Pandox AB (publ) year-end report January–December 2022

Strong cash flow and reinstated dividend

October–December 2022

• Revenue from Property Management amounted to MSEK 848 (648). For comparable units, the increase was 25 percent, adjusted for currency effects
• Net operating income from Property Management amounted to MSEK 698 (542). For comparable units, the increase was 22 percent, adjusted for currency effects
• Net operating income from Operator Activities amounted to MSEK 184 (26)
• EBITDA amounted to MSEK 829 (521), an increase of 59 percent
• Cash earnings amounted to MSEK 515 (196), equivalent to SEK 2.80 (1.07) per share
• Unrealised changes in the value of investment properties and derivatives amounted to MSEK -67 (97) and MSEK -59 (187) respectively. Unrealised changes in the value of operating properties amounted to MSEK -1 (-13) (only reported for disclosure purposes)
• Profit for the period amounted to MSEK 101 (258), equivalent to SEK 0.66 (1.41) per share

 

January–December 2022

• Revenue from Property Management amounted to MSEK 3,307 (2,422), including government grants of MSEK 117 (26). For comparable units, the increase was 30 percent, adjusted for currency effects
• Net operating income from Property Management amounted to MSEK 2,868 (2,027). For comparable units, the increase was 30 percent, adjusted for currency effects
• Net operating income from Operator Activities amounted to MSEK 566 (-22), including government grants of MSEK 143 (185)
• EBITDA amounted to MSEK 3,304 (1,868), an increase of 77 percent
• Cash earnings amounted to MSEK 2,056 (713), equivalent to SEK 11.18 (3.88) per share
• Unrealised changes in the value of investment properties and derivatives amounted to
  MSEK 1,185 (-368) and MSEK 2,318 (740) respectively. Unrealised changes in the value of operating properties amounted to MSEK 331 (47) (only reported for disclosure purposes)
• Profit for the period amounted to MSEK 4,204 (609), equivalent to SEK 22.94 (3.32) per share
• The Board of Directors is proposing a dividend of SEK 2.50 (–) per share, totalling approximately MSEK 460 (–)

Comment from CEO Liia Nõu

Fast and strong market recovery
The hotel market’s recovery in 2022 was both faster and stronger than we had dared to hope for when the year began. After a weak start due to pandemic restrictions, demand picked up significantly once they were lifted. Now, three quarters later, RevPAR in Pandox’s portfolio is largely back to levels before the pandemic (nominally), the difference being that average prices are higher, and occupancy is slightly lower. We can once again see proof of the hotel market’s ability to overcome difficult crises.

For Pandox, the hotel market’s strong recovery resulted in a significant improvement in earnings – for both the full year and the fourth quarter. For comparable units, net sales and total net operating income increased by 66 and 58 percent respectively in 2022 compared with 2021. For the fourth quarter the increase was 54 and 44 percent respectively. Adjusted for government grants, our total net operating income in 2022 was only slightly lower than in 2019.

Higher property valuation despite increasing yield requirement
Uncertainty regarding interest rates has resulted in higher financing costs, and this has also created a degree of upward pressure on the yield requirement in the hotel property market. But the combination of the higher starting level for the yield requirement and increased cash flows has up to now limited any negative effect on value for Pandox.

Normalisation of the hotel market was reflected during the year in higher valuations for our properties. This was due to a higher expected cash flow with sustained higher average prices, which outweighed increased yield requirements. For the whole property portfolio, the average yield requirement increased by 0.14 percentage points to 5.74 percent at the end of 2022 compared with the same date in 2021. Measured from the end of 2019, before the pandemic, the average yield requirement increased by 0.18 percentage points.

It is worth emphasising that Pandox’s only financing is through banks and that we have a good dialogue with our lenders on future refinancing. Higher market interest rates will, however, cause a further increase in Pandox’s interest costs in 2023.

 

Leveraging acquisition and divestment opportunities
Turbulence in the property market has created business opportunities for Pandox. We have chosen to take advantage of these through the acquisition of NH Brussels Louise in Belgium and DoubleTree by Hilton Bath in the UK, for a total equivalent to around MSEK 900. For the hotel in Brussels we signed a new lease with Citybox which will take effect in 2024 after renovations are completed. The hotel in the UK is already well-invested and has good potential to take additional market share. We have also freed up capital through the divestment of InterContinental Montreal in Canada (as of 1 Februari 2023), Mora Hotel & Spa in Sweden and Scandic Kajanus in Finland, for a total equivalent to around MSEK 790. We expect to be able to invest these funds in new projects with a higher return.

Further potential in some segments
In 2022 demand was strong throughout the domestic leisure segment and demand in the domestic business segment improved significantly as the year progressed. Some international demand is still absent, however, and there is therefore potential for improvement. This is also the case for larger conferences and trade fairs, which take longer to plan and fill up. The lifting of Covid-19 restrictions in China should also lead to increased travel from China to Europe, particularly in the second half of 2023. This will benefit larger, classic tourist destinations and big cities in particular, but airport hotels by larger airports will also benefit from it.

Cautious optimism about 2023
Due to Pandox’s size, the data, insights and our dedicated employees who are driven by the desire to create value for both Pandox and its partners, we hold a strong position in the hotel property market. Having predominantly variable revenue, which normally provides protection against increased operating expenses and higher interest rates, means that we have an attractive business model. In addition, our sound financial position and strong cash flow afford us the freedom to seize opportunities in investments and acquisitions. We also are open to selling hotel properties if the price is right and, in doing so, free up additional capital which we can reinvest in new projects with higher value-creation potential.

We are cautiously optimistic about the hotel market in 2023 based on external expectations of a recession that is less severe than was feared and of potential economic growth again as soon as 2024. There is still recovery potential in business and international travel. The main risk is the continuing direct and indirect effects of the war in Ukraine.

Based on the recovery in the hotel market and Pandox’s strong cash flows and stable financial position, the Board of Directors is proposing a dividend of SEK 2.50 per share, equivalent to approximately MSEK 460.
 

Liia Nõu, CEO
 

Presentation of the year-end report
Pandox will present this year-end report to investors, analysts and the media in a conference call webcast on 9 February 2023 at 08:30 CET. As a service to Pandox’s stakeholders there will also be an external update on the hotel market.

To follow the webcast, go to https://ir.financialhearings.com/pandox-q4-2022

To participate by phone, please use one of the following phone numbers:
SE: +46 8 505 163 86
UK: +44 20 319 84884
US: +1 412 317 6300
Pin code: 9224444#

Attachment: Year-end report January–December 2022
 

FOR FURTHER INFORMATION, PLEASE CONTACT:
Liia Nõu, CEO, +46 (8) 506 205 50
Anneli Lindblom, CFO, +46 (0) 765 93 84 00
Anders Berg, SVP Head of Communications and IR, +46 (0) 760 95 19 40

This information is information that Pandox AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted, through the agency of the contact persons set out above, for publication on 9 February 2023 at 07:00 CET.

About Pandox
Pandox is a leading owner of hotel properties in Northern Europe with a focus on sizeable hotels in key leisure and corporate destinations. Pandox’s hotel property portfolio comprises 157 hotels with approximately 35,500 hotel rooms in 15 countries. Pandox’s business is organised into Property Management, which comprises hotel properties leased on a long-term basis to leading hotel operators, and Operator Activities, which comprises hotel operations executed by Pandox in its owner-occupied hotel properties. Pandox was founded in 1995 and the company’s B shares are listed on Nasdaq Stockholm. www.pandox.se