NH Hotel Group, S.A. and Subsidiaries Half-Yearly Condensed Consolidated Financial Statements and Interim Consolidated Management Report for the six-month period ending 30 June 2015 Translation of Consolidates Financial Statements and Consolidated Management Report originally issued in Spanish and prepared in accordance with IFRS s as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.
NH HOTEL GROUP, S.A. AND SUBSIDIARIES ABRIDGED CONSOLIDATED BALANCE SHEETS AT 30 JUNE 2015 AND 31 DECEMBER 2014 ( thousand) ASSETS Note 30/06/2015* 31/12/2014** LIABILITIES AND SHAREHOLDERS' EQUITY Note 30/06/2015* 31/12/2014** NON CURRENT ASSETS: EQUITY Property, plant and equipment 6 1,667,411 1,606,360 Share capital 9 700,544 700,544 Goodwill 5 132,789 93,923 Reserves of the parent 9 498,467 624,570 Intangible assets 5 123,236 78,842 Reserves of fully consolidated companies 51,575 (68,049) Investments accounted for using the equity method 18,426 17,816 Reserves of companies consolidated using the equity method (21,135) (19,794) Non-current financial investments- 7 164,575 165,564 Other equity instruments 27,230 27,230 Loans and accounts receivable not available for trading 157,800 158,859 Exchange differences (98,528) (102,659) Other non-current financial investments 6,775 6,705 Treasury shares 9 (38,027) (38,805) Deferred tax assets 157,913 157,858 Consolidated Profit/(Loss) for the financial year (17,425) (9,550) Other non-current assets 16,878 11,085 Equity attributable to the shareholders of the Parent Company 1,102,701 1,113,487 Total non-current assets 2,281,228 2,131,448 Non-controlling interests 9 27,254 23,181 Total equity 1,129,955 1,136,668 NON-CURRENT LIABILITIES Debt instruments and other marketable securities 8 467,849 463,982 Bank borrowings 8 306,111 268,944 Obligations under finance leases 2,270 2,782 Other non-current liabilities 8 105,494 88,484 Provisions for contingencies and charges 11 47,775 56,930 Deferred tax liabilities 189,592 179,730 Total non-current liabilities 1,119,091 1,060,852 CURRENT ASSETS: Non-current assets classified as held for sale 4 91,959 95,193 CURRENT LIABILITIES: Inventories 8,833 8,226 Liabilities associated with non-current assets classified as held for sale 4 56,750 56,075 Trade receivables 185,148 136,012 Debt instruments and other marketable securities 8 3,613 3,517 Non-trade receivables- 72,886 69,789 Bank borrowings 8 62,456 70,911 Tax receivables 39,851 35,123 Obligations under finance leases 8 975 1,056 Other non-trade debtors 33,035 34,666 Trade and other payables 256,166 231,427 Short term financial investments 7 1,740 2,787 Tax payables 39,692 40,094 Cash and cash equivalents 56,362 200,103 Provisions for contingencies and charges 11 12,688 14,835 Other current assets 21,935 17,441 Other current liabilities 38,705 45,564 Total current assets 438,863 529,551 Total current liabilities 471,045 463,479 TOTAL ASSETS 2,720,091 2,660,999 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 2,720,091 2,660,999 (*) Unaudited balances. (**) Audited balances. Presented for purposes of comparison only. Notes to the accounts 1 to 17 attached hereto form an integral part of the condensed consolidated statement of financial position as at 30 June 2015.
NH HOTEL GROUP, S.A. AND SUBSIDIARIES CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2014 AND 30 JUNE 2013 ( thousands) Note 2015* 2014** Net revenues 655,103 603,972 Other operating income 426 419 Net gains on disposal of non-current assets 3,089 2,760 Procurements (32,097) (31,961) Staff costs (197,626) (191,629) Depreciation and amortisation charges (46,143) (51,786) Net impairment losses (4,064) 3,221 Other operating expenses (366,075) (342,858) Variation in the provision for onerous contracts 11,064 9,564 Other operating expenses (377,139) (352,422) Profit (loss) on disposal of financial investments 2 4,711 3,986 Profit (loss) from companies accounted for using the equity method (70) 1,512 Finance income 2,131 4,194 Change in fair value of financial instruments 1,785 Finance costs (34,138) (34,558) Net exchange differences (Income/(Expense)) 5,551 (4,051) PROFITS / (LOSSES) BEFORE TAX FROM CONTINUING OPERATIONS 14 (7,417) (36,779) Corporation Tax 16 (5,215) (1,147) PROFIT / (LOSS) FOR THE FINANCIAL YEAR - CONTINUING (12,632) (37,926) Profit (loss) for the year from discontinued operations net of tax 4 (2,570) (5,966) PROFIT / (LOSS) FOR THE FINANCIAL YEAR (15,202) (43,892) Exchange differences 3,642 (1,687) Arising from the measurement of financial instruments Income and expenses recognised directly in equity 3,642 (1,687) TOTAL COMPREHENSIVE LOSS (11,560) (45,579) Profit / Loss for the year attributable to: Parent Company Shareholders (17,425) (42,780) Non-controlling interests 2,128 (966) Non-controlling interests in discontinued operations 95 (146) Comprehensive loss attributable to: Parent Company Shareholders (13,294) (44,132) Non-controlling interests 1,734 (1,447) Profit / Loss per share in Euros (basic and diluted) 3-b (0.05) (0.14) (*) Unaudited balances. (**) Presented for purposes of comparison only. Notes to the accounts 1 to 17 attached hereto form an integral part of the consolidated Comprehensive Income Statement for the six-month period ended 30 June 2015.
. NH HOTEL GROUP, S.A. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED Share capital 30 JUNE 2015 AND 30 JUNE 2014 Issue premium and reserves ( thousands) Equity Attributed to the Parent Company Own Funds Treasury shares and shareholdings Profit for the year attributable to the Parent Other equity instruments Valuation adjustments Non-controlling interests Total Equity Adjusted balance at 31/12/2014 700,544 536,727 (38,805) (9,550) 27,230 (102,659) 23,181 1,136,668 Total recognised income / (expense) - - - (17,425) - 4,131 1,734 (11,560) Transactions with shareholders or owners - 214 1,719 575 - - 2,474 4,982 Capital Increases / (Reductions) (Note 9) - - - - - - - - Distribution of dividends - - - 575 - - (331) 244 Treasury share transactions (net) - - 1,719 - - - - 1,719 Increases / (Reductions) due to business combinations - - - - - - 2,805 2,805 Other transactions with shareholders or owners - 214 - - - - - 214 Other changes in equity - (8,975) - 8,975 - - (135) (135) Transfers between equity items - (8,975) - 8,975 - - - - Other changes - - - - - - (135) (135) Ending balance at 30/06/2015 700,544 527,966 (37,086) (17,425) 27,230 (98,528) 27,254 1,129,955 Share capital Issue premium and reserves Equity Attributed to the Parent Company Own Funds Treasury shares and shareholdings Profit for the year attributable to the Parent Other equity instruments Valuation adjustments Non-controlling interests Total Equity Adjusted balance at 31/12/2013 616,544 542,825 (38,115) (39,818) 27,230 (103,657) 153,001 1,158,010 Total recognised income / (expense) - - - (42,780) - (1,352) (1,447) (45,579) Transactions with shareholders or owners 84,000 36,449 209 325 - - (122,283) (1,300) Capital Increases / (Reductions) (Note 9) 84,000 113,288 - - - - - 197,288 Distribution of dividends - - - 325 - - - 325 Treasury share transactions (net) - - 209 - - - - 209 Increases / (Reductions) due to business combinations - - - - - - - - Other transactions with shareholders or owners - (76,839) - - - - (122,283) (199,122) Other changes in equity - (39,493) - 39,493 - - (510) (510) Transfers between equity items - (39,493) - 39,493 - - - - Other changes - - - - - - (510) (510) Ending balance at 30/06/2014 (**) 700,544 539,781 (37,906) (42,780) 27,230 (105,009) 28,761 1,110,621 (*) Unaudited balances. (**) Presented for purposes of comparison only. Unaudited balances. Notes to the accounts 1 to 17 attached hereto form an integral part of the condensed consolidated statement of changes in equity for the sixmonth period ended 30 June 2015.
NH HOTEL GROUP, S.A. AND SUBSIDIARIES CONDENSED CONSOLIDATED CASH FLOW STATEMENTS PRODUCED IN THE SIX-MONTH PERIODS ENDED 30 JUNE 2015 AND 30 JUNE 2014 ( thousands) 1. OPERATING ACTIVITIES 30/06/2015* 30/06/2014** Consolidated profit (loss) before tax: (7,417) (42,745) Adjustments: Depreciation of tangible and amortisation of intangible assets (+) 46,143 51,786 Impairment losses (net) (+/-) 4,064 (3,221) Allocations for provisions (net) (+/-) (11,064) (9,564) Gains/Losses on the sale of tangible and intangible assets (+/-) (3,089) (2,760) Gains/Losses on investments valued using the equity method (+/-) 70 (1,512) Financial income (-) (2,131) (4,194) Financial expenses and variation in fair value of financial instruments (+) 32,353 34,558 Net exchange differences (Income/(Expense)) (5,551) 4,051 Profit (loss) on disposal of financial investments (4,711) (3,986) Other non-monetary items (+/-) 2,455 3,073 Adjusted profit (loss) 51,122 25,486 Net variation in assets / liabilities: (Increase)/Decrease in inventories (136) 2,879 (Increase)/Decrease in trade debtors and other accounts receivable (41,075) (36,864) (Increase)/Decrease in other current assets (1,642) (2,541) Increase/(Decrease) in trade payables 23,694 18,233 Increase/(Decrease) in other current liabilities (15,614) 3,469 Increase/(Decrease) in provisions for contingencies and expenses (4,575) (4,785) Income tax paid (2,937) (3,750) Total net cash flow from operating activities (I) 8,837 2,127 2. INVESTMENT ACTIVITIES Finance income 2,181 4,427 Investments (-): Tangible and intangible assets and investments in property (81,415) (44,068) Non-current assets classified as held for sale - (285) Non-current financial investments (78,685) - (160,100) (44,353) Disinvestment (+): Group companies, joint ventures and associates 19,623 44,986 Tangible and intangible assets and investments in property 3,764 5,000 23,387 49,986 3. FINANCING ACTIVITIES Total net cash flow from investment activities (II) (134,532) 10,060 Interest paid on debts (-) (27,345) (30,527) Variations in (+/-): Equity instruments Treasury shares (778) (209) Debt instruments: - Loans from credit institutions (+) 91,600 - Loans from credit institutions (-) (91,156) (21,649) - Other financial liabilities (+/-) (4,137) (7,128) Total net cash flow from financing activities (III) (31,816) (59,513) 4. GROSS INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III) (157,511) (47,326) 5. Effect of exchange rate variations on cash and cash equivalents (IV) 5,340 546 6. Effect of variations in the scope of consolidation (V) 8,430-7. NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III-IV+VI) (143,741) (46,780) 8. Cash and cash equivalents at the start of the financial year 200,103 133,869 9. Cash and cash equivalents at the end of the financial year (7+8) 56,362 87,089 (*) Unaudited balances. (**) Presented for purposes of comparison only. Unaudited balances. Notes to the accounts 1 to 17 attached hereto form an integral part of the condensed consolidated cash flow statement produced in the six-month period ended 30 June 2015.
NH Hotel Group, S.A. and Subsidiaries Notes to the half-yearly condensed consolidated financial statements for the six-month period ended 30 June 2015 1. Introduction, basis for presentation of the half-yearly condensed consolidated financial statements and other information a) Introduction NH Hotel Group, S.A. (hereinafter the Parent Company ) was incorporated as a limited company in Spain on 23 December 1881. The object of the company, as per its articles is, essentially, to operate and manage hotel establishments. The registered office is located at no. 120 Santa Engracia (Madrid, Spain). The articles of association and additional public information concerning the Parent Company can be consulted on its website: www.nh-hotels.com. In addition to the operations that it undertakes directly, the Parent Company is the head of a group of subsidiaries undertaking diverse activities and that, alongside the Parent, form the NH Group (hereinafter the Group or the NH Group ). As a result, in addition to its own individual financial statements, the Parent Company must also prepare consolidated financial statements for the Group that include shareholdings in joint ventures and investments in associates. At 30 June 2015, the NH Hotel Group was operating in 29 countries, with 383 hotels and 59,097 rooms, of which approximately 85% are located in Spain, Germany, Italy and Benelux. The Group's consolidated financial statements for 2014 were approved by the shareholders at the Annual General Meeting of NH Hotel Group, S.A. held on 29 June 2015. b) Basis for presentation of the half-yearly condensed consolidated financial statements In accordance with European Parliament and Council Regulation (EC) 1606/2002 of 19 July 2002, all companies governed by the law of a European Union Member State, and whose securities are admitted to trading on a regulated market of any Member State, shall prepare their consolidated accounts for the years beginning on or after 1 January 2005 in conformity with the International Financial Reporting Standards (hereinafter, IFRS) previously adopted by the European Union. The Group's consolidated financial statements for 2014 were prepared by the directors of the Parent Company in accordance with the provisions of the International Financial Reporting Standards adopted by the European Union, applying the principles of consolidation, accounting policies and measurement criteria described in Note 4 of the report on said consolidated financial statements, so that they provide a true and fair view of the consolidated equity and consolidated financial position of the Group as at 31 December 2014 and the consolidated results from its operations, the changes in consolidated equity and consolidated cash flows for the year ended on this date. These summary consolidated half-yearly financial statements are presented in accordance with IAS 34 on Interim Financial Information, and were prepared by the Directors of the Parent Company on 27 August 2015, all pursuant to Article 12 of Spanish Royal Decree 1362/2007. In accordance with the provisions of IAS 34, the interim financial report is only drawn up for the purposes of updating the content of the most recent financial statements drafted by the Group, placing emphasis on the new activities, events and circumstances that arose during the half-year period and not duplicating the information previously published in the consolidated financial statements for 2014. In light of the foregoing, in order to understand the information contained in these half-yearly condensed consolidated financial statements, they should be read in conjunction with the Group's consolidated financial statements for 2014. 2
The accounting policies and methods used in the preparation of these half-yearly condensed consolidated financial statements are the same as those applied in the consolidated financial statements for 2014. Also, in the first six months of 2015, the Group used the relevant measurement basis for non-current assets and disposal groups classified as held for sale. The Company classifies a non-current asset or disposal group as held for sale when the decision to sell it has been taken and the sale is expected to occur within twelve months. These assets or disposal groups are measured at cost or fair value minus their selling costs, whichever is the lower. Non-current assets classified as held for sale are not depreciated, but rather at the end of each reporting period the related valuation adjustments are made to ensure that the carrying amount is not higher than fair value minus selling costs. Income and expenses arising from non-current assets and disposal groups classified as held for sale which do not qualify for classification as discontinued operations are recognised under the corresponding heading in the income statement on the basis of their nature. Furthermore, during the first half of 2015 the following obligatory regulations and interpretations, already adopted by the European Union, entered into force for 2015 and, where applicable, have been used by the Group when preparing the interim condensed consolidated financial statements. (1) New obligatory regulations, amendments and interpretations for the year commencing 1 January 2015. New standards, amendments and interpretations Approved for use in the European Union Obligatory application in the years beginning on or after: IFRIC 21 Levies (published in May 2013) Interpretation on when to recognise a liability to pay a levy 17 June 2014 (1) Improvement to IFRS 2011-2013 Cycle (published in December 2013) Minor amendments to a series of standards 01 January 2015 (2) (1) The European Union endorsed IFRIC 21 (EU Gazette, 14 June 2014), amending the original commencement date set out by the IASB (1 January 2014) to 17 June 2014. (2) The IASB commencement date for these regulations was from 1 July 2014. The IFRIC 21, records liabilities for charges and taxes imposed by the various Authorities, for which charges and taxes the Group receives no specific asset or service. The main taxes affected by the aforementioned accounting regulations are as follows: - Property tax (IBI): In accordance with current legislation this is due on 1 January each financial year, which is the date on which the Group has the tax liability. - Business tax (IAE): This becomes due simply by carrying out business activities in Spain, on 1 January each financial year. These regulations and interpretations coming into force doesn t have a significant impact on the intermediate condensed consolidated financial statements. (2) New obligatory regulations, amendments and interpretations in years subsequent to the calendar year which commenced on 1 January 2015 (applicable from 2015 onwards) The following standards and interpretations had been published by the IASB on the date these consolidated financial statements were approved, but had not yet entered into force either because the date of their entry into force is subsequent to the date of these half-yearly condensed consolidated financial statements or because they have not yet been adopted by the European Union: 3
New standards, amendments and interpretations Approved for use in the European Union Amendment to IAS 19 Defined Benefit Plans: Employee Contributions (published in November 2013) Improvement to IFRS 2010-2012 Cycle (published in December 2013) Not approved for use in the European Union (1) The IASB commencement date for these regulations was from 1 July 2014. (2) In May 2015 the IASB issued a proposal to defer IFRS 5 coming into force for one year, until 1 January 2018. At today's date the Group is assessing the impact that future application of these regulations may have on the financial statements once they come into force. The Group's preliminary assessment is that the impact of applying these regulations will not be significant. c) Estimates made The consolidated results and the calculation of the consolidated equity are subject to the accounting principles and policies, measurement criteria and estimates followed by the Parent Company's Directors for the preparation of the halfyearly condensed consolidated financial statements. The main accounting principles and policies and measurement criteria are described in Notes 2 and 4 in the report on the consolidated financial statements for 2014. In the half-yearly condensed consolidated financial statements, estimates made by the Directors of the Parent Company and of the consolidated entities have been used to put a figure on some of the assets, liabilities, income, expenses and commitments that appear in these statements. In essence, these estimates, made on the basis of the best information available at the time, refer to: 1. The Corporation Tax expense that, in accordance with IAS 34, is recognised in interim periods on the basis of the best estimate of the weighted average tax rate that the Group expects for the annual period (please refer to Note 16); 2. The evaluation of possible losses arising from the impairment of certain assets (please refer to Notes 5 and 6); 3. The hypotheses used in the actuarial calculation of liabilities for pensions and other undertakings made to the workforce; 4. The useful life of tangible and intangible assets; 5. The valuation of consolidation goodwill; 6. The market value of certain financial instruments; 7. The estimation of onerous contracts; 8. Calculation of provisions and evaluation of contingencies. The amendment was issued to make it possible to deduct these costs from the service cost in the same period in which they are paid when certain requirements are met. Minor amendments to a number of standards. IFRS 15 - Revenue from Contracts with Customers (published in May 2014) New standard on revenue recognition (replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC-31 IFRS 9 Financial Instruments (final phase published in July 2014) It replaces the classification and measurement, impairment and hedge accounting requirements in IAS 39 Amendments and/or interpretations Amendment to IAS 16 and IAS 38 - Acceptable Methods of Depreciation and Amortisation (published in May 2014) Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint Ventures (published in May 2014) Improvement to IFRS 2012-2014 Cycle (published in May 2014) Clarifies the methods acceptable for depreciating and amortising property, plant and equipment and intangible assets, which do not include those based on income. Specifies how to account for the acquisition of an interest in a joint venture whose activity constitutes a business. Minor amendments to a number of standards. Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets between Clarification on the result of these operations if dealing with an Investor and its Associate or Joint Venture (published in September 2014) businesses or assets. Amendment to IAS 27 Equity Method in Separate Financial Statements This will allow the equity method to be applied to the individual (published in August 2014) statements of an investor. Amendments to IAS 16 and IAS 41: Bearer plants (published in June 2014) Bearer plants will be measured at cost instead of fair value. Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities (December 2014) Amendment to IAS 1: Disclosures initiative (December 2014) Clarifications on the consolidation exception in investment entities. Clarifications with regard to disclosures (materiality, aggregation, order of notes, etc.) Obligatory application in the years beginning on or after: 01 February 2015 (1) 01 January 2017 (2) 1 January 2018 1 January 2016 4
In spite of the fact that the estimates described above were carried out using the best information available at the time on events analysed, it is possible that events may take place in the future which compel their amendment (upwards or downwards) at the close of the year 2015, or in later years. This will be done, if it should be necessary and in accordance with the provisions of IAS 8, prospectively recognising the effects of the change in estimate on the integral consolidates profit and loss statement for the affected years. There were no significant changes in the estimates made at the close of the 2014 financial year, nor changes in the accounting criteria during the six-month period ended 30 June 2015. d) Contingent assets and liabilities Note 24 of the report on the Group's consolidated financial statements for the year ended 31 December 2014 provides information on the contingent assets and liabilities as at that date. Note 10 to these summary consolidated half-yearly financial statements for the six-month period ended 30 June 2015 details the most significant changes in the contingent assets and liabilities during that period. e) Correction of errors There have been no corrections of errors of significant impact in the half-yearly condensed consolidated financial statements for the six-month period ended 30 June 2015. f) Comparison of information The information contained in these half-yearly condensed consolidated financial statements for the first six months of 2014 is presented solely for the purposes of comparison with the information for the six-month period ended 30 June 2015. g) Seasonality of the Group's transactions Given the activities of the Group's companies, its transactions are marked by a slight cyclical or seasonal character. 96% of the hotels managed are aimed at business clients so the months with the highest hotel sales are March to June and September to November. On the other hand, the seasonality in the holiday hotels varies in the months of December to April and July to August, when sales are higher. h) Relative importance In determining what information to break down in these notes on the different items in the financial statements or other matters, the Group, in accordance with IAS 34, has taken into account relative importance in relation to the half-yearly condensed consolidated financial statements. i) Condensed consolidated cash flow statements In the abridged consolidated cash flow statements the following expressions are used with the following meanings: Cash flows are the inflows and outflows of cash and cash equivalents. Operating activities are the activities that form the main source of ordinary income for the Group, as well as other activities that cannot be classified as investment or financing. Investment activities are the purchase and disposal of long-term assets, as well as other investments not included in cash and cash equivalents. Financing activities are those activities that bring about changes in the size and composition of own funds and the loans taken out by the Group. 5
For the purposes of preparing the condensed consolidated cash flow statement, "cash and cash equivalents" was considered to be cash and bank deposits payable on demand, in addition to those highly-liquid short-term investments that are readily convertible into specific cash amounts and subject to little risk of a change in value. 2. Significant changes in the composition of the Group On 14 January 2015, the Group sold its subsidiary NH Parque de la 93, S.A. It is to receive a total of 23 million for the sale, 3.4 million of this amount still pending receipt. The Group earned a net gain of 4.7 million from this transaction. The effect of the disposal of the aforementioned company on the abridged consolidated balance sheet at 30 June 2015 is as follows: Thousands of euros Property, plant and equipment (16,430) Working capital (1,953) Net assets disposed of (18,383) Account receivable 3,471 Net Consideration received 19,623 Consolidated profit 4,711 There is also a negative effect of 620 thousand euros owing to the conversion differences associated with the aforementioned shareholding, which is entered in the net exchange differences item of the condensed consolidated comprehensive results. On 4 March 2015, the Group acquired a shareholding of 95.13%, amounting to a total of 2,898,374 shares, in the share capital of Hoteles Royal, S.A., a Colombian company which is the parent of Hoteles Royal, the Latin American hotel management group. The Group paid a net amount of 78.1 million; it has still to pay a remainder of 16.4 million, payable in two years, entered in the Other non-current liabilities item. At 30 June 2015, the Group has an undertaking to acquire the remaining 4.87% of the share capital, amounting to 4.6 million, entered under the Other current liabilities item. The effect of the business combination on the condensed consolidated statement of financial position at 30 June 2015 is as follows: 6
Thousands of euros Property, plant and equipment (Note 6) 48,939 Intangible fixed assets (Note 5) 42,504 Other non-current assets 154 Other current assets 22,798 Bank borrowings (26,383) Provisions for contingencies and extraordinary costs (Note 11) (4,549) Deferred tax liabilities (8,276) Other current and non-current liabilities (14,360) Non-controlling interests (Note 9) (2,805) Net assets acquired 58,022 Net Consideration (78,070) Account payable (16,410) Acquisition undertaking (4,579) First consolidation difference (Note 5) (41,037) 3. Dividends paid by the Parent Company a) Dividends paid by the Parent Company The Parent Company has not paid out any dividends during the period in question. The Annual General Meeting of Shareholders held on 29 June 2015 did not pass any resolution on dividend distribution. b) Profit per share in ordinary and discontinued activities Basic and diluted profit per share Basic earnings per share (EPS) are calculated by dividing the net profit or loss attributable to the Group in a period by the weighted average number of shares in circulation during the period, excluding the average number of treasury shares held during the same period. In accordance with this: 30/06/2015 30/06/2014 Net Profit/(Loss) for the year ( thousands) (17,425) (42,780) Weighted average number of shares in circulation (thousands) 350,272 299,231 Basic Earnings/(Loss) per share in euros (0.05) (0.14) Diluted earnings per share are established on a similar basis to basic earnings per share; however, the weighted average number of shares outstanding is increased by options on shares, warrants and convertible debt. 7
30/06/2015 Net Profit/(Loss) for the year ( thousands) (17,425) Weighted average number of shares with dilutive effect (in thousands) 392,010 Diluted Earnings/(Loss) per share in euros (0.04) 4. Non-current assets and disposal groups of items classified as held for sale In accordance with IFRS 5, Non-current assets classified as held for sale and discontinued operations (Note 1.b), nonstrategic assets which, pursuant to the Strategic Plan, are undergoing divestment with committed sales plans, were reclassified. Specifically, Donnafugata Resort, S.R.L, Sotocaribe, S.L and Capredo Investments GmbH are classified as discontinued operations, with the last two consolidated by the equity method. The assets classified as held for sale, after deducting their liabilities, were measured at the lower of their carrying amount and the expected sales price minus costs. The sections below detail, by type, the various income and balance sheet items relating to assets and liabilities classified as held for sale and discontinued operations. Condensed consolidated balance sheets. Headings of Non-current assets and liabilities classified as held for sale Details by balance headings of the assets and liabilities presented under the corresponding Held for Sale headings at 30 June 2015 are shown below: 8
30/06/2015 31/12/2014 Property, plant and equipment 38,783 38,783 Financial assets 46,361 46,988 Investments accounted for using the equity method 46,329 46,956 Other non-current financial investments 32 32 Deferred tax assets 293 293 Inventories 173 669 Accounts receivable for sales and services and trade receivables 2,152 1,749 Tax receivables 34 535 Cash 3,995 6,022 Other current assets 168 139 Non-current assets classified as held for sale 91,959 95,193 Bank borrowings (non-current) 27,308 - Other non-current liabilities 15,781 15,781 Capital subsidies 15,781 15,781 Provisions for contingencies and charges 825 469 Deferred tax liabilities 286 286 Bank borrowings (current) 1,571 28,212 Trade payables 3,576 3,642 Tax payables 177 306 Other current liabilities 7,225 7,379 Liabilities associated with assets classified as held for sale 56,749 56,075 Consolidated comprehensive profit and loss statement The profit and loss of the discontinued operations shown in the accompanying consolidated profit and loss statement is broken down by company as follows: 2015 Capredo Investments, GmbH Sotocaribe, S.L. Donnafugata Resort, S.R.L Net turnover and other operating income - - 3,382 3,382 Operating expenses - - (4,266) (4,266) Operating profit (loss) - - (884) (884) Profit (Loss) before tax (101) (526) (2,024) (2,651) Corporate income tax - - - - Profit (Loss) for the year from discontinued operations net of tax (101) (540) (2,024) (2,665) Profit attributed to non-controlling interests - - 95 95 Total On 31 July 2015, the Group transferred the indirect ownership of approximately 95% of the capital of Donnafugata Resort Spa, (Please refer to Note 17). 9
5. Intangible assets a) Goodwill The breakdown of the heading "Goodwill" as at 30 June 2015 and 31 December 2014, depending on the companies that generated the goodwill, is as follows: Thousands of euros 30/06/2015 31/12/2014 NH Hoteles Deutschland, GmbH and NH Hoteles Austria, GmbH 87,835 89,945 Others 3,917 3,978 First consolidation difference Hoteles Royal, S.A. 41,037-132,789 93,923 Recoverable goodwill values have been allocated to each cash generating unit, mainly rental agreements, by using five year projections on results, investments and working capital. Details of the cash-generating units to which such goodwill arising on consolidation has been allocated is shown below: Thousands of euros CGU 6 16,480 CGU 21 10,760 CGU 22 8,110 CGU 12 7,579 CGU 13 6,062 CGU 2 5,400 CGUs with goodwill allocated individually < 37,361 4 M 91,752 The impairment testing policies applied by the Group to its intangible assets and to its goodwill in particular are described in Note 4 to the consolidated financial statements for the year ended 31 December 2014. In accordance with the methods used and in line with the estimates, projections and valuations at the disposal of the Directors of the Parent Company, no impairment was recorded during the first six months of 2015. The acquisition of Hoteles Royal, S.A. gives a first consolidation negative difference of 41.04 million. (Please refer to Note 2). At the date that these six-monthly financial statements were drawn up it was not possible to conclude the valuation processes needed to apply the acquisition method as described in the valuation rules included in the consolidated annual accounts for 2014, for which reason this accounting is considered to be provisional and the provisional values may be adjusted in the appropriate period to obtain the information required, which in no case will be over one year. a) Other intangible assets The inclusion of Hoteles Royal, S.A. in the consolidation scope (See Note 2) has involved a net addition in the intangible fixed assets item of 42.5 million, referring mainly to management rights of the hotels operated. The most significant inclusions in 2015 were in Spain ( 7.9 million), as a result of the investments made to develop the new website and implement the SAP tool (both front and back office). 10
6. Property, plant and equipment a) Movement in the period The inclusion of Hoteles Royal, S.A. in the consolidation scope (See Note 2) has involved a net addition in the property, plant and equipment heading of 48.9 million. The main additions during the six month period ended on 30 June 2015 were renovations to hotels in Spain, such as NH Zurbano ( 2.05 million), NH Collection Eurobuilding ( 1.68 million) and NH Collection Gran Hotel ( 0.55 million). In Italy, hotels such as NH Milano Fiori (3.88 million), NH Jolly Madison Towers ( 1.54 million), NH Genova Plaza ( 1.22 million) and NH Milano Touring ( 1.41 million) were renovated. Hotels in Central Europe such as NH Danube City ( 1.06 million) and Hamburg City ( 0.61 million). In Benelux, construction work at the NH Utrecht ( 2.29 million) and NH Atlanta ( 1.79 million) hotels. And, finally, in Latin America the NH Mexico City ( 1.64 million) hotel was refurbished. During the first six months of 2015 and 2014 property, plant and equipment items were disposed of with a carrying amount of 1,078 thousand euros and 46,099 thousand euros, respectively, giving rise to net gains of 1,562 thousand euros during the first six months of 2015 and 2,760,000 for the year ended 31 December 2014. b) Impairment losses In the first six months of 2015 and 2014, no significant impairment losses were recognised on items of property, plant and equipment. c) Commitments to purchase property, plant and equipment items At 30 June 2015 the Group had property, plant and equipment purchase commitments regarding new projects, the amounts of which are detailed in the following table: 2015 2016 2017 Expected investment (millions of euros) 3.4 7.8 10.1 7. Financial assets Composition and breakdown The breakdown of the Group's financial assets as at 30 June 2015 and 31 December 2014 is shown below, presented by type and categories for the purposes of valuation: 11
Financial Assets: Type / Category Financial Assets Held for Trading Other Financial Assets at Fair Value with Changes in P&L Thousands of euros Financial assets available for sale 30/06/2015 Loans and Accounts Receivable Investments Held to Maturity Hedging Derivatives Equity instruments - - 6,775 - - - Debt securities - - - 154,514 - - Derivatives - - - - - - Other financial assets - - - 3,286 - - Long-term / non-current - - 6,775 157,800 - - Equity instruments - - - - - - Debt securities - - - - - - Derivatives - 1,740 - - - - Other financial assets - - - - - - Short-term / Current - - - - - - Total - 1,740 6,775 157,800 - - Financial Assets: Type / Category Financial Assets Held for Trading Other Financial Assets at Fair Value with Changes in P&L Thousands of euros Financial assets available for sale 31/12/2014 Loans and Accounts Receivable Investments Held to Maturity Hedging Derivatives Equity instruments - - 6,705 - - - Debt securities - - - 154,930 - - Derivatives - - - - - - Other financial assets - - - 3,929 - - Long-term / non-current - - 6,705 158,859 - - Equity instruments - - - - - - Debt securities - - - - - - Derivatives - 2,787 - - - - Other financial assets - - - - - - Short-term / Current - - - - - - Total - 2,787 6,705 158,859 - - 8. Financial liabilities a) Composition and breakdown The Group's financial liabilities at 30 June 2015 and 31 December 2014, broken down by type and category for the purposes of valuation, are shown below: 12
Thousands of euros 30/06/2015 Financial Liabilities: Type / Category Financial Liabilities Held for Trading Other Financial Liabilities at Fair Value with Changes in P&L Debts and Accounts Payable Hedging Derivatives Bank borrowings - - 306,111 - Debt instruments and other marketable - - 467,849 - securities Derivatives - - - - Other financial liabilities - - 107,764 - Long-terms debts / Non-current financial liabilities current - - 881,724 - Bank borrowings - - 62,456 - Debt instruments and other marketable - - 3,613 - securities Derivatives - - - - Other financial liabilities - - 975 - Short-term debts / Current financial liabilities current - - 67,044 - Total - - 948,768 - Thousands of euros 31/12/2014 Financial Liabilities: Type / Category Financial Liabilities Held for Trading Other Financial Liabilities at Fair Value with Changes in P&L Debts and Accounts Payable Hedging Derivatives Bank borrowings - - 268,944 - Debt instruments and other marketable - - 463,982 - securities Derivatives - - - - Other financial liabilities - - 91,266 - Long-terms debts / Non-current financial liabilities current - - 824,192 - Bank borrowings - - 70,911 - Debt instruments and other marketable - - 3,517 - securities Derivatives - - - - Other financial liabilities - - 1,056 - Short-term debts / Current financial liabilities current - - 75,484 - Total - - 889,676 - Both periods recorded a large part of the Group's debt as long term due to the corporate refinancing in November 2013. As regards this financing, the commitment remains to adhere to a series of financial ratios, measured twice yearly, at 30 June and 31 December each year. At 30 June 2015 these financial ratios were completely adhered to. 13
b) Debts and accounts payable Debts with credit institutions: the breakdown of the loans from credit institutions as at 30 June 2015 and 31 December 2014 is as follows (thousands of euros): Limit Available Disposed Year 1 Year 2 Year 3 Year 4 Remainder Mortgages 113,731-113,731 19,896 19,789 31,989 32,749 9,307 Floating interest rate 108,567-108,567 19,807 19,700 31,900 32,660 4,500 Fixed interest rate 5,164-5,164 89 89 89 89 4,807 Hoteles Royal Loans 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Floating interest rate 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Subordinated loans 75,000-75,000 - - - - 75,000 Floating interest rate 75,000-75,000 - - - - 75,000 Club Deal Floating interest rate 181,000 43,667 137,333 19,000 19,000 99,333 - - 114,333-114,333 19,000 19,000 76,333-66,667 43,667 23,000 - - 23,000 - - Convertible Bond * Fixed interest rate 230,519-230,519 - - - 230,519 - High-Yield Bond Fixed interest rate 250,000-250,000 - - - - 250,000 SUBTOTAL 876,633 43,667 832,966 41,596 48,689 132,922 265,768 343,990 5.0% 5.8% 16.0% 31.9% 41.3% Credit lines 27,550 7,438 20,112 20,112 - - - - Floating interest rate 27,550 7,438 20,112 20,112 - - - - GROSS BANK BORROWINGS 904,183 51,105 853,078 61,708 48,689 132,922 265,768 343,990 NET DEBT 853,022 7.2% 5.7% 15.6% 31.2% 40.3% Arrangement expenses (18,696) (1,286) (500) (2,200) (5,012) (9,698) Borrowing costs 5,647 5,647 Borrowing position at 30/06/2015 904,183 51,105 840,029 66,069 48,189 130,722 260,756 334,292 Borrowing position at 31/12/2014 887,928 65,600 807,354 74,428 67,469 110,186 229,479 325,792 * See Convertible Bonds The maturity schedule above includes the following refinancing committed to during the first half of 2015 in the Group's gross financial debt: - On 13 February 2015 NG Hotel Group, S.A. signed a mortgage for 40 million with four Spanish financial institutions to subsequently refinance, on 26 February 2015, the mortgage debt in Italy consolidated under the "IMI loan" (INTESA Bank Group) and reduce the financial expense from a fixed rate of 4.25% to 2.75% and extending the term by two years with expiry being November 2017 instead of 2015. The guarantees of five Italian assets are replaced with a hotel in the Netherlands, a guarantee previously extended in the refinanced loan. The repayments were maintained at 8 million each year in a single annual payment in November up to expiry in 2017 when it will be completely repaid.ok - On 26 June 2015 NG Hotel Group, S.A. signed a mortgage for 36 million with three Spanish financial institutions to refinance the mortgage debt in Germany with RBS and reduce the financial expense from a fixed rate of 5.00% to 2.50% and extending final expiry from June 2016 to October 2018. The guarantees are still the same five German assets after "assignment" of them and the annual repayments are still 3 million each year with a single payment in October/November up to expiry in 2018 when it will be completely repaid. 14
The Group's loans bear interest at a fixed rate for 58.3% of the total consolidated debt, including the two issues of guaranteed and convertible senior bonds, of 6.875% and.4%, respectively. Additionally, the Hoteles Royal debt is consolidated as a result of an agreement to purchase minority shareholdings. The total equivalent amount is 26.4 million (See Note 2) relating to mortgages in Chile and the chain's bilateral loans with various expiry dates. Convertible Bonds This transaction is considered an instrument comprising liabilities and equity, with the equity valued at the time of issuance. At 30 June, this amounts to 19.481 million. As is commonplace for this type of issue, and in order to enhance the liquidity of the instrument on the secondary market, NH Hotel Group, S.A. signed a security loan agreement with the placing entities for up to 9 million treasury shares. This loan bears interest at 0.5% and was drawn to the extent of 7.9 million shares at 30 June 2015. Liquidity Group treasury and its availability has been drained during the period mainly due to two transactions: thorough renovation of the hotels in accordance with the hotel repositioning plan and the transaction to purchase shares in the Hoteles Royal chain which was closed off on 4 March 2015 (to date this investment amounts to 78.1 million). The Group holds 56.4 million in treasury and 51.1 million in available credit lines at 30 June 2015. 9. Equity At 30 June 2015 the Parent Company's share capital, after the capital increase on 26 June 2014, was represented by 350,271,788 fully subscribed and paid up bearer shares, each with a par value of 2. According to the latest notifications received by the Parent Company and the notices given to the National Securities Market Commission by the obligated entity, after the increase in capital the significant shareholders in the Parent company were made up as follows: Number of direct voting rights Number of indirect voting rights Total percentage of voting rights Shareholder (%) HNA Group Co., Ltd. * - 103,329,925 29.50 Tangla Spain, S.L.U. 103,329,925-29.50 Grupo Inversor Hesperia, S.A. 31,870,384-9.099 Oceanwood Capital Mgt LLP ** - 26,549,890 7.58 Barendina, S.A. 20,949,890 5.981 Schroders Plc - 10,572,504 3.018 * HNA Group Co. Ltd. is the owner of 100% of the share capital of HNA Group (International) Company Limited (before HNA Group International Headquarter (Hong Kong) Co. Ltd.), which is the owner of 100% of the share capital of Tangla Luxembourg, S.Á.R.L., which is the owner of 100% of the share capital of Tangla Spain, S.L.U.. ** Oceanwood Capital Mgt LLP holds the discretion in the voting rights exercise of Barendina, S.A. and Oceanwood Investment Limited in NH Hotel Group, SA through a contract/asset management mandate signed with both companies. 15
a) Issued share capital At 30 June 2015 the Parent Company's share capital after the capital increase was represented by 350,271,788 fully subscribed and paid up bearer shares, each with a par value of 2. b) Issue premium and reserves The most significant variations shown in the summary consolidated statement of changes in equity relating to the twelvemonth periods ended 30 June 2015 and 30 June 2014, are as follows: Other reserves The "Other reserves" heading in the summary consolidated half-yearly financial statements as at 30 June 2015 has dropped due to the negative reserves contributed by the subsidiaries. c) Treasury shares and shareholdings At 30 June 2015, NH Hotel Group held 9,115,030 treasury shares. On 4 November 2013, the Spanish Securities Market Commission was informed of the loan of 9,000,000 shares from the total number of treasury shares to three financial entities that were involved in the placement of bonds convertible or exchangeable into the shares of NH Hotel Group, S.A., worth 250 million; the purpose of this loan was to allow those financial entities to offer the shares to subscribers of the bonds requesting them. Out of these 9,000,000 shares, at 30 June 2015, 1,050,418 have been returned but continue to be blocked. d) Non-controlling interests The movements in this heading in 2015 and 2014 are summarised below: Thousands of euros 2015 2014 Opening balance 23,181 153,001 Increases of capital - (123,055) Comprehensive profit (loss) attributable to non-controlling interests 1,734 (558) Changes in percentage shareholdings and sales - (4,626) Business combinations 2,805 - Dividends paid to non-controlling interests (331) (765) Other movements (135) (816) Closing balance 27,254 23,181 In 2014, the "Increases of capital" entry includes the effect of the increase with which, on 26 June 2014, the Group acquired 44.5% of the Group company NH Italia, S.p.A. and which involved the issue of 42,000,000 new ordinary shares. The capital increase was fully paid up by Intesa Sanpaolo, S.p.A. through the contribution of 445,000 shares representing 44.5% of the share capital of NH Italia, S.p.A. In 2014, the Changes in percentage shareholdings entry includes the effect of the sale of 96.997% of Sotogrande S.A. on 14 November 2014 under the minority interests entry amounting to 4.626 million. The Dividends paid to non-controlling interests item reflects the dividends paid out in 2015 to the following companies: NH Marín, S.A.. 16
10. Disputes Note 24 of the report on the consolidated annual accounts relating to the financial year ended 31 December 2014 describes the main tax and legal disputes involving the Group as at that date. Developments in the above mentioned disputes as at 30 June 2015 are detailed below: On 25 March 2009, Sotogrande, S.A. granted a put option to the non-controlling shareholders of Donnafugata Resort S.r.l. representing 30% of its share capital. On 20 October 2010, the minority shareholders gave notice of their intention to partially exercise the aforementioned put option in accordance with the agreement signed by the parties in March 2009. An independent expert was commissioned to appraise the company as a consequence of this notice. Sotogrande, S.A. considered this expert's valuation of the company to be excessive and far from its real value, and began arbitration proceedings in which it challenged the independent expert's report. On 26 October 2012, the arbitration tribunal issued an award confirming the independent expert's valuation. Sotogrande, S.A. lodged an appeal against this award and the hearing has been set for 23 February 2016. Provisions have been made to cover the entire amount claimed since 30 September 2013. The minority shareholders initiated a second arbitration procedure and on 2 December 2014 an award was given for the principal plus interest for an estimated amount of 10,673,484.06 for which provisions have been made in its entirety. An appeal was not lodged against this award. Nevertheless, the minority shareholders have lodged an exequatur in Spain (request for recognition of a foreign award in Spain). The owner of a hotel has filed a suit against a Group company, demanding compliance with certain contractual obligations. The Group company has lodged an appeal. No negative or significant material consequences are expected. A claim has been filed against two of the Group's companies seeking payment of unpaid instalments to rights management bodies for approximately 890,000 plus interest from 1 January 2008 to 31 May 2013, in addition to an unspecified amount corresponding to the period thereafter until a judgement is issued, plus interest and costs. Several Group companies have appeared as creditors in 6 separate insolvency proceedings. No negative or significant material consequences are expected. As at 30 June 2015, the Directors of the Parent Company estimate that the hypothetical losses the Group could incur as a result of the ongoing disputes will have no significant impact on the Group's equity. (Please refer to Note 17). On 31 July 2015, the Group transferred the indirect ownership of approximately 95% of the capital of Donnafugata Resort Spa, (Please refer to Note 17). 11. Provisions Details of Provisions for Contingencies and Expenses at 30 June 2015 and 31 December 2014 are as follows: Thousands of euros 30/06/2014 31/12/2014 Provisions for contingencies and non-current expenses Onerous contracts 16,648 26,986 Provision for pensions and similar obligations 13,033 13,797 Others 18,094 16,147 47,775 56,930 17
Provisions for contingencies and current expenses Onerous contracts 10,314 10,114 Restructuring provision 2,374 4,721 12,688 14,835 Total 60,463 71,765 In the first six months of 2015, 11,064,000 of the provision for onerous contracts were applied charged to the profit and loss account. In addition, 1,375 thousand euros were allotted relating to updating the provision for onerous contracts. Additionally, the entry of Hoteles Royal, S.A. into the consolidation perimeter as meant the entry of provision for risks and expenses of 4,548 thousand euros. 12. Related parties In addition to its subsidiaries, associates and joint ventures, the Group's related parties are considered to be the key management personnel of the Parent Company (Board Members and Directors, along with their immediate relatives), as well as organisations over which key management personnel may exert significant influence or control. Transactions carried out by the Group with its related parties during the first half of 2015 are stated below, distinguishing between major shareholders, members of the Board of Directors and Directors of the Parent Company and other related parties. The conditions of the related-party transactions are equivalent to those of transactions carried out under market conditions: Thousands of euros 30/06/2015 Income and Expenses Major Shareholders Directors and Senior Management Group Persons, Companies or Entities Total Expenses: Finance costs 631 - - 631 Management or cooperation agreements - - - - R&D transfers and licence agreements - - - - Lease rentals - - - - Reception of services - - - - Purchase of goods (finished or in-progress) - - - - Write-downs for bad debts and doubtful accounts - - - - Losses on retirement or disposal of assets - - - - Other expenses - - - - 631 - - 631 Income: Finance income - - - - Management or cooperation agreements 2,693 - - 2,693 R&D transfers and licence agreements - - - - Dividends received - - - - Lease rentals - - - - Provision of services - - - - Sale of goods (finished or in-progress) - - - - Gains on retirement or disposal of assets - - - - Other income - - - - 2,693 - - 2,693 18
Financial expenses accrued in relation to the financing agreements entered into with banks which were significant shareholders of the Parent Company during all or part of 2014 was 631,000 ( 3,597,000 during the first six months of 2015). The heading Management or cooperation agreements includes the amounts that have accrued in the form of management fees payable to the NH Hotel Group during the period of 2014 by virtue of the hotel management agreement signed with Grupo Inversor Hesperia, S.A. Thousands of euros 30/06/2014 Income and Expenses Major Shareholders Directors and Senior Management Group Persons, Companies or Entities Total Expenses: Finance costs 3,597 - - 3,597 Management or cooperation agreements - - - - R&D transfers and licence agreements - - - - Lease rentals 4,856 - - 4,856 Reception of services - - - - Purchase of goods (finished or in-progress) - - - - Write-downs for bad debts and doubtful accounts - - - - Losses on retirement or disposal of assets - - - - Other expenses - - - - 8,453 - - 8,453 Income: Finance income - - - - Management or cooperation agreements 2,531 - - 2,531 R&D transfers and licence agreements - - - - Dividends received - - - - Lease rentals - - - - Provision of services - - - - Sale of goods (finished or in-progress) - - - - Gains on retirement or disposal of assets - - - - Other income - - - - 2,531 - - 2,531 Financing agreements: loans and capital contributions The composition of the financing agreements entered into with the Group's significant shareholders at 30 June 2015 and 31 December 2014 is as follows: Thousands of euros 2015 2014 Movement Intesa Sanpaolo S.p.A. - 42,333 (42,333) Banco Santander, S.A. 41,717 21,717 20,000 Total 41,717 64,050 (22,333) Interest accrued but not due 273 145 128 At 30 June 2015, unmatured accrued financial expenses in relation to the financing agreements with credit institutions that are shareholders in the Parent Company amounted to 273,000 ( 145,000 as at 31 December 2014). 19
Other Financing agreements: Thousands of euros 2015 2014 Loans to associates Sotocaribe, S.L. 3,786 3,445 Total 3,786 3,445 Other transactions By virtue of the contractual relationship signed with Grupo Inversor Hesperia, S.A., at 30 June 2015, 7.04 million are receivable for various items, of which 5.77 million are due at the aforementioned date (At the date of drawing up of these half-yearly financial statements Grupo Inversor Hesperia, S.A. has issued commercial paper for the amount of 4.2 million with maturity in November 2015). At 30 June 2015 the net balance recognised in relation to Grupo Inversor Hesperia, S.A. came to 5.14 million ( 2.96 million at 31 December 2014). 13. Remuneration and other benefits of the Parent Company's Board of Directors and Senior Management Note 28 of the report on the Group's consolidated financial statements for the year ended 31 December 2014 details the existing agreements on remuneration and other benefits of members of the Parent Company's Board of Directors and Senior Management. A summary table containing the most relevant data concerning such remuneration and benefits in relation to the six-month periods ended 30 June 2015 and 2014 is provided below: Thousands of euros 30/06/2015 30/06/2014 Members of the Board of Directors Remuneration item- Fixed remuneration 600 525 Variable remuneration 333 263 Allowances 52 48 Allowances as per Articles 232 335 Transactions in shares and/or other financial instruments - - Others 4 3 1,221 1,174 Other benefits- Loans granted Life insurance premiums 76 83 76 83 Senior Management excluding Executive Directors: Total remuneration received by senior management 1,316 1,265 Loans granted to senior executives Others 1,316 1,265 At 30 June 2015 there were 6 senior executives (in 2014 there were also 6). The two conditions that must be met simultaneously to be considered Senior Management are, on the one hand, forming part of the Management Committee and, on the other, reporting directly to the Managing Director. 20
The shareholders at the Annual General Meeting held on 25 June 2013 resolved to implement a Long-term Incentive payable in shares as of 1 January 2014. The beneficiaries of the plan include the members of the Board of Directors. The plan will consist of the issue of ordinary NH shares on various dates, subject to the fulfilment of the basic conditions established in the plan. This plan is based on the assignment of "Performance Shares" to the beneficiaries, calculated as a percentage of their fixed salary in accordance with their level of responsibility. The plan will have a total duration of five years, divided into three three-year cycles. The accrued portion of the variable remuneration is included under "Remuneration of Executives." 14. Segment information Note 27 of the report on the Group's consolidated financial statements for the year ended 31 December 2014 provides details of the criteria used by the Group to define its business segments. There have been no changes to the segmentation criteria. The net turnover figure by geographic area as at 30 June 2015 and 2014 is as follows: Net turnover by Thousands of euros Geographic Area 30/06/2015 30/06/2014 Spain 154,588 145,609 Benelux 126,232 126,362 Italy 123,121 110,630 Germany 142,175 138,066 Latin America 63,430 38,696 Rest of Europe 45,557 44,609 Total 655,103 603,972 The reconciliation of the profit per segment with the consolidated profit before tax as at 30 June 2015 and 2014 is as follows: Thousands of euros Profit (loss) before tax 30/06/2015 30/06/2014 Segments Hotel (16,784) (37,265) Property (641) (5,515) Total profit (loss) from the segments subject to reporting (17,425) (42,780) (+/-) Unallocated profits (losses) - - (+/-) Non-controlling interests 2,223 (1,112) (+/-) Tax on profits (losses) from discontinued operations 7,785 (7,113) Profit (loss) before tax (7,417) (36,779) Details of the total assets by geographic area as at 30 June 2015 and 31 December 2014 are as follows: 21
Thousands of euros Total Assets 30/06/2015 31/12/2014 Spain 754,291 848,466 Benelux 617,327 600,816 Italy 580,205 578,681 Germany 313,715 303,599 Latin America 412,885 292,974 Rest of Europe 41,668 36,463 Total 2,720,091 2,660,999 In addition, the variation in the total assets per segment as at 30 June 2015 compared to 31 December 2014 is as follows: Thousands of euros Total assets 30/06/2015 31/12/2014 Change Segments Hotel 2,673,762 2,499,670 174,092 Property 46,329 161,329 (115,000) Total assets 2,720,091 2,660,999 59,092 15. Average workforce The average number of people employed by the Parent Company and fully consolidated companies during the first half-year period of 2015 and 2014, broken down by professional categories, is as follows: 30/06/2015 30/06/2014 Group's general management 6 8 Managers and heads of department 1,117 1,305 Technical staff 908 943 Sales representatives 358 435 Administrative staff 229 334 Rest of workforce 11,117 9,493 13,735 12,518 The workforce breakdown by sex and professional category as at 30 June 2015 and 2014 was as follows: 30/06/2015 30/06/2014 Males Females Males Females Group's general management 6-7 1 Managers and heads of department 682 421 770 534 Technical staff 485 401 588 480 Sales representatives 78 267 127 309 Administrative staff 68 128 98 196 Rest of workforce 7,156 4,078 6,572 3,310 8,475 5,295 8,162 4,830 22
The average number of people with a disability greater than or equal to 33% employed directly by the Parent Company and the fully consolidated companies as at 30 June 2015 and 2014, broken down by professional categories, is as follows: 30/06/2015 30/06/2014 Group's general management - - Managers and heads of department 4 2 Technical staff 4 5 Sales representatives - - Administrative staff - - Rest of workforce 20 19 28 26 The average age of the Group s workforce was approximately 37 and average seniority in the Group was 7.4 years. 16. Tax note The NH Hotel Group companies have calculated the estimated Corporate Income Tax to 30 June 2015 applying the regulations in force in the countries in which they operate and specifically, as regards companies resident in Spain, in accordance with the provisions contained in Law 27/2014, of 27 November. 17. Subsequent events On 10 June 2015 NH FINANCE, S.A. signed the novation of the "Club Deal" - Long Term Syndicated Loan ( 181 million of which 137 million were drawn down at June 2015) signed in October 2013 with a group of eight banks under the following terms: (i) the margin is reduced from 4.0% (linked to a grid depending on the net financial debt/ebitda ratio) to the 3 month Euribor + 2.5% (no grid), (ii) the original expiry date is extended by twelve months until October 2018, and (iii) the interim annual repayments are reduced to 9.5 million with tranche A being delayed until 2018. In 2018, the year it expires, both tranche B, bullet, and the rest of tranche A will be repaid. 23
Debt Table Post-Novation 30/6/15: Limit Available Disposed Year 1 Year 2 Year 3 Year 4 Remainder Mortgages 113,731-113,731 19,896 19,789 31,989 32,749 9,307 Floating interest rate 108,567-108,567 19,807 19,700 31,900 32,660 4,500 Fixed interest rate 5,164-5,164 89 89 89 89 4,807 Hoteles Royal Loans 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Floating interest rate 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Subordinated loans 75,000-75,000 - - - - 75,000 Floating interest rate 75,000-75,000 - - - - 75,000 Club Deal Floating interest rate 181,000 43,667 137,333 9,500 9,500 9,500 108,833-114,333-114,333 9,500 9,500 9,500 85,833-66,667 43,667 23,000 - - - 23,000 - Convertible Bond Fixed interest rate 230,519-230,519 - - - 230,519 High-Yield Bond Fixed interest rate 250,000-250,000 - - - - 250,000 SUBTOTAL 876,633 43,667 832,966 32,096 39,189 43,089 374,601 343,990 3.9% 4.7% 5.2% 45.0% 41.3% Credit lines 27,550 7,438 20,112 20,112 - - - - Floating interest rate 27,550 7,438 20,112 20,112 - - - - GROSS BANK BORROWINGS 904,183 51,105 853,078 52,208 39,189 43,089 374,601 343,990 6.1% 4.6% 5.1% 43.9% 40.3% Arrangement expenses (18,696) (1,286) (500) (2,200) (5,012) (9,698) Borrowing costs 5,647 5,647 Borrowing position at 30/06/2015 904,183 51,105 840,029 56,569 38,689 40,889 369,589 334,292 Borrowing position at 31/12/2014 887,928 65,600 807,354 74,428 67,469 110,186 229,479 325,792 On 31 July 2015, the Group transferred the indirect ownership of approximately 95% of the capital of Donnafugata Resort Spa, the owner of the hotel and resort of the same name located in Ragusa, Sicily (Italy). The consideration of 1 was received for the capital of the owner companies, which have contracted financial obligations amounting to approximately 28 million with Italian lending institutions. The transfer has generated capital gains and it has been performed without contingent liabilities at the expense of NH Hotel Group. NH Hotel Group has agreed to maintain the management of the hotel and resort until 31 December 2015, with the possibility of early termination by the new owner. Donnafugata Resort was considered to be an asset ready to be sold since 2014 and made a negative contribution to the Group s net earnings. 24
NH Hotel Group, S.A. and Subsidiaries Consolidated Interim Management Report for the Six-month Period Ended 30 June 2015 EVOLUTION OF BUSINESS AND GROUP'S SITUATION NH Hotel Group (www.nh-hotels.com) holds third place in the European business hotels ranking. The company runs around 400 hotels with almost 60,000 rooms in 29 countries in Europe, America and Africa in destinations such as Amsterdam, Barcelona, Berlin, Bogotá, Brussels, Buenos Aires, Düsseldorf, Frankfurt, London, Madrid, Mexico City, Milan, Munich, New York, Rome and Vienna. The accumulated evolution of the group at 30 June 2015 sits at an improvement to ADR of +9.8% ( 86.2/Room) compared to 2014, under-occupation of -0.04% and improvement to RevPAR of +9.7% reaching 57.0/Room, generating improvement in income of +8.3% (reaching 665.3M). EBITDA before expenses was +58.4% (reporting 57.2M) and the Net Recurring Profit 50.7% (up to -12.5M). The repositioning and improvements made by the Company within the framework of its strategic five year plan are boosting consumer satisfaction levels and the results of the hotels in the Group which are showing better evolution over direct competitors in a majority of the destinations where the Company operates. Moreover, the positive perception of the hotels continues to increase, as can be seen from the evolution of the indicators of consumer ratings, both internally using satisfaction surveys and externally on travel web sites which base their recommendations on users' opinions. Repositioning hotels (27 completed at the end of the second quarter, 16 more in execution and another 19 planned to commence works in the second half); development of the new NH Collection brand (currently 43 hotels and 14 more planned for the end of 2015); bolstering positioning in the Meeting & Events segment with particular emphasis on technological systems such as 3D holographic telepresence and interactive conferencing systems; along with efforts in communication and marketing directed at increasing the Group's visibility and loyalty (campaigns, new web site and revamped NH Rewards loyalty programme). Evolución del RevPar RevPar LFL&R in the first half of the year grows by +9.1% due to the+9.5% price increase and the -0.4% decrease in occupancy. B.U. España B.U. Italia Very favorable performance in the first half, with a RevPar LFL&R (comparable and refurbishment hotels) growth of +13.8% compared to the same period of last year. The evolution of the first half is explained by a +10.6% increase in prices and a +2.8% increase in occupancy. Both the cities of Madrid (+30.4%) and Barcelona (+16.0%) stand out. Is the market with the best evolution of the Group. RevPar LFL&R increased by +14.3% in the first half, explained by a +14.6% % increase in prices and a -0.2% decrease in occupancy. The behaviour of Milan stands out mainly due to the Expo in Milan, where NH counts with 11 hotels and 2,157 rooms 1
B.U. Benelux RevPar LFL&R growth of +5.2%, explained by a good performance of prices with +5.8% price increase. The behavior of the cities of Brussels and Amsterdam is remarkable. B.U. Europa Central RevPar LFL increased by +2.7% with a +5.7% increase in prices and a -2.8% decrease in occupancy due to the lower number of trade fairs, particularly in Düsseldorf, and a worse holiday schedule in Germany during the month of May. Frankfurt stands out due to its trade fair schedule. B.U. Las Américas Revenues LFL&R grows +20.0% in the first half for the whole region, a +11.3% at a constant exchange rate, mainly explained by a +21.8% prices increase (+12.9% at a constant exchange rate). Regarding average prices México and Argentina had a good performance during the first half, growing a +18.8% (+11.4% at a constant exchange rate) and a +24.9% (+14.7% at a constant exchange rate) respectively. 2
Recurring Result. Management Consolidated Income Statement (including Hoteles Royal) (millones de ) 6M 2015 6M 2014 2015/2014 6M 2015 6M 2014 2015/2014 M Eur. M. Eur Var. % M. Eur M. Eur Var. % Hotel Activity Revenue 643.9 614.2 4.8% 665.3 614.2 8.3% Total Revenue 643.9 614.2 4.8% 665.3 614.2 8.3% Staff Costs (236.8) (229.3) 3.3% (244.1) (229.3) 6.5% Operating expenses (208.9) (206.6) 1.1% (218.0) (206.6) 5.5% GROSS OPERATING PROFIT 198.2 178.3 11.2% 203.2 178.3 14.0% Lease payments and property taxes (143.1) (142.1) 0.7% (146.0) (142.1) 2.7% EBITDA BEFORE ONEROUS 55.1 36.2 52.3% 57.2 36.2 58.4% Onerous contracts reversal provision 5.3 9.6 (45.1%) 5.3 9.6 (45.1%) EBITDA AFTER ONEROUS 60.3 45.7 31.9% 62.5 45.7 36.7% Depreciation (45.0) (42.6) 5.5% (45.9) (42.6) 7.8% EBIT 15.3 3.1 393.2% 16.6 3.1 432.5% Interest expense (21.7) (27.0) (19.6%) (22.2) (27.0) (17.6%) Income from minority equity interests (0.07) 1.51 (104.6%) (0.07) 1.51 (104.6%) EBT (6.4) (22.4) 71.3% (5.8) (22.4) 74.3% Corporate Income Tax (5.1) (4.1) 23.2% (5.6) (4.1) 34.6% NET INCOME before minorities (11.5) (26.5) 56.6% (11.3) (26.5) 57.3% Minority interests (1.1) 1.1 (196.4%) (1.2) 1.1 (208.1%) NET RECURRING INCOME (12.6) (25.4) 50.5% (12.5) (25.4) 50.7% Non Recurring EBITDA (6.9) 2.0 (446.0%) (7.0) 2.0 (451.0%) Other non recurring items 2.0 (19.4) 110.5% 2.0 (19.4) 110.5% NET INCOME including Non-Recurring (17.4) (42.8) 59.3% (17.4) (42.8) 59.2% * Includes Hotel Royal from March 4, 2015 P&L STATEMENT NH HOTEL GROUP NH (ex. Hoteles Royal) NH TOTAL* The first semester closes with a revenue growing by +8.3% (reaching 665.3M), EBITDA before onerous by +58.4% (totalling 57.2M) and Recurring Net Income by +50.7% ( -12.5M) and the Net Income including Non- Recurring by +59,2% ( -17,4 M). The improvement of +8.3% in total revenues is mainly due to: i) Increase of RevPar (via ADR +9.8%) ii) Enhancement derived from exchange rates +2.9M iii) Hoteles Royal integration +21.4 M iv) Net effect due to changes in the consolidated hotel portfolio -2.3M Staff expenses rise by +6.5%. This increase is explained by the reinforcement of staff (Spain, Benelux, and Latam), the integration of Hoteles Royal chain to the Group, increases in collective agreements and the increased number of hotels joining the Collection category. 3
Other operational expenses increase by +5.5%. This increase is mainly due to the increase in revenues and higher Marketing and IT expenses, as well as of other variable costs due to the adaptation of hotels to the Collection category. Financial expenses decrease a -17.6% due to the evolution of exchange rates and interest rates during the first half. At the end of loan was refinanced in Germany, reducing the financial cost from a 5% to a 2.5% fixed margin, and delaying final maturity from June 2016 to October 2018. Net Income, including Non- Recurring activity, closes with a growing by +59,2% ( -17.4 M). Since the integration of Hoteles Royal, it has contributed + 21.4 M of revenues and + 2.2 M of EBITDA before onerous. By Business Unit (hotel activity LFL&R): Spain Very favorable performance in the second quarter, with a RevPar LFL&R growth of +13.8%, explained by a +10.6% increase in prices and a +2.8% increase in occupancy. Both the cities of Madrid (+21.1%) and Barcelona (+10.1%)stand out. LFL&R revenues increased by +7.6% ( +11.0M), growing less than RevPar mainly due to the lower F&B revenues, as a result of its outsourcing in 3 hotels with a positive impact on EBITDA, the closing for refurbishment of the restaurant of NH Calderón, as well as the impact of the segmentation pricing strategy. Operating expenses increased by +3.1% ( +3.4M) mainly due to the increase in staff expenses caused by the increase in occupancy. Lease payments decreased by -1.4% ( -0.6M) due to rent renegotiations. EBITDA LFL&R including onerous stands at +5.0M as opposed to -3.3M in the previous year, showing improvement of +8.2M. Perspectives for the third quarter are positive, maintaining a target increase of two digits in RevPar. Italy RevPar LFL&R increased by +14.3%, explained by a +14.6% increase in prices and a -0.2% increase in occupancy. The behaviour of Milan stands out, with a +19.6% increase in RevPar due to the Expo in Milan, where NH counts with 11 hotels and 2,157 rooms The lower growth in revenues during the second quarter (+10.3 compared to the increase in RevPar, is explained due to the fact that the profile of tourists visiting the Expo spend less in F&B than the usual business clients, as well as to the lower Food & Beverage and salon rental revenues caused by the refurbishment of NH Milanofiori and NH Midas. Increase in operating expenses by +2.5% ( +2.0M), explained by the increase in IT expenses and commissions. GOP LFL&R increased by +29,2% ( +9,5M). Increase in rent of NH Collection Palazzo Barocci, renovated in 2014, and NH Parma, which opened in mid-2014, compensated by the savings in rent of NH Concordia, translates into a rent increase of +4.0% ( +0.8M) obtaining a EBITDA LFL&R including onerous of +76.9% ( +8.6M), reaching 19.9M in the first half. Perspectives for Q3 are very good, with a two digit target growth of RevPar. Benelux RevPar LFL&R growth of +5.2%, with +5.8% price increase. The behaviour of the cities of Amsterdam (+7.8%) and Brussels (+4.0%) stands out. The decrease of F&B revenues, due to its outsourcing in the NH Amsterdam Centre, the worse performance of the conference centres, and the change in the pricing strategy, has lead LFL&R revenues, +0.3% ( +0.5M) not to grow at the same rate as the RevPar increase. Operating expenses increased by +0.7% ( +0.6M) mainly due to the increase of payroll expenses by +2.1% ( +1.1M). Reduction in leases due to renegotiations by -2.5% ( -0.6M) reaching an EBITDA LFL&R including onerous of 21.4M (+1.8% o +0.4M). Q3 is expected to have a behavior above the average of the first semester. Amsterdam and Brussels are expected to perform above the BU average due to the 5 in-depth refurbishments that will be completed after the summer (3 of which will be upgraded to NH Collection). Central Europe RevPar LFL increased by +2.7%, with a +5.7%, increase in prices and a -2.8%, decrease in occupancy, due to the lower number of trade fairs, particularly in Düsseldorf, and a worse holiday schedule in Germany during the month of May. Frankfurt stands out, with a +9.7%, growth, due to its trade fair schedule. LFL&R revenues increased by +1.8% ( +3.2M), below RevPar, due the performance in F&B revenues, due to the 4
evolution of restaurant revenue, to a lower number of available rooms because of refurbishments and to the depreciation of Euro vs Swiss Franc. Operating expenses increased by +0.9% ( +1.1M), due to the +2.1% ( +1.3M) increase in payroll expenses, as a result of the implementation of minimum salary, collective agreements and the impact of the exchange rate of the Swiss Franc. Rents have slightly increased as a result of renegotiation, which has allowed the company to achieve an EBITDA LFL&R including onerous growth of 3.4M ( +1.8M). Q3 will be affected negatively by the refurbishment of 3 hotels, with the turnaround starting in Q4. Las Américas Revenues LFL&R at real exchange rate of the business unit in the region grows +18.4% ( +6.0M), below the increase in RevPar LFL&R +20.0%, due to a lower increase of other income. Operating expenses increased by +21.7% ( +5.2M), mainly due to the combined effect of increased inflation and rising staff costs in Argentina. Lease payments increased +12.4% ( +0.3M) due to the contract extension of Hilton Aeropuerto and the variable rent component of the NH Collection Monterrey. As a result, EBITDA LFL&R including onerous increases by +8.3% ( +0.5M). Mexico, Chile and the managed hotels in the Caribbean progress positively, taking also into account the positive impact of the exchange rate. Argentina continues to reduce the positive development of the business unit by reducing its EBITDA by -1.0M, due to the following variations in local currency: revenue increase of +19.1%, lower than the +37.3% increase of the operating expenses, explained by the increase in personnel expenses of +48.5% (due to the collective bargaining agreement, the temporary personnel for the implementation of SAP and the strengthening of shared services and management teams) and the operating costs, which have risen by +26.7%, reflecting the actual CPI of the country. Actions have been taken in order to mitigate the effects. For the third quarter it is expected a RevPar growth of two digits in line with the second quarter. THE ENVIRONMENT Sustainability is a strategic value for NH Hotel Group and, for that reason, it is a part of the 24 initiatives making up the Strategic 5-year Plan, acting as a transversal value pivot to construct the new NH. We use innovation and eco-efficiency to ensure our guests' comfort, satisfying the highest standards, providing environments which are healthy and foster well-being, and promoting conservation and protection of the natural and urban heritage in which our hotels are located. For NH Hotel Group sustainability means caring for our guests, caring for the places where our hotels are and caring for the world that we all share. In 2014 the sustainability objectives set out in the five year Strategic Plan were achieved and since 2008 energy consumption has been reduced by 26.4%, water consumption by 30.6% and the carbon footprint by 69.4%/ SHARES AND SHAREHOLDERS At 30 June 2015, the share capital of NH Hotel Group, S.A. was represented by 350,271,788 fully subscribed and paid up bearer shares each with a par value of 2. On the issue date of this report, all these shares carried the same voting and dividend rights and were listed on the Spanish Stock Market Interconnection System of Madrid, Barcelona, Valencia and Bilbao. In the first six months of 2015, the average market price of NH Hotel Group, S.A. was 4.87 per share ( 3.52 in the same period in 2014), with a minimum price of 3.73 per share on 7 January and a maximum exchange price of 5.49 per share on 22 May. During the first six months of 2015 treasury stock transactions were carried out purchasing 332,607 shares and selling 576,575 shares. At 30 June 2015, NH Hoteles held 9,115,030 treasury shares. On 4 November 2013, the Spanish Securities Market Commission was informed of the loan of 9,000,000 shares from the total number of treasury shares to three financial entities that were involved in the placement of bonds convertible or exchangeable into shares in NH Hotel Group, S.A., worth 250 million; the purpose of this loan was to allow those financial entities to offer the shares to subscribers of the bonds requesting them. Out of these 9,000,000 shares, at 30 June 2015, 1,050,418 have been returned but continue to be blocked. 5
During the first six months of 2015, 315,765,129 shares in NH Hotel Group, S.A. were traded on the Continuous Market (174,407,546 shares in the same period in 2014) with average daily share trading on the Continuous Market of 2,526,000 shares. The following charts reflect share price and performance and market capitalisation. CAPITALISATION 2007 - JUNE 2015 (millions of euros) 2.000 1.914 1.804 1.500 1.321 1.392 1.000 917 837 500 546 538 644 AVERAGE VOLUME OF DAILY TRADING (millions of euros) 2007 - JUNE 2015 16 14 12 10 14 12 8 6 06 4 03 03 02 03 03 2 01 0 6
DAILY AVERAGE NUMBER OF SHARES TRADED 2007 - JUNE 2015 ) (Thousand of shares traded) 2.600 2.400 2.200 2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 0 888 363 923 749 758 364 725 1.331 2.526 PERFORMANCE NH HOTEL GROUP IBEX 35 JULY 2014 - JUNE 2015 % NH HOTEL GROUP IBEX 35 135 120 105 90 07-14 08-14 09-14 10-14 11-14 12-14 01-15 02-15 03-15 04-15 05-15 06-15 FUTURE OUTLOOK 2015: In terms of RevPar, and after the good performance of Q2, the estimation for the year is a grow by ~9%. Total revenue for the year remains as the initial estimate because there is more room inventory in refurbishment and other income is expected to remain constant during the second half of the year (less available rooms, outsourcing restaurant centers, segmentation changes). At EBITDA level due to the factors discussed above the growth target remains at + 25% in the year. 7
Repositioning Plan: Repositioning May 2015 (# hotels) 8 2014 2015 19 16 19 Completed In execution To start during H2 2015 From the start of the plan to the end of the second quarter of 2015 it has been completed the renovation of 27 hotels. The hotels completed before the start of Q2 2015 which had not started the renovation in Q2 2014 (NH Atocha (Madrid), NH Turcosa (Castellon), NH Danube City (Vienna), NH Milano Touring (Milan), NH Plaza (Genoa)) achieved an average RevPar increase of +26.1% in the second quarter of 2015. This increase, which is greater than in other quarters, is partly due to the excellent behaviour of the cities of Milan and Madrid. Brand: NH Collection, with 43 hotels in Q2 and 57 hotels in late 2015, and starts to display its potential in terms of quality (with improvements also in non-renovated hotels) and in terms of prices: TripAdvisor Score ADR Increase in 2015 Q1 Q2 NH Collection 11,9% 18,5% NH 4* 5,9% 9,3% 09 09 09 08 08 08 8,3 8,3 7,5 7,5 NH Collection Release 8,8 8,6 8,5 8,4 8,0 7,9 7,8 7,8 9,0 9,0 8,9 8,9 8,1 8,1 8,1 8,0 07 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 NH Collection NH (4*) It continues to improve our position in TripAdvisor after the implementation of the brilliant basics and the improved service. 26% of the group's portfolio is in the top 10 urban hotels (40% for NH Collection) and 50% in the top 30%. NH Rewards had more than 4.7 million members in late June, representing 30% of the chain's sales. It is expected to start implementing the NH Rewards Corporate campaign in 30 companies during the year. 8
Pricing & Revenue Management: The implementation of hotel indexation in the top 20 destinations and the redefinition of our competitive set were completed, while the B2C pricing and type of room strategies are in the optimization stage. The project for the improvement of the Revenue Management tool, which will include all the information required in a single source, improves forecasts and implements business rules applying new pricing practices, is making good progress. IT: SAP migration was completed in April, applying the new Back Office model in all BUs. Migration of the Front Office has been completed in Europe (285 hotels), and will start in America in July, on schedule. The disconnection of the previous system has been scheduled for December, reducing costs in line with the plan by ceasing to support two parallel infrastructures. The new website, after a period (January-May) of adjustments (optimizing performance, purchasing process, contents, and usability) starts to have good results. Hoteles Royal has been successfully integrated, available for online sales since 7 May, and the renovated Hesperia website was launched on 18 May. Support functions: The implementation of the shared services centre was completed in April excluding Hoteles Royal, whose entry is scheduled for 2016. Business units are in the stage of providing services or stabilising, after the migration of systems and outsourcing of the administration function. Monitoring is maintained to ensure that efficiencies are reflected in the income statement. Portfolio optimization: As part of the portfolio optimization plan, the target is reduced to 11 hotels during the year (compared to the initial 13-15), after the renegotiation agreements made in the first half of the year. 4 hotels left the portfolio during the first six months. Leases: 70% of the target for the year has been attained by June 2015, with annualised savings of 4.9M, of which 64% are indefinite. Integration of Hoteles Royal: Since the 7th of May, hotels under the Royal brand have been connected to the NH web, to which the Radisson hotels were also included at the end of May, after completing their rebranding to NH. Hotel rebranding was completed on schedule, significantly improving their visibility in terms of internal and external signage. From May to August, specific events at hotel level will continue, as well as prepare the official launch on 10 September in Bogotá. EVENTS AFTER THE REPORTING PERIOD On 10 June 2015 NH FINANCE, S.A. signed the novation of the "Club Deal" - Long Term Syndicated Loan ( 181 million of which 137 million were drawn down at June 2015) signed in October 2013 with a group of eight banks under the following terms: (i) the margin is reduced from 4.0% (linked to a grid depending on the net financial debt/ebitda ratio) to the 3 month Euribor + 2.5% (no grid), (ii) the original expiry date is extended by twelve months until October 2018, and (iii) the interim annual repayments are reduced to 9.5 million with tranche A being delayed until 2018. In 2018, the year it expires, both tranche B, bullet, and the rest of tranche A will be repaid. 9
Debt Table Post-Novation 30/6/15: Limit Available Disposed Year 1 Year 2 Year 3 Year 4 Remainder Mortgages 113,731-113,731 19,896 19,789 31,989 32,749 9,307 Floating interest rate 108,567-108,567 19,807 19,700 31,900 32,660 4,500 Fixed interest rate 5,164-5,164 89 89 89 89 4,807 Hoteles Royal Loans 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Floating interest rate 26,383-26,383 2,700 9,900 1,600 2,500 9,683 Subordinated loans 75,000-75,000 - - - - 75,000 Floating interest rate 75,000-75,000 - - - - 75,000 Club Deal Floating interest rate 181,000 43,667 137,333 9,500 9,500 9,500 108,833-114,333-114,333 9,500 9,500 9,500 85,833-66,667 43,667 23,000 - - - 23,000 - Convertible Bond Fixed interest rate 230,519-230,519 - - - 230,519 High-Yield Bond Fixed interest rate 250,000-250,000 - - - - 250,000 SUBTOTAL 876,633 43,667 832,966 32,096 39,189 43,089 374,601 343,990 3.9% 4.7% 5.2% 45.0% 41.3% Credit lines 27,550 7,438 20,112 20,112 - - - - Floating interest rate 27,550 7,438 20,112 20,112 - - - - GROSS BANK BORROWINGS 904,183 51,105 853,078 52,208 39,189 43,089 374,601 343,990 6.1% 4.6% 5.1% 43.9% 40.3% Arrangement expenses (18,696) (1,286) (500) (2,200) (5,012) (9,698) Borrowing costs 5,647 5,647 Borrowing position at 30/06/2015 904,183 51,105 840,029 56,569 38,689 40,889 369,589 334,292 Borrowing position at 31/12/2014 887,928 65,600 807,354 74,428 67,469 110,186 229,479 325,792 On 31 July 2015, the Group transferred the indirect ownership of approximately 95% of the capital of Donnafugata Resort Spa, the owner of the hotel and resort of the same name located in Ragusa, Sicily (Italy). The consideration of 1 was received for the capital of the owner companies, which have contracted financial obligations amounting to approximately 28 million with Italian lending institutions. The transfer has generated capital gains and it has been performed without contingent liabilities at the expense of NH Hotel Group. NH Hotel Group has agreed to maintain the management of the hotel and resort until 31 December 2015, with the possibility of early termination by the new owner. Donnafugata Resort was considered to be an asset ready to be sold since 2014 and made a negative contribution to the Group s net earnings. 10