Earnings Report /
Croatia

Valamar Riviera: Strong Top Line to Compensate for OPEX Growth in Q3

  • Operating revenue increased significantly, growing by 154% YoY to HRK 677.5m.

  • Adjusted EBITDA increased by 47% to HRK 28.9m. The EBITDA was heavily influenced by the operating expenses this year.

  • Valamar expects the EBITDA to normalize by the end of the year, as higher Q3 profitability adds its contribution.

Tea Pevec
Tea Pevec

Head of Research

Follow
InterCapital
2 August 2022
Published byInterCapital

Strong Q2 2022 shows that the top line is above our estimates, with all trends pointing towards 2019’s level. Given the current inflationar

2H 2022 continued the trend of recovery and growth on the top line that already started in Q1 2022. Operating revenue increased significantly, growing by 154% YoY to HRK 677.5m. The increase was driven by strong improvements in tourist flows, with Valamar realizing 2.1m overnights, an increase of 145% YoY, and 3% less than 2019. The operating revenue growth was also driven by higher average prices, which are 26% higher YoY, and 8% higher than in 2019. The premium properties segment, and especially campsites, recorded the best performance. Since H1 2022 includes the pre-summer season and the majority of the revenue and profitability is made in Q3, these results are encouraging on the top line. This trend is also evident if we look at Valamar’s board revenue in July, which Valamar expects to be 21% higher than in 2019, driven by higher average prices with a similar number of overnights. This is also true if we look at the ADR, which increased by 26% YoY to HRK 597.

Adjusted EBITDA increased by 47% to HRK 28.9m. The adjustment refers to the effect of one-off items in 2022 and 2021. The EBITDA was heavily influenced by the operating expenses this year, as high energy, foodstuffs, and labour costs weighed heavily on this line. Likewise, Q2 2021 included govt. related pandemic subsidies, something which wasn’t given again in Q2 2022. Combined with the pick up of the tourism activity, as well as the current material, energy, and labour cost pressures, OPEX increased by 81% YoY and amounted to HRK 888.2m. Breaking this down further, material expenses increased by 145% YoY, while staff costs increased by 251% YoY.

However, it should be noted that Valamar expects the EBITDA to normalize by the end of the year, as higher Q3 profitability adds its contribution. The net financial result amounted to HRK -18.1m, a decrease of 89% YoY, mainly because of negative FX differences. The tax income amounted to HRK 37.3m, mainly because of recognizing deferred tax assets on realized loss. Combined with the higher OPEX, this resulted in a net loss after MI of HRK -165.4m (H1 2021: HRK 104.4m). The Group also commented on 2021/2022 investments, in the total amount of HRK 313m, which will go into Corinthia Hotel in Baška, Istra, and Lanterna Premium Camping Resorts, and the renovation of Dalmacija Sunny Hotel by Valamar, among others.

Strong Q2 2022 shows that the top line is above our estimates, with all trends pointing towards 2019’s level. Given the current inflationary pressures, however, profitability already suffered, but considering that Q3 is when much of the profit is made, if Valamar can repeat or surpass its 2019 net profit, then our 2022 estimates can be achieved. The growing interest rate environment is also putting pressure on equity, and as such, we will re-evaluate our estimates after Q3 results.

y pressures, however, profitability already suffered, but considering that Q3 is when much of the profit is made, if Valamar can repeat or surpass its 2019 net profit, then our 2022 estimates can be achieved. The growing interest rate environment is also putting pressure on equity, and as such, we will re-evaluate our estimates after Q3 results.