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To: Business Editor 27th July 2000
For immediate release
The following announcement was today issued to the London Stock Exchange.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
INTERIM REPORT 2000 HIGHLIGHTS
Acquisition of The Rafael Group completed
Recovery in Hong Kong continues
London hotel relaunched
Results
(unaudited)
Six months ended 30th June
2000 1999 Change
US$m US$m %
Combined total revenue of hotels under management 187 163 +15
Profit before interest and tax 18 21 –16
Profit after tax and minority interests 3 9 –73
Cash flows from operating activities 10 12 –20
US¢ US¢ %
Earnings per share 0.32 1.28 –75
Interim dividend per share 0.50 0.50 -
“The reopening of the London hotel and the addition of the Rafael hotels will contribute
positively to results, although this will be partially offset by higher finance costs. The
Group’s results in the second half of the year will also benefit from the continued recovery
in Hong Kong.”
Simon Keswick, Chairman
27th July 2000
The interim dividend of US¢0.50 per share will be payable on 18th October 2000 to shareholders on the
register of members at the close of business on 25th August 2000. The ex-dividend date will be on
23rd August 2000, and the share registers will be closed from 28th August to 1st September 2000, inclusive.
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MANDARIN ORIENTAL INTERNATIONAL LIMITED
INTERIM REPORT 2000
Mandarin Oriental International Limited today announced that the first half of the year saw
a significant step forward in the development of the Group with the acquisition of The
Rafael Group, increasing its room portfolio from 5,800 to 7,000, and with the reopening of
the London hotel following an extensive renovation programme.
PERFORMANCE
Mandarin Oriental’s performance in the six months benefited from the continued recovery
in its Hong Kong hotels. However, this was more than offset by operating costs associated
with the closure of the London hotel. As a result, consolidated profit before interest and
tax for the six months ended 30th June 2000 was US$18 million compared with
US$21 million in the first half of 1999. Higher interest and tax charges also contributed to
the lower consolidated profit after tax and minority interests at US$3 million, compared
with US$9 million in 1999.
Earnings per share for the half year were US¢0.32, a decrease of 75% from US¢1.28 in
1999.
The Board has declared an interim dividend of US¢0.50 per share which is unchanged
from 1999. The dividend will be payable in cash.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that improved
performances from the Group’s Hong Kong hotels were led by Mandarin Oriental, Hong
Kong which increased its occupancy to 76% in the first six months of 2000 compared with
62% in 1999. Occupancy at The Excelsior continued to be strong at 86%. Average room
rates at the two hotels improved but remained below levels achieved before the economic
downturn.
In the rest of Asia, the hotels in Manila and Jakarta were affected by continuing economic
uncertainty while the hotels in Singapore and Macau performed satisfactorily. The
Oriental, Bangkok did well despite the commencement of a self-financed US$30 million
rooms renovation programme in mid-May. The renovations will be carried out over a
two-year period during the summer months.
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In London, Mandarin Oriental Hyde Park reopened in late May and has shown
encouraging results to date. The renovation programme, costing approximately
£50 million since acquisition, was more extensive than anticipated due to the degree of
complexity in improving the structure of this heritage building. A state-of-the-art spa
facility will open in the autumn to complete the repositioning of this property as one of
London’s finest hotels.
Results from the Group’s North American hotels continued to improve. In particular,
Kahala Mandarin Oriental, Hawaii increased its occupancy from 56% to 67% while
maintaining its average room rate.
The results of the newly acquired Rafael hotels had no material effect on the half year as
the results were consolidated only from late May when the acquisition was completed.
June results were in line with expectations.
Corporate resources have been strengthened to support the Group’s growth strategy. A US
office has been established to provide management services to the Group’s growing North
American portfolio. The Group’s new brand advertising campaign was launched and the
sales force was increased significantly in major regional centres.
DEVELOPMENTS
The Group acquired The Rafael Group, an operator of six distinctive luxury hotels in
North America and Europe. The consideration for the acquisition was US$143 million
which was financed out of proceeds from a Rights Issue in early 2000 of approximately
US$150 million.
Mandarin Oriental, Miami is on schedule to open in late 2000 and work is progressing on
Mandarin Oriental, New York, scheduled to open in late 2003.
The Group’s strategy remains focussed on positioning Mandarin Oriental as one of the
world’s leading luxury hotel brands with a growing presence in North America and
Europe. The objective is to increase the number of rooms under operation to 10,000 and a
number of opportunities are being pursued.
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OUTLOOK
In conclusion, Simon Keswick said, “The reopening of the London hotel and the addition
of the Rafael hotels will contribute positively to results, although this will be partially
offset by higher finance costs. The Group’s results in the second half of the year will also
benefit from the continued recovery in Hong Kong.”
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Mandarin Oriental International Limited
Consolidated Profit and Loss Account
Year ended
(unaudited) 31st
Six months ended 30th June December
2000 1999 1999
US$m US$m US$m
Revenue (note 2) 93.7 86.9 179.2
Cost of sales (55.9) (52.8) (108.4)
Gross profit 37.8 34.1 70.8
Selling and distribution costs (8.2) (5.4) (10.7)
Administration expenses (16.9) (13.5) (29.4)
Other operating (expenses)/income (0.6) 0.4 -
Operating profit (note 3) 12.1 15.6 30.7
Share of operating results of associates
and joint ventures (note 4) 5.5 5.4 11.8
Profit before interest and tax 17.6 21.0 42.5
Net financing charges (12.1) (9.7) (20.3)
Profit before tax 5.5 11.3 22.2
Tax (note 5) (3.0) (1.8) (4.6)
Profit after tax 2.5 9.5 17.6
Minority interests - (0.2) (0.2)
Profit after tax and minority interests 2.5 9.3 17.4
US¢ US¢ US¢
Earnings per share (note 6)
- basic 0.32 1.28 2.39
- diluted 0.32 1.28 2.38
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Mandarin Oriental International Limited
Consolidated Balance Sheet
(unaudited) At 31st
At 30th June December
2000 1999 1999
US$m US$m US$m
Net operating assets
Goodwill (note 7) 24.1 - -
Tangible assets (note 8) 991.7 740.5 891.3
Associates and joint ventures 196.0 183.4 167.9
Hotel investments 12.6 - -
Other fixed asset investments 8.6 - -
Pension assets 12.7 12.8 12.6
Non-current assets 1,245.7 936.7 1,071.8
Stocks 3.2 2.9 2.8
Debtors and prepayments 32.2 23.0 30.1
Bank balances 117.2 109.5 122.1
Current assets 152.6 135.4 155.0
Creditors and accruals (42.5) (27.7) (39.3)
Borrowings (note 9) (45.7) (123.6) (22.8)
Current tax liabilities (5.4) (4.7) (4.8)
Current liabilities (93.6) (156.0) (66.9)
Net current assets/(liabilities) 59.0 (20.6) 88.1
Long-term borrowings (note 9) (387.3) (199.4) (306.2)
Capital lease obligations (7.6) - -
Deferred tax liabilities (14.6) (18.9) (17.2)
Pension liabilities (0.9) (0.9) (0.9)
894.3 696.9 835.6
Capital employed
Share capital (note 10) 42.6 35.3 35.3
Share premium (note 10) 88.8 23.8 24.0
Revenue and other reserves 755.4 628.3 767.4
Shareholders’ funds 886.8 687.4 826.7
Minority interests 7.5 9.5 8.9
894.3 696.9 835.6
US$ US$ US$
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Net asset value per share 1.04 0.97 1.17
No interim valuations of the Group’s properties have been undertaken. Stated values at
30th June 2000 and 1999 reflect the values at the previous 31st December. However,
properties acquired from The Rafael Group were stated at fair value at acquisition on
19th May 2000.
Mandarin Oriental International Limited
Consolidated Statement of Changes in Shareholders’ Funds
Year ended
(unaudited) 31st
Six months ended 30th June December
2000 1999 1999
US$m US$m US$m
At beginning of period 826.7 686.7 686.7
Property revaluation surplus - - 135.0
Net exchange translation differences (13.0) (2.8) (3.3)
Net gains/(losses) not recognised in consolidated
profit and loss account (13.0) (2.8) 131.7
Profit after tax and minority interests 2.5 9.3 17.4
Dividends (note 11) (6.0) (6.0) (9.5)
Convertible bonds issue-equity component (note 9) 4.5 - -
Equity rights issue 72.1 - -
Exercise of share options - 0.2 0.4
At end of period 886.8 687.4 826.7
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Mandarin Oriental International Limited
Consolidated Cash Flow Statement
Year ended
(unaudited) 31st
Six months ended 30th June December
2000 1999 1999
US$m US$m US$m
Operating activities
Operating profit 12.1 15.6 30.7
Depreciation and other non-cash items 6.6 7.4 14.9
(Increase)/Decrease in working capital (0.3) (0.7) 2.8
Interest received 4.7 3.1 5.5
Interest and other financing charges paid (10.8) (11.4) (21.3)
Tax paid (4.7) (4.6) (7.3)
7.6 9.4 25.3
Dividends from associates and joint ventures 2.1 2.7 5.9
Cash flows from operating activities 9.7 12.1 31.2
Investing activities
Purchase of subsidiary net of cash and
cash equivalents acquired (note 7) (135.4) - -
Investments in and loans to associates and
joint ventures (8.0) (3.7) (9.3)
Repayment of loans to associates - - 21.3
Purchase of tangible assets (note 8) (26.3) (19.1) (42.7)
Sale of tangible assets - - 0.4
Cash flows from investing activities (169.7) (22.8) (30.3)
Financing activities
Issue of shares 72.1 0.2 0.4
Issue of convertible bonds 73.8 - -
Drawdown of borrowings (note 9) 34.7 35.4 141.0
Repayment of borrowings (note 9) (19.5) (34.0) (135.6)
Dividends paid by the Company (6.0) (6.0) (9.5)
Cash flows from financing activities 155.1 (4.4) (3.7)
Effect of exchange rate changes - - 0.1
Net decrease in cash and cash equivalents (4.9) (15.1) (2.7)
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Cash and cash equivalents at beginning of
period 121.8 124.5 124.5
Cash and cash equivalents at end of period 116.9 109.4 121.8
US¢ US¢ US¢
Cash flow per share from operating activities 1.23 1.67 4.29
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The unaudited interim condensed financial statements have been prepared in accordance
with International Accounting Standard (“IAS”) 34 - Interim Financial Reporting. The
accounting policies used in the preparation of the interim condensed financial statements
are consistent with those used in the annual financial statements for the year ended
31st December 1999.
2. REVENUE
Six months ended 30th June
2000 1999
US$m US$m
- Hong Kong & Macau 69.0 60.2
- Southeast Asia 15.5 16.2
- North America 4.7 1.4
- Europe 4.5 9.1
93.7 86.9
3. OPERATING PROFIT
- Hong Kong & Macau 15.8 12.2
- Southeast Asia 2.4 3.6
- North America (0.5) 0.6
- Europe (5.6) (0.8)
12.1 15.6
4. SHARE OF OPERATING RESULTS OF ASSOCIATES AND JOINT VENTURES
- Hong Kong & Macau 0.6 1.1
- Southeast Asia 4.4 4.5
- North America 0.3 (0.2)
- Europe 0.2 -
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5.5 5.4
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5. TAXATION
Six months ended 30th June
2000 1999
US$m US$m
Company and subsidiaries 2.0 0.7
Associates and joint ventures 1.0 1.1
3.0 1.8
Tax on profits has been calculated at rates of taxation prevailing in the territories in
which the Group operates. Taxation includes United Kingdom tax credit of US$865,000
(1999: US$1,300,000).
6. EARNINGS PER SHARE
Basic earnings per share are calculated on the profit after tax and minority interests of
US$2.5 million (1999: US$9.3 million) and on the weighted average number of
789.3 million (1999: 726.6 million) shares in issue during the period. The weighted
average number excludes the Company’s shares held by the Trustee under the
Company’s Senior Executive Share Incentive Schemes.
Diluted earnings per share are calculated on the weighted average number of 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. The convertible bonds are anti-dilutive and therefore are ignored in
calculating diluted earnings per share.
Ordinary shares in millions
2000 1999
Weighted average number of shares in issue 789.3 726.6
Adjustment for shares deemed to be issued for no consideration 1.6 1.4
Weighted average number of shares for diluted earnings per share 790.9 728.0
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7. ACQUISITION
On 19th May 2000, the Group acquired 100% of the share capital of The Rafael Group
Limited which is a hotel investment and management company incorporated in
Bermuda. The consideration of US$147.7 million, including acquisition costs, was
settled in cash. The fair value of the net identifiable assets of the company at the date of
acquisition was US$123.5 million. The resulting goodwill of US$24.2 million will be
amortised on a straight line basis over 20 years. The acquired business contributed
revenue of US$4.5 million and operating profit of US$0.5 million to the Group for the
period from 19th May 2000 to 30th June 2000.
The assets and liabilities arising from the acquisition are as follows:
US$m
Tangible fixed assets (note 8) 102.1
Associate 21.8
Hotel investments 12.6
Other fixed asset investments 8.6
Borrowings (note 9) (26.3)
Other assets less liabilities 4.7
Fair value of net assets 123.5
Goodwill 24.2
Total purchase consideration 147.7
Cash and cash equivalents of subsidiary acquired (12.3)
Net cash consideration 135.4
There are no other significant changes in the composition of the Group during the first
six months of 2000.
8. TANGIBLE ASSETS AND CAPITAL COMMITMENTS
At 31st
At 30th June December
2000 1999 1999
US$m US$m US$m
Opening net book value 891.3 732.6 732.6
Exchange rate adjustments (21.5) (3.9) (3.9)
Purchase of subsidiary (note 7) 102.1 - -
Additions 26.3 19.1 42.7
Disposals - - (0.5)
Depreciation (6.5) (7.3) (14.6)
Revaluation surplus - - 135.0
Closing net book value 991.7 740.5 891.3
Capital commitments 70.3 79.5 83.2
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9. BORROWINGS
At 31st
At 30th June December
2000 1999 1999
US$m US$m US$m
Bank borrowings 363.4 323.0 329.0
Convertible bonds 69.6 - -
433.0 323.0 329.0
Current 45.7 123.6 22.8
Non-current 387.3 199.4 306.2
433.0 323.0 329.0
i) Bank borrowings
The movements in bank borrowings can be analysed as follows:
US$m
Six months ended 30th June 2000
Opening balance 329.0
Exchange rate adjustments (7.1)
Acquisition of subsidiary (note 7) 26.3
Drawdown of borrowings 34.7
Repayment of borrowings (19.5)
Closing balance 363.4
ii) Convertible bonds
6.75% convertible bonds were issued by the Group in March 2000. Proceeds of the
bonds were used to finance the acquisition of The Rafael Group. The bonds are due in
2005 and convertible up to and including 23rd February 2005 into fully paid ordinary
shares of the Company at an initial conversion price of US$0.671 per ordinary share.
US$m
Proceeds of convertible bond issued 75.8
Cost of issue (2.0)
Equity conversion component (4.5)
69.3
Amortisation of cost of issue 0.1
Interest expense 1.6
Interest paid (1.4)
Liability component at 30th June 69.6
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10. SHARE CAPITAL AND SHARE PREMIUM
Ordinary Share Share
shares capital premium
in millions US$m US$m
Six months ended 30th June 2000
Opening balance 728.3 36.4 42.0
Rights issue 145.7 7.3 67.0
Cost of rights issue - - (2.2)
Issued under share incentive scheme 11.4 0.6 5.8
885.4 44.3 112.6
Outstanding under share incentive schemes (33.9) (1.7) (23.8)
Closing balance 851.5 42.6 88.8
On 17th March 2000, the Group issued 145,660,854 ordinary shares at US$0.51 per
ordinary share to finance the acquisition of The Rafael Group.
11. DIVIDENDS
Six months ended 30th June
2000 1999
US$m US$m
Final dividend in respect of 1999 of US¢0.85
6.0 6.0
per share (1998: US¢0.85 per share)
An interim dividend in respect of 2000 of US¢0.50 (1999: US¢0.50) per share amounting
to US$4.3 million (1999: US$3.5 million) is declared and will be accounted for as an
appropriation of revenue reserves in the year ending 31st December 2000.
12. INTERIM REPORT
The Interim Report will be posted to shareholders on or about 25th August 2000. Copies
may be obtained from Jardine Matheson International Services Limited, P.O. Box HM
1068, Hamilton HM EX, Bermuda; Capita IRG plc, Bourne House, 34 Beckenham Road,
Beckenham, Kent BR3 4TU, England and M & C Services Private Limited, 16
Raffles Quay #23-01, Hong Leong Building, Singapore 048581.
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The interim dividend of US¢0.50 per share will be payable on 18th October 2000 to
shareholders on the register of members at the close of business on 25th August 2000. The
ex-dividend date will be on 23rd August 2000, and the share registers will be closed from
28th August to 1st September 2000, inclusive. Shareholders will receive their dividends in
United States Dollars, unless they are registered on the Jersey branch register where they
will have the option to elect for Sterling. These shareholders may make new currency
elections by notifying the United Kingdom transfer agent in writing by 28th September 2000.
The Sterling equivalent of dividends declared in United States Dollars will be calculated by
reference to a rate prevailing ten business days prior to the payment date. Shareholders
holding their shares through The Central Depository (Pte) Limited (“CDP”) in Singapore
will receive United States Dollars unless they elect, through CDP, to receive Singapore
Dollars.
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For further information, please contact:
Mandarin Oriental Hotel Group International Limited
Edouard Ettedgui / John Witt (852) 2895 9288
Chantal Hooper (852) 2895 9160
Forrest International Limited
David Dodwell / Cynthia Ma (852) 2522 6475
This and other Group announcements can be accessed through the Internet at
“www.irasia.com/listco/sg/mandarin”.
NOTE TO EDITORS
Mandarin Oriental Hotel Group is an international hotel investment and management group
operating 19 deluxe and first class hotels worldwide. With two further hotels under
development, one in Miami, Florida and the other in New York, Mandarin Oriental will
operate some 7,000 rooms. The Group has equity interests in most of its properties and net
assets of US$900 million at 30th June 2000. Mandarin Oriental employs 9,000 staff
globally.
The parent company, Mandarin Oriental International Limited, is incorporated in Bermuda,
listed in London, Singapore and Bermuda and has a sponsored American Depositary Receipt
programme. Mandarin Oriental Hotel Group International Limited, which operates from
Hong Kong, manages the activities of the Group’s hotels.
Mandarin Oriental’s aim is to be recognised as one of the top global luxury hotel groups,
providing exceptional customer satisfaction in each of its hotels. This will be effected
through a strategy of investing in facilities and people while maximising profitability and
long-term shareholder value. The Group regularly receives recognition and awards for
outstanding service and quality management. The growth strategy of the Group is to
progress towards operating 10,000 rooms in major business centres and key leisure
destinations around the world.
