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China Lodging Group Announces Its Preliminary Results for Hotel Operations in the Third Quarter of 2014

11/13/2014| 10:21:25 AM|

China Lodging Group, Limited (Nasdaq:HTHT) ("China Lodging Group" or the "Company"),announced its unaudited financial results for the third quarter ended September 30, 2014.

 

SHANGHAI, China, Nov. 12, 2014 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (Nasdaq:HTHT) ("China Lodging Group" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the third quarter ended September 30, 2014.

Operational Highlights of Third Quarter 2014

 

Third Quarter of 2014 Financial Results
(RMB in thousands)Q3 2013Q2 2014Q3 2014
Revenues:   
Leased hotels 1,066,240 1,145,597 1,256,926
Manachised and franchised hotels 149,862 177,409 214,577
Total revenues 1,216,102 1,323,006 1,471,503
Less: business tax and related surcharges (69,436) (76,035) (84,002)
Net revenues 1,146,666 1,246,971 1,387,501

 

 

Total revenues for the third quarter of 2014 were RMB1,471.5 million (US$239.7 million), representing a 21.0% year-over-year increase and an 11.2% sequential increase. The year-over-year increase was primarily due to our hotel network growth. The sequential increase was due to seasonality and the expansion of our hotel network.

Total revenues from leased hotels for the third quarter of 2014 were RMB1,256.9 million (US$204.8 million), representing a 17.9% year-over-year increase and a 9.7% sequential increase.

Total revenues from manachised and franchised hotels for the third quarter of 2014 were RMB214.6 million (US$35.0 million), representing a 43.2% year-over-year increase and a 21.0% sequential increase.

Net revenues for the third quarter of 2014 were RMB1,387.5 million (US$226.1 million), representing a 21.0% year-over-year increase and an 11.3% sequential increase.

 

(RMB in thousands)Q3 2013Q2 2014Q3 2014
Operating costs and expenses:   
Hotel operating costs 823,214 928,860 983,259
Selling and marketing expenses 37,280 37,252 53,610
General and administrative expenses  68,762 78,280 99,520
Pre-opening expenses 52,438 50,072 44,983
Total operating costs and expenses 981,694 1,094,464 1,181,372

 

 

Hotel operating costs for the third quarter of 2014 were RMB983.3 million (US$160.2 million), compared to RMB823.2 million (US$134.5 million) in the third quarter of 2013 and RMB928.9 million (US$149.7 million) in the previous quarter, representing a 19.4% year-over-year increase and a 5.9% sequential increase. The Company's hotel network expansion, especially the increased number of midscale leased hotels which incur a significant amount of rental and depreciation costs, was the main driver for the increase in hotel operating costs. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB981.1 million (US$159.8 million), representing 70.7% of net revenues, compared to 71.7% for the third quarter in 2013 and 74.4% for the previous quarter. The year-over-year decrease in the percentage was mainly attributed to a higher portion of higher-margin manachised revenue. The sequential decrease in the percentage was mainly due to seasonality.

Selling and marketing expenses for the third quarter of 2014 were RMB53.6 million (US$8.7 million), compared to RMB37.3 million (US$6.1 million) in the third quarter of 2013 and RMB37.3 million (US$6.0 million) in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB53.3 million (US$8.7 million), or 3.9% of net revenues, compared to 3.2% for the third quarter of 2013 and 3.0% for the previous quarter. The year-over-year and sequential increase was mainly due to increased online marketing activities.

General and administrative expenses for the third quarter of 2014 were RMB99.5 million (US$16.2 million), compared to RMB68.8 million (US$11.2 million) in the third quarter of 2013 and RMB78.3 million (US$12.6 million) in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB86.1 million (US$14.0 million), representing 6.2% of net revenues, compared with 5.4% of net revenues in the third quarter of 2013 and 5.9% in the previous quarter. The year-over-year increase in the percentage was mainly attributable to the increased IT spending, including R&D expense to enhance guest experience and digital channels, and spending to enable us to provide comprehensive IT services to our hotels.

Pre-opening expenses for the third quarter of 2014 were RMB45.0 million (US$7.3 million), representing a 14.2% year-over-year decrease and a 10.2% sequential decrease. The decrease was mainly due to fewer leased hotels in the pipeline.

Income from operations for the third quarter of 2014 was RMB202.1 million (US$32.9 million), compared to RMB171.1 million (US$28.0 million) in the third quarter of 2013 and RMB158.3 million (US$25.5 million) in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the third quarter of 2014 was RMB218.0 million (US$35.5 million), compared to adjusted income from operation (non-GAAP) of RMB180.0 million (US$29.4 million) for the third quarter of 2013 and RMB165.2 million (US$26.6 million) for the previous quarter. The adjusted operating margin for the third quarter of 2014 was 15.8%, compared with 15.7% in the third quarter of 2013 and 13.2% in the previous quarter.

Net income attributable to China Lodging Group, Limited for the third quarter of 2014 was RMB149.6 million (US$24.4 million), compared to RMB124.9 million (US$20.4 million) in the third quarter of 2013 and RMB124.2 million (US$20.0 million) in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the third quarter of 2014 was RMB165.5 million (US$27.0 million), representing a 23.6% year-over-year increase and a 26.2% sequential increase.

Basic and diluted earnings per share/ADS. For the third quarter of 2014, basic earnings per share were RMB0.60 (US$0.10) and diluted earnings per share were RMB0.59 (US$0.10); basic earnings per ADS were RMB2.40 (US$0.39) and diluted earnings per ADS were RMB2.36 (US$0.38). For the third quarter of 2014, excluding share-based compensation expenses, adjusted basic earnings per share were RMB0.66 (US$0.11) and adjusted diluted earnings per share (non-GAAP) were RMB0.65 (US$0.11); adjusted basic earnings per ADS (non-GAAP) were RMB2.65 (US$0.43) and adjusted diluted earnings per ADS (non-GAAP) were RMB2.61 (US$0.43).

EBITDA (non-GAAP) for the third quarter of 2014 was RMB349.5 million (US$56.9 million), compared with RMB289.8 million (US$47.4 million) in the third quarter of 2013 and RMB304.3 million (US$49.1 million) in the previous quarter. Excluding pre-opening expenses and share-based compensation expenses, adjusted EBITDA from operating hotels (non-GAAP) for the third quarter of 2014 was RMB410.4 million (US$66.9 million), compared with RMB351.2 million (US$57.4 million) for the third quarter of 2013 and RMB361.3 million (US$58.2 million) for the previous quarter. The year-over-year increase was mainly due to the expansion of our hotel network. The sequential increase was mainly due to seasonality.

Hotel income (non-GAAP), which is the difference between net revenues and hotel operating costs, was RMB404.2 million (US$65.9million) for the third quarter of 2014, compared with RMB323.5 million (US$52.9 million) in the third quarter of 2013 and RMB318.1 million (US$51.3 million) in the previous quarter. The hotel income from the leased hotels was RMB245.4 million (US$40.0 million) during the third quarter of 2014. The hotel income from the manachised and franchised hotels was RMB158.8 million (US$25.9 million) during the third quarter of 2014, or accounting for approximately 40% of total hotel income.

Cash flow. Operating cash flow for the third quarter of 2014 was RMB439.0 million (US$71.5 million). Investing cash flow for the third quarter was RMB280.1 million (US$45.6 million).

Cash and cash equivalents and Restricted cash. As of September 30, 2014, the Company had a total balance of cash and cash equivalents, restricted cash of RMB849.5 million (US$138.4 million).

Loans and other debt financing

As of September 30, 2014, the Company had a short-term loan balance of RMB300.0 million. As of September 30, 2014, the total credit facility available to the Company was RMB889.6 million.

Business Outlook and Guidance

"Thanks to the growing popularity of our brand portfolio, we are pleased to see our hotel network and member base expansion accelerated against a slow macro-economic backdrop. To bolster our leadership in this competitive market, we will dedicate additional resources to technology, through open innovation platforms that strengthen our expertise. We believe this will lay a sound foundation for the Company to capture the huge growth opportunity in the coming years," commented Mr. Qi Ji, founder, executive Chairman and CEO of the Company.

The Company expects net revenues for the fourth quarter of 2014 to grow 15.5% to 17.5% growth year-over-year. Therefore, the Company expects net revenues for the full year of 2014 to grow 19% to 19.6%, slightly lower than the initial full year expectations the Company provided at the beginning of the year. The above forecast reflects the Company's current and preliminary view, which is subject to change.

Change of Board Member

China Lodging Group announced that the resignation of Mr. Yongjian Sun, a director of the Board, effective on October 30, 2014. Ms. Qionger Jiang has been appointed as a director, effective on October 30, 2014. Jiang has been acting as the CEO and artistic director of SHANG XIA since 2008 and she is an internationally renowned designer. SHANG XIA is the first international famous Chinese luxury brand, in partnership with Hermes. Jiang received a Bachelor of Arts degree at designing school of Shanghai Tongji University, and continued her studies of furniture and interior design at the École nationale supérieure des Arts Décoratifs in Paris. In 2013, she also received "chevalier des arts et lettres" decoration from French president. 

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