Scandic Hotels Group AB (publ) (SHOT) Earnings Call Transcript

Welcome to the Scandic Hotels Group Q2 2026 Report Presentation. For the first part of the conference call, you will be in listen-only mode. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Jens Mathiesen; and CFO Par Christiansen. Please go ahead.

Thank you very much, and good morning, everyone, and thank you all for joining us for this Q2 presentation. My name is Jens Mathiesen, I'm the CEO of Scandic and together with me, I have our CFO, Per Christiansen, as always. Let's dive into the highlights. So please turn to Page 2. we delivered a good quarter with solid growth. We improved our earnings and also higher profitability. The business is performing well across most of our markets, with Finland remaining the exception. Market conditions were favorable, supported by a busy event calendar, strong leisure travel and stable demand for business travel and meetings. Demand was particularly strong in the capital cities of Sweden, Denmark and Ireland. Finland remained challenging throughout the quarter, while the Norwegian wholesale market was affected by a hotel strike lasting more than 6 weeks. The recovery in Finland is taking longer than we had expected, but we remain focused on turning the performance around. We now expect a gradual improvement with a stable second half of the year with a financial performance on same levels as last year. During the quarter, we expanded the wholesale portfolio, continued to grow Scandic Go, we secured a long-term financing framework, and we progressed at the large acquisition according to plan with completion expected in the fourth quarter. Looking ahead, the booking situation remained strong. Compared with earlier this year, we now see better pricing conditions across our markets, supporting our expectation of a good third quarter with occupancy broadly in line with last year and higher average room rates. Please turn to Page 3. Let's here take a closer look at the financials for the quarter. I'm pleased with the result, which reflects the strong underlying development. Sweden delivered another strong quarter, Norway also performed well despite the strike. Denmark continued to show strength and the [indiscernible] delivered another strong quarter. The positive development was seen across most of the markets, while Finland continued to face a more challenging market. As a result, adjusted EBITDA increased to SEK 796 million, corresponding to a margin of 13.3% compared with 12.5% last year. High operational efficiency and disciplined cost control continue to support our performance. Please turn to Page 4. Here, let's take a closer look at the market development, starting with the Nordics. Overall, the market development -- developed well during the quarter, supported by a busy event calendar, continued strong leisure travel and also stable demand for both business travelers and the meeting and conference segment. Sweden had another strong quarter, particularly in Stockholm, where high activity in both leisure and corporate demand supported [ SLT ] market. In Norway, the wholesale workers' strike had a significant impact on the market during the quarter, affecting both occupancy and room rates. Despite this temporary disruption, the underlying market fundamentals remain healthy. Denmark also continued to show strength with Copenhagen benefiting from high international demand and a strong event Canada. As you can see from the chart, Finland has been the clear exception of this not only during the second quarter but throughout the first half of the year. But all in all, the Nordic wholesale market is healthy. And based on what we see today, we expect market conditions to remain favorable going forward. Please turn to Page 5 to have a look at the development of Ireland and U.K. Ireland continued to perform strongly with particularly good pricing development across the market. The Dublin market also remained healthy, supported by a solid demand from both business and leisure travelers. The U.K. was stable with both London and the regional markets showing steady and in some areas, improving market conditions. Please note that the market data on this slide covers April and May only as final June market statistics have not been yet published. Looking at the largest performance for the full quarter, it's also encouraging to see that the business continued to perform well relative to the market. Dalata delivered another strong quarter with particularly good performance across Ireland, London and the U.K. overall. These are attractive markets with good long-term fundamentals. Please turn to Page 6. Let me give you a brief update on our wholesale pipeline. We continue to expand the portfolio at a good pace at the end of the quarter, including Dalata's pipeline, we have 20 hotels and more than 4,700 rooms in development across our markets. The pipeline includes a good mix of Scandic, Scandic Go and Dalata hotels with several attractive projects in prime locations. Together, this provides a strong platform for continued growth in the years ahead. Over the next slides, I'm highlighting some of the most recent openings and signings. So please turn to Page 7. Here, we can highlight some of the recent development for Scandic Go since our first quarter presentation, we have continued to expand the Scandic Go portfolio with both new openings and new signings. During the quarter, we opened 4 new Scandic Go hotels, 1 in Helsingborg 1 in Gothenburg and our first 2 Scandic Go hotels in Finland in Turku and Oulu. We also signed a new Scandic Go Hotel in Central Stockholm further strengthening our presence in 1 of the most attractive wholesale locations in the Nordics. Scandic Go is gaining traction. Interest from property owners remains strong, and the concept continues to create attractive growth opportunities in prime city locations while allowing us to reach new customer segments. Please turn to Page 8. Here are a couple of other activities since the previous quarter. We signed an agreement for our third hotel in Frankfurt further strengthening our position in 1 of Europe's most attractive wholesale markets. We also signed 2 new franchise hotels, continuing to build a high-quality franchise portfolio in a disciplined way. Franchise is an important complement to our leased portfolio, and it enables us to grow together with strong local partners. So overall, activity remains high, and we continue to see strong interest from property owners across our markets. With that, I hand it over to Par for the financial updates.

Thank you, Jens. Good morning, everyone. I will now go through the Q2 financials. Please turn to Page 10. Looking at the second quarter, we saw organic growth of 1.2% and overall, good results better than last year in Sweden, Norway and other Europe, including Dalata. Norway was negatively affected by the 6-week long strike, but results were mitigated by the hard work from the teams as well as the strike-related compensation. The much lower result in Finland compared to last year is explained mainly due to softer prices, rent costs affected by fixed rent agreements and guaranteed levels and the saved hours in operations was offset by higher salary costs. The coming important third quarter looks in line with last year for Finland. Strong performance from Dalata. The contribution from the management contract gave us SEK 78 million in top line and SEK 66 million on the EBITDA level. Group costs in line with same quarter last year, efficiency improvements, balancing the inflation and salary increases. In total, we saw a result of SEK 796 million and a margin of 13.3% and an improvement compared to last year's margin. All in all, a stable result. Please turn to next page. We had a strong cash flow of more than SEK 2 billion on a rolling 12-month basis. Investments was in line with plan, and we continue to deliver on our portfolio strategy. The free cash flow totaled of SEK 0.9 billion on a rolling 12 basis. Please turn to next page. We have a strong financial position, net debt of SEK 276 million, meaning a leverage of 0.1x compared to 0.3x same time last year. We are in a good position to support the portfolio growth and the planned acquisition of Dalata Hotel operations. All in all, we delivered a solid quarter. Please turn to next page. In the quarter, we signed a new long-term financing framework with the [ wider ] bank group, SEK 7.5 billion is committed. This support the planned acquisition of Dalata, the contract is a 3-year tenure with extension options for another 2 years. I will now hand back to you, Jens, and please turn to Page 15. .

Thank you, Par. So here, let me wrap up with a few concluding remarks. Overall, I'm pleased with how the business continues to develop. We see good business momentum across most of our markets with Sweden, Norway and Denmark all performing well. Dalata also delivered another strong quarter and continues to perform ahead of last year. We are not satisfied with the development in Finland during the quarter. The recovery is taking longer than we had expected but we have had a clear plan in place for some time now and remain fully focused on turning the performance around. Based on what we see today, the booking situation for the second half of the year, is stable and broadly in line with last year, giving us confidence that the performance will gradually improve from current levels. At the same time, we continue to develop Scandic at a good pace. We are expanding the wholesale portfolio. Scandic Go continues to gain traction, Dalata acquisition is progressing according to plan and remains on track for completion in fourth quarter and our new financing framework that Par just mentioned provides the financial flexibility to support our continued growth. Looking ahead, the booking situation remains strong as we enter the peak season. Occupancy increased by almost 3 percentage points in the third quarter last year compared to the same quarter of 2024. Based on the current booking situation, we expect to maintain those strong occupancy levels this year. Compared with earlier this year, we now see better conditions for driving rates and we continue to execute on our pricing strategy. Together, this gives us confidence in a good quarter with higher average room rate. I feel very positive about where Scandic is today. We have good business momentum, a strong financial position and a clear growth strategy. Together, this gives us a strong platform to continue growing the business, improving profitability and further strengthening Scandic's market position. With that, I hand it back to the operator, and we go to the Q&A.

[Operator Instructions] The next question comes from Alice Beer from ABG Sundal Collier.

I have a couple of questions, but just let me start off with the outlook. You guided for Q3 occupancy in line with last year and higher ARR. Is that rate improvement broad-based across Sweden, Norway and Denmark? Or is it concentrated to a specific city or events? .

No, it's a good question. Overall, we see a very stable traction when it comes to occupancy. We even mentioned this a bit because last year, we were trying to drive a bit more volumes into the markets overall, and that's why we increased from approximately 71% to 74% occupancy 3 percentage points. That was driven by a lot of campaigning. This year, we see a, let's say, more stabilized booking situation, which also gives us more confidence in the ability to drive more rate. So -- and this goes all across the markets, like we even mentioned because it's clear that it was a disappointment in Finland for the quarter, but it's also very clear when we look ahead at the second half looks to be much more in line with last year, which was a much more normalized level. So we look all over markets, including Finland for a more stabilized second half.

Okay. Perfect. And then just considering you commented a bit about this in your closing statement, but if you could just expand on the Finland outlook. I mean, what specific observable data points, whether that's bookings or RevPAR or corporate travel. What gives you confidence that H2 will be broadly in line with last year rather than further down?

No, it's very much linked to the business on books and let's say, the day-to-day traction on the in booking trends. When we look at the quarter -- second quarter, we also saw that the quarter was weak, and we were not gaining the same kind of bigger events as we did last year, which we normally have on the books for quite let's say, a long time before we enter. So we needed to pick up from other segments, and that was simply not something that we could do alone in the market when the market didn't recover. When you look at the second half we have much more events and, let's say, larger meeting events and and 1-year events coming in that are already on the books, and we have a more stabilized corporate development in the second half than what we have seen in the beginning. So all in all, it's we're quite good at forecasting, and we were also good at forecasting second half. The only thing we couldn't really predict was the strike in Norway, which, of course, came in after we announced our expectations for the quarter. But all in all, we have a good booking situation also -- now we are in the middle of July, and we have seen a very stable beginning and in some markets, very solid beginning. Stockholm has been strong in the beginning with some big concerts from [ Barneyand ] we have had -- witnessed in Stockholm for like 11 days between June and July, which has been also filling all of Stockholm and of course, Sweden is a major market for us. So July started off very well in our markets.

Okay. Great. And moving on then could you talk a bit about your performance versus the market in the other markets if we exclude Dalata ? I mean, Denmark market data, for example, is a very strong Q2 print. But we see quite the same performance for your other market segment. Could you just expand on other markets, excluding Dalata.

I think we were -- if you look at some of these, both in Dalata, we are -- of course, Dalata we are ahead of even the market. If you look at Norway, we are also ahead of the market. that even includes the fact that we had a higher impact on the Scandic hotels for the strike. Simply, more hotels was taken out of Scandic. We had an impact of 52% of our hotels of that strike versus some of our competitors of around 30% and below percent of their markets or their hotels. So and even with that, we actually take market shares -- but we need to look at this from a longer perspective. Of course, in a single quarter, you can see some quarters, we win, some quarters, you lose some in percentage points versus market. Overall, we deliver, I would say, close to the market in general. I would like us to drive even more rates in the market going forward when we see a stable environment in occupancy level, and that's also our strategy to secure that going forward. So I think overall, we are delivering quite solid in the markets. But of course, you can always look back and say, okay, in this market, we should have been a bit more focused on driving higher prices to gain another percentage point on that, and that's easy to do afterwards. We try to do the best we can to yield the best way we do. And I think what I look at also in looking forward is with that focus in mind. So I'm satisfied with the focus in the company on doing all we can to drive rates.

Okay. Sounds reasonable. Just a final question for me then. Could you just provide some commentary on how much Norway's top line was affected by the strike. I mean, if I understand it correctly, please, correct me if I am wrong, but the compensation affected earnings but not top line. So just how should we think about the underlying performance in Norway?

But I think it's -- in round figures, maybe it's like SEK 100 million actually. So it's quite a lot of effects from top line during that period of time. So it's quite a lot that it was affected. And I think we mitigated that well, both through some of the salary support we get from a strike, but also to the fact that we had like I think are like 1,400 people or so out for the strike that were called out for strike and that meant that every managers and central office, everybody was in operation to support our business. And I'm really proud of the way that period of time, that shows strength that we actually can deliver such a strong result even with a 6-week strike. And then if we haven't had that strike, you see enormous uplift in the year-to-date numbers, and that is continuing. So -- all in all, Norway is a very solid market.

That's very fair. That was all for me.

The next question comes from Adela Dashian from Jefferies.

One question on Sweden. We saw a particularly strong profitability here in the quarter. How much of the margin improvement would you say is driven by a heavy events calendar? .

Well, it's a good question, Adela, because I think we are definitely supported by that, but we also see -- actually in Sweden, we see quite a healthy development on both the corporate and meeting segments as well. So it's not only event and leisure-driven -- but even the general leisure is having a good uplift in Sweden overall. So maybe it's because like some journalist is reading writing about this morning that more sweets may be tend to spend more vacation time in Sweden. It's a good environment right now for both the domestic and into Nordic traveling. And weather is still good here and people they enjoy it. So it might be that more people are actually having a bit more vacation time as long as weather is also from the Nordic weather this summer yet. So all in all, I think we had a good -- but it's a good but also event calendar. We had some good events like I mentioned, we have concerts 2 in a row. We had always witness is also like an event, of course, with so many people attending that. That was filling Stockholm for like 11, 12 days. And of course, that is supporting the result. But it is a very strong result. We're up in Sweden, 7.5% on occupancy, and we are up 7.6% on RevPAR itself, and that is throughout the quarter, and June especially was very strong.

Okay. Great. And then maybe also on other Europe. Can you -- I don't know if you touched on this maybe already, but can you speak a little bit about why the RevPAR was down during the quarter. And despite this, you managed to deliver strong margin. So maybe how those 2 coincide? .

Yes. I think like you see, we're having -- we have quite a lot of happenings in other Europe. We have also hotel in Stuttgart that are still on the ramp-up. But all in all, so we have a net sales increase of 7.4%. And you even see other Europe totally have a margin increase -- so all in all, I'm actually satisfied with that. We will definitely see in the coming years that we have a huge focus on growth, especially in Germany, and we have more openings coming up. And of course, we need to expect that those -- some of these hotels are in a ramp-up and some of them also have a ramped-up lease period of normally 3 years. So we pay less lease at the beginning, et cetera. But it will take some time to set these new hotels in the market. Copenhagen has been strong and continues to be strong. I would say Oulu has been fairly weak. We also have 1 of our hotels that has undergone a big renovation but if you look at Copenhagen, that continues to be a very strong market. And of course, our partnership with SAS is very good for us in that market because it drives a lot of new business in Copenhagen. So of course, other Europe, including Denmark, is overall on a good traction.

Okay. And then lastly, just on your -- the new financing framework and your balance sheet and so on. Should we expect, especially now also with Dalata complete thing in Q4. Should we expect you to pursue further expansion opportunities or what kind of capital allocation priorities you have at the moment? .

Yes, I can take it. But I think, I mean, it's a good question. I think with the new finance agreement, we have a platform to firstly, of course, take on the a lot operations and then have a healthy headroom for both market fluctuations over time as well as the in-year fluctuations given that we are so cash generating, of course, in a year or 2, there will be opportunities to take on further growth opportunity if that will be the case. And as we said before, we will, of course, balance the capital through expansion, organic expansion dividend. It could come back also to, of course, buybacks and they might also, of course, be other growth opportunities coming up. But right now, I guess, we will focus mainly on the Dalata business and then integrate that successfully. And then I guess, the other things might come.

The next question comes from Jamie Rollo from Morgan Stanley. .

Just back on Finland and the guidance for flat profits in the second half of the year, what RevPAR are you expecting to deliver that performance and I know you talked about things living better, but is that also a flat RevPAR? And also how much of the Q2 deterioration in Finland was due to weak market demand versus company-specific issues like the renovations and the fixed minimum rents.