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.
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
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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."
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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/.
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.
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,
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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.
Vivian Chen, Investor Relations Director
7 Days Group Holdings Limited
+86 20 8922 5858
IR@7daysinn.cn
+1 (212) 889 4350
7DaysInn@taylor-rafferty.com
Mahmoud Siddig, Managing Director
Taylor Rafferty
+852 3196 3712
7DaysInn@taylor-rafferty.com
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