27th Jul 2006 10:05
Mandarin Oriental International Ld27 July 2006 To: Business Editor 27th July 2006 For immediate release The following announcement was today issued to the London Stock Exchange. MANDARIN ORIENTAL INTERNATIONAL LIMITEDINTERIM REPORT 2006 Highlights • Temporary closure of Mandarin Oriental, Hong Kong, for renovation• Sale of The Mark, New York completed• Three new hotel projects announced "While revenues in the second half will continue to be affected by the Hong Kongrenovation, overall market conditions in Mandarin Oriental's key locations areexpected to remain strong for the remainder of the year." Simon Keswick, Chairman27th July 2006 Results_______________________________________________________________________________________________________ (unaudited) Six months ended 30th June 2006 2005 Change US$m US$m %_______________________________________________________________________________________________________Combined total revenue of hotels under management 398.4 390.1 +2Earnings before interest, tax, depreciation and amortization(1) 48.9 62.7 -22Profit attributable to shareholders - excluding gains on disposal 13.7 19.2 -29Profit attributable to shareholders 48.7 55.3 -12Funds from operations(2) 54.5 62.3 -13_______________________________________________________________________________________________________ USc USc %_______________________________________________________________________________________________________Earnings per share - excluding gains on disposal 1.42 2.07 -31Earnings per share 5.04 5.96 -15Funds from operations per share(2) 5.64 6.71 -16_______________________________________________________________________________________________________ US$ US$ %_______________________________________________________________________________________________________Net asset value per share 0.93 0.82 +13Net asset value per share with leasehold properties at valuation(3) 1.56 1.32 +18_______________________________________________________________________________________________________(1) EBITDA does not include gains on disposal.(2) Funds from operations ('FFO') figures have been presented to provide additional information to investors to facilitate comparison with other hotel companies with substantial real estate interests. FFO is defined as profit attributable to shareholders excluding depreciation of hotel buildings, net of relevant deferred tax and minority interests.(3) The net asset value per share with leasehold properties at valuation has been presented after adjusting for the market value of the Group's leasehold interests. International Financial Reporting Standards ('IFRS') do not permit leasehold interests of owner-occupied land to be carried at valuation. The Group considers that the IFRS treatment does not reflect the economic substance of its underlying property investments. Therefore, the Group has presented the net asset value per share taking into account the fair market value of leasehold interests as supplementary financial information in addition to the net asset value per share in accordance with IFRS._______________________________________________________________________________________________________ MANDARIN ORIENTAL INTERNATIONAL LIMITEDINTERIM REPORT 2006 OVERVIEW Market conditions remained favourable in the Group's key markets as room ratesbenefited from growing demand and limited new supply. The temporary closure forrenovation of the Group's original flagship, Mandarin Oriental, Hong Kong,affected the results in the first half, although the impact was partly offset bygrowing contributions from properties elsewhere in the Group. The completion ofthe sale of The Mark hotel in New York further enhanced the Group's strongfinancial position. PERFORMANCE Earnings from operations before interest, tax, depreciation and amortization('EBITDA') for the first six months of 2006 were US$48.9 million compared withUS$62.7 million for the comparable period in 2005. This decrease was partiallyoffset by the recognition of tax losses and by lower financing charges due tothe reduction of net debt resulting from asset sales. Profit attributable to shareholders for the first six months was US$48.7million, and included a US$35.0 million gain arising from the disposal of theGroup's interest in The Mark, New York. This compares with the profitattributable to shareholders of US$55.3 million in the first half of 2005, whichincluded a gain of US$36.1 million on the disposal of a property interest inHawaii. Excluding gains from disposals, profit attributable to shareholders wasUS$13.7 million in the first half of 2006 compared with US$19.2 million in thefirst half of 2005. Earnings per share for the first six months of 2006, including gains ondisposals, were USc5.04, compared to USc5.96 in the corresponding period in2005. Excluding such gains, earnings per share were USc1.42 and USc2.07,respectively. GROUP REVIEW The impact of the renovation of Mandarin Oriental, Hong Kong has been to lowerthe hotel's contribution to Group EBITDA by US$26.4 million compared to the sameperiod in 2005. This reduction was, however, partly offset by improvements inother subsidiary hotels. The Excelsior, Hong Kong and the Group's Europeanproperties benefited from rising average rates as demand continued to be strong. The contribution to operating results from associates and joint venturesincreased with stronger performances in Macau, Bangkok and New York. The Group'sSingapore hotel also produced significantly improved results following extensiverenovations that were completed in the first half of 2005. DEVELOPMENTS Mandarin Oriental, Hong Kong is scheduled to reopen in late September with some200 rooms and most of the public areas completed, while the full complement of502 rooms is expected to be available by the year end. September will also seethe addition of a new property to the Group's European portfolio with theopening of a 99-room Mandarin Oriental in Prague. Three new management projects have been announced over the past six months. A292-room luxury resort on Hainan Island in China is scheduled to open in thefirst part of 2007. This will be followed in late 2007 by Mandarin Oriental,Barcelona, a 144-room luxury hotel in the heart of the city's commercial andentertainment district. The Group is also to manage a new 120-room luxury hoteland 90 branded residences constituting part of a US$3 billion, 75 acre mixed-useproject located in Dallas, Texas, which will be completed in 2009. Further development opportunities are under consideration as the Group continuesto develop as one of the world's leading luxury hotel brands. OUTLOOK In conclusion, the Chairman, Simon Keswick said, "While revenues in the secondhalf will continue to be affected by the Hong Kong renovation, overall marketconditions in Mandarin Oriental's key locations are expected to remain strongfor the remainder of the year." ______________________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Profit and Loss Account______________________________________________________________________________________________ (unaudited) Year Six months ended ended 30th June 31st Restated December 2006 2005 2005 US$m US$m US$m______________________________________________________________________________________________Revenue (note 2) 182.5 192.7 399.2Cost of sales (124.5) (121.0) (254.3) ________ ________ ________Gross profit 58.0 71.7 144.9Selling and distribution costs (11.9) (11.4) (23.7)Administration expenses (31.1) (27.6) (60.8)Gain on disposal (note 9) 76.9 - - ________ ________ ________Operating profit (note 3) 91.9 32.7 60.4Net financing charges (7.9) (12.1) (22.4)Share of results of associates and joint ventures (note 4) 6.2 2.5 8.7Gain on disposal of associates (note 10) - 50.3 52.3 ________ ________ ________Profit before tax 90.2 73.4 99.0Tax (note 5) (41.8) (19.4) (24.8) ________ ________ ________Profit after tax 48.4 54.0 74.2 ________ ________ ________ Profit attributable to shareholders 48.7 55.3 77.2Loss attributable to minority interests (0.3) (1.3) (3.0) ________ ________ ________ 48.4 54.0 74.2 ________ ________ ______________________________________________________________________________________________________ USc USc USc______________________________________________________________________________________________Earnings per share (note 6)- basic 5.04 5.96 8.14- diluted 4.99 5.91 8.07 Earnings per share - excluding gains on disposal(notes 9 and 10)- basic 1.42 2.07 4.33- diluted 1.41 2.05 4.30______________________________________________________________________________________________ ______________________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Balance Sheet______________________________________________________________________________________________ (unaudited) At 31st At 30th June December Restated 2006 2005 2005 US$m US$m US$m______________________________________________________________________________________________Net assetsIntangible assets (note 7) 215.6 218.5 215.5Tangible assets 747.0 715.5 684.0Associates and joint ventures 179.7 177.1 174.0Other investments 5.6 8.0 5.1Loans receivable 43.0 43.0 43.0Pension assets 22.5 22.7 22.8Deferred tax assets 16.8 7.8 9.9Other non-current assets 8.2 0.7 5.5 ________ ________ ________Non-current assets 1,238.4 1,193.3 1,159.8 Stocks 3.3 2.8 3.1Debtors and prepayments 61.6 57.6 59.0Cash at bank 257.8 146.7 169.1 ________ ________ ________ 322.7 207.1 231.2Non-current assets classified as held for sale (note 11) - - 80.3 ________ ________ ________Current assets 322.7 207.1 311.5 ________ ________ ________Creditors and accruals (60.4) (54.4) (80.3)Current borrowings (note 8) (9.4) (7.5) (8.3)Current tax liabilities (49.0) (12.7) (6.8) ________ ________ ________ (118.8) (74.6) (95.4)Liabilities directly associated with non-current assets classified as held for sale (note 11) - - (14.0) ________ ________ ________Current liabilities (118.8) (74.6) (109.4) ________ ________ ________ Net current assets 203.9 132.5 202.1Long-term borrowings (note 8) (485.4) (479.6) (471.6)Deferred tax liabilities (53.2) (49.9) (49.8)Pension liabilities (1.7) (1.7) (1.7) ________ ________ ________ 902.0 794.6 838.8 ________ ________ ________Total equityShare capital 48.3 48.3 48.3Share premium 159.3 158.7 158.8Revenue and other reserves 690.0 582.2 628.0 ________ ________ ________Shareholders' funds 897.6 789.2 835.1Minority interests 4.4 5.4 3.7 ________ ________ ________ 902.0 794.6 838.8 ________ ________ ______________________________________________________________________________________________________ ______________________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Statement of Recognized Income and Expense______________________________________________________________________________________________ (unaudited) Year ended Six months ended 31st 30th June December 2006 2005 2005 US$m US$m US$m______________________________________________________________________________________________ Net exchange translation differences 25.5 (22.8) (31.4)Gain on cash flow hedges 2.7 6.8 11.7Tax on items taken directly to equity - - (9.8)Surplus on revaluation of properties - - 35.6Actuarial gains on defined benefit pension plans - - 0.6 ________ ________ ________ Net income recognized directly in equity 28.2 (16.0) 6.7Profit for the period/year 48.4 54.0 74.2 ________ ________ ________Total recognized income and expense for the period/year 76.6 38.0 80.9 ________ ________ ________ Attributable to:Shareholders of the Company 75.9 37.4 84.6Minority interests 0.7 0.6 (3.7) ________ ________ ________ 76.6 38.0 80.9 ________ ________ ________ _____________________________________________________________________________________________Mandarin Oriental International LimitedConsolidated Cash Flow Statement_____________________________________________________________________________________________ (unaudited) Year ended Six months ended 31st 30th June December Restated 2006 2005 2005 US$m US$m US$m_____________________________________________________________________________________________ Operating activitiesOperating profit 91.9 32.7 60.4Depreciation 13.9 14.3 30.0Amortization of land use rights 0.3 0.3 0.6Non-cash items (note 12a) (75.5) 0.4 3.0Movements in working capital (17.0) (15.9) (0.3)Interest received 4.8 0.5 2.8Interest and other financing charges paid (13.4) (13.9) (26.3)Tax paid (3.2) (3.0) (13.8) ________ ________ ________ 1.8 15.4 56.4Dividends and interest from associates and joint ventures 6.6 3.5 8.0 Cash flows from operating activities 8.4 18.9 64.4 Investing activitiesPurchase of tangible assets (56.2) (11.2) (40.0)Advance of loans receivable - (13.0) (13.0)Purchase of other investments (0.3) (1.6) (0.9)Purchase of minority interests - (0.2) (2.7)Proceeds on disposal of associates - 93.1 95.3Repayment of loan to an associate - 4.1 4.1Capital distribution from an associate 0.9 8.7 8.7Proceeds on disposal of The Mark (note 12b) 142.7 - - Cash flows from investing activities 87.1 79.9 51.5 Financing activitiesIssue of shares 0.5 0.3 0.3Drawdown of borrowings 9.1 104.0 115.0Repayment of borrowings (3.1) (112.3) (116.5)Dividends paid by the Company (note 14) (14.5) (9.7) (9.6)Capital contribution from minority interests - 0.6 - Cash flows from financing activities (8.0) (17.1) (10.8)Effect of exchange rate changes 1.0 (0.7) (2.0) _________ _________ ________Net increase in cash and cash equivalents 88.5 81.0 103.1Cash and cash equivalents at 1st January 168.8 65.7 65.7 _________ _________ ________Cash and cash equivalents at 30th June/31st 257.3 146.7 168.8December _________ _________ _____________________________________________________________________________________________________ ________________________________________________________________________________________Mandarin Oriental International LimitedNotes________________________________________________________________________________________ 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the unaudited interim condensed financial statements which have been prepared in accordance with IAS 34 - Interim Financial Reporting. There have been no changes to the accounting policies described in the 2005 annual financial statements. In 2005, the Group conducted a comprehensive review of deferred taxation across the Group's hotel properties to ensure full compliance with IAS 12 Income Taxes. As a result, certain prior period adjustments were made to conform more fully to IFRS. These adjustments were primarily to provide for deferred tax arising from fair value adjustments which had not previously been provided. The comparative figures for the six months ended 30th June 2005 have been restated to reflect these adjustments which were adopted in the preparation of the 2005 annual financial statements. 2. REVENUE Six months ended 30th June 2006 2005 US$m US$m __________________________ By geographical area: Hong Kong & Macau 41.0 78.7 Other Asia 52.1 15.6 Europe 54.6 52.4 The Americas 34.8 46.0 __________ _________ 182.5 192.7 __________ _________ 3. OPERATING PROFIT Six months ended 30th June 2006 2005 US$m US$m __________________________ By geographical area: Hong Kong & Macau (3.2) 22.7 Other Asia 2.8 (1.2) Europe 9.7 7.9 The Americas 5.7 3.3 __________ _________ 15.0 32.7 Gain on disposal (refer note 9) 76.9 - __________ _________ 91.9 32.7 __________ _________ 4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES Net Net Operating finance profit/ profit charges Tax (loss) US$m US$m US$m US$m ____________________________________________ Six months ended 30th June 2006 By geographical area: Hong Kong & Macau 2.8 (0.2) (0.1) 2.5 Other Asia 7.2 (1.7) (1.1) 4.4 The Americas 3.3 (3.4) (0.6) (0.7) __________ __________ _________ _________ 13.3 (5.3) (1.8) 6.2 __________ __________ _________ _________ Six months ended 30th June 2005 By geographical area: Hong Kong & Macau 2.1 (0.1) (0.1) 1.9 Other Asia 3.7 (1.3) (0.9) 1.5 The Americas 2.1 (3.0) - (0.9) __________ __________ _________ _________ 7.9 (4.4) (1.0) 2.5 __________ __________ _________ _________ 5. TAX Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates and includes a tax charge of US$41.9 million arising on the disposal of the Group's 100% interest in The Mark, New York (refer note 9). The 2005 tax on profits included a tax charge of US$14.2 million arising on the disposal of the Group's 40% investment in Kahala Mandarin Oriental, Hawaii. This tax charge was calculated after utilizing brought forward tax losses in the United States of US$65.1 million and comprised current tax of US$2.5 million and deferred tax of US$11.7 million on temporary differences (refer note 10). 6. EARNINGS PER SHARE Basic earnings per share are alculated on the profit attributable to shareholders of US$48.7 million (2005: US$55.3 million) and on the weighted average number of 966.2 million (2005: 927.5 million) shares in issue during the period. The weighted average number excludes shares held by the Trustee under the Senior Executive Share Incentive Schemes. Diluted earnings per share are calculated on the weighted average number of 976.8 million (2005: 935.1 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period. Ordinary shares in millions 2006 2005 ___________________________ Weighted average number of shares in issue 966.2 927.5 Adjustment for shares deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes 10.6 7.6 _____________ ____________ Weighted average number of shares for diluted earnings per share 976.8 935.1 _____________ ____________ The Directors consider funds from operations ('FFO') to be a supplemental measure of the Group's performance and believe this should be considered along with, but not as an alternative to, profit attributable to shareholders as a measure of the operating performance. FFO is defined as profit attributable to shareholders excluding depreciation of hotel buildings, net of relevant deferred tax and minority interests. Six months ended 30th June 2006 2005 __________________________________________________ Per share Per share US$m USc US$m USc Profit attributable to shareholders 48.7 5.04 55.3 5.96 Depreciation of buildings, net of deferred tax and minority interests 5.8 0.60 7.0 0.75 ______ ______ _____ _____ Funds from operations 54.5 5.64 62.3 6.71 ______ ______ _____ _____ 7. INTANGIBLE ASSETS At 31st At 30th June December 2006 2005 2005 US$m US$m US$m _______ _______ _______ Land use rights 192.3 191.9 192.2 Goodwill 23.3 26.6 23.3 _______ _______ _______ 215.6 218.5 215.5 _______ _______ _______ 8. BORROWINGS At 31st At 30th June December 2006 2005 2005 US$m US$m US$m _______ _______ _______ Bank loans 485.2 469.6 470.7 Other borrowings 9.6 9.5 9.2 Finance lease - 8.0 - _______ _______ _______ 494.8 487.1 479.9 _______ _______ _______ Current 9.4 7.5 8.3 Long-term 485.4 479.6 471.6 _______ _______ _______ 494.8 487.1 479.9 _______ _______ _______ 9. SALE OF THE MARK, NEW YORK The sale of the Group's 100% interest in The Mark, New York was completed on 16th February 2006 for a gross consideration of US$150.0 million. The hotel was originally acquired in 2000 as part of the US$142.5 million acquisition of The Rafael Group. The pre-tax gain on this disposal is US$76.9 million, and the post-tax gain on the disposal is US$35.0 million. 10. SALE OF 40% INVESTMENT IN KAHALA MANDARIN ORIENTAL, HAWAII On 8th June 2005, the Company completed the sale of its 40% investment in the partnership that leased the Kahala Mandarin Oriental hotel in Hawaii to its 60% partner, Kahala Royal Corporation ('KRC'). The Group had exercised its put option in January 2005 pursuant to its rights under its partnership agreement with KRC. On completion, the Group received a gross consideration of US$97.1 million, which included the repayment of loans to an associate of US$4.1 million. The pre-tax gain on this disposal was US$50.3 million. After utilization of brought forward US tax losses, the post-tax gain on this disposal was US$36.1 million. 11. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE Year ended 31st Six months ended 30th June December 2006 2005 2005 US$m US$m US$m _________ __________ ___________ Intangible assets - - 5.2 Tangible assets - - 67.2 Deferred tax assets - - 1.3 Current assets - - 6.6 _________ __________ ____________ Total assets - - 80.3 _________ __________ ____________ Long-term borrowings - - (11.0) Current liabilities - - (3.0) _________ __________ ____________ Total liabilities - - (14.0) _________ __________ ____________ At 1st January 2006, total assets and liabilities classified as held for sale amounted to US$80.3 million and US$14.0 million respectively, which were in relation to the Group's 100% interest in The Mark, New York. The sale was completed in February 2006 for a consideration of US$150.0 million (refer note 9). 12. NOTES TO CONSOLIDATED CASH FLOW STATEMENT Year ended Six months ended 30th June 31st Restated December 2006 2005 2005 US$m US$m US$m _________ __________ ___________ a) Non-cash items Gain on disposal (refer note 9) (76.9) - - Pension expenses 0.3 0.3 0.8 Other 1.1 0.1 2.2 _________ __________ ___________ (75.5) 0.4 3.0 _________ __________ ___________ b) Proceeds on disposal of The Mark Net assets disposed of 73.1 - - Gain on disposal (refer note 9) 76.9 - - _________ __________ ___________ Sale proceeds 150.0 - - Tax and other expenses paid on disposal (7.3) - - _________ __________ ___________ Net cash flow 142.7 - - _________ __________ ___________ 13. CAPITAL COMMITMENTS At 31st At 30th June December 2006 2005 2005 US$m US$m US$m ______ ______ ______ Capital commitments 99.3 135.5 152.5 ______ ______ ______ 14. DIVIDENDS No interim dividend in respect of 2006 is proposed (2005: nil). A final dividend of USc1.50 per share has been paid in respect of 2005. - end - For further information, please contact: Mandarin Oriental Hotel Group International LimitedJohn R Witt (852) 2895 9288Jill Kluge / Sally de Souza (852) 2895 9167 Matheson & Co LimitedMartin Henderson (44) 207 816 8135 GolinHarrisKennes Young (852) 2501 7987 Weber Shandwick Square MileRichard Hews/Helen Thomas (44) 207 067 0700 This and other Group announcements can be accessed through the Internet at'www.mandarinoriental.com' This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mandarin In.sg