Orient-Express Hotels Ltd. Reports First Quarter 2013 Results

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Orient-Express Hotels Ltd. Reports First Quarter 2013 Results

  • First quarter same store revenue per available room ("RevPAR") up 6% compared to prior-year quarter in US dollars; up 7% in local currency
  • First quarter total revenue up 3% to $103.2 million from $100.5 million in prior-year quarter
  • First quarter adjusted EBITDA up 41% to $4.5 million from $3.2 million in prior-year quarter
  • Continued progress on portfolio optimization and capital redeployment strategy, including expansion of North American footprint with successful opening of 92-key El Encanto, Santa Barbara, California
  • Positive indications for 2013; bookings for total owned hotels up 8% from the same time last year

HAMILTON, Bermuda--(BUSINESS WIRE)-- Orient-Express Hotels Ltd. (NYSE: OEH, www.orient-express.com) (the "Company"), owners, part-owners or managers of 46 luxury hotel, restaurant, tourist train and river cruise properties operating in 22 countries, today announced its results for the first quarter ended March 31, 2013.

Total revenue was $103.2 million in the first quarter of 2013, up $2.7 million or 3% from $100.5 million in the first quarter of 2012. Revenue from owned hotels for the first quarter was $89.2 million, up $1.7 million or 2% from $87.5 million in the first quarter of 2012. On a same store basis, owned hotels RevPAR was up 6% in US dollars and up 7% in local currency. Trains & cruises revenue in the first quarter was $11.2 million, up 18% compared to $9.5 million in the first quarter of 2012.


Adjusted EBITDA was $4.5 million for the first quarter, up $1.3 million or 41% from $3.2 million in the prior-year period. The principal increases were at Road To Mandalay and The Governor's Residence, both in Myanmar, where aggregate EBITDA increased by $2.6 million. EBITDA also increased at Maroma Resort and Spa, Riviera Maya, Mexico (up $0.4 million) and Charleston Place, South Carolina (up $0.4 million), offset by a decrease at Copacabana Palace, Rio de Janeiro (down $1.1 million).

Adjusted net loss from continuing operations for the first quarter was $8.3 million ($0.08 per common share) compared with a loss of $14.4 million ($0.14 per common share) in the first quarter of 2012.

"2013 has started on a positive note," said John Scott, President and Chief Executive Officer. "Same store RevPAR across our portfolio was up 6% in US dollar terms and up 7% in local currency. Adjusted EBITDA for the Company's traditionally low first quarter was $4.5 million, up 41% from $3.2 million last year.

"The highlight of the first quarter was the March opening of the El Encanto hotel in Santa Barbara, California that has firmly established our brand presence in the important US West Coast travel market. This wonderfully restored hotel will significantly enhance the revenue-generating power of our portfolio and will fully contribute to earnings in future periods.

"Our new leadership team remains sharply focused on our strategy to increase the earnings power of our properties and optimize our unique portfolio of luxury travel assets. During the quarter, we completed the sale of Porto Cupecoy, Sint Maarten, generating cash proceeds of $19.0 million and removing a loss-making asset from our portfolio. We are also embarking on significant renovation plans at Charleston Place and Grand Hotel Europe, St. Petersburg, two of our key cash-generating properties.

"Current early indicators for 2013 are positive, with bookings pace for owned hotels up 8% compared to last year. Booked revenue for the Italian properties is 15% ahead of where it was at the same time last year and Asia is 18% ahead, reflecting the continued strength of Asia and providing momentum as we enter our second and third quarters."

Company highlights

The Company opened the completely renovated 92-key El Encanto hotel on March 18, 2013. The property has been very well received by clients, the travel trade and international media and bookings are growing for the peak summer season.

The Company made continued progress on its plans for a three-year refurbishment at Grand Hotel Europe that will include the conversion of 19 rooms into six ultra-luxury suites, including a two-bedroom presidential suite; a new food and beverage concept from a world-class restaurant designer; an expanded spa; and fully renovated meeting room space. In April, the Company made a first draw-down of $4.0 million under its new $50.0 million loan facility, of which $26.0 million will fund the refurbishment, which is scheduled to commence in the second quarter.

Also in the second quarter, the Company will commence the first phase of a three-year rooms refurbishment at Charleston Place. The first phase of the project entails the renovation of 145 rooms and is partially financed by $9.2 million of additional funds borrowed in December 2012 pursuant to an increase in principal of the hotel's existing loan facility.

The Grand Hotel Europe and Charleston Place renovations have been phased so that they will have minimal disruption on hotel operations.

The Company took positive steps to strengthen its core leadership with the appointment of three vice presidents, bringing new talent to the management team. Amrita Bhalla will join the Company as Vice President, Global Human Resources, and Katherine Blaisdell will join the Company as Vice President, Technical Services, following the planned retirement of Roger Collins after 22 years of dedicated service. Amrita Bhalla joins the Company from a leading Asian hospitality group, where she was Chief People Officer and Executive Vice President, Human Resources. Prior to this, she served as Executive Vice President of Human Resources for The Oberoi Group and before that as Director, Recruitment & Development for Four Seasons Hotels & Resorts. Katherine Blaisdell joins the Company from Rosewood Hotels & Resorts, where she was Vice President, Architecture & Design, responsible for managing global hotel construction and renovation projects. During her years in the industry, she has also served as Director of Project Management & Construction for St. Regis Hotels & Resorts and as Vice President of Design & Construction for Viceroy Hotels.

These appointments follow the internal promotion of Neil Gribben to Vice President, Accounting and Control in March 2013. In his new role, Neil will continue to oversee the Company's regional financial controllers and the financial performance of its business units, and in addition, is now responsible for the financial reporting function in central finance.

Operating Performance

Europe:

In the Company's seasonally low first quarter, revenue from owned hotels was $16.0 million, up $0.2 million or 1% from $15.8 million in the first quarter of 2012, despite some continued weakness in certain European markets.

Same store RevPAR in Europe was up 8% compared to the prior-year quarter in US dollars (up 9% in local currency) due to a two point increase in occupancy.

EBITDA for the quarter was a loss of $8.0 million compared to a loss of $7.6 million in the first quarter of 2012.

North America :

Revenue from owned hotels for the quarter was $30.7 million, up $1.6 million or 5% from $29.1 million in the first quarter of 2012. Revenue in the first quarter grew at every property in the region compared to the same quarter last year, led by Maroma Resort and Spa, where revenue was up $0.6 million or 15% compared to the first quarter of 2012 due to strong package business and double-digit rate growth.

Same store RevPAR in the region increased by 9% in US dollars, largely due to a 7% increase in average daily rate ("ADR").

EBITDA in North America was $6.1 million before impairment charges, down $1.1 million from $7.2 million in the first quarter of 2012. Lower EBITDA in the first quarter of 2013 was impacted by $2.0 million of charges for planned pre-opening expenses at El Encanto, offset by increases of $0.4 million at each of Charleston Place and Maroma Resort and Spa, with good conversion on mostly rate-driven revenue growth.

Rest of World:

Asia-Pacific:

Revenue for the first quarter of 2013 was $10.3 million, an increase of $1.8 million or 21% compared to $8.5 million in the first quarter of 2012. Revenue growth in the region continued to be led by The Governor's Residence, Yangon (up $0.7 million), as Myanmar's popularity as a tourist destination continues to grow. Same store RevPAR for the region increased by 23% in both US dollars and local currency due to a 16% increase in ADR and a four-point increase in occupancy.

EBITDA grew by 31% to $3.8 million compared to $2.9 million in the first quarter of 2012, which included a $0.5 million increase at The Governor's Residence and a $0.3 million increase at La Residence d'Angkor, Siem Reap, Cambodia, reflecting strong demand throughout the region.

Southern Africa:

First quarter revenue from owned hotels was $6.4 million, down $0.2 million or 3% from $6.6 million in the first quarter of 2012. This is largely due to the year-over-year weakening of the South African rand versus the US dollar. Excluding the effect of currency movements, revenue was $0.6 million ahead of last year.

Due to an eight-point improvement in occupancy, same store RevPAR in the region was up 14% in local currency terms but, due to a weaker South African rand, was down 1% in US dollars.

EBITDA was $1.3 million versus $1.8 million in the first quarter of 2012 due to a management restructuring charge of $0.3 million in the first quarter of 2013 and a negative currency impact of $0.2 million.

South America:

First quarter revenue from owned hotels was $25.8 million, down $1.6 million or 6% from $27.4 million in the first quarter of 2012. This decrease is primarily the result of difficult year-over-year comparisons at Copacabana Palace, as a number of large events in Rio de Janeiro in the first quarter of 2012 did not recur; however, the benefit of the renovated product is expected to be felt over the remainder of the year, with full year revenue currently forecasted to exceed prior-year levels. Same store RevPAR in the region for the first quarter decreased by 3% in both US dollars and local currency.

EBITDA for the quarter was $8.0 million, a decrease of $1.0 million compared to $9.0 million in the first quarter of last year. In addition to the revenue shortfall at Copacabana Palace, $0.4 million of this decrease was due to costs incurred to resolve a tax case in Brazil.

Hotel management & part-ownership interests:

EBITDA for the first quarter of 2013 was a loss of $2.0 million compared to a loss of $0.7 million in the first quarter of 2012. This loss was attributable to $0.7 million of management restructuring charges related to the closure of the Singapore development office, which will result in cost savings in future periods, and a decline of $0.7 million at Hotel Ritz, Madrid due to a write-off of fixed assets.

Restaurants:

Revenue from '21' Club in the first quarter of 2013 was unchanged from the same quarter of 2012 at $3.8 million. EBITDA was $0.2 million compared to $0.3 million in the first quarter of 2012.

Trains & cruises:

Revenue for the first quarter of 2013 was $11.2 million, up $1.7 million or 18% from $9.5 million in the first quarter of 2012. This growth is due to an increase of $2.7 million from Road To Mandalay, which performed extremely well due to the continued popularity of Myanmar as a tourist destination, offset by decreases from the UK day-trains, as the sluggish UK economy and poor weather impacted demand and a reduced number of trips was operated in the first quarter with a heavier loading into the busier summer months.

EBITDA was $1.1 million compared to a loss of $0.3 million in the first quarter of 2012. This growth was also attributable to Road To Mandalay, where first quarter EBITDA was $2.5 million compared to $0.4 million in the prior year, offset by some declines from the UK day-trains.

Central costs:

In the first quarter of 2013, central overheads were $9.0 million compared with $7.8 million in the prior-year period. This increase was largely due to management restructuring charges of $1.0 million incurred during the quarter. Together with the restructuring costs within Southern Africa and the hotel management business, these costs will result in meaningful cost savings in future periods.

In addition, the Company incurred $1.5 million of non-cash share-based compensation expense compared to $2.0 million in the first quarter of 2012.

Impairment:

Following a strategic review of its assets, the Company recorded a total non-cash impairment charge for the quarter of $35.7 million related to La Samanna, St Martin.

Depreciation and amortization:

The depreciation and amortization charge for the first quarter of 2013 was $11.5 million, up from $10.5 million in the first quarter of 2012 as a result of the completion of several recent capital projects and the opening of El Encanto.

Interest:

The interest charge for the first quarter of 2013 was $7.0 million, down $0.2 million from $7.2 million in the prior year quarter. The amount of capitalized interest related to El Encanto was $1.1 million in the first quarter of 2013 compared to $0.9 million in the prior-year quarter.

Tax :

The tax benefit for the first quarter of 2013 was $6.1 million compared to a charge of $0.2 million in the same quarter in the prior year. The tax benefit in the first quarter of 2013 included a release of tax provisions in Brazil of $3.9 million following the conclusion of inquiries by the tax authorities.

Investment:

The Company invested a total of $20.7 million in its portfolio during the first quarter of 2013, including $10.8 million for the renovation of El Encanto, $1.9 million primarily for the completion of the refurbishment at Copacabana Palace, $1.4 million at Charleston Place, including the refurbishment of the Palmetto Café, $1.3 million primarily for façade works at Grand Hotel Europe, and the balance for routine capital expenditures.

Balance Sheet

At March 31, 2013, the Company had long-term debt (including the current portion and debt of consolidated variable interest entities) of $606.0 million, working capital loans of $0.4 million and cash balances of $101.0 million (including $21.7 million of total restricted cash of which $13.4 million is in other assets), resulting in total net debt of $505.4 million compared to total net debt at the end of 2012 of $505.0 million. At March 31, 2013, the ratio of net debt to trailing 12-month adjusted EBITDA was 4.8 times.

Undrawn amounts available to the Company at March 31, 2013 under short-term lines of credit were $3.9 million, bringing total cash availability (excluding restricted cash) at March 31, 2013 to $83.2 million.

At March 31, 2013, approximately 48% of the Company's debt was at fixed interest rates and 52% was at floating interest rates. The weighted average maturity of the debt was approximately 2.3 years and the weighted average interest rate was 4.0%. The Company had $85.9 million of debt repayments due within 12 months. These obligations are expected to be met through a combination of operating cash flow, proceeds from recent divestment of non-core assets, refinancing of the facilities, and utilization of available cash.

* * * * * * * *

ORIENT-EXPRESS HOTELS LTD.
SUMMARY OF OPERATING RESULTS
(Unaudited)
   
$millions - except per share amounts Three months ended
March 31,
 2013 2012
 
Revenue and earnings from unconsolidated companies
Owned hotels
- Europe16.015.8
- North America30.729.1
- Rest of world42.5 42.6
Total owned hotels89.287.5
Hotel management & part-ownership interests(1.0)(0.3)
Restaurants3.83.8
Trains & cruises11.2 9.5
Total (1)103.2 100.5
 
Analysis of earnings
Owned hotels
- Europe(8.0)(7.6)
- North America6.17.2
- Rest of world13.013.7
Hotel management & part-ownership interests(2.0)(0.7)
Restaurants0.20.3
Trains & cruises1.1(0.3)
Central overheads(9.0)(7.8)
Share-based compensation(1.5) (2.0)
EBITDA before impairment(0.1)2.8
Impairment(35.7) -
EBITDA(35.8)2.8
Depreciation & amortization(11.5)(10.5)
Interest(7.0)(7.2)
Foreign exchange gain2.1 0.9
Loss before tax(52.2)(14.0)
Tax6.1 (0.2)
Net loss from continuing operations(46.1)(14.2)
Discontinued operations(0.9) 0.4
Net loss(47.0) (13.8)
Net earnings attributable to non-controlling interests(0.2)(0.3)
Net loss attributable to Orient-Express Hotels Ltd.(47.2) (14.1)
 
Net loss per common share attributable to Orient-Express Hotels Ltd.(0.46)(0.14)
Number of shares - millions 103.01 102.72

 

(1) Comprises losses from unconsolidated companies of $0.9 million (2012 - $46,000) and revenue of $104.1 million (2012 - $100.5 million).

ORIENT-EXPRESS HOTELS LTD.
SUMMARY OF OPERATING INFORMATION FOR OWNED HOTELS
   
 Three months ended
March 31,
  2013 2012
Average Daily Rate (in US dollars) 
Europe424423
North America472440
Rest of world406402
Worldwide430418
 
Room Nights Available
Europe48,03949,379
North America63,65063,791
Rest of world

94,742

96,694

Worldwide206,431209,864
 
Rooms Nights Sold
Europe16,44615,654
North America40,96140,633
Rest of world

65,186

65,348

Worldwide122,593121,635
 
Occupancy
Europe34%32%
North America64%64%
Rest of world69%68%
Worldwide59%58%
 
RevPAR (in US dollars)
Europe145134
North America303280
Rest of world279272
Worldwide256242
 
Same Store RevPAR (in US dollars)
Europe145134
North America305280
Rest of world279272
Worldwide256242
 
Same Store RevPAR (% change)US dollarLocal currency
Europe8%9%
North America9%9%
Rest of world3%5%
Worldwide 6% 7%
 
ORIENT-EXPRESS HOTELS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
 March 31, December 31,
$millions 2013 2012
 
Assets
Cash79.393.4
Restricted cash8.321.1
Accounts receivable40.236.5
Due from unconsolidated companies15.415.2
Prepaid expenses and other35.121.2
Inventories43.544.6
Other assets held for sale2.922.1
Real estate assets2.0 1.9
Total current assets226.7256.0
 
Property, plant & equipment, net of accumulated depreciation1,126.51,171.6
Property, plant & equipment, net of accumulated depreciation of consolidated variable interest entities184.1183.8
Investments in unconsolidated companies55.758.9
Goodwill159.1161.3
Other intangible assets18.418.6
Other assets53.8 41.8
 
Total assets1,824.3 1,892.0
 
Liabilities and Equity
 
Working capital loans0.4

-

Accounts payable22.625.2
Accrued liabilities80.077.5
Deferred revenue44.530.5
Other liabilities held for sale1.42.2
Current portion of long-term debt and capital leases84.190.1
Current portion of long-term debt of consolidated variable interest entities1.8 1.8
 
Total current liabilities234.8227.3
 
Long-term debt and obligations under capital leases424.4431.4
Long-term debt of consolidated variable interest entities95.796.2
Deferred income taxes103.1104.1
Deferred income taxes of consolidated variable interest entities60.160.3
Other liabilities28.7 34.4
 
Total liabilities946.8953.7
 
Shareholders' equity874.9936.0
Non-controlling interests2.6 2.3
Total equity877.5938.3
   
Total liabilities and equity 1,824.3 1,892.0
 
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ORIENT-EXPRESS HOTELS LTD.
RECONCILIATIONS AND ADJUSTMENTS
(Unaudited)
   
 Three months ended
$millions - except per share amounts March 31,
2013 2012
 
EBITDA(35.8)2.8
 
Adjusted items:
Pre-opening expenses (1)2.1-
Management restructuring (2)1.6-
Write-off of fixed assets (3)0.70.4
Acquisition proposal costs (4)0.2-
Impairment (5)35.7 -
 
Adjusted EBITDA 4.5 3.2
 
Reported net loss attributable to Orient-Express Hotels Ltd.(47.2)(14.1)