Stock Indicators A L Price per Share $ 6.50 $ 5.46 EPS(L12M) $ 0.45 $ 0.45 Book Value Per Share $ 6.37 $ 6.37 P/E P/BV A L A L Posadas 14.40 12.1 1.02 0.86 Market 15.40 3.02 FV/ EBITDA 8.40 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 260% 240% 220% 200% 180% 160% 140% 120% 100% 80% 60% Summary of Financial Information Posadas IPC (In millions pesos as of June 30, 2000) Accumulated 2000 % 1999 Total Assets 8,782.0 100 8,672.8 100 1% Total Liabilities 4,600.7 52 4,232.2 49 9% Net Worth 4,181.3 48 4,440.6 51 (6)% Majority Net Worth 3,145.0 36 3,266.4 38 (4)% Net Sales 1,782.4 100 1,423.0 100 25% Operating Income 373.3 21 318.2 22 17% EBITDA 476.7 27 411.3 29 16% Majority Net Income 100.3 6 473.9 33 (79%) Room Distribution Fiesta Americana Fiesta Inn Caesar Park Others Total Urban Coastal Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms México 20 5,813 27 3,972 0 0 3 718 50 10,503 39 7,459 11 3,044 USA 0 0 1 151 0 0 6 1,033 7 1,184 5 754 2 430 Brazil 0 0 0 0 3 618 0 0 3 618 2 388 1 230 Argentina 0 0 0 0 1 170 0 0 1 170 1 170 0 0 Total 20 5,813 28 4,123 4 788 9 1,751 61 12,475 47 8,771 14 3,704 % 47 33 6 14 100 70 30 1
Grupo Posadas, S.A. de C.V. & Subsidiaries Income Statement as of June 30th 2000 & 1999 (Constants thousand pesos as of June 30, 2000) 2000 1999 Var% 2nd Quarter % 2nd Quarter % 2nd Quarter Total Revenue 939,555 100.0 688,032 100.0 36.6 Hotels Revenue 676,454 100.0 555,613 100.0 21.7 Direct Cost 486,528 71.9 397,023 71.5 22.5 Contribution 189,926 28.1 158,590 28.5 19.8 Management Revenue 113,100 100.0 95,159 100.0 18.9 Direct Cost 64,550 57.1 63,295 66.5 2.0 Otros gastos (ingresos) (1,048) (0.9) 825 0.9 na Contribution 49,598 43.9 31,039 32.6 59.8 Other Businesses Revenue 150,001 100.0 37,260 100.0 302.6 Direct Cost 148,378 98.9 35,546 95.4 317.4 Contribution 1,623 1.1 1,714 4.6 (5.3) Corporate Expenses 20,277 2.2 21,075 3.1 (3.8) Depreciation & Amortization 56,675 6.0 50,573 7.4 12.1 Goodwill Amortization, Net (4,298) (0.5) (3,743) -0.5 14.8 Operating Profit 168,493 17.9 123,438 17.9 36.5 Integral Cost of Financing 212,731 22.6 46,739 6.8 355.1 Other (gains) and expenses (2,390) (0.3) 3,956 0.6 na Extraordinary Expenses - 0.0 (10) 0.0 na Profit Before Taxes (41,848) (4.5) 72,753 10.6 na ISR y PTU 19,537 2.1 5,758 0.8 239.3 Deferred Taxes 10,589 1.1-0.0 na Earnings from Affiliates 419 0.0 1,490 0.2 (71.9) Net Profit before Minority (71,555) (7.6) 68,485 10.0 na Minority Interest 24,837 2.6 13,754 2.0 80.6 Majority Profit (96,392) (10.3) 54,731 8.0 na Variations in real terms 2
Grupo Posadas, S.A. de C.V. & Subsidiaries Income Statement as of June 30th 2000 & 1999 (Constants thousand pesos as of June 30, 2000) 2000 1999 Six Months % Six Months % Var% Total Revenue 1,782,401 100.0 1,423,014 100.0 25.3 Hotels Revenue 1,383,545 100.0 1,154,369 100.0 19.9 Direct Cost 968,538 70.0 791,114 68.5 22.4 Contribution 415,007 30.0 363,255 31.5 14.2 Management Revenue 235,813 100.0 206,974 100.0 13.9 Direct Cost 127,804 54.2 122,242 59.1 4.5 Otros gastos (ingresos) (1,294) (0.5) 1,593 0.8 na Contribution 109,303 46.4 83,139 40.2 31.5 Other Businesses Revenue 163,043 100.0 61,671 100.0 164.4 Direct Cost 170,787 104.7 58,527 94.9 191.8 Contribution (7,744) (4.7) 3,144 5.1 na Corporate Expenses 39,856 2.2 38,207 2.7 4.3 Depreciation & Amortization 112,243 6.3 100,414 7.1 11.8 Goodwill Amortization, Net (8,852) (0.5) (7,256) (0.5) 22.0 Operating Profit 373,319 20.9 318,173 22.4 17.3 Integral Cost of Financing 169,393 9.5 (208,022) (14.6) na Other (gains) and expenses (957) (0.1) 6,174 0.4 na Extraordinary Expenses - 0.0 74 0.0 na Profit Before Taxes 204,883 11.5 519,947 36.5 (60.6) ISR y PTU 30,979 1.7 16,280 1.1 90.3 Deferred Taxes 20,849 1.2-0.0 na Earnings from Affiliates 652 0.0 1,316 0.1 (50.5) Net Profit before Minority 153,707 8.6 504,983 35.5 (69.6) Minority Interest 53,456 3.0 31,072 2.2 72.0 Majority Profit 100,251 5.6 473,911 33.3 (78.8) Terms Variations 3
Grupo Posadas, S.A. de C.V. & Subsidiaries Consolidated Balance Sheet as of June 30,2000 & 1999 (Constant Thousand of Pesos as of June 30, 2000) ASSETS Current Long Term 2000 1999 Variation (%) Cash & Marketable Securities 181,603 2.1 261,612 3.0 (30.6) Notes & Accounts Receivable 336,023 3.8 342,045 3.9 (1.8) Inventories 237,381 2.7 245,726 2.8 (3.4) Other Current Assets 47,603 0.5 46,590 0.5 2.2 Total 802,610 9.1 895,973 10.3 (10.4) Long Term Notes Receivable 67,539 0.8 28,479 0.3 137.2 Long Term Investments 81,024 0.9 92,883 1.1 (12.8) Other Investments 56,031 0.6 61,731 0.7 (9.2) Prop. & Equipment, net 7,239,411 82.4 7,129,353 82.2 1.5 Deferred Assets 535,364 6.1 464,407 5.4 15.3 Total Assets 8,781,979 100.0 8,672,826 100.0 1.3 LIABILITIES Current Suppliers 184,550 2.1 154,212 1.8 19.7 Bank Loans 238,126 2.7 371,527 4.3 (35.9) Other Current Liabilities 322,794 3.7 287,151 3.3 12.4 Total 745,470 8.5 812,890 9.4 (8.3) Long Term Debt 3,319,795 37.8 3,250,952 37.5 2.1 Other Liabilities 41,284 0.5 68,169 0.8 (39.4) Deferred Liabilities 1 494,126 5.6 100,192 1.2 393.2 Total Liabilities 4,600,675 52.4 4,232,203 48.8 8.7 STOCKHOLDERS' EQUITY Capital Stock Issued 2,067,399 23.5 2,068,870 23.9 (0.1) Reserve for Reacq. of Shares 109,969 1.3 87,798 1.0 25.3 Accumulated Earnings 1,529,461 17.4 921,702 10.6 65.9 Accum. Effect of Restatement -662,068-7.5-285,923-3.3 131.6 Net Income 100,251 1.1 473,911 5.5 (78.8) Total 3,145,012 35.8 3,266,358 37.7 (3.7) Minority Interest 1,036,292 11.8 1,174,265 13.5 (11.7) Total Stockholders' Equity 4,181,304 47.6 4,440,623 51.2 (5.8) Total Liabilities & Equity 8,781,979 100.0 8,672,826 100.0 1.3 1 Includes deferred taxes derived from the application of Bulletin D-4 4
Note: All of the variations referred to in this document have been calculated in real terms. During the second quarter of the year, the company undertook a number of significant actions that enable it to reaffirm its leadership position in the Mexican market, while further consolidating its presence in the Brazilian market. First, the company s aggressive strategy in the Franchising Division is moving ahead with solid and steady advances. In the month of May, Fiesta Americana and Fiesta Inn hotels launched their frequent guest program Fiesta Rewards in the Mexican market, which is now in force in more than 45 properties in 25 Mexican destinations. This program is focused on gaining and maintaining the loyalty of Posadas guests through two main approaches: granting them additional benefits during their stay (preferential rates, business center discounts, and concierge services), facilitating the exchange of points for greater rewards that guests can share with their families (complimentary stays in hotels, plane tickets, car rentals, and others). These points are accumulated in each stay and/or hotel-related expenses at any Fiesta Americana or Fiesta Inn hotel. Fiesta Rewards was implemented to replace the Programa Comercial Fiesta (PCF), which has become the nation s leading frequent guest program with more than half a million members. Posadas attempts to increase this affiliation level through the aggressive nationwide launch of Fiesta Rewards, which highlighted the program s new image and emphasized the benefits more broadly among the general public. It should be pointed out that PCF contributed with 40% of the room/nights generated in urban hotels during 1999. This year, important new alliances are being signed with commercial partners that enjoy nationwide recognition, to bring even greater benefits to the new frequent guest program. Second, in the month of June Posadas signed an agreement with one of Brazil s most prestigious construction companies, Gaissler & Solon, to build a property of the new hotel brand, Caesar Business, in the city of Belo Horizonte. This project will be operated under a 20-year leasing scheme, and represents an investment of 15 million dollars. Belo Horizonte, capital of the state of Minas Gerais, features a number of important financial and business centers, and boasts a lively social and political environment that has already placed it as Brazil s third most important city. The opening of the Caesar Business Belo Horizonte property is scheduled for April 2003, and will feature 160 flats. Under this scheme, which is popular in the Brazilian market, each room or flat is sold to real estate investors, who then place the room in a pool for daily rent and hotel management purposes, so that each property is managed under strict quality standards. 5
Total Revenue The combination of an increase of 3 percentage points (pp) in chainwide occupancy rates, along with an increase of more than 1,000 rooms added by the company during the past year, and substantial sales posted by the company s Vacation Club unit, resulted in a 37% increase in total revenue during the second quarter. Operating Profit and EBITDA During the second quarter, operating earnings advanced by 37.0% due to an increase of 15% in the gross operating profit (GOP) of the Hotel division, and to a substantial improvement in margins related to the management business (11 pp). Also contributing to the earnings increase was a reduction of 4% in corporate expenses during the second quarter, compared to 2Q99. For these reasons, the consolidated operating margin was kept at levels of around 18%. For its part, EBITDA substantially increased by 30% in peso terms and 42% in dollar terms during the second quarter, while the EBITDA margin went from 24.7% to 23.5%. As in previous quarters, this decrease in margins is attributed to coastal hotels in the wake of the peso s overvaluation, and to the inclusion of new leased hotels within the business mix over the past year (425 rooms). However, the impact of the peso s overvaluation has been compensated by an increase of 2.5pp in the margins of Fiesta Americana urban properties. Owned Hotels Total Urban Coastal 2 nd Quarter 2000 Avarage No. Of rooms 8,075 11 6,123 10 1,952 15 Avarage Daily Rate 883 (2) 875 (5) 905 6 Occupancy 66 3 64 4 73 2 REVPAR 583 3 560 1 656 9 Accumulated Avarage No. Of rooms 8,031 12 6,079 10 1,952 16 Avarage Daily Rate 918 (5) 880 (6) 1,018 (4) Occupancy 67 5 64 5 75 4 REVPAR 614 2 567 1 761 2 During the second quarter, revenue from owned hotels show an increase of 21.7%, due to an 11% increase in the number of available rooms and 3 pp in occupancy rates. Although it is important to point out that the new FA Grand at Los Cabos makes a significant contribution to this growth, existing hotels also turned in higher revenue, as a result of increases of 5pp in occupancy rates and 3% in their revenue per available room (REVPAR). 6
The strategy implemented at certain Fiesta Americana urban properties continues to yield good results. Both the FA Reforma and the FA Guadalajara increased their occupancy rates by 20 pp in the second quarter, as well as their revpar, by 35% and 25%, respectively. Hotels in the United States showed an increase of 4 pp in their occupancy rates and 3% in their dollar rates. As a result, their revpar advanced by 8% over those posted in the second quarter of 1999. The overall contribution of Posadas USA grew by 43% in 2Q00. Management Total Urban Coastal 2 nd Quarter 2000 Avarage no. Of rooms 12,126 9 8,590 11 3,536 6 Avarage Daily Rate 937 (3) 886 (6) 1,046 2 Occupancy 66 3 64 2 73 3 REVPAR 623 1 565 (2) 764 8 Accumulated Avarage no. Of rooms 12,070 10 8,534 11 3,536 7 Avarage Daily Rate 975 (7) 891 (6) 1,149 (7) Occupancy 66 3 63 3 74 4 REVPAR 646 (2) 564 (2) 846 (2) In the second quarter, revenue from this division increased by 18.9%, due mainly to an increase of 15% in GOP (the incentive basis) throughout the chain, as well as an increase of 9% in the number of managed rooms. It should be highlighted here that the GOP from coastal properties, even when expressed in peso terms, shows an increase of 19% as a result of marketing strategies and operating efficiencies achieved as far as cost reductions are concerned. Meanwhile, GOP of urban properties advanced by 12%. This growth is also the result, as in the previous quarter, of the fees received during the period by the Caesar Park chain, which was not recording fee revenues during the second quarter of 1999. Coastal properties have managed to increase their occupancy rates by 3 pp, and their peso-denominated rates by 2%. In dollar terms, the rates for these hotels show an increase of 11% during the second quarter, as a result of a more profitable business mix derived from the inclusion of the FA Grand Los Cabos hotel. Other Businesses During the month of April, the company recorded the accumulated revenues from its Vacation Club unit. These revenues were previously included on a regular basis in the deferred credits line item. Such revenues include the pre-operational stage of the business, which started in 1998. The effect on overall sales from including these revenues amounts to approximately 100 million pesos. Elsewhere, the developments at Ixtapa showed sales of lots and villas during the second quarter. Without considering the 7
impact of Vacation Club pre-operational revenues, the sales growth of Other Businesses would have amounted to 10% during the quarter. Corporate Expenses The results of the company s new corporate structure, which focuses on more efficient operations and expense controls through operational automation, are beginning to show. In the second quarter, corporate expenses decreased by 4% over 2Q99, from 3% to 2% as a percentage of total revenues. Integral Cost of Financing 2Q00 2Q99 6M00 6M99 Interest Income (7,053) (13,386) (15,712) (188,728) Interest Expense 111,519 108,730 225,572 241,696 Foreign Exchange Loss (Gain) 155,517 27,444 93,344 (74,076) Gains from Monetary Position (47,252) (76,050) (133,811) (186,914) Total Financing Cost 212,731 46,738 169,393 (208,022) A depreciation of more than 6% of the peso during the second quarter resulted in an exchange loss of 155,517 thsd. pesos. Elsewhere, the quarter s inflation rate of 1.5% (vs 2.2% in 2Q99) resulted in a lower monetary position than the same comparative quarter. The marginal reduction in earned interests is basically due to lower rates applicable to the company s peso-denominated debt (21% in 2Q99 vs. 17% in 2Q00). The combination of these factors yielded a loss in the integral cost of financing of 212,731 thsd. pesos. During the month of May, the company refinanced credit lines for more than US$52 million into pesos. After these operations, the dollar-denominated debt as a percentage of total debt went from 88% in the first quarter to 72% at the close of June 2000. Elsewhere, debt indicators maintain a favorable trend. The debt/ebitda ratio has been reduced by nearly a full percentage point since the end of 1999, while interest coverage rose from 2.20 to 2.33 during the same period. With this improvement, Posadas confirms its goal of downsizing its leverage situation, as it continues to penetrate and grow in the market through partnership alliances. CAPEX During 2Q00, capital expenditures reached US$8 million, bringing the total for the first half of the year to US$14 million. These capital outlays have been financed principally through internal flow. For the full year, capital expenditures are expected to reach approximately US$40 million. 8
Internet Strategy During the quarter, Posadas concluded the restructuring of its Franchising area, which now contemplates a director general for its e-business strategy, seeking to promote the company s venture into the digital market. This area strives to launch Posadas onto the digital economy, which is why it becomes imperative to begin a process of internal analysis, focused on identifying those Posadas assets that could bring the greatest added value within the virtual world. To achieve success in this new economy, we will adopt as a takeoff point the definition of a strategic plan focused on the search of digital opportunities, improving our web presence, maximizing and strengthening Posadas brands, and ensuring customer satisfaction and loyalty through e-crm (Customer Relationship Management) programs. Borrowing a few more Internet terms, what we need to do is to adopt a clicks & bricks strategy for Posadas. In other words, we are going to make sure that Posadas, in addition to creating value for its assets in the real world ( bricks ), capitalizes in the virtual world ( clicks ) other non-material assets such as its brands. At the same time, the Office of Technology will be responsible for providing the technical support required to sustain the business. It is true that today, systems have permeated throughout all corners of the company s operation, generating value to our business offer, and stepping up internal processes. It is a strategic area that is everywhere, from the hotel guestroom (Internet in rooms) to our relationships with suppliers and vendors (e-procurement), enabling us to positively influence our global performance and supporting our market positioning (e-marketing). Other Relevant Events In May, the company opened a new Fiesta Inn hotel in Tijuana with 127 rooms under a lease contract. This property, the chain s number 28, is a conversion from an existing hotel to one that meets Posadas standards. Openings Last 12 Months Hotel No. of Opening Date Type rooms FA Grand Los Cabos 250 Sept. 99 Owned Fiesta Inn Torreón 146 Sept. 99 Leased Fiesta Americana Puebla 152 Oct. 99 Leased Fiesta Inn Ciudad Juarez 165 Oct. 99 Owned Fiesta Inn Monterrey Centro 231 Jan. 00 Mgmt Fiesta Inn Tijuana 127 May 00 Leased TOTAL 1,071 9
For more information: Oliver Iriarte Financial Planning Manager Tel: (525)326-6919 Fax: (525)201-8411 E-mail: oiriarte@posadas.com.mx or investorrelations@posadas.com.mx YOU CAN CONSULT OUR INTERNET PAGE AT: www.posadas.com 10