of results
in first half. EBITDAR margin stood at 42.4% for the period, a
1.1-point like-for-like increase. This performance confirms the
business' robust performance in its core markets, in spite of the
loss of a contract in Belgium and the change in tax law in
Argentina. Furthermore, the Services started to migrate from paper
vouchers to cards, improving the operating margin. As a result,
EBITDAR margin in Europe was up 0.3 points with a flow-through
rate(3) of 49%. In Latin America, EBITDAR margin improved by 2.0
points and the flow-through rate reached 64% overall and 77% in
Brazil, where the EBITDAR margin gained 3.1 points. Upscale and
Midscale Hotels In Upscale and Midscale Hotels, EBITDAR margin
widened by a 0.5 points like-for-like to 27.7%, with a flow-through
rate of 35%. In France, revenue was up 6.8% and EBITDAR margin
increased by 0.4 points like-for-like. The effective flow-through
rate of 34% would have been 49% excluding the negative impact of
the January 1 discontinuation of payroll tax relief on low
salaries. In Europe (excluding France), revenue and EBITDAR margin
increased respectively by 3.7% and 0.8 points, with a flow-through
rate of 52%. Economy hotels (outside the United States) In Economy
Hotels, EBITDAR margin improved by 1.0 point like-for-like to
35.8%, with a flow-through rate of 53%. In France, like-for-like
revenue increased by 5.4%, with flow-through rate of 22% reflecting
the impact of both F1 hotel renovations and the above-mentioned
discontinuation of payroll tax relief on low salaries since January
1. Adjusted for these impacts, the flow-through rate would have
been 36% for the period. In Germany, revenue improved by 4.1%
like-for-like with a flow-through rate of 72%, while in the UK, the
flow-through rate was 68%, with revenue up 8.5% like-for-like.
Economy Hotels in the United States In Economy Hotels in the US,
EBITDAR margin improved by 0.2 points to 37.9% in a difficult
economic environment, demonstrating disciplined control of costs.
EBIT rose by 1.8% to EUR425 million as reported and by 15.4%
like-for-like. Operating profit before tax and non-recurring items
amounted to EUR393 million, an increase of 3.6% as reported. This
figure takes into account an EUR18 million negative currency effect
due mainly to the British pound and the US dollar. On a
like-for-like basis, operating profit before tax and non-recurring
items was up by 16.0%, or by 25.0% excluding the impact on
financial expense of the return to shareholders. Net profit, Group
share came to EUR310 million, compared with EUR596 million for the
year-earlier period. Most of the decline was attributable to a
decrease in capital gains from EUR533 million in first-half 2007,
mainly from the disposal of Go Voyages and property divestments, to
EUR130 million in first-half 2008. This differential in capital
gains explains most of the reduction in net profit in first half
2008. Operating profit before non-recurring items, net of tax
amounted to EUR263 million, compared with EUR258 million in
first-half 2007. Net earnings per share amounted to EUR1.40, based
on the weighted average 221.7 million shares outstanding during the
period. Funds from operations totaled EUR487 million in first-half
2008. In first-half 2007, they included EUR39 million from
businesses that have since been divested (Go Voyages, Red Roof Inn
and the Foodservices in Italy and Brazil). At constant scope of
consolidation, funds from operations were up 2.3% for the period.
Net debt amounted to EUR931 million at June 30, 2008. It takes into
account EUR368 million in expansion capex and the EUR226 million
cost of acquiring assets held for sale (mainly by exercising call
options as part of the restructuring of hotel property assets) and
EUR503 million in proceeds from asset sales. Dividends paid in
first-half 2008 amounted to EUR714 million, including EUR332
million in a special dividend of EUR1.50 per share. The main
financial ratios reflect the Group's robust financial position.
Gearing stood at 28.0% at June 30, 2008, while the ratio of
adjusted funds from operations to adjusted net debt(4) came to
24.2%. Return on capital employed continued to improve, rising to
14.5% at June 30, 2008, from 12.8% at June 30, 2007. ROCE in the
Hotels business has improved by 2.9 points since December 31, 2006,
from 11.1% to 14.0% at June 30, 2008. Significant progress in
implementing the strategic plan Accor Services: extending the range
of prepaid services and products Active in the prepaid market for
more than 40 years with Ticket Restaurant meal vouchers and Ticket
Alimentation food vouchers, the Services business is expanding its
lineup with Prepaid Gifts, Prepaid Car and Prepaid Transport
products to meet the expectations of employers and employees alike.
This development is being led by a growing emphasis on new
technological solutions, such as smart cards and cell phones, as
well as on innovative marketing techniques. In first-half 2008,
Accor Services launched: - The UUB prepaid card, aimed at Un- and
UnderBanked employees in the United Kingdom. - The Commuter Check
card (transit and parking) in the United States to promote the use
of public transportation. - The "Ma Kadeos" range of customizable
gift cards. Accor Services is relying on acquisitions that enable
it either to strengthen its technological expertise - as was the
case with UK-based Prepay Technologies, acquired in 2007 - or to
immediately increase market share. An annual budget of EUR100
million has been allocated for acquisitions to help drive
additional revenue growth of around 5% a year. The Services
business is also enjoying sustained organic growth in revenue of 8%
to 16% a year in accordance to Group's objectives, with increases
of 15.5% in 2006, 11.9% in 2007 and 11.8% in first-half 2008.
Ramp-up of the Hotel brands The repositioning of Sofitel in the
Luxury segment has led to the rebranding of 19 hotels since 2007
and to a 9.7% increase in average room rates for the period. At
June 30, the Sofitel network was comprised of 161 hotels, of which
68 will display the new visual identity by the end of 2008. A
number of high-profile units are undergoing renovation, including
Sofitel Amsterdam The Grand, Sofitel Aswan Old Cataract in and
Sofitel Brussels Le Louise. The July rollout of the "Life is
Magnifique" advertising campaign has revitalized the brand's
visibility. Pullman, the new Upscale brand launched last December,
performed well in the first half, with RevPAR rising by 3.5% for a
network comprised of 20 hotels at June 30, 2008. Forty-six new
hotels are already planned, including 30 rebrandings and 16
openings. In the non-standardized Economy segment, the All Seasons
brand introduced in September 2007 already had a network of 14
hotels in France at June 30. In addition, 50 new hotels are
commited, including 35 openings and 15 rebrandings. MGallery and
Accor Loyalty program scheduled for launch in September The
MGallery label, designating a collection of upscale hotels with
distinctive personality comprised of rebranded Mercure and Sofitel
units, will be introduced on September 3. Accor Hospitality's new
online, multi-brand loyalty program will be launched on September
12, with deployment in 2,000 hotels in 80 countries. Further
expansion in the Hotels business During the first half, 11,000
rooms were opened, of which 37% in Europe, 31% in Asia-Pacific, 19%
in other emerging markets, and 13% in North America. In China,
where the network includes 63 hotels, expansion has been especially
robust, as illustrated by the openings of the Novotel Beijing West
and Mercure Wanshang in Beijing in time for the Summer Olympics. At
June 30, 2008, there were 86 hotels in the pipeline, including 24
new contracts signed in the first half. In all, there were 101,000
rooms in the pipeline at June 30, 2008, compared with 93,000 at
December 31, 2007. A total of 23,000 rooms were signed during the
first half, compared with 21,325 during the prior-year period.
Hotel property disposals proceeding as scheduled Of the targeted
EUR978 million in disposals over the year, assets totaling EUR482
million were divested in the first half, while agreements to sell
an additional EUR119 million in assets have been signed, with
closing scheduled during the second half. As a result, more than
60% of the expected full-year program has already been completed.
Outlook for 2008 Business in July In the Services business, revenue
increased by 16.3% like-for-like in July. During the month,
like-for-like RevPAR in the Upscale and Midscale Hotels in Europe
rose by 3.0%, with increases of 4.2% in France, 4.7% in Germany and
0.4% in the rest of Europe. In Economy Hotels in Europe,
like-for-like RevPAR was up 1.7% overall, rising 3.1% in France,
1.0% in Germany, and 0.4% in the rest of Europe. These trends
confirm the resistance of the Group's two core markets, France and
Germany. In Economy Hotels in the US, RevPAR was down 3.0% in July,
in line with the market. - 2008 earnings objective Over the full
year, the Group is aiming to report profit before tax and
non-recurring items of between EUR910 million to EUR930 million.
This target takes into account the following factors: - Growth in
profit before tax and non-recurring items (excluding the impact of
the return to shareholders) of 25% in the first half and of around
10% in the second, in light of the less favorable economic
environment. - An additional negative EUR85-million impact on
profit before tax of the Group transformation which is made of a
negative EUR55- million impact on net financial expense of the
return to shareholders (share buybacks and the payment of special
dividends in 2007 and 2008) and a negative EUR30-million impact of
assets divested in 2007-Go Voyages, the Foodservices in Italy and
Brazil, and Red Roof Inn. - An estimated negative EUR40-million
currency effect due to the weak US dollar and British pound. - An
estimated negative EUR17-million impact of expansion (hotel
openings or acquisitions). This earnings objective would represent
around 16% growth in profit before tax like-for-like for the year,
excluding the impact of the return to shareholders. Upcoming events
- October 14: Third-quarter revenue - October 20, 21 & 22:
Investor Days --------------------------------- (1) At constant
scope of consolidation and exchange rates. (2) Return on capital
employed (ROCE) corresponds to EBITDA expressed as a percentage of
fixed assets at cost plus working capital. (3) Defined as the
like-for-like change in EBITDAR expressed as a percentage of the
like-for-like change in revenue. (4) The ratio of funds from
operations before non-recurring items to adjusted net debt is
calculated according to a method used by the main rating agencies,
with net debt adjusted for the 8% discounting of future minimum
lease payments and funds from operations adjusted for interest
expense on these payments. Funds from operations before
non-recurring items corresponds to cash flow from operating
activities before non-recurring items and changes in working
capital requirement. DATASOURCE: Accor CONTACT: MEDIA CONTACTS:
Armelle Volkringer, Senior Vice President Corporate Communications,
and External Relations, Phone: +33(0)1-45-38-84-85; Emmanuelle
Baumgartner, Senior Vice President, Media Relations Department,
Phone: +33(0)1-45-38-84-85; Alain Delrieu, Senior Media Relations
Officer, Phone: +33-1-45-38-84-85; INVESTOR RELATIONS, Eliane
Rouyer-Chevalier, Senior Vice President, Investor Relations and
Financial Communication, Phone: +33-1-45-38-86-26; Solene Zammito,
Deputy Director Investor Relations, Phone: +33-1-45-38-86-33
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