Orient-Express Hotels Reports Second Quarter 2009 Results
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Orient-Express Hotels Reports Second Quarter 2009 Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-08-06
Second Quarter 2009 Earnings Summary
- Second quarter total revenues, excluding Real Estate, of
$132.0 million
- Same store RevPAR down 24% in local currency, 33% in US dollars
- Adjusted EBITDA before Real Estate of $26.7 million
Key Events
- Raised $141.3 million of cash in common share offering in May 2009
primarily for debt reduction
- Completed sale of Lapa Palace for $42.0 million (EUR29.4 million), or
22x 2008 EBITDA
- Entered into sale agreement for Windsor Court Hotel
- Entered into agreement with the New York Public Library to spread
future payments over 24 months
- Same store revenue drop offset by 54% through fixed and variable
overhead savings
- Completed $16 million re-financing of Australian properties
- Implemented launch of corporate brand strategy, including new website
- Obtained tangible net worth covenant waivers on two facilities
referenced in 2008 Form 10-K
Orient-Express Hotels Ltd. (NYSE: OEH, http://www.orient-express.com), owners or part-owners and managers of 50 luxury hotels, restaurants, tourist trains and river cruise properties operating in 25 countries, today announced its results for the second quarter ended June 30, 2009.
The net loss for the period was $24.3 million (loss of $0.36 per common share) on revenue of $132.0 million, compared with net earnings of $19.5 million ($0.46 per common share) on revenue of $177.5 million in the second quarter of 2008. The net loss from continuing operations for the period was $2.6 million (loss of $0.04 per common share) compared with net earnings from continuing operations of $21.3 million ($0.50 per common share) in the second quarter of 2008. The adjusted net loss from continuing operations for the period was $2.6 million (loss of $0.04 per common share) compared with adjusted net earnings from continuing operations of $19.7 million ($0.46 per common share) in the second quarter of 2008.
"During the second quarter, we saw demand begin to stabilize. The decline in booking trends and in revenue and profitability forecasts levelled off," commented Paul White, President and Chief Executive Officer. "Same store RevPAR declined by 24% in local currency and revenue before Real Estate, excluding Charleston Place (consolidated from January 1, 2009), was down by 30% in US dollars or by $49.8 million. We are continuing to control costs and consequently this drop in revenue was offset by 54% through fixed and variable cost savings of $26.9 million.
"Cost reductions are key to managing through recession and are particularly challenging in the luxury sector where guest service must not be compromised. Creative initiatives, such as the introduction of flexible opening dates for hotels and restaurants and a reduction in the number of train trips to maximize occupancy, have ensured these cuts are not visible to our clients.
"The sale of the Lapa Palace, the successful extension of the New York Public Library agreement, the renegotiation of the Company's two outstanding covenant issues, along with a well supported equity raise, have improved the balance sheet and significantly enhanced our liquidity position. The Company plans to make further disposals of non-core assets in the coming quarters as we continue to deleverage the Company in line with our target to reach a four to five times ratio of debt to average EBITDA by the end of 2011.
"The key to Orient-Express' success lies in its ability to increase RevPAR premiums and grow market share in its core markets, in particular during the high seasons. We believe our collection of iconic properties, now underpinned by the relaunch of the Orient-Express brand, positions the Company well for the future."
Business Highlights
Revenue, excluding Real Estate revenue, was $132.0 million in the second quarter of 2009, down $41.0 million from the second quarter of 2008. This reflected Owned Hotels same store RevPAR decline of 24% in local currency (33% in US dollars). Adjusted EBITDA before Real Estate was $26.7 million, down $23.6 million on the prior year quarter.
Revenue from Owned Hotels for the second quarter was $105.3 million, including $13.4 million from Charleston Place. This excludes revenue from Lapa Palace and Windsor Court Hotel, which are now accounted for as discontinued operations. On a same store basis, revenue from Owned Hotels declined by 29% year over year.
Trains and Cruises revenue fell by 29% or $9.0 million. As these operations have a high variable cost component, EBITDA fell by only $3.0 million.
Adjusted EBITDA before Real Estate was $26.7 million compared to $50.3 million in the prior year. The principal variances from the second quarter of 2008 included the results from Hotel Cipriani, Venice (down $2.8 million), Reid's Palace, Madeira (down $1.3 million), Grand Hotel Europe, St Petersburg (down $7.2 million), Maroma Resort and Spa, Riviera Maya, Mexico (down $1.2 million) and the Venice Simplon-Orient-Express (down $2.9 million). Adjusted EBITDA excludes the $1.5 million contributed by Lapa Palace and Windsor Court Hotel, which is included in discontinued operations.
The Grand Hotel Europe in St. Petersburg re-opened ten 19th century historic suites in May 2009 after a meticulous restoration. Located on the Historic Floor of the hotel, the name of each suite reflects the rich history of both the hotel and St. Petersburg itself, with themes including Stravinsky, Faberge and Romanov.
During the second phase of its refurbishment program, completed in April 2009, Hotel Cipriani completed a further 14 rooms in the San Marco wing, overlooking the Antique Gardens. The Casanova Wellness Centre was also enlarged, with a new Hammam and a couples massage room. Bar Gabbiano was refurbished and expanded, as was Porticciolo, the lagoon-front casual dining restaurant.
Following damage due to Cyclone Nargis in Burma in May 2008, the Road To Mandalay cruise ship has been completely refurbished and is scheduled to return to service in August 2009. The space and style of all cabins have been improved and capacity reduced from 108 beds to 82, improving the onboard experience. A new Governor's Suite and an additional five State Suites have been created, bringing the total number of State Suites to 18.
Construction is close to completion on a new spa and suites at La Residence d'Angkor, scheduled to open in September 2009. Located in a brand new wing of the boutique city resort, the spa will encompass six treatment rooms with eight 70msquared guest suites on the floor above. Once complete, the eight new suites will bring the total number of rooms at the hotel to 62.
Regional Performance
Europe: In the second quarter, revenues from Owned Hotels were $52.2 million, down 36% from $81.2 million in the second quarter of 2008. EBITDA was $17.2 million in 2009 versus $32.8 million in the prior year. Same store RevPAR decreased by 26% in local currency (39% in US dollars). In Europe, the hotel most impacted by the economic downturn was Grand Hotel Europe, St Petersburg, which experienced a $7.2 million fall in EBITDA, driven by a 42% fall in local currency RevPAR (57% in US dollars).
North America: Revenue was $26.8 million, including $13.4 million with respect to Charleston Place Hotel, South Carolina which was consolidated from January 1, 2009. Excluding this hotel, revenue was 21% lower than the second quarter of 2008. Including EBITDA of $4.1 million from Charleston Place Hotel, there was an EBITDA increase of $1.8 million. Same store RevPAR for the region fell by 30%. The region includes Maroma Resort and Spa, Riviera Maya, Mexico, which was impacted by the H1N1 (swine flu) crisis. The hotel suffered a 56% fall in RevPAR and EBITDA fell by $1.2 million.
Southern Africa: Revenue of $6.6 million was 20% lower year over year, and EBITDA of $1.1 million was 16% lower than in the second quarter of 2008. Local currency same store RevPAR was down by 15% year over year (down by 19% in US dollars).
South America: Revenue decreased by 12% to $11.1 million in the second quarter of 2009, from $12.6 million in the second quarter of 2008. Local currency same store RevPAR was up by 3%. EBITDA was $1.2 million, which was 14% greater than last year. Copacabana Palace revenues were down by $0.5 million year over year, and EBITDA was up by $0.3 million. The region's EBITDA results were impacted by a $1.5 million EBITDA loss at Hotel das Cataratas which is scheduled to re-launch under the Orient-Express brand in October 2009, following the extensive upgrading of the property. The hotel's 195 rooms (down from 203) include nine suites, and it has a new spa as well as remodelled restaurants and swimming pool.
Asia Pacific: Revenue for the second quarter of 2009 was $8.6 million, a decrease of 15% year over year. EBITDA was $1.4 million compared to $1.3 million in the second quarter of 2008. Same store RevPAR in local currency for the region fell by 15% from $153 to $129.
Hotel management and part-ownership interests: EBITDA for the second quarter of 2009 was $1.2 million compared to $7.7 million in the second quarter of 2008, which included $4.6 million of EBITDA earnings from Charleston Place Hotel.
Restaurants: Revenue from restaurants in the second quarter of 2009 was $3.6 million compared to $5.3 million in the same quarter of 2008, and EBITDA was $0.2 million compared with $0.9 million in 2008.
Trains and Cruises: Revenue was down $9.0 million in the second quarter of 2009, a decrease of 29% year over year, and EBITDA was down by $3.0 million, reflecting the high level of variable costs in the trains business.
Central costs: In the second quarter of 2009, central costs were $6.8 million compared with $7.2 million in the prior year period. In the quarter, a $0.6 million increase in the cost of non-cash equity-compensation awards was offset by a $1.0 million saving in staff costs.
Interest: The interest charge for the second quarter of 2009 was $7.6 million compared with $10.6 million in the second quarter of 2008.
Tax: The tax charge for the quarter was $11.0 million compared to a charge of $11.2 million in the same quarter in the prior year. The second quarter 2009 tax charge includes a net tax charge of $0.5 million following the resolution of a tax audit in Italy. In addition, the second quarter 2009 tax charge includes a deferred tax charge of $2.7 million arising in respect of fixed asset timing differences following appreciation of local currencies against the US dollar exchange rates in the quarter.
Discontinued Operations: The charge in the second quarter of 2009 was $21.7 million. Discontinued operations in the second quarter include the results of Lapa Palace, Lisbon, Windsor Court Hotel, New Orleans and Bora Bora Lagoon Resort. The charge included an operating loss in the quarter of $0.3 million, impairment charges, net of tax, of $14.4 million relating to Windsor Court and $12.0 million to Bora Bora Lagoon Resort, plus a gain on the sale of Lapa Palace of $5.0 million.
Investment: Capital expenditure in the second quarter was $14.7 million which was necessary to complete projects at, in particular, Grand Hotel Europe, Hotel Cipriani and Copacabana Palace. In addition, the Company invested $11.5 million during the quarter in the Company's development at Porto Cupecoy and $2.8 million was invested in Hotel das Cataratas.
Liquidity and Capital Reserves
At June 30, 2009, the Company had total debt of $808.7 million, working capital loans of $31.9 million and cash balances of $156.7 million (including $13.1 million of restricted cash), giving a total net debt of $683.9 million compared with total net debt of $848.5 million at the end of the first quarter of 2009.
At June 30, 2009, undrawn amounts available to the Company under committed short-term lines of credit were $25.3 million and undrawn amounts available to the Company under secured revolving credit facilities were $32.0 million, bringing total cash availability at June 30, 2009, to $214.0 million, including restricted cash of $13.1 million. The Company's liquidity and net debt position were improved by its equity offering, raising $141.3 million in May 2009, and by the sale of the Lapa Palace.
At June 30, 2009, approximately 54% of the Company's debt was at fixed interest rates and 46% was at floating interest rates. The weighted average maturity of the debt was approximately 2.8 years and the weighted average interest rate (including margin) was approximately 3.8%.
In July 2009, the Company successfully completed an A$20 million ($16 million) refinancing of its two Australian properties. The existing loan was scheduled to mature in April 2010 and the Company has secured a three-year loan from a new lender at a rate of 2.5% over the Australian dollar lending rate.
Disposal of Non-Core Assets
In June 2009, the Company announced that it had sold its Lisbon hotel, Lapa Palace, to a private Portuguese investor for EUR29.4 million ($42.0 million).
In July 2009, the Company entered into a sale agreement for Windsor Court Hotel, New Orleans. Orient-Express will continue to operate the hotel until the sale is completed, which is expected to be in September 2009.
New York Public Library
Also in July, the Company reached agreement with the New York Public Library to secure and spread future payments over the next 24 months in connection with its acquisition of the land and building of the Donnell branch of the Library, adjoining the Company's '21' Club.
Outlook
"While the ongoing decline in demand that has characterized the last two quarters has slowed, I believe it is still too early to predict and return to growth," said Paul White. "We will therefore continue with our prudent approach to cash management, including the tight control of costs and capital expenditure, and continue to expedite the sale of non-core assets and developed real estate. Our aim is to significantly deleverage the Company by the end of 2011, with a targeted ratio of debt to EBITDA on a stabilized basis, in the four to five times range."
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