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Mandarin Oriental International Ltd Half-year Report

30/07/2020 11:01am

UK Regulatory (RNS & others)


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RNS Number : 6252U

Mandarin Oriental International Ltd

30 July 2020

30th July 2020

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

HALF-YEARLY RESULTS FOR THE SIX MONTHSED 30TH JUNE 2020

Highlights

-- Underlying loss of US$102 million

-- Majority of hotels closed during second quarter

-- Group's balance sheet and funding position remain robust

"The Group saw substantial underlying losses in the first half of the year as a consequence of the COVID-19 pandemic. A material recovery in business levels is not expected until 2021 at the earliest and a significant further loss is therefore likely in the second half of 2020. The Board remains confident that the Group's robust financial position and strong brand will enable Mandarin Oriental to weather the downturn and return to profit when luxury travel begins to recover."

Ben Keswick

Chairman

Results

 
                                                                           (unaudited) 
                                                            Six months ended 30th June 
                                                                                  2020    2019  Change 
                                                                                  US$m    US$m       % 
------------------------------------------------------------------------- 
  Combined total revenue of hotel under management (1)                           276.4   641.0    - 57 
  Revenue                                                                         95.5   279.6    - 66 
  Underlying EBITDA (Earnings before interest, tax, depreciation 
   and amortisation)(2)                                                         (50.1)    69.1     N/A 
  Underlying (loss)/profit attributable to shareholders(3)                     (101.8)    10.7     N/A 
 Loss attributable to shareholders                                             (435.5)  (12.1)     N/A 
                                                                                   USc     USc       % 
                                                                           -----------  ------ 
 Underlying (loss)/earnings per share(3)                                        (8.06)    0.85     N/A 
 Loss per share                                                                (34.48)  (0.96)     N/A 
 Interim dividend per share                                                          -    1.50     N/A 
                                                                                   US$     US$       % 
                                                                           -----------  ------ 
 Net asset value per share(4)                                                     2.90    3.26    - 11 
 Adjusted net asset value per share(4)(5)                                         4.34    4.70     - 8 
 Net debt/shareholders' funds(4)                                                   11%      7% 
 Net debt/adjusted shareholders' funds(4)(5)                                        8%      5% 
-------------------------------------------------------------------------  -----------  ------  ------ 
  (1) Combined revenue includes turnover of the Group's subsidiary hotels in 
   addition to 100% of revenue from associate, joint venture and managed hotels. 
   (2) EBITDA of subsidiaries plus the Group's share of EBITDA of associates and 
   joint ventures. 
   (3) The Group uses 'underlying profit' in its internal financial reporting 
   to distinguish between ongoing business performance and non-trading items, 
   as more fully described in note 7 to the condensed 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) At 30th June 2020 and 31st December 2019, respectively. 
   (5) The Group's investment property under development is carried at fair value 
   on the basis of valuations carried out by independent valuers at 30th June 
   2020 and 31st December 2019. 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 for 30th 
   June 2020 and 31st December 2019 have included the market value of the Group's 
   freehold and leasehold interests which were appraised as at 31st December 2019. 
 
 

MANDARIN ORIENTAL INTERNATIONAL LIMITED

HALF-YEARLY RESULTS FOR THE SIX MONTHSED 30TH JUNE 2020

OVERVIEW

All of the Group's hotels were either closed or operated at single-digit percentage occupancy levels for much of the second quarter. Combined total revenue of hotels under management fell by 57% in the first half of 2020 compared to the equivalent period in 2019, with the majority of this decline occurring in the second quarter, which saw combined total revenues 86% lower than the same period last year. A number of cost containment measures have been implemented, but significant underlying losses were incurred in the first half of the year.

FINANCIAL PERFORMANCE

Underlying losses before interest, tax, depreciation and amortisation for the first half of 2020 were US$50 million, compared to earnings of US$69 million in the first half of 2019. Underlying losses for the period were US$102 million, compared to an underlying profit of US$11 million in the first half of 2019.

The biannual revaluation of The Excelsior site at 30th June 2020 resulted in a non-cash decrease of 10% or US$334 million, as a result of a decline in open market office and retail rents in Hong Kong in the first half of the year. Together with the underlying loss, this resulted in a total loss attributable to shareholders for the period of US$436 million.

At 30th June 2020, net debt was US$412 million compared to US$300 million at the end of 2019. This reflected US$52 million of capital expenditure during the period, primarily in relation to the renovation of Mandarin Oriental Ritz, Madrid and the redevelopment of The Excelsior site. Gearing was 8% of adjusted shareholders' funds, compared to 5% at the end of 2019. The Group's financial position remains robust and it is well-placed to weather a prolonged downturn. At 30th June 2020, the Group had US$187 million of cash reserves and US$217 million in available, committed debt facilities.

In light of the substantially reduced levels of business, no interim dividend will be paid.

HOTEL PERFORMANCE

In Europe and America, all hotels were closed from late March onwards. Hotels in Asia and the Middle East mostly remained open during the first half, although operating at very low occupancy levels once anti-pandemic restrictions and border controls were imposed.

The Group's flagship Hong Kong hotel remained open, but with single-digit percentage occupancy levels for most of the second quarter, and the hotel made a loss during the first half. It did, however, benefit from a partial recovery in food & beverage business when government anti-pandemic measures were relaxed. The remainder of the Group's owned hotels also incurred losses in the second quarter, despite cost containment measures.

On a more positive note, in June the Group's hotels on the Chinese mainland saw a significant recovery in occupancy levels to some 40%. Elsewhere, a number of the Group's hotels have begun to reopen in anticipation of some demand but, in many cases, this demand is expected to remain low and not in line with normal market conditions.

NEW DEVELOPMENTS

A management contract was signed in July 2020 for a new hotel and residences project in Vienna, which is scheduled to open in 2023.

PEOPLE

On behalf of the Board, I would like to thank all our colleagues for their continuing dedication, hard work and professionalism during such challenging times.

I stepped down as Managing Director on 15th June 2020 and was succeeded by John Witt, who joins the Board. I will continue as Chairman.

OUTLOOK

The Group saw substantial underlying losses in the first half of the year as a consequence of the COVID-19 pandemic. A material recovery in business levels is not expected until 2021 at the earliest and a significant further loss is therefore likely in the second half of 2020. The Board remains confident that the Group's robust financial position and strong brand will enable Mandarin Oriental to weather the downturn and return to profit when luxury travel begins to recover.

Ben Keswick

Chairman

 
 
Mandarin Oriental International Limited 
 Consolidated Profit and Loss Account 
 
 
 
                                              (unaudited)                                                  Year ended 31st 
                                       Six months ended 30th June                                                 December 
                              2020                                  2019                                              2019 
 
                     Underlying                             Underlying                             Underlying 
                       business  Non-trading                  business  Non-trading                  business  Non-trading 
                    performance        Items    Total      performance        Items    Total      performance        Items    Total 
                           US$m         US$m     US$m             US$m         US$m     US$m             US$m         US$m     US$m 
 
 
Revenue (note 2)           95.5            -     95.5            279.6            -    279.6            566.5            -    566.5 
Cost of sales           (122.1)            -  (122.1)          (185.8)            -  (185.8)          (364.7)            -  (364.7) 
                                              -------        ---------  -----------  -------                                ------- 
 
Gross 
 (loss)/profit           (26.6)            -   (26.6)             93.8            -     93.8            201.8            -    201.8 
Selling and 
 distribution 
 costs                   (16.2)            -   (16.2)           (21.2)            -   (21.2)           (38.8)            -   (38.8) 
Administration 
 expenses                (52.7)            -   (52.7)           (58.8)            -   (58.8)          (117.2)            -  (117.2) 
Other operating 
 income/(expense)          14.4            -     14.4             11.8       (32.3)   (20.5)             25.2       (32.7)    (7.5) 
Change in fair 
 value 
 of investment 
 property 
 under development            -      (333.7)  (333.7)                -          8.8      8.8                -       (67.3)   (67.3) 
                    -----------  -----------  -------        ---------  -----------  -------        ---------  -----------  ------- 
 
Operating 
 (loss)/profit 
 (note 3)                (81.1)      (333.7)  (414.8)             25.6       (23.5)      2.1             71.0      (100.0)   (29.0) 
 
 
Financing charges         (8.0)            -    (8.0)            (9.4)            -    (9.4)           (18.1)            -   (18.1) 
Interest income             1.1            -      1.1              1.8            -      1.8              3.4            -      3.4 
 
 
Net financing 
 charges                  (6.9)            -    (6.9)            (7.6)            -    (7.6)           (14.7)            -   (14.7) 
Share of results 
 of 
 associates and 
 joint 
 ventures (note 4)       (13.5)            -   (13.5)            (1.6)            -    (1.6)            (1.7)            -    (1.7) 
                                                             ---------  ----------- 
 
(Loss)/profit 
 before 
 tax                    (101.5)      (333.7)  (435.2)             16.4       (23.5)    (7.1)             54.6      (100.0)   (45.4) 
Tax (note 5)              (0.3)            -    (0.3)            (5.8)          0.7    (5.1)           (13.5)          3.3   (10.2) 
                    -----------  -----------  -------        ---------  -----------  -------        ---------  -----------  ------- 
 
(Loss)/profit 
 after 
 tax                    (101.8)      (333.7)  (435.5)             10.6       (22.8)   (12.2)             41.1       (96.7)   (55.6) 
                    -----------  -----------  -------        ---------  -----------  -------        ---------  -----------  ------- 
 
Attributable to: 
Shareholders of 
 the 
 Company (note 6 & 
 7)                     (101.8)      (333.7)  (435.5)             10.7       (22.8)   (12.1)             41.2       (96.7)   (55.5) 
Non-controlling 
 interests                    -            -        -            (0.1)            -    (0.1)            (0.1)            -    (0.1) 
                    -----------  -----------  -------        ---------  -----------                 ---------  -----------  ------- 
 
                        (101.8)      (333.7)  (435.5)             10.6       (22.8)   (12.2)             41.1       (96.7)   (55.6) 
                    -----------  -----------  -------        ---------  -----------                 ---------  -----------  ------- 
 
 
                            USc                   USc              USc                   USc              USc                   USc 
 
 
(Loss)/earnings 
per 
share (note 6) 
- basic                  (8.06)               (34.48)             0.85                (0.96)             3.26                (4.39) 
- diluted                (8.06)               (34.48)             0.85                (0.96)             3.26                (4.39) 
                    -----------               -------        ---------               -------        ---------               ------- 
 
 
 
 
 
Mandarin Oriental International Limited 
 Consolidated Statement of Comprehensive Income 
 
 
                                                          (unaudited)  Year ended 
                                                     Six months ended        31st 
                                                            30th June    December 
                                                      2020       2019        2019 
                                                      US$m       US$m        US$m 
 
 
Loss for the period                                (435.5)     (12.2)      (55.6) 
Other comprehensive (expense)/income 
 
 
Items that will not be reclassified 
 to profit or loss: 
                                                 ---------  ---------  ---------- 
Remeasurements of defined benefit 
 plans                                                   -      (0.6)         3.4 
Revaluation surplus of right-of-use 
 assets before transfer to investment 
 property under development (note 
 8)                                                      -    2,943.4     2,943.4 
Tax on items that will not be reclassified               -        0.1       (0.6) 
                                                 ---------  ---------  ---------- 
 
                                                         -    2,942.9     2,946.2 
Items that may be reclassified subsequently 
 to profit or loss: 
                                                 ---------  ---------  ---------- 
Net exchange translation differences 
- net gains arising during the period                  1.3       12.8        25.0 
Cash flow hedges 
- net losses arising during the 
 period                                              (9.9)      (2.4)       (0.4) 
Tax relating to items that may be 
 reclassified                                          1.6        0.4         0.1 
Share of other comprehensive (expense)/income 
 of associates and joint ventures                    (4.1)        2.0         3.1 
                                                 ---------  ---------  ---------- 
 
                                                    (11.1)       12.8        27.8 
 
 
Other comprehensive (expense)/income 
 for the period, net of tax                         (11.1)    2,955.7     2,974.0 
                                                 ---------  ---------  ---------- 
 
Total comprehensive (expense)/income 
 for the period                                    (446.6)    2,943.5     2,918.4 
                                                 ---------  ---------  ---------- 
 
Attributable to: 
Shareholders of the Company                        (446.5)    2,943.5     2,918.4 
Non-controlling interests                            (0.1)          -           - 
                                                 ---------  ---------  ---------- 
 
                                                   (446.6)    2,943.5     2,918.4 
                                                 ---------  ---------  ---------- 
 
 
 
 
Mandarin Oriental International Limited 
 Consolidated Balance Sheet 
 
 
                                              (unaudited)   At 31st 
                                             At 30th June  December 
                                            2020     2019      2019 
                                            US$m     US$m      US$m 
 
 
Net assets 
Intangible assets                           49.5     50.4      53.0 
Tangible assets                          1,147.3  1,179.6   1,174.6 
Right-of-use assets                        297.9    305.5     300.3 
Investment property under development 
 (note 8)                                2,657.9  3,020.3   2,967.7 
Associates and joint ventures              208.9    208.6     203.1 
Other investments                           15.3     16.2      15.9 
Deferred tax assets                         11.5     12.0      10.6 
Pension assets                               0.8        -       1.3 
Non-current debtors                          4.8      4.9       6.2 
                                         -------  -------  -------- 
 
Non-current assets                       4,393.9  4,797.5   4,732.7 
 
 
Stocks                                       5.9      5.8       6.2 
Current debtors                             62.3     99.2      97.2 
Current tax assets                           2.2      2.0       1.9 
Bank and cash balances                     187.1    211.1     270.7 
                                         -------  -------  -------- 
 
Current assets                             257.5    318.1     376.0 
                                         -------  -------  -------- 
 
Current creditors                        (130.1)  (147.7)   (166.0) 
Current borrowings                        (41.9)    (2.5)     (2.5) 
Current lease liabilities                  (7.0)    (6.9)     (7.0) 
Current tax liabilities                   (11.7)   (17.5)    (19.1) 
                                         -------  -------  -------- 
 
Current liabilities                      (190.7)  (174.6)   (194.6) 
                                         -------  -------  -------- 
 
 
Net current assets                          66.8    143.5     181.4 
Long-term borrowings                     (557.2)  (544.3)   (568.6) 
Non-current lease liabilities            (166.2)  (173.3)   (168.4) 
Deferred tax liabilities                  (58.0)   (58.1)    (59.4) 
Pension liabilities                            -    (2.6)     (0.2) 
Non-current creditors                      (9.3)    (1.5)     (0.9) 
                                         -------  -------  -------- 
 
                                         3,670.0  4,161.2   4,116.6 
                                         -------  -------  -------- 
 
Total equity 
Share capital                               63.2     63.1      63.2 
Share premium                              499.7    499.7     499.7 
Revenue and other reserves               3,103.9  3,594.8   3,550.1 
                                         -------  -------  -------- 
 
Shareholders' funds                      3,666.8  4,157.6   4,113.0 
Non-controlling interests                    3.2      3.6       3.6 
                                         -------  -------  -------- 
 
                                         3,670.0  4,161.2   4,116.6 
                                         -------  -------  -------- 
 
 
 
 
Mandarin Oriental International Limited 
 Consolidated Statement of Changes in Equity 
 
 
                                                                                         Attributable 
                                                                                                   to  Attributable 
                                                              Asset                      shareholders       to non- 
                    Share    Share   Capital   Revenue  revaluation   Hedging  Exchange        of the   controlling    Total 
                  capital  premium  reserves  reserves     reserves  reserves  reserves       Company     interests   equity 
                     US$m     US$m      US$m      US$m         US$m      US$m      US$m          US$m          US$m     US$m 
 
 
Six months ended 
30th June 
2020 (unaudited) 
At 1st January 
 2020                63.2    499.7     260.3     434.8      2,943.4         -    (88.4)       4,113.0           3.6  4,116.6 
Total 
 comprehensive 
 income                 -        -         -   (435.5)            -     (8.7)     (2.3)       (446.5)         (0.1)  (446.6) 
Change in 
 interest in a 
 subsidiary             -        -         -       0.3            -         -         -           0.3         (0.3)        - 
 
At 30th June 
 2020                63.2    499.7     260.3     (0.4)      2,943.4     (8.7)    (90.7)       3,666.8           3.2  3,670.0 
                                                        ----------- 
 
Six months ended 
30th June 
2019 (unaudited) 
At 1st January 
 2019                63.1    497.8     262.5     525.0            -       0.6   (116.6)       1,232.4           3.8  1,236.2 
Total 
 comprehensive 
 income                 -        -         -    (12.6)      2,943.4     (2.1)      14.8       2,943.5             -  2,943.5 
Dividends paid 
 by the Company         -        -         -    (18.9)            -         -         -        (18.9)             -   (18.9) 
Issue of shares         -      0.1         -         -            -         -         -           0.1             -      0.1 
Share-based 
 long-term 
 incentive 
 plans                  -        -       0.3         -            -         -         -           0.3             -      0.3 
Change in 
 interest in a 
 subsidiary             -        -         -       0.2            -         -         -           0.2         (0.2)        - 
Transfer                -      1.8     (1.8)         -            -         -         -             -             -        - 
                  -------  -------  --------  --------  -----------  --------  --------  ------------  ------------  ------- 
 
At 30th June 
 2019                63.1    499.7     261.0     493.7      2,943.4     (1.5)   (101.8)       4,157.6           3.6  4,161.2 
                  -------  -------  --------  --------  -----------  --------  --------  ------------  ------------  ------- 
 
 

Revenue reserves as at 30th June 2020 included cumulative fair value loss on the investment property under development of US$401.0 million.

 
 
Mandarin Oriental International Limited 
 Consolidated Statement of Changes in Equity (continued) 
 
 
                                                                                         Attributable 
                                                                                                   to  Attributable 
                                                              Asset                      shareholders       to non- 
                    Share    Share   Capital   Revenue  revaluation   Hedging  Exchange        of the   controlling     Total 
                  capital  premium  reserves  reserves     reserves  reserves  reserves       Company     interests    equity 
                     US$m     US$m      US$m      US$m         US$m      US$m      US$m          US$m          US$m      US$m 
 
 
Year ended 31st 
December 
2019 
At 1st January 
 2019                63.1    497.8     262.5     525.0            -       0.6   (116.6)       1,232.4           3.8   1,236.2 
Total 
 comprehensive 
 income                 -        -         -    (52.6)      2,943.4     (0.6)      28.2       2,918.4             -   2,918.4 
Dividends paid 
 by the Company         -        -         -    (37.9)            -         -         -        (37.9)             -    (37.9) 
Issue of shares       0.1      0.1         -         -            -         -         -           0.2             -       0.2 
Share-based 
 long-term 
 incentive 
 plans                  -        -     (0.3)         -            -         -         -         (0.3)             -     (0.3) 
Change in 
 interest in a 
 subsidiary             -        -         -       0.2            -         -         -           0.2         (0.2)         - 
Transfer                -      1.8     (1.9)       0.1            -         -         -             -             -         - 
                  -------  -------  --------  --------  -----------  --------  --------  ------------  ------------  -------- 
 
At 31st December 
 2019                63.2    499.7     260.3     434.8      2,943.4         -    (88.4)       4,113.0           3.6   4,116.6 
                  -------  -------  --------  --------  -----------  --------  --------  ------------  ------------  -------- 
 
 
 
 
 
Mandarin Oriental International Limited 
 Consolidated Cash Flow Statement 
 
 
                                                              (unaudited)  Year ended 
                                                         Six months ended        31st 
                                                                30th June    December 
                                                            2020     2019        2019 
                                                            US$m     US$m        US$m 
 
 
Operating activities 
                                               -----------------  -------  ---------- 
 
Operating (loss)/profit                                  (414.8)      2.1      (29.0) 
Depreciation and amortisation                               37.4     59.7        91.9 
Other non-cash items                                       335.6    (8.0)        69.0 
Movements in working capital                               (0.9)   (22.0)       (3.1) 
Interest received                                            1.3      1.7         3.4 
Interest and other financing charges 
 paid                                                      (8.1)   (10.4)      (19.2) 
Tax paid                                                   (8.3)    (3.7)       (6.0) 
                                               -----------------  -------  ---------- 
 
                                                          (57.8)     19.4       107.0 
Dividends and interest from associates 
 and 
   joint ventures                                              -      3.2         5.9 
 
 
Cash flows from operating activities                      (57.8)     22.6       112.9 
 
Investing activities 
                                               -----------------  -------  ---------- 
 
Purchase of tangible assets                               (14.3)   (27.9)      (41.7) 
Additions to investment property 
 under development                                        (11.1)    (4.0)      (15.1) 
Purchase of intangible assets                              (3.2)    (2.8)       (8.3) 
Payment on Munich expansion                                    -    (0.7)       (1.1) 
Purchase of other investments                              (0.4)    (0.9)       (1.1) 
Advance to associates and joint ventures                  (23.1)   (15.8)      (16.7) 
Repayment of loans to associates 
 and joint ventures                                          0.4      0.4         3.6 
 
 
Cash flows from investing activities                      (51.7)   (51.7)      (80.4) 
 
Financing activities 
                                               -----------------  -------  ---------- 
 
Issue of shares                                                -      0.1         0.1 
Drawdown of borrowings                                      32.4    537.7       555.8 
Repayment of borrowings                                        -  (523.3)     (522.3) 
Principal elements of lease payments                       (3.6)    (3.2)       (6.4) 
Dividends paid by the Company (note 
 9)                                                            -   (18.9)      (37.9) 
 
 
Cash flows from financing activities                        28.8    (7.6)      (10.7) 
                                               -----------------  -------  ---------- 
 
Net (decrease)/increase in cash and 
 cash equivalents                                         (80.7)   (36.7)        21.8 
Cash and cash equivalents at beginning 
 of period                                                 270.7    246.8       246.8 
Effect of exchange rate changes                            (2.9)      1.0         2.1 
                                               -----------------  -------  ---------- 
 
Cash and cash equivalents at end 
 of period                                                 187.1    211.1       270.7 
                                               -----------------  -------  ---------- 
 
 
 
 
 
Mandarin Oriental International Limited 
 Notes to Condensed Financial Statements 
 
 
   1.    ACCOUNTING POLICIES AND BASIS OF PREPARATION 

The condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and on a going concern basis. The condensed financial statements have not been audited or reviewed by the Group's auditors pursuant to the UK Auditing Practices Board guidance on the review of interim financial information.

The Group had early adopted the 'Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7' (effective 1st January 2020) for the Group's annual reporting period commencing 1st January 2019.

There are no changes to the accounting policies as described in the 2019 annual financial statements other than the following changes in relation to government grants. Other amendments which are effective in 2020 and relevant to the Group's operations, do not have a significant effect on the Group's accounting policies. The Group has not early adopted any other standard or amendments that have been issued but not yet effective.

Government grants

Grants from government are recognised at their fair values where there is reasonable assurance that the grants will be received, and the Group will comply with the conditions associated with the grants.

Grants that compensate the Group for expenses incurred are recognised in the profit and loss as other income on a systematic basis in the period in which the expenses are recognised. Unconditional grants are recognised in the profit and loss as other income when they become receivable.

Grants related to assets are deducted in arriving at the carrying value of the related assets.

2. REVENUE

 
                             Six months ended 30th June 
                                            2020   2019 
                                            US$m   US$m 
 
 
 By geographical area: 
 Asia                                       43.7  150.2 
 Europe, Middle East and Africa ('EMEA')    37.2   77.6 
 America                                    14.6   51.8 
 
                                            95.5  279.6 
                                           -----  ----- 
 
 Revenue from contracts with customers: 
 Recognised at a point in time              37.8  104.8 
 Recognised over time                       49.7  164.8 
                                           -----  ----- 
 
                                            87.5  269.6 
 Revenue from other sources: 
 Rental income                               8.0   10.0 
                                           -----  ----- 
 
                                            95.5  279.6 
                                           -----  ----- 
 
 
   3.    EBITDA FROM SUBSIDIARIES (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION) 
 
                                               Six months ended 30th June 
                                                             2020    2019 
                                                             US$m    US$m 
 
 
 By geographical area: 
 Asia                                                      (15.5)    44.6 
 EMEA                                                      (10.0)    13.0 
 America                                                   (18.2)     2.3 
 
 Underlying EBITDA from subsidiaries                       (43.7)    59.9 
 
 Non-trading items (note 7) 
                                                          -------  ------ 
    Fire at Mandarin Oriental Hyde Park, London 
    - repair expenses and write-off of tangible 
         assets and other incidental expenses                   -   (7.7) 
    - insurance recovery for replacement of 
         tangible assets and other incidental expenses          -     7.7 
    Closure of The Excelsior, Hong Kong 
    - other costs                                               -   (6.5) 
    Change in fair value of investment property 
         under development                                (333.7)     8.8 
    Change in fair value of other investments                   -   (0.4) 
 
                                                          (333.7)     1.9 
                                                          -------  ------ 
 
 EBITDA from subsidiaries                                 (377.4)    61.8 
 Underlying depreciation and amortisation 
  from 
    subsidiaries                                           (37.4)  (34.3) 
 Non-trading items (note 7) 
    Closure of The Excelsior, Hong Kong 
    - accelerated depreciation and amortisation                 -  (25.4) 
                                                          -------  ------ 
 
 Operating (loss)/profit                                  (414.8)     2.1 
                                                          -------  ------ 
 

Included in other operating income were government grants, the majority of which were in support of employee retention, of US$10.1 million in relation to the COVID-19 pandemic for the six months ended 30th June 2020.

   4.    SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES 
 
                             Depreciation  Operating         Net              Net 
                                      and    (loss)/   financing          (loss)/ 
                    EBITDA   amortisation     profit     charges    Tax    profit 
                      US$m           US$m       US$m        US$m   US$m      US$m 
 
 
 Six months ended 
  30th June 2020 
 By geographical area: 
 Asia                (0.5)          (4.5)      (5.0)       (1.0)    0.9     (5.1) 
 EMEA                (2.4)          (0.2)      (2.6)           -      -     (2.6) 
 America             (3.5)          (1.4)      (4.9)       (0.9)      -     (5.8) 
                    ------  -------------  ---------  ----------  -----  -------- 
 
                     (6.4)          (6.1)     (12.5)       (1.9)    0.9    (13.5) 
 
 Six months ended 
  30th June 2019 
 By geographical area: 
 Asia                  9.1          (6.1)        3.0       (0.9)  (1.0)       1.1 
 EMEA                (2.0)          (0.2)      (2.2)           -      -     (2.2) 
 America               2.1          (1.3)        0.8       (1.2)  (0.1)     (0.5) 
                    ------  -------------  ---------  ----------  -----  -------- 
 
                       9.2          (7.6)        1.6       (2.1)  (1.1)     (1.6) 
 
 

Included in share of results of associates and joint ventures were the Group's share of government grants, the majority of which were in support of employee retention, of US$1.6 million in relation to the COVID-19 pandemic for the six months ended 30th June 2020.

   5.    TAX 
 
                                  Six months ended 30th June 
                                                 2020   2019 
                                                 US$m   US$m 
 
 
 Tax (charged)/credited to profit and loss is 
  analysed as follows: 
 Current tax                                    (0.6)  (8.7) 
 Deferred tax                                     0.3    3.6 
                                                -----  ----- 
 
                                                (0.3)  (5.1) 
                                                -----  ----- 
 
 By geographical area: 
 Asia                                           (0.6)  (2.9) 
 EMEA                                             0.3  (1.9) 
 America                                            -  (0.3) 
                                                -----  ----- 
 
                                                (0.3)  (5.1) 
                                                -----  ----- 
 

Tax credit relating to cash flow hedges of US$1.6 million (2019: US$0.4 million) is included in other comprehensive income or expense.

Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates.

Share of tax credit of associates and joint ventures of US$0.9 million (2019: tax charge of US$1.1 million) is included in share of results of associates and joint ventures (note 4).

   6.    EARNINGS PER SHARE 

Basic loss/earnings per share are calculated on loss attributable to shareholders of US$435.5 million (2019: US$12.1 million) and on the weighted average number of 1,263.2 million (2019: 1,262.6 million) shares in issue during the period.

Diluted loss/earnings per share are calculated on loss attributable to shareholders of US$435.5 million (2019: US$12.1 million) and on the weighted average number of 1,263.2 million (2019: 1,263.2 million) shares 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 period.

The weighted average number of shares is arrived at as follows:

 
                                       Ordinary shares in millions 
                                                     2020     2019 
 
 
 Weighted average number of shares for basic 
  earnings per share calculation                  1,263.2  1,262.6 
 Adjustment for shares deemed to be issued 
  for no consideration under the share-based 
  long-term incentive plans                             -      0.6 
                                                  -------  ------- 
 
 Weighted average number of shares for diluted 
  earnings per share calculation                  1,263.2  1,263.2 
                                                  -------  ------- 
 

Additional basic and diluted loss/earnings per share are also calculated based on underlying loss/profit attributable to shareholders. A reconciliation of earnings is set out below:

 
                                          Six months ended 30th June 
                                     2020                             2019 
 
 
                                                                      Basic     Diluted 
                                      Basic     Diluted             (loss)/     (loss)/ 
                                       loss        loss            earnings    earnings 
                                  per share   per share           per share   per share 
                           US$m         USc         USc    US$m         USc         USc 
 
 
 Loss attributable 
  to shareholders       (435.5)     (34.48)     (34.48)  (12.1)      (0.96)      (0.96) 
 Non-trading items 
  (note 7)                333.7                            22.8 
 
 Underlying (loss)/ 
  profit attributable 
  to shareholders       (101.8)      (8.06)      (8.06)    10.7        0.85        0.85 
                        -------                          ------ 
 
   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 investments property under development and investments which are measured at fair value through profit and loss; gains and losses arising from the sale of businesses, investments and properties; impairment of non-depreciable intangible assets 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:

 
                                                Six months ended 30th June 
                                                              2020    2019 
                                                              US$m    US$m 
 
 Fire at Mandarin Oriental Hyde Park, London 
 
   *    repair expenses and write-off of tangible assets 
 
 
  and other incidental expenses                                  -   (7.7) 
 
   *    insurance recovery for replacement of tangible 
 
 
  assets and other incidental expenses                           -     7.7 
 Closure of The Excelsior, Hong Kong 
 
   *    accelerated depreciation and amortisation                -  (25.3) 
 
   *    other costs                                              -   (5.9) 
 Change in fair value of investment property 
  under development (note 8)                               (333.7)     8.8 
 Change in fair value of other investments                       -   (0.4) 
                                                           -------  ------ 
 
                                                           (333.7)  (22.8) 
                                                           -------  ------ 
 
   8.    INVESTMENT PROPERTY UNDER DEVELOPMENT 

Following the closure of The Excelsior, Hong Kong, by the end of March 2019, its use has been changed from a hotel property to a commercial property for redevelopment. The site was revalued and transferred from a right-of-use asset held at historical depreciated cost to an investment property under development subject to regular valuation reviews. The revaluation surplus of US$2,943.4 million was recognised to the asset revaluation reserve through other comprehensive income on 31st March 2019. Subsequent fair value change of the investment property under development has been recognised as a non-trading item in the profit and loss.

 
 
                                         Six months ended 
                                                               Year ended 
                                                30th June   31st December 
                                         2020        2019            2019 
                                         US$m        US$m            US$m 
 
 
 Fair value at beginning of period    2,967.7           -               - 
 Transfer from right-of-use assets 
  on 31st March                             -     2,993.6         2,993.6 
 Exchange differences                    12.8        13.9            25.5 
 Additions                               11.1         4.0            15.9 
 (Decrease)/increase in fair value    (333.7)         8.8          (67.3) 
                                     --------  ----------  -------------- 
 
 Fair value at end of period          2,657.9     3,020.3         2,967.7 
                                     --------  ----------  -------------- 
 
   9.    DIVIDS 
 
                           Six months ended 30th June 
                                          2020   2019 
                                          US$m   US$m 
 
 
 No final dividend in respect of 2019 
  (2018: USc1.50 per share)                  -   18.9 
                                         -----  ----- 
 
 

No interim dividend in respect of 2020 has been declared by the Board (2019: USc1.50 per share amounting to a total of US$19.0 million).

10. CAPITAL COMMITMENTS

Total capital commitments at 30th June 2020 and 31st December 2019 amounted to US$736.7 million and US$765.6 million, respectively.

11. FINANCIAL INSTRUMENTS

Financial instruments by category

The fair values of financial assets and financial liabilities, together with carrying amounts at 30th June 2020 and 31st December 2019 are as follows:

 
                                                                             Other 
                                          Fair value      Financial      financial 
                            Fair value       through         assets    liabilities       Total 
                            of hedging        profit   at amortised   at amortised    carrying     Fair 
                           instruments      and loss           cost          costs      amount    value 
                                  US$m          US$m           US$m           US$m        US$m     US$m 
 
 
 30th June 2020 
 Financial assets 
  measured at fair 
  value 
 Other investments                   -          15.3              -              -        15.3     15.3 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 Financial assets 
  not measured 
  at fair value 
 Debtors                             -             -           51.3              -        51.3     51.3 
 Bank and cash 
  balances                           -             -          187.1              -       187.1    187.1 
                          ------------                               ------------- 
 
                                     -             -          238.4              -       238.4    238.4 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 Financial liabilities 
  measured at fair 
  value 
 Derivative financial 
  instruments                    (9.3)             -              -              -       (9.3)    (9.3) 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 Financial liabilities 
  not measured 
  at fair value 
 Borrowings                          -             -              -        (599.1)     (599.1)  (599.1) 
 Lease liabilities                   -             -              -        (173.2)     (173.2)  (173.2) 
 Trade and other 
  payable excluding 
  non-financial 
  liabilities                        -             -              -        (106.4)     (106.4)  (106.4) 
                          ------------                               ------------- 
 
                                     -             -              -        (878.7)     (878.7)  (878.7) 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 
 
                                                                             Other 
                                          Fair value      Financial      financial 
                            Fair value       through         assets    liabilities       Total 
                            of hedging        profit   at amortised   at amortised    carrying     Fair 
                           instruments      and loss           cost          costs      amount    value 
                                  US$m          US$m           US$m           US$m        US$m     US$m 
 
 
 31st December 
  2019 
 Financial assets 
  measured at fair 
  value 
 Other investments                   -          15.9              -              -        15.9     15.9 
 Derivative financial 
  instruments                      1.5             -              -              -         1.5      1.5 
                          ------------  ------------  -------------  -------------  ----------  ------- 
                                   1.5          15.9              -              -        17.4     17.4 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 Financial assets 
  not measured at 
  fair value 
 Debtors                             -             -           61.4              -        61.4     61.4 
 Bank and cash 
  balances                           -             -          270.7              -       270.7    270.7 
                          ------------                               ------------- 
 
                                     -             -          332.1              -       332.1    332.1 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 Financial liabilities 
  measured at fair 
  value 
 Derivative financial 
  instruments                    (0.9)             -              -              -       (0.9)    (0.9) 
                          ------------ 
 
 Financial liabilities 
  not measured at fair 
  value 
 Borrowings                          -             -              -        (571.1)     (571.1)  (571.1) 
 Lease liabilities                   -             -              -        (175.4)     (175.4)  (175.4) 
 Trade and other 
  payable excluding 
  non-financial 
  liabilities                        -             -              -        (132.4)     (132.4)  (132.4) 
                          ------------                               ------------- 
 
                                     -             -              -        (878.9)     (878.9)  (878.9) 
                          ------------  ------------  -------------  -------------  ----------  ------- 
 
 

Fair value estimation

(i) Financial instruments that are measured at fair value

For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value measurements are disclosed by level of the following fair value measurement hierarchy:

(a) Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly ('observable current market transactions')

The fair values of derivative financial instruments are determined using rates quoted by the Group's bankers at the balance sheet date. The rates for interest rate swaps and caps and forward foreign exchange contracts are calculated by reference to market interest rates and foreign exchange rates.

The fair values of unlisted investments mainly include club and school debentures, are determined using prices quoted by brokers at the balance sheet date.

(b) Inputs for assets or liabilities that are not based on observable market data ('unobservable inputs')

The fair values of other unlisted investments are determined using valuation techniques by reference to observable current market transactions (including price-to earnings and price-to book ratios of listed securities of entities engaged in similar industries), or the market prices of the underlying investments with certain degree of entity specific estimates or discounted cash flow by projecting the cash flows from these investments.

There were no changes in valuation techniques during the six months ended 30th June 2020 and the year ended 31st December 2019.

The table below analyses financial instruments carried at fair value at 30th June 2020 and 31st December 2019, by the levels in the fair value measurement hierarchy:

 
                                                   Observable 
                                               market current  Unobservable 
                                                 transactions        inputs  Total 
                                                         US$m          US$m   US$m 
 
 
 30th June 2020 
 Assets 
 Other investments                                        4.6          10.7   15.3 
 
 Liabilities 
 Derivative financial instruments 
  at fair value 
 
   *    through other comprehensive income              (9.3)             -  (9.3) 
                                              ---------------  ------------  ----- 
 
 31st December 2019 
 Assets 
 Other investments                                        4.6          11.3   15.9 
 Derivative financial instruments 
  at fair value 
 - through other comprehensive 
  income                                                  1.5             -    1.5 
                                              ---------------  ------------  ----- 
 
                                                          6.1          11.3   17.4 
                                              ---------------  ------------  ----- 
 
 Liabilities 
 Derivative financial instruments 
  at fair value 
 
   *    through other comprehensive income              (0.9)             -  (0.9) 
                                              ---------------  ------------  ----- 
 

There were no transfers among the two categories during the six months ended 30th June 2020 and the year ended 31st December 2019.

Movement of financial instruments which are valued based on unobservable inputs during the six months ended 30th June 2020 and the year ended 31st December 2019 are as follows:

 
                             Unlisted 
                          investments 
                                 US$m 
 
 
 At 1st January 2020             11.3 
 Additions                        0.4 
 Disposals                      (1.0) 
                         ------------ 
 
 At 30th June 2020               10.7 
                         ------------ 
 
 At 1st January 2019              9.1 
 Additions                        2.2 
                         ------------ 
 
 At 31st December 2019           11.3 
                         ------------ 
 

(ii) Financial instruments that are not measured at fair value

The fair values of current debtors, bank and cash balances, current creditors and current borrowings are assumed to approximate their carrying amounts due to the short-term maturities of these assets and liabilities.

The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments discounted at market interest rates.

12. RELATED PARTY TRANSACTIONS

In the normal course of business , the Group undertakes a variety of transactions with certain of its associates and joint ventures.

The most significant of such transactions are management fees of US$2.7 million (2019: US$7.3 million) received from the Group's six (2019: six) associate and joint venture hotels which are based on long-term management agreements 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 first six months of the current financial year.

Amounts of outstanding balances with associates and joint ventures are included in debtors as appropriate.

Mandarin Oriental International Limited

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal control. The following have been identified previously as the areas of principal risk and uncertainty facing the Company, and they remain relevant in the second half of the year. The risk of a global pandemic, such as COVID-19, had been highlighted as a key risk.

   --     Economic and Financial Risk 
   --     Commercial and Market Risk 
   --     Pandemic, Terrorism and Natural Disasters 
   --     Key Agreements 
   --     Reputational Risk and Value of the Brand 
   --     Regulatory and Political Risk 

For greater detail, please refer to pages 115 and 116 of the Company's 2019 Annual Report, a copy of which is available on the Company's website www.mandarinoriental.com .

Responsibility Statement

The Directors of the Company confirm to the best of their knowledge that:

(a) the condensed financial statements have been prepared in accordance with IAS 34; and

(b) the interim management report includes a fair review of all information required to be disclosed by the Disclosure Guidance and Transparency Rules 4.2.7 and 4.2.8 issued by the Financial Conduct Authority in the United Kingdom.

For and on behalf of the Board

James Riley

Craig Beattie

Directors

Dividend Information for Shareholders

In light of the substantially reduced levels of business, no interim dividend in respect of the 2020 financial year will be paid.

About Mandarin Oriental Hotel Group

Mandarin Oriental Hotel Group is an international hotel investment and management group with deluxe and first class hotels, resorts and residences in sought-after destinations around the world. Having grown from its Asian roots into a global brand, the Group now operates 33 hotels and seven residences in 23 countries and territories, with each property reflecting the Group's oriental heritage and unique sense of place. Mandarin Oriental has a strong pipeline of hotels and residences under development. The Group has equity interests in a number of its properties and adjusted net assets worth approximately US$5.5 billion as at 30th June 2020.

Mandarin Oriental's aim is to be recognised as the world's best luxury hotel group. This will be achieved by investing in the Group's exceptional facilities and its people, and seeking selective opportunities for expansion around the world, while maximising profitability and long-term shareholder value. The Group regularly receives recognition and awards for outstanding service and quality management. The Group is committed to exceeding its guests' expectations through exceptional levels of hospitality, while maintaining its position as an innovative leader in the hotel industry.

The parent company, Mandarin Oriental International Limited, is incorporated in Bermuda and has a standard listing on the London Stock Exchange, with secondary listings in Bermuda and Singapore. Mandarin Oriental Hotel Group International Limited, which operates from Hong Kong, manages the activities of the Group's hotels. Mandarin Oriental is a member of the Jardine Matheson Group.

- end -

For further information, please contact:

 
Mandarin Oriental Hotel Group International 
 Limited 
James Riley / Craig Beattie                   (852) 2895 9288 
Sally de Souza                                (852) 2895 9167 
 
Brunswick Group Limited 
David Ashton                                  (852) 3512 5063 
 

As permitted by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in the United Kingdom, the Company will not be posting a printed version of the Half-Yearly Results announcement to shareholders. The Half-Yearly Results announcement will remain available on the Company's website, www.mandarinoriental.com, together with other Group announcements.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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