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China Lodging Group, Limited Reports First Quarter of 2016 Results

SHANGHAI, China, May 11, 2016 (GLOBE NEWSWIRE via COMTEX) --

  • A total of 2,989 hotels or 304,428 hotel rooms in operation as of March 31, 2016.
  • Net revenues increased 18.8% year-over-yearto RMB1,438.0 million (US$223.0 million) [1] for the first quarter of 2016, exceeding the high end of the guidance.
  • Adjusted EBITDA (non-GAAP) increased 71.1% year-over-year to RMB275.7 million (US$42.8 million)for the first quarter of 2016.
  • Net income attributable to China Lodging Group, Limited was RMB69.4 million (US$10.8 million) for the first quarter of 2016, compared with net loss attributable to China Lodging Group, Limited of RMB7.0 million for the first quarter of 2015.
  • Basic earnings per ADS [2] were RMB1.03 (US$0.16) and diluted earnings per ADS were RMB1.01 (US$0.16) for the first quarter of 2016. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB1.25 (US$0.19) and adjusted diluted earnings per ADS (non-GAAP) were RMB1.22 (US$0.19) for the first quarter of 2016.
  • In first quarter of 2016, the Company paid cash dividend of $0.68 per ADS which was declared in December 2015.
  • The Company provided guidance for Q2 2016 net revenues growth of 12% to 15%.

China Lodging Group, Limited HTHT, -2.29% ("China Lodging Group", "HuaZhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the first quarter ended March 31, 2016.

Operational Highlights of First Quarter 2016

  • During the first quarter of 2016, the Company completed the transaction for strategic alliance with AccorHotels [3] . Pursuant to this transaction, 96 hotels were merged to HuaZhu's platform.

  • During the first quarter of 2016, including both organic growth and strategic alliance, the Company added 11 net leased ("leased-and-operated") and owned hotels, 215 net manachised ("franchised-and-managed") and franchised hotels. As of March 31, 2016, the Company had 627 leased and owned hotels, 2,189 manachised hotels, and 173 franchised hotels in operation in 356 cities. The number of hotel rooms in operation increased by 34% from a year ago.

  • As of March 31, 2016, the Company had 25 leased hotels and 607 manachised and franchised hotels contracted or under construction.

  • The ADR, which is defined as the average daily rate for all hotels in operation (excluding certain franchised Starway hotels), was RMB172 in the first quarter of 2016, compared with RMB168 in the first quarter of 2015 and RMB177 in the previous quarter. The year-over-year increase of 2.5% was due to more favorable brand mix with an increased proportion of midscale and upscale hotels. The sequential decrease mainly resulted from seasonality.

  • The occupancy rate for all hotels in operation (excluding certain franchised Starway hotels) was 80.4% in the first quarter of 2016, compared with 81.6% in the first quarter of 2015 and 84.3% in the previous quarter. The year-over-year decrease was mainly due to lower occupancy in lower-tier cities. The sequential decrease resulted mainly from seasonality.

  • RevPAR, defined as revenue per available room for all hotels in operation (excluding certain franchised Starway hotels), was RMB139 in the first quarter of 2016, compared with RMB137 in the first quarter of 2015 and RMB149 in the previous quarter. The year-over-year increase was mainly attributable to the higher ADR. The sequential decrease resulted mainly from seasonality.

  • For all hotels which had been in operation for at least 18 months (excluding certain franchised Starway hotels), the same-hotel RevPAR was RMB142 for the first quarter of 2016, representing a 0.3% year-over-year decrease, with a 0.8% increase in ADR and a 0.9-percentage-point decrease in occupancy rate. The midscale and upscale hotels registered an 8.8% same-hotel RevPAR improvement, with a 5.0% increase in ADR and 2.8-percentage-point increase in occupancy rate.

  • As of March 31, 2016, the Company's loyalty program had approximately 55.3 million members, who contributed more than 85% of room nights sold during the first quarter of 2016. In the first quarter of 2016, approximately 87% of room nights were sold through the Company's own channels. The higher percentage of room nights sold through travel agents channels in the first quarter was due to increase utilization of lower costs OTA sales channels during the low season.

"We are pleased with our start to the year with a set of higher-than-expected results. Our net revenues achieved 18.8% year-over-year growth while adjusted EBITDA grew by 71.1% for the first quarter. This was mainly driven by increased contributions from JI Hotel, HanTing 2.0 and Hi Inn that recorded significant same hotel RevPAR increase of 10%, 8% and 6%, respectively." said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group.

"Our brands remain popular in the market. HanTing Hotel, our flagship brand, re-designed and upgraded in 2015, continues to be favored by our customers and franchisees. HanTing Hotel has a pipeline of 271 hotels and JI Hotel, a leading midscale hotel brand has 105 hotels in the pipeline. In the first quarter, we welcomed 5 brands ranging from economy to upscale segments through our strategic alliance with AccorHotels. We believe our strong capability in development and execution will further strengthen our leading position as an industry consolidator." Ms. Zhang added.

First Quarter of 2016 Financial Results

(RMB in thousands) Q1 2015 Q4 2015 Q1 2016
Revenues:
Leased and owned hotels 1,055,541 1,287,714 1,201,761
Manachised and franchised hotels 226,283 305,573 318,103
Others - - 628
Total revenues 1,281,824 1,593,287 1,520,492
Less: business tax and related surcharges (71,454 ) (86,972 ) (82,507 )
Net revenues 1,210,370 1,506,315 1,437,985

Total revenues for the first quarter of 2016 were RMB1,520.5 million (US$235.8 million), representing an 18.6% year-over-year increase and a 4.6% sequential decrease. The year-over-year increase was primarily due to our hotel network expansion through organic growth and strategic alliance. The sequential decrease was due to seasonality.

Total revenues from leased and owned hotels for the first quarter of 2016 were RMB1,201.8 million (US$186.4 million), representing a 13.9% year-over-year increase and a 6.7% sequential decrease.

Total revenues from manachised and franchised hotels for the first quarter of 2016 were RMB318.1 million (US$49.3 million), representing a 40.6% year-over-year increase and a 4.1% sequential increase. Total revenues from manachised and franchised hotels accounted for 20.9% of the Company's total revenues in the first quarter of 2016, up from 17.7% a year ago.

Other revenues represent revenues generated from businesses other than hotels, which mainly include revenues from HuaZhu mall.

Net revenues for the first quarter of 2016 were RMB1,438.0 million (US$223.0 million), representing an 18.8% year-over-year increase and a 4.5% sequential decrease.

(RMB in thousands) Q1 2015 Q4 2015 Q1 2016
Operating costs and expenses:
Hotel operating costs 1,058,624 1,198,604 1,200,459
Selling and marketing expenses 45,828 46,791 33,055
General and administrative expenses 77,942 128,233 106,607
Pre-opening expenses 34,593 16,216 22,019
Total operating costs and expenses 1,216,987 1,389,844 1,362,140

Hotel operating costs for the first quarter of 2016 were RMB1,200.5 million (US$186.2 million), compared to RMB1,058.6 million in the first quarter of 2015 and RMB1,198.6 million in the previous quarter, representing a 13.4% year-over-year increase and a 0.2% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB1,197.7 million (US$185.8 million), representing 83.3% of net revenues, compared to 87.4% for the first quarter in 2015 and 79.4% for the previous quarter. The year-over-year decrease in the percentage was mainly attributable to the improved blended RevPAR, and the increased level of maturity of our leased hotels. The sequential increase in the percentage was mainly due to seasonality.

Selling and marketing expenses for the first quarter of 2016 were RMB33.1 million (US$5.1 million), compared to RMB45.8 million in the first quarter of 2015 and RMB46.8 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB32.8 million (US$5.1 million), or 2.3% of net revenues, compared to 3.8% for the first quarter of 2015 and 3.1% for the previous quarter. The year-over-year and sequential decrease was mainly attributable to the lower marketing spending as a result of timing issue in the first quarter of 2016.

General and administrative expenses for the first quarter of 2016 were RMB106.6 million (US$16.5 million), compared to RMB77.9 million in the first quarter of 2015 and RMB128.2 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB94.7 million (US$14.7 million), representing 6.6% of net revenues, compared with 5.5% of net revenues in the first quarter of 2015 and 7.7% in the previous quarter. The year-over-year increase was mainly due to increased personnel cost as a result of the Company's growth in scale and brand portfolio. The sequential decrease was mainly due to decreased professional fees.

Pre-opening expenses for the first quarter of 2016 were RMB22.0 million (US$3.4 million), representing a 36.3% year-over-year decrease and a 35.8% sequential increase. The year-over-year decrease was mainly due to fewer leased hotels opened and in the pipeline through our organic growth, and the sequential increase was mainly due to more leased hotels in the pipeline in the first quarter of 2016.

Income from operations for the first quarter of 2016 was RMB70.8 million (US$11.0 million), compared to loss from operations of RMB10.8 million in the first quarter of 2015 and income from operations of RMB130.6 million in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the first quarter of 2016 was RMB85.6 million (US$13.3 million), compared to adjusted income from operation (non-GAAP) of RMB1.6 million for the first quarter of 2015 and RMB144.5 million for the previous quarter. The adjusted operating margin, defined as adjusted operating income (non-GAAP) as percentage of net revenues, for the first quarter of 2016 was 5.9%, compared with 0.1% in the first quarter of 2015 and 9.7% in the previous quarter. The improved year-over-year adjusted operating margin was mainly due to the improved blended RevPAR, and operating leverage. The sequential decrease in the margin was due to seasonality.

Net income attributable to China Lodging Group, Limited for the first quarter of 2016 was RMB69.4 million (US$10.8 million), compared to net loss attributable to China Lodging Group, Limited of RMB7.0 million in the first quarter of 2015 and net income attributable to China Lodging Group, Limited of RMB70.8 million in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the first quarter of 2016 was RMB84.3 million (US$13.1 million), representing a 1465.1% year-over-year increase and a 0.5% sequential decrease. The year-over-year increase was mainly due to the expanded hotel network, the improved blended RevPAR, the lower pre-opening expenses, and gain from partial disposal of Home Inns ADS in the first quarter of 2016.

Basic and diluted earnings per share/ADS. For the first quarter of 2016, basic earnings per share were RMB0.26 (US$0.04) and diluted earnings per share were RMB0.25 (US$0.04); basic earnings per ADS were RMB1.03 (US$0.16) and diluted earnings per ADS were RMB1.01 (US$0.16). For the first quarter of 2016, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) and adjusted diluted earnings per share (non-GAAP) were RMB0.31 (US$0.05); adjusted basic earnings per ADS (non-GAAP) were RMB1.25 (US$0.19) and adjusted diluted earnings per ADS (non-GAAP) were RMB1.22 (US$0.19).

EBITDA (non-GAAP) for the first quarter of 2016 was RMB260.8 million (US$40.5 million), compared with RMB148.8 million in the first quarter of 2015 and RMB306.5 million in the previous quarter. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the first quarter of 2016 was RMB275.7 million (US$42.8 million), compared with RMB161.2 million for the first quarter of 2015 and RMB320.4 million for the previous quarter.

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