Arena Hospitality Group dd

During 9M 2023, Arena Hospitality Group (AHG) recorded total revenue growth of 15% YoY, and 21.3% compared to 2019. Taken together, this led to an EBITDA decrease of 4% YoY to EUR 35m. Together, this led to a net income of EUR 14.6m, a decrease of 17...

The positive trend recorded in Q1 carried on in Q2 2023, leading to improvements in revenue across all regions. OPEX grew significantly as well, amounting to EUR 41.9m, an increase of 44% YoY. In H1 2023, the net profit of the Company is negative at...

Q1 2023 continues the story we have seen in Croatian tourism for the last year, albeit with some positive surprises. For AHG, this came in the form of higher revenues across all regions, with total revenue increasing by 83% YoY. In terms of profita...

The 2022 total revenue amounted to HRK 825.3m, an increase of 79% YoY, and 6.1% compared to 2019. EBITDA amounted to HRK 234.9m, an increase of 44% YoY, under the influence of higher OPEX (+104% YoY). The net profit for the year amounted to HRK 36.2m...

In Q3 2022, total revenue amounted to HRK 512.8m, an increase of 43% YoY. Compared to 2019, this is an increase of 21%. EBITDA increased by 68.9% YoY and amounted to HRK 274.6m, while compared to 2019, this is an increase of 10%. Finally, the net inc...

H1 2022 marked the continuation of the travel demand surge already recorded in Q1 2022, with strong occupancy growth and solid increase across all customer segments and Arena’s operating regions. Campsites also contributed 29% of the total revenue mix, as compared to 22% in 2019. CEE region also recorded a noteworthy performance, with total revenue of HRK 20.8m (H1 2021: HRK 0.5m), an ADR of HRK 894, and an occupancy of 23.4%, mainly driven by the Arena Franz Ferdinand’s performance. EBITDA amounted to HRK 6.4m (H1 2021: HRK -49.3m), driven by the higher business activity and government grants received in Germany.

Q1 2022 marked a period of gradual improvement in demand compared to the same period last year, as the travel restrictions across Europe were eased. The performance across all three regions (Croatia, Germany, and CEE region) recorded an improvement, especially in the CEE region where Arena franz ferdinand in Nassfeld contributed 40% (or HRK 17.4m) of the Group’s total revenue during Q1, with an occupancy rate of 66%. Even so, the relaxation of measures in Croatia also had a significant impact on the Company’s performance, with revenue growing by 151% YoY and amounting to HRK 12.8m. With the increase in business activity, OPEX also grew by 84.8% to HRK 76.5m.

Revenue in 2022 to exceed record 2019 levels, with profitability following closely. Combined, this will drive the occupancy rates, ADR, and accommodation revenue in Croatia above the levels seen in the record 2019. HRK 300m in 2022E, and decreasing to HRK 232m by 2023E. This takes into account all the current investments into assets the Company is executing: Lease hotel in Zagreb, FRANZ Ferdinand, art'otel Budapest, 88 Rooms Hotel Belgrade, as well as a potential for new acquisitions, which the Company is actively monitoring for. However, we do not expect business travel to recover to pre-pandemic levels anytime soon. As such, we estimate occupancy rates, ADR, and acc.

With the strong recovery experienced in 2021 across the whole tourism industry, AHG followed suit. Because of this recovery in Croatia EBITDA also turned positive at HRK 0.9m (vs. Q4 2020: HRK -36.9m), but net income remained negative at HRK -38m (Q4 2020: HRK -117.6m), which is in line with our expectations and should be expected due to more strict pandemic measures in Q4, especially in Germany. and ADR to HRK 580.5, a 19.3% increase. Government-supported payroll expenses amounted to app. HRK 14.2m of this and ended in July 2021.

Easing of travel restrictions, opening of borders and ramp up in vaccine roll out has positively affected the operations of Arena, so Q3 results show strong improvement on all lines. In 9M Group received State support on all its markets in the total amount of HRK 49.7m. On German portfolio performance Government measures reduced the payroll expense by HRK 6.8m and operating expenses by HRK 17m in 9M 2021. On the level on the whole year, we expect to see Group’s bottom line in slightly positive territory. Croatia performed somewhat better on the top-line than our estimate.

Reopening of economies from June has positively affected the operations of Arena, so Q2 results show improvement on all lines. We note that the increase could be attributed to strong Q2 (HRK 41.5m) and weak Q1 of HRK 5.1m as the Group returned to usual doing business only in June. The Group continued to receive State support on all its markets and to renegotiate contracts with lessors. All this reduced the operating expenses which were down 10% to HRK 105.6m. So, in H1 net loss amounted to HRK -103.7m compared to HRK -125.0m in H1 2020, which is an improvement of 17% YoY. On the level on the whole year, we expect to see Group’s bottom line in slightly positive territory.

In Q1 21, Croatian tourism observed a decrease in arrivals by as much as 44.7% and a decrease in tourist nights by 39.2%, as a result of the ongoing Covid-19 situation. Such a market condition affected the operations of Arena, which noted a sharp decrease in accommodation revenue of 87% to HRK 5.2m. Total revenues in the Croatian portfolio reached HRK 5.1m (-49%), while accommodation revenue reached HRK 2.8m (-70%). In Germany the Group continues to utilise the “Kurzarbeit” measures which reduced the payroll expense by HRK 3.5m during Q1. Going further down the P&L, the Group had noted a net loss of HRK 66.9m compared to HRK 46.2m in Q1 2020). We keep our current recommendation of Hold.

2020 results are mostly in line with our estimates, including the assumptions on decision not to pay dividend, while the Group has accelerated the pace of investing. In 2020 the Group invested a total of HRK 274.3m, exceeding our estimate by HRK 87m as the purchase of the Belgrade hotel was realized already in 2020 coupled with more investments in public areas and facilities of certain hotels and campsites. In the Croatian portfolio EBITDA was slightly positive at HRK 3.1m (-98% YoY) with the Campsites segment being the only one posting a positive EBITDA of HRK 14.8m (margin 20% vs. 40% in 2019).

Revenues to return to pre-crisis levels in 2022E and profitability in 2023E. In comparison to our previous estimate, revenues are substantially lower in 2020E due to the pandemic impact on consumer behaviour and measures introduced to curb the spread of disease. Occupancy for Croatia is expected to return to the pre-crisis level in 2022E. Higher yielding investments are fully operational in 2023E when Arena’s EBITDA profitability is expected to reach pre-crisis levels (29.6%) and amount to HRK 246m. From 2022E it is assumed that the company will resume dividend payment.

In 9M 2020 total revenue decreased 67%, which is slight improvement as Croatia operations have supported the top line resulting in a softer drop as compared to H1 (-71%). In the Croatian portfolio, 3Q EBITDA was at HRK 57.2 due (-71% YoY) as campsites contributed by over 50% to Q3 revenues and over 60% in profitability. Therefore, in 9M EBITDA was positive at HRK 23.7m (down 87% YoY). In 9M 2020 tax income amounted to 25.6m, as tax benefits were granted by the Ministry of Economy linked to the previous investments the Group has undertaken in Croatia. Due to improvement in operating profitability in Q3, net loss decreased (vs H1) and amounted to HRK -109.7m.

The ongoing coronavirus crises has resulted in a strong deterioration in the revenue of Arena Hospitality Group’s Croatian and Foreign operations. Total revenue decrease of 70% YoY was as a result of revenue decrease in Croatian portfolio of 80% YoY and German and Hungarian portfolio of 60% YoY. Decline in accommodation revenue of 71% was driven by decreased business activity related to the pandemic outbreak. Depreciation grew by 13.7% to HRK 53m (1H 2019: HRK 46.6m ) due to previously undertaken investments, while capex in the period was HRK 158m. The company’s debt has increased by 11.5% from end of 2019 as it withdrew debt to finance the investments under way during H1.

Croatia's Arena Hospitality Group published Q1 2020 financial results which are reflecting the start of Covid-19 imposed shut-down measures. The like-for-like comparison of EBITDA, that excludes the contribution of Hotel Brioni’s operations as the hotel is now closed for refurbishment, is down 37%, driven by a decline in accommodation revenue of 26%.Operating profitability decreased 10 p.p. The company’s debt has increased by 11% as it withdrew debt to finance the investments under way during Q1.

Arena Hospitality Group published audited FY 19 results, which are in line with our recently published estimates. Such a decrease could be attributed to the delay in the opening of the Arena Kažela Campsite, increase in employee expenses (+7.5% yoy) and travel agent commissions across the portfolio (+9% yoy). The main driver of growth were Arena One 99 Glamping and Arena Kažela Campsite. As a result, accommodation revenue is up by 3.1% to HRK432.5mn. Growth in profitability arising from new investments was offset by a more pronounced increase in cost of labour, travel agent commissions, waste management and property taxes. EBITDAR recorded an increase of 2.3% to HRK75.

Our latest update of the model for the Arena Hospitality Group values the company at HRK438 per share, making it a Buy recommendation. The implied valuation prices the company above the forward EV/EBITDA multiple of their peers which we attribute to stronger growth prospects due to refurbishment potential of existing assets, strong balance sheet (net debt/EBITDA of 1.9x) and internationalised revenue structure in comparison to domestic (Croatian) peers. We envisage in our business model that the company will invest more than HRK1bn over the projected period.