REG - Mandarin Oriental Jardine Matheson Hdg - 2023 Preliminary Results
07/03/2024 10:15
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RNS Number : 9991F Mandarin Oriental International Ltd 07 March 2024
Announcement
7th March
2024
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
2023 PRELIMINARY ANNOUNCEMENT OF RESULTS
HIGHLIGHTS
· Underlying profit increased to US$81 million, from US$8 million in
2022
· Strong operating and financial performance driven by record rates
· Management fees grew by 30%, with strong recovery by hotels in Asia
· Increased development pipeline with two new hotel openings and eight
new management contracts announced
· Final dividend at US¢3.50 per share, resulting in total dividends of
US¢5.00 per share
"Mandarin Oriental delivered a strong recovery in 2023. The Group faces some
geopolitical and macroeconomic uncertainties entering 2024, but with the
appointment of Laurent Kleitman as Group Chief Executive, we are optimistic
about the Group's long-term strategy."
Ben Keswick
Chairman
RESULTS
Year ended 31st December
2023 2022 Change
US$m US$m %
Combined total revenue of hotels under management((1)) 1,890.2 1,568.1 +21
Revenue 558.1 454.1 +23
Underlying EBITDA (Earnings before interest, tax, depreciation and 177.6 111.4 +59
amortisation)((2))
Underlying profit attributable to shareholders((3)) 81.0 7.6 +966
Revaluation loss on investment properties (486.7) (104.1) -368
Gain on sale of a subsidiary/asset disposals 41.3 47.0 -12
Loss attributable to shareholders (365.4) (49.5) -638
US¢ US¢ %
Underlying earnings per share((3)) 6.41 0.60 +968
Loss per share (28.91) (3.92) -638
Dividends per share 5.00 - n/a
US$ US$ %
Net asset value per share 2.34 2.61 -10
Adjusted net asset value per share((4)) 3.67 3.87 -5
Net debt/shareholders' funds 8% 11%
Net debt/adjusted shareholders' funds((4)) 5% 8%
(1) Combined revenue includes turnover of the Group's subsidiary hotels in
addition to 100% of revenue from associate, joint venture and managed hotels.
(2) EBITDA of subsidiaries plus the Group's share of EBITDA of associates
and joint ventures.
(3) The Group uses 'underlying profit' in its internal financial reporting
to distinguish between ongoing business performance and non-trading items, as
more fully described in note 34 to the financial statements. Management
considers this to be a key measure which provides additional information to
enhance understanding of the Group's underlying business performance.
(4) The Group's investment properties are carried at fair value on the
basis of valuations carried out by independent valuers at 31st December
2023. 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 at 31st December 2023 have
included the market value of the Group's freehold and leasehold interests.
The final dividend of US¢3.50 per share will be payable on 15th May 2024,
subject to approval at the Annual General Meeting to be held on 8th May 2024,
to shareholders on the register of members at the close of business on 22nd
March 2024.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 2023
OVERVIEW
2023 was a year of significant growth and progress for Mandarin Oriental.
The Group grew its Management Business, with two new openings and the
announcements of eight new hotel and residences projects. Our colleagues
continued to provide the exceptional service for which the brand is legendary
and secured record room rates, which translated into strong operating and
financial performance.
2023 Financial Performance
Underlying profit increased to US$81 million, from US$8 million in 2022, with
underlying earnings per share at US¢6.41, compared with US¢0.60 in 2022.
Non-trading losses of US$446 million primarily comprised a non-cash
revaluation of the Causeway Bay site under development, resulting in a loss
attributable to shareholders of US$365 million.
Net debt fell to US$225 million at the end of 2023, from US$376 million at the
end of 2022, reflecting significantly higher operating cashflow from the
business, net of ongoing capital investment, as well as proceeds from
disposals. Gearing as a percentage of adjusted shareholders' funds was 5%,
compared to 8% at the end of 2022.
The Directors recommend a final dividend of US¢3.50 per share. This,
together with the interim dividend of US¢1.50 per share declared, will result
in total dividends of US¢5.00 per share.
Year in review
In 2023, Mandarin Oriental, with its distinctive portfolio of hotels, was able
to satisfy consumers' continuing robust appetite for luxury leisure travel.
The Group's legendary levels of service underpinned an increase in rates,
and it continued to build occupancy, which translated into substantial
improvements in Revenue Per Available Room ('RevPAR') across almost all
hotels.
Hotels in Asia benefitted from the return of travel demand from the Chinese
mainland following the removal of restrictions at the beginning of 2023,
generating substantially higher management fees. Two of the Group's key
owned hotels in the region - Hong Kong and Tokyo - delivered notably better
performance than in 2022. In Europe, the Middle East and Africa ('EMEA'),
hotels reported solid growth over 2022 and gained market share, particularly
in resort destinations. In America, RevPAR performance remained broadly
stable, with easing domestic leisure demand partially offset by higher demand
from corporate and group travellers.
Sustainability
We believe the long-term success of our business hinges on doing the right
things for our planet and our people. The Group remains on track to achieve
its 2030 environmental targets and has made particular progress in reducing
energy and waste intensity, and in expanding the scope of its responsible
procurement. Mandarin Oriental's sustainability commitments also undertake
to create positive impacts for the communities in which its hotels operate.
This year, the 'MOgiving' initiative was launched in all the Group's hotels,
to empower colleagues to contribute to their local communities.
GOVERNANCE
The Group has continued to evolve its governance in 2023, to ensure that its
board and committees have the right expertise and independence to support the
delivery of the Group's strategic priorities. In 2023, Richard Solomons was
appointed as Independent Non-Executive Chair of the Audit Committee and
Jinqing Cai, an Independent Non-Executive Director, was appointed as a member
of the Committee. The Audit Committee now has a majority of independent
members, whose expertise and understanding of the luxury and hospitality
sectors will strengthen the Committee.
PEOPLE
In September 2023, Laurent Kleitman succeeded James Riley as Group Chief
Executive. On behalf of the Board, I would like to thank James for his
contribution to the Group and welcome Laurent, who has joined us with many
years of experience in building iconic, luxury consumer brands.
Our colleagues play an instrumental role in defining the brand and creating
the legendary guest experience for which Mandarin Oriental is renowned. I
would like to take this opportunity to express my gratitude to them for the
unwavering commitment they show to our guests, which underpins the long-term
success of the Group.
OUTLOOK
Mandarin Oriental delivered a strong set of results in 2023. Despite some
geopolitical and macroeconomic uncertainties entering 2024, the Group remains
optimistic about its future growth as it continues to invest in its core
strengths of brand desirability, a strong management contract pipeline,
continued delivery of innovation and service excellence and an unwavering
commitment to people and the environment.
Ben Keswick
Chairman
Group Chief Executive's RevieW
I am delighted to have joined Mandarin Oriental and am pleased to share my
initial views of the Group and the progress we have made across several fronts
over the past year.
Having been with the Group for a few months and visited most of our properties
around the world, met with many of our owners and partners, and spent time
listening to and learning from our thousands of colleagues, it is clear to me
that Mandarin Oriental is not only a strong business today but also has
significant opportunities ahead.
Since my appointment in September 2023, my team and I have been reviewing our
strategy to ensure that the Group is able to build on the right foundations to
accelerate growth. Strategic thinking and changes are currently underway,
with a greater focus on significantly scaling up the Management Business
globally, further elevating the brand's desirability, to become the reference
point in luxury hospitality, and enriching our proposition to guests and
owners. I am very convinced that the Mandarin Oriental brand, together with
the exceptional operational expertise of our teams centrally and around the
world, has the potential to take a larger share of the global luxury
hospitality market in the coming years. Our understanding of excellence, our
long-standing service tradition, our interpretation of luxury and our
creativity are some of the many assets that we are building upon.
Our dual Asian origin, blending the vibrancy and modernity of Hong Kong - The
Mandarin - with the refinement of Bangkok - The Oriental -, makes us the most
distinctive and authentic luxury hospitality brand in the world. And today,
50 years after these two iconic hotels were brought together, we have created
a formidable Group: from the strength of our growing Management Business to
the enormous potential of our brand, from the quality of our operators and
15,000 colleagues to the strength of our partners, Mandarin Oriental has solid
foundations from which we will scale up, while retaining our unique sense of
high-end luxury.
I look forward to sharing our full new strategic plan in more detail later
this year.
Looking back to 2023, we had occasion to celebrate many significant
achievements, starting in February with the rebranding of Emirates Palace
Mandarin Oriental, Abu Dhabi. This is our third hotel in the Middle East and
complements Mandarin Oriental Jumeira, Dubai and Mandarin Oriental, Doha,
reinforcing our brand presence in the region. Reflecting our unwavering
dedication to elevating the guest experience, Mandarin Oriental, Singapore
re-opened its doors to guests in September after a transformative renovation.
In October, we celebrated the 60th anniversary of one of our historic
hotels, Mandarin Oriental, Hong Kong, with Oscar-winning brand ambassador
Michelle Yeoh and other distinguished guests showcasing the contemporary
luxury and Oriental heritage that differentiate the brand. And finally, as
we concluded 2023, we opened the magnificent and iconic Mandarin Oriental
Savoy, Zurich after an extensive renovation.
2023 Performance
Summary of Performance
The Group manages 38 hotels and nine residences globally, of which 25
properties are managed and 13 properties are owned or partially owned. In
2023, the Management Business delivered strong operating performance and
improved profitability. Combined total revenue for hotels under management
was US$1.9 billion in 2023, 21% above 2022. This increase was driven
primarily by a 29% increase in RevPAR. The improvement in RevPAR was
primarily due to a gradual recovery in occupancy across all geographies, a
continuation of high rates in Europe, the Middle East and Africa ('EMEA'), and
a solid rebound in rates in Asia. Food & Beverage ('F&B') revenue
also increased by 18% year-on-year, contributing to the strong top-line
outperformance in 2023.
In EMEA, most hotels gained market share in 2023 compared to 2022. Average
RevPAR was US$645, up 14% from 2022. While average rates remained fairly
stable in 2023 compared to the prior year, occupancy recovered to pre-pandemic
levels. RevPAR performance was notably better than 2022 in Bodrum, Abu Dhabi
and Marrakech, predominantly driven by robust leisure demand.
In Asia, RevPAR was US$213, up 75% from 2022. The progressive return of
domestic and some outbound travel demand from Chinese mainland at the start of
the year contributed to a strong pick-up in both occupancy and rates within
the region. Within Chinese mainland, our hotels in Beijing, Hong Kong,
Macau, Shanghai and Shenzhen generated strong year-on-year improvements in
RevPAR. In the rest of Asia, Tokyo, Bangkok and Kuala Lumpur also delivered
considerable RevPAR improvements. Despite substantial RevPAR growth in 2023
compared to 2022, RevPAR for the region remained slightly below pre-pandemic
levels as occupancy continued to recover.
In the Americas, RevPAR was US$408, up 3% from 2022. Domestic leisure demand
eased marginally from the strong levels seen in 2022 but was compensated by a
steady continuing recovery in the corporate transient and group segments.
Management Business
With the openings of two new hotels, the Group continued to execute its
strategy of scaling up the Management Business. This growth in scale,
combined with RevPAR improvement, resulted in a 30% increase in hotel
management fees and a 55% improvement in EBITDA for the Management Business
compared to 2022. Most hotels delivered higher fees, with hotels in Asia in
particular seeing a robust rebound from 2022.
The sale of branded residences, such as The Residences at Mandarin Oriental,
Mayfair - luxury apartments situated in the heart of one of London's most
stylish neighbourhoods - and Mandarin Oriental Residences, Fifth Avenue in the
heart of Manhattan, remains a strategic focus and contributed some 10% of the
total fees earned from the Management Business.
Owned Hotel Performance
Our 13 owned properties reported a combined EBITDA 63% higher than in 2022,
and most properties maintained or improved their earnings. Of note were the
materially improved contributions produced by Hong Kong and Tokyo, both of
which were severely impacted by stringent travel restrictions for the majority
of 2022, and the early part of 2023. London and Geneva also delivered
considerably improved results driven by better RevPAR and F&B performance.
The exceptions with lower earnings in 2023 were Singapore and Miami. After
undergoing an extensive renovation for six months, Mandarin Oriental,
Singapore has re-opened with a transformed and elevated guest experience with
an enhanced appeal to leisure travellers. Against the backdrop of easing
domestic leisure demand in America, Miami reported a slight drop in average
rates, partially offset by improved occupancy and F&B performance.
Financial Performance
As a result of strong top-line performance, EBITDA for 2023 was US$178
million, a 59% increase from the prior year. Underlying profit substantially
improved from US$8 million in 2022 to US$81 million in 2023.
A Year IN REVIEW
The Group's long-term growth strategy is to grow Mandarin Oriental brand's
desirability and expand the Management Business through the signing of
management contracts in key destinations, whilst retaining some ownership of
brand-defining properties.
Management Business
The Group's Management Business made good progress in 2023. In August, we
introduced Mandarin Oriental's contemporary luxury to Greece with the opening
of our beachfront getaway in Costa Navarino. In December, we opened our
third property in Switzerland - Mandarin Oriental Savoy, Zurich, following an
extensive renovation of this historic property, which dates back to 1838.
In addition to these openings, we underpinned the future growth of our
portfolio with the signing of eight hotel and residences projects, all of
which will be managed by the Group:
· Luxury residences in the heart of Madrid's most exclusive
neighbourhood, Salamanca;
· A scenic beachfront resort in Mallorca;
· A hotel and residences in Athens with contemporary design and
unobstructed views of the Aegean Sea;
· A hotel and residences in Bankside - the Group's third property in
London;
· A transformative redevelopment of Mandarin Oriental, Miami, in a
larger hotel and residences complex in the unique Brickell Island location;
· A secluded resort in Porto Cervo, Sardinia, overlooking the Gulf of
Pevero;
· A high-end boutique resort in Setouchi, Japan that consists of three
distinctive properties around the Seto Inland Sea; and
· A full renovation and rebranding of the historic Gellért Hotel in
Budapest.
Overall, at the end of 2023, the Group has a pipeline of 28 hotels (14 of
which have a residences component) and two standalone residences to open over
the next five years. And I remain very optimistic about announcing new
strategic projects in 2024.
Owned Assets
As part of our regular review of the Group's assets, in 2023, we decided to
sell our owned properties in Jakarta and Paris. The disposal of our Jakarta
property was completed in June 2023, with the hotel management contract
retained. The Group has also signed an option to sell the Paris hotel
property, securing a long-term hotel management contract with the new owner.
We expect to complete this transaction in the first half of 2024.
We are making good progress with the redevelopment of our Causeway Bay site in
Hong Kong and have begun leasing activities in line with our expectation to
complete construction of the building in the first half of 2025. We have
updated our valuation for the project to purely reflect residual, value-in-use
estimates, in line with normal market practice as the development project
progresses toward completion.
Brand
In 2023, we continued to strengthen the desirability of the Mandarin Oriental
brand. The Group focussed on increasing the awareness of the brand amongst
our target audience, and investing behind our award-winning 'I'm A Fan'
advertising campaign, which has featured over 50 celebrities who are genuine
fans of Mandarin Oriental. We also celebrated a key milestone for Mandarin
Oriental, with the 60th anniversary of our flagship hotel in Hong Kong, which
has been at the forefront of luxury hospitality since it opened its doors in
1963.
During the period, we have built awareness and engagement of Mandarin Oriental
through extensive media coverage in both lifestyle publications and social
channels, focussing on the Group's core brand pillars of craftsmanship and
design; innovative dining; holistic wellness; and our legendary service which
are at the heart of our Oriental heritage. These focusses have been further
strengthened by the attainment of many global awards for excellence,
solidifying the Group's reputation for delivering the highest quality.
Significant awards in 2023 included Best Luxury Hotel Brand in the annual
Luxury Travel Intelligence ranking; 29 Michelin stars won by 18 of our global
restaurants; the World's Best Hotel Spa Brand by the World Spa Awards, and the
placement of 20 of our properties in Condé Nast Traveller Readers' Choice
Awards, more than in any previous year.
Further, we have forged partnerships with prestigious like-minded brands.
These included the hosting of Louis Vuitton's summer pop-up store and
co-branded beach bar at Mandarin Oriental, Bodrum, and the development of a
dedicated showcase suite for Vacheron Constantin in Dubai.
Transformation
Modernisation of the Management Business remains a strategic focus, with the
key aims of supporting growth in scale, enriching the customer experience,
delivering improved operating efficiency, and elevating our colleagues value
proposition.
In the past year, we continued to advance several transformation initiatives
across the organisation in support of this strategic objective. In
particular, the Group has embarked on the Guest Experience Programme which
will greatly improve our ability to recognise, understand and engage our
guests across Mandarin Oriental. A redesign of Fans of M.O. will enable us
better to attract and retain both top guests and local fans. We are
establishing a bespoke relationship management service to build brand-level
loyalty with ultra-high-net-worth guests. Internally, we have made
encouraging progress in driving operational efficiency through modernising our
systems and processes required to support evolving business needs.
People & Culture
The Group's focus on recruiting and developing the right talent, as well as
providing an engaging colleague experience, remains central to our People and
Culture strategy. In the past year, the Group has recruited 176 Rising Fans
into the new graduate programme. More broadly, we achieved notable
improvements in retention, with a reduction in voluntary turnover from 25% to
22%. Our efforts were acknowledged in the Group's latest Colleague
Engagement Survey, which indicated improvement across all drivers of
sustainable engagement and exceeded both the 'Travel & Leisure' norm and
the 'High-Performance' norm.
Our HR transformation journey, The People Project, is a strategic initiative
that aims to put the colleague experience at the centre, elevate the role of
our people managers, and simplify, harmonise and automate our HR processes.
The initiative is a major step towards enabling an engaged workforce through
a compelling work experience, laying a solid foundation for the organisation
to build on as it scales up.
Sustainability
I am delighted to share that the Group's commitment to sustainability was
recognised in 2023 by the Global Sustainable Tourism Council. In line with
our belief in contributing positively to local communities, we launched
'MOgiving' within all our hotel properties, to empower our colleagues to
create positive social impact locally. We continue to make progress against
our other sustainability targets, about which further information will be
published in our forthcoming Sustainability Report 2023.
The year ahead
In 2023, Mandarin Oriental delivered improved operational performance and
continued to lay the foundation for strong future growth. In early 2024, we
completed the rebranding of Mandarin Oriental Al Faisaliah, Riyadh, and in the
coming 12 months we are focussed on delivering several planned openings,
including Muscat in Oman - a unique beachfront urban resort, Mayfair in London
- an exclusive boutique hotel in the heart of the capital's fashion and
shopping district, Qianmen in Beijing - an elegant hotel that offers an
authentic experience within a traditional Hutong quarter, and a standalone
residences project on Fifth Avenue in New York. I am confident that we will
be in a position to announce several further strategic projects in key
locations in the course of 2024, which will enable the brand to expand its
footprint in highly sought-after destinations and continue to improve the
financial performance of the Group.
As we continue to grow, we will remain attentive to cultivating and raising
the desirability of the Mandarin Oriental brand and maintaining and uplifting
the quality of Mandarin Oriental guest experiences at every opportunity.
Laurent Kleitman
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2023
2023 2022
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$m
Revenue (note 2) 558.1 - 558.1 454.1 - 454.1
Cost of sales (308.7) - (308.7) (302.7) - (302.7)
Gross profit 249.4 - 249.4 151.4 - 151.4
Selling and distribution costs (35.6) - (35.6) (27.0) - (27.0)
Administration expenses (116.7) - (116.7) (109.2) - (109.2)
Other operating income/(expense) 5.2 (0.4) 4.8 5.7 - 5.7
Change in fair value of investment properties - (486.7) (486.7) - (104.1) (104.1)
Gain on sale of a subsidiary/asset disposals (notes 16 & 14) - 43.8 43.8 - 40.6 40.6
Operating (loss)/profit (note 3) 102.3 (443.3) (341.0) 20.9 (63.5) (42.6)
Financing charges (17.6) - (17.6) (16.7) - (16.7)
Interest income 7.7 - 7.7 2.3 - 2.3
Net financing charges (9.9) - (9.9) (14.4) - (14.4)
Share of results of associates and joint ventures (note 4) (0.3) (0.6) (0.9) 9.7 - 9.7
(Loss)/profit before tax 92.1 (443.9) (351.8) 16.2 (63.5) (47.3)
Tax (note 5) (11.0) (2.5) (13.5) (8.5) 6.4 (2.1)
(Loss)/profit after tax 81.1 (446.4) (365.3) 7.7 (57.1) (49.4)
Attributable to:
Shareholders of the Company (notes 6 & 7) 81.0 (446.4) (365.4) 7.6 (57.1) (49.5)
Non-controlling interests 0.1 - 0.1 0.1 - 0.1
81.1 (446.4) (365.3) 7.7 (57.1) (49.4)
US¢ US¢ US¢ US¢
(Loss)/earnings per share (note 6)
- basic 6.41 (28.91) 0.60 (3.92)
- diluted 6.41 (28.91) 0.60 (3.92)
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2023
2023 US$m 2022
US$m
Loss for the year (365.3) (49.4)
Other comprehensive expense
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans (2.5) (2.1)
Revaluation surplus of right-of-use assets before transfer to investment - 79.8
properties
Tax on items that will not be reclassified 0.4 0.3
(2.1) 78.0
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
- net gain/(loss) arising during the year 34.0 (58.2)
- transfer to profit and loss 33.5 -
Cash flow hedges
- net (loss)/gain arising during the year (15.1) 16.6
Tax relating to items that may be reclassified 1.3 (2.4)
Share of other comprehensive income of associates 0.4 0.7
and joint ventures
54.1 (43.3)
Other comprehensive income for the year, net of tax 52.0 34.7
Total comprehensive expense for the year (313.3) (14.7)
Attributable to:
Shareholders of the Company (314.2) (14.7)
Non-controlling interests 0.9 -
(313.3) (14.7)
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2023
2023 2022
US$m US$m
Net assets
Intangible assets 43.7 45.7
Tangible assets (note 8) 618.6 916.3
Right-of-use assets 229.1 242.4
Investment properties (note 9) 2,060.3 2,472.6
Associates and joint ventures 155.8 203.8
Other investments 14.0 14.0
Deferred tax assets 14.0 14.2
Pension assets 0.6 3.0
Non-current debtors 10.9 12.2
Non-current assets 3,147.0 3,924.2
Stocks 5.0 5.0
Current debtors 80.3 90.5
Current tax assets 1.7 6.8
Cash and bank balances 178.8 226.2
265.8 328.5
Assets classified as held for sale (note 10) 331.9 -
Current assets 597.7 328.5
Current creditors (158.0) (159.1)
Current borrowings (note 11) (414.9) (2.2)
Current lease liabilities (5.8) (5.9)
Current tax liabilities (22.1) (18.4)
(600.8) (185.6)
Liabilities directly associated with assets classified as held for sale (note (24.1) -
10)
Current liabilities (624.9) (185.6)
Net current (liabilities)/assets (27.2) 142.9
Long-term borrowings (note 11) (0.6) (599.8)
Non-current lease liabilities (110.6) (123.5)
Deferred tax liabilities (42.0) (41.6)
Pension liabilities - (0.1)
Non-current creditors (1.1) (4.5)
Non-current liabilities (154.3) (769.5)
2,965.5 3,297.6
Total equity
Share capital 63.2 63.2
Share premium 500.9 500.7
Revenue and other reserves 2,396.3 2,730.2
Shareholders' funds 2,960.4 3,294.1
Non-controlling interests 5.1 3.5
2,965.5 3,297.6
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2023
Share Share Capital Revenue Asset revaluation reserves US$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
2023
At 1st January 63.2 500.7 258.9 (428.8) 3,023.2 15.4 (138.5) 3,294.1 3.5 3,297.6
Total comprehensive income - - - (367.6) - (13.7) 67.1 (314.2) 0.9 (313.3)
Dividends paid by the Company - - - (19.0) - - - (19.0) - (19.0)
Unclaimed dividend forfeited - - - 0.1 - - - 0.1 - 0.1
Subsidiary disposed of - - 0.2 (0.6) - - (0.2) (0.6) 0.7 0.1
Transfer - 0.2 (0.2) - - - - - - -
At 31st December 63.2 500.9 258.9 (815.9) 3,023.2 1.7 (71.6) 2,960.4 5.1 2,965.5
2022
At 1st January 63.2 500.5 259.1 (377.7) 2,943.4 0.9 (80.6) 3,308.8 3.5 3,312.3
Total comprehensive income - - - (51.1) 79.8 14.5 (57.9) (14.7) - (14.7)
Transfer - 0.2 (0.2) - - - - - - -
At 31st December 63.2 500.7 258.9 (428.8) 3,023.2 15.4 (138.5) 3,294.1 3.5 3,297.6
Revenue reserves as at 31st December 2023 included cumulative fair value
losses on the investment property under development of US$1,207.8 million
(2022: US$720.2 million).
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2023
2023 2022
US$m US$m
Operating activities
Operating loss (note 3) (341.0) (42.6)
Depreciation, amortisation and impairment 51.1 58.2
Other non-cash items 440.3 63.5
Movements in working capital (2.8) (1.1)
Interest received 8.5 2.1
Interest and other financing charges paid (17.6) (15.6)
Tax paid (2.6) (8.0)
135.9 56.5
Dividends and interest from associates and joint ventures 5.3 -
Cash flows from operating activities 141.2 56.5
Investing activities
Purchase of tangible assets (13.7) (12.8)
Additions to investment properties (71.0) (30.2)
Purchase of intangible assets (6.4) (6.1)
Additions to right-of-use assets - (0.2)
Refund on Munich expansion - 4.0
Purchase of other investments (0.1) (0.2)
Purchase of an associate - (1.0)
Advance to associates and joint ventures (20.7) (2.4)
Repayment of loans to associates and joint ventures 67.2 4.2
Sale of a subsidiary (note 13) 75.6 -
Net proceeds from asset disposals (note 14) - 131.4
Cash flows from investing activities 30.9 86.7
Financing activities
Drawdown of borrowings 58.1 23.0
Repayment of borrowings (247.9) (139.5)
Principal elements of lease payments (6.2) (5.7)
Dividends paid by the Company (note 12) (19.0) -
Cash flows from financing activities (215.0) (122.2)
Net (decrease)/increase in cash and cash equivalents (42.9) 21.0
Cash and cash equivalents at 1st January 226.2 212.8
Effect of exchange rate changes 7.0 (7.6)
Cash and cash equivalents at 31st December 190.3 226.2
At 31st December 2023, cash and cash equivalents of US$190.3 million included
cash and bank balances of US$11.5 million classified as assets held for sale
(note 10).
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has been based on the
audited results for the year ended 31st December 2023 which have been prepared
in conformity with International Financial Reporting Standards ('IFRS'),
including International Accounting Standards ('IAS') and Interpretations as
issued by the International Accounting Standards Board ('IASB').
At 31st December 2023, the current liabilities of the Group exceeded its
current assets by US$27.2 million. Included in the current liabilities were
the current portion of long-term bank loans of US$414.9 million due to mature
within 2024. In February 2024, the Group has refinanced bank facilities of
US$409.2 million to enable the Group to meet its obligations as and when they
fall due. Accordingly, the financial statements have been prepared on a
going concern basis.
The Group has adopted the following standard and amendments for the annual
reporting period commencing 1st January 2023.
IFRS 17 'Insurance Contracts' (effective from 1st January 2023)
The standard covers recognition, measurement, presentation and disclosure for
insurance contracts. The Group has assessed its performance guarantees
provided to third-party hotel owners and concluded that current arrangements
do not include significant insurance risk. They remain within the scope of
the Group's existing revenue recognition accounting policies.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2 (effective from 1st January 2023)
The amendments require entities to disclose material rather than significant
accounting policies. The amendments define what is 'material accounting policy
information' and explain how to identify when accounting policy information is
material.
Material accounting policy information is information that, when considered
together with other information included in an entity's financial statements,
can reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements. IASB further clarifies that immaterial accounting policy
information does not need to be disclosed. If it is disclosed, it should not
obscure material accounting information. To support this amendment, the IASB
also amended IFRS Practice Statement 2 Making Materiality Judgements to
provide guidance on how to apply the concept of materiality to accounting
policy disclosures.
The material accounting policies following the adoption of IAS 1 are included
in note 34 of the financial statements.
Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising
from a Single Transaction (effective from 1st January 2023)
The amendment requires deferred tax to be recognised on transactions that, on
initial recognition, give rise to equal amounts of taxable and deductible
temporary differences. They typically apply to transactions such as leases
of lessees and decommissioning obligations and require the recognition of
additional deferred tax assets and liabilities. On adoption of the
amendment, there is no impact on the Group's consolidated financial
statements.
Amendment to IAS 12 - International Tax Reform - Pillar Two Model Rules
(effective for annual reporting period commencing on or after 1st January
2023)
The amendment provides a temporary mandatory exception from deferred tax
accounting in respect of Pillar Two income taxes and certain additional
disclosure requirements. The Group is within the scope of the OECD Pillar
Two model rules, and has applied the amendment from 1st January 2023.
Pillar Two legislation has been enacted or substantially enacted in certain
jurisdictions in which the Group operates. The legislation will be effective
for the Group's annual reporting period commencing 1st January 2024. Since
the Pillar Two legislation was not effective at 31st December 2023, the Group
has no related current tax exposure.
The Group is in scope of the enacted or substantively enacted legislation and
has performed an assessment of the Group's potential exposure to Pillar Two
income taxes when the legislation comes into effect. The assessment of the
potential exposure to Pillar Two income taxes is based on the latest financial
information for the year ended 31st December 2023 of the constituent entities
in the Group. Based on the assessment, the effective tax rates in most of
the jurisdictions in which the Group operates are above 15%. However, there
are a limited number of jurisdictions where the effective tax rate is slightly
below or close to 15%. The Group does not expect a material exposure to
Pillar Two income taxes in those jurisdictions.
Apart from the above, there are no other standard or amendments which are
effective in 2023 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
2023 2022
US$m US$m
By business activity:
Hotel ownership 486.8 400.9
Hotel & Residences branding and management 94.5 68.5
Less: intra-segment revenue (23.2) (15.3)
558.1 454.1
By geographical area:
Asia 219.9 141.4
Europe, the Middle East and Africa ('EMEA') 288.6 239.7
America 49.6 73.0
558.1 454.1
From contracts with customers:
Recognised at a point in time 163.7 140.8
Recognised over time 375.8 295.2
539.5 436.0
From other sources:
Rental income 18.6 18.1
558.1 454.1
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING LOSS FROM SUBSIDIARIES
2023 2022
US$m US$m
By business activity:
Hotel ownership 101.9 45.3
Hotel & Residences branding and management 52.5 33.8
Property development (1.0) -
Underlying EBITDA from subsidiaries 153.4 79.1
Non-trading items (note 7)
- change in fair value of investment properties (486.7) (104.1)
- change in fair value of other investments (0.4) -
- gain on sale of a subsidiary/asset disposals 43.8 40.6
(443.3) (63.5)
EBITDA from subsidiaries (289.9) 15.6
Underlying depreciation and amortisation from subsidiaries (51.1) (58.2)
Operating loss (341.0) (42.6)
By geographical area:
Asia 41.5 (8.7)
EMEA 108.5 82.8
America 3.4 5.0
Underlying EBITDA from subsidiaries 153.4 79.1
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and profit/ financing profit/
EBITDA amortisation (loss) charges Tax (loss)
US$m US$m US$m US$m US$m US$m
2023
By business activity:
Hotel ownership 23.8 (15.2) 8.6 (8.9) 0.2 (0.1)
Other 0.4 (0.5) (0.1) (0.1) - (0.2)
Underlying 24.2 (15.7) 8.5 (9.0) 0.2 (0.3)
Non-trading items (note 7)
- closure costs (0.6) - (0.6) - - (0.6)
23.6 (15.7) 7.9 (9.0) 0.2 (0.9)
By geographical area:
Asia 10.4 (10.1) 0.3 (3.3) 0.1 (2.9)
EMEA 5.5 (3.6) 1.9 (3.3) 0.1 (1.3)
America 8.3 (2.0) 6.3 (2.4) - 3.9
Underlying 24.2 (15.7) 8.5 (9.0) 0.2 (0.3)
Non-trading items (note 7)
- closure costs (0.6) - (0.6) - - (0.6)
23.6 (15.7) 7.9 (9.0) 0.2 (0.9)
2022
By business activity:
Hotel ownership 32.3 (15.4) 16.9 (5.6) (1.0) 10.3
Other - (0.5) (0.5) (0.1) - (0.6)
32.3 (15.9) 16.4 (5.7) (1.0) 9.7
By geographical area:
Asia 19.2 (10.4) 8.8 (2.4) (1.1) 5.3
EMEA 4.0 (3.4) 0.6 (1.1) 0.1 (0.4)
America 9.1 (2.1) 7.0 (2.2) - 4.8
32.3 (15.9) 16.4 (5.7) (1.0) 9.7
5. TAX
2023 2022
US$m US$m
Tax (charged)/credited to profit and loss is analysed as follows:
Current tax (11.8) (12.0)
Deferred tax (1.7) 9.9
(13.5) (2.1)
By business activity:
Hotel ownership (7.2) 5.3
Hotel & Residences branding and management (6.3) (7.4)
(13.5) (2.1)
By geographical area:
Asia (8.3) (0.2)
EMEA (4.3) (5.2)
America (0.9) 3.3
(13.5) (2.1)
Tax relating to components of other comprehensive income is analysed as
follows:
Remeasurements of defined benefit plans 0.4 0.3
Cash flow hedges 1.3 (2.4)
1.7 (2.1)
Tax on profits has been calculated at rates of taxation prevailing in the
territories in which the Group operates.
In 2023, current tax included a non-trading capital gain tax charge of US$2.5
million in relation to the sale of 96.9% ownership stake in P.T. Jaya Mandarin
Agung, the owning company of Mandarin Oriental, Jakarta (note 16).
In 2022, current tax included a non-trading capital gain tax charge of US$4.3
million and deferred tax included a non-trading credit of US$10.7 million in
relation to the sale of Mandarin Oriental, Washington D.C. (note 14).
Share of tax credit of associates and joint ventures of US$0.2 million (2022:
share of tax charge of US$1.0 million) is included in share of results of
associates and joint ventures (note 4).
6. (LOSS)/EARNINGS PER SHARE
Basic loss per share is calculated using loss attributable to shareholders of
US$365.4 million (2022: US$49.5 million) and the weighted average number of
1,263.8 million (2022: 1,263.7 million) shares in issue during the year.
Diluted loss per share is calculated using loss attributable to shareholders
of US$365.4 million (2022: US$49.5 million) and the weighted average number of
1,263.8 million (2022: 1,263.8 million) shares in issue after adjusting for
the number of shares which are deemed to be issued for no consideration under
the share-based long-term incentive plans based on the average share price
during the year.
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2023 2022
Weighted average number of shares for basic loss 1,263.8 1,263.7
per share calculation
Adjustment for shares deemed to be issued for no consideration under the - 0.1
share-based long-term incentive plans
Weighted average number of shares for diluted loss 1,263.8 1,263.8
per share calculation
Additional basic and diluted loss/earnings per share are also calculated based
on underlying profit attributable to shareholders. A reconciliation of
loss/earnings is set out below:
2023 2022
US$m Basic Diluted (loss)/ US$m Basic Diluted (loss)/ earnings
(loss)/ earnings (loss)/ earnings per share US¢
earnings per share per share
per share US¢ US¢
US¢
Loss attributable to shareholders (365.4) (28.91) (28.91) (49.5) (3.92) (3.92)
Non-trading items (note 7) 446.4 57.1
Underlying profit attributable to shareholders 81.0 6.41 6.41 7.6 0.60 0.60
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater understanding
of the Group's underlying business performance. Items classified as
non-trading items include fair value gains or losses on revaluation of
investment properties and investments which are measured at fair value through
profit and loss; gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable intangible assets
and other investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other credits and
charges of a non-recurring nature that require inclusion in order to provide
additional insight into underlying business performance.
An analysis of non-trading items after interest, tax and non-controlling
interests is set out below:
2023 2022
US$m US$m
Change in fair value of investment properties (note 9) (486.7) (104.1)
Change in fair value of other investments (0.4) -
Gain on sale of a subsidiary (note 16)/asset disposals (note 14) 41.3 47.0
(445.8) (57.1)
Share of results of associates and joint (0.6) -
ventures - closure
costs (note 4)
(446.4) (57.1)
8. TANGIBLE ASSETS
2023 2022
US$m US$m
Opening net book value 916.3 1,098.2
Exchange differences 34.0 (58.5)
Additions 13.1 12.8
Disposals (note 14) (0.8) (90.3)
Transfer to investment properties - (0.6)
Classified as held for sale (note 10) (305.1) -
Depreciation charge (38.9) (45.3)
Closing net book value 618.6 916.3
9. INVESTMENT PROPERTIES
2023 2022
US$m US$m
Opening fair value 2,472.6 2,462.0
Exchange differences (5.5) 0.6
Additions 79.9 26.4
Transfer from tangible assets - 0.6
Transfer from right-of-use assets - 87.1
Decrease in fair value (486.7) (104.1)
Closing fair value 2,060.3 2,472.6
In 2022, an owned-use property, including tangible assets of US$0.6 million
and right-of-use assets of US$87.1 million, was transferred to a completed
residential investment property following the change of use determined by the
management.
At 31st December 2023, investment properties comprised a commercial investment
property under development of US$1,971.9 million (2022: US$2,384.9 million)
and a completed residential investment property of US$88.4 million (2022:
US$87.7 million).
10. ASSETS CLASSIFIED AS HELD FOR SALE
2023 2022
US$m US$m
Intangible assets 0.1 -
Tangible assets 305.1 -
Deferred tax assets 0.1 -
Current assets* 26.6 -
Total assets 331.9 -
Current liabilities (24.1) -
In December 2023, the Group has announced that it has, pursuant to a
preliminary sale agreement, signed an option to sell its interests in Mandarin
Oriental, Paris (the 'Paris hotel') to SLH Hotels Srl, the owner of Mandarin
Oriental, Milan, for US$227.0 million (€205.0 million). The two retail
units at the main entrance of the Paris hotel are not included in the sale and
were being actively marketed for sale at 31st December 2023.
The Group will retain a long-term management agreement to manage and brand the
Paris hotel.
The Group's acceptance of the offer for its interests in the Paris hotel is
subject to completion of a consultation process with the relevant Works
Council. Subject to that process and to the statutory right of pre-emption
by the City of Paris, among other conditions, it is anticipated that final
documentation will be signed and completion of the sale of the Paris hotel
will take place on or after 31st March 2024.
* Included cash and bank balances of US$11.5 million.
11. BORROWINGS
2023 2022
US$m US$m
Bank loans 415.5 599.8
Other borrowings - 2.2
415.5 602.0
414.9 2.2
Current
Long-term 0.6 599.8
415.5 602.0
The Group has borrowing facilities of US$754.4 million due to mature within
2024. In February 2024, the Group has refinanced bank facilities of US$409.2
million for three to five years.
12. DIVIDENDS
2023 2022
US$m US$m
Interim dividend in respect of 2023 of US¢1.50 19.0 -
(2022: nil) per share
A final dividend in respect of 2023 of US¢3.50 (2022: nil) per share
amounting to a total of US$44.2 million (2022: nil) is proposed by the
Board. The dividend proposed will not be accounted for until it has been
approved at the 2024 Annual General Meeting. The amount will be accounted
for as an appropriation of revenue reserves in the year ending 31st December
2024.
13. SALE OF A SUBSIDIARY
Net cash inflow for the sale of a subsidiary, P.T. Jaya Mandarin Agung (note
16), is summarised as follows:
2023 2022
US$m US$m
Non-current assets 4.8 -
Currents assets 5.2 -
Non-current liabilities (0.6) -
Current liabilities (4.0) -
Non-controlling interests 0.4 -
Net assets 5.8 -
Cumulative exchange translation difference 33.1 -
Profit on disposal before tax 43.8 -
Sales proceeds (net of selling expenses) 82.7 -
Adjustment for deferred payments (3.2) -
Cash and cash equivalents of a subsidiary disposed of (3.9) -
Net cash inflow 75.6 -
The revenue and loss after tax in respect of the subsidiary disposed of during
the year amounted to US$6.0 million and US$0.6 million, respectively.
14. ASSET DISPOSALS
In September 2022, the Group completed the sale of Mandarin Oriental,
Washington D.C., including tangible assets and stocks of US$90.8 million, for
gross proceeds of US$139.0 million. After taking into account the selling
expenses and sales related taxes of US$7.6 million, the net proceeds were
US$131.4 million. As a result, the Group has recognised a post-tax,
non-trading gain of US$47.0 million which included a net tax credit of US$6.4
million.
15. CAPITAL COMMITMENTS
At 31st December 2023, total capital commitments of the Group amounted to
US$354.6 million (2022: US$512.2 million).
16. RELATED PARTY TRANSACTIONS
The parent company of the Group is Jardine Strategic Limited ('JSL') and the
ultimate holding company of the Group is Jardine Matheson Holdings Limited
('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:
The Group managed six (2022: six) associate and joint venture hotels and
received management fees of US$14.3 million (2022: US$14.7 million) based on
long-term management agreements on normal commercial terms.
The Group provided hotel management services to Hongkong Land group ('HKL'), a
subsidiary of JMH. Total management fees received from HKL in 2023 amounted
to US$2.2 million (2022: US$1.4 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 2023 and
2022 (due to net loss).
The Group rented a property to DFI Retail Group, a subsidiary of JMH, and
received rental income of US$0.6 million (2022: US$0.7 million), based on
lease agreements on normal commercial terms. The lease was terminated during
the year.
In respect of the Causeway Bay site under development, the Group paid
consultancy fees of US$1.9 million (2022: US$3.2 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$59.8 million (2022: US$13.6 million). The HKL agreement and
GCL contract were arranged on normal commercial terms.
In June 2023, the Group completed the sale of 96.9% ownership stake in P.T.
Jaya Mandarin Agung, the owning company of Mandarin Oriental, Jakarta in
Indonesia, to P.T. Astra Land Indonesia, a subsidiary of JMH, at a total
consideration of US$84.8 million. The Group has recognised a post-tax,
non-trading gain of US$41.3 million which included cumulative exchange
translation loss of US$33.1 million and a tax charge of US$2.5 million. The
Group has retained the hotel management contracts to manage and brand the
hotel. Mandarin Oriental, Jakarta has become a managed hotel of the Group
following the sale (notes 7 and 13).
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.
The outstanding balances with associates and joint ventures are included in
debtors as appropriate.
Mandarin Oriental International Limited
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal
control. The process by which the Group identifies and manages risks will be
set out in more detail in the Corporate Governance section of the Company's
2023 Annual Report (the 'Report'). Set out below are the principal risks and
uncertainties facing the Company as required to be disclosed pursuant to the
Disclosure Guidance and Transparency Rules, as well as a summary of the steps
taken to mitigate those risks.
These risks are in addition to the matters referred to in the Chairman's
Statement, Group Chief Executive's Review and other parts of the Report.
1. 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
· Engage external consultants and experts where necessary.
· Perform regular cybersecurity and data vulnerability assessment at
least annually and/or penetration testing to identify weaknesses.
· Active monitoring and use of social media.
2. Concentration Risk
Certain locations in Asia contribute a significant portion of the Group's
underlying profit. Adverse conditions such as social upheaval, erosion of the
rule of law or travel restrictions could reduce a location's competitiveness
and impact the Group's businesses with operations and exposure to that
jurisdiction.
Mitigation
· Geographical diversification of the businesses through organic
growth.
· Maintaining financial strength under challenging scenarios.
· Further strengthening the Group's brand to sustain competitiveness
and resilience.
3. Commercial Risk
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 businesses.
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 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
· Utilise market intelligence and deploy strategies for
business-to-consumer business.
· Establish customer relationship management and digital commerce
capabilities.
· Engage in longer-term contracts and proactively approach suppliers
for contract renewals.
· Re-engineer existing business processes to take advantage of new
technological capabilities.
· Invest in and partner with companies that can provide the Group
access to different capabilities and technologies.
4. Environmental and Climate Risk
Environmental disasters such as earthquakes, floods and typhoons can damage
the Group's assets and disrupt operations. Global warming-induced climate
change has increased the frequency and intensity of storms, leading to higher
insurance premiums or reduced coverage for such natural disasters.
With governments also taking a more proactive approach towards carbon taxes,
renewable energies and electric vehicles, additional investments and efforts
to address physical and transition risks of climate change are anticipated
from businesses.
With interest in sustainability surging in recent years from investors,
governments and the general public, expectations by regulators and other
stakeholders for accurate corporate sustainability reporting and commitments
towards carbon neutrality to address climate change are also growing. This
brings increasing challenges to the Group to meet key stakeholders'
expectations.
There is potential for negative publicity and operational disruption arising
from conflict between activists and the Group's businesses that is perceived
to be engaged in trade and activities that are environmentally unfriendly.
Mitigation
· Executive Advisory Panel, Sustainability Leadership Council and Hotel
Sustainability Committees have been in place to mobilise and coordinate
sustainability efforts across the Group.
· A sustainability strategy framework, including a pillar for the planet,
drives the Group's sustainability agenda.
· Renewed environmental targets for 2025 and 2030 have been determined
per property through a Group-wide inventory management plan.
· 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 Environmental, Social and Governance (ESG) reporting
standards and requirements, to align Group disclosures to best market
practice.
· Conduct climate risk assessments and adaptation action plans based on
recommendations of Task Force on Climate-Related Financial Disclosure (TCFD),
including implementing measures to address physical risks posed by climate
change and identifying opportunities in global transition to a low carbon
economy.
5. Financial Strength and Funding
The Group's activities expose it to a variety of risks to its financial
strength and funding, including market risk, credit risk and liquidity risk.
The market risk the Group faces 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 assets and liabilities; and iii) securities
price risk as a result 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 may face liquidity risk if its credit rating deteriorates or if it
is unable to meet its financing commitments.
Mitigation
· Set clear policies and limits on market, credit and liquidity risks,
including in relation to foreign exchange exposure, interest rate risks,
cash management and prohibition on derivatives not used in hedging.
· Regular internal audits of compliance with treasury policies.
· Adopt appropriate credit guidelines to manage counterparty risk.
· When economically feasible, take borrowings in local currency to
hedge foreign exchange exposures on investments.
· Fix a portion of borrowings in fixed rates.
· Maintain adequate headroom in committed facilities to facilitate the
Group's capacity to pursue new investment opportunities and to provide some
protection against market uncertainties.
· Keep an appropriate funding balance between equity and debt from
banks and capital markets, both short- and long-term in tenor, to give
flexibility to develop the business.
· Maintain sufficient cash and marketable securities, and availability
of funding from an adequate amount of committed credit facilities and the
ability to close out market positions.
· 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.
6. Governance and Misconduct
Effective management of the Group's risks depends on the existence of an
appropriate governance structure, tone from top leadership, and functioning
system of internal controls. Ethical breaches, management override of
controls, employee fraud and misconduct, or other deficiencies in governance
and three lines of internal controls may result in financial loss and
reputational damage for the Group.
Inadequate capability and diversity in management or the Board may also lead
to sub-optimal deliberations and decisions.
Mitigation
· Established Group-wide mandatory code of conduct.
· Maintain a robust Corporate Governance Framework which includes a
whistleblowing channel.
· Maintain functionally independent internal audit function that
reports to the Group Audit Committee on risk management, the control
environment and significant non-compliance matters.
· Maintain Professional Indemnity, Crime and General Liability
insurance policies with adequate coverage.
7. Health, Safety and Product Quality
The Group's colleagues engage in physical activities that may lead to serious
injury or fatal incidents if work conditions are unsafe or workers do not take
due care to observe safety procedures.
The safety and quality of food products and other items delivered by the Group
are fundamental to its reputation with customers. Any actual or perceived
deficiency in product safety or quality may damage consumer confidence and the
brand's reputation, leading to financial loss.
Mitigation
· Establish safe working environments and regular safety training for
all employees and subcontractors.
· Establish contractual requirements for contractors to comply with
high expected levels of safety standards.
· Conduct occupational health and safety awareness campaigns.
· Establishing product quality and safety standards, guidelines.
· Ensure suppliers follow the Group's guidelines, principals'
requirements, and local regulations.
8. IT and Cybersecurity
The Group's businesses are ever more reliant on technology in their operations
and face increasing cyber-attacks from groups targeting both individuals and
businesses. As a result, the privacy and security of customer and corporate
information are at risk of being compromised through a breach of our or our
suppliers' IT systems or the unauthorised or inadvertent release of
information, resulting in brand damage, impaired customer trust, loss of
competitiveness or regulatory action.
Cyber-attacks stemming from inadequate cybersecurity or lack of employee
cybersecurity awareness may also adversely affect the Group's ability to
manage daily business operations, resulting in business interruption,
reputational damage, regulatory penalties, lost revenues, repair or other
costs.
Mitigation
· Engage external consultants to perform assessments on the business
units with industry benchmarks.
· Define cybersecurity programme and centralised function to provide
oversight, promote cybersecurity hygiene, strengthen cybersecurity defences
and manage cybersecurity incidents.
· Perform regular vulnerability assessment and penetration testing to
identify weaknesses.
· Maintain disaster recovery plans and backup for data restoration.
· Arrange regular security awareness training at least annually and
phishing testing to raise users' cybersecurity awareness.
· Conduct regular internal audits of IT general controls and
cybersecurity.
9. Pandemic
COVID-19 has demonstrated the wide-ranging and long-lasting impacts and
disruptions for businesses, communities and employees that may result from the
spread of a pandemic. While the governments and businesses have gained
experience from COVID-19 in preparing for and responding to future pandemic
scenarios, nevertheless significant disruptions and uncertainties would likely
result from global or regional pandemics of a similar nature if they raise the
prospect of lockdowns, restrictions on cross-border mobility, interruptions to
supply chains, and dampened consumer sentiment while vaccines are unavailable.
Mitigation
· Increase flexibility and resilience of work arrangements, including
tools that enable employees to effectively work from home, where possible.
· Test business continuity plans periodically for various scenarios
including loss of premises, systems, people and extended periods of split
teams.
· Increase resilience of supply chain with sourcing alternative
suppliers for key inputs and close coordination with logistics partners.
10. Political and Economic Risk
Changes and uncertainties in the political landscape pose risks for business
activity and sentiment in the territories where the Group operates and
consequently for the current investments and future growth of the Group. In
recent years, sources of uncertainty include geopolitical tensions between
China and the United States, terrorism and government instability in parts of
South East Asia. Rising costs of fuel and staple foods are particularly
sensitive for developing markets where the Group operates, heightening the
risk of civil discontent and political instability. The imposition of export
bans by some governments on food and raw materials adds further uncertainties
in the availability and cost of supplies for the Group's hotels and residences
that import these items.
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 such developments might have on the Group's joint venture partners,
associates, bankers, suppliers, or customers. These developments could
include recession, inflation, deflation, currency fluctuations, restrictions
in the availability of credit, business failures, or increases in financing
costs, oil prices or the cost of raw materials. Such developments might
increase operating costs, reduce revenues, lower asset values or result in
some or all of the Group's hotels and residences being unable to meet their
strategic objectives.
Mitigation
· Maintain the Group's financial strength and funding sources under
scenarios of economic downturn and other stresses.
· 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 and keep conservative assumptions on global
commodity prices.
· Insurance programme covering business interruption due to civil
unrest.
11. People and Talent
The competitiveness of the Group's businesses depends on the quality of the
people that it attracts and retains. The unavailability of needed human
resources may impact the ability of the Group's businesses to operate at
capacity, implement initiatives and pursue opportunities.
Recent and future workforce rationalisation may raise the potential for
organisational gaps in capabilities, succession and controls.
With worker preferences shifting towards greater importance attached to mental
health and well-being, the Group faces heightened risk for talent attraction
and retention if they cannot adapt their propositions for workers.
Mitigation
· Support workforce practices that promote well-being and flexible work
arrangements that are competitive with the market.
· Ensure proactive manpower planning and succession planning are in
place.
· Enhance modern employer branding, training for staff members,
compensation, and benefits, including retention incentives.
· Implement strategy to promote Inclusion, Equity and Diversity across
the Group.
· Establish employee assistance and counselling programmes.
· Enhance talent development plans to increase employees' visibility on
future career paths, including identifying strategic talent pools.
· Delivering new learning programmes to equip staff with finance,
procurement, HR, digital, IT and innovation technical capabilities for
business transformation.
12. Compliance with and Changes to Laws and Regulations
The Group's businesses are subject to several regulatory regimes in the
territories they operate in. New or changing laws and regulations in a wide
range of areas such as foreign ownership of assets and businesses, exchange
controls, building and environmental standards, competition, tax, employment,
and data privacy could potentially impact the operations and profitability of
the Group's business. Non-compliance may lead to reputational damage from
media exposure and financial loss due to litigation or penalties by government
authorities.
Mitigation
· Engage legal experts at early stage to assess implications of new
rules.
· Stay connected and informed of relevant new and draft regulations.
· Engage external consultants where necessary.
· Raise awareness via principals' brand conference with an annual
update on new regulations that may have been implemented in other markets.
· Lobby relevant associations and authorities through appropriate
channels.
· Perform early scenario planning to assess implications of new rules
and prepare for contingencies.
Mandarin Oriental International Limited
Responsibility Statements
The Directors of the Company confirm to the best of their knowledge that:
a) the consolidated financial statements prepared in accordance with
International Financial Reporting Standards, including International
Accounting Standards and Interpretations as issued by the International
Accounting Standards Board, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group; and
b) the Chairman's Statement, Group Chief Executive's Review, Financial
Review and the description of Principal Risks and Uncertainties facing the
Group as set out in the Company's 2023 Annual Report, which constitute the
management report required by the Disclosure Guidance and Transparency Rule
4.1.8, include a fair review of all information required to be disclosed under
Rules 4.1.8 to 4.1.11 of the Disclosure Guidance and Transparency Rules issued
by the Financial Conduct Authority in the United Kingdom.
For and on behalf of the Board
Laurent Kleitman
Matthew Bishop
Directors
Mandarin Oriental International Limited
Dividend Information for Shareholders
The final dividend of US¢3.50 per share will be payable on 15th May 2024,
subject to approval at the Annual General Meeting to be held on 8th May 2024,
to shareholders on the register of members at the close of business on 22nd
March 2024. The shares will be quoted ex-dividend on 21st March 2024, and
the share registers will be closed from 25th to 29th March 2024, inclusive.
Shareholders will receive cash dividends in United States Dollars, except when
elections are made for alternate currencies in the following circumstances.
Shareholders on the Jersey branch register
Shareholders registered on the Jersey branch register can elect for their
dividends to be paid in Sterling. These shareholders may make new currency
elections for the 2023 final dividend by notifying the United Kingdom transfer
agent in writing by 26th April 2024. The Sterling equivalent of dividends
declared in United States Dollars will be calculated by reference to a rate
prevailing on 2nd May 2024.
Shareholders holding their shares through CREST in the United Kingdom will
receive cash dividends in Sterling only, as calculated above.
Shareholders on the Singapore branch register who hold their shares through
The Central Depository (Pte) Limited ('CDP')
Shareholders who are on CDP's Direct Crediting Service ('DCS')
Those shareholders on CDP's DCS will receive their cash dividends in Singapore
Dollars unless they opt out of CDP Currency Conversion Service, through CDP,
to receive United States Dollars.
Shareholders who are not on CDP's DCS
Those shareholders not on CDP's DCS will receive their cash dividends in
United States Dollars unless they elect, through CDP, to receive Singapore
Dollars.
Shareholders on the Singapore branch register who wish to deposit their shares
into the CDP system by the dividend record date, being 22nd March 2024, must
submit the relevant documents to Boardroom Corporate & Advisory Services
Pte. Ltd., the Singapore branch registrar, by no later than 5.00 p.m. (local
time) on 21st March 2024.
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 60
years ago into a global brand, the Group now operates 38 hotels, nine
residences and 23 exclusive homes in 25 countries and territories, with each
property reflecting the Group's oriental heritage, local culture and unique
design. 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$4.6 billion as at 31st December 2023.
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 in the standard segment of 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
Laurent Kleitman / Matthew Bishop (852) 2895 9288
Chris Orlikowski (44) 791 7280 210
Brunswick Group Limited
William Brocklehurst (852) 5685 9881
Full text of the Preliminary Announcement of Results and the Preliminary
Financial Statements for the year ended 31st December 2023 can be accessed via
the Mandarin Oriental corporate website at
'https://www.mandarinoriental.com/en'.
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