TIDMMDO TIDMJAR TIDMJDS
RNS Number : 1135F
Mandarin Oriental International Ltd
05 March 2020
To: Business Editor 5th March 2020
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
2019 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Lower earnings in Hong Kong
-- London hotel fully re-opened
-- Commenced redevelopment of The Excelsior site
-- Four new hotels opened and seven new management contracts signed
"The Group's performance is being significantly impacted by the
ongoing coronavirus, particularly in Hong Kong. Results for the
remainder of the year will depend on the duration, geographic
extent and impact of the coronavirus and the measures taken to
control it. The Group's results should, however, benefit from the
newly renovated London and Bangkok hotels and the Group looks
forward to the re-opening of the iconic Mandarin Oriental Ritz,
Madrid in late summer."
Ben Keswick
Chairman
Results
Year ended 31st December
2019 2018 Change
US$m US$m %
restated (6)
--------------------------------------------------- ------- -------- --- ------
Combined total revenue of hotels under
management(1) 1,325.1 1,397.6 -5
Underlying EBITDA (Earnings before interest,
tax, depreciation and amortisation)(2) 154.5 187.9 -18
Underlying profit attributable to shareholders(3) 41.2 64.9 -37
(Loss)/profit attributable to shareholders (55.5) 43.4 N/A
USc USc %
------- -------- ---
Underlying earnings per share(3) 3.26 5.15 -37
(Loss)/earnings per share (4.39) 3.44 N/A
Dividends per share 3.00 3.00 -
US$ US$ %
------- -------- ---
Net asset value per share(4) 3.26 0.98 +233
Adjusted net asset value per share(5) 4.70 4.62 +2
Net debt/shareholders' funds(4) 7% 23%
Net debt/adjusted shareholders' funds(5) 5% 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 34 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 net asset value per share and net debt/shareholders'
funds at 31st December 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 under development
on 31st March 2019.
(5) The Group's investment property under development is carried
at fair value on the basis of a valuation carried out by independent
valuers at 31st December 2019. The other 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 have included the market
value of the Group's freehold and leasehold interests.
(6) 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 financial statements.
The final dividend of USc1.50 per share will be payable on 13th
May 2020, subject to approval at the Annual General Meeting to be
held on 6th May 2020, to shareholders on the register of members at
the close of business on 20th March 2020.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2019
OVERVIEW
The Group's underlying profit significantly decreased in 2019,
primarily due to the closure of The Excelsior in Hong Kong. While
results were also impacted by the social unrest in Hong Kong and
the major renovation at the Bangkok hotel, earnings did benefit
from the re-opening of the London hotel following the fire in 2018
and the receipt of related insurance proceeds.
PERFORMANCE
Underlying earnings before interest, tax, depreciation and
amortisation ('EBITDA') were US$155 million, compared to US$188
million in the prior year. Excluding earnings from The Excelsior,
underlying EBITDA were US$146 million compared to US$153 million in
2018.
Underlying profit for the year was US$41 million compared with
US$65 million in 2018. In addition, several non-trading items were
recognised, primarily in relation to the redevelopment of The
Excelsior as a commercial building and its reclassification as a
commercial investment property following the hotel's closure in
March 2019. These items included a US$67 million (1%) decrease in
the valuation of The Excelsior site at the end of the year and
US$29 million of accelerated depreciation of hotel assets and
closure costs. These items resulted in a loss attributable to
shareholders of US$56 million in the year compared to a profit
attributable to shareholders of US$43 million in 2018.
The adjusted net asset value per share, which reflects an
independent valuation of the Group's owned hotel properties and the
valuation of The Excelsior site as a commercial development, was
US$4.70 at 31st December 2019, compared with US$4.62 per share at
the end of 2018.
The Directors recommend a final dividend of USc1.50 per share,
resulting in a total annual dividend of USc3.00 per share,
unchanged from 2018.
The Group's net debt at 31st December 2019 was US$300 million,
slightly higher than the US$285 million at the end of 2018. Gearing
as a percentage of adjusted shareholders' funds at 31st December
2019, after taking into account the market value of all of the
Group's property interests, was 5%.
YEAR IN REVIEW
Several of the Group's owned or partially owned properties
reported better earnings in 2019 although overall results were
impacted by the redevelopment of The Excelsior site, the social
unrest in Hong Kong and the renovation in Bangkok. The Group's
London Hyde Park hotel fully re-opened in April 2019 and the hotel
is quickly re-establishing its position at the top of the London
market. Results at the London property benefited from settlement of
the insurance claim relating to the fire in 2018, which included
proceeds for business interruption in respect of both 2018 and
2019. The restoration of Mandarin Oriental Ritz, Madrid is on track
and the Group is looking forward to the opening of this historic
property in late summer of 2020.
The redevelopment of The Excelsior site is progressing well, and
the demolition phase commenced in September 2019. The Group expects
the redevelopment to take around six years to complete and to cost
some US$650 million.
The Group opened four new hotels in 2019 in Dubai, Doha, Beijing
and Lake Como. The Group also continues to build its development
pipeline with seven new management contracts signed and announced
in 2019, including six new hotels and one standalone Residences
project. New Mandarin Oriental hotels were announced in Istanbul,
Nanjing, Lake Lucerne, Dallas and Tel Aviv and the Group took over
management of Emirates Palace in Abu Dhabi at the beginning of
2020.
PEOPLE
Each and every day our colleagues work tirelessly to provide the
legendary service and experiences for which Mandarin Oriental is
recognised. On behalf of the Directors, I would like to thank
colleagues throughout the Group for their continuing dedication,
loyalty and commitment and for how they have performed and
responded to, and shown great resilience in the face of, the
ongoing challenging conditions for the Group.
Simon Keswick stepped down as a Director with effect from 1st
January 2020. On 20th January 2020, it was announced that Lord
Sassoon will retire from the Board on 9th April 2020. Edouard
Ettedgui will retire from the Board following the Company's AGM on
6th May 2020. The Board would like to record its gratitude to all
of them for their significant contributions to the Group over many
years. Archie Keswick was appointed as a Director on 5th December
2019 and the Board was pleased to welcome him to the Board.
As separately announced on 5th March 2020, with effect from 15th
June 2020 the roles of Chairman and Managing Director, which are
currently held on a combined basis by Ben Keswick, will be
separated. Ben Keswick will remain as Chairman and John Witt will
join the Board and take on the role of Managing Director of the
Company.
OUTLOOK
The Group's performance is being significantly impacted by the
ongoing coronavirus, particularly in Hong Kong. Results for the
remainder of the year will depend on the duration, geographic
extent and impact of the coronavirus and the measures taken to
control it. The Group's results should, however, benefit from the
newly renovated London and Bangkok hotels and the Group looks
forward to the re-opening of the iconic Mandarin Oriental Ritz,
Madrid in late summer.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
KEY HIGHLIGHTS
2019 was an extremely busy year for the Group and I am pleased
with the progress we have made on several fronts. We opened four
new hotels this year in Dubai, Doha, Beijing and Lake Como, opened
a new Residences in Bangkok, and announced seven new development
projects, including the takeover of the iconic Emirates Palace in
Abu Dhabi. Having started 2019 without a presence in the Middle
East, we now have three operating hotels in a region which is an
important outbound market for many of our properties globally. This
is also the first time the Group has opened four hotels in a single
year, and I hope signals a new era of growth for the Group - over
the last four years we have diligently built a pipeline that
currently includes 20 new projects which are scheduled to open in
the next five years, in addition to the properties whose management
we have already taken over during the period.
Other events of note included the re-opening of our flagship
Hyde Park hotel in London after a comprehensive refurbishment, the
re-opening of the River Wing at the historic Bangkok hotel
following renovation, a completed rooms renovation in Tokyo, and
good progress on the renovation of the Madrid hotel which is on
track to open in late summer 2020. The redevelopment of The
Excelsior site into a commercial building commenced in May and is
currently in the demolition phase. The new commercial building is
expected to be completed in 2025.
Our guest recognition programme, Fans of M.O., surpassed half a
million members in 2019, less than 18 months after launch. We
designed Fans of M.O. as a unique recognition-based programme to
fit the needs of our customers and I am delighted with the response
and continued take-up. Further enhancements to the programme are
coming in 2020 and I am confident these innovations will continue
to differentiate us in the industry.
Fans of M.O. is a key customer-facing element of our digital
strategy, but there are also significant investments being made to
modernise our core information technology systems that will support
our digital and data ambitions. This is a significant endeavour but
one which we have been working on for a number of years. We started
to replace all our core hotel property management systems in 2018
and we expect this to be complete for all hotels in the first half
of 2020. This is a major step as we look to consolidate and to
better utilise the rich data available across our business in order
to elevate customer luxury experiences to even higher levels.
Sustainability is a central part of our culture and we focus on
motivating our colleagues to act responsibly in everything that
they do, with a particular emphasis on how they can impact their
local communities. In 2019, we set ourselves an ambitious, yet
achievable goal of eliminating all single-use plastic from our
premises by the end of March 2021. This is a significant challenge
but one in which we can provide valuable leadership to industry and
more broadly. I am delighted at how our colleagues have wholly
embraced this challenge as part of our joint commitment to deliver
on the Group's sustainability responsibilities.
The Group's overall performance in 2019 was good considering the
difficult trading conditions in Hong Kong. Excluding the Group's
hotels in Hong Kong from the second half onwards, when they were
impacted by social unrest, overall Revenue Per Available Room (1)
('RevPAR') for the Group was broadly flat in US dollar terms on a
like-for-like basis and many of the Group's hotels maintained or
improved their competitive positions. Including the Hong Kong
hotels, overall RevPAR decreased by 4% compared to 2018.
Financial performance was significantly affected by three
factors: (i) the closure of The Excelsior hotel at the end of March
2019; (ii) the social unrest in Hong Kong; and (iii) the partial
closure of the Bangkok hotel for renovation. On the positive side,
the Group's financial results benefited from the receipt of
business interruption insurance proceeds relating to the fire at
the London hotel in 2018, as the Group's claim was settled in
2019.
On an overall basis, underlying EBITDA (2) fell by 18% compared
to the prior year, as better results at several of the Group's
properties could not offset the impact of the three factors I
referred to earlier. Excluding the results of The Excelsior in both
2018 and 2019, underlying EBITDA fell 5%.
(1) The like-for-like comparison includes all hotels that were
operational for the entire year for both 2018 and 2019. Mandarin
Oriental, Bangkok is included up until the closure of the River
Wing, comprising 338 of the hotel's 368 keys, for a major
renovation at the beginning of March 2019.
(2) The Group uses earnings before interest, tax, depreciation
and amortisation ('EBITDA') to analyse operating performance.
2019 PERFORMANCE
RevPAR Performance
The Group's overall RevPAR decreased 4% compared to the prior
year, primarily due to the impact of the social unrest on the
Group's two hotels in Hong Kong which were both also coming off a
strong base having performed well in 2018.
In Asia, excluding the two Hong Kong hotels from the third
quarter onwards, RevPAR was slightly lower. Including the two Hong
Kong hotels for the whole of 2019, RevPAR for the region decreased
by 8%. For the full year, Mandarin Oriental, Hong Kong just slipped
below its 2018 average daily rate, while occupancy fell 20
percentage points compared to the prior year. Overall, this was a
good performance in the context of what the broader market
experienced. The Landmark Mandarin Oriental, which is managed under
a long-term contract, experienced a steeper 33% decline in RevPAR
for the full year, because of the hotel's higher leisure segment
mix. Tokyo delivered an extremely strong performance, buoyed by the
Rugby World Cup, with higher average daily rates driving RevPAR up
by 15%. Our hotels in Singapore and Kuala Lumpur also performed
well against the backdrop of strong performances in 2018. Despite
Jakarta's promising results in 2018, weak demand from corporate
accounts and continued oversupply in that market led to an 11%
decrease in RevPAR.
In EMEA (3) , most hotels improved their RevPAR performance
although the strength of the US dollar weighed on results. On a
constant currency basis, RevPAR for the region was up 6%, while it
was broadly flat in US dollar terms (4) . On a local currency
basis, there were notably improved RevPAR performances in Munich,
Milan, Marrakech and Bodrum while Paris held on well despite the
impact of the ongoing protests there. We were delighted that the
Group's London flagship hotel fully re-opened in April 2019 and, as
we had hoped, the hotel quickly established a leading position in
the city and performed well. The hotel experienced strong demand
across all segments at city-leading average daily rates.
RevPAR performances in America were mixed and overall the region
was slightly up. Miami benefited from increased demand in the
leisure and group segments and while market conditions helped
Washington D.C. improve, the hotel's competitive position remains
sub-par. The Group's hotels in Boston and New York ended the year
as market leaders, although RevPAR performance at both was slightly
lower.
(3) Europe, Middle East and Africa.
(4) Because Mandarin Oriental Hyde Park, London was partially
closed during periods of both 2018 and 2019, its performance has
been excluded from the regional year-on-year RevPAR comparison.
Financial Performance
The Group's financial performance is primarily driven by its
owned and partially owned properties. Underlying EBITDA was lower
at US$155 million, compared to US$188 million in the prior year.
Underlying profit was US$41 million, compared to US$65 million in
2018.
Most of the Group's properties maintained or improved their
earnings in 2019 and the lower result was due to a few specific
events. The closure of The Excelsior, which contributed underlying
EBITDA of US$9 million in 2019 compared to US$35 million in 2018,
had a material impact. Lower earnings in Bangkok were also expected
due to the major renovation there. Taken together with the impact
of the ongoing social unrest in Hong Kong on Mandarin Oriental,
Hong Kong - the Group's most important hotel from an earnings
perspective, these three factors led earnings lower and could not
be compensated for by better results at many of the Group's other,
albeit smaller, properties. Tokyo produced a notably improved
contribution due to a strong top-line performance and cost
controls.
Earnings benefited from settlement of the insurance claim in
London relating to the fire on 6th June 2018. In addition to
business interruption proceeds received for 2019, the hotel's
results also included additional compensation for the loss of
profits in 2018.
Separately, earnings from the Group's management business were
lower compared to the prior year, which had benefited from the
one-off termination fees received as the Group ceased to manage the
hotels in Las Vegas and Atlanta in 2018.
STRATEGY
The Group's vision remains unchanged - to be recognised as the
world's best luxury hotel group.
We want our guests to recognise us as nothing short of the
world's best in our field. With our 13,000 colleagues globally, we
want to evolve and innovate our luxury standards to anticipate
guest needs. And finally, we want to expand our footprint to offer
our guests a truly global portfolio of destinations.
Our vision is underpinned by four key strategic priorities that
are at the forefront of our agenda:
- The Mandarin Oriental brand is the Group's most powerful asset
. Its global reach, despite the relatively modest size of our
portfolio, provides us with a strong growth platform as the brand
continues to draw interest from owners, developers and guests
alike. The growth opportunity is illustrated by the pipeline the
Group has today and I expect the pipeline to grow further in the
next two to three years.
- Our people underpin the unique luxury experience that defines
Mandarin Oriental . Meaningful and memorable luxury experiences
that keep guests coming back are curated by our colleagues, who
must be motivated to co-create and evolve our luxury standards. We
empower colleagues by constantly reinforcing our cultural
values.
- Personalisation is the key for competitive differentiation .
Guests now demand completely tailored experiences, which are only
possible if we truly understand our guests and their needs. Fans of
M.O. will greatly enhance our ability to personalise.
- Implementing the right digital technologies is a major
opportunity . Developments in technology continue to accelerate and
the Group must adopt the relevant technologies that will support
our portfolio growth and enable better delivery of luxury
experiences. Several of the Group's core systems will be replaced
in the coming years and we are investing in a range of new digital
platforms that will help our colleagues to enhance guest
experiences.
Expanding the Mandarin Oriental portfolio, and maintaining our
luxury standards, remains a key focus over the coming years. The
Group holds equity interests in around half of its 33 hotels, while
the remainder are managed on behalf of third-party owners. Our
planned future expansion is largely expected to come from new
management agreements, although the Group's strong balance sheet
remains well-placed to fund selective investment opportunities in
strategic destinations that have long-term asset value growth
potential. Our target is to consistently grow the overall Mandarin
Oriental portfolio by an average of three new properties each
year.
The Group's current pipeline of 20 properties, in addition to
our demonstrated desire and willingness to rebrand existing hotels,
gives me confidence that we are on a sustainable growth trajectory.
In addition to new management fees, earnings growth will also come
from the branding and management of residential developments. As 12
of the Group's pipeline projects incorporate a residential
component, the Group expects to receive significant branding fees.
Residences are attractive to guests and developers and are
complementary to hotels, so will continue to play an important role
in the Group's growth.
Nonetheless, owned assets remain at the heart of our portfolio
and will continue to generate the majority of the Group's earnings
for the foreseeable future, so it is crucial that we continue to
re-invest and drive profitability in these properties. Renovations
in Bangkok and Madrid are ongoing, and several more renovations,
some major and some minor in nature, are expected in the coming
years. These continued investments are crucial to sustain our
market leading position.
There are two further areas that cut across all facets of our
strategy: sustainability and innovation.
Corporate responsibility values are deeply engrained in Mandarin
Oriental's heritage. As the Group grows, its responsibilities to
support local communities and drive sustainability in the way that
its hotels operate become even more important. Responsible
procurement and waste management are two specific issues I expect
us to be very active in over the next 12 months, in addition to
progressing towards our goal of eliminating all single-use plastic
by the end of March 2021.
Staying relevant in the pace of today's world necessitates an
environment that fosters a culture of innovation, one that
encourages new and different behaviours and ideas. By its nature
and for good reasons historically, the hotel industry was built on
organisational hierarchies which in today's world can inhibit
agility and innovation. Building a culture of innovation means we
must strive to reduce hierarchies, limit bureaucracy and eliminate
the fear of speaking up or making mistakes. On one level, I know
that our colleagues innovate every day in order to exceed guest
expectations and constantly deliver new moments of surprise and
delight. On the other hand, I also know that we must continue to
actively support and encourage these behaviours to truly enable a
sustained shift in mindset and culture.
BUSINESS DEVELOPMENTS
The Group has 20 announced projects under development which are
expected to open in the next five years, comprising eight
standalone hotel projects, 10 projects with hotel and residence
components and two standalone residence projects.
Over the past four years, we have announced 16 new projects and
taken over management of four hotels. This momentum illustrates the
continued interest in the brand and highlights the growth
opportunity at hand. While I would like this rate of announcements
to continue, it is more realistic to expect a slower pace as we
reach a pipeline of 20-25 projects, which is optimal. An ongoing
pipeline of 20-25 hotels that are expected to open within five
years, recognising that some may be delayed or fall away due to
circumstances out of our control, will stand us in good stead to
open at least three new hotels a year without compromising quality
standards.
All of our announced projects are management agreements with no
equity participation. We remain flexible to investment in
properties of strategic interest, but we also balance this against
the need to deploy capital at our owned assets as I have outlined
above.
Our expansion is focused on building a presence in major global
city-centre and resort locations where the brand is currently
absent, while also reinforcing our position in existing markets by
opening additional properties as we are doing for example in
London.
Seven new management contracts were announced in 2019:
- Standalone residences on Fifth Avenue in New York;
- Hotel and residences in Istanbul, Turkey;
- A hotel in Nanjing, China;
- A hotel re-branding on Lake Lucerne, Switzerland;
- Hotel and residences in Dallas;
- Hotel and residences in Tel Aviv, Israel; and
- Future re-branding of the Emirates Palace, Abu Dhabi, having
taken over management of the hotel at the start of 2020.
I am hopeful of several more project announcements this year.
While the potential for further reflags is possible, I expect 2020
to be a quieter year for new hotel openings as we gear up for a
host of planned openings in 2021 and 2022.
OUR PEOPLE
What differentiates Mandarin Oriental is and always will be our
people, their dedication to guests and to delivering exceptional,
personalised service with moments of delight and surprise. To be
recognised as the world's best luxury hotel group, we rely on the
world's best people which means we must provide an environment and
culture where they are encouraged to express themselves. I am
impressed by the dedication of our colleagues to this vision, the
pride with which they carry the Mandarin Oriental brand, and the
continuing desire to deliver unique and memorable experiences. As
always, I would like to personally thank each and every one of our
13,000 colleagues for their work in keeping Mandarin Oriental as
one of the very best brands in luxury hospitality.
THE YEAR AHEAD
Looking ahead to 2020, I am cautious as there continues to be
economic and political uncertainties in many of the markets in
which we operate. Results for the remainder of the year will depend
on the duration, geographic extent and impact of the coronavirus
and the measures taken to control it. At this stage, it is
difficult to tell how long the situation will persist and whether
the impact experienced in East Asia will extend to other parts of
the world. Results should benefit however, from re-openings in
Bangkok and Madrid, as well as a full year of operations in
London.
This is a year where we need to focus on sustaining our
performance despite these uncertainties, while also progressing
several strategic initiatives relating to digital, our core
information technology infrastructure and Fans of M.O. The
re-opening of Mandarin Oriental Ritz, Madrid will be a significant
milestone for the brand and continuing to build our development
pipeline remains a key priority. We are also on the lookout for new
business opportunities and partnerships and I am hopeful of
announcing some of these innovative projects too. So, while there
are fewer planned new hotel openings in 2020, there is plenty to
look forward to as well as the possibility of some reflagging
projects.
Over the last few years we have made significant capital
investments in our owned assets, together with a successful effort
to rebuild a credible development pipeline that will grow the
portfolio. This I believe has set the Group up with a strong
platform for growth. The future looks very exciting for Mandarin
Oriental.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2019
2019 2018
Underlying Non-trading Underlying Non-trading
business items business items
performance (note 7) Total performance (note 7) Total
US$m US$m US$m US$m US$m US$m
restated restated restated
Revenue (note 2) 566.5 - 566.5 613.7 - 613.7
Cost of sales (364.7) - (364.7) (388.2) - (388.2)
------- --------
Gross profit 201.8 - 201.8 225.5 - 225.5
Selling and
distribution
costs (38.8) - (38.8) (42.3) - (42.3)
Administration
expenses (117.2) - (117.2) (122.1) - (122.1)
Other operating
(expense)/income 25.2 (32.7) (7.5) 30.6 (21.0) 9.6
Change in fair
value
of investment
property
under development - (67.3) (67.3) - - -
------- ----------- ------- ----------- ----------- --------
Operating
(loss)/profit
(note 3) 71.0 (100.0) (29.0) 91.7 (21.0) 70.7
Financing charges (18.1) - (18.1) (16.4) - (16.4)
Interest income 3.4 - 3.4 2.2 - 2.2
Net financing
charges (14.7) - (14.7) (14.2) - (14.2)
Share of results
of
associates and
joint
ventures (note 4) (1.7) - (1.7) 5.7 - 5.7
(Loss)/profit
before
tax 54.6 (100.0) (45.4) 83.2 (21.0) 62.2
Tax (note 5) (13.5) 3.3 (10.2) (18.5) (0.5) (19.0)
------- ----------- ------- ----------- ----------- --------
(Loss)/profit
after
tax 41.1 (96.7) (55.6) 64.7 (21.5) 43.2
------- ----------- ------- ----------- ----------- --------
Attributable to:
Shareholders of
the
Company 41.2 (96.7) (55.5) 64.9 (21.5) 43.4
Non-controlling
interests (0.1) - (0.1) (0.2) - (0.2)
------- ----------- ------- ----------- ----------- --------
41.1 (96.7) (55.6) 64.7 (21.5) 43.2
------- ----------- ------- ----------- ----------- --------
USc USc USc USc
(Loss)/earnings per share
(note
6)
- basic 3.26 (4.39) 5.15 3.44
- diluted 3.26 (4.39) 5.14 3.43
------- ------- ----------- --------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2019
2019 US$m 2018
US$m
restated
(Loss)/profit for the year (55.6) 43.2
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
--------- --------
Remeasurements of defined benefit plans 3.4 (3.0)
Revaluation surplus of right-of-use assets
before transfer to investment property under
development (note 9) 2,943.4 -
Tax on items that will not be reclassified (0.6) 0.5
2,946.2 (2.5)
Items that may be reclassified subsequently
to profit or loss:
--------- --------
Net exchange translation differences
* net gains/(losses) arising during the year 25.0 (39.7)
Cash flow hedges
- net (losses)/gains arising during the
year (0.4) 0.6
Tax relating to items that may be reclassified 0.1 (0.1)
Share of other comprehensive income/(expense)
of associates
and joint ventures 3.1 (1.8)
27.8 (41.0)
Other comprehensive income/(expense) for
the year, net of tax 2,974.0 (43.5)
--------- --------
Total comprehensive income/(expense) for
the year 2,918.4 (0.3)
--------- --------
Attributable to:
Shareholders of the Company 2,918.4 -
Non-controlling interests - (0.3)
--------- --------
2,918.4 (0.3)
--------- --------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2019
At 31st December At 1st January
2019 2018 2018
US$m US$m US$m
restated restated
Net assets
Intangible assets 53.0 49.3 43.8
Tangible assets (note 8) 1,174.6 1,205.9 1,272.0
Right-of-use assets 300.3 342.9 284.2
Investment property under development
(note 9) 2,967.7 - -
Associates and joint ventures 203.1 196.1 195.7
Other investments 15.9 15.2 11.0
Deferred tax assets 10.6 11.5 11.0
Pension assets 1.3 0.2 4.9
Non-current debtors 6.2 5.1 0.5
-------- -------- --------------
Non-current assets 4,732.7 1,826.2 1,823.1
Stocks 6.2 6.6 6.4
Current debtors 97.2 95.9 100.2
Current tax assets 1.9 3.5 4.0
Bank and cash balances 270.7 246.8 183.9
-------- -------- --------------
Current assets 376.0 352.8 294.5
-------- -------- --------------
Current creditors (166.0) (168.3) (149.1)
Current borrowings (note 10) (2.5) (524.2) (2.6)
Current lease liabilities (7.0) (5.7) (6.5)
Current tax liabilities (19.1) (14.0) (17.8)
-------- -------- --------------
Current liabilities (194.6) (712.2) (176.0)
-------- -------- --------------
Net current assets/(liabilities) 181.4 (359.4) 118.5
Long-term borrowings (note 10) (568.6) (7.3) (508.1)
Non-current lease liabilities (168.4) (161.3) (100.6)
Deferred tax liabilities (59.4) (61.6) (58.6)
Pension liabilities (0.2) (0.4) (0.6)
Non-current creditors (0.9) - (0.2)
-------- -------- --------------
4,116.6 1,236.2 1,273.5
-------- -------- --------------
Total equity
Share capital 63.2 63.1 62.9
Share premium 499.7 497.8 493.9
Revenue and other reserves 3,550.1 671.5 710.6
-------- -------- --------------
Shareholders' funds 4,113.0 1,232.4 1,267.4
Non-controlling interests 3.6 3.8 6.1
-------- -------- --------------
4,116.6 1,236.2 1,273.5
-------- -------- --------------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2019
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
2019
At 1st January
- 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 - - - (52.6) 2,943.4 (0.6) 28.2 2,918.4 - 2,918.4
Dividends paid
by the Company - - - (37.9) - - - (37.9) - (37.9)
Issue of shares 0.1 0.1 - - - - - 0.2 - 0.2
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 (1.9) 0.1 - - - - - -
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
At 31st December
2019 63.2 499.7 260.3 434.8 2,943.4 - (88.4) 4,113.0 3.6 4,116.6
-----------
2018
At 1st January
- 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
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2019
2019 2018
US$m US$m
restated
Operating activities
------- --------
Operating (loss)/profit (note 3) (29.0) 70.7
Depreciation and amortisation 91.9 93.2
Other non-cash items 69.0 (4.0)
Movements in working capital (3.1) 17.5
Interest received 3.4 1.9
Interest and other financing charges paid (19.2) (15.7)
Tax paid (6.0) (18.8)
------- --------
107.0 144.8
Dividends and interest from associates and
joint ventures 5.9 7.8
Cash flows from operating activities 112.9 152.6
Investing activities
------- --------
Purchase of tangible assets (41.7) (61.2)
Additions to investment property under development (15.1) -
Purchase of intangible assets (8.3) (7.4)
Payment on Munich expansion (1.1) -
Purchase of other investments (1.1) (1.1)
Advance to associates and joint ventures (16.7) (9.1)
Repayment of loans to associates and joint
ventures 3.6 1.2
Repayment of intangible assets - 0.8
Insurance recovery received for purchase
of
tangible assets (note 12) - 7.8
Cash flows from investing activities (80.4) (69.0)
Financing activities
------- --------
Issue of shares 0.1 0.1
Drawdown of borrowings 555.8 27.6
Repayment of borrowings (522.3) (0.2)
Principal elements of lease payments (6.4) (6.5)
Dividends paid by the Company (note 13) (37.9) (37.8)
Cash flows from financing activities (10.7) (16.8)
------- --------
Net increase in cash and cash equivalents 21.8 66.8
Cash and cash equivalents at 1st January 246.8 183.9
Effect of exchange rate changes 2.1 (3.9)
------- --------
Cash and cash equivalents at 31st December 270.7 246.8
------- --------
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has
been based on the audited results for the year ended 31st December
2019 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.
The Group has applied IFRS 16 'Leases' for the first time for
the Group's annual reporting period commencing 1st January 2019 and
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 principal
accounting policies are set out below.
There are no other amendments or interpretations relating to
existing accounting standards, which are effective in 2019 and
relevant to the Group's operations, that have a significant effect
on the Group's accounting policies.
The Group has elected to early adopt the 'Interest Rate
Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7'
(effective 1st January 2020) in relation to hedge accounting for
the Group's annual reporting period commencing 1st January 2019. In
accordance with the transition provisions, the amendments have been
adopted retrospectively with respect to hedging relationships that
existed at the start of the reporting period or were designated
thereafter. The amendments provide temporary relief from applying
specific hedge accounting requirements to hedging relationships
which are directly affected by the uncertainty arising from the
reforms and replacement of the existing benchmark interest rates
such as LIBOR and other inter-bank offered rates ('IBOR reform').
The forthcoming IBOR reform may take effect at different times and
may have a different impact on hedged items (the floating rate
borrowings) and the hedging instruments (the interest rate swaps
used to hedge the borrowings). The reliefs have the effect that the
IBOR reform should not generally cause hedge accounting to
terminate. The reliefs under the amendments will end when the
uncertainty arising from the IBOR reform are no longer present; or
the hedging relationship is discontinued. Early adoption of these
amendments has no impact to the Group's consolidated financial
statements in 2019.
Apart from the above, the Group has not early adopted any
standard, interpretation 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. Upon the adoption of IFRS 16, 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.
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 year
ended 31st December 2018:
Increase/(decrease)
in profit
US$m
Costs of sales 0.9
Selling and distribution costs 0.1
Administration expenses 0.1
Net financing charges (1.3)
Share of results of associates and joint ventures (0.1)
Tax 0.1
------
Underlying profit attributable to shareholders (0.2)
Non-trading items -
------
Profit attributable to shareholders of the Company (0.2)
------
Basic underlying earnings per share (USc) (0.01)
------
Diluted underlying earnings per share (USc) (0.01)
------
Basic earnings per share (USc) (0.02)
------
Diluted earnings per share (USc) (0.02)
------
(b) On the consolidated statement of comprehensive income for
the year ended 31st December 2018:
Increase/(decrease)
in profit
US$m
Profit and total comprehensive income for the year (0.2)
-----
(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 161.3 100.6
Current creditors (2.5) (2.3)
Current lease liabilities 5.7 6.5
Total equity and liabilities 157.7 98.2
------- -------
(d) On the consolidated cash flow statement for the year ended
31st December 2018:
Inflows/(outflows)
US$m
Operating activities
Operating profit 1.1
Depreciation and amortisation 6.7
Interest and other financing charges paid (1.3)
Financing activities
Principal elements of lease payments (6.5)
-----
Net change in cash and cash equivalents -
-----
(e) Changes in principal accounting policies on adoption of IFRS
16
Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Lease contracts may contain lease and non-lease components. The
Group allocates the consideration in the contract to lease and
non-lease component based on their relative stand-alone prices. For
property leases where the Group is a lessee, it has elected not to
separate lease and immaterial non-lease components and accounts for
these items as a single lease component.
(i) As a lessee
The Group enters into property leases for use as hotels or
offices.
The Group recognises right-of-use assets and lease liabilities
at the lease commencement dates, that is the dates 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 amounts of the initial measurement
of lease liabilities recognised, lease payments made at or before
the commencement dates 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.
The Group also has interests in leasehold land for use in its
operations. Lump sum payments were made upfront to acquire these
land interests from their previous registered owners or governments
in the jurisdictions where the land is located. There are no
ongoing payments to be made under the term of the land leases,
other than insignificant lease renewal costs or payments based on
rateable value set by the relevant government authorities. These
payments are stated at cost and are amortised over the term of the
lease which includes the renewal period if the lease can be renewed
by the Group without significant cost.
Lease liabilities are measured at the present value of lease
payments to be made over the lease terms. 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. Lease liabilities are measured at amortised cost
using the effective interest method. 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 when
there is a change in the lease term, or there is a change in future
lease payments arising from a change in an index or rate, or there
is a change in the Group's estimate of the amount expected to be
payable under a residual guarantee, or there is a change arising
from the reassessment of whether the Group will be reasonably
certain to exercise an extension or a termination option. When the
lease liability is remeasured, a corresponding adjustment is made
to the carrying amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of right-of-use asset has
been reduced to zero.
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low value assets (i.e. US$5,000 or
less) and short-term leases. Low value assets comprised office
equipment. Short-term leases are leases with a lease term of 12
months or less. Lease payments associated with these leases are
recognised on a straight-line basis as an expense in profit and
loss over the lease term.
Lease liabilities are classified as non-current liabilities
unless payments are within 12 months from the balance sheet
date.
(ii) As a lessor
The Group enters into contracts with lease components as a
lessor primarily on its properties. These leases are operating
leases as they do not transfer the risk and rewards incidental to
the underlying properties. The Group recognises the lease payments
received under these operating leases on a straight-line basis over
the lease term as part of revenue in the profit and loss.
(f) Critical accounting estimates and judgements
Leases
Liabilities and the corresponding right-of-use assets arising
from leases are initially measured at the present value of the
lease payments at the commencement date, discounted using the
interest rates implicit in the leases, or if that rate cannot be
readily determinable, the Group uses the incremental borrowing
rate. The Group generally uses the incremental borrowing rate as
the discount rate.
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.
Lease payments to be made during the lease term will be included
in the measurement of a lease liability. 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.
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 lives. 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 segment of the investment property being valued.
The market value of investment property under development is
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 property
which recently transacted and adjusted to reflect the conditions of
the subject property 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.
2. REVENUE
2019 2018
US$m US$m
By geographical area:
Asia 272.2 357.0
Europe, Middle East and Africa ('EMEA') 189.5 143.7
America 104.8 113.0
566.5 613.7
----- -----
From contracts with customers:
Recognised at a point in time 207.3 222.5
Recognised over time 339.4 370.1
----- -----
546.7 592.6
From other sources:
Rental income 19.8 21.1
----- -----
566.5 613.7
----- -----
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING (LOSS)/PROFIT FROM SUBSIDIARIES
2019 2018
US$m US$m
By geographical area:
Asia 75.1 113.8
EMEA 55.6 34.1
America 6.8 13.4
------ ------
Underlying EBITDA from subsidiaries 137.5 161.3
Non-trading items (note 7)
------ ------
Fire at Mandarin Oriental Hyde Park, London
* repair expenses and write-off of tangible assets
and other incidental expenses (8.3) (28.6)
* insurance recovery for replacement of tangible assets
and other incidental expenses 9.0 29.6
Closure of The Excelsior, Hong Kong - other costs (6.5) (2.8)
Change in fair value of investment property under
development (67.3) -
Change in fair value of other investments (1.5) 4.4
(74.6) 2.6
------ ------
EBITDA from subsidiaries 62.9 163.9
Underlying depreciation and amortisation from
subsidiaries (66.5) (69.6)
Non-trading items (note 7)
Closure of The Excelsior, Hong Kong
- accelerated depreciation and amortisation (25.4) (23.6)
------ ------
Operating (loss)/profit (29.0) 70.7
------ ------
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and profit/ financing profit/
EBITDA amortisation (loss) charges Tax (loss)
US$m US$m US$m US$m US$m US$m
2019
By geographical
area:
Asia 16.7 (11.1) 5.6 (1.8) (0.3) 3.5
EMEA (4.0) (0.4) (4.4) - - (4.4)
America 4.3 (2.7) 1.6 (2.4) - (0.8)
------ ------------ --------- --------- ----- -------
17.0 (14.2) 2.8 (4.2) (0.3) (1.7)
------ ------------ --------- --------- ----- -------
2018
By geographical
area:
Asia 26.7 (9.3) 17.4 (1.6) (3.0) 12.8
EMEA (4.2) (1.9) (6.1) - - (6.1)
America 4.1 (2.9) 1.2 (2.2) - (1.0)
------ ------------ --------- --------- ----- -------
26.6 (14.1) 12.5 (3.8) (3.0) 5.7
------ ------------ --------- --------- ----- -------
5. TAX
2019 2018
US$m US$m
Tax (charged)/credited to profit and loss is
analysed as follows:
Current tax (12.7) (15.4)
Deferred tax 2.5 (3.6)
------ ------
(10.2) (19.0)
------ ------
By geographical area:
Asia (4.0) (14.9)
EMEA (5.0) (2.3)
America (1.2) (1.8)
------ ------
(10.2) (19.0)
------ ------
Tax relating to components of other comprehensive income is
analysed as follows:
Remeasurements of defined benefit plans (0.6) 0.5
Cash flow hedges 0.1 (0.1)
----- -----
(0.5) 0.4
----- -----
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$0.3 million
(2018: US$3.0 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$55.5 million (2018: profit of
US$43.4 million) and on the weighted average number of 1,262.9
million (2018: 1,260.6 million) shares in issue during the
year.
Diluted loss/earnings per share are calculated on loss
attributable to shareholders of US$55.5 million (2018: profit of
US$43.4 million) and on the weighted average number of 1,263.2
million (2018: 1,263.3 million) shares in issue after adjusting for
the number of shares which are deemed to be issued for no
consideration under the share-based long-term incentive plans based
on the average share price during the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2019 2018
Weighted average number of shares for basic
earnings
per share calculation 1,262.9 1,260.6
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans 0.3 2.7
------- -------
Weighted average number of shares for diluted
earnings
per share calculation 1,263.2 1,263.3
------- -------
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2019 2018
Basic Diluted
(loss)/ (loss)/ Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
(Loss)/profit
attributable
to shareholders (55.5) (4.39) (4.39) 43.4 3.44 3.43
Non-trading items
(note 7) 96.7 21.5
Underlying profit
attributable
to shareholders 41.2 3.26 3.26 64.9 5.15 5.14
------ ----
7 . NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investment property under development and
investments which are measured at fair value through profit and
loss; gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable
intangible assets and other investments; provisions for the closure
of businesses; acquisition-related costs in business combinations;
and other credits and charges of a non-recurring nature that
require inclusion in order to provide additional insight into
underlying business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2019 2018
US$m US$m
Fire at Mandarin Oriental Hyde Park, London*
* repair expenses and write-off of tangible assets
and other incidental expenses (8.3) (28.6)
* insurance recovery for replacement of tangible assets
and other incidental expenses 9.0 29.6
Closure of The Excelsior, Hong Kong
* accelerated depreciation and amortisation (22.8) (24.3)
* other costs (5.8) (2.6)
Change in fair value of investment property
under development (note 9) (67.3) -
Change in fair value of other investments (1.5) 4.4
------ ------
(96.7) (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 were recognised as
non-trading expenses. The Group received cash payments from the
insurers in 2018 and 2019 (note 12). The insurance compensation for
the replacement of tangible assets and other incidental expenses
was recognised as non-trading income. The insurance compensation
for the reimbursement of operating expenditure and loss of profit
of US$31.1 million and US$27.7 million was recorded as underlying
business performance in 2018 and 2019 respectively.
Following an announcement on 9th October 2018, The Excelsior,
Hong Kong closed on 31st March 2019 and demolition work has
commenced ahead of the planned construction of a commercial
building on the site (note 9). An accelerated depreciation and
amortisation charge as a result of the revision of the estimated
useful lives of the non-leasehold land assets of the hotel,
together with additional costs in respect of the hotel closure,
were recognised as non-trading expenses in 2018 and 2019.
8 . TANGIBLE ASSETS
2019 2018
US$m US$m
Opening net book value 1,205.9 1,272.0
Exchange differences 6.4 (38.5)
Additions 42.3 62.1
Disposals and write-off (0.1) (7.0)
Transfer to intangible assets - (1.4)
Depreciation charge (79.9) (81.3)
------- -------
Closing net book value 1,174.6 1,205.9
------- -------
Freehold properties include a property of US$102.1 million
(2018: US$105.0 million), which is stated net of tax increment
financing of US$19.7 million (2018: US$20.5 million) (note 11).
9. INVESTMENT PROPERTY 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$2.9 billion was recognised
to the asset revaluation reserves through other comprehensive
income. Subsequent fair value change of the investment property
under development has been recognised as a non-trading item in the
profit and loss.
2019
US$m
Transfer from right-of-use assets at 31st March 2019 2,993.6
Exchange differences 25.5
Additions 15.9
Decrease in fair value (67.3)
-------
Closing fair value 2,967.7
-------
10. BORROWINGS
2019 2018
US$m US$m
Bank loans 567.2 527.4
Other borrowings 3.9 4.1
571.1 531.5
----- -----
Current 2.5 524.2
Long-term 568.6 7.3
----- -----
571.1 531.5
----- -----
The Group entered into new committed facilities of US$760
million in 2019, comprising a US$118 million facility in London and
a US$642 million facility in Hong Kong. Both facilities have a
tenor of five-year period and are secured against Mandarin Oriental
Hyde Park, London and Mandarin Oriental, Hong Kong respectively.
The new facilities were used to refinance bank loans which were
matured and fully repaid in 2019.
11 . TAX INCREMENT FINANCING
2019 2018
US$m US$m
Netted off against the net book value of
property (note 8) 19.7 20.5
----- -----
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.
12. INSURANCE RECOVERY RECEIVED FOR PURCHASE OF TANGIBLE
ASSETS
The Group received insurance payments of US$66.3 million and
US$31.1 million in 2018 and 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$97.4 million, US$7.8 million was to cover the remedial capital
expenditure of the tangible assets which was recorded under
investing activities in 2018. The remaining balance was recorded
under operating activities.
13. DIVIDS
2019 2018
US$m US$m
Final dividend in respect of 2018 of USc1.50
(2017: USc1.50) per share 18.9 18.9
Interim dividend in respect of 2019 of USc1.50
(2018: USc1.50) per share 19.0 18.9
----- -----
37.9 37.8
----- -----
A final dividend in respect of 2019 of USc1.50 (2018: USc1.50)
per share amounting to a total of US$18.9 million (2018: US$18.9
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2020 Annual
General Meeting. The amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2020.
14. CAPITAL COMMITMENTS
At 31st December 2019, total capital commitments of the Group
amounted to US$765.6 million (2018: US$816.5 million) which
primarily included the commitment for the redevelopment of The
Excelsior, Hong Kong as a commercial building following the hotel
closure on 31st March 2019. The redevelopment is expected to take
up to six years to complete.
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$14.5 million (2018: US$14.8 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 year.
Amount 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 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 2019 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, Group Chief
Executive's Review and other parts of the Report.
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 Review and in a note to the
Financial Statements in the Report.
2. Commercial and Market Risk
Risks are an integral part of normal commercial activities, 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 or
redevelopments in its owned properties, exposing it to construction
risks. 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 affect travel patterns, demand for the
Group's products and services and possibly 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 and cybersecurity breaches,
loss or misuse of personal data, 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 nature of the Group's global operations mean that it is
subject to numerous laws and regulations, including but not limited
to those covering employment, competition, taxation, data privacy,
foreign ownership, town planning, anti-bribery, money laundering
and exchange controls. Changes to laws and regulations have the
potential to impact the operations and profitability of the Group's
business. Non-compliance with laws and regulations could result in
fines and/or penalties. Changes in the political environment,
including prolonged civil unrest in the territories where the Group
operates, could adversely 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 2019 Annual Report, including
the Chairman's Statement, Group Chief Executive's Review and the
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
Craig Beattie
Directors
The final dividend of USc1.50 per share will be payable on
13th May 2020, subject to approval at the Annual General Meeting
to be held on 6th May 2020, to shareholders on the register
of members at the close of business on 20th March 2020. The
shares will be quoted ex-dividend on 19th March 2020, and
the share registers will be closed from 23rd to 27th March
2020, 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 final dividend by notifying
the United Kingdom transfer agent in writing by 24th April
2020. The Sterling equivalent of dividends declared in United
States Dollars will be calculated by reference to a rate prevailing
on 29th April 2020.
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 20th March 2020, 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 19th March 2020.
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 33 hotels and seven 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$5.9 billion as at 31st December
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
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2019 can be accessed through the internet at
'www.mandarinoriental.com'.
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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