TIDMMDO TIDMJAR TIDMJDS
RNS Number : 8627G
Mandarin Oriental International Ltd
08 March 2018
To: Business Editor 8th March 2018
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
2017 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Underlying profit slightly lower due to renovation of London property
-- Strategic review of The Excelsior, Hong Kong ongoing
-- Nine new management contracts signed
-- Restoration of Hotel Ritz, Madrid commenced
"In 2018, profit will be impacted by the final stages of the
renovation of Mandarin Oriental Hyde Park, London as well as the
commencement of the renovation of Hotel Ritz, Madrid. In the longer
term, however, Mandarin Oriental will benefit from these
investments as well as the strength of its brand and the opening of
new hotels under development."
Ben Keswick
Chairman
Results
Year ended 31st December
2017 2016 Change
US$m US$m %
Combined total revenue of hotels under
management(1) 1,380.4 1,323.7 +4
Underlying EBITDA (Earnings before interest,
tax,
depreciation and amortization)(2) 157.9 158.2 -
Underlying profit attributable to shareholders(3) 54.9 57.3 -4
Profit attributable to shareholders 54.9 55.2 -1
USc USc %
----------------------------------------------------- ------- ------- ------
Underlying earnings per share(3) 4.37 4.56 -4
Earnings per share 4.37 4.40 -1
Dividends per share 3.00 4.00 -25
US$ US$ %
----------------------------------------------------- ------- ------- ------
Net asset value per share 1.01 0.93 +9
Adjusted net asset value per share(4) 4.57 3.10 +47
Net debt/shareholders' funds 26% 25%
Net debt/adjusted shareholders' funds(4) 6% 8%
----------------------------------------------------- ------- ------- ------
(1) Combined revenue includes turnover of the Group's subsidiary
hotels in addition to 100% of revenue from associate, joint
venture and managed hotels.
(2) EBITDA of subsidiaries plus the Group's share of EBITDA
of associates and joint ventures.
(3) 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.
(4) 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 USc1.50 per share will be payable on 16th
May 2018, subject to approval at the Annual General Meeting to be
held on 9th May 2018, to shareholders on the register of members at
the close of business on 23rd March 2018.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2017
OVERVIEW
Underlying profit was slightly lower than the prior year
primarily due to the impact of the renovation of the London
property. The combined results of the Group's other hotels improved
in 2017.
The Group is continuing to review strategic options for The
Excelsior, Hong Kong, including the possible redevelopment of the
site into a commercial building.
PERFORMANCE
Underlying earnings before interest, tax, depreciation and
amortization were in line with the prior year at US$158 million,
despite the adverse impact of the London renovation. Underlying
profit declined from US$57 million in 2016 to US$55 million in
2017. Underlying earnings per share were USc4.37 compared with
USc4.56 in 2016. With no non-trading items during the year, profit
attributable to shareholders was also US$55 million, unchanged from
2016.
Following an independent valuation of the Group's owned
properties, the net asset value per share was US$4.57 at 31st
December 2017, compared with US$3.10 per share at the end of 2016.
This increase mainly reflects the higher valuation of The
Excelsior, Hong Kong.
In light of the ongoing programme of renovations, the Directors
recommend a reduced final dividend of USc1.50 per share. This,
together with the interim dividend of USc1.50 per share, will make
a total annual dividend of USc3.00 per share, compared to USc4.00
per share in 2016.
At 31st December 2017, the Group's net debt was US$327 million,
compared to US$297 million at the end of 2016. Gearing as a
percentage of adjusted shareholders' funds at 31st December 2017,
after taking into account the market value of the Group's property
interests, was 6% compared to 8% at the end of 2016.
GROUP REVIEW
Despite a generally improved performance across the portfolio,
notably in Hong Kong, underlying profit was slightly lower, mainly
due to the impact of the renovation in London.
The renovation of Mandarin Oriental Hyde Park, London remains on
schedule. The first phase was completed in September 2017, and the
second phase is expected to complete in the second quarter of
2018.
Hotel Ritz, Madrid closed at the end of February 2018 to
commence a EUR99 million restoration, of which the Group will fund
its half share. The renovation will be extensive, covering all
guestrooms and public areas, and will include the restoration of
many interior architectural features. The hotel is expected to
reopen towards the end of 2019.
STRATEGIC REVIEW OF THE EXCELSIOR, HONG KONG
In June 2017, the Group announced that consideration was being
given to its strategic options for The Excelsior, Hong Kong. A
subsequent review of market interest in a potential sale did not
give rise to any acceptable offers. The Group is still considering
all options for the site, including possible redevelopment as a
commercial property, although no decision has yet been made.
NEW DEVELOPMENTS
Seven new management contracts were signed and announced in
2017. Mandarin Oriental hotels, each with branded residences, are
scheduled to open in Dubai and Honolulu in 2020, in a second
location in London in 2021 and in Melbourne in 2022. A new hotel
project in Beijing, which will feature 72 guestrooms located in a
traditional hutong quarter, is expected to open in 2019. The Group
also took over the management of two existing hotels during the
year, in Santiago, Chile and on Canouan in Saint Vincent and the
Grenadines. In time both will be rebranded as Mandarin Oriental
properties.
In the first two months of 2018, the Group announced two further
projects. In Barcelona, it will brand and manage 34 Residences, in
an existing property close to Mandarin Oriental, Barcelona, opening
in 2020. In Viña del Mar, a coastal resort in Chile, the Group will
manage a 195-room hotel, also due to open in 2020.
In the next 12 months, the Group expects to open its first
hotels in the Middle East, in Doha and Jumeirah Beach, Dubai, as
well as Mandarin Oriental Wangfujing in Beijing.
PEOPLE
On behalf of the Directors, I would like to acknowledge the
contribution of all colleagues throughout the Group for continuing
to facilitate the exceptional experiences we provide to our
guests.
Dr Richard Lee and Lord Powell will step down from the Board at
the forthcoming Annual General Meeting and will not seek
re-election. We would like to thank them for their contributions to
the Company. We are very pleased that Jack Chen, a senior executive
of Taikang Insurance Group, Inc., has been invited to join the
Board with effect from 9th May 2018.
OUTLOOK
In 2018, profit will be impacted by the final stages of the
renovation of Mandarin Oriental Hyde Park, London as well as the
commencement of the renovation of Hotel Ritz, Madrid. In the longer
term, however, Mandarin Oriental will benefit from these
investments as well as the strength of its brand and the opening of
new hotels under development.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
2017 has been a busy year and a considerable amount has been
achieved. The Group's hotels generally performed well with Revenue
Per Available Room ('RevPAR') increasing by 5% in US dollar terms
on a like-for-like basis(1) . Underlying EBITDA(2) also held firm
despite the adverse impact from the renovation of our London
property. Progress on this renovation, alongside receiving approval
from the city authorities for the restoration of Hotel Ritz in
Madrid, have been highlights. The Group also embarked on a
strategic review of The Excelsior hotel in Hong Kong, which is
continuing. Moreover, seven new development properties were
announced during the year.
The demand for luxury travel continues to grow strongly, which
is encouraging. However, the luxury hotel landscape is evolving at
a rapid pace, as global high net worth travellers increasingly look
for unique experiences, while competition becomes more intense and
diverse. New players are emerging in various forms, whether that be
additional luxury brand operators producing new offerings, or
disruptors seeking to enter the luxury hospitality space with
alternative accommodation facilities. Technology is also
increasingly playing its part in the variety of services and
facilities on offer to guests and in the way in which brands engage
and interact with their customers.
1 The like-for-like comparison includes all hotels that were
operational for the entire year of both 2016 and 2017. As Mandarin
Oriental Hyde Park, London was only partially closed as a result of
the renovation during the period, the hotel is included in the
like-for-like comparison. All references to RevPAR are in US dollar
terms, unless stated otherwise.
2 The Group uses earnings before interest, tax, depreciation and
amortization ('EBITDA') to analyze operating performance.
STRATEGY
Against this volatile background, Mandarin Oriental's vision -
to be recognized as the world's best luxury hotel group - keeps us
focused on what we do best and positions the Group for growth
within the evolving market environment. Having grown from our Asian
roots into a global brand, we currently operate 31 hotels and eight
residences in 21 countries and territories. The Group holds equity
interests in many of its hotels and also manages hotels on behalf
of third party owners. As the Group expands, its management
business is likely to account for an increasing proportion of the
Mandarin Oriental portfolio.
Nonetheless, owned assets remain at the heart of the Group's
portfolio and if we are to sustain our market position it is
crucial that we invest appropriately in these owned properties.
Mandarin Oriental's strong balance sheet makes it well placed to do
this, while providing the means to consider selective investment
opportunities in strategic destinations that have long-term asset
growth potential.
Historically, the Group has been highly dependent upon corporate
business with many of its properties being located at the heart of
business districts. However, leisure travel is an increasingly
important segment for us and we must adapt to offer a broader range
of luxury leisure experiences, as well as business ones. At the
same time, we will need to build further our reputation as an
operator of resort properties.
An increasingly significant component of the luxury hospitality
business today is the branding and managing of residential
developments. The majority of the Group's recently announced
developments incorporate a residential component.
The Group remains focused on ensuring that its hotels are
positioned amongst the leaders in their individual markets. We
continue to invest in the core brand attributes of exceptional
design and architecture, restaurant and bar concepts, spa and
wellness facilities, all of which are underpinned by intuitive
personalized service. We stay alert to new trends and
opportunities, ensuring the brand remains relevant to today's
multi-generational audience. Recent new concepts include the
opening of The Aviary NYC at Mandarin Oriental, New York and PDT
Hong Kong at The Landmark Mandarin Oriental.
The Group's global recognition continues to be reflected in
numerous awards from respected associations, and in 2018, Group
restaurant outlets were awarded 21 Michelin stars across the
portfolio, more than any other hotel brand in the world.
2017 PERFORMANCE
Underlying EBITDA of US$158 million were in line with the prior
year, despite the disruption of the London renovation throughout
2017. Underlying profit was US$55 million in 2017, compared to
US$57 million in 2016.
In Asia, RevPAR was up 8% overall in 2017 on a like-for-like
basis as demand trends improved generally across the region.
Several properties delivered double-digit RevPAR growth and an
improved performance from the Group's wholly-owned Hong Kong hotels
was particularly notable.
Mandarin Oriental, Hong Kong achieved a 6% increase in RevPAR
over the previous year. The hotel experienced improved leisure
demand, while corporate demand was broadly stable, which helped the
hotel to maintain its overall competitive position in the market.
Its wide range of restaurants and bars attracted more hotel guests
and the local community, with food and beverage revenues up 5% over
the previous year.
The Excelsior, Hong Kong also benefited from improved city-wide
demand, with increased occupancy leading to a 7% uplift in RevPAR.
The Group continues to review a variety of strategic options for
the site, including possible redevelopment as a commercial
property, and a further announcement will be made once a decision
is reached.
Mandarin Oriental, Bangkok benefited from improved visitor
arrivals to the city in 2017, which led to an increase in RevPAR of
8% in local currency terms, or 14% in US dollar terms, as a result
of a stronger baht. The 2016 renovation of the Garden Wing was also
a positive factor in the property's overall performance.
Mandarin Oriental, Jakarta had another difficult year with
RevPAR down 16%. Increased competition, together with very weak
corporate demand, put pressure on average rates and occupancy
levels.
In Europe, while the renovation of the London property
negatively impacted the Group's overall results, improved
performances across the rest of the region led to a RevPAR increase
of 4% on a like-for-like basis.
Mandarin Oriental Hyde Park, London's performance was affected
by the phased renovation and by ongoing security concerns in the
city. Consequently, RevPAR was down 37%. The first phase of the
renovation was completed in September 2017, and the new
Knightsbridge wing rooms have been well received. The second phase,
involving the Hyde Park wing, is now underway. When complete in the
second quarter of 2018, the hotel will be in a strong position to
reassert its claim to be the leader in luxury hospitality in the
city.
Mandarin Oriental, Munich and Mandarin Oriental, Geneva
delivered strong performances, with RevPAR up 12% and 10%
respectively. Both hotels reinforced their market-leading positions
in their individual markets.
Hotel Ritz, Madrid closed at the end of February 2018 for the
start of a long-awaited restoration, which will involve the careful
renovation of the hotel's many fine interior architectural features
and the significant upgrade of its facilities and services, while
maintaining its unique character. The hotel is expected to reopen
in late 2019.
In The Americas, overall trading conditions were broadly in line
with the prior year with RevPAR for the region up 1% on a
like-for-like basis. Notably, Mandarin Oriental, Washington D.C.
benefited from the Presidential Inauguration and stronger city-wide
demand, which led to RevPAR growth of 19%. Mandarin Oriental, New
York had a weaker year in 2017 with RevPAR down 6%, primarily due
to lower leisure demand, although the hotel was able to maintain
its competitive position in the market.
DEVELOPMENT
Currently, the Group has 15 hotels and nine residences under
development which are likely to become operational within five
years. All are management contracts with no equity participation,
but as I stated earlier, consideration will continue to be given to
investing in properties on an exceptional basis where they are felt
to be strategic to our long-term positioning. The Group is focused
on building its portfolio in major global city centre locations
where the brand is currently absent, developing a strong resort
portfolio and reinforcing the Group's position in existing markets
by expanding its presence with new properties.
Additional resources have been added to the Group's development
effort with a view to building a stronger pipeline of new openings
over the coming years. While the Group has achieved a global reach,
its strong reputation belies the modest size of its current hotel
portfolio. This gives us a large and wide-ranging number of
possible locations in which new properties can be considered.
During the course of 2017, this was exemplified by the announcement
of seven new management contracts as follows:
A new 125-room hotel and 107 branded residences in Honolulu on
the Hawaiian island of Oahu, and a second property in Dubai,
comprising 259 rooms and 158 branded residences. Both projects are
scheduled to open in 2020.
A new 197-room hotel and 146 branded residences in Melbourne,
Australia, due to open in 2022, will mark the Group's first entry
into Australia.
A second, luxury hotel project in Beijing comprising 72 rooms
located within the Qianmen East Hutong Quarter, close to Tiananmen
Square. The hotel, which is due to open in 2019, will provide
guests with a rare opportunity to experience luxury living in
traditional and authentic Beijing surroundings.
A second London property on Hanover Square in the heart of
London's Mayfair district, with 50 rooms and 80 branded residences.
Mandarin Oriental Mayfair is expected to open in 2021.
Also during the year, the Group took over the management of two
operating hotels. One is located in the city centre of Santiago,
Chile, and the other is a luxury resort on Canouan in Saint Vincent
and the Grenadines. Both projects will be rebranded as Mandarin
Oriental properties in due course, thereby introducing the brand to
two new important markets.
Since the start of 2018, the Group has announced a new
management agreement for a 195-room beach front resort in Viña del
Mar in Chile. Most recently, the Group announced an agreement to
brand and manage 34 Residences by Mandarin Oriental, close to
Mandarin Oriental, Barcelona. Both projects are due to open in
2020.
In the next 12 months, the Group expects to open its first
hotels in the Middle East, in Doha and Dubai, as well as Mandarin
Oriental Wangfujing in Beijing.
STRUCTURE
To date the Group has been organized in geographic segments with
senior executives holding management responsibility for Asia,
Europe and The Americas. With effect from 1st January 2018 a Chief
Operating Officer has been appointed with all operating hotels
reporting to him either directly or indirectly. This will help to
ensure that consistent operating standards are maintained across
our global portfolio as we grow. A Chief Relationship Officer has
also been appointed to manage many of the Group's key owner
relationships as well as to oversee the development of new
properties in the period prior to their ramp up for opening by an
operating team.
CULTURE
At the heart of Mandarin Oriental's reputation as a luxury hotel
group is its culture, derived from its oriental heritage and an
unwavering focus on exceptional service that delivers personal
experiences and moments of delight. I would like to personally
thank our 12,000 colleagues for their dedication, commitment and
loyalty in providing this exemplary service and to ensuring the
smooth operation of our properties around the world. Sustaining and
building upon the strong culture and professionalism of our
colleagues is key to our present and future success. As we grow, so
too does the challenge of sustaining this culture and point of
differentiation, but I am confident that our colleagues will
continue to rise to the task.
OUTLOOK
In 2018, the Group will focus on building its development
pipeline in both existing and new markets. At the same time, the
continued investment behind our core attributes as well as new,
innovative concepts and services will ensure that the Mandarin
Oriental brand remains relevant to today's multi-generational
audience. Earnings will be held back by the final months of the
renovation of Mandarin Oriental Hyde Park, London as well as the
commencement of the restoration of Hotel Ritz, Madrid. Looking
forward however, the Group's results will benefit from enhanced
contributions from these renovated flagship properties and from the
growing pipeline of new hotels and residences as they open.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2017
2017 2016
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$m
Revenue (note 2) 610.8 - 610.8 597.4 - 597.4
Cost of sales (389.7) - (389.7) (383.4) - (383.4)
------- -------
Gross profit 221.1 - 221.1 214.0 - 214.0
Selling and
distribution
costs (38.2) - (38.2) (39.7) - (39.7)
Administration expenses (113.9) - (113.9) (104.5) (1.8) (106.3)
------- -------- ------- ------------ -------- -------
Operating profit (note
3) 69.0 - 69.0 69.8 (1.8) 68.0
Financing charges (12.3) - (12.3) (12.1) - (12.1)
Interest income 1.3 - 1.3 1.3 - 1.3
Net financing charges (11.0) - (11.0) (10.8) - (10.8)
Share of results of
associates and joint
ventures (note 4) 11.5 - 11.5 11.2 (0.3) 10.9
Profit before tax 69.5 - 69.5 70.2 (2.1) 68.1
Tax (note 5) (15.0) - (15.0) (13.7) - (13.7)
------- -------- ------- ------------ -------- -------
Profit after tax 54.5 - 54.5 56.5 (2.1) 54.4
------- -------- ------- ------------ -------- -------
Attributable to:
Shareholders of the
Company 54.9 - 54.9 57.3 (2.1) 55.2
Non-controlling
interests (0.4) - (0.4) (0.8) - (0.8)
------- -------- ------- ------------ -------- -------
54.5 - 54.5 56.5 (2.1) 54.4
------- -------- ------- ------------ -------- -------
USc USc USc USc
Earnings per share
(note
6)
- basic 4.37 4.37 4.56 4.40
- diluted 4.35 4.35 4.54 4.38
------- ------- ------------ -------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2017
2017 US$m 2016
US$m
Profit for the year 54.5 54.4
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
--------- ------
Remeasurements of defined benefit plans 7.7 (3.1)
Tax on items that will not be reclassified (1.2) 0.5
6.5 (2.6)
Items that may be reclassified subsequently
to profit or loss:
--------- ------
Net exchange translation differences
* net gains/(losses) arising during the year 87.1 (56.1)
Cash flow hedges
- net gains arising during the year 0.8 2.5
Tax relating to items that may be reclassified (0.2) (0.4)
Share of other comprehensive income/(expense)
of associates
and joint ventures 8.4 (1.7)
96.1 (55.7)
Other comprehensive income/(expense) for
the year, net of tax 102.6 (58.3)
--------- ------
Total comprehensive income/(expense) for
the year 157.1 (3.9)
--------- ------
Attributable to:
Shareholders of the Company 157.3 (3.0)
Non-controlling interests (0.2) (0.9)
--------- ------
157.1 (3.9)
--------- ------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2017
2017 2016
US$m US$m
Net assets
Intangible assets 47.7 44.3
Tangible assets (note 8) 1,453.2 1,352.1
Associates and joint ventures 196.6 163.8
Other investments 11.0 10.7
Deferred tax assets 11.0 2.6
Pension assets 4.9 -
Other non-current debtors 0.5 -
------- -------
Non-current assets 1,724.9 1,573.5
Stocks 6.4 5.9
Debtors and prepayments 100.2 94.2
Current tax assets 4.0 5.2
Bank and cash balances 183.9 182.6
------- -------
Current assets 294.5 287.9
------- -------
Creditors and accruals (151.4) (140.1)
Current borrowings (note 9) (2.6) (2.5)
Current tax liabilities (17.8) (8.7)
------- -------
Current liabilities (171.8) (151.3)
------- -------
Net current assets 122.7 136.6
Long-term borrowings (note 9) (508.1) (477.4)
Deferred tax liabilities (58.6) (56.1)
Pension liabilities (0.6) (3.2)
Other non-current liabilities (0.2) -
------- -------
1,280.1 1,173.4
------- -------
Total equity
Share capital 62.9 62.8
Share premium 493.9 490.4
Revenue and other reserves 717.2 616.2
------- -------
Shareholders' funds 1,274.0 1,169.4
Non-controlling interests 6.1 4.0
------- -------
1,280.1 1,173.4
------- -------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2017
Attributable
to Attributable
shareholders to non-
Share Share Capital Revenue Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m
2017
At 1st January 62.8 490.4 286.2 501.2 (0.6) (170.6) 1,169.4 4.0 1,173.4
Total
comprehensive
income - - - 61.3 0.7 95.3 157.3 (0.2) 157.1
Dividends paid by
the Company - - - (50.3) - - (50.3) - (50.3)
Issue of shares 0.1 0.6 - - - - 0.7 - 0.7
Share-based
long-term
incentive
plans - - (0.8) - - - (0.8) - (0.8)
Change in
interest in a
subsidiary - - - (2.3) - - (2.3) 2.3 -
Transfer - 2.9 (19.5) 16.6 - - - - -
------- ------- -------- -------- -------- -------- ------------ ------------- -------
At 31st December 62.9 493.9 265.9 526.5 0.1 (75.3) 1,274.0 6.1 1,280.1
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
------- ------- -------- -------- -------- -------- ------------ ------------- -------
Total comprehensive income included in revenue reserves
comprises profit attributable to shareholders of the Company of
US$54.9 million (2016: US$55.2 million) and net actuarial gain on
employee defined benefit plans of US$6.4 million (2016: net
actuarial loss of US$2.6 million). There was no fair value loss on
other investments
in 2017 (2016: nil).
Change in interest in a subsidiary includes the Group's increase
in attributable interest in Portals Hotel Site LLC, the owner of
Mandarin Oriental, Washington D.C., from 80% to 83.6% as a result
of a non-controlling member of the subsidiary failing to fund an
additional capital contribution during the year.
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2017
2017 2016
US$m US$m
Operating activities
------- -------
Operating profit (note 3) 69.0 68.0
Depreciation 56.7 57.7
Amortization of intangible assets 2.1 2.1
Other non-cash items 0.2 2.7
Movements in working capital 9.6 (3.8)
Interest received 1.3 1.3
Interest and other financing charges paid (12.3) (10.4)
Tax paid (13.3) (19.0)
------- -------
113.3 98.6
Dividends and interest from associates and
joint ventures 6.6 9.1
Cash flows from operating activities 119.9 107.7
Investing activities
------- -------
Purchase of tangible assets (82.6) (77.0)
Purchase of intangible assets (5.7) (2.7)
Payment on Munich expansion (note 11) (3.1) -
Acquisition of Mandarin Oriental, Boston
(note 12) - (140.0)
Purchase of other investments (0.9) (1.3)
Advance to associates and joint ventures (11.4) (2.8)
Repayment of loans to associates and joint
ventures 1.3 0.9
Sale of tangible assets - 0.1
Sale of other investments 0.4 -
Cash flows from investing activities (102.0) (222.8)
Financing activities
------- -------
Issue of shares 0.6 -
Drawdown of borrowings 30.8 51.5
Repayment of borrowings (2.5) (1.6)
Dividends paid by the Company (note 13) (50.3) (56.5)
Dividends paid to non-controlling interests - (0.1)
Cash flows from financing activities (21.4) (6.7)
------- -------
Net decrease in cash and cash equivalents (3.5) (121.8)
Cash and cash equivalents at 1st January 182.5 308.6
Effect of exchange rate changes 4.9 (4.3)
------- -------
Cash and cash equivalents at 31st December 183.9 182.5
------- -------
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 2017 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.
There are no new standards or amendments, which are effective in
2017 and relevant to the Group's operations, that have a material
impact 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
2017 2016
US$m US$m
By geographical area:
Hong Kong 235.8 224.5
Other Asia 107.9 106.4
Europe 163.8 177.8
The Americas 103.3 88.7
610.8 597.4
----- -----
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTIZATION) AND OPERATING PROFIT FROM SUBSIDIARIES
2017 2016
US$m US$m
By geographical area:
Hong Kong 74.0 69.3
Other Asia 29.6 29.2
Europe 17.0 25.2
The Americas 7.2 5.9
------ ------
Underlying EBITDA from subsidiaries 127.8 129.6
Non-trading items
- acquisition-related costs (note 7) - (1.8)
------ ------
EBITDA from subsidiaries 127.8 127.8
Less: depreciation and amortization (58.8) (59.8)
------ ------
Operating profit 69.0 68.0
------ ------
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Net Net
and Operating financing profit/
EBITDA amortization profit charges Tax (loss)
US$m US$m US$m US$m US$m US$m
2017
By geographical
area:
Other Asia 23.5 (8.3) 15.2 (1.4) (2.3) 11.5
Europe 2.7 (0.8) 1.9 - (0.1) 1.8
The Americas 3.9 (3.0) 0.9 (2.4) (0.3) (1.8)
------ ------------ --------- --------- ----- -------
30.1 (12.1) 18.0 (3.8) (2.7) 11.5
2016
By geographical
area:
Other Asia 20.9 (7.8) 13.1 (1.5) (2.3) 9.3
Europe 1.8 (0.7) 1.1 - - 1.1
The Americas 5.9 (3.0) 2.9 (2.2) 0.1 0.8
------ ------------ --------- --------- ----- -------
28.6 (11.5) 17.1 (3.7) (2.2) 11.2
Non-trading items
* provision for litigation (note 7) (0.3) - (0.3) - - (0.3)
------ ------------ --------- --------- ----- -------
28.3 (11.5) 16.8 (3.7) (2.2) 10.9
------ ------------ --------- --------- ----- -------
5. TAX
2017 2016
US$m US$m
Tax (charged)/credited to profit and loss
is analyzed as follows:
Current tax (23.6) (14.9)
Deferred tax 8.6 1.2
------ ------
(15.0) (13.7)
------ ------
By geographical area:
Hong Kong (10.3) (8.8)
Other Asia 3.9 (3.5)
Europe (7.2) (0.9)
The Americas (1.4) (0.5)
------ ------
(15.0) (13.7)
------ ------
Tax relating to components of other comprehensive income is
analyzed as follows:
Remeasurements of defined benefit plans (1.2) 0.5
Cash flow hedges (0.2) (0.4)
----- -----
(1.4) 0.1
----- -----
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$2.7 million
(2016: US$2.2 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$54.9 million (2016: US$55.2 million) and on
the weighted average number of 1,257.7 million (2016: 1,255.9
million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable
to shareholders of US$54.9 million (2016: US$55.2 million) and on
the weighted average number of 1,262.0 million (2016: 1,261.5
million) shares in issue after adjusting for the number of shares
which are deemed to be issued for no consideration under the
share-based long-term incentive plans based on the average share
price during the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2017 2016
Weighted average number of shares for basic
earnings
per share calculation 1,257.7 1,255.9
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans 4.3 5.6
------- -------
Weighted average number of shares for diluted
earnings
per share calculation 1,262.0 1,261.5
------- -------
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2017 2016
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
Profit attributable
to shareholders 54.9 4.37 4.35 55.2 4.40 4.38
Non-trading items
(note 7) - 2.1
Underlying profit
attributable
to shareholders 54.9 4.37 4.35 57.3 4.56 4.54
---- ----
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include gains and losses arising
from the sale of businesses, investments and properties; impairment
of non-depreciable intangible assets and other investments;
provisions for the closure of businesses; acquisition-related costs
in business combinations; provisions against asset impairment and
writebacks; and other credits and charges of a non-recurring nature
that require inclusion in order to provide additional insight into
underlying business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2017 2016
US$m US$m
Acquisition-related costs
- administration expenses - 1.8
Provision for litigation
- share of results of associates and joint
ventures - 0.3
----- -----
- 2.1
----- -----
8. TANGIBLE ASSETS
2017 2016
US$m US$m
Opening net book value 1,352.1 1,255.0
Exchange differences 75.2 (61.5)
Additions 82.5 216.9
Disposals (0.1) (0.6)
Transfer from intangible assets 0.2 -
Depreciation charge (56.7) (57.7)
------- -------
Closing net book value 1,453.2 1,352.1
------- -------
Freehold properties include a property of US$108.5 million
(2016: US$111.6 million), which is stated net of tax increment
financing of US$21.3 million (2016: US$22.2 million) (note 10).
9. BORROWINGS
2017 2016
US$m US$m
Bank overdrafts - 0.1
Bank loans 506.5 473.9
Other borrowings 4.2 4.2
Tax increment financing (note 10) - 1.7
----- -----
510.7 479.9
----- -----
Current 2.6 2.5
Long-term 508.1 477.4
----- -----
510.7 479.9
----- -----
10. TAX INCREMENT FINANCING
2017 2016
US$m US$m
Netted off against the net book value of
property (note 8) 21.3 22.2
Loan (note 9) - 1.7
----- -----
21.3 23.9
----- -----
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% which was repaid on maturity on 10th April
2017.
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).
11. PAYMENT ON MUNICH EXPANSION
The Group paid a further US$3.1 million instalment in respect of
the land purchase price and related cost for the expansion of
Mandarin Oriental, Munich in 2017 (2016: nil). Cumulative costs
paid by the Group amounted to US$20.0 million (2016: US$16.9
million), the majority of which have been included within Other
Debtors pending transfer of title in the underlying land.
12. ACQUISITION OF MANDARIN ORIENTAL, BOSTON
In 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$140.0 million represented the fair values of the tangible assets
acquired at the acquisition date. There was no goodwill arising on
acquisition.
13. DIVIDS
2017 2016
US$m US$m
Final dividend in respect of 2016 of USc2.50
(2015: USc3.00) per share 31.4 37.7
Interim dividend in respect of 2017 of USc1.50
(2016: USc1.50) per share 18.9 18.8
----- -----
50.3 56.5
----- -----
A final dividend in respect of 2017 of USc1.50 (2016: USc2.50)
per share amounting to a total of US$18.9 million (2016: US$31.4
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2018 Annual
General Meeting. The amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2018.
14. CAPITAL COMMITMENTS
At 31st December 2017, total capital commitments of the Group
amounted to US$254.3 million (2016: US$270.9 million).
15. 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$13.6 million (2016: US$13.2 million) received from the Group's
six (2016: 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 2017 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. This may also include failure to adapt to
rapidly evolving customer preferences and expectations. 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 2017 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 USc1.50 per share will be payable on
16th May 2018, subject to approval at the Annual General Meeting
to be held on 9th May 2018, to shareholders on the register
of members at the close of business on 23rd March 2018. The
shares will be quoted ex-dividend on the Singapore Exchange
and the London Stock Exchange on 21st and 22nd March 2018,
respectively. The share registers will be closed from 26th
to 30th March 2018, 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 2017
final dividend by notifying the United Kingdom transfer agent
in writing by 27th April 2018. The sterling equivalent of
dividends declared in United States dollars will be calculated
by reference to a rate prevailing on 2nd May 2018.
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 23rd March 2018, 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 22nd March 2018.
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 31 hotels and eight residences in 21 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. The Group has
equity interests in a number of its properties and adjusted net
assets worth approximately US$5.7 billion as at 31st December
2017.
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
Karin Wong (852) 3512 5077
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2017 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
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