Mandarin In.sg Regulatory News (MDO)

The following announcement was issued today to a Regulatory Information Service approved by the Financial Services Authority in the United Kingdom. 

2010 PRELIMINARY ANNOUNCEMENT OF RESULTS

Highlights

·; Recovery in demand across key markets, particularly Hong Kong

·; Improved profitability and strong balance sheet

·; Successful opening of the new Macau hotel

·; New projects announced in Abu Dhabi, Doha and Shanghai

"Markets stabilized in 2010 and 2011 has begun well for Mandarin Oriental. While it is too early to anticipate the outcome for the year, over the medium term the Group should benefit from the strength of its brand, the limited new supply of hotel rooms in many of its key markets and the phased completion in coming years of hotels under development."

Simon Keswick, Chairman

3rd March 2011

Results 

The final dividend of US¢3.00 per share will be payable on 18th May 2011, subject to approval at the Annual General Meeting to be held on 11th May 2011, to shareholders on the register of members at the close of business on 18th March 2011. The ex-dividend date will be on 16th March 2011, and the share registers will be closed from 21st to 25th March 2011, inclusive.

MANDARIN ORIENTAL INTERNATIONAL LIMITED

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2010

OVERVIEW

More favourable economic conditions throughout 2010 resulted in increased demand in most of the Group's markets, leading to a significant improvement in underlying profit. While cost control measures remained in place across the portfolio, all hotels focused on maintaining or enhancing their competitive positions.

PERFORMANCE

Earnings before interest, tax, depreciation and amortization for 2010 were US$136 million, compared to US$88 million in 2009.

Underlying profit was US$44 million in 2010, which compared with US$12 million in 2009. Underlying earnings per share were US¢4.48, compared to US¢1.27 in 2009. There were no non-trading items in 2010, while in 2009 the profit attributable to shareholders of US$83 million included such items, being principally a gain from a property disposal.

The Directors recommend a final dividend of US¢3.00 per share. This, together with the interim dividend of US¢2.00 per share, will make a total annual dividend of US¢5.00 per share, compared to US¢7.00 per share in 2009.

The net asset value per share with freehold and leasehold properties adjusted for fair market value was US$2.33 at 31st December 2010, compared to US$2.18 at the end of 2009. This is based on the valuation of the Group's hotel properties by its independent valuers. The Group's balance sheet remains strong with net debt of US$144 million, representing 6% of adjusted shareholders' funds.

GROUP REVIEW

Profitability improved across the Group's hotels in 2010 with the strongest performances being seen in Asia.

In Hong Kong, a significant recovery in demand produced increased occupancy and rates. As a result, revenue per available room ('RevPAR') at Mandarin Oriental, Hong Kong and The Excelsior rose by 38% and 30%, respectively. Mandarin Oriental, Singapore benefited from an increase in visitor arrivals to the city and delivered a strong performance with a 31% improvement in RevPAR in local currency terms. In Bangkok, while the hotel remains the market leader, business levels were down following the political demonstrations earlier in the year.

The Group's London property performed satisfactorily despite the disruption caused by the construction of the adjacent One Hyde Park complex and the volcanic ash cloud in April.

In The Americas, while business levels generally have yet to recover fully, the New York hotel produced a strong performance particularly in the second half of the year.

Under the Group's hotel management activity, fees received from its portfolio of hotels increased during the year, reflecting the improved market conditions.

DEVELOPMENTS

The Group now has a total of 26 hotels, with a further 16 under development.

A new Mandarin Oriental hotel opened in Macau in June 2010 under a long-term management contract. This was followed by the launch of The Residences and Apartments at Mandarin Oriental, Macau in November 2010, where the Group will benefit from branding fees as sales proceed.

During the year, three new projects were announced. Two developments due to open in 2014, in Abu Dhabi and Doha, mark the Group's entry into the Middle East. A new hotel in Pudong, Shanghai, which is scheduled to open in 2013, represents the fourth hotel in mainland China that the Group operates or has under development. One previously announced project in Atlanta will now not proceed.

In 2011, the Group will benefit from branding fees following the completion of the 86 Residences at Mandarin Oriental, London, located in the One Hyde Park complex. In addition, a non-trading gain of approximately US$10 million will be recognized following the grant by the developer of One Hyde Park of a leasehold interest within the complex at no cost, allowing the Group to add new facilities to the hotel.

Mandarin Oriental, Paris will open this summer, under a long-term lease. Located on fashionable rue Saint-Honoré, the hotel has been designed to compete amongst the city's legendary palace hotels.

PEOPLE

On behalf of the Board, I would like to express my appreciation to all employees throughout the Group for their exceptional commitment to excellent service delivery.

OUTLOOK

Markets stabilized in 2010 and 2011 has begun well for Mandarin Oriental. While it is too early to anticipate the outcome for the year, over the medium term the Group should benefit from the strength of its brand, the limited new supply of hotel rooms in many of its key markets and the phased completion in coming years of hotels under development.

Simon Keswick

Chairman

3rd March 2011

GROUP CHIEF EXECUTIVE'S REVIEW

BUSINESS STRATEGY

Mandarin Oriental Hotel Group aims to be widely recognized as the best international luxury hotel group operating in sought-after destinations around the globe. An award-winning owner and operator of some of the world's most prestigious hotels and resorts, the Group continues to grow its global presence, with 26 hotels in operation and a further 16 under development. Together, this brings the total number of rooms to more than 10,000 in 27 countries.

PROGRESS ACHIEVED

Continued recognition of the Mandarin Oriental brand internationally ensured that the Group benefited from the improvement in the global economy throughout 2010. The Group's financial performance was impacted positively as increased demand led to higher occupancies in almost every destination. This in turn allowed most hotels to raise their rates, although not yet back to the levels achieved in 2008. Performances were strong in Asia, particularly in Hong Kong, where corporate travel rebounded. Our hotels also benefited from the growing number of outbound leisure travellers from newer markets, particularly mainland China, which is now the Group's second largest source of business after the United States.

Cost control measures continued to be enforced across the portfolio. Nonetheless, all hotels ensured that the services and facilities they offered were of the highest quality, thereby maintaining or enhancing their competitive positions in their local marketplaces. The Group's global brand recognition was enhanced further with the opening of Mandarin Oriental, Macau in June 2010 and the announcements of three new management contracts for hotels under construction in Abu Dhabi, Doha and Shanghai. Mandarin Oriental's reputation for excellence continues to grow as more hotels open in key destinations, and this, combined with our financial strength, places the Group in a strong position to take advantage of opportunities for further growth.

PERFORMANCE IN 2010

Set out below is a review of the Group's performance in 2010, 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

The Group is increasingly recognized for delivering 21st century luxury with oriental charm. Each of our hotels ensures its position as one of the best in its market through a combination of tradition, quality and innovation, while the Group continues to invest behind our core brand attributes of creative hotel design and architecture, holistic spa operations, excellent dining experiences and guest-orientated technology. 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 2010 is evidenced by the achievement of many significant awards from respected travel associations and publications worldwide. Highlights include Condé Nast Traveler US 'Readers' Choice Awards 2010' which featured 15 award nominations, and 'The World's Best' 2011 from Travel + Leisure which had nominations for seven of our hotels. The Group's growing brand awareness in mainland China was also recognized with both Mandarin Oriental, Hong Kong and The Landmark Mandarin Oriental, Hong Kong being listed in the prestigious 2010 Hurun 'Presidential Awards'. Eight hotels were nominated in the Forbes Travel Guide listing and 11 hotels appeared in the prestigious Institutional Investor's 'World's Best 2010' listings.

The Group's reputation for excellent dining experiences has been acknowledged further, with nine restaurants being honoured, and a total of 11 stars awarded, in the most recent 2011 Michelin guides, including three at Mandarin Oriental, Tokyo alone. Mandarin Oriental, Barcelona's signature restaurant Moments, was awarded one Michelin star; an outstanding achievement in its first year of operation. The Group has also announced further partnerships with several internationally renowned chefs who will bring their well recognized cuisine to a number of unique restaurants already in existence and being planned for 2011 and beyond.

The Group's overall spa operations were also recognized in 2010 with Mandarin Oriental being nominated for the third year as 'Best Spa Brand' in SpaFinder's 2010 'Readers' Choice Awards'. In addition, Mandarin Oriental, Sanya was nominated 'Best Destination Spa' and Mandarin Oriental, Hong Kong received 'Best Hotel Spa' of the year in SpaChina magazine. The prestigious Forbes 'Five Star Spa' award has also been granted to a record six hotels, more than any other hotel group in the world.

Mandarin Oriental's newly opened hotels in Barcelona and Las Vegas achieved impressive accolades in their first full year of operation. In addition to the Michelin award, Mandarin Oriental, Barcelona was also recognized on the 'Hot List' in Condé Nast Traveller UK and was voted 'Best Business Hotel' by Wallpaper and Fortune magazines. Mandarin Oriental, Las Vegas was awarded 'Best Getaway Spa' and 'Best Luxury Spa' by SpaFinder, and did well to receive the prestigious 'Five Diamond Lodging Award' for 2011 from the American Automobile Association (AAA). Once again, Mandarin Oriental's hotels in New York, Boston and Riviera Maya, Mexico also achieved this exceptional rating. Mandarin Oriental, Macau, which opened in June 2010, is already attracting positive reviews and accolades, in particular for its design quality.

Mandarin Oriental's global recognition is further enhanced by the Group's award-winning international advertising campaign which features 20 celebrity 'fans', who regularly stay in our hotels. The Group welcomed three new celebrities to the campaign in 2010: singer and actor, Harry Connick Jr; French classical pianist, Hélène Grimaud and Chinese singer and songwriter, Sa Dingding.

As the number of hotels we operate in new destinations grows, Mandarin Oriental is increasingly recognized for creating some of the world's most sought-after properties, providing exceptional services and amenities.

2. Strengthening our competitive position

Critical to the success of the Group is the ability of our hotels to maintain or enhance their leadership positions against primary competitors in their individual markets. Strong brand recognition, combined with the strength of our hotel management teams, plus the added support provided by an established corporate structure, allows our properties to compete effectively and to achieve premium rates.

Demographic trends continue to support the Group's strategy of creating quality services and facilities which attract individuals who will pay a premium for genuine luxury experiences that are meaningful and of value. This is particularly relevant in today's environment where understated luxury is in demand and preferable to the conspicuous consumption of the pre-crisis years. Higher-spending leisure customers make up more than 40% of the Group's room nights, and across the portfolio, our hotels have witnessed a return in demand from our traditional markets. Our hotels have also experienced growth from newer markets where the Group has been increasing its investment in recent years. Mainland China now provides 11% of our total visitor arrivals, up from 4% in 2009.

Our position is further supported by limited new supply in many of the key markets in which we operate. A lack of suitable sites on which to build luxury hotels and the high costs associated with their construction, continues to enhance the competitive position of many of our properties.

Overall, the Group's profitability improved as a result of better conditions in all markets.

The highlights of each region are as follows:

Asia

The Group's strongest performance was in Asia, where our hotels were well placed to benefit from the improved economy, particularly in Hong Kong. As a result of increased demand in most markets, overall Revenue Per Available Room ('RevPAR') for Asia was up by 25% in US dollar terms on a like-for-like basis.

The Group's flagship, Mandarin Oriental, Hong Kong, benefited from improved city-wide activity and an increase in demand from the corporate segment, achieving a 38% increase in RevPAR over 2009. At the same time the hotel improved its competitive position in the market. Both Mandarin Oriental, Hong Kong and The Landmark Mandarin Oriental maintained their exceptional 'Five Star' rating in the Forbes Travel Guide; two of only five hotels in Hong Kong to achieve the highest rating.

Visitor arrivals at The Excelsior, Hong Kong have returned close to historical levels with occupancy back up to 86%. Average rates also increased, although they remain below 2008 levels. Overall the hotel achieved a 30% increase in RevPAR compared to 2009.

In Tokyo, the market became even more competitive with new supply in the luxury hotel segment. Despite this, Mandarin Oriental's excellent reputation amongst Japan's domestic leisure travellers resulted in higher occupancy levels and the hotel did well to increase its RevPAR by 11% in local currency terms. Importantly Mandarin Oriental, Tokyo was voted the 'Best Hotel in the World' in the 2010 Institutional Investor's survey.

Mandarin Oriental, Singapore took full advantage of strong economic conditions and growth in visitor arrivals to the city to increase its occupancy to 81% and improve its average rate. This resulted in a 31% increase in RevPAR in local currency terms.

Mandarin Oriental, Bangkok was impacted by the continuing political uncertainty, further exacerbated by the anti-government demonstrations that occurred in the first half of the year. The hotel, however, remains the market leader in the city. Once again the property was recognized as one of the world's best hotels in the most important worldwide travel awards.

Throughout the rest of Southeast Asia, our hotels took full advantage of the stronger demand with both Kuala Lumpur and Manila increasing their RevPAR in local currency terms by 11% and 10% respectively. After soft opening in October 2009 with a partial room inventory, Mandarin Oriental, Jakarta finalized the completion of its comprehensive US$50 million renovation during the second quarter of 2010. The hotel is building market share, but it will take time to stabilize in what remains a highly competitive environment.

Mandarin Oriental, Macau, which opened in June, is on track to establish itself as a leader in luxury hospitality in the territory.

Europe

In Europe, the Group's hotels were successful in maintaining or enhancing their competitive positions at the top of their markets and improved their performances despite the economic downturn. Consequently, overall RevPAR for Europe increased by 5% in US dollar terms on a like-for-like basis.

Mandarin Oriental Hyde Park, London experienced resilient demand, particularly from leisure travellers, with occupancy remaining high at 80%. Average rates in local currency terms increased by 4% over the previous year. The hotel benefited from the successful opening of Bar Boulud in May, a contemporary French bistro operated by celebrity chef Daniel Boulud, which received excellent reviews in the international media and was listed as 'The Best Restaurant' to open in London in the 2010 Time Out guide. Since January 2011, the hotel's facilities have been further enhanced with the highly acclaimed launch of Heston Blumenthal's first London operation, Dinner, as well as the completion of Mandarin Oriental's first Residences in London in the One Hyde Park project adjacent to the hotel.

The 86 Residences at Mandarin Oriental, London will generate a significant amount of branding fees for the Group in 2011. A gain of approximately US$10 million will also be recognized 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 Munich, our hotel maintained its position as the undisputed market leader in the city and benefited from strong demand in the high-end leisure market, resulting in a 29% increase in RevPAR over 2009 in local currency terms. Mandarin Oriental, Geneva maintained its competitive position and was able to increase average rates by 5% to CHF 720 as a result of improved corporate demand.

Mandarin Oriental, Barcelona has successfully positioned itself at the forefront of the city's luxury hotel market in its first full year of operation, with a strong average rate and solid occupancy levels. The hotel has been designated 'The Best New City Hotel in the World' in the annual Tatler UK Travel Guide.

The Americas

While the economic recovery was uneven across the region, most properties improved their performances when compared to 2009. Overall, the Group's RevPAR in this region increased by 16% in US dollar terms on a like-for-like basis.

In Washington D.C., although occupancy increased to 61%, average rates were below last year's due to the competitive market environment for meetings and conventions in the city. The hotel remains well established as one of the city's most luxurious properties, and appeared in numerous reader surveys in prestigious US publications including Institutional Investor's 'World's Best 2010'.

Mandarin Oriental, New York performed strongly, particularly in the second half of the year as corporate and leisure travel to the city improved. Overall, the hotel increased its RevPAR by 22% when compared to 2009. The hotel's excellent positioning in this important destination was further reinforced by the retention of both the prestigious Forbes 'Five Star' rating and the American Automobile Association's 'Five Diamond Lodging Award'.

In Miami, while the market remains challenging, the hotel capitalized on increases in demand with occupancy at 65%, up from 56% last year. The hotel continues to perform well against competition, receiving positive media attention and a listing in all of the major readership surveys. The Spa at Mandarin Oriental, Miami once again received the Forbes 'Five Star' rating, and remains the only hotel in Florida to do so.

In other destinations, Mandarin Oriental, Boston performed strongly in a highly competitive environment, achieving a RevPAR increase of 41% over 2009. In Las Vegas, depressed market conditions resulted in lack of demand and significant pressure on average rates. Nonetheless, Mandarin Oriental has quickly established itself as the leading luxury hotel in the city, achieving international recognition and awards, including the Forbes 'Five Star' rating for its spa in its first full year of operation.

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

Mandarin Oriental should achieve its mid-term goal of operating 10,000 rooms in key global locations within the next few years. Moreover, the Group has achieved strong geographic diversification with a well balanced portfolio across the globe.

In June 2010, the Group successfully opened its 213-room luxury hotel in Macau, further establishing the brand's presence in this strategically important destination. Mandarin Oriental, Barcelona and Mandarin Oriental, Las Vegas, which both opened to great acclaim at the end of 2009, successfully completed their first full year of operation and have strengthened further the Group's brand recognition in southern Europe and on the west coast of the United States respectively. In 2011, the Group will add a new luxury property to its portfolio in the historic centre of Paris.

The Group announced three new projects over the course of 2010, all of which will be operated under long-term management contracts. In February, the Group announced a 160-room luxury hotel and 35 serviced apartments in Abu Dhabi, which is scheduled to open in 2014. This development will also feature 50 branded Residences at Mandarin Oriental. This was followed in June by the announcement of a second development in the Middle East, Mandarin Oriental, Doha in Qatar, which is also scheduled to complete in 2014 with 160 rooms and 95 serviced apartments. In October 2010, the Group announced a new luxury hotel currently under development in Pudong in Shanghai, which will open in 2013 with 362 rooms and 210 serviced apartments.

While some projects are experiencing delays, construction work in most of the Group's 16 hotel developments is progressing well. One previously announced project, in Atlanta, will no longer proceed.

In 2010, the Group's third Residences project was completed in Las Vegas, and in June 2010, The Residences and Apartments at Mandarin Oriental, Macau were announced. This project will be the first branded Mandarin Oriental residential concept in Asia when it opens in mid-2011. There are now a total of 13 Residences at Mandarin Oriental projects open or under development. The associated branding fees from these projects will provide an additional return for the Group over the next few years.

The potential for further growth remains significant and the Group continues to review opportunities for additional luxurious hotels and resorts in important or unique locations around the world. Mandarin Oriental is well positioned to invest in hotels in strategic locations that offer attractive returns, while at the same time Mandarin Oriental's strong brand continues to be compelling to luxury hotel developers. In fact, all 16 of the Group's announced projects, except for the leasehold interest in Paris, are long-term management contracts without equity participation, reflecting the brand's strength. Overall, the Group's strategy of operating both owned and managed hotels remains in place.

4. Achieving a strong financial performance

Mandarin Oriental's financial performance recovered in 2010, reflecting the improved performance across the Group, particularly in the owned hotels in Hong Kong. Branding fees received during the year from Residences projects in Taipei and Las Vegas also contributed to the Group's results. Excluding non-trading items, profit attributable to shareholders in 2010 was US$44 million compared to US$12 million in 2009.

The financial well being of the Group remains a critical factor in its continued success. Mandarin Oriental remains in a strong financial position with a low level of gearing and significant cash balances. There is no requirement for refinancing any of the Group's significant bank borrowings in 2011, and the investment required to complete Mandarin Oriental, Paris will be met from the Group's cash resources.

Reflecting the Group's strong financial position, the Board has recommended a final dividend of US¢3.00, which, when combined with the interim dividend of US¢2.00, makes a full year dividend of US¢5.00.

THE FUTURE

Further improvement in demand for Mandarin Oriental's luxury hotels is dependent on a sustained recovery of the global economy. The Group, however, will benefit from its growing portfolio as new properties open and stabilize in sought-after destinations around the world.

With the credibility of the brand now firmly established, supported by our strong balance sheet, Mandarin Oriental is moving ever closer to its goal of being widely recognized as the best luxury hotel group in the world.

Edouard Ettedgui

Group Chief Executive

3rd March 2011