TIDMMDO TIDMJAR
RNS Number : 5255D
Mandarin Oriental International Ltd
03 March 2022
Announcement
3rd March 2022
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
2021 PRELIMINARY ANNOUNCEMENT OF RESULTS
HIGHLIGHTS
-- Much improved performance
-- Pandemic continues to impact results
-- Strong liquidity and funding position
-- Four hotels opened and five new projects announced
"2021 was a challenging year, as the impact and uncertainties of
COVID-19 continued to restrict global travel. However, performance
improved in the second half as barriers to travel were gradually
reduced in most parts of the world. This, together with government
and other pandemic-related support enabled the Group to
significantly reduce underlying losses. Trading conditions,
however, remain difficult, particularly in East Asia, and an
underlying loss is expected for the first half of 2022. The outlook
for the full year is dependent on the level of travel restrictions
implemented by governments. With its strong, globally recognised
brand, loyal customer base and robust development pipeline,
Mandarin Oriental remains well positioned for long-term
growth."
Ben Keswick
Chairman
RESULTS
Year ended 31st December
2021 2020 Change
US$m US$m %
---------------------------------------------------- -------- ------- ------
Combined total revenue of hotels under
management(1) 1,053.5 593.0 +78
Revenue 316.9 183.7 +73
Underlying EBITDA (Earnings before interest,
tax, depreciation and amortisation)(2) 40.7 (74.2) n/a
Underlying loss attributable to shareholders(3) (68.1) (205.9) +67
Revaluation loss on investment property
under development (73.9) (474.9) +84
Loss attributable to shareholders (141.4) (680.1) +79
USc USc %
-------- -------
Underlying loss per share(3) (5.39) (16.30) +67
Loss per share (11.19) (53.84) +79
Dividends per share(4) - - -
US$ US$ %
-------- -------
Net asset value per share 2.62 2.78 -6
Adjusted net asset value per share(5) 3.93 4.09 -4
Net debt/shareholders' funds 16% 14%
Net debt/adjusted shareholders' funds(5) 10% 10%
---------------------------------------------------- -------- ------- ------
(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/loss' 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, no interim and final
dividends in respect of the 2021 and 2020 financial years have
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 2021. 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 2021
OVERVIEW
The Group's financial performance in 2021 improved significantly
compared with 2020, although results remained materially below
pre-pandemic levels, with underlying losses of US$68 million.
Combined total revenue of hotels under management increased by 78%
in 2021 compared to the prior year, benefitting from the relaxation
of travel restrictions in most parts of the world in the second
half of 2021. Travel restrictions, however, in most of East Asia
remained in place throughout the year.
Results were boosted by COVID-19-related receipts that included
government support, primarily in Europe, rent concessions in Tokyo,
and business interruption insurance proceeds for hotels in the
United States. At 31st December 2021, the Group's liquidity
position remained robust.
2021 FINANCIAL PERFORMANCE
Underlying earnings before interest, tax, depreciation and
amortisation ('EBITDA') were US$41 million, compared to EBITDA
losses of US$74 million in 2020. The Group's underlying losses were
reduced to US$68 million for the year, from US$206 million in 2020.
The 2020 result included a US$31 million post-tax impairment of the
carrying value of the leasehold interest in the Geneva hotel.
There was a non-trading loss of US$74 million (US$475 million in
2020), due to a 3% decrease in the fair valuation of the Causeway
Bay site, which is being developed into a new office and retail
complex (compared with a decrease of 15% in 2020). Accordingly,
losses attributable to shareholders were US$141 million, compared
to losses of US$680 million in 2020.
The adjusted net asset value per share, which reflects both the
independent valuation of the Group's owned hotel properties and of
the Causeway Bay site, was US$3.93 at 31st December 2021, a 4%
decrease compared with US$4.09 per share at the end of 2020.
At 31st December 2021, net debt was US$517 million, compared to
US$506 million at the end of 2020. Gearing as a percentage of
adjusted shareholders' funds was 10%, unchanged from 2020. The
Group remains well funded with a robust liquidity position that was
strengthened with the addition of new committed facilities in
2021.
No dividend will be paid in respect of 2021.
YEAR IN REVIEW
Performance in 2021 was better than 2020, as restrictions on
travel and hospitality operations were gradually relaxed in most
countries. Performance varied by region, however, as demand
remained heavily influenced by the extent and pace with which these
restrictions were lessened.
In East Asia, restraints on international travel remained in
place throughout the year, limiting most hotels to domestic demand.
In Europe and the United States, a relaxation of travel
restrictions in the second half of the year allowed business levels
to improve.
EBITDA for most of the Group's owned hotels improved, driven by
both better trading conditions and government support in some
countries. Results were notably better in Hong Kong, London,
Munich, Geneva, Paris, Boston and New York. The EBITDA from the
Group's property interests in 2021 was US$24 million, compared to a
loss of US$62 million in 2020. After depreciation and interest
charges, there was an underlying loss from the Group's property
interests of U$71 million in 2021, compared to a loss of US$174
million in the prior year.
Performance of the management business improved substantially,
producing an EBITDA of US$17 million compared to a loss of US$12
million in 2020. Particularly strong management fees were earned in
resort destinations such as Bodrum and Dubai. There was an
underlying profit of US$5 million in 2021, compared to a loss of
US$30 million in 2020.
Whilst the Group continues to maintain cost control and to seek
permanent savings, its main focus is now on rebuilding revenues and
business activity levels. Capital expenditure continues to be
closely scrutinised.
DEVELOPMENT
The Group's total number of hotels under operation has increased
to 36, following the opening of its latest property in Shenzhen in
January 2022. In 2021, the Group took over the management of the Al
Faisaliah Hotel in Riyadh and opened a new hotel on the Bosphorus
in Istanbul, both under management contracts. The Group also
reopened Mandarin Oriental Ritz, Madrid, in which it owns a 50%
interest, after an extensive programme of restoration and
refurbishment.
The Group's development pipeline remains robust, with 24
projects expected to open in the next five years. In 2021, new
management contracts were announced in Da Nang, Vietnam and
Hangzhou, China, in addition to a standalone residences project in
Beverly Hills. Two new deals in Costa Navarino and the Maldives
have recently been announced since the start of 2022.
Two hotels and three standalone residences projects are
scheduled for opening in 2022, while the Group also expects to
rebrand the Al Faisaliah Hotel in Riyadh, as well as the Emirates
Palace in Abu Dhabi.
In Hong Kong, the Causeway Bay site under development remains on
track to complete in 2025.
GOVERNANCE ENHANCEMENTS
The Group has an ongoing focus on enhancing its governance, and
in the past year it has made changes to the composition of its
Board, to reduce its size and to increase its diversity and bring
greater sector expertise through the appointment of new independent
non-executive directors. The Group has also established formal
Audit, Remuneration and Nominations Committees.
PEOPLE
On behalf of the Board, I would like to take this opportunity to
express my sincere appreciation to all our colleagues for their
continuing commitment and dedication during these very challenging
times. The contributions of our colleagues are central to the
Mandarin Oriental guest experience and we will remain focused on
ensuring Mandarin Oriental is an employer of choice.
Jack Chen, Julian Hui, Lincoln K.K. Leong, Anthony Nightingale
and Percy Weatherall retired from the Board in December 2021 . We
thank each of them for their valuable contributions over many
years. With effect from 1st December 2021, Jinqing Cai and Richard
Solomons have joined the Board as Independent Non-Executive
Directors and bring a wealth of relevant experience.
Craig Beattie stepped down as Chief Financial Officer at the end
of August and was succeeded by Matthew Bishop. We would like to
thank Craig for his contribution to Mandarin Oriental.
OUTLOOK
2021 was a challenging year, as the impact and uncertainties of
COVID-19 continued to restrict global travel. However, performance
improved in the second half as barriers to travel were gradually
reduced in most parts of the world. This, together with government
and other pandemic-related support enabled the Group to
significantly reduce underlying losses. Trading conditions,
however, remain difficult, particularly in East Asia, and an
underlying loss is expected for the first half of 2022. The outlook
for the full year is dependent on the level of travel restrictions
implemented by governments. With its strong, globally recognised
brand, loyal customer base and robust development pipeline,
Mandarin Oriental remains well positioned for long-term growth.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
KEY HIGHLIGHTS
In a year that has seen continuing disruption and uncertainty as
a result of the pandemic, we are pleased that the Group has made
good progress in a number of areas and was able to deliver an
improved operational and financial performance, although results
remained materially behind pre-pandemic levels.
All of our hotels were open at the end of 2021, after numerous
closures and interruptions to their business during the two
preceding years. Mandarin Oriental Ritz, Madrid reopened in April
to great acclaim after an extensive restoration, a property that is
sure to be a landmark European destination for many years to come.
We also took over management of the Al Faisaliah Hotel in Riyadh,
opened a hotel on the Bosphorus in Istanbul and, at the start of
2022, opened a hotel in Shenzhen. Three new deals were announced in
2021, including a standalone branded residences project in Beverly
Hills, and a further two deals have already been announced so far
in 2022, adding to the strong pipeline that we have diligently
built over the last few years.
We made significant investments in the period in our digital
platforms, including the re-design of mandarinoriental.com, and
through our renewed marketing efforts were able to pass the
milestone of one million Fans of M.O., underlining the success of a
programme that was first launched in 2018. We also strengthened our
leadership team by bringing on board Joanna Flint as Chief
Commercial Officer, a new role which oversees the development and
execution of the Group's commercial strategy while also taking
executive responsibility for all aspects of Mandarin Oriental's
customer experience. We are also delighted by the substantial
progress we have made in effectively eliminating single-use non
reusable plastics from the operations of the Group.
Our operating performance was much improved, and our hotels
continue to hold market-leading positions. Financially, while
performance remains well below pre-COVID-19 levels, we were able to
produce significantly improved results, moving from an EBITDA loss
of US$74 million in 2020 to an EBITDA profit of US$41 million in
2021. As a consequence of our property interest in many of our
hotels and the associated depreciation, we remain in an underlying
loss position, although we were able to reduce this loss by over
60%, from US$206 million to US$68 million.
2021 PERFORMANCE
2021 saw a significant improvement in the financial performance
of the Group. It was, however, well below pre-pandemic levels due
to the continued disruption caused b yCOVID-19. The Group reported
EBITDA of US$41 million and an underlying loss of US$68 million, a
marked improvement from 2020, albeit still significantly below 2019
levels. The Group recorded positive EBITDA in the third and fourth
quarters, the first such positive performances since the fourth
quarter of 2019. Revenue generation and innovation, as well as cost
control, remained as key areas of focus. Capital expenditure was
tightly controlled. The combined total revenue from hotels under
management was US$1,054 million, an increase of 78% over 2020, but
behind the US$1,325 million recorded in 2019.
In East Asia, border controls and restrictions on mobility and
hospitality operations were in place throughout the year. The
ability to travel domestically varied depending on the extent of
restrictions and hotels remained reliant on domestic demand. As a
consequence, some hotels, such as Bangkok, Kuala Lumpur and Taipei,
operated at very low levels of occupancy. The best performances
were achieved in the Chinese mainland, supported by steady domestic
demand, and occupancy in Hong Kong, Singapore and Jakarta was also
commendable given the stringent restrictions imposed by
governments. Despite the challenging environment, occupancy for the
region increased to 35%, from 27% in 2020, while average daily
rates ('ADR') were broadly unchanged from 2020.
In the rest of the world, whilst border controls and
restrictions were in place during the first half of the year, these
started to lessen towards the end of the second quarter as
vaccination programmes accelerated. This led to increased travel
and an improvement in trading conditions. The Group's hotels
benefitted from pent-up leisure demand and the relative strength of
suite bookings. Several hotels in Europe also received government
support, boosting financial performance. In Europe, Middle East and
Africa ('EMEA'), the Group recorded occupancy of 48% in the second
half of the year and RevPAR for EMEA was up 78% for the full year,
driven by a strong increase in ADR, which rose to US$983, ahead of
2019 levels. Similarly, in America, RevPAR and ADR for the region
were up 55% and 24% compared to 2020, with ADR at US$593, also
ahead of 2019 levels.
Owned Hotels Performance
The Group's financial performance is heavily dependent on the
performance of its owned and partially-owned properties. These
hotels recorded a positive EBITDA of US$24 million, but an
underlying loss of US$71 million, due to the substantial amount of
depreciation attributable to the properties.
Several of the Group's owned or partially-owned hotels are in
East Asia and continued to be significantly impacted by stringent
government restrictions on travel and movement. In particular, Hong
Kong effectively remained closed to travel in 2021 and while our
flagship hotel there was able to deliver positive EBITDA by
competing effectively with attractive staycation rates, the hotel
posted an underlying loss. The opening of both Hong Kong's border
with the Chinese mainland and its international border are critical
for this important hotel to substantially improve its financial
performance. The Group's hotels in Tokyo, Jakarta, Bangkok and
Kuala Lumpur all incurred EBITDA losses, while the hotel in
Singapore was EBITDA positive.
In Europe, as restrictions eased, our hotels were able to
perform better. London, Munich, Geneva and Paris achieved positive
EBITDA, driven by significantly improved demand in the second half
of the year, as well as government financial support totalling
US$36 million. Most of the Group's owned hotels in Europe were able
to achieve underlying profit, with the exception of Madrid and
London, both of which carry substantial depreciation charges
following major recent renovations.
In America, there were mixed performances at individual hotels.
Miami benefitted from pent-up leisure demand and was able to
achieve a positive EBITDA and record an underlying profit. New York
and Boston both improved significantly from 2020 and almost
achieved positive EBITDA. Performance in Washington D.C. was more
challenging given the hotel's size and historic reliance on
corporate and group demand, which remained weak. The Group also
received some US$3 million in insurance proceeds for business
interruption at its hotels in America.
Management Business Performance
The Group's management business reported a positive EBITDA of
US$17 million and an underlying profit of US$5 million, a marked
improvement from the prior year when an EBITDA loss of US$12
million and underlying losses of US$30 million were incurred.
Particularly strong management fees were earned in several
hotels. In East Asia, The Landmark Mandarin Oriental, Hong Kong
served as a quarantine hotel and benefitted from strong demand,
achieving occupancy of over 60%. Hotels on the Chinese mainland,
including Shanghai and Sanya, also delivered good performances. In
EMEA, several leisure and resort destinations experienced pent-up
demand, especially in destinations where restrictions on travel
were limited. Dubai and Bodrum achieved occupancies and ADR that
exceeded 2019 levels, delivering record management fees.
NEAR-TERM PRIORITIES
Over the last two years or so, we have operated with highly
uncertain market conditions and this seems likely to continue for a
while. We have, however, adapted our strategy, operating models and
ways of working and we believe we are now a far more flexible and
agile business than previously.
In the near term, our priorities are to rebuild business levels
and win new business, enhance our "Colleague Experience", uphold
the brand's reputation for quality, and maintain our agile approach
to operations to improve profitability.
1) Rebuilding business: we must ensure that, as demand returns,
our hotels are winning market share. As we have seen, demand can
fluctuate quickly, and it is therefore critical that we are
proactive and flexible in how we reach and respond to customers.
Consumer behaviour is changing: direct and omni-channel bookings
have increased substantially, corporate travel remains muted and
demand for leisure-oriented experiences has rebounded strongly. We
have reorganised ourselves to adapt to customer behaviour more
quickly yet also need to be ready to adjust further as trends
evolve.
2) Enhancing our "Colleague Experience": our colleagues have
faced enormous pressure over the last two years. Throughout the
pandemic, they have continued to serve customers with passion and
pride, delivering the exceptional experiences Mandarin Oriental is
renowned for. It is critical that we recognise their contribution,
by improving compensation and benefits, driving engagement and
providing attractive learning and career development opportunities.
Hospitality talent is in high demand, across both hotels and other
industries, and we must focus on the attraction and retention of
colleagues as a strategic priority.
3) Upholding exceptional quality: long periods of low demand
have sometimes made it difficult to maintain quality standards.
Exceptional quality in service standards underpins the Mandarin
Oriental brand and we must ensure that we maintain our reputation
as a leader in luxury hospitality.
4) Maintaining operational agility: we continue to refine our
operating model in hotels in response to fluctuating demand. This
has included a review of organisation structures and the
introduction of labour management and productivity tools. Whilst
these developments will help to rebuild profitability, we will
balance their use with the need to maintain our exceptional service
standards and colleague morale.
STRATEGY- A WORLD OF FANS
Last year, we launched our new vision - A World of Fans - and we
remain confident that this vision, underpinned by our strategic
priorities, will advance both the value of the brand and the
profitability of the Group. Through A World of Fans, we see an
opportunity to build meaningful and long-lasting relationships with
a global community of Fans. Every customer interaction, physical or
digital, is an opportunity to create a Fan - someone who spends
with us, works with us, advocates for us or aspires to experience
life exceptionally with Mandarin Oriental luxury. We believe the
priorities outlined below remain the right foundation to drive
long-term business performance and growth.
-- Elevating our brand - the brand is the Group's most powerful
asset. We will grow our brand by continuing to drive the momentum
of our hotel and residences pipeline, expanding the global
footprint of Mandarin Oriental. In addition, we are starting to
establish a presence beyond the four walls of our hotels, both
through local hotel activities as well as continued investments in
innovative partnerships that extend the reach and value of our
brand, such as our investment in StayOne, a peer-to-peer luxury
holiday home rental platform, Shop M.O., our online retail store
and the O&MO Alliance, our strategic alliance with The Oberoi
Group.
-- Powering our core - we would like to have market-leading
positions in all our hotels. To achieve this, our commercial
organisation has recently been optimised to ensure we leverage the
full potential of the brand's extensive network, and to ensure that
customers receive personalised access to our full range of bespoke
luxury experiences across our portfolio. Through Fans of M.O., our
industry unique customer recognition programme, we have over one
million loyal Fans allowing us to create relevant, long-lasting and
mutually beneficial relationships with our customers. We are
continuing to invest heavily in our digital capabilities, and we
expect further significant improvements in our digital experience
through 2022. At our hotels, we are progressing well with our
roadmap to modernise core business systems and integrate insights
drawn from data into our service delivery to continually elevate
customer experiences to even higher levels.
-- Lifting our people - our people underpin the unique luxury
experience that defines Mandarin Oriental's service proposition.
The pandemic has brought new challenges, and we must respond to the
increased pressures on our colleagues by providing work
environments that are attractive, engaging and flexible. At the
same time, with a robust pipeline on the horizon, our Group will
experience substantial growth over the next five years and it is
essential that we retain our cultural DNA as we welcome new
colleagues into Mandarin Oriental. Our Mandarin Oriental colleagues
are extremely loyal, and in turn we are determined to reward that
loyalty by a continued commitment to maintaining an exceptional
colleague workplace experience.
-- Exceptional quality - our unwavering focus on delivering the
highest standards of luxury hospitality and experiences is at the
heart of the brand's reputation and is a pivotal competitive
differentiator. This must remain evident from the way we design our
hotels, known for creating a unique sense of place, through to the
delivery of warm, personalised and exceptional service consistently
throughout our portfolio. Reinforcing our product and service
standards is ever more critical as we plan for 21 hotels and 15
residences opening in the next five years.
CORE VALUES
Our core values of customer focus and sustainability are central
to the culture of Mandarin Oriental. These cut across all facets of
our strategy and are deeply engrained in Mandarin Oriental's
culture.
Customer focus
As we extend the reach of our brand, serving an increasingly
diverse customer base, we embed customer focus throughout the
organisation by removing the barriers to innovation, such as
unnecessary hierarchies and bureaucracy, and encouraging risk
taking and entrepreneurialism. We foster and promote collaboration,
to ensure that we enable our colleagues to constantly focus on
proactively delighting our customers.
Sustainability
Our culture extends to how we serve as stewards of our
communities. The Group drives sustainability commitments that align
with the United Nations Sustainable Development Goals and we are
focused on four areas: the planet, community and customers. We have
integrated sustainability throughout our operations and processes,
from sustainable development discussions with owners, to
environmental management systems that ensure continuous
environmental performance improvements, daily procurement decisions
that embed ethical and sustainability considerations and the
empowerment of our colleagues and guests to make a difference to
our planet and communities We were delighted that, with the support
of our colleagues, we were largely able to substantially reduce
single-use plastics from the operation of our hotels in 2021, and
are on track to eliminate them in 2022, in spite of the increased
pressure to return to relying on single-used plastics due to
COVID-19.
DEVELOPMENT STRATEGY AND BUSINESS DEVELOPMENT
The Group operates 36 hotels today. In 2021, three new projects
were announced in Hangzhou, Da Nang and a standalone branded
residences project in Beverly Hills and two further deals in Costa
Navarino and the Maldives have been announced since the start of
2022. Whilst there have been some delays in the progression of
project developments due to the pandemic, our pipeline remains
robust with 24 announced projects to open in the next five years,
comprising nine standalone hotel projects, 12 projects with hotel
and residences components and three standalone residences
projects.
Historically, as the Group was starting out and expanding its
brand into key gateway cities, it was sometimes necessary to invest
equity into the ownership of an asset to secure projects. Today,
with the strength of the brand, and our track record in creating
market leading hotels, this is not usually necessary. Our strategy
for portfolio expansion is therefore focused on growing through
management contracts. We are seeking to diversify into resort
destinations, broaden our reach in key cities where the brand is
currently absent and consolidate the brand's position by adding
second or third hotels in certain destinations. Our projects in the
Maldives and Grand Cayman (resort destinations), Zurich (a
strategically important city) and Mayfair and Dubai (second hotels
in these destinations) are examples that illustrate this. Over many
years, we have successfully built a portfolio of iconic hotels and
are now seeing the benefits this can bring in terms of momentum for
signing new projects. We expect this momentum to build as we seek
to secure more brand defining projects and new growth
opportunities.
By focusing on the management business, the Group is seeking to
accelerate its pace of growth and its scale, transitioning the
business away from a reliance on property and towards hotel and
brand management. Property ownership is still a strategic option
for the Group, where it can play a key role in securing projects,
but this will be done sparingly and only where alternatives are
scarce. Our current portfolio of owned hotels is continuously
reviewed and, provided we are able to retain long-term management
contracts, we would consider opportunities for value realisation.
This will strengthen the Group's balance sheet and enable us to
accelerate the growth of our management business.
During the year we completed an extensive restoration of
Mandarin Oriental Ritz, Madrid. Good progress was made with the
redevelopment of the site in Causeway Bay, Hong Kong which used to
house The Excelsior hotel. Completion of a new Grade A office and
retail complex remains on schedule for 2025. There has been no
change to the Group's strategy for this site, which is a valuable
non-core asset.
Looking ahead, we expect 2022 to be an extremely busy year. We
plan to open two new hotels in Mayfair and Luzern, three standalone
residences projects in New York, Beverly Hills and Barcelona, and
rebrand the Al Faisaliah Hotel and the Emirates Palace. In addition
to the two recently announced projects, I would also expect a
number of further projects to be signed during the year.
OUR PEOPLE
I would like to take this opportunity to express my appreciation
to each and every one of my colleagues for the tireless effort and
dedication they have demonstrated through the enormous challenges
we have faced during the upheavals of the last two years. The
commitment shown by our colleagues to delivering exceptional
service to our customers underpins Mandarin Oriental's brand
promise and is central to achieving A World of Fans.
LOOKING AHEAD
There continue to be numerous uncertainties associated with the
pandemic. We have adapted well to these conditions and taken
important steps to keep up with trends in consumer behaviours that
have been accelerated by the pandemic. We see great opportunities
ahead for the Group to grow rapidly on the foundations which have
been laid over the last few years. We are extremely well positioned
to grow and achieve scale as a hotel management and brand
management company, by delivering on our pipeline, continuing to
build deep relationships with our Fans, investing in our digital
reach and presence, reinforcing a strong "Colleague Experience",
and sustaining the exceptional quality standards that the brand is
known for.
We are confident in the recovery of luxury travel, and the
ability of Mandarin Oriental to deliver meaningful long-term
growth. We at Mandarin Oriental look forward to delivering
exceptional experiences to A World of Fans as barriers to travel
are gradually removed.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2021
2021 2020
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$m
Revenue (note 2) 316.9 - 316.9 183.7 - 183.7
Cost of sales (261.3) - (261.3) (233.0) - (233.0)
------- -------
Gross
profit/(loss) 55.6 - 55.6 (49.3) - (49.3)
Selling and
distribution
costs (20.7) - (20.7) (31.4) - (31.4)
Administration
expenses (104.1) - (104.1) (97.5) - (97.5)
Other operating
income/(expense) 43.2 0.6 43.8 (7.6) 0.7 (6.9)
Change in fair
value
of investment
property
under development - (73.9) (73.9) - (474.9) (474.9)
------- ----------- ------- ----------- ----------- -------
Operating loss
(note
3) (26.0) (73.3) (99.3) (185.8) (474.2) (660.0)
Financing charges (13.8) - (13.8) (14.2) - (14.2)
Interest income 1.1 - 1.1 1.6 - 1.6
Net financing
charges (12.7) - (12.7) (12.6) - (12.6)
Share of results
of
associates and
joint
ventures (note 4) (21.8) - (21.8) (26.8) - (26.8)
Loss before tax (60.5) (73.3) (133.8) (225.2) (474.2) (699.4)
Tax (note 5) (7.6) - (7.6) 19.4 - 19.4
------- ----------- ------- ----------- ----------- -------
Loss after tax (68.1) (73.3) (141.4) (205.8) (474.2) (680.0)
------- ----------- ------- ----------- ----------- -------
Attributable to:
Shareholders of
the
Company (notes 6
& 7) (68.1) (73.3) (141.4) (205.9) (474.2) (680.1)
Non-controlling
interests - - - 0.1 - 0.1
------- ----------- ------- ----------- ----------- -------
(68.1) (73.3) (141.4) (205.8) (474.2) (680.0)
------- ----------- ------- ----------- ----------- -------
USc USc USc USc
Loss per share (note 6)
- basic (5.39) (11.19) (16.30) (53.84)
- diluted (5.39) (11.19) (16.30) (53.84)
------- ------- ----------- -------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2021
2021 US$m 2020
US$m
Loss for the year (141.4) (680.0)
Other comprehensive (expense)/income
Items that will not be reclassified to profit
or loss:
--------- -------
Remeasurements of defined benefit plans 3.5 5.2
Tax on items that will not be reclassified (0.6) (0.9)
2.9 4.3
Items that may be reclassified subsequently
to profit or loss:
--------- -------
Net exchange translation differences
* net (losses)/gains arising during the year (70.7) 80.0
Cash flow hedges
- net gains/(losses) arising during the
year 11.6 (11.4)
Tax relating to items that may be reclassified (1.3) 1.9
Share of other comprehensive (expense)/income
of associates
and joint ventures (2.0) 1.8
(62.4) 72.3
Other comprehensive (expense)/income for
the year, net of tax (59.5) 76.6
--------- -------
Total comprehensive expense for the year (200.9) (603.4)
--------- -------
Attributable to:
Shareholders of the Company (200.7) (603.9)
Non-controlling interests (0.2) 0.5
--------- -------
(200.9) (603.4)
--------- -------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2021
2021 2020
US$m US$m
Net assets
Intangible assets 46.7 45.4
Tangible assets (note 8) 1,098.2 1,181.5
Right-of-use assets 273.3 297.4
Investment property under development (note
9) 2,462.0 2,528.3
Associates and joint ventures 201.5 231.6
Other investments 16.5 16.1
Deferred tax assets 13.7 17.8
Pension assets 7.1 5.5
Non-current debtors 8.9 5.1
Non-current assets 4,127.9 4,328.7
Stocks 5.3 6.0
Current debtors 68.8 71.7
Current tax assets 2.2 3.1
Bank and cash balances 212.8 164.6
------- -------
Current assets 289.1 245.4
------- -------
Current creditors (157.2) (144.6)
Current borrowings (note 10) (2.5) (64.2)
Current lease liabilities (6.3) (7.0)
Current tax liabilities (9.9) (10.1)
------- -------
Current liabilities (175.9) (225.9)
------- -------
Net current assets 113.2 19.5
Long-term borrowings (note 10) (727.8) (606.6)
Non-current lease liabilities (147.4) (170.1)
Deferred tax liabilities (50.1) (47.1)
Pension liabilities (0.3) (0.3)
Non-current creditors (3.2) (10.9)
------- -------
Non-current liabilities (928.8) (835.0)
------- -------
3,312.3 3,513.2
------- -------
Total equity
Share capital 63.2 63.2
Share premium 500.5 499.7
Revenue and other reserves 2,745.1 2,946.6
------- -------
Shareholders' funds 3,308.8 3,509.5
Non-controlling interests 3.5 3.7
------- -------
3,312.3 3,513.2
------- -------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2021
Attributable
to Attributable
Asset shareholders to non-
Share Share Capital Revenue revaluation Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
2021
At 1st January 63.2 499.7 260.3 (240.3) 2,943.4 (9.7) (7.1) 3,509.5 3.7 3,513.2
Total
comprehensive
income - - - (137.8) - 10.6 (73.5) (200.7) (0.2) (200.9)
Transfer - 0.8 (1.2) 0.4 - - - - - -
At 31st December 63.2 500.5 259.1 (377.7) 2,943.4 0.9 (80.6) 3,308.8 3.5 3,312.3
-----------
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
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Revenue reserves as at 31st December 2021 included cumulative
fair value loss on the investment property under development of
US$616.1 million (2020: US$542.2 million).
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2021
2021 2020
US$m US$m
Operating activities
------ -------
Operating loss (note 3) (99.3) (660.0)
Depreciation, amortisation and impairment 68.5 124.2
Other non-cash items 71.2 472.8
Movements in working capital 0.9 1.4
Interest received 0.4 1.8
Interest and other financing charges paid (13.5) (14.1)
Tax paid (1.8) (9.6)
Cash flows from operating activities 26.4 (83.5)
Investing activities
------ -------
Purchase of tangible assets (15.3) (38.9)
Additions to investment property under development (19.7) (21.6)
Purchase of intangible assets (6.1) (5.3)
Refund on Munich expansion (note 13) 13.0 -
Purchase of other investments (0.3) (0.6)
Purchase of an associate - (2.0)
Advance to associates and joint ventures (7.1) (40.5)
Repayment of loans to associates and joint
ventures 3.0 0.4
Cash flows from investing activities (32.5) (108.5)
Financing activities
------ -------
Drawdown of borrowings 130.6 88.4
Repayment of borrowings (66.4) (0.1)
Principal elements of lease payments (3.3) (6.0)
Cash flows from financing activities 60.9 82.3
------ -------
Net increase/(decrease) in cash and cash
equivalents 54.8 (109.7)
Cash and cash equivalents at 1st January 164.6 270.7
Effect of exchange rate changes (6.6) 3.6
------ -------
Cash and cash equivalents at 31st December 212.8 164.6
------ -------
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 since the COVID-19 pandemic began. Prior to the
pandemic the Group had significant headroom in its committed debt
facilities and cash balances available to finance operating losses,
which was increased with new debt facilities in February 2021 .
Operating conditions generally improved towards the end of 2021,
with 34 hotels open in the second quarter and additions of two new
hotels in Bosphorus, Istanbul and Shenzhen in August 2021 and
January 2022 respectively. In 2021, the Group recorded a total cash
inflow from operating activities of US$26 million, a significant
improvement from a total cash outflow from operating activities of
US$84 million in 2020.
A return of profitability by the Group will be dependent on the
level of travel restrictions that are maintained by
governments.
The Group's balance sheet is underpinned by 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$5.0 billion at 31st December
2021.
At 31st December 2021, the Group had total liquidity of US$507
million, comprising US$294 million of undrawn committed facilities
and US$213 million of cash balances. The Group's facilities are not
subject to any cash flow covenants and had an average remaining
tenor of 2.1 years. This robust liquidity position enables the
Group to sustain a prolonged downturn in the hospitality industry
should that eventuate as well as meet its capital commitments.
Overall, the Group's balance sheet position remains strong.
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 operate
at substantially reduced levels of business as a consequence of
travel restrictions maintained by governments 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 financial 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
2021 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 adopted the following amendments for the annual
reporting period commencing 1st January 2021.
Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7,IFRS 4 and IFRS 16 (effective 1st January 2021)
The amendments provide practical expedient from certain
requirements under the IFRSs as a result of the reform which affect
the measurement of financial assets, financial liabilities and
lease liabilities, and a number of reliefs for hedging
relationships. The Group applied the amendments from 1st January
2021 and there is no significant impact on the Group's consolidated
financial statements.
COVID-19 Related Rent Concessions beyond 30th June 2021:
Amendment to IFRS 16 Leases (effective 1st April 2021)
The Group adopted and applied the practical expedient of the
COVID-19 Related Rent Concessions: Amendment to IFRS 16 Leases,
published in June 2020 ('2020 amendment'), in the 2020 annual
financial statements. The 2021 amendment extends the practical
expedient in the 2020 amendment to eligible lease payments due on
or before 30th June 2022. By using the 2021 amendment, the Group
continues to apply the practical expedient consistently to all
lease contracts with similar characteristics and in similar
circumstances, and does not assess these concessions as lease
modifications.
Apart from the above, there are no other amendments which are
effective in 2021 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
2021 2020
US$m US$m
By business activity:
Hotel ownership 278.9 161.4
Hotel & Residences branding and management 48.5 27.1
Less: intra-segment revenue (10.5) (4.8)
316.9 183.7
------ -----
By geographical area:
Asia 132.4 96.9
Europe, Middle East and Africa ('EMEA') 137.8 66.1
America 46.7 20.7
316.9 183.7
------ -----
From contracts with customers:
Recognised at a point in time 111.5 72.5
Recognised over time 185.6 94.8
------ -----
297.1 167.3
From other sources:
Rental income 19.8 16.4
------ -----
316.9 183.7
------ -----
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING LOSS FROM SUBSIDIARIES
2021 2020
US$m US$m
By business activity:
Hotel ownership 25.9 (49.2)
Hotel & Residences branding and management 16.6 (12.4)
------ -------
Underlying EBITDA from subsidiaries 42.5 (61.6)
Non-trading items (note 7)
------ -------
Change in fair value of investment property under
development (73.9) (474.9)
Change in fair value of other investments 0.6 0.7
(73.3) (474.2)
------ -------
EBITDA from subsidiaries (30.8) (535.8)
Underlying depreciation, amortisation and impairment
from subsidiaries (68.5) (124.2)
------ -------
Operating loss (99.3) (660.0)
------ -------
By geographical area:
Asia (8.6) (18.6)
EMEA 59.7 (10.5)
America (8.6) (32.5)
------ -------
Underlying EBITDA from subsidiaries 42.5 (61.6)
------ -------
In relation to the COVID-19 pandemic, the Group received
government grants and rent concessions of US$35.8 million (2020:
US$31.9 million) and US$3.4 million (2020: US$2.3 million)
respectively for the year ended 31st December 2021. 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$30.9 million, which was reflected in the underlying loss of
2020.
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net
and (loss)/ financing Net
EBITDA amortisation profit charges Tax loss
US$m US$m US$m US$m US$m US$m
2021
By business activity:
Hotel ownership (1.7) (14.5) (16.2) (4.5) (0.4) (21.1)
Other (0.1) (0.6) (0.7) - - (0.7)
------ ------------ --------- --------- ----- ------
(1.8) (15.1) (16.9) (4.5) (0.4) (21.8)
------ ------------ --------- --------- ----- ------
By geographical
area:
Asia (2.2) (10.0) (12.2) (2.3) 1.5 (13.0)
EMEA (2.5) (2.8) (5.3) (0.7) (1.9) (7.9)
America 2.9 (2.3) 0.6 (1.5) - (0.9)
------ ------------ --------- --------- ----- ------
(1.8) (15.1) (16.9) (4.5) (0.4) (21.8)
------ ------------ --------- --------- ----- ------
2020
By business activity:
Hotel ownership (12.9) (12.7) (25.6) (3.2) 2.4 (26.4)
Other 0.3 (0.6) (0.3) (0.1) - (0.4)
------ ------------ --------- --------- ----- ------
(12.6) (13.3) (25.9) (3.3) 2.4 (26.8)
------ ------------ --------- --------- ----- ------
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)
------ ------------ --------- --------- ----- ------
In relation to the COVID-19 pandemic, the results of associates
and joint ventures included the Group's share of government grants
and rent concessions of US$1.4 million (2020: US$3.7 million) and
US$0.1 million (2020: US$0.1 million) respectively for the year
ended 31st December 2021.
5. TAX
2021 2020
US$m US$m
Tax (charged)/credited to profit and loss is
analysed as follows:
Current tax (2.5) 0.6
Deferred tax (5.1) 18.8
----- -----
(7.6) 19.4
----- -----
By business activity:
Hotel ownership (5.8) 19.5
Hotel & Residences branding and management (1.8) (0.1)
----- -----
(7.6) 19.4
----- -----
By geographical area:
Asia (2.0) 0.5
EMEA (4.8) 20.6
America (0.8) (1.7)
----- -----
(7.6) 19.4
----- -----
Tax relating to components of other comprehensive income is
analysed as follows:
Remeasurements of defined benefit plans (0.6) (0.9)
Cash flow hedges (1.3) 1.9
----- -----
(1.9) 1.0
----- -----
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 charges of US$0.4 million (2020: tax credits
of US$2.4 million) (note 4).
6 . LOSS PER SHARE
Basic loss per share is calculated using loss attributable to
shareholders of US$141.4 million (2020: US$680.1 million) and the
weighted average number of US$1,263.4 million (2020: 1,263.2
million) shares in issue during the year.
Diluted loss per share is calculated using loss attributable to
shareholders of US$141.4 million (2020: US$680.1 million) and the
weighted average number of 1,263.8 million (2020: 1,263.2 million)
shares in issue after adjusting for the number of shares which are
deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during
the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2021 2020
Weighted average number of shares for basic
loss
per share calculation 1,263.4 1,263.2
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans 0.4 -
------- -------
Weighted average number of shares for diluted
loss
per share calculation 1,263.8 1,263.2
------- -------
Additional basic and diluted loss per share are also calculated
based on underlying loss attributable to shareholders. A
reconciliation of loss is set out below:
2021 2020
Basic Diluted Basic Diluted
loss loss loss loss
per share per share per share per share
US$m USc USc US$m USc USc
Loss attributable
to shareholders (141.4) (11.19) (11.19) (680.1) (53.84) (53.84)
Non-trading items
(note 7) 73.3 474.2
Underlying loss
attributable
to shareholders (68.1) (5.39) (5.39) (205.9) (16.30) (16.30)
------- -------
7 . NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investment property under development and
investments which are measured at fair value through profit and
loss; gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable
intangible assets, associates and joint ventures and other
investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other
credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2021 2020
US$m US$m
Change in fair value of investment property
under development (note 9) (73.9) (474.9)
Change in fair value of other investments 0.6 0.7
------ -------
(73.3) (474.2)
------ -------
8 . TANGIBLE ASSETS
2021 2020
US$m US$m
Opening net book value 1,181.5 1,174.6
Exchange differences (42.3) 64.4
Additions 14.0 40.4
Disposals - (0.3)
Depreciation and impairment charge (55.0) (97.6)
------- -------
Closing net book value 1,098.2 1,181.5
------- -------
Freehold properties include a property of US$93.5 million (2020:
US$98.1 million), which is stated net of tax increment financing of
US$18.0 million (2020: US$18.8 million) (note 11).
9. INVESTMENT PROPERTY UNDER DEVELOPMENT
2021 2020
US$m US$m
Opening fair value 2,528.3 2,967.7
Exchange differences (15.0) 12.1
Additions 22.6 23.4
Decrease in fair value (73.9) (474.9)
Closing fair value 2,462.0 2,528.3
------- -------
10. BORROWINGS
2021 2020
US$m US$m
Bank loans 726.5 666.7
Other borrowings 3.8 4.1
730.3 670.8
----- -----
Current 2.5 64.2
Long-term 727.8 606.6
----- -----
730.3 670.8
----- -----
11 . TAX INCREMENT FINANCING
2021 2020
US$m US$m
__
----- -----
Netted off against the net book value of
property (note 8) 18.0 18.8
----- -----
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
In light of the substantially reduced levels of business due to
the impact of COVID-19 pandemic, no interim and final dividends in
respect of the 2021 and 2020 financial years have been declared or
proposed by the Board.
13. REFUND ON MUNICH EXPANSION
The Group withdrew from the expansion project of Mandarin
Oriental, Munich and received cash refund on the deposits of land
and related costs in October 2021.
14. CAPITAL COMMITMENTS
At 31st December 2021, total capital commitments of the Group
amounted to US$550.3 million (2020: US$728.7 million). This
primarily related to capital commitments for the Causeway Bay site
under development, which is expected to complete in 2025.
15. RELATED PARTY TRANSACTIONS
Jardine Strategic Limited ('JSL') became the parent company of
the Group following the completion of the simplification of the
Group's parent company structure in April 2021. Jardine Strategic
Holdings Limited and JMH Bermuda Limited, a wholly-owned subsidiary
of the Group's ultimate parent company, Jardine Matheson Holdings
Limited ('JMH'), amalgamated under the Bermuda Companies Act to
form JSL, a wholly-owned subsidiary of JMH. Both JMH and JSL 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 2021, the Group managed six (2020: six) associate and
joint venture hotels and received management fees of US$6.6 million
(2020: US$4.2 million) based on long-term management agreements on
normal commercial terms.
The Group provided hotel management services to Hongkong Land
('HKL'), a subsidiary of JMH. Total management fees received from
HKL in 2021 amounted to US$2.3 million (2020: US$1.2 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 2021 and 2020 (due to underlying
losses).
During 2021, in respect of the Causeway Bay site under
development, the Group paid consultancy fees of US$1.2 million
(2020: US$2.1 million) to HKL in consideration for project
management consultancy services. In addition, Gammon Construction
Limited ('GCL'), a joint venture of JMH, completed value of works
of US$17.9 million (2020: US$16.3 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 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 Company's 2021 Annual Report (the
'Report').
1. Economic Risk
The Group's business is exposed to the risk of adverse
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 its strategic objectives fully.
These developments could also adversely affect travel patterns,
impacting demand for the Group's products and services.
Mitigation Measures
-- Monitor the volatile macroeconomic environment and consider
economic factors in strategic and financial planning processes.
-- Make agile adjustments to existing business plans and
explore new business streams and new markets.
-- Review pricing strategies.
-- Insurance programme covering property damage and business
interruption.
2. Commercial 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 highly competitive global hotel
industry. Failure to compete effectively in terms of product
quality, service levels or price can adversely affect 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 reduce
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 regarding acquiring
new hotel properties and undertaking significant 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.
As a result, they 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.
Mitigation Measures
-- Utilise market intelligence and deploy strategies for
business-to-consumer businesses.
-- Establish customer relationship management programme and
digital commerce capabilities.
-- Engage in longer-term contracts and proactively approach
suppliers for contract renewals.
-- Re-engineer existing business processes.
3. Financial and Treasury Risk
The Group's activities expose it to a variety of financial
risks, comprising market risk, credit risk and liquidity risk.
Market risk facing the Group includes i) foreign exchange risk
from future commercial transactions, net investments in foreign
operations and net monetary assets and liabilities that are
denominated in a currency that is not the entity's functional
currency; ii) interest rate risk through the impact of rate changes
on interest bearing liabilities and assets; and iii) securities
price risk because of its equity investments and limited
partnership investment funds which are measured at fair value
through profit and loss, and debt investments which are measured at
fair value through other comprehensive income.
The Group's credit risk is primarily attributable to deposits
with banks, contractual cash flows of debt investments carried at
amortised cost and those measured at fair value through other
comprehensive income, credit exposures to customers and derivative
financial instruments with a positive fair value.
The Group exercises prudent liquidity risk management which
includes managing the profile of debt maturities and funding
sources, maintaining sufficient cash and marketable securities, and
ensuring the availability of funding from an adequate amount of
committed credit facilities and the ability to close out market
positions.
Mitigation Measures
-- Limit foreign exchange and interest rate risks to provide
a degree of certainty about costs.
-- The investment of the Group's cash resources is managed
so as to minimise risk, while seeking to enhance yield.
-- Appropriate credit guidelines are in place to manage counterparty
risk.
-- When economically sensible to do so, borrowings are taken
in local currency to hedge foreign exchange exposures on
investments.
-- A portion of borrowings is denominated in fixed rates. Adequate
headroom in committed facilities is maintained to facilitate
the Group's capacity to pursue new investment opportunities
and to provide some protection against market uncertainties.
The Group's funding arrangements are designed to keep an
appropriate balance between equity and debt from banks and
capital markets, both short and long term in tenor, to give
flexibility to develop the business.
-- The Group's Treasury operations are managed as cost centres
and are not permitted to undertake speculative transactions
unrelated to underlying financial exposures.
The detailed steps taken by the Group to manage its exposure to
financial risk are set out in the Financial Review and a note to
the Financial Statements in the Report.
4. Pandemic, Terrorism and Natural Disasters
A global or regional pandemic would impact the Group's business,
affecting 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 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.
Management recognise that there is an increased talent
management and labour shortage risk, primarily due to the
pandemic.
Mitigation Measures
-- Flexible work arrangements and compliance with hygiene
protocols.
-- Supply chain stabilisation includes sourcing backup suppliers
and better coordination with logistics partners.
-- Engage external consultants for climate risk analysis.
-- Business Continuity Plans are tested and audited periodically.
-- Insurance programmes that provide robust cover for natural
diasters
5. Key Agreements
The Group's business relies upon joint venture and partnership
agreements, property leasehold arrangements, management, license,
branding and services agreements or other key contracts.
Accordingly, 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 and the wider Group.
Mitigation Measures
-- Strengthen existing relationships with partners through
complying with partnership agreements, property leasehold
arrangements, management, license, branding and services
agreements or other key contracts.
-- Engage in longer-term contracts and proactively approach
suppliers for contract renewals.
-- Regular communication with partners and strengthen quality
assurance programmes.
-- Engage external consultants and legal experts where necessary.
6. 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. Accordingly,
any damage to the Group's brand equity or reputation, including as
a result of adverse effects relating to health and safety, acts or
omissions by Group personnel, 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.
Mitigation Measures
-- Perform regular cybersecurity and data vulnerability assessment
at least annually and/or penetration testing to identify
weaknesses.
-- Active monitoring and use of social media
-- Engage external consultants and experts where necessary.
7. 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 can 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 in which the Group
operates, could adversely affect the Group's business.
Mitigation Measures
-- Stay connected and informed of relevant new and draft regulations.
-- Engage external consultants and legal experts where necessary.
-- Raise awareness via principal's brand conference with an
annual update on new regulations that may have been implemented
in other markets.
8. Cybersecurity Risk
The Group's business is ever more reliant on technology in its
operations and faces increasing cyberattacks from groups targeting
both individuals and businesses. As a result, the privacy and
security of guests and corporate information are at risk of being
compromised through a breach of our or our suppliers' IT systems or
the unauthorised or accidental 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, reputation damage or other costs.
Mitigation Measures
-- Engage external consultants to perform assessments on the
business units with industry benchmarks.
-- Define cybersecurity programme and centralised function
to provide oversight, manage cybersecurity matters, and
strengthen cyber defences and security measures.
-- Perform regular vulnerability assessments and/or penetration
testing to identify weaknesses.
-- Maintain disaster recovery plans and backup for data restoration.
-- Arrange security awareness training and phishing testing
to raise users' cybersecurity awareness.
9. People Risk
The competitiveness of the Group's businesses depends on the
quality of the people that it attracts and retains. Unavailability
of needed human resources may impact the ability of the Group's
businesses to operate at capacity, implement initiatives and
pursue opportunities.
The pandemic has accelerated corporate investments in digital
projects and stimulated global consumer demand for e-commerce.
This has created heightened demand and competition across industries
for various skillsets, particularly in IT and supply chain.
Pandemic-related travel restrictions and a more stringent approach
to issuing work visas to non-locals in some of the key markets
have also disrupted the availability of labour across borders,
exacerbating labour shortages as economies rebound.
Mitigation Measures
-- Ensure proactive manpower planning and succession planning
are in place.
-- Enhance modern employer branding, training for colleagues,
compensation and benefits, talent development plan.
-- Implement strategy to promote diversity and inclusion across
the Group.
-- Provide employee retention programmes .
10. Environmental and Climate Risk
Global climate change has led to a trend of increased frequency
and intensity of potentially damaging natural events for the
Group's assets and operations. With interest in sustainability
surging in recent years from investors, governments and other
interested parties, expectations by regulators and other
stakeholders for accurate corporate sustainability reporting and
commitments towards carbon neutrality and other sustainability
related goals are also growing. This brings increasing challenges
to the Group and its businesses to meet key stakeholders'
expectations.
Mitigation Measures
-- Executive Advisory Panel, Sustainability Leadership Council
and Hotel Sustainability Committees have been in place
to mobilise and coordinate sustainability efforts across
the Group.
-- Renewed environmental targets for 2025 and 2030 have been
determined per property through a Group-wide inventory
management plan.
-- Environmental initiatives span across energy reduction,
carbon reduction, renewable energy, water conservation,
waste reduction and switching to LED lighting.
-- Perform climate risk assessments and adaptation action
plans across the Group.
-- Identify environmental impact opportunities that address
multiple problems and risks and gaps that are generally
relevant to all properties and society in general.
-- Assess emerging ESG reporting standards and requirements,
and align the Group's disclosures to best market practice.
Mandarin Oriental International Limited
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
a) the consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations
adopted by the International Accounting Standards Board; and
b) the sections of the Company's 2021 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
Matthew Bishop
Directors
Dividend Information for Shareholders
In light of the substantially reduced levels of business, no
final dividend in respect of the 2021 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 36 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$5.0 billion as at 31st December
2021.
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 primary 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 / Matthew Bishop (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
2021 can be accessed through the internet at '
www.mandarinoriental.com '.
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