Significant Progress in Implementing the Strategic Plan

A Transformed, Less Cyclical Group

    PARIS, August 28 /PRNewswire-FirstCall/ --
    - Solid first-half revenue performance: up 5.2%
      like-for-like(1), up 11.8% in Services and up 5.1% in Hotels
    - Improvement in operating margin: 0.8 points like-for-like,
      particularly a strong increase in Services (up 1.1 pt)
    - Operating profit before tax and non-recurring items: EUR393
      million, up 16.0% like-for-like and 25.0% like-for-like and excluding
      the impact of the return to shareholders
    - Sharp improvement in profitability: ROCE(2) of 14.5%, vs.
      12.8% at June-end 2007

    - Full-year target for operating profit before tax and
      non-recurring items: between EUR910 million and EUR930 million, up
      16.0% like-for-like and excluding the impact of the return to
      shareholders

At a time of transformation

The Group's first-half 2008 results reflect the impact of the strategic initiatives deployed since early 2006.

Disposals of non-strategic businesses and restructuring of real estate to improve profitability

To refocus the Group on its two core Hotels and Services businesses, a number of non-strategic assets have been sold, for a total of EUR1.4 billion.

As part of the Hotels business' 'Asset Right' strategy, hotel ownership structures have been changed in a commitment to improving return on capital employed and reducing earnings volatility. This process has generated nearly EUR4 billion since 2005.

This strategy has also benefited Accor shareholders, who have had EUR2.4 billion returned to them since 2006 in the form of share buybacks and special dividends.

    This transformation has one-off impacts on interim results:
    - Revenue declined 6.2% (EUR249 million) year-on-year, due to
      a loss of 12.6% (EUR507 million) in revenue from asset disposals.
    - Operating profit before tax and non-recurring items rose by
      3.6% as reported, reduced by 4% (EUR14 million) due to asset sales
      and 9% (EUR35 million) due to the return to shareholders.
    On a like-for-like basis, operating profit before tax and
    non-recurring items increased by 16.0%, and by 25.0% excluding the impact
    on financial expense of the return to shareholders.
    - Net profit stood at EUR310 million versus EUR596 million in
      first-half 2007, a 48.0% decline that primarily reflected the EUR255
      million decrease in capital gains.
    This transformation has long-term positive impacts on Group
    performance:
    - Operating margin, improved by 1.6 points over the period.
    - Return on capital employed, at 14.5% at June 30, 2008, has
      improved by 1.7 points since June 30, 2007. The Group has disposed
      of EUR749 million in US Economy Hotels assets and EUR653 million in
      non-strategic assets, while at the same time focusing on higher return
      businesses like Economy Hotels in Europe, with a 22.8% ROCE, and
      Services, with a 21.0% ROCE at June 30, 2008.
    - A less cyclical Group: Accor is now relying on the two
      businesses - Economy hotels in Europe and Services - that are low
      cyclical businesses and account for nearly 70% of EBIT compared to 44%
      in 2001. Those two activities proved strong resilience during the last
      cycle (2001-2003). In first half 2008, their combined margin improved
      by 1.0 point.

As a result of those transformations, the full-year target is to report profit before tax and non-recurring items of between EUR910 million and EUR930 million, reflecting a 16% increase in profit before tax for the year (like-for-like and excluding the impact of the return to shareholders) which takes into account a more uncertain economic environment.

Anticipating an economic environment that might remain difficult in 2009, Accor will implement an EUR75-million cost savings plan over 2009 and 2010, covering particularly corporate overheads, organization of head offices in Latin America and the United States, marketing expenditure, purchasing, and new IT projects.

    High quality first-half 2008 results

    (in EUR millions)           H1 2007 H1 2008 % Change      % Change
                                                reported Like-for-like
    Revenue                       4,015   3,766    -6.2%         +5.2%
    EBITDAR                       1,095   1,088    -0.6%         +7.9%
    EBITDAR margin                 27.3%   28.9%   +1.6 pts      +0.8 pts
    Operating profit before tax     379     393    +3.6%        +16.0%
    and non-recurring items
    Net profit, Group share         596     310   -48.0%
    ROCE                           12.8%   14.5%   +1.7 pts

Consolidated revenue totaled EUR3,766 million for the first six months of 2008, up 5.2% like-for-like but down 6.2% as reported due to the large number of asset disposals in 2007.

EBITDAR amounted to EUR1,088 million, up 7.9% like-for-like compared with first-half 2007. A favorable economic environment in the first half and the impact of the Dynamic Pricing policy, as well as sustained demand in the Services business, helped lift EBITDAR margin 1.6 points as reported (0.8 points like-for-like) to 28.9% of revenue.

Services

Services delivered a good set of results in first half. EBITDAR margin stood at 42.4% for the period, a 1.1-point like-for-like increase. This performance confirms the business' robust performance in its core markets, in spite of the loss of a contract in Belgium and the change in tax law in Argentina. Furthermore, the Services started to migrate from paper vouchers to cards, improving the operating margin. As a result, EBITDAR margin in Europe was up 0.3 points with a flow-through rate(3) of 49%.

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