Orient-Express Hotels Reports Fourth Quarter and Full Year 2010 Results

    Fourth Quarter Earnings Summary



    - Fourth quarter total revenue, excluding Real Estate, up 13% to $126.6

      million



    - Revenue from Owned Hotels up 15% to $102.2 million



    - Same store RevPAR up by 9% in local currency, up 10% in US dollars



    - Adjusted EBITDA before Real Estate of $16.2 million, up 17%



    Key Events



    - Raised $117.3 million of cash in common share offering



    - Completed the refinancing of six European hotels with new loan

      facilities totaling EUR187.5 million ($251.5 million)



    - Completed the refinancing of four US properties with new loan

      facilities totaling $122.9 million, bringing the total amount of debt

      refinanced in the fourth quarter of 2010 to $374.4 million



    - Appointed Roy Paul as Vice President and Chief Development Officer to

      drive management contract opportunities



    - Refurbished 32 rooms and opened new Planet Restaurant at Mount Nelson

      Hotel, Cape Town



    - Second phase of three year refurbishment in Sicily completed



    - Hotel Ritz Madrid celebrated the 100th anniversary of its inauguration

      in the presence of Infanta D.(a) Elena, the eldest daughter of King D.

      Juan Carlos I of Spain

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 fourth quarter and full year ended December 31, 2010.

"Widespread belief that our industry has begun to enter a sustained period of recovery was supported by a fourth consecutive quarter of good RevPAR growth, albeit in a quarter that is 'low season' for many of our properties," said Paul White, President and Chief Executive Officer. "The same store RevPAR growth of 10% (9% in local currency) was driven primarily by occupancy, with rates holding up well. In addition to this solid operating performance, the Company continued to improve its balance sheet after completing key refinancings on ten assets and raising $117.3 million of cash by way of a successful common share offering.

"I am pleased to see Orient-Express continue to achieve the highest recognition for its service levels, with more awards from the most highly regarded sources in the industry. Credit must be given to our workforce around the world, who continually strive to exceed customer expectations - the true driver of RevPAR."

Business Highlights

Revenue, excluding Real Estate, was $126.6 million in the fourth quarter of 2010, up $14.5 million from the fourth quarter of 2009.

Revenue from Owned Hotels for the fourth quarter was $102.2 million, up $13.1 million from the fourth quarter of 2009. On a same store basis, Owned Hotels RevPAR was up 9% in local currency and up 10% in US dollars.

Trains and Cruises revenue in the fourth quarter was $17.6 million compared to $16.1 million in the fourth quarter of 2009.

Adjusted EBITDA before Real Estate was $16.2 million compared to $13.8 million in the prior year. The principal variances from the fourth quarter of 2009 included the Brazilian hotels (up $2.0 million), La Samanna, St Martin (up $0.9 million), Hotel Cipriani, Venice (up $0.8 million), Trains and Cruises (up $0.8 million) and '21' Club, New York, (up $0.5 million), offset by Southern African hotels (down $1.2 million), Grand Hotel Europe, St Petersburg (down $0.6 million) and Maroma Resort & Spa, Riviera Maya (down $0.6 million).

Adjusted net losses from continuing operations for the period were $16.0 million (loss of $0.17 per common share), compared with $11.0 million ($0.14 per common share) in the fourth quarter of 2009. Net loss attributable to Orient-Express Hotels Ltd. for the period was $26.5 million (loss of $0.27 per common share), compared with a net loss attributable to Orient-Express Hotels Ltd. of $16.8 million (loss of $0.22 per common share) in the fourth quarter of 2009. The current quarter net loss includes a $5.2 million tax charge in respect of valuation allowances compared to no charge in respect of valuation allowances in the prior year quarter.

In November, the Company completed its public offering of 10 million Class A common shares. In addition, the underwriters for the offering exercised in full their over-allotment option to purchase an additional 1.5 million Class A common shares, bringing the total shares sold to 11.5 million at a price of $10.75 per share for gross proceeds of $123.6 million. The Company received net proceeds of approximately $117.3 million, after deducting underwriting discounts and offering expenses.

During the fourth quarter the refinancing of six European hotels was completed with new loan facilities totaling EUR187.5 million ($251.5 million at the exchange rate at December 31, 2010). Also during the quarter, four US properties were refinanced for a total of $122.9 million. This brings the total amount of debt refinanced in the fourth quarter of 2010 to $374.4 million, all of which has a maturity profile of at least three years.

In November 2010, the Company reached agreement for the sale of a non-core asset in France for $12.1 million and the sale is scheduled to complete in the first quarter of 2011.

In January 2011, the Company appointed Roy Paul as Vice President and Chief Development Officer to drive its planned entry into the management contract business. Until 2007, Roy Paul had led the development team at Four Seasons Hotels and Resorts for 20 years.

During the quarter, 32 rooms overlooking the garden in the main building of the Mount Nelson Hotel were refurbished. The rooms have been designed along classic lines with refreshing contemporary elements. In December, the hotel successfully launched a new concept gourmet restaurant called Planet.

The EUR2.0 million ($2.7 million) second phase of a three year complete renovation project at Grand Hotel Timeo and Villa Sant'Andrea, Taormina, which the Company acquired in January 2010, continued this quarter whilst both hotels were closed for the winter season. Villa Sant'Andrea has a new infinity edge pool overlooking the Bay of Mazzaro and the pool restaurant at Grand Hotel Timeo has been extended. Since acquisition, across both properties 25 new suites and junior suites have been created from existing room stock. More than 80% of room stock at both properties has been refurbished since acquisition.

La Residence Phou Vao, Luang Prabang received the Enduring Excellence Award 2011 at Tatler magazine's Travel Awards, and the Copacabana Palace, Rio de Janeiro was awarded the Hotels Green Stamp prize from the Brazilian Association of the Hotel Industry.

Regional Performance

Europe:

In the fourth quarter, revenue from owned hotels was $29.7 million, up 10% from $26.9 million in the fourth quarter of 2009. Same store local currency RevPAR was unchanged from the prior year (down 7% in US dollars). EBITDA was a loss of $0.3 million in 2010 versus a profit of $1.2 million in the prior year. The two new hotels in Sicily, which were closed for most of the quarter, reported an EBITDA loss of $1.5 million.

North America:

Revenue from owned hotels was $28.1 million, up 14% from $24.6 million in the fourth quarter of 2009. Local currency same store RevPAR increased by 11%. EBITDA was $3.3 million compared to $2.6 million in the fourth quarter of 2009. Charleston Place, Charleston and La Samanna benefited from revenue growth of 17% and 23%, respectively.

Rest of World:

Southern Africa:

Fourth quarter revenue was $9.8 million, up 7% from $9.2 million in the fourth quarter of 2009 largely as a result of strong corporate business at The Westcliff, Johannesburg. Same store local currency RevPAR was down 8% (up 1% in US dollars). EBITDA was $1.4 million, compared to $2.6 million in the fourth quarter of 2009. EBITDA was negatively impacted by pre-opening costs for the new Planet Restaurant and energy tariff increases at the Mount Nelson Hotel.

South America:

Revenue increased by 23% to $24.1 million in the fourth quarter of 2010, from $19.6 million in the fourth quarter of 2009. Same store RevPAR increased by 18% in both local currency and US dollars. EBITDA was $6.0 million, compared to $4.2 million last year, an increase of 43%. Year on year revenue increased at Hotel das Cataratas, Iguassu Falls by $1.9 million or 75% following the recent major refurbishment of the rooms and public areas to Orient-Express standards. Year on year revenue increased at Copacabana Palace by $2.4 million or 16%, primarily driven by growth in average rate.

Asia Pacific:

Revenue for the fourth quarter of 2010 was $10.6 million, an increase of $1.8 million or 20% year over year. Same store local currency RevPAR increased by 22% in local currency (22% in US dollars). EBITDA was $2.5 million compared to $2.1 million in the fourth quarter of 2009.

Hotel management and part-ownership interests:

EBITDA for the fourth quarter of 2010 was $0.4 million compared to EBITDA of $1.2 million in the fourth quarter of 2009. The share of results from Hotel Ritz Madrid and Peru hotels decreased by $0.5 million and $0.4 million, respectively.

Restaurants:

Revenue from '21' Club in the fourth quarter of 2010 was $6.5 million compared to $5.7 million in the same quarter of 2009, and EBITDA was $2.2 million compared with $1.7 million in 2009. This growth is largely attributable to a 7% increase in average spend.

Trains and Cruises:

Revenue increased by $1.5 million to $17.6 million in the fourth quarter of 2010, an increase of 9% year over year, and EBITDA increased by $0.8 million to $5.4 million. Fourth quarter EBITDA for the Venice Simplon-Orient-Express increased from 2009 by $0.4 million as a result of increased passenger numbers, and EBITDA for Road to Mandalay increased by $0.7 million as operations in 2009 had only just re-commenced after a full refurbishment. These gains are offset by a decrease in the share of results from PeruRail of $0.5 million, caused largely by higher fuel costs and the scheduled reduction of an allowance received against concession fees payable to the Peruvian government.

Central costs:

In the fourth quarter of 2010, central costs decreased by $0.9 million to $5.6 million compared with $6.5 million in the prior year period.

Real Estate:

In the fourth quarter of 2010, there was an EBITDA loss of $0.7 million from Real Estate activities, primarily related to Porto Cupecoy, Sint Maarten, compared with a loss of $1.9 million in 2009. During the quarter, six units were sold and the Company recognized $7.9 million of revenue from eight units transferred to customers. Cumulatively, at the end of the quarter, 103 units net of cancellations had been sold and the legal title of 95 units had been transferred. Since the end of the quarter, a further eight units have been sold, resulting in 111 or 60% of the total units sold and leaving 73 units unsold.

Depreciation, amortization and impairment:

The depreciation and amortization charge for the fourth quarter of 2010 was $11.4 million compared with $11.0 million in the fourth quarter of 2009. The increase was largely due to the depreciation charge relating to the two new Sicilian hotels.

During the quarter, there was an impairment charge of $8.0 million, which included $6.4 million relating to the Company's New York hotel project, and a charge of $1.6 million relating to two model homes at Keswick Estate, Virginia.

Interest:

The interest charge for the fourth quarter of 2010 was $11.7 million compared with $6.7 million in the fourth quarter of 2009. The current year quarter included a $1.3 million charge to write off deferred finance costs relating to debt that was refinanced in the quarter and a $1.9 million associated cost of termination of interest rate swaps.

Tax:

The tax charge for continuing operations for the fourth quarter of 2010 was $9.9 million, compared to a tax charge of $4.6 million in the same quarter in the prior year. The 2010 fourth quarter tax charge included a $5.2 million charge in respect of valuation allowances.

Discontinued operations:

Losses from discontinued operations in the quarter were $2.8 million. This included a loss of $1.7 million at Windsor Court Hotel, New Orleans, where an insurance settlement resulted in the write off of costs above a $0.5 million award, and an impairment charge of $1.1 million in respect of two Internet businesses that were written down to reflect the level of an offer received.

Investment:

The Company invested $3.0 million during the quarter in the two new Sicilian properties. Payments of a further $1.5 million were made to the New York Public Library and there was additional capital expenditure of $11.9 million, including $1.8 million at Mount Nelson Hotel, $1.6 million at Hotel das Cataratas and $1.3 million at El Encanto, Santa Barbara.

Liquidity

At December 31, 2010, the Company had long-term debt (including the current portion and debt of consolidated variable interest entities) of $728.4 million, working capital loans of $1.2 million and cash balances of $158.8 million (including $8.4 million of restricted cash), giving a total net debt of $570.8 million compared with total net debt of $659.2 million at the end of the third quarter of 2010. The decrease in net debt is largely attributable to the equity raise completed during the quarter.

At December 31, 2010, undrawn amounts available to the Company under short-term lines of credit were $12.1 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability (excluding restricted cash) at December 31, 2010, to $174.5 million.

At December 31, 2010, 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 3.4 years and the weighted average interest rate (including margin and swaps) was approximately 4.5%.

At December 31, 2010, excluding revolving credit facilities of $28.0 million which are available for redrawing, the Company had $98.6 million of debt repayments due within 12 months. The Company is in advanced discussions with two existing lenders regarding the refinancing of two loans totaling $58.7 million that mature within 12 months, leaving a further $39.9 million of scheduled debt amortization due within the 12 month period.

Outlook

"As we move into 2011," said Paul White, "it is perhaps worth reflecting on some key achievements Orient-Express has made in 2010:

    - Same store RevPAR, up 11% (local currency and US dollars)



    - Strengthened balance sheet with capital raises and key refinancings

      with maturities of 3-5 years



    - Net debt to adjusted EBITDA before Real Estate reduced from 9.1x to

      6.7x



    - Acquired two 'iconic' properties in a core market (Italy) and completed

      the upgrade of Hotel das Cataratas



    - Won 'Cipriani' trademark litigation, securing a valuable brand in

      Europe



    - Closed and agreed sales of three non-core assets for $33.5 million



    - Completed Porto Cupecoy development with 111 units or 60% sold at

      February 24, 2011

"This was all in a year where the first quarter was dominated by severe weather conditions in Peru and Madeira, the ash cloud in Europe, and political unrest in South East Asia. As we look forward, the US traveler is returning to our high end properties, backed up by stronger domestic business. Leisure and corporate transient sectors are showing stronger recovery, with groups trailing, with the key result being the ability to drive average daily rate and average daily spend across our portfolio."

    Reconciliation and Adjustments



                                      Three months ended  Twelve months ended



                                          December 31         December 31



    $'000 - except per share amounts

                                        2010      2009       2010      2009

                                       6,630    13,215     37,569    69,547



    EBITDA

    Real Estate                          666     1,943      5,329     3,476

    EBITDA before Real Estate          7,296    15,158     42,898    73,023

    Adjusted items:

    Legal costs (1)                      (18)        6       (175)      654

    Cipriani litigation (2)                -         -       (788)        -

    Grand Hotel Timeo & Villa

    Sant'Andrea (3)                      344         -      2,068         -

    Management restructuring (4)         555         -      1,666     1,419

    Peru hotel depreciation

    adjustment (5)                         -         -      1,240         -

    Impairment (6)                     7,986         -     38,497     6,500

    Gain on insurance proceeds (7)         -    (1,385)         -    (1,385)





    Adjusted EBITDA before Real

    Estate                            16,163    13,779     85,406    80,211





    Reported net loss attributable to

    Orient-Express Hotels Ltd.       (26,479)  (16,830)   (62,759)  (68,797)

    Net losses/(earnings)

    attributable to non- controlling

    interests                              5       (48)      (179)      (60)

    Reported net loss                (26,484)  (16,782)   (62,580)  (68,737)

    Discontinued operations net of     2,793     6,199      ( 469)    48,613

    tax

    Net losses from continuing

    operations                       (23,691)  (10,583)   (63,049)  (20,124)

    Adjusted items net of tax:

    Legal costs (1)                      (18)        6       (175)      654

    Cipriani litigation (2)                -         -       (788)        -

    Grand Hotel Timeo & Villa

    Sant'Andrea (3)                      249         -      1,535         -

    Management restructuring (4)         397         -      1,322     1,043

    Peru hotel depreciation

    adjustment (5)                         -         -        853         -

    Impairment (6)                     7,426         -     37,937     6,500

    Gain on insurance proceeds (7)         -    (1,385)         -    (1,385)

    Interest rate swaps (8)            1,104      (142)     1,772       823

    Amortization of finance costs (9)    906         -        906         -

    Foreign exchange (10)             (2,379)    1,056     (4,946)      812

    Adjusted net loss from continuing

    operations                       (16,006)  (11,048)   (24,633)  (11,677)





    Reported EPS                       (0.27)    (0.22)     (0.68)    (1.01)

    Reported EPS from continuing

    operations                         (0.25)    (0.14)     (0.69)    (0.30)

    Adjusted EPS from continuing

    operations                         (0.17)    (0.14)     (0.27)    (0.17)

    Number of shares (millions)        96.62     76.84      91.54     68.05

1. Legal costs incurred in defending the Company's class B common share structure, net of awards or claims for reimbursement.

2. Cash received in excess of costs incurred following settlement of 'Cipriani' trademark litigation.

3. Non-recurring costs and purchase transaction costs incurred in relation to Grand Hotel Timeo and Villa Sant'Andrea.

4. Restructuring and redundancy costs.

5. Additional charge to reflect revision of useful economic life of assets at Machu Picchu Sanctuary Lodge.

6. Impairment charges recorded on owned properties and Porto Cupecoy.

7. Gain on the settlement of insurance proceeds received for cyclone-damaged assets on the Road to Mandalay ship.

8. Charges on swaps that did not qualify for hedge accounting and termination costs on closing swaps.

9. Amortization of remaining deferred finance costs on refinanced debt.

10. Foreign exchange 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.

    Net debt / adjusted EBITDA reconciliation



                                                      Twelve months ended and

                                                         as at December 31

    $'000

                                                         2010         2009



    Cash (including restricted cash)                  158,773       91,568



    Working capital facilities                          1,174        6,666

    Current portion of long-term debt and capital

    leases                                            124,805      173,223

    Current portion of long-term debt of

    consolidated variable interest entities             1,775          165

    Long-term debt and obligations under capital

    leases                                            511,336      559,042

    Long-term debt of consolidated variable interest

    entities                                           90,529       79,304

                                                      729,619      818,400



    Net debt                                          570,846      726,832



    Adjusted EBITDA before Real Estate                 85,406       80,211



    Net debt / adjusted EBITDA before Real Estate        6.7x         9.1x

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