The eurozone crisis rages on, growth in Europe and the US slows, and yet French hotel group Accor seems to expect an Indian summer. It has primed investors for a near-20 per cent increase in full-year earnings before interest and tax, in line with consensus, on higher occupancy and average room rates, and no sign of slackening demand.
Investors, keen to harvest what they can from Accor’s asset sale programme, were irked that it did not use Tuesday’s investor day to herald a special dividend; they marked down its shares by 1.9 per cent. As Accor has underperformed the FTSE Eurofirst 300 leisure and hotels index by almost 16 per cent already this year, that looks harsh.
Accor’s return to basics under new chief executive Denis Hennequin has much to recommend it. After selling its Lenôtre catering business and its stake in casino operator Lucien Barrière, it is 100 per cent hotelier – as owner, operator or franchiser.
By selling its hotels and putting them on management or franchise contracts, the owner of Novotel and Ibis hopes to be 80 per cent “asset light” by 2015. Owning only 20 per cent of its properties outright would put it in line with the sector trend, while the sales would by 2015 reduce adjusted net debt by €2.2bn – not bad given it was saddled with almost €1.6bn of debt when it demerged its voucher business last year. Accor plans to be net debt free by year-end, from €559m in June.
That may seem reasonable as its full-year ebit projection of €530m would almost cover that. But Accor’s heavy exposure to anaemic Europe makes its trailed “medium-term” ebit margin improvements of 2 to 4 percentage points (from about 8 per cent) look over-hopeful. Investors may clamour for jam now. But so soon after the demerger of its cash cow voucher business, Accor should postpone balance sheet management until the outlook becomes clearer.
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