Mandarin In.sg Regulatory News (MDO)

6 Mar 2007 09:05

Mandarin Oriental International Ld06 March 2007 To: Business Editor 6th March 2007 For immediate release The following announcement was today issued to a Regulatory Information Serviceapproved by the Financial Services Authority in the United Kingdom. MANDARIN ORIENTAL INTERNATIONAL LIMITED2006 PRELIMINARY ANNOUNCEMENT OF RESULTS Highlights • Mandarin Oriental, Hong Kong renovation completed• 14 hotels under development• Gain from disposal of The Mark, New York "Overall market demand is expected to remain strong in 2007 with limited newhotel supply in most destinations. The Group's results will also gain significantly from the contribution of the newly renovated Hong Kong hotel. Over the longer term, the Group will benefit from the opening of the many hotels currently under development." Simon Keswick, Chairman6th March 2007 Results______________________________________________________________________________ Year ended 31st December 2006 2005 Change US$m US$m %______________________________________________________________________________Combined total revenue of hotels undermanagement 850.3 815.4 +4Earnings before interest, tax, depreciationand amortization(1) 116.4 124.0 -6Profit attributable to shareholders -excluding gain on disposal 45.0 41.1 +9Profit attributable to shareholders 80.0 77.2 +4Funds from operations(2) 92.6 90.4 +2______________________________________________________________________________ USc USc %______________________________________________________________________________Earnings per share - excluding gain ondisposal 4.66 4.33 +8Earnings per share 8.28 8.14 +2Funds from operations per share(2) 9.58 9.53 +1Dividend per share 3.00 1.50 +100______________________________________________________________________________ US$ US$ %______________________________________________________________________________Net asset value per share 1.03 0.87 +18Net asset value per share with leaseholdproperties at valuation(3) 1.78 1.50 +19______________________________________________________________________________ (1) EBITDA does not include gains on disposal and the impact of property revaluations. (2) Funds from operations ('FFO') figures have been presented to provide additional information to investors to facilitate comparison with other hotel companies with substantial real estate interests. FFO is defined as profit attributable to shareholders excluding depreciation of hotel buildings, net of relevant deferred tax and minority interests. (3) The net asset value per share with leasehold properties at valuation has been presented after adjusting for the market value of the Group's leasehold interests. International Financial Reporting Standards ('IFRS') do not permit leasehold interests of owner-occupied land to be carried at valuation. The Group considers that the IFRS treatment does not reflect the economic substance of its underlying property investments. Therefore, the Group has presented the net asset value per share taking into account the fair market value of leasehold interests as supplementary financial information in addition to the net asset value per share in accordance with IFRS. The final dividend of USc3.00 per share will be payable on 16th May 2007,subject to approval at the Annual General Meeting to be held on 9th May 2007, toshareholders on the register of members at the close of business on 23rd March2007. The ex-dividend date will be on 21st March 2007, and the share registerswill be closed from 26th to 30th March 2007, inclusive. MANDARIN ORIENTAL INTERNATIONAL LIMITED PRELIMINARY ANNOUNCEMENT OF RESULTSFOR THE YEAR ENDED 31ST DECEMBER 2006 OVERVIEW The continued improvement in key markets led to enhanced results for most of theGroup's hotels and helped offset the impact on earnings arising from the ninemonth closure for renovation of its Hong Kong flagship property. The Group'sdevelopment strategy also made good progress with 14 hotels now underdevelopment, compared with eight at the same time last year. The Group's financial position was strengthened further with significant gains realized on assetdisposals. PERFORMANCE Earnings before interest, tax, depreciation and amortization for 2006 wereUS$116 million compared with US$124 million in 2005, when Mandarin Oriental,Hong Kong was open throughout the year. Profit attributable to shareholders in 2006 was US$80 million, including apost-tax gain of US$35 million on the sale of The Mark hotel in New York. Thiscompares with US$77 million in the previous year, which included a US$36 milliongain arising from the disposal of the Group's property interest in Hawaii.Excluding gains on disposals, profit attributable to shareholders in 2006 wasUS$45 million compared with US$41 million in 2005. Earnings per share for the year were USc8.28 compared with USc8.14 in 2005.Excluding gains on disposals, 2006 earnings per share were USc4.66 compared withUSc4.33 per share in 2005. The Directors are recommending an increased dividend of USc3.00 per share compared with USc1.50 per share in 2005. The net asset value per share with leasehold properties adjusted for fair marketvalue was US$1.78 at 31st December 2006, compared with US$1.50 at 31st December2005. GROUP REVIEW Strong results from the Group's owned hotels offset the losses arising at Mandarin Oriental, Hong Kong during its closure for renovation. Since re-opening in late September 2006, the hotel has achieved a 50% increase in its average room rate compared to the same period in 2005. The Excelsior, Hong Kong and the Group'sEuropean properties performed well, benefiting from higher room rates and increases in occupancy. The contribution from the Tokyo hotel also improved significantly as its 2005 results had included pre-opening costs. The contribution to operating results from associates and joint ventures rose, largely due to strong performances at the hotels in Singapore and New York. The Group completed the sale of The Mark hotel in New York in February 2006, realizing a gain of US$35 million. In December 2006, the Group announced the saleof half of its 50% investment in Mandarin Oriental, New York, which wascompleted in March 2007. The gain of some US$16 million arising on the sale willbe recognized in the Group's 2007 results. Mandarin Oriental will continue to manage the hotel under an enhanced long-term contract. DEVELOPMENTS Mandarin Oriental now has 9,500 rooms in operation or planned as it continues toexpand as one of the world's leading luxury hotel brands. The Group has 20hotels in operation and a further 14 under development, of which four are in Greater China, including the Group's recently announced projects in Guangzhou and Taipei. The Group opened its latest hotel in Prague in September 2006, and in 2007 hasplans to open resort properties on the Riviera Maya, Mexico and Hainan Island,China. In September 2006, agreement was reached to brand and manage 80 luxuryresidences in a new development to be built adjacent to the Group's Londonhotel. Residences at Mandarin Oriental will also be included in a further sevenof the 14 hotels currently under development. OUTLOOK In conclusion, the Chairman, Simon Keswick said, "Overall market demand isexpected to remain strong in 2007 with limited new hotel supply in most destinations. The Group's results will also gain significantly from the contribution of the newly renovated Hong Kong hotel. Over the longer term, the Group willbenefit from the opening of the many hotels currently under development." GROUP CHIEF EXECUTIVE'S REVIEW PROGRESS ACHIEVED A number of significant accomplishments in 2006 have resulted in Mandarin Oriental moving closer to its goal of being recognized as the world's best luxury hotel group. Firstly, the Group benefited from strong market conditions in our key locationsand from the enhanced contributions of our growing and geographically-diversified portfolio. Indeed, overall financial results for the year were comparable with 2005, despite the loss of revenues from the Group's 100%-owned Mandarin Oriental, Hong Kong, which successfully re-opened in September 2006 following a nine-month closure for renovation. Secondly, Mandarin Oriental's international expansion continued to accelerate in2006 with the opening of its latest hotel in Prague and the announcement of fivenew management contracts. In the first two months of 2007, three furtherprojects have been announced for luxury hotels in Paris, Guangzhou and Taipei.During the year, the Group also announced its first European Residences at Mandarin Oriental, adjacent to our London hotel. The Group now comprises a portfolioof 20 hotels with a further 14 under development giving a total of 9,500 roomsin 20 countries. Finally, the Group continued to benefit from gains realized on selective disposals within its portfolio of hotel investments. Responding to exceptional marketconditions in New York, the Group completed the sale of its 100% interest in TheMark in February 2006. This was followed by the announcement in December 2006 ofthe sale of half of the Group's 50% equity in Mandarin Oriental, New York. The sale was completed in March 2007 and the gain will be recognized in the 2007 results. PERFORMANCE IN 2006 Set out below is a review of the Group's performance in 2006, with reference tothe following strategic objectives: • Improving continuously our position as one of the world's best luxury hotel groups • Strengthening our competitive position • Increasing the number of rooms under operation to 10,000 • Achieving a strong financial performance 1. Improving continuously our position as one of the world's best luxury hotel groups Mandarin Oriental is enjoying increasing recognition for creating many of theworld's most desirable luxury hotels, providing its guests with 21st centuryluxury combined with oriental charm. From our roots in the heart of Asia, wheremost of our original properties have benefited from renovations in recent yearsand remain market leaders, Mandarin Oriental has expanded into the global arena,with award-winning properties in some of the world's most sought-after locations. Across the world, the Group remains focused on delivering the brand attributeswhich define our own style of luxury. This includes creative hotel design and architecture, expertise in holistic spa operations, innovative diningexperiences, guest-orientated technology and, of course, the legendary servicewhich remains the foundation of everything we do. The investment behind our brand 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. During the year, both the Group and our individualhotels received an impressive array of awards from respected publications and associations, as well as widespread media coverage. Here are a few highlights: In the 2006 Readers Choice Awards in Conde Nast Traveler US, ten Mandarin Oriental hotels were featured - the highest number of Mandarin Oriental hotels ever toappear in one edition, and covering half of our total portfolio. In Institutional Investor's annual ranking, Mandarin Oriental had nine hotelslisted in the top 100 World's Best Hotels, including Mandarin Oriental, Washington D.C. and The Oriental, Bangkok in first and second place respectively. The Group was again well recognized in 2006 for its spa operations, being awarded 'Favourite Brand' by Spa Finder in the US with eight hotels listed in top categories, and 'Best Wellness and Spa Company' by Spa Asia, with four individual hotel spas winning in a variety of categories. Finally, The Asian Wall Street Journal's listing of the top 200 Asia-based companies, listed Mandarin Oriental Hotel Group in second position as 'Hong Kong'sMost Admired Companies by Quality'. Such strong brand recognition allows our properties to achieve premium rates andcompete effectively in all our destinations. 2. Strengthening our competitive position Being market leaders within their local environment is a key goal for each ofour hotels, and 2006 was a positive year for our competitive positioning. As demand for luxury travel experiences continued to grow, our hotels performed wellwith increased Revenue Per Available Room (RevPAR) achieved across all regions,largely due to stronger average room rates. The year saw Asia up 18%, Europe up21% and The Americas up 10% over 2005 (excluding the effect of new and renovatedhotels in the period). Consequently, operating profits at the individual hotelshave shown significant improvement over the previous year. The highlights of each region are as follows: AsiaThe closure of Mandarin Oriental, Hong Kong for the first nine months of 2006while undergoing a major renovation, had a negative impact on the Group'sresults. The renovation was designed to secure its position as one of theworld's legendary hotels and it re-opened in late September to great acclaimfrom international travellers and the local community alike. In the last quarter, it achieved an average rate of over US$400, a 50% increase over the sameperiod in 2005. The hotel's re-designed restaurants and bars were well receivedand have performed above expectations. Following the re-opening of Mandarin Oriental, Hong Kong, the Group now operatestwo luxury hotels within the city. The Landmark Mandarin Oriental, Hong Kong,which complements the Group's original flagship property, has established itselfas a contemporary, lifestyle hotel. In its first full year of operation, this113-room hotel achieved an average rate of US$413 at an occupancy of 81%,representing an increased RevPAR of 42% over 2005. The Excelsior, Hong Kong achieved a 21% increase in RevPAR compared to 2005, asa result of strengthening room rates, up from an average of US$133 to US$159 in2006, with strong demand from all market segments. The Excelsior's food andbeverage revenues were also up 10% above 2005 levels. In Macau, Mandarin Oriental continued to perform well within its competitiveset, with a 12% increase in average rate, and is well positioned to take full advantage of this burgeoning market. Southeast Asia benefited from improvement in the underlying economies, particularly in The Philippines where Mandarin Oriental, Manila achieved a 31% increasein RevPAR over 2005. In Singapore, the re-positioning of the hotel following afull-scale renovation in 2005, combined with better market conditions, resultedin a 58% increase in RevPAR over the previous year. Celebrating its 130th anniversary in 2006, The Oriental, Bangkok once againsignificantly outperformed the market and appeared in the top listings of themost important world-wide travel awards, confirming its legendary status. In its first full year of operations, the 179-room Mandarin Oriental, Tokyofocused on positioning itself as one of the top luxury hotels in the city, and achieved an average room rate of US$470. In April 2006, Forbes magazine listed Mandarin Oriental Tokyo as one of the 'Best New Hotels' in the World. EuropeIn Europe, our hotels benefited from a strong demand for luxury accommodation, particularly from the leisure market, and a limited new supply of hotel rooms,which drove increases in room rates. Mandarin Oriental Hyde Park, London,performed well against its competition achieving an average rate of US$736, a14% increase over the previous year while occupancy rose from 77% to 85%. Mandarin Oriental, Munich remained the undisputed market leader and attained RevPARgrowth of 21% as a result of stronger room rates. In Geneva, Mandarin Orientalimproved both occupancy and room rate, resulting in a 14% increase in RevPARover the previous year. The AmericasIn its second full year of operation, Mandarin Oriental, Washington D.C. furtherestablished its position as one of the city's most luxurious properties, achieving the 'Best Hotel in the World' award in the annual Institutional Investor hotel ranking, as well as receiving the American Automobile Association's 'Five Diamond Award' for its signature restaurant, CityZen. Occupancy was impacted by less citywide activity in 2006, however, the average rate strengthened to US$301, up from US$290 in the previous year. Mandarin Oriental, New York continued to receive many accolades in 2006 as oneof the best hotels in The Americas. It is one of only a handful of hotels toreceive both the prestigious 'Mobil Five Star' and the American AutomobileAssociation's 'Five Diamond Lodgings Awards'. The Spa has also been awarded the'Mobil Five Star'. The hotel outperformed its competition in 2006, achieving anoccupancy of 75% at an average room rate of US$824, giving an overall increasein RevPAR of 23% over the previous year. While the Group announced in December 2006 that it has sold half of its interestin Mandarin Oriental, New York, we continue to own 25% of the hotel and havesecured enhanced terms for our long term management of the property. The Group's other hotels in The Americas benefited from the general increase inluxury travel across all markets. 3. Increasing the number of rooms under operation to 10,000 The development of Mandarin Oriental's brand accelerated in 2006 and we areconfident of reaching our goal to operate at least 10,000 rooms in major citiesand resort destinations around the world within the next few years. Since February 2006, we have announced eight new Mandarin Oriental hotels in Paris, Taipei,Guangzhou, Hainan Island, Barcelona, Dallas, Marrakech and Turks & Caicos. TheGroup currently operates 6,500 rooms in 20 hotels, with a further 14 hotelsunder development. Mandarin Oriental has achieved a strong geographic diversification with 15 properties in Asia, 12 in The Americas and seven in Europe and North Africa. With the exception of Paris, which will be operated under a long-term lease agreement, all 14 properties currently under development are management contractsrequiring limited capital from the Group. This is a clear indication of thestrength of our brand and the fees generated by our management activity will bea significant source of our future revenue growth. At the same time, we are wellpositioned to take advantage of investment opportunities that arise in strategiclocations. The Group remains a significant owner of hotel properties, particularly in major cities, and benefits from the long-term capital appreciation such assets normally provide. Ownership also ensures the continuing control of our brand heritage and gives us increased credibility with third party hotel developers. Overall, the operation of both owned and managed hotels remains an essential strategy of the Group. The growth of the Group's portfolio of Residences at Mandarin Orientalcontinues, with many of the new hotels under development including a residentialcomponent. The luxury development adjacent to Mandarin Oriental Hyde Park,London, announced in 2006, will house some of the world's most sophisticated apartments, serviced by Mandarin Oriental, and add services and amenities that willbenefit our hotel's guests and enhance the hotel's value. 4. Achieving a strong financial performance Mandarin Oriental achieved a strong financial performance in 2006, with theimproved results of the Group's growing international portfolio offsetting theimpact of the nine-month closure of the Group's 100%-owned Mandarin Oriental,Hong Kong. Excluding gains from disposals, profit attributable to shareholdersin 2006 was US$45 million compared to US$41 million in 2005. The Group completed the sale of The Mark, New York in 2006 for after-taxproceeds of US$98 million, resulting in a post-tax gain of US$35 million. Thisresulted in an overall profit for the year of US$80 million compared to US$77million in 2005, which had included a post-tax gain of US$36 million from thedisposal of our 40% interest in a Hawaii hotel. The Group's financial position is strong with gearing of 18% at 31st December2006 based on adjusted shareholders' funds, down from 22% at the end of 2005.Following completion of the sale of half of our 50% interest in Mandarin Oriental, New York in March 2007, net debt was reduced by a further US$69 million, anda post-tax gain of approximately US$16 million will be recognized in 2007. The Group's net asset value per share at 31st December 2006 was US$1.78 basedon adjusted shareholders' funds, compared with US$1.50 at the end of theprevious year. THE FUTURE In 2007, the Group will benefit from the contribution of the renovated MandarinOriental, Hong Kong, and the prospects for the rest of our portfolio are encouraging, given current positive trends in most of our markets. Recognition of Mandarin Oriental as a strong global luxury brand continues to gain momentum. As we develop new and exciting hotels in strategic destinations, and enter important new markets, we are getting closer to reaching our ultimategoal of being the best luxury hotel group in the world. Edouard EttedguiGroup Chief Executive6th March 2007 ________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Profit and Loss Accountfor the year ended 31st December 2006________________________________________________________________________________ 2006 2005 US$m US$m________________________________________________________________________________ Revenue (note 2) 404.6 399.2Cost of sales (267.2) (254.3) _________ _________Gross profit 137.4 144.9Selling and distribution costs (27.7) (23.7)Administration expenses (64.6) (60.8)Gain on disposal of The Mark (note 4) 76.8 - _________ _________Operating profit (note 3) 121.9 60.4 Interest income 11.0 3.0Financing charges (26.2) (25.4) Net financing charges (15.2) (22.4) Share of results of associates andjoint ventures (note 5) 13.0 8.7Gains on disposal of associates (note 6) - 52.3 _________ _________Profit before tax 119.7 99.0Tax (note 7) (39.5) (24.8) _________ _________Profit for the year 80.2 74.2 _________ _________Profit attributable to shareholders 80.0 77.2Profit/(Loss) attributable tominority interests 0.2 (3.0) _________ _________ 80.2 74.2 _________ _________________________________________________________________________________________ USc USc________________________________________________________________________________ Earnings per share (note 8)- basic 8.28 8.14- diluted 8.17 8.07 Earnings per share - excluding gain on disposal- basic 4.66 4.33- diluted 4.60 4.30________________________________________________________________________________ ________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Balance Sheetat 31st December 2006________________________________________________________________________________ Restated 2006 2005 US$m US$m________________________________________________________________________________Net assetsIntangible assets 216.0 215.5Tangible assets (note 9) 882.5 684.0Associates and joint ventures 190.0 174.0Other investments 6.4 5.1Loan receivable 12.0 43.0Pension assets 27.1 22.8Deferred tax assets 27.4 9.9Other non-current assets 2.9 5.5 _________ _________Non-current assets 1,364.3 1,159.8 Stocks 4.3 3.1Debtors and prepayments 65.7 59.0Cash at bank 286.7 169.1 _________ _________ 356.7 231.2Non-current asset classified asheld for sale (note 10) 53.9 80.3 _________ _________Current assets 410.6 311.5 _________ _________Creditors and accruals (91.0) (80.3)Current borrowings (note 11) (25.4) (8.3)Current tax liabilities (4.4) (6.8) _________ _________ (120.8) (95.4)Liabilities directly associated withnon-current asset classified as held for sale (note 10) - (14.0) _________ _________Current liabilities (120.8) (109.4) _________ _________ Net current assets 289.8 202.1Long-term borrowings (note 11) (575.1) (471.6)Deferred tax liabilities (72.9) (49.8)Pension liabilities (1.5) (1.7)Other non-current liabilites (0.2) - _________ _________ 1,004.4 838.8 _________ _________Total equityShare capital 48.4 48.3Share premium 160.3 158.8Revenue and other reserves 792.0 628.0 _________ _________Shareholders' funds 1,000.7 835.1Minority interests 3.7 3.7 _________ _________ 1,004.4 838.8 _________ _________________________________________________________________________________________ ________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Statement of Recognized Income and Expensefor the year ended 31st December 2006________________________________________________________________________________ 2006 2005 US$m US$m________________________________________________________________________________ Surplus on revaluation of properties 74.1 35.6Actuarial gains on defined benefit pension plans 5.6 0.6Net exchange translation differences 45.1 (31.4)(Loss)/Gain on cash flow hedges (2.9) 11.7Tax on items taken directly to equity (25.3) (9.8) ________ ________Net income recognized directly in equity 96.6 6.7Profit for the year 80.2 74.2 ________ ________Total recognized income and expense for the year 176.8 80.9 ________ ________Attributable to:Shareholders of the Company 176.8 84.6Minority interests - (3.7) ________ ________ 176.8 80.9 ________ ________________________________________________________________________________________ ________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Cash Flow Statementfor the year ended 31st December 2006________________________________________________________________________________ 2006 2005 US$m US$m________________________________________________________________________________Operating activitiesOperating profit 121.9 60.4Depreciation 28.4 30.0Amortization of intangible assets 0.3 0.6Non-cash items (74.7) 3.0Movements in working capital (1.4) (0.3)Interest received 10.5 2.8Interest and other financing charges paid (26.5) (26.3)Tax paid (8.2) (13.8) ________ ________ 50.3 56.4Dividends and interest from associatesand joint ventures 12.1 16.2 Cash flows from operating activities 62.4 72.6 Investing activitiesPurchase of tangible assets (135.5) (40.0)Purchase of intangible assets (0.8) -Investments in and loans to associatesand joint ventures (0.2) (1.0)Advance of loan receivable - (12.0)Increase in other investments (1.2) (0.9)Purchase of minority interests - (2.7)Proceeds on disposal of The Mark 98.5 -Proceeds on disposal of associates - 95.3Repayment of loans to an associate - 4.1Capital distribution from an associate 1.2 0.5 Cash flows from investing activities (38.0) 43.3 Financing activitiesIssue of shares 1.6 0.3Drawdown of borrowings 113.6 115.0Repayment of borrowings (8.9) (116.5)Dividends paid by the Company (note 13) (14.5) (9.6) Cash flows from financing activities 91.8 (10.8)Effect of exchange rate changes 1.6 (2.0) ________ ________Net increase in cash and cash equivalents 117.8 103.1Cash and cash equivalents at 1st January 168.8 65.7 ________ ________Cash and cash equivalents at 31st December 286.6 168.8 ________ ________________________________________________________________________________________ ________________________________________________________________________________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 2006 which have been prepared inconformity with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the InternationalAccounting Standards Board. The financial statements have been prepared underthe historical cost convention except as disclosed in the accounting policies. In 2006, the Group adopted the following amendments and interpretation toexisting standards which are relevant to its operations: IAS 21 (amended 2005) Net Investment in a Foreign OperationIAS 39 (amended 2005) Cash Flow Hedge Accounting of Forecast Intragroup TransactionsIAS 39 (amended 2005) The Fair Value OptionIAS 39 and IFRS 4 (amended 2005) Financial Guarantee ContractsIFRIC 4 Determining whether an Arrangement contains a Lease There have been no changes to the accounting policies as a result of adoption ofthe above amendments and interpretation. Certain comparative figures have been reclassified to conform with current yearpresentation. The following standards, and amendment and interpretations to existing standards, which are relevant to the Group's operations, were published but are not yet effective in 2006: IFRS 7 Financial Instruments: Disclosures, and the complementary amendment to IAS 1, Presentation of Financial Statements - Capital DisclosuresIFRS 8 Operating SegmentsIFRIC 8 Scope of IFRS 2IFRIC 10 Interim Financial Reporting and ImpairmentIFRIC 11, IFRS 2 Group and Treasury Share Transactions The Group will apply IFRS 7, IFRIC 8 and IFRIC 10 for annual periods beginning1st January 2007, IFRS 8 for annual periods beginning 1st January 2009, and IFRIC 11 for annual periods beginning 1st January 2008. 2. REVENUE 2006 2005 US$m US$m ________ ________By geographical area:Hong Kong & Macau 106.3 161.5Other Asia 111.0 38.3Europe 123.3 106.8The Americas 64.0 92.6 ________ ________ 404.6 399.2 ________ ________ 3. OPERATING PROFIT 2006 2005 US$m US$m _______________________By geographical area:Hong Kong & Macau (1.8) 37.3Other Asia 9.0 (6.4)Europe 28.4 20.5The Americas 9.5 9.0 ________ ________ 45.1 60.4Gain on disposal of The Mark (refer note 4) 76.8 - ________ ________ 121.9 60.4 ________ ________ 4. GAIN ON DISPOSAL OF THE MARK The sale of the Group's 100% interest in The Mark, New York was completed on16th February 2006 for a gross consideration of US$150.0 million. The hotel wasoriginally acquired in 2000 as part of the US$142.5 million acquisition of The Rafael Group. The pre-tax gain on this disposal is US$76.8 million, and thepost-tax gain on the disposal is US$35.0 million. 5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES 2006 2005 US$m US$m _______________________By geographical area:Hong Kong & Macau 5.0 3.6Other Asia 9.3 6.2The Americas (1.3) (1.1) ________ ________ 13.0 8.7 ________ ________ The Directors have reviewed the carrying values of all operating propertiesowned by associates and joint ventures at 31st December 2006 in consultationwith the Group's independent valuers. The Group's share of the underlying netrevaluation surplus of US$16.6 million has been dealt with in capital reserves(2005: net revaluation surplus of US$4.6 million to capital reserves). 6. GAIN ON DISPOSAL OF ASSOCIATES On 8th June 2005, the Group completed the sale of its 40% investment in the partnership that leased the Kahala Mandarin Oriental hotel in Hawaii to its 60% partner, Kahala Royal Corporation ('KRC'). The Group had exercised its put option in January 2005 pursuant to its rightsunder its partnership agreement with KRC. On completion, the Group received agross consideration of US$97.1 million, which included the repayment of loans toan associate of US$4.1 million. The pre-tax gain on this disposal was US$50.3million. After utilization of brought forward US tax losses, the post-tax gainon this disposal was US$36.1 million. In July 2005, the Group disposed of its investment in Reid Street Properties fora cash consideration of US$2.3 million resulting in a gain on disposal of US$2.0million. 7. TAX 2006 2005 US$m US$m ________ ________Current tax 50.6 12.7Deferred tax (11.1) 12.1 ________ ________ 39.5 24.8 ________ ________ Tax on profits has been calculated at rates of taxation prevailing in theterritories in which the Group operates and includes a tax charge of US$41.8million arising on the disposal of the Group's 100% interest in The Mark, NewYork (refer note 4). The 2005 tax on profits included a tax charge of US$14.2 million arising on thedisposal of the Group's 40% investment in Kahala Mandarin Oriental, Hawaii. Thistax charge was calculated after utilizing brought forward tax losses in theUnited States of US$65.1 million and comprised current tax of US$2.5 million anddeferred tax of US$11.7 million on temporary differences (refer note 6). 8. EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholdersof US$80.0 million (2005: US$77.2 million) and on the weighted average number of966.6 million (2005: 948.9 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$80.0 million (2005: US$77.2 million) and on the weighted average number of979.3 million (2005: 956.5 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the SeniorExecutive Share Incentive Schemes based on the average share price during the year. The number of shares for basic and diluted earnings per share is reconciledas follows: Ordinary shares in millions 2006 2005 ________________________________Weighted average number of shares in issue 966.6 948.9Adjustment for shares deemed to be issued for noconsideration under the Senior Executive ShareIncentive Schemes 12.7 7.6 ________ ________Weighted average number of shares fordiluted earnings per share 979.3 956.5 ________ ________ The Directors consider funds from operations ('FFO') to be a supplemental measure of the Group's performance and believe this should be considered along with, but not as an alternative to, profit attributable to shareholders as a measure of the operating performance. FFO is defined as profit attributable to shareholders excluding depreciation ofhotel buildings, net of relevant deferred tax and minority interests. 2006 2005 ___________________________ ___________________________ Per share Per share US$m USc US$m UScProfit attributableto shareholders 80.0 8.28 77.2 8.14Depreciation of hotelbuildings, net ofdeferred tax andminority interests 12.6 1.30 13.2 1.39 _______ _______ _______ _______Funds from operations 92.6 9.58 90.4 9.53 _______ _______ _______ _______ 9. TANGIBLE ASSETS AND CAPITAL COMMITMENTS 2006 2005 US$m US$m ____________________________Opening net book value 684.0 752.1Translation differences 52.4 (49.1)Additions 129.4 48.6Disposals (0.2) (0.1)Transfer (out)/in (0.1) 1.9Depreciation (28.4) (30.0)Revaluation surplus 45.4 27.8Classified as non-current asset held for sale (refer note 10) - (67.2) ________ ________Closing net book value 882.5 684.0 ________ ________Capital commitments 37.7 152.5 ________ ________ The Directors have reviewed the carrying values of all properties at 31stDecember 2006 in consultation with the Group's independent valuers. TheDirectors are of the opinion that there is an increase in the fair value of allproperties of US$33.7 million net of deferred tax of US$11.7 million which hasbeen taken to capital reserves. In 2005, a surplus of US$21.3 million net ofdeferred tax of US$6.5 million was taken to capital reserves. If the freehold properties and the building component of leasehold properties had been included in the financial statements at cost, the carrying value would have been US$607.5 million (2005: US$503.3 million). Tangible assets include a property of US$110.9 million (2005: US$114.2 million),which is stated net of tax increment financing of US$30.6 million (2005: US$31.5million) (refer note 12). 10. NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE An analysis of the non-current asset classified as held for sale is as follows: 2006 2005 US$m US$m _________________________ Intangible assets - 5.2Tangible assets (refer note 9) - 67.2Associates and Joint Venture 13.7 -Loan receivable 31.2 -Deferred tax assets - 1.3Current assets 9.0 6.6 ________ ________Total assets 53.9 80.3 ________ ________Long-term borrowings - (11.0)Current liabilities - (3.0) ________ ________Total liabilities - (14.0) ________ ________ The Group's 25% interest in Mandarin Oriental, New York was classified as heldfor sale as at 31st December 2006, which amounted to total assets of US$53.9million. The sale was completed on 1st March 2007 (refer note 14). The Group's 100% leasehold interest in The Mark, New York was classified as heldfor sale in 2005. At 31st December 2005, total assets and total liabilities amounted to US$80.3 million and US$14.0 million respectively. The sale wascompleted on 16th February 2006 for a consideration of US$150.0 million (refernote 4). 11. BORROWINGS 2006 2005 US$m US$m __________________________Bank loans 590.9 470.4Other borrowings 7.9 7.8Tax increment financing (refer note 12) 1.7 1.7 ________ ________ 600.5 479.9 ________ ________Current 25.4 8.3Long-term 575.1 471.6 ________ ________ 600.5 479.9 ________ ________ 12. TAX INCREMENT FINANCING 2006 2005 US$m US$m __________________________ Netted off against the net book value ofproperty (refer note 9) 30.6 31.5Loan (refer note 11) 1.7 1.7 ________ ________ 32.3 33.2 ________ ________ A development agreement was entered into between one of the Group's subsidiarieswith the District of Columbia ('District'), pursuant to which the District agreed to provide certain funds to the subsidiary out of net proceeds obtainedthrough the issuance and sale of certain tax increment financing bonds ('TIFBonds') for the 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 a loan, 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 the date 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). The loan of US$1.7 million (2005: US$1.7 million) is included in long-term borrowings(refer note 11). 13. DIVIDENDS No interim dividend has been paid in respect of 2005 and 2006. A final dividendin respect of 2006 of USc3.00 (2005: USc1.50) per share amounting to a total ofUS$29.0 million (2005: US$14.5 million) is proposed by the Board. The dividendproposed is not accounted for until it has been approved at the Annual GeneralMeeting. The amount will be accounted for as an appropriation of revenuereserves in the year ending 31st December 2007. 14. POST BALANCE SHEET EVENT On 21st December 2006, the Group announced that it had entered into an agreementto sell half of its investment in Mandarin Oriental, New York. This sale reducesthe Group's interest in the hotel from 50% to 25%. Mandarin Oriental, New York is valued at US$340 million for the purposes of thesale. On disposal of its 25% interest, the Group will receive after tax proceedsof US$29 million with a post-tax gain of approximately US$16 million which willbe recognized in 2007. As part of the transaction, the Group will also receiverepayment of its outstanding mezzanine loan to the hotel of US$40 million, for atotal proceeds of US$69 million. The sale was completed on 1st March 2007. The Group's 25% interest in the property which is being sold was classified asnon-current asset held for sale as at 31st December 2006. The Group willcontinue to manage the hotel under a long-term agreement. The final dividend of USc3.00 per share will be payable on 16th May 2007,subject to approval at the Annual General Meeting to be held on 9th May 2007, toshareholders on the register of members at the close of business on 23rd March2007. The ex-dividend date will be on 21st March 2007, and the share registerswill be closed from 26th to 30th March 2007, 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 forSterling. These shareholders may make new currency elections by notifying theUnited Kingdom transfer agent in writing by 27th April 2007. The Sterling equivalent of dividends declared in United States Dollars will be calculated byreference to a rate prevailing on 2nd May 2007. Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore willreceive United States Dollars unless they elect, through CDP, to receive 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,. LtdPhilip Hawkins 020 7816 8136 GolinHarrisKennis Young (852) 2501 7987 Weber ShandwickRichard Hews/ Helen Thomas 020 7067 0700 Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 2006 can be accessed through theInternet at 'www.mandarinoriental.com'. This information is provided by RNS The company news service from the London Stock Exchange