Index

7.- INTANGIBLE ASSETS

The breakdown and movements under this heading during 2017 and 2016 were as follows (in thousands of euros):

  Balance at 31.12.15 Change in consolidation scope Exchange differences Inclusions/Allowances Retirements Transfers to other items Balance at 31.12.16 Exchange differences Inclusions/Allowances/td> Retirements Transfers to other items Balance at 31.12.2017
COST                        
Hotel operatin rights 65.560 - 3.078 4.835 (131) - 73.342 (4.098) 282 (304) - 69.222
Agreement premiums 68.517 - - - (1.256) - 67.315 - 39.996 (12.413) - 94.898
Concessions, patents and trademarks 37.649 - 555 305 (2) 65 38.572 (748) 315 (82) (52) 38.005
Software applications 116.496 7 (10) 15.100 (3.631) 10 127.972 (16) 9.871 (75.354) 1.855 64.328
  288.276 7 3.623 20.240 (5.020) 75 307.201 (4.862) 50.464 (88.153) 1.803 266.453
CUMULATIVE DEPRECIATION                        
Hotel operating rights (22.056) - (154) (2.973) 138 (80) (25.125) (633) (2.635) - 20 (28.373)
Agreements premiums (15.181) - - (2.014) 871 (4.725) (21.049) - (5.401) 4.831 (874) (28.373)
Concessions, patents and trademarks (34.232) - (49) (841) 2 13.689 (21.431) (148) (1.236) 82 1.059 (21.674)
Software applications (75.388) (5) 236 (11.091) 2.271 (8.962) (92.939) 21 (12.536) 75.040 78 (30.336)
  (146.857) (5) 33 (16.919) 3.282 (78) (160.544) (760) (21.808) 79.953 283 (102.876)
Impairments (22.137) - 1 (2.303) 1.495 2.740 (20.204) 2 (228) 7.692 244 (12.494)
NET BOOK VALUE 119.282           126.453         151.083

7.1 Hotel operating rights

The additions were not significant in 2017. The increase in hotel rights in 2016 came from the investment made in improvements under the management contract of the hotel NH Collection Grand Hotel Krasnapolsky. This investment was allocated to the consolidated comprehensive profit and loss statement over 12.5 years according to the average useful life of the assets making it up, during which period it is estimated that the investment made will be recovered.

On 28 July 1994, NH Hoteles, S.A. was granted a right of use on Hotel NH Plaza de Armas in Seville, which is owned by Red Nacional de los Ferrocarriles Españoles (RENFE), for a thirty-year period commencing on the date the agreement was executed. NH Hoteles, S.A. paid RENFE the amount of 30.2 million euros in accordance with a payment schedule which concluded in 2014. The Group has reflected the entire amount agreed upon as the transaction’s price in the “Hotel operating rights” item. In order to correctly accrue this price, the result of spreading out the cost over the thirty-year term of the agreement was assigned to the consolidated comprehensive profit and loss statement in accordance with an increasing instalment with a percentage annual growth of 4%.

7.2 Agreement premiums

As stated in Note 1, on 7 March 2017 a new framework agreement to manage 28 hotels in Spain was signed between NH Hotel Group, S.A., NH Hoteles España, S.A., and Hoteles Hesperia, S.A. and Grupo Inversor Hesperia, S.A. (“GIHSA”) and certain subsidiaries over a 9-year period. The aforementioned framework agreement is legally embodied in 28 new management contracts for the aforementioned 28 hotels, all located in Spain, for a period of 9 years. Due to the early cancellation of the previous management contracts, GHISA made a payment of 6,000 thousand euros in compensation to Hoteles Hesperia, S.A., the owner of the management contracts which were cancelled. This amount has been recorded under “Other Operating Income” in the consolidated comprehensive profit and loss statement summarised herein.

The signing of new management contract represents a cost of 38,560 thousand euros for NH Hotel Group, S.A. which will be paid in three instalments. The first payment was made in the first half of 2017 for an amount of 17,000 thousand euros, with two payments still pending, of 10,000 thousand euros to be paid on 30 April 2018 and 11,560 thousand euros to be paid on 30 April 2019 recorded respectively under short and long term “other financial liabilities” in the accompanying Group consolidated balance sheet. The debt pending payment accrues 4% interest.

7.3 Software applications

The most significant inclusions in the current year were in Spain, as a result of the investments made to develop the corporate website and implement front office systems of the hotels and IT transformation plan projects.

The derecognitions are mainly represented by withdrawals of software applications which were fully amortised at year-end.

In 2016, there were reductions in software applications amounting to 1,372 thousand euros, which have been recorded under the heading “Net result on disposal of non-current assets” in the 2016 consolidated comprehensive profit and loss statement.

During the year some items have been retired, replaced or disposed, generating positive net capital gains for them amounting to 30,148 thousand euros (see Note 8).

Also during 2017, impairment provisions of 228 thousand euros and reversals of 1,627 thousand euros were recognised under “Net Profits/(Losses) from asset impairment” of the consolidated comprehensive profit and loss statement.

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