| To: Business Editor | 10th March 1999 For immediate release |
The following announcement was today issued to the London Stock Exchange.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
1998 PRELIMINARY ANNOUNCEMENT OF RESULTS
Results
"Little improvement is expected in travel and tourism around Asia this year but our hotels are maintaining their high standards of service and responding vigorously to the regional economic downturn."
Simon Keswick, Chairman
"We have sharpened our vision to ensure Mandarin Oriental is recognised as one of the top global luxury hotel groups. Our objective is to improve our profitability in the near term while maintaining our commitment to excellence and building for the future."
Edouard Ettedgui, Chief Executive Officer
The final dividend of US¢0.85 per share will be payable on 9th June 1999, subject to approval at the Annual General Meeting to be held on 2nd June 1999, to Shareholders on the register of members at the close of business on 1st April 1999. The ex-dividend date will be on 26th March 1999, and the share registers will be closed from 5th to 9th April 1999, inclusive.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 1998
While 1998 was a year of significant falls in travel and tourism in Asia, for our Group it was marked by consolidation and strong cost control, without compromising our commitment to excellence.
PERFORMANCE
Mandarin Oriental International Limited today announced that the consolidated trading profit for the year ended 31st December 1998 was US$46 million, a decrease of 44% from 1997. This reflects the decline in hotel demand in almost all parts of Asia Pacific throughout 1998. A non-recurring provision of US$24 million (1997: US$9 million), mainly relating to a diminution in value below original cost of certain of the Group's properties, resulted in a profit before interest and taxation of US$22 million, 69% lower than for 1997. This, combined with higher interest expenses, has resulted in the Group, for the first time, suffering a net loss after taxation and minority interests. The loss amounted to US$4 million compared with a profit of US$46 million in 1997. Excluding non-recurring items, net profit after taxation for 1998 declined by 64% to US$20 million, and earnings per share declined by 65% to US¢2.77.
An independent valuation of the Group's hotel properties at the end of 1998 indicated a further decrease in hotel values below that of 1997. As a result, Shareholders' funds at the close of 1998 were US$672 million compared with US$930 million in 1997. As a result, debt/equity ratio deteriorated from 18% to 30%. Net asset value per share was US$0.95, a decrease of 28%.
In view of the reported net loss after non-recurring items in 1998, the Group's existing and anticipated capital commitments, and the continuing depressed state of the hotel industry in the Asian Region, the Board has again decided to reduce the dividend. Accordingly, the Directors recommend a final dividend of US¢0.85 per share, payable in cash, which, together with the interim dividend of US¢0.50 per share, will make a total annual dividend of US¢1.35 per share, a decrease of 61% from 1997.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that the market decline, which started in the second half of 1997 when Asia's economic crisis began to bite, has continued throughout 1998. However, most of the Group's hotels improved their market share.
Despite streamlining their operations, the Group's two Hong Kong hotels made a significantly reduced contribution to its results. Mandarin Oriental, Manila maintained its profit margins in 1998, but its contribution was affected by the decline in the Peso exchange rate. A weak currency in Indonesia, coupled with political upheavals, also affected the performance of Mandarin Oriental, Jakarta.
In London, the renovation programme at Mandarin Oriental Hyde Park is well underway and, on completion, is expected to confirm its position as one of London's premier luxury hotels. Inevitably, this programme is having a significant negative impact on the hotel's current performance and revenue.
Whilst the Group's other associate hotels in Southeast Asia were adversely affected both by the market decline and fluctuating exchange rates, The Oriental, Bangkok did well to increase its profit contribution. Kahala Mandarin Oriental, Hawaii also improved its performance, despite a generally declining market.
DEVELOPMENTS
The new Mandarin Oriental, Kuala Lumpur opened in 1998 to a positive reception. Whilst not yet fully operational, this 643-room hotel is already demonstrating its potential to achieve a pre-eminent position in this important Asian market. However, there is a significant over-supply of hotel rooms in Kuala Lumpur, and this is likely to continue for some time.
The 325-room Mandarin Oriental Brickell Key, Miami, Florida, a joint venture with Swire Properties, has commenced construction and is expected to open at the end of 2000.
The Group will continue to pursue appropriate developments in key cities around the world, with a particular focus on the US market.
OUTLOOK
In conclusion, Simon Keswick said, "Little improvement is expected in travel and tourism around Asia this year but our hotels are maintaining their high standards of service and responding vigorously to the regional economic downturn."
1 BASIS OF PREPARATION
The financial information contained in this announcement has been based on the audited results for the year ended 31st December 1998 which have been prepared in conformity with International Accounting Standards.
In accordance with the revised International Accounting Standard 12, deferred taxation is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values. This is a change in accounting policy as in previous years deferred taxation was provided to the extent that a liability or an asset was expected to be payable or receivable in the foreseeable future. The comparative figures for 1997 have been restated to reflect the change in policy. The effect of this change has been to increase the profit after taxation and minority interests for the year ended 31st December 1997 by US$0.7 million, and to decrease the Shareholders' funds at 31st December 1997 by US$29.0 million.
There have been no other changes to the accounting policies described in the 1997 Financial Statements.
2 SEGMENTAL INFORMATION
3 NON-RECURRING ITEMS
4 TAXATION
Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates.
5 EARNINGS PER SHARE
Basic earnings per share are calculated on the loss after taxation and minority interests of US$4.3 million (1997: profit of US$45.7 million) and on the weighted average number of 703.8 million (1997: 702.0 million) shares in issue during the year. The weighted average number excludes shares held by the Trustee of the Senior Executive Share Incentive Schemes.
Diluted earnings per share are calculated on the weighted average number of 704.8 million (1997: 702.0 million) shares after adjusting for the number of 1.0 million (1997: 0.3 million) shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes.
Earnings per share excluding non-recurring items are calculated on the profit after taxation and minority interests and after adjusting for the non-recurring items of US$23.8 million (1997: US$9.2 million).
6 CASH FLOW PER SHARE
Cash flow per share is calculated on the cash flows from operating activities of US$23.3 million (1997: US$78.9 million) and on the weighted average number of shares of 703.8 million (1997: 701.7 million) in issue during the year.
7 ANNUAL REPORT
The Annual Report will be posted to Shareholders on or about 4th May 1999. Copies may be obtained from Butterfield Corporate Services Limited, P.O. Box HM 1540, Hamilton HM FX, Bermuda; 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.
The final dividend of US¢0.85 per share will be payable on 9th June 1999, subject to approval at the Annual General Meeting to be held on 2nd June 1999, to Shareholders on the register of members at the close of business on 1st April 1999. The ex-dividend date will be on 26th March 1999, and the share registers will be closed from 5th to 9th April 1999, 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 21st May 1999. 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.
For further information, please contact:
| Mandarin Oriental Hotel Group International Limited Edouard Ettedgui/Stuart Burnett | (852) 2895 9162 (office) |
| Forrest International Limited Sue Gourlay/Cynthia Ma | (852) 2522 6475 (office) |
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 1998 can be accessed through the Internet at "http://www.irasia.com/listco/sg/mandarin". This announcement is also available through "First Call".
Source: Mandarin Oriental International Limited
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