Operative & Fincial Results: S e c o n d Q u a r t e r 2 0 1 4
Grupo Posadas, S.A.B. de C.V. & Subsidiaries Mexico City, July 28, 2014 Information presented with respect to the same quarter of last year under IFRS accounting standards: 2 System-wide RevPAR increased 2.7 in the second quarter 120 hotels with more than 20 thousand rooms in operation Opening of the first Gamma Belo by Fiesta Inn hotel Five new hotel openings in 2Q14 and thirteen in the last twelve months Pipeline considers 48 new hotels and 32 additiol rooms Tax claim of $767 million was determined Cash available as of June 30, 2014 of $755 million (US$58 million) In 2014 we have opened ten hotels (Fiesta Inn Merida, the following eight One hotels: Alameda in Mexico City, Silao, Guadalajara Periferico Poniente, La Paz, Villahermosa Centro, Vallarta Aeropuerto, Queretaro Centro Sur, Cancun Centro and the first Gamma Belo by Fiesta Inn). Simultaneously we continue with a good performance of our hotels systemwide with a RevPAR growth higher than the economy and it is worth mentioning that we surpassed the total number of hotels and rooms in operations that we had prior to the sale of the hotel business in South America. said Jose Carlos Azcarraga - CEO. > Fincial Highlights Million pesos as of June 30, 2014 2Q14 YY 2014 YY Total Revenues EBIT EBITDA Net Result 1,420.9 113.1 212.9 20.6 100 8 15 1 (28.9) (56.9) (40.3) 33.2 2,763.1 167.4 363.2 (8.0) 100 6 13 (0) (46.4) (79.8) (64.5) As we have mentioned in the past, the 2014 quarterly results will compare unfavorably with previous year as the EBITDA from the hotels sold in 2013 was recorded throughout 2013. Since the offering of the Notes due in 2017, we anticipated this effect, as a fact, our 2Q14 and 1S14 reported EBITDA is moderately below the EBITDA budgeted then. During the 2Q14 System-wide hotel performance continued improving with better margins over the second quarter of 2013. Our Available Daily Rate(ADR) increased 8.0, occupancy decreased 3.2 percent points ( pp ), which resulted in a Revenue Per Available Room (RevPAR) growth of 2.7 that represents a continued improving growth trend on a month by month basis for the last 31 consecutive months. Even though we noticed a certain slowdown in the growth pace recorded versus previous quarters, we may attribute this effect in part to the 2014 World Cup in Brazil. Investor relations contact: Gerardo de Prevoisin Tel.: (5255) 5326-6757 gerardo.deprevoisin@posadas.com
Urban hotels, which represent 80 of the total rooms operated, continue to perform better with a margil increase in RevPAR of 0.1 and our coastal hotels performed with a RevPAR increase of 11.5. 3 On March 12, 2014, Posadas launched a new brand of hotels -Gamma by Fiesta Inn- that will operate hotels that are currently operated as independent hotels. The initial scheme offers services to the owners of these hotels advanced information and technological systems that will allow them to improve the performance of their hotels in regard of reservations, among others, that will be operated under franchise contracts. In June 2014, the first hotel with 84 rooms under the Gamma Belo brand was opened in the city of Morelia, Michoacan. On March 19, 2014, the extraordiry and ordiry shareholders meeting approved among others, the cancelation of 65,151,031 shares -series A- of the Company, subject to the termition of certain trusts that the company is the direct or indirect beneficiary. After this, 512,737,588 with a $1 peso value per share are the total actual outstanding shares of the Company.
> Development The Company has opened in the 1S14 nine new hotels and the first Gamma Belo hotel, 1,228 rooms in total. As of June 30, 2014, we continue with an aggressive pipeline comprised of executed agreements to operate 48 new hotels with 6,386 rooms, besides opening an important number of hotels this quarter we signed 8 hotels more (+962 rooms) than in 1Q14 s pipeline, representing a net increase of 13 hotels. This development plan represents an increase in capacity of 32 with 80 of these hotels under the economy and business formats including the Gamma brand. These hotels represent a total investment of US$470 million that will be invested by third parties. Openings are expected to begin in the second half of 2014, and we expect all of these to be operating before December 2016 according to commitments made with the different property owners. During the last twelve months 12 hotels with 1,480 additiol rooms excludes Vacation Club- were opened, 5 of them opened in the 2Q14: One Sali Cruz, One Irapuato, Fiesta Inn Mérida, One Ciudad de México Alameda, One Silao, One Guadalajara Periférico Vallarta, One La Paz, One Villahermosa Centro, One Vallarta Aeropuerto, GAMMA Beló, One Querétaro Centro Sur and One Cancún Centro. First time that we opened so many hotels in a quarter and LTM, two per month and one per month, respectively. 4 Brands Mexico Total Hotels Rooms Live Aqua 1 46 1 Fiesta America Grand 2 345 5 Fiesta America 4 886 14 Fiesta Inn 14 1,738 27 Gamma 4 541 9 One hotels 23 2,830 44 Total 48 6,386 100 Hotel openings (LTM) No. of rooms Type One Sali Cruz One Irapuato Fiesta Inn Mérida One Ciudad de México Alameda One Silao One Guadalajara Periférico Vallarta One La Paz One Villahermosa Centro One Vallarta Aeropuerto GAMMA Beló One Queretaro Centro Sur One Cancuan Centro 166 117 121 84 110 1,480 Maged Maged Maged Maged Maged Maged Maged Maged Maged Maged Maged Maged
> Owned and Leased Hotels 5 2Q14 (QQ) Average Rooms Average Daily Rate Occupancy (Var. in pp) RevPAR Accum. Average Rooms Average Daily Rate Occupancy (Var. in pp) RevPAR 5,619 1,187 68 803 5,643 1,214 67 811 Total Urban Coastal Var. Var. Var. (2.3) 10.9 (0.1) 10.8 (9.1) 11.9 1.1 13.7 4,345 1,089 65 703 4,369 1,090 63 690 (8.1) 8.4 (0.9) 7.0 (15.7) 9.2 0.4 9.9 1,274 1,453 77 1,125 1,274 1,541 78 1,207 24.3 10.2 (0.1) 1 24.3 8.5 (1.2) 6.9 During the quarter, revenues from this segment represented 45 of the consolidated revenues. The EBITDA margin was 18.9 representing a 6.9pp improvement over the 2Q13. A higher ADR (Average Daily Rate) of 10.9 and a margil decrease of 0.1pp in occupancy resulted in a RevPAR increase of 10.8. The average number of rooms available was reduced by 2.3 as a result of the hotels sold and the ending of two leased hotel contracts that were located in Morelia and Culiacan. Hotels located in the north and center of Mexico over performed our forecast while the Resorts and hotels in the gulf/ south underperformed slightly while the hotels in the pacific underperformed moderately versus our forecast. Results for urban hotels showed an improvement when compared with 2Q13; on average with 8.1 less rooms owned, an 8.4 increase in ADR and a slight decrease in occupancy of 0.9pp, RevPAR improved by 7.0. With 24.3 more average number of rooms available for coastal hotels due to the transfer of the Fiesta America Grand (FAG) Los Cabos hotel to the all-inclusive format, before January 2014 it was operated by the vacation club business. This segment showed an increase in ADR of 10.2 and a margil decrease in occupancy of 0.1pp. The above resulted in a RevPAR increase of 1 when compared with the same period of previous year. This was in part due to the vacation period of holly week mentioned in this report.
> Magement Total Urban Coastal Var. Var. Var. 2Q14 (QQ) Average Rooms Average Daily Rate Occupancy (Var. in pp) RevPAR Accum. Average Rooms Average Daily Rate Occupancy (Var. in pp) RevPAR 18,320 1,112 62 688 17,924 1, 61 691 Includes Owned & Leased and Maged hotels. 8.5 8.0 (3.2) 2.7 6.6 6.8 (1.9) 3.6 15,764 1,025 61 622 15,436 1,022 60 610 8.0 5.9 (3.5) 0.1 6.2 5.8 (2.1) 2.1 2,556 1,578 69 1,092 2,488 1,653 72 1,188 11.8 13.7 (1.4) 11.5 8.8 8.2 (0.6) 7.4 Revenue for the Magement business represented 19 of total revenue in the quarter. The EBITDA margin of 15.3 represented a 13.8pp drop versus 2Q13. This effect is due in part to the (i) investment realized in the brand development of Gamma and operation of this brand of hotels and in the new standards for the Fiesta America brand, (ii) the elimition of intercompany revenues from the owned and leased hotels in accordance with IFRS and (iii) to our call center Konexo that quit providing services to a client that represented approximately 50 of its revenues. Ampersand, our Loyalty solutions design, administration and operation business, signed a contract with an important massive consumption beverages client which will add up to 5 of total revenue for 2014 and 10 for a full year operation. 6 The average number of rooms operated recorded an 8.5 increase in the quarter, while System-wide hotels reported a 8.0 improvement in ADR, a 3.2pp decrease in occupancy, and a RevPAR growth of 2.7 which represents a slower pace than what was recorded in previous quarters. By regions, Resorts, North and Gulf/South over performed our forecast while the Center and Pacific regions underperformed. System-wide urban hotels had an increase in the average number of operated rooms of 8.0 with an improvement in ADR of 5.9, with a 3.5pp drop in occupancy but achieved a slight RevPAR increase by 0.1. Coastal hotels recorded an 11.8 increase in the average number of available rooms after including the FAG Los Cabos hotel, previously accounted for in the Vacation Club segment. In addition, occupancy dropped 1.4 while ADR, and RevPar increased 13.7 and 11.5, respectively. The growth pace observed was stronger than the recent trend that was recorded as a result of the vacation period that occurred in different quarters, 2Q14 vs. 1Q13.
> Vacation Club & Other The Vacation Club and Other business segment mainly include the Fiesta America Vacation Club (FAVC). Total revenues for the quarter amounted to 36 of the group s consolidated revenues in 2Q14. The contribution margin was 16.5. 7 For this period we observed an acceptable pace in the volume of membership s sales versus our forecast but a slight decrease in Resorts/hotels generation and in the payment of accrued interests of the finced receivables. As of June 30, 2014, the receivables balance reached US$135 million. In the LTM the available rooms has been increased by 164 with the opening of 16 units in Nima Bay in Puerto Vallarta and the third phase of the Fiesta America Vacation Villas in Los Cabos with 148 new keys. > EBITDA In 2Q14 an EBITDA of $212.9 million was recorded, that compares unfavorably with the $356.9 million recorded in 2Q13 after excluding the sale of 3 hotels and the headquarters offices, among others- the EBITDA proforma of $170 million in 2Q14 is 28 lower than the $235 million comparable for 2Q13. For the last twelve months, EBITDA (IFRS) was $613.5 million (US$47.3 million with an exchange rate -end of period- of MXN$12.9714 per USD). After excluding mainly the guaranty payment on Chemuyil, the EBITDA would be $77 million, 13 lower than the $887 million EBITDA that would correspond to the 2Q13 LTM. > Capital Expenditures Capital expenditures during the quarter were $179.6 million similar figure as previous quarter-, 67 was used for maintence and refurbishing mainly the Fiesta Inn Aeropuerto in Mexico City hotel-, 13 for corporate purposes and the remaining 20 for the vacation club in the refurbishing of the hotel in Cozumel.
> Comprehensive Fincial Cost Concept 2Q14 2Q13 2014 2013 Interests earned Interests expense Fluctuations loss (gain) Other expenses (products) Fincial expenses Total Figures in thousands of pesos. (8,482) 108,171 (19,148) 0 16,169 96,711 (16,666) 97,346 221,577 (801) 12,890 314,346 (16,177) 205,488 (27,875) 0 28,405 189,842 At the end of the quarter, considering the effect of IFRS, the net coverage ratio was 1.7 times; 1.5 times lower than the observed in the same quarter of the previous year. The foreign exchange unrealized gain was higher in 2Q14 as the MXN/USD depreciated margilly when in 2Q13 it depreciated 5.6 versus the immediate quarter for each period. (34,192) 192,571 23,122 (47,765) 33,238 166,975 8 > Net Result As a result of the aforementioned, a net income of $20.5 million for the quarter was recorded.
> Fincial Position As of March 30, 2014 the cash balance was $755.3 million (US$58.2 million). Total assets are $12.4 billion (US$955.5 million). The main uses of cash during the quarter were, among other items: capital expenditures previously described, new taxes in the context of the Mexican fiscal reform and interests paid. 9 Total Debt at the end of the quarter was $4,541.3 million (US$350.1 million), net of issuance expenses, while Net Debt (IFRS) was US$291.9 million, the Net Debt to EBITDA ratio was 6.2 times under IFRS, which compares unfavorably as this ratio was 2.0 times in 2Q13. The Total Debt mix under IFRS at the end of the quarter was as follows: 14 in short-term, 100 in U.S. dollars and with a fixed rate. The average debt maturity was 3.0 years and there was no secured debt outstanding. The federal tax authorities determined a $767 million tax claim to Grupo Posadas. The Company has filed the applicable procedure against this claim. To this date and with the information that we have available, our deferred taxes are represented accordingly. As of the release date of this report, the existing corporate ratings are: Moody s: global scale B2 with negative outlook. S&P: global B with stable outlook. Fitch: global Issuer Default Rating (IDR) B and local BB+(mex), both with stable outlook. The ratings for the 9.25 Senior Notes Due 2015 and 7.875 Senior Notes Due 2017 were: Moody s: B2 / S&P: B / Fitch: B+RR3. In compliance with article 4.033.02 Frac. VIII of the Mexican Stock Exchange rules, Posadas informs that J.P. Morgan Securities LLC, alyst, Jacob Steinfeld jacob.a.steinfeld@jpmorgan.com (1-212) 834-4066, Bank of America Merrill Lynch, alyst, Roy Yackulic roy.yackulic@baml.com (1-646) 855-6945 and BCP Securities, LLC, alyst: James Harper jharper@bcpsecurities.com (1-203) 629 2181 provide coverage to Grupo Posadas.
> Grupo Posadas as of June 30, 2014 Posadas is the leading hotel operator in Mexico that owns, leases and mages 120 hotels with 20,195 rooms in the most important and visited urban and coastal destitions in Mexico (99 of total rooms) and owns one hotel in the United States (1). 80 of rooms are in urban destitions and 20 in coastal. Posadas operates under the following main brands: Live Aqua, Fiesta America Grand, Fiesta America The Explorean, Fiesta America Vacation Villas, Fiesta Inn, Gamma by Fiesta Inn and One Hotels. Its leadership has been recognized by several entities and publications such as the Asociación Interciol de Hoteles & Restaurantes that identify Posadas among the 70 most important hotel operators in the world. Posadas trades in the MSE since 1992. For further information please visit www.posadas.com 63 24 13 Distribution by type of rooms Leased Maged Owned 2,557 rooms 12,827 rooms 4,811 rooms 10 Brand Mexico USA Total Hotels Rooms Hotels Rooms Hotels Rooms Live Aqua 2 506 2 506 Fiesta America 17 4,889 17 4,889 Fiesta Inn 61 8,842 61 8,842 Gamma 1 84 1 84 FA Vacation Villas 6 1,607 6 1,607 One Hotels 31 3,851 31 3,851 Other 1 213 1 203 2 416 Total 119 19,992 1 203 120 20,195 99 1 100
> Income Statement - IFRS (million pesos) 11 Concept Total Revenues Owned & Leased Hotels Revenues Direct cost Contribution Magement Revenues Direct cost Contribution FA Vacation & Other Revenues Direct cost Contribution 2Q14 1,420.9 642.4 521.2 121.2 271.6 230.1 41.5 506.9 423.5 83.4 10 10 81.1 18.9 10 84.7 15.3 10 83.5 16.5 2Q13 1,998.4 1,032.4 909.3 123.1 375.3 266.0 109.2 590.8 387.8 202.9 10 (28.9) 10 88.1 11.9 Var. (37.8) (42.7) (1.6) 10 (27.6) 70.9 (13.5) 29.1 (62.0) 10 (14.2) 65.6 9.2 34.4 (58.9) 2014 3 2,763.1 1,286.7 1,063.6 223.1 518.6 411.7 106.9 957.9 811.6 146.2 10 10 82.7 17.3 10 79.4 20.6 10 84.7 15.3 2013 5,158.7 3,367.8 2,735.9 631.9 745.4 528.9 216.6 1,045.5 734.9 310.6 10 10 81.2 18.8 10 70.9 29.1 10 70.3 29.7 Var. (46.4) (61.8) (61.1) (64.7) (30.4) (22.2) (50.6) (8.4) 10.4 (52.9) Corporate expenses Depreciation / amortization Asset impairment Other expenses (revenue) Operating Profit 64.9 99.9 (31.8) 113.1 4.6 7.0 (2.2) 8.0 60.9 94.5 17.5 262.4 3.0 4.7 0.9 13.1 6.6 5.7 (56.9) 122.2 195.8 (9.1) 167.4 4.4 7.1 (0.3) 6.1 116.1 193.0 19.9 83 2.3 3.7 0.4 16.1 5.2 1.5 (79.8) EBITDA 212.9 15.0 356.9 17.9 (40.3) 363.2 13.1 1,023.0 19.8 (64.5) Comprehensive fincing cost Other Part. in Assoc. Companies Profit Before Taxes Discontinued Operations Income taxes Deferred taxes 96.7 () 16.3 (7.2) 24.2 (19.7) 6.8 () 1.2 (0.5) 1.7 (1.4) 314.3 (0.1) (52.0) 2.2 128.4 (147.5) 15.7 () (2.6) 0.1 6.4 (7.4) (69.2) (81.2) (86.7) 189.8 (22.4) (6.7) 96.3 (103.5) 6.9 (0.8) (0.2) 3.5 (3.7) 167.0 663.0 3.0 131.4 67.5 3.2 12.9 0.1 2.5 1.3 13.7 (26.7) Net Income before Minority Minority Interest Net Majority Income 19.0 (1.5) 20.6 1.3 (0.1) 1.4 (35.0) (50.5) 15.4 (1.8) (2.5) (96.9) 0.8 33.2 (8.6) (0.6) (8.0) (0.3) () (0.3) 461.1 1.1 46 8.9 8.9
> Consolidated Balance Sheet as of June 30, 2014 and December 31st, 2013 - IFRS (million pesos) Concept Jun - 14 Dec -13 12 ASSETS Current Cash & short term investments Notes & accounts receivable Inventories Other assets Total current assets Long Term Accounts and notes receivable Investments in shares Other investments Property, plant and equipment, net Intangible and deferred assets Non current assets Total Assets LIABILITIES Current Suppliers Bank loans Stock market loans Other Other current liabilities Total current liabilities 755.3 2,414.8 77.7 159.0 3,406.8 1,951.7 14.5 330.9 6,405.4 284.6 8,987.0 12,393.7 344.7 664.1 696.0 682.1 2,387.0 6.1 19.5 0.6 1.3 27.5 15.7 0.1 2.7 51.7 2.3 72.5 10 2.8 5.4 5.6 5.5 19.3 1,231.7 2,250.6 141.8 157.2 3,781.3 1,910.6 35.4 239.9 6,337.6 214.4 8,738.0 12,519.4 348.3 60 808.1 1,756.4 9.8 18.0 1.1 1.3 30.2 15.3 0.3 1.9 50.6 1.7 69.8 10 2.8 4.8 6.5 14.0 Long Term Bank loans Stock market loans Other liabilities Deferred tax liabilities and Other 3,874.9 948.8 1,806.6 31.3 7.7 14.6 4,555.1 692.2 2,127.5 36.4 5.5 17.0 Total Liabilities 9,017.4 72.8 9,131.2 72.9 STOCKHOLDERS EQUITY Majority interest Minority interest Total 3,159.7 216.7 3,376.4 25.5 1.7 27.2 3,157.8 230.4 3,388.2 25.2 1.8 27.1 Total Liabilities & Stockholders Equity 12,393.7 10 12,519.4 10
> Consolidated Cash Flow Statement - IFRS (Million pesos from January 1st. to June 30, 2014 & 2013) Concept 2014 2013 13 Consolidated Net Income Before Taxes + (-) Items not requiring cash + (-) Other unrealized items + (-) Entries related to Investments + Asset impairment, Depreciation and amortization for the year + (-) Gain or loss on sale of property, plant and equipment + (-) Equity in results of associates and joint ventures (-) Interest income +(-) Other items + (-) Items related to fincing activities + Accrued interest + (-) Currency fluctuations + Derivatives Cash before taxes Cash flow provided or used in operation + (-) Decrease (increase) in accounts receivable + (-) Decrease (increase) in inventories + (-) Decrease (increase) in other accounts receivables and other assets + (-) Increase (decrease) in suppliers + (-) Increase (decrease) in other liabilities + (-) Income taxes paid or returned Net cash flows from operation Net cash flow from investing activities (-) Investment in intangibles (-) Investment in property, plant and equipment + Business sales (-) Interests received + (-) Other items Net cash from fincing activities Net cash flows + Bank fincing + Stock market fincing + Other fincing, includes margin calls (-) Bank and stock market fincing amortization (-) Other fincing amortization + (-) Increase (decrease) in equity (-) Dividends paid + Premium on issuance of shares + Contribution for future capital increases (-) Interest expense (-) Repurchase of shares + (-) Other items (22.4) (43.1) (43.1) 208.7 195.8 29.0 (16.2) 177.6 205.5 (27.9) 320.7 (417.7) 68.4 4.4 (37.1) (3.6) (16.7) (433.2) (97.0) (209.7) (292.5) 6.7 16.2 6 (306.8) (169.6) 44.9 (8.0) (217.5) 10.9 663.0 (740.1) (740.1) 198.6 193.0 39.8 6.9 (41.1) 195.9 192.6 23.1 (19.8) 317.4 (853.4) (423.2) 6.3 (47.1) (114.3) (238.5) (36.6) (536.0) 2,051.4 (247.4) 2,015.2 (6.9) 290.5 1,515.4 (1,589.2) 835.5 (1,647.3) (119.7) (293.2) (364.5) Net increase (decrease) in cash and cash equivalents Changes Cash and cash equivalents at the begining of period Cash and cash equivalents at the end of period (476.4) 1,231.7 755.3 (73.8) 1,48 1,406.2