Recovery in Hotel business improves operating and net profit

Accor SA is a France-based hotel operator. Accor's portfolio consists of hotel brands such as Sofitel, Pullman, Novotel, Mercure, Suite Novotel, Adagio, ibis Styles, all seasons, Etap Hotel, Formule 1, hotelF1, Studio 6 and Motel 6, and its related activities, Thalassa sea & spa and Lenotre that provide services ranging from luxury to budget class.

Debt increase: Partly to finance Acquisitions

Accor’s dividend policy continued in 2013 where a dividend of €0.80, a raise of €0.04 from the prior year was awarded to shareholders which was paid in cash and part in stock. Long term debt on June 30, 2014 stood at €2,552 million an increase of more than €853 million from the end of prior year. This increase in debt was linked to acquisitions of Moor Park and Axa Real Estate hotel portfolios carried out in first half of 2014.

Tangible positive impact of cost-cutting measures on operating margins

Consolidated revenue amounted to €5,536 million in 2013 down 2.0% as reported from the prior year. Accor’s EBIT (FY 2013: € 536 million) delivered a growth of 1.9% from the prior year lifted by the positive effects of asset disposals and lease contract restructuring. Company’s solid second-half performance in 2013, reflecting a firm recovery in the hotels business, the introduction of an effective distribution strategy and the impact of the cost-savings plan helped Accor better its bottom line.

Accor’s net income for the year 2013 was sharply higher at €139 million from the prior year when it recorded a loss of €584 million effected by discontinued operations. EPS was hence impacted in the fiscal year 2012 and was negative however higher net income in 2013 reversed the EPS as it came in at €0.55. Revenue for the six months ended June 30, 2014 totalled €2,593 million, a decrease of 1.8% on a reported basis from the prior year.

EBIT rose by 14.7% for HY June 30, 2014 to €219 million from €191 million in first-half 2013, lifted by strong demand in all regions except France, and by the positive effects of the cost savings plan. This increase in EBIT helped Net profit to surge by 73.3% to €60 million for the six months ended June 2014 from the prior year for the same time period.

Market consensus

Market consensus foresees revenue growing at a slower pace and this mirrors the company’s performance in 2013. However EBIT and net income is set to come in higher in future periods. This increase is related to some of the acquisitions made in the first half of 2014 which will positively impact the Net Income and consequently EPS. Further Accor is foreseen paying greater dividends following increase in its bottom line. The scale below shows market expectations for Accor:

Accorfinance

Upcoming events

Expected to announce its 3rd quarterly results on 16 October 2014.

Annual shareholders meeting scheduled on April 29, 2015.

Major shareholders

P>Following are 3 major shareholders of company:

  • Eurazeo 10.02% with 23.06 million shares
  • Colony Capital, L.L.C. 7.69% with 17.71 million shares
  • Franklin Mutual Advisers, LLC 4.84% with 11.14 million shares

    significant change in shareholding

    Following are the major shareholding transactions that took place recently:

  • Colony Capital, L.L.C. selling 7.80 million shares
  • Marketfield Asset Management LLC selling 2.18 million shares

    Accor stock’s performance which shows the stock touching a high in 2011 and hit a bottom in 2012 only to rebound in 2014

    Accorgraph