Accor announces EUR 1bn funding injection

9th March 2005, Comments 0 comments

PARIS, March 9 (AFP) - Accor hotels reported on Wednesday a 13.2-percent rise in pre-tax profit and a EUR 1 billion (USD 1.34 billion) investment from a fund as part of an "innovative" property strategy.

PARIS, March 9 (AFP) - Accor hotels reported on Wednesday a 13.2-percent rise in pre-tax profit and a EUR 1 billion (USD 1.34 billion) investment from a fund as part of an "innovative" property strategy.

Accor said that Colony Capital, a US-based international fund, had agreed to invest EUR 1 billion in the company via two separate bond issues and would be represented on the supervisory board.

The company said that the move would "strengthen Accor's finances and provide new resources to drive growth" under a plan involving the sale of the Sofitel hotels.

Colony said it expected to see a 20-percent return on its contribution, as Accor ramped up growth in emerging markets.

The announcement came as the hotels group reported a 13.2-percent rise in pre-tax profit for 2004 to EUR 592 million, from EUR 523 million a year earlier.

The result slightly topped the company's target of EUR 570-590 million and was in line with analysts' forecasts in a range of EUR 578-592 million.

The company said that "after a lacklustre summer in the hotel business, in France and in the US economy segment, the fourth quarter showed an upturn, particularly in upscale and midscale hotels and the US economy segment, which is beginning to leverage the economic recovery."

It proposed to shareholders an unchanged ordinary dividend of EUR 1.05, but accompanied by a special dividend payment of EUR 0.25.

Accor said that the new real estate strategy should unlock additional financial resources of about EUR 400 million over the next 18 months.

Those funds would be used for acquisitions as well as "product repositioning (and) shareholder policy", it said.

A Colony spokesman said the EUR 1 billion investment was "a big, big vote of confidence in the Accor team (and) a vote of confidence in the brands of the group".

He said: "I'm deeply persuaded of this... we know the hotel trade is on the upturn."

He spoke at a meeting of analysts to present the full-year 2004 Accor results as well as the Colony investment and a new strategy for the group's real estate assets.

He said Colony was "looking forward to a 20 percent return on our investment", in line with previous performance by the fund.

Accor said that half the Colony investment would be used to refinance debt, and that the other half was earmarked for "driving faster expansion", quantified as fitting five-years of growth into three.

It involved selling upscale hotels, such as the Sofitel chain, while retaining the management contract, and sometimes with a minority stake. The company said this would "reduce earnings volatility in a segment that is more sensitive to business cycles".

The group targeted 75 percent of all Sofitel units to be under management contract in 2006, versus 62 percent in 2004 and 52 percent in 2000.

In the midscale segment, Accor would transfer fixed leases into variable leases based on a percentage of revenues with no minimum guaranteed.

"In line with this strategy, an initial transaction, concerning 128 hotels in France worth an aggregate EUR 1 billion, has been signed with (investors consortium) Fonciere des Murs," Accor said.

By 2006, 15 percent of Novotel and Mercure hotels should be under variable lease contracts, versus one percent in 2004, it said.

Revenues in 2004 were up 4.3 percent at EUR 7.123 billion from EUR 6.828 billion in 2003 while net profit fell 11.5 percent to EUR 239 million, due to a non-recurring EUR 58 million impairment loss on Compass shares, Accor said.

Investors welcomed the Colony investment and good 2004 results, pushing Accor shares 4.20 percent higher to EUR 37.22 in midday Paris trading, while the CAC 40 was up 17.30 points (0.42 percent) at 4,102.68.


Subject: French News

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