TIDMMDO TIDMJAR TIDMJDS
RNS Number : 3997H
Mandarin Oriental International Ltd
01 August 2019
To: Business Editor 1st August 2019
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
HALF-YEARLY RESULTS FOR THE SIX MONTHSED 30TH JUNE 2019
Highlights
-- Underlying profit impacted by closure of The Excelsior and renovation in Bangkok
-- Mandarin Oriental Hyde Park, London fully reopened
-- Four new hotels opened
-- Two new management contracts signed
"The closure of The Excelsior and the renovation in Bangkok have
led to reduced earnings in the first half of the year, while
overall results for the rest of the Group were broadly flat.
Elsewhere, Mandarin Oriental will benefit from its reopened hotel
in London as well as the growing pipeline of new developments."
Ben Keswick
Chairman
Results
(unaudited)
Six months ended 30th June
2019 2018 Change
US$m US$m %
restated (7)
--------------------------------------------------- ------ -------- --- ------
Combined total revenue of hotels under
management(1) 641.0 700.2 -8
Underlying EBITDA (Earnings before interest,
tax, depreciation and amortisation)(2) 69.1 84.0 -18
Underlying profit attributable to shareholders(3) 10.7 22.2 -52
(Loss)/profit attributable to shareholders (12.1) 22.2 N/A
USc USc %
------ -------- ---
Underlying earnings per share(3) 0.85 1.76 -52
(Loss)/earnings per share (0.96) 1.76 N/A
Interim dividend per share 1.50 1.50 -
US$ US$ %
------ -------- ---
Net asset value per share(4)(5) 3.29 0.98 +236
Adjusted net asset value per share(4)(6) 4.61 4.62 -
Net debt/shareholders' funds(4)(5) 8% 23%
Net debt/adjusted shareholders' funds(4)(6) 6% 5%
--------------------------------------------------- ------ -------- --- ------
(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 condensed 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) At 30th June 2019 and 31st December 2018, respectively.
(5) The net asset value per share and net debt/shareholders'
funds at 30th June 2019 included a US$2.9 billion one-time asset
revaluation gain through reserves following the reclassification
of The Excelsior site as an investment property on 31st March
2019.
(6) The Group's investment properties under development are
carried at fair value on the basis of valuations carried out
by independent valuers at 30th June 2019. The freehold and leasehold
interests are carried at amortised cost in the consolidated
balance sheet. Both the adjusted net asset value per share and
net debt/adjusted shareholders' funds for 30th June 2019 and
31st December 2018 have included the market value of the Group's
freehold and leasehold interests which were appraised as at
31st December 2018.
(7) The comparative figures in 2018 have been restated due to
changes in accounting policies upon adoption of IFRS 16 'Leases',
as set out in note 1 to the condensed financial statements.
The interim dividend of USc1.50 per share will be payable on
17th October 2019 to shareholders on the register of members at the
close of business on 23rd August 2019.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
HALF-YEARLY RESULTS FOR THE SIX MONTHSED 30TH JUNE 2019
OVERVIEW
Underlying profit was lower during the first half of the year,
primarily due to the closure of The Excelsior and reduced earnings
from the Bangkok hotel, which largely closed in March 2019 for a
major renovation. Across the rest of the Group's properties,
overall results were broadly flat.
FINANCIAL PERFORMANCE
Underlying earnings before interest, tax, depreciation and
amortisation for the first six months of 2019 were US$69 million,
down from US$84 million in the first half of 2018. In the first
half of 2018, results included the receipt of a one-off early
termination fee in respect of the cessation of the Group's
management of the Las Vegas hotel from the end of August 2018.
Underlying profit for the period was US$11 million, compared
with US$22 million in the equivalent period in 2018. Underlying
earnings per share were USc0.85, down from USc1.76 in 2018. The
Group recognised US$23 million of net non-trading losses in the
period, primarily in connection with the closure of The
Excelsior.
An interim dividend of USc1.50 per share has been declared,
unchanged from last year.
At 30th June 2019, the Group's net debt was US$336 million and
gearing as a percentage of adjusted shareholders' funds was 6%.
HOTEL PERFORMANCE
Performances were mixed across the Group's owned properties. In
Asia, a slow-down in corporate business reduced earnings at the
Group's flagship Hong Kong hotel. Results in Tokyo were notably
better, while in the rest of the region performances were broadly
flat, except for Bangkok which was lower due to the renovation. In
Europe, earnings were higher at the London hotel, which continued
to include insurance coverage for loss of profits due to the fire
in June 2018. In the same period last year, the hotel was only
partially open whilst undergoing a renovation programme. In Paris,
results were lower as city-wide demand was impacted by
demonstrations in the city. In America, Boston performed well but
results were weaker in Washington D.C.
NEW DEVELOPMENTS
The Group opened four new hotels in the first six months of the
year in Beijing, Doha, Dubai and Lake Como.
In addition, the Group signed management contracts for two new
properties: a second hotel and residences in Istanbul and
standalone residences in New York.
OUTLOOK
The closure of The Excelsior and the renovation in Bangkok have
led to reduced earnings in the first half of the year, while
overall results for the rest of the Group were broadly flat.
Elsewhere, Mandarin Oriental will benefit from its reopened hotel
in London as well as the growing pipeline of new developments.
Ben Keswick
Chairman
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
(unaudited)
Six months ended 30th June Year ended 31st December
2019 2018 2018
Underlying Non-trading Underlying Non-trading Underlying Non-trading
business Items business Items business Items
performance (note 7) Total performance (note 7) Total performance (note 7) Total
US$m US$m US$m US$m US$m US$m US$m US$m US$m
restated restated restated restated restated restated
Revenue (note 2) 279.6 - 279.6 307.9 - 307.9 613.7 - 613.7
Cost of sales (185.8) - (185.8) (195.4) - (195.4) (388.2) - (388.2)
------- ----------- -------- --------
Gross profit 93.8 - 93.8 112.5 - 112.5 225.5 - 225.5
Selling and
distribution
costs (21.2) - (21.2) (19.9) - (19.9) (42.3) - (42.3)
Administration
expenses (58.8) - (58.8) (60.1) - (60.1) (122.1) - (122.1)
Other operating
(expense)/income 11.8 (23.5) (11.7) 3.3 - 3.3 30.6 (21.0) 9.6
----------- ----------- ------- ----------- ----------- -------- ----------- ----------- --------
Operating profit
(note
3) 25.6 (23.5) 2.1 35.8 - 35.8 91.7 (21.0) 70.7
Financing charges (9.4) - (9.4) (7.3) - (7.3) (16.4) - (16.4)
Interest income 1.8 - 1.8 0.8 - 0.8 2.2 - 2.2
Net financing
charges (7.6) - (7.6) (6.5) - (6.5) (14.2) - (14.2)
Share of results
of
associates and
joint
ventures (note 4) (1.6) - (1.6) 1.3 - 1.3 5.7 - 5.7
-----------
(Loss)/profit
before
tax 16.4 (23.5) (7.1) 30.6 - 30.6 83.2 (21.0) 62.2
Tax (note 5) (5.8) 0.7 (5.1) (8.4) - (8.4) (18.5) (0.5) (19.0)
----------- ----------- ------- ----------- ----------- -------- ----------- ----------- --------
(Loss)/profit
after
tax 10.6 (22.8) (12.2) 22.2 - 22.2 64.7 (21.5) 43.2
----------- ----------- ------- ----------- ----------- -------- ----------- ----------- --------
Attributable to:
Shareholders of
the
Company 10.7 (22.8) (12.1) 22.2 - 22.2 64.9 (21.5) 43.4
Non-controlling
interests (0.1) - (0.1) - - - (0.2) - (0.2)
----------- ----------- ------- ----------- ----------- -------- ----------- ----------- --------
10.6 (22.8) (12.2) 22.2 - 22.2 64.7 (21.5) 43.2
----------- ----------- ------- ----------- ----------- -------- ----------- ----------- --------
USc USc USc USc USc USc
(Loss)/earnings per share
(note 6)
- basic 0.85 (0.96) 1.76 1.76 5.15 3.44
- diluted 0.85 (0.96) 1.76 1.76 5.14 3.43
----------- ------- ----------- -------- ----------- --------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
(unaudited) Year ended
Six months ended 31st
30th June December
2019 2018 2018
US$m US$m US$m
restated restated
(Loss)/profit for the period (12.2) 22.2 43.2
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss:
--------- --------- ----------
Remeasurements of defined benefit
plans (0.6) 0.2 (3.0)
Revaluation surplus of right-of-use
assets before transfer to investment
properties under development (note
8) 2,943.4 - -
Tax on items that will not be reclassified 0.1 - 0.5
--------- --------- ----------
2,942.9 0.2 (2.5)
Items that may be reclassified subsequently
to profit or loss:
--------- --------- ----------
Net exchange translation differences
- net gains/(losses) arising during
the period 12.8 (28.8) (39.7)
Cash flow hedges
- net (losses)/gains arising during
the period (2.4) 1.6 0.6
Tax relating to items that may be
reclassified 0.4 (0.3) (0.1)
Share of other comprehensive income/(expense)
of associates and joint ventures 2.0 (1.6) (1.8)
--------- --------- ----------
12.8 (29.1) (41.0)
Other comprehensive income/(expense)
for the period, net of tax 2,955.7 (28.9) (43.5)
--------- --------- ----------
Total comprehensive income/(expense)
for the period 2,943.5 (6.7) (0.3)
--------- --------- ----------
Attributable to:
Shareholders of the Company 2,943.5 (6.5) -
Non-controlling interests - (0.2) (0.3)
--------- --------- ----------
2,943.5 (6.7) (0.3)
--------- --------- ----------
Mandarin Oriental International Limited
Consolidated Balance Sheet
(unaudited) At 31st
At 30th June December
2019 2018 2018
US$m US$m US$m
restated restated
Net assets
Intangible assets 50.4 44.0 49.3
Tangible assets 1,179.6 1,228.8 1,205.9
Right-of-use assets 305.5 279.9 342.9
Investment properties under development
(note 8) 3,020.3 - -
Associates and joint ventures 208.6 193.8 196.1
Other investments 16.2 11.1 15.2
Deferred tax assets 12.0 10.7 11.5
Pension assets - 4.2 0.2
Non-current debtors 4.9 1.7 5.1
------- -------- --------
Non-current assets 4,797.5 1,774.2 1,826.2
Stocks 5.8 6.2 6.6
Current debtors 99.2 112.8 95.9
Current tax assets 2.0 3.2 3.5
Bank and cash balances 211.1 204.4 246.8
------- -------- --------
Current assets 318.1 326.6 352.8
------- -------- --------
Current creditors (147.7) (137.1) (168.3)
Current borrowings (note 9) (2.5) (2.6) (524.2)
Current lease liabilities (6.9) (6.6) (6.9)
Current tax liabilities (17.5) (23.6) (14.0)
------- -------- --------
Current liabilities (174.6) (169.9) (713.4)
------- -------- --------
Net current assets/(liabilities) 143.5 156.7 (360.6)
Long-term borrowings (note 9) (544.3) (527.0) (7.3)
Non-current lease liabilities (173.3) (97.3) (160.1)
Deferred tax liabilities (58.1) (57.7) (61.6)
Pension liabilities (2.6) (0.4) (0.4)
Non-current creditors (1.5) - -
------- -------- --------
4,161.2 1,248.5 1,236.2
------- -------- --------
Total equity
Share capital 63.1 63.0 63.1
Share premium 499.7 497.6 497.8
Revenue and other reserves 3,594.8 682.0 671.5
------- -------- --------
Shareholders' funds 4,157.6 1,242.6 1,232.4
Non-controlling interests 3.6 5.9 3.8
------- -------- --------
4,161.2 1,248.5 1,236.2
------- -------- --------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
Attributable
to Attributable
Asset shareholders to non-
Share Share Capital Revenue revaluation Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
Six months
ended 30th
June
2019
(unaudited)
At 1st January
2019
- as
previously
reported 63.1 497.8 262.5 531.8 - 0.6 (116.6) 1,239.2 3.8 1,243.0
- changes in
accounting
policies
(note 1) - - - (6.8) - - - (6.8) - (6.8)
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
- as restated 63.1 497.8 262.5 525.0 - 0.6 (116.6) 1,232.4 3.8 1,236.2
Total
comprehensive
income - - - (12.6) 2,943.4 (2.1) 14.8 2,943.5 - 2,943.5
Dividends paid
by the
Company - - - (18.9) - - - (18.9) - (18.9)
Issue of
shares - 0.1 - - - - - 0.1 - 0.1
Share-based
long-term
incentive
plans - - 0.3 - - - - 0.3 - 0.3
Change in
interest in a
subsidiary - - - 0.2 - - - 0.2 (0.2) -
Transfer - 1.8 (1.8) - - - - - - -
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
At 30th June
2019 63.1 499.7 261.0 493.7 2,943.4 (1.5) (101.8) 4,157.6 3.6 4,161.2
-----------
Six months
ended 30th
June
2018
(unaudited)
At 1st January
2018
- as
previously
reported 62.9 493.9 265.9 526.5 - 0.1 (75.3) 1,274.0 6.1 1,280.1
- changes in
accounting
policies
(note 1) - - - (6.6) - - - (6.6) - (6.6)
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
- as restated 62.9 493.9 265.9 519.9 - 0.1 (75.3) 1,267.4 6.1 1,273.5
Total
comprehensive
income - - - 22.4 - 1.4 (30.3) (6.5) (0.2) (6.7)
Dividends paid
by the
Company - - - (18.9) - - - (18.9) - (18.9)
Issue of
shares 0.1 0.1 - - - - - 0.2 - 0.2
Share-based
long-term
incentive
plans - - 0.4 - - - - 0.4 - 0.4
Transfer - 3.6 (3.6) - - - - - - -
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
At 30th June
2018 63.0 497.6 262.7 523.4 - 1.5 (105.6) 1,242.6 5.9 1,248.5
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Total comprehensive income for the six months ended 30th June
2019 included in revenue reserves comprised loss attributable to
shareholders of the Company of US$12.1 million (2018: profit of
US$22.2 million) and net actuarial loss on employee defined benefit
plans of US$0.5 million (2018: net actuarial gain of US$0.2
million).
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity (continued)
Attributable
to Attributable
Asset shareholders to non-
Share Share Capital Revenue revaluation Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
Year ended
31st December
2018
At 1st January
2018
- as
previously
reported 62.9 493.9 265.9 526.5 - 0.1 (75.3) 1,274.0 6.1 1,280.1
- changes in
accounting
policies
(note 1) - - - (6.6) - - - (6.6) - (6.6)
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
- as restated 62.9 493.9 265.9 519.9 - 0.1 (75.3) 1,267.4 6.1 1,273.5
Total
comprehensive
income - - - 40.8 - 0.5 (41.3) - (0.3) (0.3)
Dividends paid
by the
Company - - - (37.8) - - - (37.8) - (37.8)
Issue of
shares 0.2 0.1 - - - - - 0.3 - 0.3
Share-based
long-term
incentive
plans - - 0.5 - - - - 0.5 - 0.5
Change in
interest in a
subsidiary - - - 2.0 - - - 2.0 (2.0) -
Transfer - 3.8 (3.9) 0.1 - - - - - -
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
At 31st
December 2018 63.1 497.8 262.5 525.0 - 0.6 (116.6) 1,232.4 3.8 1,236.2
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Total comprehensive income for the year ended 31st December 2018
included in revenue reserves comprised profit attributable to
shareholders of the Company of US$43.4 million and net actuarial
loss on employee defined benefit plans of US$2.6 million.
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
(unaudited) Year ended
Six months ended 31st
30th June December
2019 2018 2018
US$m US$m US$m
restated restated
Operating activities
----------------- -------- ----------
Operating profit 2.1 35.8 70.7
Depreciation and amortisation 59.7 35.3 93.2
Other non-cash items (8.0) 20.5 (4.0)
Movements in working capital (22.0) (24.1) 17.5
Interest received 1.7 0.7 1.9
Interest and other financing charges
paid (10.4) (7.1) (15.7)
Tax paid (3.7) (1.9) (18.8)
----------------- -------- ----------
19.4 59.2 144.8
Dividends and interest from associates
and
joint ventures 3.2 3.2 7.8
Cash flows from operating activities 22.6 62.4 152.6
Investing activities
----------------- -------- ----------
Purchase of tangible assets (27.9) (34.0) (61.2)
Additions to investment properties (4.0) - -
Purchase of intangible assets (2.8) (2.2) (7.4)
Payment on Munich expansion (0.7) - -
Purchase of other investments (0.9) (0.8) (1.1)
Advance to associates and joint ventures (15.8) (4.9) (9.1)
Repayment of loans to associates
and joint ventures 0.4 0.4 1.2
Repayment of intangible assets - - 0.8
Insurance recovery received for purchase
of
tangible assets (note 10) - - 7.8
Cash flows from investing activities (51.7) (41.5) (69.0)
Financing activities
----------------- -------- ----------
Issue of shares 0.1 0.1 0.1
Drawdown of borrowings 537.7 24.1 27.6
Repayment of borrowings (523.3) (0.1) (0.2)
Principal elements of lease payments (3.2) (3.3) (6.5)
Dividends paid by the Company (note
11) (18.9) (18.9) (37.8)
Cash flows from financing activities (7.6) 1.9 (16.8)
----------------- -------- ----------
Net (decrease)/increase in cash and
cash equivalents (36.7) 22.8 66.8
Cash and cash equivalents at beginning
of period 246.8 183.9 183.9
Effect of exchange rate changes 1.0 (2.3) (3.9)
----------------- -------- ----------
Cash and cash equivalents at end
of period 211.1 204.4 246.8
----------------- -------- ----------
Mandarin Oriental International Limited
Notes to Condensed Financial Statements
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' and on a going
concern basis. The condensed financial statements have not been
audited or reviewed by the Group's auditors pursuant to the UK
Auditing Practices Board guidance on the review of interim
financial information.
There are no changes to the accounting policies as described in
the 2018 annual financial statements except for the adoption of
IFRS 16 'Leases' from 1st January 2019 and the application of IAS
40 'Investment Properties' from 31st March 2019 at the time of the
closure of The Excelsior, Hong Kong in order for the site to be
redeveloped as a commercial building. Changes to the accounting
policies are set out below.
The other amendments or interpretation, which are effective in
2019 and relevant to the Group's operations, do not have a
significant effect on the Group's accounting policies.
The Group has not early adopted any standard or amendments that
have been issued but not yet effective.
IFRS 16 'Leases'
The standard replaces IAS 17 'Leases' and related
interpretations and introduces a comprehensive model for the
identification of lease arrangements and accounting treatments for
both lessors and lessees. The distinction between operating and
finance leases is removed for lessee accounting, and is replaced by
a model where a lease liability and a corresponding right-of-use
asset have to be recognised on the balance sheet for almost all
leases by the lessees. The Group's recognised right-of-use assets
primarily relate to property leases, which are entered into for use
as hotels or offices. Prior to 2019, payments made under operating
leases were charged to profit and loss on a straight-line basis
over the period of the lease. From 1st January 2019, each lease
payment is allocated between settlement of the lease liability and
finance cost. The finance cost is charged to profit and loss over
the lease period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
In addition, leasehold land which represents payments to third
parties to acquire interests in property, previously included in
intangible assets and tangible assets, is now presented under
right-of-use assets. Leasehold land is amortised over the useful
life of the lease, which includes the renewal period if the lease
is likely to be renewed by the Group without significant cost.
The accounting for lessors does not change significantly.
IAS 40 'Investment Properties'
Properties including those under operating leases which are held
for long-term rental yields or capital gains are classified and
accounted for as investment properties, but the business model does
not necessarily envisage that the properties will be held for their
entire useful life. Investment properties are carried at fair
value, representing estimated open market value determined annually
by independent qualified valuers who have recent experience in the
location and category of the investment property being valued.
The market value of investment properties under development are
derived using the direct comparison method, with reference to the
residual method where appropriate. The direct comparison method is
based on market evidence of transaction prices for similar
properties which recently transacted and adjusted to reflect the
conditions of the subject properties including property site and
location. The residual method is based on the estimated capital
value of the proposed development assuming completion as at the
date of valuation, after deducting development costs together with
developer's profit and risk. Consideration has been given to
assumptions that are mainly based on market conditions existing at
the balance sheet date. Changes in fair value are recognised in
profit and loss.
Changes to accounting policies on adoption of IFRS 16 have been
applied retrospectively, and the comparative financial statements
have been restated.
The effects of adopting IFRS 16 were as follows:
(a) On the consolidated profit and loss account for the six
months ended 30th June 2018:
Increase/(decrease)
in profit
US$m
Costs of sales 0.4
Administration expenses 0.1
Net financing charges (0.6)
------
Profit attributable to shareholders of the Company* (0.1)
------
* Further analysed as:
Underlying profit attributable to shareholders (0.1)
Non-trading items -
------
Profit attributable to shareholders (0.1)
------
Basic underlying earnings per share (USc) (0.01)
------
Diluted underlying earnings per share (USc) (0.01)
------
Basic earnings per share (USc) (0.01)
------
Diluted earnings per share (USc) (0.01)
------
(b) On the consolidated statement of comprehensive income for
the six months ended
30th June 2018:
Increase/(decrease)
in profit
US$m
Profit and total comprehensive income for the period (0.1)
-----
(c) On the consolidated balance sheet at 1st January:
Increase/(decrease)
2019 2018
US$m US$m
Assets
Intangible assets (3.7) (3.9)
Tangible assets (180.6) (181.2)
Right-of-use assets 342.9 284.2
Associates and joint ventures (1.0) (0.9)
Deferred tax assets 0.1 -
Total assets 157.7 98.2
------- -------
Equity and liabilities
Revenue and other reserves (6.8) (6.6)
Non-current lease liabilities 160.1 100.6
Current creditors (2.5) (2.3)
Current lease liabilities 6.9 6.5
Total equity and liabilities 157.7 98.2
------- -------
(d) On the consolidated cash flow statement for the six months
ended 30th June 2018:
Inflows/(outflows)
US$m
Operating activities
Operating profit 0.5
Depreciation and amortisation 3.4
Interest and other financing charges paid (0.6)
Financing activities
Principal elements of lease payments (3.3)
-----
Net change in cash and cash equivalents -
-----
(e) Changes in principal accounting policies on adoption of IFRS
16
Right-of-use assets
Right-of-use assets are recognised at the commencement date of
the lease, that is the date the underlying assets are available for
use. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment, and adjusted for any remeasurement of
lease liabilities. The cost of the right-of-use assets includes
amount of the initial measurement of lease liabilities recognised,
lease payments made at or before the commencement date less any
lease incentives received, initial direct costs incurred, and
restoration costs.
Right-of-use assets are depreciated using the straight-line
method over the shorter of their estimated useful lives and the
lease terms.
When right-of-use assets meet the definition of investment
properties, they are presented in investment properties, and are
initially measured at cost and subsequently measured at fair value,
in accordance with the Group's accounting policy.
Payments associated with short-term lease and leases of
low-value assets (i.e. US$5,000 or less) are recognised on a
straight-line basis as an expense in profit and loss. Short-term
leases are leases with a lease term of 12 months or less.
Lease liabilities
Lease liabilities are recognised at the commencement of the
lease and are measured at the present value of lease payments to be
made over the lease term. Lease payments include fixed payments
(including in-substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised and payments of
penalties for terminating a lease, if the lease term reflects the
Group exercising that option. The variable lease payments that do
not depend on an index or a rate are recognised as expense in the
period on which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased by the interest costs on the lease
liabilities and decreased by lease payments made. The carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Interest is included as finance costs and charged to the profit
and loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liabilities for
each period.
Lease liabilities are classified as non-current liabilities
unless payments are within 12 months from the balance sheet
date.
(f) Critical accounting estimates and judgements
(i) Determination of lease term of contracts with renewal
options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any period covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the
assets for additional terms. The Group applies judgement in
evaluating whether it is reasonably certain to exercise the option
to renew. That is, the Group considers all relevant factors that
create an economic incentive for it to exercise the renewal. After
the commencement date, the Group reassesses the lease term if there
is a significant event or change in circumstances that is within
its control and affects its ability to exercise or not to exercise
the option to renew.
The assessment of whether the Group is reasonably certain to
exercise the options impacts the lease terms, which significantly
affects the amount of lease liabilities and right-of-use assets
recognised.
(ii) Determination of discount rates
The Group uses the incremental borrowing rate at the lease
commencement date as the discount rate to measure a lease liability
if the interest rate implicit in the lease cannot be readily
determinable. The Group applies the incremental borrowing rate with
reference to the rate of interest that the Group would have to pay
to borrow, over a similar term as that of the lease, the funds
necessary to obtain an asset of a similar value to the right-of-use
asset in the country where it is located.
2. REVENUE
Six months ended 30th June
2019 2018
US$m US$m
By geographical area:
Hong Kong 96.5 118.5
Other Asia 53.7 55.5
Europe 77.6 76.3
America 51.8 57.6
----- -----
279.6 307.9
----- -----
Revenue from contracts with customers:
Recognised at a point in time 104.8 109.5
Recognised over time 164.8 188.0
----- -----
269.6 297.5
Revenue from other sources:
Rental income 10.0 10.4
----- -----
279.6 307.9
----- -----
3. EBITDA FROM SUBSIDIARIES (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION)
Six months ended
Year ended
31st
30th June December
2019 2018 2018
US$m US$m US$m
By geographical area:
Hong Kong 26.0 34.2 75.4
Other Asia 18.6 19.1 38.4
Europe 13.0 8.1 34.1
America 2.3 9.7 13.4
-------- ---------- ----------
Underlying EBITDA from subsidiaries 59.9 71.1 161.3
Non-trading items (note 7)
-------- ---------- ----------
Fire at Mandarin Oriental Hyde Park,
London
- repair expenses and write-off
of tangible
assets and other incidental expenses (7.7) (20.3) (28.6)
- insurance recovery for replacement
of
tangible assets and other incidental
expenses 7.7 20.3 29.6
Closure of The Excelsior, Hong Kong
- other costs (6.5) - (2.8)
Change in fair value of investment
properties
under development 8.8 - -
Change in fair value of other investments (0.4) - 4.4
1.9 - 2.6
-------- ---------- ----------
EBITDA from subsidiaries 61.8 71.1 163.9
Underlying depreciation and amortisation
from
subsidiaries (34.3) (35.3) (69.6)
Non-trading items (note 7)
Closure of The Excelsior, Hong Kong
- accelerated depreciation and amortisation (25.4) - (23.6)
-------- ---------- ----------
Operating profit 2.1 35.8 70.7
-------- ---------- ----------
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and profit/ financing profit/
EBITDA amortisation (loss) charges Tax (loss)
US$m US$m US$m US$m US$m US$m
Six months ended
30th June 2019
By geographical area:
Other Asia 9.1 (6.1) 3.0 (0.9) (1.0) 1.1
Europe (2.0) (0.2) (2.2) - - (2.2)
America 2.1 (1.3) 0.8 (1.2) (0.1) (0.5)
------ ------------- --------- ---------- ----- --------
9.2 (7.6) 1.6 (2.1) (1.1) (1.6)
Six months ended
30th June 2018
By geographical area:
Other Asia 12.8 (4.8) 8.0 (0.7) (1.5) 5.8
Europe (1.5) (2.1) (3.6) - - (3.6)
America 1.6 (1.4) 0.2 (1.1) - (0.9)
------ ------------- --------- ---------- ----- --------
12.9 (8.3) 4.6 (1.8) (1.5) 1.3
5. TAX
Six months ended 30th June
2019 2018
US$m US$m
Tax (charged)/credited to profit and loss is
analysed as follows:
Current tax (8.7) (8.5)
Deferred tax 3.6 0.1
----- -----
(5.1) (8.4)
----- -----
By geographical area:
Hong Kong (2.4) (5.7)
Other Asia (0.5) (1.1)
Europe (1.9) (1.5)
America (0.3) (0.1)
----- -----
(5.1) (8.4)
----- -----
Tax credit relating to cash flow hedges of US$0.4 million (2018:
tax charge of US$0.3 million) is included in other comprehensive
income or expense.
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$1.1 million
(2018: US$1.5 million) is included in share of results of
associates and joint ventures (note 4).
6. EARNINGS PER SHARE
Basic loss/earnings per share are calculated on loss
attributable to shareholders of US$12.1 million (2018: profit of
US$22.2 million) and on the weighted average number of 1,262.6
million (2018: 1,259.9 million) shares in issue during the
period.
Diluted loss/earnings per share are calculated on loss
attributable to shareholders of US$12.1 million (2018: profit of
US$22.2 million) and on the weighted average number of 1,263.2
million (2018: 1,263.2 million) shares after adjusting for the
number of shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on the
average share price during the period.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2019 2018
Weighted average number of shares for basic
earnings per share calculation 1,262.6 1,259.9
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans 0.6 3.3
------- -------
Weighted average number of shares for diluted
earnings per share calculation 1,263.2 1,263.2
------- -------
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
Six months ended 30th June
2019 2018
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
(Loss)/profit
attributable to
shareholders (12.1) (0.96) (0.96) 22.2 1.76 1.76
Non-trading items
(note 7) 22.8 -
Underlying profit
attributable to
shareholders 10.7 0.85 0.85 22.2 1.76 1.76
------ ----
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investments properties and investments which are
measured at fair value through profit and loss; gains and losses
arising from the sale of businesses, investments and properties;
impairment of non-depreciable intangible assets and other
investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other
credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
Six months ended
Year ended
30th June 31st December
2019 2018 2018
US$m US$m US$m
Fire at Mandarin Oriental Hyde Park,
London*
* repair expenses and write-off of tangible assets
and other incidental expenses (7.7) (20.3) (28.6)
* insurance recovery for replacement of tangible
assets and other incidental expenses 7.7 20.3 29.6
Closure of The Excelsior, Hong Kong
* accelerated depreciation and amortisation (25.3) - (24.3)
* other costs (5.9) - (2.6)
Change in fair value of investment
properties under development (note
8) 8.8 - -
Change in fair value of other investments (0.4) - 4.4
-------- ---------- --------------
(22.8) - (21.5)
-------- ---------- --------------
* On 15th April 2019, Mandarin Oriental Hyde Park, London fully
re-opened following the necessary repairs caused by the fire on 6th
June 2018. The repair expenses and write-off of damaged tangible
assets, and other incidental expenses have been recognised as
non-trading expenses. The Group received interim cash payments
during 2018 and the first half of 2019 from the insurers (note 10).
The insurance compensations for the replacement of tangible assets
and other incidental expenses have been recognised as non-trading
income. The insurance compensations for the reimbursement of
operating expenditures and loss of profits of US$31.1 million and
US$11.8 million have been recorded as underlying business
performance in 2018 and the first half of 2019 respectively. The
total property damage and business interruption claims with the
Group's insurers are expected to be concluded in 2019.
Following an announcement on 9th October 2018, The Excelsior,
Hong Kong closed on 31st March 2019 and demolition work has
commenced ahead of the planned construction of a commercial
building on the site (note 8). An accelerated depreciation and
amortisation charge as a result of the revision of the estimated
useful lives of the non-leasehold land assets of the hotel,
together with additional costs in respect of the hotel closure,
have been recognised as non-trading expenses in 2018 and the first
half of 2019.
8. INVESTMENT PROPERTIES UNDER DEVELOPMENT
Following the closure of The Excelsior, Hong Kong, its use has
been changed from a hotel property to a commercial property for
redevelopment. The site was revalued and transferred from a
right-of-use asset held at historical depreciated cost to an
investment property under development subject to regular valuation
reviews. The revaluation surplus of US$2.9 billion was recognised
to the asset revaluation reserve through other comprehensive
income. Subsequent fair value change of the investment property has
been recognised as a non-trading item in the profit and loss.
9. BORROWINGS
The Group entered into new committed facilities of US$754
million in 2019, comprising a US$114 million facility in London and
a US$640 million facility in Hong Kong. Both facilities have a
tenor of five-year period and are secured against Mandarin Oriental
Hyde Park, London and Mandarin Oriental, Hong Kong respectively.
The new facilities were used to refinance bank loans due to mature
in 2019.
10. INSURANCE RECOVERY RECEIVED FOR PURCHASE OF TANGIBLE
ASSETS
The Group received interim insurance payments of US$66.3 million
and US$7.8 million in 2018 and the first half of 2019 respectively,
covering both property damage and business interruption caused by
the fire at Mandarin Oriental Hyde Park, London on 6th June 2018.
Of this US$74.1 million, US$7.8 million was to cover the remedial
capital expenditure of the tangible assets which was recorded under
investing activities. The remaining balance was recorded under
operating activities.
11. DIVIDS
Six months ended 30th June
2019 2018
US$m US$m
Final dividend in respect of 2018 of USc1.50
(2017: USc1.50) per share 18.9 18.9
----- -----
An interim dividend in respect of 2019 of USc1.50 (2018:
USc1.50) per share amounting to a total of US$19.0 million (2018:
US$18.9 million) has been declared by the Board and will be
accounted for as an appropriation of revenue reserves in the second
half of the year ending 31st December 2019.
12. CAPITAL COMMITMENTS
Total capital commitments at 30th June 2019 and 31st December
2018 amounted to US$785.0 million and US$816.5 million
respectively.
13. FINANCIAL INSTRUMENTS
Financial instruments by category
The fair values of financial assets and financial liabilities,
together with carrying amounts at 30th June 2019 and 31st December
2018 are as follows:
Other
Fair value Financial financial
Fair value through assets liabilities Total
of hedging profit at amortised at amortised carrying Fair
instruments and loss cost costs amount value
US$m US$m US$m US$m US$m US$m
30th June 2019
Financial assets
measured at fair
value
Other investments - 16.2 - - 16.2 16.2
------------ ------------ ------------- ------------- ---------- -------
Financial assets
not measured
at fair value
Debtors - - 51.5 - 51.5 51.5
Bank and cash
balances - - 211.1 - 211.1 211.1
------------ -------------
- - 262.6 - 262.6 262.6
------------ ------------ ------------- ------------- ---------- -------
Financial liabilities
measured at fair
value
Derivative financial
instruments (1.5) - - - (1.5) (1.5)
------------ ------------ ------------- ------------- ---------- -------
Financial liabilities
not measured
at fair value
Borrowings - - - (546.8) (546.8) (546.8)
Lease liabilities - - - (180.2) (180.2) (180.2)
Trade and other
payable excluding
non-financial
liabilities - - - (119.7) (119.7) (119.7)
------------ -------------
- - - (846.7) (846.7) (846.7)
------------ ------------ ------------- ------------- ---------- -------
Other
Fair value Financial financial
Fair value through assets liabilities Total
of hedging profit at amortised at amortised carrying Fair
instruments and loss cost costs amount value
US$m US$m US$m US$m US$m US$m
31st December
2018
Financial assets
measured at fair
value
Other investments - 15.2 - - 15.2 15.2
Derivative financial
instruments 0.9 - - - 0.9 0.9
------------ -------------
0.9 15.2 - - 16.1 16.1
------------ ------------ ------------- ------------- ---------- -------
Financial assets
not measured at
fair value
Debtors - - 61.2 - 61.2 61.2
Bank and cash
balances - - 246.8 - 246.8 246.8
------------ -------------
- - 308.0 - 308.0 308.0
------------ ------------ ------------- ------------- ---------- -------
Financial liabilities
not measured at fair
value
Borrowings - - - (531.5) (531.5) (531.5)
Lease Liabilities - - - (167.0) (167.0) (167.0)
Trade and other
payable excluding
non-financial
liabilities - - - (136.3) (136.3) (136.3)
------------ -------------
- - - (834.8) (834.8) (834.8)
------------ ------------ ------------- ------------- ---------- -------
Fair value estimation
(i) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the
balance sheet, the corresponding fair value measurements are
disclosed by level of the following fair value measurement
hierarchy:
(a) Inputs other than quoted prices in active markets that are
observable for the asset or liability, either directly or
indirectly ('observable current market transactions')
The fair values of derivative financial instruments are
determined using rates quoted by the Group's bankers at the balance
sheet date. The rates for interest rate swaps and caps and forward
foreign exchange contracts are calculated by reference to market
interest rates and foreign exchange rates.
The fair values of unlisted investments mainly include club and
school debentures, are determined using prices quoted by brokers at
the balance sheet date.
(b) Inputs for assets or liabilities that are not based on
observable market data ('unobservable inputs')
The fair values of other unlisted investments are determined
using valuation techniques by reference to observable current
market transactions (including price-to earnings and price-to book
ratios of listed securities of entities engaged in similar
industries), or the market prices of the underlying investments
with certain degree of entity specific estimates or discounted cash
flow by projecting the cash flows from these investments.
There were no changes in valuation techniques during the six
months ended 30th June 2019 and the year ended 31st December
2018.
The table below analyses financial instruments carried at fair
value at 30th June 2019 and 31st December 2018, by the levels in
the fair value measurement hierarchy:
Observable
market current Unobservable
transactions inputs Total
US$m US$m US$m
30th June 2019
Assets
Other investments 5.7 10.5 16.2
Liabilities
Derivative financial instruments
at fair value
* through other comprehensive income (1.5) - (1.5)
--------------- ------------ -----
31st December 2018
Assets
Other investments 6.1 9.1 15.2
Derivative financial instruments
at fair value
- through other comprehensive
income 0.9 - 0.9
--------------- ------------ -----
7.0 9.1 16.1
--------------- ------------ -----
There were no transfers among the two categories during the six
months ended 30th June 2019 and the year ended 31st December
2018.
Movement of financial instruments which are valued based on
unobservable inputs during the six months ended 30th June 2019 and
the year ended 31st December 2018 are as follows:
Unlisted
investments
US$m
At 1st January 2019 9.1
Additions 1.4
------------
At 30th June 2019 10.5
------------
At 1st January 2018 9.3
Disposals (0.2)
------------
At 31st December 2018 9.1
------------
(i) Financial instruments that are not measured at fair
value
The fair values of current debtors, bank and cash balances,
current creditors, current borrowings and current lease liabilities
are assumed to approximate their carrying amounts due to the
short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market
prices or are estimated using the expected future payments
discounted at market interest rates.
14. 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$7.3 million (2018: US$7.3 million) received from the Group's six
(2018: 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 first six months of the current financial year.
Amounts of outstanding balances with associates and joint
ventures are included in debtors as appropriate.
Mandarin Oriental International Limited
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and
internal control. The following have been identified previously as
the areas of principal risk and uncertainty facing the Company, and
they remain relevant in the second half of the year.
-- Economic and Financial Risk
-- Commercial and Market Risk
-- Pandemic, Terrorism and Natural Disasters
-- Key Agreements
-- Reputational Risk and Value of the Brand
-- Regulatory and Political Risk
For greater detail, please refer to pages 103 and 104 of the
Company's 2018 Annual Report, a copy of which is available on the
Company's website www.mandarinoriental.com.
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
(a) the condensed financial statements have been prepared in
accordance with IAS 34; and
(b) the interim management report includes a fair review of all
information required to be disclosed by the Disclosure Guidance and
Transparency Rules 4.2.7 and 4.2.8 issued by the Financial Conduct
Authority in the United Kingdom.
For and on behalf of the Board
James Riley
Craig Beattie
Directors
The interim dividend of USc1.50 per share will be payable
on 17th October 2019 to shareholders on the register of members
at the close of business on 23rd August 2019. The shares
will be quoted ex-dividend on 22nd August 2019, and the share
registers will be closed from 26th to 30th August 2019, inclusive.
Shareholders will receive their cash dividends in United
States Dollars, unless they are registered on the Jersey
branch register, in which case they will have the option
to elect for their dividends to be paid in Sterling. These
shareholders may make new currency elections for the 2019
interim dividend by notifying the United Kingdom transfer
agent in writing by 27th September 2019. The Sterling equivalent
of dividends declared in United States Dollars will be calculated
by reference to a rate prevailing on 2nd October 2019.
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 August 2019, must submit the relevant
documents to M & C Services Private Limited, the Singapore
branch registrar, by no later than 5.00 p.m. (local time)
on 22nd August 2019.
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 32 hotels and six residences in 23 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$5.8 billion as at 30th June 2019.
Mandarin Oriental's aim is to be recognised as the world's best
luxury hotel group. This will be achieved by investing in the
Group's exceptional facilities and its people, and seeking
selective opportunities for expansion around the world, while
maximising 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 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 / Craig Beattie (852) 2895 9288
Sally de Souza (852) 2895 9167
Brunswick Group Limited
David Ashton (852) 3512 5063
As permitted by the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority in the United Kingdom, the
Company will not be posting a printed version of the Half-Yearly
Results announcement to shareholders. The Half-Yearly Results
announcement will remain available on the Company's website,
www.mandarinoriental.com, together with other Group
announcements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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