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DGAP-News: Design Hotels AG: Report as of the First Half-Year of 2014

August 1, 2014

DGAP-News: Design Hotels AG / Key word(s): Half Year Results Design Hotels AG: Report as of the First Half-Year of 2014 01.08.2014 / 11:12 --------------------------------------------------------------------- Design Hotels AG reports Results for and publishes its Report as of the first Half-Year 2014 - Revenue increases by 7 per cent to Euro 7.23m - EBITDA increases by 158 per cent and goes up to Euro 663,000Berlin, August 1, 2014 - Design Hotels AG (m:access, Munich: LBA; ISIN: DE0005141006) today reports and publishes the results for the first half-year of 2014 according to the German Commercial Code (HGB). Most important key performance indicators within the Group: Revenues in the first six months of 2014 increased by around 7% to Euro 7.23m (last year 6.74m). Booking commissions increased by around 10% to Euro 3.37m (3.05m) and with 47% remain the largest contributor to total revenues. Revenues from membership fees grew by 7% to Euro 1.66m (1.55m). Revenues from Marketing Products/Consulting increased by 3% to Euro 2.2m (2.14m). Gross margin for the first half-year slightly increased and came in at 68% compared with the same period of the last year (last year 65%). EBITDA for the first half-year came in at Euro 663,000 (257,000), which is an increase of 158%. EBIT for the first half-year amounted to Euro 511,000, compared to Euro 152,000 in the same period of the last year. The Net Profit (result after taxes) for the first half-year amounted to Euro 372,000, compared to Euro 47,000 in the same period of the last year. The profit per share was Euro 0.04 (0.01). As per June 30, 2014, Design Hotels had cash and cash equivalents in the form of short-term deposits in the amount of Euro 4.67m, as compared to Euro 4.41m as per December 31, 2013. As of the end of the reporting period, shareholders' equity was Euro 5.49m, as compared to Euro 5.12m at the beginning of the financial year. The balance sheet was free of liabilities to banks and noteworthy goodwill. Further comments: CEO Claus Sendlinger commented: "We were able to continue our growth path in the first half of the financial year 2014 and managed to increase the results in the three main business areas. Especially the growth in generated bookings and, as a result, increased commission revenue confirmed our qualitative growth and consumer retention strategies. The results achieved also reconfirm that we made the right decision in expanding the product and service portfolio to our member hotels and tailor them to their individual needs." "In order to increase our business more significantly internationally, we have entered a Domination Agreement with our majority shareholder, Starwood Hotels & Resorts, Incorporated, which was approved in the Annual Shareholder Meeting on July 21, 2014. It is our aim to create a realiabe basis for the development of a collaboration, coordination and integration, and to bring forward the strategic develpment of Design Hotels AG. At this point, the agreement still needs to be entered in the commercial register in order to become effective." "The Domination Agreement will not have an effect on the company operations in 2014. Only the costs for it will be accounted for in the administrative expenses in the profit and loss statement. We are very optimistic about our future business and believe to continue our growth path and achieve our set operational goals at the end of this year 2014', concluded Sendlinger. Business Report with Detailed Key Financials for the First Half-Year 2014: Business and General Framework Conditions Continuous Growth in Travel Industry The United Nations World Tourism Organization UNWTO announced continuous growth in the international tourism industry in their July 2014 report. It states that international tourist arrivals worldwide grew by 5%, which is in line with the growth rate of the year 2013. By region, the strongest growth was registered in Asia-Pacific and the Americas. For the remaining year 2014, UNWTO expects international tourist arrvials to increase by 4 - 4.5%. Net Assets, Financial Position, and Operational Results Good Revenue Development in the First Half-Year In the first half-year 2014, Revenues increased by 7% to Euro 7.23m (6.74m) compared to the same period in 2013. All three main revenue streams - membership fees, booking commissions and marketing products/consulting - could be increased in the first six months of the reporting period. The largest contributing revenue stream, the booking commissions, saw the hightest increase with 10%. The value of brokered overnight bookings increased by approx. 17%, the number of bookings increased by approximately 18%. Revenues from membership fees grew by 7%. Revenues from marketing products/consulting could be increased by almost 3%. Revenue per employee increased by about 11% to Euro 91,000 (82,000). The average number of employees decreased from 82 to 80. On June 30, 2014, 274 hotels were part of the Design Hotels group, compared to 246 at the same time in 2013 and 268 as per December 31, 2013. The total number of rooms was 20,720 (18,669) spread over 177 destinations in 53 countries. The average number of rooms was 76; the average room rate amounts to Euro 241. Gross Margin slightly above Last Year's Level The Gross Margin for the first half-year came in at 68% (65%), which is slightly above the previous year's level. Costs Operating Costs Increase Disproportionately to Revenues Total Operating Costs (Staff and Marketing Expenses, Cost of Sales and Administrative Expenses) for the first half-year amounted to Euro 4.31m (4.13m), which represents an increase of approximately 4% compared to the same period of the last year. The percentage increase of the operating costs is, therefore, clearly below the percentage increase of total revenues. Especially Selling Expenses went down by 25% to Euro 595,000 (796,000) which, on the one hand, was due to the fact that the annual members conference was moved to the second half of the year and the associated costs did not incur. On the other hand, the company had lower marketing costs compared to the previous year, where the 20-years anniversary of Design Hotels resulted in higher costs. The expenses for personnel and administration increased compared to the same period in 2013. The administrative expenses include the costs that incurred within the scope of the Domination Agreeement; they are accounted for as non-recurring costs. Results and Financial Position Stable Balance Structure EBITDA for the first half-year 2014 came in at Euro 663,000 (257,000). Following a solid increase to Euro 105,000 (-54,000) the first quarter, the second quarter showed an even higher increase to Euro 588,000 (311,000). EBIT for the first half-year showed a profit of Euro 511,000, compared to Euro 152,000 in the same period of the last year. The result after taxes for the period came in at Euro 327,000, compared to Euro 47,000 in the same period last year. Profit per Share for the first half-year was Euro 0.04 (0.01). As per June 30, 2014, Design Hotels had cash and cash equivalents in the form of short-term deposits in the amount of Euro 4.67m, compared to Euro 4.41m as per December 31, 2013. Cash and cash equivalents are expected to increase in the second half of the year. As of the end of the reporting period, shareholders' equity was Euro 5.49m, compared to Euro 5.12m at the beginning of the financial year and Euro 4.34m at the same point of time last year. The equity ratio was 63% (66% on 31.12.2013). The balance sheet was free of liabilities to banks and noteworthy goodwill. In the first half-year of 2014, a cash flow of EUR 266,000 (first half-year 2013: Euro -556,000) was generated. Outlook The general outlook for the international tourism industry is positive and UNWTO predicts a yearly growth of about 4% for the coming years. It seems that temporary economic downturns and regional crises, as currently in Syria and Ukraine, have a low impact on worldwide travel activities, and therefore, on the development of the industry. For 2014, Management of Design Hotels AG expects a revenue growth of 10.25% compared to 2013; for 2015, Management expects a revenue growth of 8.26% compared to 2014. Management also expects an increase of Earnings before Interest and Taxes by 36.32% in 2014 compared to 2013, and an increase of 23.09% in 2015, compared to 2014. The statement in the Status Report (Lagebericht) 2013, that revenues will grow in the lower double digits in 2014 and 2015, was and is wrong for the year 2015. Revenue for 2015 was and is expected to grow by 8.26%, thus a one digit percentage growth. The respective mistake in the Status Report is an editorial error. Risks The individual and market risks, which could influence the results of the Design Hotels group, remain the same as described in the risk report for 2013. The general economic climate in the first six months of 2014 was still dominated by uncertainties. Despite this, the tourism sector showed a lively demand for travel services. No considerable risks jeopardizing the continued existence of the company have occurred. Company Overview (unaudited) According to HGB (German Commercial Code) Profit and Loss Statement (all figures are in Thousand Euro) Total as per June 30 Revenues 2014 2013 Annual Membership Fees 1,658 1,548 Commissions 3,367 3,050 Marketing Products/Consulting 2,202 2,142 Total Revenues 7,227 6,740 Cost of Sales 2,322 2,362 Gross Profit 4,905 4,378 Staff Expenses 2,899 2,677 Selling Expenses 595 796 Administrative Expenses 817 660 Total Operating Expenses 4,311 4,133 Other Operating Income 96 53 Other Operating Expenses 27 41 EBITDA 663 257 EBIT 511 152 EBT 518 158 After-tax Profit/Result 372 47 Average number of employees 80 82 Revenue per Employee 91 82 Consolidated Statement of Cash flow (all figures are in Thousand Euro) Total as per June 30 2014 2013 EBITDA from Profit and Loss Statement 662 256 Cashflow from Investment Activities -131 -257 Balance Trade Payables vs. Trade Receivables -265 -555 Change in securities portfolio 0 0 Change in cash and cash equivalents 266 -556 Cash and cash equivalents at start of period 4,407 4,002 Cash and cash equivalents at end of period 4,673 3,446 Guarantees 55 52 Cash and cash equivalents 4,618 3,394 Consolidated Balance Sheet June December 30, 2014 31, 2013 Assets EUR EUR EUR EUR Long-term Assets 807,9 866,0 Fixed Assets 57 25 Short-term Assets Inventory 285,453 216,937 2,137,6 Accounts Receivable 19 1,821,570 Other Assets 811,964 424,445 Liquid Funds and 4,672,9 7,907 6,870 Securities 52 ,988 4,407,254 ,207 8,715 7,736 Total Assets ,945 ,232 Liabilities Shareholder- 's equity 8,972,0 Share capital 72 8,972,072 - Cumulative other 1,742,6 Equity Capital 29 -1,743,103 - 1,738,7 5,490 5,118 Accumulated Losses 32 ,711 -2,110,868 ,102 Short-term Liabilities 1,182,2 Accruals 55 1,215,297 Down-Payments 667,138 446,777 Accounts Payable 533,069 199,314 3,225 2,618 Other Liabilities 842,772 ,234 756,743 ,130 Total 8,715 7,736 Liabilities ,945 ,232 Change in Shareholders' Equity (all figures are in Thousand Euro) Loss Directly in Shareholders' Share carried equity included proceeds, Capital forward charges, profit and loss Total As per 1.1.2013 8,972 -2,945 -1,734 4,293 Group annual profit 47 47 Other consolida- ted results -5 -5 Total result 47 -5 42 As per 30.06.2013 8,972 -2,898 -1,739 4,335 As per 1.1.2014 8,972 -2,111 -1,743 5,118 Group annual profit 372 372 Other consolida- ted results 1 1 Total result 372 1 373 As per 30.06.2014 8,972 -1,739 -1,742 5,491 Appendix to the First Half-Year Interim Report for 2014 General Information The interim report was prepared according to the regulations of the German Commercial Code (HGB). The interim results and interim status report have neither been audited according to regulations in section 317 HGB nor reviewed by an auditor. Consolidation The basis of consolidation has remained unchanged since the annual audit for 2013. Balance and Valuation Principles The applied balance and valuation methods used correspond to those that were applied to the consolidated annual statements for 2013. A detailed description can be found in the annual report for 2013. Other Information Material post balance sheet events: On June 6/9, 2014, the company entered into a Domination Agreement with the majority shareholder, Starwood Hotels & Resorts, Incorporated. On July 21, 2014, the Annual Shareholder Meeting approved the agreeement. At this point, the agreement still needs to be entered in the commercial register in order to become effective. The entry is still pending. Profit and Loss Statement: Design Hotels generates revenues through Booking Commissions, Membership Fees and Marketing Products/Consulting. Revenues from services are recognized after the service has been delivered and it is likely that the economic benefits of rendering the service will flow to the company. Discounts granted are deducted from revenues. The Membership Fees, which are paid by the hotels in advance, are deferred on a monthly basis. Earnings Per Share: Earnings per share are to be determined for all companies whose shares are traded on a public exchange. The undiluted earnings per share are determined as the profits for the reporting period due to the shareholders of the parent company, divided by the weighted average number of shares in circulation during the reporting period. Own Shares: Design Hotels AG currently holds no own shares. Confirmation by the Legal Representatives To the best of my knowledge and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results of the group, and the interim management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group for the remaining months of the financial year. Claus Sendlinger, July 2014 Contact: Design Hotels AG Sascha Wolff (CFO) Stralauer Allee 2c 10245 Berlin Tel. +49 (0)30 884 940 014 Fax +49 (0)30 259 330 17 ir@designhotels.com About Design Hotels(TM) Design Hotels(TM) represents and markets a curated selection of more than 270 privately owned hotels in over 50 countries across the globe. Design Hotels offers them an international platform as well as comprehensive services: Conception, positioning, marketing, sales and other services and measures to optimize their revenues. As part of a worldwide creative network Design Hotels provides for innovation and exchange of ideas among its members, guests and visionary people from other branches. None of the Design Hotels members equals another. Each one has its own character, history and and kind and manner how it blends in with the environment. All houses are connected through their uniqueness. They are formed by their creators, hoteliers, architects, designers and other creative minds whose passion form unrivalled events based on good ideas. www.designhotels.com, ISIN : DE0005141006, m:access Munich Stock Exchange (Regulated Unofficial Market) --------------------------------------------------------------------- 01.08.2014 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- 280424 01.08.2014


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