GUANGZHOU, China, June 11, 2012 /PRNewswire-Asia-FirstCall/
-- 7 Days Group Holdings Limited ("7 Days Group" or the
"Company") (NYSE: SVN), a leading economy hotel chain based in
China, today announces an update
on its business strategy and share repurchase program.
Strategic Update:
As a core element of its strategy to expand its market share
within China's economy hotel
industry, 7 Days Group has gradually increased its focus on the
expansion of its portfolio of managed hotels in recent years. As of
the end of the first quarter 2012, the Company had 1,044 hotels in
operation, consisting of 417 leased-and-operated hotels and 627
managed hotels, representing a total of 104,191 rooms spanning 162
cities. A key benefit of the managed hotel model is that it allows
the Company to maintain a rapid pace of expansion, gain greater
operational leverage, expand its brand presence and generate stable
fee-based income with a higher return on employed capital.
Together, these factors have resulted in increasing
profitability and stronger free cash flow generation.
In view of the successful expansion of the Company's managed
hotel portfolio to date, and the continuing strong demand from
managed hotel partners, the Company has decided to accelerate the
shift in its long-term strategic focus from leased-and-operated
hotels to managed hotels.
In line with its revised strategic focus, the Company is
increasing its guidance for managed hotel openings for the full
year 2012 from 240 to 320. Concurrently, the Company is lowering
its outlook for new leased-and-operated hotel openings for the full
year 2012 to 80 from 120, due to the Company's shift in strategic
emphasis towards managed hotels and its decision to focus on
capital investments with higher potential returns. This will result
in a total of 400 new hotel openings in 2012, an increase from the
previously announced target of 360 new hotel openings.
Based on its performance year to date, and the expected revenue
contribution from managed hotels targeted to open in 2012, the
Company is maintaining its full year revenue guidance of 28%-32%
year-over-year growth. Furthermore, as the shift in emphasis
towards a higher rate of managed hotel openings will result in a
less capital-intensive business model, the Company expects to
deliver further margin expansion in 2012 and an overall improvement
on a year-over-year basis in net income, EBITDA and free cash
flow.
Share Repurchase Program:
In light of the Company's performance to date, its current
market valuation and confidence in the long-term growth
opportunities of the economy hotel industry in China, the Board of Directors has approved a
share repurchase plan. Under the plan, the Company is
authorized to repurchase up to US$25M
million worth of outstanding American Depositary Shares, or ADSs,
over the next 12 months, from time to time, in open-market
purchases on the NYSE Euronext at prevailing market prices, in
trades pursuant to a Rule 10b5-1 and 10b-18 repurchase plan,
or privately negotiated transactions in accordance with applicable
federal securities laws. The timing and extent of any
purchases will be determined by the Company's management, in its
discretion, and will depend upon market conditions, the trading
price of 7 Days Group's ADSs and other factors, including customary
restrictions on share repurchases. 7 Days Group expects to
implement this share repurchase program in a manner consistent with
market conditions and the interest of the shareholders. The Company
will finance the repurchase with the Company's cash on hand and
cash generated from operations.
Mr. Alex Nanyan Zheng, 7 Days Group Co-Chairman of the Board of
Directors and Chief Executive Officer, commented, "The shift in our
new hotel opening schedule for 2012 reflects the strong demand from
managed hotel partners who are drawn to 7 Days Group due to the
power of our brand and the strength of our operating platform.
While we have expanded at a rapid pace in recent years, we have not
sacrificed our commitment to providing guests with a high quality
overnight experience. This is evidenced by the fact that 7 Days Inn
was recently named as the most influential brand in the economy
hotel industry in China by the
China Brand Power Index, an affiliate of the Ministry of Industry
and Information Technology.
"The acceleration of our strategy to increase emphasis on the
expansion of our managed hotel portfolio is an important step to
further strengthening our position in China's growing economy hotel industry. The
adoption of a more asset-light approach to expansion is a logical
fit with 7 Days' business model, as the less risky, less capital
intensive and more profitable nature of managed hotels will allow
us to maintain our rapid expansion strategy and further strengthen
our brand image while increasing the Company's long-term and
sustainable growth of profitability and cash flow generation.
In addition, we will be able to further leverage our competitive
advantages, namely our best-in-class proprietary e-Commerce system
and our industry leading loyalty club, streamlined operating model
and well-established training program, to further improve our
product and services thereby enhancing our guests' experience and
satisfaction during their stay. We believe a focus on managed
hotels bring us in-line with the predominant trend in the global
lodging industry, where we are seeing operators worldwide focus
increasingly on asset-light, profit-oriented managed and franchised
operating models. Furthermore, we believe the positive impact on
our profitability and ability to generate free cash flow will be
sustainable and, in fact, will accelerate as we enter 2013 and
beyond.
"We believe the share repurchase program is in the best interest
of the Company and our shareholders. We remain confident in
the long term growth prospects of the economy hotel industry in
China, as secular demographic
shifts continue to drive increasing demand for affordable lodging
in a still highly fragmented market. We are committed to
delivering increasing returns to our shareholders, and believe that
we remain well positioned to strengthen our leading market position
and to maintain our rapid expansion."
Conference Call
7 Days' senior management will host a conference call at
9:30 pm (US Eastern) / 6:30 pm (US Pacific) on Monday, June 11, 2012, which is 9:30 am (HK / Beijing Time) on Tuesday, June 12, to discuss the strategy update
and recent business developments.
The conference call may be accessed by calling +1 866 519 4004
or +1 718 354 1231 (for callers in the US), +800 819 0121 (for
callers in China), +400 620 8038
(for mobile callers in China), +65
6723 9381 (for international callers), +800 930 346 or +852 2475
0994 (for callers in Hong Kong)
and stating passcode 7 Days. Please dial in approximately 10
minutes before the scheduled time of the call.
A recording of the conference call will be available by calling
+1 866 214 5335 (for callers in the US), +61 2 8235 5000 (for
callers outside the US), +10 800 714 0386 (for callers in
Northern China), +10 800 140 0386
(for callers in Southern China) or
+800 901 596 (for callers in Hong
Kong) and entering Conference ID number 90537060.
A live webcast of the conference call and recording of the
conference call will be available on the investor relations page of
7 Days' website at http://en.7daysinn.cn/.
About 7 Days Group Holdings Limited
7 Days Group is a leading and fast growing national economy
hotel chain based in China. It
converts and operates limited service economy hotels across major
metropolitan areas in China under
its award-winning "7 Days Inn" brand. The Company strives to offer
consistent and high-quality accommodations and services primarily
to the growing population of value-conscious business and leisure
travelers who demand affordable, clean, comfortable, convenient and
safe lodging, and to respond to its guests' needs.
Safe Harbor Statement
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, among other
things, 7 Days Group's expansion guidance for managed hotels,
including the number of hotel to be opened (including an update on
the breakdown of expected new leased-and operated hotels and new
managed hotels), the revenue forecast for 2012, the Company's
expected improvement in net income, EBITDA, cash flow and other
financial benefits from the strategic shift, the Company's
anticipated share repurchases, the Company's ability to
execute its strategic shift, its ability to offer consistent and
high-quality accommodations and services at an affordable price,
its ability to leverage the key competitive advantages and to
deliver continued growth, the positive impact of strategic shift on
the Company's profitability and cash flow, its ability to generate
increasing returns to shareholders, and the long-term prospects of
the economy hotel industry in China. These forward-looking statements are
not historical facts but instead represent only the Company's
belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of the Company's control. The
Company's actual results and financial condition and other
circumstances may differ, possibly materially, from the anticipated
results and financial condition indicated in these forward-looking
statements.
Other factors that could cause forward-looking statements to
differ materially from actual future events or results include
risks and uncertainties related to: uncertainties associated with
factors typically affecting the lodging industry, including changes
in economic conditions, adverse weather conditions, natural
disasters or outbreaks of serious contagious diseases in markets
where the Company has a presence; uncertainties regarding the
Company's ability to respond to competitive pressures;
uncertainties regarding the Company's ability to manage its
expected growth; uncertainties regarding the Company's ability to
continue its growth and achieve profitability; risks associated
with the Company's limited operating history and historical
operating losses; uncertainties regarding the Company's ability to
fund its working capital needs; uncertainties regarding its ability
to successfully and timely identify, secure or operate additional
hotel properties. For a discussion of other important factors that
could adversely affect the Company's business, financial condition,
results of operations and prospects, see "Risk Factors" beginning
on page 8 of the Company's 2011 Annual Report on Form 20-F. Any
projections in this release are based on limited information
currently available to the Company, which is subject to change.
Although such projections and the factors influencing them will
likely be changed, the Company will not necessarily update the
information. Such information speaks only as of the date of this
release.
Contacts:
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Investor
Contact:
Vivian Chen, Investor
Relations Director
7 Days Group Holdings Limited
+86 20 8922 5858
IR@7daysinn.cn
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Investor Relations
(US):
Marc Raybin,
Director
Taylor
Rafferty
+1 (212) 889 4350
7DaysInn@taylor-rafferty.com
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Investor Relations
(HK):
Mahmoud Siddig, Managing
Director
Taylor
Rafferty
+852 3196 3712
7DaysInn@taylor-rafferty.com
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SOURCE 7 Days Group Holdings Limited