Same store RevPAR down 20% in local currency, 26% in US dollars
Third Quarter 2009 Earnings Summary
• Third quarter total revenues, excluding Real Estate, of $142.5 million
• Same store RevPAR down 20% in local currency, 26% in US dollars
• Adjusted EBITDA before Real Estate and Impairment of $30.6 million
Key Events
• Windsor Court Hotel, New Orleans sold in October, for $44.3 million, over 50x 2008 EBITDA
• Total proceeds from non-core asset sales now $86.3 million
• Letter of intent signed in October for sale of third non-core hotel asset
• Relaunched Hotel das Cataratas, Iguassu Falls, Brazil, upgraded to Orient-Express standards
• Returned refurbished Road to Mandalay river cruise ship in Burma to service
• Commenced conversion of historic convent into 56 key hotel Palacio Nazarenas, Cuzco, Peru, scheduled for completion in 2011
• Sold a further two residential villas at Napasai, Koh Samui, Thailand for $1.7 million
Orient-Express Hotels Ltd. (NYSE: OEH, http://www.orient-express.com), owners or part-owners and managers of 49 luxury hotels, restaurants, tourist trains and river cruise properties operating in 25 countries, today announced its results for the third quarter ended September 30, 2009.
The net loss for the period was $13.0 million (loss of $0.17 per common share) on revenue of $144.2 million, compared with net earnings of $6.4 million ($0.15 per common share) on revenue of $176.7 million in the third quarter of 2008. The net loss from continuing operations for the period was $2.7 million (loss of $0.04 per common share) compared with net earnings from continuing operations of $20.6 million ($0.48 per common share) in the third quarter of 2008. The adjusted net earnings from continuing operations for the period was $1.4 million ($0.02 per common share) compared with adjusted net earnings from continuing operations of $22.6 million ($0.53 per common share) in the third quarter of 2008.
Commenting on the quarter, Paul White, President and Chief Executive Officer said, "The third quarter has again demonstrated the resilience of the Orient-Express business model. Our focus on the high end leisure traveller and our international diversification translated into RevPAR declines that were not as steep as those experienced by the luxury sector in general or the 'big brand' operators that rely heavily on group and corporate business. Nevertheless, the quarter was another challenging trading period for the Company and the industry as a whole.
"During the quarter we continued to expedite the sale of non-core assets, with $86.3 million of sales completed so far this year. A non-binding letter of intent has since been signed for the sale of a third non-core hotel asset, and total proceeds are expected to rise to over $100 million by the end of 2009. The completed sales, coupled with the equity raised in April, has helped to reduce our net debt from $835.3 million at December 31, 2008 to $705.8 million.
"Progress continues on our Real Estate developments in St. Martin. The construction of Porto Cupecoy is nearing completion, with the grand opening scheduled for February 2010. To date the project is nearly 50% sold. We expect the balance of 93 condominiums to be sold over the next two to three years at an anticipated average price of $0.6 to $0.7 million, which will further deleverage the balance sheet.
"Trading has been consistent with our expectations. It is particularly pleasing to see the operational efficiencies continue through the high season, when savings are more challenging in the luxury sector. Again in this quarter, we achieved savings sufficient to offset 47% of the revenue drop, excluding Charleston Place, which was consolidated from January 1, 2009."
Business Highlights
Revenue, excluding Real Estate revenue, was $142.5 million in the third quarter of 2009, down $30.8 million from the third quarter of 2008. On a same store basis, revenue, excluding Real Estate revenue, was down by 22% in US dollars or by $37.7 million.
Revenue from Owned Hotels for the third quarter was $116.5 million, including $10.0 million from Charleston Place. This excludes revenue from Windsor Court Hotel, which has been accounted for as a discontinued operation. On a same store basis, revenue from Owned Hotels declined by 21% year over year. Owned Hotels same store RevPAR declined by 20% in local currency (26% in US dollars).
Trains and Cruises revenue fell by 23% or $7.0 million. These operations have a high variable cost component and EBITDA fell by only $2.6 million.
Adjusted EBITDA before Real Estate and Impairment was $30.6 million compared to $51.3 million in the prior year. The principal variances from the third quarter of 2008 included results from owned hotels in Italy (down $3.9 million), Reid's Palace, Madeira (down $1.2 million), Grand Hotel Europe, St Petersburg (down $2.9 million), La Residencia, Mallorca (down $1.8 million), La Samanna, St. Martin (down $1.2 million), Orient-Express Safaris, Botswana (down $1.2 million), and the Venice Simplon-Orient-Express (down $2.7 million).
The results for the third quarter include a non-cash fixed asset impairment charge of $9.8 million relating to the Company's ownership of Lilianfels Blue Mountains, Katoomba, Australia.
During the quarter, work started on a fully-financed $14.1 million, 56 key hotel Palacio Nazarenas, Cuzco, Peru, scheduled for completion in 2011. The hotel, a conversion of an historic convent, will complement our next door Hotel Monasterio with a presidential suite, 29 junior suites, 9 suites and 17 deluxe oxygen-enriched rooms.
The entirely refurbished Road to Mandalay river cruise ship in Burma returned to service in August 2009, after an absence of more than 12 months, following damage sustained during Cyclone Nargis. A new Governor's Suite and five additional state cabins have been created. Deluxe cabins have been reduced in number and expanded to improve the guest experience.
Regional Performance
Europe: In the third quarter, revenues from Owned Hotels were $67.5 million, down 23% from $88.1 million in the third quarter of 2008. EBITDA was $25.6 million in 2009 versus $35.9 million in the prior year. Same store RevPAR decreased by 18% in local currency (26% in US dollars). Overall the Italian hotels experienced a 12% fall in local currency RevPAR (19% in US dollars). Reid's Palace, which is heavily dependent on the weakened UK outbound market experienced a 35% fall in local currency RevPAR (39% in US dollars). Similarly, La Residencia, which is also largely dependent on the UK market, experienced a 31% fall in local currency RevPAR (36% in US dollars). Grand Hotel Europe, St Petersburg continued to be adversely affected by the global recession and suffered a 28% fall in local currency RevPAR (44% in US dollars). The depreciation of the rouble had a $1.4 million adverse impact on the hotel's EBITDA.
North America: Revenue was $19.9 million, including $10.0 million with respect to Charleston Place, South Carolina which was consolidated from January 1, 2009. Excluding this hotel, revenue was 25% lower than the third quarter of 2008. Excluding EBITDA of $1.8 million from Charleston Place, there was an EBITDA decrease of $2.2 million. Same store RevPAR for the region fell by 31%. The region includes La Samanna, St. Martin, which was significantly impacted by the economic downturn as well as the closure of the property for one week due to a hurricane threat. Consequently, the hotel suffered a 41% fall in RevPAR.
Southern Africa: Revenue of $7.2 million was 29% lower year over year, and EBITDA of $1.1 million was 58% lower than in the third quarter of 2008.
South America: Revenue decreased by 10% to $11.3 million in the third quarter of 2009, from $12.5 million in the third quarter of 2008. EBITDA was $0.9 million, compared to $1.9 million last year. Copacabana Palace had a RevPAR decrease of 19% in local currency, and EBITDA was down by $0.5 million. The region's EBITDA results were impacted by a $1.6 million EBITDA loss at Hotel das Cataratas which was relaunched under the Orient-Express brand in October 2009.
Asia Pacific: Revenue for the third quarter of 2009 was $10.7 million, a decrease of 2% year over year. EBITDA was $2.8 million compared to $2.2 million in the third quarter of 2008. Same store RevPAR in local currency for the region fell by 4% from $172 to $166.
Hotel management and part-ownership interests: EBITDA for the third quarter of 2009 was a loss of $0.1 million compared to a profit of $4.7 million in the third quarter of 2008, which included $3.1 million of EBITDA from Charleston Place.
Restaurants: Revenue from restaurants in the third quarter of 2009 was $2.2 million compared to $2.9 million in the same quarter of 2008, and EBITDA was a loss of $0.5 million compared with a loss of $0.3 million in 2008.
Trains and Cruises: Revenue was down $7.0 million in the third quarter of 2009, a decrease of 23% year over year, and EBITDA was down by $2.6 million, reflecting the high level of variable costs in the trains business.
Central costs: In the third quarter of 2009, central costs were $7.4 million compared with $6.2 million in the prior year period. In the quarter, there was a $0.5 million increase in the cost of non-cash equity-compensation awards.
Depreciation and amortization: The depreciation and amortization charge for the third quarter of 2009 was $11.0 million compared with $8.9 million in the third quarter of 2008. The current year quarter includes $1.9 million relating to Charleston Place, which was consolidated from January 1, 2009.
Interest: The interest charge for the third quarter of 2009 was $7.8 million compared with $10.9 million in the third quarter of 2008.
Tax: The tax charge for the quarter was $7.9 million compared to a charge of $8.2 million in the same quarter in the prior year. The third quarter 2009 tax charge includes a deferred tax charge of $1.7 million arising in respect of fixed asset timing differences following appreciation of certain local currencies against the US dollar in the quarter. There was also a benefit to deferred tax of $2.9 million in respect of the impairment charge in the quarter.
Discontinued Operations: The charge in the third quarter of 2009 was $10.3 million. Discontinued operations in the third quarter include the results of Windsor Court Hotel, New Orleans, Bora Bora Lagoon Resort and La Cabana, Buenos Aires. The charge included an operating loss in the quarter of $0.4 million and impairment charges, net of tax, of $5.4 million relating to La Cabana and $4.5 million relating to Bora Bora Lagoon Resort.
Investment: Capital expenditure in the third quarter was $10.4 million which was necessary to complete projects at, in particular, Grand Hotel Europe and Copacabana Palace. This also included $5.9 million for Road To Mandalay, which is fully covered by insurance. There was an additional $9.0 million deposit for the New York hotel project. In addition, the Company invested $8.9 million during the quarter in the Company's development at Porto Cupecoy and $3.5 million was invested in Hotel das Cataratas.
Liquidity and Capital Reserves
At September 30, 2009, the Company had total debt of $830.1 million, working capital loans of $8.4 million and cash balances of $132.8 million (including $17.8 million of restricted cash), giving a total net debt of $705.8 million compared with total net debt of $683.9 million at the end of the second quarter of 2009. Additionally, at September 30, 2009, Other Liabilities Held for Sale included $36.8 million of debt relating to The Windsor Court Hotel, which was repaid in October when the hotel was sold.
At September 30, 2009, undrawn amounts available to the Company under committed short-term lines of credit were $25.0 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability at September 30, 2009, to $169.8 million, including restricted cash of $17.8 million.
At September 30, 2009, approximately 56% of the Company's debt was at fixed interest rates and 44% was at floating interest rates. The weighted average maturity of the debt was approximately 2.7 years and the weighted average interest rate (including margin) was approximately 3.5%.
Outlook
"As we enter the low season period, we see business conditions continuing to stabilize. Bookings remain very last minute, a trend we expect to continue into 2010", said Paul White. "We maintain our tight control of costs and capital expenditures and are pursuing the sale of non-core assets and developed Real Estate in line with our strategy. Having achieved key milestones in all three of these areas, with further progress expected in the coming months, the Company can now begin to evaluate growth opportunities in management, ownership or a combination of both. Our aim continues to be to deleverage the Company significantly by the end of 2011, with a targeted 4-5 times ratio of debt to EBITDA on a stabilized basis."
ORIENT-EXPRESS HOTELS LTD
Three Months ended September 30, 2009
SUMMARY OF OPERATING RESULTS
(Unaudited)
Three months ended
September 30
$'000 - except per share amount 2009 2008
Revenue and earnings
from unconsolidated companies
Owned hotels
- Europe 67,535 88,117
- North America 19,897 13,184
- Rest of World 29,113 33,437
Hotel management & part ownership interests (141) 4,664
Restaurants 2,151 2,899
Trains & Cruises 23,944 30,984
Revenue and earnings from unconsolidated
companies before Real Estate 142,499 173,285
Real Estate 1,688 3,454
Total (1) 144,187 176,739
Analysis of earnings
Owned hotels
- Europe 25,595 35,905
- North America (68) 300
- Rest of World 4,704 6,681
Hotel management & part ownership interes (141) 4,664
Restaurants (494) (269)
Trains & Cruises 7,686 10,247
Central overheads (7,418) (6,195)
EBITDA before Real Estate and Impairment 29,864 51,333
Real Estate (740) (223)
EBITDA before Impairment 29,124 51,110
Impairment (9,809) -
EBITDA 19,315 51,110
Depreciation & amortization (11,041) (8,931)
Interest (7,781) (10,858)
Foreign exchange 4,709 (2,531)
Earnings before tax 5,202 28,790
Tax (7,909) (8,239)
Net (losses)/earnings from continuing
Operations (2,707) 20,551
Discontinued operations (10,308) (14,172)
Net (losses)/earnings on common shares (13,015) 6,379
(Losses)/earnings per common share (0.17) 0.15
Number of shares - millions 76.84 42.47
(1) Comprises earnings from unconsolidated companies of $2,012,000 (2008 - $5,798,000) and revenue of $142,175,000 (2008 - $170,941,000).
ORIENT-EXPRESS HOTELS LTD
Three Months Ended September 30, 2009
SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS
Three months ended
September 30
2009 2008
Average Daily Rate
(in U.S. dollars)
Europe 797 962
North America 273 308
Rest of World 282 279
Worldwide 458 517
Rooms Available (000's)
Europe 82 82
North America 67 66
Rest of World 119 109
Worldwide 268 257
Rooms Sold (000's)
Europe 48 55
North America 36 41
Rest of World 55 66
Worldwide 139 162
RevPAR (in U.S. dollars)
Europe 470 639
North America 147 193
Rest of World 130 167
Worldwide 238 324
Change %
Same Store RevPAR Dollar Local
(in U.S. dollars) currency
Europe 470 639 -26% -18%
North America 193 282 -31% -31%
Rest of World 145 180 -19% -18%
Worldwide 280 379 -26% -20%
ORIENT-EXPRESS HOTELS LTD
Nine Months ended September 30, 2009
SUMMARY OF OPERATING RESULTS
(Unaudited)
Nine months ended
September 30
$'000 - except per share amount 2009 2008
Revenue and earnings from unconsolidated
companies
Owned hotels
- Europe 133,212 194,100
- North America 75,877 49,772
- Rest of World 85,278 105,044
Hotel management & part ownership interests 1,774 17,618
Restaurants 8,717 12,162
Trains & Cruises 52,205 73,101
Revenue and earnings from unconsolidated
companies before Real Estate 357,063 451,797
Real Estate 1,688 11,980
Total (1) 358,751 463,777
Analysis of earnings
Owned hotels
- Europe 37,357 65,277
- North America 11,957 8,936
- Rest of World 17,253 23,061
Hotel management & part ownership interests 1,774 17,618
Restaurants 31 1,516
Trains & Cruises 15,983 21,616
Central overheads (19,356) (20,153)
EBITDA before Real Estate and Impairment 64,999 117,871
Real Estate (1,533) (1,183)
EBITDA before Impairment 63,466 116,688
Impairment (16,857) -
EBITDA 46,609 116,688
Depreciation & amortization (29,992) (27,609)
Interest (24,588) (33,546)
Foreign exchange 487 2,131
(Losses)/earnings before tax (7,484) 57,664
Tax (10,010) (17,024)
Net (losses)/earnings from continuing
Operations (17,494) 40,640
Discontinued operations (34,473) (19,135)
Net (losses)/earnings on common shares (51,967) 21,505
(Losses)/earnings per common share (0.80) 0.51
Number of shares - millions 65.08 42.47
(1) Comprises earnings from unconsolidated companies of $6,362,000 (2008 - $18,323,000) and revenue of $352,389,000 (2008 - $445,454,000).
ORIENT-EXPRESS HOTELS LTD
Nine Months Ended September 30, 2009
SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS
Nine months ended
September 30
2009 2008
Average Daily Rate
(in U.S. dollars)
Europe 717 879
North America 364 406
Rest of World 276 282
Worldwide 420 484
Rooms Available (000's)
Europe 212 217
North America 164 162
Rest of World 353 343
Worldwide 729 722
Rooms Sold (000's)
Europe 102 128
North America 92 108
Rest of World 174 209
Worldwide 368 445
RevPAR (in U.S. dollars)
Europe 344 519
North America 205 271
Rest of World 136 172
Worldwide 212 299
Change %
Same Store RevPAR Dollar Local
(in U.S. dollars) Currency
Europe 344 521 -34% -23%
North America 272 368 -26% -25%
Rest of World 148 184 -20% -14%
Worldwide 235 332 -29% -21%
ORIENT-EXPRESS HOTELS LTD
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
September 30 December 31
2009 2008
$'000
Assets
Cash 132,769 77,826
Accounts receivable 62,515 45,232
Due from related parties 14,519 9,985
Prepaid expenses 25,548 19,297
Inventories 44,206 43,265
Other assets held for sale 74,971 156,207
Real estate assets 107,711 83,983
Total current assets 462,239 435,795
Property, plant & equipment, net book value 1,431,993 1,352,996
Investments 70,681 67,464
Goodwill 149,460 154,054
Other intangible assets 20,795 20,255
Other assets 38,463 38,569
2,173,631 2,069,133
Liabilities and Equity
Working capital facilities 8,402 54,179
Accounts payable 26,266 23,243
Accrued liabilities 97,059 72,277
Deferred revenue 69,397 55,988
Other liabilities held for sale 42,775 78,837
Current portion of long-term debt and capital
leases 170,074 138,813
Total current liabilities 413,973 423,337
Long-term debt and obligations under capital
leases 660,064 657,952
Deferred income taxes 168,523 162,199
Other liabilities 36,441 41,476
Total liabilities 1,279,001 1,284,964
Shareholders' equity 893,061 782,598
Non-controlling interests 1,569 1,571
Total equity 894,630 784,169
2,173,631 2,069,133
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