REG - Mandarin Oriental Jardine Matheson Hdg - 2021 Preliminary Announcement of Results
03/03/2022 09:30
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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 40.7 (74.2) n/a
amortisation)((2))
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
US¢ US¢ %
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 YEAR ENDED 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 byCOVID-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 Non-trading Total Underlying Non-trading Total
business Items US$m business Items US$m
performance US$m performance US$m
US$m US$m
Revenue (note 2) 316.9 - 316.9 183.7 - 183.7
Cost of sales (261.3) - (261.3) (233.0) - (233.0)
Gross profit/(loss) 55.6 - 55.6 (49.3) - (49.3)
Selling and distribution costs (20.7) - (20.7) (31.4) - (31.4)
Administration expenses (104.1) - (104.1) (97.5) - (97.5)
Other operating income/(expense) 43.2 0.6 43.8 (7.6) 0.7 (6.9)
Change in fair value of investment property under development - (73.9) (73.9) - (474.9) (474.9)
Operating loss (note 3) (26.0) (73.3) (99.3) (185.8) (474.2) (660.0)
Financing charges (13.8) - (13.8) (14.2) - (14.2)
Interest income 1.1 - 1.1 1.6 - 1.6
Net financing charges (12.7) - (12.7) (12.6) - (12.6)
Share of results of associates and joint ventures (note 4) (21.8) - (21.8) (26.8) - (26.8)
Loss before tax (60.5) (73.3) (133.8) (225.2) (474.2) (699.4)
Tax (note 5) (7.6) - (7.6) 19.4 - 19.4
Loss after tax (68.1) (73.3) (141.4) (205.8) (474.2) (680.0)
Attributable to:
Shareholders of the Company (notes 6 & 7) (68.1) (73.3) (141.4) (205.9) (474.2) (680.1)
Non-controlling interests - - - 0.1 - 0.1
(68.1) (73.3) (141.4) (205.8) (474.2) (680.0)
US¢ US¢ US¢ US¢
Loss per share (note 6)
- basic (5.39) (11.19) (16.30) (53.84)
- diluted (5.39) (11.19) (16.30) (53.84)
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2021
2021 US$m 2020
US$m
Loss for the year (141.4) (680.0)
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans 3.5 5.2
Tax on items that will not be reclassified (0.6) (0.9)
2.9 4.3
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
- net (losses)/gains arising during the year (70.7) 80.0
Cash flow hedges
- net gains/(losses) arising during the year 11.6 (11.4)
Tax relating to items that may be reclassified (1.3) 1.9
Share of other comprehensive (expense)/income of associates (2.0) 1.8
and joint ventures
(62.4) 72.3
Other comprehensive (expense)/income for the year, net of tax (59.5) 76.6
Total comprehensive expense for the year (200.9) (603.4)
Attributable to:
Shareholders of the Company (200.7) (603.9)
Non-controlling interests (0.2) 0.5
(200.9) (603.4)
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2021
2021 2020
US$m US$m
Net assets
Intangible assets 46.7 45.4
Tangible assets (note 8) 1,098.2 1,181.5
Right-of-use assets 273.3 297.4
Investment property under development (note 9) 2,462.0 2,528.3
Associates and joint ventures 201.5 231.6
Other investments 16.5 16.1
Deferred tax assets 13.7 17.8
Pension assets 7.1 5.5
Non-current debtors 8.9 5.1
Non-current assets 4,127.9 4,328.7
Stocks 5.3 6.0
Current debtors 68.8 71.7
Current tax assets 2.2 3.1
Bank and cash balances 212.8 164.6
Current assets 289.1 245.4
Current creditors (157.2) (144.6)
Current borrowings (note 10) (2.5) (64.2)
Current lease liabilities (6.3) (7.0)
Current tax liabilities (9.9) (10.1)
Current liabilities (175.9) (225.9)
Net current assets 113.2 19.5
Long-term borrowings (note 10) (727.8) (606.6)
Non-current lease liabilities (147.4) (170.1)
Deferred tax liabilities (50.1) (47.1)
Pension liabilities (0.3) (0.3)
Non-current creditors (3.2) (10.9)
Non-current liabilities (928.8) (835.0)
3,312.3 3,513.2
Total equity
Share capital 63.2 63.2
Share premium 500.5 499.7
Revenue and other reserves 2,745.1 2,946.6
Shareholders' funds 3,308.8 3,509.5
Non-controlling interests 3.5 3.7
3,312.3 3,513.2
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2021
Share Share Capital Revenue Asset revaluation reserves US$m Hedging Exchange Attributable to shareholders of the Company US$m Attributable to non- Total
capital premium reserves reserves reserves reserves controlling interests equity
US$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 (68.5) (124.2)
impairment from subsidiaries
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$680.1 million) and the weighted average number
of 1,263.8 million (2020: 1,263.2 million) shares in issue after adjusting
for the number of shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on the average share
price during the year.
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2021 2020
Weighted average number of shares for basic loss 1,263.4 1,263.2
per share calculation
Adjustment for shares deemed to be issued for no consideration under the 0.4 -
share-based long-term incentive plans
Weighted average number of shares for diluted loss 1,263.8 1,263.2
per share calculation
Additional basic and diluted loss per share are also calculated based on
underlying loss attributable to shareholders. A reconciliation of loss is
set out below:
2021 2020
US$m Basic Diluted loss US$m Basic Diluted loss
loss per share loss per share US¢
per share US¢ per share
US¢ US¢
Loss attributable to shareholders (141.4) (11.19) (11.19) (680.1) (53.84) (53.84)
Non-trading items (note 7) 73.3 474.2
Underlying loss attributable to shareholders (68.1) (5.39) (5.39) (205.9) (16.30) (16.30)
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater understanding
of the Group's underlying business performance. Items classified as
non-trading items include fair value gains or losses on revaluation of
investment property under development and investments which are measured at
fair value through profit and loss; gains and losses arising from the sale of
businesses, investments and properties; impairment of non-depreciable
intangible assets, associates and joint ventures and other investments;
provisions for the closure of businesses; acquisition-related costs in
business combinations; and other credits and charges of a non-recurring nature
that require inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and non-controlling
interests is set out below:
2021 2020
US$m US$m
Change in fair value of investment property (73.9) (474.9)
under development (note 9)
Change in fair value of other investments 0.6 0.7
(73.3) (474.2)
8. TANGIBLE ASSETS
2021 2020
US$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$m
Bank loans 726.5 666.7
Other borrowings 3.8 4.1
730.3 670.8
2.5 64.2
Current
Long-term 727.8 606.6
730.3 670.8
11. TAX INCREMENT FINANCING
2021 2020
US$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. DIVIDENDS
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
(https://www.mandarinoriental.com) '.
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