Mandarin In.sg Regulatory News (MDO)

Results 

MANDARIN ORIENTAL INTERNATIONAL LIMITED

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2011

OVERVIEW

Increased demand throughout 2011 led to improved performances in most of the Group's markets, which helped offset the impact on earnings of reduced occupancy in Tokyo following the earthquake and tsunami and the pre-opening costs in Paris. Most Group hotels maintained or enhanced their competitive positions, and the strength of the brand was further demonstrated by an increase in the number of leading awards received.

PERFORMANCE

Underlying earnings before interest, tax, depreciation and amortization ('EBITDA') for 2011 were US$163 million, an increase of US$27 million from 2010. The 2011 result includes US$16 million of branding fees received following the completion of The Residences at Mandarin Oriental, London offset in part by US$13 million of pre-opening expenses in Paris.

Underlying profit was up 33% at US$59 million in 2011, and underlying earnings per share were 32% higher at US¢5.92.

Profit attributable to shareholders was US$67 million. This included US$8 million of net non-trading profit, with the principal item being a gain of some US$10 million representing the value of a long-term leasehold interest in part of The Residences at Mandarin Oriental, London which was granted by the developer to the Group at no cost. There were no non-trading items in 2010.

The Group's balance sheet remains strong. After taking into account an independent valuation of the Group's hotel properties, the net asset value per share was US$2.70 at 31st December 2011, compared with US$2.33 at the end of 2010.

The Directors recommend a final dividend of US¢4.00 per share. This, together with the interim dividend of US¢2.00 per share, will make a total annual dividend of US¢6.00 per share, an increase of US¢1.00 per share from 2010.

GROUP REVIEW

Profitability improved across most of Mandarin Oriental's portfolio, particularly in Asia and Europe.

In Hong Kong, robust demand at the Group's two wholly-owned hotels led to improved occupancy, rates and profitability. Revenue per available room ('RevPAR') increased at Mandarin Oriental, Hong Kong by 14% and at The Excelsior by 18%. In Tokyo, occupancy fell to 50% from 64% in 2010, although some improvement was seen towards the end of the year. Singapore continued to benefit from a growing number of visitors to the city, but the performance in Bangkok was adversely affected in the last quarter of the year by the floods in Thailand.

In Europe, most of the Group's hotels benefited from an increase in demand, with particularly strong performances in London and Munich. Mandarin Oriental, Paris opened in June to considerable acclaim. The 138-room property is positioned as one of the best hotels in the city and has been well received.

In The Americas, business levels improved across the portfolio, although the rate of RevPAR growth was lower than in the Group's other regions.

DEVELOPMENT

The Group's next planned hotel opening is in Guangzhou in the second half of 2012. This will be followed in 2013 by Taipei, Milan and Shanghai. The Group has recently announced that it will manage a new 102-room hotel with Residences in Bodrum, Turkey, which is expected to open in 2014.

Mandarin Oriental now has 27 hotels in operation. It has a further 15 hotels under development, all of which will be operated under long-term management contracts that require no capital investment by the Group. In addition, the Group operates, or has under development, 13 Residences at Mandarin Oriental which are connected to its properties.

PEOPLE

On behalf of the Directors, I would like to acknowledge the contribution of all employees throughout the Group for continuing to provide exceptional levels of service to our guests.

R.C. Kwok and Sydney Leong retired as Directors of the Company on 12th May and 31st December 2011, respectively. Anthony Nightingale will step down as Managing Director at the end of March 2012, and will remain as a non-executive Director. On behalf of the Board, I would like to thank them for their significant contributions to the Group. On 1st March 2012 Lincoln Leong was appointed a Director of the Company. Joining the Board on 1st April 2012 will be Ben Keswick as Managing Director and Adam Keswick as a Director.

OUTLOOK

While levels of demand improved in 2011, current economic challenges in Europe and the United States may impact some of the Group's markets in 2012. Results should, however, benefit from a recovery of demand in Tokyo and a full year of trading in Paris. Over the longer term, Mandarin Oriental will benefit from the strength of its brand, the limited new supply of luxury hotels in its key markets and the phased opening of hotels in its portfolio.

Simon Keswick

Chairman

1st March 2012

GROUP CHIEF EXECUTIVE'S REVIEW

BUSINESS MODEL AND STRATEGY

Mandarin Oriental Hotel Group is an award-winning international hotel investment and management group with deluxe and first class hotels, resorts and residences in sought-after destinations around the world. The Group now operates, or has under development, 42 hotels representing over 10,000 rooms in 27 countries, with 18 hotels in Asia, 12 in The Americas and 12 in Europe and the Middle East. In addition, the Group operates, or has under development, 13 Residences at Mandarin Oriental connected to its properties. The Group has equity interests in a number of its properties and adjusted net assets worth approximately US$2.7 billion as at 31st December 2011. Capitalizing on the strength of its brand, the Group operates hotels on behalf of third party owners that require no equity investment by the Group.

The Group's strategy is to be recognized widely as the best global luxury hotel group, which it will achieve by investing in its exceptional facilities and its people while continuing to seek further selective opportunities for expansion around the world. This strategy combined with a strong balance sheet is designed to achieve long-term growth in both earnings and net asset value.

PROGRESS ACHIEVED

In 2011, the Group's overall results benefited from increased demand which led to higher occupancies in most of the Group's markets. This in turn enabled almost every hotel across the portfolio to raise their rates in local currency terms over the previous year. Performances were particularly strong throughout Europe and Asia, principally in Hong Kong, which helped to offset the impact of pre-opening expenses for our new hotel in Paris as well as the losses incurred in Tokyo following the earthquake in March 2011. Our hotels continue to benefit from the increasing number of high net worth leisure travellers who are attracted by the growing recognition of the Mandarin Oriental brand. The Group experienced improved demand from its traditional markets, as well as growth from developing markets, predominantly China, which is now the second largest source of business after the United States, accounting for 13% of Mandarin Oriental's total room nights.

The Group's global brand recognition was further enhanced in 2011 with the opening of Mandarin Oriental, Paris in June, on the prestigious rue Saint-Honoré, achieving significant global publicity. Operated under a long-term lease, the 138-room hotel is being positioned as one of the best in the city and has achieved an average rate of close to €950 in its first six months of operation. The hotel's food and beverage concepts led by celebrity chef Thierry Marx have also been well received. Having a strong brand presence in the top 'world' cities of London, New York and Paris is crucial to all luxury brands, and Mandarin Oriental will continue to benefit from the prominent exposure our hotels have achieved in these important destinations.

In addition, the Group announced a new management contract in February 2012, for a luxury resort with Residences at Mandarin Oriental, currently under construction in a coastal setting in Bodrum, Turkey.

The recognition and credibility of the Mandarin Oriental brand internationally, together with our financial strength, places the Group in a strong position to take advantage of future growth opportunities.

PERFORMANCE IN 2011

Set out below is a review of the Group's performance in 2011, with reference to the 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 increasingly recognized for creating some of the world's most sought-after properties, delivering 21st century luxury with oriental charm. Each of our hotels ensures its position at the top of its market by delivering the Group's unique style of luxury, through a combination of tradition, quality and innovation. Throughout the portfolio, the Group invested behind our core brand attributes of creative hotel design, architecture and technology, holistic spa operations and excellent dining experiences. Above all, the delivery of legendary service to our guests remains at the core of everything we do.

The Group's increasing global recognition in 2011 is evidenced by the achievement of many significant awards from respected travel associations and publications worldwide. Highlights included a record of ten hotels being awarded in the 2012 Forbes Travel Guide, with six gaining the top 'Five Star Hotel' status. Condé Nast Traveler US 'Readers Choice Awards' 2011 featured 14 hotel awards, and 'The World's Best' 2011 from Travel + Leisure included winning entries for nine of our hotels. Nine hotels also featured in the prestigious Institutional Investor's 'World's Best 2011' listings. The Group's growing brand awareness in mainland China was also recognized with The Landmark Mandarin Oriental, Hong Kong and our properties in Sanya and Macau being listed in several prestigious publications such as The Hurun Report and Condé Nast Traveler US.

The Group's reputation for excellent dining experiences has been further acknowledged with ten restaurants being honoured, and a total of 12 stars awarded, in the most recent 2012 Michelin guides, including three at Mandarin Oriental, Hong Kong alone. Mandarin Oriental Hyde Park, London's newest restaurant Dinner, was awarded one Michelin star and was also voted 'Best New Restaurant' in Tatler, UK's annual Dining Awards. Amber at The Landmark Mandarin Oriental, Hong Kong was voted one of the 'Top 50 Restaurants' in the world in the respected San Pellegrino listings.

The Group's overall spa operations were also recognized in 2011 with Mandarin Oriental being nominated for the fourth consecutive year as 'Best Spa Brand' in SpaFinder's 2011 'Readers' Choice Awards'. The prestigious Forbes 'Five Star Spa' award has also been granted to a record eight hotels, including the Group's newest spas at Mandarin Oriental, Macau and Singapore. This is more than any other hotel group in the world.

Mandarin Oriental's newly opened hotel in Paris was highlighted in Condé Nast Traveler, Spain's 'Hot List' and received the coveted 'Best Business Hotel' by Wallpaper magazine in its first few months of operation. Once again, Mandarin Oriental's hotels in New York, Boston, Las Vegas and Miami achieved the 'Five Diamond Lodging Award' for 2012 from the American Automobile Association.

Mandarin Oriental's global recognition is further enhanced by the Group's award-winning international advertising campaign which now features 23 celebrity 'fans', who regularly stay in our hotels. The campaign has grown in popularity since its launch in 2000, and in 2011, an additional three well-known personalities were introduced as fans: Kevin Spacey, the legendary actor and director; Sophie Marceau, the famous French actress; and shoe designer, Christian Louboutin.

Mandarin Oriental's goal, to be recognized as the world's best luxury hotel group, will be further accomplished as we increase the number of hotels we operate in new and exciting travel destinations.

2. Strengthening our competitive position

While better conditions in all markets in 2011 resulted in improved profitability across most of the Group, critical to our success is the focus of every hotel on maintaining or enhancing their leadership positions against primary competitors in their individual markets. Achieving a top competitive position in every destination reflects the strength of our hotel management teams combined with our strong brand recognition plus the added support provided by an established corporate structure. Our position has been further supported by limited new supply in many of the key markets in which we operate.

Demographic trends continue to support the Group's strategy of creating quality services and facilities which allows our properties to compete effectively and to achieve premium rates. Over the last few years, Mandarin Oriental's operational and marketing focus has been on attracting leisure travellers who are looking for meaningful luxury experiences that are of value. As a result, higher-spending leisure customers make up more than 40% of the Group's room nights, and this successful shift in consumer demand has resulted in an increase in the Group's average rate across the portfolio.

The highlights of each region are as follows:

Asia

Increasing demand across the region, with the exception of Tokyo, resulted in a strong performance in Asia, particularly in Hong Kong. Overall, Revenue per Available Room ('RevPAR') for Asia was up by 14% in US dollar terms over the previous year on a like-for-like basis.

The 100%-owned Mandarin Oriental, Hong Kong improved its operating performance, benefiting from strong city-wide activity and an increase in demand, particularly from the corporate segment. As a result, the hotel achieved a 14% RevPAR improvement over 2010. Food and beverage revenues also improved, with a 20% increase over the prior year. Both Mandarin Oriental, Hong Kong and The Landmark Mandarin Oriental received the coveted 'Five Star' rating in the Forbes Travel Guide 2012 for both the hotel and spa, for the third year in succession.

The Excelsior, the Group's other 100%-owned hotel in Hong Kong, successfully maintained its leading competitive position and achieved an overall RevPAR gain of 18% as a result of both occupancy and average rate increases. Occupancy, at 89%, has returned to historical levels.

In Tokyo, our hotel's performance was negatively affected by the impact of the earthquake and subsequent tsunami in March 2011. Visitor arrivals to the city plummeted in the immediate aftermath of the disaster, resulting in a significant drop in occupancy at the hotel, which only started to recover at the end of the year. Nonetheless the hotel maintained its competitive position and was voted 'Best Hotel in Japan' in the 2011 International Hotel Awards.

In Singapore, the strong city-wide demand that began in 2010 continued throughout 2011, driving further increases in average rate at our hotel, which led to an overall RevPAR improvement of 14% in local currency terms. Mandarin Oriental, Singapore was the only property in the city to achieve Forbes 'Five Star' status in the annual Forbes Travel Guide 2012 for both the hotel and its spa.

Mandarin Oriental, Bangkok's performance was adversely impacted by the serious flooding in northern Thailand in the last quarter of 2011. Nonetheless, occupancy levels for the full year were above levels achieved in 2010, resulting in an overall RevPAR improvement of 10% in local currency terms. The hotel remains the market leader in the city and was once again recognized as one of the world's best hotels in the most important travel awards, including 'Best City Hotel In Asia' in Travel + Leisure's 2011 'World's Best Awards'.

Mandarin Oriental, Jakarta continued to build occupancy following its comprehensive renovation which was completed in 2010. The hotel's competitive position has improved and it achieved an overall increase in RevPAR of 42% in local currency terms.

Mandarin Oriental, Macau, which opened in June 2010, improved its performance in its first full year of operation, achieving an overall occupancy of 63%, up from 49% at the end of 2010. The hotel is already establishing itself as a leader in luxury hospitality in the territory and was voted one of the 'Best Business Hotels' in Business Traveller, Asia Pacific. The hotel's spa also achieved Forbes 'Five Star' status. During 2011, the 92 Residences and Apartments located above the hotel were launched, resulting in branding fees from the continued sales.

Throughout the rest of Asia, our hotels took full advantage of the stronger demand with RevPAR up in all other locations, except Kuala Lumpur which was unchanged from 2010.

Europe

In Europe, the Group's hotels competed effectively at the top of their markets and improved their performances as a result of resilient demand and limited supply. Consequently, overall RevPAR for Europe increased by 20% in US dollar terms on a like-for-like basis over 2010, with a combined average rate which now exceeds US$700.

Mandarin Oriental Hyde Park, London's performance was bolstered by strong demand, particularly from leisure travellers from both traditional and new markets. Occupancy remained high at 80% and the hotel successfully achieved a 15% increase in average rate, at £538, resulting in an overall RevPAR increase of 14% in local currency terms. The hotel's food and beverage revenues also improved significantly following the launch of Dinner, Heston Blumenthal's first London operation, at the beginning of 2011. This followed the successful opening of Bar Boulud in May 2010. Both restaurants have already garnered an array of distinctive awards.

The 86 Residences at Mandarin Oriental, London, which opened at One Hyde Park to great acclaim in January 2011, generated US$16 million of one-off branding fees for the Group. In addition, the Group benefited from a non-trading gain of approximately US$10 million, following the grant to the Group by the developer of One Hyde Park of a long-term leasehold interest within the complex at no cost. This space will be used primarily to add a swimming pool, an enhanced fitness centre and car parking to the hotel's existing guest facilities in 2012.

Mandarin Oriental, Munich benefited from strong demand in the high-end leisure market, and successfully maintained its position as the undisputed market leader in the city. Improvements in both occupancy and average rate resulted in a 19% increase in RevPAR over 2010 in local currency terms. Mandarin Oriental, Geneva's operating performance was impacted by the continuation of a phased rooms renovation and a strong Swiss franc, resulting in an 8% decrease in RevPAR in local currency terms although the hotel maintained its competitive position. In US dollar terms the contribution from this subsidiary hotel was similar to 2010.

In Barcelona and Prague, our hotels have successfully positioned themselves ahead of the competition in their respective markets, and both continue to receive global recognition for excellence in well respected publications such as Condé Nast Traveler US.

The Americas

Overall RevPAR in The Americas increased by 9% on a like-for-like basis, as a result of improvements in both occupancies and average rates in all destinations.

In Washington D.C., the hotel improved its competitive position and strengthened both occupancy and rate to achieve a 6% increase in RevPAR over 2010. The hotel appeared in numerous reader surveys in prestigious publications including Institutional Investor's 'World's Best 2011'.

Mandarin Oriental, New York's strong positioning as one of the world's most luxurious properties enabled the hotel to grow occupancy levels by 3% while maintaining its average rate despite a highly competitive market. The hotel's international recognition was further reinforced by the retention of both the prestigious Forbes 'Five Star' rating and the American Automobile Association's 'Five Diamond Lodging Award'.

Mandarin Oriental, Miami took advantage of market demand and performed well against challenging competition, achieving a 19% increase in RevPAR. The hotel continues to receive positive media attention, and the hotel's Spa has received the Forbes 'Five Star' rating in 2012 for the third consecutive year; the only hotel in Florida to do so.

In other destinations, Mandarin Oriental's managed properties performed well against competition and all achieved increases in occupancy and rate. Mandarin Oriental, Boston and Mandarin Oriental, Las Vegas achieved the Forbes 'Five Star' rating in 2011 for both the hotel and the spa, with the hotel in Las Vegas achieving a further 'Five Star' rating for its restaurant, Twist, operated by Pierre Gagnaire.

3. Increasing the number of rooms under operation to 10,000

Mandarin Oriental has achieved strong geographic diversification with a well balanced portfolio across the globe and is on track to achieve its mid-term goal of operating 10,000 rooms in key global locations within the next few years. The Group now operates close to 7,700 rooms around the world, which rises to almost 11,000 including the hotels under development.

In 2012, the Group will launch a new luxury property in Guangzhou, followed in 2013 by openings in Taipei, Milan and Shanghai. In total, the Group has announced 15 new hotel developments, all of which are long-term management contracts requiring no capital investment by the Group. This includes the most recent announcement of a 102-room luxurious hideaway resort and spa with 214 branded Residences at Mandarin Oriental which is scheduled to open on an exclusive 100 acre waterfront site on the Bodrum Peninsula in Turkey in 2014.

In addition to the Group's portfolio of hotels, a total of 13 Residences at Mandarin Oriental projects are open or under development. The associated branding fees from these projects, as well as ongoing revenues from management fees and the use of hotel facilities by the home owners, will provide an additional return for the Group over the next few years.

The long-term potential for growth is significant and the Group's strategy of operating both owned and managed hotels remains in place. Mandarin Oriental is well positioned to take advantage of selective investment opportunities in strategic locations that offer attractive returns, while at the same time our strong brand continues to be compelling to developers of luxury hotels. The Group has in the pipeline, many opportunities for additional luxurious hotels and residences in important or unique locations around the world.

4. Achieving a strong financial performance

The Group's financial well being remains fundamental to its success. Mandarin Oriental is in a strong financial position with a low level of gearing and significant cash balances.

In 2011, the Group's overall financial performance was strengthened as a result of the improved operating performances across its portfolio, particularly in the owned hotels in Hong Kong. Branding fees received during the year from Residences projects in London and Macau also contributed to the Group's results. These increases were, however, partially offset by the loss incurred in Tokyo and the pre-opening expenses at Mandarin Oriental, Paris. The investment required to complete the Paris hotel was met from the Group's cash resources.

Excluding non-trading items, profit attributable to shareholders in 2011 was US$59 million compared to US$44 million in 2010. Including non-trading items, profit attributable to shareholders in 2011 was US$67 million. There were no non-trading items in 2010.

Reflecting the Group's strong financial position, the Board has recommended a final dividend of US¢4.00, which, when combined with the interim dividend of US¢2.00, makes a full year dividend of US¢6.00.

THE FUTURE

While the Group experienced a rebound in demand in 2010 and 2011, the current macro-economic volatility around the world, particularly in the financial sector, may put pressure on occupancies in the immediate term. However, the Group will benefit from its strong brand and its growing portfolio as new properties open in sought-after destinations around the world, as well as by the limited supply of competitive luxury hotels in our key markets.

Mandarin Oriental's long-term strategy of being widely recognized as the best luxury hotel group in the world is firmly on track.

Edouard Ettedgui

Group Chief Executive

1st March 2012