Annual report 2004/05

The Group’s operations
Profits before tax increased to MSEK 182 (177), the best result in SkiStar’s history. A weak
winter season has been compensated by higher capital gains and lower net financial income.
Key points for the year
• Acquisition of Trysil, Norway’s
largest ski resort.
• Net sales and profit:
- Net sales reduced to MSEK 977 (990).
- Income before tax amounted to
MSEK 182 (177).
- Income after tax decreased to MSEK
172 (313).
- Net earnings per share amounted to
SEK 8:83 (16:26) during the period.
In the previous year a large one-off
tax revenue amount was reported.
• An increased dividend of SEK 6:00
(5:00) per share is proposed.
• The current booking situation for
the 2005/06 season showed a 4%
improvement at the beginning of
October than at the same point in
time in the previous year.
Organisation and legal structure
All operations in Sweden are
conducted in the Parent Company,
SkiStar AB (publ).
Property
Operations in Norway are conducted
in the wholly-owned subsidiary,
Accounting/Finance
/IR/Purchases
HR/Guest Service
Hemsedal Skisenter AS and the 65%
owned subsidiary Hemsedal Booking
AS. Hemsedal Skisenter AS has an
option to purchase the outstanding
shares in Hemsedal Booking AS in
CEO
2008. The Group’s managerial group
was comprised of twelve individuals
during the year: CEO, CFO,
Market and Sales Manager, Human
Resources Manager, Market Manager,
Sales Co-ordinator, IT Manager,
Property Manager and four Heads of
Destinations, one for Åre, Vemdalen,
Sälen and Hemsedal.
Operational structure
SkiStar’s operations are divided into two
business areas and three staff
functions. Business Area Destinations is
comprised of four areas of operations:
Sälen, Åre, Vemdalen and Hemsedal.
The second business area is the recently
formed Business Area Property. The
staff functions are divided into SkiStar
Travel (comprising Marketing/Sales/IT),
Accounting/Finance/IR/Purchases and
HR/Guest Service.
Staff functions
Accounting, Finance, Purchasing, IR
Accounting, finance, purchasing and
IT are co-ordinated under the CFO.
SkiStar Travel
Accounting principles and reporting
routines are, amongst other things, coordinated
under Accounting in order to
achieve standardised reporting for the
Group. In addition, work with
standardised models for financial
control, such a follow-up of
effectiveness and profitability, is
conducted here. All credit risk
management and interest rate hedging is
handled centrally and follows adopted
policies. The Investor Relations function,
IR, handles information to the stock
market in the form of annual reports,
interim reports, press releases, analyst
meetings, capital market days and
financial information via the website.
Certain purchases are handled centrally
in order to generate purchase synergy
effects.
Human Resources, Guest Service
To ensure that all of the functions and
departments of the Group prioritise and
work with leadership and guest service
in a standardised manner, the overall
human resources function for the Group
has been centralised under a Human
Resources Manager. See also
pages 18–19.
SkiStar Travel
The Group’s marketing, sales and IT
has been co-ordinated under the name
SkiStar Travel since January 2005.
This co-ordination has taken place in
order to the take full advantage of and
gain the greatest possible effect from
SkiStar’s total resources in these three
areas. See also pages 20–22.
Business Area Properties
Business Area Properties has been
operational since January 2005. The
responsibilities of this business area
include generating profits and making
financial resources available via sales
of older properties and utilising these
resources to develop and build modern
properties at SkiStar’s destinations.
More information on Business Area
Properties can be found on page 34.
Business Area Destinations
Business Area Destinations is divided
into four areas of operation: Åre,
Vemdalen, Sälen and Hemsedal. This
business area is presented on pages
24–33.
Acquisition of Trysil in progress
On 19 May SkiStar submitted an offer
to Trysilfjell BA, the owners of the ski
resort in Trysil, Norway, for acquiring
the companies which together conduct
alpine skiing activities in Trysil.
Trysilfjell BA accepted SkiStar’s offer on
23 May. The offer entails that SkiStar
offer a cash payment of a maximum
of MNOK 190 or a maximum of
1,672,000 B shares, or, alternatively,
a combination of cash and shares.
Thereafter, the seller informed SkiStar
that the purchase price would be
comprised of a maximum of 60,000
B shares. These shares will be acquired
on the basis of a repurchase of shares.
The date of taking possession was
agreed at 1 November 2005. The
Norwegian Competition Authority has
not, to date, approved this transaction.
It is the Competition Authority’s
opinion that after the acquisition of
Trysil, SkiStar will have a dominating
position in the operation of alpine ski
resorts in Scandinavia. A final ruling
from the Norwegian Competition
Authority is expected in mid-November
2005, and therefore the acquisition
has been slightly delayed. If the
Competition Authority’s decision is
negative for SkiStar, the company will
lodge an appeal with a superior
body, the Norwegian Ministry of
Modernisation. In the event of such an
appeal, the acquisition will be further
delayed by a few months. In 2004 Trysil
generated total net sales of MNOK 230
and reported profits before tax
amounting to MNOK 24. Trysil is
Norway’s largest ski resort with a
market share of 15% of ski passes in
Norway. The company conducts skiing,
ski hire and accommodation agency
activities. Ski school activities are
conducted by one of the associated
companies. Trysil is a high-standard,
modern ski resort. There is ski lift
capacity for 32,400 skiers per hour,
with 22 ski lifts and 5 chairlifts. There
are 64 slopes. The companies
administer 3,300 of a total of
approximately 8,000 commercial beds
in the area. The occupancy rate for the
cabins and apartments, provided on an
agency basis, was 67% in the 2004/05
season. After the completion of the
acquisition, SkiStar’s market share of ski
passes in Scandinavia will increase from
32% to 42%. With the acquisition of
Trysil, SkiStar provides a
comprehensive offering in the Nordic
markets, with Hemsedal in Norway and
Åre in Sweden having more advanced
profiles, and Trysil in Norway as well as
Sälen and Vemdalen in Sweden
focusing on families. The acquisition
provides synergies primarily within
Marketing, Sales and IT.
Division of operating income and costs, MSEK
Operating income 2004/05 2003/04 +/– +/–, %
Alpine skiing/Lift 545 560 –15 –3
Accommodation 162 162 0 0
Ski rental 91 85 6 7
Ski school 37 38 –1 –3
Sports outlets * 24 42 –18 –43
Properties 59 57 2 4
Capital gains 45 25 20 80
Other ** 72 49 23 47
Total 1 035 1 018 17 2
Operating expenses
Operating income and results per business area, MSEK
Cost of materials –56 –62 6 –10
Personnel costs –313 –305 –8 3
Other costs –336 –324 –12 4
Total –705 –691 –14 2
* Leased sports outlets generated net sales of MSEK 20 in 2003/04.
**Other income includes, amongst other things, recently-started charter flight operations.
Åre Vemdalen Hemsedal Sälen Property
2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04
Net sales 265 238 70 74 170 163 472 515 0 0
Other income 3 0 1 0 0 0 9 2 45 25
Operating income 268 238 71 74 170 163 481 517 45 25
Operating expenses –205 –187 –52 –51 –128 –111 –320 –341 0 0
Depreciation –31 –31 –8 –7 –30 –24 –53 –54 0 0
Operating income 32 20 11 16 12 28 108 122 45 25
Operating margin, % 12 8 15 22 7 17 22 24 100 100
14 15