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Accor: Resilient performance in the first nine months of 2008: revenue up 4.1% like-for-like
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on Friday 17 October 2008
Services revenue up by a strong 12.6% over the first nine months
Including 14.1% growth in the third quarter
· Hotels revenue up 3.7% over the first nine months
Including 1.1% growth in the third quarter
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· In light of the global economic downturn, adjusted full-year earnings
guidance: profit before tax at between €870m and €890m
(vs. €910m and €930m previously)
· A sound financial position
The Group's revenue performance in the first nine months was shaped by the following factors:
· Like-for-like growth of 4.1%.
· The strategic refocusing on the Hotels and Services businesses (with the disposals of Red Roof
Inn, Go Voyages and the Italian and Brazilian foodservices operations) and the continued
deployment of the “asset-right” strategy, which together had a negative impact of €754 million or
12.3% on revenue for the period.
· The expansion strategy which added €298 million or 4.9% to growth, including the effects of the
full consolidation of Orbis in the third quarter of 2008.
· A 2.1% negative currency effect resulting from the euro's appreciation against the dollar, the
pound and most South American currencies.
S
ervices revenue up 12.6% like-for-like in the first nine months
Revenue from the Services business in the first nine months increased by 11.0% as reported and 12.6% likefor-
like.
Acquisitions added 3.8% to growth. However, the currency effect was a negative 2.2%, mainly due to the
weakness of Latin American currencies.
Q3 2008: up 14.1% like-for-like
Third quarter revenue growth was a strong 14.1% like-for-like, versus 11.8% in the first half.
In Europe, revenue rose by 11.8% like-for-like, reflecting gains of 16.9% like-for-like in France, following the
deployment of a special action plan to boost meal voucher sales, and 8.9% like-for-like in the United
Kingdom. In Belgium, adjusted for the loss of the Onem contract, revenue was up 5.2%, compared to a
decline of 23.3% like-for-like.
In Latin America, like-for-like growth totaled 17.6%. Growth in Brazil accelerated to 17.5% in the third
quarter, from 8.6% in the first half, while the other Latin American countries saw revenue rise an aggregate
17.6% like-for-like. This performance takes into account the 39.4% fall in revenue in Argentina in the third
quarter following the withdrawal of payroll tax breaks. Excluding Argentina, revenue growth in Latin America
came to 22%.
Hotels revenue up 3.7% like-for-like in the first nine months
Hotels revenue amounted to €4,329 million in the first nine months of 2008, down 1.4% as reported but up
3.7% like-for-like, including increases of 5.1% in the first half and 1.1% in the third quarter. Adjusted for the
effects of the Rugby World Cup, which created a high basis of comparison in third-quarter 2007, like-for-like
growth for the quarter came to 1.4%.
The Hotels revenue performance in the first nine months was shaped by the following factors:
· Like-for-like growth of 3.7%.
· The sale of Red Roof Inn and other hotel units under the “asset-right” strategy, which had a
negative impact of €291 million or 6.6% on revenue for the period.
3/9
· The expansion strategy, added €182 million or 4.1% to growth, with the consolidation of Orbis in
the third quarter adding €59 million (of which €51 million in the Upscale & Midscale Hotels
segment and €8million in the Economy Hotels in Europe segment).
· The currency effect, mainly due to the weakness of the dollar (1.7% unfavorable effect) and the
pound (1.1% un favorable effect), which was a negative 2.6%.
Upscale and Midscale Hotels
2008 YTD: up 4.7% like-for-like
In Upscale and Midscale Hotels, revenue rose by 4.7% like-for-like in the first nine months of 2008.
Q3 2008: up 1.8% like-for-like
Third quarter growth was 1.8% like-for-like, compared with 6.2% in the first half, reflecting a more difficult
economic environment. Adjusted for the effects of the Rugby World Cup, the growth rate was 2.4%. Revenue
in France rose 1.0% excluding the effects of the Rugby World Cup. In Germany, revenue was up 2.2% likefor-
like, with RevPAR climbing 4.8% in the third quarter. In the United Kingdom, revenue expanded by a
strong 4.1% like-for-like, reflecting high activity levels in London where RevPAR rose 7.6% compared with a
0.2% increase in the regions.
Economy Hotels (outside the United States)
2008 YTD: up 4.5% like-for-like
In the Economy Hotels segment, revenue for the first nine months of 2008 rose 4.5% like-for-like.
Q3 2008: up 1.7% like-for-like
Business growth slowed in the third quarter, with revenue gaining 1.7% like-for-like compared with 6.1% in
the first half. In France, revenue was up 1.8% like-for-like, led by the Ibis brand which reported 3.7% like-forlike
revenue growth and a 7.0% increase in RevPAR for its Paris units. F1 revenues were adversely affected
by the hotel renovation program, but nevertheless remained stable compared with the third quarter of 2007
despite the fact that 30 units are currently being renovated. In Germany, the performance of the Economy
Hotels segment was dampened by renovation work at 13 hotels. Adjusted for these effects, revenues were
up 1.3% like-for-like in the third quarter, versus an unadjusted decline of 0.2%. In the United Kingdom,
revenue expanded 5.1%, helped by strong demand in London where Ibis hotels' RevPAR was 10% higher,
compared with a 1.7% increase in the regions.
Economy Hotels in the United States
2008 YTD: down 1.2% like-for-like
Like-for-like Motel 6 revenue contracted by 1.2% in the first nine months of 2008, reflecting a challenging
economic environment as well as higher gas prices.
Q3 2008: down 2.7% like-for-like
On a like-for-like basis, revenue contracted by 2.7% in the third quarter, after dipping 0.4% in the first half.
The downturn stemmed from the unfavorable economic environment and extreme weather conditions,
including the hurricanes that hit Texas and Ohio during the quarter. Franchise revenues were up 13.1%.
4/9
Significant transactions and events of the period
Accor has confirmed its commitment to expanding in Poland by raising its stake in the Orbis hotel
group to 50%
As part of its hotel development strategy in Central Europe, a market with very strong growth potential, Accor
announced in early September that it had raised to 50.01% its holding in the Orbis group, which is listed on
the Warsaw Stock Exchange. Accor, which had held 45.48% of the company since August 2007, recently
acquired an additional 4.53% stake at a price of PLN 55.4 per share, representing an investment of
approximately €35 million.
Orbis, which earned net profit of €41 million on revenue of €307 million in 2007, has been fully consolidated
with effect from July 1, 2008.
In addition to hotels, the company also has operations in travel services, car rental, intercity bus services and
casinos. It has a total of some 4,600 employees.
Financial position and results
Changes in scope of consolidation
· Expansion
In Services, acquisitions accounted for 3.8% of revenue growth for the first nine months of 2008, in line with
the Group’s medium-term objectives.
In Hotels, expansion initiatives – including the opening of 19,450 rooms, of which 8,450 during the third
quarter – boosted revenue for the nine-month period by 4.1%.
· Acquisitions
The consolidation of Orbis from July 1, 2008 added €109 million to consolidated revenue for the period.
Currency effect
The currency effect reduced revenue for the first nine months by 2.1%, or €126 million. The 8.6% fall in the
dollar against the euro since the start of the year had a €64 million negative impact, while the euro's
appreciation against the pound trimmed revenue by €50 million or 14.2%.
Share buybacks
Under the 22.5-million share buyback program approved by the Annual Shareholders' Meeting of May 13,
2008, a total of 812,699 shares were bought back during the first nine months of 2008, representing an
investment of €33.6 million.
Financing
Accor has a sound financial position with a 24.2% FFO1 / Adjusted net debt ratio as of June 30, 2008. The
Group had €1.4 billion in unused confirmed credit lines as of end-September 2008. No major refinancing
transactions are planned in the period to 2012.
1 FFO = Adjusted Fund From Ordinary Activities
5/9
2008 earnings objective
The third quarter 2008 figures reflect the first signs of a real economic downturn. Given the unusual lack of
visibility for the coming months, Accor is revising slightly its 2008 earnings guidance. The Group now expects
profit before tax and non-recurring items to stand at between €870 million and €890 million (vs. €910 million
to €930 million previously).
This guidance of €870 million to €890 million would represent around 12% growth in profit before tax like-forlike
1 for the year, of which 25% growth for the first half and a 3% growth for the second.
In the current economic slowdown, Accor benefits from a sound financial position. By anticipation, the Group
has already launched a €75 million cost savings plan, of which €50 million in 2009.
The Group relies on its two-low cyclical businesses, Services and Economy hotels in Europe, which
represent 67% of consolidated EBIT. The targeted second half profit before tax and non recurring items of
around 3% like-for-like1reflects this resilience.
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