Draft Statement by the Chairman for AGM/Annual Report <strong>2010</strong> guests, and the Government’s new initiatives, on the back of Hungary’s presidency of the EU in the first half of 2011, are to be welcomed. A boost for tourism will definitely contribute to economic growth and create more much needed jobs in Hungary. Danubius is willing to pay its full part in this process. In my report last year, I mentioned the importance of the Company’s strategy over the last decade of expanding its health spa business into other countries in the region. Once again, this strategy proved important to Group results as increasing numbers of guests from Russia and former Soviet countries helped maintain our Czech business, whilst Slovakia recorded an upturn of guests from Israel and Arab countries. In Romania, the business proved resilient, despite the wider problems of the Romanian economy. Apart from the continued roll out of the new operating software in Hungary, bringing access to cutting edge management information systems, significant investments have been made in our subsidiaries. In Marienbad, the Maria Spa Project will be completed in Spring 2011 and the fully refurbished balneotherapy facilities in Piestany are now open. In Romania, a programme of refurbishing hotel rooms was completed and work on the wellness and pool area will be concluded later in 2011. We expect 2011 to be another challenging year, not least as, at least for the time being, the Hungarian and Czech currencies are at stronger levels than the rates included in our budgets. Hence, there can be no let up in the tight control of our business costs and cashflow, as well continued innovation in sales and marketing, particularly e-commerce, social media and the enhancement of margins through improved channel management. Danubius will also continue its adjustment to the very different business conditions from those of three or four years ago. We are currently exploring new opportunities, both for investments and management contracts, which are slowly emerging from the shake out of the recession. Such investments must be rigorously justified in the light of the present economic conditions and the availability of finance. However, following the substantial reduction in its cost base over recent years, Danubius should be well placed to take advantage of such opportunities and to improve its profits as revenues start to grow again. During the last year, I can inform you that CP Holdings increased its direct interest in the Company from 80.03% of shares entitled to a voting right to 81.40% today. Given the <strong>2010</strong> results and the exacting business conditions which continue to face the Group, the Board is not proposing the payment of a dividend this year. I would particularly like to thank our managers and employees for their understanding, loyalty and commitment during these difficult times. Only with the full co-operation of all our people, at every level in the organisation, can we maintain service quality which is so essential to our future success. CP Holdings has been a major investor in Danubius Group for over 15 years and I want to assure you that we are not fair weather friends. It is a particular pleasure to me that two further generations of the Schreier family are now involved in our business and this underpins our commitment to Danubius and to all our other business in the region. Whilst I am optimistic by nature, the uncertainties which exist in the world mean we must be realistic in assessing the outlook for 2011. The continuing trend towards later booking and increasing energy and commodity prices are examples of factors which make forecasting difficult. We must hope that improved economic growth forecasts are delivered, especially in Hungary, and that our customers feel sufficiently secure to travel more whether for business or leisure. The frustrating events of the last two or three years must not be allowed to obscure the long term strengths of Danubius – our unique and historical hotel assets, our health spas with signature treatments based on local natural resources and our great reputation for hospi- 3
<strong>ANNUAL</strong> <strong>REPORT</strong> <strong>2010</strong> Draft Statement by the Chairman for AGM/Annual Report <strong>2010</strong> tality. These strengths, together with the tenacity and dedication of our people, will hold us in good stead as we turn the corner from recession to recovery. 4 April 2011 Sir Bernard Schreier Chairman of the Board
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