Mandarin In.sg Regulatory News (MDO)

6 Mar 2008 09:05

Mandarin Oriental International Ld06 March 2008 To: Business Editor 6th March 2008 For immediate release The following announcement was issued today to a Regulatory Information Serviceapproved by the Financial Services Authority in the United Kingdom. MANDARIN ORIENTAL INTERNATIONAL LIMITED2007 PRELIMINARY ANNOUNCEMENT OF RESULTS Highlights • Strong contribution from Hong Kong hotels • Eight new hotel projects announced, including Beijing and Paris • Full year dividend per share increased by 100% to USc6.00 "Favourable conditions enabled Mandarin Oriental to achieve record earnings in2007 and demand remained stable as the new year began. Although the economicenvironment may become more difficult in 2008, the current outlook for the Groupremains encouraging due to both the strength of the brand and the limited newsupply of luxury hotels. This is particularly true in Asia and Europe where theGroup has significant hotel ownership interests." Simon Keswick, Chairman6th March 2008 Results---------------------------------------------------------------------------------------------- Year ended 31st December 2007 2006 Change US$m US$m %----------------------------------------------------------------------------------------------Combined total revenue of hotels under management (1) 1,007.7 850.3 +19Earnings before interest, tax, depreciation and amortization(2) 190.2 116.4 +63Profit attributable to shareholders 108.2 80.0 +35Profit attributable to shareholders - excluding gains 87.1 45.0 +94 on disposal and writeback of impairment of an associate---------------------------------------------------------------------------------------------- USc USc %----------------------------------------------------------------------------------------------Earnings per share 11.16 8.28 +35Earnings per share - excluding gains on disposal and writeback of impairment of an associate 8.98 4.66 +93Dividends per share 6.00 3.00 +100---------------------------------------------------------------------------------------------- US$ US$ %----------------------------------------------------------------------------------------------Net asset value per share 1.18 1.03 +15Net asset value per share with leasehold properties at 2.34 1.78 +31 valuation(3) ---------------------------------------------------------------------------------------------- (1) Combined revenue includes turnover of the Group's subsidiary hotels in additionto 100% of revenue from associate, joint venture and managed hotels.(2) EBITDA does not include gains on disposal and writeback of impairment of anassociate.(3) The net asset value per share with leasehold properties at valuation has beenpresented after adjusting for the market value of the Group's leasehold interests.International Financial Reporting Standards ('IFRS') do not permit leaseholdinterests of owner-occupied land to be carried at valuation. The Group considersthat the IFRS treatment does not reflect the economic substance of its underlyingproperty investments. Therefore, the Group has presented the net asset value pershare taking into account the fair market value of leasehold interests assupplementary financial information in addition to the net asset value per share inaccordance with IFRS. ----------------------------------------------------------------------------------------------- The final dividend of USc5.00 per share will be payable on 14th May 2008, subjectto approval at the Annual General Meeting to be held on 7th May 2008, toshareholders on the register of members at the close of business on 20th March2008. The ex-dividend date will be on 18th March 2008, and the share registers willbe closed from 24th to 28th March 2008, inclusive. - more - MANDARIN ORIENTAL INTERNATIONAL LIMITED PRELIMINARY ANNOUNCEMENT OF RESULTSFOR THE YEAR ENDED 31ST DECEMBER 2007 OVERVIEW Favourable conditions in most markets and a limited new supply of hotel rooms inkey city centre locations enabled Mandarin Oriental to achieve higher averagerates and record earnings in 2007. In particular, the Group's two wholly-ownedHong Kong hotels performed well, including its original flagship, MandarinOriental, Hong Kong, which was reopened in late September 2006 after completionof a major renovation programme. The Group's development programme continued apace in 2007 and, with a recordnumber of new hotel projects announced, Mandarin Oriental now has 10,000 roomsin operation or under development. PERFORMANCE Earnings before interest, tax, depreciation and amortization for 2007 wereUS$190 million compared with US$116 million in 2006 when Mandarin Oriental, HongKong was closed for nine months. Profit attributable to shareholders in 2007 was US$108 million, which includes aUS$16 million gain arising from the sale of half the Group's 50% equity interestin Mandarin Oriental, New York and a US$5 million investment writeback inrespect of the value of the Group's 25% interest in its Kuala Lumpur hotel. Thiscompares with US$80 million in the previous year, which included a post-tax gainof US$35 million arising from the sale of The Mark hotel in New York. Excludingthe non-trading items, profit attributable to shareholders was US$87 million in2007 compared with US$45 million in 2006. Earnings per share for the year were USc11.16 compared with USc8.28 in 2006.Excluding non-trading items, earnings per share in 2007 were USc8.98 comparedwith USc4.66 per share in 2006. The Directors recommend a final dividend of USc5.00 per share. This, togetherwith the interim dividend of USc1.00 per share, will make a total annualdividend of USc6.00, an increase of 100% compared with the USc3.00 paid inrespect of 2006. The Group remains in a strong financial position. The net asset value per sharewith leasehold properties adjusted for fair market value was US$2.34 at 31stDecember 2007, an increase of 31% compared with US$1.78 at the end of 2006. DEVELOPMENTS The Group announced eight new projects in 2007, comprising hotels in Beijing,Guangzhou, Taipei, Milan and Paris and three in resort destinations. All of the18 hotels the Group now has under development will be managed on behalf ofthird-party owners, with the exception of Paris which is a long-term lease. Tenof the projects incorporate a Residences at Mandarin Oriental component, inaddition to the residences being built next to the Group's existing hotel inLondon. Mandarin Oriental Riviera Maya, Mexico opened in February 2008, bringing thetotal number of the Group's operating hotels to 21. The opportunity for futuregrowth is significant as the Group is now well-recognized as a pre-eminentinternational luxury brand, with a reputation for exceptional service. OUTLOOK In conclusion, the Chairman, Simon Keswick said, "While demand was stable in thefirst two months of the year, economic conditions in 2008 may become moredifficult in some of the Group's markets. The outlook for Mandarin Oriental,however, remains encouraging due to both the strength of the brand and thelimited new supply of luxury hotels. This is particularly true in Asia andEurope where the Group has significant hotel ownership interests." GROUP CHIEF EXECUTIVE'S REVIEW BUSINESS STRATEGY Mandarin Oriental aims to be widely recognized as the best international luxuryhotel group offering 21st century luxury with oriental charm in sought-afterdestinations around the world. An award-winning owner and operator of some ofthe world's most prestigious hotels and resorts, our Group will continue to growprofitably its global presence. Mandarin Oriental now operates 21 hotels with afurther 18 under development, bringing the total number of rooms to 10,000 in 23countries, reflecting the increasing strength of the brand. PROGRESS ACHIEVED A number of significant accomplishments resulted in 2007 being another milestoneyear for Mandarin Oriental. Firstly, the Group achieved its highest ever financial performance. Thisresulted from the enhanced contributions of our growing and diversified globalportfolio which benefited from strong market conditions in our key locations.The increasing demand for luxury travel experiences, the continued limited newsupply in our sector and the impact of the global growth of the Group is clearlydemonstrated by comparing our performance over the past four years, since theend of the Asian downturn in 2003: 2004 2005 2006 2007 07 vs. 04 US$m US$m US$m US$m %-----------------------------------------------------------------------------------------------------Combined total revenue of hotels under management 667 815 850 1,008 51-----------------------------------------------------------------------------------------------------EBITDA 99 124 116 190 92-----------------------------------------------------------------------------------------------------Profit attributable to shareholders excluding non-trading items 19 41 45 87 358----------------------------------------------------------------------------------------------------- Secondly, Mandarin Oriental's international expansion continued to accelerate.In 2007, the Group ended the year with a record of eight new managementcontracts announced, including luxury hotels in the strategically importantcities of Beijing and Paris. Further progress has been made in the developmentof Mandarin Oriental's hideaway concepts, with the recent opening of MandarinOriental Riviera Maya, Mexico. During the year, the Group also announced afurther three Residences at Mandarin Oriental that will accompany hotelprojects, bringing the total number of branded Residences to 12. The Groupcontinues to review additional opportunities for luxurious urban hotels,resorts, hideaways and residences in important locations around the world. Finally Mandarin Oriental increased its global recognition. The Group and itshotels were highly successful in achieving significant awards from respectedtravel associations and publications, with more Mandarin Oriental hotelsfeatured than ever before. Highlights include the 2007 Conde Nast Traveler US'Readers Choice Awards' which featured ten Mandarin Oriental hotels and 'TheWorld's Best' from Travel & Leisure, with nine hotels appearing. MandarinOriental, New York remains one of only a few hotels to achieve both theprestigious 'Mobil Five Star' and the American Automobile Association's 'FiveDiamond Lodgings Award'. The Group's expertise in holistic spa operations wasalso recognized with Mandarin Oriental achieving more spa awards than in anyother year, including 'Best Wellness and Spa Company' by Spa Asia and the most'Outstanding Brand' in Spa Finders 2007 Readers Choice Awards, with sixindividual hotel spas winning in a variety of categories. Finally MandarinOriental Hotel Group was voted Best Overseas Hotel Group by readers of TheObserver and The Guardian newspapers in the UK in October 2007. PERFORMANCE IN 2007 Set out below is a review of the Group's performance in 2007, with reference tothe following strategic objectives: • Being recognized as the world's best luxury hotel group • Strengthening our competitive position • Increasing the number of rooms under operation to 10,000 • Achieving a strong financial performance 1. Being recognized as the world's best luxury hotel group Mandarin Oriental is enjoying increasing recognition for creating many of theworld's most desirable luxury hotels. From our roots in the heart of Asia, wheremost of our original properties remain market leaders having benefited fromrenovations in recent years, Mandarin Oriental has expanded into the globalarena, with award-winning properties in many of the world's leadingdestinations. The visibility of our brand will increase further as the number ofhotels we operate around the world continues to grow. The Group remains focused, as always, on delivering the brand attributes whichdefine our own style of luxury. This includes creative hotel design andarchitecture, innovative dining experiences, expertise in holistic spaoperations, guest-orientated technology and, of course, the legendary servicewhich remains the foundation of everything we do. The investment behind ourbrand and our people over the past few years has led to the Group becoming wellrespected as a management company amongst the owners and developers of luxuryhotels around the world. Such strong brand recognition allows our properties to achieve premium rates andcompete effectively. 2. Strengthening our competitive position To be the market leader within their local environment is a key goal for each ofour hotels, and we continued to improve our competitive positioning in 2007.Demand for luxury travel grew, as did our ability to increase average rates.This led to higher Revenue Per Available Room (RevPAR) across all regions, withAsia up 12%, Europe up 26% and The Americas up 14% over 2006. Consequently,operating profits at most of the individual hotels have shown significantimprovement over the previous year. The highlights of each region are as follows: Asia The Group's results benefited from the full contribution of Mandarin Oriental,Hong Kong which reopened as one of the world's legendary hotels in lateSeptember 2006 following a nine-month closure and a US$150 million renovation.In its first full year of operation since the renovation, the hotel achieved anoccupancy of 74% and an average rate of US$399, 50% above the rate in 2005.While the hotel's occupancy was affected by the tail end of the renovation workin the earlier part of the year, occupancy was 84% in the fourth quarter. There-designed hotel has been acclaimed locally and internationally and is quicklyre-establishing its top position in readership surveys of prestigiouspublications around the world. It was voted 'Best Renovated Hotel' in BusinessTraveller UK's annual readership survey in 2007. The Excelsior, Hong Kong, the Group's second wholly-owned property in the citywith 885 rooms, also had an excellent year, achieving an 8% increase in RevPARover 2006 results, with the average rate up to US$179 from US$163. In Macau, Mandarin Oriental maintained its competitive position despite asignificant increase in the city's hotel supply which led to a RevPAR decreaseof 5% year-on-year. As a result of further improvements in the local economies, RevPAR increased by22% in Manila and 17% in Kuala Lumpur. In September 2007, the Group's 50% ownedhotel in Singapore was re-named Mandarin Oriental, Singapore to align theproperty better with the Group's brand, following the successful renovation in2005. The hotel capitalized on strong market conditions throughout the year,achieving a 28% increase in RevPAR with the average rate up to US$209 fromUS$163 in 2006. In December 2007, Mandarin Oriental, Jakarta closed its doorsfor two years to embark on a far-reaching, US$50 million renovation programmedesigned to re-position the property as one of the city's most luxurious andcontemporary hotels. Despite the political uncertainties in Thailand, The Oriental, Bangkokmaintained its strong competitive position and once again appeared at the top ofthe most important world-wide travel awards. Mandarin Oriental, Tokyo performed well in its second full year of operation,achieving a 19% increase in RevPAR over 2006 with an average rate of US$475. Thehotel continues to enhance its reputation as one of the top luxury hotels in thecity. Recently, it was voted the top-rated hotel in Japan in Zagat's 2007-2008World's Top Hotels, Resorts & Spas Survey, and its fine-dining restaurantSignature was awarded a Michelin Star. Europe In Europe, strong demand for luxury accommodation, particularly from the leisuremarket, and a limited new supply of hotel rooms, drove increases in room ratesin all of our hotels. In particular, Mandarin Oriental Hyde Park, London had anexcellent year, increasing its average rate from US$731 in 2006 to US$886 in2007, a 12% increase in local currency terms. Occupancy also increased from 85%to 88%. Following the completion of a full scale rooms renovation programme inthe first half of the year, Mandarin Oriental, Munich maintained its position asthe undisputed market leader in the city, and increased its average rate toUS$585 from US$503 in 2006, a 7% increase in local currency terms. In Geneva,Mandarin Oriental improved both its occupancy and average room rate, resultingin a 23% increase in RevPAR in local currency terms, despite having commenced arenovation to the public areas of the hotel in October 2007. The work will becompleted in June 2008 and will include new restaurants and bars as well asseven additional roof-top suites which will be particularly appealing to theleisure traveller. The Americas All of the Group's hotels in The Americas benefited from strong demand andlimited new supply, resulting in rate increases in each location. MandarinOriental, Washington D.C. did well to increase its contribution to the Group'sresults, with a 14% increase in RevPAR mainly due to higher average rates. Thehotel has established itself as one of the city's most luxurious properties, andover the longer term, there is potential for further achievement as the localneighbourhood develops along the Potomac River. Once again, the Group's flagship New York property received many accolades fromits guests and the world's media. Mandarin Oriental, New York achieved anaverage rate of US$937 with an occupancy of 76%, resulting in a 15% increase inRevPAR over the previous year. Our Miami property also increased its RevPARperformance by 14% over the previous year. 3. Increasing the number of rooms under operation to 10,000 With the record number of new projects announced in 2007, Mandarin Oriental willsuccessfully achieve its mid-term goal of operating 10,000 rooms in key globallocations within the next few years. During the year, we announced eight newMandarin Oriental hotels, resorts or hideaways in Beijing, Guangzhou, Taipei,Marbella, Milan, Paris, Costa Rica and St Kitts. Mandarin Oriental Riviera Maya,Mexico is the Group's most recent hotel to open in February 2008, while MandarinOriental, Sanya, a resort destination on China's Hainan Island, should open bythe mid-year. Both hotels had been planned to open in 2007, but were affected byconstruction delays. Beijing and Boston should also open later this year. Goingforward, the timing of new hotel openings will be subject to change asdevelopers find it more difficult to access new financing. The number of hotels operated by the Group will increase from 21 currently to 39in the coming years. Critical mass and strong geographic diversification willthen have been achieved with 16 properties in Asia, 14 in The Americas and ninein Europe and North Africa. The brand has been enhanced further by the increasing number of Residences atMandarin Oriental which are generally integrated with the new hoteldevelopments. The Group receives one-off branding fees from these residentialprojects, as well as ongoing revenues resulting from the use of hotel facilitiesby the owners of the villas or apartments. The potential for future growth remains significant. The Group constantlyreviews opportunities for additional luxury properties, each of which must meetexacting criteria aimed at providing exceptional experiences to MandarinOriental guests. Most new opportunities are in the form of management contractswhich require limited capital from the Group but generate significant brandingand management fees. With the exception of Paris which is a long-term lease, all18 current projects under development are management contracts, highlighting thestrength of the brand. At the same time, the Group will remain a significantowner of hotel properties, particularly in major cities, and we are wellpositioned to take advantage of future investment opportunities that may arisein strategic locations. Ownership provides potential long-term capitalappreciation, ensures the continuing control of our brand heritage and gives usincreased credibility with third-party hotel owners and developers. Our hotelinvestments can also provide the Group with significant profits and cash flow asit benefits fully from favourable market conditions, as demonstrated by ourportfolio in 2007. Overall, the intent of operating both owned and managedhotels remains fundamental to the strategy of the Group. 4. Achieving a strong financial performance Mandarin Oriental achieved a record performance in 2007, with improved resultsfrom the Group's growing international portfolio as well as the return of thecontribution from the fully renovated, 100%-owned Mandarin Oriental, Hong Kong.Excluding gains from disposals and other non-trading items, profit attributableto shareholders in 2007 was US$87 million compared to US$45 million in 2006. The completed sale of half of its 50% interest in Mandarin Oriental, New York inMarch 2007, resulted in a post-tax gain of US$16 million. The Group continues toown 25% of this strategically important property with improved terms for ourlong-term management contract. In 2007, the Group carried out a full review of its hotel investments byindependent, third-party valuers. This has been reflected in the adjusted netasset value per share which was US$2.34 at 31st December 2007, an increase of31% from 2006 as the Group continued to benefit from capital appreciation on itshotel investments. Reflecting the Group's growth in earnings and strong financial position,Mandarin Oriental has recommended a 100% increase in the full year dividend toUSc6.00. THE FUTURE Mandarin Oriental is well positioned to benefit from its global portfolio, asnew hotels come on stream in the coming few years and the Group doubles in size.The demand for luxury travel and the limited new supply in most of thedestinations in which we operate should also provide support, notwithstandingpossible future uncertainties. As we open new and exciting projects in the world's most sought-afterdestinations, the recognition of Mandarin Oriental as a global luxury brandgrows stronger. The Group is therefore in an excellent position to deliver ourlong-term vision of being widely recognized as the best luxury hotel group inthe world. Edouard EttedguiGroup Chief Executive6th March 2008 -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Profit and Loss Accountfor the year ended 31st December 2007------------------------------------------------------------------------------------- 2007 2006 US$m US$m ------------------------------------------------------------------------------------Revenue (note 2) 529.5 404.6Cost of sales (318.8) (267.2) ---------------------------Gross profit 210.7 137.4Selling and distribution costs (32.6) (27.7)Administration expenses (70.4) (64.6)Gain on disposal of The Mark (note 4) - 76.8 ---------------------------Operating profit (note 3) 107.7 121.9 ---------------------------Interest income 18.9 11.0Financing charges (35.3) (26.2) ---------------------------Net financing charges (16.4) (15.2) ---------------------------Share of results of associates and joint ventures excluding writeback of impairment of an associate 17.8 13.0Writeback of impairment of an associate (note 5) 5.1 - ---------------------------Share of results of associates and joint ventures (note 5) 22.9 13.0Gain on disposal related to an associate (note 6) 16.0 - ---------------------------Profit before tax 130.2 119.7Tax (note 7) (22.8) (39.5) ---------------------------Profit for the year 107.4 80.2 ---------------------------Attributable to:Shareholders of the Company 108.2 80.0Minority interests (0.8) 0.2 --------------------------- 107.4 80.2 ---------------------------------------------------------------------------------------------------------------- USc USc-------------------------------------------------------------------------------------Earnings per share (note 8)- basic 11.16 8.28- diluted 10.96 8.17Earnings per share - excluding gains on disposal and writeback of impairment- basic 8.98 4.66- diluted 8.82 4.60------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Balance Sheetat 31st December 2007------------------------------------------------------------------------------------- 2007 2006------------------------------------------------------------------------------------- US$m US$mNet assetsIntangible assets 216.2 216.0Tangible assets (note 9) 995.0 882.5Associates and joint ventures 204.6 190.0Other investments 10.3 6.4Loan receivables 3.4 12.0Pension assets 34.0 27.1Deferred tax assets 27.5 27.4Other non-current assets 0.2 2.9 ---------------------------Non-current assets 1,491.2 1,364.3 ---------------------------Stocks 4.7 4.3Debtors and prepayments 69.3 65.7Current tax assets 3.4 -Cash at bank 492.4 286.7 --------------------------- 569.8 356.7Non-current asset classified as held for sale (note 10) - 53.9 ---------------------------Current assets 569.8 410.6 ---------------------------Creditors and accruals (105.5) (91.0)Current borrowings (note 11) (13.4) (25.4)Current tax liabilities (7.2) (4.4) ---------------------------Current liabilities (126.1) (120.8) ---------------------------Net current assets 443.7 289.8Long-term borrowings (note 11) (663.9) (575.1)Deferred tax liabilities (107.7) (72.9)Pension liabilities (0.1) (1.5)Other non-current liabilities (2.9) (0.2) --------------------------- 1,160.3 1,004.4 ---------------------------Total equityShare capital 48.7 48.4Share premium 163.5 160.3Revenue and other reserves 940.1 792.0 ---------------------------Shareholders' funds 1,152.3 1,000.7Minority interests 8.0 3.7 --------------------------- 1,160.3 1,004.4 ---------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Statement of Recognized Income and Expensefor the year ended 31st December 2007------------------------------------------------------------------------------------- 2007 2006 US$m US$m-------------------------------------------------------------------------------------Surplus on revaluation of properties 78.4 74.1Actuarial gains on defined benefit pension plans 7.6 5.6Net exchange translation differences 38.3 45.1Gain on other investments 0.1 -Loss on cash flow hedges (5.5) (2.9)Tax on items taken directly to equity (29.6) (25.3) --------------------------- Net income recognized directly in equity 89.3 96.6Transfer to profit and loss on realization of exchange reserves (8.3) -Profit for the year 107.4 80.2 --------------------------- Total recognized income and expense for the year 188.4 176.8 --------------------------- Attributable to:Shareholders of the Company 184.1 176.8Minority interests 4.3 - --------------------------- 188.4 176.8 ---------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Cash Flow Statementfor the year ended 31st December 2007------------------------------------------------------------------------------------- 2007 2006 US$m US$m-------------------------------------------------------------------------------------Operating activities ---------------------------Operating profit 107.7 121.9Depreciation 37.6 28.4Amortization of intangible assets 0.9 0.3Non-cash items (3.9) (74.7)Movements in working capital 5.3 (1.4)Interest received 18.5 10.5Interest and other financing charges paid (34.9) (26.5)Tax paid (14.0) (8.2) --------------------------- 117.2 50.3Dividends and interest from associates and joint ventures 12.3 12.1 ---------------------------Cash flows from operating activities 129.5 62.4 Investing activities ---------------------------Purchase of tangible assets (50.1) (135.5)Purchase of intangible assets (1.6) (0.8)Investments in and loans to associates and joint ventures - (0.2)Advance of mezzanine loans (3.4) -Repayment of mezzanine loan 12.0 -Increase in other investments (3.6) (1.2)Proceeds on disposal of The Mark - 98.5Proceeds on disposal related to an associate 70.7 -Capital distribution from associates 14.4 1.2 ---------------------------Cash flows from investing activities 38.4 (38.0) Financing activities ---------------------------Issue of shares 3.5 1.6Drawdown of borrowings 535.9 113.6Repayment of borrowings (464.4) (8.9)Dividends paid by the Company (note 13) (38.7) (14.5) --------------------------- Cash flows from financing activities 36.3 91.8Effect of exchange rate changes 1.3 1.6 ---------------------------Net increase in cash and cash equivalents 205.5 117.8Cash and cash equivalents at 1st January 286.6 168.8 ---------------------------Cash and cash equivalents at 31st December 492.1 286.6 ---------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedNotes-------------------------------------------------------------------------------------1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the audited results for the year ended 31st December 2007 which have been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies. In 2007, the Group adopted the following standards and interpretations to existing standards which are relevant to its operations: IFRS 7 Financial Instruments: DisclosuresAmendment to IAS 1 Capital DisclosuresIFRIC 8 Scope of IFRS 2IFRIC 9 Reassessment of Embedded DerivativesIFRIC 10 Interim Financial Reporting and Impairment There have been no changes to the accounting policies as a result of adoption of the above standards and interpretations. Certain comparative figures in the segmental disclosure have been reclassified to conform with current year presentation. The following standards and interpretations to existing standards, which are relevant to the Group's operations, were published but are not yet effective in 2007: IFRS 3 Business CombinationsAmendment to IAS 27 Consolidated and Separate Financial StatementsIFRS 8 Operating SegmentsIAS 1 Presentation of Financial StatementsIAS 23 Borrowing CostsAmendments to IFRS 2 Share-Based Payment - Vesting Conditions and CancellationsIFRIC 11, IFRS 2 Group and Treasury Share TransactionsIFRIC 13 Customer Loyalty ProgrammesIFRIC 14, IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The Group will apply Amendments to IFRS 2, IFRIC 11, IFRIC 14 and IAS 19 from 1st January 2008; IFRS 8, IAS 1, IAS 23 and IFRIC 13 from 1st January 2009; and IFRS 3 and Amendment to IAS 27 from 1st January 2010. 2. REVENUE 2007 2006 US$m US$m ---------------------------By geographical area:Hong Kong and Macau 200.8 106.3Other Asia 119.3 111.0Europe 146.4 123.3The Americas 63.0 64.0 --------------------------- 529.5 404.6 ---------------------------3. OPERATING PROFIT 2007 2006 US$m US$m ---------------------------By geographical area:Hong Kong and Macau 54.2 (1.8)Other Asia 3.6 9.0Europe 47.0 28.4The Americas 2.9 9.5 --------------------------- 107.7 45.1Gain on disposal of The Mark (refer note 4) - 76.8 --------------------------- 107.7 121.9 --------------------------- 4. GAIN ON DISPOSAL OF THE MARK The sale of the Group's 100% interest in The Mark, New York was completed on 16th February 2006 for a gross consideration of US$150.0 million. The hotel was originally acquired in 2000 as part of the US$142.5 million acquisition of The Rafael Group. The pre-tax gain on this disposal was US$76.8 million, and the post-tax gain on the disposal was US$35.0 million. 5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES 2007 2006 US$m US$m ---------------------------By geographical area:Hong Kong and Macau 4.5 5.0Other Asia 18.3 9.3The Americas 0.1 (1.3) --------------------------- 22.9 13.0 --------------------------- 5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES The operating properties owned by associates and joint ventures were revalued at 31st December 2007 by independent, professionally qualified valuers on an open market basis. As a result, the consolidated profit and loss account includes a US$5.1 million (2006: nil) writeback of an impairment previously made against the value of the Group's interest in Mandarin Oriental, Kuala Lumpur. In addition, the Group's share of the underlying net revaluation surplus of US$1.6 million has been dealt with in capital reserves. In 2006, the Group's share of the underlying net revaluation surplus of US$16.6 millionwas dealt with in capital reserves. 6. GAIN ON DISPOSAL RELATED TO AN ASSOCIATE The sale of half of the Group's 50% investment in Mandarin Oriental, New York was completed on 1st March 2007. This sale has reduced the Group's interest in the hotel from 50% to 25%. The hotel was valued at US$340.0 million for the purpose of the sale. On disposal of the 25% interest, the Group recorded a pre-tax gain of US$25.0 million, with a post-tax gain of US$16.0 million after a tax charge of US$9.0 million arising on the disposal. The Group will continue to manage the hotel under a long-term agreement. 7. TAX 2007 2006 US$m US$m --------------------------- Current tax 13.3 50.6Deferred tax 9.5 (11.1) --------------------------- 22.8 39.5 --------------------------- The applicable tax rate for the year was 17% (2006: 37%) and represents theweighted average of the rates of taxation prevailing in the territories in whichthe Group operates. The decrease in the applicable tax rate is caused by achange in the profitability of the Group's subsidiary undertakings in therespective territories. The 2006 tax on profits included a tax charge of US$41.8 million arising on thedisposal of the Group's 100% interest in The Mark, New York (refer note 4). 8. EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholdersof US$108.2 million (2006: US$80.0 million) and on the weighted average numberof 969.8 million (2006: 966.6 million) shares in issue during the year. Theweighted average number excludes shares held by the Trustee of the SeniorExecutive Share Incentive Schemes. Diluted earnings per share are calculated on profit attributable to shareholdersof US$108.2 million (2006: US$80.0 million) and on the weighted average numberof 987.1 million (2006: 979.3 million) shares after adjusting for the number ofshares which are deemed to be issued for no consideration under the SeniorExecutive Share Incentive Schemes based on the average share price during theyear. The number of shares for basic and diluted earnings per share isreconciled as follows: Ordinary shares in millions 2007 2006 --------------------Weighted average number of shares in issue 969.8 966.6Adjustment for shares deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes 17.3 12.7 --------------------Weighted average number of shares for diluted earnings per share 987.1 979.3 -------------------- Basic and diluted earnings per share are also presented based on the profit before gains on disposal and writeback of impairment. A reconciliation of earnings is set out below: 2007 2006 -------------------------------------- -------------------------------------- Basic Diluted Basic Diluted earnings earnings earnings earnings per share per share per share per share US$m USc USc US$m USc USc -------------------------------------- --------------------------------------Profit before gains on disposal and writeback of impairment 87.1 8.98 8.82 45.0 4.66 4.60Gains on disposal 16.0 35.0Writeback of impairment 5.1 - ------ ------ Profit attributable to shareholders 108.2 11.16 10.96 80.0 8.28 8.17 ------ ------ 9. TANGIBLE ASSETS AND CAPITAL COMMITMENTS 2007 2006 US$m US$m ---------------------------Opening net book value 882.5 684.0Translation differences 26.0 52.4Additions 53.6 129.4Disposals (0.1) (0.2)Transfer out - (0.1)Depreciation charge (37.6) (28.4)Revaluation surplus 70.6 45.4 ---------------------------Closing net book value 995.0 882.5 ---------------------------Capital commitments 62.6 37.7 --------------------------- The Group's freehold properties and the building component of leaseholdproperties were revalued at 31st December 2007 by independent, professionallyqualified valuers on an open market basis. As a result, there was an increase inthe fair value of properties of US$70.6 million. After providing for deferredtax liabilities of US$23.6 million on the revalued amounts, US$47.0 million hasbeen taken to capital reserves. In 2006, there was an increase in the fair valueof properties of US$45.4 million. After providing for deferred tax liabilitiesof US$11.7 million on the revalued amounts, US$33.7 million was taken to capitalreserves. Tangible assets include a property valued at US$148.2 million (2006: US$110.9million), which is stated net of tax increment financing of US$29.8 million(2006: US$30.6 million) (refer note 12). If the freehold properties and the building component of leasehold propertieshad been included in the financial statements at cost less depreciation, thecarrying value would have been US$646.5 million (2006: US$607.5 million). 10. NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE An analysis of the non-current asset classified as held for sale is as follows: 2007 2006 US$m US$m ---------------------------Associates and joint venture - 13.7Loan receivable - 31.2Current assets - 9.0 ---------------------------Total assets - 53.9 ---------------------------The Group's 25% interest in Mandarin Oriental, New York was classified as held for sale as at 31st December 2006. The sale was completed on 1st March 2007 (refer note 6). 11. BORROWINGS 2007 2006 US$m US$m ---------------------------Bank loans 667.0 590.9Other borrowings 8.6 7.9Tax increment financing (refer note 12) 1.7 1.7 --------------------------- 677.3 600.5 ---------------------------Current 13.4 25.4Long-term 663.9 575.1 --------------------------- 677.3 600.5 --------------------------- 12. TAX INCREMENT FINANCING 2007 2006 US$m US$m ---------------------------Netted off against the net book value of property (refer note 9) 29.8 30.6Loan (refer note 11) 1.7 1.7 --------------------------- 31.5 32.3 --------------------------- A development agreement was entered into between one of the Group's subsidiariesand the District of Columbia ('District'), pursuant to which the District agreedto provide certain funds to the subsidiary out of net proceeds obtained throughthe issuance and sale of certain tax increment financing bonds ('TIF Bonds') forthe development and construction of Mandarin Oriental, Washington D.C. The District agreed to contribute to the subsidiary US$33.0 million through theissuance of TIF Bonds in addition to US$1.7 million issued in the form of aloan, bearing simple interest at an annual rate of 6.0%. The US$1.7 million loanplus all accrued interest will be due on the earlier of 10th April 2017 or thedate of the first sale of the hotel. The receipt of the TIF Bonds has been treated as a government grant and nettedoff against the net book value in respect of the property (refer note 9). Theloan of US$1.7 million (2006: US$1.7 million) is included in long-termborrowings (refer note 11). 13. DIVIDENDS 2007 2006 US$m US$m ---------------------------Final dividend in respect of 2006 of USc3.00 (2005: USc1.50) per share 29.0 14.5Interim dividend in respect of 2007 of USc1.00 (2006: nil) per share 9.7 - --------------------------- 38.7 14.5 --------------------------- A final dividend in respect of 2007 of USc5.00 (2006: USc3.00) per shareamounting to a total of US$48.5 million (2006: US$29.0 million) is proposed bythe Board. The dividend proposed will not be accounted for until it has beenapproved at the Annual General Meeting. The amount will be accounted for as anappropriation of revenue reserves in the year ending 31st December 2008. The final dividend of USc5.00 per share will be payable on 14th May 2008,subject to approval at the Annual General Meeting to be held on 7th May 2008, toshareholders on the register of members at the close of business on 20th March2008. The ex-dividend date will be on 18th March 2008, and the share registerswill be closed from 24th to 28th March 2008, inclusive. Shareholders willreceive their dividends in United States Dollars, unless they are registered onthe Jersey branch register where they will have the option to elect for Sterling.These shareholders may make new currency elections for the 2007 final dividendby notifying the United Kingdom transfer agent in writing by 25th April 2008.The Sterling equivalent of dividends declared in United States Dollars will becalculated by reference to a rate prevailing on 30th April 2008. Shareholdersholding their shares through The Central Depository (Pte) Limited ('CDP') inSingapore will receive United States Dollars unless they elect, through CDP, toreceive Singapore Dollars. - end - For further information, please contact: Mandarin Oriental Hotel Group International LimitedEdouard Ettedgui / John R Witt (852) 2895 9288Jill Kluge / Sally de Souza (852) 2895 9167 Matheson & Co., Limited Philip Hawkins (020) 7816 8136 GolinHarrisKennes Young (852) 2501 7987 Weber Shandwick FinancialRichard Hews / Hannah Marwood (020) 7067 0700 Full text of the Preliminary Announcement of Results and the PreliminaryFinancial Statements for the year ended 31st December 2007 can be accessedthrough the Internet at 'www.mandarinoriental.com'. This information is provided by RNS The company news service from the London Stock Exchange