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NH Hotel Group exceeds all its targets triples recurring net profit in 2017

March 5, 2018 Financial No Comments Email Email

Today, NH Hotel Group presented its 2017 results, reporting very strong trends in its key hotel business indicators which have translated into solid growth in overall Group revenue. The highlights last year include efficient management and control over operating expenses, significant growth in recurring profit and reduction of leverage. In fact, the Company topped all of the guidance provided for the year.

NH Hotel Group’s CEO, Ramón Aragonés, said of these results “in 2017 we outperformed all the profit and leverage targets we had committed to. Our profitable management of the business, coupled with the effort made to strengthen our capital structure and create value for all of our shareholders by executing our business plan, has put NH Hotel Group in an ideal position to tackle the most ambitious targets in the Company’s history with a solid success guarantee.”

– NH Hotel Group’s FY17 results –

Thanks to the momentum displayed by the hotel business all year long and the impact of the initiatives rolled out, particularly the brand and hotel repositioning work, 2017 was marked by significant growth in revenue of 6.5% to €1.57 billion, up from €1.47 billion in 2016. The solid growth registered in all its markets drove an increase in the Company’s topline of €96.5 million.

Topping the ranking of growth in like-for-like revenue by market, it is worth highlighting the Group’s excellent performance in Benelux, where revenue rose by 12.8%, driven by leading and secondary city destinations in the Netherlands, the strong performance of hotels refurbished the year before and the ongoing recovery of the Belgian market. Not far behind was Spain, where revenue was 11.8% higher, boosted by extraordinarily strong prices and demand in all destinations all year long and despite the tension in Catalonia that affected the Company’s performance in Barcelona in the last quarter of the year. Italy, meanwhile, posted revenue growth of 4.5%, led by Milan and the secondary cities. Central Europe was 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. This region registered growth of 0.2% in 2017; this figure rises to 2.2% stripping out the impact of the hotels under refurbishment. Lastly, revenue in Latin America was 4.5% higher, thanks to strong business volumes in Mexico and Argentina and despite currency devaluation in these markets.

The price management strategy rolled out last year drives a growth in revenue per available room (RevPAR) of 8.5%. Note that the RevPAR growth reported in 2017 was driven equally by strategic growth in the ADR of 4.9% to €95.2 and growth in occupancy of 3.4% to 70.8% across the Company’s portfolio of hotels. This strategic focus once again 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 1.5, 2.0 and 3.6 percentage points, respectively, higher than that of its competitors, particularly in the key city destinations.

The strategic focus on efficiency all year long drove significant margin expansion. Specifically, the Group posted recurring EBITDA(1) of €233.1 million in 2017 compared to €180.9 million in 2016, exceeding guidance, which had been raised from €220-225 million to €230 million, and offsetting the adverse impact of the earthquake in Mexico last September and the political tension and instability in Catalonia (Spain) which affected the last quarter. Despite higher occupancy rates, the Company managed to convert 54% of incremental revenue into EBITDA(1). As a result, it lifted its EBITDA margin by 2.6 percentage points from 2016.

Thanks to the business evolution and its more efficient management, NH Hotel Group tripled recurring net profit from €11.5 million in 2016 to €34.8 million in 2017. Reported net profit was €35.5 million, year-on-year growth of 15.4%, despite the fact that 2016 net profit included €23 million more of net gains from asset disposals than this year’s figure.

The growth in profits in 2017, coupled with deleveraging, puts the Company in a position to submit a proposal for the payment of a gross dividend against 2017 profits of €0.10 per outstanding share at the upcoming AGM, implying an estimated payout of €35 million.

Hotel business performance in 2017 by market

Ratios: like-for-like hotel data + hotels under refurbishment

EBITDA figures: Recurring EBITDA before onerous reversal and capital gains from asset disposals

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