SkiStar AB (publ) (SKISB) Earnings Call Transcript & Summary

Welcome to the SkiStar Q4 2022-'23 Presentation. [Operator Instructions] Now, I will hand the conference over to the speakers CEO, Stefan Sjostrand; and CFO, Martin Almgren. Please go ahead.

Good morning, and a warm welcome to the SkiStar Q4 and full year presentation. And this is Stefan Sjostrand talking, and next to me, our CFO, Martin Almgren here. So we will try to guide you through this presentation, and we have an agenda. If we're looking to that, we will give you a short introduction, then we will take you through the Q4 result, and then we will give you an outlook and summary and some Q&As from you guys. So short introduction, again, we are then operating the 5 largest ski resorts in Scandinavia, and not only ski resorts, actually, full year resorts. And then on top of that, we're also running SkiStar Stockholm, which is also a full year around destination. And we're really proud of having the 5 largest destinations, which we will come back to later on as well. Shortly then, we are the leading organizer for ski holidays, and our vision is to create more memorable mountain experience and doing that all-year-round. And last year, we managed to deliver SEK 4.3 billion in revenues. We are really proud of the guests who give us 8 out of 10. And also, our employees, who gave us 8 out of 10 to work within SkiStar. We also are very glad that our digital transformation works well. And previous year, we have 95% of our guests who made digital check-ins and also 76% of all transactions were made digitally, which is, of course, really important in those times. 3 years ago, we decided to make a transformation out of this company. We decided to go from European focus into Scandinavia. We decided to go from mountain skiing into an all-year-round business. And we decided to go from a lift and technical focus into really focus on the customer and the guest. We decided to go from hotel, and when I grow up small cabin in the forest to really stay better way than you are doing at home. We also decided to take really [ frugally ] within sustainability and going from sustainability and sustainable snow production into a more sustainable and memorable alpine experiences. And this was then into 4 areas of transformation. And we will try to guide you through these 4 areas of transformation today, as well, also try to help you to understand our result in a better way than maybe you can read throughout the report. So a short summary of the quarter then from my perspective as the CEO then, we can really clearly see that the pricing strategy pays off, even if the Q4 is a very small quarter for us from a financial part, you can really see that this is an important part that the pricing strategy works well. If you compare to many other companies in this industry, we can see that we have had a lot of visitors during the summer period and also increased the number of activity days by 16%. So a very strong indicator that the transformation from a winter company to a year-round company works well. And we have worked with winter in 48 years, and we know quite well how to operate winter season. However, we have now just managed the third year in the summer season, and we learned and we managed to do better and better. And we believe that we now have found the key how to operate summer as well by introducing this summer pass in Salen and Trysil and that works very well. We also can see that, in Q3, there was a lot of questions regarding the Property Development if it has stopped or what happens regarding Property Development. And we have been quite transparent to you guys and really told that we have lowered the expectations on our Property Development side from the historical levels, '17, '18, '19 to a more modest deliveries around SEK 70 million to SEK 100 million per year. And last quarter, we didn't get any Property Development. This quarter, we got it instead. So I think it's important to look, not quarter-by-quarter to really look at this from a holistic perspective from a yearly perspective. We are really focused on development of our costs, since we could see a raise of cost during the 3 quarters, we decided to take a grip on this. And you can see this in the Q4 indication is quite strong. And Martin will help you through that later on as well. And I'm also really glad that we -- in the last quarter, we didn't say any number in our savings program. But now we are really glad to say that we have -- if I use the word first batch here, proud to announce that we will make the SEK 50 million identified and in process for this year. And then if I just switch over to the full year, I must then say, of course, we are not satisfied. We are not satisfied since it's not lived up to our expectations. And we are glad that we continue to show growth. If we're just looking into areas like retail side, where many companies in this sector are struggling. We are really gaining market shares and take market shares here. And we increased by 18%, which is a very strong number, and we grow both online as well in-store. So we continue to grow on top line. However, our cost side, which I was into was far too high, mainly in maintenance, marketing and staff. And I must say, that's why I'm really glad that we introduced this program. We managed to take it through the whole organization in the beginning of the year, presented it in week 8 for the organization. We managed to come through a lot in week 14. And then from September 1, now we have a new organization in place, which will, of course, be much more effective and also in a more structured way how we will operate the business going forward. We had, of course, a very strong year in a number of activity days. So that, of course, supported the top line growth. So it was the second-best year in number of activity days, and you could see that we dropped in the end of the winter season, why we lost a bit of skiing days. And, of course, we had a calendar effect. We lost some skiing days during the Christmas week 51 to week 1 last year. And also, I must say that the media focus regarding consumer confidence didn't help us. It was a lot of talks around inflation, interest rates, electricity prices. And, of course, that did not support our business. It creates a lot of worries for a lot of consumers. However, even though that a lot of those costs remains, we can see that consumer nowadays knows a little bit more about the expectations for what is my interest rate. What is the cost for my groceries and also the electricity prices is in a much more stable situation than they were a year ago. So, we are really happy to continue to invest in our business to strengthening our position and also now start to look forward, which I will come back to. But Martin, can you please take us through the EBIT and also the numbers, figures in a better way than I have done.

Yes, of course, I will. If we look -- if we start with the sales, and we can see that we had, as Stefan already said, this last 12 months was a record year in sales. We grew the sales with 5%. But we have been struggling the whole year to get the result down to EBIT and the effect down to EBIT. And we can see here that on the full year, we reached an EBIT number of SEK 604 million, which is in line with the years before the COVID. But if we look at the operating results, which ended at SEK 529 million is really the second-best operating result in the history. So from that perspective, it's a good result. And I will try to talk a little bit about the cost and explain what we have seen during the year. And one of the increases in cost is, of course, the inflation, but also the currency effect because a lot of the costs are mainly related to maintenance and repair is bought in euro. So we have had both an inflation and currency effect on that cost. If we move into the personnel costs, that also continued to increase over the years. We see that the salary effect amounted to a little bit more than SEK 26 million, SEK 27 million, which is an increase of slightly more than 3% on personnel cost. But we also have an increase in number of employees due to the movement or the transition to all-year-around company with more activities on the summer, which also need more employees. And last year, we had a positive effect of SEK 16 million on the personnel cost, and that was related to the repayment from Fora and reduced employee contribution for younger people. So that is part of the -- or the main part of the increase in personnel. If we then look into another cost that has increased is the rent and leasing cost for the hotels, and that is paid to our associated company, Skiab, which we own with 50%, and that is part of that will come back as a profit from the associated companies. Marketing cost has also increased over the first 3 quarters. But in the last quarter, we took a tighter grip around our marketing cost, and we managed to lower that cost compared to the same fourth quarter last year. And also a comment on the profit from associated companies and mainly of this comes from Skiab. And this year, we have a negative effect from Skiab and that part is related to currency effects, revaluation of the properties there and also revaluation on the investment properties. So there are 2 things that have negative impact. But important to understand is that, the underlying operating result in Skiab is continue to grow, and we have this year a stronger operating result in Skiab than the last year. At the beginning of the '22-'23 financial year, there was a lot of discussions around the electricity cost and increasing electricity prices. And now when we summarize the 12-month period, we can see that we have been able to decrease the consumption of electricity with 10%. And if we look at the total energy cost, we have been able to keep the same electricity cost this year as the last year, which is really, really positive in this environment. And also, the last thing that has increases our depreciation, and that's due to the investments that we have done in the last years. If we move into revenue per category. We can see that the SkiPass, it's more or less on the same level here. We grew the SkiPass sales with SEK 2 million. But underlying, we should also know that the volume increased with 26%. And we had a decrease on the prices of around 40% to 45%. So we have been able to compensate the price changes on the SkiPass product on the summer season with an increase of volume, which is really, really positive to see. And that is one of the strategies that we have to really grow the number of activity days in the winter season or summer season, sorry. Rental shops still continue to grow even on the summer period. And then we see that in this quarter, we had the sales from the Property Development. And that's mainly 2 projects. It's Fjellnest in Hemsedal and [indiscernible] in Salen. [indiscernible] in Salen is related to the new area around the new lift in Soderasen that we announced earlier this -- before the summer that we will build. Finally, the last comment is around the Hotel. And there we have had a really tough summer season. We have had a drop in volume, both on accommodation and also on the restaurant side. Looking at the category, the revenue per category for the full year. We see that the SkiPass and accommodation sales, the drop that we had in the third quarter that will be effective also for the full year. And then the rental shop or retail shop is continuing to grow. And the growth is 18%, and we are growing both the web shop, plus 39%, but also the physical stores are growing their sales, which is really positive. And just to give a little bit flavor on our own brand equip, we grew that with 63% this year, and we are growing also the gross margin with 3 percentage units, and the total sales on equip is now up to SEK 47 million. So that is positive. Property Development, the same 2 projects, Fjellnest and [indiscernible]. And then we see Hotel & Lodge, we had positive growth in Q1 to Q3. Moving on to the EBIT. We see that the sales increase in Operation of Mountain Resorts more or less could compensate for the higher costs in the quarter. So we ended up with a EUR 2 million lower result than last year. And in the quarter, we had the property sales of [indiscernible], which had a positive effect, and that's the reason behind the increase in Property Development. And in the Hotel segment, we couldn't adjust the cost component to the lower sales volume that we had, and that's why we had a SEK 12 million lower result from the Hotel division this year compared to last year. Looking at the EBIT per segment for the whole year. We have a lower -- most of the result is related to operations of ski results. And here you see the effect of the lower sales of SkiPass and accommodation that fall through and also the increased cost side has an effect here, of course. Moving to the Property Development side. Most of the result is relate -- the lower result of SEK 72 million is related to the lower results from Skiab in this year, so from associated companies. And operational hotels that SEK 12 million out of SEK 20 million comes from the last quarter that we -- that I just explained. So to summarize, I think we have touched on all the points here, but the one -- second one from the bottom, I want to highlight a little bit. We -- after the year-end, we have made 2 acquisitions. We bought Trysilguidene, which is the ski school and ski guides in Trysil 1st of September, and we also bought a property in Klovsjo, which is today using a sportshop. And on the balance sheet, the financial debt has increased and the net debt-to-EBITDA is amounted to SEK 2.0 million if we exclude the IFRS debt -- the IFRS 16 debt. So we are still having an okay balance sheet, not as strong as the previous year, but still quite okay. If we move on to the sustainability part. There are 3 main areas we are focusing on and the activity and recreation days, we have already touched on this one, that we had a positive effect in this summer. Looking at the second one, the ecosystem and the impact from there. During this quarter, our climate goals were approved by a Science Based Targets. So this is really, really positive for us. And we are working on this over the coming years. And we continue our dialogue with different organizations and the municipalities, et cetera. And during the summer or the Q4, we have been able to clean our mountains, and we have gathered more than SEK 600,000 as a contribution to Hall Fjallet Rent. So that's part of the projects that we do in the area. Now, Stefan.

Thank you very much, Martin, for that explanation. And now I will try to give you some outlook of how we look forward for this year. And then I will also make a short announcement that are really welcoming all of you October 12 for our Capital Market Day, where we will try to also show more about the future, so to say. But if we then start to just give a brief overview of our 5 destinations. We are really proud to have an unmatchable position in Scandinavia. And when a lot of organizations or media compare our situation and prices on SkiPass, et cetera, we really would like to highlight the size of our 5 destinations. We are in a situation where we actually have a strong position in Scandinavia, where Salen is one of the largest destinations in the world. And also, if we compare our #5 destination, Hemsedal, with 54 groomed slopes compared to #6, which is almost a half size. So we are really proud of this, and we're also super glad that we continue to grow our destinations. And like Martin just explained around acquisitions now we have made in Trysil and in Klovsjo, also shows with this picture that our strategy continues to be in the right direction. And the idea is that, we will take a stronger and stronger grip around services at our destinations. And as you can see on this picture, the 5 large ski destination, we now are running all the activities we have planned to do, and that means also that we can expect growth in the next coming years from all areas. A lot of things happens around the climate right now. And for us, it's so important to be in the leadership around setting up goals, goals which are relevant and also supporting the climate. And that's why I'm really proud that we have signed the Science Based Targets, and they have also got the -- get the approval. And we want to continue the growth within sustainability. And that's why also we are really glad that when we are talking to climate experts, where we are reading different surveys about what's going on in the climate. We can proudly see that our efforts may change, of course. However, we're also glad that our 5 destinations, winter destinations are in areas where we also have an advantage compared to, for example, the alps, but also some ski resorts in Scandinavia. We will soon come up to the booking numbers. And for us, support for our booking numbers is that we -- a couple of quarters back, started to show you our digital performance. And we're actually really proud that we are increasing the number of visits to our digital platforms by 20%. So we are going from 28 million visits to more than 33 million visits online or on our SkiStar app. And that's really strength in this digital era. And the positive thing with that is that, since we also make all distribution by skistar.com. Of course, this is extremely strong and also that we can continue to grow within the digital bookings. And as you can see, we also -- revenue has increased with close to SEK 400 million based on online sales. When we have so much visit, it's, of course, important that you convert the visit into a sales number. And as you can see, we have managed to convert our visits into sales as well. So we have an increased conversion rate of 7%, which also, of course, helped our booking numbers now going forward. I've been in the media this morning and spoken about our booking numbers, and we have never shown you this graph before, but we really want to be more and more transparent of how our booking numbers look like. And just to explain this graph is to see then the booking numbers we are showing right now with plus 7%. They are very close to our record season we had during the pandemic. And they are, as you can see, in a different situation than we have had historical. So this is a very strong number and also shows that the guests looking forward to come and visit us during the winter period. And when you look into competition, many competitors start to talk about the Christmas situation and the breaks for families around week 7 to week 10. However, I would like to show you this graph, which is also a graph showing our booking pattern, where we will then have a very stable booking during our weeks. And normally, at this period of time, we have around 60% book, but now we have a little bit more. And this is that we are then the 7% ahead. As you can see on this slide, we are 10% up during Christmas period, and that is mainly due to a calendar effect compared to last year. And the interest for celebrating Christmas, New Year in the Scandinavian Mountains is really high. If you look into the winter holidays period week 7 to 10, which is normally, I must say, almost always fully booked. We are 3% up, which is also a very strong number on high levels. And there, you can see that the week 7 is the highest week booked, and that is what we call the Danish week, so to say, because that is when Danes have their spring -- their winter holidays. What I'm really proud of is the week 2 to 6. Here, you can see that we have a very stable development. We have an increase of actually 9%, and that's also showing that the families are back. And here, we also see that we have an increase of ski school with 30% up. And that is a very strong indicator that the children and families are back and back in bookings compared to last year. And that means also that last year, we can see a later booking pattern, but we must say that the booking patterns are back to normal again, that we are not seeing the late booking pattern, not at least right now for the moment. It's actually the opposite. People are back to early bookings. And lastly, but not least, you can see the period between week 11 and 18, that include now the period of time where we had difficulties previous year with Eastern. And now we can say that we have actually up 14% in that period of time. So all in all, we are showing 7% up in bookings, which, of course, is a very strong number nowadays when we hear about a tough economic situation. I also will give you a flavor of average spend. And this is a picture we have never shown before, but that's actually giving you a flavor of how much each nationality of spending. So in average, booking at SkiStar spend around SEK 17,000 and the average is 2.3 products in average if you book in the skistar.com system. And then if you look into the growth, we have right now of plus 35% of Danish guests. They are then spending almost the double amount of money as a Swedish or Norwegian guest. So, of course, the increase of Danish and also international guests in general, will help us with the higher spending since those guests are booking in average almost 3 products compared to the average 2. So we are really satisfied with this spending and also the number of articles that customers are using. Lastly, but not least, and a summary, we really believe that we have a strong position, and we are actually strengthening our position during this period of time. Really proud of the sustainability Science Based Targets has been approved and also that they continue to be in focus. We have also took a grip on our cost situation, like Martin explained, I'm really glad to see that we now have a new organization in place in September 1. We're also showing that we are taking the first SEK 50 million out of cost, which is important. I've just talked about the fantastic booking situation and the increased demand from our international guests. And also, the strength we have in our brand showing that we have increased application from 6,300 applicants last year, up to over 8,000 applicants for seasonal work at SkiStar destinations showing the strength of the brand and also for us as an employer. And that actually the young -- mainly young people really love to work in our company and also really proud that 8 out of 10 says that they really like to work at SkiStar. Again, a warm welcome for the Capital Market Day, October 12 in Stockholm. We will also have it online. But in physical, always nice to meet up and see your faces. And we all are now looking for the upcoming winter season where we are proud with all our investment made. We have made record investment with almost more than SEK 750 million and that the new lifts, the new snowmaking system and infrastructure. So, again, thank you for listening, and apologies for the technical problems. So we open up for questions by that.

[Operator Instructions] The next question comes from Karl-Johan Bonnevier from DNB Markets.

Yes. Stefan and Martin, thank you for all those good slides. Lots of information then and I think a lot of things that will make it easier to follow you if you continue to use those also going forward. A couple of smaller questions and a couple of more broad questions for me, if it's possible. And just first, looking at the new booking pattern that you alluded to and maybe back to more normal kind of things after the late booking pattern you saw last year. I remember last year, you pushed a higher marketing cost in season to, I guess, try to fill the gap. Is that -- do you believe that your marketing costs this year will, say, be balanced back towards more normal levels again as well?

Thank you, KJ, and thank you also for the feedback. Yes. We believe that we are in a more stable situation than we were a year ago. And I must say the situation we have had the last, I must say, 6, 8 weeks has been extremely strong with the booking pattern. And, of course, when you see that the bookings are coming in, then you can be more, you can say, [ reductant ] and then more and more in a safe mode, if I can use that word, that the bookings actually are coming into our system. So -- and we have feel that it continues to increase actually. So it's -- right now, we are in a good mood.

And when you look at the SEK 50 million cost savings that you are now, say, quantifying, do you see that as a net saving coming through? Or do you see other areas where you can spend that kind of saving wisely and then maybe do some additional investments instead?

Should we share that answer, Martin? I can just start to broaden a little bit. And like we have explained that was that we took a help from an external consultant to, not only look over our staff cost also to see if we can make some structural changes. So when you do this, we looked into how can we make a structural change of how to operate the company. And then we started with the staff cost in the first -- can I use the first batch then. And that is now [ check ] more or less in that part. And now we will see those costs supporting us during the year. Everything will not come into October, November or December. They will come month by month. So when we end this year, we will see that we have managed to accomplish this. Then we also, at the same time, look into a more structural change, and that is related to -- Martin, more purchasing structure, how we will do purchase, more combined purchase? We will do -- where do we have our storage from our retail shops, et cetera? Martin, I don't know, would you like to also broad it a bit more?

Yes. And we are also looking into how we follow up internally in the new areas and how we are following up cost development and start to measure those in a different way than we have done before. So there are several things that we are working with. And the main reason here is to, of course, part of that we will use to be able to keep our investment, but also to -- so if -- just to continue to grow and also if we don't find the right investments then lower the debt.

Excellent. I interpret the answer that you see the SEK 50 million more or less as a net cost saving in this respect that everything else equal, it should be, say, SEK 50 million lower cost next year.

Yes, correct. That's correct.

Good. And looking at the strong exploration development operation in Q4. I know you've alluded to that this year was going to be back-end loaded, but obviously strong development. When you look at the pipeline you now have, what do you see for this year, the year starting, so to say, is this a level that you can continue at or on a full year basis? Or should we expect, say, a more modest number that given the -- given how the consumer outlook looks?

But we aim to -- if we look at the income from the exploration part, the level that we are having this year around the SEK 75 million. That's what we are aiming for, as we have been saying in the last quarters. And then if we will be able to have a sales of SEK 75 million this year that we are now into that is -- I think it's a little bit too early, but there are projects in our pipeline that we are working with, yes, and that supports that kind of continued growth and income from exploration. And we are aiming at around SEK 70 million, SEK 75 million on a yearly basis going forward.

And Martin, you mentioned that you have been doing some additional revaluation of investment projects and properties in Skiab. Could you allude to the size of those?

Just can you clarify that? So I understand.