TIDMMDO TIDMJAR TIDMJDS
RNS Number : 9367R
Mandarin Oriental International Ltd
11 March 2021
Announcement
11th March 2021
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
2020 PRELIMINARY ANNOUNCEMENT OF RESULTS
HIGHLIGHTS
l Underlying loss of US$206 million
l COVID-19 travel restrictions dramatically reduced demand
l Extensive cost reduction measures implemented across the
business
l Robust liquidity and funding position
l Development pipeline remains solid and four new management
contracts signed
l No dividend proposed for 2020
" 2020 was an extremely difficult year with a significant
reduction in global travel. Management actions, together with
financial support by governments in some markets, led to lower
losses in the second half of the year. Trading conditions remain
extremely challenging, and an underlying loss is expected for the
first half of 2021. The outlook for the full year remains highly
uncertain, and will be dependent on the removal of barriers to
travel and continuation of government support measures. Mandarin
Oriental remains in a strong competitive position, however, with
robust liquidity and a powerful brand that customers will return to
when travel restrictions allow. "
Ben Keswick
Chairman
RESULTS
Year ended 31st December
2020 2019 Change
US$m US$m %
Combined total revenue of hotels under
management(1) 593.0 1,325.1 -55
Revenue 183.7 566.5 -68
Underlying EBITDA (Earnings before interest,
tax, depreciation and amortisation)(2) (74.2) 154.5 n/a
Underlying (loss)/profit attributable
to shareholders(3) (205.9) 41.2 n/a
Revaluation loss on investment property
under development (474.9) (67.3) n/a
Loss attributable to shareholders (680.1) (55.5) n/a
USc USc %
-------- --------
Underlying (loss)/earnings per share(3) (16.30) 3.26 n/a
Loss per share (53.84) (4.39) n/a
Dividends per share(4) - 1.50 -100
US$ US$ %
-------- --------
Net asset value per share 2.78 3.26 -15
Adjusted net asset value per share(5) 4.09 4.70 -13
Net debt/shareholders' funds 14% 7%
Net debt/adjusted shareholders' funds(5) 10% 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) In light of the substantially reduced levels of business due
to the impact of COVID-19 pandemic, the Directors withdrew their
recommendation of a final dividend in respect of the 2019 financial
year. No dividend in respect of the 2020 financial year has been
declared or proposed by the Board.
(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 2020. 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.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2020
OVERVIEW
Government actions to curtail the COVID-19 pandemic drastically
reduced both international and domestic travel in 2020. Many
countries imposed significant restrictions on people's freedom of
movement and on hospitality operations. Against this background,
combined total revenue of hotels under management fell by 55% in
2020 compared to 2019, and the Group's profitability was severely
impacted.
Extensive cost reductions were implemented from early in the
year. Results also benefited from government financial support in
some markets. At 31st December 2020, the Group's liquidity position
remained robust and was further strengthened with the addition of
new committed facilities in early 2021.
2020 FINANCIAL PERFORMANCE
Underlying losses before interest, tax, depreciation and
amortisation ('EBITDA') were US$74 million, compared to positive
EBITDA of US$155 million in 2019. Underlying losses were US$206
million, comprising US$175 million of losses from operations and a
US$31 million post-tax impairment of the carrying value of the
Geneva hotel following a significant decrease in the market value
of the leasehold interest. In 2019, underlying earnings were US$41
million.
Non-trading items almost entirely comprised a 15% decrease in
the valuation of the Causeway Bay site under development
(previously the site of The Excelsior hotel in Hong Kong), in line
with the overall market trend in respect of reductions in property
values. The site under development was valued at some US$2.5
billion, net of future construction costs, a decrease of US$475
million during the year. In 2019, US$97 million of non-trading
losses were recognised, again mostly related to the Causeway Bay
site under development. Accordingly, losses attributable to
shareholders were US$680 million, compared to losses of US$56
million in 2019.
At 31st December 2020, the Group's adjusted net asset value per
share was US$4.09, a decrease of 13% compared to the end of 2019,
reflecting the losses incurred during the year. Net debt was US$506
million versus US$300 million at the end of 2019 and the Group
remains well funded with headroom in its available cash and
committed facilities of US$328 million. In addition, US$260 million
of new facilities were secured in February 2021. The average tenor
of the Group's debt facilities was 3.2 years, excluding the new
facilities, compared with 4.2 years at the end of 2019. Gearing as
a percentage of adjusted shareholders' funds was 10%, taking into
account the market value of the Group's properties.
No dividend will be paid in respect of 2020. The Group will
consider a resumption of dividend payments when business
performance improves.
YEAR IN REVIEW
The Group's operations and financial performance were severely
impacted by the unprecedented decline in global travel. Many hotels
were closed for several months and, when they opened, hotel
performance varied depending on the extent and duration of
government restrictions on travel. Management took significant
measures to reduce costs both in hotels and in the Group's
corporate organisation. The Group's share of payroll across owned
hotels and the corporate organisation, the major component of costs
in the business, was reduced by some 40% through a combination of
measures, including furlough, unpaid leave, reduced pay and
redundancies. Substantial reductions in non-payroll costs were also
achieved. Many of these measures are continuing.
In Asia, most hotels were able to remain operational, albeit
with sharply reduced occupancy due to constraints on travel. There
was, however, a recovery in the second half for the Group's managed
hotels in the Chinese mainland. In Europe and America, hotels
closed for much of the second quarter, with most reopening
thereafter. The relaxation of travel restrictions allowed some
recovery in business levels. A resurgence in COVID-19 cases towards
the end of the year though brought back many, even stricter,
restrictions. The Group's managed hotels in resort locations, such
as Dubai and Bodrum, performed well when travel conditions
permitted.
Non-essential capital expenditure was suspended; however the
Group did complete renovations in Boston, Bangkok and Munich.
Renovations at the Group's Hong Kong hotel to create new facilities
were also completed in early 2021. Restoration work at the 50%
owned Mandarin Oriental Ritz, Madrid continued, and the hotel is
expected to re-open in the second quarter of 2021. The Causeway Bay
site under development remains on track to complete in 2025.
The Group's development pipeline remains strong, with many
projects at an advanced stage. The Group took over the management
of the Emirates Palace in Abu Dhabi at the beginning of 2020 and
the Al Faisaliah Hotel in Riyadh in March 2021, increasing the
total number of hotels under operation to 34. New management
contracts were signed and announced in 2020 in respect of Zurich
and Vienna. In 2021, a new resort was announced in Da Nang,
Vietnam. The recently restored Mandarin Oriental Ritz, Madrid, and
Mandarin Oriental Bosphorus, Istanbul are expected to open in the
first half of 2021.
PEOPLE
2020 has been extremely challenging for colleagues. It has been
inspiring to see their continuing resilience and dedication to
delivering exceptional service whilst finding new ways to innovate
and delight customers in difficult circumstances. On behalf of the
Directors, I would like to express my sincere appreciation for the
exemplary level of teamwork, commitment and passion that colleagues
have shown and to recognise the contribution of colleagues who have
left the Group.
John Witt succeeded me as Managing Director on 15th June 2020. I
will continue as Chairman. Jeremy Parr and Mark Greenberg stepped
down as Directors of the Company on 3rd December 2020 and 31st
December 2020 respectively. We would like to thank them for their
contribution to the Board during their tenure.
OUTLOOK
2020 was an extremely difficult year with a significant
reduction in global travel. Management actions, together with
financial support by governments in some markets, led to lower
losses in the second half of the year. Trading conditions remain
extremely challenging, and an underlying loss is expected for the
first half of 2021. The outlook for the full year remains highly
uncertain, and will be dependent on the removal of barriers to
travel and continuation of government support measures. Mandarin
Oriental remains in a strong competitive position, however, with
robust liquidity and a powerful brand that customers will return to
when travel restrictions allow.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
MARKET CONDITIONS
The COVID-19 pandemic and government actions to control its
spread had an unprecedented impact on global travel in 2020. Policy
responses varied by territory and changed during the year, with the
introduction of new requirements for entering countries and in some
instances, almost complete border closures. Social distancing
measures also impacted food and beverage and spa operations.
In Asia, border controls started at the end of January 2020 and
were generally tightened through the year, reducing international
travel to near zero. The ability to travel domestically varied
depending on the extent of restrictions, making it extremely
difficult for hospitality businesses to operate. In Europe and
America, restrictive measures began in March with governments
requiring people to stay at home and many businesses required to
close. A lot of these restrictions were relaxed over the summer
months, allowing some recovery in travel. A resurgence in COVID-19
cases towards the end of the year led to their reinstatement, this
time with further border controls, extended quarantine times and
blanket travel bans between certain areas. Government financial
support was available in many territories to soften the substantial
financial impact on businesses.
At the end of 2020, most parts of the world had extensive
restrictions on travel and on food and beverage operations. These
restrictions remain in place and look likely to continue for some
time. It is however, unclear to what degree government financial
support will continue. As a result, the travel and hospitality
sectors remain largely depressed. There have been instances where
more normal levels of travel have been possible, notably within the
Chinese mainland and certain resort locations which have benefited
from a continued appetite for leisure travel to warmer
destinations.
RESPONSE TO THE PANDEMIC
We faced extremely challenging operating conditions throughout
2020. During the year, we took steps to mitigate the substantial
operational and financial impact on our business. Key actions taken
include:
1. Containing costs: We conducted an extensive review of costs
across hotels and the corporate organisation, considering
location-specific business levels, anti-pandemic restrictions and
available government financial support. The Group's share of
payroll, the largest component of costs, was reduced by around 40%
across owned hotels and the corporate organisation compared to
2019. Colleagues experienced reduced pay, unpaid leave and furlough
measures for much of the year. At the end of 2020, over 40% of
colleagues remained on some form of payroll measure.
While the Group drew upon government financial support where
available, some reductions in the workforce were necessary to
contain costs. During the year, headcount across hotels and the
corporate organisation was reduced from around 13,920 to 10,770
through redundancies and natural attrition. Our colleagues and the
service that they deliver are the core of our business and the
Group will continue to ensure that actions taken are balanced with
maintaining Mandarin Oriental service standards.
Every possible avenue to reduce costs was proactively pursued.
Non-payroll costs including advertising and marketing expenses were
significantly reduced or suspended, except for selective digital
marketing. Hotel capital expenditure was curtailed and all
non-essential projects were postponed or cancelled.
2. Rethinking revenue: The vast majority of our operating income
in a typical year is generated from our rooms as opposed to our
food and beverage or spa operations. Rooms demand is almost
entirely related to international travel, except within the Chinese
mainland and the United States, where domestic demand is
substantial. In 2020, this was reversed, as most hotels were
primarily limited to domestic demand. As a result, we had to pivot
our offering toward domestic customers. This involved familiarising
them with the concept of 'staycations' (i.e. a short holiday or
break spent in one's home country rather than abroad). As customers
gradually adapted to the new circumstances and some governments
started to encourage domestic spending, we were often able to
capture a solid share of domestic demand through competitive room
pricing and by incorporating food and beverage and spa promotions
into our offers. Where regulations allowed, our food and beverage
operations continued to generate reasonably strong traffic and
innovated to meet demand for food delivery outside of our
properties.
3. Maintaining health and safety standards: The comfort, health
and safety of our customers and colleagues has always been our
primary concern. Mandarin Oriental was one of the first hotel
groups to initiate enhanced health and safety protocols, publicised
as our 'We Care' programme to ensure customers and colleagues felt
safe when they were with us. 'We Care' is a set of measures
comprising individual consultations prior to arrival, to cater to
personal hygiene preferences and interaction levels, as well as
heightened disinfection protocols. We continue to closely monitor
and adapt measures to meet changing local and global
requirements.
GROUP PERFORMANCE IN 2020
In 2020, border controls and restrictions on mobility and
hospitality operations constrained the ability of our hotels to
generate revenues and impacted Group profitability. In April, the
lowest point of the year, the Group's global portfolio averaged
only 468 paying room guests per day, compared with over 7,155 per
day during the same period in 2019. Moreover, through 2020 only one
million paying room guests stayed at our hotels, compared to 2.5
million in 2019. The combined total revenue from hotels under
management fell by 55% and underlying EBITDA losses of US$74
million were incurred.
In Hong Kong and the Chinese mainland, the impact started to be
felt as occupancy levels fell to single-digits in February and in
the rest of Asia, reached low double-digits in March. In Europe,
the Middle East and America, the impact started several weeks
later.
During the second quarter, most hotels in Europe and America
were either fully or practically closed. We put extensive measures
in place to reduce costs. In Asia, most hotels remained operational
but at single-digit occupancy levels. The Chinese mainland was the
sole exception, where operating conditions improved driven by a
recovery in domestic demand.
In the third quarter, domestic and some short-haul international
demand in specific locations started to return. Most hotels were
reopened but operated at very modest levels of occupancy.
In the fourth quarter, many of the hotels in Asia and America
saw some further improvement in occupancy driven by staycation
business. Notably, the 494-key Mandarin Oriental, Hong Kong, was
able to improve average occupancy to 29% in the fourth quarter. In
the Chinese mainland, our hotels in Sanya, Beijing and Guangzhou
reached December occupancy levels in line with 2019. Dubai also
benefited from more relaxed regulations and reported average
occupancy of 71% in the fourth quarter. In Europe however, business
activity worsened as mobility restrictions were tightened due to a
resurgence in COVID-19 cases.
NEAR-TERM PRIORITIES
It is difficult to accurately predict when business levels will
recover as trading conditions remain highly uncertain. We are
focused on managing costs during periods of fluctuating demand and
on being prepared for when travel and operations are able to resume
in full. Our near-term priorities are:
1. Driving revenue : We expect that demand will remain
significantly below normal levels in the first half of 2021.
Performance in the second half will depend on the relaxation of
travel restrictions and the degree of pent up customer demand.
Where tight border controls remain in place, growing our share of
domestic demand will require price flexibility and creativity to
keep customers coming back. At the same time, travel between some
destinations is likely to resume faster than others and we will be
closely monitoring this to ensure that our hotels are
well-positioned. We must also be alert to new revenue
opportunities.
2. Controlling costs : Extensive cost measures remain in place.
Costs in each hotel are actively reviewed on an individual basis,
considering the local demand outlook and availability of government
financial support. While containing financial losses is a key
priority, this must be balanced with the need to maintain
motivation and morale among colleagues who have been loyal to
Mandarin Oriental for many years. We will be dependent upon them to
deliver exceptional experiences when demand returns.
3. Maintaining a strong funding position : We have taken
appropriate measures to maintain a robust liquidity position to
absorb financial losses until such time as there is a recovery in
business levels.
4. Growing the pipeline : The Group operates 34 hotels today and
our strategy for expansion is based on the opening of new managed
hotels and residences. For this to be fulfilled, we must maintain
and continue to grow the pipeline of development projects. While
there have been some delays in the scheduled opening dates of new
properties, our pipeline remains robust with 20 announced hotel
projects and two standalone residences expected to open in the next
five years. The Group will receive significant branding fees when
individual units are sold. Continued interest from owners and
developers in Mandarin Oriental is a signal of our underlying
growth momentum, putting the Group in a strong position once market
conditions improve.
STRATEGIC PRIORITIES
Whilst our primary focus has been on crisis management through
the pandemic, we also are continuing to progress our strategic
priorities to drive future growth. Key achievements during the year
include:
1. Brand: Despite the effective suspension of our brand and
advertising expenditure, there were over 180,000 sign-ups to our
Fans of M.O. customer recognition programme. We also evolved the
programme to offer new benefits and recognition to our most loyal
Fans.
2. People: In the face of enormous personal and professional
challenges faced by colleagues, there was a considerable effort by
all to sustain ongoing engagement. Through our virtual engagement
activities, we were able to give our colleagues access to personal
growth opportunities and to connect colleagues across the world. I
am enormously grateful to all of our colleagues who contributed to
these engagement activities, which strengthen our culture. We also
launched our Forever Fans alumni programme which will enable past,
present and future colleagues to connect and maintain a
long-lasting relationship with Mandarin Oriental.
3. Customers: Our colleagues always put the customer first and
when I speak with guests, this is consistently the reason that they
return to us. Customer expectations are reaching a level where data
will play a central role in enabling colleagues to deliver
exceptional experiences. In the future, we will strengthen
colleague intuition with insights drawn from data so that we are
able to deliver the personalisation that customers expect. We have
made significant progress this year connecting our data sources
across the Group into a single platform.
4. Digital: Over the last two years we have replaced property management systems, the technology infrastructure at the heart of a hotel, across the Group. Replacing core systems is critical to streamlining operations, enabling colleagues to spend more time with customers and less time with administrative tasks. We will continue to target infrastructure transformations to modernise our core business systems. We also intend to push ahead with investments in our digital platforms.
Having started our journey from a single hotel in 1963, our
vision was to be widely recognised as the best luxury hotel group
in the world. Our focus has always been to provide exceptional
hospitality within our hotels but in future, we will also need to
create meaningful relationships with our customers beyond the four
walls of a hotel.
In 2020, we set out a new vision for the Group: A World of Fans.
This celebrates the global recognition that our brand has achieved,
while also setting a new purpose and challenge for the Group to
look for new ways to engage more broadly with customers everywhere
and to use every customer interaction, within or outside our
hotels, physical or digital, to convert a customer into a Fan of
Mandarin Oriental.
We recently announced a couple of initiatives that signalled
this redefined intent. Firstly, by forming the O&MO Alliance,
we found an ideal partner in the Oberoi Group whose hotel portfolio
will provide Mandarin Oriental customers with access to the most
luxurious destinations in India, a market where we do not currently
have any hotels. Through collaborating with Oberoi, we will have an
opportunity to grow our Indian customer base. Secondly, we made a
small investment in a peer-to-peer luxury home rental platform,
Stay One Degree. Working with the founders, our objective is for
Mandarin Oriental customers to be able to choose between both homes
and hotels, to greatly increase the number and type of destinations
that we offer.
BUSINESS DEVELOPMENTS
As I outlined previously, maintaining the momentum of our
development pipeline and new hotel and residence openings is
critical. In 2020, we took over management of the Emirates Palace,
Abu Dhabi and announced the takeover of the Al Faisaliah Hotel in
Riyadh effective in March 2021. We also announced two management
contracts, the first for a new hotel in Vienna and the second for a
re-flagging of an existing property in Zurich, whose management we
will take on following a full renovation. In 2021, we signed a new
resort location in Da Nang, Vietnam.
Our development pipeline remains robust, with 20 hotels and two
standalone residences under development. All of these are
management agreements for which we receive annual fees with no
equity participation. While the pandemic has and will continue to
impact construction timelines and there is always a risk that some
projects may not complete, many of the projects in the Group's
pipeline are at an advanced stage.
During the year, despite the challenging financial environment,
we completed renovations that were already underway at our hotels
in Bangkok and Boston. A significant restoration of the Mandarin
Oriental Ritz, Madrid is expected to complete in the second quarter
of 2021. We also felt it was timely to commence renovations in Hong
Kong and Munich, which will position both hotels well to benefit as
demand returns.
Good progress was made with the redevelopment of the site in
Causeway Bay, Hong Kong, which used to house The Excelsior hotel.
In 2019, the Group announced its intent to redevelop the site into
a mixed-use commercial building for a cost of some US$650 million,
to be financed using a combination of existing and new debt
facilities. Demolition was completed in 2020 and approvals to
maximise the gross floor area of the site were obtained. Completion
of the building remains on schedule for 2025. As previously
indicated, it is not the Group's intention to be the long-term
owner of commercial property. Opportunities for the monetisation of
this asset will continue to be reviewed.
CORE VALUES
As our business grows and our customer base becomes ever more
diverse, evolving our colleague culture remains a priority. We
foster a culture of inclusivity and empowerment, where colleagues
feel comfortable in being themselves and in voicing their ideas. We
encourage our colleagues to believe in, and deliver, our core
values of doing the right thing for customers, communities and the
planet. Sustainability and innovation form the foundation of our
culture.
Our approach to sustainability focuses on combining the power of
grass-roots action with global, Group-wide initiatives. One such
example is our commitment to completely eliminate single-use
plastic across all hotels. This encompasses items in our rooms,
restaurants, spas and lobbies as well as in back of house areas
unseen by the customer such as kitchens. We set ourselves an
ambitious completion date of the end of March 2021. This has hugely
accelerated efforts across hotels to find sustainable alternatives
to single-use plastic. Whilst we will not fully meet this target
and the pandemic has certainly played a part in this, we hope that,
by the end of June, we will have reduced the single use plastic
usage in our properties by over 95% in a normalised year. By
setting an aggressive timeline, we have ensured that actions are
taken now and that a meaningful reduction in plastic usage has been
achieved in very short order.
The Group is committed to four broader sustainability
objectives: reducing our environmental footprint, increasing our
social impact, responsible procurement and diversity and inclusion.
Specific targets within these areas will be included in our
Sustainability Report that will be published in May 2021. In 2021,
we will be focused on increasing responsible procurement for
agricultural commodities, seafood and paper, progressing towards
our new five and ten year environmental goals and identifying new
social inclusion and waste management initiatives.
In the area of innovation, we are focused on removing the
barriers to creativity and thinking differently. This means
flattening hierarchies, removing bureaucracy and eliminating the
fear of failure. Our colleagues innovate every day as they
constantly delight and surprise our customers. We must continue to
support and reward these behaviours to proactively evolve our
culture over time.
COLLEAGUES
I would like to express my deepest thanks for the dedication of
our colleagues in the face of the toughest conditions that our
industry has faced. Despite the challenges that the year presented,
they continued delivering exceptional service to our customers. At
the same time, we asked many colleagues to accept a variety of pay
reductions, unpaid leave and furlough to help our business through
this period. Our people are the heart of everything that we do and
their passionate commitment to delight customers, no matter what
the circumstances, underpins Mandarin Oriental.
It was with sadness that we said goodbye to some of our
colleagues who left the Group. I would like to thank them for their
dedication over many years and wish them the best for the
future.
LOOKING TO THE FUTURE
Trading conditions continue to be difficult. While this is
likely to persist in the short-term, I remain confident about the
positive long-term future of our industry and Mandarin Oriental's
growth prospects.
The pandemic has accelerated trends in consumer behaviour that
have been prevalent in the travel industry for some time. For
example, the shift to digital channels, the increasing demand for
leisure-oriented experiences and the reduction in corporate travel.
When I look back at the pockets of demand during 2020, I am
encouraged that people's underlying appetite for travel and their
desire for aspirational, luxury experiences will grow.
The Group's balance sheet has been conservatively geared to
sustain business downturns and today remains well-positioned to
finance us through this crisis. I am also confident that we have
taken the right steps to reduce losses and we will continue to
monitor our business levels actively. When travel does return, the
strength and reputation of Mandarin Oriental, and the extraordinary
service delivered by our colleagues, will draw our customers back
to us and welcome new Fans to Mandarin Oriental.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2020
2020 2019
Underlying Underlying
business Non-trading business Non-trading
performance Items Total performance Items Total
US$m US$m US$m US$m US$m US$m
Revenue (note 2) 183.7 - 183.7 566.5 - 566.5
Cost of sales (233.0) - (233.0) (364.7) - (364.7)
------- -------
Gross
(loss)/profit (49.3) - (49.3) 201.8 - 201.8
Selling and
distribution
costs (31.4) - (31.4) (38.8) - (38.8)
Administration
expenses (97.5) - (97.5) (117.2) - (117.2)
Other operating
(expense)/income (7.6) 0.7 (6.9) 25.2 (32.7) (7.5)
Change in fair
value
of investment
property
under development - (474.9) (474.9) - (67.3) (67.3)
------- ----------- ------- ----------- ----------- -------
Operating
(loss)/profit
(note 3) (185.8) (474.2) (660.0) 71.0 (100.0) (29.0)
Financing charges (14.2) - (14.2) (18.1) - (18.1)
Interest income 1.6 - 1.6 3.4 - 3.4
Net financing
charges (12.6) - (12.6) (14.7) - (14.7)
Share of results
of
associates and
joint
ventures (note 4) (26.8) - (26.8) (1.7) - (1.7)
(Loss)/profit
before
tax (225.2) (474.2) (699.4) 54.6 (100.0) (45.4)
Tax (note 5) 19.4 - 19.4 (13.5) 3.3 (10.2)
------- ----------- ------- ----------- ----------- -------
(Loss)/profit
after
tax (205.8) (474.2) (680.0) 41.1 (96.7) (55.6)
------- ----------- ------- ----------- ----------- -------
Attributable to:
Shareholders of
the
Company (notes 6
& 7) (205.9) (474.2) (680.1) 41.2 (96.7) (55.5)
Non-controlling
interests 0.1 - 0.1 (0.1) - (0.1)
------- ----------- ------- ----------- ----------- -------
(205.8) (474.2) (680.0) 41.1 (96.7) (55.6)
------- ----------- ------- ----------- ----------- -------
USc USc USc USc
(Loss)/earnings per share
(note
6)
- basic (16.30) (53.84) 3.26 (4.39)
- diluted (16.30) (53.84) 3.26 (4.39)
------- ------- ----------- -------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2020
2020 US$m 2019
US$m
Loss for the year (680.0) (55.6)
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
--------- -------
Remeasurements of defined benefit plans 5.2 3.4
Revaluation surplus of right-of-use assets
before transfer to investment property under
development (note 9) - 2,943.4
Tax on items that will not be reclassified (0.9) (0.6)
4.3 2,946.2
Items that may be reclassified subsequently
to profit or loss:
--------- -------
Net exchange translation differences
* net gains arising during the year 80.0 25.0
Cash flow hedges
- net losses arising during the year (11.4) (0.4)
Tax relating to items that may be reclassified 1.9 0.1
Share of other comprehensive income of associates
and joint ventures 1.8 3.1
72.3 27.8
Other comprehensive income for the year,
net of tax 76.6 2,974.0
--------- -------
Total comprehensive (expense)/income for
the year (603.4) 2,918.4
--------- -------
Attributable to:
Shareholders of the Company (603.9) 2,918.4
Non-controlling interests 0.5 -
--------- -------
(603.4) 2,918.4
--------- -------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2020
2020 2019
US$m US$m
Net assets
Intangible assets 45.4 53.0
Tangible assets (note 8) 1,181.5 1,174.6
Right-of-use assets 297.4 300.3
Investment property under development (note
9) 2,528.3 2,967.7
Associates and joint ventures 231.6 203.1
Other investments 16.1 15.9
Deferred tax assets 17.8 10.6
Pension assets 5.5 1.3
Non-current debtors 5.1 6.2
-------
Non-current assets 4,328.7 4,732.7
Stocks 6.0 6.2
Current debtors 71.7 97.2
Current tax assets 3.1 1.9
Bank and cash balances 164.6 270.7
------- -------
Current assets 245.4 376.0
------- -------
Current creditors (144.6) (166.0)
Current borrowings (note 10) (64.2) (2.5)
Current lease liabilities (7.0) (7.0)
Current tax liabilities (10.1) (19.1)
------- -------
Current liabilities (225.9) (194.6)
------- -------
Net current assets 19.5 181.4
Long-term borrowings (note 10) (606.6) (568.6)
Non-current lease liabilities (170.1) (168.4)
Deferred tax liabilities (47.1) (59.4)
Pension liabilities (0.3) (0.2)
Non-current creditors (10.9) (0.9)
------- -------
3,513.2 4,116.6
------- -------
Total equity
Share capital 63.2 63.2
Share premium 499.7 499.7
Revenue and other reserves 2,946.6 3,550.1
------- -------
Shareholders' funds 3,509.5 4,113.0
Non-controlling interests 3.7 3.6
------- -------
3,513.2 4,116.6
------- -------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2020
Attributable
to Attributable
Asset shareholders to non-
Share Share Capital Revenue revaluation Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
2020
At 1st January 63.2 499.7 260.3 434.8 2,943.4 - (88.4) 4,113.0 3.6 4,116.6
Total
comprehensive
income - - - (675.5) - (9.7) 81.3 (603.9) 0.5 (603.4)
Change in
interest in a
subsidiary - - - 0.4 - - - 0.4 (0.4) -
At 31st December 63.2 499.7 260.3 (240.3) 2,943.4 (9.7) (7.1) 3,509.5 3.7 3,513.2
-----------
2019
At 1st January 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 63.2 499.7 260.3 434.8 2,943.4 - (88.4) 4,113.0 3.6 4,116.6
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Revenue reserves as at 31st December 2020 included cumulative
fair value loss on the investment property under development of
US$542.2 million (2019: US$67.3 million).
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2020
2020 2019
US$m US$m
Operating activities
------- -------
Operating loss (note 3) (660.0) (29.0)
Depreciation, amortisation and impairment 124.2 91.9
Other non-cash items 472.8 69.0
Movements in working capital 1.4 (3.1)
Interest received 1.8 3.4
Interest and other financing charges paid (14.1) (19.2)
Tax paid (9.6) (6.0)
------- -------
(83.5) 107.0
Dividends and interest from associates and
joint ventures - 5.9
Cash flows from operating activities (83.5) 112.9
Investing activities
------- -------
Purchase of tangible assets (38.9) (41.7)
Additions to investment property under development (21.6) (15.1)
Purchase of intangible assets (5.3) (8.3)
Payment on Munich expansion - (1.1)
Purchase of other investments (0.6) (1.1)
Purchase of an associate (2.0) -
Advance to associates and joint ventures (40.5) (16.7)
Repayment of loans to associates and joint
ventures 0.4 3.6
Cash flows from investing activities (108.5) (80.4)
Financing activities
------- -------
Issue of shares - 0.1
Drawdown of borrowings 88.4 555.8
Repayment of borrowings (0.1) (522.3)
Principal elements of lease payments (6.0) (6.4)
Dividends paid by the Company (note 12) - (37.9)
Cash flows from financing activities 82.3 (10.7)
------- -------
Net (decrease)/increase in cash and cash
equivalents (109.7) 21.8
Cash and cash equivalents at 1st January 270.7 246.8
Effect of exchange rate changes 3.6 2.1
------- -------
Cash and cash equivalents at 31st December 164.6 270.7
------- -------
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
(a) Going concern
The Group's operations and financial performance were severely
impacted by the unprecedented decline in both international and
domestic travel in 2020 due to the COVID-19 pandemic. Most
governments introduced measures that impacted people's freedom of
movement and led to an overall 68% decline in revenue in 2020. It
is unclear how long it will take for the Group's revenues to
recover to pre-pandemic levels, although they are expected to
substantially improve once government restrictions are lifted .
The Group has taken a number of actions to reduce cost and
preserve cash both in the hotels in which it has an ownership
interest as well as the corporate organisation. These included the
suspension of non-essential capital expenditure and non-payroll
expenses, significantly reduced payroll costs through furlough,
unpaid leave, reduced pay and redundancies as well as participation
in government financial support measures wherever possible. In
addition, the Directors withdrew their recommendation of a final
dividend in respect of the 2019 financial year and a dividend is
not proposed in respect of 2020.
While a significant amount of costs has been reduced, there are
certain fixed costs relating to property ownership that continue to
be incurred. In 2020, the Group incurred total cash outflow from
operating activities of US$84 million (2019: cash inflow of US$113
million). A return to positive operating cash flow is expected once
revenues substantially recover.
The Group has equity interests in a number of prime hotel
properties which are carried on the Group's balance sheet at
historical cost less depreciation. Taking into account the market
value of the Group's property interests, the adjusted shareholders'
funds were US$5.2 billion at 31st December 2020.
The Group has historically maintained a conservatively financed
balance sheet with significant levels of liquidity. While net debt
increased during 2020, at 31st December 2020 gearing was 10% of
adjusted shareholders' funds. At 31st December 2020, the Group had
total liquidity of US$328 million, comprising US$163 million of
undrawn committed facilities and US$165 million of cash balances.
The Group's facilities are not subject to any cash flow covenants
and had an average remaining tenor of 3.2 years. In February 2021,
the Group further strengthened its liquidity by securing new
committed facilities of US$260 million, with a tenor of two years.
This robust liquidity position enables the Group to sustain a
prolonged downturn in the hospitality industry should that
eventuate. Overall, the Group's balance sheet position remains
strong.
Trading conditions in 2021 remain highly uncertain, with limited
visibility on the pace and scale of a market recovery. In adopting
the going concern basis for preparing the financial statements, the
Directors have considered a stress-test cash flow forecast which
assumes the majority of the Group's hotels are closed as a
consequence of government restrictions for a period of 12 months
from the date of approval of the financial statements.
Having considered the outcome of the stress-test cash flow
forecast, the Directors are of the opinion that the Group has
sufficient resources to continue operating for a period of at least
12 months from the date of approval of the financial statements.
Accordingly, the financial statements have been prepared on a going
concern basis.
(b) Basis of preparation
The financial information contained in this announcement has
been based on the audited results for the year ended 31st December
2020 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 elected to early adopt the 'Interest Rate
Benchmark Reform - Phase 1: 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.
The Group has adopted the following changes in relation to rent
concessions for the annual reporting period commencing 1st January
2020.
COVID-19 Related Rent Concessions: Amendment to IFRS 16
Leases
The Group has early adopted the Amendment, which became
effective 1st June 2020. Where the Group is a lessee, the practical
expedient is applied to account for the change in lease payments
resulting from rent concessions granted as a direct consequence of
the COVID-19 pandemic. The Group elects not to assess these
concessions as lease modifications when all of the following
conditions are met:
(i) the revised lease payments are substantially the same
as, or less than, the consideration for the lease immediately
preceding the change;
(ii) reduction in lease payments relates to payment due on
or before 30th June 2021; and
(iii) there is no substantive change to the other terms and
conditions of the lease.
Rent concessions fulfilling the above conditions are recognised
in the profit and loss over the period in which they cover.
Apart from the above, there are no other amendments which are
effective in 2020 and relevant to the Group's operations, that have
a significant impact on the Group's results, financial position and
accounting policies.
The Group has not early adopted any standard, interpretation or
amendments that have been issued but not yet effective.
2. REVENUE
2020 2019
US$m US$m
By geographical area:
Asia 96.9 272.2
Europe, Middle East and Africa ('EMEA') 66.1 189.5
America 20.7 104.8
183.7 566.5
----- -----
From contracts with customers:
Recognised at a point in time 72.5 207.3
Recognised over time 94.8 339.4
----- -----
167.3 546.7
From other sources:
Rental income 16.4 19.8
----- -----
183.7 566.5
----- -----
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING LOSS FROM SUBSIDIARIES
2020 2019
US$m US$m
By geographical area:
Asia (18.6) 75.1
EMEA (10.5) 55.6
America (32.5) 6.8
------- ------
Underlying EBITDA from subsidiaries (61.6) 137.5
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)
* insurance recovery for replacement of tangible assets
and other incidental expenses - 9.0
Closure of The Excelsior, Hong Kong - other costs - (6.5)
Change in fair value of investment property under
development (474.9) (67.3)
Change in fair value of other investments 0.7 (1.5)
(474.2) (74.6)
------- ------
EBITDA from subsidiaries (535.8) 62.9
Underlying depreciation, amortisation and impairment
from subsidiaries (124.2) (66.5)
Non-trading items (note 7)
Closure of The Excelsior, Hong Kong
- accelerated depreciation and amortisation - (25.4)
------- ------
Operating loss (660.0) (29.0)
------- ------
For the year ended 31st December 2020, the Group had received
government grants, the majority of which were in support of
employee retention of US$31.9 million. In addition, there were rent
concessions of US$2.3 million. Both amounts were in relation to the
COVID-19 pandemic. These subsidies were accounted for as other
operating income.
Mandarin Oriental, Geneva was impaired in 2020. This included an
accelerated depreciation for the leasehold property of US$41.9
million and an accelerated amortisation for the leasehold land of
US$3.4 million. Taking into account a deferred tax credit of
US$14.4 million (note 5), the net impact of the impairment was
US$30.9 million, which was reflected in the underlying loss.
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and (loss)/ financing (loss)/
EBITDA amortisation profit charges Tax profit
US$m US$m US$m US$m US$m US$m
2020
By geographical
area:
Asia 0.7 (10.2) (9.5) (1.6) 2.4 (8.7)
EMEA (4.4) (0.4) (4.8) (0.1) - (4.9)
America (8.9) (2.7) (11.6) (1.6) - (13.2)
------ ------------ --------- --------- ----- -------
(12.6) (13.3) (25.9) (3.3) 2.4 (26.8)
------ ------------ --------- --------- ----- -------
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)
------ ------------ --------- --------- ----- -------
For the year ended 31st December 2020, the results of associates
and joint ventures included the Group's share of government grants,
the majority of which were in support of employee retention of
US$3.7 million. In addition, there were rent concessions of US$0.1
million. Both amounts were in relation to the COVID-19
pandemic.
5. TAX
2020 2019
US$m US$m
Tax credited/(charged) to profit and loss is
analysed as follows:
Current tax 0.6 (12.7)
Deferred tax 18.8 2.5
----- ------
19.4 (10.2)
----- ------
By geographical area:
Asia 0.5 (4.0)
EMEA 20.6 (5.0)
America (1.7) (1.2)
----- ------
19.4 (10.2)
----- ------
Tax relating to components of other comprehensive income is
analysed as follows:
Remeasurements of defined benefit plans (0.9) (0.6)
Cash flow hedges 1.9 0.1
----- -----
1.0 (0.5)
----- -----
Tax on profits has been calculated at rates of taxation
prevailing in the territories in which the Group operates.
Deferred tax in 2020 included a credit of US$14.4 million in
relation to the impairment of Mandarin Oriental, Geneva (note
3).
The results of associates and joint ventures included the
Group's share of tax credits of US$2.4 million (2019: tax charges
of US$0.3 million) (note 4).
6 . (LOSS)/EARNINGS PER SHARE
Basic loss per share is calculated using loss attributable to
shareholders of
US$680.1 million (2019: US$55.5 million) and the weighted
average number of 1,263.2 million (2019: 1,262.9 million) shares in
issue during the year.
Diluted loss per share is calculated using loss attributable to
shareholders of US$680.1 million (2019: US$55.5 million) and the
weighted average number of 1,263.2 million (2019: 1,263.2 million)
shares in issue after adjusting for the number of shares which are
deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during
the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2020 2019
Weighted average number of shares for basic
loss/earnings
per share calculation 1,263.2 1,262.9
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans - 0.3
------- -------
Weighted average number of shares for diluted
loss/earnings
per share calculation 1,263.2 1,263.2
------- -------
Additional basic and diluted loss/earnings per share are also
calculated based on underlying loss/profit attributable to
shareholders. A reconciliation of earnings is set out below:
2020 2019
Basic Diluted
Basic Diluted (loss)/ (loss)/
loss loss earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
Loss attributable
to shareholders (680.1) (53.84) (53.84) (55.5) (4.39) (4.39)
Non-trading items
(note 7) 474.2 96.7
Underlying (loss)/profit
attributable
to shareholders (205.9) (16.30) (16.30) 41.2 3.26 3.26
------- ------
7 . NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investment property under development and
investments which are measured at fair value through profit and
loss; gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable
intangible assets, associates and joint ventures and other
investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other
credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2020 2019
US$m US$m
Fire at Mandarin Oriental Hyde Park, London
* repair expenses and write-off of tangible assets
and other incidental expenses - (8.3)
* insurance recovery for replacement of tangible assets
and other incidental expenses - 9.0
Closure of The Excelsior, Hong Kong
* accelerated depreciation and amortisation - (22.8)
* other costs - (5.8)
Change in fair value of investment property
under development (note 9) (474.9) (67.3)
Change in fair value of other investments 0.7 (1.5)
------- ------
(474.2) (96.7)
------- ------
8 . TANGIBLE ASSETS
2020 2019
US$m US$m
Opening net book value 1,174.6 1,205.9
Exchange differences 64.4 6.4
Additions 40.4 42.3
Disposals (0.3) (0.1)
Depreciation and impairment charge (97.6) (79.9)
------- -------
Closing net book value 1,181.5 1,174.6
------- -------
Freehold properties include a property of US$98.1 million (2019:
US$102.1 million), which is stated net of tax increment financing
of US$18.8 million (2019: US$19.7 million) (note 11).
9. INVESTMENT PROPERTY UNDER DEVELOPMENT
Upon the closure of The Excelsior, Hong Kong on 31st March 2019,
its use was changed from a hotel property to a commercial property
for redevelopment (the 'Causeway Bay site under development'). 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. A revaluation
surplus of US$2,943.4 million was recognised to the asset
revaluation reserves through other comprehensive income on 31st
March 2019. Subsequent fair value changes of the investment
property under development has been recognised as a non-trading
item in the profit and loss in the period to which it relates.
2020 2019
US$m US$m
Opening fair value 2,967.7 -
Transfer from right-of-use assets at 31st
March 2019 - 2,993.6
Exchange differences 12.1 25.5
Additions 23.4 15.9
Decrease in fair value (474.9) (67.3)
Closing fair value 2,528.3 2,967.7
------- -------
10. BORROWINGS
2020 2019
US$m US$m
Bank loans 666.7 567.2
Other borrowings 4.1 3.9
670.8 571.1
----- -----
Current 64.2 2.5
Long-term 606.6 568.6
----- -----
670.8 571.1
----- -----
11 . TAX INCREMENT FINANCING
2020 2019
US$m US$m
Netted off against the net book value of
property (note 8) 18.8 19.7
----- -----
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 contribute to the
subsidiary US$33.0 million out of the net proceeds obtained through
the issuance and sale of certain tax increment financing bonds
('TIF Bonds') for the development and construction of Mandarin
Oriental, Washington D.C.
The receipt of the TIF Bonds has been treated as a government
grant and netted off against the net book value in respect of the
property. The TIF Bonds are being amortised over 39 years up to
February 2043.
12. DIVIDS
2020 2019
US$m US$m
Final dividend in respect of 2019 of nil
(2018: USc1.50 per share) - 18.9
Interim dividend in respect of 2020 of nil
(2019: USc1.50 per share) - 19.0
----- -----
- 37.9
----- -----
In light of the substantially reduced levels of business due to
the impact of COVID-19 pandemic, the Directors withdrew their
recommendation of a final dividend in respect of the 2019 financial
year. No dividend in respect of the 2020 financial year has been
declared or proposed by the Board.
13. CAPITAL COMMITMENTS
At 31st December 2020, total capital commitments of the Group
amounted to US$728.7 million (2019: US$765.6 million). This
primarily related to capital commitments for the Causeway Bay site
under development, which is expected to complete in 2025.
14. RELATED PARTY TRANSACTIONS
The parent company of the Group is Jardine Strategic Holding
Limited ('JSH') and the ultimate holding company of the Group is
Jardine Matheson Holdings Limited ('JMH'). Both companies are
incorporated in Bermuda.
In the normal course of business, the Group undertakes a variety
of transactions with its associates and joint ventures and with
JMH's subsidiaries, associates and joint ventures. The more
significant of these transactions are described below:
During 2020, the Group managed six (2019: six) associate and
joint venture hotels and received management fees of US$4.2 million
(2019: US$14.5 million) based on long-term management agreements on
normal commercial terms.
The Group provided hotel management services to Hongkong Land
('HKL'), a subsidiary of JSH. Total management fees received from
HKL in 2020 amounted to US$1.2 million (2019: US$1.9 million),
based on long-term management agreements on normal commercial
terms.
The Group pays a management fee to Jardine Matheson Limited, a
subsidiary of JMH, in consideration for certain management
consultancy services. The fee is calculated as 0.5% of the Group's
net profit. No fee was paid in 2020 (due to underlying losses). In
2019, the fee was US$0.1 million.
In respect of the Causeway Bay site under development, the Group
paid consultancy fees of US$2.1 million (2019: US$2.0 million) to
HKL in consideration for project management consultancy services.
In addition, Gammon Construction Limited ('GCL'), an associate of
JMH, completed value of works of US$16.3 million (2019: US$8.0
million). The HKL agreement and GCL contract were arranged 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 2020 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.
7. Cybersecurity Risk
The Group's business is ever more reliant on technology in its
operations and faces increasing numbers of cyberattacks from groups
targeting both individuals and businesses. The privacy and security
of guests and corporate information is at risk of being compromised
through a breach of our or our suppliers' IT systems or the
unauthorised or inadvertent release of information, resulting in
brand damage, impaired competitiveness or regulatory action.
Cyberattacks may also adversely affect the Group's ability to
manage its business operations or operate information technology
and business systems, resulting in business interruption, lost
revenues, repair or other costs.
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 2020 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
Dividend Information for Shareholders
In light of the substantially reduced levels of business, no
final dividend in respect of the 2020 financial year will be
paid.
Mandarin Oriental International Limited
About Mandarin Oriental Hotel Group
Mandarin Oriental Hotel Group is an international hotel
investment and management group with luxury hotels, resorts and
residences in sought-after destinations around the world. Having
grown from its Asian roots over 50 years ago into a global brand,
the Group now operates 34 hotels and seven residences in 24
countries and territories, with each property reflecting the
Group's oriental heritage and unique sense of place. Mandarin
Oriental regularly receives international recognition and awards
for outstanding service and quality management, and 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$5.2 billion as at 31st December
2020.
Mandarin Oriental continues to drive its reputation as an
innovative leader in luxury hospitality, seeking selective
opportunities to expand the reach of the brand, with the aim to
maximise profitability and long-term shareholder value.
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
Shevaun Leach (852) 2895 9167
Brunswick Group Limited
Sunitha Chalam (852) 3512 5050
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2020 can be accessed through the internet at '
www.mandarinoriental.com '.
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END
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March 11, 2021 04:16 ET (09:16 GMT)
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