Consolidated Financial Statements and Consolidated Management ...
Consolidated Financial Statements and Consolidated Management ... Consolidated Financial Statements and Consolidated Management ...
It should be highlighted that the Group doubled its positive operating cash flow through its regular operations, excluding CAPEX and the change in working capital, even without taking into account the asset sale plan described above. As can be seen in the following table, operating cash flow amounted to 149 million euros compared to 67.4 million euros in 2010: PROFIT AND LOSS ACCOUNT EXCLUDING ELEMENTS NOT REPRESENTING CASH OUTFLOWS AND INFLOWS 12 M 2011 M EUR. Income from Hotel Activity 1,339.2 Income from Real Estate Activity 17.0 Non-recurrent Activity 72.1 TOTAL INCOME 1,428.3 Personnel costs (479.9) Direct Management expenses (420.0) Other non-recurrent expenses (32.6) Leases and property rates (295.5) Financial expenses (51.3) TOTAL EXPENSES (1,279.3) TOTAL OPERATING CASH FLOW 149.0 Note: This Consolidated Cash Flow Statement was drawn up using hotel management criteria, which do not necessarily coincide with the accounting criteria used in drawing up the Consolidated Cash Flow Statement of NH Hoteles, S.A. Group. OVERVIEW OF NH RISK POLICY NH’s operations are mainly focussed on the hotel industry and particularly on urban hotels, which are characterised by a relatively high level of operational leverage that may require high levels of investment in fixed assets, especially real estate. These have a lengthy economic cycle, which makes it necessary to finance investments mainly through financial borrowing. The Group’s policy has always been to maintain financial orthodoxy by attempting to ensure that solvency ratios always remain high. The management of the risks to which NH Hoteles is exposed in the course of its operations is one of the basic pillars of its actions. Risk management is geared to preserving the value of assets and consequently the investment of the Company’s shareholders. Minimising risks and optimising management of such risks by analysing the corresponding risk maps are among the objectives of the Group’s Management. Financial risk management is centralised at the Corporate Finance Division. The necessary procedures exist to control exposure to interest and exchange rate variations and credit and liquidity risks on the basis of the Group’s financial position and structure and economic environment variables. The size of NH Hoteles and its high levels of penetration and brand recognition enable to the Group to gain access to a larger number of expansion opportunities in a more selective fashion with the aforementioned greater emphasis on the rate of return and less or no need for investment, always attempting to minimise the risk inherent to the industry in which the Group operates. The industry is characterised by an activity that is sensitive to economic cycles and therefore to exposure to price change risks, which the Group has always managed by offsetting it with occupation. The Group’s credit risk can mainly be attributed to commercial debts. The amounts are shown net of any provisions for insolvencies and the risk is very low as the customer portfolio is spread among a large number of agencies and companies. Furthermore, part of the accounts receivable are guaranteed through insurance policies, surety, guarantees and advance payments made by tour operators. The increasing importance of the NH Group website, its telephone booking centre or electronic agencies was maintained in 2011. Together, they accounted for 59.2% of hotel revenue, as opposed to 53.6% in 2010. Compared with traditional channels or agencies, electronic channels and the Group’s own channels reduce collection times and practically eliminate liquidity risks. Concerning interest rate risks, the Group is exposed to fluctuations in the interest rates of its financial assets and liabilities, which may have an adverse effect on its results and cash flows. In order to mitigate the effect of these fluctuations, the Group has contracted a series of financial instruments, interest rate swaps and collars (a combination of swaps and options) to ensure that approximately 30% of its net debt has been hedged against extreme interest rate variations. Information on derivative financial instruments held by the Group at 31 December 2011, as well as on the policies applied to such instruments, is set out in Note 19 of the Consolidated Annual Report. The Group has subsidiaries in several countries with operating currencies other than the euro, the Group’s currency of reference. The operating results and financial position of these subsidiaries (mainly located in Mexico and Argentina) are booked in their corresponding currencies and converted later at the applicable exchange rate for their inclusion in the financial statements. In 2011 the euro fluctuated against other major currencies and this has affected sales, equity and cash flows. In order to ensure such risks are mitigated as much as possible the Group takes out debt in the same currency as the investment, always taking into account that the income generated in geographic areas with currencies other than the euro remains below 6% of total income. Regarding liquidity risks, NH Group has a suitable debt maturity calendar, which is set out in Note 17 of the Consolidated Annual Report for 2011. The Group intends to finalise the process of refinancing its debt, which began in September of 2011, during the first quarter of 2012. 12 CONSOLIDATED MANAGEMENT REPORT
The level of consolidated net financial debt at 31 December 2011, in accordance with the definition of the syndicated loan, amounted to 910 million euros, wiping 48 million euros off the Group’s net level of borrowing when compared to the previous year-end. As explained in Note 8 of the consolidated annual accounts, financing for the investments made in Italy over the last few years involved an increase in borrowing, jointly amounting to 100 million euros, which was financed by the Group’s cash generation. A 4.5% reduction in net financial debt and a 36.9% rise in EBITDA in 2011 resulted in a Debt/EBITDA ratio of 4.5 at year-end 2011, two points lower than the 6.5 recorded in 2010. Another financial leverage ratio (net financial debt /net assets) stood at 0.75 compared to the preceding year’s figure of 0.76, below the 1x ratio which has always been put forward as the Group’s goal. As regards maintaining operating sources of cash flow, this depends on the evolution of the hotel business, on maintaining current asset management policies of the Group’s customers and suppliers, as well as on the execution of the non-strategic asset sales mentioned above. These variables depend on the overall economic cycle and on the markets’ short-term supply and demand situation. The Group’s business units have the capacity to generate regular and significant cash flow from their operations. Likewise, the Group regularly makes cash and bank forecasts, which allow it to assess its liquidity needs and fulfil the payment obligations it has undertaken without the need to obtain funds under onerous terms and conditions. SHARES AND SHAREHOLDERS NH Hoteles, S.A. share capital at the end of 2011 comprised 246,617,430 fully subscribed and paid up bearer shares with a par value of two euros each. All these shares are entitled to identical voting and economic rights and are traded on the Continuous Market of the Stock Exchanges. According to the latest notifications received by the Company and the notices given to the National Securities Market Commission before the end of every financial year, the most significant shareholdings at 31 December were as follows: 2011 2010 Grupo Inversor Hesperia, S.A. 25.09% 25.09% Banco Financiero y de Ahorros, S.A. (formerly Caja de Ahorros y Monte de Piedad de Madrid) 15.75% 10.04% Caja de Ahorros de Valencia, Castellón y Alicante - 5.66% Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja 5.04% 5.04% Hoteles Participados, S.L. 5.43% 5.43% Caja de Ahorros y Monte de Piedad de Gipuzkoa y San SEBASTIÁN 6.25% 6.14% Pontegadea Inversiones, S.L. 5.07% 5.07% Intesa Sanpaolo S.p.A. 5.65% 5.65% Shares allocated to Employee Remuneration Schemes 0.88% 1.27% Shares owned by NH employees 0.63% 1.30% The Company and the National Securities Market Commission were served notice of two shareholders’ agreements on 28 and 29 December 2009. The first of these is formed by Caja de Ahorros de Valencia, Castellón y Alicante (Bancaja); Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja (Ibercaja); and Caja de Ahorros y Monte de Piedad de Madrid (Cajamadrid), grouping together a total of 20.74% of share capital. The other agreement includes Hoteles Participados, S.L. and Caja de Ahorros y Monte de Piedad de Guipuzkoa y San Sebastián (Kutxa), which groups together a total of 11.57% of share capital. Caja de Ahorros y Monte de Piedad de Madrid and Bancaja, among other savings banks, merged to form Banco Financiero y de Ahorros, S.A. in 2011. Likewise, Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastián (Kutxa) and other Basque savings banks merged on 1 January 2012 to form Kutxabank. The syndication agreements between Banco Financiero y de Ahorros, S.A. and Caja de Ahorros y Monte de Piedad Zaragoza, Aragón y Rioja (Ibercaja), on the one hand, and Hoteles Participados, S.L. and Kutxabank, on the other, were maintained until 31 December 2012, as the respective entities notified the National Securities Market Commission (CNMV). NH Hoteles, S.A.’s average share price listing was 3.92 euros per share (3.22 euros in 2010). The lowest share price of 1.90 euros per share was recorded in December (2.33 euros in June 2010) and the highest share price of 6.30 euros per share in May (4.39 euros in January 2010). At year-end, NH Hoteles held 2,056,429 treasury shares representing 0.83% of its share capital at a total cost of 11,914,000 euros. A total of 201,770,177 shares in NH Hoteles, S.A. were traded on the Continuous Market over the course of 2011 (191,767,196 shares in 2010), which accounted for 0.82 times (0.77 times in 2010) the total number of shares into which the Company’s share capital is divided. Average daily share trading on the Continuous Market amounted to 785,097 securities (749,090 securities in 2010). CONSOLIDATED MANAGEMENT REPORT 13
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The level of consolidated net financial debt at 31 December 2011, in accordance with the definition of the syndicated loan, amounted to 910 million<br />
euros, wiping 48 million euros off the Group’s net level of borrowing when compared to the previous year-end. As explained in Note 8 of the consolidated<br />
annual accounts, financing for the investments made in Italy over the last few years involved an increase in borrowing, jointly amounting to 100 million<br />
euros, which was financed by the Group’s cash generation.<br />
A 4.5% reduction in net financial debt <strong>and</strong> a 36.9% rise in EBITDA in 2011 resulted in a Debt/EBITDA ratio of 4.5 at year-end 2011, two points lower than<br />
the 6.5 recorded in 2010. Another financial leverage ratio (net financial debt /net assets) stood at 0.75 compared to the preceding year’s figure of 0.76,<br />
below the 1x ratio which has always been put forward as the Group’s goal.<br />
As regards maintaining operating sources of cash flow, this depends on the evolution of the hotel business, on maintaining current asset management<br />
policies of the Group’s customers <strong>and</strong> suppliers, as well as on the execution of the non-strategic asset sales mentioned above. These variables depend<br />
on the overall economic cycle <strong>and</strong> on the markets’ short-term supply <strong>and</strong> dem<strong>and</strong> situation. The Group’s business units have the capacity to generate<br />
regular <strong>and</strong> significant cash flow from their operations. Likewise, the Group regularly makes cash <strong>and</strong> bank forecasts, which allow it to assess its liquidity<br />
needs <strong>and</strong> fulfil the payment obligations it has undertaken without the need to obtain funds under onerous terms <strong>and</strong> conditions.<br />
SHARES AND SHAREHOLDERS<br />
NH Hoteles, S.A. share capital at the end of 2011 comprised 246,617,430 fully subscribed <strong>and</strong> paid up bearer shares with a par value of two euros each. All<br />
these shares are entitled to identical voting <strong>and</strong> economic rights <strong>and</strong> are traded on the Continuous Market of the Stock Exchanges.<br />
According to the latest notifications received by the Company <strong>and</strong> the notices given to the National Securities Market Commission before the end of every<br />
financial year, the most significant shareholdings at 31 December were as follows:<br />
2011 2010<br />
Grupo Inversor Hesperia, S.A. 25.09% 25.09%<br />
Banco Financiero y de Ahorros, S.A. (formerly Caja de Ahorros y Monte de Piedad de Madrid) 15.75% 10.04%<br />
Caja de Ahorros de Valencia, Castellón y Alicante - 5.66%<br />
Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja 5.04% 5.04%<br />
Hoteles Participados, S.L. 5.43% 5.43%<br />
Caja de Ahorros y Monte de Piedad de Gipuzkoa y San SEBASTIÁN 6.25% 6.14%<br />
Pontegadea Inversiones, S.L. 5.07% 5.07%<br />
Intesa Sanpaolo S.p.A. 5.65% 5.65%<br />
Shares allocated to Employee Remuneration Schemes 0.88% 1.27%<br />
Shares owned by NH employees 0.63% 1.30%<br />
The Company <strong>and</strong> the National Securities Market Commission were served notice of two shareholders’ agreements on 28 <strong>and</strong> 29 December 2009. The first<br />
of these is formed by Caja de Ahorros de Valencia, Castellón y Alicante (Bancaja); Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja (Ibercaja);<br />
<strong>and</strong> Caja de Ahorros y Monte de Piedad de Madrid (Cajamadrid), grouping together a total of 20.74% of share capital. The other agreement includes Hoteles<br />
Participados, S.L. <strong>and</strong> Caja de Ahorros y Monte de Piedad de Guipuzkoa y San Sebastián (Kutxa), which groups together a total of 11.57% of share capital.<br />
Caja de Ahorros y Monte de Piedad de Madrid <strong>and</strong> Bancaja, among other savings banks, merged to form Banco Financiero y de Ahorros, S.A. in 2011.<br />
Likewise, Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastián (Kutxa) <strong>and</strong> other Basque savings banks merged on 1 January 2012 to form<br />
Kutxabank.<br />
The syndication agreements between Banco Financiero y de Ahorros, S.A. <strong>and</strong> Caja de Ahorros y Monte de Piedad Zaragoza, Aragón y Rioja (Ibercaja), on<br />
the one h<strong>and</strong>, <strong>and</strong> Hoteles Participados, S.L. <strong>and</strong> Kutxabank, on the other, were maintained until 31 December 2012, as the respective entities notified the<br />
National Securities Market Commission (CNMV).<br />
NH Hoteles, S.A.’s average share price listing was 3.92 euros per share (3.22 euros in 2010). The lowest share price of 1.90 euros per share was recorded in<br />
December (2.33 euros in June 2010) <strong>and</strong> the highest share price of 6.30 euros per share in May (4.39 euros in January 2010).<br />
At year-end, NH Hoteles held 2,056,429 treasury shares representing 0.83% of its share capital at a total cost of 11,914,000 euros.<br />
A total of 201,770,177 shares in NH Hoteles, S.A. were traded on the Continuous Market over the course of 2011 (191,767,196 shares in 2010), which accounted<br />
for 0.82 times (0.77 times in 2010) the total number of shares into which the Company’s share capital is divided. Average daily share trading on the Continuous<br />
Market amounted to 785,097 securities (749,090 securities in 2010).<br />
CONSOLIDATED MANAGEMENT REPORT<br />
13
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