Orient-Express Hotels Reports First Quarter 2008 Results
Posted on Wed, May. 07, 2008
By Orient Express Hotels Ltd
HAMILTON, Bermuda, May 7 --
First Quarter 2008 highlights
- First Quarter Total Revenues of US$119.9 Million, Up 23% Over Prior Year
- Same Store RevPAR up 14% in U.S. Dollars, 12% in Local Currency
- EBITDA of US$16.4 Million, Up 8% Over Prior Year
- First Quarter Net Loss From Continuing Operations of US$2.4 Million,
Compared With a Net Loss From Continuing Operations of US$2.5 Million in the
Prior Year
- EPS Loss From Continuing Operations of US$0.06 per Common Share.
Adjusted EPS Loss of US$0.09 per Common Share
Orient-Express Hotels Ltd. (NYSE: OEH) (http://www.orient-express.com),
owners or part-owners and managers of 51 luxury hotels, restaurants, tourist
trains and river cruise properties operating in 25 countries, today announced
its results for the first quarter ended March 31, 2008.
The first quarter is traditionally a loss-making period for the Company
because several of its European hotels are closed for most of the quarter and
the Venice Simplon-Orient-Express and Royal Scotsman tourist trains and
Afloat in France canal cruises do not operate for most of the quarter.
The net loss for the period was US$4.3 million (loss of US$0.10 per
common share) on revenue of US$119.9 million, compared with a net loss of
US$3.7 million (loss of US$0.09 per common share) on revenue of US$97.7
million in the first quarter of 2007. The net loss from continuing operations
for the period was US$2.4 million (loss of US$0.06 per common share) compared
with a net loss of US$2.5 million (loss of US$0.06 per common share) in the
first quarter of 2007. The adjusted net loss from continuing operations for
the period was US$4.0 million (loss of US$0.09 per common share) compared
with an adjusted net loss of US$2.6 million (loss of US$0.06 per common
share) in the first quarter of 2007.
Business Highlights
Revenue from Owned Hotels was up US$17.4 million or 23% over the prior
year quarter, with growth across all regions.
In Europe, Grand Hotel Europe in St. Petersburg showed the strongest
revenue growth with revenues up US$3.3 million, or 53% (41% in local
currency). Reid's Palace Hotel in Madeira, La Residencia, Mallorca and Le
Manoir aux Quat'Saisons, Oxfordshire each recorded revenue growth.
In the North American region, every property showed revenue growth, with
same store RevPAR up 12%. The performance of Maroma Resort and Spa, Riviera
Maya, and Casa de Sierra Nevada, San Miguel de Allende, both Mexican
properties;
La Samanna, St Martin, French West Indies; and The Inn at Perry Cabin, St
Michaels, Maryland underpinned the US$3.5 million or 15% revenue growth.
In the Rest of World region revenue increased by US$7.9 million or 24%
with Southern Africa, South America and Asia Pacific regions all performing
ahead of 2007 levels.
EBITDA before Real Estate was US$16.9 million, up 8% year-over-year.
EBITDA margins in the U.S. were up from 26% to 27%. Overall, margins were
down from 16% to 14%, impacted by the open but not yet refurbished Hotel das
Cataratas at Iguacu Falls, Brazil, the impact of the strong Euro on
properties closed during the quarter and increased lower-margin non-room
revenues. EBITDA after Real Estate for the quarter was US$16.4 million, up 8%
year-over-year.
Paul White, President and Chief Executive Officer, said: "Overall,
revenues in our traditional first quarter earning businesses have grown as
expected. Same store Owned Hotels total revenues, which were up 18%, grew
faster than same store RevPAR growth of 14%. This performance indicates
progress in our strategy and in various initiatives for maximizing all
revenues from both room-related and non-room activities."
In recent weeks, the Company has:
- Opened Las Casitas del Colca, a luxury 20-room eco-style lodge in the
heart of the rural Andes in Peru.
- Agreed in principle to acquire the 14-room Royal Chundu Lodge in
Zambia, situated next to the Zambezi River and a short drive from the famous
Victoria Falls. The hotel site includes a half-mile long island of pristine
jungle and is due to open in early 2009 when it will extend the
Orient-Express Safaris experience for high-end travelers.
- Agreed in principle to acquire a 50% stake coupled with a management
agreement for a new built, 126-key resort in Puglia, Italy. The property,
which will complement the Company's existing Italian hotels, is due to open
in mid-2009. It comprises a mix of hotel rooms and houses built in
traditional Puglianese "village" style, includes extensive spa and resort
facilities, with access to an 18-hole championship golf course and direct
access to the Adriatic Sea.
- Completed the first phase of its detailed review of real estate
opportunities. This review covered existing projects in St Martin and at
Keswick Hall, Charlottesville, as well as potential projects in Mexico,
Portugal and Thailand. As a result of this process, the Company has
contracted with S&P Real Estate, an international full-service real estate
company that specializes in the envisioning, design, marketing and sale of
resort and luxury real estate properties ( http://www.sprealestate.com ). S&P
Real Estate will begin immediately marketing the Cupecoy Yacht Club
condominiums and have been helping the Company to assess the phasing and
pricing of future sales in light of current market conditions.
Regional Performance
In the quarter overall, revenues were up 23% from US$97.7 million to
US$119.9 million. EBITDA for the quarter was up 8% from US$15.2 million to
US$16.4 million. Same store RevPAR growth of Owned Hotels was up 14% in U.S.
dollars (12% in local currency).
Europe: For the first quarter, revenues from Owned Hotels were up 28%
year-over-year from US$21.1 million to US$27.1 million. The EBITDA loss was
US$3.7 million in 2008 versus US$3.6 million in the prior year. Same store
RevPAR increased by 30% in U.S dollars and by 16% in local currency. This
local currency growth was primarily driven by Grand Hotel Europe, which
benefited from a strong local market, the addition of 98 renovated rooms, and
the introduction of an historic floor concept offering full butler service.
However, as for many businesses operating in Russia, high inflation is
becoming a challenge. Reid's Palace, La Residencia and Le Manoir aux
Quat'Saisons all had good year-on-year revenue growth. At Le Manoir aux
Quat'Saisons, the Company has signed an agreement with its founder and two
Michelin star chef Raymond Blanc, extending his services until 2012. The
Italian hotels were, as in previous years, closed for most of the first
quarter, thereby generating EBITDA losses due to their fixed cost bases. The
overall EBITDA loss for Europe was higher than the prior year when reported
in U.S. dollars due to the 14% year-on-year appreciation of the Euro versus
the U.S. dollar.
North America: Revenue increased by 15% to US$26.7 million compared with
the first quarter of 2007, and EBITDA increased by 19% to US$7.3 million.
Same store RevPAR for the region increased by 12% from US$285 to US$319. In
particular, Maroma Resort and Spa continued to perform well, driven by rate,
occupancy and non-room revenues. Casa de Sierra Nevada also performed well,
having completed refurbishments in 2007, contributing a positive EBITDA
compared with an EBITDA loss in the first quarter of 2007. Windsor Court in
New Orleans was impacted by the early timing of Easter in the first quarter
but was able to sustain revenues at the same level as last year.
Southern Africa: Revenue increased by 10% to US$11.7 million compared
with 2007, and EBITDA increased by 6% to US$4.5 million. Same store RevPAR
for the region increased by 11% from US$181 to US$202 (16% in local
currency). The Mount Nelson in Cape Town celebrated the opening of the new
Librisa Spa, which has been eagerly anticipated by guests and locals alike.
South America: Revenue increased to US$17.6 million from US$12.6 million
in the first quarter of 2007. EBITDA was US$5.6 million in both 2008 and the
prior year. Same store RevPAR for the region increased by 6% from US$336 to
US$357. Hotel das Cataratas was acquired in October 2007 (and so is not
included in the prior year results) generating US$3.3 million of revenue in
the quarter. The hotel is currently trading around the breakeven level and
will commence its refurbishment program in the second quarter.
Asia Pacific: Revenue for the first quarter increased by 20% to US$11.5
million when compared with last year. EBITDA increased 16% from US$2.2
million to US$2.6 million. Same store RevPAR for the region increased by 15%
from US$138 to US$159 (10% in local currency). The region continued to be
impacted in the current quarter by the recent civil unrest in Burma.
Excluding the Governor's Residence in Rangoon, the region recorded an EBITDA
increase of 25%. The other hotels in the region performed well when compared
with last year, except for the Observatory in Sydney which benefited from a
major sports tournament in the first quarter of 2007 and experienced a
tighter corporate market in the current year.
Hotel management and part-ownership interests: First quarter EBITDA was
US$5.2 million compared with US$4.6 million last year. Approximately half of
the growth over last year was driven by the performance of the Peru hotels,
with Hotel Ritz Madrid and Charleston Place also showing improved performance
over last year.
Restaurants: Revenue from restaurants in the first quarter was US$4.9
million compared with US$5.3 million last year, and EBITDA was US$0.6 million
compared with US$0.9 million last year. The results of '21' Club were
impacted by a reduction in volume of corporate customers, although the
average check was almost in line with last year.
Trains and Cruises: Revenue increased by 6% to US$11.2 million compared
with the first quarter in 2007, and EBITDA increased by 34% to US$1.5
million. As in the prior quarter, this segment, which includes the Road to
Mandalay cruise operation, was impacted year-over-year by the unrest in
Burma. Excluding this operation, the Trains and Cruises business increased
revenues by 13%, with strong growth from PeruRail and early signs of a strong
season for the Venice Simplon-Orient-Express.
Central costs: In the first quarter, central costs were US$6.8 million
and US$5.7 million in first quarter of 2007. The charge in the current
quarter reflects the high sterling based component of central costs and also
includes, as required under SFAS 123R, a charge for stock options and
performance share awards issued of US$0.8 million.
Real Estate: In the first quarter, Cupecoy Yacht Club recorded an EBITDA
loss of US$0.4 million compared with a loss of US$0.2 million in the same
period in 2007. The pace of sales was slower than previously anticipated due
to property market conditions affected by the global credit crunch. We now
anticipate sales this year will be lower than previously expected. There were
no recorded sales of the villas at La Samanna. There was one lot sale at
Keswick Hall (none in the first quarter of last year).
Interest: The interest charge for the quarter was US$12.9 million
compared with US$11.4 million in the fourth quarter of 2007 and US$10.5
million in the first quarter of 2007. The increased charge reflects higher
borrowings to finance the Company's investments as well as the currency
impact of non-U.S. dollar borrowings.
Tax: The tax benefit reported by the Company in the first quarter was
US$2.4 million compared with a tax benefit of US$1.5 million in the prior
year. The Company's reported tax rate, including earnings from consolidated
and unconsolidated operations and also discontinued operations, was 35.4% in
2008, compared with 29.5% for the same period in 2007. The difference in the
reported tax rates over the two years reflects changes to the mix of income
from lower to higher tax rate jurisdictions.
Discontinued Operations: The charge in the first quarter was US$2.0
million. This represents the Bora Bora Lagoon Resort, French Polynesia, which
is in the early stages of being marketed for sale by Jones Lang LaSalle.
Investment: Total capital expenditure in the first quarter was US$20.8
million, which included various projects at, in particular, El-Encanto, Hotel
Cipriani, Grand Hotel Europe, Copacabana Palace, Le Manoir aux Quat'Saisons
and Hotel de la Cite.
A total of US$8.4 million was invested during the quarter in the
Company's real estate developments at Cupecoy Yacht Club and the villas at La
Samanna.
Balance Sheet: At March 31, 2008, the Company's total debt was US$848.3
million and cash balances amounted to US$102.3 million, giving a total net
debt of US$746.0 million compared with total net debt of US$692.0 million at
the end of 2007.
At March 31, 2008, debt was approximately 19% fixed and 81% floating. The
weighted average maturity of the debt was 3.7 years and the weighted average
interest rate (including margin) was 5.82%. The Company had cash and funds
available under revolving credit facilities totaling US$137.2 million.
Subsequent Events:
In April 2008, the Company renewed a US$47 million term loan secured on
the Windsor Court hotel for a further 5 years. Also, in April 2008, the
Company fixed its floating interest rates (excluding margin) on US$151.3
million of U.S. dollar debt at a weighted average rate of 3.74% for a
weighted average term of 4.2 years.
On Saturday, May 3, 2008, the southern part of Burma was hit by tropical
cyclone Nargis. The Road to Mandalay river cruise ship was in Rangoon for a
scheduled dry-docking. The ship was caught in the storm and sustained damage,
the severity of which is currently being assessed. The Governor's Residence
also sustained some light damage, and will be repaired during the hotel's
scheduled closure in May and June. Both assets are covered under the
Company's insurance program.
Reconciliation to reported earnings US$'000 - except per share amounts Three months ended
March 31
2008 2007
(4,338) (3,681)
US GAAP reported net loss
Discontinued operations net of tax 1,963 1,185
Net loss from continuing operations (2,375) (2,496)
Adjusted items:
Foreign exchange gain net of tax (1) (1,647) (67)
Adjusted net loss from continuing (4,022) (2,563)
operations
Reported EPS (0.10) (0.09)
Reported EPS from continuing operations (0.06) (0.06)
Adjusted EPS from continuing operations (0.09) (0.06)
Number of shares (millions) 42.47 42.26
1. Foreign exchange, net of tax, is a non-cash item arising on the
translation of certain assets and liabilities denominated in currencies other
than the reporting currency of the entity concerned.
Management evaluates the operating performance of the company's segments
on the basis of segment net earnings before interest, foreign currency, tax
(including tax on unconsolidated companies), depreciation and amortization
(EBITDA), and believes that EBITDA is a useful measure of operating
performance, for example to help determine the ability to incur capital
expenditure or service indebtedness, because it is not affected by
non-operating factors such as leverage and the historic cost of assets.
EBITDA is also a financial performance measure commonly used in the hotel and
leisure industry, although the company's EBITDA may not be comparable in all
instances to that disclosed by other companies. EBITDA does not represent net
cash provided by operating, investing and financing activities under U.S.
generally accepted accounting principles (U.S. GAAP), is not necessarily
indicative of cash available to fund all cash flow needs, and should not be
considered as an alternative to earnings from operations or net earnings
under U.S. GAAP for purposes of evaluating operating performance.
Adjusted net earnings, adjusted net earnings from continuing operations,
and adjusted E.P.S. are non-GAAP financial measures and do not have any
standardized meanings prescribed by U.S. GAAP. They are, therefore, unlikely
to be comparable to similar measures presented by other companies, which may
be calculated differently, and should not be considered as an alternative to
net earnings, cash flow from operating activities or any other measure of
performance prescribed by U.S. GAAP. Management considers adjusted net
earnings, adjusted net earnings from continuing operations, and adjusted
E.P.S. to be meaningful indicators of operations and uses them as measures to
assess operating performance because, when comparing current period
performance with prior periods and with budgets, management does so after
having adjusted for non-recurring items, foreign exchange (a non-cash item)
and significant disposals of assets or investments, which could otherwise
have a material effect on the comparability of the company's core operations.
Adjusted net earnings, adjusted net earnings from continuing operations, and
adjusted E.P.S. are also used by investors, analysts and lenders as measures
of financial performance because, as adjusted in the foregoing manner, the
measures provide a consistent basis on which the performance of the company
can be assessed.
This news release and related oral presentations by management contain,
in addition to historical information, forward-looking statements that
involve risks and uncertainties. These include statements regarding earnings
outlook, investment plans and similar matters that are not historical facts.
These statements are based on management's current expectations and are
subject to a number of uncertainties and risks that could cause actual
results to differ materially from those described in the forward-looking
statements. Factors that may cause a difference include, but are not limited
to, those mentioned in the news release, unknown effects on the travel and
leisure markets of terrorist activity and any police or military response,
varying customer demand and competitive considerations, failure to realize
hotel bookings and reservations and planned property development sales as
actual revenue, inability to sustain price increases or to reduce costs,
fluctuations in interest rates and currency values, uncertainty of
negotiating and completing proposed capital expenditures and acquisitions,
adequate sources of capital and acceptability of finance terms, possible loss
or amendment of planning permits and delays in construction schedules for
expansion or development projects, delays in reopening properties closed for
repair or refurbishment and possible cost overruns, shifting patterns of
tourism and business travel and seasonality of demand, adverse local weather
conditions, changing global and regional economic conditions, and
legislative, regulatory and political developments. Further information
regarding these and other factors is included in the filings by the company
with the U.S. Securities and Exchange Commission.
Orient-Express Hotels will conduct a conference call on Thursday, 8th
May, 2008 at 10.00 hrs ET (15.00 BST) which is accessible at +1-866-966-9439
(US toll free) or +44-(0)1452-555-566 (Standard International access). The
conference ID is 42532465. A re-play of the conference call will be available
until 5.00pm (ET) Thursday 15th May, 2008 and can be accessed by calling
+1-866-247-4222 (US toll free) or +44-(0)1452-550-000 (Standard
International) and entering replay access number 42532465. A re-play will
also be available on the company's website:
http://www.orient-expressinvestorinfo.com.
ORIENT-EXPRESS HOTELS LTD Three Months ended March 31, 2008
SUMMARY OF OPERATING RESULTS
(Unaudited)
Three months ended
March 31
US$'000 - except per share amount 2008 2007
Revenue and earnings from unconsolidated
companies
Owned hotels
- Europe 27,139 21,115
- North America 26,670 23,138
- Rest of World 40,767 32,888
Hotel management & part ownership interests 5,218 4,647
Restaurants 4,866 5,295
Trains & Cruises 11,185 10,575
Revenue and earnings from unconsolidated 115,845 97,658
companies before Real Estate
Real Estate 4,083 -
Total (1) 119,928 97,658
Analysis of earnings
Owned hotels
- Europe (3,744) (3,555)
- North America 7,300 6,120
- Rest of World 12,747 12,084
Hotel management & part ownership interests 5,218 4,647
Restaurants 649 868
Trains & Cruises 1,543 1,148
Central overheads (6,799) (5,681)
EBITDA before Real Estate 16,914 15,631
Real Estate (497) (458)
EBITDA 16,417 15,173
Depreciation & amortization (10,284) (8,775)
Interest (12,929) (10,538)
Foreign exchange 2,045 102
Earnings before tax (4,751) (4,038)
Tax 2,376 1,542
Net losses from continuing operations (2,375) (2,496)
Discontinued operations (1,963) (1,185)
Net losses on common shares (4,338) (3,681)
Losses per common share (0.10) (0.09)
Number of shares - millions 42.47 42.26
(1) Comprises earnings from unconsolidated companies of US$5,248,000
(2007 - US$3,489,000) and revenue of US$114,680,000 (2007 - US$94,169,000).
ORIENT-EXPRESS HOTELS LTD Three Months Ended March 31, 2008
SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS
Three months ended March
31
2008 2007
Average Daily Rate
(in U.S. dollars)
Europe 464 398
North America 470 438
Rest of World 296 280
Worldwide 372 345
Rooms Available (000's)
Europe 64 63
North America 57 55
Rest of World 123 104
Worldwide 244 222
Rooms Sold (000's)
Europe 27 26
North America 38 36
Rest of World 82 71
Worldwide 147 133
RevPAR (in U.S. dollars)
Europe 201 157
North America 314 280
Rest of World 198 191
Worldwide 226 204
Change %
Same Store RevPAR Dollar Local
(in U.S. dollars) currency
Europe 178 137 30% 16%
North America 319 285 12% 12%
Rest of World 212 191 11% 10%
Worldwide 231 202 14% 12%
ORIENT-EXPRESS HOTELS LTD
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
March 31 December 31
US$'000 2008 2007
Assets
Cash 102,315 94,365
Accounts receivable 70,529 62,847
Due from related parties 30,195 30,406
Prepaid expenses 22,412 16,115
Inventories 48,688 45,756
Other assets held for sale 58,662 54,417
Real estate assets 67,712 57,157
Total current assets 400,513 361,063
Property, plant & equipment, net book value 1,317,040 1,273,956
Investments 150,286 147,539
Goodwill 137,123 133,497
Other intangible assets 21,805 21,660
Other assets 49,836 50,722
2,076,603 1,988,437
Liabilities and Shareholders' Equity
Working capital facilities 71,150 64,419
Accounts payable 31,698 30,132
Due to related parties 447 -
Accrued liabilities 67,102 62,246
Deferred revenue 54,005 35,545
Other liabilities held for sale 5,426 5,619
Current portion of long-term debt and capital 171,509 127,795
leases
Total current liabilities 401,337 325,756
Long-term debt and obligations under capital 676,741 658,615
leases
Deferred income taxes 116,136 119,112
Other liabilities 33,992 34,669
Minority interest 1,977 1,754
Shareholders' equity 846,420 848,531
2,076,603 1,988,437
SOURCE Orient Express Hotels Ltd
Contact: Martin O'Grady, Vice President, Chief Financial Officer, Tel: +44-20-7921-4038, E: martin.ogrady@orient-express.com. Pippa Isbell, Vice President, Corporate Communications, Tel: +44-20-7921-4065, E: pippa.isbell@orient-express.com. Kal Goldberg,
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