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Slashed debt, reaching record low in more than 10 years

  • 01 Mar 17

Buoyant hotels and resorts, Mediterranean and EMEA accelerate further Melia posted strong FY16 results, slightly above the market and AlphaValue’s expectations. Overall, all regions including city hotels in Spain showed RevPAR level above those seen at the peak of the cycle in 2007 with several flagship resorts in the Americas and the Canaries achieving new highs. Sales were up 3.9% reported (+7% excluding capital gains), reflecting an 8.8% jump in owned & leased RevPAR (+14.3% including the managed hotels). Melia recorded a 14.3% rise in RevPAR (o/w 8.8% for the owned & leased hotels), 80% of which explained by prices and robust performances in Spain (+11.1% in RevPAR) and Germany (+7.2%), while France and the UK showed signs of recovery in Q4. In the Mediterranean region, all destinations beat last year’s level (RevPAR rose by +42.8% vs +8.7% in FY15, o/w +24.7% in ARR) with occupancy reaching 77%. EMEA was robust (+12.4% in RevPAR, +8.3% in ARR, occupancy rates at 70.2%) followed by Spain (+9.4% in RevPAR). The Americas generated a modest 3.8% rise in RevPAR (despite better performances in Q4), pointing to lower occupancy rates (68.7% on a same store basis, -4.6% yoy). However, prices held tight, partly attributable to the contribution of new openings (the NY NoMad, the RE Miami) and the improved performances in Mexico (rising Canadian, LatAm and US feeder markets) where prices (+40% for Paradisus Resorts) were fuelled by online campaigns. Brazil remained challenging (-13% in RevPAR) while the performances in Asia (+0.8% in RevPAR) largely reflected the opening of new hotels. The Real Estate operations remained limited (€18m of sales vs €70m in 2015). Robust operating performances helped cut debt to fair level EBITDA (excluding capital gains) rose by 13.7% (EBITDA margin at 16.6%, +140bp yoy) and the EBITDAR margin gained 147bp (excluding asset rotation). While the historical asphyxiating debt pile has been under the market’s scrutiny, Melia announced that its net debt level had slipped to an historic low level. Since the group completed marginal asset rotations, the robust cash flow generation has shaped the fall in net debt of €226m to €542m, translating into the lowest net debt/EBITDA ratio of 1.9x, meeting the group’s target of between 2.5x and 3x. Debt refinancing has also contributed to such a performance (average rate at 3.46% vs 4.36% in 2015) which led to a drop of €28m in the financial charge in FY16. Net profit came in at €102.9m, 154% above last year.

Good FY15 results, attractive perspectives for 2016

  • 08 Mar 16

Hot Hotel business activity… Melia released strong FY15 results, reporting a 16% rise in sales and a 29% jump in EBITDA to €293.1m. The EBITDA margin improved by 170bp from 15.2% to 16.9%. Melia succeeded in offsetting a 14% rise in operating costs, resulting from a change in perimeter, the appreciation of the US dollar against the euro and the devaluation of the bolivar (Venezuela). Rental expenses soared by 14.3% due to the incorporation of new rental hotels. The Hotel business performed strongly, with a 15.1% rise in RevPAR (90% explained by prices, +15.8% excluding Venezuela) and a rise of 218bp in the hotel business margin in Owned & Leased (c.80% of sales, 68% of EBITDA). … not only attributable to resorts The Americas was the best performer (+20.6% in RevPAR), boosted by Mexico (+27.7%) which benefited from strong resorts (the Paradisus Cancun recorded a 35% rise in sales following the rebranding), notably with the Playa de Carmen which contributed $36m to EBITDA in FY15. Such a performance is largely due to a strengthening in RevPAR in Q4 (+33.4%, helped by the adjustment of the Venezuelan bolivar to the SICAD II exchange rate in December 2014 for the full year), which is explained by healthy trends in urban hotels (in premium Spain and Europe) and to the hot resorts in the Caribbean (+18% in RevPAR in Paradisus la Esmeralda) and the Canary Islands (RevPAR +23% in Gran Melia Palacio de Isora vs Q4 14, the resort contributed €17.5m in FY15, 20% above FY14’s). The FY15 performances were also shaped by the strong growth in European cities (+56% and +25% in RevPAR in Melia Milano and Melia Vienna) while Melia Milan has strongly benefited from the Milan World Expo. Urban Spain confirmed its recovery (+17.5% in RevPAR). €216m of debt reduction and lightened cost of debt Net debt was reduced by €216m to €769m (in line with the 2007 level) while the net debt ratio was eased to 2.6x, despite having invested €137m in properties, including the acquisition of a 58.5% stake in the owner of Melia Milano. The financing cost of debt was lowered by €36m to 44% of EBIT (vs 84% in FY14) but the average cost of debt decreased to a moderate 4.36% rate (vs 4.8% and 5.5% in FY14 and FY13 respectively). In 2015, the real estate business was boosted by asset rotation which included the disposal of Melia’s seven largest resorts in Spain (for €178m to a JV 80%-owned by Starwood Capital and 20% by Melia), the sale of the 875-room Calas de Mallorca resort for €23.6m and the 450-room Sol Falco in Menorca for €20m. Melia did not issue any asset disposal targets for FY16.

Q3 15 results above expectations but stretched valuation multiples

  • 10 Nov 15

The 9m 15 results reflected the strengthening of Spanish cities' hotels, with a strong summer season in the Mediterranean. Melia reported a 51% rise yoy in net profit to €52.3m. The Hotel business reported a 10.7% rise in RevPAR (85% explained by prices). FX along with stable costs LFL provided support to the EBITDA which soared by 28.5% yoy to €255m (+15.9% excl. capital gains) while the EBITDA margin gained 209 basis points to 19.3%. America recorded strong RevPAR growth (+4.8% in RevPAR for owned/leased hotels), helped by Mexico (+7.4%) which benefited from remarkable performances at the Playa del Carmen and Paradisus Cancun (+30%) resorts. European cities performed strongly. Italy (+19.7% in RevPAR) was fuelled by Melia Milano (+48%), supported by events, while the UK (+4.2%, RevPAR +25% in ME London) and Germany (+5.9%) proved resilient despite the lack of major trade fairs for the latter. Premium Spain (luxury resorts and urban properties) confirmed the strong momentum in prices seen in Q2. ME Ibiza stood out (+38% in RevPAR, average summer rate per room of €500) while urban properties showed impressive figures (RevPAR +21% in Grand Melia Colon). France stood as an exception with RevPAR collapsing by 20.2% (-2.1% excl. La Defense). The Mediterranean resorts (+6.4% in RevPAR, 100% explained by prices) remained supportive while Spanish hotels also proved buoyant (RevPAR +11.2%) reflecting the continuing recovery in Spain in both the leisure and corporate segments. Recent booking trends point towards a very positive Q4 15 and Melia expects double-digit growth in RevPAR for FY15 (vs single-digit announced in H1, more than 2/3rds explained by prices).

Disappointing operating leverage amidst high market expectations

  • 11 Sep 15

The hotel business helped Melia to report a strong H1 15 publication in terms of trading but the group's EBITDA margin (excl. capital gains) showed a timid improvement. Revenue growth confirmed the recovery of Spanish cities which resulted in a strong pricing power. Group revenue was up 19.2% on the back of an 11.5% rise in hotel RevPAR fuelled by price increases. The Americas (+30% in RevPAR) were buoyed by the Caribbean feeder market (+28.2% in RevPAR in resorts in Dominican Republic) and Mexico (+34.6%, including +37.8% at the Paradisus Cancun). The appreciation of the US dollar against the euro was also a big help. European cities performed strongly with record rates and RevPAR growth seen in Italy (+20% in RevPAR) and the UK (+15% in RevPAR at the ME London in spite of the appreciation of sterling). Premium hotels in Spain (+10% in RevPAR) benefited from the strategy on the luxury segment (+30% in RevPAR Gran Melia Marbella). RevPAR trends were also robust in Madrid (+10.2% in RevPAR due to increased airport business), Seville (+20.2%) and luxury resorts in the Balearics, while Barcelona recovered a positive trend. The Mediterranean region recorded a 7.8% rise in RevPAR (95% explained by price increases), fuelled by Spanish mainland coast hotels (+12.8%). Group underlying EBITDA rose by 22.1% but the EBITDA margin showed a limited improvement from 14% to 14.34%.