Pandox Anual Report 2005 (Eng)
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    Pandox Anual Report 2005 (Eng) Pandox Anual Report 2005 (Eng) Document Transcript

    • Annual Report
    • Contents The Company the ­year ­in ­brief . . . . . . . . . . . . . . . . . . . . . ­ ­ ­4 ­ ­ Business ­trends . . . . . . . . . . . . . . . . . . . . . . ­ ­6 Message ­from ­the ­CeO ­ . . . . . . . . . . . . . . . . . ­ ­8 Vision, ­business ­concept, ­ ­ objectives ­and ­strategies . . . . . . . . . . . . . . . 0 the ­Pandox ­Model ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ 2 types ­of ­lease ­ . . . . . . . . . . . . . . . . . . . . . . 4 Human ­resources . . . . . . . . . . . . . . . . . . . . 6 Pandox’ ­focus ­on ­the ­environment ­ . . . . . . . . 8 Market ­overview . . . . . . . . . . . . . . . . . . . . . 9 Corporate ­Governance ­ . . . . . . . . . . . . . . . . 25 Board ­of ­Directors ­ . . . . . . . . . . . . . . . . . . . 26 Management ­and ­Auditors ­ . . . . . . . . . . . . . 27 The hotel portfolio Hotel ­property ­portfolio . . . . . . . . . . . . . . . . 30 Operating ­companies ­ . . . . . . . . . . . . . . . . . 32 list ­of ­properties ­ . . . . . . . . . . . . . . . . . . . . 34 Hotel ­properties . . . . . . . . . . . . . . . . . . . . . 36 Financials ­ ­ ­ Financial ­overview ­ . . . . . . . . . . . . . . . . . . . 48 Sensitivity ­analysis . . . . . . . . . . . . . . . . . . . 50 evaluation ­and ­fiscal ­situation . . . . . . . . . . . 52 Definitions ­ . . . . . . . . . . . . . . . . . . . . . . . . 53 ten-year ­overview . . . . . . . . . . . . . . . . . . . . 54 Quarterly ­data ­2004–2005 . . . . . . . . . . . . . 56 Financial ­statements ­2005 . . . . . . . . . . . . . 57 report ­of ­the ­Board ­of ­Directors . . . . . . . . . . 58 Income ­statement ­and ­comments ­ . . . . . . . . 60 Balance ­sheet ­and ­comments ­ . . . . . . . . . . . 62 Changes ­in ­equity ­ . . . . . . . . . . . . . . . . . . . 64 Cash ­flow ­statement ­with ­comments . . . . . . . 65 Accounting ­principles . . . . . . . . . . . . . . . . . 66 Notes ­to ­the ­Accounts . . . . . . . . . . . . . . . . . 68 Proposed ­disposition ­of ­earnings ­ . . . . . . . . . 74 Auditors’ ­report . . . . . . . . . . . . . . . . . . . . . 75
    • About Pandox Pure business concept with focused strategy • Pandox is one of northern Europe’s leading pure hotel property companies. The Company has built up specialist expertise within the key areas of hotel markets, hotel operations, hotel properties and business development. Active ownership, with well-developed and strategic plans for each hotel, enables the creation of good prerequisites for stable and improved cash flows, and thereby growth in value for the shareholders. • Pandox’ strategy is to own one type of asset – hotel properties. Its focus is strengthened by a priori- tised market segment. Pandox is to own large hotel properties in Sweden, major locations in Europe, as well as developing regions in eastern Europe. • The hotels should be in central, natural and strong locations such as city centres, airports and exhibi- tion centres. The hotels should be in the upper medium to high price range and focus on the busi- ness and leisure segments. • The hotels owned by Pandox are operated and marketed by the most powerful players in the hotel market, who with well-known brands and dynamic independent distribution channels create strong market positions and thereby stable revenues. • Revenues are created by flexible lease agreements related to the operator’s turnover and results or through management agreements where Pandox assigns a third party to manage operations, or alter- natively through its own management. Irrespective of the form of operation, Pandox contributes via its active ownership to increasing total cash flows and reducing risks. • At the end of the year, the Company owned 36 hotel properties, of which one asset management assignment and five operating companies. Pandox owns and develops assets in Sweden, Denmark, Belgium, Germany, Switzerland, UK, and the Bahamas. PA N D O X ­– ­A N Nu A l ­r eP Ort ­2005 ­ ­ ­ ­
    • The Company the ­year ­in ­brief . . . . . . . . . . . . . . . . . . . . . . 4 ­ ­ Business ­trends . . . . . . . . . . . . . . . . . . . . . . 6 Message ­from ­the ­CeO ­ . . . . . . . . . . . . . . . . . 8 Vision, ­business ­concept, ­ ­ objectives ­and ­strategies . . . . . . . . . . . . . . . 0 the ­Pandox ­Model ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ . ­ 2 types ­of ­lease ­ . . . . . . . . . . . . . . . . . . . . . . 4 Human ­resources . . . . . . . . . . . . . . . . . . . . 6 Pandox’ ­focus ­on ­the ­environment ­ . . . . . . . . 8 Market ­overview . . . . . . . . . . . . . . . . . . . . . 9 Corporate ­Governance ­ . . . . . . . . . . . . . . . . 25 Board ­of ­Directors ­ . . . . . . . . . . . . . . . . . . . 26 Management ­and ­Auditors ­ . . . . . . . . . . . . . 27
    • the year in brief Significant events in 2005 Property management revenues and total revenues Pandox’ property revenues amounted to SEK 574.0 M (592.9), which for comparable units represented an increase of 2.3 percent against with last year. The Group’s total revenue amounted to SEK 778.6 M (762.8). Sales in Sweden On 1 July, Pandox sold twelve Swedish hotel properties for a total amount of SEK 1.1 billion. The capital gain after tax upon this divestment amounted to approximately SEK 450 M. These properties are included in the operating results of the first six months of 2005. Profits The pre-tax profit for 2005, excluding non-recurring items, amounted to SEK 222.9 M (228.6). Profit after tax, including non-recurring revenues, amounted to SEK 688.3 M (124.7). Cash flow Cash flow from ongoing operations, excluding non-recurring items, amoun- ted to SEK 301.4 M (298.9). Acquisition in Basle In February 2005, Pandox acquired the hotel property Radisson SAS Hotel Basle with 205 rooms at an acquisition cost of SEK 280 M. The property was taken over financially on 1 January 2005. 4 ­ ­ ­PANDOX ­– ­ANNuAl ­r e P Ort ­2 0 0 5
    • Acquisitions in Brussels and Copenhagen Pandox acquired two hotel properties in the autumn 2005 – one in Brussels and one in Copenhagen with 315 and 203 rooms respecti- vely for a total acquisition cost of about SEK 380 M. The hotel opera- ting companies in both hotel properties will be run under Pandox’ management. Increased demand Demand for hotel rooms increased in Sweden in 2005. The number of rooms sold rose by about 6 percent. Improved room occupancy Room occupancy in Pandox’ Swedish prioritised market segment amounted to 60.5 percent (57.4), representing an increase of 3.1 percentage points. Room occupancy in northern Europe’s major cities was 67.1 percent (65.7), representing a rise of 1.5 percentage points. Rising RevPAR in Stockholm In Sweden’s largest hotel market, Stockholm, revenue per available room (RevPAR) increased by 8.3 percent. Key figures 2005 2004 Property revenues, SEK M 574.0 592.9 Operating net, SEK M 470.2 477.9 Profit before tax 1), SEK M 222.9 228.6 Profit after tax 2), SEK M 688.3 124.7 Cash flow 1), SEK M 301.4 298.9 1) Excluding non-recurring revenues. 2) Including non-recurring revenues. Accounting principles Pandox applies the Swedish Annual Accounts Act and generally accepted accounting principles, as well as taking into account the recommendations of the Swedish Accounting Standards Board. As the company is delisted from the Stockholm Stock Exchange, Pandox do not have to follow the accounting principles recommended by IFRS. PA N D O X ­– ­A N Nu A l ­r eP Ort ­2005 ­ ­ ­5 ­
    • business trends Offensive acquisitions improve quality and potential Pandox carried out transactions for more strategic location and attractive design. One of the Royal Crown, and strengthens its posi- than SEK 1.7 billion in 2005, of which of the first measures was to change the tion as one of the leading players. SEK 660 M represent acquisitions. name to Copenhagen Hotel 27 so as not to Pandox sold twelve hotel properties during The Radisson SAS Hotel Basle was acquired for be associated with the hotel’s historic profile. the year for a total of SEK 1.1 billion. All SEK 280 M. Basle is Switzerland’s second The total development program is estimated hotels were located in Sweden. They had largest city with 500,000 inhabitants. It is a to cost about DKK 60 M. Further to this been acquired on different occasions at the well-developed destination with a large con- acquisition, Pandox owns 687 rooms in end of the 1990s, and under Pandox’ man- gress and exhibition centre, as well as a central Copenhagen. agement underwent development programs number of large sports stadiums, which The Royal Crown Hotel Brussels was acquired resulting in a capital gain of approximately render Basle an attractive location for major and taken over in the autumn. It has 315 SEK 450 M. events. The hotel is centrally located and is rooms and is located close to Place Rogier in The transactions in 2005 contributed to the a full-service product with 205 rooms, con- central Brussels. The hotel is a full-service continued improvement of the Company’s ference facilities, swimming pool, restaurant product with well-developed conference structure and potential. The revenue struc- and bar. facilities, gym, restaurant, and bar. Built in ture has been strengthened in major inter- Copenhagen Hotel 27, which was previously 1976, the hotel has tried from the start to national hotel markets, and the proportion of marketed under the name of Mermaid, was establish itself in the higher price segment, revenues coming from Stockholm, Brussels, acquired in November 2005. The hotel has but without having succeeded. Pandox’ London, Copenhagen, Gothenburg and 203 rooms and is located in central Copen- vision is to develop the hotel to one of the Basle now amounts to about 80 percent. hagen, close to Tivoli and the Ströget shop- leading medium-price hotels in central The proportion of result-based rents has ping street. The hotel, which was closed at Brussels with a focus on the business, con- increased through a rise in hotel operating the time of taking possession, has per- ference and tourist segment. The develop- companies run under own management, formed badly for several years and requires ment program includes a new distribution and is estimated to be about 15 percent in significantly active measures. The action strategy, upgrading and development of the 2006. The average size has increased to plan that was prepared in conjunction with current product offer, modernisation of the 218 rooms. The above implies that Pandox’ the acquisition started with the recruitment organisation, new property technology, and hotel property portfolio in terms of revenue of new management and board with expe- more. The investment is estimated to structure, brand names, size, quality and rience of turnaround cases. A vision has been amount to approximately EUR 12 M, and is profitability must be considered as being established with the ambition of creating forecasted to take up to two years to imple- one of the best in Europe. one of Copenhagen’s leading medium-price ment. Pandox owns more than 1,000 rooms hotels with the help of the product’s size, in central Brussels further to the acquisition 6 ­ ­ ­PANDOX ­– ­ANNuAl ­r e P Ort ­2 0 0 5
    • Dynamic hotel property portfolio Pandox’ portfolio currently contains many which 29 junior suites, as well as corridors project also covers the closing of the current interesting development projects that will and property technology. All in all, the total restaurant, Times, and the development of further improve both profitability and quali- investment is estimated to amount to shopping areas. The total investment is esti- ty. A number of examples are as follows: approximately SEK 100 M, and is being car- mated to approximately SEK 45 M, and is The Crowne Plaza Brussels City Centre is current- ried out in close cooperation with the opera- being carried out in close cooperation with ly undergoing total refurbishment, spread tor Elite Hotels. the operator. over five different phases. The first two The Royal Crown Hotel Brussels will be the sub- The Scandic Copenhagen will be subject in phases have been completed and covered ject of an investment and development pro- 2006 to an investment program in the cur- the recruitment of new management and gram to be started in 2006 with the objec- rent conference and banquet areas with the the implementation of professional control tive of creating one of Brussels’ leading objective of strengthening the hotel as one methods, as well as the total refurbishment hotels for business and conference guests of the leading properties in Copenhagen. of 216 rooms and related corridors. The lobby and tourists. The investment will cover The project also includes improvements to floor has been improved, and restaurant and the total refurbishment of the property, up- the lobby areas and a restaurant. The total bar areas have been upgraded and made grading of the product offer, as well as the investment is estimated to amount to about more effective. Phase three was started at modernisation of the organisation. The SEK 50 M. the end of 2005 and covers the develop- total investment is estimated to amount to Scandic Hallandia will be subject in 2006 to an ment of a new conference centre and the approximately EUR 12 M. investment in order to increase the number total refurbishment of about 140 hotel The Copenhagen Hotel 27 is currently under- of rooms and refurbishment of conference, rooms, of which eight business suites. All going an upgrading program in four phases. restaurant and room product and property in all, the total investment is estimated to The first phase is in progress and covers the technology. The total investment is estimat- amount to about EUR 14 M. total refurbishment of 55 hotel rooms and a ed to amount to about SEK 40 M. The Elite Park Avenue Hotel is currently under- facelift of the lobby area. The total invest- The First Hotel Grand Borås will undergo an going total refurbishment, spread over four ment is estimated to amount to about investment program in 2006 concerning the phases. The first two phases have been DKK 60 M. hotel product and property technology with completed and covered the upgrading of The Scandic St Jörgen is currently undergoing the objective of modernising the hotel and 178 hotel rooms, of which eight suites an upgrading of rooms and conference strengthening its position as Borås’ leading including bathrooms, as well as the lobby areas with the objective of strengthening the hotel. The total investment is estimated to area with restaurant, pub and bar. The third hotel’s market position, and to it being one amount to SEK 12 M. phase started at the beginning of the year of Malmö’s leading hotels. The development and covers a further 84 hotel rooms, of PA N D O X ­– ­A N Nu A l ­r eP Ort ­2005 ­ ­ ­7 ­
    • me s s a g e f r o m t h e c e o Quality and potential are being strengthened 2005 was a further successful year for Pandox run under franchise agreement or without a autumn. Both acquisitions include both the pro- with good profit-growth, a high rate of transac- brand name. Pandox is an active owner and perty and hotel operations and are typical Pan- tions, as well as several offensive investments controls operations via a strategic plan estab- dox acquisitions. The hotels are located in good in the existing portfolio, which both improved lished and adapted for each respective hotel. international hotel markets that are currently the quality and potential of the hotel properties. Each plan is updated twice a year and the growing. The Royal Crown Hotel is situated Revenues rose by 2.3 percent for comparable action programs are carried out in accordance close to Place Rogier, which is witnessing units. with the Company’s working methodology – strong development with several new and large known as the Pandox Model. office complexes. The Copenhagen Hotel 27 Hotel portfolio with high quality is located two blocks from Rådhusplatsen with Pandox was formed in 1995 and was quoted Offensive acquisitions and divestments less than ten minutes’ walk to Tivoli. Both hotels on the Stockholm Stock Exchange in 1997. It is Pandox’ underlying growth continues to be are large, which creates prerequisites for good now in private ownership since 2004 further to good. The operating net rose by 2.7 percent for profitability in their operations and thereby im- Eiendomsspar AS and Sundt AS making a pub- comparable units despite several major invest- proved value in the property. The hotels, which lic offer for all shares in the Company. After ten ments being made during the year which re- currently perform badly, require significantly years of good development, Pandox has posi- duced capacity and thereby revenues. Pandox active measures. The Copenhagen Hotel 27, tioned itself as one of the leading pure hotel carried out transactions for more than SEK 1.7 which was closed when Pandox took posses- property companies in Europe. At the end of billion during the year, of which SEK 1.1 billion sion, has reopened with a new name, new the year, the Company owned 36 hotel proper- pertained to the sale of hotel properties. This board and new management. The strategy is to ties, of which one asset management assign- divestment was the largest in the Company’s develop operations under own management ment and five operating companies. Business history. The sold hotels had been acquired on and to steer towards a vision of creating one of operations are established in seven countries. different occasions at the end of the 1990s, Copenhagen’s best medium-price hotels with In addition to the home market in Sweden, and under Pandox’ management underwent the help of the hotel’s size and strong location, Pandox owns hotel properties in Denmark, various development programs with the objec- as well as a modern and attractive design. The Belgium, Germany, Switzerland, UK, and tive of improving cash flows in the hotel opera- development program is estimated to amount the Bahamas. tions and thereby the value of the assets. to DKK 60 M. The quality of the portfolio is very high. The Examples of measures implemented The Royal Crown Hotel was operated under majority of revenues come from markets with include the change of brand names, upgrading a management agreement with Accor under both international and domestic demand, and development of the products, rationalisa- the brand name of Mercure when Pandox took which in turn creates stable revenues with good tion measures, better management systems, possession. The hotel tried to become estab- potential. The average size of the hotels is 218 etc. The sale of twelve Swedish hotels lished in the 1980s as a high-priced hotel, but rooms. All properties are situated in strong and generated a capital gain of approximately did not succeed. Pandox’ strategy is to develop natural hotel locations such as in city centres or SEK 450 M, which will be used for new strate- the product towards a new market position, close to large airports and exhibition centres. gic acquisitions. Three acquisitions were also and to create one of Brussels’ leading business The hotels are run in different operational made during the year. The Radisson SAS Hotel and conference hotels in the medium-price forms in close cooperation with strong and well- Basle with 205 rooms was acquired in the segment. This repositioning implies radical known brand names such as Hilton, Radisson spring. A new development plan for the hotel is changes with a new brand name and a power- SAS, Scandic, Elite Hotels, Choice Hotels of currently being prepared in close cooperation ful distribution strategy. The hotel’s product Scandinavia, Crowne Plaza and First Hotels, or with Radisson SAS. The hotel is located in cen- offer will be adapted to new requirements, and are marketed through independent distribution tral Basle close to the shopping and business the organisation will be changed and moder- and sales channels. Revenues in the Company district. Basle is a well-developed destination nised. The strategy is to operate under own are created partly through lease agreements with strong business and conference activities, management with the same team that carried where Pandox transfers the right to a third party and with its strategic position in central Europe, out the development of the Crowne Plaza. The to operate the hotel and receives rent linked to has many international exhibitions and sports acquisition of the Royal Crown Hotel implies the operator’s turnover, or alternatively via man- events – thus creating a stable hotel market. that Pandox now owns more than 1,000 hotel agement agreements where Pandox assigns a The Royal Crown Hotel in Brussels with 315 rooms in central Brussels and has established third party to manage the operation, or through rooms and the Copenhagen Hotel 27 with 203 itself as one of the leading players in one of an own operating company where the hotel is rooms in Copenhagen were incorporated in the Europe’s most dynamic hotel markets. In addi- 8 ­ ­ ­PANDOX ­– ­ANNuAl ­r e P Ort ­2 0 0 5
    • tion to the Royal Crown Hotel with 315 rooms, fectiveness of the operations is low, in addition 2005 by the Dagens Industri newspaper. The there are the Hilton Brussels City with 285 to there being high demands on the owners to upgrading of the Crowne Plaza Brussels City rooms, the Crowne Plaza Brussels City Centre invest. The return on investment is often quite Centre was started in 2004 and two of the five with 356 rooms, and the Scandic Grand Place simply not that which was promised. The rea- phases have been completed. Despite disrup- with 100 rooms. son is that the large hotel companies’ systems tions in operations, the hotel gained market are often expensive and bureaucratic. Instead shares during the year and was host to the US Value of cooperation with brand names of coming to grips with one’s internal efficiency, Secretary of State during her visit to Brussels. One of the trends in the hotel market is the con- one tries to shift the burden over to the owners. The Scandic Park in Stockholm now has a new tinued reorganisation of the hotel sector. Most The question is whether one will succeed? It is lobby that acts as a good complement to the evident is the impact of the major international quite possible that several hotel property com- previous room refurbishments, and strength- hotel companies. During the year, we have wit- panies will acquire their own operational compe- ens the hotel’s position as one of the leading nessed major divestments of properties where tence in order to increase their future flexibility. four-star hotels in the city. The Radisson SAS hotel companies have chosen to control opera- Grand Hotel in Helsingborg has completed a tions via long-term management agreements. Destination development are development program of its rooms, and has The motives pertain to increased demands increasingly important created a hotel arcade with restaurants, bar, from the capital market to identify hidden Another current question concerns destination café, newsstand, meeting rooms, and more. values in the hotel companies’ balance sheets development. Locations with good knowledge The surrounding world continues to witness and to reduce future financial investment com- of how to develop and market their city to- good growth and a high level of activity, which mitments in properties. The consequence of wards, for example, international conference are the most important reasons for demand the hotel companies’ new strategies is the signi- and exhibition organisers, create higher growth within the hotel sector continuing to be good. ficant reduction of one’s position as hotel pro- and more stable demand than locations that do Together with relatively low additional capacity, perty owner, and through management agree- not possess such competence. Destination de- good prerequisites have been created for 2006. ments trying to transfer the risks to the property velopment therefore start to be an increasingly In this positive picture, Pandox has the oppor- ownership. In view of this situation, there is important component when deciding major in- tunity to continue to develop better than the good reason to analyse the value of the interna- vestments. Many towns and cities have realised market. The Company’s acquisitions in 2005, tional brand names. Historically, there are two the financial benefits of being an attractive des- combined with development projects and new motives that have dominated why a hotel pro- tination. Experts on destination development agreements, mean that profit and cash flow for perty owner has chosen to seek cooperation believe that Europe will be split into a Premium comparable units will be better in 2006 than with a hotel company, compared with operating League, a First Division and a broad division re- last year. hotels with own management. One of them is to garding attractiveness for visitors. The ultimate participate in the hotel company’s brand name gain is considerable tax revenues in the form of Stockholm, February 2006 and systems, which strengthens and renders shopping, hotel accommodation and new jobs more visible the property’s position. Another – which should interest political players. For strong argument is that the companies have example, in order for Stockholm to be able to been prepared to provide guarantees or sign compete in the future, significant investments leases for the right to operate the hotels, which will be required where target-oriented efforts has given the owner a minimum yield and re- are made to attract more low-price airlines, de- Anders Nissen duced risk. In the future, reasons to cooperate veloped sports and concert stadiums, contin- CEO will subsequently rest entirely on the hotel com- ued infrastructure investments and considera- panies’ ability to create profitability and a return ble patience. You must sow before being able on investment for the owner via their ability to to harvest. Gothenburg is a classic example of market and manage the hotels. If one does not how to build up a destination in the long-term. succeed, there will be a manifest risk that the owner will choose another form of cooperation Good outlook for 2006 upon the expiry of the agreement. When look- The quality of Pandox’ hotel property portfolio ing at the length of management agreements, continues to improve. Work with restoring the the hotel companies appear themselves to Elite Park Avenue to one of the leading hotels doubt their ability in view of that they often wish in Gothenburg was started during the year. to have agreements of 30-40 years with unilat- Most of the rooms have been totally refurbished eral right of extension. The strategy is easy to and a broad offer of food and drink has been follow. Good revenues are often created in the launched, where the Park Aveny Café was international companies’ systems, but the ef- designated Business Restaurant of the Year PA N D O X ­– ­A N Nu A l ­r eP O rt ­2 0 0 5 ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­9 ­
    • vision , business concept , objectives and strategies Leading and profitable Pandox’ principal task from a share- vide both the operator and the owner with the • Own operator company with a management holders’ perspective is to create con- impetus to continually develop their business agreement. operations. A special working method to enable • Own operator company without a manage- ditions that enable an increase in the the follow-up and analysis of each hotel prop- ment agreement, but that is supplemented value of the Company through the erty has been developed – known as the Pan- by a franchise agreement with a distributor. development of cash flow in the hotel dox Model. The first alternative dominates, but all of the property portfolio combined with pro- Leasing hotels is a very complex process forms of partnership are included in Pandox’ fitable acquisitions and divestments. and requires deep insight into the prevailing business operations. The Company’s vision, business con- competition in the local market. A market study that includes demand and its distribution Overall objective cept, objectives and strategies have between the different price and project seg- The principal objective is to achieve an optimal been formulated with this philosophy ments must be performed. The analysis shall return on investment and growth in value acting as the principal point of depar- include the best available brand names as well through specific knowledge of hotels, hotel ture. as the product quality that has the best profita- properties, and business development. bility potential. The hotel lease agreement Vision should be formulated in a manner that the par- Financial goals Pandox’ vision is to be the leading and most ties’ intentions and quality requirements be Pandox’ equity/assets ratio should amount to at profitable hotel property company in northern clear. Investment and maintenance plans must least 25 percent. This solvency ratio require- Europe with regard to expertise, systems and be decided and responsibilities be allocated. ment should be viewed against the background working methods, such as through active Cooperation issues regarding the way the busi- of Pandox’ acquisition strategy and tax situa- ownership of hotel properties. ness shall be managed, evaluated and control- tion. The equity/assets goal shall be regularly led are included in the leasing process. reviewed in order to achieve an optimal return Business concept There are different forms of partnership to on investment for the shareholders. Pandox’ business concept is to actively own, choose from depending upon local conditions develop and to lease hotel properties based on and each hotel’s history and current position: Strategy expertise within hotel properties, hotel opera- • Lease agreement with a partner that handles A number of strategies have been defined to tions and business development. both operations and distribution. enable Pandox to achieve its established goals Both the business concept and vision place • Lease agreement with a partner that only and objectives. stringent demands on specialist skills within acts as operator, and that is supplemented Pandox’ principal strategy is to own one three areas – hotels and hotel operations, hotel by a franchise agreement with a distributor. type of property – hotel properties. properties and business development. Con- stant updating, development and training are therefore required within the different areas of expertise. By breaking down Pandox’ business concept into fundamental components, the fol- lowing comments may be made. Prerequisites for an increase in cash flow are created through development and active measures within the hotel properties. The dis- tribution of revenues and earnings is deter- mined by incentives via flexible leases that pro- 0 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Portfolio strategy and partnership strategy, with the aim to add Own operations In order to maximise revenues and cash flow, value through higher cash flow or through limit- Pandox has its own expertise for operating ho- Pandox concentrates on one prioritised, expan- ing the risk involved. Examples of active owner- tels. Experience has shown that there are situa- sive market segment. Pandox’ market segment ship are set out below. tions when this is the most profitable and most comprises hotel properties in Sweden, major effective way of improving cash flow. cities in northern Europe, as well as developing Acquisitions regions in eastern Europe. The hotel properties Pandox has built up its own expertise in the Participation in the restructuring process shall be centrally situated in natural and strong field of acquisitions and acquisition methods. Pandox plays an active role in the ongoing hotel locations such as city centres, airports This implies that Pandox analyses, evaluates, restructuring of the hotel property market. and exhibition centres. The hotels shall be in negotiates and executes all acquisitions in- Pandox participate through acquisitions, the medium to high price range, and focus on house, and enables a deep insight into acquisi- divestments and choice of partner. business travellers and tourists. Pandox be- tions and their real potential and risks, while in- lieves that hotels included in this market seg- creasing knowledge of the market. Cash flow strategy ment have the best chances of success in a Pandox adapts to each individual situation with growing hotel business cycle, while risks are Choice of partners the support of the working methodology of the limited in the event of a downturn. This is due Pandox works together with all competitive Pandox Model. Pandox is thus able to actively to hotel markets in large locations being more market players where joint forms of cooperation participate in the development and implemen- stable and having better growth potential, be- can be developed and applied for the optimisa- tation of cash flow strategies together with its cause they attract more capital and people. tion of total cash flow. partners. Strong and strategic locations are always im- portant in the hotel industry, and the size of the Strategic alliances Active ownership via divestment of parts hotel provides profitability benefits – which in Pandox can deepen the cooperation with its of the existing portfolio turn increases Pandox’ potential for improved prioritised partners in order to jointly make ac- Pandox cultivates its portfolio in accordance return on investment. quisitions and undertake restructuring pro- with its portfolio strategy. The majority of divest- grams or major investments. ments are managed directly by the Company. Strategy for active ownership Pandox further develops its focus and expertise Leases and agreements structure in the chosen market segment through active Pandox enters into all forms of leases and ma- ownership. Active ownership is adapted to nagement agreements to create joint incentives each situation with regard to both procedures and benefit the development of total cash flow. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­ ­
    • the pandox model Improved cash flow with limited risk Hotel properties have characteristics Pandox Model, Market Survey and Financial Market information system that are distinctly different to other Reporting. Pandox has an IT system that contains infor- Pandox’ working methodology to generate mation about the hotel market in terms of occu- types of property, and demand spe- increased cash flow with limited risk is known pancy, average room rates, growth trends, cialist skills and knowledge. Value- as the Pandox Model, and is the Company’s comparative past performance figures, as well growth is complex and is based on most important principal operating procedure. as a target group analysis. The system covers revenues and profits being influenced The model includes four different stages, the major part of Pandox’ market. The assem- by several factors such as the under- before implementation and follow-up. Each bled information is structured by location, geo- lying hotel market, choice of brand hotel property is regularly evaluated based on graphical area, as well as price and product the four stages of the Pandox Model. Similarly, segments. name, price and product segment, each investment and divestment is preceded type of lease, and active ownership. by such an evaluation. The four stages are Database and external market systems Successful results demand that the market analysis, market strategy, profitability Pandox has access to a database that contains hotels be continuously reviewed and optimisation, and lease optimisation (see basic information about all hotels in Pandox’ analysed with the help of well-deve- diagram on the opposite page). markets. The Company also has an agreement loped working methodology that The operating tools described in the follow- with various consultancy firms that constantly ing market survey section are used within the monitor and analyse European and American provides support to the decision- Pandox Model. hotel markets in particular. making process. Market survey Networks In order to maintain and benefit from the The point of departure for a market survey is to Companies and individuals that are important knowledge and experience that the organisa- assess the market situation and trends within a for Pandox’ operations are assembled in a da- tion constantly develops, the Company has pro- specific market, based on current and correct tabase, divided into various markets and func- duced and developed business procedures market information. To support this principal tions of the individuals concerned. and operating systems. These are used on a procedure, Pandox employs a market informa- daily basis and the results are documented. tion system, external marketing systems and Media monitoring Clear and user-friendly processes improve the databases, research and analyses, as well as Articles about hotels published in Sweden and quality of analyses and decision-making, and the Company’s networks and media monitor- abroad are registered daily. facilitate the transmission of knowledge while ing. Taken together, market surveys provide up- reducing the risk of losing important experi- to-date and reliable knowledge of prevailing Hotel product analysis ence and skills when key people leave. market conditions. The hotel product analysis is a tool used as Pandox’ principal procedures consist of the 2 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • The Pandox Model Market analysis Market strategy Profitability optimisation Lease optimisation A market analysis is performed in Further to the market analysis, a Hotel operations shall be managed by The optimal cash flow of each respec- order to assess a hotel’s profitability strategic plan for each hotel property the hotel operator in the most effective tive hotel property is divided between potential and subsequent ability to is established based on each respec- way possible. In view of that the value the operator, Pandox and other related pay the agreed rent. The local market tive hotel’s specific prerequisites and of a property is influenced by the parties. The lease is formulated in is identified and analysed with regard market profile. The strategic plan for profitability of the related hotel opera- such a way that all parties involved to demand, competition and the cur- the property influences the choice tions, the operator is Pandox’ most are given an incentive to continuously rent and future offer. of hotel operator and distributor. The important partner. The hotel operator improve the hotel property’s overall property’s continued area of use is is constantly assessed in order to profitability. Pandox uses revenue- unconditionally evaluated during the ensure positive developments of the based, result-based, management preparation of the strategic plan. hotel’s operations and the value of the and fixed-fee leases, or a combination property. of them. Possibility to Action plan acquire hotel with concrete property measures Market analysis Market strategy Profitability Lease optimisation Evaluation of optimisation each hotel prop- erty and the hotel property portfolio Sales as per the strategy support to establish a hotel’s position and Hotel evaluation and investment budget prepared for each hotel property, which standard compared with competitors. This system developed by Pandox assesses the is followed up on a monthly basis at both hotel profitability of a hotel business, and can conse- and Group level. Long-term forecasts are Manuals for lease and management quently establish the value of a hotel property. drawn up for several years ahead as an integral agreements The system is used for acquisitions and major part of the budget process in conjunction with Our manuals for lease and management agree- investments. the strategic plans prepared according to the ments provide a description of the various Pandox Model. The ongoing revenue reporting types of hotel agreements that Pandox uses, Financial reporting follows changes observed within the hotel mar- and how they shall be formulated. They contain Pandox’ focus on increased cash flow and the ket, and provides good underlying data for the clear allocation of responsibility and checklists optimisation of return on investment in its hotel quarterly forecasts prepared per hotel property to support ongoing operations. The manuals properties requires a detailed evaluation of pro- and for the Group. All in all, this financial sys- are also an excellent tool for assessing risk ex- posed and implemented measures. Pandox tem provides current information and data that posure in connection with acquisitions. has therefore developed a system to enable the enable the continuous assessment of the port- financial reporting and follow-up of target-varia- folio’s potential and risks, and consequently the bles. Financial reporting is based on the annual active measures that should be prioritised. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­3 ­
    • types of lease Incitement for both the operator and Pandox The value of hotel property is largely unlike for example office buildings, cash flow is Revenue-based determined by the structure of the generated in the hotel property, which in turn Revenue-based hotel leases are linked to sales increases demands for skills, expertise and in- generated by the hotel business. This form of lease. sight into the underlying hotel market. lease provides Pandox with a share of growth in Each hotel lease is the result of a compre- both the market as a whole and in the market To produce a good hotel lease that is dynamic hensive market analysis that includes changes share. To limit the risk, these leases generally for both parties is a complicated process. In ad- in the market and competition from different specify a minimum guaranteed amount of dition to legal expertise, substantial knowledge players both in the short and long term. rental revenue (guarantee/base rent). of conditions within the hotel industry is re- The structure of each hotel lease is adapted quired, as well as insight into the priorities of to each prevailing situation, and reflects Pan- Result-based each respective party. The point of departure is dox’ active ownership. By using various tech- A result-based hotel lease implies that the hotel that the hotel property owner should have the niques, Pandox can limit the risk in a declining property owner receives a share of the hotel initiative in matters that create cash flow. market and simultaneously participate in a operator’s operating net. The operating net is market that is showing an upward trend. created by the prevailing market situation, Specific characteristics Should the operator’s liquidity weaken, Pandox market share, and the hotel operator’s ability to Each hotel property has its own specific cha- has the expertise and ability to manage the run the business efficiently. This type of lease racteristics. The value of a hotel property is hotel itself, which indeed has occurred on requires that the hotel property owner under- more dependent on the profitability of the ope- several occasions. stands the operator’s financial control system. ration’s (the tenant’s) business than is the case Result-based hotel leases can also specify with office or industrial premises. Leasing costs Types of lease minimum guaranteed rental revenue. This form represent a large part of a hotel’s operating ex- The choice of type of lease is essentially gover- of lease is suitable in markets with rapid growth penses, where the hotel property is the raw ma- ned by the following factors – type of hotel, as- in conjunction with changes in the business terial in the finished product that is rented out sessment of the hotel market, the operator that that create strong growth in earnings. in the form of hotel rooms. Furthermore, a hotel will manage the hotel, and length of the lease. property in general has one single tenant – the Pandox uses all four types of lease found in the Fixed-fee hotel lease hotel operator. Another characteristic is that, hotel property sector. Fixed-fee hotel leases with an index linked to 4 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Elite Park Avenue Hotel, Gothenburg. The hotel is currently undergoing a total refurbishment. The investment is estimated to amount to about SEK 100 M and is completed in collaboration with the operator Elite Hotels. the development of the Consumer Price Index hotel property’s owner - ”manage the man- Pandox’ lease structure (CPI) are used in mature markets and in well- ager” - for which a management fee is paid to Pandox’ lease structure reflects its active and established hotel products. A fixed-fee lease the operator/manager. situation-adapted ownership. The lease struc- limits the risk but also the potential. Management agreements can be suitable ture is governed by factors such as anticipated for hotel property companies with specialist market trends, local competition, planned in- Management agreement expertise where one can integrate the opera- vestments, as well as choice of operators and A management agreement can be perceived as tor’s activities with its ownership, and thereby distributors. By combining various types of a sort of agent contract. The main characteris- obtain a greater portion of the operating net. lease, Pandox has achieved a lease structure tic is that the hotel property owner also owns With this type of agreement, unlike the leases that is 85 percent flexible, which provides Pan- the hotel business. Through a management described above, the property owner does not dox with increased cash flow in a rising market agreement, an operator/manager is assigned to have to take into account the indirect rights of while simultaneously offering a 55 percent pro- operate and manage the hotel on behalf of the possession, as there is no tenant. tection against downturns in the market through fixed-fee leases and rental guarantees. DuE-DATE STRuCTuRE OF THE LEASE AGREEMEnTS REnTAL REVEnuE 2005 By TyPE OF LEASE SEK M Revenue-based leases, 50% 400 300 Revenue-based leases with guarantee, 34% 200 Management leases, 100 own operation, 8% Fixed leases, other tenants, 5% 0 2006 2007 2008 2009 2010 2011+ Fixed leases, 3% PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­5 ­
    • human resources Pandox’ knowledge bank – Competence and expertise provide added-value Anders Nissen, Chief Executive Officer, born in 1957. Lars Häggström, Business Area Manager and Mikael Planell, Business Area Manager, born in Anders Nissen has a strong background from the ho- International Property Manager, born in 1954. Lars 1960. Mikael Planell is responsible for a large part of tel industry, and has been active within the sector for Häggström is a graduate engineer and has considera- Pandox’ Swedish hotel property portfolio, as well as nearly 20 years. His operating experience includes ble experience of the hotel sector, with an emphasis operations in Copenhagen. He has a solid back- being as well as holding leading positions within the on property-related questions. He was technical man- ground from the hotel sector with 20 years as hotel group management team of the hotel operator Reso. ager of Scandic Hotels from 1993 to 1998, and prop- manager and area manager, both in Sweden and In the beginning of 1993, Anders became CEO of Se- erty manager of Hotellus International from 1998 to abroad. Before joining Pandox in the beginning of curum Hotel & Turism AB, where he led the process 2000 when Pandox acquired the company. Lars has 2005, he was manager of operating and business of structuring Securum’s hotel activities. Anders was business area responsibility for the international development for Accor Hotels’ Nordic operations. a key player behind the initiative to form Pandox, and hotels, as well as several major Swedish properties. has been CEO since the Company was started in He has furthermore managed the re-branding of five 1995. large Hilton hotels as well as the ongoing further-de- velopment of the Crowne Plaza Brussels City Centre. Nils Lindberg, Chief Financial Officer, born in 1947. Nils Lindberg has considerable experience in the economic and financial area within industry and the banking sector. He has worked as controller and treasurer of Dow Chemical Nordic Region, as well as Salme Olsson bank manager with Nordbanken and business man- Louise Ceder ager within Securum Finans. Nils joined Pandox in 1995, and is responsible for economic and financial Nevio Sagberg issues within the Group with a focus on financial con- trol and reporting, as well as the management of the Jill Jansson Group’s financing. Anette Österberg, Analyst, born in 1975. Anette Österberg is a graduate in business economics from the European Business School in London. She has also studied property valuation at the Royal Institute Anders Nissen of Technology (KTH) in Stockholm. Upon completion of her studies, Anette worked with Corporate Finance at Deloitte & Touche. She was recruited by Pandox in the spring of 2003 as analyst, and works with acquisitions, market analysis, market communication and decision-making support for the business area managers. Salme Olsson, Property Accountant, born in 1944. Salme Olsson has studied economics at Stockholm University. She joined Pandox in 1995 after having previously worked within the Beijer Group and AEG, and now currently works within Pandox’ finance and accounting department. Jesper Engman, Business Area Manager and Analyst, born in 1974. Jesper Engman is a graduate engineer from the Royal Institute of Technology (KTH) in Stock- holm and Nottingham Trent University with a speciali- sation in property finance. He has experience of the hotel property sector through working for First Host and Hotellus International. Jesper joined Pandox in 2000 as analyst, and works with acquisitions, divest- Johnny ments and market analysis. He is also manager of one of Pandox’ three business areas since 2004. Folke Holmqvist 6 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Ann-Sophie Forsmark, Property Accountant, born in Nevio Sagberg, Corporate Counsel, born in 1965. Folke Holmqvist, Property Manager Sweden, born in 1971. Ann-Sophie Forsmark is a graduate economist Further to obtaining his law degree at Lund University 1943. Folke Holmqvist is a construction engineer from the IHM Business School. She joined Pandox in and studying at the University of Montreal, Nevio Sag- with 25 years’ experience of the building sector and 1999 after having previously been employed by Rid- berg worked first for a district court and then for a five years as CEO of a hotel company. He became darstaden AB, Marco Polo and Fritidsresor. Ann-So- lawyer’s office before joining Pandox in 1996. His property manager of Securum Hotel & Turism AB in phie works within Pandox’ finance and accounting tasks have included building up the Company’s legal 1993 and took part in the formation of Pandox. Folke department. department and preparing various hotel lease and has been project manager for several major refur- agreement manuals. In addition to legal questions, bishment programs, and as Property Manager for the Nevio works with acquisitions and provides business Swedish properties works closely with the three busi- area managers and the Company’s management with ness area managers. underlying support for decision-making. He also acts as secretary of the Parent Company’s board of directors. Jonas Pettersson, Controller, born in 1971. Jonas Pettersson is a graduate in business administration and economics from Stockholm University, and has also studied to become an electrical engineer at the Åsa Nilsson Royal Institute of Technology (KTH) in Stockholm. He has previously worked with Corporate Finance at Jonas Pettersson Deloitte & Touche and Nordea Securities, and most re- Lars Häggström cently comes from the position as group controller of Anette Österberg the industrial company DeLaval. Jonas was recruited by Pandox as Controller in the autumn of 2005. Jesper Engman Jill Jansson, Assistant to the CEO, born in 1952. Jill Jansson joined Pandox in September 2005 as Assist- Nils Lindberg ant to the CEO. Her position implies providing support to the board of directors and management of the Company, as well as internal and external communi- cation including the annual report and accounts. Jill comes most recently from Ventelo Sverige AB, and has also worked within group functions at Pharmacia. Åsa Nilsson, Property Support, born in 1979. Åsa Nilsson has studied property entrepreneurship and is currently studying operational engineering at univer- sity level in parallel with her work at Pandox. She has previously been operational assistant at Jones Lang LaSalle before joining Pandox in 2003. Åsa works with property operations and related support. Louise Ceder, Receptionist, born in 1970. Louise Ceder is responsible for daily office procedures, to- gether with the Assistant to the CEO. She has been with Pandox since 2000. Anders Hallin, Hotel Manager and Business Area Manager, born in 1963. Anders Hallin is both hotel manager of the Radisson SAS Östersund and Business Area Manager. He has solid experience of the hotel industry and comes most recently from Mora Hotell. Mikael Planell Ann-Sophie Forsmark PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­7 ­
    • pandox’ focus on the environment A holistic view that contributes to sustainable development Hotels are in general very focused on new and rebuilding projects. Purchasing pro- sector-related regulations, Pandox shall en- the environment. Pandox endeavours cedures are also very important from an en- deavour to improve its environment policy vironmental viewpoint by placing demands on through the following measures: to work in the same spirit, and main- suppliers and contractors so that Pandox may tains an environment policy that sti- reduce negative environmental effects within • To further develop environmental skills by pulates that the Company shall coope- its operations. The Company therefore gives continuously identifying and fulfilling training rate with its hotel operators so as to priority to suppliers and contractors that share and information requirements. create good prerequisites for their its environmental values. • To perform necessary environment reviews environmental work and participation upon the purchase or sale of land and buil- Environmental inventory dings as well as major refurbishments and in development measures. An environmental inventory of Pandox’ hotel new building in order to avoid future environ- properties provides the Company with under- mental liabilities. Pandox has produced sector-adapted tools to lying data for an assessment of the properties’ • Upon the purchase and supply of services, facilitate environmental work. Examples of environmental status and a perception of how to select solutions, products and material these tools include environment aspect lists, various environmental problems can be solved. from a life-cycle perspective regarding checklists, and instruments for the environ- finances, energy, function and environment. mental evaluation of property management in Environment policy • To take preventive measures in order to mini- conjunction with the procurement of opera- Together with each hotel operator, Pandox shall mise the emission of harmful substances tional services. actively ensure a gradual reduction of the bur- from the Company’s hotel properties. den on the environment. As hotel property • To sort refuse and waste from construction, Environmental vision owner, the Company has significant potential to demolition and property management. Pandox shall provide attractive hotel properties contribute to a long-term and sustainable de- • Pandox shall prioritise suppliers, contractors with good environmental performance, and fol- velopment of the environment based on a ho- and consultants that have a specific environ- low developments within the environment sector. listic approach and covering all operational as- ment policy. Pandox shall fulfil by a comforta- pects. Decisions shall support the minimum ble margin the environmental requirements Environmental burden use of resources and maximum recycling in or- of the countries where the Company is opera- For Pandox, the most central environmental der to protect and preserve the environment. In tional. impact arises when the Company is involved in addition to following current legislation and 8 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • market overview Broad improvements in a year of recovery Nearly all markets showed good has caught up in the last year, narrowing the in the summer, resulting in a further slowdown. growth in occupancy during the year. gap between east and west. Trends have been Demand, primarily from the leisure segment, less encouraging in Germany, where economic was affected the most while price trends were Major international markets have also growth has had difficulty in picking up. The relatively unchanged. After a strong 2004, the witnessed good trends in average hotel market has also experienced considera- year 2005 was therefore a disappointment for room rates, although there is a ten- ble expansion in capacity, which in turn has put London. Room occupancy was 75 percent, im- dency that growth in demand is pressure on the market. According to the Ger- plying a decline of two percent compared with weakening. man Hotel Association (IHA), there are cur- the previous year. The average room rate ma- rently 323 new hotels under construction in naged better with GBP 107 – representing a Germany. Another reason for the weaker trends rise of 4 percent compared with 2004. Market trends* in Germany is that exhibitions and fairs are held every other year, and that 2005 was unfortu- Paris The year 2005 witnessed a period of recovery, nately an off-year in this respect. Paris declined by a relatively small amount in although despite this trend certain markets are Barcelona and Madrid are two of the few the downturn further to the peak year of 2000. still below the levels of the previous period of European cities where average room rates The city’s RevPAR fell by 15 percent between prosperous business activity. The United declined. Both cities are suffering from consi- 2000 and 2003, compared with the decrease States, Asia and the Middle East have ex- derable additional capacity, which is expected in RevPAR in London of 37 percent. Paris ceeded the record years of the beginning of to continue and thereby have a dampening started to rise early in 2004 and has witnessed the millennium. The steady growth in Europe effect on trends. good trends also this year. Room occupancy has still not been sufficient to achieve previous rose by six percent to 71 percent. Average peak levels. London room rates were however the driving force be- The United States have had a record year London normally follows New York in the hotel hind the city’s RevPAR with an increase during with both high room occupancy and good ave- economic cycle, although it has recently fallen the year of 7 percent to EUR 131. rage rates. Occupancy was 63 percent and the behind. This is partly explained by the diffe- average room rate was USD 91, representing rence in the pattern of demand. London has Amsterdam an increase of 8 percent in RevPAR compared primarily benefited from low-budget travellers The year 2005 started with very strong growth with 2004. In the first half-year, it was primarily on short vacations, while international demand in occupancy, while average room rates re- leisure travellers who stood for the strong dri- has been the strong driving force in American mained at last year’s level. The rate of growth ving force within the hotel market. cities. International guests spend an average of slowed during the year but has nonetheless al- Within Europe, it is the eastern and central seven days in New York compared with only ways been stable. Room rates improved slightly regions that have experienced the best growth. three days for domestic guests, which has been during the year, but are in general at a lower Eastern Europe has previously had the abso- a clear advantage in an already strong market. level than other major cities in Europe. Amster- lutely lowest average room rates in Europe, but London also suffered from the terrorist attacks dam’s RevPAR is far behind the peak year of MARKETinG DEVELOPMEnT 2005 % 8 Occupancy 6 ARR RevPAR 4 *All figures for Sweden, Norway and Finland are 2 for a rolling 12-month period from December 0 2004 to November 2005. Other countries refer USA Europe Sweden to the calendar year 2005. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­9 ­
    • market overview 2000, but should continue to rise further to the The city also had several conferences that growth during the year. In February, the munici- year’s total increase of 6 percent due primarily brought in business travellers. More cruise pality of Stockholm achieved positive growth in to growth in demand. ships than usual also had a positive effect. Room RevPAR on a rolling 12-month basis for the first occupancy increased by 7 percent during the time since the economic downturn that hit the Brussels year, with an overall total of 72 percent. Average Stockholm hotel market in 2002/2003. Of the Brussels had a very good start to the year with room rates rose by 12 percent to DKK 755. various geographic markets in Stockholm, the growth in both average rates and room occu- northern parts grew most during the year, pancy. Trends have since then been stable. Helsinki where demand increased by 13 percent for the Brussels achieved the highest rise of all major The hotel market in Helsinki has been relatively full-year, while the western area rose by 6 per- European cities in average room rates in 2005, stable for a couple of years, but witnessed good cent and the south by 2 percent. Demand in resulting in an increase of 3 percent and a rise growth in 2005. The increased integration with the city centre increased by 6 percent, while in room occupancy of 2 percent. Brussels suc- the Baltic countries has started to have positive the high-price segment rose by 4 percent. ceeded in 2005 to recover about half of the effects on both ferry traffic and the hotel mar- Stockholm closed the year with room occu- RevPAR decline from the most recent eco- ket. The World Athletic Championships were pancy of 66 percent, representing an improve- nomic downturn. held in Helsinki in August, leading to a signifi- ment of 3 percent compared with 2004. Average cant rise in both occupancy and average room room rates were 3 percent higher than last year. Berlin rates. Demand has however had some diffi- After a good 2004, Berlin experienced negative culty and room occupancy rose by only 1 per- Gothenburg trends in 2005. Major additions to capacity sig- cent in 2005 to 67 percent. Average room rates Gothenburg produced surprising results and nificantly affected the city during the year. Just for the year were EUR 103, representing an in- turned upwards with great determination. The in 2005 for example, openings have taken crease of 6 percent. year was encouraging and witnessed stable im- place of a 251-roomed Express by Holiday Inn, provement due primarily to growth in demand. a 274-roomed Dorint Novotel, a 267-roomed Oslo Gothenburg is skilled at selling itself as an at- Courtyard, as well as a 505-roomed Maritim. Oslo had a very strong year. The highest rise in tractive destination both for tourists and busi- The city dropped both in room occupancy and RevPAR was due to increasing demand, and ness travellers. Good coordination between in- average rates during the year. RevPAR was average rates also rose during the year. Room dustry and commerce and the municipality lies close to 2 percent below 2004. occupancy was 69 percent, representing an in- behind the successful marketing, and has crease of 5 percent. Average room rates rose by made Gothenburg less sensitive to economic Copenhagen 3 percent to NKK 750. fluctuation. Average room rates improved Copenhagen had a very good year for several steadily during the year and closed at almost 1 reasons. The 200th anniversary of HC Stockholm percent better than last year. Room occupancy Andersen was celebrated in 2005, which Growth in demand was very strong in Stock- was 63 percent, representing an increase of 3 attracted both national and international guests. holm, and almost the entire region had good percent compared with the previous year. OCCuPAnCy LEVELS AnD PRiCE DEVELOPMEnT 2005, nORDiC REGiOn Helsinki Oslo Copenhagen Gothenburg Malmö Occupancy Stockholm ARR 0 4 8 12 16 20 % OCCuPAnCy LEVELS AnD PRiCE DEVELOPMEnT 2005, EuROPE Brussels Paris Berlin Amsterdam Occupancy London ARR –4 –2 0 2 4 6 8 % 20 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • The Radisson SAS Arlandia Hotel is Sweden’s largest airport hotel with direct link to Arlanda International Airport. A significant upgrading and product development program has been carried out over the last two years. Malmö summer, thus having a very positive effect on The largest event ever in the Malmö region was hotels. Room occupancy was an overall 62 per- organised in 2005 when the qualifying heats of cent, representing an increase of 4 percent. the America’s Cup were held at the end of the The underlying demand rose by 9 percent. Av- RevPAR TREnDS, nORDiC REGiOn Euro Copenhagen 100 Oslo Helsinki 85 Stockholm 70 Malmö 55 Gothenburg 40 2000 2001 2002 2003 2004 2005 Sources: Deloitte, Swedish Tourist Authority, SCB, Finlands Statistik, Danmarks Statistik, Statistisk Sentralbyrå. RevPAR TREnDS, EuROPE Euro 175 London 150 Paris 125 Brussels Amsterdam 100 Berlin 75 50 2000 2001 2002 2003 2004 2005 Sources: Deloitte, Swedish Tourist Authority, and SCB. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­2 ­
    • market overview Record high volumes in the transactions market As a result of a continued good underlying hotel One example of major transactions was the acquisition price amounted to GBP 3.3 billion. market combined with trends such as ”asset- InterContinental Hotel Group’s ”sale and ma- After 40 years as separate companies, all light”, that is, divestments of properties, the nagement back” of 73 Holiday Inn properties Hilton hotels will now be run within one and the transactions market has rocketed upwards and in the amount of EUR 1.5 billion. Purchasers same company. reached record levels in 2005. The sector has of the properties comprised a consortium with There have also been many transactions in for some time now attracted new types of inves- Lehman Brothers, Realstar Group and GIC Scandinavia. The most active player was the tors. A broader group is now looking at hotels in Real Estate (LRG). Whitbread sold 46 Marriott newly started Norwegian hotel property com- an effort to achieve a better return on investment Hotels in Great Britain during the year to Condor pany, Norgani Hotels ASA, which became than found in the stock market or more tradi- Overseas Holdings (a joint venture between listed on the Oslo Stock Exchange in the tional types of property with offices and shops. Marriott International and Whitbread) as a autumn. Several major portfolio acquisitions We have been able to observe hotel compa- stage in their focus towards the budget sector. were made upon the forming of the company. nies go towards ”asset-light” over a certain The transaction amounted to EUR 1 billion. Pandox, Capona and the Wenaas Group sold period of time, and their sales of properties Hilton also made a major transaction during the the properties that formed the basis. have gone quickly. Demand is considerable for year with the sale of 11 properties to Stardon Further transactions are expected within both individual and portfolio acquisitions. The UK Ltd, amounting to EUR 160 M. The largest the market. The hotel portfolio Hospitality greatest activity has been observed in Great transaction of the year was the British Hilton Europe BV (HEBV) will either be listed on the Britain, where nearly half of all transactions Group’s sale of its international hotel division to stock exchange or will be sold. Condor Over- were completed. the American Hilton Hotels Corporation. The seas Holdings is planning to sell its properties. 22 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Competition analysis Interest for the hotel market continues to in- Capona sold its 30-percent holding in Hotell- hotels in Denmark and two hotels in Sweden crease, and is coming from a rising number of eiendom AS to Norgani during the year. In the via management agreements. The company is actors – American, Irish and Spanish investors future, Capona will invest more in hotels lo- however independent and can also have other have been particularly active in Europe this cated in city centres. operators than Tribe in its property portfolio. year. The different types of investor are also broadening. Private equity companies are pur- norgani Hotels ASA Wenaasgruppen AS (The Wenaas Group) chasing more and more, while other finance Geographical coverage: Sweden, Denmark, Geographical coverage: Denmark, Norway companies and funds that previously only fo- Norway and Finland and Russia cused for example on the stock market, have Number of hotels: 63 hotel properties, of which Number of hotels: 17 started to invest in the hotel market. Major 41 in Sweden, 12 in Norway, 6 in Denmark and Number of rooms: 3,600 (October 2005) changes are also taking place in view of opera- 2 in Finland. The company was formed at the end of 1997 tor companies selling their properties. Opportu- Number of rooms: 7,605 (October 2005) and is privately owned. The business concept nities for consolidation are rising in number. Norgani is a newly formed company that is is to own hotel properties that are leased The tempo has also been high in Scandinavia. listed on the Oslo Stock Exchange. The com- through long-term contracts. In addition to ho- For example, Pandox has made three individual pany invests in large hotels with more than tels, the Wenaas Group invests in shipping, tex- acquisitions this year, as well as a major divest- 100 rooms that are run by known operators tiles and shares. ment in the form of a portfolio to Norgani – with revenue-based leases. Major events in 2005: Wenaas acquired the Scandinavia’s new hotel property company. Major events in 2005: The company was Radisson SAS Royal Hotel in central St Peters- founded in 2005. Major portfolio acquisitions, burg for USD 30 M. Rezidor SAS Hospitality Capona AB including from Pandox and Capona, have will continue to operate the hotel. The company Geographical coverage: Sweden and Norway formed the basis of the company. Norgani has is currently investing in large cities in Russia, Number of hotels: 22 hotel properties, of which also acquired Hotelleiendom AS, a company Scandinavia and other parts of western and 3 in Norway and the rest in Sweden. composed of 16 hotels located in Sweden. eastern Europe. Number of rooms: 2,500 (December 2005) Norgani plans to invest in the Baltic coun- Pure hotel property company, but also operates tries as well as in Iceland. Vital Forsikring ASA two hotels (Wisby Hotell via a wholly owned Geographical coverage: Sweden and Norway subsidiary, and Aronsborgs Konferenshotell via Host Hoteleiendom Number of hotels: 3 in Sweden a 50-percent-owned company). Listed on the Geographical coverage: Sweden, Denmark A Norwegian privately owned life insurance and Stockholm Stock Exchange. and Norway pension company that has invested SEK 4.2 Major events in 2005: Capona sold two property Number of hotels: 18 (January 2005) billion in Swedish properties in recent years. In portfolios for a total amount of SEK 2,650 M. A Norwegian hotel property company that is Sweden, the company owns the Mercedeshu- One of the purchasers was Hotelleiendom AS privately owned by Asmund Haare, who works set, Spårvagnen, Nordic Sea and Nordic Lights which bought 16 hotel properties in Septem- with and leases out his properties to the closely properties in Stockholm as well as the Radisson ber. The other property portfolio of 14 hotels related company Tribe Hotel Management SAS Hotel in Gothenburg. was sold in July to Norgani Hotels ASA. In (which runs hotels under the First Hotels brand Major events in 2005: Acquired 50.1 percent conjunction with the sale, Capona acquired name). The management company Tribe Hotel shareholding in Kista Galleria for SEK 1.2 a shareholding of about 6 percent in Norgani Management owns and operates 9 hotels in billion. for around NKK 70 M. Six hotel properties Norway, 20 in Sweden and 3 in Denmark. Tribe located in Sweden were sold in September. Hotel Management also operates a further two PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­23 ­
    • market overview RBS nordisk Renting Major events in 2005: A number of acquisi- Hospitality Europe BV Geographical coverage: Sweden, Norway, Den- tions were made during the year, including Geographical coverage: Belgium, Germany, mark, Finland and Switzerland. Berns Hotel and Holiday Club in Finland. Netherlands, France, Sweden and the Number of hotels: 11 Czech Republic Number of rooms: 1,530 of which most are in Kapiteeli Number of hotels: 8 Sweden. Geographical coverage: Finland Number of rooms: 3,227 (October 2005) The company is a wholly owned subsidiary Number of hotels: 17 One of the largest pure hotel property compa- of The Royal Bank of Scotland, and acquires Number of rooms: 2,740 rooms of which half nies in Europe with regard to market value, with or builds large properties. Operations and in Helsinki (June 2005) registered offices in Rotterdam and London. management are taken care of by the clients Kapiteeli is Finland’s second largest hotel The company has a large proportion of Shera- themselves or external managers. property company. It is a wholly state-owned ton Hotels in its portfolio. Other brand names Major events in 2005: RBS has reduced its nationwide property investment company that include Renaissance and Hyatt. commitments within the hotel sector in recent leases out, sells and develops the properties The company is owned by American and years. The company’s largest client is Rezidor and land that it owns. Properties that the state European investors, and is planning either to SAS. No known acquisitions within the hotel no longer needs are transferred to the company divest or to become listed on a stock exchange. sector were made during the year. from Senatfastigheterna (previously Statens Fastighetsverk). Kapiteeli’s strategy is to divest Strategic Hotel Capital London & Regional Properties (L&R) hotels that are located within growth areas, Geographical coverage: North America, Geographical coverage: Sweden, Finland, as well as to expand through cooperation with Mexico, France, Hamburg and Prague Germany, England and Lithuania other investors in the market. The largest Number of hotels: 17 Number of hotels: about 60 partner is the Hilton Group, which together Number of rooms: 7,934 (October 2005) Number of rooms: about 10,000 contributes with 92 percent of the total return Global hotel investment company that is (October 2005) on investment from hotel properties. registered on the New York Stock Exchange. L&R is one of the UK’s largest privately owned Major events in 2005: The company refur- The company focuses on hotels in the upper property companies, with property assets esti- bished and expanded the Scandic City price segment, and works with Hyatt, Marriott, mated to be worth more than EUR 5 billion, of Tampere Hotel in 2004/2005 at a cost of Intercontinental and Ritz Carlton. which about 1.6 billion in the Nordic Region. EUR 21 M. The hotel was reopened in July. Major events in 2005: None in Europe. Offices were opened in Stockholm in 2002 that have the responsibility for expansion in the Thon Holding AS Host Marriott Nordic Region and northern Europe. The com- Geographical coverage: Norway and Brussels Geographical coverage: USA, Canada, Mexico, pany works primarily within four business Number of hotels: 41 Great Britain, Poland, Spain and Italy. areas: long-term property investment, outsour- Number of rooms: 6,200 Number of hotels: 145 of which 6 in Europe cing, development of commercial properties, The company is privately owned by Olav Thon, The company was formed in 1992 as a result investments in and the development of hotels. and is active within property, hotel and restau- of dividing Mariott Hotels into a hotel manage- The company made its first purchase in Fin- rant operations, trading of goods, and industry. ment company and a property company. land, the hotel property company Dividum, in The company has its own hotel chain, Thon Major events in 2005: Host Marriott acquired the autumn of 2004 and thereby obtained 31 Hotels (previously Rainbow Hotels), which rep- 38 hotels from Starwood for about USD 4 billion. hotels in its property portfolio. Dividum is to resents 30 percent of the property portfolio. invest in expanding in the Baltic countries. EuROPE’S LARGEST HOTEL COMPAniES 2005 (2004) Hotel operator Rooms 2005 Rooms 2004 Hotels 2005 Hotels 2004 1 (1) Accor 235,205 226,272 2,159 2,098 2 (3) Best Western 73,455 71,497 1,126 1,106 3 (2) Intercontinental Hotels 72,273 72,882 469 462 4 (4) Louvre Hotels 60,730 60,529 861 858 5 (5) Hilton International 53,154 52,827 252 245 6 (7) Sol Melia 43,083 42,240 205 207 7 (8) TUI AG/TUI Hotels & Resorts 40,377 40,661 170 168 8 (9) Choice 34,794 35,681 404 433 9 (6) Marriott International 29,722 45,801 144 280 10 (10) NH Hoteles 28,037 27,228 200 195 Source: MKG 01.11.2005 24 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • corporate gove r n a n c e Work of the Board of Directors Expertise and experience of the following areas rectors establishes and documents the objec- Board material is sent to the members approxi- are important in an international hotel property tives and strategy of the Company. The Board mately one week in advance. The Company’s company such as Pandox: has also adopted a finance policy, an approval auditors attend at least one meeting each year • Hotel operations and the hotel market policy and guidelines for decision-making, as to present a report of their audit and their re- • Financing well as a particular strategy regarding acquisi- view of the Company’s internal control systems. • Property and the real-estate sector tions. In addition to their ongoing audit, the Compa- • Business development The Board of Directors of Pandox holds five ny’s auditors were also commissioned by the • Brand name strategies ordinary meetings each year. In addition to the Board to carry out special reviews of major • Development of international companies. ordinary meetings, the Board held two extraor- lease agreements during the year. According dinary meetings during the year to discuss cer- to this assignment, all agreements shall be in- The Board of Directors of Pandox, which is tain business issues. spected during a three-year period according composed of six members, has broad experi- The Board meetings follow an established to a rolling timetable. ence and knowledge of these areas. annual agenda. The meetings review and discuss the external and internal reporting of Work procedures operating results and the Company’s financial The Board of Directors has adopted work pro- position, as well as various business matters. cedures and directives for the Chief Executive Other important items that are regularly studied Officer and has given management instructions and reviewed are marketing, strategy, and on reporting. Every year, Pandox’ Board of Di- budget issues. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­25 ­
    • corporate governance Board members The Board of Directors of Pandox is composed and dimensioned so as to enable the establishment and implemen- tation of the Company’s goals and strategy, to actively and effectively support the management team in the further- development of the Company, and to monitor and control operations. Christian Ringnes, Chairman Leiv Askvig Olaf Gauslå Born in 1954 Born in 1957 Born in 1961 CEO of Eiendomsspar AS. CEO of Sundt AS. CFO of Eiendomsspar AS. Member of the Board of Pandox since 2004. Member of the Board of Pandox since 2004. Member of the Board of Pandox since 2004. Other appointments: Other appointments: Chairman of NSV-Invest AS and Mini Bottle Deputy Chairman of Verdipapirsentralen ASA. Gallery AS. Board member of Imarex ASA. Board member of Schibsted ASA, Norsk Scania AS and Nationaltheatret (Deputy Chairman). Bengt Kjell Björn-Åke Wilsenius Mats Wäppling Born in 1954 Born in 1944 Born in 1956 Executive Vice President, Head of Investments, Member of the Board of Pandox since 2004. Deputy CEO, NCC AB. Industrivärden AB. Member of the Board of Pandox since 2003. Other appointments: Member of the Board of Pandox since 1996. Chairman of BDB Bankernas Depå AB. Other appointments: Other appointments: Member of the Board of Bergen Energi AB and Member of the Board of SWECO AB. Chairman of Kungsleden AB. Finansiell ID-teknik BID AB. Member of the Board of Helsingborgs Dagblad AB, Indutrade AB, Isaberg Rapid AB, Munters AB and Össur HF. 26 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • corporate gove r n a n c e Senior executives The management team is responsible for the Company’s current operations and reports to the Board of Direc- tors. Management prepares and implements strategies and action plans, and ensures that set targets be met. Other important areas of responsibility include overall planning, personnel development and an ongoing dia- logue with the capital market. Anders nissen nils Lindberg Born in 1957 Born in 1947 Chief Executive Officer Chief Financial Officer Employed since 1995 Employed since 1995 Auditors The task of the auditors is to examine the Company’s accounts, administration and financial information. The audit results in an audit report where the auditors give an opinion as to whether the annual accounts and financial statements have been prepared in accordance with the Swedish Annual Accounts Act and generally accepted accounting principles. Per Gustafsson Willard Möller Born in 1959 Born in 1943 Authorised Public Accountant Authorised Public Accountant KPMG SET Revisionsbyrå AB PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­27 ­
    • Bild över hela uppslaget
    • The hotel portfolio Ingång till kap Hotel ­property ­portfolio . . . . . . . . . . . . . . . . 30 Operator ­companies . . . . . . . . . . . . . . . . . . 32 list ­of ­properties ­ . . . . . . . . . . . . . . . . . . . . 34 Hotel ­properties . . . . . . . . . . . . . . . . . . . . . 36 Xxxxxxxxxxxxxxx ­ x Xxxxxxxxxxxx ­ x Xxxxxxxxxxxxx Xxxxxxxxxxxxx ­ x
    • hotel property portfolio Hotel property portfolio of high quality Pandox’ property portfolio is com- lio is marketed through strong brand names bro, Scandic Kramer in Malmö, Hotel Mr Chip posed of 36 hotel properties with a such as Scandic, Hilton, Radisson SAS and in Kista and First Hotel Grand in Borås. Quality. total of approximately 7,800 rooms, of Development of Pandox’ hotel which one hotel under asset manage- Size and location property portfolio ment and five with own operations. A hotel’s location and size are two quality fac- Active ownership has increased the quality of The Company’s revenue structure tors that both contribute to stable profitability. Pandox’ hotel property portfolio. Acquisitions and the hotel properties’ location, size All of Pandox’ hotels have natural and strong lo- have provided further large hotels in developed and brand names provide the portfo- cations. The average Pandox hotel has 218 markets. Divestments have increased the aver- rooms, which is four times the overall average age size of the hotels and reduced the number lio with the highest quality. in Sweden. of minor locations. Revenue structure Physical and technical standards Pandox’ revenues are generated through flexi- All Pandox’ hotels are regularly evaluated and ble lease agreements within the underlying ho- reviewed in accordance with the Pandox tel market or from its own operations. The reve- Model, leading to cash-flow-generating invest- PROPERTy REVEnuE 2005 By GEOGRAPHiC AREA nue structure is sound whereby more than 85 ment and maintenance measures. During the percent of lease revenues come from large last two years, Pandox has made investments Stockholm, 24% growth locations with stable demand for hotel amounting to approximately SEK 235 M services such as Stockholm, Gothenburg, the Gothenburg, 11% excluding acquisitions, and carried out mainte- Öresund region, Brussels, and London. nance for approximately SEK 65 M. Pandox Rest of Sweden, 18% estimates that the hotel operators have carried Öresund, 19% Brand names out programs at similar levels in accordance Belgium, 10% An important component when creating high with the intentions expressed in their leases. revenue levels is to have access to the market’s London, 8% During the year, Pandox renegotiated the strongest brand names and the best distribu- Germany, 7% leases for the Radisson SAS Plaza Hotel in Karl- tion networks. 98 percent of the Pandox portfo- Switzerland, 3% stad, Scandic Hallandia, Scandic Grand Öre- 30 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • PROPERTy REVEnuE By GEOGRAPHiC AREA, SEK M Stockholm Gothenburg Öresund Rest of Sweden international Total Total revenue 139.0 55.5 108.7 103.5 142.0 548.8 Of which hotel 1) 131.6 55.1 97.7 98.6 141.4 524.4 Of which offices 0.0 0.1 7.5 1.9 0.0 9.4 Of which shops 5.2 0.2 2.7 1.1 0.0 9.2 Of which other 2.2 0.1 0.9 2.0 0.6 5.9 Other property revenue 8.7 3.3 5.8 5.5 2.0 25.2 Total property management revenue 147.8 58.8 114.5 108.9 143.9 574.0 Operation and maintenance –29.8 –8.5 –22.8 –17.7 –25.0 –103.8 Operating net 118.0 50.3 91.7 91.3 118.9 470.2 Adjusted operating net 2) 108.5 50.3 91.7 63.9 118.9 433.3 Book value 3) 1 138.6 742.5 1 055.6 611.6 1 544.4 5 092.7 Direct yield % 9.5 6.8 8.7 10.5 7.7 8.5 1) Including rent for hotel equipment. 2) Excluding operating net from the as of 1 July divested hotel properties. 3) Including hotel equipment. Excluding the newly acquired hotel properties Hotel 27 in Copenhagen and Royal Crown in Brussels that were not charged any internal rent in 2005. Development of Pandox’ Large hotels with strong locations in prioritised towns and cities Pandox’ SIZE AND LOCATION portfolio Development of Pandox’ 2005 hotel property portfolio Local brand 1995–2005 Strong intern- names in the ational brand low and names in the medium-price medium and BRAND NAME AND SEGMENT segments high-price segments Pandox’ N D portfolio 1995 N E L A E D 1 Small hotels F I N in weak S W hotel markets Y A R W N O 1 7 ESTONIA 2 Pandox hotel properties 1 1 3 1 1 LATVIA BAHAMAS 1 USA K R LITHUANIA A M 2 1 N E 2 D RUSSIA IRELAND B 1 UNITED 1 KINGDOM POLAND HOLLAND 1 GERMANY 1 1 4 BELGIUM CUBA Lux. CZECH REPUBLIC FRANCE SLOVAKIA RIA 1 ST The figures indicate the number of hotel properties per town/city A U HUNGARY • Asset Management SWITZERLAND R O PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­3 ­ J U G O S L A V I E N T I A A L B L I A
    • operating companies Operating companies Pandox’ business concept is to be an its own or franchise a brand name. A second directors and management team. The business active hotel property owner based on form is that another partner be assigned to activities are monitored, evaluated and ana- manage the hotel on behalf of Pandox. A third lysed at regular board meetings that often specialist competence and skills alternative is that Pandox operates the hotel it- include external board members. within the hotel market, hotel opera- self and supplements marketing activities with Pandox’ most important task is to support tions, hotel property management a franchise agreement with a well-known brand the companies’ business processes by appoin- and business development. name or via an independent distributor. ting professional boards of directors and ma- Pandox’ current portfolio contains five ope- nagement teams, as well as to contributing to The Company has developed a business model rations as well as an asset management assign- management systems and working methods that contains different alternatives as to how ment, which are estimated to generate sales of being established in the companies so that the Company may enable the improvement of approximately SEK 350 M in 2006. The stra- the business development potential may be cash flows. The most common form is to sign a tegy is to build up independent companies so materialised. lease with a partner who then manages the re- that the majority of responsibility may be dele- lated operations and markets the hotel under gated to each respective company’s board of Crowne Plaza Brussels City Centre The operation and property were acquired at the end of 2003 and are one of the leading business and central city meeting hotels in Brussels. The company is run under a franchise agreement with Crowne Plaza, which is one of the brand names of the Intercontinental Group. Distribution takes place via one of the world’s most powerful channels – Holidex. An upgrading and modernisation program is currently in progress at a cost of approximately EUR 14 M. Royal Crown Hotel Brussels Eric van Dalsum, 44 years, Hotel Manager. The operation and property were acquired in the Dutch citizen. Resident in Belgium. Many years of autumn of 2005. Since Pandox took over, the hotel is solid hotel experience from management positions marketed via independent distribution channels. The at several large Radisson SAS hotels around the world. Has worked in France, England, Germany, strategy is to develop the hotel to one of the leading China, Egypt, Ireland and Indonesia. upper medium price hotels with business and con- ference guests and tourists, at an estimated cost of about EUR 12 M for the entire restructuring. Aldert Schaaphok, 46 years, Hotel Manager and Board Member of Crowne Plaza. Dutch citizen. Has lived in Brus- sels for 11 years. Owns and runs an independent consul- tancy firm that is specialised in the hotel industry with a busi- ness concept of performing various management assign- ments with the objective of improving the companies’ profita- bility. Hotel manager of various business hotels since 1990 in Holland, Germany and Belgium. Before starting his own business in 2002, Aldert was Vice President Operations of Dorint Hotels & Resorts. 32 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Copenhagen Hotel 27 The operation and property were acquired in 2005. The hotel is marketed via independent distribution channels since Pandox took over. The strategy is to develop the hotel to one of the leading upper medium price hotels in Copenhagen with the help of the hotel’s strong location, size and attractive design. The development program is estimated to cost about DKK 60 M. Ronni Guldbrandsen, 46 years, Hotel Man- ager. Danish citizen. More than 20 years of experience within the hotel and restaurant sector, including as restaurateur and product development manager of DSB Restaurants, Mora Hotell hotel manager and purchasing manager at The property was acquired in 1995 and operation Scandic Hotels, administrative manager at were taken over in 2003. The property was sold to Choice Hotels, and own hotel operations. Norgani in 2005, but Pandox still owns and runs the hotel operation. Under Pandox management, the hotel has been upgraded and modernised, which has led to significant improvements in results. Mikael Jonasson, 51 years, Hotel Manager. Swedish citizen. Solid background in the hotel and restaurant sector. International experi- ence from Denmark, England and Mexico. Radisson SAS Hotel Östersund The property was acquired in 1995 and operation was taken over in 2004. The hotel is marketed via a franchise agreement with Radisson SAS. An action plan has been implemented under Pandox’ management in order to increase the effectiveness of operations, which in turn has led to an improve- ment in results. Anders Hallin, 43 years, Hotel Manager and Business Area Manager. Swedish citizen. Anders comes most Pelican Bay Hotel & Resort at Lucaya recently from Mora Hotell and has solid experience of the hotel industry. Pandox has an asset management assignment to assist the owner Sundt AS in supporting the compa- ny’s management in the development of operation. The hotel is located on Grand Bahama Island and has 186 rooms, of which 96 are junior suites. Oper- ation is marketed as a resort hotel via independent Magnus Alnebeck, 41 years, Hotel Manager. distribution channels. In the first year, management Swedish and St Lucia citizenship. 20 years’ international hotel experience (Intercontinental, has focused on creating operational procedures Cunard, Radisson SAS, Forte). and standards as well as building up related skills and competence. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­33 ­
    • list of properties Type of number year of constr. Total surface Property Operator/Brand name lease Location of rooms extension (sqm) Stockholm Radisson SAS Arlandia Hotel, Arlanda Rezidor/Radisson SAS Og International airport 337 1979/89 15,260 Hilton Stockholm Slussen Hilton International/Hilton O City centre 288 1989 18,416 Scandic Järva Krog, Stockholm Hilton International/Scandic O Northern Stockholm 215 1971/97 11,300 Scandic Park, Stockholm Hilton International/Scandic O City centre 198 1969/88 12,290 Quality Hotel, Nacka Choice Hotels Scandinavia/Quality Og Sickla-Nacka 162 1986 10,830 Scandic Upplands Väsby Hilton International/Scandic O Stockholm north 150 1986 6,955 Mr Chip Hotel, Kista Kista Hotell AB/ – Og Stockholm north 150 1984 5,517 TOTAL STOCKHOLM 1,500 80,568 Gothenburg Scandic Crown, Göteborg Hilton International/Scandic O City centre 338 1988 24,380 Elite Park Avenue Hotel, Göteborg Elite Hotels/Elite Og City centre 291 1950/74/90 21,998 Scandic Mölndal, Göteborg Hilton International/Scandic O City centre 208 2000 11,000 TOTAL GOTHEnBuRG 837 57,378 Öresund region Scandic Copenhagen Hilton International/Scandic O City centre 484 1970/99 31,500 Scandic S:t Jörgen, Malmö Hilton International/Scandic Og City centre 265 1967/95 21,485 Copenhagen Hotel 27 Pandox/– Io City centre 203 Scandic Star, Lund Hilton International/Scandic Og Central 196 1991 15,711 Radisson SAS Grand Hotel, Helsingborg Sverigeråd AB/Radisson SAS Og City centre 164 1926/29/96 8,555 Scandic Kramer, Malmö Hilton International/Scandic O City centre 113 1875/1994 6,913 TOTAL ÖRESunD REGiOn 1,425 84,164 Regional towns and other locations Scandic Grand, Örebro Hilton International/Scandic O City centre 219 1985 12,900 Scandic Winn, Karlstad Hilton International/Scandic Og City centre 199 1984/90 10,580 Scandic Swania, Trollhättan Hilton International/Scandic Og City centre 196 1918/83/89 10,399 Radisson SAS Hotel, Östersund Pandox i Östersund AB/Radisson SAS Io City centre 177 1978 8,766 First Hotel Grand, Borås Västsvenska Hotellfastigheter AB/First Hotel Og City centre 158 1972/87/90/97 9,593 Elite Stora Hotellet, Jönköping Elite Hotels/Elite Og City centre 135 1860/1930/95 11,378 Scandic Hallandia, Halmstad Hilton International/Scandic O City centre 130 1890-talet/50/75 7,617 Radisson SAS Plaza Hotel, Karlstad Plaza Hotell & Restaurang i Karlstad AB/Radisson SAS Og City centre 131 1929/91 5,907 Scandic Billingen, Skövde Hilton International/Scandic F City centre 106 1888/1939/65 7,743 TOTAL REGiOnAL TOWnS AnD OTHER LOCATiOnS 1,451 84,883 international 2) Hilton London Docklands Hilton International/Hilton O Docklands 365 1991 22,800 Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Io City centre 356 1910 28,095 Royal Crown Hotel Brussels Pandox/– Io City centre 315 Hilton Brussels City Pandox/Hilton M City centre 285 1910/30 13,850 Radisson SAS Hotel, Basle Rezidor/Radisson SAS Og Central 205 Scandic Grand Place, Brussels Hilton International/Scandic O City centre 100 1900/91 4,500 Scandic Antwerpen Hilton International/Scandic O Ring road 204 1974 13,200 Hilton Bremen Hilton International/Hilton O City centre 235 1991 21,000 Hilton Dortmund Hilton International/Hilton O Exhibition centre 190 1990 12,500 Scandic Lübeck Hilton International/Scandic O Ring road 158 1991 9,700 Pelican Bay Hotel & Resort at Lucaya, Freeport, Grand Bahama Island Sundt GB Management/– AM Resort 186 TOTAL inTERnATiOnAL 2,599 125,645 TOTAL PAnDOX 7,812 432,638 1) Includes hotel, restaurant and conference surfaces. 2) Excluding Copenhagen (included in Öresund). O = Revenue-based, Og = Revenue-based with guaranteed rent, Or = Revenue and result-based, R = Result-based, F = Fixed, Io = Internal revenue-based, M = Management agreement, AM = Asset management agreement. 34 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Of which Offices Shops Other Right of Property Tax assessment hotel1) (sqm) (sqm) (sqm) (sqm) disposal designation value (SEK M) 15,260 – – – Land leasehold Benstocken 1:5 92.0 15,725 2,097 – 594 Land leasehold Överkikaren 31 345.0 11,300 – – – Land leasehold Tanken 2 57.4 10,290 – – 2,000 Lönnen 30 174.0 8,090 2,705 – 35 Sicklaön 363:2 90.4 6,955 – – – Vilunda 6:48 27.6 5,517 Land leasehold Knarrarnäs 7 64.1 73,137 4,802 – 2,629 850.5 REnTAL REVEnuE 2005 By 21,800 – 300 2,280 Stampen 5:5 191.0 COOPERATiOn PARTnERS 21,998 – – – Lorensberg 28:4 289.0 11,000 – – – Laken 1 61.8 Scandic, 46% 54,798 – 300 2,280 541.8 Hilton, 24% 25,200 – – 6,300 99943-2 – Radisson SAS, 14% 14,655 – 4,230 2,600 S:t Jörgen 11 120.0 Elite Hotels, 6% 15,711 – – – Porfyren 2 77.4 Crowne Plaza, 4% 7,325 – 1,230 – Högvakten 1+7 55.6 First Hotels, 2% 6,373 – 540 – Gripen 1 47.8 Quality Hotels, 2% 69,264 – 6,000 8,900 300.8 Other, 2% 10,900 – – 2,000 Land leasehold Mältaren 1 40.6 10,580 – – – Negern 2 38.6 10,399 – – – Svan 7 46.6 8,766 – – – Tenant-owner Borgens 3 33.8 DEVELOPMEnT OF AVERAGE HOTEL SizE 9,365 – – 228 Land leasehold Prometeus 3 36.8 Number of rooms per hotel 9,379 – 899 1,100 Alhambra 1 44.6 250 6,813 360 427 17 Erik Dahlberg 14 &15 35.7 200 5,907 – – – Höken 1 28.6 150 6,844 – – 899 Fjolner 7 21.2 100 50 78,953 360 1,326 4,244 326.5 0 98 99 00 01 02 03 04 05 21,500 – – 1,300 HM Land Registry: SGL465779 – 28,095 – – – – REVEnuES FROM CEnTRAL LOCATiOnS 13,850 – – – Saint-Josseten-Noode (1div) 032 – AnD inTERnATiOnAL HOTEL MARKETS SEK M 4,500 – – – – 500 13,200 – – – 24th div, Borgerhout 1st div, Ar – 400 15,100 – – 5,900 Grundbuch Altstadt IV, Blatt 60 – 11,300 – – 1,200 Grundbuch Dortmund, Blatt 897 – 300 8,800 – – 900 Grundbuch Lübeck, Blatt 54545 – 200 100 0 116,345 – – 9,300 – 98 99 00 01 02 03 04 05 392,497 5,162 7,626 27,353 2,019.6 PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­35 ­
    • Hotel property portfolio 36 hotels with strategic locations in Sweden, Denmark, Belgium, Germany, Switzerland, UK, and the Bahamas.
    • Radisson SAS Arlandia Benstocksvägen 1, Stockholm-Arlanda, +46-8-506 840 00 Operator: Rezidor designed for business travellers, conference groups Brand name: Radisson SAS and charter tourists. A significant upgrading and Lease: Revenue-based with product development program has been carried guaranteed rent out over the last two years with a total investment of more than SEK 65 M. The Radisson SAS Arlandia Hotel is Sweden’s largest The building was constructed in 1979 and airport hotel with direct link to Arlanda International extended in 1989, and has five floors. There are Airport. The hotel product comprises 337 rooms, also two small wooden buildings that are part of the restaurant, bar, large conference department, swim- conference facilities. ming pool and exercise facilities, and is primarily Scandic Järva Krog Järva Krog, Solna, +46-8-517 345 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based conference attendees. The building was recently re- furbished and contains 215 rooms, good conference The Scandic Järva Krog is strategically located in facilities and a relaxation centre. northern Stockholm next to the E4 motorway going The hotel was built in 1971 and refurbished in out to Arlanda International Airport. The hotel is 1996/1997, with a total surface of 11,300 square primarily oriented towards business travellers and metres. Hilton Stockholm Slussen Guldgränd 8, Stockholm, +46-8-517 353 00 Operator: Hilton International Brand name: Hilton Lease: Revenue-based has 288 rooms, a congress hall, conference facilities, Hilton Stockholm Slussen is a first-class full-service two restaurants, bar, exercise facilities and a swim- hotel of international standard located at Slussen in ming pool. central Stockholm and is oriented towards business The hotel is comprised of two buildings con- travellers, conference groups and tourists. The hotel structed in 1989. Scandic Park Karlavägen 43, Stockholm, +46-8-517 348 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The Scandic Park is located in the centre of The hotel was built in 1969 and underwent Stockholm at Humlegården. The product is of high considerable refurbishment in 1988. The property standard and has a large proportion of international was further refurbished and entirely upgraded during guests, and contains 198 rooms, conference facili- the period 2001-2005. The total surface is 12,290 ties and a restaurant. square metres, consisting entirely of hotel surface. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­37 ­
    • hotel properties Quality Hotel nacka Värmdövägen 84, Nacka, +46-8-506 160 00 Operator: Choice Hotels Scandinavia Brand name: Quality Lease: Revenue-based with guaranteed rent oped conference product, restaurant and relaxation centre. The hotel consists of two buildings and is Quality Hotel is located in Nacka-Sickla, which is oriented towards business travellers and conference one of Stockholm’s growth areas. The hotel is the attendees. market area’s largest with 162 rooms, a well-devel- The building was constructed in 1986. Scandic upplands Väsby Hotellvägen 1, Upplands Väsby, +46-8-517 355 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The Scandic Upplands Väsby is centrally located reasonably priced product in a good location for close to Upplands Väsby between Stockholm and motorists. The hotel has undergone an upgrading Arlanda International Airport and has 150 rooms, program. a restaurant and conference facilities. It offers a The building was constructed in 1986. Mr Chip Hotel Färögatan 9, Kista, +46-8-750 56 00 Operator: Kista Hotell AB Brand name: – Lease: Revenue-based with guaranteed rent The hotel has a strategic location in Kista, which is ties, a restaurant and bar, and is oriented towards one of Stockholm’s most expansive areas and centre business travellers. for leading companies within the IT and telecom The hotel was built in 1984 and has a total sectors. The hotel has 150 rooms, conference facili- surface of 5,517 square metres. Scandic Crown Polhemsplatsen 3, Gothenburg, +46-31-751 51 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based ment program in recent years, with an increase in the number of hotel rooms as well as an upgrading The Scandic Crown is located in the centre of of the existing rooms and lobby areas. Gothenburg and is one of the city’s largest hotels The hotel has a total surface of 24,600 square with 338 rooms, conference facilities and a restau- metres of which 89 percent is hotel surface. rant. The hotel has undergone an important develop- The building was constructed in 1988 38 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Elite Park Avenue Hotel Kungsportsavenyn 36–38, Gothenburg, +46-31-758 40 00 Operator: Elite Hotels of Sweden Brand name: Elite Lease: Revenue-based with guaranteed rent The building was constructed in 1950 and extended in 1974. A major refurbishment program was carried The Elite Park Avenue Hotel is one of Sweden’s most out in the beginning of the 1990s. A major refur- well-known hotels and enjoys an excellent location bishment and upgrading project was started on 1 on Kungsportsavenyn in Gothenburg. The hotel January 2005 in cooperation with the new operator, has 291 rooms, a restaurant, bar and considerable Elite Hotels of Sweden. The program is estimated to conference and banquet facilities. be completed in 2006. Scandic Mölndal Åbro, Mölndal, +46-31-751 52 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based to Scandic Hotels’ environmental requirements and The Scandic Mölndal is located in central Mölndal contains 208 rooms, a restaurant and conference and is the market area’s leading hotel. It was opened facilities. in 2000 and is designed for business travellers of the The total surface amounts to 11,000 square future with high IT standard. The hotel is adapted metres. Scandic Copenhagen Vester Sögade 6, Copenhagen, +45-3314 3535 Operator: Hilton International Brand name: Scandic Lease: Revenue-based ties. The hotel product includes several restaurants, The Scandic Copenhagen is one of Scandinavia’s a café, pub and bar. largest hotels located in central Copenhagen with a The hotel was built in 1970 and underwent a high proportion of international guests. Further to an major refurbishment program in 1998-2000. The extension in 2000, the hotel has 484 rooms as well hotel has a total surface of 31,500 square metres, as considerable conference and banqueting facili- of which 80 percent are hotel surface. Copenhagen Hotel 27 Löngangstraede 27, Copenhagen, +45 7027 5627 Operator: Pandox Brand name: Lease: Internal revenue-based and Börsen. The hotel has 203 rooms furnished in The Copenhagen Hotel 27 is located in central Scandinavian style, breakfast room, outdoor terrace, Copenhagen, about 200 metres from Rådhusplat- and parking. A major refurbishment and reposition- sen and within walking distance of Tivoli, Ströget ing program is currently in progress. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­39 ­
    • hotel properties Scandic S:t Jörgen Stora Nygatan 5, Malmö, +46-40-693 46 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based with guaranteed rent and conference groups. An upgrading and product The Scandic St Jörgen is Malmö’s largest hotel and development program is currently in progress, cover- is excellently located. It is a first-class hotel with 265 ing hotel rooms and the hotel property in general. rooms, conference facilities, a restaurant and bars, The building was constructed in 1967 and was and is oriented towards business travellers, tourists partially refurbished in 1995. Scandic Star Lund Glimmervägen 3–5, Lund, +46-46-285 25 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based with guaranteed rent restaurant facilities as well as a relaxation centre. The The Scandic Star is Lund’s largest hotel and is lo- hotel is primarily oriented towards business travellers cated close to the Ideon IT centre. The hotel has 196 and conference attendees. rooms, of which 150 suites, large conference and The building was constructed in 1991. Radisson SAS Grand Hotel Helsingborg Stortorget 8–12, Helsingborg, +46-42-38 04 00 Operator: Rezidor Brand name: Radisson SAS Lease: Revenue-based with and contains 164 rooms, conference facilities, as guaranteed rent well as a hotel arcade with lounge, bar, café, travel agency, beauty salon and a newsstand. The Radisson SAS Grand Hotel Helsingborg is The building was constructed in 1926 and centrally located at Stortorget. It is a first-class hotel refurbished in 1996. In February 2005, the hotel oriented towards business travellers, tourists and was merged with the adjacent Best Western Hotel conference groups. The hotel has a classic profile Högvakten, which is also owned by Pandox. Scandic Kramer Stortorget 1, Malmö, +46-40-693 54 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The Scandic Kramer is one of Sweden’s most classic and is primarily oriented towards business travellers. hotels located at Stortorget in central Malmö. The ho- The building was constructed in 1875 and was tel has 113 rooms, a restaurant, bar and conference entirely refurbished in 1994. facilities. Scandic Kramer is of international standard 40 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Scandic Grand Örebro Fabriksgatan 21–23, Örebro, +46-19-767 43 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based developed conference facilities. The Scandic Grand, which is Örebro’s largest busi- The building was constructed in 1985. The ness hotel and located in the city centre, provides total surface is 12,900 square metres, of which 84 full service, and offers 219 rooms as well as well- percent consist of hotel surface. Scandic Winn Karlstad Norra Strandgatan 9–11, Karlstad, +46-54-776 47 00 Operator: Hilton International Brand name: Scandic rooms, a restaurant, banqueting rooms, conference Lease: Revenue-based with facilities, relaxation centre and a garage. Scandic guaranteed rent Winn is oriented towards business travellers and conference groups. The Scandic Winn is Värmland’s largest business ho- The building was constructed in 1984 and tel located in the centre of Karlstad. It contains 199 extended in 1990. Scandic Swania Trollhättan Storgatan 47-49, Trollhättan, +46-520-890 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based with guaranteed rent is oriented towards business travellers, conference The Scandic Swania Trollhättan is the region’s leading groups and tourists. hotel. It is centrally located with 196 rooms and well- The building was constructed in the beginning of developed conference and restaurant facilities, and the 1990s and was refurbished in 2001. Radisson SAS Hotel Östersund Prästgatan 16, Östersund, +46-63-55 60 00 Operator: Pandox i Östersund AB Brand name: Radisson SAS Lease: Internal revenue-based The Radisson SAS Hotel Östersund is a first-class The building was constructed in 1978 and is hotel oriented towards business travellers, tourists owned via a tenant owners’ cooperative. The hotel and conference groups. It is located in central comprises 48 percent of the building’s total surface. Östersund and has 177 rooms, a restaurant, bar, Through its share in the cooperative, Pandox owns conference facilities and a swimming pool. The hotel and is responsible for the hotel part of the property as and restaurant products have been upgraded and well as two more premises. developed in recent years. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­4 ­
    • hotel properties First Hotel Grand Borås Hallbergsgatan 14, Borås, +46-33-10 82 00 Operator: Västsvenska Hotellfastigheter AB Brand name: First Hotel Lease: Revenue-based with guaranteed rent The Grand is Borås’ largest full-service hotel with the best location in Borås. well-developed conference, restaurant and entertain- The building was constructed in 1972 and was ment facilities. The hotel has 158 rooms and enjoys refurbished in 1987, 1990 and 1997. Elite Stora Hotellet Jönköping Hotellplan, Jönköping, +46-36-10 00 00 Operator: Elite Hotels Brand name: Elite Lease: Revenue-based with guaranteed rent contains 135 rooms, a restaurant, pub, conference The Stora Hotellet is Jönköping’s best known first- facilities and a banqueting room for 400 people. class hotel located in the centre of the town. The The building was constructed in 1860, was hotel is a classic hotel oriented towards business extended in the 1930s and refurbished in 1995 travellers, conference attendees and tourists. It and 2002. Scandic Hallandia Halmstad Rådhusgatan 4, Halmstad, +46-35-295 86 00 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The hotel is located adjacent to Nissan in the a relaxation centre with bubble pool and sauna. centre of Halmstad. Scandic Hallandia has 130 The building was constructed in the 19th century rooms refurbished as per Scandic’s environment and underwent two extensions between 1950 concept. The hotel also has large conference and 1975. facilities, the well-known restaurant Svea, as well as Radisson SAS Hotel Plaza Karlstad Västra Torggatan 2, Karlstad, +46-54-10 02 00 Operator: Plaza Hotell & Restaurang i Karlstad AB Brand name: Radisson SAS Lease: Revenue-based with guaranteed rent This first-class hotel has 131 rooms, two restaurants, a pub, nightclub and conference facilities. The hotel is located in central Karlstad. Radisson The building was constructed in 1929 and SAS Hotel Plaza is one of Karlstad’s most popular ho- extended in 1991 at the same time as the property tels for business travellers and conference attendees. was totally refurbished. 42 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Scandic Billingen Skövde Trädgårdsgatan 10, Skövde, +46-500-74 50 00 Operator: Hilton International Brand name: Scandic Lease: Fixed restaurant and entertainment operations as well as A classic hotel, with a good location opposite the rail- conference facilities. way station in central Skövde. The Scandic Billingen The building was constructed in 1888 and ex- is a full-service hotel oriented towards business tended in 1939 with an annex. An additional floor travellers and contains 106 rooms, extensive was built in 1965. Hilton London Docklands 265 Rotherhithe Street, London, +44-207 231 1001 Operator: Hilton International Brand name: Hilton Lease: Revenue-based health club. The hotel is oriented towards business Hilton London Docklands is located in the growth travellers, incentive trips and tourists. A considerable area of Docklands opposite Canary Wharf and the development program is currently in progress. Tower of London. It has a unique design built in The hotel was built in 1991 and the total surface several old warehouses, and contains 365 rooms, two amounts to 22,800 square metres, of which 94 restaurants, conference facilities and a Living Well percent are hotel surface. Crowne Plaza Brussels City Centre Rue Gineste 3, Brussels, +32-2 203 6200 Operator: Pandox Brand name: Crowne Plaza Lease: Internal revenue-based The Crowne Plaza in central Brussels is a traditional Pandox has started an extensive refurbishment hotel with 356 rooms, large conference and banqueting and upgrading program with a total investment of ap- facilities, a restaurant, breakfast room, bar, and fitness proximately EUR 14 M. centre. The building is in classic hotel style with a total The hotel is operated by Pandox. surface of 28,095 square metres spread over 11 floors. Hilton Brussels City Place Rogier, Brussels, +32-2 203 3125 Operator: Pandox Brand name: Hilton Lease: Management agreement contains 285 rooms, a restaurant, bar, fitness centre Further to an extensive investment program that was and conference facilities. completed in the beginning of 2002, the hotel has The total surface amounts to 13,850 square me- been converted from a tourist hotel to a high standard tres consisting entirely of hotel surface. international establishment. The Hilton Brussels City Management agreement with Hilton. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­43 ­
    • hotel properties Royal Crown Hotel Brussels Rue Royale 250, Brussels, +32-2 220 6611 Operator: Pandox Brand name: Lease: Internal revenue-based hotel has 315 rooms, a restaurant, bar, conference The Royal Crown Hotel Brussels is located in the facilities, fitness centre, and a garage. A compre- centre of the city close to the financial district, shop- hensive refurbishment and repositioning program is ping at Place Rogier and the Botanical Gardens. The currently in progress at a cost of about EUR 12 M. Scandic Grand Place Brussels Rue d’Arenberg 18, Brussels, +32-2 548 1811 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The Scandic Grand Place Brussels is located The hotel was originally built in 1900 and underwent close to Grand Place. The product is of high a total refurbishment program in 1991. The total standard and contains 100 rooms, a restaurant, surface amounts to 4,500 square metres. and conference facilities. Scandic Antwerp Lt Lippenslaan 66, Antwerp, +32-3 235 9191 Operator: Hilton International Brand name: Scandic Lease: Revenue-based been completed, covering hotel rooms, the lobby, as The Scandic Antwerp is located by a ring road well as conference facilities, restaurant, public areas outside the city of Antwerp. The hotel has 204 and a new fitness centre. rooms, with well-developed conference facilities and The hotel was built in 1974, and the total surface a restaurant. A refurbishment program has recently amounts to 13,200 square metres. Hilton Bremen Böttcherstrasse 2, Bremen, +49-421 369 60 Operator: Hilton International Brand name: Hilton Lease: Revenue-based area with well-developed industry and tourism. The hotel has recently undergone a comprehensive The Hilton Bremen is located in the centre of the investment program with the upgrading of the city. The hotel has 235 rooms, a large atrium with entire product. restaurant and bar, excellent conference facilities, The total surface amounts to 21,000 square and a swimming pool. Bremen is part of a growth metres, of which 72 percent is hotel surface. 44 ­ ­ ­PANDOX ­– ­ANNuA l ­r eP Ort ­2 0 0 5
    • Hilton Dortmund An der Buschmühle 1, Dortmund, +49-231 108 60 Operator: Hilton International Brand name: Hilton Lease: Revenue-based well as a large swimming pool and relaxation area. Dortmund’s hotel market covers the Ruhr region The Hilton Dortmund is located close to the with more than 16 million inhabitants. The hotel is Westfalenhallen area with considerable congress, currently undergoing a comprehensive investment exhibition and sporting activities. The hotel is built program. with modern design and contains 190 rooms, well- The hotel was built in 1990 and has a total sur- developed conference and banqueting facilities, as face of 12,500, of which 80 percent is hotel surface. Scandic Lübeck Travemünder Allee 3, Lübeck, +49-451 370 60 Operator: Hilton International Brand name: Scandic Lease: Revenue-based The Scandic Lübeck is just walking distance from The hotel was built in 1991 and the total surface the old town of Lübeck, and close to the exit roadway amounts to 9,700 square metres, of which 91 towards Hamburg. The hotel has a modern design percent is hotel surface. The property is currently and contains 158 rooms and a large conference undergoing an upgrading program. department. Radisson SAS Hotel Basle Steinentorstrasse 25, Basle, + 41-61-227 27 27 Operator: Rezidor Brand name: Radisson SAS Hotels Lease: Revenue-based with guaranteed rent The Radisson SAS Basle is located in central Basle The hotel has 205 rooms, conference facilities, close to the old town centre and shopping district. restaurant, and a large relaxation area. Pelican Bay at Lucaya Seahorse Road at Port Lucaya, Grand Bahama Island, +1-242 373 95 50 Operator: Sundt GB Management Brand name: Lease: Asset management agreement Pelican Bay at Lucaya is owned by Sundt AS and ties. The property contains 186 rooms, of which 96 is operated by Pandox under an asset management are suites. The area includes three swimming pools, agreement. The hotel is located on Grand Bahama and beaches and golf courses are close by. Island and is a resort complex with full service facili- The property is composed of two buildings. PA N D O X ­– ­A N Nu A l ­r eP O rt ­2005 ­ ­ ­45 ­
    • Financials Financial overview . . . . . . . . . . . . . . . . . . . 48 Sensitivity analysis . . . . . . . . . . . . . . . . . . . 50 Valuation and tax situation . . . . . . . . . . . . . 52 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 53 Ten-year overview . . . . . . . . . . . . . . . . . . . . 54 Quarterly data 2004-2005 . . . . . . . . . . . . . 56 Financial statements 2005 . . . . . . . . . . . . 57 Report of the Board of Directors . . . . . . . . . . 58 Income statement and comments . . . . . . . . 60 Balance sheet and comments . . . . . . . . . . . 62 Changes in equity . . . . . . . . . . . . . . . . . . . 64 Cash flow statement and comments . . . . . . . 65 Accounting principles . . . . . . . . . . . . . . . . 66 Notes to the accounts . . . . . . . . . . . . . . . . . 68 Proposed disposition of earnings . . . . . . . . . 74 Auditors’ report . . . . . . . . . . . . . . . . . . . . . 75
    • financial overview Well-weighted risk profile Financial policy period be matched with the average point in all borrowing in the Parent Company. The The basic objective of Pandox’ financial opera- time when rental revenues, based on under- objective is to work with long-term framework tions is to achieve the lowest possible financing lying leases, are estimated to be affected by a agreements that provide scope for borrowing costs while simultaneously limiting the risks re- change in interest rates. with varying maturities and fixed margins. Deri- lated to interest rates, foreign currencies and vative instruments such as swaps are prefera- borrowings. The interest-rate risk is the risk that Currency risk/currency risk strategy bly used for the extension of fixed-interest rate changes in interest-rate levels could negatively Pandox is exposed to currency risks due to cer- periods. affect the Group’s results. Currency risk is the tain of the Group’s assets being denominated risk that the Group’s balance sheet and income in foreign currencies. Pandox’ policy is to Capital structure statement could be negatively affected by hedge its entire exposure by raising loans in the The objective for the Group’s capital structure changes in the value of the Swedish krona. Fi- local currency of each respective country and is that the equity/assets ratio should amount to nally, the borrowing risk is the risk that external by hedging the net investment in foreign subsi- at least 25 percent in order to meet financial financing may become more difficult to find. diaries by means of appropriate currency hed- strength requirements, and to thereby enable ging instruments. continued expansion. Interest-rate risk/interest-rate strategy Pandox’ basic objective is that interest-rate ex- Methodology and systems Financing posure shall be adapted so that increased costs Pandox has developed and implemented sys- As of 31 December 2005, the Pandox Group’s as a result of reasonable changes in interest tems and procedures to enable the continuous interest-bearing liabilities amounted to SEK rates shall be compensated by higher revenue. monitoring and reporting of interest-rate risk 3,165.3 M (3,080.4). The loan portfolio had an The interest-rate risk must therefore be limited trends. average fixed-interest rate period of 3.8 years through contracting periods of varying lengths (2.8) and the average rate of interest on loans with the aim of creating an optimal due-date Financing strategy amounted to 4.07 percent (4.07). The finan- structure and fixed-interest periods. The long- In order to gain flexibility and administrative be- cing of hotel properties is raised in each re- term objective is that the average fixed-interest nefits, Pandox has centralised when possible spective local currency in accordance with the Interest struCture1), seK M until year seK DKK eur GBP CHF total share,% Interest,%2) 2006 560.3 – 328.7 227.6 54.5 1,171.1 37.0 3.2 2007 174.0 – 53.9 – – 227.9 7.2 5.3 2008 100.0 157.8 – – – 257.8 8.1 4.7 2009 125.0 – 1.8 – – 126.8 4.0 4.7 2010 250.0 – – – – 250.0 7.9 4.9 2011 and later 625.0 126.4 216.7 – 163.6 1,131.7 35.8 4.3 total 1,834.3 284.2 601.1 227.6 218.1 3,165.3 100.0 4.1 Share, % 58.0 9.0 19.0 7.0 7.0 100.0 Average interest rate, % 4.1 4.1 4.1 5.4 2.4 4.1 Average interest rate period, years 3.8 5.9 3.7 0.2 6.0 3.8 1) Converted to SEK. 2) Average interest rate in percent. 48 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • financial policy. At the same point in time, the Pandox Group’s liquid funds amounted to SEK 236.4 M (58.0). In addition, there was an unu- tilised overdraft facility of SEK 100 M (100) and unutilised credit facilities of SEK 656 M. equity capital The Pandox Group’s equity capital as per the balance sheet at 31 December 2005 amoun- ted to SEK 2,307.7 M of which SEK 1,222.0 M was restricted equity and SEK 1,085.7 M unrestricted equity. The Pandox Group’s cash flow before changes in working capital, investments and non-recur- ring revenue amounted in 2005 to SEK 301.4 M (298.9). Working capital Pandox receives rental revenue in advance and pays most of its operating costs and interest expense in arrears, meaning that the Group does not normally have to finance any working capital. PA N D O X – A N Nu A l R e P O RT 2005 49
    • sensitivity analysis Factors that affect Pandox Pandox’ operations and profitability Lease structure Leasing level are affected by a number of factors, Pandox has a large proportion of variable (reve- The leasing level as of 31 December was 99 nue and result-based) leases, which represen- percent. Vacant space amounting to 1,949 m2 of which the most important are ted 92 percent of total rental revenue in 2005. consisted entirely of store and office premises. described below. About 30 percent of variable leases contained If for any reason a hotel operator should choose a guaranteed rent, meaning that only 62 per- to terminate its lease agreement, Pandox may the hotel market cent of rental revenues were fully variable either select a new suitable operator as tenant The development of Pandox’ earnings and the downwards. A change in the occupancy rate or operate the hotel under its own manage- value of its hotel properties are dependent and the average room revenue consequently ment. With Pandox’ specialist expertise in the upon trends within the hotel market, which in affects Pandox very differently, depending on hotel sector, the risk of vacant hotel space is turn closely follow general economic develop- the direction of change. seen as being extremely low. ments. The choice of lease agreement is based on For other commercial space, which repre- Business travel and conference activities optimal distribution of cash flow between sents approximately 9 percent of total space in normally increase during periods of high eco- Pandox and the operator so that both parties the Company’s properties, Pandox is exposed nomic activity, while there is a corresponding are motivated to continuously increase the to the same fluctuations in supply and demand decrease during periods of low economic acti- hotel property’s overall profitability. Factors that for premises experienced by other property ow- vity. There is thus a strong connection between may influence risks associated with variable ners. economic trends (GDP) and trends within the leases are the hotel property’s location, market hotel market. Developments of GDP can be clo- segment and brand name/operator. Pandox’ Changed risk potential sely monitored, whereas factors that influence strategy is to operate in a selected market seg- Historically, the hotel industry and hotel pro- local hotel markets are significantly more com- ment, which in combination with its hotels mar- perty sector have always been associated with plex. The most important influential factors are ket expertise and systems, limits Pandox’ lease high risk. The market has however changed local economic conditions, the proportion of risk. significantly in recent years. Owners have be- new hotel capacity in the market, how well-de- come more professional with restructured com- veloped a market is concerning brand names Partners panies and focused strategies, with a greater and segments, currency fluctuations, as well as Pandox’ lease structure, with a large proportion holistic view and specialised expertise. Reports extraordinary events. of variable leases, means that the Company is from public companies have substantially im- more dependent on the individual tenant/ proved information about the transparency of new capacity operator’s business than other property com- the market. The proportion of established New capacity introduced to the market implies panies. The Company’s strategy to actively coo- strong brand names with efficient operations an increased risk for local players. Depending perate with the market’s most competitive and has increased. For streamlined companies with upon existing demand, additional hotel rooms powerful operators with well-established brand own expertise in hotel operations, hotel proper- through the construction of a new hotel can names, reduces both the related operative and ties and business development, and that are lead to a rapid negative influence on occupancy financial risks. Pandox’ largest tenants in terms active owners, the potential risk is considerably rates and average prices. To deal with this risk, of revenue are Scandic, Hilton, Radisson SAS, lower than it has been in historic terms. Pandox has developed an information system Elite Hotels, Crowne Plaza, Choice Hotels and that continually monitors planned new con- First Hotels, which together accounted for Decisions by public authorities structions within its market areas, and thus more than 98 percent of all leasing revenue in The hotel market can be affected by decisions enabling Pandox to be prepared and proactive. 2005. made by public authorities. Two examples of 50 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • such decisions are changes in taxation related ket value of the land in question. Site leasehold to claims for travel expenses or rules concer- rents generally run for periods of 10 to 20 ning valued added tax both in general and for years. the hotel and restaurant industry in particular. Interest rates Property tax Interest expense is Pandox’ largest single cost Property tax on Pandox’ Swedish properties item. Continuous fluctuations in interest rates amounts to 1.0 percent of the tax assessment will therefore have an impact on Pandox’ ear- value. Changes in the tax rate or in the tax as- nings. In order to limit its financial risk, the sessment value, which are adjusted annually, Company’s average fixed-interest period is 3.8 affect Pandox’ earnings. However, an increase years. The full effect of a change in interest only has a limited impact on the Company’s rates is accordingly not felt by Pandox for seve- earnings because many lease agreements are ral years. formulated so that the property tax be passed on to the tenant. Property tax on properties out- Currency risk side Sweden is generally less than one per cent Pandox’ policy is to hedge its entire currency of the book value. About 39 percent of the pro- exposure, including shareholders’ equity, by fi- perty tax was debited to tenants in 2005, which nancing properties in local currencies and by means that the net effect on Pandox’ earnings hedging the net investment in foreign subsidia- amounted to SEK 25 M. ries by means of appropriate currency instru- ments. Transaction exposure is limited as reve- site leasehold rents nue and costs are usually in the same cur- As of 31 December 2005, Pandox held six pro- rency. perties via site leasehold rights. Rents on these properties are currently calculated in such a sensitivity analysis manner that a municipality that normally owns The table below illustrates how Pandox’ ear- the land receives what is deemed to be a reaso- nings are affected by changes in certain key nable real rate of interest on the estimated mar- factors. earnInGs IMPaCt 2005 SEK M Change in rental revenue Occupancy rate +5 percentage points +43.0 Occupancy rate –5 percentage points –39.7 Average room revenue SEK +50 +29.0 Average room revenue SEK –50 –27.6 Other commercial premises +/–5%1) +/–3.8 Change in other variables Interest expense during the year +/–1 percentage point +/–11.7 Average interest expense +/–1 percentage point1) +/–31.7 Exchange rate fluctuation +/–5 % +/–1.8 Operating and maintenance costs +/–5 % +/–5.2 1) The figures in the table are standardised so that the effects of changes in rental revenue and interest rates are immediate, although such changes do not have full impact in reality until leases and loan agreements are renegotiated. PA N D O X – A N Nu A l R e P O RT 2005 51
    • valuation Hotel property portfolio value The valuation of hotel properties with each specific operator’s respective key ratios • Operating costs are assumed to increase in their specific characteristics and figures develop in this market. The opera- line with inflation. tor company’s results and forecasts, together • The rate of interest used in the calculation demands extensive knowledge and with the formulation of the lease agreement, is based on the real interest rate plus a risk expertise of the hotel market and provide underlying data to estimate revenues, premium based on location, lease, and form hotel operations. which subsequently constitute the basis of the of ownership. cash flow calculation. The value calculated is Cash flow valuation the present value of the next ten years’ cash An internal valuation of Pandox’ 36 hotel pro- Pandox continuously evaluates all of its hotel flow, with a supplement for the present value perties in accordance with this method resulted properties in accordance with a valuation of the hotel properties’ residual value after in a total value as of December 2005 that sub- model based on the properties’ cash flow, and ten years. stantially exceeds the book value. In accordance which is adapted to the characteristics specific The valuation model is based on the follo- with the Swedish Financial Accounting Stan- to the hotel industry. wing assumptions: dards Council’s recommendation No 17, each The cash flow calculation is built up from un- • Changes in rental revenue during the cal- individual property’s recovery value was recon- derneath, with the property operator’s income culation period are based on the formulation ciled with its book value, further to which it was statement as the point of departure. This in of individual leases and on underlying factors. noted that no write-downs were necessary. turn is based on assumptions as to how the un- • Inflation is assumed to amount to an average derlying hotel market will develop in terms of of 2.0 percent annually during the calcula- occupancy and average rates, as well as how tion period. The Company’s tax situation The Pandox Group’s property hol- tax claim of SEK 106.9 M. The deferred tax lia- Financial Accounting Standards Council’s re- dings are reported for accounting bility refers mainly to the estimated deferred tax gulation for assessing deferred tax upon pure based on the difference between the proper- intrinsic acquisitions, where the tax effect is purposes as fixed assets. ties’ consolidated book value and the fiscal re- taken into consideration when calculating the The consolidated book value as of 31 sidual value of each respective legal unit. The acquisition price. Since 2004 the principle that December 2005 amounted to SEK difference in value has arisen as an effect of no deferred tax liability should be calculated at 5,324.2 M excluding equipment, of surplus value upon acquisitions of property in pure asset acquisitions. The deferred tax rela- which the consolidated surplus companies, known as pure intrinsic acquisi- ting to the difference between book deprecia- values amounted to SEK 762.8 M. tions, as well as fiscal depreciation that ex- tion and fiscal depreciation is calculated based ceeds book depreciation. Tax deduction for an- on the applicable tax rate. accounting of deferred tax nual depreciation of properties has normally The deferred tax claim pertains mainly to Pandox applies the Swedish Financial Accoun- been made at the rate of 3 to 5 percent of a deficit deductions and the fiscal surplus value ting Standards Council’s recommendation property’s acquisition cost. As a result, the regarding limited partnerships. At the end of RR:9 on income tax. In short, this recommen- amount of fiscal depreciation exceeds that of 2005, there were remaining deficit deductions dation implies that both deferred tax liabilities book depreciation, and the difference between totalling SEK 272 M in the Swedish companies. and tax claims are to be included in the finan- the book value and the fiscal value of a property The valuation of deferred tax claims is based on cial statements and that any changes will affect increases year on year. The deferred tax liability their potential utilisation against future taxable the income statement as deferred tax. generated by asset acquisitions before 2004 profits, and is calculated according to the appli- Pandox’ consolidated balance sheet as of has been calculated using the present value cable tax rate. Consequently, no deficit deduc- 31 December 2005 includes a deferred tax lia- method based on the shortest period of owner- tions in non-Swedish companies were reported bility in the net amount of SEK 101.7 M cor- ship estimated for each property, and cor- at the end of 2005. responding to the difference between a defer- responds to an average tax rate of approxima- red tax liability of SEK 208.5 M and a deferred tely 10 percent. This is based on the Swedish 52 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Definitions of key data Property-related key figures Financial key figures Hotel market-related key figures Direct yield 1 Return on equity Occupied rooms Adjusted operating net as a percentage of the Profit after net financial items and paid tax as a Number of sold room nights during a given pe- book value of properties and hotel equipment percentage of average equity. riod of time – normally one year. at the end of the year. The book value of hotel equipment is included in the dominator in view Return on total assets Available rooms of that the equipment rental is included in the Profit after net financial items, plus financial Available rooms capacity during a given period numerator. costs as a percentage of average total assets. of time – normally one year. Direct yield 2 Interest coverage ratio Occupancy rate Adjusted operating net including property-rela- Profit after net financial items, less one-off Number of occupied rooms as a percentage of ted administration as a percentage of the book items, plus interest costs as a percentage of the number of available rooms. value of the properties. interest costs. Average room rate Operating net Equity/asset ratio Total revenue from sold rooms divided by the Hotel property revenue less operating and Equity at the end of the year as a percentage of number of occupied rooms. maintenance costs, property tax, ground rent total assets. and other property costs. RevPAR (Revenue Per Available Room) Total revenue from sold rooms divided by the Property-related administration number of available rooms The portion of total administration costs that is directly related to the management and deve- Market penetration lopment of a property. Other administration The occupancy rate of an individual hotel in re- costs include central administration and costs lation to the average for the market. for maintaining the Company’s market listing. GOP (Gross Operating Profit) Adjusted operating net Net profit in hotel operator companies before Operating net adjusted for properties sold and depreciation, rent, net financial items and purchased during the year. taxes. Total property revenue The sum of rental revenue and other property revenue. PA N D O X – A N Nu A l R e P O RT 2005 53
    • ten-year overview Condensed consolidated income statement seK M 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Property operations Rental revenue 123.8 140.6 218.5 254.0 476.3 551.1 536.2 535.1 562.7 548.8 Other property revenue 12.4 11.6 16.1 18.0 21.4 24.0 26.0 26.5 30.2 25.2 total property revenue4) 136.2 152.2 234.6 272.0 497.7 575.1 562.2 561.6 592.9 574.0 Operating and maintenance costs –30.5 –31.5 –47.8 –54.2 –88.9 –96.7 –93.2 –100.1 –118.7 –103.8 Operating net 105.7 120.7 186.8 217.8 408.8 478.4 469.0 461.5 474.2 470.2 Depreciation1), 2) –23.9 –26.0 –36.0 –40.3 –45.8 –56.2 –63.2 –64.3 –70.3 –78.2 Income from property operations 81.8 94.7 150.8 177.5 363.0 422.2 405.8 397.2 403.9 392.0 Hotel operations Operating revenue 29.0 41.5 18.5 – 28.2 39.7 60.1 81.3 216.8 250.2 Operating costs1) –29.8 –42.2 –18.7 – –25.5 –39.3 –58.2 –75.7 –204.4 –239.4 Operating income hotel operations4) –0.8 –0.7 –0.2 – 2.7 0.4 1.9 5.6 12.4 10.8 Gross income 81.0 94.0 150.6 177.5 365.7 422.6 407.7 402.8 416.3 402.8 Administrative costs1) –15.3 –17.2 –19.2 –21.6 –31.8 –33.9 –34.5 –35.5 –39.3 –42.5 Non-recurring revenue/expense 0.9 1.0 1.4 5.3 1.9 8.6 28.8 7.4 – 444.4 Operating income 66.6 77.8 132.8 161.2 335.8 397.3 402.0 374.7 377.0 804.7 Non-recurring financial charges – – – – – – – – –56.1 – Net financial items for current operations –69.0 –50.3 –71.3 –77.5 –150.7 –178.1 –171.0 –159.2 –148.4 –137.4 Income after financial items –2.4 27.5 61.5 83.7 185.1 219.2 231.0 215.5 172.5 667.3 Deferred tax3) 0.2 –0.3 – – –27.0 –28.3 –44.2 –50.3 –47.6 36.8 Paid taxt – – – –0.3 –1.4 –0.2 –0.1 11.4 –0.2 –15.8 Acquired income/expense – – – – – – – – – – Income/loss for the year –2.2 27.2 61.5 83.4 156.7 190.7 186.7 176.6 124.7 688.3 1) The depreciation rate on properties is 1.0 percent as of 2000 and amounted in 2004 to SEK 70.3 M. Depreciation in administration and hotel operations amounted in 2004 to respectively SEK 0.3 M and SEK 0.0 M (in 2003 to SEK 0.4 M and SEK 0.0 M; in 2002 to SEK 0.4 M and SEK 0.0 M; in 2001 to SEK 0.5 M and SEK 0.0 M; in 2000 to SEK 0.6 M and SEK 0.0 M; in 1999 to SEK 0.7 M and SEK 0.0 M; in 1998 to SEK 0.5 M and SEK 0.2 M; in 1997 to SEK 0.4 M and SEK 0.1 M and in 1996 to SEK 0.5 M and SEK 0.3 M). 2) A depreciation rate of 1.0 in 1999 would have amounted to SEK 29.4 M (1998 SEK 26.5 M, 1997 SEK 19.6 M and 1996 SEK 18.3 M). 3) As of 2001, Pandox applies the Swedish Accounting Standards Council’s recommendation on income tax (RR:9). Comparative figures for 2000 have been restated to take this into account. 4) The 2004 figure has been adjusted regarding rental revenue within hotel operations of SEK 3.7 M. 54 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Condensed consolidated balance sheet seK M, as of 31 December 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 assets Properties including hotel equipment 1,239.5 1,874.3 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 Other fixed assets 18.5 17.3 16.5 14.5 13.0 5.4 6.9 7.2 6.9 113.7 Current assets 25.3 23.7 14.6 17.9 61.9 37.1 29.5 34.6 58.6 201.7 Cash and bank 43.7 14.4 82.9 3.9 16.4 86.7 213.2 137.5 58 236.4 total assets 1,327.0 1,929.7 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 equity and liabilities Shareholders’ equity 555.7 582.9 830.1 883.6 1,670.8 1,772.1 1,853.9 1,919.2 1,923.0 2,307.7 Deferred tax liability – – – – 8.8 37.0 83.5 135.9 184.3 208.5 Interest-bearing liabilities 703.7 1,078.3 1,281.8 1,463.6 2,934.7 3,178.5 3,070.6 3,211.9 3,080.4 3,165.3 Non-interest-bearing liabilities 67.6 268.5 87.3 82.8 261.5 178.4 203.0 189.0 198.5 347.8 total equity and liabilities 1,327.0 1,929.7 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 Key data Property-related key data Book value of properties including hotel equipment 1,239.5 1,874.3 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 Total property revenue, SEK M 136.2 152.2 234.6 272 497.7 575.1 562.2 561.6 592.9 574.0 Operating net, SEK M 105.7 120.7 186.8 217.8 408.8 478.4 469 461.5 474.2 470.2 Adjusted operating net, SEK M1) 104.6 169.1 194.6 229.2 459.4 484.3 472.7 464.1 474.2 433.3 Direct yield 1, %2) 8.4 9.0 9.3 9.6 9.6 9.6 9.5 9.3 9.1 8.5 Direct yield 2, % 7.9 8.6 8.9 9.2 9.3 9.3 9.2 9.0 8.8 8.2 Financial key data Interest coverage ratio, multiple 1.0 1.5 1.8 2.0 2.2 2.2 2.3 2.3 2.6 2.63) Return on total assets, % 5.1 5.9 6.6 7.0 8.1 8.0 7.8 7.1 7.0 14.2 Return on equity, % neg 4.8 7.6 9.7 11.6 11.0 12.6 12.0 12.0 30.8 Equity/assets ratio, % 41.9 30.2 37.7 36.4 34.6 34.3 35.6 35.2 35.7 38.3 Cash flow from current operations, SEK M 21.3 53 96.8 119.1 228.2 267.2 265.8 272.4 298.9 301.4 Investments excluding acquisitions, SEK M 27.3 11.2 22.6 28.6 101.3 149.1 67.3 60.8 70.5 165.1 Property acquisitions, SEK M – 667.0 260.0 331.0 2,340.3 141.9 – 370.7 – 661.3 1) Further to the sale of twelve hotel properties in 2005. 2) Direct yield based on the book-value of the hotel properties adjusted for the two newly acquired properties, which were not charged any internal rent in 2005. 3) Excluding non-recurring income due to the sale of hotel properties. PA N D O X – A N Nu A l R e P O RT 2005 55
    • quarterly data Quarterly data 2004–2005 COnDenseD InCOMe stateMents 2004 2005 seK M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total property revenue 143.7 152.3 147.6 153 140.5 157.5 135.5 140.5 Operating net 116.7 124.0 121.1 116.1 113.4 128.2 113.9 114.6 Income from property operations 98.6 106.5 103.7 98.8 93.9 108.1 95.9 94.4 Income from hotel operations –0.6 4.4 0.0 4.9 1.3 6.1 0.9 2.5 Operating income 88.7 101.5 94.3 92.5 85.4 104.2 528.8 86.2 Net financial items –40.5 –76.4 –34.7 –52.9 –33.4 –35.7 –35.4 –33.0 Income after financial items 48.3 25.1 59.5 39.6 52.0 68.5 493.4 53.2 Income after tax 37.6 21.2 46.2 19.7 41.4 54.5 494.7 97.6 COnDenseD COnsOLIDateD BaLanCe sHeets 2004 2005 seK M 31 Mar 30 Jun 30 sep 31 Dec 31 Mar 30 Jun 30 sep 31 Dec assets Properties including hotel equipment 5,315.2 5,292.0 5,281.9 5,262.8 5,573.3 5,665.9 5,281.9 5,477.5 Other fixed assets 7.1 7.1 7.1 6.9 6.4 6.4 7.1 113.7 Current assets 46.7 59.6 64.8 58.6 62.1 86.9 64.8 201.7 Cash and bank 182.6 136.1 90.6 58.0 202.6 131.9 90.6 236.4 total assets 5,551.6 5,494.8 5,444.4 5,386.3 5,844.4 5,891.1 5,444.4 6,029.3 equity and liabilities Shareholders’ equity 1,954.9 1,979.9 2,017.2 1,923.0 1,963.9 1,899.7 2,017.2 2,307.7 Deferred tax liability 146.5 150.6 164.0 184.3 195.0 209.0 164.0 208.5 Interest-bearing liabilities 3,218.3 3,143.1 3,039.1 3,080.4 3,462.8 3,546.7 3,039.1 3,165.3 Non-interest-bearing liabilities 231.9 221.2 224.1 198.5 222.7 235.7 224.1 347.8 total equity and liabilities 5,551.60 5,494.80 5,444.40 5,386.30 5,844.4 5,891.1 5,444.4 6,029.3 PrOPertY-reLateD KeY Data 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Direct yield 1, % 9.3 9.1 9.1 9.1 8.7 8.5 8.5 8.5 FInanCIaL KeY Data 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Interest coverage ratio, multiple 2.2 2.4 2.5 2.6 2.5 2.8 2.7 2.6 Return on total assets, % 6.9 7.2 7.2 7.0 6.6 6.7 6.4 14.2 Return on equity, % 10.9 11.0 10.8 12.0 11.9 11.6 10.6 30.8 Equity/assets ratio, % 35.2 36.0 37.1 35.7 33.6 32.2 40.1 38.3 Cash flow from current operations, SEK M 66.5 80.4 77.0 75.0 71.5 16.2 141.5 72.2 Investments excluding acquisitions, SEK M 16.3 30.5 5.9 17.8 38.3 47.4 36.9 42.5 Property acquisitions, SEK M – – – – 277.0 – – 384.3 56 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Financial statements 2005 Property revenues and total revenues Pandox’ property revenues for 2005 amounted to SEK 574.0 M (592.9), which for comparable units represented an increase of 2.3 percent against with last year. The Group’s total revenue amounted to SEK 778.6 M (762.8). Sales in Sweden On 1 July, Pandox sold twelve Swedish hotel properties for a total amount of SEK 1.1 billion. The capital gain after tax upon this divestment amounted to approximately SEK 450 M. These properties are included in the operating results of the first six months of 2005. Profits The pre-tax profit for 2005, excluding non-recurring items, amounted to SEK 222.9 M (228.6). Profit after tax, including non-recurring revenues, amounted to SEK 688.3 M (124.7). Cash flow Cash flow from ongoing operations, excluding non-recurring items, amounted to SEK 301.4 M (298.9). PA N D O X – A N Nu A l R e P O RT 2005 57
    • financial statements Report of the Board of Directors The Board of Directors and Chief Denmark, Belgium, Germany, Switzerland, UK, risen slightly. Stockholm is in a stable improve- Executive Officer of Pandox AB, and the Bahamas. ment phase where the city centre and the five- star segment lead current trends. The munici- Swedish corporate registration num- accounting principles pality of Gothenburg rose by almost 6 percent ber 556030-7885, herewith submit Pandox applies the stipulations of the Swedish in RevPAR, due primarily to improved room the annual report and consolidated Annual Accounts Act and generally accepted occupancy. In Malmö, demand was affected accounts of the Company for the accounting principles, as well as the recom- positively by the qualifying heats of the financial year 2005. mendations of the Swedish Accounting Stan- America’s Cup in August. The underlying dards Board unless otherwise stated. As an un- growth is at a stable but low level. Operations and strategy listed company, Pandox is not subject to the Pandox is one of northern Europe’s leading IFRS accounting requirements. Pandox’ portfolio shows continued strength pure hotel property companies. The Company Pandox’ hotels in Stockholm have witnessed has built up specialist expertise within the key Ownership situation very good demand, and they perform better areas of hotel markets, hotel operations, hotel Since 2003/2004 Pandox is owned by the than the market in general. Scandic Park has properties and business development. Active Norwegian companies Eiendomsspar AS and increased most as a result of competing hotel ownership, with well-developed and strategic Sundt AS through their wholly-owned Swedish undergoing refurbishment and that capacity plans for each hotel, enables the creation of company APES Holding AB. was subsequently reduced within the market. good prerequisites for stable and improved The refurbishment of Elite Park Avenue in cash flows, and thereby growth in value for the Continued growth in the united states Gothenburg continues as planned. The closing shareholders. The American market had a historically good of certain parts of the hotel during the year had Pandox’ strategy is to own one type of asset year 2005. Room occupancy was 64.5 per- a negative influence on capacity. The Scandic – hotel properties. Its focus is strengthened by cent, representing a rise of 2.9 percent compa- Crown is performing in line with the market. a prioritised market segment. Pandox is to own red with last year. Average room rates in- Pandox’ hotels in Malmö have developed large hotel properties in Sweden, major loca- creased by 5.3 percent to USD 90.84 and Rev- better than the market and were given a boost tions in Europe, as well as developing regions in PAR (revenue per available room) rose in total by the qualifying heats of the America’s Cup. eastern Europe. by 8.4 percent. Uncertainty regarding an unba- Pandox’ hotels in Copenhagen are performing The hotels should be in central, natural and lanced US economy with a growing budget de- well in a strong market. Bremen has expe- strong locations such as city centres, airports ficit still however remains. rienced relatively good trends in level with the and exhibition centres. The hotels should be in market, while Pandox’ hotel in Lübeck has per- the upper medium to high price range and signs of improvement in europe formed slightly less well than the market. The focus on the business and leisure segments. In Europe, both room occupancy and average market in Dortmund, including the Pandox The hotels owned by Pandox are operated rates in general developed positively during the Hilton hotel declined in RevPAR compared and marketed by the most powerful players in year with an increase in RevPAR of 4.6 percent with the previous year. the hotel market, who with well-known brands compared with last year. In London, growth was Hilton London Docklands is in a very com- and dynamic independent distribution chan- driven by rising average rates while room oc- petitive market, with a lot of new capacity, and nels create strong market positions and thereby cupancy was slightly negatively affected further has marginally lost some market share to the stable revenues. to the terrorist attacks in the summer. All in all, newly built hotels. Pandox’ hotel in Antwerp Revenues are created by flexible lease RevPAR rose by about 2 percent in London. follows the market which in principle is un- agreements related to the operator’s turnover The market in Brussels also developed better changed compared with last year. and results or through management agree- than last year with an increase of 3.5 percent. Pandox’ geographical sub-market in Brus- ments where Pandox assigns a third party to Apart from Berlin, which witnessed a fall of sels increased by 3.5 percent during the year. manage operations, or alternatively through its approx 2 percent due to overcapacity, positive The Crowne Plaza continues to take market own management. Irrespective of the form of trends have been experienced in all major shares in spite of the hotel undergoing conside- operation, Pandox contributes via its active markets, including Paris with a rise of 7 percent rable refurbishment, but also due to excellent ownership to increasing total cash flows and in Rev PAR. sales and marketing measures. Pandox’ two reducing risks. The Swedish market is characterised by a other hotels have developed slightly under the At the end of the year, the Company owned stable rate of growth. Major locations are doing market average. The Radisson SAS Hotel in 36 hotel properties, of which one asset manage- better than the overall average of Sweden. Basle has performed better than the market so ment assignment and five operating companies. Room occupancy has gradually increased, and far this year, where room occupancy in parti- Pandox owns and develops assets in Sweden, the previously declining average rates have cular is improving. 58 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • revenues and operating net The loan portfolio has a spread due-date struc- as at 31 December 2005. Figures concerning – property operations ture with an average fixed-interest period of average number of employees, as well as sala- Property revenue for the year amounted to 3.8 years. The average interest rate on loans at ries and other remuneration, are set out in SEK 574.0 M (592.9). For comparable units, 31 December was 4.1 percent. Financing of Note 16. the portfolio improved by 2.3 percent in spite Swedish properties has been made in Swedish of two major refurbishment projects reducing kronor, while properties outside Sweden have the work of the Board of Directors capacity. In general, the improved hotel market essentially been financed in each respective during 2005 in Stockholm and Copenhagen in particular local currency. Available liquid funds, including The Board of Directors of Pandox has been has led to good growth in revenues. Property an unutilised bank overdraft facility and credit composed of six members since the Annual costs, excluding depreciation, decreased to facilities for a total of SEK 756 M, amounted to General Meeting of Shareholders held in 2005. SEK 103.8 M (118.7) due primarily to the sale SEK 992.0 M (523.0). Cash flow before chan- During the year, the Board has held one statu- of 12 Swedish hotel properties. ges in working capital, investments and exclu- tory constituent meeting and four ordinary Operating net amounted to SEK 470.2 M ding non-recurring items and tax improved by meetings in accordance with the established (474.2). For comparable units however, the SEK 2.5 M and amounted to SEK 301.4 M annual agenda. The meetings have reviewed operating net improved by 2.7 percent compa- (298.9). and discussed external and internal reporting red with the same period last year. Adjusted of operating results and the Company’s finan- direct yield before administrative costs was Investments cial position as well as various business mat- 8.5 percent (8.6) for the period. The Pandox Group’s investments amounted for ters. Other important items that are regularly the year to SEK 165.1 M (70.5). These invest- studied and reviewed each year are marketing, revenues and income – hotel operations ments essentially pertained to the refurbish- strategy, finance, and budget issues. In addi- Revenues from hotel operations come from the ment of the Elite Park Avenue in Gothenburg tion to the scheduled ordinary meetings held Hilton Brussels City, which is operated through and the Crowne Plaza in Brussels, as well as during the year, two extraordinary meetings a management agreement with Hilton, as well product improvements in a number of other were held to examine and discuss certain busi- as the Crowne Plaza Brussels, Radisson SAS properties. The book value of hotel properties, ness issues. Hotel Östersund and Mora Hotell, which are including furniture, fixtures and equipment, directly operated by Pandox. Revenues of SEK amounted to SEK 5,477.5 M (5,262.8). In Parent Company 15.8 M from the new operations Royal Crown February 2005, Pandox acquired the hotel Property activities in the Group’s property- and Hotel 27 are also included. property Radisson SAS Basle with 205 rooms owning companies are administered by staff Total revenues from operational activities for at an acquisition cost of CHF 45 M. The pro- employed by the Parent Company, Pandox AB. the year amounted to SEK 250.2 M (216.8). perty was taken over financially on 1 January The cost of these services has been invoiced Income declined by SEK 1.6 M to SEK 10.8 M 2005. In the last quarter, the hotel properties to the Group’s subsidiaries. Invoicing in 2005 (12.4), which is totally attributable to start-up Royal Crown in Brussels with 315 rooms and amounted to SEK 30.8 M (31.7). The profit for costs related to the newly acquired operations. the Hotel 27 in Copenhagen with 203 rooms the year after tax amounted to SEK 609.6 M were acquired for a total acquisition cost of (0.1). Income approximately SEK 380 M. Consolidated income for the Group for 2005, Outlook for 2006 excluding non-recurring items, amounted to asset management The surrounding world continues to witness SEK 222.9 M (228.6). The decline in income is Pandox has an asset management assignment good growth and a high level of activity, which attributable to the Company having sold 12 since January 2005 to assist the owner Sundt are the most important reasons for demand hotel properties on 1 July 2005. Income after AS and the management of the Hotel Pelican within the hotel sector continuing to be good. tax and including amounts received from the Bay on Grand Bahama Island to develop Together with relatively low additional capacity, sale of the 12 Swedish properties amounted to operations. The hotel, which has 186 rooms, good prerequisites have been created for 2006. SEK 688.3 M. has experienced positive trends and the newly In this positive picture, Pandox has the oppor- recruited management team has focused on tunity to continue to develop better than the Financing and cash flow implementing procedures and standards, as market. The Company’s acquisitions in 2005, Net financial items relating to current opera- well as producing underlying data for strategic combined with development projects and new tions for the period January-December 2005 planning. agreements, mean that profit and cash flow for amounted to SEK –137.4 (–148.4). The Group’s comparable units will be better in 2006 than interest-bearing liabilities amounted as of 31 Personnel last year. December 2005 to SEK 3,165.3 M (3,080.4). Central administration counted 14 employees PA N D O X – A N Nu A l R e P O RT 2005 59
    • financial statements Income statement Group Parent Company seK M 2005 2004 2005 2004 Property operations Rental revenue1) note 2,3 548.8 562.7 – – Other property revenue1) 25.2 30.2 – – total property revenue 574.0 592.9 – – Property costs –103.8 –118.7 – – Operating net 470.2 474.2 – – Depreciation as per plan note 4 –78.2 –70.3 – – Income from property operations 392.0 403.9 – – Hotel operations Operating revenue 250.2 216.8 – – Operating costs1) –239.4 –204.4 – – Operating income from hotel operations note 2, 16 10.8 12.4 – – Gross income 402.8 416.3 – – Administrative costs note 4, 15, 16 –42.5 –39.3 –42.1 –37.9 Non-recurring revenue/expense – – – – Other revenue – – 30.8 31.7 Operating income 360.3 377.0 –11.3 –6.2 Interest income note 7 6.8 3.2 67.7 93.2 Interest expense –139.8 –146.9 –114.4 –109.0 Shareholders’ contribution – – – – Dividend from shares in subsidiaries – – 700.0 – Dividend via Group contributions – – – 77.6 Non-recurring financial costs note 6 – –56.1 – –56.1 Other financial income and costs –4.4 –4.7 –20.2 1.2 Extraordinary income note 5 444.4 – 5.8 – net financial items 307.0 –204.5 638.9 6.9 Provision to tax allocation reserve – – – –0.3 Shareholders’ contribution – – –38.0 – Income before tax 667.3 172.5 589.6 0.4 Tax note 8 –15.8 –0.2 – –0.3 Deferred tax note 8 36.8 –47.6 20.0 – InCOMe FOr tHe Year 688.3 124.7 609.6 0.1 specification of external revenue Revenue from property operations 574.0 592.9 Of which internal rentals –45.6 –46.9 Revenue from hotel operations 250.2 216.8 total external revenue 778.6 762.8 1) For comparability with the year’s results, figures for 2004 have been adjusted by SEK 3.7 M pertaining to rental income from operating companies. 60 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Comments on the income statement rental revenue Ground rent Operating net Rental revenue pertains to hotel premises, A total of six properties owned by Pandox are The operating net for 2005 amounted to SEK hotel furniture and equipment, and other com- held under site leasehold rights. The conditions 470.2 M, representing a decrease of SEK 4.0 mercial premises. Rental revenue for 2005 de- and maturities in all cases are based on prevai- M. Adjusted direct yield, excluding administra- creased in relation to the previous year and ling market terms. tive costs, amounted to 8.5 percent (8.6). amounted to SEK 548.8 M (562.7). Property tax Hotel operations Other property revenue Pandox’ Swedish hotel properties are liable to For accounting purposes, the hotel operations Other property revenue is primarily comprised property tax at the rate of 1 percent of the tax conducted by Pandox are charged with internal of costs debited for heat, electricity and pro- assessment value. Properties located outside rent. The internal rent is linked to the operator’s perty tax. Sweden are subject to varying percentages and revenue and based on what are deemed to be underlying basis. market conditions. The internal rent is debited BreaKDOWn OF OtHer PrOPertY reVenue to hotel operations and credited to revenue in seK M 2005 2004 Other costs property management. In 2005, Pandox opera- Payment for operating costs 9.2 10.2 These costs include costs of legal counsel on ted the Hilton Brussels City through a manage- Invoicing of property tax 16.0 20.0 leasing matters, insurance premiums, and ment agreement with Hilton, as well as the di- total 25.2 30.2 costs of leasing external premises. rect operational management of the Crowne The difference between the years is an effect of Plaza Brussels City Centre, Mora Hotell, and BreaKDOWn OF PrOPertY COsts Radisson SAS Hotel Östersund. The Royal the sale of twelve hotel properties in the year. seK M 2005 2004 Crown Brussels and Copenhagen Hotel 27 ac- Property costs Operating costs 18.9 26.4 quisitions were not charged any internal rent in Operating costs Maintenance costs 29.5 36.7 2005. Ground rents 7.0 8.0 Operating costs are costs that directly pertain to the operation of the properties, such as heat, Property tax 41.1 40.0 administrative costs Other costs 7.3 7.6 Administrative costs relate to central adminis- water, electricity, and maintenance. Costs are total 103.8 118.7 tration, as well as foreign hotel property admi- reported gross, meaning that the portion of costs debited to tenants is reported as revenue The decrease in property costs is a result of the nistration. All central administrative staff is under the heading Other Property Revenue, sale of twelve hotel properties in the year. based at the Stockholm office. The remunera- and that total costs are reported among costs in tion of staff and auditors is set out in Notes 15 their full amount. and 16. Maintenance costs non-recurring financial costs Maintenance costs are costs incurred to main- Non-recurring financial costs pertain to the tain the standards of buildings and equipment. premature redemption of interest swaps. Pandox’ leases are in most cases structured so that the tenants - the hotel operators - be re- sponsible for the greater part of interior mainte- nance of the properties. PA N D O X – A N Nu A l R e P O RT 2005 61
    • financial statements Balance sheet Group Parent Company seK M 2005 2004 2005 2004 assets Fixed assets Tangible fixed assets Properties note 9 5,324.1 5,163.9 – – Equipment note 10 153.9 99.4 0.5 0.5 5,478.0 5,263.3 0.5 0.5 Financial fixed assets Shares and participations in subsidiaries note 11 – – 2,482.7 1,967.4 Amounts due by Group companies – – 2,548.0 2,882.6 Other long-term receivables 6.3 6.4 48.2 4.8 6.3 6.4 5,079.4 4,854.8 Deferred taxes recoverable 106.9 – – – total fixed assets 5,591.2 5,269.7 5,079.4 4,855.3 Current assets Inventories 1.6 0.7 – – Accounts receivables 11.5 13.0 – – Tax receivables – 2.4 – – Other receivables 85.2 26.5 3.8 1.4 Prepaid costs and accrued revenue 55.7 16.0 2.2 1.5 Other shares and participations 47.8 – – – Cash and bank 236.4 58.0 161.7 22.3 total current assets 438.1 116.6 167.6 25.2 tOtaL assets 6,029.3 5,386.3 5,247.1 4,880.5 Comments on the balance sheet Properties and equipment includes their value in the property value used trade accounts receivable Three hotel properties were acquired and twelve to calculate direct yield from the properties. At Pandox’ accounts receivable normally consists were sold in 2005. Depreciation of properties the end of the year, the book value of the pro- entirely of rental receivables. Since rent is ge- amounted to SEK 78.2 M (70.3), and the year’s perties, including hotel furniture, fixtures and nerally paid quarterly and monthly in advance, investments to SEK 165.1 M (70.5). The book equipment, amounted to SEK 5,477.5 M. amounts outstanding at year-end mainly com- value of equipment, including hotel furniture Other items consist of administration equip- prise accrued revenue-based rents. and fixtures amounted to SEK 153.9 M (99.4). ment with a book value of SEK 0.5 M. Depreciation amounted to SEK 16.6 M (10.8) Other receivables and investments to SEK 40.0 M (31.2). Other long-term receivables Short-term receivables such as those pertain- The greater part of the book value of furniture, Pertain to a long-term promissory note and to a ing to costs that are to be debited to external fixtures and equipment, representing SEK pledged deposit. parties. 153.9 M, pertains to that used by hotel opera- tors. In certain cases, these items are included Inventories Prepaid costs and accrued revenue as an unspecified portion of rent, and in other Relate to stocks of consumables in the hotel This item is comprised mainly of prepaid costs cases as a separate rental charge. When these operations. for the following year, such as insurance premi- items are included in rental revenues, Pandox ums and rents. 62 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Group Parent Company seK M 2005 2004 2005 2004 eQuItY anD LIaBILItIes equity Restricted equity Share capital 373.5 373.5 373.5 373.5 Restricted reserves 848.5 842.1 830.0 830.0 1,222.0 1,215.6 1,203.5 1,203.5 Unrestricted equity Unrestricted reserves 397.4 582.7 64.6 286.9 Profit for the year 688.3 124.7 609.6 0.1 1,085.7 707.4 674.2 287.0 total shareholders’ equity 2,307.7 1,923.0 1,877.7 1,490.5 untaxed reserves Tax allocation reserve 2004 – – 0.3 0.3 – – 0.3 0.3 Liabilities Liabilities to credit institutions note 12 3,165.3 3,080.4 2,360.2 2,801.5 Trade accounts payable 66.5 47.3 19.6 26.7 Liabilities to Group companies – – 959.7 541.6 Deferred tax liability note 8 208.5 184.3 – – Tax liabilities 0.6 0.3 0.3 0.3 Other liabilities 104.0 18.3 0.8 1.6 Accrued expenses and prepaid revenue note 13 176.7 132.7 28.5 18.0 total liabilities 3,721.6 3,463.3 3,369.6 3,389.7 tOtaL eQuItY anD LIaBILItIes 6,029.3 5,386.3 5,247.1 4,880.5 Pledged assets note 14 3,508.4 3,654.4 6.2 – Contingent liabilities note 14 – – 685.6 91.4 Cash and bank deposits rest-bearing liabilities amounted to SEK the Pandox’ Tax Situation section on page 52. The liquidity of the Pandox Group is primarily 3,165.3 M, spread over ten lenders and five managed by the Parent Company through a currencies. Because financing is arranged accrued expenses and prepaid income central bank account structure where liquidity mainly through long-term credit agreements, The amount pertains essentially to accrued in- is assembled in a joint interest-bearing transac- the majority of the debt is considered as long- terest expense and prepaid rent. tion account. Surplus liquidity can also be in- term. As regards fixed-interest rates, debt vested as a fixed term bank deposit. In addi- amounting to SEK 1,171.1 M carries a fixed Pledged assets tion, Pandox has an unutilised bank overdraft interest rate for a period of less than one year. This item refers mainly to property mortgages facility of SEK 100 M and credit facilities for a Further details are set out in the Financial pledged to credit institutions as collateral for total of SEK 656 M. Overview section on page 44. loans. restricted reserves Parent Company Deferred tax liability Contingent liabilities Opening balance adjusted for non-exercised In 2004 the net deferred tax liabilities consisted The Parent Company’s contingent liabilities options. of a deferred tax recoverable of SEK 51.0 M refer mainly to guarantees to banks with regard and a deferred tax liability of SEK 235.3 M. The to subsidiaries’ debts. Liabilities to credit institutions deferred tax items from 2005 are accounted for As at 31 December 2005, Pandox’ total inte- on a gross basis. Further details are set out in PA N D O X – A N Nu A l R e P O RT 2005 63
    • financial statements Changes in equity restricted unrestricted Profit seK M share capital reserves reserves for the year total Group 2004 Opening balance 373.5 838.0 531.1 176.6 1,919.2 Appropriation of profits – – 176.6 –176.6 0.0 Movement between unrestricted and restricted equity – 4.1 –4.1 – 0.0 Dividend – – –112.1 – –112.1 Translation differences including tax effect – – –8.8 – –8.8 Profit for the year – – – 124.7 124.7 373.5 842.1 582.7 124.7 1,923.0 restricted unrestricted Profit seK M share capital reserves reserves for the year total Group 2005 Opening balance 373.5 842.1 582.7 124.7 1,923.0 Appropriation of profits – – 124.7 –124.7 0.0 Dividend – – –273.9 – –273.9 Group contribution – – –44.7 – –44.7 Translation differences including tax effect – 6.4 8.6 – 15.0 Profit for the year – – – 688.3 688.3 373.5 848.5 397.4 688.3 2,307.7 Premium restricted unrestricted Profit seK M share capital reserve reserves reserves for the year total Parent Company 2004 Opening balance 373.5 620.0 210.0 312.8 86.2 1,602.5 Appropriation of profits – – – 86.2 –86.2 0.0 Dividend – – – –112.1 – –112.1 Profit for the year – – – – 0.1 0.1 373.5 620.0 210.0 286.9 0.1 1,490.5 Premium restricted unrestricted Profit seK M share capital reserve reserves reserves for the year total Parent Company 2005 Opening balance 373.5 620.0 210.0 286.9 0.1 1,490.5 Appropriation of profits – – – 0.1 –0.1 0.0 Dividend – – – –273.9 – –273.9 Group contribution – – – 51.5 – 51.5 Profit for the year – – – – 609.6 609.6 373.5 620.0 210.0 64.6 609.6 1,877.7 Translation differences include a tax effect of SEK –10.9 M (–0.9) regarding currency hedging of non-Swedish operations. The number of shares as at 31 December 2005 amounted to 24.900.000 with one vote per share and a nominal value of SEK 15 per share. 64 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Cash flow statement Group Parent Company seK M 2005 2004 2005 2004 Current operations Profit/loss before financial items 360.3 377.0 –11.2 –6.2 Depreciation 78.5 70.6 0.3 0.3 Income from sale of fixed assets 444.4 – 5.8 – Interest income 6.8 3.3 67.7 95.5 Interest expense and other financial costs1) –186.6 –212.1 –134.7 –166.2 Tax paid –15.8 –0.2 0.0 –0.3 Cash flow from current operations before change in working capital and investments 687.6 238.6 –72.1 –76.9 Change in working capital Increase/decrease (±) in operating receivables –95.3 –29.9 –3.0 –0.5 Increase/decrease (±) in operating liabilities 99.2 33.7 923.5 –445.5 total change in working capital 3.9 3.8 920.5 –446.0 Cash flow from current operations after change in working capital and investments 691.5 242.4 848.4 –522.9 Investment operations Investment shares and participations –65.5 – –598.7 –4.3 Investments in properties and equipment –165.1 –70.5 –0.3 –0.1 Acquisition of properties and equipment –661.2 – – – Sale of fixed assets 609.1 – 1.9 – total investments –282.7 –70.5 –597.1 –4.4 Cash flow after investments 408.8 171.9 251.3 –527.3 Financing operations Change in financial fixed assets – –7.9 –168.2 –792.8 Change in interest-bearing loans 44.9 –131.4 –441.3 1,287.9 Dividend –273.9 –112.1 497.6 –112.1 Dividend via Group contributions – – – 77.6 Cash flow from financing operations –229.0 –251.4 –111.9 460.6 Change in liquid funds 179.8 –79.5 139.4 –66.7 Liquid funds at the beginning of the year 58.0 137.5 22.3 89.0 Exchange rate difference in liquid assets –1.4 – – – Liquid funds at the end of the year 236.4 58.0 161.7 22.3 Change in liquid funds 179.8 –79.5 139.4 –66.7 1) 2004 year’s figures include a non-recurring cost for the premature redemption of interest swaps in the amount of SEK 57.8 M. Comments on the cash flow statement Adjusted for an one-off income of SEK 444.4 M the cash flow from current operations amounts to SEK 301.4 M (298.9). Cash flow per share rose to SEK 12.10 (12.00). PA N D O X – A N Nu A l R e P O RT 2005 65
    • financial statements Accounting principles The annual report and accounts have Proportional consolidation deductions in the Company are valued based been prepared in accordance with The Radisson SAS Hotel Östersund property is on the estimated potential utilisation against owned as a participation in a tenant-owners as- future taxable profits, and are calculated based the Swedish Annual Accounts Act sociation where the members have a joint influ- on the prevailing tax rate. and generally accepted accounting ence over operations. principles, as well as taking into The financial structure of the ownership Property operations account the recommendations of the may be compared with a joint venture in which The Group’s properties are reported in the ba- Swedish Accounting Standards Board each shareholder manages his/her own costs lance sheet as fixed assets in view of the pur- if not stated otherwise. Pandox’ and revenue. Against this background, the pro- pose of the holdings being the long-term ow- perty has been consolidated in accordance nership, management and development of the accounting and evaluation principles with the proportional method. properties. are in general unchanged compared with last year. tax Hotel operations Pandox applies the Swedish Financial Accoun- The hotel operations conducted by Pandox are Consolidated accounts ting Standards Council’s recommendation charged with internal rent for accounting pur- The consolidated accounts for the Group in- RR:9 regarding income tax. Briefly, the recom- poses. The internal rent is linked to the opera- clude all subsidiaries as at financial year-end. mendation implies that both deferred tax liabili- ting companies’ revenue and based on what The Swedish Financial Accounting Standards ties and tax recoverable shall be included in the are deemed to be market conditions. The inter- Council’s recommendation RR 1:00 has been financial statements, and that any changes nal rent is expensed to hotel operations, and applied in the preparation of the financial state- shall affect the income statement as deferred carried as revenue in property operations. ments. The consolidated accounts have been tax. The deferred tax relating to the difference prepared in accordance with the purchase in book depreciation and fiscal depreciation tangible fixed assets method, whereby assets and liabilities have shall be calculated using the prevailing tax rate. When new construction and additions are car- been taken over at market value in accordance Acquisitions before 2004 are based on the ried out, all direct costs including project costs with an acquisition analysis. The difference deferred tax liability relating to the asset acqui- are capitalised. In the case of refurbishments, between acquisition value and acquired share- sition and shall however be based on the ac- direct costs related to the improvement of pro- holders’ equity has been added to land and quisition price and be calculated from each perties compared with their original condition buildings as surplus value. Surplus value is respective property’s shortest estimated period are capitalised. amortised in accordance with the same princi- of ownership, resulting in an average tax rate Costs of repairing a property to its original ple used for properties. Estimated deferred tax of approximately 10 percent. Since 2004, the condition are not capitalised. An exception to liability with respect to Group surplus value and principle that no deferred tax liability should this principle involves the costs of measures estimated deferred tax recoverable are repor- be calculated at pure asset acquisitions. taken further to neglected maintenance esta- ted net as a deferred tax liability in the balance The deferred tax recoverable pertaining blished at the time of an acquisition, and where sheet. to estimated tax recoverable related to deficit the acquisition price is adjusted accordingly. 66 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Costs of tenant-related modifications that imply private cars and office machines. They are not change rate of the period, and the balance that the rent may be increased are capitalised significant in size and do not therefore influ- sheet at the exchange rate prevailing on the and depreciated over the remaining period of ence an assessment of the Group’s results and closing day. The exchange rate difference that the lease. financial position. arises as a result of this method is recorded di- Depreciation according to plan is calculated rectly against the Group’s equity. Any compa- on the acquisition value at the following per- revenue nies acquired during the year are included in centages: Management revenue pertains to rental reve- the Group at an amount relating to the period % nue as well as re-debited operating costs and following such acquisition. Buildings 1.0 property tax. Revenue and costs related to the Building fixtures 4–6.7 operations of hotel operators are reported sepa- receivables and liabilities expressed Land improvements 3.5 rately in the consolidated income statement. in foreign currencies Equipment 6.7–33 Rental revenue is spread over a period of time Receivables and liabilities expressed in foreign in accordance with the terms of each lease. currencies are restated at the rate of exchange Pandox changed the depreciation rate for buil- This implies that rent paid in advance is repor- prevailing on balance sheet date. Any differen- dings from 1.5 percent to 1 percent with effect ted as prepaid rental revenue. ces that may arise are either credited or debi- from 2000. ted to income. When loans or forward contracts Depreciation according to plan is calculated shares and participations are entered into to hedge investments in inter- on the acquisition value and a residual value of Shares and participations in subsidiaries and national subsidiaries, any exchange rate diffe- 0 kronor. subsidiaries of subsidiaries have been stated at rences that may arise are offset in the Group by acquisition value with the exception of holdings an amount corresponding to the differences Write-down of fixed assets that may have been written-down to their esti- arising from the recalculation of the net assets The Group’s properties are continuously valued mated actual value. of international subsidiaries. in accordance with an internal cash flow model, which also fulfils the requirement to cal- Financial instruments Other receivables and liabilities culate the utilisation value in accordance with Interest swaps are used to change underlying Receivables have been stated in the amounts RR:17 whereby the recoverable value, which is financial liabilities’ interest-due structure. Re- expected to be received. Other assets and liabi- the greater of the net sales value and the utili- venue and costs related to interest swaps are lities have been stated at nominal values. sation value, is compared with the property’s reported net as interest costs, and are spread book value in order to assess the need for a over the duration of each contract. possible write-down. International subsidiaries Leasing International subsidiaries are stated as per the Pandox reports all leasing contracts as opera- current rate method, which implies that the in- tional. Leasing contracts entered into concern come statement is restated at the average ex- PA N D O X – A N Nu A l R e P O RT 2005 67
    • financial statements Notes to the accounts nOte 1 – seGMent rePOrtInG Primary segment Pandox’ primary segment is comprised of two operating branches - property operations and hotel operations. Information in accordance with segment reporting is presented in the consolidated income statement and balance sheet. secondary segment Year 2005 stockholm Gothenburg Öresund rest of sweden International adjustment total Property revenue 147.7 58.8 114.5 109.0 143.9 –45.61) 528.4 Property costs –27.7 –8.4 –23.5 –19.0 –25.0 –103.7 Operating net 120.1 50.3 91.0 90.0 118.9 –45.6 424.7 Book value of properties 1.138.6 742.5 1.055.6 611.6 1.929.2 5.477.5 Investments 39.6 53.1 12.1 9.9 50.3 165.1 Operating revenue – hotel operations 66.1 184.1 250.2 Operating costs – hotel operations –59.1 –180.2 45.6 –193.7 Operating profit – hotel operations 7.0 3.9 45.6 56.4 Year 2004 stockholm Gothenburg Öresund rest of sweden International adjustment total Property revenue 159.8 75.8 102.0 133.9 121.4 –46.9 –546.0 Property costs –35.3 –8.5 –23.5 –26.0 –25.4 –118.7 Operating net 124.5 67.3 78.5 107.9 96.0 –46.9 427.3 Book value of properties 1.366.6 698.1 870.3 966.5 1 361.3 5 262.8 Investments 17.0 1.1 7.1 6.8 38.5 70.5 Operating revenue – hotel operations 63.6 153.2 216.8 Operating costs – hotel operations –58.1 –146.3 46.9 –157.5 Operating profit – hotel operations 5.5 6.9 46.9 59.3 1) Pertains to adjustment of internal rental. nOte 2 – rentaL reVenue Revenues from hotel operations pertain to business, which is operated under a management agreement with Hilton, as well as the five hotels operated by Pandox. Rent and remuneration for other property costs which were paid by these hotel operator companies to the property company are reported gross. i.e. they have not been eliminated in the income statement. This is done to provide a more accurate picture of the operating net generated by the property company and the operating income of the hotel opera- ting company. The elimination of these items would imply that the total management revenue and the operating company’s operating costs would be reduced by SEK 45.6 M for the year 2005 (46.9). nOte 3 – GeOGraPHICaL DIstrIButIOn OF rentaL reVenue % 2005 2004 Sweden 65 71 Denmark 9 8 United Kingdom 7 7 Germany 7 6 Belgium 9 8 Switzerland 3 – total 100 100 68 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • nOte 4 – DePreCIatIOn aCCOrDInG tO PLan Group Parent Company seK M 2005 2004 2005 2004 Buildings –60.7 –59.0 – – Land improvements –0.9 –0.8 – – Equipment –16.6 –10.5 –0.3 –0.3 total depreciation –78.2 –70.3 –0.3 –0.3 Depreciation amounts to a total of SEK 78.2 M of which SEK 77.9 M (70.3) refers to property operations and SEK 0.3 M (0.5) to administration. nOte 5 – nOn-reCurrInG reVenue/COsts Total Group non-recurring revenue of SEK 444.4 M of which 438.7 refers to a capital gain generated by the sale of hotel properties and 5.7 M generated by the sale of shares. nOte 6 – nOn-reCurrInG FInanCIaL COst The cost refers to the premature redemption of interest swaps. nOte 7 – Interest reVenue Parent COMPanY The interest revenue of the Parent Company is divided into SEK 65.0 M from Group companies and SEK 2.7 M from other companies. nOte 8 – DeFerreD taX anD aCtuaL taX Group Parent Company seK M 2005 2004 2005 2004 Deferred tax expense for the year Deferred tax expense relating to temporary differences 6.7 –48.5 – – Deferred tax relating to group contribution –17.4 – 20.0 – Deferred tax income due to acquired deductible deficits 58.5 – – – Deferred tax expense relating to other provisions –11.0 0.9 – – Deferred tax reported in the income statement 36.8 –47.6 20.0 – actual tax in the income statement –15.8 –0.2 – –0.3 Difference between reported tax and nominal tax rate of 28% Reported consolidated profit before tax 667.3 172.5 589.5 – Tax as per applicable tax rate of 28% –186.9 –48.3 –165.1 – Acquired tax deductibles 58.5 – – – Tax effect due to nontaxable income 108.4 – 196.0 – Tax effect of nondeductible costs and other tax adjustments 17.2 –14.8 –10.9 – Tax effect due to group contributions 17.4 – – – Tax effect relating to foreign operations 6.4 15.3 – – reported tax expense 21.0 –47.8 20.0 – Deferred tax recoverable Deficit deductions 76.3 0.1 – – Other temporary differences 24.4 44.2 – – Other deferred tax recoverable 6.2 6.7 – – total deferred tax recoverable 106.9 51.0 – – Deferred tax liabilities Differences between book value and fiscal value of properties 204.1 230.9 – – Other deferred tax liabilities 4.4 4.4 – – total deferred tax liabilities 208.5 235.3 – – total deferred tax liabilities/recoverable net –101.6 –184.3 – – PA N D O X – A N Nu A l R e P O RT 2005 69
    • financial statements nOte 9 – LanD anD BuILDInGs Group seK M 2005 2004 Opening acquisition value 5,697.6 5,669.9 Acquisition of properties 717.5 – Investments 125.1 39.3 Sales –658.0 – Translation differences – balance sheet 77.4 –11.6 Closing accumulated acquisition value 5,959.6 5,697.6 Opening depreciation –533.7 –475.1 Acquired accumulated depreciation –83.9 – Sales 49.4 – Depreciation for the year –61.6 –59.8 Translation differences – balance sheet –5.6 1.2 Closing accumulated depreciation –635.4 –533.7 Closing residual value 5,324.1 5,163.9 Tax assessment value of Swedish properties 2,019.6 2,413.1 Of which land 750.1 852.0 The acquisition value of land, buildings and equipment includes the value of the Company’s hotel property in Östersund, which is owned through a 47.6 percent share in the Borgens housing cooperation. In accordance with the Swedish Financial Accounting Standards Council’s recommendation RR:17, the book value of each property has been reconciled with its recovery value, further to which it was noted that no write-downs were necessary. nOte 10 – eQuIPMent Group Parent Company seK M 2005 2004 2005 2004 Opening acquisition value 168.3 141.3 2.3 2.2 Acquisition of equipment 60.4 – – – Investments 40.0 31.2 0.3 0.1 Sales/disposals –10.6 –3.5 – – Translation differences – balance sheet 4.1 –0.7 – – Closing accumulated acquisition value 262.2 168.3 2.6 2.3 Opening depreciation –68.9 –58.7 –1.8 –1.5 Sales/disposals 10.1 0.3 – – Acquired accumulated depreciation –32.7 – – – Depreciation for the year –16.6 –10.8 –0.3 –0.3 Translation differences – balance sheet –0.2 0.3 – – Closing accumulated depreciation –108.3 –68.9 –2.1 –1.8 Closing residual value 153.9 99.4 0.5 0.5 70 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • nOte 11 – sHares anD PartICIPatIOns In suBsIDIarIes number Par Percent Book seK M Corp. reg. no. registered office of shares value owned value Parent Company Hotab Förvaltnings AB 556475–5592 Stockholm 1.000 100 100 285.1 Pandox Förvaltning AB 556097–0815 Stockholm 550 100 100 304.7 Hotab 6 AB 556473–6352 Stockholm 1.000 100 100 0.1 Fastighets AB Grand Hotel i Helsingborg 556473–6329 Stockholm 1.000 100 100 15.9 Pandox Fastighets AB 556473–6261 Stockholm 1.000 100 100 0.1 Fastighets AB Mora Hotell 556475–9370 Stockholm 1.000 100 75 5.7 Mora Hotell AB 556475–9461 Stockholm 1.000 100 100 0.1 Fastighets AB Stora Hotellet i Jönköping 556469–4064 Stockholm 1.000 100 100 30.1 Nya P.A. Hotell AB 556495–0078 Stockholm 1.000 100 100 0.2 Pandox Hotel Management AB 556469–9782 Stockholm 1.000 100 100 0.1 Malmö Favorit Hotell AB 556475–9446 Stockholm 1.000 100 100 2 Grand Hotell i Kristianstad AB 556515–9216 Stockholm 10.000 10 100 0.6 Fastighets AB Porpur 556349–8327 Stockholm 10.000 100 100 0.1 Pandox i Halmstad AB 556549–8978 Stockholm 1.000 100 100 8.7 Pandox i Borås AB 556528–0160 Stockholm 1.000 100 100 45.3 Hotell Värmdövägen 84 AB 556286–4826 Stockholm 1.000 100 100 4.3 Hotellus International AB 556030–2506 Stockholm 7.480.000 100 100 970.2 KB Lorensberg 49:2 916833–3269 Gothenburg – – 100 Pandox i Östersund AB 556466–1352 Stockholm 1.000 100 100 2.7 Ademrac Holding 1 AB 556683–3371 Stockholm 10.093 100 100 219.4 Ademrac Holding 2 AB 556683–3363 Stockholm 10.010 100 100 219.6 Ademrac AB 556426–2748 Stockholm 1.790.042 100 6.6 3.4 Le Nouveau Palace S.A. 446188 Brussels 3.000 – 100 291.4 Convention Hotel International AG–3 Basle 14.000 – 100 6.2 Hotellus Denmark A/S 28970927 Copenhagen 5.000 – 100 0.6 Royal Crown Plaza SA 0476.704.322 Brussels 68.808 – 100 66.1 total Pandox aB 2.482.7 seK M Corp. reg. no. registered office the Group Arlanda Flyghotell KB 916500–8021 Stockholm Fastighetsbolaget Utkiken KB 916611–7755 Stockholm Fastighets AB Hotell Kramer 556473–6402 Stockholm Grand i Borås Fastighets AB 556030–7083 Stockholm Hotellus Nordic AB 556554–6594 Stockholm Hotellus Fastighet 1 AB 556554–6602 Stockholm Hotellus Säffle AB 556367–3697 Stockholm Hotellus Järva Krog AB 556351–7365 Stockholm Hotellus Mölndal AB 556554–6636 Stockholm Bioeffect AB 556244–5030 Stockholm Vestervold KB 916631–9534 Stockholm Förvaltningsbolaget Hotel Grand i Örebro KB 969622–8197 Stockholm Förvaltningsbolaget Ferrum KB 969622–6688 Stockholm Förvaltningsbolaget Hotell Bromma KB 969622–8163 Stockholm KB Sjöstjärnan Fastighetsförvaltning 916850–4554 Gothenburg Hotellus Belgium NV – Belgium Grand Hotel Brussels NV – Belgium Town Hotell SA – Belgium Hotellus Suomi OY – Finland Hotellus Nord OY – Finland Euro Lifim BV – Netherlands Bru Hotels Holding BV – Netherlands Hotellus Europa BV – Netherlands Bru Hotels BV – Netherlands Hotellus Deutschland GmbH – Germany Atlantis GmbH – Germany PA N D O X – A N Nu A l R e P O RT 2005 71
    • financial statements nOte 12 – LIaBILItIes tO CreDIt InstItutIOns Group Parent Company seK M 2005 2004 2005 2004 Liabilities that fall due within one year following balance sheet date 223.2 180.7 208.5 90.3 Liabilities that fall due between one and four years following balance sheet date 2,452.6 1,197.9 2,151.7 1,087.3 Liabilities that fall due five or more years following balance sheet date 489.5 1,701.8 1,623.9 total 3,165.3 3,080.4 2,360.2 2,801.5 nOte 13 – aCCrueD eXPenses anD PrePaID reVenue Group Parent Company seK M 2005 2004 2005 2004 Prepaid rents 40.2 43.0 – – Accrued interest expenses 11.9 4.4 8.5 9.4 Property tax 3.3 10.9 – – Other 121.3 74.4 20.0 8.6 total 176.7 132.7 28.5 18.0 nOte 14 – PLeDGeD assets anD COntInGent LIaBILItIes Group Parent Company seK M 2005 2004 2005 2004 Pledged assets for loans from credit institutions Property mortgages 3,454.40 3,654.10 – – Pledged deposit 54.0 0.3 6.2 – Contingent liabilities – – 685.6 91.4 nOte 15 – auDIt Fees anD reMuneratIOn Group Parent Company seK M 2005 2004 2005 2004 KPMG Audit assignments 1.4 1.4 0.8 0.8 Other assignments 0.1 0.1 0.1 0.1 set revisionsbyrå Audit assignments 0.1 0.1 0.1 0.1 Other Other assignments 0.4 0.5 0.2 0.2 total 2.0 2.1 1.2 1.2 72 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • nOt 16 – PersOnneL Group Parent Company 2005 2004 2005 2004 average number of employees Men 141.0 116.0 7.0 6.0 Women 154.0 130.0 7.0 7.0 total 295.0 246.0 14.0 13.0 Of whom employed in Sweden 90.0 80.0 14.0 13.0 Of whom employed in Belgium 203.0 166.0 – – Of whom employed in Denmark 2.0 – – – Wages, salaries and other remuneration, seK M Board of Directors and CEO Wages, salaries and other remuneration 5.2 5.2 5.2 5.2 Social security costs 1.9 1.9 1.9 1.9 Pension costs 0.8 0.8 0.8 0.8 total 7.9 7.9 7.9 7.9 Other employees Wages, salaries and other remuneration 76.4 64.8 10.1 8.1 Social security costs 22.9 17.2 2.8 2.5 Pension costs 3.1 2.8 1.8 1.4 total 102.4 84.8 14.7 12.0 Wages, salaries and other remuneration per country, seK M Sweden Board of Directors and CEO 7.9 7.9 7.9 7.9 Other employees 38.6 35.2 14.7 12 Belgium Other employees 63.8 49.6 – – total 110.3 92.7 21.6 19.9 Personnel employed in Belgium relate to the operator activities of the Crowne Plaza Brussels City Centre, the Hilton Brussels City, and the Royal Crown. Personnel employed in Denmark refers to Copenhagen Hotel 27. The remuneration of the Members of the Board is established by the Annual General Meeting of Shareholders. The remuneration of the Chief Executive Officer (CEO) is composed of a basic salary, a bonus, a company car, and a retirement pension scheme. The age of retirement of the CEO is 65 years, with the possibility of retiring at the age of 60. In the case of termination, the CEO shall be given a period of notice of 24 months by the Company, with a deduction clause. Upon resignation by the CEO, a period of notice of 6 months shall apply. No reporting of sickness absence will be done in accordance with the exemption rule contained in prevailing legislation that states that statistics shall not be given if the number of employees in the group does not exceed ten people or if the information could be identified with one particular individual. The term “group” concerns both gender and age categories. PA N D O X – A N Nu A l R e P O RT 2005 73
    • financial statements Proposed disposition of earnings The following profits are at the disposition of the forthcoming Annual General Meeting of Shareholders: seK Balance brought forward 64,556,033 Profit for the year 609,555,526 674,111,559 The Board of Directors and Chief Executive Officer propose that the accumulated profits be appropriated as follows: Dividend to the shareholders, seK 5.50 per share 136,950,000 Amount to be carried forward 537,161,559 674,111,559 The Board of Directors believes that the proposed dividend is justifiable when taking into consideration the character, scope and risks placed by business operations on the amount of shareholders’ equity and the Company’s consolidation needs, liquidity and financial position in general. Stockholm, 8 February 2006 Christian Ringnes Chairman Leiv Askvig Olaf Gauslå Bengt Kjell Björn-Åke Wilsenius Mats Wäppling Anders Nissen Chief Executive Officer Our audit report pertaining to this annual report and consolidated financial statements was submitted on 9 February 2006. Per Gustafsson Willard Möller Authorised Public Accountant Authorised Public Accountant 74 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Auditors’ Report to the annual General Meeting of shareholders of PanDOX aB, swedish corporate registration number 556030-7885. We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the chief executive officer of PANDOX AB for the year 2005. These accounts and the administra- tion of the company are the responsibility of the board of directors and the chief executive officer. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards re- quire that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their app- lication by the board of directors and the chief executive officer and significant estimates made by the board of directors and the chief executive officer when preparing the annual accounts and consolidated accounts, as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion con- cerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the chief executive officer. We also examined whether any board member or the chief executive officer has, in any other way, acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts and the consolidated accounts have been prepared in accordance with the Swedish Annual Ac- counts Act and thereby give a true and fair view of the company’s and the group’s financial position and results of opera- tions in accordance with generally accepted accounting principles in Sweden. We recommend to the general meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the directors’ report and that the members of the board of directors and the chief executive officer be discharged from liability for the financial year. Stockholm, 9 February 2006 Per Gustafsson Willard Möller Authorised Public Accountant Authorised Public Accountant PA N D O X – A N Nu A l R e P O RT 2005 75
    • pandox upgrade A newsletter about the hotel industry When Pandox was formed in 1995, the publica- tion of a newsletter was started in order to market the Company vis-à-vis the capital market prior to being listed on the stock exchange. The news- letter later went over to presenting public reports distributed by the Company. In spite of Pandox no longer being listed on the Stockholm Stock Exchange, we continue to maintain the flow of in- formation to people interested in the hotel sector and the hotel property market, which is why Pandox Upgrade is still regularly issued. Three newsletters were published in 2005 with topics such as market trends and current Swedish and international hotel market questions. You are most welcome to become a subscri- ber. Pandox Upgrade is free of charge and may be ordered from Pandox either by telephone at +46 (0)8-506 205 50 or via 76 PANDOX – ANNuA l R e P O RT 2 0 0 5
    • Production: Pandox/n3prenör . Photo: ulf Blomberg and others . Printed by eO Print 2006 .
    • Pandox AB, Box 5364, SE-102 49 Stockholm, Sweden Tel: +46-8-506 205 50 • Fax: 46-8-506 205 70 • • e-mail: Corporate registration number: 556030-7885