REG - Mandarin Oriental Jardine Matheson Hdg - Mandarin Oriental - 2022 Preliminary Results
02/03/2023 09:30
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RNS Number : 6708R Mandarin Oriental International Ltd 02 March 2023
2nd March 2023
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
2022 PRELIMINARY ANNOUNCEMENT OF RESULTS
HIGHLIGHTS
l Combined revenue exceeds 2019 levels
l Group returns to underlying profit
l Strong performance from management business, particularly resort hotels
l Good recovery by owned hotels, although results impacted by Hong Kong and
Tokyo
l Two new hotels and two new residences opened and seven new projects
announced
"The Group continued to recover in 2022, as travel restrictions lifted in
Europe, the Middle East, and America and ended the year strongly, with a
return to underlying profitability. The Group's management business
performed well, especially in resort destinations. Our owned hotels business
saw a good recovery, but it was held back by continuing challenges in East
Asia, which impacted the performance of Hong Kong and Tokyo in particular.
The Group expects to see a strong improvement in its results in 2023,
particularly as restrictions in East Asia continue to ease. With a robust
pipeline of new developments and a globally recognised brand, we also remain
confident in the long-term success of the Group."
Ben Keswick
Chairman
RESULTS
Year ended 31st December
2022 2021 Change
US$m US$m %
Combined total revenue of hotels under management((1)) 1,568.1 1,053.5 +49
Revenue 454.1 316.9 +43
Underlying EBITDA (Earnings before interest, tax, depreciation and 111.4 40.7 +174
amortisation)((2))
Underlying profit/(loss) attributable to shareholders((3)) 7.6 (68.1) n/a
Revaluation loss on investment property under development (104.1) (73.9) -41
Gain on asset disposals 47.0 - n/a
Loss attributable to shareholders (49.5) (141.4) +65
US¢ US¢ %
Underlying earnings/(loss) per share((3)) 0.60 (5.39) n/a
Loss per share (3.92) (11.19) +65
US$ US$ %
Net asset value per share 2.61 2.62 -
Adjusted net asset value per share((4)) 3.87 3.93 -2
Net debt/shareholders' funds 11% 16%
Net debt/adjusted shareholders' funds((4)) 8% 10%
(1) Combined total 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 33 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
2022. 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 2022 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 2022
OVERVIEW
2022 has been a year of transition, after two years in which the global
hospitality industry was badly hit by the pandemic. Travel restrictions in
Europe, the Middle East and America fell away during the first quarter, but
East Asia continued to be hampered by constraints on movement well into the
fourth quarter. The performance of the Group recovered strongly in the year,
with combined total revenue of hotels under management of US$1.6 billion in
2022, a significant increase from 2021 and 18% above 2019.
2022 Financial Performance
Underlying earnings before interest, tax, depreciation, and amortisation
('EBITDA') were US$111 million, compared to US$41 million in 2021. The Group
achieved an underlying profit of US$8 million for the full year, its first
profit since 2019. Although profitability remained significantly below
pre-pandemic levels, this is a substantial improvement compared with 2021,
when the Group recorded an underlying loss of US$68 million.
Non-trading losses of US$57 million (US$73 million in 2021) comprised a US$104
million (3%) non-cash decrease in the valuation of the Causeway Bay site under
development, offset by a US$47 million realised gain from the sale of Mandarin
Oriental, Washington D.C. in September 2022, leading to a loss attributable to
shareholders of US$49 million.
At 31st December 2022, the adjusted net asset value per share, which reflects
the independent valuation of both the Group's owned hotel properties and of
the Causeway Bay site, was US$3.87, a 2% decrease compared with 2021. Net
debt fell to US$376 million from US$517 million at the end of 2021. Gearing
as a percentage of adjusted shareholders' funds was 8%, compared to 10% at the
end of 2021.
The Group remains well funded, and its liquidity position remained robust,
with US$226 million of cash reserves and US$471 million in available,
committed debt facilities.
No dividend will be paid in respect of 2022.
Year in review
The Group's performance benefitted from the resumption of normal travel
conditions as 2022 progressed. Most of the Group's owned or partially owned
properties reported better earnings in 2022. Performance from owned hotels,
however, continued to be adversely affected by lower contributions from the
Hong Kong and Tokyo hotels, whose performance was heavily impacted by COVID
restrictions throughout most of the year. Results were notably better in
London, Paris, Singapore, and Bangkok, driven by improvements in occupancy and
high rates. Overall EBITDA from the Group's owned hotel business was US$77
million, compared to US$24 million in 2021. After depreciation and interest
charges, there was an underlying loss from the Group's property interests of
US$7 million in 2022, compared to a loss of US$71 million in the prior year.
The Group's management business recorded a stronger performance, with an
EBITDA of US$34 million, compared to US$17 million in 2021. Management fees
increased in particular in resort destinations such as Bodrum, Lake Como, and
Dubai. The Group's management business reported an underlying profit of
US$17 million in 2022, compared to US$5 million in 2021.
Development
In 2022, the Group announced seven new management contracts, in Greece, Italy,
Egypt, Kuwait, the Maldives, China and Vietnam. The Group's robust
development pipeline includes 26 projects expected to be completed in the next
five years.
The Group opened two new hotels in the year, in Shenzhen, China and Lucerne,
Switzerland, and two standalone residences in Barcelona, Spain and Beverly
Hills, USA. Five projects are scheduled for opening in 2023: Mayfair in
London, Costa Navarino in Greece, Muscat in Oman, Zurich in Switzerland, and
residences in New York.
The Causeway Bay site in Hong Kong, which is being redeveloped as a mixed-use
office and retail complex, remains on track to complete in 2025.
Sustainability
We continued to make progress against our various sustainability goals and
commitments in 2022, and have set long-term environmental targets for each of
our hotels. We have largely achieved our goal to eliminate single-use
plastics in our hotels and we remain committed to improving this. Our
ambitious goals for the future include actively reducing food waste, expanding
our responsible procurement practices, and empowering our colleagues further
in carrying out volunteering activity.
People
On behalf of the Board, I would like to express my sincere appreciation to all
our colleagues for their dedication and commitment throughout the year. Our
colleagues are central to the legendary guest experience for which the Group
is renowned, and we remain focussed on being an employer of choice.
Outlook
The Group expects to see a strong improvement in its results in 2023,
particularly as restrictions in East Asia continue to ease. With a robust
pipeline of new developments and a globally recognised brand, the Board also
remains confident in the long-term success of the Group.
Ben Keswick
Chairman
Group Chief Executive's Review
Mandarin Oriental is widely recognised today as one of the world's leading
luxury hotel groups, and the heritage of our brand is a thread that runs
through each of our properties. 2022 has been an important year of
transition for the Group, as we have moved from a difficult pandemic
environment to the return of more normal travel conditions and hence recovered
our ability to operate. We remain focussed on building on and leveraging the
strength of our brand - oriental mastery of luxury and service excellence
underpinned by our people. We are committed to our vision - A World of Fans
- as well as our strategy to grow our development pipeline and our management
business. We aspire for the Fan to grow in relevance and stature outside the
boundaries of our properties, paving the way for Mandarin Oriental to evolve
from a luxury hotel group to a luxury brand.
In 2022, it was pleasing to see the Group make a robust recovery and deliver
increasingly improved performance, as travel conditions around the world
gradually returned to normal. As we emerge from the pandemic, we have
positioned the Group for long-term growth, maintained our service standards
and continued to create moments of delight for our guests.
Our hotels performed strongly in regions without travel restrictions and were
able to sustain their market-leading position. In Asia, the operations of
our hotels were hampered by travel restrictions. In Southeast Asia these
began to be relaxed in the middle of the year but those in China and Japan
continued into the fourth quarter. However, with the full relaxation of
these restrictions at the end of 2022, we are confident of a strong rebound in
performance in 2023. Financially, while performance remained below
pre-pandemic levels in the year, the Group reported a significant improvement
in EBITDA to US$111 million, compared to US$41 million in 2021. For the
first time since the outbreak of the pandemic in 2020, the Group was able to
record an underlying profit for the year.
In addition to delivering improved operational and financial performance, we
are encouraged that the Group has made great strides across our strategic
priorities.
In 2022, the Group opened two new hotels in Shenzhen and Lucerne, and two
residences in Barcelona and Beverly Hills. We expect to open several new
properties across Europe, the Middle East, and Asia in 2023 and to complete a
comprehensive renovation of Mandarin Oriental, Singapore. In addition, seven
new management contracts were announced in 2022, further strengthening our
development pipeline. We are focussed on delivering this pipeline and
bringing our new properties to market.
2023 also marks the 60th anniversary of the opening of the Group's first hotel
- Mandarin Oriental, Hong Kong. The Group is delighted to commemorate this
historic occasion with several celebratory events planned throughout the year.
We relaunched mandarinoriental.com in 2022, following a comprehensive overhaul
resulting in enhancements to elevate the guest digital experience and drive
higher revenue through our digital sales channels. Our guest recognition
programme - Fans of M.O. - continues to grow, and we now have over 1.4 million
members, representing an increase of 32% since 2021. We extended our
footprint with the launch of Mandarin Oriental Exclusive Homes, a hand-picked
collection of the most luxurious private homes. We are also proud to be able
to announce that we have achieved the elimination of 99% of single-use
plastics across our portfolio of hotels. As we look ahead, we are optimistic
about the future.
2022 Performance
Overall, the Group's financial performance improved significantly in 2022.
Following the removal of travel restrictions in most parts of the world, the
Group experienced strong demand, and occupancy increased considerably compared
to 2021. Our hotels also achieved high rates, with many setting new records,
as guests sought luxury and superior service. In China and Japan, however,
travel restrictions that were in place until late in 2022 limited the recovery
of our hotels compared to 2021 and other regions.
Combined total revenue from hotels under management was US$1,568 million, a
49% increase compared to 2021, supporting the Group's return to profitability.
EBITDA was US$111 million and underlying profit was US$8 million. This
performance represents a marked improvement compared to our 2021 financial
performance, when we reported an EBITDA of US$41 million and an underlying
loss of US$68 million.
The improved performance was primarily driven by higher occupancy and strong
rates in Europe, the Middle East, and Africa ('EMEA') and America. While
occupancy generally remained slightly below pre-pandemic levels in key gateway
cities and leisure destinations, our hotels achieved record rates, resulting
in strong Revenue Per Available Room ('RevPAR'). In EMEA, RevPAR was US$564,
45% above 2021, driven by improved occupancy and average daily rate ('ADR').
RevPAR also exceeded 2019 by 22%. Similarly, in America, the Group
recorded RevPAR of US$397, 50% above 2021.
In Asia, the Group achieved occupancy of 39% in 2022, compared to 35% in 2021.
Travel restrictions in Southeast Asia were relaxed gradually throughout the
year, and the Group's hotels saw quarter-on-quarter improvements in occupancy,
which led to steadily improving financial performance. In China and Japan,
however, travel restrictions remained in place for almost all of 2022, and
demand was suppressed, impacting the performance of our hotels in those
markets.
Owned Hotel Performance
The Group's owned hotels, which contribute a major proportion of the Group's
results, recorded an EBITDA of US$77 million in 2022, considerably higher than
the US$24 million result in 2021. These hotels, however, made an underlying
loss of US$7 million in 2022, predominantly due to depreciation charges
attributable to the properties.
Of the Group's 14 owned or partially owned hotels, operations in the Group's
two key profit-generating hotels in Hong Kong and Tokyo were seriously
hampered by stringent travel restrictions for the majority of the year.
These restrictions were removed in the fourth quarter, but not in time to
allow much of an improvement in their financial performance. Prior to the
pandemic, Hong Kong was the Group's most profitable hotel. In 2022, it
delivered a marginally positive EBITDA, supported by food and beverage
performance, but remained well below peak performance levels. Tokyo incurred
a significant EBITDA loss, due to the rental charges arising from it being a
leased property. The Group's owned hotels in Southeast Asia benefitted from
the gradual relaxation of restrictions earlier in 2022. Popular destinations
such as Bangkok and Singapore delivered robust profitability, with these
hotels both achieving EBITDA of US$5 million in the fourth quarter, a
significant improvement from the third quarter.
In EMEA and America, where trading conditions substantially improved compared
to last year, all hotels achieved positive EBITDA. Of note were
contributions made by the Group's hotels in London and Paris, both of which
delivered profitability at or above pre-COVID levels driven by strong rates.
Madrid, which reopened in 2021 following a three-year restoration, also
delivered a solid performance. In America, the Group's hotel in Miami
delivered another good result, and hotels in key cities such as New York and
Boston were able to achieve record rates.
Management Business Performance
The Group's management business delivered a higher proportion of the Group's
overall result than it did historically. As a result of the improved trading
conditions and Mandarin Oriental's expanded portfolio of hotels and
residences, total hotel management fees were US$60 million, 57% higher than in
2021. In 2022, the management business reported a positive EBITDA of US$34
million and an underlying profit of US$17 million, a significant improvement
compared to US$17 million EBITDA and US$5 million underlying profit in 2021.
Most hotels delivered higher management fees than last year, and leisure
destinations such as Dubai, Bodrum, and Lake Como, continued to achieve high
rates and occupancy due to strong demand, and produced another record year of
management fees. Whilst the Group has remained agile in adapting to changes
in restrictions and government policies, results in China were inevitably
impacted. Only now are normal travel restrictions returning to the region,
and the Group is confident in a fast recovery in travel and improved trading
conditions in 2023.
Strategy - A World of Fans
Through the pandemic, we were focussed on near-term priorities to rebuild
business levels and win new business, uphold the brand's reputation for
quality, and maintain our agile approach to operations to improve
profitability. As we emerge from the pandemic, our vision - A World of Fans
- is advancing both the value of the brand and the profitability of the Group.
We see every interaction, both internally and externally, as an opportunity
to build meaningful and long-lasting relationships with a global community of
Fans. We are focussed on continuing to progress our strategic priorities,
outlined below, to create the right foundation to drive sustainable long-term
growth.
1. Elevating our brand
Mandarin Oriental is a globally recognised brand and the Group's most powerful
asset. The foundation lies in our portfolio of unique properties delivering
21st century luxury and legendary, personalised, and empathetic service
reflecting the Group's oriental heritage. We continue to develop the brand's
presence by expanding our global footprint through new hotels and residences.
Partnerships with other luxury brands continue to enhance the brand beyond
the four walls of our hotels. We remain focussed on growing the Group's
existing ventures, including the continual expansion of Mandarin Oriental
Exclusive Homes, our online retail store Shop M.O., and our strategic alliance
with The Oberoi Group. Our long-term objective is to evolve from a luxury
hospitality brand to a luxury brand. We will continue to review and evaluate
strategic opportunities with the goal of unleashing the full potential of the
brand and reaching a wider audience in new sectors.
2. Powering our core
As our business grows, we increasingly need to leverage our data to gain
deeper insight into our properties and determine new strategies for improved
performance and growth. The data we gather and analyse today provides
additional feedback on the strengths and weaknesses in the proposition of each
of our hotels. Our colleagues are actively using this to drive better
services, an enhanced guest experience, improved revenue management and more
effective marketing. There is still more, however, that we can do with our
data, and we have reorganised our internal teams to drive excellence in this
area, as well as enhancing visibility across all digital and transformation
initiatives.
We are also focussed on driving operational efficiencies by enhancing the
effectiveness of our systems and processes to ensure our internal functions
are modernised to enable scalability.
3. Lifting our people
Evolving and protecting our unique cultural DNA remains critical to securing
the consistent delivery of service excellence, a crucial differentiator of
Mandarin Oriental. The Group's focus on acquiring and retaining the right
talent, providing an engaging colleague experience, and preparing the
organisation for growth remains central to our people strategy and is
increasingly relevant as the hospitality industry faces talent shortages. We
are embarking on a human resources ('HR') transformation to support the needs
of a changing workforce. We recently launched a digital, interactive
learning and development platform. In addition, we will be implementing a HR
operating model that simplifies our technology platform landscape and will be
redesigning our processes to enhance our understanding of our talent to
support organisational agility.
4. Exceptional quality
The Group firmly believes that its competitive advantage lies in its portfolio
of unique properties and consistent delivery of service excellence,
characterised by the warm, engaging, personal interactions we have with our
guests. As we plan for the opening of 26 new hotels and residences in the
next few years, we are constantly evolving our guidelines across design and
technology to curate a portfolio of distinct, highly appealing properties.
We are also focussed on leveraging new technologies such as Hello MO, our
on-property live guest communication channel, to provide a customer-centric,
personalised experience for guests. In addition, we are committed to
maintaining our high service levels, striving to exceed our guests'
expectations, and evolving our standards for future guests.
Business Development strategy
The Group's long-term strategic priority is to grow its management business
significantly by securing management contracts in key destinations, leveraging
the strength of our brand. We will retain ownership of iconic properties in
brand-defining locations, in order to benefit from operational profitability
and capital appreciation over the long term, while conducting regular reviews
of the Group's asset portfolio.
Today, we operate 36 hotels and nine residences. In 2022, we opened two new
hotels in Shenzhen and Lucerne, and two standalone residences in Barcelona and
Beverly Hills. We also announced seven new management contracts in Costa
Navarino (Greece), the Maldives, Cairo, Cortina (Italy), Tianfu (China),
Kuwait, and Bai Nom (Vietnam). These new properties are all management
contracts, expanding the Group's presence into new countries and new
propositions, including the Group's first alpine resort.
Over the past few years, we have diligently built a robust pipeline, which now
comprises over 26 projects expected to open in the next five years. We are
confident that our development strategy will enable a healthy growth rate.
We remain focussed on maintaining the momentum of delivery of new hotel and
residences openings and continued replenishment of our development pipeline.
While we are somewhat reliant on developers, we are working closely with our
property owners to ensure the smooth delivery of projects and meet our target
of opening four to five new properties each year. In 2023, we expect to open
four new hotels in London, Muscat, Zurich and Costa Navarino, and residences
in New York.
As part of the regular review of our asset portfolio, we completed the sale of
Mandarin Oriental, Washington D.C., in September 2022.
Looking ahead, the redevelopment of the site in Causeway Bay, Hong Kong, is on
track to complete in 2025.
Sustainability
Corporate responsibility values are deeply ingrained in Mandarin Oriental's
culture, and sustainability implications are carefully considered in every
decision across the Group. One of our guiding principles is 'Acting with
responsibility', and we have established a Naturally Better programme to
direct our efforts towards the well-being of the planet, communities and
individuals. As the Group grows, its responsibility to drive sustainability
in the way its hotels operate becomes even more impactful.
We aim to achieve the best possible environmental performance across all of
our hotels. We have developed 10-year environmental targets for each of our
hotels, differentiated by reference to the circumstances, priorities and
location of each property and made good progress against these.
In the past year, we have continued to push ahead across our various
sustainability goals and commitments, and we are proud to have achieved
considerable success through collective action. This includes broadly
achieving our target to eliminate single-use plastics in our hotels, by
reaching 99% elimination in 2022.
Going forward, we will continue to focus on advancing our key sustainability
priorities. Our ambitious goals include actively reducing food waste and
expanding our responsible procurement practices. We will also be providing
additional paid leave for volunteering, to empower colleagues to interact with
their communities and contribute to causes that are close to their hearts.
Culture and Colleagues
At the heart of Mandarin Oriental's reputation as a luxury hotel group is its
culture, derived from its oriental heritage and an unwavering focus on
delivering exceptional, personalised, and empathetic service. We continue to
foster a culture of inclusivity and innovation, that encourages new and
different behaviours and ideas, to stay relevant with the pace of change in
today's world. We empower colleagues to feel comfortable in being themselves
and in voicing their ideas. We encourage our colleagues to believe in and
deliver our core values of doing the right thing for customers, communities,
and the planet. We must continue to actively support and reward these
behaviours to sustain this culture and mindset.
Our vision - A World of Fans - can only be achieved through our people. I
would like to personally thank each and every one of my colleagues for their
commitment, dedication, and hard work in the past year. Their continuing
desire to deliver unique and memorable experiences for our guests and the
pride with which they carry the Mandarin Oriental brand is central to the
success of the business.
The year ahead
2023 will be a very busy year for the Group with multiple new openings of
hotels and residences, and improvements to our existing portfolio. We expect
the Group's financial performance in 2023 will benefit from the return of
demand in Hong Kong and Tokyo, two of the Group's key profit-contributing
hotels. We are confident that, with our globally recognised brand, expanding
Fan base, robust pipeline of projects, and our people, we are well-placed to
benefit from improving market conditions and to achieve long-term growth.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2022
2022 2021
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$m
Revenue (note 2) 454.1 - 454.1 316.9 - 316.9
Cost of sales (302.7) - (302.7) (261.3) - (261.3)
Gross profit 151.4 - 151.4 55.6 - 55.6
Selling and distribution costs (27.0) - (27.0) (20.7) - (20.7)
Administration expenses (109.2) - (109.2) (104.1) - (104.1)
Other operating income 5.7 - 5.7 43.2 0.6 43.8
Change in fair value of investment property under development - (104.1) (104.1) - (73.9) (73.9)
Gain on asset disposals (note 7) - 40.6 40.6 - - -
Operating (loss)/profit (note 3) 20.9 (63.5) (42.6) (26.0) (73.3) (99.3)
Financing charges (16.7) - (16.7) (13.8) - (13.8)
Interest income 2.3 - 2.3 1.1 - 1.1
Net financing charges (14.4) - (14.4) (12.7) - (12.7)
Share of results of associates and joint ventures (note 4) 9.7 - 9.7 (21.8) - (21.8)
(Loss)/profit before tax 16.2 (63.5) (47.3) (60.5) (73.3) (133.8)
Tax (note 5) (8.5) 6.4 (2.1) (7.6) - (7.6)
(Loss)/profit after tax 7.7 (57.1) (49.4) (68.1) (73.3) (141.4)
Attributable to:
Shareholders of the Company (notes 6 & 7) 7.6 (57.1) (49.5) (68.1) (73.3) (141.4)
Non-controlling interests 0.1 - 0.1 - - -
7.7 (57.1) (49.4) (68.1) (73.3) (141.4)
US¢ US¢ US¢ US¢
(Loss)/earnings per share (note 6)
- basic 0.60 (3.92) (5.39) (11.19)
- diluted 0.60 (3.92) (5.39) (11.19)
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2022
2022 US$m 2021
US$m
Loss for the year (49.4) (141.4)
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans (2.1) 3.5
Revaluation surplus of right-of-use assets before transfer to investment 79.8 -
properties
Tax on items that will not be reclassified 0.3 (0.6)
78.0 2.9
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
- net losses arising during the year (58.2) (70.7)
Cash flow hedges
- net gains arising during the year 16.6 11.6
Tax relating to items that may be reclassified (2.4) (1.3)
Share of other comprehensive income/(expense) of associates and joint ventures 0.7 (2.0)
(43.3) (62.4)
Other comprehensive income/(expense) for the year, net of tax 34.7 (59.5)
Total comprehensive expense for the year (14.7) (200.9)
Attributable to:
Shareholders of the Company (14.7) (200.7)
Non-controlling interests - (0.2)
(14.7) (200.9)
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2022
2022 2021
US$m US$m
Net assets
Intangible assets 45.7 46.7
Tangible assets (note 8) 916.3 1,098.2
Right-of-use assets 242.4 273.3
Investment properties (note 9) 2,472.6 2,462.0
Associates and joint ventures 203.8 201.5
Other investments 14.0 16.5
Deferred tax assets 14.2 13.7
Pension assets 3.0 7.1
Non-current debtors 12.2 8.9
Non-current assets 3,924.2 4,127.9
Stocks 5.0 5.3
Current debtors 90.5 68.8
Current tax assets 6.8 2.2
Bank and cash balances 226.2 212.8
Current assets 328.5 289.1
Current creditors (159.1) (157.2)
Current borrowings (note 10) (2.2) (2.5)
Current lease liabilities (5.9) (6.3)
Current tax liabilities (18.4) (9.9)
Current liabilities (185.6) (175.9)
Net current assets 142.9 113.2
Long-term borrowings (note 10) (599.8) (727.8)
Non-current lease liabilities (123.5) (147.4)
Deferred tax liabilities (41.6) (50.1)
Pension liabilities (0.1) (0.3)
Non-current creditors (4.5) (3.2)
Non-current liabilities (769.5) (928.8)
3,297.6 3,312.3
Total equity
Share capital 63.2 63.2
Share premium 500.7 500.5
Revenue and other reserves 2,730.2 2,745.1
Shareholders' funds 3,294.1 3,308.8
Non-controlling interests 3.5 3.5
3,297.6 3,312.3
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2022
Share Share Capital Revenue Asset revaluation reserves US$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
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
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
Revenue reserves as at 31st December 2022 included cumulative fair value
losses on the investment property under development of US$720.2 million (2021:
US$616.1 million).
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2022
2022 2021
US$m US$m
Operating activities
Operating loss (note 3) (42.6) (99.3)
Depreciation, amortisation and impairment 58.2 68.5
Other non-cash items 63.5 71.2
Movements in working capital (1.1) 0.9
Interest received 2.1 0.4
Interest and other financing charges paid (15.6) (13.5)
Tax paid (8.0) (1.8)
Cash flows from operating activities 56.5 26.4
Investing activities
Purchase of tangible assets (12.8) (15.3)
Additions to investment property under development (30.2) (19.7)
Purchase of intangible assets (6.1) (6.1)
Additions to right-of-use assets (0.2) -
Refund on Munich expansion 4.0 13.0
Purchase of other investments (0.2) (0.3)
Purchase of an associate (1.0) -
Advance to associates and joint ventures (2.4) (7.1)
Repayment of loans to associates and joint ventures 4.2 3.0
Net proceeds from asset disposals (note 7) 131.4 -
Cash flows from investing activities 86.7 (32.5)
Financing activities
Drawdown of borrowings 23.0 130.6
Repayment of borrowings (139.5) (66.4)
Principal elements of lease payments (5.7) (3.3)
Cash flows from financing activities (122.2) 60.9
Net increase in cash and cash equivalents 21.0 54.8
Cash and cash equivalents at 1st January 212.8 164.6
Effect of exchange rate changes (7.6) (6.6)
Cash and cash equivalents at 31st December 226.2 212.8
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 2022 which have been prepared
in conformity with International Financial Reporting Standards, 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 2022.
Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract
(effective from 1st January 2022)
The amendments clarify that for the purpose of assessing whether a contract is
onerous, the cost of fulfilling the contract includes both the incremental
costs of fulfilling that contract and an allocation of other costs that relate
directly to fulfilling contracts. The Group applied the amendment from 1st
January 2022 and there was no material impact on the Group's consolidated
financial statements.
Apart from the above, there are no other amendments which are effective in
2022 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
2022 2021
US$m US$m
By business activity:
Hotel ownership 400.9 278.9
Hotel & Residences branding and management 68.5 48.5
Less: intra-segment revenue (15.3) (10.5)
454.1 316.9
By geographical area:
Asia 141.4 132.4
Europe, Middle East and Africa ('EMEA') 239.7 137.8
America 73.0 46.7
454.1 316.9
From contracts with customers:
Recognised at a point in time 140.8 111.5
Recognised over time 295.2 185.6
436.0 297.1
From other sources:
Rental income 18.1 19.8
454.1 316.9
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING LOSS FROM SUBSIDIARIES
2022 2021
US$m US$m
By business activity:
Hotel ownership 45.3 25.9
Hotel & Residences branding and management 33.8 16.6
Underlying EBITDA from subsidiaries 79.1 42.5
Non-trading items (note 7)
Change in fair value of investment property under development (104.1) (73.9)
Change in fair value of other investments - 0.6
Gain on asset disposals 40.6 -
(63.5) (73.3)
EBITDA from subsidiaries 15.6 (30.8)
Underlying depreciation and amortisation from subsidiaries (58.2) (68.5)
Operating loss (42.6) (99.3)
By geographical area:
Asia (8.7) (8.6)
EMEA 82.8 59.7
America 5.0 (8.6)
Underlying EBITDA from subsidiaries 79.1 42.5
The Group had received government grants of US$4.3 million (2021: US$35.8
million) and rent concessions of US$0.4 million (2021: US$3.4 million) for the
year ended 31st December 2022, respectively. These amounts were in relation
to the COVID-19 pandemic and were accounted for as other operating income.
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and profit/ financing profit/
EBITDA amortisation (loss) charges Tax (loss)
US$m US$m US$m US$m US$m US$m
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
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)
The results of associates and joint ventures included the Group's share of
government grants of US$0.2 million (2021: US$1.4 million) and rent
concessions of US$0.1 million (2021: US$0.1 million) for the year ended 31st
December 2022, respectively. These amounts were in relation to the COVID-19
pandemic.
5. TAX
2022 2021
US$m US$m
Tax (charged)/credited to profit and loss is analysed as follows:
Current tax (12.0) (2.5)
Deferred tax 9.9 (5.1)
(2.1) (7.6)
By business activity:
Hotel ownership 5.3 (5.8)
Hotel & Residences branding and management (7.4) (1.8)
(2.1) (7.6)
By geographical area:
Asia (0.2) (2.0)
EMEA (5.2) (4.8)
America 3.3 (0.8)
(2.1) (7.6)
Tax relating to components of other comprehensive income is analysed as
follows:
Remeasurements of defined benefit plans 0.3 (0.6)
Cash flow hedges (2.4) (1.3)
(2.1) (1.9)
Tax on profits has been calculated at rates of taxation prevailing in the
territories in which the Group operates.
In 2022, current tax included a capital gain tax charge of US$4.3 million and
deferred tax included a credit of US$10.7 million in relation to the sale of
Mandarin Oriental, Washington D.C. (note 7).
Share of tax charges of associates and joint ventures of US$1.0 million (2021:
US$0.4 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$49.5 million (2021: US$141.4 million) and the weighted average number of
US$1,263.7 million (2021: 1,263.4 million) shares in issue during the year.
Diluted loss per share is calculated using loss attributable to shareholders
of US$49.5 million (2021: US$141.4 million) and the weighted average number of
1,263.8 million (2021: 1,263.8 million) shares in issue after adjusting for
the number of shares which are deemed to be issued for no consideration under
the share-based long-term incentive plans based on the average share price
during the year.
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2022 2021
Weighted average number of shares for basic loss 1,263.7 1,263.4
per share calculation
Adjustment for shares deemed to be issued for no consideration under the 0.1 0.4
share-based long-term incentive plans
Weighted average number of shares for diluted loss 1,263.8 1,263.8
per share calculation
Additional basic and diluted loss/earnings per share are also calculated based
on underlying profit/loss attributable to shareholders. A reconciliation of
loss/earnings is set out below:
2022 2021
US$m Basic Diluted (loss)/ US$m Basic Diluted loss
(loss)/ earnings loss per share US¢
earnings per share per share
per share US¢ US¢
US¢
Loss attributable to shareholders (49.5) (3.92) (3.92) (141.4) (11.19) (11.19)
Non-trading items (note 7) 57.1 73.3
Underlying profit/(loss) attributable to shareholders 7.6 0.60 0.60 (68.1) (5.39) (5.39)
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater understanding
of the Group's underlying business performance. Items classified as
non-trading items include fair value gains or losses on revaluation of
investment properties and investments which are measured at fair value through
profit and loss; gains and losses arising from the sale of businesses,
investments and properties; impairment of non-depreciable intangible assets
and other investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other credits and
charges of a non-recurring nature that require inclusion in order to provide
additional insight into underlying business performance.
An analysis of non-trading items after interest, tax and non-controlling
interests is set out below:
2022 2021
US$m US$m
Change in fair value of investment property (104.1) (73.9)
under development (note 9)
Change in fair value of other investments - 0.6
Gain on asset disposals 47.0 -
(57.1) (73.3)
On 8th 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$47.0 million.
8. TANGIBLE ASSETS
2022 2021
US$m US$m
Opening net book value 1,098.2 1,181.5
Exchange differences (58.5) (42.3)
Additions 12.8 14.0
Disposals (note 7) (90.3) -
Transfer to investment properties (0.6) -
Depreciation charge (45.3) (55.0)
Closing net book value 916.3 1,098.2
9. INVESTMENT PROPERTIES
2022 2021
US$m US$m
Opening fair value 2,462.0 2,528.3
Exchange differences 0.6 (15.0)
Additions 26.4 22.6
Transfer from tangible assets 0.6 -
Transfer from right-of-use assets 87.1 -
Decrease in fair value (104.1) (73.9)
Closing fair value 2,472.6 2,462.0
In 2022, an own-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 a change of its future use
determined by the Directors.
At 31st December 2022, investment properties comprised a commercial investment
property under development of US$2,384.9 million (2021: US$2,462.0 million)
and a completed residential investment property of US$87.7 million (2021:
nil).
10. BORROWINGS
2022 2021
US$m US$m
Bank loans 599.8 726.5
Other borrowings 2.2 3.8
602.0 730.3
2.2 2.5
Current
Long-term 599.8 727.8
602.0 730.3
11. DIVIDENDS
No interim and final dividends in respect of the 2022 and 2021 financial years
have been declared or proposed by the Board.
12. CAPITAL COMMITMENTS
At 31st December 2022, total capital commitments of the Group amounted to
US$512.2 million (2021: US$550.3 million).
13. 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 (2021: six) associate and joint venture hotels and
received management fees of US$14.7 million (2021: US$6.6 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 2022 amounted
to US$1.4 million (2021: US$2.3 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 2022 and
2021 (due to net losses).
The Group rented a property to DFI Retail Group, a subsidiary of JMH, and
received rental income of US$0.7 million (2021: US$0.7 million), based on
lease agreements on normal commercial terms.
In respect of the Causeway Bay site under development, the Group paid
consultancy fees of US$3.2 million (2021: US$1.2 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$13.6 million (2021: US$17.9 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.
The 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 2022 Annual Report
(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 which have concentrated operations in that
jurisdiction.
Mitigation
· Geographical diversification of the business 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 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 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 business 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 Disclosures (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
whistle-blowing 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 provided 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 business is 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' 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 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
Southeast 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 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 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.
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.
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 diversity and inclusion 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 business is 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 adopted by the International
Accounting Standards Board, give a true and fair view of the assets,
liabilities, financial position and profit and losses of the Group; and
b) the Chairman's Statement, Group Chief Executive's Review, Financial
Review and the Principal Risks and Uncertainties of the Company's 2022 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
James Riley
Matthew Bishop
Directors
Dividend Information for Shareholders
In light of the modest level of underlying profit, no final dividend in
respect of the 2022 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 60
years ago into a global brand, the Group now operates 36 hotels and nine
residences in 24 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$4.9
billion as at 31st December 2022.
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
James Riley / Matthew Bishop (852) 2895 9288
Chris Orlikowski (852) 2895 9167
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 2022 can be accessed via
the Mandarin Oriental corporate website at
'https://www.mandarinoriental.com/en'.
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