Orient-Express Hotels Reports First Quarter 2010 Results
By Orient Express Hotels Ltd, PRNETuesday, May 4, 2010
HAMILTON, Bermuda, May 5, 2010 - First Quarter Earnings Summary
- First quarter total revenues, excluding Real Estate, up 6% to
$86.0 million
- Revenue from owned hotels up 12%
- Same store RevPAR up 5% in local currency, up 12% in US dollars
- Adjusted EBITDA before Real Estate of $nil million
- Peru and Madeira both impacted by extraordinary weather
conditions, EBITDA results down $5.0 million
- Costs impacted by foreign exchange movements of $7.7 million
Key events
- Raised $131 million of cash in common share offering for
acquisition of strategic assets in Sicily, debt reduction and general
corporate purposes
- Completed acquisition of Grand Hotel Timeo and Villa Sant'Andrea
in Taormina, Sicily for EUR81 million ($115 million) and commenced
renovations
- Awarded GBP7.7 million ($10.5 million) in a legal action to
protect the "Cipriani" trademark
- Completed sale of Lilianfels Blue Mountains, Australia for AUD21
million ($19.3 million)
Orient-Express Hotels Ltd. (NYSE: OEH, www.orient-express.com),
owners or part-owners and managers of 50 luxury hotel, restaurant, tourist
train and river cruise properties operating in 24 countries, today announced
its results for the first quarter ended March 31, 2010.
For the first quarter, the Company reported a net loss of $13.0 million
(loss of $0.15 per common share) on revenue of $89.7 million, compared with a
net loss of $14.6 million (loss of $0.29 per common share) on revenue of
$81.1 million in the first quarter of 2009. The net loss from continuing
operations for the period was $18.2 million (loss of $0.21 per common share),
compared with a net loss of $11.6 million (loss of $0.23 per common share) in
the first quarter of 2009. The adjusted net loss from continuing operations
for the period was $19.2 million ($0.22 per common share), compared with an
adjusted net loss of $0.1 million ($nil per common share) in the first
quarter of 2009.
"In what is traditionally Orient-Express' quiet quarter, it was pleasing
to see revenues begin to show growth, with system-wide same store local
currency RevPAR growing at 5%, underpinned by growth in Rest of World of
16%," said Paul White, President and Chief Executive Officer. "However, the
quarter was not without its challenges. Freak weather struck in Peru and
Madeira, resulting in the closure of the Cuzco-Machu Picchu rail link and our
hotel in Machu Picchu for most of the quarter, and the island of Madeira was
briefly shut down in February. The combined EBITDA from these locations in
the first quarter was down $5.0 million but this is before we book any
insurance proceeds. On a more positive note, during the first quarter, we
were delighted to add to our Italian portfolio with the acquisition of Grand
Hotel Timeo and Villa Sant'Andrea, financed by the successful common share
offering in January. The Company has ended the quarter well positioned for
growth and of course, we are now moving into our strong trading season."
Business Highlights
Revenue, excluding Real Estate revenue, was $86.0 million in the first
quarter of 2010, up $4.9 million from the first quarter of 2009.
Revenue from Owned Hotels for the first quarter was $79.2 million. Owned
Hotels same store RevPAR was up 5% in local currency and up 12% in US
dollars.
Trains and Cruises revenue in the first quarter was $5.0 million, a
decrease of $1.4 million over the prior year quarter, primarily because of
events in Peru.
Adjusted EBITDA before Real Estate and Impairment was $nil million
compared to a profit of $9.6 million in the prior year. The principal
variances from the first quarter of 2009 included Grand Timeo Hotel and Villa
Sant'Andrea, Taormina, Sicily (loss of $0.4 million), La Samanna, St. Martin
(down $1.3 million), Copacabana Palace, Rio de Janeiro (up $1.8 million),
share of results from Peru hotels (down $1.5 million), and share of results
from PeruRail (down $3.3 million).
In January, the Company completed its public offering of 12 million Class
A common shares. The underwriters for the offering exercised in full their
over-allotment option to purchase an additional 1.8 million Class A common
shares, bringing the total shares sold to 13.8 million at a price of $10.00
per share for gross proceeds of $138 million. Orient-Express Hotels Ltd.
received net proceeds of approximately $131 million, after deducting
underwriting discounts and offering expenses.
In January, the Company completed its acquisition of Grand Hotel Timeo
and Villa Sant'Andrea in Taormina, Sicily from The Framon Group for a
combined price, excluding contingent consideration, of EUR81million ($115
million) and the completion of the sale of Lilianfels Blue Mountains in
Australia for AUD 21 million ($19.3 million).
In March, GBP7.7 million ($10.5 million) plus costs and interest was
awarded against the Cipriani London restaurant and the parent company of the
restaurant owning companies of the Cipriani family, by way of an account of
profits made from their acts of infringement of the trade mark "Cipriani".
Until funds are received, this will not be recorded as income in the
Company's accounts.
In March, the Company commenced renovation of the final 64 keys at Hotel
das Cataratas, Iguassu Falls, Brazil, to be finished in September 2010. This
makes a total of 193 rooms which will be fully refurbished in time for the
summer season.
During the winter closure, a further 18 rooms and suites were refurbished
at Hotel Cipriani, Venice, bringing to 40 the number of the rooms refurbished
in the last three years. Facilities at Cip's Club have been improved and a
further area of the "Granaries of the Republic" event space has been
refurbished with the result that events of up to 350 persons can now be
hosted there.
At the Villa San Michele, the Donatello suite has been fully refurbished
along with six junior suites above the Italian garden.
Four superior suites were remodelled at Le Manoir aux Quat'Saisons which
opened at the end of April. Named Blanc de Blanc, L'Orangerie, Jade and Lace,
two feature private gardens and each is entirely individual in design.
Seventeen terrace suites are being renovated at the Grand Hotel Europe
and will be finished during May. These rooms are prized in the high season of
White Nights from May to July, for their floor to ceiling windows offering
spectacular panoramic views of St. Petersburg.
Work continues on the new 56 key hotel Palacio Nazarenas, adjacent to
Hotel Monasterio in Cuzco, Peru. Demolition of existing structures is now
complete and reinforcement of the historic buildings is progressing well. A
team of full time archaeologists has been appointed by the Institute of
National Culture because of the importance of the site, which contains Inca
and pre-Inca structures. The project is scheduled for completion in 2011.
Regional Performance
Europe: The Italian hotels were closed throughout the first quarters of
2010 and 2009. In the first quarter of 2010, revenues from Owned Hotels were
$13.5 million, which was in line with the first quarter of 2009. Same store
RevPAR for the region fell by 14% in local currency on a seasonally low
volume of business. EBITDA was a loss of $8.1 million in 2010 versus a loss
of $5.4 million in the prior year. The effect of stronger local currencies in
the 2010 quarter had a $1.5 million negative impact on costs. The first
quarter of 2010 includes an EBITDA loss of $1.5 million for Grand Hotel Timeo
and Villa Sant'Andrea. This includes non-recurring start-up and acquisition
costs of $1.1 million which may not be capitalized under US GAAP.
North America: Revenue was $27.3 million in the 2010 first quarter,
compared to $29.2 million last year. Local currency same store RevPAR for the
region fell by 2%. EBITDA in the region fell by $2.3 million to $5.4 million.
This included a $0.7 million negative impact on costs caused by the
strengthening of local currencies at Maroma Resort and Spa and La Samanna.
Southern Africa: Revenue of $8.9 million in the first quarter of 2010 was
$1.3 million greater than the prior year although local currency same store
RevPAR was 10% lower. EBITDA of $2.3 million was $0.3 million lower than the
first quarter of 2009. The effect of stronger local currencies in the 2010
quarter had a $1.5 million negative impact on costs versus the prior year.
South America: Revenue was $20.0 million in the first quarter, compared
to $13.9 million in the prior year. This strong performance was partly
attributable to a 73% uplift in revenue from Hotel das Cataratas.
Additionally, the Copacabana Palace benefited this year from the successful
conversion of 38 suites into 20 suites and 36 double rooms, which was
completed in April 2009. Same store RevPAR for the region increased by 35%.
Hotel das Cataratas, which is now in a pre-stabilization phase, contributed
an EBITDA loss in the 2010 quarter of $0.6 million, compared to an EBITDA
loss of $0.5 million in the prior year. For the region, EBITDA of $5.9
million was $1.4 million higher than the prior year. This included a $2.9
million negative impact on costs caused by the strengthening of local
currencies in Brazil and Peru.
Asia Pacific: Revenue for the first quarter of 2010 was $5.9 million, an
increase of 37% year over year. EBITDA was $2.1 million compared to $1.4
million in the first quarter of 2009. Same store RevPAR in local currency for
the region increased by 21%.
Hotel management and part-ownership interests: EBITDA for the first
quarter of 2010 was a loss of $1.3 million compared to a profit of $0.7
million in the first quarter of 2009. Of the fall in EBITDA, $1.5 million was
attributable to the Peru hotels, which were impacted by a decline in business
following the floods at Machu Picchu. The Peru hotels joint venture was out
of compliance with financial covenants in a loan agreement of the joint
venture amounting to $27.8 million. Discussions with the banks are ongoing
and an ultimately successful outcome is anticipated. This loan is
non-recourse to and is not credit-supported by the Company while it remains a
50% partner in the joint venture.
The Company's share in net earnings from Hotel Ritz Madrid was down $0.5
million following restructuring costs incurred at the hotel of $0.4 million.
Restaurant: Revenue from '21' Club in the first quarter of 2010 was $3.1
million, compared to $3.3 million in the first quarter of 2009, and EBITDA
was $0.1 million compared to $0.3 million in the prior year.
Trains and Cruises: Revenue in the first quarter of 2010 was $5.0
million, $1.4 million less than the prior year quarter. This included a $3.3
million decrease in earnings from PeruRail, which was impacted by the damage
to tracks caused by the floods at Machu Picchu. Consequently, there was a
significant impact on Trains and Cruises EBITDA, which overall fell by $3.2
million to a loss of $1.7 million.
Central costs: In the first quarter of 2010, central costs were $7.6
million compared with $5.1 million in the prior year period which included
$1.0 million of non-cash credits. The current year quarter included $1.5
million of non-cash equity compensation costs, which was $0.7 million greater
than the prior year quarter.
Real Estate: In the first quarter of 2010, there was an EBITDA loss of
$1.3 million from real estate activities, primarily relating to Porto
Cupecoy. During the quarter, revenue reported from units transferred to
customers was $3.7 million.
Depreciation and amortization: The depreciation and amortization charge
for the first quarter of 2010 was $11.3 million compared with $9.1 million in
the first quarter of 2009.
Interest: The interest charge for the first quarter of 2010 was $6.8
million compared to $9.2 million in the first quarter of 2009. The prior year
quarter included a charge of $1.3 million arising from ineffective interest
rate swaps.
Tax: The tax charge for the first quarter of 2010 was $0.3 million,
compared to a credit of $8.9 million in the same quarter in the prior year.
The first quarter of 2010 included a $2.0 million charge in respect of
valuation allowances and did not include the tax benefit from loss-making
territories forecasting tax loss for the full year. The first quarter of 2009
had no charge in respect of valuation allowances and included a tax benefit
of $1.6 million from loss-making territories that had forecast tax loss for
the full year.
Discontinued operations: The profit for the first quarter of 2010 was
$5.2 million including the results of Bora Bora Lagoon Resort. The profit
included an operating loss in the quarter, net of tax, of $1.5 million,
offset by the release of a cumulative translation adjustment following the
sale of Lilianfels Blue Mountains of $6.7 million.
Investment: The Company invested $6.3 million during the quarter in its
development at Porto Cupecoy and $1.0 million in Hotel das Cataratas.
Payments of a further $1.0 million were made to the New York Public Library
and there was additional capital expenditure of $9.2 million in the first
quarter, including $2.6 million at Hotel Cipriani and $1.3 million on the
Venice Simplon-Orient-Express for refurbishment works.
Liquidity and Capital Reserves
At March 31, 2010, the Company had long term debt of $854.6 million,
working capital loans of $11.7 million and cash balances of $168.5 million
(including $17.9 million of restricted cash), giving a total net debt of
$697.8 million compared with total net debt of $726.4 million at the end of
2009.
At March 31, 2010, undrawn amounts available to the Company under
committed short-term lines of credit were $20.6 million and undrawn amounts
available to the Company under secured revolving credit facilities were $12.0
million, bringing total cash availability at March 31, 2010 to $201.1
million, including restricted cash of $17.9 million.
At March 31, 2010, approximately 60% of the Company's debt was at fixed
interest rates and 40% was at floating interest rates. The weighted average
maturity of the debt was approximately 2.2 years and the weighted average
interest rate (including margin and swaps) was approximately 3.5%.
Recent events
The closure of European airspace due to the eruption of the
Eyjafjallajoekull volcano in Iceland in mid-April caused travel chaos and
resulted in lost revenue estimated at $0.8 million to the end of April.
It is not yet possible to estimate any financial impact of the civil
disruption in Bangkok on the Eastern & Oriental Express and the Company's
properties in Asia but any impact will be reduced because the end of the
first quarter marks the start of the low season in this region.
Most PeruRail services to Machu Picchu have resumed, following the
flooding in January. At present trains can only run from the Sacred Valley,
supplemented by a bus service from Cuzco. It is estimated that it will be
possible to make the entire journey from Poroy station in Cuzco to Machu
Picchu by rail from July 2010, subject to favorable weather conditions
enabling completion of the track repair work.
Business at Reid's Palace in Madeira has returned to normal following the
flooding on the island in February. The hotel was not damaged but the airport
was closed temporarily.
Outlook
Looking ahead, Paul White said, "In spite of extraordinary weather and
the more recent volcanic activity in Iceland, underlying business trends are
positive for the industry, and particularly for the luxury segment. Our
strong ownership model should mean that revenue increases will convert to
good EBITDA performance. That said, it is important to understand that the
marketplace is highly competitive. Orient-Express reacted quickly when the
downturn was upon us starting in 2008; we have kept a tight rein on
expenditure including Capex but it is now time to invest in recovery,
supporting areas such as sales, marketing, our employees and the product
itself. This will ensure our properties can continue to trade in the
privileged position they occupy in the market.
"Our 2011 goals remain unchanged. We are focussed on maximizing revenue,
continuing sales of non-core assets and developed Real Estate, with the aim
of continuing to reduce net debt to within an acceptable range of 4 to 5x
EBITDA."
Reconciliation and Adjustments
$'000 - except per share amounts Three months ended
March 31
2010 2009
(3,587) 1,534
EBITDA
Adjusted items:
Legal costs (1) 109 515
Grand Hotel Timeo & Villa 1,143 -
Sant'Andrea(2)
Management restructuring(3) 949 717
Impairment(4) - 6,500
Adjusted EBITDA (1,386) 9,266
US GAAP reported net loss (13,008) (14,639)
Discontinued operations net of tax (5,169) 3,010
Net loss from continuing operations (18,177) (11,629)
Adjusted items net of tax:
Legal costs (1) 109 515
Grand Hotel Timeo & Villa 866 -
Sant'Andrea(2)
Management restructuring(3) 760 625
Impairment (4) - 6,500
Interest rate swaps (5) 17 1,081
Foreign exchange (6) (2,771) 2,848
Adjusted net loss from continuing (19,196) (60)
operations
Reported EPS (0.15) (0.29)
Reported EPS from continuing operations (0.21) (0.23)
Adjusted EPS from continuing operations (0.22) (0.00)
Number of shares (millions) 87.83 50.96
1. Legal costs incurred in defending the Company's class B common share
structure.
2. Non-recurring costs and purchase transaction costs incurred in
relation to Grand Hotel Timeo and Villa Sant'Andrea.
3. Restructuring and redundancy costs.
4. Impairment charges recorded on three owned properties.
5. Charges on swaps that did not qualify for hedge accounting.
6. Foreign exchange, net of tax, is a non-cash item arising on the
translation of certain assets and liabilities denominated in currencies other
than the reporting currency of the entity concerned.
Management evaluates the operating performance of the Company's segments
on the basis of segment net earnings before interest, foreign currency, tax
(including tax on unconsolidated companies), depreciation and amortization
(EBITDA), and believes that EBITDA is a useful measure of operating
performance, for example to help determine the ability to incur capital
expenditure or service indebtedness, because it is not affected by
non-operating factors such as leverage and the historic cost of assets.
EBITDA is also a financial performance measure commonly used in the hotel and
leisure industry, although the Company's EBITDA may not be comparable in all
instances to that disclosed by other companies. EBITDA does not represent net
cash provided by operating, investing and financing activities under US
generally accepted accounting principles (US GAAP), is not necessarily
indicative of cash available to fund all cash flow needs, and should not be
considered as an alternative to earnings from operations or net earnings
under US GAAP for purposes of evaluating operating performance.
Adjusted EBITDA and adjusted net earnings of the Company are non-GAAP
financial measures and do not have any standardized meanings prescribed by US
GAAP. They are, therefore, unlikely to be comparable to similar measures
presented by other companies, which may be calculated differently, and should
not be considered as an alternative to net earnings, cash flow from operating
activities or any other measure of performance prescribed by US GAAP.
Management considers adjusted EBITDA and adjusted net earnings to be
meaningful indicators of operations and uses them as measures to assess
operating performance because, when comparing current period performance with
prior periods and with budgets, management does so after having adjusted for
non-recurring items, foreign exchange (a non-cash item), disposals of assets
or investments, and certain other items (some of which may be recurring)
which management does not consider indicative of ongoing operations or which
could otherwise have a material effect on the comparability of the Company's
operations. Adjusted EBITDA and adjusted net earnings are also used by
investors, analysts and lenders as measures of financial performance because,
as adjusted in the foregoing manner, the measures provide a consistent basis
on which the performance of the Company can be assessed.
This news release and related oral presentations by management contain,
in addition to historical information, forward-looking statements that
involve risks and uncertainties. These include statements regarding earnings
outlook, investment plans, debt reduction, asset sales and similar matters
that are not historical facts. These statements are based on management's
current expectations and are subject to a number of uncertainties and risks
that could cause actual results to differ materially from those described in
the forward-looking statements. Factors that may cause a difference include,
but are not limited to, those mentioned in the news release, unknown effects
on the travel and leisure markets of terrorist activity and any police or
military response, varying customer demand and competitive considerations,
failure to realize hotel bookings and reservations and planned property
development sales as actual revenue, inability to sustain price increases or
to reduce costs, rising fuel costs adversely impacting customer travel and
the Company's operating costs, fluctuations in interest rates and currency
values, uncertainty of negotiating and completing proposed asset sales,
capital expenditures and acquisitions, inability to reduce funded debt as
planned or to agree bank loan agreement waivers or amendments, adequate
sources of capital and acceptability of finance terms, possible loss or
amendment of planning permits and delays in construction schedules for
expansion or development projects, delays in reopening properties closed for
repair or refurbishment and possible cost overruns, shifting patterns of
tourism and business travel and seasonality of demand, adverse local weather
conditions, changing global and regional economic conditions in many parts of
the world and weakness in financial markets, legislative, regulatory and
political developments, and possible continuing challenges to the Company's
corporate governance structure. Further information regarding these and other
factors is included in the filings by the Company with the U.S. Securities
and Exchange Commission.
Orient-Express Hotels will conduct a conference call on Thursday, May 6,
2010 at 10.00 hrs EDT (15.00 GMT) which is accessible at +1-888-935-4575 (US
toll free) or +44(0)20-7806-1953 (Standard International access). The
conference ID is 2848773. A re-play of the conference call will be available
until 5.00pm (EDT) Thursday, May 13, 2010 and can be accessed by calling
+1-866-932-5017 (US toll free) or +44(0)20-7111-1244 (Standard International)
and entering replay access number 2848773#. A re-play will also be available
on the company's website: www.orient-expressinvestorinfo.com.
ORIENT-EXPRESS HOTELS LTD
Three Months ended March 31, 2010
SUMMARY OF OPERATING RESULTS
(Unaudited)
Three months ended
March 31
$'000 - except per share amount 2010 2009
Revenue and earnings
from unconsolidated companies
Owned hotels
- Europe 13,455 13,451
- North America 27,339 29,155
- Rest of World 38,410 28,118
Hotel management & part ownership (1,308) 692
interests
Restaurants 3,114 3,291
Trains & Cruises 4,972 6,355
Revenue and earnings from 85,982 81,062
unconsolidated
companies before Real Estate
Real Estate 3,694 -
Total (1) 89,676 81,062
Analysis of earnings
Owned hotels
- Europe (8,142) (5,415)
- North America 5,444 7,726
- Rest of World 10,915 8,762
Hotel management & part ownership (1,308) 692
interests
Restaurants 143 250
Trains & Cruises (1,715) 1,443
Central overheads (7,584) (5,105)
EBITDA before Real Estate and (2,247) 8,353
Impairment
Real Estate (1,340) (319)
EBITDA before Impairment (3,587) 8,034
Impairment - (6,500)
EBITDA (3,587) 1,534
Depreciation & amortization (11,317) (9,123)
Interest (6,757) (9,159)
Foreign exchange 3,822 (3,826)
Loss before tax (17,839) (20,574)
Tax (338) 8,945
Net loss from continuing operations (18,177) (11,629)
Discontinued operations 5,169 (3,010)
Net loss on common shares (13,008) (14,639)
(0.15) (0.29)
Loss per common share
Number of shares - millions 87.83 50.96
(1) Comprises loss from unconsolidated companies of $2,857,000 (2009 -
earnings of $1,551,000) and revenue of $92,533,000 (2009 - $79,511,000)
ORIENT-EXPRESS HOTELS LTD
Three Months Ended March 31, 2010
SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS
Three months ended
March 31
2010 2009
Average Daily Rate
(in US dollars)
Europe 375 366
North America 376 412
Rest of World 327 285
Worldwide 348 338
Rooms Available (000's)
Europe 50 51
North America 67 68
Rest of World 116 108
Worldwide 233 227
Rooms Sold (000's)
Europe 14 15
North America 41 38
Rest of World 71 61
Worldwide 126 114
RevPAR (in US dollars)
Europe 104 107
North America 227 230
Rest of World 201 163
Worldwide 187 170
Change %
Same Store RevPAR Dollar Local
(in US dollars) currency
Europe 88 94 -7% -14%
North America 227 230 -1% -2%
Rest of World 223 171 30% 16%
Worldwide 194 174 12% 5%
ORIENT-EXPESS HOTELS LTD
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
March 31 December 31
$'000 2010 2009
Assets
Cash 168,496 92,045
Accounts receivable 60,995 59,905
Due from related parties 17,885 19,385
Prepaid expenses 27,285 22,331
Inventories 43,171 44,191
Other assets held for sale 17,265 41,770
Real estate assets 126,012 120,288
Total current assets 461,109 399,915
Property, plant & equipment, net 1,480,864 1,403,773
book value
Investments 56,332 58,432
Goodwill 184,013 149,180
Other intangible assets 21,065 20,982
Other assets 37,945 40,408
2,241,328 2,072,690
Liabilities and Equity
Working capital facilities 11,744 6,666
Accounts payable 21,231 23,575
Accrued liabilities 78,247 74,569
Deferred revenue 77,783 68,784
Due to related parties 482 -
Other liabilities held for sale 3,586 11,847
Current portion of long-term debt 173,060 173,223
and capital leases
Total current liabilities 366,133 358,664
Long-term debt and obligations under 602,074 559,042
capital leases
Long-term debt held by consolidated
variable interest
79,429 79,469
entities
Deferred income taxes 162,458 160,742
Other liabilities 46,949 34,295
Total liabilities 1,257,043 1,192,212
Shareholders' equity 982,341 878,709
Non-controlling interests 1,944 1,769
Total equity 984,285 880,478
2,241,328 2,072,690
Contact:
Martin O'Grady
Vice President, Chief Financial Officer
Tel: +44-20-7921-4038
E: martin.ogrady@orient-express.com
Pippa Isbell
Vice President, Corporate Communications
Tel: +44-20-7921-4065
E: pippa.isbell@orient-express.com
Contact: Martin O'Grady, Vice President, Chief Financial Officer, Tel: +44-20-7921-4038, E: martin.ogrady at orient-express.com; Pippa Isbell, Vice President, Corporate Communications, Tel: +44-20-7921-4065, E: pippa.isbell at orient-express.com
Tags: Bermuda, Hamilton, May 5, Orient Express Hotels Ltd
