Other direct management costs were reduced by 0.4%, offsetting the extraordinary systems costs (in line with the new systems plan being implemented in the Company)
and the increase in energy costs.
The Company reduced lease costs by 1.5% in 2013, also offsetting increases from negotiations of prior years and CPI reviews. In 2013, 56 actions were carried out in
relation to leased hotels with negative EBITDA, also achieving the termination of eight leases. These actions enabled savings of EUR 16.7 million, of which EUR 6.9
million are temporary. Additional reductions in leases to those already obtained are envisaged in 2014.
In 2012, in terms of EBITDA, provisions for redundancy were recognised in order to reduce the differences in personnel costs in Spain and Italy compared to other,
muchmore efficient business units (Benelux andCentral Europe). In 2013, EUR
+
21.3
millionwere included inEBITDA, which included the gains on the sale of theNH
Krasnapolsky hotel and the inadequate provisions for indemnities recognised in 2012, which made the room cleaning functions viable both in Spain and Italy.
The Group has assessed the recoverability of the carrying amount of its assets based on its business plan since, after the material provision recognised at 2012 year-end,
it was not necessary to recognised any additional amount at consolidated level.
Recurring finance costs totalled EUR 59 million, up 7.6% from the EUR 54.8 million recognised in 2012. This increase is attributable to former credit spread increases
until June. In the last quarter, finance costs were reduced in respect of the previous year due to the debt amortisation made during the year.
Also, non-recurring finance costs (EUR 11.1 million) are due to the costs inherent to debt refinancing and to the reversal of the exchange differences arising from the
distribution of dividends in Latin America.
The change in fair value of financial instruments includes, firstly, the reduction in the provision for the equity swap hedging theOptions Plan approved in 2007 andwhich,
as a result of the rise in the share price from 2012 year-end to the cancellation thereof in November (from EUR 2.61 to EUR 4.00) after refinancing the debt, is positive
(
EUR
+
9.6
million). Secondly, it also includes the market value of the Group’s interest rate derivatives which, due to their unfavourable performance during the year,
contributed negatively to this heading (EUR 1.93 million).
In 2013, the negative result before tax of NH Hoteles amounted to EUR 32.4 million which, after deducting corporation tax, EUR 6 million, and non-controlling
interests, EUR 1.5 million, totalled EUR 39.8 million.
In 2013, in the normal course of business excluding CAPEX and changes in working capital, NH Hoteles, S.A., reported positive operating cash flow which, after
generating EUR 73.2 million, increased by EUR 45.8 million (2012: EUR 27.4 million), as shown in the table below:
INCOME STATEMENT EXCLUDING ELEMENTS THAT DONOT REPRESENT CASHOUTFLOWS OR INFLOWS
12
M2013
€Million
Income from the hotel business
1,266.0
Income from the property business
14.9
Non-recurring activity
45.1
TOTAL INCOME
1,326.0
Cost of property sales
(0.3)
Staff costs
(460.7)
Direct management costs
(421.8)
Other non-recurring costs
(22.2)
Leases and property tax (excl. Revers. of prov. for onerous contracts and other)
(288.9)
Financial expenses
(59.0)
TOTAL COSTS
(1,252.8)
TOTAL OPERATING CASH FLOW
73.2
Note: This Consolidated Statement of Cash Position was prepared using hotel management criteria that do not necessarily coincide with the accounting principles and rules applied in the preparation
of the Consolidated Statement of Cash Flows of Grupo NHHoteles, S.A.
A cash outflow related to expenses, less than that reported in 2012 (EUR 1,284.3million) and an increase in earnings of EUR 14,4million compared to 2013 are themain
component of the greater generation of cash flow recognised in the balance sheet of Grupo NHHoteles, S.A.
FUTURE OUTLOOK
The hotel sector is particularly sensitive to the economic environment and to business activity, although in recent years it has reported improved annual growth and
occupancy rates than other production activities. The forecast for the next ten years made by the World Travel & Tourism Center (WTTC) maintains global year-on-
year growth of between 3%-4% and a growing proportion of tourism and hospitality in world GDP. However, in the case of Europe, where the NHGroup has the greatest
presence, the growth forecast for these activities ranges between 3%-4%, depending on the country.
In the last five years, the major hotel chains, such as NH Hotels, with a significant volume of billings and hotels, presence in multiple countries, access to international
distribution channels, etc., have reported financial results substantially higher than those of sector SMEs, which are much more sensitive to room and occupancy rate-
related fluctuations in demand, having less hotel locations.
Expectationsof improvement intheworldeconomy in2014and2015heraldarecoveryofhotelrevenuefortheNHGroup inthesecondhalfof2014.Also,thegeographic
diversification of NHHoteles’s activity allows countries with the best economic prospects for 2014 to far outweigh the more stagnant economic activity in Spain.
CONSOLIDATEDMANAGEMENT REPORT
12
