Second quarter total revenues, excluding Real Estate, up 13% to $146.0 million, Revenue from owned hotels up 15%
Orient-Express Hotels Ltd. (NYSE: OEH, http://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 second quarter ended June 30, 2010.
Net loss for the period was $0.8 million (loss of $0.01 per common share) on revenue of $173.4 million, compared with a net loss of $24.3 million (loss of $0.36 per common share) on revenue of $129.4 million in the second quarter of 2009. Net earnings from continuing operations for the period were $1.0 million (earnings of $0.01 per common share), compared with a net loss of $2.5 million (loss of $0.04 per common share) in the second quarter of 2009. The adjusted net earnings from continuing operations for the period were $3.4 million (earnings of $0.04 per common share), compared with an adjusted net loss of $2.5 million (loss of $0.04 per common share) in the second quarter of 2009.
"Overall, we continue to be encouraged," said Paul White, President and Chief Executive Officer. "Same store RevPAR in the second quarter grew in all regions, with North America up a healthy 16% and Rest of World 34% up in local currency. Total EBITDA for Owned Hotels was up $4.0 million. Trains and Cruises revenues and EBITDA were stable year over year despite the impact on PeruRail of the floods that destroyed parts of the track to Machu Picchu. Across the business as a whole, before Real Estate, total revenues were up $16.6 million and EBITDA was up $6.3 million.
"I am pleased to be able to report that significant progress has been made in the refinancing of both our European and US assets, most of which have loan maturities in the second half of 2011. It is also good to see the effect of our strategic actions, combined with the fledgling recovery, resulting in our debt to EBITDA ratio continuing to move in the right direction."
Business Highlights
Revenue, excluding Real Estate revenue, was $146.0 million in the second quarter of 2010, up $16.6 million from the second quarter of 2009.
Revenue from Owned Hotels for the second quarter was $118.1 million. On a same store basis, Owned Hotels RevPAR was up 12% in local currency and up 13% in US dollars.
Trains and Cruises revenue in the second quarter was $21.9 million, which includes the Company's share of PeruRail insurance income (net of costs) of $2.8 million. This was in line with the prior year quarter.
Adjusted EBITDA before Real Estate was $32.4 million compared to $26.6 million in the prior year. The principal variances from the second quarter of 2009 included Grand Hotel Europe, St. Petersburg, Russia (up $1.8 million), Copacabana Palace, Rio de Janeiro, Brazil (up $1.2 million), Charleston Place, Charleston, South Carolina (up $1.4 million), The Westcliff, Johannesburg, South Africa (up $1.8 million) and share of results from Hotel Ritz Madrid, Spain (up $1.2 million).
On May 27, the Grand Hotel Timeo and Villa Sant'Andrea re-opened on schedule under the Orient-Express flag, following the first phase of renovations. The staff, who trained at other Orient-Express hotels in Italy during the closure, are coping well with the heavy demands of the summer season, starting with a full house of demanding guests for the annual Taormina Film Festival within two weeks of opening.
During the quarter GBP2.6 million ($3.9 million) was received from the defendants in the "Cipriani" trademark litigation. This is in addition to GBP0.5 million ($0.8 million) already received in these proceedings. The balance of the claim of GBP6.6 million ($9.8 million) is to be settled by a deferred payment arrangement to be received over five years.
On June 1, the Bermuda Supreme Court upheld the Company's class B shareholding structure and dismissed the petition filed in early 2009 by two hedge fund groups challenging that structure. One of them has indicated an intention to appeal this judgment.
In May, the Company completed the sale of La Cabana restaurant in Buenos Aires, Argentina for $2.7 million, which was received in the quarter.
In July, the complete railway track from Cuzco to Machu Picchu reopened following the heavy flooding on the line in January 2010, which made whole sections of the track impassable. In April, PeruRail established its operations at a temporary station in the Sacred Valley and coordinated transfers by bus between Cuzco and the Sacred Valley, and onwards to Machu Picchu by rail.
The seventeen terrace rooms under renovation at the Grand Hotel Europe were finished in time for the high season of White Nights which runs from May to July. A three year phased restoration of the facade of the hotel commenced in July.
Restoration is progressing on the new 56 key hotel Palacio Nazarenas, adjacent to Hotel Monasterio in Cuzco, Peru, with 50% of basic construction of listed buildings and 65% of excavation of non-historic areas now complete. Due to some interesting archaeological finds, work on certain sections of the site is being delayed and completion of the project is now expected in the first quarter of 2012.
The volatile political situation in Bangkok has calmed considerably but demand for the Asian hotels and the Eastern & Oriental Express continues to be monitored closely because many flights are routed through Bangkok. At present, business has returned to normal during this low season period in the region.
At the Company's Porto Cupecoy development in St Maarten, the legal title of 45 units had been transferred at the end of the quarter and a further 28 units have been transferred since then. The cumulative number sold is now 105 out of a total of 185 units. All third party debt has now been discharged on this project.
Regional Performance
Europe: In the second quarter of 2010, revenues from Owned Hotels were $56.5 million, up 8% from $52.2 million in the second quarter of 2009. Same store RevPAR increased by 1% in local currency. EBITDA was $17.3 million in the second quarter 2010 versus $17.2 million in the prior year. The second quarter 2010 included EBITDA losses of $1.0 million for Grand Hotel Timeo and Villa Sant'Andrea of which $0.5 million were start-up costs. The hotels opened at the end of May and had only one full month of trading. Grand Hotel Europe experienced a $1.8 million gain in EBITDA, driven by a 17% increase in local currency RevPAR and strong banqueting business.
North America: Revenue from Owned Hotels was $29.2 million, up 9% from $26.8 million in the second quarter of 2009. EBITDA was $5.4 million in 2010 versus $4.3 million in the prior year. Both revenue and EBITDA increases were mainly attributable to Charleston Place Hotel, which had revenue growth of $1.8 million, or 14%, and EBITDA gains of $1.4 million driven by both strong group and transient room night demand. Local currency same store RevPAR for the region increased by 16%.
Southern Africa: Revenue of $9.2 million in the second quarter of 2010 was up by $2.6 million, or 39% over the prior year, with local currency same store RevPAR up 57%. EBITDA of $2.5 million was $1.5 million higher than the second quarter of 2009. Revenue was boosted by the World Cup tournament in June, although business levels in the run up to the World Cup were lower than the previous year.
South America: Revenue was $15.7 million in the 2010 second quarter, compared to $11.1 million in the prior year. Same store RevPAR in local currency for the region increased by 32%. The Copacabana Palace contributed $3.2 million of the revenue increase, which was driven by rooms and food and beverage growth, especially from banqueting. Hotel das Cataratas, Iguassu Falls, Brazil, on schedule for third phase completion in September, experienced an EBITDA loss in the 2010 quarter of $1.6 million, compared to an EBITDA loss of $1.5 million in the prior year. For the region, EBITDA of $3.0 million was $1.7 million higher than the prior year. This included a $1.8 million adverse impact on costs caused by the strengthening of local currencies.
Asia Pacific: Revenue was $7.5 million in the second quarter of 2010, up $1.3 million or 20%. Same store RevPAR in local currency for the region increased by 12%. EBITDA was $0.8 million in the current quarter and $1.2 in the prior year quarter.
Hotel management and part-ownership interests: EBITDA for the second quarter of 2010 was $2.2 million compared to $1.2 million in the second quarter of 2009. Of the increase in EBITDA, $1.2 million was attributable to the Hotel Ritz Madrid, Spain. This was offset by a fall of $0.2 million from the Peru hotels, which suffered from the lingering impact of the floods that occurred in the first quarter.
Restaurants: Revenue from '21' Club, New York in the second quarter of 2010 was $3.8 million, up 15% compared to $3.3 million in the second quarter of 2009, and EBITDA was $0.5 million compared to $0.3 million in the prior year.
Trains and Cruises: Revenue in the second quarter of 2010 and 2009 was unchanged at $21.9 million. EBITDA in the second quarter of 2010 was $6.8 million, compared to an EBITDA of $6.9 million in the prior year. Both revenue and EBITDA included insurance income in the second quarter of 2010 of $2.8 million from PeruRail, which was impacted by the damage to tracks caused by the floods during the first quarter of 2010.
Central costs: In the second quarter of 2010, central costs were $5.7 million compared with $6.8 million in the prior year period. The current year quarter is net of $0.3 million of cost recovery relating to the Bermuda litigation and $0.8 million gain from the favorable settlement of the "Cipriani" trademark litigation, both of which are excluded from adjusted EBITDA.
Real Estate: In the second quarter of 2010, there was an EBITDA loss of $1.4 million from real estate activities compared with $0.5 million in 2009, primarily relating to Porto Cupecoy. During the quarter, the Company recognized revenue from units transferred to customers of $27.4 million.
Depreciation and amortization: The depreciation and amortization charge for the second quarter of 2010 was $11.6 million compared with $9.5 million in the second quarter of 2009.
Interest: The interest charge for the second quarter of 2010 was $7.4 million compared to $7.5 million in the second quarter of 2009.
Tax: The tax charge for the second quarter of 2010 was $7.4 million compared with $11.0 million in the same quarter in the prior year. The prior year included 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.
Discontinued operations: The loss for the second quarter of 2010 was $1.8 million including the results of Bora Bora Lagoon Resort. The loss included an operating loss in the quarter, net of tax, of $1.4 million and a final loss on the sale of La Cabana restaurant of $0.4 million.
Investment: The Company invested $3.8 million during the quarter in Hotel das Cataratas. Payments of a further $1.8 million were made to the New York Public Library and there was additional capital expenditure of $15.9 million in the second quarter, including $1.3 million at Hotel Cipriani, Venice, Italy, $6.4 million at Grand Hotel Timeo and Villa Sant'Andrea and $1.8 million at Le Manoir aux Quat' Saisons.
Liquidity
At June 30, 2010, the Company had term debt (including the current portion) of $761.6 million, working capital loans of $8.2 million and cash balances of $129.1 million (including $16.6 million of restricted cash), giving a total net debt of $640.7 million compared with total net debt of $697.8 million at the end of the first quarter of 2010.
At June 30, 2010, undrawn amounts available to the Company under committed short-term lines of credit were $18.6 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability at June 30, 2010 to $159.7 million, including restricted cash of $16.6 million.
At June 30, 2010, approximately 63% of the Company's debt was at fixed interest rates and 37% 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%.
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