NH Hotel Group SA

MAD:NHH

Earnings Call Transcript 2021-Q2

[Operator]

Ladies and gentlemen, welcome to NH Hotel Group H1 2021 Results Conference Call. I now hand over to the speakers. Sir, please go ahead.

[Javier Vega-Penichet]

Hi. Good morning to all. This is Javier Vega-Penichet from IR Department. Our CEO, Ramon Aragones, will share the mostly positive trend that started in May and how KPIs of ADR and occupancy are improving in the last 2 months. Also the recovery of the B2B demand is gaining momentum for the post-summer months. Then our CFO, Luis Martinez, will provide a more detailed description of the results and will dive in the cash flow detail, liquidity and the reinforced capital structure of the group after the milestones achieved in the last months. At the end, a Q&A session will be open to answer questions you may have.So let's start with our CEO remarks.

[Ramon Aragones Marin, CEO, MD & Executive Director]

Thank you, Javier. Good morning, everyone, and thank you for joining us today. This is Ramon Aragones. After a weak start of the year, the ongoing lifting of restriction has permitted the travel activity to gradually recover since the month of May, especially in some areas of Europe, and together with the efficiency and cost control measures, including fixed [ run rate ] reductions allowed us to report the first EBITDA improvement since the pandemic started, both in the second quarter and in the first half figures. Also, net income has improved significantly, partially supported by the net capital gain from an asset rotation transaction.The gradual rollout of vaccination programs, together with the progressive easing of restriction, has helped us to accelerate the reopening of our portfolio in the last months. As such, currently, approximately 90% of hotels are open. Revenue improvement has permitted to reduce average cash burn per month from EUR 29 million in the first quarter to EUR 50 million in the second quarter. As occupancy has increased, cash burn has decreased. This improvement has continued in July, reaching an occupancy between 40, 45 at group level and paving revenues of around EUR 70 million and allowing us to confirm the slightly positive operation cash flow in this month. With regard to rates during periods of mobility restrictions, the company follow a volume strategy and with flexibility in terms of cancellation. Whilst the recovery has started, our focus on rates is back to normal, limiting the discounted rates and reintroducing prepaid rates. As such, ADR in the month of June has been EUR 83 and compared to EUR 66 in the first quarter and EUR 78 in the second quarter. In July, this ADR recovery has continued, and we expect to close July with an ADR closer to EUR 90 and keep increasing in August and September. Our strategy is to focus on those segments that are traveling first to capture the short-term pent-up demand with tactical promotion and rollout of initiatives to adapt the new demand wins such as extended stays. We have also launched new campaigns for the corporate segment, focusing on small and medium accounts. The flexible operating structure and financial resilience proven during the first half of 2021 has allowed to strength the capital structure through an equity injection, extension of the syndicated facilities, bond refinancing and asset rotation. This proactive road map implemented has addressed the financial stability with a strong liquidity position of EUR 478 million at the end of June. No relevant debt maturities up to 2026 and allowing the management team to focus and capitalize on the industry recovery in the coming quarters. Moving to the detail of the results on Page 4 of the presentation and as I commented previously, the gradual revenue improvement, together with cost control measure, has allowed to report an EBITDA improvement of plus EUR 79 million in the second quarter or last EUR 97 million, including IFRS 16, explained by the remarkable 64 conversion rate on the second quarter. In the first 6 months, this EBITDA improvement amounted to plus EUR 12 million or plus EUR 27 million, including IFRS 16. We have done a tremendous effort to reduce the cost base. Overall, in the first 6 months, we have been able to minimize our nonrent cost by 30% by adapting the workforce structure in all geographies through temporary layoffs and time salary reduction, both in hotels and headquarters. This fixed cost base continues to minimize and a collective dismissal process has been executed in Spain Central Services at the end of April as part of a global strategy, resulting in EUR 34 million in structural cost savings captured together with other efficiency plans implemented at operating level such as meeting and event, housekeeping, outsources of back office's function and optimization and closing of certain of our offices. In addition to the EUR 34 million of total cost savings already captured, the company intends to achieve additional cost savings during the rest of 2021 and 2022, with the aim of increasing those savings up to EUR 60 million, always in accordance with local employment legislation and leveraging on our digital capabilities with technology as an enabler to push automation, to boost automation. The effort in efficiency and cost control has allowed to cover all the operating costs before rents or EBITDA in the first 6 months. With regard to leases, savings amounted to EUR 32 million in the first 6 months compared to EUR 23 million achieved in the first half of last year. And we continue to negotiate with landlords additional rate reduction for the third quarter of this year. Moving to Page 6 of the presentation. Occupancy for the second quarter reached 23% that compares with 40% in the first quarter, being June the first month with an occupancy higher than 30% at group level. Like-for-like occupancy in the month of June by country has been the following: Spain 47%, Italy 31%, Central Europe 23%, and 32% in Benelux. So an immediate pickup in May month is observed in those countries where mobility restrictions are least. This improvement has continued in July, reaching an occupancy between 40%, 44% at group level with the following like-for-like detail by country. Spain 55%, Italy close to 45%, Central Europe between 35%, 40%, and Benelux around 35%, and we expect to keep increasing in August and September. As commented before, ADR has also improved, reaching EUR 83 in the month of June that compares to EUR 66 in the first quarter and EUR 78 in the second quarter. In July, ADR will be closer to EUR 90. This improvement in RevPAR is translated into revenues. Q2 revenues excluding EUR 39 million of subsidies reached EUR 115 million, almost doubling the reported figure in the first quarter that was EUR 62 million. Including subsidies, reported revenue was EUR 155 million, but still minus 67% below the reported figure in 2019. With regards to EBITDA, the improvement in the second quarter was plus EUR 79 million, explained by the remarkable EUR 64 million conversion rate and reaching minus EUR 36 million excluding IFRS 16 on a positive figure of EUR 31 million, including IFRS 16. In the first 6 months, the improvement amounted to EUR 12 million. Well, to conclude my intervention, I want to remark our confidence in the future of the group. The recovery in domestic leisure demand is already tangible and is gaining momentum as Europe steps up its vaccination rate and eases restriction. The difficulties faced in early 2021 are behind, and we trust that a gradual recovery is sustainable. There is no doubt that leisure demand will fully recover and very fast. There is also a pent-up demand for meetings among our corporate customers, and we have seen an increase in booking requests for the months after the summer, although still minus 35% compared to the number of requests of 2019. Moreover, we have a registered money pipeline for September and October that reached 65%, 75%, 80% of 2019 levels. This translates that we are already perceiving the gradual reactivation of a small business group after the summer, and we expect large group meetings, congresses and big events could recover progressively from the last month of 2021. With regards the long-term view of the recovery, although sector consensus assumes to recover pre-COVID levels by 2024, the current more efficient operating model together with the new openings at the Boscolo portfolio and the recent reforming in cities such as Dublin, Amsterdam, London and New York will allow us to reach a higher profitability compared to 2019 and to target recovered EBITDA 1 year ahead of sector consensus. Let me now turn the call over to Luis that will give you more details on the results and balance sheet.

[Luis Martinez Jurado, Chief Financial Officer]

Thank you, Ramon. This is Luis Martinez speaking. Thanks for your attendance, and good morning to everyone. Jumping to the details of the results on Page 7. Reported revenue in the first 6 months reached EUR 216 million, 74% below 2019 reported levels. Revenues in the first quarter amounted to EUR 62 million and reached EUR 154 million in the second quarter due to reactivation of the activity since May with the easing of restrictions in the different countries. Q2 revenue figure includes EUR 39 million of subsidies and, despite a significant improvement from previous quarters, they are still EUR 67 million below 2019 reported figures. Excluding subsidies, Q2 revenue figure almost doubled revenues of the first quarter of the year. By regions, I'm moving to Page 8, a better performance has been achieved in Southern European countries and in secondary cities, especially towards the end of the quarter, and this trend has continued in July. It is important to remark that secondary cities in Spain and Italy are already showing a positive evolution compared to last year. Moving to Page 10. The reported EBITDA improvement is explained by the recovery of activity since May and the lower cost base. Payroll in the first 6 months has decreased by EUR 58 million or minus 33%. Operating expenses declined by EUR 34 million or minus 26%. This effort in efficiency and cost control has allowed the company to cover the operating cost before rents or EBITDA in the first 6 months. Reported lease payments and property taxes fell by EUR 28.2 million or minus 83%, mainly explained by the fixed rent concessions achieved during the first half of the year. Excluding perimeter changes on IFRS 16, fixed rent saving agreements amounted to EUR 32 million in the first half of 2021. In Q2, fixed rent savings amounted to EUR 16 million compared to EUR 23 million in Q2 2020 due to the closure of the majority of the portfolio in the same period in 2020. Reported recurring EBITDA improved by EUR 27 million, reaching minus EUR 6.8 million in the first 6 months. Excluding IFRS 16, recurring EBITDA improved by EUR 12.4 million, reaching minus EUR 136.7 million for the first 6 months of 2021. In the second quarter, this improvement is enlarged due to the recovery acceleration since May. Reported recurring EBITDA in Q2 improved by EUR 96 million, reaching positive EUR 31.4 million. Excluding IFRS 16 accounting impact, recurring EBITDA improved by close to EUR 79 million, reaching minus EUR 36.3 million, implying a remarkable 64% conversion rate. Below EBITDA, and jumping to Page 11, financial expenses increased by EUR 3.4 million, mainly due to the higher gross financial debt compared to the same period in 2020, explained by the full drawdown of the RCF, the EUR 250 million, unsecured syndicated ICO loan, the EUR 100 million shareholder injection since May this year. Net recurring result has improved for the first time since the end of 2019. EBITDA growth explains the EUR 30 million improvement in the net recurring income reported figure that reaches minus EUR 172 million compared to minus EUR 202 million reported last year. Nonrecurring activity of the period contributed with positive EUR 27 million mainly explained by the net capital gain from the sale and leaseback of NH Collection Calderon in Barcelona that amounted to EUR 47 million, partially offset by certain one-off impacts and write-offs related to the refinancing of the debt and also by the cost of the collective dismissal process. As a consequence, reported total net income improved by EUR 73 million, reaching minus EUR 145.4 million compared to minus EUR 218.5 million in the first half of 2020. Moving to the cash flow evolution on Page 12. The gradual revenue improvement since May together with all cost control measures implemented has allowed NH to reduce the average cash burn per month from EUR 29 million in Q1 to EUR 15 million in Q2, excluding the proceeds from the sale and leaseback signed last month. As you can see in the graph, both the working capital and taxes show positive dynamics. This is mainly explained by a very high conversion of revenues into cash collections due to the lower weight of B2B clients to which typically NH gives great terms. [ A smart ] supply chain management with deferred payment terms, certain corporate income tax and VAT refunds in several countries, and some tax postponement facilities in Benelux. CapEx reached EUR 24 million in the first 6 months and will continue at limited levels during the coming quarters. On June 30, NH announced the sale leaseback of NH Collection Barcelona Grand Hotel Calderon for a price of EUR 125.5 million, an initial lease term of 20 years. The lease includes an option for NH for 2 extensions of 20 years each. This transaction generated a net capital gain of EUR 46.7 million and an estimated net cash after taxes of EUR 113 million. The proceeds will be used to reduce debt. This sustained recovery has continued in July, and I can affirm that NH has crossed the operating cash flow breakeven point, landing into the positive operating cash flow area. The group closed June with an available liquidity of EUR 478 million, out of which EUR 447 million is cash and EUR 31 million in the form of available credit lines. This liquidity of June closing already reflects the proceeds of the sale leaseback transaction and the EUR 100 million equity injection by the majority shareholder Minor International executed through a shareholder loan that will be capitalized through a rights offering process after summer and extend it to all shareholders. This agreement has provided immediate liquidity and demonstrated the shareholder support on the turnaround of the business. Net financial debt increased by EUR 17 million from EUR 685 million in December 2020 to EUR 703 million in June 2021. Operating liability of the fixed leases under IFRS 16 amounts to EUR 2 billion in our balance sheet as of June 2021. Regarding gross financial debt, and as you can see on Page 13, the debt optimization has continued in June with a successful placement of EUR 400 million senior secured bond due in July 2026 and with a 4% coupon. The proceeds of this new bond have been made used for the early redemption of the EUR 357 million senior notes due in 2023. In addition, and thanks to the strong confidence of our banks on NH, the company has signed in June the maturity extension of its EUR 242 million syndicated revolving credit activity from March 2023 to March 2026. And a covenant holiday for the entire 2021 and 2022, enabling the company to face no relevant debt maturities until 2026, allowing us to focus and capitalize on the industry recovery in the coming quarters. And now after covering the results of the first half of the year, the team will be happy to answer any questions you may have. Thank you very much for your time and attendance.

[Operator]

[Operator Instructions] We have the first question from Andre Juillard from Deutsche Bank.

[Andre Juillard, Research Analyst]

First one is about the miles segment and the business client feel in general. I wanted to know if you had a decent visibility on the bookings for the outturn for seminar shares and all these kind of events, which are generally booked in advance? Second question is about the balance sheet. If I look at your results, I can only say that the job has been done between the high-yield bond, the credit line, which has to be converted into capital and so on, the disposal of the asset. If necessary, I guess that you are ready to consider any other option. But if necessary, because my feeling is that the leverage you have at the moment is considered as decent.

[Ramon Aragones Marin, CEO, MD & Executive Director]

So thank you for your question. So the recovery is coming from all the segments, not only from leisure, also for corporate, miles, congress, et cetera. We are still far from where we'd like to be, but we are having a -- very nice on the books for the coming 4 months from B2B and small and business accounts and also for small meetings. As for the big meetings, we -- I think we have to wait until the end of this year. But big meetings are changing really faster than we expected. So my personal feeling is that in the last quarter of this year, we will have a positive surprise from all the segments.

[Luis Martinez Jurado, Chief Financial Officer]

And regarding your question on the balance sheet, well, indeed, thank you for your recognition on the job that we have done and the work we have done on the balance sheet. Indeed, we are very, let's say, confident on the fact that there is no relevant debt maturity and this is going to be fixed after this refinancing, which gives us a lot of headroom in terms of time. We have no covenant pressure until the end of 2022. The full 2021, 2022 [ are wait. ] So no pressure on covenants. And for us, the priority from now onwards is deleveraging. So at the same time, of course, ensure liquidity. Liquidity has been key in this crisis, and it has always shown a very strong liquidity level. Even in the worst moments, we have been honoring our payment commitments, we have been ensuring operational continuity and we have always kept a very high level of liquidity. So in this -- for us, ensuring -- continuing to ensure liquidity plus starting deleveraging process is our priority. In this sense, of course, we will rely on the improvement of the business to stabilize the cash flow. But at the same time, we have already given the first step, we have an asset disposal process. And the ultimate goal of that asset disposal process is to reduce debt. So as we have explained in several calls, even in the process of the refinancing, our priorities are: First is ensuring liquidity, simultaneously a sustainable [ debt maturing ] profile, but of course, and at the same level, start a deleveraging process as we did in the previous years before COVID. Remember that, our leverage, was extremely low at the end of December 2019. And thanks to that, we have had the headroom to react to this crisis, great liquidity, and ensure operational continuity. So we are -- we think we have done the right things in this crisis.

[Andre Juillard, Research Analyst]

Okay. Maybe one additional question about leases. You had, I guess, a permanent discussion with your members since the beginning of this crisis. You've been able to delay or to reduce some rent. But could you give us some more color about the general conditions that have been renegotiated with landlords? Has the duration of -- the average duration of the lease being extended? So happy to have some more detail about that aspect.

[Ramon Aragones Marin, CEO, MD & Executive Director]

As a whole, let me say that what we have with most of our landlords is a balance sheet. So we are cooperating with them many years. So there's a long-term relationship. I have to say that most of them, they really helped us during this period, and they are still supporting us. So we have achieved very nice agreements. I would say that we don't have -- nothing to regret from our negotiation with them. We are not much for the coming years. In some cases, we have spent the lease 1 year or something like that. But in most of the cases, I would say 70% of the cases, what we got from them is simply helps. They really supported us. They are very happy with the company. In most of the cases, as you know, we have many hotels with different landlords. It's quite strange case that we have only one hotel with a landlord. So from the very beginning, we find a fantastic, let's say, approach from them. And we are still negotiating some agreement for this year. We will have some additional help from our landlords for 2021. So we feel comfortable with this agreement that we have reached with them.

[Operator]

Next question from [ Tom Parel ] from [indiscernible].

[Unknown Analyst]

Luis, thank you for the results presentation. I mean a good outcome. Maybe can I start by asking you a couple of things. Your liquidity at EUR 478 million, I think this is post the asset disposals you've recently done. Is that EUR 150 million to EUR 200 million number included in the EUR 478 million, is my first question. Second, do you see the need for any further asset disposals at this point? Do you feel the need to do any more disposals in Benelux or Spain as the case may be? And number 3 is, what are you seeing in terms of booking trends? I remember you mentioning you have visibility on 4 weeks or sometimes it's only a week, but are you able to outline? We're nearly at the end of August -- sorry, at the end of July. So what kind of booking trends are you seeing for August and September?

[Luis Martinez Jurado, Chief Financial Officer]

So yes, this figure, the EUR 478 million includes the proceeds of the asset disposal. Correct. And your question on further disposal, Ramon can give more color.

[Ramon Aragones Marin, CEO, MD & Executive Director]

Yes. Tom, well, listen, the idea of the company is to complete another transaction before the end of this year. We are exploring several options and -- but we are still working on it. So we are far from finishing. So we will communicate to all of you once we will have further information. Obviously, today, we are not in a hurry. The situation is totally different than it was just 3 months ago. But anyway, we have the commitment of closing this transaction before the end of the year, and we will do it. So regarding booking trends, listen, the situation has totally changed -- radical change of trend right now. Honestly, we couldn't expect what is happening right now. Just 3 months ago from May, the situation has changed. We have started in Spain, but now it's in all the countries where we have a strong presence with the exception of South America where, unfortunately, they are behind. But now we are growing in all the markets. We are growing in Spain, we are growing in Italy, in Germany and in Benelux just when we induce some numbers. As I mentioned before, we grew 40% in June versus May.We are growing in July another 40% versus June and July, and we expect to grow about 30%, 40% in August. But for me, the most important is how we are managing the ADR because you have a look to the numbers, you will see that despite that, we are growing in occupancy, and we are opening more hotels. Now we have 90% of the portfolio opening. We have been able to do so without sacrificing ADR. We are now -- every month, we are growing in ADR. We expect to finish almost above EUR 90 and let's see what happen in September. And don't forget that in 2019, we used to have about EUR 100. So we are not really far from the numbers in terms of ADR that we got in 2019. So we are extremely optimistic for the future. We are now building a very good on the books for the coming months. We are going to start September with higher revenues than the total revenues we got in May, just today. And you can imagine that it's still 1 month coming. So honestly, I think it's complicated to come to final conclusion. But for sure, NH has overgrown these prices.

[Unknown Analyst]

Okay. So Ramon if you're going to grow 30% to 40% even in August over July, the question I have is, do you need -- I mean do you anticipate needing further liquidity through further asset disposals? Is the EUR 478 million not enough to carry through next year, especially since you say you're doing to -- you're doing extremely well? Because on the one hand, I'm hearing that, yes, you may do further asset disposals in December, it's all lined up. And when the time is right, you will tell the lenders. But on the other hand, I'm hearing local recovery is good. So I'm asking, do you need to go to that step where you make the asset disposals or are you comfortable with the EUR 478 million of liquidity to carry through to next April, March?

[Ramon Aragones Marin, CEO, MD & Executive Director]

I feel comfortable with the current liquidity of company. But as you know, and you know me, I don't like to have that. So we are going to reduce the debt as soon as possible. So I don't feel comfortable at all with the level of debt of the company. So we have the commitment to reduce the debt. That's the reason why we are going to keep our strategy of asset rotation to reduce debt, the sooner the better. So this is the reason why we are now keep with this strategy of asset rotation. This is not because need of liquidity, because we don't need liquidity right now, but I think it's quite important to reduce debt.

[Luis Martinez Jurado, Chief Financial Officer]

Let me add, Tom, because you know that for us, liquidity is extremely important. But at the same time, deleveraging is our commitment. As a first step, and you know we have a very flexible facility that can be reduced and grown again, we have this as yet. What we have done in July is used a portion of that liquidity to reduce the outstanding amount, the withdrawn amount of the RCF, of the revolver. So we don't need to seek of EUR 478 million of liquidity. That's not the plan. In July, we have already reduced value by reducing RCF, but not liquidity, the cash, because the RCF is liquid. So at any moment, we can grow it again. It's a fully committed facility. It has no covenants until 2022. They have been extended to 2026. So I think we are managing a very smart liquidity strategy, combining an optimization of the outstanding debt and therefore, the financial expense and at the same time, ensuring that the company has a very reasonable and well sized level of liquidity. So as Ramon has explained and as we explained in the road show of the bond, our plan is, during the year, once we have full visibility on the stabilization of the cash flow and also visibility on Q1 '22, the plan is to repay entirely or reduce entirely the outstanding amount of the RCF. And as second step, we don't know when we will start with that, obviously, it will be when the liquidity is not -- when the business is fully recovered. We will continue with the deleveraging strategy. And we have other loans to repay. But we are not in a hurry. We don't have short-term activities. We don't have covenants that put pressure on us. So I think we have the best of the worlds. We have the liquidity. We have loan maturity. We have asset disposal process with very good terms. And therefore, we think we have a clear priority. That is the leverage.

[Operator]

Next question from [ Miguel Medina ] from [ ArmanexT. ]

[Unknown Analyst]

Two questions. The first one, I'm afraid it's a follow-up on the previous question, and I think that you have already answered it, but just to clarify. I think that when you announce the asset disposal plan, you were aiming for around EUR 200 million, of which you have done a bit more than 50%. But I think that at the time, you did not consider the capital injection from Minor EUR 100 million. So if I combine the 2, you have basically achieved the EUR 200 million that you were aiming for from asset disposals. So based on what you have just answered, your idea is that if you can, you are going to accelerate that process as you have done so far this year in order to reduce the leverage. Is this -- am I correct?

[Ramon Aragones Marin, CEO, MD & Executive Director]

Yes, you are right. But what happened with the increasing capital of Minor was some months ago when we didn't have the certainty that we have right now. And anyway, that is -- that means that we are -- we feel more comfortable, but it doesn't mean that we are going to change our goals. Our strategy is clear. Our strategy is slower. And we're going to keep with the same goals that we had before, try to reduce debt as soon as possible.

[Unknown Analyst]

Okay. And then the second question, apologies if you have mentioned this before, but what was the cost in the end of the collective dismissal program? Because I think that from the number of people that you announced, originally, there was some reduction after you reached an agreement with the unions. So I was trying to see if you could provide us with the cost of the delay of plan and compare that with the savings that you have achieved so far, which I believe you mentioned EUR 34 million, EUR 35 million with the possibility of growing back to EUR 60 million over time.

[Ramon Aragones Marin, CEO, MD & Executive Director]

Well, we are still working on it because we are -- for example, right now, I was sitting in the collective dismissal in Italy. So we are still with some processes worldwide. We were finishing in Spain. The negotiation in Spain was better than expected. But for the moment, we can, let's say, give you the final figure. But anyway, I would say it has been an interesting, let's say, process for the company, necessary process. And we feel happy with the result. But when we finish with all these collective dismissal worldwide, that will be maybe the first quarter of 2022, we will communicate the finance figures to all of you.

[Unknown Analyst]

Okay. But basically, you have achieved so far, EUR 34 million, EUR 35 million as a result of this plan. And you are -- if everything goes according to plan, you will hit around EUR 66 million in a year in [ EBIT ].

[Ramon Aragones Marin, CEO, MD & Executive Director]

Yes. But this is the total savings, including a structural measure like reducing of the number of offices and some original decision that we have taken with the structural cost. It's not only payroll. Payroll is going to be about 85%, but it's another 50% coming from different sectors.

[Unknown Analyst]

Sorry, because the line cut off -- was cut off, payroll will be around 70% of this total savings and the balance will come from other items. Is that what you said?

[Ramon Aragones Marin, CEO, MD & Executive Director]

Yes, more or less. More or less. The EUR 60 million is the goal, and now we use to fix our goals. But it's a light program. The commitment with our board is to conclude this process before the summer 2022.

[Operator]

[Operator Instructions] The next question from [ Raul Safara ] from Banco Santender.

[Unknown Analyst]

Yes. I just wanted to -- I mean to -- it's not really a question. If you could remind us what's your targeted leverage levels. So assuming that we are now entering the stage of gradually cash flow generation starting on the third quarter. So what's the goal here? If you can remind us what are your targets now or if they are the same as they were before? And then also, the other one would be on the -- if you could also remind me when do you expect the EBITDA, let's say, the normalized EBITDA level to -- when do you expect to reach the normalized EBITDA level? Is that 2023 or '24, I believe Ramon said 1 year before. So I guess this would be '23, but if you could just confirm that. And that's it.

[Ramon Aragones Marin, CEO, MD & Executive Director]

So on the leverage target, as you can imagine, and you know that the [ agreement ] of NH in the past year has been to reduce leverage and to keep a very low level of leverage. Of course, the situation has changed dramatically. We have gone through the worst crisis in the history of this industry. And now thinking of going back to those levels of leverage before the crisis, it seems to be a real challenge. We think that a company like us needs to reduce debt, and that's our commitment. That's why we are doing this as a disposal process, that's why we are putting such focus on managing working capital, but we don't have a specific number. We don't have a specific target, only that we want to go back to sustainable levels of debt.

[Luis Martinez Jurado, Chief Financial Officer]

So answering your question, [ Raul, ] we expect to come back to a normal EBITDA, let's say, about EUR 300 million in 2023. We don't expect to reach all of it and expect reach the former figures in terms of revenues until 2024. But to be totally agree with you, the situation is changing so quickly that I couldn't say right now what is going to happen. But for sure, it's going to be better -- it's going to be sooner than the market consensus because our cost reduction plan. So for sure in 2023, we will come back to the previous EBITDA level.

[Operator]

[Operator Instructions] We have one question from [ Miguel Medina ] from [ ArmanexT.]

[Unknown Analyst]

One final one. Just curious because you are active renegotiating the leases in which you have been very, very successful. I guess also you are trying to reduce the fixed element of the lease and this the variable element of the fixed. And on the other hand, obviously, you have also been involved in the asset disposal plan, selling NH Hotel Barcelona Calderón, your parent company entered into a transaction with [ Zafora. ] I'm just curious to see if what you are doing on the leasing side, the higher variable component, et cetera, is having an impact on the asset valuations, or there is such a demand for hotels that you don't notice a negative impact on the asset valuation from the changes on the leases.

[Ramon Aragones Marin, CEO, MD & Executive Director]

Well, as you know, the investor used to pay attention to the fixed rent. Variable is, let's say, a complement is something that could happen or not. In our case, I have to say that we are not suffering this, let's say, problem with -- from the investor because obviously, we sold our trophy assets, Calderon in Barcelona. And right now, we have several options, and we are exploring different possibilities. But in any case, we are not ready to selling distress, let's say. We only will close an operation if it is according to our standards.

[Operator]

We don't have any more questions. [Operator Instructions] Seeing as we don't have any more questions. Back to you for the conclusion.

[Javier Vega-Penichet]

Okay. Thank you very much for all for attending this call. We expect you have a good summer holiday, and will keep in touch with the IR department for any further questions you may have. Thank you for your time.

[Ramon Aragones Marin, CEO, MD & Executive Director]

Thank you.

[Luis Martinez Jurado, Chief Financial Officer]

Thank you.

[Operator]

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your partition. You may now disconnect your lines.