Orient-Express Hotels' CEO Discusses Q2 2012 Results - Earnings Call Transcript

| About: Belmond Ltd. (BEL)

Orient-Express Hotels Ltd. (OEH) Q2 2012 Earnings Call August 1, 2012 10:00 PM ET


Amy Brandt - Director, IR

Philip Mengel - Interim CEO

Filip Boyen - VP & COO

Martin O’Grady - VP & CFO


Josh Attie - Citi

Carlo Santarelli - Deutsche Bank

Joe Greff - JPMorgan

Steve Kent - Goldman Sachs


Good day and welcome to the second quarter 2012 earnings conference call for Orient-Express Hotels. For your information, today’s call is being recorded. At this time I would like to turn the conference over to Amy Brandt, Director of Investor Relations. Please go ahead.

Amy Brandt

Thanks Martin. Good morning, everyone, and thank you for joining us today for the second quarter 2012 earnings conference call for Orient-Express Hotels.

We issued our earnings release last night. The release is available on our website at orient-expresshotelsltd.com as well as on the SEC website. On the call today are Philip Mengel, Chairman and Interim Chief Executive Officer; Filip Boyen, Chief Operating Officer; and Martin O’Grady, Chief Financial Officer.

Before we get started today, I would like to read out our usual cautionary statement under the Private Securities Litigation Reform Act of 1995 in the United States. In the course of remarks to you today by Orient-Express Hotels’ management and in answering your questions, they may make forward-looking statements concerning Orient-Express Hotels such as its earnings outlook, future investment plans and other matters that are not historic facts.

We caution that actual results of Orient-Express Hotels may differ materially from these forward-looking statements. Information about factors that could cause actual results to differ is set out in yesterday’s news release, the company’s latest annual report to shareholders and the filings of the company with the Securities and Exchange Commission.

I’d now like to turn the call over to Philip.

Philip Mengel

Thank you, Amy. Good morning, Ladies and gentlemen, and thank you for joining us. Just a point of clarification. Amy gave me a promotion. I am a Board member, Director and Interim Chief Executive, but not Chairman. Just so there is no confusion.

As we highlighted in our press release, progress in operations and financial results during the second quarter were affected by the economic uncertainty in Europe, particularly the weakening exchange rate of the euro and other currencies against the US dollar.

Our revenue in Q2 was down 2% to $163.8 million compared with the same quarter of last year and adjusted EBITDA for the second quarter was $41.5 million or 3% below last year. The EBITDA adjustments now include adding back the FAS 123 costs of non cash share-based compensation and also reflect the elimination of properties that are subject to contracts for sale.

Despite the Eurozone issues, our quarter two operations remained positive and financial results advanced in local currencies. Out hotel room night sold in the second quarter were slightly ahead of last year with a 4% decline in Europe offset by positive comparisons in all other regions.

Our worldwide RevPAR in local currency was 3% ahead of last year. Revenue from trains & cruises of $27 million was 7% ahead of last year. In constant currency, total revenue and adjusted EBITDA were both 4% ahead of the same quarter of 2011. Our adjusted EBITDA margin was maintained at 25%, despite a 4% reduction in revenue.

Our adjusted net income for the second quarter benefited from a $4.7 million reduction in interest expense and advanced to $14.8 million compared to $10.2 million last year. Good progress was made during the quarter in our investment program in our strategy to redeploy capital from sale of non-core properties to enhance revenue and profit.

During 2012, to date we've completed five new spectacular suite additions to Hotel Splendido, completed a beautiful new lobby bar at the Grand Hotel, Europe. We have refurbished 50% of the room stock at The Inn at Perry Cabin and opened a new all-suite hotel Palacio Nazarenas in our Peru Joint venture.

The main building at Copacabana Palace is currently closed for renovation of a 121 rooms and suites and the creation of exciting new retail stores in the main hotel and at the beach. We will complete the refurbishment of public areas and additional rooms at La Samanna during the third quarter and we recently committed to room refurbishment for the Oasis wing at Mount Nelson Hotel in Cape Town as well as improvement to our safari camps in Botswana.

During August, a major renovation to the second floor ball room at the '21' Club in New York will be completed. Looking ahead, we're on schedule for the opening of El Encanto, the landmark hotel in Santa Barbara at California in March 2013 after a total rebuild.

These exciting investments are supported by the strategy of redeploying capital from property sales. We recently announced agreements to sell the Observatory Hotel in Sydney and The Westcliff in Johannesburg. The combined proceeds of $66 million will represent a valuation of over 30 times trailing 12 months EBITDA from these properties. These proceeds will be directed to debt reduction, cash reserves and revenue enhancing investments projects in our core properties. Our objective is to raise shareholder value through strengthening the balance sheet, improving return on assets and adding high margin incremental revenues.

At the end of the second quarter, the ratio of debt-to-trailing 12-month adjusted EBITDA was 4.5 times. After reflecting the adjustment for adding back non-cash cost to share-based compensation, our target for the leverage ratio by the end of 2013 is to be below 3.5 times.

Our near-term operating outlook will continue to be influenced by the economic and currency developments in Europe. Longer term, we’re very confident of the high quality of our luxury hospitality assets and our disciplined investment program will delivered excellent returns for our shareholders.

Before handing over to Filip Boyen for more detail on the second quarter, I'll just provide a brief comment on the search for the permanent CEO. As previously announced, our board and search committee began work with a new search consultant in June and that process is well underway. We’re very pleased with the progress, but we do not have any specific news to announce today.

I would now like to introduce Filip Boyen, our Chief Operating Officer.

Filip Boyen

Thank you, Philip and good morning everybody. Looking at each of our operating regions individually in Europe revenue from owned hotels in the second quarter was $70.9 million, down $5.8 million from the second quarter of 2011.

The major reasons for this decrease was the weaker euro, which lost 11% of its value against the US dollars from the same time last year. Underlying trading was actually $2.3 million ahead of the second quarter of 2011, if we exclude the effects of currency movements. Growth in inaudible) underlying trading was led by the two Sicilian properties, where the refurbishments were very well received.

We have increased average daily rates from around $300 when we acquired the properties to around $580 now, with both hotels returning approximately 80% occupancy year round. There was small decreases at Hotel Cipriani, Hotel Splendido and Hotel Caruso where demand has been impacted by the difficult economic climate.

No Biennale Festival in Venice this year which provided approximately $950,000 of additional revenue in June 2011, and April was almost a weather washout. Same-store RevPAR in Europe was also affected by the weaker euro and was flat compared to the prior year in local currency, but down 7% in US dollars due to a 3% drop in ADR.

EBITDA for the quarter was $26.8 million down $2 million from the second quarter of 2011; however excluding the effects of the weaker European currencies, EBITDA was $1.1 million ahead of the second quarter of 2011.

Revenue from owned hotels in North America for the quarter was $30 million up $2.3 million from the second quarter of 2011. This growth is largely attributable to Charleston Place where strong results are driven by corporate and group business.

Same store RevPAR in the region increased by 9% in US dollars due to a 7% increase in ADR and a 2 percentage point improvement in occupancy. EBITDA in North America grew by 30% to $6.9 million compared to $5.3 million and we were able to increase the adjusted EBITDA margin from 19% to 24%.

EBITDA growth was seen at Charleston Place and also at La Samanna where the refurbishment had a very positive effect. After we complete the second phase of the refurbishments this year, we expect this growth to continue.

In Southern Africa, second quarter revenue from owned hotels was $3.6 million down from $4 million in the second quarter of 2011. Same store RevPAR was up 19% in local currency and down 3% in US dollars due to currency movements affecting ADR and US dollar terms.

At our (inaudible) camps in Botswana were installing floor-to-ceiling windows have been adding to the rooms, average rate has increased by 23%. Despite the overall dollar revenue shortfall in the region, EBITDA actually improved by $0.3 million to a loss of $0.5 million as we have seen the benefits of our cost savings initiatives.

In South America, second quarter revenue from owned hotels was $20 million down $1.7 million from the second quarter of 2011. This decrease included a $0.5 million increase at Hotel das Cataratas where business from the local Brazilian market was particularly strong, driving an increase in average rate of 11%.

Revenue decreased by $2.3 million at Copacabana Palace which was negatively impacted by a 23% weakening of the Brazilian real versus the US dollar compared to last year. Same store RevPAR in the region decreased by 2% as a result of 6% decrease in ADR offset by an increase in occupancy from 59% to 61%.

EBITDA for the quarter was $4.3 million, a decrease of $0.3 million compared to the second quarter of last year. EBITDA margin increased from 21% to 22%. Forward bookings in our new joint venture owned property Palacio Nazarenas in Cuzco, Peru are very positive with bookings reflecting an average rate of US $555 the highest of all our hotels in Peru.

In the Asia Pacific region, revenue for the second quarter was $6.3 million, an increase of 15% compared to the second quarter of 2011, revenue growth in the region was led by Napasai which benefited from its new lagoon and the Governor’s residence as Myanmar further opens up to international tourism and business travel.

Same store RevPAR increased by 15% in US dollars due to a 9% increase in [ADR] and an additional 2 percentage points in the occupancy. EBITDA was a 100k ahead of the second quarter of 2011.

For trains and cruises, revenue increased by $1.7 million or 7% to $27 million in the second quarter of 2012, largely due to a $2.1 million increase from PeruRail generated by increased passenger numbers and the $1.1 million revenue increase from Venice Simplon-Orient-Express, which is on target to achieve a record year.

EBITDA was $1.9 million ahead of the second quarter of 2011. EBITDA margin increased from 24% to 30%. We further enhanced our digital tools for sales and marketing and in May we launched a new website at orientexpress.com using responsive web design which means the site automatically adapts to multiple devices including iPads and smartphones. The continuous development of content rich digital marketing and intelligent use of social media is a key focus for our marketing group.

With regards to our performance versus our comp set for our 13 hotels that report to Smith Travel Research, our overall market performance year-to-date remains in the strong position with a RevPAR index of 115 with gains coming predominantly in rate.

Our occupancy remained fairly flat year-on-year whereas the (inaudible) experienced a slight decline. Looking at the breakdown of our market segments to groups market by which we mean corporate meetings, incentive travel and leisure groups continue to show a small but positive upward trend. This segment currently represents 21% of our rooms' revenue an increase of 2% on the second quarter of 2011.

The US and the UK continued to be our two strongest geographical markets with the North American market currently representing 39% of total business and in the second quarter our geographic mix remained fairly stable, but we are seeing declines in demand from the UK and Europe notably France, Germany and Italy.

We saw the strongest growth in the US market followed by Russia where we saw gains to 17 of our businesses. We continue to see modest gains in emerging markets particularly South America where we opened Orient-Express field sales offices in Brazil in 2011 and Mexico City in April 2012.

We continue our strategy of developing emerging markets were see growth potential. In July, we appointed a sales representative based in Dubai for the Middle East markets and will appoint the sales representative for the Chinese market in the next quarter with web site and social media capabilities rolling out thereafter.

Looking towards the rest of the year, revenue on the books in US dollars for the third quarter for owned hotels is down 7% compared to the same period in 2011 and for owned trains and cruises is down 9%, occupied rooms are down 1% and ADR and US dollars is down 6%. In some regions, we are seeing encouraging forward bookings with third quarter revenue on the books in US dollars is up 6% in North America and up 5% in Asia.

For the rest of the world excluding Asia and in Europe, we are slightly ahead in local currency but down 9% in US dollars as local currencies remain weaker. For the fourth quarter revenue on the books for owned hotels is down by 1%, owned trains and cruises is up by 5% and for total hotels, trains and cruises and joint ventures we are up 18%.

For the full year 2012, revenue achieved and on the books for owned hotels is flat compared to 2011. However, if we were to compare using the same currency rates as this time in 2011; our revenue on the books for the full year for owned hotels would actually be up 5% compared with the same time in 2011.

Rooms' occupancy is flat year-on-year and average daily rate is up 5%. I'll now hand over to Martin.

Martin O’Grady

Thank you, Filip and good morning everyone. Moving down from EBITDA, our depreciation charge in the quarter was $10.5 million, down $0.4 million on last year. Interest expense [Technical Difficulty] [10.1 million] last year, last year included a $1.7 million non-recurring write-off of deferred finance costs.

And the decrease is also explained by reduction in net debt of about $47 million since the end of the second quarter of 2011 and also in this year there was $1 million of capitalized interest during the quarter related to the construction of El Encanto.

There was tax charge in the quarter of $7.5 million compared with $10 million in the same quarter of last year. This quarter’s tax charge includes a deferred tax credit of $2.4 million caused by currency fluctuations.

Cash tax in the quarter was $4.3 million. For the rest of 2012, we are anticipating a tax charge of $10 million to $11 million in Q3 and $5 million to $6 million in Q4. We anticipate cash tax in the remainder of 2012 to be between $11 million and $13 million spread evenly over the two remaining quarters.

Just looking ahead for 2013 just for tax, we currently anticipate a tax charge in the range of $20 million to $22 million and we expect this to be spread as follows.

In Q1, a tax credit of $0.5 million to $1.5 million. In Q2, a charge off $6 million to $7 million, in Q3, a charge of $11 million to $12 million and finally for Q4 '13 a charge of $3.5 million to $4.5 million.

Overall, adjusted net earnings from continuing operations were $14.8 million compared to $10.2 million in the second quarter of '11. On the balance sheet at the end of the quarter, the company had $71.6 million of unrestricted cash plus an additional $3.9 million of funds available under short-term lines of credit. Total debt at June 30th was $615.6 million. Our net debt at the end of the quarter including restricted cash of $14.5 million was $529.5 million and our net debt to adjusted EBITDA pre-real estate was 4.5 times and our interest ratio was 4.2 times.

Our debt maturity schedule including amortization is now as follows: In 2012, $34.8 million, 2013, $133.5 million, 2014, $141.8 million and thereafter $305.5 million. Of the $34.8 million due in 2012, $10.9 million represented debt on The Observatory Hotel in Sydney which will be repaid on completion of the sale of that hotel later this month.

At the end of March, interest expense on 50% of our debt fixed and the average cost of debt including margin was 4.2%. Weighted average maturity of our debt was 2.8 years.

Turning to the cash flows for the quarter, net cash from operating activities was $26.4 million and there was $26 million of investment in the quarter which included $10.6 million at El Encanto, and $2.6 million the ongoing refurbishment at Copacabana Palace; $2.1 million for the five new suites at Splendido and $1.7 million for the completion of the remaining works at the two Sicilian properties and the balance routine CapEx at the other properties.

Net drawdown under long-term financing arrangements during the quarter was $4.4 million and this comprises drawdown of $21.8 million offset by scheduled debt repayments including amortization of $17.4 million.

We have continued to make good progress during the quarter in regard to our term loans. Yesterday, we were pleased to sign an agreement to refinance the debt outstanding on our two Sicilian properties with a new €35 million or $43 million tranche of debt from the existing lenders to our four mainland Italian properties.

Although the existing loans from a bank withdrawing from this market does not mature for one more year, we commenced work early on this refinancing due to the uncertainties in European debt markets. The refinancing will close in September and then we will pay down principle of €2 million or $2.5 million and we will also paid [$2.5 million] in three years in line with our existing Italian facility and this new tranche of debt will carry a margin of 5%.

We have also completed during the quarter the refinancing at Napasai for $13.5 million with a 3% margin over five years and there was no net pay down associated with this. As has been mentioned, sale agreements have been signed on Observatory and Westcliff and combined gross proceeds of $66 million will be received on completion and $10.9 million of debt on The Observatory will be repaid which will leave aggregate net proceeds of $55 million and that will be used to invest in the company’s portfolio and enhance cash liquidity.

So after taking accounts these refinancings and the repayments of debt following the sale of Observatory, our debt maturity schedule including amortization would be as follows: In 2012, $23 million, 2013, $87 million, 2014, $142 million and thereafter $349 million. The 2013 maturities include only two principle loans totaling $61 million from a supportive bilateral lending and we expect to work on those refinancings towards the end of this year.

Regarding other refinancings, we have continued to progress $50 million financing arrangement for the Grand Europe, and have has received now by credit committee approvals and is now subjected to the satisfaction of certain pre-conditions. The current loan outstanding on the Hotel is very low, it’s at $10 million and we have also see bank credit committee approval for the $12 million facility that we have been working on to Bali, and there we will use the proceeds to invest in improving that property and currently there is no debt outstanding on the Bali properties.

So just looking at our committed project topics, we have started to invest $17 million in Copacabana Palace and that’s for the main building and to the large lobby but there is also a new specialty retail offering there. This work is largely financed through a $15 million delay draw portion of the properties $115 million loan facility.

And finally at El Encanto, we have a remaining $45 million of investment and that includes $35 million that will be financed under our El Encanto construction finance facility.

That’s all from me and now I will hand you back to the operator for the question-and-answer.

Question-and-Answer Session


(Operator Instructions) And we can take our first question which comes from Josh Attie of Citi. Please go ahead.

Josh Attie - Citi

Can you talk about G&A expenses, the current run rate of $10 million a quarter is about $40 million annualized. Historically, the G&A for the company has been in the $25 million to $30 million range and that includes 2007 when your earnings were much higher. What are some of the reasons for the increase and what kind of return do you expect to get on the incremental spending?

Martin O’Grady

Josh, the run rate this year includes some investment we've been making in the -- investing in increasing the awareness of the Orient-Express brand and so in total for the year, we're going to be less than $30 million hopefully; the bank losses about $1.5 million of investments in marketing for that. Large part of it, the balance of that $36 million, the large part of that of course is not cash share based compensation, which historically was less than half of that going back to 2006, 2007 and that’s really the primary reason why we decided to split that out this year, apart from the fact that people want to focus on the cash elements of EBITDA, it does represents a quite an important part of potential cost.

And another part of course is being compensation; we have invested in the last couple of years in professional, on the legal side, on the finance side, on HR side and another areas where really the company wasn’t properly represented in the past. And now I would say difference compared to 2006 is that you have a group of professionals running on Blue Chip model and obviously we’re fully – and advantage of additional opportunities that do come along in due course.

Josh Attie - Citi

And, can you give us an update on where you are in the CEO process, CEO search process, it's taken some time and maybe can you talk about what some of the issues are and its positive to take a long time?

Philip Mengel

Well, we don't have a lot to add, I think it was previously announced that the Board stepped back and retained a new search firm just in June and we have started the process with them and are progressing it, I think in a good manner, it’s hard to put a timeframe on something like this, but I would certainly hope we would have finalization in the next few months.

Josh Attie - Citi

Well, maybe just looking at the last, not looking forward, but looking over the last 12 months, I guess what are some of the reasons, do you think that it’s taken so long, have you changed some of the qualities you are looking for, what's making it so difficult to find someone?

Philip Mengel

Well, its such a subjective thing, its very difficult to add any rule; specific comment to it except that I think the Board quite naturally is very concerned that this choice is a successful one and a high quality one and up till now just haven't hit on the right solution and are being very deliberate and I think reasonably relaxed that the company is progressing in a solid fashion.


Our next question comes from Carlo Santarelli of Deutsche Bank.

Carlo Santarelli - Deutsche Bank

If you could touch a little bit more on some of the CapEx projects that you mentioned. I think you identified a little bit more than $60 million -- how should we think about 60 million worth -- how should we think about the timing of that and is there anything else out there that you guys are looking at meaningfully to in say 2013?

Filip Boyen

Well with the El Encanto investments, that’s going to be really spread fairly evenly over the next one, two, three quarters may be 15 in next quarter, 14 the next one and then maybe hit the balance – sorry 15 in Q3, maybe 14 in Q4 and then 10 in Q1 and then it will run at the balance of the 45 in Q2.

Copacabana, the 15 or 17 we invested just over two in the last quarter and then the balance will be mostly in Q3 about nine and then the balance probably Q4 and then will be a 1 million in Q1 to finish off that project.

We have a number of smaller projects going on which are kind of spread. Other committed projects that we have got on in about four or five different assets which are revenue enhancing spread of about $15 million which should spread over the next four or five quarters.

And then we will have other projects that we will consider over the next period of time, but of course a lot of that would be conditional upon first receiving proceeds from these asset sales which as we have said in the past, we would like to invest roughly half into revenue-enhancing investments and roughly half to either pay down debts or further improve liquidity.

Carlo Santarelli - Deutsche Bank

And that Copacabana, of the 17 you said, nine in the 3Q and what was the 4Q?

Filip Boyen

Around five. But the Copacabana Palace don’t forget is fully financed. It's very (inaudible) important.


Our next question comes from Joe Greff of JPMorgan. Please go ahead.

Joe Greff - JPMorgan

I am hoping you guys could on Europe talk about may be how you are altering or modifying your marketing strategies given some demand softness in certain source markets in the Euro zone?

And then I have a second question. It's actually about the margin performance in the second quarter given maybe where some of the demand metrics were a little bit ahead of what we otherwise would have expected. Can you talk about what you are doing at owned hotel level and what your margin expectations are going forward?

Filip Boyen

Okay for Europe, Joe we are obviously concentrating to grow the America market further and we hope that with the strengthening dollar against the euro this will become easier and easier even though that takes a while for that to settle in and to have results, but so far from a geographical point of view, our British market has reduced from 16% in Q2 2011 to 14% this year.

And we were able to offset that by the North American market which has increased from 37% last year to 39% this year. The other positive was that the Russian market has increased and in terms of strategies, we are trying to focus very much on the emerging markets.

For Europe we are focusing very strongly on Scandinavia. Sweden and Denmark, this market is slowly increasing and basically that’s what we are doing on that front.

Okay on the margins, I mean we are quite happy with the result of the margins. The EBITDA margins have improved in most areas. In North America EBITDA margin increased by 4.7 points over the quarter compared to last year, the rest of the world by 1.5 points. Trains & cruises increased by 5.5.

Obviously, Europe we have a small decline in Q2 of 1 point because of the decline in the market, but if we look at our retention, our average retention for all the businesses was 70% this quarter which we are quite happy with. You know, that our target for retention is 50% on [positive] revenue, 40% on negative revenue. And basically there are many components of making that happen. Time and motion is a strong one where we're introducing payroll systems in quite a few of our big properties which make sure that our productivity of staff is increasing.

And clearly we're looking very strongly in places where we can to some extent reduce our staff but certainly a not a loss of the guests experience. So apart from that, there is many, many initiatives we're carrying through on the cost side and as I said, I am quite happy with the result there.


(Operator Instructions) Our next question comes from Steve Kent of Goldman Sachs. Please go ahead.

Steve Kent - Goldman Sachs

Just a couple of questions on the asset sale process. Can you talk about buyer pool for some of your assets? Are there multiple bidders for the properties? What type of buyers are you seeing? And the reason I ask is it seems to be a pretty active market for selling assets. So just want to have a better understanding and also just how many properties do you think you will sell as you trim down, move away from your non-core? And then one final question just on the trends of business, as you gone through this summer and as it feels like Europe is getting softer, are you seeing a change in sort of the quality of the bookings or last minute bookings or cancellations or any of those other indicators of issues?

Philip Mengel

Steve on the strategic plans on property sales, I think looking back, we announced in our earlier call, we probably had six or eight properties, [candidates] for sale. In this year, we have executed on the sale of Bora Bora and received proceeds from that sale in the second quarter. We completed the sale of Keswick in Virginia in the first quarter, and as we discussed today, we have contracts now for sales we will close in the second half for both Observatory and Westcliff.

And we have several more properties, our [candidates] for sale and I think its probably best just talk about what I think these characteristics are, what is our strategy is. We’re very focused increasingly on return on assets and I think that’s part of our focus on improving shareholder value and we believe that a sustained shareholder value improvement comes from earning returns on assets that exceed the cost of capital.

So when we look at properties that we think in locations that are probably non-strategic for our future plans that have a lower return on assets currently and many of them in that category require significant investment to improve them and we have an opportunity to realize high valuation compared to current contributions to properties and they are [candidates] for sale with the objective of recycling or redeploying that capital.

And I think that is going to be a strategy that serves us well and I think the Westcliff and Observatory sales demonstrate that, our current returns. Our current EBITDA from those two properties in 2011 was $1.8 million and it was trending to be less than that this year and our expected proceeds are $66 million.

And that capital is I think going to be better employed in terms of shareholder value for the leverage reduction and investment in projects and core properties that can enhance revenue, enhance profitability by adding keys, adding revenue producing projects whether it’s a spa or its additional events base or things of that type.

So we have a couple of properties at the moment that are in some advanced stages of marketing and hopefully that we will execute on one or two of those in the near future. But I don't want to put any particular number on it, I just think as an ongoing strategy the non-strategic properties with low returns if we can productively realize good sale proceeds and redeploy effectively.

Filip Boyen

And Steve on the booking based pattern, not much has changed to be honest compared to Q1, still a relatively short booking window. And obviously, our challenges have been here in the UK where there was aggressive campaigning to keep the British people in the country and I must say they have been pretty successful. We've received, yes we've received some cancellations but hardly any individual travelers, but mostly groups and mainly from financial institutions, but when I say some, I mean three or four medium-sized groups and mainly in Italy and in the United States.


That concludes today's question-and-answer session. And that also concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

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