| To: Business Editor | 13th September 1999 For immediate release |
The following announcement was today issued to the London Stock Exchange.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
INTERIM REPORT 1999 HIGHLIGHTS
Results
"The Group continues to respond vigorously to the twin challenge of the current difficult market conditions in Asia and the long-term development of our global brand."
Simon Keswick, Chairman
13th September 1999
The interim dividend of US¢0.50 per share will be payable on 23rd November 1999 to Shareholders on the register of members at the close of business on 1st October 1999. The ex-dividend date will be on 27th September 1999, and the share registers will be closed from 4th to 8th October 1999, inclusive.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
INTERIM REPORT 1999
PERFORMANCE
Mandarin Oriental International Limited today announced that the Group continued to be adversely affected by highly competitive pricing for hotel rooms in almost all Asian destinations in the first half of 1999. As a result, trading profit declined by 16% to US$20 million compared with US$23 million in the first six months of 1998. However, a reduced tax charge limited the decline in net profit for the period to only 3% at US$9 million.
Earnings per share for the half year were US¢1.32, a decrease of 4% from US¢1.37 in 1998.
The Board has declared an interim dividend of US¢0.50 per share which is unchanged from 1998. The dividend will be payable in cash.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that in Hong Kong, both Mandarin Oriental and The Excelsior maintained their relative market positions. However, while room occupancies reflected some growth in visitor arrivals, the competitiveness of the marketplace significantly reduced average room rates in comparison with the first six months of 1998. Mandarin Oriental, Manila also saw a significant decline in room rates in its market despite improved occupancy. In Jakarta, both occupancy and room rates declined in a weak market. The renovation programme at Mandarin Oriental Hyde Park, London continued with the refurbishment of the guest rooms. The work is having a negative impact on the hotel's current performance, particularly given the temporary reduction in available rooms.
Of the associate hotels, The Oriental, Bangkok has achieved an increase in room rates, but the summer months have seen a reduction in business levels for the whole market. Mandarin Oriental, Macau and The Oriental, Singapore improved their operating performance despite reductions in average room rates in lacklustre markets. Kahala Mandarin Oriental, Hawaii has continued its steady improvement through focussed marketing and growing customer awareness.
The newest hotel, Mandarin Oriental, Kuala Lumpur has already attained the leading position in the city in terms of revenue per available room. However, room rates in Kuala Lumpur continue to be affected by an oversupplied market.
Overall, each hotel's operating costs have been reduced, which partially offset the erosion of profit margins resulting from the continued weakness in revenue.
DEVELOPMENTS
The Group's growth strategy is based on continuing to develop the Mandarin Oriental brand by adding luxury facilities to the existing hotels to enhance further the guests' experience and by increasing the number of hotels which the Group operates. Several opportunities in key international cities in the United States and Asia are being pursued.
Among the existing hotels, the restoration of Mandarin Oriental Hyde Park continues to be the most significant project. The current programme will be extended to include the creation of a luxurious health and beauty spa, unique to London, a re-design of the hotel's renowned Park restaurant, additional meeting rooms and an overhaul of the hotel's back-of-house infrastructure. To avoid significant disruption to the comfort of hotel guests, the hotel will close for approximately five months from November 1999 in order to complete the programme. This temporary closure has been timed to coincide with the hotel's quietest business period. All staff will be retained during closure in preparation for the relaunch of the hotel.
The revised cost of the total renovation programme is expected to be £43 million, of which £15 million had been spent by the end of last year. Due to the impact of the restoration on operations, the hotel's earnings before interest and depreciation for the current year will be approximately breakeven.
Construction of the 325 room Mandarin Oriental Brickell Key, Miami, in which the Group has a 25% interest, is now well underway. This landmark property located near the city's financial district will open in late 2000.
YEAR 2000
Work is on schedule to ensure that the Group is Y2K ready in all business critical activities by the year end. Both internal and external risks have been assessed by the individual hotels, and business continuity plans are being put in place. The Audit Committee has been monitoring progress and reporting to the Board.
Most of the remediation programmes involve routine capital expenditure on replacement systems and equipment. Other costs relating to resolving this issue are not significant and are expensed as incurred.
While the Group continues to make satisfactory progress and is making every effort to reduce the risks of the Y2K issue, there can be no absolute assurance that the Y2K programmes will be completely successful due to the inherent unpredictability and scope of the Y2K problem.
OUTLOOK
In conclusion, Simon Keswick said, "Market conditions in the Group's key Asian markets are expected to remain difficult during the remainder of the year at least. Average room rates will continue to be vulnerable to price competition. The costs associated with the refurbishment of the London property will also depress group profits.
"The Group continues to respond vigorously to the twin challenge of the current difficult market conditions in Asia and the long-term development of our global brand."
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.
In 1999, the Group implemented IAS 14 (revised) - Segment Reporting, IAS 17 (revised) - Leases, IAS 19 (revised) - Employee Benefits and IAS 35 - Discontinuing Operations. The provisions of IAS 10 (revised) - Events Occurring After the Balance Sheet Date, IAS 16 (revised) - Property, Plant and Equipment, IAS 22 (revised) - Business Combinations, IAS 28 (revised) - Accounting for Investments in Associates, IAS 31 (revised) - Financial Reporting of Interests in Joint Ventures, IAS 36 - Impairment of Assets, IAS 37 - Provisions, Contingent Liabilities and Contingent Assets and IAS 38 - Intangible Assets are applied in advance of their effective dates.
In accordance with IAS 10 (revised), dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date. In previous years dividends proposed or declared after the balance sheet date were recognised as a liability at the balance sheet date. The effect of this change has been to increase the Shareholders' funds at 31st December 1997 and 1998 by US$13.0 million and US$6.0 million respectively.
In accordance with IAS 19 (revised), pension costs are assessed using the projected unit credit method. Under this method, pension obligations are measured as the present value of the estimated future cash flows by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liability. Plan assets are measured at fair value. This is a change in accounting policy as in previous years pension costs were assessed using the attained age normal method and pension obligations were discounted at the expected rate of return on plan assets. The comparative figures for 1998 have been restated to reflect the change in policy. The effect of this change has been to increase the Shareholders' funds by US$11.4 million at 31st December 1997 and 1998. There has been no material effect on the net profit for 1998.
In accordance with IAS 38, pre-opening costs are expensed as they are incurred. This is a change in accounting policy as in previous years pre-opening costs were capitalised and amortised over five years from the date of opening. The comparative figures for 1998 have been restated to reflect the change in policy. The effect of this change has been to decrease the Shareholders' funds at 31st December 1997 and 1998 by US$2.3 million and US$2.4 million respectively. There has been no material effect on the net profit for 1998.
With the exception of IAS 10 (revised), IAS 19 (revised) and IAS 38, there are no changes in accounting policy resulting from the adoption of the above standards in these condensed financial statements. There have been no other changes to the accounting policies described in the 1998 financial statements.
2. REVENUE
3. OPERATING PROFIT
4. SHARE OF PROFITS LESS LOSSES OF ASSOCIATES
5. NON-RECURRING ITEMS
6. TAXATION
Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. Taxation includes United Kingdom tax of US$12,000 (1998: US$10,000).
7. EARNINGS PER SHARE
Basic earnings per share are calculated on the profit after taxation and minority interests of US$9.3 million (1998: US$9.6 million) and on the weighted average number of 705.4 million (1998: 702.8 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 706.8 million (1998: 702.9 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period.
Earnings per share excluding non-recurring items for the year ended 31st December 1998 were calculated on the profit after taxation and minority interests after adjusting for the non-recurring items of US$23.8 million.
8. TANGIBLE ASSETS AND CAPITAL COMMITMENTS
9. BANK AND OTHER ADVANCES
Subsequent to 30th June 1999, there have been put into place new committed facilities totalling approximately US$100 million with terms of three years.
10. DIVIDENDS
An interim dividend in respect of 1999 of US¢0.50 (1998: US¢0.50) per share amounting to US$3.5 million (1998: US$3.5 million) is declared and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 1999.
11. INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 5th October 1999. Copies may be obtained from Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, 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 interim dividend of US¢0.50 per share will be payable on 23rd November 1999 to Shareholders on the register of members at the close of business on 1st October 1999. The ex-dividend date will be on 27th September 1999, and the share registers will be closed from 4th to 8th October 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 4th November 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 / John Witt | (852) 2895 9288 (office) |
| Forrest International Limited Sue Gourlay / Cynthia Ma | (852) 2522 6475 (office) |
Full text of this and other Group announcements can be accessed through the Internet at
"http://www.irasia.com/listco/sg/mandarin".
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