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Edited Transcript of NHH.MC earnings conference call or presentation 26-Feb-19 11:00am GMT

Full Year 2018 NH Hotel Group SA Earnings Call

Madrid Mar 1, 2019 (Thomson StreetEvents) -- Edited Transcript of NH Hotel Group SA earnings conference call or presentation Tuesday, February 26, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Beatriz Puente Ferreras

NH Hotel Group, S.A. - Executive MD of Finance & Administration

* Javier Vega-Penichet

NH Hotel Group, S.A. - SVP of Investments & IR

* Ramón Aragonés Marín

NH Hotel Group, S.A. - CEO, MD & Executive Director

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Conference Call Participants

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* Francisco José Rodríguez Sánchez

Banco de Sabadell. S.A., Research Division - Research Analyst

* Guilherme Macedo Sampaio

Banco Português de Investimento, S.A., Research Division - Analyst

* Javier Pinedo Zorrilla

Exane BNP Paribas, Research Division - Research Analyst

* Joao Safara Silva

Grupo Santander, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Welcome to NH Hotel Group 2018 Results Presentation Conference Call. I now hand over to the speaker. Please go ahead.

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Javier Vega-Penichet, NH Hotel Group, S.A. - SVP of Investments & IR [2]

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Good morning to all. This is Javier Vega-Penichet from Investor Relations. Welcome to NH Hotel Group 2018 Results Conference Call. Today, with you, our CEO, Ramón Aragonés, will share with you main guidelines of the strong operating and financial results released yesterday, with a focus on the top line. He will also comment on the key initiatives regarding synergies and integration with Minor Hotels. Then, our CFO, Beatriz Puente, will follow with more detailed evolution up to the profit line, to conclude with comments on the strong financial position of the group and IFRS 16 implementation starting this year. Finally, a Q&A session will be open to all of you.

So let's get started. Please, Ramón?

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [3]

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Good morning, everyone, and thank you for joining us today. This is Ramón Aragonés speaking. It's a pleasure to present another solid set of results. 2018 has been an excellent year in which the group has delivered again record results, overachieving all its financial targets.

Before getting into the results, let me share with you that NH has already started to work with Minor International to identify, formulate and quantify the potential synergistic benefits across both complementary business. The key initiatives identified are: integration activity operation regarding Minor Hotels in Portugal and Brazil. Regarding brands, joint brand positioning has been agreed. Over 5 hotels identified has potential accretive rebrand, out of which 3 to Anantara.

Also, potential for expansion has been identified for both Minor International and NH brands across geographies. As we have already communicated, NH will be in charge of developing the Minor brands in Europe and South America, and Minor will be in charge of developing our brands in Asia, Africa and Oceania. We have started the negotiation with trade partners, mainly OTAs, travel agents and procurement suppliers, to improve pricing scheme based on the combined portfolio.

We are also working on a combination of global sales. NH portfolio has been incorporated in Minor International websites and cross-selling opportunities has already started. We expect to have a loyalty program database analysis complete and roadmapped by the third quarter 2019, including assessment of merger and cross-redemption.

Finally, with regards to human capital, the employee mobility policy is in progress.

Additionally, the Board of Directors of NH approved last 7th of February, with the abstention of Minor representatives, a governance framework to establish relation between NH and Minor; preferred business geographical areas; and a reciprocal brand master licensing was settled.

Looking in 2019, we continue delivering growth. Despite changes of perimeters and new repositioning investment identified, our EUR 285 million EBITDA guidance and recurring net income close to EUR 100 million by the end of this year is reiterated. In light of this, we look forward to continue delivering record-setting results. And it will be proposed to the AGM the approval of EUR 0.15 dividend per share for the financial year 2019, totaling EUR 59 million, an alignment with the dividend policy announced last year.

Moving to 2018 result. As you can see in the highlights on Page 3 of the presentation, the positive operating trend and business improvement has continued, with revenue up plus 5.6% reaching EUR 1.6 billion. The combination of sound revenue growth and persistent focus on efficiency has allowed NH to achieve EUR 265 million of EBITDA, EUR 32 million versus the previous year; and to improve its margin from 15% to 16%.

Moreover, lower financial costs due to the strong leverage accomplished has allowed to double the net recurring income up to EUR 72 million. We mark that this growth has been higher than the EBITDA growth.

Coming back to the revenue evolution by perimeter in Page 6. The 4.6% growth takes into account the revenue loss from 2018 reforms totaling minus EUR 12 million; and the negative currency evolution of the period in LatAm, subtracting minus EUR 37 million. Excluding currency impact, revenue would have grown plus 6.7%.

I will highlight that the revenue growth in this year has been driven by the healthy performance in the comparable or like-for-like perimeter, which grew plus 5.6% in constant currency. We mark the sound performance in Europe throughout the year, with a like-for-like growth of 4.1%, and in particular, the strong evolution in Benelux, plus 6.5%; Italy, plus 4.2%; and Central Europe, plus 3.2%. Spain grew plus 2.7% despite the comparison, it's affected by the remarkable plus 10% like-for-like growth of 2017; and Barcelona, weak situation until September. At group level and included in the reflection of accounting assets related to Argentina, revenue growth is plus 4.3%. Looking to the fourth quarter, the improved trend allowed to report actual revenue growth of plus 7.4% in Q4. Excluding currency impact in the quarter, revenue would have grown plus 8.7%.

With regards to RevPAR metrics in Page 7. The growth in the year has been plus 3.8%, 61% through ADR, which grew plus 2.3% and reached EUR 98. Remarkable ADR growth in Benelux of 3.8%; Italy, 3.4%; and Central Europe, 3.1%. Occupancy level reached 72%, implying an increase of 1 percentage point. In order to better understand the RevPAR trend, it is worth highlighting the plus 4.3% growth in the like-for-like or comparable perimeter in the year.

Insight by region are: Spain, plus 3%. Solid 4% growth in Madrid and secondary cities; Barcelona, minus 1%, explained by the lower domestic leisure demand, although stabilization in Q4 has allowed to report 20%.

Italy, 5%. Excellent evolution of Rome, plus 10%; and secondary cities, plus 5%.

Benelux, plus 8%, with outstanding growth in Brussels, 14%; Amsterdam, 6%; and Dutch secondary cities, plus 8%.

Central Europe, plus 4%, with a positive trade fair calendar in cities like Munich, plus 19%; Berlin, 13%; and Frankfurt, 6%.

These RevPAR numbers confirms the group management ability to constantly increase market share ahead of competition, supported by the higher quality of our hotels.

In Page 8. Average RevPAR growth versus competitors has outperformed with a relative increase of plus 1.5 percentage points, explained by higher relative price increase of 1 percentage point and slightly higher relative occupancy of plus 0.5 percentage point.

Let me now turn the call over to Beatriz, who will give you more details by region and the rest of the P&L, the leverage path and targets for the year.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [4]

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Thank you, Ramón. This is Beatriz Puente speaking, and good morning, everyone, and thank you for attending the NH conference call.

To provide more color on the revenue performance by region, on Page 9 on the presentation, and to emphasize the like-for-like growth. Revenues increased by 5.6% at constant FX, mainly driven by Spain with a solid 2.7% on like-for-like growth. And this growth, I would say, is remarkable if we take into account that last year, the growth versus '17 of Spain was a 10% increase.

Italy with 4.2% growth in the like-for-like perimeter, with a strong performance in the key cities, mainly Rome, 10% increase; and Milan, 4% increase, despite a negative fair calendar in the second half of the year.

For Benelux, outstanding performance, with the contribution of Brussels with a double-digit growth of 12%; Amsterdam, growth of 6%; and secondary cities of 5%. That allowed the region to reach a like-for-like growth of 6.5%.

In Central Europe, like-for-like revenue grew of 3.2%. And we were -- we have a favorable trade fair calendar last year.

Moving to Latin America, all regions have been impacted by currency devaluation. In the case of Mexico, revenues increased by 6% at a constant FX. And including the negative performance of the currency, reported revenues were stable.

Regarding Argentina, and I will cover later on the impact of hyperinflation, our revenues at local level, of course, increased by double. But including the currency devaluation, the reported figure was 7% for Argentina.

Regarding the portfolio of Royal in Colombia, revenues decreased by 1% in local currency. And including the depreciation of the currency, reported figure was 4%.

Moving to the cost evolution on Page 10 of the presentation. NH continues to focus on cost control. That has allowed the group to achieve an excellent conversion rate at GOP level of 70%. And in order to achieve the results, payroll costs grew roughly 1.7%, while operating expenses grew by 2.3%. Take into account the impact of the openings and closings that fully explained the increase on staff costs of -- roughly 75% of that increase is justified by these changes in perimeters. So the cost control and efficiency measures put in place has allowed the company to maintain a very high conversion rate.

Regarding leases. Charges on property taxes increased by roughly 16.7% (sic) [EUR 16.7 million]. That's explained partially by one of the hotels, as you recall, that we sold last year in Amsterdam; and we also signed a lease -- a very profitable lease, and that explain the increase on the leases. And the rest, another 50% of that increase, is explained by increase on the variable rent, and also, the increase on the performance of the hotels.

Regarding recurring EBITDA, we beat the guidance provided to the market. That was EUR 260 million. The group reached EUR 265 million this year, an increase of EUR 32 million; and also, a very important increase in, also, the margin of the EBITDA by 1.3 percentage points, reaching 16.3%, and with a sound, I would say, conversion rate, close to 45%.

Moving to Page 11 of the presentation. And mainly, what you can see here is significant decrease of the financial costs mainly due to the refinancing process of the company put in place 2 years ago, and also, with the early redemption of the bond, the convertible bond in June. And also, remember that last year, we exercised the right to early redemption of 10% of the outstanding bond or nominal bond of EUR 40 million paid full in cash.

I will highlight also that the cost and [dollarization] strategy of all the excess cash that we have in Argentina and the rest of the Latin American countries has allowed us to generate also financial income.

From an accounting point of view, the company has implemented IAS 29. In our case, because we own assets in Argentina, has generated financial income of EUR 25.7 million in the year. We are happy to define that in the P&L for you to be aware of that impact.

Regarding corporate income tax. Higher income -- corporate income tax, this is mainly due to the improvement of the business, and also, of -- we have a tax impact because -- related to this IAS 29 financial income.

Regarding net recurring income related to the business. The group reached EUR 72.4 million, more than double the figure of last year, which is significant increase at EBITDA level. That goes to the bottom line of the company, mainly due to the improvement of the business and also the lower financial costs.

Regarding the nonrecurring items contribution. This year, the net figure has been EUR 32 million. That is mainly -- comes from the contribution of net capital gains from asset rotation. And also, it's partially offset by the depreciation that we have linked to the repositioning of assets that will be -- has been performing in '18 and will be performing in '19, and also, some provisions that the company has allocated to redundancy payments. Both the capital gains and taxes from the presentation are included in this category in nonrecurring items.

Including the impact -- net impact of IAS 29, total net income amounted to EUR 118 million, showing, as we said before, a positive contribution from the revaluation of the fixed assets in Argentina.

If we move to Page 12, just to highlight the solid operating cash generation of the company. The cash position of the group as of year-end reached EUR 266 million, bringing down the net financial debt of the company to negative EUR 171 million by year-end, down from figures that -- we forgot, but they were as high as EUR 655 million by the end of 2017. The strong deleverage of the company has been achieved by a combination, of course, of reduction of gross debt, but also very important, significant cash flow generation of the company.

The net financial debt leverage ratio for year-end 2018 was 0.6x compared to 5.6x in the end of '15, and also better than the guidance that we -- revised guidance that we provided to the market that was 0.81x.

It's worth mentioning also that, as I mentioned, we maintained a cash position as of year-end of EUR 266 million. So the group has more than EUR 300 million in available credit lines, out of which EUR 250 million are due in September '21.

With regards to the cash outflows. Mainly, it's justified by the CapEx payments that the company has paid linked to the repositioning and maintenance CapEx of the group of EUR 108 million; and roughly EUR 25 million are CapEx that mainly is overflow that we will end up paying during the first quarter of '19.

Additionally, as Ramón has stated, the group has -- the board has proposed also a dividend policy that we'll comply with, that EUR 0.15 for year '18, that will be paid in '19 roughly EUR 59 million. And that's additional dividend to the one that we paid this year of EUR 39 million.

On Slide 14, and also, regarding the implementation of IFRS 16. As you know, we will apply -- the group will apply that from the 1st of January this year onwards. The application of the IFRS 16 established a recognition on the balance sheet of the operating leases, therefore, we will add a financial liability equal to the present value of the fixed lease commitments. And of course, we will also recognize an asset for the right of use of the underlying asset.

The group decided to apply the retrospective modified method, therefore, which means if the asset is calculated at the start of each contract and the liability has been calculated at transition date, 1st of January this year.

Therefore, the estimated impact as of the beginning of January 2019 is based on the current portfolio at that transaction date. That means without considering any additions, cancellations or modifications of the contract that the group has, will be, presently, an increase on the right of the use of the assets of EUR 1.7 billion; an increase on the operating financial leases of -- liabilities of EUR 2.1 billion; and lower -- the difference will go against reserves of roughly EUR 400 million at consolidated level.

In addition, it's estimated that the net profit before taxes, again [offset by these variables], will decrease by roughly, before taxes, EUR 5 million in the first year. Although, of course, this impact will be reduced in the coming periods.

It's fair to mention that the liability increase, the EUR 2.1 billion, is in line with the information that we disclosed last year on 2017 accounts regarding the fixed operating leases. And also, it's aligned with the average calculation that the credit agencies has released in their reports. And as you are aware of, they are rating into account the operating leases.

And also, very important for us, I will highlight that IFRS 16 has no cash impact. Very important, also, as you are aware of, our current financial covenants exclude IFRS 16 from the calculation of debt.

To conclude, after beating 2018 guidance, NH maintains 2019 targets. As we have disclosed today, it was EUR 285 million for recurring EBITDA, despite the exit of Hesperia and also the new repositioning opportunities that has been identified. And the net recurring income targets for '19 will be close to EUR 100 million for this -- for '19. Those are our targets. Of course, it's clear there is potential impact of IAS 29 and IFRS 16 that I mentioned before.

Regarding the integration plan, as Ramón has mentioned, NH has begun to work with Minor on defining a new 5-year plan, and also more important, to identify the potential synergies between both groups. And also, as we have included one page on the presentation, there is a timeline that we'll foresee -- the group foresee that will be presented on the second quarter of this year.

After covering the key milestone of 2018 results, we are open for Q&A questions. I'm very happy to answer any questions that you may have. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Javier Pinedo from Exane.

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Javier Pinedo Zorrilla, Exane BNP Paribas, Research Division - Research Analyst [2]

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I was wondering, how should we expect the EBITDA -- sorry, disclaimer, I connected a little bit later so maybe you have already answered this. Sorry in advance. How much cost savings, on a standalone basis, without any coming from Minor, do you have identified that you could save in 2019 and 2020? And related with this, is the achievement of the guidance of EBITDA of EUR 285 million basically coming from prices -- or increase in prices across the board? Or is it something that is supported also by cost savings -- out of any cost savings coming from Minor integration?

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [3]

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Javier, thank you for your questions regarding the cost potential synergies linked to the integration with Minor and the synergies. As I mentioned, we are in the process of finalizing the 5-year plan of NH on a standalone basis, and also, finalizing all the key initiatives that we highlight on the page of the integration plan with Minor to quantify those synergies. Mainly, the synergies will come -- that's also stated by Minor, will come from revenue performance because of the potential to access new [feature] markets and rebranding opportunities. And of course, some costs will come from sharing kind of the best practices that we have, our know-how, contracts, but the main will come from revenue side. But of course, we'll share that when we present the plan, and we will quantify those synergies.

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [4]

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Well, regarding the growth, it will come from prices, as usual, in the last year in this company. For the very first time this year, we want to exceed EUR 100 of ADR. And regarding cost savings, we are in the middle of the -- [more than the middle], in the end of the operating model that we have launched a few years ago, and we expect to save about EUR 3 million -- 3 additional million this year. But it is -- we are always focused on efficiency, and maybe we will be able to identify additional synergies and -- I mean, during the year. And of course, we expect to find some cost synergies from Minor's integration.

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Javier Pinedo Zorrilla, Exane BNP Paribas, Research Division - Research Analyst [5]

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And just a follow-up. Sorry, again, if you have already commented on that. When you look at your portfolio, NH standalone, have you -- originally you have been investing in the last years, once you had a proper financial leverage, have been investing in repositioning and refurbishment. So looking in your current portfolio, is there any relevant room for repositioning or refurbishment, relevant of many hotels? Or can you give us some color on that, please?

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [6]

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Of course, there is still room for improvement. We are all the time analyzing the possibility to invest in CapEx repositioning if we can get the returns that we are looking for. Obviously, this is going to be the same rhythm -- the same level of investment that we got before, but there is still room for improvement. And if we identify possibilities, we'll do it. And in the current plan for this year, we have already included some CapEx repositioning in our hotels in the different business units.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [7]

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Yes, Javier, and just -- sorry, to follow up on that. When we disclosed last year on the presentation for our 9 months results, we identified some further repositioning opportunities, as we said before, for the period '19 and '20. We have identified additional -- and we disclosed that figure, additional EUR 100 million for repositioning opportunities to be executed in '19 and '20, and that we expect, of course, that we'll have lower return compared to the previous one. But we will foresee that, that will provide us a 15% return that will add another EUR 25 million on a run-rate basis to the EBITDA of the company. So the -- answering that question is, yes, the group has still opportunities in the portfolio that has already been identified. And of course, now we will start finalizing the business plans and also start renegotiating with some of the owners of those assets to see if we co-invest or what is the changes on those contracts. But yes, we have further opportunities we can have on our portfolio.

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Javier Pinedo Zorrilla, Exane BNP Paribas, Research Division - Research Analyst [8]

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Actually, yes, my question was more related with on top of the already announced. Because considering your financial leverage, I was assuming that if you had identified more hotels to be refurbished or repositioned, you will already be doing it because you have the leverage -- the financial leverage capacity. So that -- my question was on top of the already announced. But I guess, that more or less had been answered.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [9]

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Yes. It's a question of, of course, always to balance the opportunity cost of the repositioning when you execute that, the resources that you have to execute that, and also, of course, that you need to have a return that will justify that investment. Otherwise, we will not do it. So answering, in short, we have identified opportunities that we can carry out during the period '19 and '20.

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Operator [10]

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The next question comes from Francisco Rodríguez from Banco Sabadell.

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Francisco José Rodríguez Sánchez, Banco de Sabadell. S.A., Research Division - Research Analyst [11]

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I do have 3 questions, please. First one would be if you could comment a little bit on the development you're seeing in your main markets, basically Spain and Benelux, and also, if you could comment a little bit on Italy. Also, I've seen a very nice performance in your working capital in Q4. So I would -- I was wondering, how much of that is sustainable going into next year? And the last question would be regarding your CapEx for '19. I'm not sure if you've given a specific figure. And if you could repeat, please, the return you are aiming for your new refurbishment investments.

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [12]

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So we have started the year very well. We have exceeded the budget in January, and everything indicates that we will do it also in February. The March forecast is positive. So for sure, we will finish the first quarter above the budget. Specifically, in Italy and -- what's the other country he's asked?

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Javier Vega-Penichet, NH Hotel Group, S.A. - SVP of Investments & IR [13]

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Benelux, Spain and Italy.

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [14]

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Benelux -- Spain, Benelux and Italy. Well, in Spain, we feel comfortable. We don't have exposure in leisure, as you know, so we'll not be affected by the recovery of the North Africa destinations. And the positive trend in Barcelona make us optimistic for this year in Spain. In the rest of the cities, the demand remains strong. We don't expect any surprise in Benelux. We are still positive in Brussels and more or less according to the budget in Amsterdam. And in Germany, I think that this year is going to be better than the previous one because the -- fair calendars. So generally speaking, we are on track to deliver the budget this year.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [15]

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And then, Francisco, regarding your questions of our working capital, yes, the positive contribution of the fourth quarter is mainly linked to the effort that we assigned 2 years ago to our -- within our internal plan to recover all the overdue that the company has in the past. And this is kind of the last mile of that recovery process. Therefore, going forward, based on kind of the business itself, and of course, average collection periods and average payment period, the company should not invest on working capital. But as you will see, this, like, EUR 20 million of recovery that is overdue, that is mainly a one-off of the result of finalizing this plan that I mentioned before. And regarding CapEx for 2019, roughly, these are bulk figures: For maintenance and IT, based on also the range that we always said, 4% to 5% of our revenues figure, we foresee CapEx of roughly EUR 80 million. Then we foresee also another EUR 80 million linked to this repositioning wave. Then you have the CapEx of New York. Remember, for '19, that's roughly -- add another EUR 40 million -- or EUR 40 million, EUR 41 million. And then you have expansion of CapEx, another EUR 20 million. So all in, roughly EUR 220 million, EUR 225 million. And then on cash flow basis, it will depend on when we will finalize the works on the -- sometimes there are some overflow from one year to another. But our bulk figure will be EUR 220 million, EUR 225 million for CapEx for '19. Important to say that more than half of that CapEx is to increase the EBITDA of the company. We're speaking of New York, that is now contributing to the EBITDA of the company; and we are speaking of repositioning opportunities of roughly EUR 80 million. So more than half of that CapEx is to provide further growth to the company.

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Francisco José Rodríguez Sánchez, Banco de Sabadell. S.A., Research Division - Research Analyst [16]

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Okay. Sorry, just to follow up, if I may. Could you comment on Italian market? And also, could you repeat, please -- I know you've given the figure, but I didn't get it, the return you are expecting from this repositioning CapEx?

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [17]

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Regarding the last question, the return that we foresee is roughly 15%, 1-5. And regarding...

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [18]

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Regarding Italy, we have -- it generally has been worse than expected because of different reasons, for example, in Venice, because of the horrible weather we had during January. February is going quite well. So we don't expect a lot of changes this year in the normal trajectory of Italy.

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Operator [19]

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The next question comes from [Tim Holsche] from [Neuberger Berman].

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Unidentified Analyst, [20]

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I guess, my question was around the ratings profile. I believe S&P recently upgraded your standalone credit profile from B to B+. But on account of the parent, Minor, have they increased leverage of the parent? I think they have revised your stable -- sorry, they have revised your outlook to stable from positive. In addition to the dividends that you've already spelled out in the presentation, of the EUR 50-odd million, have you been in discussions with the parent to see if they want to do a special dividend or if they want to delever? Or have they given you any such indications? How should we think about kind of leverage in the slightly distant term over the year?

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [21]

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Thank you for your questions. Regarding -- you said ratings, we'll not highlight, and it's very important for us, once we have disclosed IFRS 16. And of course, methodology of rating agencies might change or not, or they will maintain their methodology. What we can say, if you run the numbers based on the increase on the EUR 2.1 billion of operating leases as financial debt of the company, and of course, you adjust EBITDA with the fixed rent component that we had for last year for NH, based on that adjusted leverage ratio, we'll be close to 4x, okay? So that's lower than any ratio expected. Regarding [Standard and Poor's], it's very clear in the report that they changed methodology because they applied group methodology. Regarding your question, if we have had an indication from the parent company or the major holder of the company regarding any change on dividend policy, regarding that, we have no indication of any change. I will refer to the prospectus that Minor disclosed to the market, where they stated a lot of time that they maintain the dividend policy of the company. If that might change, we are not aware of any change as of today.

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Operator [22]

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The next question comes from João Safara from Bank of Santander.

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Joao Safara Silva, Grupo Santander, Research Division - Equity Analyst [23]

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Actually, just one question. Most of my questions have been already answered. And it's a follow-up question on what you just mentioned, Beatriz. Just trying to understand here, what is the -- well, the capital structure of NH going forward? I mean, we have an idea of what would be, more or less, net debt-to-EBITDA in -- for NH on a standalone basis, and my question is if that changes with Minor and with IFRS 16. Basically, update us here on what would be your, let's say, your optimal leverage in terms of net debt to EBITDA.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [24]

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Thank you, João. Regarding the second question, the one that, as management, we can answer, I already explained that with the adjustment of IFRS 16, the adjusted leverage ratio as of today, because it is at the beginning of January '19, will be close to the 4x leverage ratio. So I would say, lower than -- of course, when we foresee this impact and because of also the performance and the financial deleverage of the company of 0.6x, that's how you explain the 4x leverage. Regarding the future, what we can say, of course, as we said, we are working on this 5-year plan with Minor. And within this 5-year plan, of course, Minor will define again, as you said, what is their financial policy, as other colleagues asked before, and what will be kind of the target leverage ratio. I will also refer to you to Minor presentation. It's expected that they will release today also their financial -- their results of 2018, and they will have a presentation, I think, to the markets next week. So -- but for the time being, what we can say to you is that we are working on this 5-year plan that, of course, should define the capital structure of the company going forward.

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Operator [25]

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(Operator Instructions) The next question comes from Guilherme Sampaio from CaixaBank BPI.

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Guilherme Macedo Sampaio, Banco Português de Investimento, S.A., Research Division - Analyst [26]

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Two, if I might. The first one, well, even if you cannot provide a long-term target for net debt to EBITDA, do you have any guidance that you could reveal relating to 2019, so net debt-to-EBITDA target for the end of 2019? And secondly, in terms of overall demand trends, of course, this was a very strong quarter due to some specific events. I'd like to know whether we should -- in underlying terms, you're seeing stable growth trends or you're seeing some deceleration due, for instance, from the -- due to the weaker -- the stronger comparables as we progress throughout the year.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [27]

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Thank you, Guilherme. Regarding your question, as I said, we ask you to wait a bit for the second half of the year to have that planned. But answering the question out of -- based on pure, let's say, [leveraged borrower's] situation and with the CapEx outflow that I mentioned before, with the guidance that we provide to the market, of the EUR 285 million -- sorry, there is no change, okay? There is no change on the leverage of the company. There is no change on the asset rotation of the company. It should be stable. I mean, if you run the numbers, you will see that in terms of cash flow generation, the company will generate cash flow -- enough cash flow to pay for the repositioning CapEx, to pay for the dividend that will be proposed to the AGM, to pay for the interest charge of the company. But again, as I said, based on pure [leveraged] borrower's condition as of today.

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [28]

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Well, regarding the business, despite the dis-acceleration (sic) [deceleration] in some countries for the moment, we feel comfortable. As I mentioned before, we have started very well. And the vision we have right now is -- for the first half of the year is positive. We don't know what could happen in the second half of the year, but so far, all the data, all the information we have is positive regarding to achieve our goals this year.

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Operator [29]

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There are no further questions in the conference, so I now give back the floor to the speaker.

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Beatriz Puente Ferreras, NH Hotel Group, S.A. - Executive MD of Finance & Administration [30]

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Thank you very much for attending the NH conference call, and of course, happy to follow up through our IR department any follow-up questions that you have. Thank you.

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Ramón Aragonés Marín, NH Hotel Group, S.A. - CEO, MD & Executive Director [31]

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Thank you. Thank you very much.

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Operator [32]

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Ladies and gentlemen, this conclude the conference call. Thank you all for your participation. You may now disconnect.