LDN - Business

AccorHotels beats profit expectations, ex-president Sarkozy joins board

[February 22, 2017] By Dominique Vidalon

PARIS (Reuters) - AccorHotels, Europe's largest hotelier, posted a record operating profit for 2016, which beat expectations, as restructuring efforts paid off and robust demand in Germany and Britain offset weakness in France.

However, shares in the company - which have outperformed the market in 2017 - lost ground on concerns over its future use of cash and a lack of guidance for 2017.

Having recruited former French President Nicolas Sarkozy to head its international strategy, AccorHotels said it was moving along with a planned sale of its HotelInvest property business - worth 6.6 billion euros ($6.9 billion) - by mid-July.

The sale of a majority stake in that property unit, with AccorHotels likely to retain around 30 percent, will raise cash to fund its expansion and better fight the rising challenges of companies such as Airbnb.

Chief Executive Sebastien Bazin said the property sale would give it "significant headroom to seize numerous opportunities provided by the rapid transformation of our industry."

However, several analysts interpreted this as a sign that Accor may embark upon some pricey acquisitions, with Accor shares down 3 percent in mid-session trading.

"If we tie this in with the appointment of Nicolas Sarkozy, it suggests that Accor intends to do more M&A (mergers and acquisitions), so it is unlikely that a significant proportion of the proceeds from the sale of the real estate division will be returned to shareholders," said Berenberg analysts.

Earlier this month a magistrate ordered Sarkozy to stand trial over irregularities in the funding of his failed 2012 re-election bid, potentially exposing him to a one-year prison sentence if convicted.

IN MIDDLE OF REORGANISATION

AccorHotels, which has more than 4,000 hotels ranging from the budget Ibis to the luxury Sofitel brand, competes with InterContinental, Marriott and Starwood.

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Former French President Nicolas Sarkozy reacts during a visit in Poissy, near Paris, France, September 6, 2016. REUTERS/Philippe Wojazer/File Photo

Group earnings before interest and taxes (EBIT) rose 3.8 percent to 696 million euros in 2016, beating forecasts, while Accor said it had started to see signs of recovery in France.

CEO Bazin, who took over in August 2013, has been cutting costs and expanding in China and the luxury hotels market, with AccorHotels having bought FRHI Holdings, the owner of London's Savoy and New York's Plaza hotels.

AccorHotels has also struck several deals in order to fight the rising challenge of companies such as Airbnb and online travel agents such as Expedia <EPE.O>

Bazin reiterated on Wednesday that the group's ambition was to generate 30 percent of its revenue in the medium term from new businesses, such as concierge service John Paul or British serviced home rental company Onefine Stay.

The French tourism industry has been impacted by a spate of deadly, Islamist militant attacks in the country, although group finance chief Jean-Jacques Morin said a key industry measure of average revenues per hotel room in France had risen in January.

Accor shares are up around 6 percent so far in 2017, beating a 3 percent rise on the pan-European STOXX 600 index.

($1 = 0.9524 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and David Evans)

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