Earnings Report /
Croatia

Valamar Riviera: Top-line doubled, operations in line with seasonality

  • 1Q is not indicative for the business operations for the year as it only make 2% of total business

  • Q1 EBITDA was down to HRK -91m due to discontinued Covid-19 state support and extra expenses for the summer season

  • In current light of events, we believe that our 2022 estimate for top-line growth of 28% should be easily achieved

Tea Pevec
Tea Pevec

Head of Research

InterCapital
2 May 2022
Published by

1Q is not indicative for the business operations for the year as it only make 2% of total business but 1Q showed solid top-line results. Operating revenue doubled to HRK 59.5bn. COVID-19 pandemic significantly weakened both globally and in Croatia. Related restrictions in Croatia have been significantly eased and business was in Q1 running almost completely normally so ADR increased 3.6% to HRK 427. In Q1 four hotels and two camps were opened while an additional five hotels were opened during February and March. Several other hotels and campsites were opened mid of April during the Easter holidays. Booking was up since the beginning of the year but slowed down a bit after the Russia-Ukraine crisis started. In the last few weeks, it increased again and booking trends point to a potentially good summer season.

EBITDA in Q1 was down to HRK -91m despite strong growth in revenue (+97%) due to discontinued Covid-19 state support and increased expenses due to the opening of more hotels and early preparation for the summer season. Material costs growth was in line with the growth of business volume, while gross margin is on a normal level for 1Q operations. Staff costs more than tripled to HRK 76m as in Q1 2022 there were more hotels YoY opened and there were no pandemic subsidies. The number of employees increased to 3,604 while the average monthly salary stood at HRK 7,364. State grants for job preservation were realized in the amount of HRK 39m in Q1 2021. Other operating expenses increased 43% YoY which is less than growth of sales of 97%. Due to lower interest expense and unrealized gains on financial assets, Valamar noted a slight improvement in the net financial result which stood at HRK -26m. The Group has shown tax income of HRK 39m (due to tax incentives) which all resulted in net income after minority of HRK -172m (vs. HRK -116m in Q1 2021).

Financial results are in line with our estimates. We have an outlook for the solid summer season, and we believe that the ongoing geopolitical situation should not influence demand for Valamar facilities and services. In light of current events, we believe that our 2022 estimate for top-line growth of 28% should be easily achieved. Therefore, we are fine with our recommendation and target price.