Directors` Report on the Operations of Orbis S.A. for 2012

Transcription

Directors’ Report
on the Operations of Orbis S.A.
for 2012
February 19, 2013
Orbis Spółka Akcyjna
Directors’ Report on the Operations of Orbis S.A. for 2012
(all amounts in PLN thousands, unless otherwise stated)
TABLE OF CONTENTS
TABLE OF CONTENTS ..................................................................................................................................................... 2 1. DESCRIPTION OF THE COMPANY ORBIS S.A........................................................................................................ 3 1.1. 1.2. 1.3. 1.4 1.4.1 1.4.2 1.4.3 1.4.4 1.4.5 ORBIS S.A. BUSINESS ............................................................................................................................... 3 ORBIS S.A. SHARE PRICE ......................................................................................................................... 4 COMPANIES FORMING THE ORBIS GROUP............................................................................................ 5 CORPORATE GOVERNANCE .................................................................................................................... 6 CORPORATE GOVERNANCE DECLARATION .......................................................................................... 6 THE COMPANY’S SHAREHOLDERS ......................................................................................................... 8 THE COMPANY’S GOVERNING BODIES, THE MANAGEMENT BOARD AND THE SUPERVISORY
BOARD ........................................................................................................................................................ 9 RULES OF PROCEDURE OF THE COMPANY’S GOVERNING BODIES ................................................ 10 INTERNAL CONTROL ............................................................................................................................... 10 2. SIGNIFICANT FACTORS FOR THE DEVELOPMENT OF THE COMPANY, INCLUDING DESCRIPTION OF
MAJOR RISKS AND THREATS; PROSPECTS FOR CHANGES OF FACTORS ................................................... 11 2.1. 2.1.1 2.1.2 2.2. 2.2.1 2.2.2 2.2.3 2.2.4 2.3 2.3.1 2.3.2 2.3.3 EXTERNAL FACTORS .............................................................................................................................. 11 MACROECONOMIC FACTORS ................................................................................................................ 11 LEGAL ENVIRONMENT ............................................................................................................................ 14 INTERNAL FACTORS ............................................................................................................................... 15 INVESTMENT PROGRAM ......................................................................................................................... 15 EMPLOYMENT AND PAYROLL & RELATED EXPENSES ....................................................................... 16 FINANCIAL POSITION OF ORBIS S.A...................................................................................................... 17 COMPANY’S POLICY IN THE FIELD OF INVESTOR RELATIONS.......................................................... 17 PROSPECTS FOR THE COMPANY’S DEVELOPMENT .......................................................................... 18 MACROECONOMIC ENVIRONMENT ....................................................................................................... 18 TOURIST TRAFFIC ................................................................................................................................... 18 PLANS FOR SUBSEQUENT PERIODS .................................................................................................... 19 3. INCOME STATEMENT ............................................................................................................................................. 20 4. STATEMENT OF FINANCIAL POSITION ................................................................................................................ 22 4.1 4.2 4.3 4.4 4.5 4.6 NON-CURRENT ASSETS ......................................................................................................................... 22 CURRENT ASSETS................................................................................................................................... 22 ASSETS CLASSIFIED AS HELD FOR SALE ............................................................................................ 23 NON-CURRENT LIABILITIES .................................................................................................................... 23 CURRENT LIABILITIES ............................................................................................................................. 23 BORROWINGS .......................................................................................................................................... 24 5. STATEMENT OF CASH FLOWS .............................................................................................................................. 25 6. RATIO ANALYSIS OF THE FINANCIAL STATEMENTS ......................................................................................... 26 6.1 6.2 6.3 PROFITABILITY RATIOS .......................................................................................................................... 26 EFFICIENCY RATIOS................................................................................................................................ 27 FINANCING RATIOS ................................................................................................................................. 28 7. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD ............................................................ 29 8. INFORMATION ON THE COMPANY AUTHORIZED TO AUDIT FINANCIAL STATEMENTS ................................ 29 9. LITIGIOUS MATTERS .............................................................................................................................................. 29 10. RELATED PARTY TRANSACTIONS ....................................................................................................................... 29 11. CONTINGENT ASSETS AND LIABILITIES ............................................................................................................. 29 2
1.
1.1.
DESCRIPTION OF THE COMPANY ORBIS S.A.
ORBIS S.A. BUSINESS
The joint-stock company Orbis Spółka Akcyjna with its seat in Warsaw was established in the course of transformation of
the State-Owned Enterprise Orbis on the basis of Act of July 13, 1990, on Privatization of State-Owned Enterprises
(Official Journal “Dz.U.” of 1990, No. 51 item 298, as further amended). On December 17, 1990, a notary’s deed of
transformation of the State-Owned Company Orbis into a single-shareholder company of the State Treasury was drafted
(Notary’s Deed Rep. A No. 1882/90).
On January 9, 1991, the District Court for the Capital City of Warsaw, XVI Commercial Division, issued a decision on
entering Orbis Spółka Akcyjna in the Commercial Register (RHB 25134).
On June 28, 2001, the District Court for the Capital City of Warsaw, XIX Commercial Division of the National Court
Register, entered Orbis Spółka Akcyjna in the Register of Business Operators.
Orbis Spółka Akcyjna is registered under the number KRS 0000022622 in the District Court for the Capital City of
Warsaw in Warsaw, presently XII Commercial Division of the National Court Register (KRS).
The Company pursues its operations on the basis of its Statutes, the consolidated text of which was adopted by the
Extraordinary General Meeting of Shareholders of Orbis Spółka Akcyjna on June 19, 2008 (Notary’s Deed Rep. A No.
2475/2008).
The scope of the Company’s business includes:
•
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•
•
•
•
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•
•
•
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•
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activities of travel agencies, offices and tour operators, as well as other booking assistance activities and related
services,
activities related to organization of fairs, exhibitions and congresses,
hotels and other lodging units,
food&beverage services,
other services related to booking, not elsewhere classified,
other land passenger transport, not elsewhere classified,
maintenance and repair of motor vehicles, except for motorcycles,
other financial services, not elsewhere classified, except for insurance and pension funds,
advertising agencies activities,
other publishing activities,
non-specialized wholesale activities,
retail sale in non-specialized stores with food, beverages or tobacco predominating,
other non-school education, not elsewhere classified,
other monetary intermediation,
gambling and betting activities,
other personal insurance and general insurance,
activities of other transport agencies,
lease and management of own or leased real estate,
management of real estate on mandate basis.
As at December 31, 2012 the structure of Orbis S.A. comprised 28 hotels located in 19 towns, cities and resorts in
Poland, with an aggregate operating capacity of 6,170 rooms.
Hotels belonging to Orbis S.A. operate under the following Accor brands: Sofitel, Novotel, Mercure and ibis Styles as well
as under the Orbis Hotels brand and Holiday Inn1 in Warsaw. Moreover, as at the end of the reporting period, the
Company managed the Sofitel in Wrocław (205 rooms) and granted a franchise to the following hotels: ibis Styles Gdynia
Reda (86 rooms) and Mercure Kasprowy in Zakopane (288 rooms). In addition, the Company owns nine ibis budget
hotels, two ibis hotels and the Mercure Grand hotel in Warsaw, operated by its subsidiary Hekon-Hotele Ekonomiczne
S.A.
The Company’s hotels offer comprehensive food&beverage services, have professionally equipped conference rooms
and Business Centres, feature recreational facilities and spa. This potential ranks the Orbis hotel network first both in
Poland as well as in the Central and Eastern Europe.
1
From January 1, 2013 hotel under Mercure brand
3
Chart 1: Hotel room structure per brand - Orbis S.A.
1.2.
ORBIS S.A. SHARE PRICE
During the period from January 1, 2012 till December 31, 2012, the Orbis S.A. share prices fluctuated between
PLN 34.31 and PLN 47.27. The spread between the highest and the lowest price equalled PLN 12.96, that is 37.8% of
the lowest quotation.
In the first half of the year Orbis share price positively stood out among market indices (WIG, WIG 20), with the highest
quotation on March 16, 2012 when the share price stood at PLN 47.27. However, the second half of the year was
marked by lower rates of return than market indices, and Orbis share price reached the lowest level in the analysed
period i.e. PLN 34.31, (on August 7). At the end of 2012, Orbis share price reached the level of PLN 38.00 (as compared
to PLN 37.90 at the end of 2011). The average daily trading volume in Orbis securities equalled 13,922 shares.
Chart 2. Orbis S.A. and WIG-20 index quotations during the period January 1, 2012 – December 31, 2012
2 000
Thou.
50
PLN
48
1 600
46
42
40
800
38
36
400
34
volume
Orbis
17‐Dec
3‐Dec
5‐Nov
19‐Nov
5‐Oct
19‐Oct
21‐Sep
7‐Sep
24‐Aug
9‐Aug
26‐Jul
12‐Jul
28‐Jun
14‐Jun
30‐May
30‐Apr
16‐May
16‐Apr
29‐Mar
15‐Mar
1‐Mar
16‐Feb
2‐Feb
0
3‐Jan
32
19‐Jan
Volume
1 200
Share price
44
30
WIG20
4
1.3.
COMPANIES FORMING THE ORBIS GROUP
As at December 31, 2012 Orbis S.A. directly held shares and interests in the following commercial companies:
Table 1. Companies forming the Orbis Group – direct subsidiaries and associates
Name, legal status and
corporate seat of the company
Share capital, in
PLN thousand
% share of the
parent
company in
share capital
% share of the
parent company in
the no. of voting
rights at the GM
Business operations
Direct subsidiaries
Hekon - Hotele
Ekonomiczne S.A., Warsaw
Hotel services, food&beverage
services
300 000
100.00
100.00
Orbis Transport Sp. z o.o.,
Warsaw
3 272
96,00*
96,00* Rent of vehicles
Wioska Turystyczna Wilkasy Sp.
z o.o., Wilkasy
1 650
100.00
100.00
Hotel services, food&beverage
services, leisure
Orbis Kontrakty Sp. z o.o.,
Warsaw
100
80.00
80.00
Organization of purchases for
hotels managed by partners
Orbis Corporate Sp. z o.o.,
Warsaw
5
100.00
100.00
Tourist, transport, hotel,
food&beverage services
* Percentage stake upon redemption of shares made by Orbis Transport Sp. z o.o.
The value of shares and interests in related parties, determined at cost, directly held by Orbis S.A. amounted to
PLN 446,403 thousand as at the reporting date. The carrying amount of shares and interests equals PLN 444,446
thousand.
Moreover, Orbis S.A. holds minority shares and interests taken up as a result of debt conversion, or in the companies
without any development prospects. The following companies fall into this category: Meritum Bank ICB S.A. (formerly:
Bank Współpracy Europejskiej S.A.), Polskie Hotele Sp. z o.o. in liquidation and Tarpan Sp. z o.o. in liquidation. The
value of shares and interests held in these companies, determined at cost, amounted to PLN 1,313 thousand, and is fully
written down, thus their carrying amount as at December 31, 2012 equals zero.
Changes in the structure of the Group and their effect, including merger, acquisition and disposal of direct
subsidiaries and associates:
•
INTER Bus Sp. z o.o. in liquidation – the Company was removed from the Register of Business Operators of the
National Court Register on January 5, 2012.
•
Orbis Development Sp. z o.o. in liquidation – the Company was removed from the Register of Business
Operators of the National Court Register on January 5, 2012.
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Orbis Incoming Sp. z o.o. in liquidation - the Company was removed from the Register of Business Operators of
the National Court Register on January 12, 2012.
•
PKS Tarnobrzeg Sp. z o.o. – on February 29, 2012 Orbis Transport Sp. z o.o. concluded an agreement for the sale
of 100% shares in PKS Tarnobrzeg Sp. z o.o. for the price of PLN 1,100 thousand. Consequently, Orbis Transport
ceased to be an indirect shareholder of PMKS Tarnobrzeg Sp. z o.o.
•
PKS Gdańsk Sp. z o.o. – on March 22, 2012 Orbis Transport Sp. z o.o. concluded an agreement for the sale of
100% shares in PKS Gdańsk Sp. z o.o. for the price of PLN 10,200 thousand.
•
Capital Parking Sp. z o.o. – on December 20, 2012 Orbis Transport Sp. z o.o. concluded an agreement for the sale
of 100% shares in Capital Parking Sp. z o.o. for the price of PLN 111 thousand. Pursuant to the agreement, the
shares were transferred onto a new owner, a natural person, on December 30, 2012.
In view of the sale of all subsidiary companies by Orbis Transport Sp. z o.o., 2012 was the last year of existence of the
Orbis Transport Group.
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Other events:
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Sale of shares in Orbis Transport Sp. z o.o. – on December 18, 2012 Orbis S.A. (seller) and
Orbis Transport Sp. z o.o. (buyer) executed an agreement for the sale of part of shares held by Orbis S.A. in its
subsidiary Orbis Transport Sp. z o.o. Pursuant to this agreement, on the date thereof the buyer acquired 252,358
shares from Orbis S.A., accounting for 89.63% of the total number of shares in the company, for a total price of PLN
32.3 million. The transaction was settled in cash and by set-off of mutual liabilities arising from the purchase by
Orbis S.A. from Orbis Transport Sp. z o.o. of the right to perpetual usufruct of a plot of land located at
47, Łopuszańska Street in Warsaw, as well as buildings, structures and facilities comprising a real property owned
separately from the land. The shares have been purchased by the buyer for the purpose of their voluntary
redemption that was registered in the National Court Register on January 24, 2013. Upon share redemption, Orbis
S.A. still remains the majority shareholder of Orbis Transport Sp. z o.o., with 96.00% stake in the share capital.
1.4
1.4.1
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE DECLARATION
Orbis S.A. complies with the rules of the “Code of Best Practices for WSE Listed Companies” available at
http://www.corpgov.gpw.pl/assets/library/polish/regulacje/dobre_praktyki_19_10_2011_final.pdf and at the seat of the
Warsaw Stock Exchange.
Orbis S.A. refrained from complying with the following rules of corporate governance:
Rule No. II.1. Orbis S.A. will not comply with this rule, partially and permanently. The Company has a corporate website,
yet it will not publish the information required under points 6), 7), 10) and 11) of this rule on its website. This decision has
been supported by a number of reasons, including the fact that disclosure obligations have been made more rigid as
compared to the currently applicable legal regulations (point 10) and as compared to the present corporate practices of
the Company (points 6 and 7), as well as by an unclear wording of these fragments of the Rule No. II.1 (points 7 and 10).
Orbis S.A. declares that is shall consider a progressive introduction of appropriate corporate mechanisms, in particular
involving putting in place additional organizational and technical means that would facilitate the application of the rules of
corporate governance to the extent mentioned above.
Re.: II.1.6. – This fragment of the rule applies generally to new duties of the Supervisory Board (reporting duties),
which were not required under the former rules of corporate governance, which implies the need to introduce
substantive changes in the program of the Supervisory Board’s works. Moreover, on the basis of the content of this
rule, it is difficult to define precisely the degree of detail in the Supervisory Board’s reports as regards the work of the
Board’s committees and evaluation of the internal control system and risk management system. As regards the
requirement to publish a report on the Supervisory Board’s operations, the content of this rule is not correlated with
the content of the Rule No. III.1. It must be noted that so far the Company has not complied with the Rule No. 28
(the former version of the corporate governance rules), which required submission by the Board’s committees of
annual reports on their operations. The Company also informs herein about permanent non-compliance with the
Rule No. III.8., since relevant internal regulations concerning the work of the Supervisory Board committees are not
fully compliant with Annex I to the Commission Recommendation of 15 February 2005 on the role of non-executive
directors (…). The Company also declares partial non-compliance with the Rule No. III.1.
Re.: II.1.7. – The requirement to publish questions put forward by shareholders before and during the General
Meeting, as well as responses to these questions on the corporate website requires implementation by the Company
of procedures that are extraordinary and require substantial outlays. The content of this rule generally covers all
matters on the agenda, which may apply to both organizational and substantive issues. Provision of substantive
information lies within the Management Board’s scope of powers. According to the applicable legal regulations, the
Management Board is not under the duty to respond to shareholders’ questions beyond the General Meeting. The
Company foresees problems with establishing whether a given person putting forward a question prior to a General
Meeting is a shareholder and, in consequence thereof, whether such question and the response thereto should be
published on the corporate website. The above doubts give rise to apprehension that compliance with the Rule No.
II.1.7. would rigidly formalize the Company’s information policy. The Company declares, however, that it shall
consider the possibility of putting in place appropriate internal procedures for the purpose of complying with this rule.
Re.: II.1.10. – Information concerning events leading to the acquisition or limitation of rights of a shareholder, which
may constitute the basis for investment decisions (Rule No. II.1.10), are published by the Company in the form of
reports, under circumstances defined in the regulations governing public trading in financial instruments. These
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reports are then published on the Company’s corporate website. It must be noted that the informative value of the
Company’s website should be regarded as its supplementary feature, while investors should make decisions based
on reports submitted in accordance with the Act on Public Offering, Conditions Governing the Introduction of
Financial Instruments to Organized Trading, and Public Companies. The requirement to consider the website as the
exclusive carrier of investor information about a group of events outlined very imprecisely under the Rule No.
II.1.10., makes compliance with this rule very risky for the issuers. As regards point 10), the issuer is under the duty
to qualify individual events as corporate events as well as other events of similar nature, to qualify such events as
events that might affect the Company’s share price (investment decisions) and to disclose them within an
appropriate time limit.
Re.: II.1.11. – As regards the Rule No. II.1.11., at present the Company does not have a mechanism of obtaining
and disclosure to the public of information concerning a relationship between a member of the Supervisory Board
and a shareholder who holds shares representing not less than 5% of all votes at the General Meeting. The
Company does not permanently comply with the Rule No. III.2. Information concerning members of the Supervisory
Board are available to the public only to the extent required under the applicable law.
Rule No. II.3. and Rule No. III.9. According to the Polish Commercial Partnerships and Companies’ Code, the powers of
the Supervisory Board should be expanded by way of amending the Statutes. The powers of the Company’s
Management Board and the Supervisory Board are laid down in the Company’s Statutes, which do not envisage the
need to apply for the consent of the Supervisory Board for execution of an agreement or another transaction on account
of the fact that the other party to the transaction is a related entity. On the other hand, the Statutes set forth such an
obligation if the value of the transaction exceeds a specified amount. Besides the above-mentioned actions, the
Management Board may also request the Supervisory Board’s opinion or resolution on other matters. In the opinion of
the Company, the present wording of the Statutes is adjusted to the size of its organizational frame and its business. The
Management Board of the Company does not intend to initiate amendments to the Statutes as regards matters related
above in the foreseeable future. In practice, the application of this rule is also hampered by a quite imprecise definition of
the type of contracts, with respect to which such additional powers would be granted to the Supervisory Board. The
criterion of considering that a contract is “significant” or “typical” or “executed on market terms” are very indefinite and
may even give rise to differences in interpretation between the Management Board and the Supervisory Board. For
reasons mentioned above, Orbis S.A. does not permanently comply with the Rule No. II.3. and Rule No. III.9. However,
the Management Board of Orbis S.A. would like to emphasize that transactions with shareholders and other persons,
whose interests affect the Company’s interest, are executed with particular diligence.
Rule No. III.1. The Company does not permanently comply with this rule as regards point 1). The Company foresees
compliance with this fragment of the Rule No. III.1.1. in the future. At the moment, the Company’s Supervisory Board
does not see any possibility to expand the scope of its duties to include a permanent control over the functioning of the
internal control system and the risk management system. The Supervisory Board will consider such a decision, also
taking into account the allocation of tasks amongst the operative committees of the Board, in order to ensure that the
control measures permit a regular annual evaluation of how these systems function in the Company.
Rule No. III. 2. and Rule No. III. 4. In the opinion of the Company, these rules impose stricter disclosure obligations upon
members of the Company’s Supervisory Board as compared to the previously applicable corporate governance rules
relating to corresponding matters. The present wording of these rules does not eliminate doubts as to the degree of
definiteness in defining the relationship between a member of the Supervisory Board and a shareholder, nor clarifies the
notion of the conflict of interest, which were the basic reasons for non-compliance with the former version of these rules
by the Company. Due to the Company’s ownership structure, the absence of a precise definition of these issues in the
code of best practices has a major bearing, if as a result of compliance with these rules some members of the
Supervisory Board were not able to participate in its works.
Rule No. III. 8. This rule applies to the tasks and functioning of Supervisory Board’s committees. The Company did not
declare compliance with the corporate governance rules in their former wording, relating to independent members of the
Supervisory Board and internal committees with participation of independent Board’s members. These rules have
changed; hence the Company at present complies with the Rule No. III.6. However, the internal regulations governing
the works of the Supervisory Board committees are not fully compliant with the Annex I to the Commission
Recommendation of 15 February 2005 on the role of non-executive directors (…). According to the Company’s appraisal,
compliance with the Commission Recommendation as regards the tasks and functioning of the Supervisory Board
committees should be tantamount to application of the basic guidelines of this document. The degree of transposition of
the Recommendation’s guidelines should, however, be adjusted to the size of the Company’s organizational structure
and to the powers of the Supervisory Board, arising under the national law.
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Moreover, Rule IV.10. is not and will not be applied in coming years. At present, the Company does not envisage the
possibility to participate in its General Meetings via means of electronic communication, particularly due to risks, of both
technical as well as legal nature, for a proper and efficient organization and holding of the General Meeting of
Shareholders, in particular:
a) real risk of such disruptions in the transmission that would prevent a continuous bilateral communication with
shareholders who are in a location other than the room where the Meeting is held,
b) major, also in the context of transmission disruptions, difficulties in identifying each shareholder/plenipotentiary who
are in a location other than the room where the General Meeting is held, as well as ascertaining the results of voting
"over distance", particularly in the case of secret ballot. With regard to this issue, the right vested in a
shareholder/plenipotentiary to vote prior to the General Meeting (Article 4065.1.3 of the Commercial Partnerships
and Companies’ Code) and granting a power of attorney in an electronic form, which need not be signed by a secure
electronic signature (Article . 4121.2 of the Commercial Partnerships and Companies’ Code) is also of significance.
Under the circumstances outlined above, the Management Board of Orbis S.A. cannot declare compliance with the
Rule IV.10. within a time limit set by the Board of the Stock Exchange. The Company will notify potential compliance with
this Rule in a separate report. Until then, the Rule IV.10. of the Best Practices will not be complied with. The Company
will monitor the effects of non-compliance with the Rule IV.10. and, in case it is found that such consequences are
adverse, the Company will undertake appropriate measures.
1.4.2
THE COMPANY’S SHAREHOLDERS
The list of Orbis S.A. shareholders determined as at February 19, 2013 on the basis of notifications specified in Article 69
of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and
Public Companies was as follows:
Table 2. The Company’s Shareholders as at February 19, 2013
Shareholder
Accor S.A.
(including a subsidiary of Accor S.A. – Accor Polska Sp. z o.o. – 4.99%)
Aviva Otwarty Fundusz Emerytalny Aviva BZ WBK
Other shareholders
Number of shares /
number of voting rights
at the GM
Stake in the share
capital / number of
voting rights at the
GM
24 276 415
52,69%
4 577 880
9,94%
17 222 713
37,37%
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1.4.3
THE COMPANY’S GOVERNING BODIES, THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD
During the period from January 1, 2012 till December 31, 2012, the Company’s Management Board and the Supervisory
Board were composed of the following persons:
Table 3. Members of the Company’s Management Board and Supervisory Board
Governing body
Management Board
Function
Name
President
Laurent Francois Picheral
Vice-President
Ireneusz Andrzej Węgłowski
Member
Marcin Szewczykowski
Chairman
Claude Moscheni
Jacek Kseń
Erez Boniel
Christian Karaoglanian
Supervisory Board
Artur Gabor
Yann Caillère
Marc Vieilledent
Jarosław Szymański
Andrzej Procajło
Andrzej Przytuła
In 2012 there were no changes of the managing persons.
To the Company’s knowledge, as at the date of publication of the report, members of the Management Board hold the
following shares in Orbis S.A.:
•
•
•
Laurent Francois Picheral
Ireneusz Andrzej Węgłowski
Marcin Szewczykowski
- President of the Management Board, does not hold any Orbis S.A. shares
- Vice-President of the Management Board, holds 3,000 Orbis S.A. shares
- Member of the Management Board, does not hold any Orbis S.A. shares
To the Company’s knowledge, as at the date of publication of the financial statements, members of the Supervisory
Board of the 8th tenure hold the following shares in Orbis S.A.:
•
•
•
•
•
•
•
•
•
•
Claude Moscheni
Jacek Kseń
Erez Boniel
Christian Karaoglanian
Artur Gabor
Yann Caillère
Marc Vieilledent
Jarosław Szymański
Andrzej Procajło
Andrzej Przytuła
- does not hold any Orbis S.A. shares
- holds 1,000 Orbis S.A. shares
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1.4.4
RULES OF PROCEDURE OF THE COMPANY’S GOVERNING BODIES
The Company operates pursuant to its Statutes, the latest consolidated text of which was determined by the Annual
General Meeting of Shareholders of Orbis Spółka Akcyjna on June 19, 2008 (Notary’s Deed Rep. A no. 2475/2008).
The joint tenure of Management Board members is three years. The Supervisory Board appoints and recalls the
President of the Management Board and, having sought the opinion of the President of the Management Board, the
remaining members of the Management Board. The President, any member of the Management Board as well as the
entire Management Board may be recalled by the Supervisory Board prior to the expiry of the tenure. Matters that do not
exceed the scope of ordinary management of the Company may be dealt with by any member of the Management Board
without a prior resolution of the Management Board. The ordinary management of the Company involves managing the
overall affairs of the Company as well as such legal and factual actions undertaken by the Management Board that
should be carried out under regular circumstances in order to properly discharge the Company’s duties. Matters
exceeding the scope of ordinary management of the Company and matters objected to by any member of the
Management Board require passing a resolution at a Management Board meeting. All actions affecting the Company’s
share capital (including share issue) as well as other actions of strategic nature, listed in the Company’s Statutes (e.g.
proposed payment of dividend) to be taken by the Management Board, require a prior consent of the Supervisory Board.
Pursuant to the Statutes, the Management Board has adopted its By-Laws that detail rules of procedure of the
Management Board. The By-Laws have been approved by the Supervisory Board.
The joint tenure of Supervisory Board members is three years. With the exception of the three members elected by the
Company's employees, members of the Supervisory Board are elected by the General Meeting of Shareholders. The
Company's employees may recall a Supervisory Board member elected by them prior to the lapse of his/her tenure. A
motion to recall a Supervisory Board member needs to be signed by one-fifth of all eligible employees. In accordance
with the provisions of the Statutes, the Supervisory Board has adopted its By-Laws defining the Board’s organization and
detailed procedures of its operations.
The Annual General Meeting of Shareholders is convened by the Management Board of the Company within six months
following the end of each financial year. Pursuant to the Statutes, the Extraordinary General Meeting of Shareholders is
convened by the Management Board of the Company upon its own initiative or upon a written request of the Supervisory
Board, members of the Supervisory Board elected by the employees. If, despite the request referred to in the preceding
sentence, the Management Board of the Company fails to convene the General Meeting within two weeks from the filing
of the request, members of the Supervisory Board elected by the employees have the right to convene the Extraordinary
General Meeting. A General Meeting of Shareholders is valid if the number of shares represented thereat is equivalent to
at least 25% of the Company's share capital. Resolutions of the General Meeting of Shareholders are adopted by a
simple majority of votes cast in favour of a resolution, unless these Statutes provide otherwise and unless absolutely
binding provisions of the Polish Partnerships and Companies’ Code require other majority. A resolution is deemed
adopted if the number of votes cast in favour of a resolution is greater than the number of votes cast against it.
Abstaining votes are not taken into account. Each share carries one vote at the General Meeting of Shareholders.
The powers of the General Meeting of Shareholders include, among others, amending the Company’s Statutes,
alteration of the Company’s core business, examination and approval of the Directors’ Report on the Operations of the
Company and financial statements for the past financial year, adopting a resolution concerning distribution of profits or
coverage of losses, merger, division or transformation of the Company as well as winding-up and liquidation of the
Company. Acquisition or transfer of real property, right to perpetual usufruct or interest in real property does not require a
resolution of the General Meeting of Shareholders, except for transfer of such assets where the net transaction value
exceeds PLN 200,000,000. Pursuant to the provisions of the Statutes, the General Meeting of Shareholders has adopted
its By-Laws defining in detail its rules of procedure for the meetings.
1.4.5
INTERNAL CONTROL
The internal control system in place in Orbis S.A. is based on functional control exercised by its management in
respective hotels of the Company and organizational units of the Head Office. This control relies on operational
procedures as well as control and supervision procedures, implemented in organizational units.
Risk management in respect of preparation of financial statements incorporates on-going audit of the internal control
system exercised by the Internal Audit Team of the Company. The internal control system covers major processes in the
Company, including those areas that affect, directly or indirectly, correctness of financial statements. Internal audits are
carried out upon request of, and to the extent determined by, the Management Board and in consultation with the Audit
Committee appointed from amongst the Supervisory Board members.
10
2.
SIGNIFICANT FACTORS FOR THE DEVELOPMENT OF THE COMPANY, INCLUDING DESCRIPTION OF
MAJOR RISKS AND THREATS; PROSPECTS FOR CHANGES OF FACTORS
2.1.
EXTERNAL FACTORS
2.1.1
MACROECONOMIC FACTORS
Economic growth
The level and rate of growth of the GDP is one of the basic factors determining demand in the hotel sector.
According to preliminary estimates of the Central Statistical Office [GUS], in 2012 the GDP grew by 2% compared to
4.3% last year (Rzeczpospolita daily: Consumption deteriorated the growth. We are in for a low [“Konsumpcja pogorszyła
wzrost. Dołek przed nami”] of January 30, 2013). Such a level of GDP growth is lower than projected by analysts. The
World Bank and analysts from Moody’s rating agency predict that in 2012 the Polish GDP will go up by 2.2%
(Rzeczpospolita daily: The second half of the year may not bring recovery [“Drugie półrocze może nie przynieść
ożywienia”] of January 18, 2013; Rzeczpospolita daily: Inflation will continue falling down “Inflacja będzie dalej spadać”]
of January 16, 2013). However, according to the European Commission’s economic forecasts for the EU, the economic
growth in Poland stood at 2.4% in 2012 (Rzeczpospolita daily: Baltic States on top in the EU [“Bałtycka czołówka w Unii”]
of November 8, 2012).
The most considerable drop in the GDP was reported in the fourth quarter of 2012. Estimates based on the figures for
the whole year show that in the fourth quarter the GDP could slow down to below 1%, as compared to 1.4% in the third
quarter of 2012. Such a decline is brought about by higher-than-projected fall in consumption that went down by 1% y/y
(Rzeczpospolita daily: Consumption deteriorated the growth. We are in for a low [„Konsumpcja pogrążyła wzrost. Dołek
przed nami”] of January 30, 2013). In December industrial output fell by 10.6%, which translates into the worst result in
nearly four years and a drop exceeding projections of 6% on average, or even the more pessimistic 9% (Wyborcza.biz:
Disastrous end of the year. Output down by 10%, construction sector in a deep low, fewer jobs [“Fatalny koniec roku.
Produkcja spadła o 10 proc., budowlanka w głębokim dole, z pracą gorzej”] of January 18, 2013). Similarly, a substantial
decline was reported in public investments, with two-digit declines at the end of 2012. Moreover, exports, that in mid2012 favourably impacted economic growth, shrank as well (Rzeczpospolita daily: Polish economy heading towards
recession [“Polska Gospodarka zmierza ku recesji”] of January 21, 2013).
Currency rate
The EUR/PLN exchange rate exerts a substantial impact on the demand in the tourist & hotel business. According to
data of the National Bank of Poland, in 2012 the average EUR/PLN exchange rate stood at PLN 4.1859 and was by
1.6% higher than the average EUR/PLN rate in 2011. Exchange rate fluctuations impact the attractiveness of Polish
hotels for foreigners.
Tourist traffic
According to preliminary estimates of the Institute of Tourism, in the first three quarters of 2012 a 11.0% growth was
reported in the number of foreigners’ arrivals as compared to 2011. Over that time the estimated number of tourists grew
by 11.0%.
During three quarters of 2012 the number of foreign tourists who stayed at mass accommodation facilities went up by
11.8% as compared to the corresponding period of 2011. The number of sold beds rose by 10.3%. Countries with the
highest growths in the number of persons staying at accommodation facilities include: Ireland, Belorussia, Russia, the
Ukraine, Norway, Greece, Latvia, Switzerland, Portugal, and Turkey.
During three quarters of 2012 an increase was reported in passenger traffic. Polish airports serviced 19,273 thousand
passengers (regular and chartered flights, excluding transit traffic), which translates into a 14.2% rise against three
quarters of 2011. The highest increases were reported by airports in Zielona Góra (145,9%), Szczecin (44,9%) and Łódz
(26.0%) (figures from the Civil Aviation Office).
No figures covering the entire year 2012 have been published as at the date of publication of this report.
11
Impact of the European Football Championship EURO 2012
According to figures from the Institute of Tourism, 275 thousand one-day guests and 285 thousand football fans who
stayed for at least one night came to Poland for June’s European Football Championship Euro 2012. Total proceeds
from foreigners who came for the tournament amounted to PLN 1.0 billion (Hotelarstwo portal: Euro 2012: 285 thousand
persons accommodated, 275 thousand persons dropped in, they all spent PLN 1.04 billion [“Euro 2012: nocowało 285
tys., „zajrzało” 275 tys. osób, wydali 1,04 mld zł”] of October 29, 2012).
According to data from the Central Statistical Office [GUS], the number of foreign guests staying at accommodation
facilities in Poland in July 2012 was by 9.4% higher than in July 2011. Furthermore, the number of sold beds went up by
5.8% (Hotelarstwo portal: Exceptional summer for Polish hotels – HotelsCombined analysis [“Wyjątkowe lato polskich
hoteli] – analiza HotelsCombined”] of November 10, 2012).
According to the report of the company PL.2012, the so-called “Polish effect”, i.e. the impact of the European Football
Championship Euro 2012 held in Poland on the economy, development of foreign tourist traffic and image of the country,
will be more sizeable than the so-called “Barcelona effect”. Thanks to the organization of the Championship, the number
of foreign tourists visiting Poland annually may grow by 766 thousand, against the projected 489 thousand. Also,
projected proceeds from tourism may be higher, amounting to even as much as PLN 7 billion against PLN 4.2 billion
forecast before the Championship. The cumulated impact of the Euro 2012 Championship may amount to even as much
as PLN 21.3 billion in the years 2008-2020.
Chart 3: Projected revenues from foreign tourism.
Source: PL.2012
12
According to the company PL.2012, over 677 thousand foreign tourists and football fans from 123 countries of the world
visited Poland during Euro 2012. During the Championship, Poland hosted 8.4 thousand foreign journalists, 2.4 thousand
members of national football teams and approx. 400 foreign voluntaries. 296 thousand fans from abroad enjoyed
themselves on stadiums, approx. 370 thousand football fans from abroad stayed in fan zones, restaurants and bars.
Actual spending of foreign tourists during Euro 2012 exceeded projections from 2010 by 33% and amounted to PLN 1.1
billion. (PL.2012: The Polish Effect – the success of Euro 2012 beyond expectations, [“Efekt Polski – Sukces Euro 2012
powyżej oczekiwań”] of November 21, 2012).
Chart 4: Foreign tourists’ spending in Poland during Euro 2012 in PLN.
Source: PL.2012
According to STR Global figures, the highest room rates were achieved in Tri-City, but it was Poznań that earned most
on tourists. The highest occupancy rate was reported in Wrocław (Hotelarstwo portal: Euro 2012: Polish hoteliers earned
a fortune [“Euro 2012: Polscy hotelarze zarobili krocie”] of June 28, 2012). According to the survey by TRI Hospitality, in
June hotels in Warsaw generated a 195.6% growth in profit per one room sold, which ranked Warsaw among Europe’s
top cities (Hotelarstwo portal: Hotels in Warsaw: miserable growth in room occupancy, decline in F&B revenues and
tremendous growth in profits [“Hotele w Warszawie: mizerny wzrost wykorzystania pokoi, spadek przychodów z
gastronomii i wielki wzrost zysków”] of August 6, 2012).
13
2.1.2
LEGAL ENVIRONMENT
The following legislative acts of significance for business operations of the Orbis Group were promulgated in 2012:
•
on May 3, 2012, the Act of September 16, 2011 on Amendments to the Act – Code of Civil Procedure and to Certain
Other Acts (Official Journal “Dz. U.” No. 233, item 1381) entered into force. The most important amendments include
abolition of a separate procedure in economic matters, a new regulation of principles concerning the presentation of
evidence by parties, the duty to state all facts and evidence without delay so that the proceedings can be conducted
efficiently and quickly, or more precise definition of court’s duties in the field of obtaining material relating to
proceedings as part of the so-called information hearing of the parties;
•
on July 1, 2012, the Regulation of the Minister of Finance of April 3, 2012 amending the Regulation on current and
periodic information provided by issuers of securities and the conditions for considering it equivalent to information
required by laws of a country not being a Member State (Official Journal “Dz. U.” No. 71 item 397) entered into force.
The Regulation introduces, among others, changes to certain definitions, provisions on making corrections to
periodic reports in current reports and changes in the scope of periodic reports;
•
in Official Journal “Dz. U.” No. 100 item 592 the consolidated text of the Act on Company Social Benefit Fund was
promulgated (the text of the Act is appended to the Announcement of the Marshal of the Polish Sejm of April 24,
2012);
•
in Official Journal “Dz. U.” of 2012 item 1149 the consolidated text of Act on Financial Market Supervision was
promulgated (the text of the Act is appended to the Announcement of the Marshal of the Polish Sejm of August 30,
2012);
•
in Official Journal “Dz. U.” of 2012 item 1232 the consolidated text of Act on Electronic Payment Instruments was
promulgated (the text of the Act is appended to the Announcement of the Marshal of the Polish Sejm of September
13, 2012);
•
in Official Journal “Dz. U.” of 2012 item 1282 the consolidated text of Act on Stamp Duty was promulgated (the text
of the Act is appended to the Announcement of the Marshal of the Polish Sejm of September 13, 2012);
•
on December 31, 2012 the Act of December 7, 2012 amending the Act on Census Records and Identity Cards, as
well as Certain Other Acts came to force (Official Journal “Dz. U.” of 2012 item 1407). The most substantial change
is the deletion of Chapter 5 “Registration Obligation of Pensioners and Tourists”, which means that the obligation to
register persons temporarily staying a hotel prior to lapse of 24 hours of their arrival was deleted from the Act.
14
2.2.
INTERNAL FACTORS
2.2.1
INVESTMENT PROGRAM
In 2012 Orbis S.A. expended PLN 99,918 thousand on property, plant and equipment.
The year 2012 saw the completion of the construction of the ibis & ibis budget Stare Miasto Kraków hotels and the ibis &
ibis budget Reduta hotels in Warsaw. The hotels in Kraków were opened in April, while the ones in Warsaw in May of
this year. Works relating to the construction of the Novotel in Łódź continued in 2012. The hotel is scheduled to be
rendered operational in the second quarter of 2013.
Major projects aimed at enhancing hotel standard that were implemented in 2012 included:
• modernization of rooms and corridors on the 31st floor of the Novotel Centrum in Warsaw up to the state-of-the-art
Next standard, the modernized floor was made available to guests as an executive floor;
• modification of arrangement and full modernization of selected rooms in the Novotel Airport in Warsaw and the
Novotel in Wrocław as part of adaptation to the Novation standard;
• modification of arrangement of public areas (reception area, hall, restaurant and bar) in the Novotel Airport in Warsaw
and in the Novotel in Wrocław;
• full modernization of public areas in Novotel Centrum in Gdańsk, including modification of arrangement and interior
design of the lobby, reception area, restaurant, bar and conference rooms according to the Novotel brand standards;
• partial modification of arrangement and fit-out of the lobby and reception area in the Novotel Centrum in Katowice;
• modernization of a conference floor and corridors in the Novotel Kraków Centrum
• modernization of cooling systems in the Sofitel Victoria in Warsaw, Novotel Bronowice in Kraków and Novotel Marina
in Gdańsk;
• modernization of the swimming pool in the Posejdon hotel in Gdańsk where, following completion of the designing
stage, modernization works started in the third quarter.
Furthermore, the fourth quarter of 2012 witnessed commencement of designing works related to the modernization of the
Sofitel Victoria in Warsaw.
In 2012 preparatory works for further modernization of rooms in selected Mercure hotels operating within the network
commenced.
Other expenditure incurred in the period from January to December 2012 was channelled for small-scale modernizations
and purchases of tangible assets, and had as their objective the improvement of guests’ comfort as well as
modernization and development of security systems, and for works necessary to maintain proper technical condition of
hotels.
IT expenditure incurred in 2012 was earmarked, first and foremost, for the implementation of the project involving the
launch of the professional WiFi service for hotel guests. In the second half of 2012, the project involving replacement of
Front Office and Food&Beverage systems and connection to the AccorTEL systems and network, i.e. the WAN [Wide
Area Network] covering the entire Orbis Hotel Group, was implemented in four hotels (Halny Cieszyn, Mercure Jelenia
Góra, Mercure Zamość Stare Miasto and Magura Bielsko-Biała). Moreover, the Holiday Inn (presently Mercure
Warszawa Centrum) was incorporated into AccorTEL structures within the frame of the rebranding project, marking
finalization of the Orbis hotels’ standardization in terms of IT systems.
Other IT expenditure was appropriated for the first stage of implementation of projects scheduled to come to an end in
2013 (e-invoicing) as well as for the development and modification of already operating systems to bring them in line with
organizational changes and new business needs of the Group.
15
2.2.2
EMPLOYMENT AND PAYROLL & RELATED EXPENSES
Average employment in 2012 stood at 2,211 full-time jobs and declined by 11.7% versus past year, which is a result of
reduction of employment in regional offices and the Head Office of the Company as well as discontinuation of operations
by eight hotels in 2011 and 2012.
The ratio of employment per one room available in hotel branches stood at 0.30 and did not change compared to past
year.
Table 4. Average employment in Orbis S.A. (full-time jobs) in 2012
2012
I. Hotel services /1. to 5./
2011
% change
1 584.5
1 810.3
-12.5%
1. Room department
687.7
780.0
-11.8%
2. Food&beverage department
876.1
1 004.9
-12.8%
17.3
19.6
-11.5%
3. Miscellaneous services
4. Support services
2.3
5.0
-54.0%
5. Commercial activities
1.1
0.8
37.5%
II. General administration and management
331.4
386.3
-14.2%
III. Property operation and maintenance
132.0
147.9
-10.8%
IV. Marketing
163.1
160.5
1.6%
2 211.0
2 505.0
-11.7%
TOTAL:
Employee benefit expense incurred in 2012 amounted to PLN 156.8 million. In 2011 employee benefit expense stood at
PLN 152.1 million. The growth in these expenses was considerably influenced by actuarial valuation of provisions for
jubilee awards and retirement benefits.
Provisions of the new Departmental Collective Labour Agreement for Orbis S.A. Employees came into force as of
April 1, 2012. The new Agreement sorts out the names of positions in Orbis S.A., determines uniform and coherent rules
of remunerating as well as awarding bonuses and other employment-related benefits. Moreover, negotiations on the
Company Benefit Fund were finalised and the Fund becomes effective as from January 1, 2013.
Orbis S.A. successfully completed two years of preparations and negotiations with the Polish Agency for Enterprise
Development [PARP], as a result of which Orbis S.A. obtained funds from the EU to co-finance 60% of the training &
development project “We invest in training and development” in the years 2012/2013. The project will include training
sessions on 27 topics for 1,922 participants, as well as individual coaching financed in 100% for 499 persons, of which
number 21% are training participants aged 45+. Since January, ESF training sessions have been attended by 584
persons.
Cooperation continued with the University of Łódź on the second edition of Top Talent Hotel Management project – the
first industry-related post-graduate studies for future hotel managers. This year, students were selected by committees
from Poland, the Czech Republic, Lithuania, the Ukraine and Russia. The studies were delivered in 9-day sessions from
March to November 2012.
The Talent Development Program, another international program that prepares for serving managerial roles, is designed
for future department managers. 12 persons, including 10 employees of the Orbis Hotel Group, attended sessions held in
four 10-day long modules in Budapest and Poznań since January 2012. Beside workshops, program participants
underwent cross-trainings in hotels of the Orbis Hotel Group in Poland and the Accor network abroad, e.g. in Great
Britain, Belgium, Hungary. Diploma papers will be submitted and evaluated during the final session in April 2013.
The European Football Championship in Poland was preceded by trainings provided to prepare hotel employees for
various scenarios that may occur during the event, with special emphasis on widely-perceived safety.
16
Training & development activities continued in 2012, involving the following areas:
• managing teams, customer service quality and sales, for management staff,
• sales, including trainings on Revenue Management, Business Communication and the ASA system,
• improving customer service quality combined with suggestive sales of services for line employees,
• operation of hotel modules, software applications, safety and fire protection.
2.2.3
FINANCIAL POSITION OF ORBIS S.A.
The Company has maintained strong financial position since last year, with cash and cash equivalents at the level of
77 million as at December 31, 2012.
In the fourth quarter of 2012 the Company repaid a loan from its related company Hekon-Hotele Ekonomiczne Sp. z o.o.
The Company does not have any liabilities arising from borrowings as at the end of the reporting period.
As at December 31, 2012 unused credit lines amounted to PLN 120,000 thousand, of which:
• PLN 20,000 thousand – overdraft available at Bank Handlowy w Warszawie S.A.,
• PLN 100,000 thousand – mid-term revolving facility available at Société Générale S.A. Branch in Poland (agreement
signed on July 29, 2011 for a term of 3 years).
On October 4, 2012 the Fitch rating agency confirmed Orbis’ rating at “BBB+(pol)” with stable outlook. Confirmation of
the rating reflects good trading performance in 2011 and the first six months of 2012, despite a weaker economic
environment in the country and in Europe, as well as its non-core asset disposal program which led to a material
improvement in the Group's cash position and financial ratios (see: current report no. 22/2012).
2.2.4
COMPANY’S POLICY IN THE FIELD OF INVESTOR RELATIONS
Orbis S.A. shareholders embrace Polish and foreign corporate and individual investors. Therefore, the Company pursues
an open information policy, publishes current and interim reports on its operations. The Management Board of the
Company offers comments and responds to investor inquiries during teleconferences organized after publication of
quarterly results. Individual meetings with investors and analysts are held at the Head Office. Also, Company
representatives participate in the so-called Investor’s Days organized by financial institutions.
All financial data and information published by Orbis are available on the corporate website www.orbis.pl. Tabs devoted
to corporate issues have been redesigned, and new functionalities, including a “live chat”, have been added. The first
chat with investors took place after publication of results for the third quarter of 2012. The investor service meets the
requirements set for issuers by the Stock Exchange, allows to search archived current and interim reports that the
Company sends via the ESPI system, and to follow the share price.
Orbis is a supporting member of the Association of Stock Exchange Issuers, an association representing companies
listed at the Warsaw Stock Exchange. The Company protects its corporate image among individual investors and the
public as well as initiates and implements Corporate Social Responsibility projects. Furthermore, Orbis S.A. cooperates
with the Association of Individual Investors that organizes open conferences and meetings to promote knowledge of
principles of financial markets functioning.
17
2.3 PROSPECTS FOR THE COMPANY’S DEVELOPMENT
2.3.1
MACROECONOMIC ENVIRONMENT
According to the projections of the Minister of Finance and in line with the Budget Act, in 2013 the economic growth will
stand at 2.2%, while the average annual inflation at 2.7%. Following a harsh first quarter, the second half of the year
2013 will bring a pickup of Polish and European economies (Wyborcza.biz: ”Rostowski: Polish economy will pick up in
the second half [“Rostowski: W drugim półroczu polska gospodarka przyspieszy”] of January 8, 2013). The projections of
the Minister of Finance mismatch market forecasts. Analysts project that the average GDP growth will equal 1.5% in
2013, with a possible recession in the first half and a recovery in the second half of the year (Rzeczpospolita daily:
Economy has hit bottom [“Gospodarka szoruje brzuchem po dnie”] of January 2, 2013). Also, the World Bank predicts an
economic growth at the level of 1.5% in 2013. A downwards correction of the projection from 3% at mid-year is
attributable predominantly to a weaker condition of the European economy, including German economy that is of key
bearing for Poland (Rzeczpospolita daily: The second half of the year may not bring recovery [“Drugie półrocze może nie
przynieść ożywienia”] of January 18, 2013). The German Federal Statistical Office informed that in the fourth quarter of
2012 German GDP shrank by 0.5%, while in the entire year 2012 it rose by 0.7%, i.e. slightly below economists’
expectations. The predicted growth in German GDP is 0.8% in 2013 (Rzeczpospolita daily: Feeble growth in Germany,
but the USA picks up [“Słaby wzrost w Niemczech, ale USA przyspieszają”] of January 16, 2013).
Analysts from the rating agency Moody’s project that in 2013 the Polish GDP will rise by 1.8% and will exceed the
average for the Central and Eastern Europe (Rzeczpospolita daily: Inflation will continue declining [“Inflacja będzie dalej
spadać”] of January 16, 2013).
According to projections collected among analysts and economists of the “Parkiet” stock exchange paper, the first
quarter of 2013 is to bring the slowest growth in the Polish economy in 2013, standing at a mere 0.6%. A slow recovery
is forecast for the spring, with an economic growth at the level of 1.1-1.5% in the second and third quarters, and at 2.1%
in the fourth quarter of 2013. These figures translate into the GDP growth by slightly more than 1% in the entire 2013.
Upturn on Asian markets, in Italy, Spain and the USA in the second half of 2013 should also improve economic
environment in Poland (Rzeczpospolita daily: Economy to move up at the end of the year [“Gospodarka ruszy pod koniec
roku”] of January 8, 2013).
Positive outlooks come from the annual ranking of economic freedom in 177 countries prepared by The Heritage
Foundation and “The Wall Street Journal”, where Poland went up by seven positions among countries described as
“mostly free”. Worthy of noting are very low barriers to trade in Poland and political stability as well as the fact that the
country has created a dynamic environment for entrepreneurs (Rzeczpospolita daily: Crisis challenges [“Kryzysowe
wyzwania”] of January 11, 2013).
2.3.2
TOURIST TRAFFIC
The Ministry of Sports and Tourism estimates that 13.5 million tourists visited Poland in 2012. In view of a gradual
increase (13.3 million in 2011 and 12.5 million in 2010), the Ministry predicts that we may expect as many as 14 million
tourists in 2013. Estimates provided by the President of the Institute of Tourism are more conservative (13.8 million
tourists), while the majority of analysts are of the opinion that these estimates are too optimistic and it will be a great
success for Poland if the 2012 level of tourist arrivals is maintained.
President of the Polish Tourist Organization believes that the year 2013 will be much better for incoming tourism than
preceding years, including 2012. Such optimism is fuelled by the campaign staged to promote Poland as the host country
for Euro 2012, and by the promotional campaign on Asian markets. The Polish Tourist Organisation projects a multi-fold
rise in the number of Chinese (approx. 30 thousand Chinese per year have come to Poland to date). The advertising
campaign will continue for 2 years and will be run in the biggest Chinese urban agglomerations. Also, the Agency counts
on an increase in the number of tourists from Scandinavia and France where a campaign promoting Poland is coming to
an end (Hotelarstwo: Polish Tourist Organization counts on a multi-fold growth in the number of tourists from China
[“POT liczy na kilkukrotny wzrost liczby turystów z Chin”] of January 11, 2013).
According to the ITB World Travel Trends Report 2012/2013, prepared by IPK International for ITB Berlin, the number of
outbound trips in Europe is to go up by 2% in 2013, despite unfavourable signals from the European economy. Only one
third of respondents stated that economic situation would impact their travel decisions in 2013. Approx. 28% persons
indicated they would travel more in 2013 than in the preceding year, while 21% said they would travel less (IPK
International for ITB Berlin: ITB World Travel Trends Report 2012/2013 of December 2012).
18
According to the UNWTO, the international tourist market grew by 4% in the period from January to August 2012, and
the predicted annual growth stood within the range of 3% to 4%. The tourist market in the Central and Eastern Europe
reported a 9% growth compared to the preceding year. The Organization predicts a decline in demand for tourist
services in 2013 to the level from +2 to +4% (UNWTO: International tourism strong despite uncertain economy of
November 5, 2012).
2.3.3
PLANS FOR SUBSEQUENT PERIODS
Good financial standing, being a result of completed restructuring measures and repayment of borrowings, gives reasons
to anticipate that Orbis S.A. will continue its activities in a stable way.
In 2013 the process of changing the hotel operating model under the adopted ”asset light” strategy will be continued.
Orbis S.A. intends to develop the hotel network in Poland on the basis of franchise and management agreements,
predominantly for Mercure and ibis Styles brands. Focusing on the “asset light” models, the Orbis Hotel Group will be
able to develop the network fast, without incurring sizeable capital expenditure.
Pursuant to the adopted development strategy, in 2012 the Orbis Hotel Group added two new hotels to the network,
namely ibis Kaunas Centre (management agreement) and ibis Styles Gdynia Reda (franchise agreement). The Mercure
Kasprowy Zakopane has been operating under a franchise agreement since December.
New hotel openings are planned for 2013. Based on agreements signed to date, the Orbis Hotel Group will expand by
four franchised properties, offering 385 rooms in aggregate. Two hotels have been already opened, i.e. Mercure Piotrków
Trybunalski Vestil (38 rooms) and Mercure Krynica-Zdrój Resort & SPA (100 rooms).
The strategic assumption is that from 2014 on 100% new properties that join the Orbis Group operate based on the
“asset light” strategy.
In the second quarter of 2013, 161 rooms are scheduled to be completed in the Novotel hotel in Łódź. Presently,
finishing works are underway in this property.
In order to improve guest comfort, the already operating hotels will continue to be modernized. A major item of capital
expenditure planned for 2013 is a comprehensive modernization of the Sofitel Victoria in Warsaw. Modernization works
will cover both public areas (lobby, bar, restaurants, conference rooms) and guest rooms. Elements of the building
façade will also be changed.
Bearing in mind the need to constantly upgrade the standard of offered services, a decision was taken to incorporate
three hotels into the group of Mercure brand hotels. Since July 2012, the Zamojski hotel in Zamość has been welcoming
guests under the new name: Mercure Zamość Stare Miasto. In 2013, the Holiday Inn in Warsaw and the Halny in
Cieszyn were rebranded, as from January 1 and February 1, respectively. Consequently, 16 Mercure hotels (13 owned
and 3 franchised) operate in Poland under the Mercure brand.
19
3.
INCOME STATEMENT
Table 5. Income statement of Orbis S.A.
12 months ended 12 months ended
Dec. 31, 2012
Dec. 31, 2011
Net sales of products, merchandise and materials
Cost of sales
Distribution & marketing expenses
Overheads & administrative expenses
of which:
-depreciation & amortization
-staff costs
-outsourced services
Other operating income
Other operating expenses
Revaluation of non-current assets
EBITDA
EBITDA margin (EBITDA/Revenues)
Operating profit - EBIT
EBIT margin (EBIT/Revenues)
Profit on the sale of a part or total holdings in subsidiaries, affiliates and
associates
Financial income
Financial expenses
Profit before tax
Income tax
Net profit
% change
537 389
(399 515)
(22 655)
(73 106)
540 669
(423 656)
(22 809)
(72 230)
-0,6%
5,7%
0,7%
-1,2%
(98 640)
(156 752)
(103 958)
5 505
(15 207)
(147)
130 904
24,36%
32 264
6,00%
(110 094)
(152 086)
(116 231)
118 039
(18 947)
(4 864)
226 296
41,85%
116 202
21,49%
10,4%
-3,1%
10,6%
-95,3%
19,7%
96,98%
-42,2%
-17,5pp
72,23%
-15,5pp
6 852
3 768
81,8%
79 637
(5 152)
113 601
(9 360)
104 241
43 745
(13 306)
150 409
(23 713)
126 696
82,0%
61,3%
-24,5%
60,5%
-17,7%
In 2012 Orbis S.A. generated lower sales compared to the corresponding period of past year. The decline in sales
results, to a large extent, from the restructuring of the possessed hotel portfolio (in the course of two last years eight
hotels discontinued operations). Despite a lower number of rooms on offer, the Company reported growths in all
operating ratios. Company performance was undoubtedly considerably impacted by the European Football
Championship Euro 2012 held in June. Increased sales are also attributable to various marketing campaigns aimed at
enhancing awareness of brands included in the Orbis Hotel Group’s portfolio.
The decline in Company sales was consistently accompanied by a high cost discipline, which was reflected in a decline
in cost of sales. The share of distribution & marketing expenses and overheads & administrative expenses in net sales
remained at an identical level. Regular measures aimed at reducing water and energy consumption in Company hotels
have been implemented since last year. As a result of transactions of real property sale executed in 2011, depreciation
costs declined as well. However, an increase was reported in the employee benefit expense. Despite a decline in
employment in 2012, the Company incurred substantially higher costs of jubilee awards and retirement benefits, which is
an effect of modification of assumptions for actuarial valuation of provisions for these benefits. Moreover, the introduction
of new principles of awarding bonuses to employees as well as an increase in social insurance charges borne by the
employer exerted impact on higher staff costs.
A substantial difference in other operating income on the year-to-year basis is an effect of executed transactions of sale
of real property. In 2011, five hotels were sold (Cracovia and Francuski in Kraków, Neptun in Szczecin, Prosna in Kalisz
and Solny in Kołobrzeg), and so were the real property of the Bristol hotel and the real property in Płock (former Petropol
hotel). Gains on these transactions amounted to PLN 116.2 million. No such significant property sale transactions were
executed in 2012.
20
Other operating expenses declined as compared to the past year. This item is dominated by costs of employment
restructuring, related to liquidation of hotels and optimization of employment in the Head Office.
In 2012 the item profit on the sale of holdings in subsidiaries, affiliates and associates comprises the result on the sale of
part of shares in Orbis Transport Sp. o.o. In 2011 Orbis generated profit on the disposal of all shares held in Orbis
Casino Sp. z o.o.
The growth in financial income in 2012 as compared to past year results from the dividend received from related
companies, including Orbis Transport Sp. z o.o. that had not paid dividend in 2011.
Financial expenses were considerably curbed in the current period. In 2012 the Company incurred much lower borrowing
costs as a result of total repayment of the investing credit facility in August 2011.
The negative impact of the income tax included, Orbis S.A. closed the year 2012 with a net profit of PLN 104,241
thousand.
Table 6. Orbis S.A. results, net of effects of one-off events
PLN thousand
EBITDA
2012
2011
% change
130 904
226 296
1. sale of real property
(750)
(116 200)
2. revaluation of property, plant and equipment and investment property
3 134
4 864
3. revaluation of financial non-current assets (impairment loss on loans granted to PBP
Orbis Sp. z o.o.)
(2 987)
0
4. costs of surety for insurance guarantee issued by Signal Iduna Polskie Towarzystwo
Ubezpieczeń S.A. to PBP Orbis Sp. z o.o.
0
1 438
5. set up provision for court litigations
1 900
0
6. costs of employment restructuring
10 286
15 092
0
2 788
142 487
134 278
7. results of closed down hotels
EBITDA like-for-like
-42,2%
6,1%
21
4.
STATEMENT OF FINANCIAL POSITION
Table 7. Statement of financial position of Orbis S.A.
As at
Dec. 31, 2012
Non-current assets
% share in total assets
Current assets
Assets classified as held for sale
TOTAL ASSETS
Equity
% share in total equity and liabilities
Non-current liabilities
- of which: borrowings
Current liabilities
- of which: borrowings
TOTAL EQUITY AND LIABILITIES
Borrowings/total equity ratio
Debt ratio (total liabilities/total assets ratio)
4.1
As at
Dec. 31, 2011
1 849 171
91,2%
115 840
5,7%
61 634
3,0%
2 026 645
1 898 389
93,7%
40 251
0
2,0%
88 005
0
4,3%
2 026 645
1 939 037
91,3%
160 616
7,6%
24 000
1,1%
2 123 653
1 858 656
87,5%
39 019
0
1,8%
225 978
110 623
10,6%
2 123 653
0,0%
6,3%
6,0%
12,5%
% change
-4,6%
-27,9%
156,8%
-4,6%
2,1%
3,2%
-61,1%
-100,0%
-4,6%
-6,0pp
-6,1pp
NON-CURRENT ASSETS
In 2012 the most considerable changes were reported in property, plant and equipment as well as investment property.
This is chiefly an effect of completed construction of ibis&ibis budget hotels in Warsaw and Kraków that were reclassified
from assets under construction to investment property.
The growth in investment property results also from reclassification of the Giewont hotel in Zakopane from tangible
assets. In March 2012, operating activities in this hotel discontinued, and the Company has been generating revenue
from the lease of this hotel since April.
The decrease in property, plant and equipment as compared to its balance as at December 31, 2011 was also brought
about by the reclassification of the Mercure Kasprowy hotel in Zakopane to assets held for sale. Moreover, depreciation
accrued for the year exceeded expenditure for tangible assets.
Also, the level of investments in subsidiary companies changed substantially as compared to past year, which results
from the sale of part of holdings in Orbis Transport Sp. z o.o.
4.2
CURRENT ASSETS
Significant items of current assets include cash and cash equivalents, trade receivables and other short-term
receivables.
The Company discloses high levels of cash in both periods presented. Owing to good operating results, generated
particularly in the second quarter of 2012, cash derived from on-going operations were appropriated for repayment of the
loan. The decline in cash as at December 31, 2012 as compared to past year results predominantly from payment of
dividend in August.
22
The growth in trade receivables as at the end of 2012 is an effect of opening of four new hotels in Warsaw and Kraków.
As at the end of the reporting period, Orbis discloses higher receivables from the subsidiary Hekon S.A. on account of
lease of economy hotels. The level of receivables from non-related companies did not change considerably as compared
to December 31, 2011.
Other short-term receivables comprise chiefly taxes and charges receivable as well as prepayments. The decline in other
short-term receivables as compared to the end of 2011 is chiefly an outcome of the refund of the VAT relating to
purchases made in December in connection with carried out construction works.
4.3
ASSETS CLASSIFIED AS HELD FOR SALE
As at December 31, 2012, the assets classified as held for sale item includes:
• rights to perpetual usufruct of land and the building of the Mercure Kasprowy hotel in Zakopane,
• rights to perpetual usufruct of land and the building in Łopuszańska street in Warsaw.
The change in the balance of this item as compared to the end of 2011 results from the sale of the Polonez hotel in
Poznań in October.
4.4
NON-CURRENT LIABILITIES
The most sizeable item of non-current liabilities are provisions for pension and similar benefits. As at the end of 2012,
these provisions rose, predominantly as an effect of modification of assumptions adopted for purposes of their actuarial
valuation, i.e. the discount rate was reduced from 5.5% do 4.5% and the retirement age for men and women was
extended up to 67 years.
The increase in other non-current liabilities is connected with the preliminary contract of sale of the Giewont hotel in
Zakopane, signed in April 2012, and the accompanying contract of lease for a maximum term of 20 years. The Company
received PLN 5.5 million as an advance payment towards the selling price. Also, rent for the first three years of the lease
was paid on advance on the date of execution of the contract. The final contract of sale of the hotel will be concluded
after the legal title to real properties possessed by Orbis S.A. is entered in land and mortgage registers.
The drop in deferred income tax liabilities is a result of a decrease in the difference between the carrying amount and the
tax value of tangible assets, mainly due to completed transactions of sale of properties.
4.5
CURRENT LIABILITIES
In 2012 the most substantial change was reported in borrowings, which is a result of the repayment of the entire amount
of the loan from the subsidiary Hekon Hotele Ekonomiczne.
Trade payables dropped considerably as compared to December 31, 2011. The decrease was brought about by
settlement of investment liabilities that arose on account of construction and modernization works reported under trade
payables as at the end of 2011.
An increase in the 12 months ended December 31, 2012 was noted in Other current liabilities. It is mainly an effect of the
implementation of new rules of awarding bonuses to employees, which increased the level of accrued expenses for
liabilities to employees.
23
4.6
BORROWINGS
On October 17, 2012 annex no. 6 to the loan agreement dated October 23, 2006 between Hekon-Hotele Ekonomiczne
S.A. (lender) and Orbis S.A. (borrower) was executed. It was agreed in the annex that the loan would be repaid by
December 31, 2012. The principal was repaid in the following instalments:
• October 11, 2012 - PLN 40.0 million,
• October 31, 2012 – PLN 21.0 million,
• November 19, 2012 – PLN 23.2 million,
• December 4, 2012 – PLN 20.3 million,
• December 31, 2012 – PLN 5.1 million.
Following repayment of the above amounts, the Company does not have any loan liabilities as at December 31, 2012.
24
5.
STATEMENT OF CASH FLOWS
Table 8. Statement of cash flows of Orbis S.A.
12 months
ended
Dec. 31, 2012
Cash flows from/used in operating activities
Cash flows from/used in investing activities
Cash flows from/used in financing activities
Total net cash flows
Cash and cash equivalents at the end of period
12 months
ended
Dec. 31, 2011
% change
108 812
28 892
(179 799)
79 695
211 166
(200 658)
36,5%
-86,3%
-10,4%
(42 095)
90 203
-146,7%
77 470
119 565
-35,2%
In 2012 the Company reported negative net cash flows. Cash generated from operating and investing activities were
utilized to set off the part of the negative balance of financing activities.
Operating activities
The Company generated high positive cash flows from operating activities in 2012, which is an effect of substantially
better operating performance attributable to the European Football Championship. Also, advantageous influence was
exerted by the restructuring of the hotel network and optimization of costs implemented in recent years.
Investing activities
In 2012 the Company generated positive cash flows from investing activities.
Main sources of inflows comprised dividend from subsidiary companies and funds derived from the sale of the Polonez
hotel in Poznań and shares in Orbis Transport Sp. z o.o. Furthermore, in 2012 the Company received advance payments
totalling PLN 12 million towards transactions of sale of two hotels in Zakopane.
Substantially higher inflows from investing activities reported in 2011 related to the sale of five hotels (Cracovia, Neptun,
Prosna, Solny and Francuski) as well as the real property of the Bristol hotel in Warsaw and the former Petropol hotel in
Płock. Also, the sale of shares in Orbis Casino Sp. z o.o. exerted an advantageous impact on the level of cash flows.
Furthermore, in December 2011 the subsidiary company Orbis Transport Sp. z o.o. repaid loans to the Company.
Expenditure incurred in both periods within the frame of investing activities included predominantly sums spent on the
construction of economy hotels in Warsaw and Krakow as well as on the construction of the Novotel in Łódź.
Financing activities
In both reporting periods the Company reported negative cash flows from financing activities.
Cash generated from operating and investing activities in 2012 allowed the Company to repay the entire amount of the
loan. The lower level of liabilities on account of borrowings as compared to the corresponding period of past year
considerably reduced borrowing costs.
The surplus of cash held as at the end of 2011, being a result of last year’s transactions of sale of real properties, was in
part appropriated for the payment of dividend.
The Company did not incur any new borrowings, hence no inflows from financing activities were reported.
25
6.
RATIO ANALYSIS OF THE FINANCIAL STATEMENTS
An analysis covering profitability, turnover and financing ratios has been made on the basis of the financial statements
(income statement and statement of financial position).
6.1
PROFITABILITY RATIOS
Return on equity (ROE)
2012
Net profit
2011
104 241
126 696
Equity - opening balance
1 858 656
1 731 960
Equity - closing balance
1 898 389
1 858 656
5,5%
7,1%
Return on equity
This ratio depicts the rate of return generated by capital invested in a business. In 2012 this ratio decreased due to a
lower net profit.
Return on assets (ROA)
2012
Net profit
2011
104 241
126 696
Total assets - opening balance
2 123 653
2 164 766
Total assets - closing balance
2 026 645
2 123 653
5,0%
5,9%
Return on assets
This ratio reveals a rate of return generated by the company’s assets. The ratio decreased slightly as compared to 2011.
Net return on sales (NROS)
2012
2011
Net profit
104 241
126 696
Sales of products, merchandise and materials
537 389
540 669
19,4%
23,4%
Net return on sales
This ratio reveals the value of net profit generated by a single sales unit. Return on sales declined, which was
substantially impacted by the sale of hotel properties in 2011.
26
6.2
EFFICIENCY RATIOS
Receivables collection period
2012
Trade receivables – opening balance
Trade receivables – closing balance
Net sales of products, merchandise and materials
2011
22 994
25 112
26 811
22 994
537 389
540 669
360
360
17
16
Number of days
Receivables collection period
This ratio shows the average number of days preceding payment of receivables. In 2012 this ratio changed slightly. The
receivables collection period remains relatively short (approx. two and a half weeks), which proves that funds are not
frozen on the receivables account.
Payables deferral period
2012
2011
Trade payables – opening balance
66 663
35 283
Trade payables – closing balance
40 631
66 663
399 515
423 656
360
360
48
43
Cost of sales
Number of days
Payables deferral period
This ratio shows the average number of days preceding settlement of payables. In 2012 the payables deferral period
deteriorated, predominantly owing to substantial investment purchases in December 2011.
Inventory turnover
2012
Inventory – opening balance
Inventory - closing balance
Cost of sales
Number of days
Inventory turnover
2011
3 245
3 444
2 933
3 245
399 515
423 656
360
360
3
3
This ratio shows the average number of days in the inventory turnover cycle. In 2012 the inventory turnover cycle
remained at the same level as in 2011.
27
6.3
FINANCING RATIOS
Debt-to-equity
2012
Total debt
Total equity and liabilities
2011
128 256
264 997
2 026 645
2 123 653
6%
12%
Debt to equity
The debt-to-equity ratio reveals the contribution of external capital in financing assets. In 2012 this ratio declined due to
the drop in debt resulting from repayment of the entire amount of the loan.
Non-current asset cover ratio
2012
2011
Equity
1 898 389
1 858 656
Non-current assets
1 849 171
1 939 037
103%
96%
Non-current asset cover ratio
This ratio reveals the percentage of non-current assets which is financed by equity. This ratio improved in 2012 as a
result of a decrease in the level of property, plant and equipment and sale of shares in Orbis Transport Sp. z o.o.,
accompanied by an increase in equity brought about by the high net profit generated.
Current ratio
2012
Current assets and assets classified as held for sale
Current liabilities
Current ratio
2011
177 474
184 616
88 005
225 978
2,02
0,82
Current ratio reveals the cover of current assets by current liabilities.
The current ratio stands at a good level. Its increase as compared to the past year results from the repayment of the
loan.
28
7.
SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD
On January 21, 2013 the open pension fund Aviva Otwarty Fundusz Emerytalny Aviva BZ WBK disposed of Orbis S.A.
shares as a consequence of which the Fund’s stake in the total number of votes in the Company declined to below 10%,
namely to 9.94%.
8.
INFORMATION ON THE COMPANY AUTHORIZED TO AUDIT FINANCIAL STATEMENTS
On July 13, 2012, the Company executed an agreement with Deloitte Audyt Sp. z o.o. for the review and audit of
financial statements of Orbis S.A. The agreement covers the review of semi-annual separate and consolidated financial
statements for the six-month period ended June 30, 2012 and for the six-month period ended June 30, 2013, and the
audit of annual separate and consolidated financial statements for the year 2012 and 2013.
The total net fee due or paid out for the audit of separate and consolidated financial statements of Orbis S.A. amounted
to PLN 557 thousand in 2012 (PLN 559 thousand in 2011).
The fee for other attestation services (audit and review of consolidation packs) amounted to PLN 60 thousand in 2012
(PLN 60 thousand in 2011).
9.
LITIGIOUS MATTERS
Information about proceedings pending before court, arbitration or public administration authorities is provided in Note
32.2 to the financial statements of Orbis S.A. for 2012.
10.
RELATED PARTY TRANSACTIONS
The Company executes transactions with related parties at arm's length. Information about transactions with related
parties is provided in Note 35 to the financial statements of Orbis S.A. for 2012.
11.
CONTINGENT ASSETS AND LIABILITIES
Information on contingent assets and liabilities, including issued or received sureties and guarantees, is provided in Note
32.1 to the financial statements of Orbis S.A. for 2012.
29

Directors` Report on the Operations of Orbis S.A. for 2012

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