PR Newswire/Les Echos/ Press release February 20, 2013 Sustained growth and solid results in 2012 *** Accor enters a deep transformation process to drive further growth Solid results in 2012 * Growth in revenue, up 2.7% like-for-like(1) to EUR5,649 million * Improvement in EBIT, up 3% like-for-like to EUR526 million * Operating profit before tax and non-recurring items, up 4.1% like-for-like to EUR468 million * Net profit of EUR80 million, before the impact of the Motel 6 disposal * Ordinary dividend of EUR0.76 a share, up 17% compared with 2011 (subject to shareholder approval) * Record expansion with the opening of more than 38,000 rooms, 85% of which under management or franchise agreements * EUR1,402 million reduction in adjusted net debt thanks to the asset management strategy, of which EUR606 million from the asset management program and EUR796 million from the disposal of Motel 6. 2013-2016: a new ambition * Confirmed expansion plan of 30,000 rooms per year through organic growth, with an EBIT margin above 15% * Extended Asset Management plan, with 800 hotels to be restructured, for a total negative impact of EUR2 billion on the Group's revenue, and a EUR2 billion reduction in Adjusted Net Debt * About EUR30 million annual investment plan to consolidate the Group distribution systems * A EUR100 million savings plan between 2013 and 2014, to maintain the Group's competitiveness, in an environment shaped by increasing operating costs and accrued competition in Europe * A clear improvement in the Group's economic performance by 2016-end, implying a structurally strong cash-flow generation 1At constant scope of consolidation and exchange rates (1) At constant scope of consolidation and exchange rates Accor's performance in 2012 was shaped by: * Sustained revenue growth in every segment, driven by steadily rising room rates * An improvement in EBIT, to EUR526 million, at the upper end of the target range announced in August 2012 * The generation of positive free cash flow before non-recurring items, at EUR150 million * The disposal, on October 1st, of Motel 6 to Blackstone * The effective launch of the ibis megabrand program, with the rebranding of more than 1,500 hotels * The issue in June of EUR600-million in five-year, 2.875% bond, with a further EUR100 million tranche successfully added in September. 2012 full-year results (in EUR millions) 2011 % change % change adjusted(1) 2012 adjusted(1) like-for-like(2) Revenue 5,568 5,649 +1.5% +2.7% EBITDAR(3) 1,759 1,788 +1.7% +1.9% EBITDAR margin 31.6% 31.7% +0.1 pt -0.3 pt EBIT 515 526 +2.0% +3.0% Operating profit before tax and non-recurring items 428 468 +9.4% +4.1% Net profit before loss from discontinued operations 248 80 N/A N/A Loss from discontinued operations (221) (679) N/A N/A Net profit/(loss), Group share 27 (599) N/A N/A (1) Following signature of the sales agreement with Blackstone, the consolidated income statements for the two periods presented have been adjusted for the reclassification of Motel 6's income statement items in the loss from discontinued operations. (2) At constant scope of consolidation and exchange rates (3) Earnings before interest, taxes, depreciation, amortization and rental expense Consolidated revenue for the year ended December 31, 2012 totaled EUR5,649 million, up 1.5% year-on-year on a reported basis and 2.7% at comparable scope of consolidation and exchange rates (like-for-like). Business in emerging markets remained robust throughout the year. Revenue was stable overall in Europe, with key markets holding firm (led by a good performance in the capital cities) and the situation in Southern Europe remaining difficult. By segment, like-for-like growth came to 2.7% in the Upscale & Midscale and 2.6% in Economy hotels. The gains were due to rising room rates across every segment and a 16.5% organic growth in management and franchise fees. * A new record year for development In 2012, 266 hotels, or 38,085 rooms, were opened, of which: - 85%(2) were under management contracts or franchise agreements. - 48% were in the Asia-Pacific region, 28% in Europe, 14% in Latin America and 10% in Africa Middle East. The development momentum remains very strong, with 112,600 rooms in the pipeline as of December 31, 2012, of which 84% were under management contracts or franchise agreements and 77% in emerging markets (52% in the Asia-Pacific region, 17% in Latin America and 8% in Africa Middle East). * Stable performance in Upscale & Midscale hotels In the Upscale & Midscale segment, revenue increased by 1.4% as reported and by 2.7% like-for-like in 2012. The segment's EBITDAR margin was stable at 28.8% of revenue (down 0.1 point as reported and 0.5 point like-for-like). This represented a satisfactory performance given, in particular, the renovation of several Pullman hotels and the continued deterioration in the Southern European economies. * Good performance in Economy hotels Revenue from Economy hotels increased 3.4% as reported and 2.6% like-for-like. EBITDAR margin stood at a record high 38.6%, up 0.4 point as reported and stable like-for-like, supported by robust demand and the segment's sustained development under asset-light agreements, particularly in emerging markets. A total of 15,000 rooms were opened in the ibis family during the year. Solid improvement in EBIT Consolidated EBITDAR(3) totaled EUR1,788 million, up 1.9% year-on-year like-for-like and 1.7% as reported. EBITDAR margin widened by 0.1 point as reported to 31.7% of consolidated revenue. EBIT rose by 3.0% like-for-like over the year, to EUR526 million (2011: EUR515 million), led by the reduction in depreciation and amortization charges due to the asset management program. Operating profit before tax and non-recurring items rose to EUR468 million from EUR428 million in 2011, a like-for-like gain of 4.1% that partly reflected the significant improvement in net finance expense, to EUR75 million from EUR92 million in 2011, due to a reduction in the average cost of debt. Net profit excluding the impact of the Motel 6 disposal was EUR80 million. Reported net profit was impacted by the non-recurring EUR679 million accounting loss on the Motel 6 disposal, including asset write-downs and the exercise of call options on fixed-lease hotels. As a result of this non-recurring loss, Accor posted a net loss of EUR599 million. Funds from operations rose to EUR694 million (2011: EUR670 million). Recurring expansion expenditure amounted to EUR245 million for the year, while hotel maintenance and renovation expenditure totaled EUR299 million, including EUR39 million related to the ibis megabrand program. (2) In number of rooms (3) Earnings before interest, taxes, depreciation, amortization and rental expense In 2012, cash flow was positively impacted by assets disposals totaling EUR352 million. The acquisitions of Mirvac for EUR193 million and of Grupo Posadas' Latin American operations for EUR217 million, combined with the payment of EUR114 million in a special dividend and the EUR158 million change in working capital, had a EUR195 million impact on consolidated debt in 2012, with the result that net debt amounted to EUR421 million at December 31, 2012. Consolidated return on capital employed rose to 14% at December 31, 2012 from 13.9% a year earlier. ROCE improved to 11.4% in the Upscale & Midscale segment, due to the successful deployment of the asset disposal program, and ended the year stable at 19.5% in the Economy segment, reflecting the roll-out of the ibis megabrand and the ongoing room renovation work in ibis budget hotels. At December 31, 2012, Accor had EUR1.5 billion in unused, confirmed long-term credit lines. The Group also optimized its cost of debt over the year with the successful issue of EUR600-million in 2.875% bonds, with a further EUR100 million tranche added in September. These EUR700 million bond issue will be used in 2013 to retire EUR700 million in bonds and other loan debentures carrying an average 6.14% in interest, thereby leading to a significant decrease in financial expenses. Continued deployment of the asset management program In 2012, 79 hotels changed ownership structure and are now operated under variable-rent leases, management contracts or franchise agreements. Another 20 hotels were sold during the year. These transactions had the effect of reducing adjusted net debt by EUR606 million. As of February 20, 2013, following the announced sale and management-back of the Sofitel Paris Le Faubourg and a variety of other transactions, the impact of property disposals on adjusted net debt amounted to EUR111 million. As a result, Accor has now met its objective of a EUR1.2 billion impact on adjusted net debt over the 2011-2012 period. These transactions have confirmed Accor's ability to pursue a dynamic asset management strategy. A new ambition for 2016 As part of the ongoing transformation of its business model, which is being driven both by fast growth under management and franchise contracts and by a dynamic asset management strategy, Accor is now committed, by the end of 2016, to operating its portfolio a room base 40% under franchise agreements, 40% under management contracts and 20% in owned or leased hotels. This transformation will also lead to a geographical shift in the income stream, with the target of earning 50% of EBIT from emerging markets by the end of 2016 (15% of EBIT was earned from emerging markets at the end of 2011.) This process will involve consolidating the Group's existing leadership in emerging markets, restructuring the portfolio in Europe to focus on a majority of management and franchise contracts, and strengthening the Group's expertise and accountability. It will be supported by five key drivers: 1. Strengthening the brands and distribution 2. Maintaining the fast pace of development 3. Stepping up the asset management program 4. Improving organizational efficiency 5. Achieving operational excellence to improve competitiveness 1. Strengthening brands and distribution Today, Accor has a comprehensive portfolio of strategically related brands, covering the entire market from Luxury to Economy. It intends to strengthen this strategy, which is essential in an asset light model for both guests and owners. The other critical challenge in an asset-light model is distribution, which is constantly evolving. Accor will invest about EUR30 million a year between now and the end of 2016 to increase online bookings to 50% of the total and to limit the influence of online travel agents. 2. Maintaining the fast pace of development After another year of record investment, Accor has confirmed its ambitious objective of opening 30,000 new rooms and acquiring 5,000 others, with 85% of them operated under asset-light structures. The EBIT margin targeted for this expansion is close to 17%. By 2016, development expenditure will decrease to between EUR100 million and EUR150 million a year, from EUR250 million in 2012, and will be primarily dedicated to economy hotels in strategic cities around the world. 3. Stepping up the asset management program Asset management is one of the core pillars of the Group's transformation. The 2013-2015 plan, designed to reduce adjusted net debt by EUR1 billion, has been accelerated with a new plan for 2016 that will restructure some 800 hotels, of which nearly 200 are owned and 600 leased. 83% of this restructuring process will take place in Europe. The total impact on revenue will amount to EUR2 billion. The impact on consolidated adjusted net debt will total EUR2 billion by the end of 2016, of which EUR1 .3 billion from owned hotels and EUR700 million from lease contracts, including EUR600 million in exit costs for fix-leased hotels i.e. less than 3 years of rental charge. 4. Improving organizational efficiency To support the transformation, Accor is reorganizing its corporate functions around two departments: - The Operations Department, with, since January 1st, 2013, an organization by brands in Europe committed to optimizing each one's identity, reputation, distribution and asset-light development. - The Property Management Department, which will be established in first-half 2013. Its central objectives will be to implement the asset management plan, manage and optimize capital expenditure and manage property asset turnover. Support functions will back activities in both departments. 5. Achieving operational excellence to improve competitiveness In response to the structural increase in operational costs, a more competitive market environment (evolution of online distribution) and the sustained deterioration in market conditions in Southern Europe, Accor has launched a EUR100-million cost savings plan for the 2013-2014 period. In particular, the plan will involve a strategic review and prioritization of projects, as well as a reduction in operating costs for the Group and its subsidiaries in Europe. This will come as part of the Operational Excellence program already underway, which notably implies disciplined cost management. The objective is to systematically strengthen and optimize the strategic transformations launched by the Group. Through implementation of the above strategy by 2016 Accor is targeting to: - Reduce its adjusted net debt by EUR2 billion, of which EUR1.3 billion for owned hotels and EUR700 million for leased hotels. - Improve consolidated operating margin above 15% and ROCE above 18%. - Structurally reduce capital expenditure to an annual envelope of EUR300-400 million, of which EUR100-150 million of expansion capex and EUR200-250 million for maintenance and renovation capex. - Reduce its sensitivity to cycles by 50% vs. 2010. Together, this will considerably optimize the structural generation of cash flow. Besides, Accor confirms its commitment to keep its investment grade status. In that frame, the Group will continue to explore opportunistic acquisitions offering ROCE above 12% and will return cash to shareholders through ordinary dividends (with a 50% pay-out ratio) and special dividends. Upcoming events - April 17, 2013: First-quarter 2013 revenue - April 25, 2013: Annual Shareholders' Meeting Other information The Board of Directors met on February 19, 2013 and approved the financial statements for the year ended December 31, 2012. The financial statements have been audited and the auditors' report is being issued. The consolidated financial statements and notes related to this press release are available on the www.accor.com website. Accor, the world's leading hotel operator and market leader in Europe, is present in 92 countries with nearly 3,500 hotels and 450,000 rooms. Accor's broad portfolio of hotel brands - Sofitel, Pullman, MGallery, Grand Mercure, Novotel, Suite Novotel, Mercure, Adagio, ibis, ibis Styles, ibis budget and hotelF1 - provides an extensive offer from luxury to budget. With more than 160,000 employees in Accor brand hotels worldwide, the Group offers its clients and partners 45 years of know-how and expertise. MEDIA RELATIONS Agnès Caradec Elodie Woillez Senior Vice President, Corporate Phone: +33 (0)1 45 38 87 08 Communications and External Relations Phone: +33 (0)1 45 38 87 52 INVESTOR AND ANALYST RELATIONS Sébastien Valentin Léa Ledermann Vice President, Investor Relations Investor Relations and Financial Communication Phone: +33 (0)1 45 38 86 36 Phone: +33 (0)1 45 38 86 25 Appendix Adjusted 2011 Income Statement In EUR millions 2011 2011 2011 Reported Motel 6 Adjusted Revenue 6,100 532 5,568 EBITDAR 1,923 164 1,759 EBIT 530 15 515 Operating profit before tax and non-recurring items 438 10 428 The content and accuracy of news releases published on this site and/or distributed by PR Newswire or its partners are the sole responsibility of the originating company or organisation. 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Sustained growth and solid results in 2012 - Accor enters a deep transformation process to drive further growth
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