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A Year of Growth for Club Med in 2012 despite a challenging environment in Europe

2012 Annual Results

MIAMI, Dec. 7, 2012 /PRNewswire/ --

- Business volume     up 3.7% to €1,515 million
- 4 and 5 Trident customers     up 7% increase [+ 57,000 ]
- Operating Income Villages     up 1% to €62 million
- Net income before tax and non-recurring items     up 7.3% to €35 million
- Net result     €2 million
- Gearing     -10 points at 23%
- Free cash flow     up 45% to €55 million

Xavier Mufraggi, CEO of Club Med North America, comments on the fiscal 2012 results as a reflection of Club Med's success in the U.S. saying:

"Club Med North America is pleased to announce another profitable year in 2012, with our best results in more than 10 years despite a challenging market, illustrating the success of a change in business model that aligns with an upscale and family-focused strategy.

The success of the renovation of Sandpiper Bay in Florida is one of the key elements in Club Med North America's impressive performance. The resort surpassed expectations and illustrates the importance of having an all-inclusive family resort in the U.S. Sandpiper Bay was not the only resort responsible for our growth, and even despite challenges in the market, the region has also garnered more sustainability through an increase in brand loyalty, and an acceleration of new guest recruitment in resorts worldwide (including ski destinations and additional group bookings.)

Club Med continues to keep a pulse on the industry in order to offer today's travelers an unparalleled and dynamic vacation experience at more than 80 locations around the world. 

For 2013, we will continue to invest in our portfolio by opening new resorts in Pragelato Vialattea, Italy, Belek, Turkey and Guilin, China, while also renovating current properties in Rio Das Pedras, Brazil and Cherating Beach, Malaysia. Specifically in North America, we will continue to focus on our points of differentiation vs. the competition. For example, we will reinforce the positioning of our sports offering through a new concept surrounding "Active Vacations" set to launch at our Sandpiper Bay property. To further strengthen our positioning as the leader in unique children's offerings, this spring Club Med will introduce the most competitive pricing for children in the market by extending our kids under 2 stay free to kids under 4.

In response to the increased interest from American and Canadian customers in our unique ski product, Club Med has prospective plans to open a new ski resort in North America. Our brand already has 50 years of experience in ski vacations and 23 ski properties worldwide with high occupancy rates and an outstanding level of guest satisfaction.

We are confident in the North American market and look forward to upcoming projects and new growth."

Commenting on the annual results, Henri Giscard d'Estaing, Chairman and Chief Executive Officer, noted that:

"Club Mediterranee's reported an increase in revenue for fiscal 2012 despite accelerating deterioration of the European tourist markets during the summer. Thanks to its powerful positioning on the upscale market, the Group was able to protect its margins and demonstrate the resilience of its business model.

Club Med is now in a position for a new step forward in the deployment of its international expansion strategy, by leveraging its stronger financial position, its upscale portfolio of villages and the ability to interface one-to-one with customers through direct distribution network.

Club Med is positioned to capture growth in the market of all-inclusive upscale vacation packages in order to get by the end of 2015 one in three customers to come from fast-developing economies."

1.   A year of growth in 2012 despite worsening market conditions in Europe

 -- Key figures for fiscal 2012 (1 November 2011 - 31 October 2012)

  • Village business volume (corresponding to total sales regardless of village operating structure) rose by 3.7% to €1,515 million from €1,461 million in fiscal 2011.
  • Village revenue totaled €1,447 million, up 2.2% with increases of 2.8% in the Europe-Africa region (of which +2.5% in France in a market declining by 2.6% according to CETO1) and 4.5% in the Americas region. In Asia, revenues dipped 2.6% due to the sale of the Lindeman Island village in Australia. Excluding Lindeman Island, revenue from the region was up 2.8%, helped by a 24% rise in the number of Chinese customers during the fiscal year.
  • RevPAB (revenue per available bed) at constant exchange rates was 2.1% higher, at €99.3, versus €97.3 in fiscal 2011, reflecting a 1.8% improvement in the average price per hotel day to €139,3 and a one-point rise in the occupancy rate to just under 69%.

 -- Profitability preserved attesting to the business model's robustness.

  • EBITDA Villages was stable at €126 million. EBITDA margin stood at 8.7%, close to the 9% target announced last June.
  • Operating Income Villages rose to €62 million from €61 million in fiscal 2011, lifted by higher contributions from the Americas and Asia. These two regions now account for over two-thirds of total operating income villages, reflecting the effectiveness of the Group's global strategy.
  • Operating loss from the management of assets amounted to €26 million, with the €32 million cost of closing non-strategic villages partly offset by gains on disposal of the Meribel Aspen Park village and other assets.
  • Other operating income and expense represented a net expense of €14 million, of which restructuring costs accounted for €10 million.
  • Finance cost - net represented €8 million versus €16 million in fiscal 2011. The €47 million reduction in average net debt led to interest savings of €3 million, while profits on sales of shares and provision reversals had a positive impact of €4 million.
  • Net income before tax and non-recurring items rose slightly to €35 million after quadrupling in fiscal 2011. Attributable net profit was stable at €2 million.
  • The Board of Directors meeting held on 6 December approved the 2012 financial statements. It also indicated that it would like for shareholders to benefit from the Company's improvements. This could be done through purchase of shares to be cancelled under the shareholder buyback program which will be submitted at the Annual Shareholder Meeting.  Due to the lack of visibility on the fiscal 2013 earnings, in the currently worsening economic environment and declining European tourist market, the Board believes that this option is preferable to paying a cash dividend for fiscal 2012.

 -- Club Med has three major strengths to help it withstand the challenging environment in France and the rest of Europe

  • A strong financial position, with growing positive underlying free cash flow. In fiscal 2012, free cash flow stood at €55 million compared with €38 million the previous year, or €36 million versus €26 million excluding the impact of asset disposals and village exit costs.  In addition, net debt is significantly lower at €118 million, reflecting a 10-point improvement in gearing to 22.6%, while the ratio of net debt to EBITDA villages has improved considerably and now stands at less than 1x. It was divided by two since 2010.
  • A fully refurbished, upscale village offer, with 4 and 5-Trident villages representing two third of total capacity at 31 October 2012, a 3.6-point increase over one year. Three villages were sold during the year (Meribel Aspen Park, Lindeman Island and Bora-Bora) and five non-strategic villages were closed (Smir, Coral Beach, Djerba Meridiana, Beldi and Nabeul).

The Valmorel village in France that was opened last December has confirmed the validity of the Group's strategic positioning in the uscale and very upscale segments. With an occupancy rate of 81% in its first year, the new village attests the leading position of Club Med's mountain village offer, even in the summer.

  • Tighter customer relations, with over 60% of sales carried out directly. Online bookings have continued to grow, accounting for 20.5% of sales in fiscal 2012.

2.   Fiscal 2013 outlook

 -- A slightly growing Winter 2013, led by demand in the Americas and Asia.

As of 1 December, winter 2013 bookings (business volume at constant exchange rates) were up 1.1% on the prior-year season. In 2011, bookings at that date represented two-thirds of the winter total.

Bookings in the Europe-Africa region were down 0.8%. In France, Club Med Business bookings that reached records last year were down, while the individuals were up +1.2% in business volume. This figure translate in number of customers to a -3.1%, while the market is down 10.3% at the end of October, according to France's tour operators organization CETO.

Bookings in the Americas and Asia were up by 7.2% and 5.0% respectively, lifted by the more favorable economic environment in these regions and, in particular, by the dynamism of Brazil, China and other fast-developing markets.

Bookings for the past four weeks were down 0.6% with a drop of 5.1% for the Europe-Africa region, partly offset by booking that are up in Americas and Asia.

 --  The uncertain environment calls for prudence in 2013

In light of the sluggish economic environment in Europe, particularly France, the following measures have been taken:

  • Winter 2013 capacity has been adjusted by 3.7% compared with winter 2012. In Europe-Africa, closure of Meribel Aspen Park and Coral Beach along with temporary shutdowns of certain villages in North Africa have led to a 5.4% capacity reduction. For the summer 2013 season, Europe-Africa capacity has been shrunk by 6.2% in response to the uncertain economic environment.
  • Capital spending will be kept at the fiscal 2012 level of around €55 million and will concern both ongoing projects to move the village offer upscale and necessary maintenance work. In addition, a further €10 million or so may be spent on acquiring equity interests to speed up the pace of growth in certain high potential markets such as Brazil and Russia.
  • Costs reported under "Operating loss from the management of assets" should be considerably lower than in fiscal 2012 now that the program to move the village offer upscale is nearing completion.

Based on the above outlook, the Group should report positive free cash flow in fiscal 2013.

3.   2015: a new milestone in Club Med's global strategy to capture growth in the all-inclusive upscale vacation package market

 -- Step up the pace of growth in fast-developing markets

With growth set to remain strong in major high potential markets such as China, Brazil and Russia, Club Med is aiming for one in three customers to come from fast-developing markets by the end of 2015.

First among these will be China, which will become Club Med's second largest market by 2015 with 200,000 customers, five villages (including Guilin, the country's second 4-Trident village which will welcome its first guests in spring 2013) and a new premium resort hotel brand – by Club Med – aligned with local demand. The "by Club Med" large upscale resort-hotels will target Chinese city-dwellers looking for long weekend breaks in the countryside at relatively short distance from their home. They will also serve the meetings, incentives, conferences and exhibitions (MICE) market.

 -- Continue to win market share in France and other mature markets by strengthening premium distribution, upgrading pricing policies to include a family deal with children under 6 staying free, and offering new products such as new Club Med Discovery tours and new Club Med 2 cruises.

 --  Promote Club Med brand's unique spirit

In early 2013, Club Med will be launching its new worldwide brand advertising campaign to raise its notoriety, recruit new customers and promote repeat bookings.

To speed up the pace of international expansion, new distribution channels are being developed and the Group is targeting a fourfold increase in the number of Club Med shop-in-shops and franchise outlets (from 50 to 200) by the end of 2015.

 -- Optimize the business model

Club Med is taking its upscale strategy a step further, with three-quarters of village capacity set to meet 4 or 5-Trident standards by 2015 including new villages such as Pragelato Vialattea in Italy, Belek in Turkey and Guilin in China that are due to open in 2013. These new destinations will increase the number of year-round permanent villages (or bi-seasonal) with optimum capacity.

In line with the asset-light strategy, most of the current development projects are based on the management contract model, the aim being to improve return on capital employed while also achieving a balance of models for the village portfolio.

Additional information

The consolidated and parent company financial statements of Club Mediterranee for the fiscal year ended 31 October 2012 were approved by the Board of Directors on 6 December 2012.
These financial statements have been audited and the Auditors' reports are in the process of being prepared.
The fiscal 2012 financial results presentation is available for download at http://www.clubmed-corporate.com.  

CETO : Cercle d'Etudes des Tours Operateurs (French Tour-Operators Association)


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