danubius hotels group annual report 2011

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DANUBIUS HOTELS GROUP

ANNUAL REPORT

2011


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Contents

Statement by the Chairman

Quality in focus -2011

The Board of Directors

The Supervisory Board

Tourism in 2011

Report of the Board of Directors

Report of the Supervisory Board

Independent Auditors Report

Consolidated statement of financial position

Consolidated income statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Report on the 2012 business targets

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Statement by the Chairman for AGM -

Annual Report 2011

Dear Shareholders,

It is no surprise that 2011 proved to be another extremely challenging year, against the background of

the continuing crisis in the Eurozone and the economic problems in Hungary.

Nevertheless Danubius Group increased revenues, more than maintained

its operating profit and reduced borrowings; all due to extremely tight

management of our activities. Our investment policy of the last decade to

achieve geographical diversification through the acquisition of health spa

businesses in the region continued to sustain the groups results. This policy

will also provide important opportunities for development in the future.

Hungary has been caught up in the European financial crisis and is currently

negotiating with the European Union and the IMF on a range of issues. From

the viewpoint of the tourism industry, it is important that Hungary concludes

its negotiations on financial aid as soon as possible as uncertainty always

raises question marks in the minds of potential tourists and conference organisers. Having said this, the fourth

quarter of 2011 produced some positive signs as, helped by the weaker Hungarian forint, both sales revenue

and EBITDA were ahead of the previous year. Nevertheless, the underlying problem of the imbalance of supply

and demand in Budapest continued the prolonged and aggressive rates war which required an everyday fight

from our sales people to hold on to market share. In addition, rising energy prices eroded some of the benefits

achieved from various cost-cutting programmes implemented by management over the last three years,

including the recent steps in 2011 of further reducing headcount, establishing new clusters Budapest and

rationalising structures in the head office and some countryside hotels.

Against these continuing efforts to improve the efficiency of our business, it was especially disappointing

to learn of the demise of MALEV in February 2012. Whilst several of the budget airlines have quickly stepped

into the breach, the transition away from a scheduled national carrier is bound to be painful and will further

complicate the competitive position of Hungary in the global tourism market. MICE business and leisure

groups will certainly be affected but, even now, it is too early to be sure of the full implications.

Turning to the operational results for 2011, our Company continued to prove resilient to extremely testing

business conditions and I would highlight the following aspects:

Revenues increased by 2%, more than HUF 1 billion compared to 2010, mainly thanks to the strong

fourth quarter and weaker Forint.

Group occupancy increased by 0.7% compared to 2010, whilst in Hungary the occupancy increase was

1.1% despite an increasingly competitive market.

The operating profits and cashflow of the subsidiaries in Czech Republic, Slovakia and Romania played

an important role in offsetting difficult trading conditions in Hungary.

In spite of the HUF 260 million one-off charge for restructuring, the operational profit of the group

improved by 37%.

The net cash provided by our operating activities increased from HUF 4.3 billion in 2010 to HUF 4.6 billion in

2011, due largely to effective management of working capital.

The overall level of Group borrowings decreased considerably by EUR 7.7 million from the beginning ofthe year, however interest costs increased due to high EURIBOR prime rates. Management exercised

tight control over l iquidity.

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ANNUAL REPORT2011


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Annual Report 2011

Due to the extreme volatility of the forint in the fourth quarter, the largely unrealised foreign exchange

loss for the year amounted to HUF 1.9 billion compared to HUF 0.5 billion in 2010.

As a result of the financial results, our loss af ter tax increased from HUF 1.0 billion in 2010 to HUF 2.3

billion, but, despite this,

shareholders equity grew by just over 1%, due to translation gains on investments in subsidiaries.

Against this background, I would like to mention four developments which can have a positive influence

on our future business:

First, the Companys results have been boosted over recent months by the relatively weaker forint and

Czech Crown. If this continues in 2012, then our revenues and margins will benefit.

Secondly, I already mentioned the diversification of our business and I would like to illustrate the

importance of this with some figures. In 2011, 42% of revenue arose in the health spas outside Hungary

and this figure rises above 60% if the Hungarian spas are included. Of course the Budapest market

remains central to our activities, but it is an important advantage that the company is not as dependent

on it as it was years ago. Marienbad and Sovata had particularly successful years and the Hungarian

spa business performed ahead of 2010. Life was more difficult in Piestany where Slovakias membership

of the Euro has intensified competitive pressures.

A third factor is that not all markets are slow. The Russian market has continued to boom in Marienbad,

with Russian guests now outnumbering German guests, and Russian guest nights in Hungary grew

39%. Poland and Turkey are also in the first tier of the healthier European economies and Hungarian

guest nights from these countries were up 27% and 16% respectively on 2010. We will see in due

course whether the Governments overtures to China bear fruit, but Chinese guest nights in Hungary

were also up 37% on 2010. Occupancy in 2011 compared with 2010 was up in all countries, except

Slovakia, but, looking forward, it is absolutely clear that we must accelerate our drive into new markets.

and finally a huge opportunity is presented by the constant advance of technology. Not just internet

and social media, but smart phones and other mobile devices which are being used more and more to

research, make enquiries and book hotels. Whilst the big brands may have an advantage in such

developments, in Hungary and our spa business we have much non-branded competition and a great

chance to take a lead.

In order to capitalise fully on these opportunities, it remains the case that further investment will berequired in our properties. We have been able to complete substantial projects in Marienbad, the new

Maria Spa, in Piestany, the renewed Balneotherapy section and in Sovata, a new wellness and spa area.

In Hungary the climate for investment and crucially for funding investment has continued to be more difficult.

We continue to look hard for the right solutions to funding the investment needs of our hotels but it will

remain essential that, when we are able to invest, we invest wisely and in a way that will ensure a proper

return on that investment.

During the last year, I can inform you that CP Holdings increased its overall direct and indirect interest

in the Company from 81.40% to 81.72% today, which ensures a 78.03% voting right.

Given the 2011 results and the exacting business conditions which continue to face the Group, the Board

is not proposing the payment of a dividend this year.


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ANNUAL REPORT2011


Annual Report 2011

As I have already indicated, I expect that tough business conditions wil l continue in 2012, particularly

in Hungary, where the economic situation is likely to lead to a further tightening of domestic demand.

We must hope that the polit icians across Europe are able to stabi lise the economic situation, so lessening

uncertainty and starting the process of rebuilding confidence in markets. I would like to thank the

management and all employees of Danubius Group for their perseverance, hard work and loyalty throughout

the last year. In Hungary, we are particularly grateful for the continued commitment of our people during

a period of organisational change. Sir Bernards grandson and one of your directors, Alexei Schreier, has

now been appointed Joint Managing Director of CP Holdings Limited and this is a further signal of the

wholehearted commitment of the Schreier family and all at CP Holdings to the Danubius Hotels Group,

its management and employees.

As we look back on 2011, we can take particular pride in the results of our health spa hotels and

the qual ity of our treatments and customer service which allow us to build further on our position as

the leading spa hotel chain in Europe. In Budapest, our team has shown huge enthusiasm in an

extraordinarily competitive market. Across the Company, we know that our people will continue to deliver

these outstanding efforts during 2012. We will concentrate on improving all those aspects of our business

over which we have control and, like many other businesses, look forward to the start of a gradual economic

recovery. We are fortunate that our business is underpinned by our unique asset base and this will hold us

in good stead for the future.

Sir Bernard Schreier

Chairman of the Board


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Mission Statement

Our mission at Danubius Hotels Group, through listening to our

guests, is to meet and exceed constantly their expectations.

Quality is put at the heart of everything we do, whether at

Health Spa Resorts or City Hotels.

We give our associates the utmost of attention, knowledge and

training.

Quality in focus


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ANNUAL REPORT2011

Mission Statement

We build and strengthen our leadership in operat ing Health

Spa Resorts in European destinations.

We create value through innovative international investments and

management with social responsibility, efficient and environment

friendly operations.

Quality in focus


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The Board of Directors

Chairman of the Board;

Chairman of

CP Holdings Limited and subsidiaries;

Vice President of Bank Leumi Plc.

Director of CP Holdings Limited

Director of CP Holdings Limited

Sir Bernard Schreier Alexei Schreier

Iris Gibbor John Smith

Deputy Chairman of Danubius Hotels

Group from 2007;

Director of CP Holdings

Limited and subsidiaries

Robert Levy

Chief Executive Officer

of CP Holdings Limited from 2007;

Director of subsidiaries

Sndor Betegh

Chief Executive Officer

of Danubiusfrom 1990 till 2006

Dr. Imre Dek

Senior Vice President

of Danubius from 1990,Chief Executive Officer

from 2006

Jnos Tbis

Vice President,

Finance of Danubiusas of 1991

Dr. Istvn Fluck

General Vice President ofFEMTEC,

Medical Director and

Chief Physician of

Budapest Spa Zrt.

Jzsef Lszl

Manager ofSAS Skandinavian Airlines

in Budapest until 1998;

honorary docent

Ing. Lev Novobilsky

General Manager ofLcebn Lzne a.s.


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The Supervisory Board

Tibor Antalpter

Chairman of the Supervisory Board

from 2002;

Ambassador of the Republic of Hungary

to London from 1990 to 1995

Dr. Gbor Bor

Chief Executive Officer of

Investor Holding Zrt.

and Interag Holding Zrt.

Dr. Andrs Glszcsy

Retired minister

Lszl Polgr

Auditor, forensic auditor

in taxation

and accounting

ANNUAL REPORT2011


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Tourism in 2011

In 2011, the public accommodation establishments registered a slight decline due to lower domestic demand.

The number of guests was higher by 1.5% while the number of guest-nights were 0.6% lower compared to previous

year. The number of domestic guests decreased by 2.4% while the number of guest-nights lowered by 4.3%

compared to last year. The number of foreign guests increased by 6%, while the number of guest-nights was up by

only 3.2% compared to 2010. Accommodation establishments showed a 3% increase in revenue at current prices.

In 2011, 3.7 million foreign guests spent 9.9 million nights in public accommodation establishments. Concerning

major source markets lower number of tourists arrived from Germany, France and Italy, while there was an

increase in case of Czech Republic, USA, Australia and United Kingdom.

In the course of this period, public accommodation establishments recorded 3.9 million domestic guests and

9.5 million domestic guest-nights, the numbers of tourist arrivals decreased by 3,000, the numbers of guest-

nights decreased by 157 thousand compared to 2010. In hotels, having a two-third stake from domestic arrivals,

the number of guest-nights increased by 3% compared with a year earlier, while boarding houses suffered a

significant, 25% decline.

The number of tourist arrivals and guest-nights increased considerably in the wellness hotels.

In 2011, room occupancy in hotels was 46.5% on average, within this, 5 star units reached occupancy rate of

63.5%, while 4 star units reached an occupancy of 53.5%. In 2011 the occupancy rate in spa hotels was 54%.

In the reference period, the number of guest-nights at Lake Balaton was lower by 6.4% in case of guests from

foreign countries, and lower by 9.1% in case of domestic guests compared to previous year.

9

Increase of the number of hotel rooms in the

period 2000-2011

20 000

10 000

0

5-star

2000 New rooms built between 20012011

2538

1 805

8

174

12818

19

402

1 602

4-star 3-star

Increase of the number of hotel rooms in

the period 2000-2011

2000 New rooms built between 20012011

23%

77%

Distribution of guestnights in commercial accommodations in 2011Domestic

Gernany

Austria

Great-Britain

USA

Italy

Spain

Other foreign countries

51%

11%

26%

4%2%

3%2%

1%


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Tourism in 2011

In Budapest in contrast to Balaton because of the pick up in foreign demand the numbers of guest-nights

increased by 4.5%.

In the observed period, public accommodation establishments had gross revenues of HUF 245 billion. Within

this, accommodation revenues amounted to HUF 136 billion. Total revenue increased by 3% compared to 2010.

The gross average room rate was HUF 15,842, the revenue per available room in hotels (gross REVPAR) was

HUF 5,812. In the last year the forint was weaker in average by HUF 4 than in 2010.

In the high tourist season (July), the number of accommodation establishments operating in our country was

2,892, the number of available bed places was same than in 2010

Source: Hungarian Central Statistical Office

Change of guestnights in hotels (2011/2010)

15%

10%

5%

0%

5%

10%

15%

20%Domestic Germany Austria Great-

BritainUSA Italy Spain Other

foreigncountries

Total

Cost and balance of tourism-according to the current account balance (EUR million)

5000

4000

3000

2000

1000

0

Balance

Cost

2010 2011

Balance: 2 229 Balance: 2 248

Revenue: 4 051 Revenue: 4 030

-4,3%

-6,6%

1,3% 1,2%

6,2%

-1,0% -0,6%

15,4%

7,3%

ANNUAL REPORT2011


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Tourism in 2011

Tourism in 2011, Czech Republic

The Czech Statistical Office reported that during the whole year 2011 compared to previous year, there was

a higher number of guests by 5,7% and a number of overnight stays by 3,5%. Foreign tourists arrived 7,9% up

and their number of overnight stays rose by 8,1%. There were also more residents guests by 3,4% in collective

accommodation establishments but their number of nights went down by 1,1%. An average number of overnight

stays is in a long term reducing; this was remarkable in 2011 too. Guests spent in average 3,0 nights in surveyed

accommodation establishments.

From the point of regions, the highest increase in the number of guests was reported in Capital Prague and

Stredocesky region (both equally by 8,2%); a decrease of guests interest in accommodation was shown in

Pardubicky region only (by 4,4%). In total number of overnight stays, there was the highest growth in Prague and

Vysocina region (by 9,0%). In five from fourteen regions guests stayed less nights than in 2010 in Pardubicky

(by 8,4%), Jihocesky (by 3,6%), Plzensky (by 1,8%), Zlinsky and Kralovehradeckem (both by 1,9%).

Czech Statistical Office

Tourism in 2011, Slovakia

According to data by the Slovakian statistical office revenues from the tourism sector went up by 3,6% in 2011.

The number of accommodation facilities has dropped by 3,7% whilst the capacity of accommodation went up by

0,7% at national level. The number of guests visiting the commercial accommodation places was up by 5,3% (last

year it was a an increase by 0,3%). The domestic demand shows a small accession (+2,2%) while the foreign one

indicates a notable increase by 10,1%. In Slovakia the majority (59%) of guests are domestic similary to the the

previous years. The number of guestnights in 2011 increased by 1,5%.

Those arriving from the neighbouring countries (54,9% ) represents the greatest proportion among the foreign

guests here (the Czech Republic is still on the top of the foreign guests list by 33% and this figure showed an

increase in 2011 , visitors from Poland 12%, fom Hungary and Austria 4-4%). The German demand shows a growth

in Slovakia, and at the same time US, Chinese, Russian South Korean, Finnish and Spanish demand indicates an

increase too in 2011. Compared to previous year, in 2011 the number of foreign visitors from Europe rose by

9,5%, from Asia by 14% and from America by 20%.


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This report contains consolidated financial statements for the period ended 31 December 2011 as prepared by

the management in accordance with International Financial Reporting Standards as adopted by the EU (EU IFRS).

Sales revenue in the fourth quarter improved by 11%, resulting in improved EBITDA both in the quarter and in

full year in spite of the significant one-off effect of headcount reduction measures made in Q4.

HIGHLIGHTS

1 The presentation currency of the Group is HUF. The EUR amounts are provided as a convenience translation using average f/x rates of the

respective periods.

In 2011 total net sales revenues were HUF 44.0 billion, a 2% increase compared to last year, mainly thanks

to the improvement of Hungarian market in Q4, together with the full year pick up in our Czech and Romanian

markets. In EUR terms there was a slight 1% increase in revenue at Group level. Group occupancy in 2011

was 60.7% compared to 60.0% in 2010.

In 2011 both EBITDA and operating performance improved, mainly due to weakening of forint against euro.

Segmental performance in 2011 was the following:

Hungarian segments revenue for 2011 increased by 1% to HUF 25.3 billion as the occupancy of hotels grew

by 1.1% from 57.2% to 58.3%, however the average room rate dropped by 3%. In spite of the one-off cost

of headcount reductions the operating loss for the year lessened, due to further cost savings.

Czech hotels contributed an impressive revenue increase of 10% in 2011. The operating profit of HUF 622

million in 2011 was also an improvement of 8% compared to the profit of HUF 574 million in 2010. Half of

the revenue increase was due to 4% stronger crown on average compared to the forint, which had also

a cost increasing effect in HUF terms.

Slovakian segments operating revenue increased slightly in 2011 to HUF 9.0 billion; the operating result for

2011 was a profit of HUF 134 million, the same as it was in 2010.

In 2011 the total revenue of Romanian segment grew by 11% to HUF 1.6 billion, due to a pick up in

occupancy and price increase, in addition operating profit was HUF 260 million, compared to HUF 203 million

last year.

The Financial result in 2011 was a significant loss of HUF 2.8 billion compared to a loss of HUF 1.3 billion in 2010,

due mainly to unrealised FX differences. In 2011 HUF 1.9 billion FX loss (mostly unrealised) was recognised on

monetary assets and liabilities, while in 2010 recognised FX loss was HUF 0.5 billion. Interest expenses increased

by 18% to HUF 1.0 billion in 2011 from HUF 0.85 billion in 2010, due to the increase in 3 month EURIBOR rates.

ON THE YEAR 2011 PERFORMANCE OF DANUBIUS GROUP

Danubius Hotels Group(IFRS)

HUF million EUR million1

FY 2011 FY 2010 Ch % FY 2011 FY 2010 Ch %

Net sales revenues 43,952 42,921 2 157.4 155.8 1

EBITDA 4,901 4,853 1 17.6 17.6 -

Operating profit/(loss) 489 356 37 1.8 1.3 36Financial results (2,828) (1,309) 116 (10.1) (4.8) 113

Loss before tax (2,339) (953) 145 (8.4) (3.5) 142

Operating cash flow 4,577 4,269 7 16.4 15.5 6

CAPEX 4,255 2,514 69 15.2 9.1 67

HUF/EUR 279.2 275.4 1 n.a.

ANNUAL REPORT2011


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Loss before tax in 2011 was HUF 2.3 billion, compared to a loss of HUF 1.0 billion in 2010.

Net cash provided by operating activities in 2011 was HUF 4.6 billion, 7% improvement compared to 2010,

due to better operational performance.

During 2011 capital expenditure and investments amounted to HUF 4.3 billion compared to HUF 2.5 billion

in 2010, due to considerable spending on spa facilities in Slovakia, Czech Republic and Romania.

Since Danubius is committed to increased efficiency as a key factor of improved performance, average Group

headcount in 2011 further decreased and was 4,487 compared to 4,646 in 2010.


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FIGURES AND RATIOS IN HOTEL BUSINESS 2011

FINANCIAL OVERVIEW

Hungarian Segment

Total sales revenue and other operating income of 2011 improved by 1% to HUF 25.3 billion, thanks to the

higher revenue of fourth quarter which was mainly driven by the weak forint against euro.

Room revenue of Hungarian hotels in 2011 was HUF 12.9 billion, no material change compared to 2010 due

to the combined result of occupancy increase from 57.2% to 58.3% and the decrease of average room rate

Hungarianhotels

Czechhotels

Slovakianhotels

Romanianhotels

Number of rooms 5,345 807 1,298 400

Occupancy 58.3% 78.8% 60.5% 57.7%

Average rate (HUF) 12,301 19, 909 12,183 7,969

Number of staff 2,364 604 1,187 244

Average number of staff / rooms 0.43 0.75 0.91 0.61

Profit of rooms department (HUF million) 9,885 3,702 2,852 576

Profit of F&B (HUF million) 1,610 275 469 300

Profit of spa department (HUF million) 458 926 1,765 114

Profit of other minor departments (HUF million) 1 110 116 120

Departmental profit 11,954 5,013 5,202 1,110

Profit margin 51.3% 62.9% 58.8% 68.0%

Distribution of the number of rooms available

Hungary

67%

Romania

5%Slovakia

18%

Czech Republic

10%

Distribution of hotel revenues

Hungary

56%

Romania

4%

Slovakia

21%

Czech Republic

19%

HUNGARYHUF million EUR million

FY 2011 FY 2010 Ch % FY 2011 FY 2010 Ch %

Net sales revenues 25,322 25,189 1 90.7 91.46 (1)

EBITDA 1,416 1,449 (2) 5.1 5.3 (4)

Operating loss (527) (554) (5) (1.9) (2.0) (6)

Financial results (2,593) (1,232) 110 (9.3) (4.5) 108

Loss before tax (3,120) (1,785) 75 (11.2) (6.5) 72

CAPEX 1,239 784 58 4.4 2.8 56

ANNUAL REPORT2011


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Capital expenditures were HUF 1.24 billion in 2011, including spending on Hilton Budapest, DHSR Aqua and

Hotel Marina compared to HUF 0.8 billion spent in 2010.

Overall the loss before tax of Hungarian segment was HUF 3.1 billion in 2011, compared to a loss of HUF

1.8 billion in 2010.

Czech Segment

Total sales revenue and other operating income increased by 10% to HUF 8.0 billion in 2011 compared to 2010,

almost half of the increase was due to the weakening of forint against Czech crown. Out of total revenue pick-up

room revenue increased by 8%, while F&B and Spa revenue increased by 15% and 10%, respectively. Marienbad

hotels occupancy is the highest within the group and this year increased to 78.8% from 77.0% last year, however

the average room rate achieved (ARR) decreased slightly to CZK 1,753 from CZK 1,766 mainly due

to strengthening of crown against EUR. The average length of stay was 9.4 days in 2011, no material change

compared to 2010. The number of guest nights was 361,833 in 2011 compared to 338,797 and the drop

in German and domestic guests was more than compensated by increasing number of guests arriving

from Russian markets.

The amount of material expenses and services used in 2011 was HUF 3.6 billion, up by 13%, excluding the

translational effect of 4%, it is in line with the inflation and the increase in the number of guests served. Within

this energy costs increased by 9% to HUF 703 million, maintenance expenses increased by 36% to HUF 601 million,

because of the major expenditure on the Maria Spa project. Total personnel expenses in 2011 were HUF 2.3 billion,

up by 7% of which 4% is due to translational effect.

In 2011 the operational performance of Czech hotels improved considerably by 8% compared to 2010.

CZECHHUF million

FY 2011 FY 2010 Ch %

Total revenue and income 7,986 7,273 10

EBITDA 1,554 1,508 3

Operating profit 622 574 8

Financial results (101) 4 n.a.

Profit before tax 521 578 (10)

CAPEX 1,617 853 90

HUF/CZK average 11.35 10.90 4

CZK/EUR average 24.60 25.27 (3)

Distribution of guestnights in our Czech hotels

Russia

34%

Germany

34%

Ukraine

3%

Czech Republic

19%

Israel

3%

Other

2%

Other Europian

3%Kazakhstan

2%

ANNUAL REPORT2011


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Due to the combined effect of the increase of 3 months EURIBOR and the decrease in the outstanding amount

of bank loans, interest expense for 2011 was HUF 51 million, compared to HUF 46 million in 2010. As the result

of slight weakening of CZK in 2011 against EUR, a HUF 51 million foreign exchange loss was recognised in profit

and loss on monetary assets and liabilities denominated in EUR, compared to a gain of HUF 49 million in 2010.

Capital expenditure in 2011 amounted to HUF 1.6 billion, up by 90%, including significant spending on

Maria and Vltava spa facilities.

Overall, the profit before tax of Czech operations for 2011 decreased by 10% to HUF 521 million compared

to HUF 578 million.

Slovakian Segment

The functional currency of the Slovakian subsidiary is Euro as of 1 January 2009. Total sales revenue and other

operating income in FY 2010 decreased by 2% to HUF 9.0 billion, mainly due to the stronger forint against euro.Room revenue in EUR increased by 2% in 2009 as the average room rate (ARR) increased to EUR 41.8 from EUR

40.3 while the occupancy decreased from 62.7% to 62.2%. The number of rooms sold decreased from 299,336

to 296,203 in FY 2010. The number of guestnights in FY 2010 was 480,045 compared to 477,515 in FY 2009,

the average length of stay in financial year of 2010 was 10,0 days, the same level of last year. The number of

German guests decreased by 15% compared to FY 2009, together with the decrease of guests from neighbouring

countries like Austria and Czech Republic, however the number of guests arriving from Israel and Kuwait increased

considerably by 23% and 26%, respectively. Comparative FY 2009 revenue included HUF 94 million (EUR 0.3

million) one-off gain on the sale of a land, while there was no sale of fixes assets in financial year of 2010.

The amount of material expenses and services used in FY 2010 was HUF 3.3 billion, down by 1%, within this,

energy cost decreased by 12% to HUF 709 million, mainly due to the implementation of energy savings systemsand maintenance expenses were HUF 217 million compared to HUF 212 million in FY 2009. Personnel expenses

SLOVAKIAHUF million

FY 2011 FY 2010 Ch %


EBITDA 1,440 1,455 (1)


Financial results (138) (96) 43

Profit before tax (4) 37 n.a.

CAPEX 947 458 107

HUF/EUR 279.21 275.41 1

Distribution of guestnights in our Slovakian hotels

Germany

20%

Austria

2%

Czech Republic

8%

Israel

11%

Other

10%

Other Asian countries

6%

Slovakia

43%


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for FY 2010 were HUF 3.4 billion, a decrease of 3% in HUF terms, reflecting partly the stronger HUF and headcount

reduction measures.

Due to the decrease of 3 months EURIBOR and the lower average level of borrowings the interest expenses for

FY 2010 amounted to HUF 100 million, compared to HUF 152 million in FY 2009.

Capital expenditure during financial year of 2010 was HUF 458 million compared to the HUF 293 million in FY 2009.

Overall, the profit before tax of Slovakian operations for FY 2010 was HUF 37 million compared to a profit of

HUF 210 million in FY 2009.

Romanian Segment

Total sales revenue and other operating income for 2011 was HUF 1.6 billion, up by 11% in HUF terms compared

to last year. In 2011 occupancy was 57.7%, an increase of 1.0% compared to last year, in addition average room

rate (ARR) improved significantly from RON 105 to RON 121. In 2011 room departmental profit improved by 19%.

The number of guests during the year of 2011 increased to 43,957 from 36,754 primarily due to the increasing

number of leisure and conference tourists.

Due to the combined effect of inflation and the increase in occupancy, total material expenses and services

used in 2011 were HUF 660 million, up by 9% compared to last year. Within this, energy cost was HUF 183 million,

up by 25% compared to 2010, due to higher energy need of new spa facilities, and maintenance expenses

decreased by 27% to HUF 36 million. Personnel expenses increased by 8%, due to minimum wage requirements

and higher number of staff required by new spa facilities.

ROMANIA HUF million

FY 2011 FY 2010 Ch %


EBITDA 491 442 11


Financial results 4 15 (71)

Profit before tax 264 217 22

CAPEX 452 425 6

HUF/RON average rate 65.85 65.41 1

RON/EUR average rate 4.24 4.21 1

Distribution of guestnights in our Romanian hotels

Germany

1%

Hungary

10%

Moldavia

11%

Other

2%

Romania

76%

ANNUAL REPORT2011


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APPENDIX II - AUDITEDCONSOLIDATED STATEMENT OF INCOME PREPARED IN ACCORDANCE WITH IFRS (HUF million)

Year ended 31 2011 Year ended 31 2010

Room revenue 21,368 20,914

Food and beverage revenue 13,160 12,719

Spa revenue 5,926 5,801

Other departmental revenue 2,084 2,056

Revenue from wineries 161 132

Revenue from security services 806 774

Other income 447 525

Total operating revenue and other income 43,952 42,921

Cost of goods purchased for resale 444 447

Material costs 9,414 8,965

Services used 9,779 9,612

Material expenses and services used 19,637 19,024

Wages and salaries 11,600 11,704

Other personnel expenses 1,458 1,197

Taxes and contributions 3,650 3,595

Personnel expenses 16,708 16,496

Depreciation and amortisation 4,412 4,497

Other expenses 2,611 2,522

Changes in inventories of finished goods and w.i.p. 119 74

Work performed and capitalised (24) (48)

Total operating expenses 43,463 42,565

Profit from operations 489 356

Interest income 41 77

Interest expense (985) (850)

Foreign currency loss (1,884) (536)

Financial loss (2,828) (1,309)

Loss before tax (2,339) (953)

Current tax expense 100 338

Deferred tax expense / (benefit) (83) (409)

Loss for the year (2,356) (882)

Attributable to:

Owners of the Company (2,387) (933)

Non-controlling interest 31 51

Basic and diluted earnings per share (HUF per share): (302) (118)


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APPENDIX III AUDITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (HUF million)

22

ANNUAL REPORT2011


Loss for the year (2,356) (882)

Other comprehensive income

Foreign currency translation differencies for foreign operations 3, 045 1,501

Changes of fair values of hedge derivatives (71) -

Total other comprehensive income 2,974 1,501

Total comprehensive income for the period 618 619

Attributable to:

Owners of the Company 289 530

Non-controlling interest 329 89

Total comprehensive income for the period 618 619


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APPENDIX IV - AUDITEDCONSOLIDATED STATEMENT OF CASH FLOWS PREPARED IN ACCORDANCE WITH IFRS (HUF million)

1 Represents the amount of cash and cash equivalents less the amount of bank overdrafts

APPENDIX V

SUBSEQUENT EVENTS

There has not been any matter or circumstance occurring subsequent to the end of the reporting period thathas significantly affected, or may significantly affect, the operations of the Group, the result of those operations

or the state of affairs of the Group in future periods.

23


Profit from operations 489 356

Depreciation and amortisation 4,412 4,497

Change of provisions 145 (163)

Impairment of receivables and write-off of inventories 4 130

Changes in working capital

(Increase)/ decrease of accounts receivable and other current assets (123) (377)

(Increase)/ decrease of inventory 82 89

Increase / (decrease) of accounts payable and other current liabilities 903 882

Interest paid (936) (1,076)

Income tax paid (399) (69)

Net cash provided by operating activities 4,577 4,269

Purchase of property, plant and equipment and intangibles (4,255) (2,514)

Interest received 31 82

Net cash used in investing activities (4,224) (2,432)

Receipt of long-term bank loans 1,774 3,282

Repayment of long-term bank loans (4,162) (3,200)

Net cash provided by financing activities (2,388 82

Net increase (decrease) in cash held (2 035) 1,919

Cash and cash equivalents at the beginning of the period, net 3,965 1,981

Effect of exchange rate fluctuations on cash held 181 65

Cash and cash equivalents at the end of the period, net 2,111 3,965


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danubius hotels group annual report 2011

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