Slide 1: FY 2017 Results & Strategic Update
FY 2017 RESULTS & STRATEGIC UPDATE February 21st, 2018
Slide 2: Disclaimer
Disclaimer By reading the following presentation slides, you further agree to be bound by the following limitations and qualifications: This presentation is for information purposes only and does not constitute an offer or solicitation for the sale or purchase of any securities, any part of the busi
Slide 3: Opening Remarks
OPENING REMARKS Sébastien Bazin Chairman & CEO
Slide 4: FY 2017 Results
FY 2017 RESULTS Jean-Jacques Morin CFO
Slide 5: 2017: Another Record Year
2017: Another Record Year Gross Volume Revenue EBITDA EBIT FFO Rec. FCF c.€18bn €1,937m €626m €492m €559m €435m +19% +7.9% +8.1% +10.1% Excl. Forex L/L L/L L/L +43% x2 ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 5
Slide 6: €18bn Gross Volume and c. €2bn in Revenue, up 7.9% L/L
€18bn Gross Volume and c. €2bn in Revenue, up 7.9% L/L FY 2016 FY 2017 Change HotelServices In €m In €m Reported L/L Gross volume at €18bn, up 19% excluding currency effect HotelServices 1,524 1,746 +14.6% +5.1% New Businesses 44 100 N/A +6.9% AccorHotels Revenue Hotel Assets 599 616 +2.9% +7.0% Var
Slide 7: Regained pricing power in France thanks to strong demand
Regained pricing power in France thanks to strong demand France & Switzerland Europe +4.2% +6.5% 7.4% 7.4% 7.9% 5.1% 7.6% 5.0% 6.0% 4.7% 1.3% 4.7% 4.5% 3.5% 2.1% 2.1% -0.4% -0.2% -1.5% -2.8% -5.4% -5.3% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 2015 2016 2017 RevPAR
Slide 8: RevPAR growth of 4.7% was 80% occupancy driven
RevPAR growth of 4.7% was 80% occupancy driven Asia Pacific Systemwide +5.8% +4.7% 6.8% 6.2% 6.2% 5.8% 6.2% 5.8% 5.1% 5.0% 4.6% 4.5% 2.8% 3.5% 3.6% 2.5% 1.6% 1.1%1.4% 2.7% 0.3% -0.6% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 2015 2016 2017 RevPAR L/L Occupancy Rate A
Slide 9: 301 hotels & 51,400 rooms added in 2017
301 hotels & 51,400 rooms added in 2017 By segment By region (in % of rooms) (in % of rooms) 20% Rixos 16% Luxury & Upscale South 6% 16 hotels America 7k rooms France & Switzerland 1% BHG NCAC >1/3 21 hotels upscale & 3k rooms 23% luxury Europe 31% Midscale Organic 264 hotels 38% 41k rooms ASPAC 16%
Slide 10: Consolidating leadership in core markets
Consolidating leadership in core markets (At December 31, 2017 - in rooms) 169k Network 152k 4,283 Hotels 28k 24k 616k 3k Rooms 8k Europe 168k NCAC 99 France & Switz. 75k Countries 52k 48k Pipeline 33k 19k ASPAC 874 Hotels MEA 161k South America Rooms ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE
Slide 11: HotelServices: Sound momentum in all key markets
HotelServices: Sound momentum in all key markets FY FIGURES 2016 2017 L/L(1) FEES BY SEGMENT (€m) France & Switzerland 374 389 +2.5% 22% 24% 34% 41% Europe 400 430 +7.2% Luxury MEA 105 114 +2.7% 43% 42% ASPAC 416 462 +7.7% 35% Midscale 32% NCAC 126 159 +5.2% South America 69 35% 34% 30% 27% Economy
Slide 12: HotelServices and Hotel Assets driving margin up
HotelServices and Hotel Assets driving margin up FY FIGURES HOTEL NEW HOTEL HOLDING & (IN €m) SERVICES BUSINESSES ASSETS INTERCOS Revenue 1,746 100 616 (525) 1,937 EBITDA 656 (25) 96 (101) 626 2017 EBITDA margin 38% N/A 16% N/A 32% EBIT 576 (33) 50 (100) 492 EBIT margin 33% N/A 8% N/A 25% Revenue 1,
Slide 13: Sound margin improvement at HotelServices
Sound margin improvement at HotelServices SALES, FY FIGURES MANAGED & OTHER MARKETING HOTELSERVICES (IN €m) FRANCHISED ACTIVITIES & DIGITAL Revenue 910 642 195 1,746 EBITDA 557 31 68 656 2017 EBITDA margin 61.2% 4.9% 35.1% 37.6% EBIT 516 7 54 576 EBIT margin 56.7% 1.1% 27.5% 33.0% Revenue 782 547 19
Slide 14: HotelServices EBIT: Solid performance in key regions
HotelServices EBIT: Solid performance in key regions FY FIGURES 2016 2017 L/L (In €m) France & Switzerland 122 126 +4% Europe 130 146 +6% ASPAC 99 130 +18% MEA 33 30 (28)% NCAC 10 86 22% South America 16 12 (28)% Worldwide structures 59 46 N/A HOTELSERVICES 467 576 9% ACCORHOTELS / FY 2017 RESULTS &
Slide 15: New Businesses €100m
New Businesses €100m Revenue 10% Underlying L/L growth (rebased 12 months) Stable EBITDA – Increased D&A following M&A Breakeven by 2019 confirmed Gekko acquisition closed in January ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 15
Slide 16: Sound momentum in Europe for Hotel Assets
Sound momentum in Europe for Hotel Assets FY 2017 REVENUE BY REGION +7.0% +8.4% L/L Revenue L/L RevPAR <1% 9% ASPAC France & Switzerland 20% South +200bps America EBIT MARGIN 6% MEA Initial signs of recovery in South America in Q4 65% Europe Accretive asset management strategy ACCORHOTELS / FY 2017
Slide 17: From EBIT to Net profit
From EBIT to Net profit In € millions 2016 2017 EBIT 397 492 Net financial expense (117) (54) Share of profits/(losses) of associates 6 28 Operating profit before tax and non-recurring items 286 467 Non-recurring items (96) (107) Income tax expense 2 51 Minority interests (31) (36) Net profit/(loss)
Slide 18: Discontinued operations
Discontinued operations: FY RESULTS 2016 2017 Stable revenue reflecting: (In €m) - Asset management strategy Revenue 3,986 3,985 including HotelF1 and renovation programs EBITDA 533 522 - offset by sound operating D&A (233) - momentum in Europe EBIT 300 522 Depreciation stopped as per IFRS 5 Operati
Slide 19: From EBITDA to Recurring Free Cash Flow
From EBITDA to Recurring Free Cash Flow 2017 RECURRING INVESTMENT BY SEGMENT In € millions 2016 2017 EBITDA 506 626 6% Cost of net debt (71) (71) 20% Holding Hotel Assets Income tax (cash) (81) (51) Non cash & others 35 54 Funds from operations 391 559 Recurring Investment (188) (161) 4% Working cap
Slide 20: From Recurring FCF to Change in Net Debt
From Recurring FCF to Change in Net Debt In € millions 2016 2017 Recurring Free Cash Flow 199 435 Non recurring development (3,052) (357) Change in net Proceeds debt from disposals 212 147 Dividends (178) (163) (1,876) Hybrid financial instruments & interests (37) (37) (224) Others (245) (220) Net D
Slide 21: Improving Debt Profile
Improving Debt Profile AVERAGE RATE & MATURITY 7% 6.51% 4.5 4.6 5 6% 5.37% 4.2 Years AccorHotels is 3.5 3.6 4 committed to 5% 3 Investment Grade 4% 2.9 4.28% 3.11% 2.8 2.89% 2.85% 3% 2.04% 2 S&P & Fitch 2% 1 ratings both 1% at BBB- 0% 0 2011 2012 2013 2014 2015 2016 2017 Rate Maturity (years) ACCORH
Slide 22: 2017 Proposed Dividend
2017 Proposed Dividend 2016 2017 Profit before non-recurring items, 469 538 net of tax(1) (in € millions) Profit before non-recurring items, net of tax per share (in €) 1.81 1.87 Ordinary Dividend per share (2) (in €) 1.05 1.05 Ordinary Dividend (in € millions) 299 302 Subject to shareholders’ appro
Slide 23: New accounting principles
New accounting principles Impacts of IFRS 15 implementation Key money Hotels staff costs reimbursements • Capitalized and amortized over the contract • Not taken into account in P&L (fully reimbursed by CURRENT term the owner) • Treated as a rebate and recognized as a • Reimbursement to be recognize
Slide 24: A world of opportunities for 2018 and beyond
A world of opportunities for 2018 and beyond Fast growth expected Another record year to in the world travel market come in organic room openings Solid momentum in our Accretive M&A opportunities in Hospitality key regions & signs of recovery in South America Upcoming partnerships Progressive ramp-u
Slide 25: Strategic Perspectives
STRATEGIC PERSPECTIVES Sébastien Bazin Chairman & CEO
Slide 26: We stayed committed to our initial ambition
We stayed committed to our initial ambition “Be the world’s most valued and best performing hotel company” Reinvent a profitable & sustainable business model around our 2 core competencies Implement an efficient geographic-based organization to better serve Guests & Partners Master the digital
Slide 27: We delivered a lot
We delivered a lot Financial Digital Strong value M&A Segment Asset-light Stronger profile initiatives creation at disciplined positioning model than Improved Recognized AccorInvest & successful Revamped transition ever ACCORHOTELS / FY 2017 RESULTS 2 & STRATEGIC UPDATE 7 ACCORHOTELS / FY 2017 RESUL
Slide 28: Strong profitability improvements
Strong profitability improvements +8% CAGR / +450 bps margin 765 696 665 602 515 526 521 449 11.9% 12.4% 12.9% 11.0% 9.3% 9.6% 9.3% 8.4% 2010 2011 2012 2013 2014 2015 2016 2017 EBIT (incl. AccorInvest) (€m) EBIT margin (%) ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 28
Slide 29: Fast growth in high fee & fast growing segments & regions
Fast growth in high fee & fast growing segments & regions Luxury: + 19 pts in 4 years Emerging: +7 pts in 4 years 8% South America 41% 5% NCAC 25% Luxury & Upscale 27% France & Switzerland Economy 27% ASPAC 27% 32% 8% Europe Midscale MEA 2017 Fees by Segment 2017 Room Portfolio by Geography ACCORHOT
Slide 30: Management contracts: sustainable cash-flows & high pipeline visibility
Management contracts: sustainable cash-flows & high pipeline visibility Key Benefits High pipeline conversion 80% of HotelServices fees generated Sustainable historical by managed hotels pipeline conversion rate of 110% Best suited for Asia & Luxury / Upscale high growth and high margin markets
Slide 31: Solid infrastructures responding to high growth
Solid infrastructures responding to high growth GUESTS A SINGLE APP 41M +70% 9m Loyalty members Price updates per day X2 vs 2014 Revenue vs 2016 vs 5M in 2014 HOTELS 1.7 X4.5 968 Booking/ second Look-to-book rate Solicitations since 2014 per booking in 2017 ACCORHOTELS / FY 2017 RESULTS & STRATEGIC
Slide 32: Real estate portfolio restructuring created high value
Real estate portfolio restructuring created high value €1.8bn net investments since 2014 €2.7bn value creation Economic spread 12% €1.5bn €700m €800m €1.2bn 8% €2.0bn Growth / Net value Cumulative NOI IRR AccorHotels Acquisitions Disposals Dev. Capex creation 2014-2017 WACC ACCORHOTELS / FY 2017 RES
Slide 33: €6.3bn Capex spent in 4 years mainly on our core business
€6.3bn Capex spent in 4 years mainly on our core business 2014-17 Non-recurring Capex (€bn) & % of total Investments since 2014 HOTEL SERVICES 3.7 60% HOTEL ASSETS 2.0 30% €2.0bn assets acquired NEW BUSINESSES 0.6 10% ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 33
Slide 34: We exceeded initial expectations
We exceeded initial expectations $1.1bn • Initial Investment of $2.7bn 5.5x • €65m synergies per year delivered ahead of schedule $193m • EV/EBITDA multiple of 13.0x post-synergies vs 20.0x at closing Initial investment Current stake value (Jan 16) (Feb 18) (1) Note: (1) As of 01-Feb-2018 ACCORHOTEL
Slide 35: We are disciplined investors
We are disciplined investors • Extend and secure our existing leaderships • Accelerate our development in specific markets and/or segments STRATEGIC FIT • Complement service offering to guests and partners • Favor mid-size targets STRICT EPS accretive EBITDA multiples ROCE post In line with FINANCIA
Slide 36: AccorHotels is stronger than ever
AccorHotels is stronger than ever Now #1 hotel player in all of our key regions(1) Powerful Brands Pipeline Business Volume In K rooms +50% In €bn X2 X2 18 161 25 112 9 13 2012 2017 2012 2017 2012 2017 System growth Yearly openings Market Cap. In K rooms +37% In K rooms In €bn +35% X2 616 41 13 450
Slide 37: Travel & Tourism: a blessed industry
Travel & Tourism: a blessed industry 6,286 +7% 5,114 p.a. +3.5% 3,986 p.a. 2010 2017 2020 Travel & Tourism spending (in $bn) Source: WTTC ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 37
Slide 38: Underlying market growth is accelerating
Underlying market growth is accelerating General trends will support the Specific trends will support hospitality industry growth AccorHotels growth China already 2x larger than US 8% growth in international for travel expenditures arrivals in Europe and 5% in ASPAC vs. 2% in North America 2nd faste
Slide 39: We are expanding where Travel & Tourism grow
We are expanding where Travel & Tourism grow 9M 2017 OPENINGS OF LEADING HOTEL COMPANIES Total Excl. in K rooms NorthAm A 52.2 18.0 B 40.3 13.8 34.1 33.9 C 27.7 13.3 D 7.0 3.8 ASPAC Europe MEA South Am. North Am. Sources: Company publications ACCORHOTELS / FY 2017 RESULTS & STRATEGIC UPDATE 39
Slide 40: All initiatives increase value for guests, partners or both
All initiatives increase value for guests, partners or both Brand & guest services expertise Distribution & revenue power CRM & Loyalty program knowledge Hotel Grow Business Scale, density and strong growth potential Guests differentiated non-hotel solutions Extend New B2B touchpoint
Slide 41: We have six strategic levers to grow AccorHotels
We have six strategic levers to grow AccorHotels SUSTAINABLE ATTRACT CONVERT RETAIN DEMAND with world class brands thanks to a via enhanced GENERATION supported by superior seamless distribution personalization operational execution experience & loyalty strategy STRONG EXPAND MULTIPLY BUSINESS and h
Slide 42: Appendices
Appendices RAFFLES — ontent @)-J exeress BANYANTREE LEGEND © aaron = SOQ! soritee _ onefinestay RIXOS pullmanq swissdtel ANGSANA — ,.,20!.,,. GRAND MERCURE SEBEL NOVOTEL Mercure oe MAMA ibis, 308 hotelea
Slide 43: Appendices: FY 2017 RevPAR & Exchange rates
Appendices FY 2017 RevPAR & Exchange rates
Slide 44: France RevPAR
France RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR FY 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 68.1 +4.4 193.6 -1.4 131.8 +5.3 Midscale 66.8 +4.5 103.2 -2.3 68.9 +4.7 Economy 68.0 +2.8 59.2 -0.3 40.2 +4.0 TOTAL 67.6 +3.4 78.8 -0.9 53.
Slide 45: Germany RevPAR
Germany RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR FY 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 70.0 +0.1 152.3 +4.0 106.7 +4.1 Midscale 70.2 -0.1 91.2 +0.6 64.0 +0.5 Economy 73.7 +0.2 65.4 +2.4 48.2 +2.7 TOTAL 71.9 +0.1 83.5 +1.7 60.
Slide 46: UK RevPAR
UK RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR FY 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 81.5 +3.9 186.5 -0.7 152.0 +4.2 Midscale 77.1 +1.5 93.6 +3.3 72.2 +5.4 Economy 81.9 -0.1 71.1 +4.1 58.2 +4.0 TOTAL 79.6 +1.0 91.2 +3.3 72.6 +4.
Slide 47: RevPAR - Systemwide
RevPAR - Systemwide Q3 2017 Q4 2017 FY 2017 OR ARR RevPAR OR ARR RevPAR OR ARR RevPAR chg chg chg chg % chg % chg % chg % chg % chg % % pts € € % pts € € % pts € € L/L L/L L/L L/L L/L L/L L/L L/L L/L Lux. & Upscale 72.3 +3.1 155 +0.6 112 +5.1 67.4 +3.0 149 +1.2 101 +6.0 68.0 +3.0 155 +0.7 106 +5.4 M
Slide 48: RevPAR – Geographical breakdown (1/2)
RevPAR – Geographical breakdown (1/2) Q3 2017 Q4 2017 FY 2017 OR ARR RevPAR OR ARR RevPAR OR ARR RevPAR chg chg chg chg % chg % chg % chg % chg % chg % % pts € € % pts € € % pts € € L/L L/L L/L L/L L/L L/L L/L L/L L/L Lux. & Upscale 74.3 +2.3 216 +0.3 161 +3.6 66.4 +2.3 192 +1.8 127 +5.5 68.4 +3.9 2
Slide 49: RevPAR – Geographical breakdown (2/2)
RevPAR – Geographical breakdown (2/2) Q3 2017 Q4 2017 FY 2017 OR ARR RevPAR OR ARR RevPAR OR ARR RevPAR chg chg chg chg % chg % chg % chg % chg % chg % % pts € € % pts € € % pts € € L/L L/L L/L L/L L/L L/L L/L L/L L/L Lux. & Upscale 71.0 +4.0 102 +0.3 72 +6.2 69.4 +2.9 111 +1.2 77 +5.5 68.1 +3.4 110
Slide 50: 2017 Exchange Rates
2017 Exchange Rates 2016 2017 2017 vs. 2016 1€ = X foreign currency average rate average rate Change Brazilian real (BRL) 3.86 3.61 +7.0% Australian dollar (AUD) 1.49 1.47 +1.1% Sterling (GBP) 0.82 0.88 (6.5)% American dollar (USD) 1.11 1.13 (2.1)% Swiss Franc (CHF) 1.09 1.11 (2.0)% ACCORHOTELS / FY
Slide 51: Appendices: Q4 2017 Revenue
Appendices Q4 2017 Revenue RAFFLES ontent @)-JZ express = BANYANTREE LEGEN) @feirmon’ SOQ! soriter _ onefinestay RIXOS pullmaq swissdtel ANGSANA — ,.,20!.,,. GRAND MERCURE SEBEL NOVOTEL Mercure pa MAMA ibis ibis ibis. | J08 — hotem=4 i jours hotels - ‘SHELTER ioc
Slide 52: Sound Q4 2017 revenue performance at €512m, up 8.6% L/L
Sound Q4 2017 revenue performance at €512m, up 8.6% L/L Like-for-Like Like-for-like growth +8.6% +€41.7m >HotelServices: +5.5% comp(1) >New Businesses: +1.0% L/L >Hotel Assets: +11.3% Expansion Impact of expansion +0.2% +1.1m >New Businesses: €15m >Disposals/Renovations, net of acquisitions €(14)m C
Slide 53: Q4 revenue up 8.6% L/L
Q4 revenue up 8.6% L/L Q4 2016 Q4 2017 Change In €m In €m Reported L/L HotelServices 449 465 +3.6% +5.5% New Businesses 18 24 +34.6% +1.0% Hotel assets 147 149 +1.4% +11.3% Holding & Intercos (129) (127) N/A N/A AccorHotels 485 512 +5.5% +8.6% • HotelServices: Gross volume at €4.5bn, up 7.2% excludi
Slide 54: HotelServices Q4 Revenue
HotelServices Q4 Revenue Q4 FIGURES Q4 2016 Q4 2017 L/L(1) (IN €M) In €m In €m France & Switzerland 89 89 +0.1% Europe 108 112 +5.1% MEA 34 29 +1.6% ASPAC 125 126 +8.4% NCAC 61 39 +0.2% South America 18 20 +13.4% Worldwide structures 12 50 +44.8% HOTELSERVICES 449 465 +5.5% (1) Like-for-like revenue
Slide 55: France RevPAR
France RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR Q4 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 67.0 +2.9 191.5 +1.7 128.3 +6.4 Midscale 64.1 +4.0 104.0 +1.0 66.7 +7.7 Economy 65.9 +3.7 60.6 +2.3 39.9 +8.4 TOTAL 65.4 +3.8 79.7 +1.6 52.
Slide 56: Germany RevPAR
Germany RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR Q4 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 72.7 +1.7 156.3 +6.5 113.7 +9.1 Midscale 69.1 -1.3 92.1 +1.8 63.7 -0.1 Economy 72.2 -1.2 66.1 +3.8 47.8 +2.2 TOTAL 70.9 -1.0 85.0 +3.5 60.
Slide 57: UK RevPAR
UK RevPAR (Owned & Leased, Franchised & Managed hotels) Average Room Occupancy RevPAR Q4 2017 Rate % D (L/L, pts) € D (L/L, %) € D (L/L, %) Luxury & Upscale 78.9 -1.2 187.2 -1.2 147.7 -2.7 Midscale 75.9 +0.7 93.2 +2.9 70.7 +4.0 Economy 78.9 -2.5 69.9 +2.0 55.2 -1.0 TOTAL 77.5 -0.9 90.7 +1.9 70.3 +0.
Slide 58: Q4 2017 Exchange Rates
Q4 2017 Exchange Rates Q4 2016 Q4 2017 Q4 2017 vs. Q4 2016 1€ = X foreign currency average rate average rate Change Brazilian real (BRL) 3.54 3.90 (10.2)% Australian dollar (AUD) 1.44 1.55 (7.9)% Sterling (GBP) 0.84 0.88 (4.6)% American dollar (USD) 1.05 1.18 (12.4)% Swiss Franc (CHF) 1.07 1.17 (8.7
Slide 59: Appendices: Portfolio at the end of Dec. 2017
Appendices Portfolio at the end of Dec. 2017
Slide 60: Portfolio at December 31, 2017 (1/2)
Portfolio at December 31, 2017 (1/2) MANAGED FRANCHISED TOTAL (Incl. Owned & leased) # hotels # rooms # hotels # rooms # hotels # rooms Luxury & Upscale 34 6,996 26 2,043 60 9,039 Midscale 158 22,814 262 23,819 420 46,633 Economy 334 36,634 831 58,963 1,165 95,597 FRANCE & SWITZERLAND 528 66,525 1,1
Slide 61: Portfolio at December 31, 2017 (2/2)
Portfolio at December 31, 2017 (2/2) MANAGED FRANCHISED TOTAL (Incl. Owned & leased) # hotels # rooms # hotels # rooms # hotels # rooms Luxury & Upscale 197 51,927 48 8,147 245 60,074 Midscale 202 48,156 58 8,084 260 56,240 Economy 162 29,819 142 18,947 304 48,766 ASPAC 577 132,208 257 36,167 834 16
Slide 62: FY 2017 Results & Strategic Update
FY 2017 RESULTS & STRATEGIC UPDATE February 21st, 2018