NH Hotel : posts EBITDA growth of 37% and a net profit increase of 135% excluding the impact of recognised capital gains in 2016

- NH Hotel Group's 9M17 results -

• A good performance by the hotel business across all markets, particularly in Benelux (+13.2%) and Spain (+13.1%), drove revenue a solid 6.7% higher year-on-year to €1.17 billion million in 9M17
• The strategy of enhancing the guest experience continues to drive relative outperformance across the Company's universe of destinations, as is evident in the RevPAR growth of 9.5%, shaped by growth in the ADR of 5.7% to €96 and an increase in demand of 3.6%
• Despite the higher business volumes, the efficiency cost control policy has translated into excellent growth in recurring EBITDA of 37% to €170 million, €46 million more than in 9M16, implying a revenue-to-EBITDA conversion ratio of 63% and margin expansion of 3.2 percentage points (14.6%)
• Recurring net profit was €22.6 million higher year-on-year, a significant improvement attributable exclusively to the underlying business
• Reported net profit was €24.5 million, year-on-year growth of 13.7%, despite the fact that 9M16 net profit included €26 million more of net non-recurring capital gains from asset rotation than this year's figure. Stripping out this temporal effect, reported net profit would have been 135% higher year-on-year at €29 million

- Financial targets -

• Strong cash generation since year-end has driven a reduction in net debt of €53 million to €694 million. In parallel, the Company continues to formally deleverage, having announced the redemption and full cancellation of the outstanding balance (€100m) of its senior secured notes due 2019

- NH Hotel Group's #1 NH Investor Day -

• The Company has mapped out its priorities until 2019, which are articulated around its commercial and pricing strategy, efficiency management plans and deleveraging, while tapping its current strengths to take advantage of incremental repositioning and organic growth opportunities
• EBITDA guidance for this year has been raised from €225 million to €230 million, reiterated in the wake of a positive nine months and October trend, and expects pro forma EBITDA to reach around €300 million and recurring net profit of approximately €100 million by 2019

Today, NH Hotel Group presented its results for the first nine month of the year, a set of earnings which once again displays solid and sustainable topline growth in all markets, outperformance relative to its competitors in its universe of top destinations and efficient control over operating expenses.

- 9M17 earnings performance -

• NH Hotel Group has reported year-on-year growth in revenue of 6.7% to €1.17 billion.
• The Company is growing solidly in all its markets and on aggregate is outperforming its direct peers in its main destinations. As a result, NH Hotel Group saw its revenue increase by €73.1 million in 9M17.

According to NH Hotel Group's CEO, Ramón Aragonés, the keys to this earnings performance were the strong revenue performance in all markets, coupled with the managerial efficiency demonstrated, evident in an excellent revenue-to-EBITDA conversion ratio of 63%. He underlined the fact that 'NH Hotel Group is very well positioned to achieve its objectives in the coming years, underpinned by the prevailing business momentum and its recently announced plans'. With respect to the latter, NH Hotel Group's CEO said, 'we will boost the profitability of the Group's premium brands; we will foster a dynamic commercial and pricing strategy; we will continue to execute our asset rotation policy and to analyse opportunities to reposition the hotels with the highest potential; we will focus on managing the Company's operations efficiently; and we will remain committed to generating cash and reducing debt'.

As for the year-on-year revenue evolution by market, it is worth highlighting the Group's excellent performance in Benelux, where it posted growth of 13.2%, driven by the full recovery of the Brussels market and a strong performance in primary and secondary cities in The Netherlands. Similar growth was registered in Spain, where revenue growth reached 13.1%, boosted by extraordinary price growth and strong demand in all destinations in the first nine months of the year. Italy, meanwhile, posted revenue growth of 3.5%, and Central Europe, affected by a favourable line-up of trade fairs in Germany in 2016 and the refurbishment of three key hotels in Berlin, Munich and Hamburg in 2017, registered topline growth of 0.1%. Lastly, revenue in Latin America was 5.5% higher year-on-year, thanks to strong business volumes in Mexico and Argentina and despite currency devaluation in these markets.

The price management strategy rolled out during the reporting period paved the way for an increase in revenue per available room (RevPAR) of 9.5%, with a positive evolution in all markets. Note that the RevPAR growth reported in 9M17 was driven equally by strategic growth in the ADR of 5.7% to €95.6 and growth in occupancy of 3.6% (71.2%) across the Company's portfolio of hotels. This strategic focus once again has enabled NH Hotel Group to outperform its direct competitors in its main destinations as a whole, posting growth in its ADR, occupancy rate and RevPAR that was 1.4, 2.0 and 3.6 percentage points, respectively, higher than that of its competitors, particularly in the key city destinations.

Trend in key hotel indicators by quarter

ADR:average daily rate

RevPAR: revenue per available room

9M17 earnings performance relative to competitors

Key cities for which there is a market source for this metric

Source: STR/MKG/Fairmas (average growth for the peer group

Despite the growth in business volumes in the first nine months of the year, the efficiency measures and cost controls implemented have translated into an excellent revenue-to-EBITDA conversion ratio of 63%, with the Company posting a significant growth in EBITDA of 37% to €170.4 million in the reported period. As a result, its EBITDA margin expanded by 3.2 percentage points.

This has enabled the Group to report recurring net profit of €27.1 million in 9M17, up €22.6 million year-on-year, a significant improvement attributable entirely to the strong underlying business performance.

Reported net profit was €24.5 million, year-on-year growth of 13.7%, despite the fact that 9M16 net profit included €26 million more of net non-recurring capital gains from asset rotation than this year's figure. Stripping out this temporal effect, reported net profit would have been 135% higher year-on-year at €29 million.

Consolidated NH Hotel Group income statement:

Hotel business performance by market

(like-for-like hotel data + hotels under refurbishment)

Benelux was the Group's best-performing market, thanks to significant business volume growth on the back of the refurbishment work carried out in early 2016, the full recovery of the Brussels market and good momentum in Amsterdam and the secondary cities. Benelux posted growth in occupancy of 6.8% and in the ADR of 7.8% for RevPAR expansion of 15.1%. This market generated €250.8 million of revenue, up 13.2% year-on-year, and EBITDA of €49.2 million, €14.7 million more than in 9M16.

Spain performed excellently throughout the first nine months, boosted by business dynamism in key cities such as Madrid and Barcelona, where revenue rose by 15.0% and 12.9%, respectively, with the secondary cities putting in a strong showing at 7.9%. RevPAR across this country as a whole registered like-for-like growth of 16.5%, driven by growth of 11.2% and 4.8% in the ADR and occupancy rate, respectively. Revenue in the Spanish unit was 13.1% higher at €297.8 million, while EBITDA doubled to €45.2 million.

Italy presented like-for-like RevPAR growth of 5.8%, shaped by growth in the ADR and in occupancy of 5.3% and 0.4%, respectively. The secondary cities have been been particularly strong in this market. Revenue in Italy increased by 3.5% to €203.7 million, while EBITDA jumped 21.1% to €39.5 million.

Central Europe reported 9M17 RevPAR growth of 2.5%, driven entirely by growth in the occupancy rate (+3.4%). The slight decrease in prices (-0.9%) is primarily attributable to the tough comp in terms of trade fair timing in Germany. Revenue in Central Europe amounted to €288.4 million, up 0.1% year-on-year, while EBITDA was 4.3% higher, at €16.5 million.

Latin America also reported growth despite adverse currency trends in Mexico and Argentina. RevPAR rose by 5.3% in 9M17, thanks to growth in the ADR of 4.0% and in occupancy of 1.2%. Revenue was 5.5% higher year-on-year at €100.7 million. By region, Mexico posted topline growth of 6.9% (real exchange rate), despite currency depreciation and the impact of the earthquake in September; in Argentina revenue growth (real exchange rate) was 17.5%, driven by higher business volumes (occupancy: +11.7%) and prices (+5.6%); lastly, Colombia reported 1.6% less revenue than in 9M16 due to a drop in corporate events on the back of growth in offer in Bogota.

- Financial targets -

Strong cash flow generation during the period has enabled the Company to reduce its net debt by €53 million to €694 million between year-end and 30 September.

In parallel, on 30 October, the Company announced a transaction designed to reduce its debt, redeeming and cancelling the full outstanding balance (€100 million) on its €250 million of senior secured notes due 2019. The bonds will be redeemed on 30 November, funded from available cash. Potential temporary use of short-term credit facilities due to seasonality of the business. The transaction will generate net interest savings of around €9.6 million between 30 November 2017 and 15 November 2019, which is when the bonds would have matured.

After the redemption, and without considering the temporary use of short-term credit facilities, the average cost of the company's debt will fall from 4.2% to 3.8%; its average tenor will increase from 4.1 to 4.4 years, and the gross debt will stand at around €740 million.

- NH Hotel Group's #1 NH Investor Day -

The Company held its first Investor Day on 28 September, mapping out its priorities through to 2019, which are articulated around revenue management, efficiency and deleveraging, while tapping its current strengths to take advantage of incremental repositioning and organic growth opportunities.

Against the backdrop of the event, the Company also raised its EBITDA guidance for 2017 from €225 million to €230 million, a figure which would imply year-on-year growth of 27% (FY16 EBITDA: €186 million). The Group's favourable performance in the first nine months and the positive trend of October puts it in a position to reaffirm this significant increase in its guidance.

In terms of the trading update, it is worth noting the fact that NH Hotel Group continued to perform well in Spain in October, despite the political conflict affecting Catalonia; the Group's excellent performance in other primary and secondary cities in Spain more than offset any business impact in this region. Specifically, NH Hotel Group registered topline growth of 4.0% in Spain in October, compared to 4.7% Group-wide, which is supported also by the growth in Italy (6.1%) and Benelux (12.9%).

Lastly, NH Hotel Group expressed confidence in its ability to deliver pro forma EBITDA of around €300 million and recurring net profit of roughly €100 million in 2019, shaped by organic growth and repositioning throughout the life of the plan.

About NH Hotel Group

NH Hotel Group is a world-leading urban hotel operator and a consolidated multinational player. It operates close to 400 hotels and almost 60,000 rooms in 31 markets across Europe, the Americas and Africa, including top city destinations such as Amsterdam, Barcelona, Berlin, Bogota, Brussels, Buenos Aires, Düsseldorf, Frankfurt, London, Madrid, Mexico City, Milan, Munich, New York, Rome and Vienna.