Earnings Call: Q1 2021

Apr 27, 2021

Welcome, everyone, to this presentation of Randox First Quarter Report for 2021. I'm Anders Speer, Head of Investor Relations at Randox. And with me in this room, I have Anders Knissen, our CEO and Lianne Ho, our CFO. And in line with our tradition through this pandemic, we also have an external guest with us, and that is Robin Rosman, who is Managing International at STR. And as you all know well by now, Robin represents a leading independent research firm focused on the hotel market, and he will share their view on this market. And as always, we are very happy to have him on board for this presentation. As we always do, we divide the presentation into 3 parts. We start with Anders and Lia going through the business update and the financial highlights for the quarter. And then we'll let Robin talk about the external hotel market view. And as a final step, we open up for questions. So with that, I hand over to you Anders. Well, thank you very much, Anders, and welcome also from my side to this Q1 report for 20 21. We start with a short update about Pandex. Pandex is one of Europe's largest hotel property company. Our main strategy is to buy underperforming hotel and sign long term revenue based lease agreement with the best operator with we together with our partner developed hotel. If that Strategy is not in place. We can choose to operate hotels itself. At the moment, we own 156 Hotel Properties with 35,000 rooms in 15 countries and in 90 destinations. 100 and 36% of this is linked to what we call the property market property management, meaning the lease portfolio representing 84% of the property value. And the 20 hotels is operator activity. That means our own Operations, representing 16% of the property market value. As you all know who are followers, Pandox has a world class strong network of brands and partners, which are very Strong to have in all market conditions, maybe specifically in these days. Just a few words about the quarter from my side before I hand over to Lia. This Another tough quarter for the hotel industry and even for Pandox. The negative trend from Q4 continue. As you all remember, the hotel market 2020 was really much a roller coaster, A start in very strong. There was a collapse in the mass when COVID-nineteen arrived. Good comeback over summer period and a promising Start after the summer and then new restrictions was imposed again and the market Substantially decreased, and we are still in that business environment. And with that said, we are still Profit profitable, and we still have a strong financial position in Pampax. And we see a positive development in the market outside of Europe. We will come back to this later on. And there we have an attractive position in the recovery phase by having most of our hotels in the regional and domestic markets. And some numbers, the return on equity, as I said, is 9%. Growth in total net operating income is minus 30 4, like for like growth in property management minus 14. As you all remember, we had a good start in last year, January, February. So we compare Numbers from a very strong performing market even in this quarter. And liquid funds and with the facilities, SEK 4 point SEK 6,000,000,000, so we are at the we are a strong we have a strong financial position. With that, I hand over for Leah. Yes. Thank you, Anders. Page 5, I think we are now. Yes, as Anders just said, demand in the hotel market followed the trend from the 4th quarter with very difficult business conditions in the hotel market. As a consequence, contractual minimum rent and fixed Pandex. Were Pandex's main sources of income in the quarter. As you know, this income covers all Pandex operating costs, including interest payments. Cash flow in the quarter was impacted by an increase in the trade account receivables as well as investments. End of quarter, trade account receivables related to new payment terms amounted to some SEK 566,000,000, which is an increase compared with the 4th quarter, Which were SEK439,000,000. We report negative unrealized value changes in the property management, which reflects lower expected cash flows, And I will come back to that later in the presentation. Next page, please. PAMDOC's revenue base is diversified with revenues from different operational models and agreement types. Currently, minimum rent and fixed rent are PAMDOG's main source of revenue. These amount to almost SEK 2,000,000,000 per year was slightly less than SEK 500,000,000 per quarter. In the Q1, revenue based rent amounted to SEK 31,000,000. No reductions in hotel rooms have been given. In the Q1, revenue from operating activities amounted to SEK 92,000,000. Next page, please. On this slide, you can see our portfolio split per operational model measured in a number of rules. As you can see, 36.36 percent are fully variable from 1st unit of rent or revenue, 58% are fully variable only above the minimum guarantee level and 7% is fixed. Next page, please. In our revenue based leases with minimum guaranteed rent, The rent is variable, but can't fall below a certain minimum level. For variable rent to materialize, the accumulated total rent must Exceed the accumulated minimum level during a certain period. This is normally a calendar year. While it offers protection in a weak market, it can also limit Pandex revenue growth in the first phase of recovery that starts from very low level. The occupancy rates required for variable rent to materials in Pandex revenue based leases with the minimum rent differ between markets. This is due to market practice, commercial considerations and also contract age. Generally, the minimum level is lower in the Nordic region. At the end of this presentation, you can find more information about this specifically. Next page, please. In the Q1, Panmex valued the property portfolio according to the same method and same model we used since the IPO 2015. Values have been adjusted downward due to lower anticipated cash flows, mainly as a result of COVID-nineteen. Yields Are again largely unchanged due to still inconclusive transaction evidence. As we learn more about the effects of COVID-nineteen crisis, we expect to be able to estimate at 10.6% is currently valued each year as a reference point. Currently, approximately 50% of the properties has been externally valued during the last past 12 months. External valuations exhibit large dispersions both within and between markets. External valuations are on average 5% below PAMDOG's internal valuations. The valuation difference is small in the Nordics and larger outside the Nordics. In the Q1, total unrealized changes in value amounted to a negative SEK 344,000,000, Over to negative SEK 351,000,000 for investment properties and a positive SEK 7,000,000 for operating properties. Please note that according to IFRS, unrealized changes in value for operating properties are only reported for information purpose, hand. That is included in the EPRAN ARP calculation. End of period, the average valuation yield for investment properties was SEK 5.46 And for operating properties, it was 6.38%. Next page please, Page 10. On this slide, we can see the value change of our portfolio per quarter as well as accumulated value change from the start of the pandemic in Q1 2020. For the total portfolio, the accumulated negative value change over this period amounts to negative 4.9%. Our approach to property valuation is fact based and rests on a combination of External and internal factors and considerations. As said, we see high correlation between restrictions and demand in the hotel market. When restrictions go up, the margins down and buy to better. We saw it in Europe during last summer, And we have seen it recently in major hotel markets outside Europe such as the U. S. When restrictions go down, demand go up due By domestic travelers, which benefits hotels with domestic and regional demand exposure, just like Pandox portfolio. Furthermore, transactions relevant for Pandex indicates resilient valuation. You're still out How the world will look like after the pandemic, of course. But so far, demand is clearly linked to restrictions, not change of behavior. In addition, we have a well developed bottom up approach to our valuations. We know our hotel properties better than anyone else. We have individual business plans for each and every property, and we have a detailed understanding of the specific revenue drivers for each asset. Yes. The pandemic has a negative short term effect on the cash flows in the hotel properties, but we're requesting assumptions of And a negative long term yield effect. Next page, please, Page 11. Again, let's take a quick look at our Efrenov and financial position. End of period, Efrenov per share amounted to around SEK 100 and SEK 70,000,000. This corresponds to a decrease of approximately 9% on annualized basis. Loan to value amounted to 49.5%. Cash and cash equivalents and long term unutilized credit facilities amounted to approximately SEK 4,700,000,000. Credit facilities maturing in less than 1 year amount to approximately SEK 5,500,000,000 of which approximately SEK 3,800,000,000 will mature in December 2021. Founders has positive and close dialogue with all of us lenders On new financing, refinancing as well as adjustment of terms and covenants in existing credit agreements with consolidation to COVID-nineteen. In the Q1, lenders have given waivers in individual credit agreement. Next page, please. And with that, I hand back to Anders Pei. Thank you very much, Lia. So let's then move over to market presentation. And we would like to we have chosen 3 areas to create more insight for 2021. The first is an recap and an update on market in Pandox business areas. And the second part will be take a look at market head of Europe, sort of patent do we see? And finally, guiding for markets and effects for PANDOXX. So I'll just start on the 3 focus areas, which we have had since the pandemic started. And we call it the working methodology, respond, restart and reinvent. Respond is and operate in large international operations to secure liquidity and data contact with banks and our partners. We are still in that phase, but we have been spending more and more time on restart, which is the plan for recovery and what sort of action do we need to take to be ready And reinvent what's next for this our industry. So next page, please. To get back to full performance, if you start there, we think it's we need different development levels. It, of course, start with that the country and cities open up and activity starts. After that, hotel Pan. Open and then we will see domestic leisure return. After that, we will see domestic business return. PAMX. And then we will come international meetings and group return. And that is basically how the market also had react over This recovery phase in Marketo is ahead of Europe or as it was in Europe over summer period. Next page, please. A quick recap. So everybody starts from the same point. As you remember, COVID-nineteen arrived in Northern Europe in March, society closed down, economic activity decreased. But when Vistricting was lifted in June July, recovery started across Europe with domestic leisure as main driver. After the holiday period, the local business travel returned in Q4 looked quite promising. And then in October, new restrictions was imposed. Demand decreased substantially across all segments. And this low business environment are continuing to Q1 2021. And now we are waiting for this vaccine program will gain confidence. Again, next page, please. I'm now at Page number 15. If you look at in numbers, you're in Nordic Panmex. Regional Markets. And we saw a strong start in 2020, collapse in March as Good recovery over summer, a good platform in September before these new restrictions was implemented. And since then, It has been a very slow market. Next page, please. I am Page Steen, where you can see now rolling 7 days trend in the Nordic regionals, a Small uplift, but very slow still. Everything is linked to these that restrictions has not eased here yet. If we then move over to Stockholm, you also see a strong start in the last year, the same with It's substantial decrease in mass. And then market has been as all large City has been slower than regional and domestic markets has been. So even Stockholm and it's still weak market in Stockholm. And next page, please. I'm Page number 18, looking at Germany occupancy. And you see also here a good start, It collapsed in March and then we were and okay after summer period. But since then, Germany is perhaps one of Those countries who have had hardest restrictions, you haven't been allowed to travel and stay in hotels. So of course, they had no demand and we cannot expect Anything happened in Germany before the issue of the restrictions. But if you come to U. K, that is more optimistic view. And you see here again, it was good start in 2020. And you see in March and April, things came down. And after restriction, it was easier in June August. It was quite a strong regional market, Which came down also when new restrictions was implemented. But if you look at the next Page 20, You will see that the rolling 12 start to move. I know this is just a week, but I see ahead of this And I see business on the book gradually coming up. So with very small change or positive of restrictions was easier, The market has in regional market come start to come down. Equatorial start to lift up again. And you see that the market for summer is start to looking very promising. So UK is the one who is leading the Europe train out of Back in Recovery. And if we then and yes, quick in London, you're seeing as in Stockholm, Large markets are weak and that will take longer time for these sort of market to come back compared to Panmics and Regional and Domestic Markets. I'm now at number 22, and I'm now moving over for market, who is the Head of Europe, Try to see what can we see and what sort of pattern is there. You can say that's the same pattern everywhere, strong recovery, the driver is domestic demand And there's a strong correlation between restrictions and demand in these markets. Let's start with China. China is first out in the recovery phase, and the driver is domestic leisure and then also The business had opened up. We see an improve in meetings segment. We see also large convention are taking place in the market, very positive and very interesting large city like Shanghai and Beijing are start to moving. And that is the first sign since the pandemic started that large markets start to increase the demand. And they are coming now very in a strong speed up to close 10.19 years level very soon. And that is, of course, very promising also for Europe that you can see that the first market has a large market are also coming back at the one who is the 1st in line. And super interesting, strong domestic demand trend compensates for lack of international travelers, something we had talked about a lot in Pandex that we believe that the domestic market will be stronger than ever and the driver will be for this recovery will be domestic Demand. If you look at the number in Page 24, you can see since the restriction was easier In February, March last year, there had been a strong growth in market. And you can see in September, October, November, they were more or less up to 2019 years level in occupancy. And you see also now a strong underlying Trend was the decrease in January, February was temporary restriction was implemented due To Chinese New Year Eve, as many of you know, it's a mega market with 100,000,000 people traveling back to the Small cities where they came from, and they don't want to spread the virus. So they have a temporary restrictions there. But when that was easier, The market came back immediately and you see a strong business on the books in China. So this is super promising. And if you look over go over to U. S, that is the runner-up market at the moment, A very successful vaccination rollout had lead to travel confidence. And now and also here you see that demand This is the driving by domestic leisure and local business. These two segments are fully back in U. S. As well. And you see an early sign of meeting in event, however, still in low levels. We have tried to calculate it. We think the market on these 2 segment are around 20% of 2019 year's level. Despite of that, the occupancy is around 80% of 2019 In ES level, which of course is sensational because low meeting demand, lower activity as said, No international demand and big and large corporations hasn't started to travel yet. So U. S. Are really coming very strong. And again, as I said, domestic leisure and local business are fully back in this large hotel market. In numbers, in the Page 26, you see in U. S. Has been a Strong start and then it came down in March April, promising summer and now it's back in 55% occupancy again. So they are in 1 or 2 quarter, they are probably back in 2019 years level in terms of occupancy. And then you need to gain rate, of course, and that will come in with a large 25 big country cities will start to Come back with the same trend that's beginning in Shanghai. That's what we're waiting for. And so Page number 27, go back to full performance. Now our U. S. And China on level 4. And I would say, China are PAMX on very much on the way up to level number 5. And in Europe, after the summer, we were at number 34, and it's likely that Hamburg. Europe will come back to number 34 quite immediately here when restrictions were easier. And so Some sort of outlook. And of course, again, and I very emphasize this, that all Everything depends on the restrictions. That is out of our control. But given this, that the recovery The restrictions will ease you in the same rate as in U. S. We are about a quarter behind U. S. Or probably a little bit more. That means that the recovery will start in Q1, Q2 this year. We're already in Q2 and the one who will take the train there is UK and then hopefully the summer will be strong. In autumn, after the summer, the market will establish around level 4, which are something around at least 50% occupancy, and that is supported by domestic leisure And local regional business. And of course, this is our this that PanOx has an attractive And positioned here with 80% of rooms in domestic and regional markets. So What does this mean for Pandox? Yes, the contract structure gives different revenue exposure as Lia was into before, And this is just a repeat of what had already been said. Full and immediately impact coming from operator activity and revenue based lease agreement without a minimum level, and that is representing 36% of the company's number of room Roomstock. And then you had the gradual impact from market recovery, and it's representing 64% of that revenue base leases with minimum guarantee rent. And given this to give you some guidelines here, so given that the retail market We started the year and the design of the agreement where we are strong protection downside and with the limited variable revenue is expected In the lease with a minimum guarantee rent in 2021. But of course, it's very good for our partner if market will be stronger and they will coming back to a positive cash position. So before I hand over to Robby, I would also like to jump on A very interesting area, transactions, which we had discussed here before. And PAMX. Then transactions market had gradually opened. Over this quarter, there had been done 15 major single acquisitions who has is relevant for Pandox to follow that will be doing more acquisitions or transactions, but 15 of them are relevant to us. And the seller operators who sell because they need to have to increase or strengthen their Financial position, very strong interest from Bayer. So far, the acquisitions confirm Pandox valuations. And we don't see any distressed Prices and we don't see any distressed asset as we speak. It might happen Further here, but not today. And a few example, large hotel in Stockholm was Sold by approximately €320,000 per room. That is in line with or above what we have in our books. In Copenhagen, a sensational high price, €520,000 per room, which is very much above our valuations. You have one in Berlin and a big very good hotel, I will say, and have EUR 170,000,000 per room. Yes, it's fantastic hotel. And this is also in line with what we have with our hotel in Berlin. Yes, 2 hotels in Munich in the line which we have and you have one in Dublin and that price is above what we have in our books. So, so far, high prices, no distress and what they complete is confirming Amdocs Valuations. So with that, I hand over to Robin Rosmand. Thank you very much, and welcome, Robin. Thank you, Anders. Great to be here. So going on to Slide 32 and agenda. This agenda is PAM. Exactly what we were saying in January this year. And so Q1 has Very much played out as we expected certainly in Europe where we knew it was going to be a tough quarter and that's certainly what it was. And when we look at what we're seeing and expecting for the rest of the year and beyond, if I'm honest, not much has changed from what we last shared 3 months ago. But what we do have is some more data, some more trends that help either validate or course correct Some of the things that we've been saying. So just talking through that briefly and I'll go through some of these quite quickly as I'm sure you've seen many of them before and I'll Really focused on the ones that I think are most pertinent. If we go on to Slide 34, Something you've all seen hopefully seen before, indexing occupancy across the world back to 2019 levels. And really the things I'd point out here that are new is some really positive trends over the last 3 months. In China, which has bounced back from the dip that they had back to now about 80% of 2019 levels, but perhaps more impressively, the U. S. Right and steadily recovering to about 80 Since the 2019 levels and the Middle East after peaking quite significantly over the Sort of December, January period of dip back as restrictions on international travel have been necessitated by PAMX. The recent wave of COVID cases we're seeing across the world. But certainly, those three regions showing us Hamburg. Some strong recovery patterns to 60% to 80% of 2019 occupancy levels. Whereas, As you all know, in Europe, restrictions mean that occupancies are now very low, about 20% of what we'd normally have at this time of year. One last thing on this page that I'll reference and if you can remember for later on, it is the China line. And the reason what I'll just pull out there is if you go back and look at last year when China dipped down, its recovery started In Q2 2020 from a very low base and you could see it steadily climbs at that sort of 45 degree angle Up to a point in mid July where it was 60% of 2019 occupancies and then it continued to climb thereafter. And by Q4 was actually 90%, 95% of 2019 occupancy levels. And then it dipped down again after that. And the reason for the dip down is a lot of that spike up was pent up demand, which was released, created a spike and then it dipped down and we saw that sort of plateau where AMP. International or the lack of international travel, we're restricting some markets. And then Anders mentioned, recent number of cases in Chinese New Year's meant to dip down, but Hamburg. So just keep that in the back of your mind. From starting a recovery in Q2 was pretty much up to 90% or more in Q4. Because I think that will be relevant for Europe. On to Slide 35, just looking at average rates, And this one's always been a surprise to me. Certainly for the Middle East and for China where you can see that average rates indexed 2019 are pretty much back at 2019 levels. I personally had expected that they would be sitting more at around the 80 Mark, kind of where sort of the rest of the world is in Europe is sitting a bit lower at around about 70 10%. But what that does say is, rates has the potential to recover maybe far faster than we might otherwise have thought. Given those markets are still only at 80% of 2019 occupancy levels. So some Positive trends there in terms of the rate at which rate can recover even when the market isn't fully recovered from an occupancy perspective. So just very briefly on Europe. Looking at Q1 on Slide 36, no surprises. The gray line Well below prior year levels. Moving on to Slide 37. You can see for March in particular, March was when the lockdown started last year, sort of partially sort of March to March. This year is certainly still worse than last year in most places except for in Italy. And then as we go to Slide 38, there you go. PAMX. That's what we call a bad data slide because it's showing fantastic improvements year over year, April month to date in 2021 is huge growth on 2020. Just ignore the y axis and the percentage levels because then all the content is removed. But nonetheless, things are getting better and the comparables are going to get better as we go forward. So let's just talk about Q2. And on Slide 40, got here just a snapshot of looking across Europe. At the beginning of February, we were if you looked 2 weeks out, how much occupancy was already on the books? So in other words, Harmonic, how many rooms have been sold as a percentage of available rooms for the next 2 weeks as of the 8th February? And you can see that the numbers range from 4% to 7%, so very low. And how much were we Picking up. In other words, over the last week, how much did we sell for the next 2 weeks? We're on towards nothing, pretty universally. Why only 2 weeks? Well, the reality is the lead time for many reservations is so short at the moment that about 2 weeks It's all that really robust in terms of time frame to look at what how business on the books will play out to actual. But long story short, We knew early on in Q1 that it was going to be pretty dire and the data played out as such. When we look at business on the books now on the April, April 19, on Slide 41, you can see it's definitely much more positive. We're seeing occupancies in double digits, particularly in the U. K. 15%, Switzerland is 15%. And we're seeing that that is growing each week, so picking up about 4 percentage points each week. So much better, still relatively low numbers, but much better. So what does that mean as we go through the rest of the quarter? Well, interestingly, you'd expect U. K. To be showing much higher Yes, then say Switzerland, but it's not. It looks pretty similar. And the reason for that is if you go into Slide 42, That certainly for the next month still, hotels are really still restricted from being fully reopened, Can't do any kind of leisure travel. And I'd still say there is a push against business travel at the moment. And it's really only from The designated opening date, I think, 17th May, where things are More open for people to travel and hotels can freely open through leisure. And so that is where we're starting to see these Certainly, we can spikes our business on the books at 25% and beyond. And the interesting thing when you look at this is usually you would expect business on the books to tail down from the left To the right hand side of the axis. So you have more business on the books today than 3 months in the future, whereas what we're seeing is confidence is building as we go Into the future. So positive signs there. But what about the U. K. Versus the markets around the world? Well, on Slide 43, We can see that Ireland, even though there is no definitive planned reopening date, There is optimism that's coming back and an expectation that by the beginning of June, things will start to reopen and people are starting to book for that. So we're seeing it ramp up and Pretty close. Obviously, they also had the hope of the euros being hosted or some of the euro games being hosted there. That's unfortunately now being Canceled. So it'd be interesting to see how much of an impact that has on business in the books. I suspect not that much, to be honest, Because those are all Saturday peaks going through into the future. On Slide 44 is where it gets, I think quite interesting to see the difference between the U. K, France, Belgium and Italy, which Really can be put down to the vaccination gap between the different countries. And it shows Really, I think good cause for hope that as soon as cases are down, as soon as there's more certainty around ability to travel That there's no reason why France, Belgium and Italy and other countries in Europe wouldn't bounce back quite quickly to the levels of business and books that we're seeing And the U. K. Because that is really all underpinned by high levels of vaccination and certainty over reopening dates. Slide 45 shows that certainly Switzerland is doing a bit better than France, Belgium and Italy, But still quite well below the U. K. Business in the book. So what does those numbers actually mean? I mean, it's going up to Slide 46, What can we take away from looking at future business on the book that shows business at this level? And it is really difficult to make any definitive conclusions at the moment because Lead times to actual booking between booking and people staying are still very low, as I said, mostly within 2 weeks of stay. And we're outside that window. But what we can tell on Slide 46, this shows business on the books forward into the future From when the announcement took place that hotels would reopen to where we are now on the 19th April. And really the key takeaway is that As you move forward, the green line gets darker. And the darker green lines are always above the lighter green line. So every week, hotels are picking up more business Into the future. We're not seeing cancellations. We're seeing it grow. And we're seeing that growth accelerate. If you look in recent weeks, On those Saturday peaks, hotels are the UK market as a whole is picking up 3 to 5 percentage points of occupancy every week. And that's likely to accelerate. So looking at this data, just And assessing it from a high level, you would say that this should translate to occupancies of over 50% on the weekends, Really from the moment that the market reopens and that should continue to improve as we go through July and into the summer. Slide 47 shows regional U. K. Similar story, just a bit higher percentages versus London on Slide 48, which is tracking about 5 percentage points behind the U. K. Average, which is actually a bit more robust PAMX than I had expected. And I think that speaks to what Anders mentioned earlier and that with the lack of international travel, I think we will see some displacement where that will be replaced by domestic travel that will maybe like myself take the opportunity Banff. Do a staycation in London, go and stay at a lovely hotel, eat at a fantastic restaurant And feel like you're in a different world altogether. So that kind of takes me to Q3 And Q4 quite briefly. And I'll briefly just because it's very much similar to what we've been saying before, very much similar to What Anders mentioned earlier on Slide 50, the profile of recovery will be Leisure than Business, then Events and Groups, and that will be blended between domestic first and then international Later on. Going back to Slide 51, I just wanted to bring back that what I referenced earlier on In terms of China, clearly very different market to Europe. But nonetheless, I think a good benchmark what is likely to happen. And again, recovery starting in Q2 and by Q4 was up to 90% plus of 2019 levels. And it really did start with those Saturday weekend leisure peaks. And that is what we're seeing when we look at business on the books for the U. K. At the moment. And I personally see no reason why this the trend across the U. K. And the rest of Europe wouldn't look a little bit like this. Although perhaps, And this is my personal view. I actually think the bounce back is likely to be stronger, Kind of really down to pent up demand. In the same way that if you take a bottle of champagne out of the fridge and you leave it out getting warm and you open it after 1 hour, maybe the cork goes out a little faster than you expected it to. But if you take that bottle of champagne And instead of leaving it out for an hour, you leave it out for a whole year in the sun. Then the moment you undo that metal wiring around the top, That cork is going to fly out and champagne is going to go everywhere. And I think that is much more likely what we will see And Europe, given that the extreme state of pent up demand, certainly from a leisure perspective, as I perceive around the region. And so on Slide 52, it's no surprise that many people around the industry are expecting that in the summer we will have a strong bounce back. That we look at other VERTICALS. We're seeing significant rate growth year on year for any kind of appealing leisure destination. So I think we will see that come back Quite strongly. And then we may have a tail off like we did in China when the reliance on domestic business demand came back, But certainly continued growth in the long term. And so moving to the long term, I think PAMX. If you look at our forecast and these are just forecasts beyond 2 weeks, it's very difficult to really have any kind of certainty at the moment. But we do expect business travel will take longer to recover. And that's ultimately what PAMX. We'll hold back full recovery of the markets to something like 2024 from a RevPAR perspective. But going to Q4 and to Slide 55, I think it's important to recognize that Because of that pent up demand, because of that recovery, we think things will get back to 2019 levels. From a demand perspective, pretty quickly in the sense that by Q4 2022, most will be at 90% Of 2019 levels of demand. And that when you look at rates and assume that won't be quite back yet on Slide That RevPAR will be at the moment, we're forecasting around about 80% to 90% of 2019 levels By Q4 2022. Now that is on a quarterly basis. So when you go to annualized and you assume that the final 10% of recovery will take a bit longer. That is why you see on an annualized basis us forecasting Full recovery out more towards 2024, 2025. However, very much these are caveated by, As I said before, it's really quite hard to call. A lot does depend on the shape of the economic recovery And how much longer there will be meaningful restrictions on international travel. And so with that, I will stop and hand back to Anders. Thank you very much, Robin, for this run through. And now, operator, we are ready for questions. And we now have your first question from the line of Simon Morgenson of BNP. Your line is now open. Hi, James. Do you hear me? We hear you. Good. Thank you. I have a few questions for PAM. To start off, in terms of transactions in the market, yes, there had been no evidence of transactions When it comes to the yields and valuation of the stocks, but clearly later on, Anders, you showed us some well known transactions in the market. Can you please just clarify on what you actually meant by in that association because you communicated differently, Both of you. What? Lija, when she showed the yields in the transaction, she said there was Not that liquid market, not many transactions being done. But we saw on the Grand Hotel in Copenhagen Grand Hotel in Stockholm has been sold, the Choice Hotel in Copenhagen. PAMX. Okay. You mean that we should actually decrease our yield? Well, I think, well, We're not in that position yet. But I think as said that our yields are resilient. And I think Anders Confirm that the transaction that have been done has, if anything, been more aggressive Than anything we've seen before. So yes, well, we won't, for time being, decrease our yields. Interesting view, Simon. That's why I didn't understood your question, but I understood it now, yes. Well, very, very promising levels, if I may say so. We will see if that continue. Okay. Thank you. The other one is that Lia said there had been some waivers on individual loan agreements. Is there anything you would clarify on that and the implications If there are any implications of that? Well, yes, nothing different from the previous year. 2021, of course, started the same way as 2020. So there are individuals given in some credit facilities, But we have all the waivers in place. Okay. And my first most concerning question is, Hanra, is the deferred rent payments In the quarter, you haven't touched upon this. But when you go into the balance sheet now, we see it's SEK 566,000,000 in deferred rent payments, which is Some of them are long term, some of them are short term. But when you compare just the gain in Q1, I can easily see it's SEK 127,000,000 More now in Q1 than it was at the beginning of the quarter. This is a sum that, based on my calculations, corresponds to roughly actually 24 10% of the net rent in the operator activities paid in Q1. Is that rents not does that actually mean that 24% of The rents from the operators aren't being paid this quarter? Or could you please elaborate a bit on these figures? Well, the EUR 566 PAMX. This is accumulated delayed payment and Terms, and this is about $120,000,000 more than in Q4. And this is, of course, an effect of Both that we in the end of 2020, we entered into some agreements which are which for example, There was a postponement, especially in Germany, where like 50% of the rents paid Also for Q1 and Q2 will be delayed over a period of up to a year or more. I said before that I didn't expect this amount to be more than SEK 500,000,000. Now we're going to say SEK 566,000,000 and this will unfortunately be maybe SEK 50,000,000 more. But this is a consequence of the fact that we haven't seen the recovery as we expected as Quickly. However, these are again with operators. It's a few operators where we have bank guarantees and corporate guarantees. So this is a liquidity help we are giving them. We don't give any reactions around. I've said it 100 times, and I'm saying it 100 times more. And we don't see this as any danger, but the opposite is this is the way for the operators to Managed the liquidity. Yes. But this sums actually it mostly refers then to the operator activities And that sounds like it's roughly This is not the operating activity. This is only the Not the operating yes, yes, yes, I'm sorry. To the operators, I'm sorry, the external operations. My fault. But it is more than 20% of the rents, which is including P and L every quarter so far, right? Well, it's also sometimes agreements in the end of that. It's not only the increase is not only related To the Q1, but it's also how the payments have been for Q4 2020. PAMX. And that comes to a lot of parts of the questions. You touched upon the regional levels. Is this mostly in Germany? PAM. Is it in the U. K. Or in the Nordics because you have 3 large operators and pretty much everyone knows who they are? Well, it's outside the Nordics. And this is again typically a consequence that the lockdown has been much worse, more severe outside the Nordics. Also that we entered into agreements, the more recently signed agreements outside the Nordics, where the minimum rent is maybe like 90% of the turnover rent, which is Quite hard because of again, we did quite a lot of transactions in 2017, 2018, 2019. So of course, this is with operators outside Hamburg. In the Nordic, these are old agreements, which again, it's on a much lower level, which Should not be a problem for the operators to pay. Yes. Is there any cost for operator to delay payments? Or is it interest rate free? Or how do you solve that? Well, typically, there may be some interest, but not very low interest. Pampers. It's not one standard, but if there's an interest, sometimes the industry, but it's on a very low interest. Okay. So it's not like normal delayed payments interest terms? Exactly. And again, it's €500,000,000 Yes. Okay. My last question is a bit more on the positive note. The U. K. Vaccination has been quite leading and the most going the fast The farthest of the markets you covered for our investors in. How do you see the bookings are transcending there versus the rest Of the markets you are and how much because you've spoken about the performance of RevPAR so far, but you I assume you still have overviews of booking PAMX into Q2. And what you can tell us how much is actually the vaccination driving bookings as you can see? That is a strong correlation between successful valuation vaccination program, which lead to easier restrictions at Pan. That is strongest processes that you can find in the industry today. And UK had been probably the most successful in terms of vaccination program. And you see that now that the confidence is coming back even if the restrictions are still quite hard. They start to book over summer. They already did that in Q4 last year, but that continue. I believe today, tough to get a hotel room in Brighton for July, August already. And I know all housing in the southern or in resort Destinations in U. K. Is also very high and a very, very strong trend in terms of booking. What we now see for the last couple of weeks is also some sort of improvements for Q2. But there we wait for more data before we can say that the trends are there. But as it looks Now U. K. Will be the one, as I said before, who will take lead of the recovery in Europe. And that is based on restriction, they will issue restriction first. Sorry, Freiman, what you said? Have you seen the same bookings? Because last year also, this summer was very good in the Nordics with a lot of Yes. In the Netherlands Peyen at home. Are the bookings you think it was full in Brighton, etcetera, in the U. K. Are you seeing the same in the Nordics? No, we don't we see some sort of positive movement over summer, but That hasn't really started yet in the Nordic. And Norway are still very much in lockdown and even in Finland. So it had to be More restrictions had to issue before you will also see that in Nordic. But again, If this come and expect to come here in Q2, then immediately you will see it. In all resort cities, you will see Also in domestic and regional destination in Scandinavia and we'll take a lead. And our forecast is that The summer will be stronger this year compared to last year, basically because it will start earlier. Thank you for taking my questions, and I hope to meet you guys soon. You remember that last year, It was even above 2019 years level in Kristiansand and in Lillehammer. And so you see that Norway was The best market in Europe in July last year. Okay. Thank you for taking all my questions, both of you, and hope to meet you soon. Thank you. Thank you. Thank you. Bye bye. Thank you. And your next question comes from the line of Frederik Amundis. Klein of Carnegie, your line is now open. Good morning. Yes, a couple of questions. So starting off, you made some remarks and clarifications in the quarterly report Regarding the weak start of the year and the sign of the rental agreement, that will have an adverse impact on Revenue Recognition in the during the coming quarters. Why did you feel obliged to mention that? PAMX. Did you look at estimates and felt like investors did not understand the mix? So what was the rationale behind mentioning that? Well, the major reason was that we want to have and Give you good guidelines how we see the market is coming. And of course, when we in one hand are have a positive view about the market outcome then, of course, on the other hand, when we have a mechanism in our lease agreement, then we I think we should tell you also it not come as a surprise. Yes, I understand. PAMX. The start of the year has been tougher than last year. But on the other hand, the outlook for the Q2 looks better. And those two factors are moving in opposite directions. But I would imagine that you still expect a gradual recovery year on year on top line for Pampers. And I'm thinking about the property management part now. Yes. But coming back for having to come above minimum level the minimum rent in other market outside Europe With the start of the year, they have been very slow, for example, in Germany. Then you need a very, very good Q3 and Q4. 4, and we don't want to give you that expectations. Yes, that's clear. And then on you You mentioned behavioral changes. Of course, they were still out there. And then who knows how it will look like. But in your internal model that you use for Your property valuation, have you assumed any behavioral changes long term? Or is this purely driven by the cash flow impact During 2020 and the start of 2021. No, we don't see any consumer trends. It's people who normally Have not been in the not had so much experience about the Tel business to talk about it. And when that had been in all crisis, it is Fizz crisis. So we always talk about big change in the market. You will never come back and you can kind of close their hotel and no business travelers will be there. Yes. This maybe will happen this time, but we don't see it. And that's why we don't also take any other views in our valuations that we have done before. So let's wait and see. What we see in market head of Europe is that we very, very see very small change in consumer behavior. But what we see is that restriction holding back demand. And so let's wait for the restriction with the issue and see what's coming up. And then one question on projects generally in the market. Of course, the crisis leads to lower new supply. How are you looking at Pampers. Supply situation across Europe, I know it's very much a 50 by 60 nature. But generally, are you seeing that New projects are put on hold and that could have a positive impact on situation 2 years out or something like that. Yes. I would say most of the hotels who was published will be billed, Sad to be sad because there was already any contract. But you don't see any new hotel project development coming up, of course. So We will have we need recovery phase in some markets like Copenhagen. We'll have a tougher than other because of new supply. But from, let's say, 2023 or something like that, the most of the gain New capacity has coming in, and then we have to take it from there. It is Always the same, a new player coming into the market. And when the market is peaking out, then the new supply coming in and make things even worse. Hopefully, we can buy a few of these hotels. Yes. That's the usual economical cycle when it comes to construction and real estate. Then finally on the and the follow-up on the deferred rent That you mentioned, it increased somewhat in the Q1. Lea, how do you perceive that line Going forward Q2, Q3, do you expect it to be at a similar level or continue upwards? No. I think it will be on the Similar or slightly above in Q2 due to the fact that we are in Q2 now and the restrictions are Hitting hard. I expect this we have split it between the long term and short term. So you can see that nothing was SEK 217,000,000 which is Long term and the rest is short term, I. E. Within 12 months. So I do expect it to peak maybe at another Bank. €650,000,000 or so. And then diminish unless there is 8th or 10th wave of this horrific pandemic. I hope not. Thank you for taking my questions. Thank you. Thank you. And your last question at this time comes from the line of Stefan Anderson of SEB. Your line is now open. Thank you. Two questions from me. First on the valuation side, a bit curious there where Looking at the external values, seems like you are closer to them this quarter on and it's a 12 months rolling number, I understand. Then in the last quarter and in Q4, you also had Q1 valuations included. I think the external ones were 6% below then and now it's 5%. So my question is, First, well, it's a twofold question. First, have you seen if you don't look at the long term development, the 12 months rolling, but just look Q4 to Q1 now, have you seen the external values becoming more positive? Or is it just an effect Of your negative revaluations in the quarter. And then connected to this, I think last quarter in the Nordics, You were agreeing and this quarter you say that you have the external values a little bit lower. So my question is then also Has there been a change in tone for some reason in the Nordics? Why such a big difference between other regions? Okay. Yes. Let me start. Well, when it comes to the undertone from the external evaluations, I mean, there are Practical limitations to doing a lot of evaluations. And of course, practically, Every bad quarter you leave means that you actually it's getting better and better. PAM. My personal view is that value agents are cautious people and that they may be Getting more confidence and looking at more sort of how is it going, it's we're not all going to die. It's they take a More realistic long term view on yields, long term yields, etcetera, especially when you see other property assets The values go down. So there is no reason why there should be such a yield gap between hotels And other property at that. When it comes to between the regions, I think still maybe I wasn't clear. I think on average, it's 5%. If anything, the Nordics are in line with what we see and sometimes even more positive. I mean, we do have external valuations where PAMX. The value is higher than what we have. But especially when you look at Germany and maybe U. K. And where we have done some Antwerp. External valuations, they are initially larger gap than the Nordics still, Which is, my personal view, a reflection of the uncertainties of the transaction market, the lockdowns and All of the bad things, I was going to say. Okay. And then the second question relates More philosophical, but see what you can answer on the contract side. We're speaking to some of your operators. Given the situation, of course, everyone is trying to improve their situation also long term. And my impression is with talking to some of them is that it's not helpful to just get the lower price, which could be one discussion. It's more focused on a bigger flexibility, meaning that you could leave Some of the upside to the top donor and get some more help. On the other side, of course, you are already in that space in the Nordics. But PAMX. So my question is really, do you think that your contract in the Nordics could become even more flexible than they are today? And the second question, do you think that your model, which is not as common outside of Nordic, Antoine. Could gain traction that you could actually have some more valuable contracts also in other parts? Well, Stefan, I think the model we have is what people talk about that they would like to achieve A revenue based model, where you have a minimum level, you invest together, you have frequently And frequently a dialogue about how to improve the hotel. That is rare in our industry. It's PAM. It's normal property company who don't have any specific understanding or lack of understanding of the hotel business And you want to have some other fix as possible. So I think things are moving in our direction. So We see that what we are doing today is where most of the operator want to go. So we don't see any big things there. Then of course, investment as we speak is something that some of the operator has not liquidity to do. And then We can support them. And that, I will say, have 2 positive effects. 1 is that we are ready when things are He's coming back. And the other thing is that will strengthen our partnerships, so that is only positive. So our knowledge In the hotel industry and the model we have to be an active investor is have never worked better than it works at the moment. And on that note that do you think could you see a situation where PAMX. Take more of the upside in the strong market and then give away even more in the downside when that happens? Or are you very, very happy with where you are? Pampers. Well, let's see what's coming up in discussions when new contract will be signed. We have nothing in 2021. We will come in a portfolio with Scandic 2022. And of course, I would say, our position is that we want to have More guarantees. We want to have higher and minimum level, and they want to have opposite. That is not something who is special For this crisis has always been, but strong partners normally come to agreement because we know We expect to cooperate and fight. Sorry for having a final follow-up on that. Would there be a limitation from your financial bank and so when it comes to having lower limit more flexibility and lower guarantees. Well, typically not. I think Bank. The bank if we think we are doing a good deal, then the bank is actually confident that we are securing their interest as well. Okay. Okay. Thank you very much. Thank you. Well, Ladies and gentlemen, thank you very much. Thank you very much, Robin. And again, remember that Robin is An independent researcher and very professional one, but very independent what you say is nothing that we talked about before. So thank you for listening to us and hope to meet you in mid of July with a more stronger market. And what I can promise you is that Q2 will be better this year compared to last year. Thank you very much and goodbye and have a good day.