Orient-Express Hotels Ltd. Reports Fourth Quarter 2012 Results

Orient-Express Hotels Ltd. Reports Fourth Quarter 2012 Results

• Fourth quarter same store revenue per available room ("RevPAR") equal to prior-year quarter in US dollars; up 7% excluding Copacabana Palace, Rio de Janeiro, which was partially closed for planned renovation

• Fourth quarter total revenue down 1% to $128.0 million from $129.1 million in prior-year quarter; up 3% excluding Copacabana Palace

• Fourth quarter adjusted EBITDA down 3% to $19.6 million from $20.3 million in prior-year quarter; up 12% excluding Copacabana Palace

• Delivered significant progress on portfolio optimization strategy, including re-opening of extensively refurbished main building of Copacabana Palace in December; completing sales of The Westcliff, Johannesburg and, in January 2013, Porto Cupecoy, Sint Maarten, for combined proceeds of $45.0 million; and announcing renovation plans for Grand Hotel Europe, St. Petersburg and Charleston Place, South Carolina

• Positive early indications for 2013; bookings for total owned hotels up 11% from the same time last year

• Appointed John M. Scott III as President and Chief Executive Officer in November 2012 and named Ralph Aruzza as Chief Sales & Marketing Officer in February 2013

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 fourth quarter ended December 31, 2012.

Total revenue was $128.0 million in the fourth quarter of 2012, down $1.1 million or 1% from $129.1 million in the fourth quarter of 2011. Excluding Copacabana Palace, which was partially closed for renovation for the majority of the quarter, total revenue was up 3% compared to the fourth quarter of 2011.

Revenue from owned hotels for the fourth quarter was $99.2 million, down $1.6 million or 2% from $100.8 million in the fourth quarter of 2011. On a same store basis, owned hotels RevPAR was flat in US dollars and down 1% in local currency. Excluding Copacabana Palace, same store RevPAR for the fourth quarter increased by 7% in US dollars and 6% in local currency.

Trains & cruises revenue in the fourth quarter was $21.0 million, up 2% compared to $20.6 million in the fourth quarter of 2011.

Adjusted EBITDA was $19.6 million for the fourth quarter, down $0.7 million from $20.3 million in the prior-year period. The principal decrease was at Copacabana Palace, which was down $2.2 million as a result of the partial closure. Excluding the year-over-year decrease at Copacabana Palace, adjusted EBITDA would have been $1.5 million ahead of the prior-year quarter. This growth was led by Road To Mandalay and The Governor's Residence, both in Myanmar, which were up $1.2 million and $0.4 million, respectively.

Adjusted net loss from continuing operations for the fourth quarter was $9.4 million ($0.09 per common share) compared with a loss of $7.2 million ($0.07 per common share) in the fourth quarter of 2011.

"Despite difficult macro-economic conditions, we had a solid finish to the year," said John Scott, President and Chief Executive Officer. "We delivered adjusted EBITDA of $104.3 million and full-year RevPAR growth of 3% over 2011 in local currency terms, including RevPAR growth across all regions except South America, which was affected by the partial closure of Copacabana Palace. The growth in RevPAR reflects the inherent value of our unique and iconic assets and demonstrates the resilience in demand for our unrivalled luxury travel experiences. Importantly, excluding Copacabana Palace, full-year local currency RevPAR was up 6% over 2011. The renovation of Copacabana Palace, one of our premier properties, was completed in time for Rio de Janeiro's peak Christmas and New Year period, and positions us well to capitalize on Rio's growing international profile.

"Overall, we continued to make significant progress on our strategy to increase the earnings power of our properties and optimize our unique portfolio of luxury travel assets. We completed the disposals of The Westcliff in the fourth quarter and Porto Cupecoy in January 2013 for combined proceeds of $45.0 million. Consistent with our focus on redeploying capital into core, high-value properties, the proceeds from these divestitures will be used to provide capital for our active program of targeted reinvestment in our current portfolio and to further strengthen our balance sheet. In 2012, we added or re-opened 301 refurbished rooms, including those in the Copacabana Palace renovation. In 2013, we will open El Encanto in Santa Barbara, which will further enhance the revenue-generating power of our portfolio, and commence exciting renovation projects at several key properties, including Grand Hotel Europe and Charleston Place. These renovations have been phased so that they will have minimal disruption on hotel operations.

"Our portfolio optimization program and on-going balance sheet strengthening initiatives - combined with solid operating results - provide a strong platform for long-term growth. In the near-term, we remain cautiously optimistic about 2013. While the macro-economic challenges remain, we have seen some positive early indications for the year, including a 11% increase in full-year bookings over the same time last year."

Key Strategic Achievements

The Company successfully completed the previously announced sales of The Westcliff in the quarter and Porto Cupecoy in January 2013. The purchaser of The Westcliff will retain the Company as the manager of the hotel for a period of up to 12 months while the purchaser develops its long-term refurbishment plans. The aggregate sales proceeds from both of these transactions is $45.0 million, with net proceeds of approximately $41.7 million available to the Company for reinvestment in core properties and to strengthen the Company's balance sheet. In addition, the Company has retained ownership of four condominium units that were not part of the Porto Cupecoy disposal but are under contract of sale. These pending unit sales are expected to contribute $3.5 million of additional proceeds.

In December, the Company completed the final phase of a $20.0 million comprehensive refurbishment of the main building of Copacabana Palace, a landmark property on Copacabana beach in Rio de Janeiro. The refurbishment program, which commenced in 2011, included all 145 rooms and suites in the main building and significant enhancements to the lobby and public areas.

During the quarter, the Company successfully secured extensions to its leases of Eagle Island Camp and Savute Elephant Camp, both in Botswana. Both leases have additional terms of 15 years along with conditional renewals for a further 15 years, effectively representing 30-year extensions for both sites.

These key portfolio enhancements build on projects that the Company completed earlier in 2012, including the addition of five new suites at Hotel Splendido, Portofino; completion of the final phase of renovation at Grand Hotel Timeo and Villa Sant'Andrea in Sicily; refurbishment of the public areas at La Samanna, St. Martin; a 30-key rooms refurbishment at Mount Nelson Hotel, Cape Town; and the renovation of banqueting space at '21' Club in New York. In addition the Company, through a 50% joint venture, opened the 55-suite Palacio Nazarenas in Cuzco, Peru in June. With these projects, including the renovations of Copacabana Palace and the Company's safari camps, the Company either added or re-opened 301 refurbished rooms during the year, which positions the Company well for incremental revenue growth in 2013 and later years.

2013 Portfolio Optimization Plans

The Company continues to make progress on its 92-key El Encanto hotel, which is scheduled to open in March 2013. This hotel will provide the Company with its first property on the west coast of the United States as well as increase brand awareness in this important market.

During the fourth quarter, the Company announced a three-year refurbishment program for Grand Hotel Europe that will commence in 2013 and 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. The refurbishment is expected to have minimal impact on operations. The Company signed a new $50.0 million loan facility agreement to fund the refurbishment. This facility is expected to close in the first quarter of 2013, providing $26.0 million for refurbishment of the property, $5.2 million for repayment of debt and costs, and the remaining $18.8 million for general corporate purposes.

In addition, during 2013, the Company will initiate a phased three-year rooms refurbishment at Charleston Place, which is one of the Company's largest cash generators. In the first phase, which will be carried out over four months during the hotel's low season, the Company will renovate 145 rooms. The refurbishment is not expected to disrupt operations, and the first phase will be partially financed by $9.2 million of additional funds borrowed in December pursuant to an increase in principal of the hotel's existing loan.

Executive Management Team

In November, the Company announced the appointment of John M. Scott III as President and Chief Executive Officer and as a member of the Board of Directors. Mr. Scott is an experienced operator of luxury hotels who most recently served as President and Chief Executive Officer of Rosewood Hotels & Resorts, where he oversaw a portfolio of 17 ultra-luxury hotels located in seven countries with combined revenues in excess of $500 million.

The Company recently announced the appointment of Ralph Aruzza as Chief Sales & Marketing Officer, responsible for strategic marketing, global sales and corporate communications. Mr. Aruzza, who has 35 years of experience in the luxury hotel sector, was previously Vice President of Sales & Marketing for Rosewood Hotels & Resorts, where he oversaw all strategic brand initiatives and global sales networks while directing channel management and customer relationship management.

Operating Performance

Europe:

In the fourth quarter, revenue from owned hotels was $32.1 million, down $0.7 million or 2% from $32.8 million in the fourth quarter of 2011. The major decrease was at Hotel Cipriani, where there was $1.2 million of additional non-operating income recorded in the fourth quarter of 2011.

Same store RevPAR in Europe was up 7% compared to the prior-year quarter in US dollars (up 4% in local currency) due to a 13% increase in average daily rate ("ADR") offset by a 3 percentage point decrease in occupancy.

EBITDA for the quarter was $2.6 million, up $1.0 million from $1.6 million in the fourth quarter of 2011. The growth was led by a $0.5 million increase at Hotel Cipriani due to a particularly busy close to the season in November and payroll-related cost savings, offset by decreases at Reid's Palace due to both a weaker UK outbound market and reduced airlift to Madeira, and La Residencia, Mallorca also impacted by the weaker UK outbound market.

North America :

Revenue from owned hotels for the quarter of $26.7 million was unchanged from the fourth quarter of 2011. Same store RevPAR in the region increased by 4% in US dollars due to a 6% increase in ADR offset by a 2 percentage point decrease in occupancy.

EBITDA in North America was $3.6 million, up $2.3 million from $1.3 million in the fourth quarter of 2011. The results for the fourth quarter of 2012 included $2.2 million of charges for pre-opening expenses and the write-off of fixed assets. In 2011, there were charges of $4.4 million for refurbishment-related write-offs and the settlement of a VAT liability. Underlying EBITDA after adjusting for these items is largely unchanged year-over-year.

Rest of World:

Asia-Pacific:

Revenue for the fourth quarter of 2012 was $9.0 million, an increase of $1.2 million or 15% compared to $7.8 million in the fourth quarter of 2011. Revenue growth in the region continued to be led by The Governor's Residence, Yangon (up $0.8 million), as Myanmar remains an increasingly popular destination with growing demand for tourist accommodation. Same store RevPAR for the region increased by 18% in US dollars due to a 13% increase in ADR and a 3 percentage point increase in occupancy.

EBITDA grew by 14% to $3.3 million compared to $2.9 million in the fourth quarter of 2011, which included a $0.4 million increase at The Governor's Residence and $0.3 million and $0.1 million increases at La Residence d'Angkor, Siem Reap, Cambodia and Napasai, Koh Samui, Thailand, respectively, reflecting strong demand throughout the region.

Southern Africa:

Fourth quarter revenue from owned hotels was $7.8 million, up $1.5 million or 24% from $6.3 million in the fourth quarter of 2011. Same store RevPAR was up 13% in local currency and up 4% in US dollars. EBITDA was $2.0 million versus $1.7 million in the fourth quarter of 2011 as a result of local currency ADR growth at the safari camps in Botswana and the benefits of labor and other cost-saving initiatives in South Africa.

South America:

Fourth quarter revenue from owned hotels was $23.6 million, down $3.6 million or 13% from $27.2 million in the fourth quarter of 2011. This decline resulted from a $4.6 million decrease at Copacabana Palace as a result of the partial closure of the main building for refurbishment, offset by growth at other properties. As a result, same store RevPAR in the region decreased by 20% but was up 7% excluding Copacabana Palace.

EBITDA for the quarter was $6.2 million, a decrease of $1.5 million compared to $7.7 million in the fourth quarter of last year. This decrease was attributable to a reduction of $2.2 million at Copacabana Palace, which was partially closed for renovation, offset by increases of $0.4 million at both Hotel das Cataratas, Iguassu, where strong demand from the domestic Brazilian market continued, and Miraflores Park Hotel, Lima, which experienced growth in occupancy and ADR during the quarter.

Hotel management & part-ownership interests:

EBITDA for the fourth quarter of 2012 was $1.1 million compared to $1.6 million in the fourth quarter of 2011. The quarterly result included a $0.2 million decline from Hotel Ritz, Madrid, which was affected by difficult economic conditions in Spain.

Restaurants:

Revenue from '21' Club in the fourth quarter of 2012 was $6.3 million compared to $6.4 million in the same quarter of 2011. EBITDA of $2.0 million was unchanged from the same quarter of 2011.

Trains & cruises:

Revenue for the fourth quarter of 2012 was $21.0 million, up $0.4 million or 2% from $20.6 million in the fourth quarter of 2011. This growth includes $1.7 million from Road To Mandalay, which performed very strongly against the backdrop of Myanmar's booming tourist market, offset by decreases from Venice Simplon-Orient-Express and the UK day-trains due to decreases in charter business.

EBITDA was $6.5 million compared to $6.7 million in the fourth quarter of 2011.

Central costs:

In the fourth quarter of 2012, central overheads were $8.5 million compared with $8.4 million in the prior-year period. This increase includes $1.2 million of professional advisory fees related to the previously announced unsolicited proposal from The Indian Hotels Company Limited to acquire the Company that was received on October 18, 2012 and $0.4 million related to CEO recruitment costs, offset by central compensation costs that were $1.3 million lower than in the fourth quarter of 2011.

In addition, the Company incurred $2.4 million of non-cash share-based compensation expense compared to $2.0 million in the fourth quarter of 2011. The Company also incurred $0.2 million of central marketing costs, as it continued to invest in new marketing initiatives and expand its geographic presence.

Depreciation and amortization:

The depreciation and amortization charge for the fourth quarter of 2012 was $12.4 million, up from $11.3 million in the fourth quarter of 2011.

Interest:

The interest charge for the fourth quarter of 2012 was $7.2 million, down $0.2 million from $7.4 million in the prior year quarter.

Tax :

The tax charge from continuing operations for the fourth quarter of 2012 was $12.7 million, compared to a charge of $15.1 million for the same quarter in the prior year. Fourth quarter 2012 tax expense included a $3.8 million deferred tax charge relating to one-off discrete items in the period. The fourth quarter 2011 tax charge included $7.4 million charge in respect of the gain on disposal of excess development rights of '21' Club.

Investment:

The Company invested a total of $29.1 million in its portfolio during the fourth quarter of 2012, including $11.5 million for the renovation of El Encanto, $9.0 million primarily for completion of the refurbishment at Copacabana Palace, $1.7 million at Mount Nelson Hotel primarily for the refurbishment of 30 rooms, $1.0 million primarily for the completion of the refurbishment of public areas at La Samanna, $1.0 million at Grand Hotel Europe primarily for work on the hotel's façade, and the balance for routine capital expenditures.

Balance Sheet

At December 31, 2012, the Company had long-term debt (including the current portion and debt of consolidated variable interest entities) of $619.5 million and cash balances of $114.5 million (including $21.1 million of restricted cash), resulting in total net debt of $505.0 million compared with total net debt of $531.1 million at the end of 2011. At December 31, 2012, the ratio of net debt to trailing 12-month adjusted EBITDA was 4.8 times.

Undrawn amounts available to the Company at December 31, 2012 under short-term lines of credit were $4.5 million, bringing total cash availability (excluding restricted cash) at December 31, 2012 to $97.9 million.

At December 31, 2012, approximately 49% of the Company's debt was at fixed interest rates and 51% was at floating interest rates. The weighted average maturity of the debt was approximately 2.6 years and the weighted average interest rate was 4.0%. The Company had $91.9 million of debt repayments due within 12 months. These obligations are expected to be met through a combination of operating cash flow, proceeds from divestments of non-core assets, refinancing of the facilities, and utilization of available cash.