Hapimag AG I Annual General Meeting 2017 0
Hapimag AG I Annual General Meeting 2017 Dear Shareholders and Guests You are very welcome here today at the 53rd Annual General Meeting of Hapimag AG. On behalf of all my colleagues on the Board of Directors and the Executive Board, I would like to thank you for travelling to Baar today. Over the past year, the Board of Directors and the management have intensively studied how Hapimag’s business model can be developed. In this respect, we can build on the proven concept of part-ownership and a special holiday model based on subscription points. Since 1963, we have continued to inspire our members and customers with their changing needs and requirements. Before I hand you over to Kurt Scholl, Chairman of the Finance Committee, and our CEO Hassan Kadbi, who will talk about the results of the 2016 financial year, please allow me to very briefly address the specific situation of Hapimag in the current business development: 1
Hapimag AG I Annual General Meeting 2017 A recent heading read: “Our children no longer buy cars and holiday homes!” Consumer behaviour is changing. This in turn is changing the economy as well. Today, people only want to pay for usage and not for ownership. Ownership has become a secondary factor. If parents move into a retirement home, the children no longer want to take over the family home, let alone the holiday home. “Our descendants are no longer interested in our possessions!” is the complaint voiced by the outgoing generation. The younger generation of the so-called millennials who were born between 1980 and 2000 clearly does things differently than the previous generation and is in the process of changing the economy. As a provider of holiday homes, we have to adapt to this. While we know that goods are willingly shared and used collectively, the millennials generation are no longer aiming for ownership per se. Their parents waited a long time before making a major acquisition and saved to be able to afford something. However, such products are now available immediately and inexpensively to the millennials. These new consumers are not concerned primarily with the concept of sharing or with a sense of community. For them, sharing simply means lower costs, especially no fixed costs and no costs for the provision of the goods and services they use. The wide choice and swift availability of offers as well as a high degree of flexibility by the supplier are important. The joint use of shared goods should simply be more economic than private ownership and therefore offer its own special merits. 2
Hapimag AG I Annual General Meeting 2017 The concept of sharing is a long-standing tradition and is the most popular form of consumption for certain items today. Books, laundries, car-sharing, public transport mobility options and holiday apartments come to mind. The accompanying business models involve subscription to regular services on the one hand and the efficient use through part ownership (fractionalised ownership) on the other. The "sharing economy" will expand massively through the consistent implementation of new online applications and new models will become more widespread thanks to digitalisation. This is demonstrated by successful platforms such as Uber (for taxis) and AirBnB (for overnight stays), which are the leaders of the sharing economy in our sector. Ultimately, all of these new online business models offer the same thing. As mediators, they allow the customers to access products exactly when and where they are needed. And they focus on the people and their needs rather than on tradition! In fact they integrate digital technology in all aspects of their focused business operations and thereby challenge the traditional accommodation sector. 3
Hapimag AG I Annual General Meeting 2017 An accommodation platform is an intermediary between the tenant and landlord, and does not have to concern itself with the maintenance of the rental properties. Hapimag on the other hand is the owner of all properties and operator of the holiday resorts, offering a comprehensive range of services (holiday experience) and a quality guarantee. As a public limited company organised on a membership basis, which focuses on the beneficial use of the resort and not on distributing a dividend, Hapimag has to master special challenges. A crucial factor for the future of the Hapimag business model is not only to lead the generation of millennials to use the resorts, but to convince them of the system of part ownership; this is because new shareholders create the financial basis for new investments in the long term. All the necessary changes that we tackle in a proactive manner are made in the genuine interest of all active and satisfied members. These members want to go on holidays with Hapimag for a long time to come and to provide their children and future generations with the same opportunity. Your presence here in Baar today is proof that our valued shareholders support this objective. I am delighted this is the case and am at the same time confident that the Executive Board and Board of Directors can rely on your support. 4
Hapimag AG I Annual General Meeting 2017 Good morning shareholders and guests. I am delighted to present the results of 2016 financial year. 5
Hapimag AG I Annual General Meeting 2017 Hapimag’s balance sheet structure remains solid. Hapimag’s equity declined from EUR 287 million to EUR 277 million and internal operating resources fell from EUR 545 million to EUR 540 million. These lower values are due to the decrease of 3,700 in the number of shares outstanding. The high equity ratio and high share of internal operating resources contiue to put Hapimag in a solid financial position. 6
Hapimag AG I Annual General Meeting 2017 Hapimag generated operating income of EUR 188.3 million in 2016, which was down EUR 5.1 million on the previous year. This is attributable to the following factors: Flights are increasingly being booked online and at very reasonable prices. Even our members are making ever-more use of this option. Hapimag therefore discontinued its travel business effective 31 March 2016. It consequently generated EUR 6.4 million lower revenue in the travel business than in the previous year. At 68.1%, occupancy at our resorts (beyond the opening times) remained high. Occupancy at the Bodrum, Paris and Marrakech resorts was down significantly year-on-year due to uncertainty in the wake of unrest and terrorist attacks. Owing to the drop in revenue in our largest resort of Bodrum, revenue generated in the resorts was down slightly, at EUR 84.3 million. However, there was encouraging growth in occupancy at the resorts in Spain and Portugal. In addition to income from exercised rights of residence, the item “Other sales” includes the book profit of EUR 11.5 million (net of tax) from the sale of the Chamonix resort. 7
Hapimag AG I Annual General Meeting 2017 In addition to lower operating income, operating expenses also fell by 5% to EUR 144.8 million. The greatest savings were made in cost of sales and services due to the cessation of the travel business and in personnel expenses. The Hapimag Group therefore achieved an operating result of EUR 9.0 million. After deduction of the financial result and income taxes, the consolidated result amounted to EUR 0.8 million. The increase in the financial result and income taxes is due to the sale of the resorts in Chamonix and Hok-Yxenhaga. 8
Hapimag AG I Annual General Meeting 2017 Free cash flow improved to EUR 13.6 million. As a result, liquidity increased to EUR 20.5 million. 9
Hapimag AG I Annual General Meeting 2017 Let us turn to the property portfolio. Bearing in mind that some questions arose prior to this Annual General Meeting concerning the sale of resorts, I would like to briefly outline our standard sales process. Hapimag resorts are basically analysed as part ongoing portfolio management, with specific attention paid to the performance of so- called “problem” resorts. As part of preparing an independent valuation, the Executive Board decides whether or not a resort should be sold. If the decision is made in favour of selling, this recommendation is presented to the Board of Directors as a basis for decision. Ultimately, the Board of Directors decides on the sale or non- sale of a resort. Once the Board of Directors has decided to sell a resort, one or more brokerage firms that are relevant for the destination are identified and assigned responsibility for the sale. Hapimag of course uses its own network too, to avoid being totally dependent on brokerage firms. We are not involved in any sales negotiations at present. However, we are currently looking very carefully at the Château de Chabenet resort as a potential candidate in this respect. 10
Hapimag AG I Annual General Meeting 2017 Four resort sales were recorded last year. Due to: low and falling occupancy rates, structurally negative contributions to total comprehensive income/loss and a charge to the income statement and renovations not being financially justifiable Hapimag made the decision to sell the Kanzelhöhe, Hok-Yxenhaga, Chamonix and Bad Kleinkirchheim resorts. Despite various measures being taken, we were unable to increase occupancy at the Hok-Yxenhaga resort. Excess capacity at alpine resorts was a decisive factor in the sale of the other three resorts. In addition, we were not given approval for partition in Chamonix. 11
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