TIDMMDO TIDMJAR TIDMJDS
RNS Number : 0760Y
Mandarin Oriental International Ltd
02 March 2017
To: Business Editor 2nd March 2017
For immediate release
The following announcement was issued today to a Regulatory
Information Service approved by the Financial Conduct Authority in
the United Kingdom.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
2016 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Weak demand persists in key cities
-- Underlying earnings 37% lower
-- Phased renovation of London hotel commenced
-- New management contract in Hawaii
"Challenging market conditions are expected to continue to
impact the Group, and earnings will also be disrupted by the
renovation of the London hotel. Nevertheless, the Group's strong
brand position, healthy balance sheet and continued portfolio
development will underpin its future performance."
Ben Keswick
Chairman
Results
Year ended 31st
December
2016 (1) 2015 Change
US$m US$m %
Combined total revenue of hotels
under management(2) 1,323.7 1,335.3 -1
Underlying EBITDA (Earnings before
interest, tax,
depreciation and amortization)(3) 158.2 188.4 -16
Underlying profit attributable
to shareholders(4) 57.3 90.3 -37
Profit attributable to shareholders 55.2 89.3 -38
USc USc %
--------------------------------------- ------- --- ------- ------
Underlying earnings per share(4) 4.56 7.53 -39
Earnings per share 4.40 7.44 -41
Dividends per share 4.00 5.00 -20
US$ US$ %
--------------------------------------- ------- --- ------- ------
Net asset value per share 0.93 0.98 -5
Adjusted net asset value per
share(5) 3.10 2.84 +9
Net debt/shareholders' funds 25% 11%
Net debt/adjusted shareholders'
funds(5) 8% 4%
--------------------------------------- ------- --- ------- ------
(1) Per share numbers reflect the Company's rights
issue in March 2015.
(2) Combined revenue includes turnover of the
Group's subsidiary hotels in addition to 100%
of revenue from associate, joint venture and
managed hotels.
(3) EBITDA of subsidiaries plus the Group's share
of EBITDA of associates and joint ventures.
(4) The Group uses 'underlying profit' in its
internal financial reporting to distinguish between
ongoing business performance and non-trading
items, as more fully described in note 7 to the
financial statements. Management considers this
to be a key measure which provides additional
information to enhance understanding of the Group's
underlying business performance.
(5) The adjusted net asset value per share and
net debt/adjusted shareholders' funds have been
adjusted to include the market value of the Group's
freehold and leasehold interests which are carried
in the consolidated balance sheet at amortized
cost.
----------------------------------------------------------------------
The final dividend of USc2.50 per share will be payable on 11th
May 2017, subject to approval at the Annual General Meeting to be
held on
3rd May 2017, to shareholders on the register of members at the
close of business on 17th March 2017.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2016
OVERVIEW
Weak demand in a number of key cities during the year led to a
decrease in underlying profit.
PERFORMANCE
Underlying profit of US$57 million was US$33 million lower than
the US$90 million reported in the prior year, and underlying
earnings per share were USc4.56 compared with USc7.53 in 2015.
Profit attributable to shareholders was US$55 million, compared to
US$89 million in 2015, after deducting non-trading items in each
year.
Following an independent valuation of the Group's hotel
properties, the net asset value per share was US$3.10 at 31st
December 2016, compared with US$2.84 per share at the end of
2015.
The Directors recommend a final dividend of USc2.50 per share.
This, together with the interim dividend of USc1.50 per share, will
make a total annual dividend of USc4.00 per share, compared to
USc5.00 per share in 2015.
GROUP REVIEW
The Group experienced softer demand in many of its key markets
throughout the year, particularly Hong Kong, London and Paris.
Mandarin Oriental Hyde Park, London was impacted further by the
start in September of its phased renovation programme, which is
expected to complete in the second quarter of 2018.
The Group was able to benefit from a positive trading
environment in Tokyo, a return to normal operations in Munich
following a public area renovation, and a contribution from the
newly acquired equity interest in Mandarin Oriental, Boston. This
was partly offset by weaker performances in Washington D.C. and
Jakarta.
BUSINESS DEVELOPMENTS
In April, the Group completed its US$140 million acquisition of
Mandarin Oriental, Boston, a hotel it has managed since opening in
October 2008. In July, the Group announced that it will brand and
manage 30 luxury Residences at Mandarin Oriental adjacent to
Mandarin Oriental, Bali, both of which are due to open in mid-2018.
In February 2017, the Group announced a management contract for a
125-room luxury hotel and 107 residences in Honolulu, Hawaii, which
are expected to open in 2020.
Mandarin Oriental currently operates 29 hotels and eight
residences in 19 countries and territories. The Group has a strong
pipeline of hotels and residences under development, with the next
hotel opening in Doha expected to be in the second half of this
year.
PEOPLE
On behalf of the Directors, I would like to acknowledge the
contribution of our colleagues throughout the world for continuing
to provide the exceptional service for which the brand is
renowned.
James Riley took over as Group Chief Executive on 1st April
2016, replacing Edouard Ettedgui who remains on the Board as a
non-executive Director. Y.K. Pang joined the Board on 1st
August.
We were saddened by the death in June of Lord Leach. He made a
significant contribution to the Group and his wise counsel will be
greatly missed.
OUTLOOK
Challenging market conditions are expected to continue to impact
the Group, and earnings will also be disrupted by the renovation of
the London hotel. Nevertheless, the Group's strong brand position,
healthy balance sheet and continued portfolio development will
underpin its future performance.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
STRATEGY
Mandarin Oriental Hotel Group is the award-winning owner and
operator of some of the world's most luxurious hotels, resorts and
residences. Having grown from its Asian roots into a global brand,
the Group currently operates 29 hotels and eight residences in 19
countries and territories.
The Group holds equity interests in a number of its hotels, and
had adjusted net assets of approximately US$3.9 billion as at 31st
December 2016. Capitalizing on the strength of its brand, Mandarin
Oriental also manages hotels on behalf of third party owners that
require limited or no equity investment by the Group.
Mandarin Oriental is focused on becoming recognized as the
world's best luxury hotel group by expanding its geographical
presence and creating hotels that are positioned amongst the
leaders in their local markets, delivering contemporary luxury and
a unique sense of place, while reflecting the Group's oriental
heritage. It will continue to invest in its core brand attributes
of creative hotel design and architecture, award winning
restaurants, bars and wellness facilities, and legendary service
delivery. At the same time, the Group remains alert to new trends
and opportunities, ensuring the brand remains relevant to today's
multi-generational audience.
Mandarin Oriental's strategy is to operate both managed and
owned hotels. The Group is focused on becoming the brand of choice
for owners and developers in order to further build its portfolio
of managed properties in key city centres and resort destinations
around the world. At the same time, the Group's strong balance
sheet allows for reinvestment in existing flagship properties as
well as selectively investing in opportunities in strategic
locations that offer attractive returns.
Expansion of the Residences at Mandarin Oriental portfolio also
remains a key focus, with the associated branding fees and ongoing
management fees from these projects providing a growing return for
the Group.
The long-term potential for growth of the Group's portfolio is
significant.
HOTEL OVERVIEW
While each hotel focused on maintaining or enhancing its
leadership position against primary competitors in its individual
market, the Group encountered challenging conditions in many of its
destinations in 2016. This resulted in a 3% decline in Revenue Per
Available Room (RevPAR) across the Group's 29 hotels in US dollar
terms on a like-for-like basis([1].) Highlights of the Group's
regional performance, focusing on subsidiary and significantly
owned associate hotels are as follows, with all references to
RevPAR being in US dollar terms, unless otherwise stated:
Asia
Overall, RevPAR for Asia in 2016 on a like-for-like basis was
down 1%, with the region generally experiencing softer demand,
particularly in Hong Kong and Jakarta.
Mandarin Oriental, Hong Kong was affected by a decline in
visitor arrivals to the city as well as a softening in the
corporate sector. As a result, RevPAR was down 7% over the previous
year. Food and beverage performance was also impacted, with revenue
down 6% year on year.
The Excelsior, the Group's other wholly-owned hotel in Hong
Kong, was also impacted by the city-wide decline in leisure demand,
particularly from mainland China, combined with an oversupply in
its competitive set. As a consequence, RevPAR was down 4%. Similar
to Mandarin Oriental, Hong Kong, the hotel's food and beverage
revenue declined by 5%.
Mandarin Oriental, Tokyo maintained RevPAR in-line with the
previous year in local currency terms. As a result of a stronger
yen, however, RevPAR was up 10% in US dollar terms. Food and
beverage performed well and the hotel was once again awarded a
Michelin star for each of its three restaurants, the only hotel in
the city to achieve this accolade.
Mandarin Oriental, Jakarta maintained its competitive position
but was negatively impacted by lower demand as a result of ongoing
security concerns. Occupancy was down 18% leading to a decline in
RevPAR of 23%.
Mandarin Oriental, Bangkok performed well, benefiting from the
completion in April 2016 of the renovation of the historic Authors'
and Garden Wings including Le Normandie restaurant.
Despite softer demand in the luxury sector, Mandarin Oriental,
Singapore did well to maintain performance in line with the
previous year and increase its market share.
([1]) Like-for-like comparison excludes hotels without a full
year of operation in either 2015 or 2016.
Europe
While the Group's hotels performed well against their respective
competition during 2016, weaker demand in London and Paris put
pressure on occupancy and rates city-wide, with the Group's overall
RevPAR for the region down 15% on a like-for-like basis.
A decline in demand in the London luxury hotel segment in the
first half impacted Mandarin Oriental Hyde Park's performance. The
hotel was further affected by the renovation which began in
September. Consequently, RevPAR was down 29%, or 19% in local
currency terms. The renovation of the guestrooms and facilities,
which is expected to be completed by the second quarter in 2018,
will ensure the property remains one of the best luxury hotels in
the city. It will remain open throughout this period with reduced
facilities and room inventory.
Mandarin Oriental, Munich saw a 20% increase in RevPAR as the
hotel's performance benefited from the completion in May 2016, of a
14-month public area renovation. The hotel remained the undisputed
market leader and the new facilities, which include a Matsuhisa
restaurant by chef Nobu, a bar and a rejuvenated lobby lounge, have
reinforced its appeal in the city.
Mandarin Oriental, Paris was impacted by weaker city-wide demand
due to ongoing travel security concerns. This, in addition to
increased supply in the luxury sector following the completion of
renovations by competitor hotels, led to a decline in RevPAR of
22%. The hotel's food and beverage operations, led by chef Thierry
Marx, continued to perform well.
In Geneva, the hotel maintained its competitive position,
however a drop in average rate led to a 5% decrease in RevPAR over
the previous year.
Hotel Ritz, Madrid improved its rates and market share, as a
result of increased visitor arrivals. The hotel will undergo a
comprehensive renovation, which is currently scheduled to commence
in the first quarter of 2018.
The Americas
Trading conditions in The Americas were generally positive
during 2016, especially at the Group's associate and managed
hotels, with overall RevPAR for the region up 3% on a like-for-like
basis.
Mandarin Oriental, Boston maintained its position as market
leader, however softer city-wide demand led to a drop in RevPAR of
6%.
The performance of Mandarin Oriental, Washington D.C. was
impacted by a room renovation programme during the year, leading to
a 6% decline in RevPAR.
In New York, the Group's flagship hotel performed well and
improved its competitive position.
FINANCIAL PERFORMANCE
Earnings were lower in 2016, mainly as a result of weaker demand
in the Group's key cities of Hong Kong, London and Paris.
Underlying earnings before interest, tax, depreciation and
amortization for 2016 were US$158 million, compared with US$188
million in 2015. Underlying profit of the Group of US$57 million
was US$33 million down on the US$90 million achieved in 2015.
Reflecting the lower earnings, cash flow generated from
operations during the year was US$108 million, and total net cash
outflow for the Group in 2016 was US$125 million, after paying
dividends of US$57 million, capital expenditure of US$77 million
across the Group's portfolio, and investing US$90 million of Group
cash reserves to acquire Mandarin Oriental, Boston. In comparison,
cash flow generated from operations during 2015 was US$140 million,
whilst total net cash outflow for the Group was US$16 million,
after paying dividends of US$75 million, hotel capital expenditure
of US$50 million, and using net proceeds received of US$314 million
from a 1 for 4 rights issue to repay US$262 million of bank debt
and invest US$73 million to acquire the Group's 50% interest in
Hotel Ritz, Madrid.
At 31st December 2016, the Group's net debt was US$297 million,
compared to US$132 million at the end of 2015.
Gearing as a percentage of adjusted shareholders' funds at 31st
December 2016, after taking into account the market value of the
Group's property interests and the US$140 million Boston
acquisition was 8% compared to 4% at the end of 2015.
BRAND AWARENESS
The recognition of Mandarin Oriental as one of the world's best
luxury hotel groups, has steadily grown during the 17-year tenure
of Edouard Ettedgui, who stepped down as Group Chief Executive on
31st March 2016. During the year, this continued to be reflected in
the awards received from respected travel associations and
publications worldwide. Highlights include Condé Nast Traveler, US
'Readers' Choice Awards' 2016 featuring 13 Mandarin Oriental
hotels. In addition, Mandarin Oriental, Hong Kong was voted 'Best
Overseas Business Hotel' in the Condé Nast Traveller, UK 2016
awards and Mandarin Oriental, Bangkok received the highest accolade
in the 2016 Tatler Travel Guide for 'Enduring Excellence'.
In China, Mandarin Oriental was listed in the top five 'Best
Luxury Hotel Brands' in the Hurun Report.
In the 2017 Michelin guides, a total of 12 restaurants were
honoured with 18 stars being granted across the Group. The Group's
spa operations were also acknowledged as being among the best, with
a record 12 hotels gaining the prestigious Forbes 'Five Star Spa'
award.
GROWTH
The Group has 11 hotels under development which are expected to
open in the next five years. All are management contracts with no
equity interest. The Group continues to review new opportunities
around the world and expects to see a steady growth in its
portfolio over the coming years.
In April, the Group acquired the equity interest in Mandarin
Oriental, Boston for US$140 million. The Group has managed the
148-room hotel on Boylston Street since its opening in 2008, and
also manages 85 privately owned Residences at Mandarin Oriental
connected to the hotel.
In July, the Group announced that it will brand and manage 30
luxury Residences at Mandarin Oriental adjacent to Mandarin
Oriental, Bali, both of which are due to open in mid-2018.
In February 2017, the Group announced a management contract for
a 125-room luxury hotel and 107 Residences at Mandarin Oriental in
Honolulu, Hawaii, which are expected to open in 2020.
In the second half of 2017, Mandarin Oriental expects to open
its first hotel in the Middle East, in a new city centre
development in the heart of Doha, Qatar.
THE FUTURE
Challenging conditions are expected to continue to impact
performance in a number of key markets in 2017, and earnings will
be disrupted by the renovation of the London property. Looking
further ahead however, the Group's results should benefit from the
increasing demand of high net worth individuals from both
traditional and emerging markets, travelling to our key
destinations. The Group's results will also be supported by
enhanced contributions from renovated flagship properties and from
new hotel openings.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2016
2016 2015
Underlying Non- Underlying Non-
business trading business trading
performance items Total performance items Total
US$m US$m US$m US$m US$m US$m
Revenue (note 2) 597.4 - 597.4 607.3 - 607.3
Cost of sales (383.4) - (383.4) (362.1) - (362.1)
------- -------
Gross profit 214.0 - 214.0 245.2 - 245.2
Selling and
distribution
costs (39.7) - (39.7) (37.0) - (37.0)
Administration
expenses (104.5) (1.8) (106.3) (100.4) (0.5) (100.9)
------- -------- ------- ------------ -------- -------
Operating profit
(note 3) 69.8 (1.8) 68.0 107.8 (0.5) 107.3
Financing charges (12.1) - (12.1) (13.7) - (13.7)
Interest income 1.3 - 1.3 1.9 - 1.9
Net financing charges (10.8) - (10.8) (11.8) - (11.8)
Share of results
of associates and
joint ventures
(note 4) 11.2 (0.3) 10.9 11.0 (0.5) 10.5
Profit before tax 70.2 (2.1) 68.1 107.0 (1.0) 106.0
Tax (note 5) (13.7) - (13.7) (16.6) - (16.6)
------- -------- ------- ------------ -------- -------
Profit after tax 56.5 (2.1) 54.4 90.4 (1.0) 89.4
------- -------- ------- ------------ -------- -------
Attributable to:
Shareholders of
the Company 57.3 (2.1) 55.2 90.3 (1.0) 89.3
Non-controlling
interests (0.8) - (0.8) 0.1 - 0.1
------- -------- ------- ------------ -------- -------
56.5 (2.1) 54.4 90.4 (1.0) 89.4
------- -------- ------- ------------ -------- -------
USc USc USc USc
Earnings per share
(note 6)
- basic 4.56 4.40 7.53 7.44
- diluted 4.54 4.38 7.50 7.41
------- ------- ------------ -------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2016
2016 2015
US$m US$m
Profit for the year 54.4 89.4
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss:
------ ------
Remeasurements of defined benefit
plans (3.1) (5.4)
Tax on items that will not be
reclassified 0.5 0.9
(2.6) (4.5)
Items that may be reclassified
subsequently to profit or loss:
------ ------
Net exchange translation differences
* net losses arising during the year (56.1) (43.3)
Revaluation of other investments
- transfer to profit and loss - (0.6)
Cash flow hedges
- net gains arising during the
year 2.5 -
Tax relating to items that may
be reclassified (0.4) -
Share of other comprehensive expense
of associates
and joint ventures (1.7) (11.7)
(55.7) (55.6)
Other comprehensive expense for
the year, net of tax (58.3) (60.1)
------ ------
Total comprehensive (expense)/income
for the year (3.9) 29.3
------ ------
Attributable to:
Shareholders of the Company (3.0) 29.3
Non-controlling interests (0.9) -
------ ------
(3.9) 29.3
------ ------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2016
2016 2015
US$m US$m
Net assets
Intangible assets 44.3 44.1
Tangible assets (note
8) 1,352.1 1,255.0
Associates and joint ventures 163.8 164.4
Other investments 10.7 10.2
Loans receivable - -
Deferred tax assets 2.6 2.8
------- -------
Non-current assets 1,573.5 1,476.5
Stocks 5.9 6.0
Debtors and prepayments 94.2 89.9
Current tax assets 5.2 1.8
Bank and cash balances 182.6 308.6
------- -------
Current assets 287.9 406.3
------- -------
Creditors and accruals (140.1) (138.6)
Current borrowings (note
9) (2.5) (4.2)
Current tax liabilities (8.7) (9.3)
------- -------
Current liabilities (151.3) (152.1)
------- -------
Net current assets 136.6 254.2
Long-term borrowings (note
9) (477.4) (436.2)
Deferred tax liabilities (56.1) (59.8)
Pension liabilities (3.2) -
Other non-current liabilities - (3.0)
------- -------
1,173.4 1,231.7
------- -------
Total equity
Share capital 62.8 62.8
Share premium 490.4 490.3
Revenue and other reserves 616.2 673.6
------- -------
Shareholders' funds 1,169.4 1,226.7
Non-controlling interests 4.0 5.0
------- -------
1,173.4 1,231.7
------- -------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2016
Attributable
to Attributable
shareholders to non-
Share Share Capital Revenue Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m
2016
At 1st January 62.8 490.3 284.5 504.7 (2.7) (112.9) 1,226.7 5.0 1,231.7
Total comprehensive
income - - - 52.6 2.1 (57.7) (3.0) (0.9) (3.9)
Dividends paid by
the Company - - - (56.5) - - (56.5) - (56.5)
Dividends paid to
non-controlling interests - - - - - - - (0.1) (0.1)
Share-based long-term
incentive plans - - 2.2 - - - 2.2 - 2.2
Transfer - 0.1 (0.5) 0.4 - - - - -
------- ------- -------- -------- -------- -------- ------------ ------------ -------
At 31st December 62.8 490.4 286.2 501.2 (0.6) (170.6) 1,169.4 4.0 1,173.4
2015
At 1st January 50.2 188.2 283.1 495.6 (2.7) (58.0) 956.4 5.0 961.4
Total comprehensive
income - - - 84.2 - (54.9) 29.3 - 29.3
Dividends paid by
the Company - - - (75.3) - - (75.3) - (75.3)
Issue of shares 12.6 301.4 - - - - 314.0 - 314.0
Share-based long-term
incentive plans - - 2.3 - - - 2.3 - 2.3
Transfer - 0.7 (0.9) 0.2 - - - - -
------- ------- -------- -------- -------- -------- ------------ ------------ -------
At 31st December 62.8 490.3 284.5 504.7 (2.7) (112.9) 1,226.7 5.0 1,231.7
------- ------- -------- -------- -------- -------- ------------ ------------ -------
Total comprehensive income included in revenue reserves
comprises profit attributable to shareholders of the Company of
US$55.2 million
(2015: US$89.3 million) and net actuarial loss on employee
defined benefit plans of US$2.6 million (2015: US$4.5 million). In
addition, in 2015, total comprehensive income included in revenue
reserves was also stated after deducting a US$0.6 million fair
value gain on other investments which was transferred to the profit
and loss account.
________________________________________________________________________________________________________________________________
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2016
2016 2015
US$m US$m
Operating activities
------- -------
Operating profit (note 3) 68.0 107.3
Depreciation 57.7 50.6
Amortization of intangible assets 2.1 2.3
Other non-cash items 2.7 2.2
Movements in working capital (3.8) (1.6)
Interest received 1.3 2.0
Interest and other financing charges
paid (10.4) (12.1)
Tax paid (19.0) (18.5)
------- -------
98.6 132.2
Dividends and interest from associates
and joint ventures 9.1 8.0
Cash flows from operating activities 107.7 140.2
Investing activities
------- -------
Purchase of tangible assets (77.0) (50.0)
Purchase of intangible assets (2.7) (1.5)
Acquisition of Mandarin Oriental,
Boston (note 11) (140.0) -
Acquisition of Hotel Ritz, Madrid
(note 12) - (73.3)
Purchase of other investments (1.3) (0.9)
Advance to joint ventures (2.8) (0.1)
Repayment of loans to associates 0.9 0.6
Sale of tangible assets 0.1 -
Sale of other investments - 0.8
Cash flows from investing activities (222.8) (124.4)
Financing activities
------- -------
Issue of shares (note 13) - 314.0
Drawdown of borrowings 51.5 -
Repayment of borrowings (1.6) (261.5)
Dividends paid by the Company
(note 14) (56.5) (75.3)
Dividends paid to non-controlling
interests (0.1) -
Cash flows from financing activities (6.7) (22.8)
------- -------
Net decrease in cash and cash
equivalents (121.8) (7.0)
Cash and cash equivalents at 1st
January 308.6 324.3
Effect of exchange rate changes (4.3) (8.7)
------- -------
Cash and cash equivalents at 31st
December 182.5 308.6
------- -------
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has
been based on the preliminary results for the year ended 31st
December 2016 which have been prepared in conformity with
International Financial Reporting Standards ('IFRS'), including
International Accounting Standards ('IAS') and Interpretations
adopted by the International Accounting Standards Board.
Amendments effective in 2016 which are relevant to the Group's
operations:
Amendments to IFRS Accounting for Acquisitions
11 of Interests in Joint Operations
Amendments to IAS Disclosure Initiative: Presentation
1 of Financial Statements
Amendments to IAS Clarification of Acceptable
16 and Methods of Depreciation and
IAS 38 Amortization
Annual Improvements 2012 - 2014 Cycle
to IFRSs
The adoption of these amendments does not have a significant
effect on the Group's accounting policies and disclosures.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
2. REVENUE
2016 2015
US$m US$m
By geographical area:
Hong Kong 224.5 238.6
Other Asia 106.4 100.1
Europe 177.8 204.9
The Americas 88.7 63.7
597.4 607.3
----- -----
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTIZATION) AND OPERATING PROFIT FROM SUBSIDIARIES
2016 2015
US$m US$m
By geographical area:
Hong Kong 69.3 83.2
Other Asia 29.2 27.8
Europe 25.2 44.5
The Americas 5.9 5.2
------ -------
Underlying EBITDA from subsidiaries 129.6 160.7
Non-trading items
- acquisition-related costs (note 7) (1.8) (0.5)
------ -------
EBITDA from subsidiaries 127.8 160.2
Less: depreciation and amortization (59.8) (52.9)
------ -------
Operating profit 68.0 107.3
------ -------
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Net Net
and Operating financing profit/
EBITDA amortization profit charges Tax (loss)
US$m US$m US$m US$m US$m US$m
2016
By geographical
area:
Other Asia 20.9 (7.8) 13.1 (1.5) (2.3) 9.3
Europe 1.8 (0.7) 1.1 - - 1.1
The Americas 5.9 (3.0) 2.9 (2.2) 0.1 0.8
------ ------------ --------- --------- ----- -------
28.6 (11.5) 17.1 (3.7) (2.2) 11.2
Non-trading
items
* provision for litigation (note 7) (0.3) - (0.3) - - (0.3)
------ ------------ --------- --------- ----- -------
28.3 (11.5) 16.8 (3.7) (2.2) 10.9
------ ------------ --------- --------- ----- -------
2015
By geographical
area:
Other Asia 21.1 (7.7) 13.4 (1.4) (2.2) 9.8
Europe 1.5 (0.3) 1.2 - (0.3) 0.9
The Americas 5.1 (2.8) 2.3 (2.1) 0.1 0.3
------ ------------ --------- --------- ----- -------
27.7 (10.8) 16.9 (3.5) (2.4) 11.0
Non-trading
items
* acquisition-related costs (note 7) (0.5) - (0.5) - - (0.5)
------ ------------ --------- --------- ----- -------
27.2 (10.8) 16.4 (3.5) (2.4) 10.5
------ ------------ --------- --------- ----- -------
5. TAX
2016 2015
US$m US$m
Tax (charged)/credited to profit
and loss is analyzed as follows:
Current tax (14.9) (17.9)
Deferred tax 1.2 1.3
------ ------
(13.7) (16.6)
------ ------
By geographical area:
Hong Kong (8.8) (10.7)
Other Asia (3.5) (1.7)
Europe (0.9) (4.1)
The Americas (0.5) (0.1)
------ ------
(13.7) (16.6)
------ ------
Tax relating to components of other comprehensive income or
expense is analyzed as follows:
Remeasurements of defined benefit
plans 0.5 0.9
Cash flow hedges (0.4) -
----- ---
0.1 0.9
----- ---
Tax on profits has been calculated at rates of taxation
prevailing in the territories in which the Group operates.
Share of tax of associates and joint ventures of US$2.2 million
(2015: US$2.4 million) is included in share of results of
associates and joint ventures (note 4).
6. EARNINGS PER SHARE
Basic earnings per share are calculated on profit attributable
to shareholders of US$55.2 million (2015: US$89.3 million) and on
the weighted average number of 1,255.9 million (2015: 1,199.6
million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable
to shareholders of US$55.2 million (2015: US$89.3 million) and on
the weighted average number of 1,261.5 million (2015: 1,204.5
million) shares after adjusting for the number of shares which are
deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during
the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2016 2015
Weighted average number of shares
for basic earnings
per share calculation 1,255.9 1,199.6
Adjustment for shares deemed to
be issued for no consideration
under the share-based long-term
incentive plans 5.6 4.9
------- -------
Weighted average number of shares
for diluted earnings
per share calculation 1,261.5 1,204.5
------- -------
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2016 2015
Basic Diluted
Basic Diluted earnings earnings
earnings earnings per per
per share per share share share
US$m USc USc US$m USc USc
Profit attributable
to shareholders 55.2 4.40 4.38 89.3 7.44 7.41
Non-trading
items (note
7) 2.1 1.0
Underlying
profit attributable
to shareholders 57.3 4.56 4.54 90.3 7.53 7.50
---- ----
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include gains and losses arising
from the sale of businesses, investments and properties; impairment
of non-depreciable intangible assets and other investments;
provisions for the closure of businesses; acquisition-related costs
in business combinations; provisions against asset impairment and
writebacks; and other credits and charges of a non-recurring nature
that require inclusion in order to provide additional insight into
underlying business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2016 2015
US$m US$m
Acquisition-related costs
- administration expenses 1.8 0.5
- share of results of associates
and joint ventures - 0.5
----- -----
1.8 1.0
Provision for litigation
- share of results of associates
and joint ventures 0.3 -
----- -----
2.1 1.0
----- -----
8. TANGIBLE ASSETS
2016 2015
US$m US$m
Opening net book value 1,255.0 1,315.1
Exchange differences (61.5) (59.1)
Additions 216.9 49.9
Disposals (0.6) (0.3)
Depreciation charge (57.7) (50.6)
------- -------
Closing net book value 1,352.1 1,255.0
------- -------
Freehold properties include a property of US$111.6 million
(2015: US$104.6 million), which is stated net of tax increment
financing of US$22.2 million (2015: US$23.0 million) (note 10).
9. BORROWINGS
2016 2015
US$m US$m
Bank overdrafts 0.1 -
Bank loans 473.9 434.1
Other borrowings 4.2 4.6
Tax increment financing (note 10) 1.7 1.7
----- -----
479.9 440.4
----- -----
Current 2.5 4.2
Long-term 477.4 436.2
----- -----
479.9 440.4
----- -----
10. TAX INCREMENT FINANCING
2016 2015
US$m US$m
Netted off against the net book
value of property (note 8) 22.2 23.0
Loan (note 9) 1.7 1.7
----- -----
23.9 24.7
----- -----
A development agreement was entered into between one of the
Group's subsidiaries and the District of Columbia ('District'),
pursuant to which the District agreed to provide certain funds to
the subsidiary out of the net proceeds obtained through the
issuance and sale of certain tax increment financing bonds ('TIF
Bonds') for the development and construction of Mandarin Oriental,
Washington D.C.
The District agreed to contribute to the subsidiary US$33.0
million through the issuance 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 loan plus 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 netted off against the net book value in respect of the
property (note 8). The loan of US$1.7 million (2015: US$1.7
million) is included in current (2015: long-term) borrowings (note
9).
11. ACQUISITION OF MANDARIN ORIENTAL, BOSTON
On 27th April 2016, the Group completed its US$140.0 million
acquisition of Mandarin Oriental, Boston, a hotel that the Group
has managed since its opening in 2008. The consideration of
US$140.0 million represented the fair values of the tangible assets
acquired at the acquisition date. There was no goodwill arising on
acquisition.
12. ACQUISITION OF HOTEL RITZ, MADRID
In May 2015, the Group acquired a 50% interest in the Hotel
Ritz, Madrid for EUR65 million (US$73.3 million) in a joint venture
with The Olayan Group, with Mandarin Oriental managing the hotel
under a long-term management agreement. The hotel is to undergo a
comprehensive renovation in 2018 and 2019, currently estimated to
cost a total of some EUR90 million, of which the Group's share will
be EUR45 million (US$47 million).
13. ISSUE OF SHARES
In April 2015, the Group completed a 1 for 4 rights issue with
250.9 million new ordinary shares issued at US$1.26 per share,
raising US$316.2 million of gross proceeds. The proceeds of the
issue were used to pay down debt in advance of the refurbishment of
Mandarin Oriental Hyde Park, London and to fund the Group's
acquisition of a 50% interest in the Hotel Ritz, Madrid. The Group
paid expenses of US$3.6 million in connection with the rights issue
in 2015.
The Group issued 1.3 million new ordinary shares under the
share-based long-term incentive plans with proceeds of US$1.4
million in 2015.
14. DIVIDS
2016 2015
US$m US$m
Final dividend in respect of 2015
of USc3.00
(2014: USc5.00) per share 37.7 50.2
Interim dividend in respect of
2016 of USc1.50
(2015: USc2.00) per share 18.8 25.1
----- -----
56.5 75.3
----- -----
A final dividend in respect of 2016 of USc2.50 (2015: USc3.00)
per share amounting to a total of US$31.4 million (2015: US$37.7
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2017 Annual
General Meeting. The amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2017.
15. CAPITAL COMMITMENTS
At 31st December 2016, total capital commitments of the Group
amounted to US$270.9 million (2015: US$321.4 million).
16. RELATED PARTY TRANSACTIONS
In the normal course of business, the Group undertakes a variety
of transactions with certain of its associates and joint
ventures.
The most significant of such transactions are management fees of
US$13.2 million (2015: US$13.2 million) received from the Group's
six (2015: six) associate and joint venture hotels which are based
on long-term management agreements on normal commercial terms.
There were no other related party transactions that might be
considered to have a material effect on the financial position or
performance of the Group that were entered into or changed during
the current financial year.
Amount of outstanding balances with associates and joint
ventures are included in debtors and prepayments, as
appropriate.
Mandarin Oriental International Limited
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and
internal control. The process by which the Group identifies and
manages risk will be set out in more detail in the Corporate
Governance section of the Company's 2016 Annual Report (the
'Report'). The following are the principal risks and uncertainties
facing the Company as required to be disclosed pursuant to the
Disclosure Guidance and Transparency Rules issued by the Financial
Conduct Authority in the United Kingdom and are in addition to the
matters referred to in the Chairman's Statement and Group Chief
Executive's Review.
1. Economic and Financial Risk
The Group's business is exposed to the risk of negative
developments in global and regional economies and financial
markets, either directly or through the impact on the Group's
investment partners, third-party hotel owners and developers,
bankers, suppliers or customers. These developments can result in
recession, inflation, deflation, currency fluctuations,
restrictions in the availability of credit, business failures, or
increases in financing costs. Such developments may increase
operating costs, reduce revenues, lower asset values or result in
the Group being unable to meet in full its strategic objectives.
These developments could also adversely affect travel patterns
which would impact demand for the Group's products and
services.
The steps taken by the Group to manage its exposure to financial
risk will be set out in the Financial Risk Management section in
the Financial Statements in the Report.
2. Commercial and Market Risk
Risks are an integral part of normal commercial practices, and
where practicable steps are taken to mitigate such risks.
The Group operates within the global hotel industry which is
highly competitive. Failure to compete effectively in terms of
quality of product, levels of service or price can have an adverse
effect on earnings. Significant competitive pressure or the
oversupply of hotel rooms in a specific market can lead to reduced
margins. Advances in technology creating new or disruptive
competitive pressures might also negatively affect the trading
environment.
The Group competes with other luxury hotel operators for new
opportunities in the areas of hotel management, residences
management and residences branding. Failure to establish and
maintain relationships with hotel owners or developers could
adversely affect the Group's business. The Group also makes
investment decisions in respect of acquiring new hotel properties
and undertaking major renovations at hotels in which it has an
ownership interest. The success of these investments is measured
over the longer term and as a result is subject to market risk.
Mandarin Oriental's continued growth depends on the opening of
new hotels and branded residences. Most of the Group's new
developments are controlled by third-party owners and developers
and can be subject to delays due to issues attributable to planning
and construction, sourcing of finance, and the sale of residential
units. In extreme circumstances, such factors might lead to the
cancellation of a project.
3. Pandemic, Terrorism and Natural Disasters
The Group's business would be impacted by a global or regional
pandemic as this would impact travel patterns, demand for the
Group's products and services and could also affect the Group's
ability to operate effectively. The Group's hotels are also
vulnerable to the effects of terrorism, either directly through the
impact of an act of terrorism or indirectly through the impact of
generally reduced economic activity in response to the threat of or
an actual act of terrorism. In addition, a number of the
territories in which the Group operates can experience from time to
time natural disasters such as typhoons, floods, earthquakes and
tsunamis.
4. Key Agreements
The Group's business is reliant upon joint venture and
partnership agreements, property leasehold arrangements,
management, license, branding and services agreements or other key
contracts. Cancellation, expiry or termination, or the
renegotiation of any of these key agreements and contracts, could
have an adverse effect on the financial performance of individual
hotels as well as the wider Group.
5. Reputational Risk and Value of the Brand
The Group's brand equity and global reputation is fundamental in
supporting its ability to offer premium products and services and
to achieving acceptable revenues and profit margins. Any damage to
the Group's brand equity or reputation, including as a result of
negative effects relating to health and safety, acts or omissions
by Group personnel, information system breaches, and any
allegations of socially irresponsible policies and practices, might
adversely impact the attractiveness of the Group's properties or
the loyalty of the Group's guests.
6. Regulatory and Political Risk
The Group's business is subject to a number of regulatory
environments in the territories in which it operates. Changes in
the regulatory approach to such matters as employment legislation,
tax rules, foreign ownership of assets, planning controls and
exchange controls have the potential to impact the operations and
profitability of the Group's business. Changes in the political
environment, including prolonged civil unrest, could also affect
the Group's business.
Mandarin Oriental International Limited
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
a) the consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations
adopted by the International Accounting Standards Board; and
b) the sections of the Company's 2016 Annual Report, including
the Chairman's Statement, Group Chief Executive's Review and
Principal Risks and Uncertainties, which constitute the management
report include a fair review of all information required to be
disclosed by the Disclosure Guidance and Transparency Rules 4.1.8
to 4.1.11 issued by the Financial Conduct Authority in the United
Kingdom.
For and on behalf of the Board
James Riley
Stuart Dickie
Directors
The final dividend of USc2.50 per share will
be payable on 11th May 2017, subject to approval
at the Annual General Meeting to be held on
3rd May 2017, to shareholders on the register
of members at the close of business on 17th
March 2017. The shares will be quoted ex-dividend
on the Singapore Exchange and the London Stock
Exchange on 15th and 16th March 2017, respectively.
The share registers will be closed from 20th
to 24th March 2017, inclusive.
Shareholders will receive their cash 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
for the 2016 final dividend by notifying the
United Kingdom transfer agent in writing by
21st April 2017. The sterling equivalent of
dividends declared in United States dollars
will be calculated by reference to a rate prevailing
on 26th April 2017.
Shareholders holding their shares through CREST
in the United Kingdom will receive their cash
dividends in sterling only as calculated above.
Shareholders holding their shares through The
Central Depository (Pte) Limited ('CDP') in
Singapore will receive their cash dividends
in United States dollars unless they elect,
through CDP, to receive Singapore dollars.
Shareholders on the Singapore branch register
who wish to deposit their shares into the CDP
system by the dividend record date, being 17th
March 2017, must submit the relevant documents
to M & C Services Private Limited, the Singapore
branch registrar, no later than 5.00 p.m. (local
time) on 16th March 2017.
Mandarin Oriental Hotel Group
Mandarin Oriental Hotel Group is an international hotel
investment and management group with deluxe and first class hotels,
resorts and residences in sought-after destinations around the
world. Having grown from its Asian roots into a global brand, the
Group now operates 29 hotels and eight residences in 19 countries
and territories, with each property reflecting the Group's oriental
heritage and unique sense of place. Mandarin Oriental has a strong
pipeline of hotels and residences under development with the next
hotel opening planned in Doha. The Group has equity interests in a
number of its properties and adjusted net assets worth
approximately US$3.9 billion as at 31st December 2016.
Mandarin Oriental's aim is to be recognized as the world's best
luxury hotel group. This will be achieved by investing in the
Group's exceptional facilities and its people, while maximizing
profitability and long-term shareholder value. The Group regularly
receives recognition and awards for outstanding service and quality
management. The Group is committed to exceeding its guests'
expectations through exceptional levels of hospitality, while
maintaining its position as an innovative leader in the hotel
industry. The strategy of the Group is to open the hotels currently
under development, while continuing to seek further selective
opportunities for expansion around the world.
The parent company, Mandarin Oriental International Limited, is
incorporated in Bermuda and has a standard listing on the London
Stock Exchange, with secondary listings in Bermuda and Singapore.
Mandarin Oriental Hotel Group International Limited, which operates
from Hong Kong, manages the activities of the Group's hotels.
Mandarin Oriental is a member of the Jardine Matheson Group.
- end -
For further information, please contact:
Mandarin Oriental Hotel Group
International Limited
James Riley / Stuart Dickie (852) 2895 9288
Jill Kluge / Sally de Souza (852) 2895 9167
Brunswick Group Limited
Joanna Donne (852) 3512 5070
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2016 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
END
FR DMGZZMRRGNZM
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