Orient-Express Hotels Ltd. Reports Second Quarter 2013 Results
Jul 30th 2013 6:56PM
Updated Jul 30th 2013 6:58PM
Orient-Express Hotels Ltd. Reports Second Quarter 2013 Results
- Second quarter same store revenue per available room ("RevPAR") up 9% in both US dollars and local currency compared to prior-year quarter
- Second quarter total revenue up 6% to $174.3 million from $163.8 million in prior-year quarter
- Second quarter adjusted EBITDA up 4% to $41.4 million from $39.9 million in prior-year quarter
- Newly elected independent director, Roland Hernandez, appointed chairman, underscoring the Company's ongoing process of renewal of its board of directors
HAMILTON, Bermuda--(BUSINESS WIRE)-- Orient-Express Hotels Ltd. (NYSE: OEH, www.orient-express.com) (the "Company"), owners, part-owners or managers of 45 luxury hotel, restaurant, tourist train and river cruise properties operating in 22 countries, today announced its results for the second quarter ended June 30, 2013.
Total revenue was $174.3 million in the second quarter of 2013, up $10.5 million or 6% from $163.8 million in the second quarter of 2012. Revenue from owned hotels for the second quarter was $143.0 million, up $12.3 million or 9% from $130.7 million in the second quarter of 2012 due largely to 9% growth in same store owned hotels RevPAR. Trains & cruises revenue in the second quarter was $25.0 million, down 7% from $27.0 million in the second quarter of 2012.
Adjusted EBITDA was $41.4 million for the second quarter, up $1.5 million or 4% from $39.9 million in the prior-year period. The largest increases, which were at Charleston Place, South Carolina (up $1.7 million), Hotel Cipriani, Venice, Italy (up $1.2 million), and Hotel Splendido, Portofino, Italy (up $0.8 million), were offset by decreases at Venice Simplon-Orient-Express (down $0.9 million), Grand Hotel Europe, St. Petersburg, Russia (down $0.6 million), and the UK day trains (down $0.5 million).
Adjusted net earnings from continuing operations for the second quarter was $17.9 million ($0.17 per common share) compared with $14.7 million ($0.14 per common share) in the second quarter of 2012.
John Scott, president and chief executive officer, commented: "Our second quarter 2013 results were positive, with revenue and adjusted EBITDA growth of 6% and 4%, respectively. The strength of our European hotels was particularly encouraging and was driven by our Italian portfolio, which showed an impressive 15% year-over-year EBITDA growth in the second quarter. Representing 37% of full year 2012 revenue, our European hotels are an important contributor to our overall success, and the strength of these hotels in the second quarter, coupled with positive forward booking trends, is a promising indicator for our full year 2013 performance and signals that demand for European hotels is recovering well. I'm equally encouraged by the success of Charleston Place, which had 28% EBITDA growth in the second quarter, and is making significant strides towards a record EBITDA year.
"During the quarter," Mr. Scott continued, "we took additional steps in the board's continuing evolution with the election of a new independent director, Roland Hernandez, to the Company's board of directors and his subsequent appointment by the board as its chairman. Roland brings a wealth of leadership and public company board experience. I am excited to work with him towards our collective goal of the Company's long-term success."
The Company continues to see strong media coverage for its two newest hotels, El Encanto in Santa Barbara, California, which opened in March 2013, and Palacio Nazarenas in Cuzco, Peru, which opened in June 2012, receiving positive recognition and awareness from guests and international media during the quarter. Both hotels appeared in Travel + Leisure magazine's 2013 It List of the coolest hotel openings, and Palacio Nazarenas was also included in Condé Nast Traveller magazine's 2013 Hot List.
During the second quarter, the Company completed the restoration of the neoclassical façade of Grand Hotel Europe, which was designed in the 1830s by Italian architect Carlo Rossi. In the coming months, the Company will commence its previously announced phased, three-year renovation plan to be funded with $26.0 million of proceeds from a new $50.0 million loan facility. Also during the quarter, the Company prepared for a phased, three-year rooms refurbishment at Charleston Place, now expected to commence at the beginning of August. The Company will utilize $9.2 million of funds borrowed in December 2012 to finance the first phase of this project. Both the Grand Hotel Europe and Charleston Place renovations have been scheduled to have limited disruption on hotel operations.
On July 22nd, the Company launched Orcaella, a 50-passenger river cruiser in Myanmar, with an eleven-night journey departing from Mandalay and navigating up the Chindwin River. Orcaella is the Company's second river cruise operation in Myanmar and, along with its existing hotel in Yangon, gives the Company an additional opportunity to capitalize on the recent surge in tourism in the country. The new ship has already received extraordinary global media attention and bookings are well ahead of the Company's plan.
Following its 2013 annual general meeting of shareholders on June 28th, the Company confirmed the election of eight directors to its board, including a new independent director, Roland Hernandez, who was subsequently appointed chairman of the board. Mr. Hernandez is a successful media and entertainment executive with broad public company board experience, including as the lead director of both MGM Resorts International and Vail Resorts, Inc. He founded and has been the chief executive officer of Hernandez Media Ventures since 2001 and previously served as chief executive officer of Telemundo Group, Inc. from 1995 to 2000.
Also at the conclusion of the 2013 annual general meeting, the Company's previous chairman, J. Robert Lovejoy, and fellow board member, Philip R. Mengel, retired from the board.
In the second quarter of 2013, revenue from owned hotels was $75.2 million, up $4.3 million or 6% from $70.9 million in the second quarter of 2012. The Italian hotel portfolio recorded particularly strong results, with revenue growth of $4.0 million or 10% over the second quarter of 2012. Hotel Cipriani's results in the quarter benefited from Venice's Biennale arts festival, which takes place every other year.
Same store RevPAR in Europe was up 10% compared to the prior-year quarter in both US dollars and local currency due primarily to an 8% increase in average daily rate ("ADR") in both US dollars and local currency.
EBITDA for the second quarter of $28.1 million was $1.3 million or 5% greater than the $26.8 million recorded for the second quarter of 2012 primarily as a result of $1.2 million and $0.8 million EBITDA increases at Hotel Cipriani and Hotel Splendido, respectively, partially offset by a $0.6 million EBITDA decrease at Grand Hotel Europe due primarily to an increase in payroll costs.
North America :
Revenue from owned hotels for the second quarter of 2013 was $36.1 million, up $6.1 million or 20% from $30.0 million in the second quarter of 2012. Revenue growth in the second quarter was driven by El Encanto, which recorded revenue of $4.1 million in its first full quarter of operations, and Charleston Place, which generated revenue growth of $2.4 million or 14% to $20.0 million, the hotel's highest recorded quarterly revenue since the Company acquired it in 1995.
Same store RevPAR in the region increased by 7% in both US dollars and local currency due to a 4% increase in same store ADR in US dollars and a two percentage point increase in same store occupancy.
EBITDA for the region was $7.6 million in the quarter, up $0.7 million or 10% from $6.9 million in the second quarter of 2012 primarily as a result of the record performance of Charleston Place, partially offset by an EBITDA loss at El Encanto arising from the hotel's initial ramp-up in operations following its March opening.
Rest of World :
Revenue from owned hotels for the second quarter of 2013 was $6.5 million, an increase of $0.2 million or 3% compared to $6.3 million in the second quarter of 2012. Revenue growth in the region continued to be led by The Governor's Residence, Yangon, Myanmar, which was up $0.2 million, as increased tourist demand for the country continued in the quarter.
Same store RevPAR for the region increased by 2% in US dollars and 4% in local currency due to a 6% increase in ADR in US dollars (8% in local currency), offset by a two percentage point decrease in occupancy.
EBITDA decreased by $0.3 million to $1.0 million in the second quarter of 2013 due to an EBITDA loss at Jimbaran Puri Bali, Indonesia, primarily due to a one-time adjustment for certain post-retirement obligations, as well as an increase in Asian head office costs.
Second quarter 2013 revenue from owned hotels was $4.6 million, up $1.0 million or 28% from $3.6 million in the second quarter of 2012. Revenue at the Company's three safari camps increased by $1.3 million due largely to higher RevPAR and revenue from third-party air services provided to guests previously reported net of related costs. The growth at the safari camps was partially offset by a $0.3 million decrease in revenue at Mount Nelson Hotel, Cape Town, South Africa, as a result of the year-over-year weakening of the South African rand versus the US dollar. Excluding the effect of currency movements, revenue in the region was $1.5 million ahead of last year.
Same store RevPAR for the region increased by 13% in US dollars and 28% in local currency primarily due to a 9% increase in ADR in US dollars (24% in local currency).
EBITDA for the second quarter was a loss of $0.1 million, representing a $0.4 million improvement from the $0.5 million loss recorded in the second quarter of 2012 due to cost savings at Mount Nelson Hotel following first quarter management restructuring actions and a rebate for past utilities charges.
Second quarter 2013 revenue from owned hotels was $20.7 million, up $0.7 million or 4% from $20.0 million in the second quarter of 2012. This increase was primarily the result of a $0.5 million increase in revenue from Copacabana Palace, Rio de Janeiro, Brazil, which, despite a challenging market in Rio, saw 10% ADR growth, as the hotel is starting to realize the benefits of the main building renovation that was completed in December 2012.
Same store RevPAR in the region increased by 6% in US dollars as a result of an 11% increase in ADR, offset by a two percentage point decrease in occupancy.
EBITDA for the quarter of $4.3 million was flat to the second quarter of last year, as revenue increases were primarily offset by higher fixed charges at Copacabana Palace.
Hotel management & part-ownership interests:
EBITDA for the second quarter of 2013 of $1.8 million was $0.2 million higher than EBITDA for the second quarter of 2012 due primarily to $0.5 million of cost savings related to the closure of the Singapore development office, partially offset by a $0.3 million decrease in EBITDA from the Peru hotels as a result of increased rooms supply in Cuzco and a US government travel warning that was issued and subsequently cancelled in the first quarter of 2013.
Revenue from '21' Club in the second quarter of 2013 of $4.4 million was $0.5 million or 13% greater than in the second quarter of 2012 primarily as a result of increased banqueting revenue following the August 2012 renovation of the first floor banqueting space. EBITDA for the second quarter of 2013 was $0.6 million compared to $0.5 million in the second quarter of 2012.
Trains & cruises :
Revenue for the second quarter of 2013 was $25.0 million, down $2.0 million or 7% from $27.0 million in the second quarter of 2012. This decline was primarily the result of a $0.9 million decrease in revenue from Venice Simplon-Orient-Express and a combined $1.0 million decrease in revenue from the Company's UK day trains, which continued to feel the effects of a sluggish UK economy.
EBITDA of $5.7 million was $2.3 million lower than the $8.0 million recognized in the second quarter of 2012 primarily due to the revenue decreases as well as $0.3 million of pre-opening expenses associated with Orcaella, the Company's river cruise operation that launched in July in Myanmar, and decreases from PeruRail and Eastern & Oriental Express.
Central costs :
In the second quarter of 2013, central overheads were $6.9 million compared with $8.0 million in the prior-year period, a savings of $1.1 million primarily due to decreased legal and professional fees and other central cost savings.
In addition, the Company incurred $2.3 million of non-cash share-based compensation expense compared to $1.6 million in the second quarter of 2012.
Depreciation and amortization :
The depreciation and amortization charge for the second quarter of 2013 was $12.3 million, up from $10.5 million in the second quarter of 2012 as a result of the completion of several recent capital projects and the opening of El Encanto.
The interest charge for the second quarter of 2013 was $8.0 million, up $1.6 million from $6.4 million in the prior year quarter. The company did not capitalize any interest related to El Encanto in the second quarter of 2013 compared to $1.0 million in the prior-year quarter.
The tax charge for the second quarter of 2013 was $2.9 million compared to a charge of $7.5 million in the same quarter in the prior year. The tax charge in the second quarter of 2013 included a deferred tax credit of $3.4 million in respect of retranslating deferred tax liabilities recorded in local currencies, as these local currencies depreciated in the current period relative to the US dollar.
The Company invested a total of $17.7 million in its portfolio during the second quarter of 2013, including $7.6 million for the renovation of El Encanto, $2.1 million at Charleston Place primarily for deposits associated with the rooms renovation project, $1.6 million at Copacabana Palace primarily for completion costs related to the main building refurbishment, $1.2 million at Grand Hotel Europe primarily for façade works as well as design and other costs associated with upcoming projects, and the balance for routine capital expenditures.
At June 30, 2013, the Company had total debt (including the current portion and debt of consolidated variable interest entities) of $628.6 million, working capital loans of $nil and cash balances of $132.0 million (including $18.4 million of total restricted cash, of which $12.6 million is in other assets), resulting in total net debt of $496.6 million compared to total net debt at the end of 2012 of $505.0 million. At June 30, 2013, the ratio of net debt to trailing 12-month adjusted EBITDA was 4.6 times, down from 4.8 times at December 31, 2012.
Undrawn amounts available to the Company at June 30, 2013 under short-term lines of credit were $4.3 million, bringing total cash availability (excluding restricted cash) at June 30, 2013 to $117.9 million.
At June 30, 2013, approximately 42% of the Company's debt was at fixed interest rates and 58% was at floating interest rates. The weighted average maturity of the debt was approximately 2.2 years and the weighted average interest rate was 4.1%. The Company had $95.2 million of debt repayments due within 12 months. These obligations are expected to be met through a combination of operating cash flow, proceeds from recent divestment of non-core assets, refinancing of the facilities, and utilization of available cash.
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|ORIENT-EXPRESS HOTELS LTD.|
|SUMMARY OF OPERATING RESULTS|
|$ millions - except per share amounts||Three months ended||Six months ended|
|June 30,||June 30,|
|Revenue and earnings from unconsolidated companies|
|- North America||36.1||30.0||66.8||59.1|
|- Rest of world||31.7||29.8||74.2||72.4|
|Total owned hotels||143.0||130.7||232.2||218.1|
|Hotel management & part-ownership interests||1.9||2.2||0.9||2.0|
|Trains & cruises||25.0||27.0||36.2||36.4|
|Analysis of earnings|
|- North America||7.6||6.9||13.7||14.1|
|- Rest of world||5.2||5.2||18.2||18.9|
|Hotel management & part-ownership interests||1.8||1.6||(0.2||)||0.9|
|Trains & cruises||5.7||8.0||6.7||7.7|
|Central marketing costs||(0.2||)||(0.3||)||(0.6||)||(0.6||)|
|EBITDA before impairment||39.6||39.1||39.6||41.9|
|Depreciation & amortization||(12.3||)||(10.5||)||(23.8||)||(21.0||)|
|Earnings/ (losses) before tax||20.2||20.7||(32.0||)||6.7|
|Net earnings / (losses) from continuing operations||17.3||13.2||(28.9||)||(1.0||)|
|Net earnings / (losses)||17.4||11.7||(29.7||)||(2.1||)|
|Net losses / (earnings) attributable to non-controlling interests||0.1||0.1||(0.1||)||(0.2||)|
|Net earnings / (losses) attributable to Orient-Express Hotels Ltd.||17.5||11.8||(29.8||)||(2.3||)|
|Net earnings/ (losses) per common share attributable to Orient-Express Hotels Ltd.||0.17||0.11||(0.29||)||(0.02||)|
|Number of shares - millions||103.06||102.89||103.04||102.80|
(1) During the fourth quarter of 2012, an additional gain of $1.6 million related to the sale of Keswick Hall was identified that should have been recorded in the first quarter of 2012. Discontinued operations for the six months ended June 30, 2012 have been restated to include this gain.
(2) Comprises earnings from unconsolidated companies of $2.4 million (2012 - $3.3 million) and revenue of $171.9 million (2012 - $160.5 million) for three months ended June 30, 2013, and earnings from unconsolidated companies of $1.6 million (2012 - $3.3 million) and revenue of $275.9 million (2012 - $261.0 million) for six months ended June 30, 2013.