NH Hotel : Results January - March 2016

cfbf6bf1-259e-491e-a301-7872c6e5cfe1.pdf SALES AND RESULTS Q1 2016 10th May 2016 Key figures for Q1 2016

• Excellent revenue growth of +8.5%, higher than the target for the quarter, as a result of the right occupancy (+2.9%) /ADR (+3.4%) strategy in a quarter characterised by low seasonal performance. Excluding the effect of the exchange rate (-€10.2M), growth in revenue would have been +12.2%.
• EBITDA in Q1 2015 (-€4.8M) was up by +29.7% (+€2.0M), despite the adverse effect of currency, the negative impact of Easter in Germany and the opportunity cost of the reforms of the quarter.
• Net Profit for the period (-36.1%) was also adversely affected by the comparison with the previous year, since this quarter did not rely on the positive effects in financial income due to exchange rate (+€9.6M in Q1 2015) and a lower fiscal income (-€3.6M in Q1 2015). For comparative purposes Net Profit would have grown +6.4% vs. Q1 2015 proforma.

• Growth in RevPar of +6.5%, 52% through the growth in prices, and +10.0% at constant exchange rate (69% as a result of ADR). Double-digit growth in Spain (+20.8%) and the growth in Italy (+5.8%), also driven by the increase in occupancy (+11.3% and +4.7%, respectively), are noteworthy of mention.
  • The price strategy enabled the less profitable rates to be replaced in the first quarter of 2016 as a result of the change of segmentation that began in 2015, thereby showing growth in occupancy (+2.9%) along with the increase in prices (+3.4%), which, despite being a quarter with less activity due to the seasonal nature of the business (Q1 '16 has 8 b.p less than the average of the other quarters of 2015), allowed prices to continue to risings ahead of direct competitors.
• Total revenue reached €301.8M, which represents an increase of +8.5% (+€23.7M), of which +7.4% was contributed by the LFL perimeter, +4.6% by the changes in perimeter due to openings and Hoteles Royal and -3.7% by the negative trend in currencies (Argentinian peso -63%; Columbia peso -29% and Mexican peso -19%). The contribution of the hotels renovated in 2015 was neutralized by the loss of revenues from the hotels renovated in the first quarter 2016 (636 rooms blocked in Q1).
• LFL revenue plus renovations (hereinafter, "LFL&R") in Spain grew by +20.3%, thus exceeding the estimated 15-20% range of growth for the quarter, and a growth of +7.7% was recorded in Italy, which was in line with the target for the quarter. Central Europe grew by +2.3%, which is higher than expected as a result of the good performance of the LFL perimeter with an increase of +2.7%, despite the negative effect of Easter in the area (-€1.6M), and a limited impact of the business loss from the hotels under renovation in Germany. It should be noted that in Benelux (-2.9%) a large number of hotel renovations took place in the first quarter and LFL growth excluding renovations was +5.9%.
• Payroll costs rose by +5.6%, 44% of which is explained by the non-comparable perimeter (openings and Hoteles Royal). Of the +3.7% growth in the LFL perimeter, 55% of this increase is explained by the rise in provisions and recurring severance envisaged in the plan.
• Other direct expenses rose by +10.9%. Excluding the non-comparable perimeter the increase is of +8.8%. 56% of this increase is explained by higher commissions (OTAs quota grew as total revenues increased and phasing effects).
• Growth of +10.2% in terms of GOP (+€6.6M), increasing the margin to 23.6% (+0.4 b.p) and its conversion ratio, excluding the higher provisions and severance payments and the increases in commissions due to phasing impacts would be 46%.

• EBITDA in the first quarter (-€4.8M) rose by +29.7% (+€2.0M). Excluding the GOP effects mentioned and excluding the property tax accrual phasing and the rent linearization, the conversion of revenue to EBITDA would be 38%.

• Net profit does not reflect the operating improvement during the quarter as a result of various budgetary factors and in line with the estimate of positive recurring Net Profit during the year: less reversals of provisions for onerous contracts (-€1.4M), greater depreciation costs due to the renovations (+€2.0M), less financial income as a result of the exchange rate (+€9.6M in Q1 2015) and less tax income in the quarter (-€3.6M).

• Net Profit in Q1 2016 excluding in the comparison of Q1 2015 the effect of the exchange rate in the financial income (-€9.6m) and the lower tax income (-€3.6m) would have improved by +6.4% vs. Q1 2015 proforma (-€42,3M).

• Out of the disposal target of €140M set for the year, at 10th of May 2016, 37% of the target was materialized (€17M up to March 31). At the end of May it is estimated to receive additional cash for other transactions of sale of non-strategic assets, which would reach 50% of the target for the year and in September this figure is expected to reach 80-85% of the target.

• The net financial debt reached €868M at 31 March 2016, which was affected by the negative contribution of the quarter with less activity in the year and the effort in capex (-€40M) in line with the renovations carried out in Q1 2016 financed through the sale of assets (+€17M) and the recovery of working capital (+€15M)
• 2016 outlook: The target set for 2016 has been maintained:
  • Growth in revenue of +7-9%
  • EBITDA of €190M (€200M in like-for-like terms) Status of the 2014-2018 Strategic Plan
• Repositioning Plan:

Repositioning March 2016 (# hoteles)

2014 8

2015

34

2016

6

4

13

Completed In execution To start during 2016

A total of 48 hotels have been fully refurbished up to March 2016. The average increase in RevPar in Q1 2016 of the hotels renovated in 2015 & 2014 (compared to the same period previous to the refurbishment) is +36.1%. Of the 10 hotels in the sample, 8 hotels are located in Spain that has had an outstanding performance in Q1 '16. The hotels included in this sample are: NH Collection Eurobuilding, NH Collection Abascal, NH Alonso Martínez, NH Collection Aranzazu, NH Pamplona Iruña, NH Collection Gran Hotel Zaragoza, NH Zurbano, NH Madrid Atocha, NH Genova Centro and NH Firenze.

At the end of 2015, hotels in perfect shape represented 59% of rooms and 64% of EBITDA. Once the €237M repositioning has been completed, 74% of rooms and 81% of EBITDA of the Group will be in perfect shape (a clear competitive advantage over competitors).

• Brand: NH Collection had a total of 56 hotels and 8,804 rooms as of March 2016 and continues to show its potential in prices and quality (with improvements also in non-refurbished hotels):

  % hotels	Dec '13	Dec '14	Dec '15	Mar '16
  In top 10	19%	24%	27%	32%
  In top 30	41%	47%	49%	51%

  Source : Trip Advisor

  At group level, 32% of the portfolio is in the top 10 of the city (40% for the NH Collection) and 51% in the top 30 (62% for the NH Collection), which shows higher levels of quality perceived by customers.

• Pricing & Revenue Management: The ADR in the Group's top cities continued to be favourable in the first quarter of 2016 compared to direct competitors. The occupancy/ADR strategy enabled the less profitable rates to be replaced in the first quarter of the year as a result of the change of segmentation that began in 2015, thereby showing growth in occupancy much greater than our competitors, along with the increase in prices, despite being a quarter with less activity due to the seasonal nature of the business.