Investor Presentation - NH Hotel Group

Private & Confidential
Nhow Berlín, GERMANY
Investor Presentation
June 2013
2 Contents
• Company Profile
• Latest Results
• Financial Structure
• Corporate Transactions:
 HNA
• Strategy and 2013 Outlook
3 Key Financials
 Share price: €2.73
 Market cap: €673M
Share Price (16/05/2013)
Financials
Current Shareholder Structure
2007 2008 2009 2010 2011 2012
Sales
1,506 1,532 1,218 1,335 1,428 1,312
GOP
525
543
342
418
494
376
35%
35%
28%
31%
35%
29%
EBITDA 283
277
70
148
202
78
%
 Outstanding shares: 308.3 M (*)
 Net Debt (March’13): €991 M
Consolidated figures (recurrent and non recurrent).
(*) The listing of the new HNA shares (61.7 M) will be
mid June.
*
Free Float;
25,4%
Group
Hesperia;
20,1%
Bankia;
12,6%
HNA; 20,0%
Kutxa; 5,0%
Intesa San
Paolo; 4,5%
Ibercaja;
4,0%
Pontegadea;
4,1%
Hoteles
Participados;
4,3%
4 An International Company
In just one decade, NH Hoteles has become
a truly international player
“NH Hoteles 23rd position
Worldwide”
(Hotels Magazine – 2012)
397
391
345
58,687
“NH Hoteles has 70 hotels in
more than 30 cities throughout
Spain”
270
242
72
66
22,468
2.164
965
7.962
6,948
8,199
6.948
8.199
1996
1998
Spain & Portugal
34,400
36,835
2.325
2.279
2.552
4.401
4.563
5.531
750
7.540
8.610
6.559
8.867
6.146
6.892
7.082
8.276
8.239
8.002
8.289
8.207
6.982
10.704
10.438
9.512
21.142
20.842
8.123
10.061
760
10.617
2000
Germany
11.570
2002
Benelux
12.481
2004
Italy
13.890
14.665
2006
2008
2010
2012
Latin America & Caribbean
Rest of the World
hotels
38,990
168
4.235
rooms
(El Mundo 18/06/1997)
4.130
51,591
3.658
227
58,853
5
Focus on Europe and Urban cities
Geographical Distribution
Distribution by Segments
TOPTOP
CITIES
CITIES
Distribution by Countries
Hotels
Hotels Rooms
Rooms
Madrid
Madrid
40 40
4,951
4,951
Barcelona
Barcelona
27 27
3,372
3,372
Amsterdam
Amsterdam
13 13
2,807
2,807
Milan
Milan
11 11
2,157
2,157
Berlin
Berlin
10 10
1,844
1,844
Buenos
Buenos
Aires
Aires
8 8
1,210
1,210
Frankfurt
Frankfurt
7 7
1,273
1,273
Rome
Rome
5 5
1,151
1,151
Brussels
Brussels
6 6
1,135
1,135
Munich
Munich
6 6
1,127
1,127
Mexico
Mexico
CityCity
6 6
1,088
1,088
N.B.: Figures as of 31ST Dec 2012.
391 hotels and 58,853 rooms.
* Dec 2012 by number of rooms
6 Diversified and balanced business model
Revenue Diversification
December 1999
December 2012
Rooms breakdown by contract type
December 1999 (10,310 rooms)
December 2012 (58,853 rooms)
76% of the group’s hotel EBITDA generated in Benelux and Central
7 Europe
Hotel Revenues (*)
Hotel EBITDA (*)
(*) Dec 2012 recurring hotel activity
• Benelux and Central Europe account for 51% of the Revenues and 76% of the EBITDA
8 Significant Owned Value
Owned hotels’ value distribution (*)
• Value of owned hotels assets: €1,600 - 1,800
million. This amount does not include the
additional value of leased and managed hotels
nor Sotogrande Real Estate
• 50% of the value concentrates in 14% of the
hotel assets
• Total capital invested in Spain is limited to 15
hotels out of 83 properties worldwide
NH Krasnapolsky
(Amsterdam)
Jolly Madison Tower
(New York)
(*) Valuation American Appraisal January 2012 / Internal Values
NH Amsterdam Center
(Amsterdam)
9 Plus Hidden Value in Sotogrande
• NH Hoteles owns 98% of Sotogrande:
• Spain: 420 hectares of land with more than 630,000 sqm of buildable area
• International: 676 hectares in Mexico (35.5% ownership) and 25 hectares in the Dominican
Republic (25% ownership)
• Donnafugata Golf Resort & Spa opened in July 2010 (88.8%)
• Impact on NH as of Dec. 2012:
• Sotogrande’s Book value for NH: €200M
• Debt (bank debt + NH loan): €111.4M
• Pre-tax Value considerations:
• Real estate inventories (Cadiz): market appraisal of €228,5m (Dec. 2012 American Appraisal).
• Other Tourist Assets (hotels and golf courses, Cadiz): €40m (book value Dec. 2012)
• Development in Mexico (Sotolindo) + Dominican Republic (Sotogrande at Cap Cana): €31,3m
+ €15,4m = €46,7m (book value Dec 2012)
• Donnafugata Golf Resort & Spa: €12.6m (total Equity invested as of December 2012)
10 Weak Trading Environment
• 2012 impacted by the strong macroeconomic deterioration, much deeper than initial forecasts
Revenues
• Total revenues decreased by -3.4% (with a slight increase in Real Estate sales). Hotel activity was
very influenced by a sharper decline in F&B (MICE segment) as compared to room revenue.
Asset sales (Jolly Lotti, NH Ligure & NH Luzern) also explain 40% of the decrease.
• During the Q4 2012 LFL RevPar performed better (-0.93%) than in the first 9 months of the year
(-1.41%) due to an improved situation in Spain (9M -7.39% and Q4 -6.48%), Benelux (9M -2.56%
and Q4 -1.81%) and Latin America (9M +2.54% and Q4 +2.85%)
RevPar
• Overall in 2012, the deterioration of RevPar is mostly driven by the decrease in the ADR (-1.0%
LFL). The occupancy rate remained at similar levels as 2011 (64.58% 2012 vs. 64.78% 2011 hotels
LFL)
• Geographically, Spain (-7.2% RevPar), Italy (-5.1%) and Benelux (-2.4%) had a negative
performance, compared to C.E (6.2%) and Latin America (2.8%). However, the latter registered a
slowdown of bookings as a result of a weaker demand in Argentina.
11 NH Hoteles
• Hotels
391
• Rooms
58,853
-8.0%
-5.8%
-2.3%
-1.3%
-0.3%
-1.0%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
12 B.U. Spain
• Hotels
174
• Rooms
20,902
• Sales
25% of total
• EBITDA
-2% of total
Managed
36%
Leased
52%
Owned
12%
Leadership position in the
urban segment
-27.7%
Brand of reference for business
Customers
-4.2%
-7.2%
Repositioning necessary in
some hotels
-24.5%
-3.6%
-3.7%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
13 B.U. Benelux
• Hotels
53
• Rooms
9,326
• Sales
24% of total
• EBITDA
57% of total
Labour market flexibility
-15.8%
Possibility of enhancing brand recognition
-9.1%
-7.4%
-2.4%
+1.1%
-3.5%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
14 B.U. Central Europe
• Hotels
76
• Rooms
13,252
• Sales
27% of total
• EBITDA
19% of total
Managed
6%
Owned
9%
Leased
85%
Good positioning in MICE segment
+23.3%
+6.2%
Possibility of enhancing brand recognition
+7.9%
+3.8%
+14.3%
+2.3%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
15 B.U. Italy
Managed
8%
• Hotels
52
• Rooms
8,239
• Sales
17% of total
• EBITDA
10% of total
Highly fragmented
competition: only 4%
of the hotels belong
to hotel groups
Leadership position:
strong negotiating
power with suppliers
and customers
-26.1%
Owned
28%
Leased
64%
Rigid labour market
Brand in the process
of gaining a foothold
-19.8%
-7.9%
-2.5%
-5.1%
-2.6%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
16 B.U. Las Americas
• Hotels
36
• Rooms
7,134
• Sales
7% of total
• EBITDA
17% of total
High quality product
and locations
Good positioning in
Dependency on the US
the corporate segment
economy (Mexico)
+9.4%
Argentina highly
volatile
+23.2%
-11.2%
+5.7%
+2.8%
-2.7%
N.B.: The hotels considered are comparable at constant December 2012 exchange rates. KPIs as of December YTD 2007,
December YTD 2011 and December YTD 2012
17 Control of Expenses
Operating
Expenses
• Efforts to make the company more efficient helped reduce these expenses by 0.3% in absolute
terms, therefore absorbing the effects of inflation
Personnel
• Thanks to the contingency plan launched in 2012, personnel expenses fell by 2.9% despite
having similar levels of activity, having strengthened sales teams (Revenue Management &
CRO & Berlin Booking Office) and the effects of inflation
• The group will continue to focus its efforts on both personnel expenses in Spain and Italy
Other
Expenses
• Negative evolution in other operating expenses that increase by €3.3M (0.8%) due to higher
Systems & IT and commercial costs (mainly commissions from the increase of intermediated
sales vs. direct channels)
Leases
• Leases reduction in line with the target, offsetting the increase of openings, “step-ups”, and
CPIs growth.
Financial
Expenses
• Net financial expenses increased (€3.5M) driven by the harshening conditions of the
refinancing that took place in April 2012.
18 Major Components of Current Cost Structure
Staff
36%
100%
Operating
expenses
32%
Leases
32%
23%
9%
Revenues
Revenues
GOP
EBITDA
Recurring hotel activity, as of December 2012
19 2012 Results
(€ million)
12 M 2012
1.288,0
22,1
12M 2011
1.339,2
17,0
2012/2011
(3,8%)
30,3%
TOTAL REVENUES
1.310,1
1.356,2
(3,4%)
Real estate cost of sales
Staff Cost
Operating expenses
(10,0)
(465,8)
(423,3)
(2,0)
(479,9)
(420,0)
390,7%
(2,9%)
0,8%
411,1
454,3
(9,5%)
0,4
(293,4)
5,3
(295,5)
92,1%
(0,7%)
118,2
164,2
(28,0%)
(112,7)
(119,0)
(5,3%)
5,5
45,2
(87,8%)
Interest expense
Income from minority equity interests
(54,8)
(4,2)
(51,3)
(2,3)
6,8%
(83,5%)
EBT
(53,6)
(8,5)
(532,3%)
Corporate income tax
(28,9)
(7,3)
(294,9%)
NET RESULT before minorities
(82,4)
(15,8)
(422,4%)
Minority interests
NET RECURRING RESULT
15,5
(66,9)
6,7
(9,1)
132,3%
(635,5%)
Non Recurring EBITDA
Other Non Recurring items
(40,2)
(185,0)
38,2
(22,9)
NET RESULT including Non-Recurring activity
(292,1)
6,2
Hotel Revenues
Real estate sales and other
GROSS OPERATING PROFIT
Onerous contract reversal provision
Lease payments and property taxes
EBITDA
Depreciation
EBIT
1
1. Revenues
Decrease in hotel activity revenues due to:
• Hotels sold in 2011 (Lotti, Ligure, Luzern)
• Decrease in F&B (MICE)
2. Real Estate Cost of sales
Higher cost of real estate assets sold due to the
3 change of the product mix sold
2
4
5
3. Staff cost
Favourable personnel expenses evolution (-2.9%)
despite having reinforced commercial teams
(Rev. Management and CRO/Booking Office)
4. Operating expenses
Improved evolution of Purchases and
Advertising but overall negative evolution due to
IT/Systems and commissions
5. Leases
Reduction of leases absorbing Openings / stepups and CPI growth
6. Non recurring EBITDA
In 2011 income from capital gains (asset
disposals) and in 2012 expenses from an increase
in severance and provisions expenses due to staff
restructuring
7. Other non recurring
In line with negative macro trends in Spain and
(205,1%) 6 Italy, the group has increased its impairment
(708,4%) 7 provision to €268 million (€52 million for the
Real Estate)
(4785,2%)
20 March YTD 2013 Results
(€ million)
1. Revenues
Revenues fell by 3.8% as a result of the slowdown
in sales of the MICE and restaurant business (with
a 5.3% drop) and the fall in average prices (-4.83%
(3,8%) 1 LFL).
It should be remarked that this quarter's results
were influenced by the negative effect of the
(98,9%)
Easter holiday (which fell in April last year), and by
(0,5%)
2 the fact that February had one less business day
4,3%
than the previous year
(17,9%)
2. Operating expenses
• Staff expenses: thanks to the containment
1381,0%
plans launched in 2012, personnel expenses fell
0,7% 3
by -0.5%
(320,3%)
• Other operating expenses: higher than previous
year because of:
(13,0%) 4
- Commission expenses
- Data processing
(31,6%)
- Energy
34,9% 5
3. Leases
(1666,7%)
Similar levels than previous year due to the
(35,5%)
reduction of leases costs in BU Spain&Portugal
and in Italy .
23,2%
3 M 2013
271,5
2,1
3M 2012
281,2
3,3
273,6
284,5
(0,0)
(113,1)
(98,3)
(0,9)
(113,7)
(94,2)
62,1
75,7
Onerous contract reversal provision
Lease payments and property taxes
3,1
(72,9)
0,2
(72,4)
EBITDA
(7,7)
3,5
Depreciation
(24,0)
(27,6)
EBIT
(31,7)
(24,1)
Interest expense
Income from minority equity interests
(17,2)
(0,9)
(12,8)
0,1
EBT
(49,9)
(36,8)
6,3
5,1
NET RESULT before minorities
(43,5)
(31,7)
(37,5%)
Minority interests
NET RECURRING RESULT
4,6
(39,0)
5,0
(26,6)
(8,8%)
(46,2%)
Non Recurring EBITDA
Other Non Recurring items
(1,6)
(1,1)
(3,5)
(1,9)
55,8%
NET RESULT including Non-Recurring activity
(41,6)
(32,0)
(29,8%)
Hotel Revenues
Real estate sales and other
TOTAL REVENUES
Real estate cost of sales
Staff Cost
Operating expenses
GROSS OPERATING PROFIT
Corporate income tax
2013/2012
(3,4%)
(37,7%)
4. Depreciation
Depreciation expenses decrease explained by
impairment provision registered in 2012.
5. Interest expense
Interest expenses increase compared to 2012 as a
6 consequence of financing with higher spreads.
43,0%
6. Non Recurring EBITDA
Mainly Severance payments
21 Historical Financial Structure
Rooms and Net Debt / EBITDA evolution
EBITDA decrease by -28%
RevPar drop of -19%
70.000
14,0 x
60.000
12,0 x
50.000
10,0 x
40.000
8,0 x
30.000
6,0 x
20.000
4,0 x
10.000
2,0 x
0
0,0 x
2003
2004
2005
2006
2007
2008
Total Rooms
2009
2010
2011
2012
Net Debt / EBITDA
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total Rooms
34.458
36.835
38.054
38.990
49.677
51.591
61.317
58.687
59.052
58.853
EBITDA
155,3
193,7
180,9
188,9
283,0
280,9
80,6
152,9
202,4
Net Debt
478,8
517,2
690,0
632,8
1.065,6
1.113,2
1.064,8
958,2
917,0
Net Debt / EBITDA
3,1 x
2,7 x
3,8 x
3,3 x
3,6 x
4,0 x
13,2 x
6,3 x
4,5 x
12,1 x
2012 PF 2012 PF
HNA
HNA &
Krasna
2012 PF HNA 2012 PF HNA & Krasna
58.853
58.853
78,0
78,0
106,0
946,0
712,0
571,0
9,1 x
5,4 x
• The group has traditionally operated with Net Debt /EBITDA levels of 3.0 - 4.0x.
22 Quarterly RevPar Evolution
NH Hoteles European LFL RevPar
Evolution (FY 2012 vs. 2011)
(€ m)
Occupancy (%)
RevPar (€)
Recurrent Revenue
Recurrent EBITDA
2012
64,6
50,4
1.310,1
118,2
2011
64,8
51,1
1.356,2
164,2
2010
62,5
49,2
1.306,8
139,1
2009
57,0
45,0
1.213,5
78,6
Change
12/11
-0,3%
-1,3%
-3,4%
-28,0%
Change
11/10
3,7%
3,8%
3,8%
18,0%
Change
10/09
9,6%
9,4%
7,7%
77,0%
-2.37%
+6.16%
-7.17%
Quarter on Quarter NH Hoteles Consolidated RevPar evolution 2005-2013
-5.09%
23 Gross Debt Breakdown and Maturities
Gross Debt as of April 2013 (€M)
Amortization schedule (€M)
1,007
105
Other Loans (1)
217
Mortgage Loans
150
284
250
1.
185
162
158
86
330
17
9
TLA2
TLA1
TLB
•
Term Loan B: 3 different instalments in 2013 (€100M),
2014 (€100M) and 2015 (€50M)
•
Term Loan A1: 5 years based on the following yearly
schedule: 10%; 10%; 20%; 20% and 40%, to be fully paid
by 2017
•
Term Loan A2: 5 years with bullet maturity (fully payable
in 2017)
Includes unsecured loans and subordinated loans.
Net Debt as of April 2013 (Includes HNA
capital increase): 794 €M
24 Asset Disposals
•
•
NH has reached a binding agreement for the
sale of the Grand Hotel Krasnapolsky in
Amsterdam for €157m, equivalent to €335k
per room
The disposal includes a management back
agreement for the next 25 years and the
purchaser will invest c. €40m in two years
1.200
1.000
Net Debt
8,4 x
Net Debt / Recurrent EBITDA
6,4 x
800
5,9 x
600
400
•
Net cash proceeds of €142m and capital
gains of €42m
200
0
2012
Price per room
€335.256 / room
EBITDA multiple 2012*
11,2x
*EBITDA 2012 adjusted by management fees
2012PF HNA 2012PF HNA +
Krasnapolsky
25 Addressing Financial Structure
• The company breached Covenants in 2012.
• Price pressure from investors on the asset disposal processes.
• Need of a proposal for a global solution through:
• Agreement with banks
• New Debt
• Divestments
26
Summary and rationale of the Agreement
Equity Investor
•
Long-term partnership with one of the
leading hotel managers in China provides
stability to the shareholder base
•
Potential to develop a mid/upscale market
portfolio in China with a strong and
reputable local partner under an “assetlight” model
•
Framework to create cross-selling
opportunities between a flagship Chinese
company in the airline/tourism business
and NH Hoteles
€234m capital increase
HNA to become a shareholder with a
20% stake
JV to expand hotel operations in China
and commercial agreement with HNA
worldwide
Framework for a broader commercial
agreement with HNA’s tourism
businesses
27 HNA Equity Agreement - Capital Increase
HNA is the 7th largest Chinese privately-owned multi-industry enterprise group and a
top 3 hotel manager
Capital increase without pre-emption subscription rights
Type of offering
Issuance of ordinary shares to be fully subscribed by
HNA
Offering size
61.7 million shares
Price
€ 3.8 per share
Total capital raised
€ 234.5 million
HNA ownership after
capital increase
20.0%
Board representation
2 HNA members
28 Strategy
Business lines
Focus on the ‘core business’:
3 and 4-star urban hotels
Profitability
Make all business units profitable
Strategic markets
Europe and Latin America:
increase presence in current and new markets
Extraordinary CAPEX
Opportunity to reposition key assets
Growth formulas
Management contracts are a priority /
Opportunistic approach for owned & leased
Emerging /
non-strategic markets
Enter with local partners /
no investment or very limited
29 2013 Outlook
Reverse the negative trend in revenues, targeting a modest increase for the whole year.
Revenues
H1 in line with Q4 2012, positive growth in H2.
Focus on yield management (i.e. EzRMS), ISO’s, NH Web, key accounts, top destinations /
portfolio repositioning, upselling & cross-Selling.
Cost savings plan in Spain, Italy and Head Quarters.
Operating
Expenses
Redesign and restructuring of support functions and administration.
Plan to address commissions.
Leases
Additional initiatives to reduce rents contemplates investments to exit 22 hotels with a targeted IRR of 14%
EBITDA
Recurring EBITDA growth of 5-10%.
The different initiatives have as objective to change the revenues trend, and restructure
staff costs to enter 2014 with an efficient company with increasing revenues
30 Disclaimer
This document has been produced by NH Hoteles, S.A (“NH Hoteles”), and it is provided exclusively for
information purposes.
This document does not constitute a purchase, nor a sale offer. The receivers of the document must know
that historical results do not provide guarantees for the future.
The information included in this document has been obtained from sources considered trustworthy.
Although all reasonable care has been applied to guarantee that the information included is neither false
nor uncertain at the moment of its publication, the document does not ensure that it is exact and complete.
The judgments and assumptions that appear in this document constitute the technical opinion of NH Hotels
and are subject to modification without previous notice. The success in historic projections does not ensure
future success.
The assumptions on which forecasts and goals are based refer to current economic and market
circumstances, which, by its nature, can be modified at any time. Moreover, such assumptions and
projections, as well as any reference to future facts, are subject to uncertainty and may not reach indicated
levels.
The statements and forecasts included in this document do not constitute testimony or guarantees, state or
tacit, on behalf of NH Hotels, its board members or directors.
Nor NH Hotels, nor its board members and directors, assume responsibility for any damage or loss, direct or
indirect that may arise from the use of the information contained in this document.
The reception of this document by its addressees implies the total acceptance of the content of this
disclaimer note.