Mandarin In.sg Regulatory News (MDO)

7 Aug 2007 10:05

Mandarin Oriental International Ld07 August 2007 To: Business Editor 7th August 2007 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 LIMITEDINTERIM REPORT 2007 Highlights • Favourable market conditions• Full contribution from the re-launched Mandarin Oriental, Hong Kong• Five new hotel projects announced including Beijing and Paris "Conditions are expected to remain favourable during the remainder of the yearwhich will benefit the Group's operations and continue to provide furtherdevelopment opportunities." Simon Keswick, Chairman7th August 2007 Results--------------------------------------------------------------------------- (unaudited) Six months ended 30th June 2007 2006 Change US$m US$m %---------------------------------------------------------------------------Combined total revenue of hotels under management 477.4 398.4 +20Earnings before interest, tax, depreciation and amortization(1) 84.5 48.9 +73Profit attributable to shareholders - excluding gains on disposal 34.3 13.7 +150Profit attributable to shareholders 50.3 48.7 +3Funds from operations(2) 57.4 54.5 +5--------------------------------------------------------------------------- US$ US$ %---------------------------------------------------------------------------Earnings per share - excluding gains on disposal 3.54 1.42 +149Earnings per share 5.19 5.04 +3Funds from operations per share(2) 5.92 5.64 +5Interim dividend per share 1.00 - n/a--------------------------------------------------------------------------- US$ US$ %---------------------------------------------------------------------------Net asset value per share 1.07 0.93 +15Net asset value per share with leasehold properties valuation(3) 1.82 1.56 +17---------------------------------------------------------------------------(1) EBITDA does not include gains on disposal.(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 interim dividend of USc1.00 per share will be payable on 24th October 2007to shareholders on the register of members at the close of business on 31stAugust 2007. The ex-dividend date will be on 29th August 2007, and the shareregisters will be closed from 3rd to 7th September 2007, inclusive. MANDARIN ORIENTAL INTERNATIONAL LIMITEDINTERIM REPORT 2007 OVERVIEWConditions in the first half of 2007 have remained strong, particularly in theGroup's key markets. Increasing average room rates together with a fullcontribution from the newly-renovated Mandarin Oriental, Hong Kong have enhancedsignificantly the Group's results. Excellent progress has also been made in theGroup's development programme, with 16 hotels now under development followingthe announcement of five new projects during the period. PERFORMANCEEarnings before interest, tax, depreciation and amortization for the first sixmonths of 2007 were US$85 million, which compares with US$49 million for thecomparable period in 2006 when Mandarin Oriental, Hong Kong was closed. Profit attributable to shareholders for the period was US$50 million comparedwith US$49 million for the first half of 2006. The 2007 result benefited from aUS$16 million gain arising from the sale of half the Group's 50% equity interestin Mandarin Oriental, New York, while the 2006 comparative included a US$35million gain arising from disposal of The Mark hotel. Excluding such gains,profit attributable to shareholders was US$34 million in the first half of 2007,compared with US$14 million in the first half of 2006. Including gains on disposals, earnings per share for the first six months of2007 were USc5.19, compared to USc5.04 in the corresponding period in 2006.Excluding such gains, earnings per share were USc3.54 and USc1.42, respectively. An interim dividend of USc1.00 per share has been declared (2006 - nil). GROUP REVIEWMandarin Oriental, Hong Kong performed well in the first six months, benefitingfrom a higher average room rate following the completion of its refurbishmentprogramme. The Excelsior, Hong Kong also achieved good growth in its room rate.The contribution from the Group's hotels in London and Geneva was higher due to strengthening occupancy and room rates. Occupancy at the Munich hotel however, showed some decline due to the effect of a three-month refurbishment programme, which has now been completed. The Washington D.C. property continued to improve its market position with revenue per available room up 13%. The contribution from associates and joint ventures showed some improvementdespite the disposal of part of the Group's investment in Mandarin Oriental, NewYork. The sale reduced the Group's equity interest in the hotel from 50% to 25%and its US$41 million mezzanine loan to the hotel was repaid. The contributionfrom the 50%-owned Singapore property, which was renovated in 2005, rose due toa 34% increase in revenue per available room. DEVELOPMENTSOver the past six months, the Group has announced five new hotel projects. Theseinclude a 241-room luxury hotel in the new, landmark headquarters of ChinaCentral Television (CCTV) in Beijing, which will open in July 2008 in time forthe Summer Olympics; and a 150-room palace hotel to open in central Paris inlate 2010. Most recently, the Group announced it will manage a new luxurious130-room beach resort and branded residences on Costa Rica's northern Pacificcoast that will open in 2009. The Group now has approximately 9,800 rooms in operation or planned and shouldreach its mid-term goal of operating 10,000 rooms in major cities and resortdestinations within the next few years. The Group's geographic spread hasincreased significantly with more than half of its portfolio now outside ofAsia. The strength of the brand continues to attract considerable interest from newowners and developers and Mandarin Oriental's growth is well-positioned tocontinue. The Group has 16 announced projects and, with the exception of Paris,these will be managed on behalf of third-party owners, requiring little or noinvestment from the Group. Eight hotels under development have incorporated aResidences at Mandarin Oriental component, in addition to the residences beingbuilt adjacent to the Group's London property. OUTLOOKIn conclusion, the Chairman, Simon Keswick said, "Conditions are expected toremain favourable during the remainder of the year which will benefit theGroup's operations and continue to provide further development opportunities." ------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Profit and Loss Account------------------------------------------------------------------------------------ (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m------------------------------------------------------------------------------------Revenue (note 2) 250.5 182.5 404.6Cost of sales (154.1) (124.5) (267.2) ------- ------- -------Gross profit 96.4 58.0 137.4Selling and distribution costs (15.3) (11.9) (27.7)Administration expenses (36.1) (31.1) (64.6)Gain on disposal (note 10) - 76.9 76.8 ------- ------- -------Operating profit (note 3) 45.0 91.9 121.9 ------- ------- -------Interest income 7.7 4.8 11.0Financing charges (16.6) (12.7) (26.2) ------- ------- -------Net financing charges (8.9) (7.9) (15.2)Share of results of associates and joint ventures (note 4) 7.5 6.2 13.0Gain on disposal of an associate (note 9) 16.0 - - ------- ------- -------Profit before tax 59.6 90.2 119.7Tax (note 5) (9.3) (41.8) (39.5) ------- ------- ------- Profit after tax 50.3 48.4 80.2 ------- ------- ------- Profit attributable to shareholders 50.3 48.7 80.0(Loss)/Profit attributable to minority interests - (0.3) 0.2 ------- ------- ------- 50.3 48.4 80.2 ------- ------- ------- ------------------------------------------------------------------------------------ USc USc USc------------------------------------------------------------------------------------Earnings per share (note 6)- basic 5.19 5.04 8.28- diluted 5.09 4.99 8.17------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Balance Sheet------------------------------------------------------------------------------------ (unaudited) At 31st At 30th June December 2007 2006 2006 US$m US$m US$m------------------------------------------------------------------------------------Net assetsIntangible assets (note 7) 214.7 215.6 216.0Tangible assets 912.9 747.0 882.5Associates and joint ventures 190.1 179.7 190.0Other investments 7.9 5.6 6.4Loan receivable 3.0 43.0 12.0Pension assets 26.8 22.5 27.1Deferred tax assets 25.7 16.8 27.4Other non-current assets 4.8 8.2 2.9 ------- ------- --------Non-current assets 1,385.9 1,238.4 1,364.3 ------- ------- --------Stocks 3.9 3.3 4.3Debtors and prepayments 55.2 61.6 65.7Cash at bank 438.3 257.8 286.7 ------- ------- -------- 497.4 322.7 356.7Non-current assets classified as held for sale (note 11) - - 53.9 ------- ------- -------- Current assets 497.4 322.7 410.6 ------- ------- -------- Creditors and accruals (87.3) (60.4) (91.0)Current borrowings (note 8) (19.9) (9.4) (25.4)Current tax liabilities (6.5) (49.0) (4.4) ------- ------- --------Current liabilities (113.7) (118.8) (120.8) ------- ------- -------- ------- ------- -------- Net current assets 383.7 203.9 289.8Long-term borrowings (note 8) (647.9) (485.4) (575.1)Deferred tax liabilities (75.6) (53.2) (72.9)Pension liabilities (1.5) (1.7) (1.5)Other non-current liabilities (0.2) - (0.2) ------- ------- -------- 1,044.4 902.0 1,004.4 ------- ------- --------Total equityShare capital 48.4 48.3 48.4Share premium 160.8 159.3 160.3Revenue and other reserves 831.5 690.0 792.0 ------- ------- --------Shareholders' funds 1,040.7 897.6 1,000.7Minority interests 3.7 4.4 3.7 ------- ------- -------- 1,044.4 902.0 1,004.4 -------- ------- --------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Statement of Recognized Income And Expense------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m------------------------------------------------------------------------------------- Surplus on revaluation of properties - - 74.1Actuarial gains on defined benefit pension plans - - 5.6Net exchange translation differences 15.8 25.5 45.1Gain/(Loss) on cash flow hedges 1.8 2.7 (2.9)Tax on items taken directly to equity (0.4) - (25.3) -------- ------- --------Net income recognized directly in equity 17.2 28.2 96.6Profit for the period/year 50.3 48.4 80.2 -------- ------- --------Total recognized income and expense for the period/year 67.5 76.6 176.8 -------- ------- --------Attributable to:Shareholders of the Company 67.5 75.9 176.8Minority interests - 0.7 - -------- ------- -------- 67.5 76.6 176.8 -------- ------- --------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Mandarin Oriental International LimitedConsolidated Cash Flow Statement------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December Restated Restated 2007 2006 2006 US$m US$m US$m-------------------------------------------------------------------------------------Operating activities -------- ------- -------- Operating profit 45.0 91.9 121.9Depreciation 18.4 13.9 28.4Amortization of intangible assets 0.4 0.3 0.3Non-cash items (note 12a) 0.7 (75.8) (75.7)Movements in working capital (5.4) (16.7) (0.4)Interest received 8.0 4.8 10.5Interest and other financing charges paid (16.3) (13.4) (26.5)Tax paid (7.3) (3.2) (8.2) -------- ------ -------- 43.5 1.8 50.3Dividends and interest from associates and joint ventures 4.7 6.6 12.1 -------- ------- -------- Cash flows from operating activities 48.2 8.4 62.4 Investing activities -------- ------- -------- Purchase of tangible assets (30.5) (56.2) (135.5)Purchase of intangible assets - - (0.8)Investments in and loans to associates and joint ventures - - (0.2)Repayment of loan receivable 12.0 - -Advance of loan receivable (3.0) - -Increase in other investments (1.1) (0.3) (1.2)Proceeds on disposal of New York (note 12b) 74.6 - -Proceeds on disposal of The Mark (note 12c) - 142.7 98.5Capital distribution from associates (note 12d) 12.3 0.9 1.2 -------- ------- -------- Cash flows from investing activities 64.3 87.1 (38.0) Financing activities -------- ------- -------- Issue of shares 0.5 0.5 1.6Drawdown of borrowings 185.4 9.1 113.6Repayment of borrowings (118.1) (3.1) (8.9)Dividends paid by the Company (note 14) (29.1) (14.5) (14.5) -------- ------- -------- Cash flows from financing activities 38.7 (8.0) 91.8Effect of exchange rate changes 0.3 1.0 1.6 -------- ------- -------- Net increase in cash and cash equivalents 151.5 88.5 117.8Cash and cash equivalents at 1st January 286.6 168.8 168.8 -------- ------- -------- Cash and cash equivalents at 30th June /31st December 438.1 257.3 286.6 -------- ------- -------- -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------Mandarin Oriental International LimitedNotes-------------------------------------------------------------------------------------- 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the unaudited interim condensed financial statements which have been prepared in accordance with IAS 34 - Interim Financial Reporting. In 2007, the Group adopted the following standard, amendment and interpretations to existing standards which are relevant to its operations: IAS 1 (amended 2005) Presentation of Financial Statements - Capital Disclosures IFRS 7 Financial Instruments: Disclosures IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment There have been no changes to the accounting policies described in the 2006 annual financial statements as a result of adoption of the above standard, amendment and interpretations. Certain comparative figures have been reclassified to conform with current period presentation. 2. REVENUE Six months ended 30th June 2007 2006 US$m US$m ------- ------- By geographical area: Hong Kong & Macau 93.5 41.0 Other Asia 57.5 52.1 Europe 67.0 54.6 The Americas 32.5 34.8 ------- ------- 250.5 182.5 ------- ------- 3. OPERATING PROFIT Six months ended 30th June 2007 2006 US$m US$m ------- ------- By geographical area: Hong Kong & Macau 24.3 (3.2) Other Asia 3.1 2.8 Europe 14.2 9.7 The Americas 3.4 5.7 ------- ------- 45.0 15.0Gain on disposal (refer note 10) - 76.9 ------- ------- 45.0 91.9 ------- ------- 4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES Net Net Operating finance profit/ profit charges Tax (loss) US$m US$m US$m US$m ------ ------- ------- ------- Six months ended 30th June 2007 By geographical area: Hong Kong & Macau 2.9 (0.2) (0.1) 2.6 Other Asia 8.7 (1.6) (2.6) 4.5 The Americas 3.1 (2.4) (0.3) 0.4 ------ ------- ------- ------- 14.7 (4.2) (3.0) 7.5 ------ ------- ------- ------- Six months ended 30th June 2006 By geographical area: Hong Kong & Macau 2.8 (0.2) (0.1) 2.5 Other Asia 7.2 (1.7) (1.1) 4.4 The Americas 3.3 (3.4) (0.6) (0.7) ------ ------- ------- ------- 13.3 (5.3) (1.8) 6.2 ------ ------- ------- ------- Share of results of associates and joint ventures is stated after charging depreciation and amortization of US$6.0 million (2006: US$6.4 million). 5.Tax Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. The 2006 tax on profits included a tax charge of US$41.8 million arising on the disposal of the Group's 100% interest in The Mark, New York (refer note 10). 6.EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholders of US$50.3 million (2006: US$48.7 million) and on the weighted average number of 968.6 million (2006: 966.2 million) shares in issue during the period. The weighted average number excludes shares held by the Trustee under the Senior Executive Share Incentive Schemes. Diluted earnings per share are calculated on profit attributable to shareholders of US$50.3 million (2006: US$48.7 million) and on the weighted average number of 988.2 million (2006: 976.8 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period. The number of shares for basic and diluted earnings per share is reconciled as follows: Ordinary shares in millions 2007 2006 ------ ------- Weighted average number of shares in issue 968.6 966.2 Adjustment for shares deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes 19.6 10.6 ------ ------- Weighted average number of shares for diluted earnings per share 988.2 976.8 ------ ------- Additional basic and diluted earnings per share are also calculated based on profit before gains on disposal. A reconciliation of earnings is set out below: Six months ended 30th June 2007 2006 ----------------------------- ------------------------------ Basic Diluted Basic Diluted earnings earnings earnings earnings per share per share per share per share US$m USc USc US$m USc USc Profit before gains on disposal 34.3 3.54 3.47 13.7 1.42 1.41 Gains on disposal 16.0 1.65 1.62 35.0 3.62 3.58 ------- ------- ------- ------- -------- -------- Profit attributable to shareholders 50.3 5.19 5.09 48.7 5.04 4.99 ------- ------- ------- ------- -------- -------- The Directors consider funds from operations ('FFO') to be a supplemental measure of the Group's performance and believe this should be considered along with, but not as an alternative to, profit attributable to shareholders as a measure of the operating performance. FFO is defined as profit attributable to shareholders excluding depreciation of hotel buildings, net of relevant deferred tax and minority interests. Six months ended 30th June 2007 2006 --------------- ------------------ Per share Per share US$m USc US$m USc Profit attributable to shareholders 50.3 5.19 48.7 5.04 Depreciation of buildings, net of deferred tax and minority interests 7.1 0.73 5.8 0.60 ------ ------ ------ ------- Funds from operations 57.4 5.92 54.5 5.64 ------ ------ ------ ------- 7.INTANGIBLE ASSETS At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ------- ------- ------- Land use rights 190.7 192.3 192.0 Goodwill 23.3 23.3 23.3 Computer software 0.7 - 0.7 ------- ------- -------- 214.7 215.6 216.0 ------- ------- -------- 8. BORROWINGS At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ------- ------- ------- Bank loans 658.4 485.2 591.0 Other borrowings 9.4 9.6 9.5 ------- ------- ------- 667.8 494.8 600.5 ------- ------- ------- Current 19.9 9.4 25.4 Long-term 647.9 485.4 575.1 ------- ------- ------ 667.8 494.8 600.5 ------- ------- ------- 9.SALE OF MANDARIN ORIENTAL, NEW YORK 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. 10.SALE OF THE MARK, NEW YORK 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$35.0 million. 11.NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ------- ------- ------- Associates and joint ventures - - 13.7 Loan receivable - - 31.2 Current assets - - 9.0 ------- ------- ------- Total assets - - 53.9 ------- ------- ------- The Group's 25% interest in Mandarin Oriental, New York was classified as held for sale at 31st December 2006, which amounted to total assets of US$53.9 million. The sale was completed on 1st March 2007 (refer note 9). 12.NOTES TO CONSOLIDATED CASH FLOW STATEMENT Year ended 31st Six months ended 30th June December 2007 2006 2006 US$m US$m US$m -------- --------- -------- a) Non-cash items Gain on disposal (refer note 10) - (76.9) (76.8) Other 0.7 1.1 1.1 -------- --------- -------- 0.7 (75.8) (75.7) -------- --------- -------- b) Proceeds on disposal of New York Net assets disposed of 13.7 - - Gain on disposal (refer note 9) 25.0 - - -------- --------- -------- 38.7 - - Repayment of mezzanine loan and interest 41.0 - - Tax and other expenses paid (5.1) - - -------- --------- -------- Net cash flow 74.6 - - -------- --------- -------- c) Proceeds on disposal of The Mark Net assets disposed of - 66.3 66.3 Direct transaction costs - 6.8 6.9 Gain on disposal (refer note 10) - 76.9 76.8 -------- --------- -------- Sale proceeds - 150.0 150.0 Tax and other expenses paid - (7.3) (51.5) -------- --------- -------- Net cash flow - 142.7 98.5 -------- --------- -------- d) Immediately after the sale of Mandarin Oriental, New York, the hotel increased its external borrowings resulting in a return of capital of approximately US$11.5 million on the Group's continuing 25% interest in the hotel. The Group also received repayment of US$0.8 million from its interest in shareholder loans previously provided to Mandarin Oriental, Miami. 13.CAPITAL COMMITMENTS At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ------- ------- ---------Capital commitments 33.0 99.3 37.7 ------- ------- --------- 14.DIVIDENDS An interim dividend of USc1.00 per share has been proposed in respect of 2007. No interim dividend has been paid in respect of 2006. A final dividend of USc3.00 per share amounting to a total of US$29.1 million has been paid in respect of 2006. This amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2007. ---------------------------------------------------------------------------------- The interim dividend of USc1.00 per share will be payable on 24th October 2007 to shareholders on the register of members at the close of business on 31st August 2007. The ex-dividend date will be on 29th August 2007, and the share registers will be closed from 3rd to 7th September 2007, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the Jersey branch register where they will have the option to elect for Sterling. These shareholders may make new currency elections by notifying the United Kingdom transfer agent in writing by 5th October 2007. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing on 10th October 2007. Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars.---------------------------------------------------------------------------------- -end- For further information, please contact: Mandarin Oriental Hotel Group International LimitedJohn R Witt (852) 2895 9288Jill Kluge / Sally de Souza (852) 2895 9167 Matheson & Co., LimitedPhilip Hawkins (020) 7816 8136 GolinHarrisKennes Young (852) 2501 7987 Weber Shandwick FinancialRichard Hews/ Georgia Dempsey (020) 7067 0700 This and other Group announcements can be accessed through the Internet at'www.mandarinoriental.com'. This information is provided by RNS The company news service from the London Stock Exchange