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Article Excerpt
HENRI GISCARD D'ESTAING, CHAIRMAN & CEO, CLUB MED: Hello, everyone, and welcome to Club Med World and to the banner of our winter season with this very nice picture from our campaign where happiness means the world.
And without further ado, I'd like to start with the presentation of our annual results 2008. Michel Wolfovski will give you his comments on the figures and the trends for the winter season 2009.
Now obviously, considering the world's environment and the economic situation, of course, we're going to tell you how we reacted and we responded to this situation. Our competitive edge, we think, and the up market positioning should help us to outrun the storm, and maybe ahead of other competitors. Indeed, despite a poor second half year impacted by the economic situation, we can see that our strategy has been validated by our results.
And firstly, we were able to improve constantly our operational profitability since 2006. Now if you consider the leisure EBITDAR from EUR205 million in 2006 up to EUR257 million in 2008, and the leisure operating income that went up from EUR16 million to EUR43 million within three years, meaning 69% improvement in 2008, and so despite the onset of the economic crisis that was felt as early as June 2008, and despite the increase in the raw materials and oil prices that proved particularly negative during our last summer season.
The turnover improved by 7.7% on a like-for-like basis against 2007, and this means 16% increase in three years. In the winter, as in the year summer 2008, we were able to improve the situation. We were able to win over new customers; more than 61,000 new customers have been won over in our 4 and 5-Trident facilities, and 25,000 in fact for the summer season, which means that we've been able to improve our customer base by 200,000 people since 2006. These up market customers account today for 48% of our customer base, and we think that they're going to prove a very valuable asset in order to outrun the storm.
Now we've also pursued our investment policy in order to put the final touch to our move up market, and we spent EUR400 million in three years, plus the contributions from our real estate partners, which means a total of EUR500 million. In 2008 alone, we spent EUR128 million in our projects, and some EUR30 million were in fact invested by our partners. Now our move up market has been now more or less finalized and so we're going to be able to reduce the amount of our investment.
We also made a strategic decision and we decided to concentrate on our means, on our core business, that is to say our villages. And this decision was made well ahead of the economic crisis, and this strengthened our financial structure.
We improved our operational profitability. We disposed of Jet Tours and Club Med Gym during the summer, and this helped us to reduce our net debt to EUR295 million and, of course, Michel will tell you more about this within a few minutes.
Now Club Med were faced with different crises in the past seven years, and we have now everything in place in order to respond to this sort of crisis very quickly, and we had not even repositioned ourselves in the up market segment at the time.
As of mid-2008, we were faced with two world economic crises. The first crisis was due to the soaring up of the oil prices and this, obviously, impacted very severely the tourism and travel sector. And just as a reminder, you know that from $70 a barrel in July 2007, oil prices went up to $147 in the crisis summer 2008. Obviously, this led to an increase in transport prices and increase in our energy cost. Now, fortunately enough, it seems that this first crisis is behind us.
The second crisis, which was at first financial and then economic, was felt as early as the end of June and, obviously, the sales went -- were sluggish as of this moment, and as of the end of August the winter bookings, which had fared very well so far, were also slowing down. As of September we were also faced with this phenomenon of people trying to wait and see what was going to happen before booking their holidays.
So in this context, the fact that our operational results is really up in 2008, and following our significant improvement in 2007, I think this does confirm that we selected the right strategy. And we are now in a position to respond more quickly and more efficiently, and in order to withstand the crisis in 2009, we've taken two series of actions in order to adapt ourselves to the crisis.
The first action will be centered on profitability and cash preservation, and Michel will tell you more about this later. The second action plan will help us to win over new market shares in this context, and we are lucky enough in that we've put the final touch to our move up market. We've got some competitive trump cards to put on the table. Now, of course, we will be faced with challenges as well, but we think we'll be able to outrun the storm.
And over to Michel now.
MICHEL WOLFOVSKI, EXECUTIVE VICE PRESIDENT & CFO, CLUB MED: Thank you, Henri. Good morning, everyone. I'm going to address several issues during this presentation. First of all, of course, I shall begin by analyzing the results for fiscal 2008 and then, as is usual, I'll give you an update on our reservations for the winter of 2009. I'll take that opportunity to speak about 2009 as a whole lot of [significant] measures we're implementing to face up to difficult times ahead.
First of all, I need to point out that we're presenting these numbers in compliance with IFRS 5. This is excluding Jet Tours and Club Med Gym, which were disposed of in the second half. The results of these businesses and the capital gains are in two distinct lines of the P&L. The restatements done pursuant to the standard for fiscals 2007 and 2006 help us have comparable data.
With this presentation I'd like to fulfill two objectives. I'd like to demonstrate that 2008 was a year where we significantly improved our operating profitability, in spite of the impact of the crisis, or the crises I should say, since the beginning of -- since last summer. So I want to demonstrate how proactive we've been in preparing for 2009.
Let's take a look at the key figures for 2008. Sales amounted to EUR1,494 million, up 6% on like-for-like basis. Sales jumped 7.7% and growth was 10.6% in the first half and 4.9% in the second half.
Leisure EBITDAR increased over 17% from EUR219 million to EUR257 million; that is to say a 7.2% increase in sales, up nearly 2 points from 2007.
Leisure operating income jumped 69% to EUR43 million, and this was on both halves in spite of the fact that the end of the year was impacted by the oil and financial crises.
Our property operating income I'll come back to in the presentation, which involves the income and cost from the management of our real estate assets, was minus EUR8 million; I think it's EUR2 million in 2007 on the one hand. It takes into consideration costs due to the shutdown of villages due to renovation and the completion of our up-scaling efforts and a few disposals made over the year.
In compliance with IFRS 5, the positive EUR31 million impact that has to do with the disposal of Jet Tours and Club Med Gym is on a separate P&L line and, therefore, it does not contribute to the operating income.
The other item in operating income, which involves credit cards and restructuring costs, was minus EUR25 million as against minus EUR19 million in 2007. This involved some restructuring and optimization efforts. I'll come back to that later on.
The Group's operating income jumped from EUR8 million to EUR10 million and net profit, therefore, amounted to EUR2 million as against minus EUR8 million in 2007. On the strength of the improvement of operating profitability, and following the disposals of Jet Tours and Club Med Gym, debt shrank from EUR336 million to EUR295 million, and free cash flow significantly improved from minus EUR30 million in 2007 to EUR50 million in fiscal '08.
Now we'll turn to the key figures of our business. Club Med villages accommodated 1,361,000 customers in 2008, up 2.8%. This is the first net increase in customers for a full year since 2001.
In line with our strategy, the growth in the number of up-scale clients involves a 61,000 customer gain for 4 and 5-Trident. Those were in 2008, and 194,000 in two years' time. Like-for-like sales increased 3.5% per hotel day. In all areas there was an increase.
The price mix of stays increased 6% in the winter and 0.7% in the summer, and the slightest price mix increase was in Europe. I need to underscore two points about Europe. Our new free proposition for kids under the age of four was very successful in the summer, and this helped recruit new customers, and it did have a temporary dilutive impact on the price mix. Now if you exclude that dilutive impact, which was temporary, once again, it involved bringing in new family customers, the average increase in the price mix for the summer in Europe was a mere 2% mainly due to slower long haul sales due to the price of jet fuel.
Club Med's capacity has remained stable. We also have to consider the shutdown of Les Almadies in Senegal and the disposal of the Mexican archeological villas. But if you take the various comfort categories, the 4 and 5-Trident capacity, which was 32% of the total in 2006 and 42% 2007, was 47% of our profit in 2008.
The number of hotel days sold was 8,870,000, up 3.9% from 2007. The occupancy rate expressed in number of beds was 70.9% this year. That is to say up 3 points from fiscal 2007. Occupancy rate for 4 and 5-Trident villages increased, it's still increasing, from 65.5% in 2006, 67.2% in 2007, and 2008 it stood at 68.4%. Our customers continue to follow our up-scaling efforts.
RevPAB, that's the revenue per available bed, which is the key indicator of our business, is going to be analyzed right now. It's critical and it determines our performance with regard to our strategy. RevPAB was up 7.5% up to 91% per hotel day. It jumped EUR6 for 2006, 2007 and increased likewise from 2007 to 2008.
RevPAB increased quarter-on-quarter. On the fourth quarter from August to October, it hit 6.2% in spite of the fact that the oil and financial crises had already kicked in. The increase in RevPAB is also due to all the efforts that we have made in up-scaling, and it materializes in all geographies.
Now, let's take a look at the variation in sales from 2007 to 2008. As we have seen on a like-for-like basis, on a like-for-like ForEx basis, 2008 sales jumped 7.7%, up...
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