OVERVIEW OF NH RISK POLICY
NH’s operations are mainly focused on the hotel industry and particularly on urban hotels, which are characterised by a relatively high level of operating
leverage that may require high levels of investment in fixed assets, especially real estate. These have a long 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
aimed 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 have been set 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 excellent penetration and brand recognition provide the Group with access to many expansion opportunities, although
these are selected more on the basis of rate of return and less on the need for investment, always attempting to minimise the risk inherent to the
industry in which the Group operates. The industry is characterised by economic cycles, and is therefore exposed to fluctuating prices, which the Group
has always managed to offset with occupancy.
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 since the customer portfolio is spread among a large number of agencies and companies. Furthermore, part of the accounts receivable are
guaranteed by insurance policies, sureties, bank guarantees and advance payments made by tour operators.
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 2012, 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 2012 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 considering that the income generated in geographic areas with currencies other than the euro remains below 8% 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 2012. The
Group intends to obtain a waiver for non-observance by NH Finance S.A. and NH Italia Srl to fulfil certain covenants in various loans .
The level of consolidated net financial debt, in accordance with the definition of the syndicated loan, stood at €945 million at 31 December 2012, €28
million up from the Group’s financial borrowing at the close of the previous year, although this is caused not by an increase in debt but by a loss of
available liquidity.
The upkeep of operational sources of cash flow depends on adapting the NH Hoteles Group business model to the evolution of the hotel business,
and also on the sale of non-strategic assets. 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 2012 comprised 246,617,430 fully subscribed and paid up bearer shares with a par value of € 2 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:
2012
2011
Grupo Inversor Hesperia, S.A.
25.09%
25.09%
Banco Financiero y de Ahorros, S.A.
15.75%
15.75%
Caja de Ahorros y Monte de Piedad de Zaragoza, Aragón y Rioja
-
5.04%
Ibercaja Banco, S.A.
5.04%
-
Hoteles Participados, S.L.
5.43%
5.43%
CK Corporación Kutxa, S.L.
6.25%
6.25%
Pontegadea Inversiones, S.L.
5.07%
5.07%
Intesa Sanpaolo, S.p.A.
5.65%
5.65%
Shares allocated to Employee Remuneration Schemes
0.84%
0.88%
Shares owned by NH employees
0.60%
0.63%
CONSOLIDATED
MANAGEMENT REPORT
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