TIDMMDO TIDMJAR
RNS Number : 6708R
Mandarin Oriental International Ltd
02 March 2023
2nd March 2023
The following announcement was issued today to a Regulatory
Information Service approved by the Financial Conduct Authority in
the United Kingdom .
MANDARIN ORIENTAL INTERNATIONAL LIMITED
2022 PRELIMINARY ANNOUNCEMENT OF RESULTS
HIGHLIGHTS
l Combined revenue exceeds 2019 levels
l Group returns to underlying profit
l Strong performance from management business, particularly
resort hotels
l Good recovery by owned hotels, although results impacted by
Hong Kong and Tokyo
l Two new hotels and two new residences opened and seven new
projects announced
"The Group continued to recover in 2022, as travel restrictions
lifted in Europe, the Middle East, and America and ended the year
strongly, with a return to underlying profitability. The Group's
management business performed well, especially in resort
destinations. Our owned hotels business saw a good recovery, but it
was held back by continuing challenges in East Asia, which impacted
the performance of Hong Kong and Tokyo in particular. The Group
expects to see a strong improvement in its results in 2023,
particularly as restrictions in East Asia continue to ease. With a
robust pipeline of new developments and a globally recognised
brand, we also remain confident in the long-term success of the
Group."
Ben Keswick
Chairman
RESULTS
Year ended 31st December
2022 2021 Change
US$m US$m %
---------------------------------------------------- -------- ------- ------
Combined total revenue of hotels under
management(1) 1,568.1 1,053.5 +49
Revenue 454.1 316.9 +43
Underlying EBITDA (Earnings before interest,
tax, depreciation and amortisation)(2) 111.4 40.7 +174
Underlying profit/(loss) attributable
to shareholders(3) 7.6 (68.1) n/a
Revaluation loss on investment property
under development (104.1) (73.9) -41
Gain on asset disposals 47.0 - n/a
Loss attributable to shareholders (49.5) (141.4) +65
USc USc %
-------- -------
Underlying earnings/(loss) per share(3) 0.60 (5.39) n/a
Loss per share (3.92) (11.19) +65
US$ US$ %
-------- -------
Net asset value per share 2.61 2.62 -
Adjusted net asset value per share(4) 3.87 3.93 - 2
Net debt/shareholders' funds 11% 16%
Net debt/adjusted shareholders' funds(4) 8% 10%
---------------------------------------------------- -------- ------- ------
(1) Combined total revenue includes turnover of the Group's
subsidiary hotels in addition to 100% of revenue from associate,
joint venture and managed hotels.
(2) EBITDA of subsidiaries plus the Group's share of EBITDA
of associates and joint ventures.
(3) The Group uses 'underlying profit/loss' in its internal
financial reporting to distinguish between ongoing business
performance and non-trading items, as more fully described in
note 33 to the financial statements. Management considers this
to be a key measure which provides additional information to
enhance understanding of the Group's underlying business performance.
(4) The Group's investment properties are carried at fair value
on the basis of valuations carried out by independent valuers
at 31st December 2022. The other freehold and leasehold interests
are carried at amortised cost in the consolidated balance sheet.
Both the adjusted net asset value per share and net debt/adjusted
shareholders' funds at 31st December 2022 have included the
market value of the Group's freehold and leasehold interests.
MANDARIN ORIENTAL INTERNATIONAL LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2022
OVERVIEW
2022 has been a year of transition, after two years in which the
global hospitality industry was badly hit by the pandemic. Travel
restrictions in Europe, the Middle East and America fell away
during the first quarter, but East Asia continued to be hampered by
constraints on movement well into the fourth quarter. The
performance of the Group recovered strongly in the year, with
combined total revenue of hotels under management of US$1.6 billion
in 2022, a significant increase from 2021 and 18% above 2019.
2022 Financial Performance
Underlying earnings before interest, tax, depreciation, and
amortisation ('EBITDA') were US$111 million, compared to US$41
million in 2021. The Group achieved an underlying profit of US$8
million for the full year, its first profit since 2019. Although
profitability remained significantly below pre-pandemic levels,
this is a substantial improvement compared with 2021, when the
Group recorded an underlying loss of US$68 million.
Non-trading losses of US$57 million (US$73 million in 2021)
comprised a US$104 million (3%) non-cash decrease in the valuation
of the Causeway Bay site under development, offset by a US$47
million realised gain from the sale of Mandarin Oriental,
Washington D.C. in September 2022, leading to a loss attributable
to shareholders of US$49 million.
At 31st December 2022, the adjusted net asset value per share,
which reflects the independent valuation of both the Group's owned
hotel properties and of the Causeway Bay site, was US$3.87, a 2%
decrease compared with 2021. Net debt fell to US$376 million from
US$517 million at the end of 2021. Gearing as a percentage of
adjusted shareholders' funds was 8%, compared to 10% at the end of
2021.
The Group remains well funded, and its liquidity position
remained robust, with US$226 million of cash reserves and US$471
million in available, committed debt facilities.
No dividend will be paid in respect of 2022.
Year in review
The Group's performance benefitted from the resumption of normal
travel conditions as 2022 progressed. Most of the Group's owned or
partially owned properties reported better earnings in 2022.
Performance from owned hotels, however, continued to be adversely
affected by lower contributions from the Hong Kong and Tokyo
hotels, whose performance was heavily impacted by COVID
restrictions throughout most of the year. Results were notably
better in London, Paris, Singapore, and Bangkok, driven by
improvements in occupancy and high rates. Overall EBITDA from the
Group's owned hotel business was US$77 million, compared to US$24
million in 2021. After depreciation and interest charges, there was
an underlying loss from the Group's property interests of US$7
million in 2022, compared to a loss of US$71 million in the prior
year.
The Group's management business recorded a stronger performance,
with an EBITDA of US$34 million, compared to US$17 million in 2021.
Management fees increased in particular in resort destinations such
as Bodrum, Lake Como, and Dubai. The Group's management business
reported an underlying profit of US$17 million in 2022, compared to
US$5 million in 2021.
Development
In 2022, the Group announced seven new management contracts, in
Greece, Italy, Egypt, Kuwait, the Maldives, China and Vietnam. The
Group's robust development pipeline includes 26 projects expected
to be completed in the next five years.
The Group opened two new hotels in the year, in Shenzhen, China
and Lucerne, Switzerland, and two standalone residences in
Barcelona, Spain and Beverly Hills, USA. Five projects are
scheduled for opening in 2023: Mayfair in London, Costa Navarino in
Greece, Muscat in Oman, Zurich in Switzerland, and residences in
New York.
The Causeway Bay site in Hong Kong, which is being redeveloped
as a mixed-use office and retail complex, remains on track to
complete in 2025.
Sustainability
We continued to make progress against our various sustainability
goals and commitments in 2022, and have set long-term environmental
targets for each of our hotels. We have largely achieved our goal
to eliminate single-use plastics in our hotels and we remain
committed to improving this. Our ambitious goals for the future
include actively reducing food waste, expanding our responsible
procurement practices, and empowering our colleagues further in
carrying out volunteering activity.
People
On behalf of the Board, I would like to express my sincere
appreciation to all our colleagues for their dedication and
commitment throughout the year. Our colleagues are central to the
legendary guest experience for which the Group is renowned, and we
remain focussed on being an employer of choice.
Outlook
The Group expects to see a strong improvement in its results in
2023, particularly as restrictions in East Asia continue to ease.
With a robust pipeline of new developments and a globally
recognised brand, the Board also remains confident in the long-term
success of the Group.
Ben Keswick
Chairman
Group Chief Executive's Review
Mandarin Oriental is widely recognised today as one of the
world's leading luxury hotel groups, and the heritage of our brand
is a thread that runs through each of our properties. 2022 has been
an important year of transition for the Group, as we have moved
from a difficult pandemic environment to the return of more normal
travel conditions and hence recovered our ability to operate. We
remain focussed on building on and leveraging the strength of our
brand - oriental mastery of luxury and service excellence
underpinned by our people. We are committed to our vision - A World
of Fans - as well as our strategy to grow our development pipeline
and our management business. We aspire for the Fan to grow in
relevance and stature outside the boundaries of our properties,
paving the way for Mandarin Oriental to evolve from a luxury hotel
group to a luxury brand.
In 2022, it was pleasing to see the Group make a robust recovery
and deliver increasingly improved performance, as travel conditions
around the world gradually returned to normal. As we emerge from
the pandemic, we have positioned the Group for long-term growth,
maintained our service standards and continued to create moments of
delight for our guests.
Our hotels performed strongly in regions without travel
restrictions and were able to sustain their market-leading
position. In Asia, the operations of our hotels were hampered by
travel restrictions. In Southeast Asia these began to be relaxed in
the middle of the year but those in China and Japan continued into
the fourth quarter. However, with the full relaxation of these
restrictions at the end of 2022, we are confident of a strong
rebound in performance in 2023. Financially, while performance
remained below pre-pandemic levels in the year, the Group reported
a significant improvement in EBITDA to US$111 million, compared to
US$41 million in 2021. For the first time since the outbreak of the
pandemic in 2020, the Group was able to record an underlying profit
for the year.
In addition to delivering improved operational and financial
performance, we are encouraged that the Group has made great
strides across our strategic priorities.
In 2022, the Group opened two new hotels in Shenzhen and
Lucerne, and two residences in Barcelona and Beverly Hills. We
expect to open several new properties across Europe, the Middle
East, and Asia in 2023 and to complete a comprehensive renovation
of Mandarin Oriental, Singapore. In addition, seven new management
contracts were announced in 2022, further strengthening our
development pipeline. We are focussed on delivering this pipeline
and bringing our new properties to market.
2023 also marks the 60th anniversary of the opening of the
Group's first hotel - Mandarin Oriental, Hong Kong. The Group is
delighted to commemorate this historic occasion with several
celebratory events planned throughout the year.
We relaunched mandarinoriental.com in 2022, following a
comprehensive overhaul resulting in enhancements to elevate the
guest digital experience and drive higher revenue through our
digital sales channels. Our guest recognition programme - Fans of
M.O. - continues to grow, and we now have over 1.4 million members,
representing an increase of 32% since 2021. We extended our
footprint with the launch of Mandarin Oriental Exclusive Homes, a
hand-picked collection of the most luxurious private homes. We are
also proud to be able to announce that we have achieved the
elimination of 99% of single-use plastics across our portfolio of
hotels. As we look ahead, we are optimistic about the future.
2022 Performance
Overall, the Group's financial performance improved
significantly in 2022. Following the removal of travel restrictions
in most parts of the world, the Group experienced strong demand,
and occupancy increased considerably compared to 2021. Our hotels
also achieved high rates, with many setting new records, as guests
sought luxury and superior service. In China and Japan, however,
travel restrictions that were in place until late in 2022 limited
the recovery of our hotels compared to 2021 and other regions.
Combined total revenue from hotels under management was US$1,568
million, a 49% increase compared to 2021, supporting the Group's
return to profitability. EBITDA was US$111 million and underlying
profit was US$8 million. This performance represents a marked
improvement compared to our 2021 financial performance, when we
reported an EBITDA of US$41 million and an underlying loss of US$68
million.
The improved performance was primarily driven by higher
occupancy and strong rates in Europe, the Middle East, and Africa
('EMEA') and America. While occupancy generally remained slightly
below pre-pandemic levels in key gateway cities and leisure
destinations, our hotels achieved record rates, resulting in strong
Revenue Per Available Room ('RevPAR'). In EMEA, RevPAR was US$564,
45% above 2021, driven by improved occupancy and average daily rate
('ADR'). RevPAR also exceeded 2019 by 22%. Similarly, in America,
the Group recorded RevPAR of US$397, 50% above 2021.
In Asia, the Group achieved occupancy of 39% in 2022, compared
to 35% in 2021. Travel restrictions in Southeast Asia were relaxed
gradually throughout the year, and the Group's hotels saw
quarter-on-quarter improvements in occupancy, which led to steadily
improving financial performance. In China and Japan, however,
travel restrictions remained in place for almost all of 2022, and
demand was suppressed, impacting the performance of our hotels in
those markets.
Owned Hotel Performance
The Group's owned hotels, which contribute a major proportion of
the Group's results, recorded an EBITDA of US$77 million in 2022,
considerably higher than the US$24 million result in 2021. These
hotels, however, made an underlying loss of US$7 million in 2022,
predominantly due to depreciation charges attributable to the
properties.
Of the Group's 14 owned or partially owned hotels, operations in
the Group's two key profit-generating hotels in Hong Kong and Tokyo
were seriously hampered by stringent travel restrictions for the
majority of the year. These restrictions were removed in the fourth
quarter, but not in time to allow much of an improvement in their
financial performance. Prior to the pandemic, Hong Kong was the
Group's most profitable hotel. In 2022, it delivered a marginally
positive EBITDA, supported by food and beverage performance, but
remained well below peak performance levels. Tokyo incurred a
significant EBITDA loss, due to the rental charges arising from it
being a leased property. The Group's owned hotels in Southeast Asia
benefitted from the gradual relaxation of restrictions earlier in
2022. Popular destinations such as Bangkok and Singapore delivered
robust profitability, with these hotels both achieving EBITDA of
US$5 million in the fourth quarter, a significant improvement from
the third quarter.
In EMEA and America, where trading conditions substantially
improved compared to last year, all hotels achieved positive
EBITDA. Of note were contributions made by the Group's hotels in
London and Paris, both of which delivered profitability at or above
pre-COVID levels driven by strong rates. Madrid, which reopened in
2021 following a three-year restoration, also delivered a solid
performance. In America, the Group's hotel in Miami delivered
another good result, and hotels in key cities such as New York and
Boston were able to achieve record rates.
Management Business Performance
The Group's management business delivered a higher proportion of
the Group's overall result than it did historically. As a result of
the improved trading conditions and Mandarin Oriental's expanded
portfolio of hotels and residences, total hotel management fees
were US$60 million, 57% higher than in 2021. In 2022, the
management business reported a positive EBITDA of US$34 million and
an underlying profit of US$17 million, a significant improvement
compared to US$17 million EBITDA and US$5 million underlying profit
in 2021.
Most hotels delivered higher management fees than last year, and
leisure destinations such as Dubai, Bodrum, and Lake Como,
continued to achieve high rates and occupancy due to strong demand,
and produced another record year of management fees. Whilst the
Group has remained agile in adapting to changes in restrictions and
government policies, results in China were inevitably impacted.
Only now are normal travel restrictions returning to the region,
and the Group is confident in a fast recovery in travel and
improved trading conditions in 2023.
Strategy - A World of Fans
Through the pandemic, we were focussed on near-term priorities
to rebuild business levels and win new business, uphold the brand's
reputation for quality, and maintain our agile approach to
operations to improve profitability. As we emerge from the
pandemic, our vision - A World of Fans - is advancing both the
value of the brand and the profitability of the Group. We see every
interaction, both internally and externally, as an opportunity to
build meaningful and long-lasting relationships with a global
community of Fans. We are focussed on continuing to progress our
strategic priorities, outlined below, to create the right
foundation to drive sustainable long-term growth.
1. Elevating our brand
Mandarin Oriental is a globally recognised brand and the Group's
most powerful asset. The foundation lies in our portfolio of unique
properties delivering 21st century luxury and legendary,
personalised, and empathetic service reflecting the Group's
oriental heritage. We continue to develop the brand's presence by
expanding our global footprint through new hotels and residences.
Partnerships with other luxury brands continue to enhance the brand
beyond the four walls of our hotels. We remain focussed on growing
the Group's existing ventures, including the continual expansion of
Mandarin Oriental Exclusive Homes, our online retail store Shop
M.O., and our strategic alliance with The Oberoi Group. Our
long-term objective is to evolve from a luxury hospitality brand to
a luxury brand. We will continue to review and evaluate strategic
opportunities with the goal of unleashing the full potential of the
brand and reaching a wider audience in new sectors.
2. Powering our core
As our business grows, we increasingly need to leverage our data
to gain deeper insight into our properties and determine new
strategies for improved performance and growth. The data we gather
and analyse today provides additional feedback on the strengths and
weaknesses in the proposition of each of our hotels. Our colleagues
are actively using this to drive better services, an enhanced guest
experience, improved revenue management and more effective
marketing. There is still more, however, that we can do with our
data, and we have reorganised our internal teams to drive
excellence in this area, as well as enhancing visibility across all
digital and transformation initiatives.
We are also focussed on driving operational efficiencies by
enhancing the effectiveness of our systems and processes to ensure
our internal functions are modernised to enable scalability.
3. Lifting our people
Evolving and protecting our unique cultural DNA remains critical
to securing the consistent delivery of service excellence, a
crucial differentiator of Mandarin Oriental. The Group's focus on
acquiring and retaining the right talent, providing an engaging
colleague experience, and preparing the organisation for growth
remains central to our people strategy and is increasingly relevant
as the hospitality industry faces talent shortages. We are
embarking on a human resources ('HR') transformation to support the
needs of a changing workforce. We recently launched a digital,
interactive learning and development platform. In addition, we will
be implementing a HR operating model that simplifies our technology
platform landscape and will be redesigning our processes to enhance
our understanding of our talent to support organisational
agility.
4. Exceptional quality
The Group firmly believes that its competitive advantage lies in
its portfolio of unique properties and consistent delivery of
service excellence, characterised by the warm, engaging, personal
interactions we have with our guests. As we plan for the opening of
26 new hotels and residences in the next few years, we are c
onstantly evolving our guidelines across design and technology to
curate a portfolio of distinct, highly appealing properties. We are
also focussed on leveraging new technologies such as Hello MO, our
on-property live guest communication channel, to provide a
customer-centric, personalised experience for guests. In addition,
we are committed to maintaining our high service levels, striving
to exceed our guests' expectations, and evolving our standards for
future guests.
Business Development strategy
The Group's long-term strategic priority is to grow its
management business significantly by securing management contracts
in key destinations, leveraging the strength of our brand. We will
retain ownership of iconic properties in brand-defining locations,
in order to benefit from operational profitability and capital
appreciation over the long term, while conducting regular reviews
of the Group's asset portfolio.
Today, we operate 36 hotels and nine residences. In 2022, we
opened two new hotels in Shenzhen and Lucerne, and two standalone
residences in Barcelona and Beverly Hills. We also announced seven
new management contracts in Costa Navarino (Greece), the Maldives,
Cairo, Cortina (Italy), Tianfu (China), Kuwait, and Bai Nom
(Vietnam). These new properties are all management contracts,
expanding the Group's presence into new countries and new
propositions, including the Group's first alpine resort.
Over the past few years, we have diligently built a robust
pipeline, which now comprises over 26 projects expected to open in
the next five years. We are confident that our development strategy
will enable a healthy growth rate.
We remain focussed on maintaining the momentum of delivery of
new hotel and residences openings and continued replenishment of
our development pipeline. While we are somewhat reliant on
developers, we are working closely with our property owners to
ensure the smooth delivery of projects and meet our target of
opening four to five new properties each year. In 2023, we expect
to open four new hotels in London, Muscat, Zurich and Costa
Navarino, and residences in New York.
As part of the regular review of our asset portfolio, we
completed the sale of Mandarin Oriental, Washington D.C., in
September 2022.
Looking ahead, the redevelopment of the site in Causeway Bay,
Hong Kong, is on track to complete in 2025.
Sustainability
Corporate responsibility values are deeply ingrained in Mandarin
Oriental's culture, and sustainability implications are carefully
considered in every decision across the Group. One of our guiding
principles is 'Acting with responsibility', and we have established
a Naturally Better programme to direct our efforts towards the
well-being of the planet, communities and individuals. As the Group
grows, its responsibility to drive sustainability in the way its
hotels operate becomes even more impactful.
We aim to achieve the best possible environmental performance
across all of our hotels. We have developed 10-year environmental
targets for each of our hotels, differentiated by reference to the
circumstances, priorities and location of each property and made
good progress against these.
In the past year, we have continued to push ahead across our
various sustainability goals and commitments, and we are proud to
have achieved considerable success through collective action. This
includes broadly achieving our target to eliminate single-use
plastics in our hotels, by reaching 99% elimination in 2022.
Going forward, we will continue to focus on advancing our key
sustainability priorities. Our ambitious goals include actively
reducing food waste and expanding our responsible procurement
practices. We will also be providing additional paid leave for
volunteering, to empower colleagues to interact with their
communities and contribute to causes that are close to their
hearts.
Culture and Colleagues
At the heart of Mandarin Oriental's reputation as a luxury hotel
group is its culture, derived from its oriental heritage and an
unwavering focus on delivering exceptional, personalised, and
empathetic service. We continue to foster a culture of inclusivity
and innovation, that encourages new and different behaviours and
ideas, to stay relevant with the pace of change in today's world.
We empower colleagues to feel comfortable in being themselves and
in voicing their ideas. We encourage our colleagues to believe in
and deliver our core values of doing the right thing for customers,
communities, and the planet. We must continue to actively support
and reward these behaviours to sustain this culture and
mindset.
Our vision - A World of Fans - can only be achieved through our
people. I would like to personally thank each and every one of my
colleagues for their commitment, dedication, and hard work in the
past year. Their continuing desire to deliver unique and memorable
experiences for our guests and the pride with which they carry the
Mandarin Oriental brand is central to the success of the
business.
The year ahead
2023 will be a very busy year for the Group with multiple new
openings of hotels and residences, and improvements to our existing
portfolio. We expect the Group's financial performance in 2023 will
benefit from the return of demand in Hong Kong and Tokyo, two of
the Group's key profit-contributing hotels. We are confident that,
with our globally recognised brand, expanding Fan base, robust
pipeline of projects, and our people, we are well-placed to benefit
from improving market conditions and to achieve long-term
growth.
James Riley
Group Chief Executive
Mandarin Oriental International Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2022
2022 2021
Underlying Underlying
business Non-trading business Non-trading
performance Items Total performance Items Total
US$m US$m US$m US$m US$m US$m
Revenue (note 2) 454.1 - 454.1 316.9 - 316.9
Cost of sales (302.7) - (302.7) (261.3) - (261.3)
------- -------
Gross profit 151.4 - 151.4 55.6 - 55.6
Selling and
distribution
costs (27.0) - (27.0) (20.7) - (20.7)
Administration
expenses (109.2) - (109.2) (104.1) - (104.1)
Other operating
income 5.7 - 5.7 43.2 0.6 43.8
Change in fair
value
of investment
property
under
development - (104.1) (104.1) - (73.9) (73.9)
Gain on asset
disposals
(note 7) - 40.6 40.6 - - -
------- ----------- ------- ------------ ----------- -------
Operating
(loss)/profit
(note 3) 20.9 (63.5) (42.6) (26.0) (73.3) (99.3)
Financing charges (16.7) - (16.7) (13.8) - (13.8)
Interest income 2.3 - 2.3 1.1 - 1.1
Net financing
charges (14.4) - (14.4) (12.7) - (12.7)
Share of results
of
associates and
joint
ventures (note
4) 9.7 - 9.7 (21.8) - (21.8)
(Loss)/profit
before
tax 16.2 (63.5) (47.3) (60.5) (73.3) (133.8)
Tax (note 5) (8.5) 6.4 (2.1) (7.6) - (7.6)
------- ----------- ------- ------------ ----------- -------
(Loss)/profit
after
tax 7.7 (57.1) (49.4) (68.1) (73.3) (141.4)
------- ----------- ------- ------------ ----------- -------
Attributable to:
Shareholders of
the
Company (notes 6
& 7) 7.6 (57.1) (49.5) (68.1) (73.3) (141.4)
Non-controlling
interests 0.1 - 0.1 - - -
------- ----------- ------- ------------ ----------- -------
7.7 (57.1) (49.4) (68.1) (73.3) (141.4)
------- ----------- ------- ------------ ----------- -------
USc USc USc USc
(Loss)/earnings per share
(note
6)
- basic 0.60 (3.92) (5.39) (11.19)
- diluted 0.60 (3.92) (5.39) (11.19)
------- ------- ------------ -------
Mandarin Oriental International Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2022
2022 2021
US$m US$m
Loss for the year (49.4) (141.4)
Other comprehensive (expense)/income
Items that will not be reclassified to profit
or loss:
------ -------
Remeasurements of defined benefit plans (2.1) 3.5
Revaluation surplus of right-of-use assets
before transfer to investment properties 79.8 -
Tax on items that will not be reclassified 0.3 (0.6)
78.0 2.9
Items that may be reclassified subsequently
to profit or loss:
------ -------
Net exchange translation differences
* net losses arising during the year (58.2) (70.7)
Cash flow hedges
- net gains arising during the year 16.6 11.6
Tax relating to items that may be reclassified (2.4) (1.3)
Share of other comprehensive income/(expense)
of associates and joint ventures 0.7 (2.0)
(43.3) (62.4)
Other comprehensive income/(expense) for
the year, net of tax 34.7 (59.5)
------ -------
Total comprehensive expense for the year (14.7) (200.9)
------ -------
Attributable to:
Shareholders of the Company (14.7) (200.7)
Non-controlling interests - (0.2)
------ -------
(14.7) (200.9)
------ -------
Mandarin Oriental International Limited
Consolidated Balance Sheet
at 31st December 2022
2022 2021
US$m US$m
Net assets
Intangible assets 45.7 46.7
Tangible assets (note 8) 916.3 1,098.2
Right-of-use assets 242.4 273.3
Investment properties (note 9) 2,472.6 2,462.0
Associates and joint ventures 203.8 201.5
Other investments 14.0 16.5
Deferred tax assets 14.2 13.7
Pension assets 3.0 7.1
Non-current debtors 12.2 8.9
Non-current assets 3,924.2 4,127.9
Stocks 5.0 5.3
Current debtors 90.5 68.8
Current tax assets 6.8 2.2
Bank and cash balances 226.2 212.8
------- -------
Current assets 328.5 289.1
------- -------
Current creditors (159.1) (157.2)
Current borrowings (note 10) (2.2) (2.5)
Current lease liabilities (5.9) (6.3)
Current tax liabilities (18.4) (9.9)
------- -------
Current liabilities (185.6) (175.9)
------- -------
Net current assets 142.9 113.2
Long-term borrowings (note 10) (599.8) (727.8)
Non-current lease liabilities (123.5) (147.4)
Deferred tax liabilities (41.6) (50.1)
Pension liabilities (0.1) (0.3)
Non-current creditors (4.5) (3.2)
------- -------
Non-current liabilities (769.5) (928.8)
------- -------
3,297.6 3,312.3
------- -------
Total equity
Share capital 63.2 63.2
Share premium 500.7 500.5
Revenue and other reserves 2,730.2 2,745.1
------- -------
Shareholders' funds 3,294.1 3,308.8
Non-controlling interests 3.5 3.5
------- -------
3,297.6 3,312.3
------- -------
Mandarin Oriental International Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2022
Attributable
to Attributable
Asset shareholders to non-
Share Share Capital Revenue revaluation Hedging Exchange of the controlling Total
capital premium reserves reserves reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
2022
At 1st January 63.2 500.5 259.1 (377.7) 2,943.4 0.9 (80.6) 3,308.8 3.5 3,312.3
Total comprehensive income - - - (51.1) 79.8 14.5 (57.9) (14.7) - (14.7)
Transfer - 0.2 (0.2) - - - - - - -
At 31st December 63.2 500.7 258.9 (428.8) 3,023.2 15.4 (138.5) 3,294.1 3.5 3,297.6
-----------
2021
At 1st January 63.2 499.7 260.3 (240.3) 2,943.4) (9.7) (7.1) 3,509.5 3.7 3,513.2
Total comprehensive income - - - (137.8) - 10.6 (73.5) (200.7) (0.2) (200.9)
Transfer - 0.8 (1.2) 0.4 - - - - - -
--
At 31st December 63.2 500.5 259.1 (377.7) 2,943.4 0.9 (80.6) 3,308.8 3.5 3,312.3
------- ------- -------- -------- ----------- -------- -------- ------------ ------------ -------
Revenue reserves as at 31st December 2022 included cumulative
fair value losses on the investment property under development of
US$720.2 million (2021: US$616.1 million).
Mandarin Oriental International Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2022
2022 2021
US$m US$m
Operating activities
------- ------
Operating loss (note 3) (42.6) (99.3)
Depreciation, amortisation and impairment 58.2 68.5
Other non-cash items 63.5 71.2
Movements in working capital (1.1) 0.9
Interest received 2.1 0.4
Interest and other financing charges paid (15.6) (13.5)
Tax paid (8.0) (1.8)
Cash flows from operating activities 56.5 26.4
Investing activities
------- ------
Purchase of tangible assets (12.8) (15.3)
Additions to investment property under development (30.2) (19.7)
Purchase of intangible assets (6.1) (6.1)
Additions to right-of-use assets (0.2) -
Refund on Munich expansion 4.0 13.0
Purchase of other investments (0.2) (0.3)
Purchase of an associate (1.0) -
Advance to associates and joint ventures (2.4) (7.1)
Repayment of loans to associates and joint
ventures 4.2 3.0
Net proceeds from asset disposals (note 7) 131.4 -
Cash flows from investing activities 86.7 (32.5)
Financing activities
------- ------
Drawdown of borrowings 23.0 130.6
Repayment of borrowings (139.5) (66.4)
Principal elements of lease payments (5.7) (3.3)
Cash flows from financing activities (122.2) 60.9
------- ------
Net increase in cash and cash equivalents 21.0 54.8
Cash and cash equivalents at 1st January 212.8 164.6
Effect of exchange rate changes (7.6) (6.6)
------- ------
Cash and cash equivalents at 31st December 226.2 212.8
------- ------
Mandarin Oriental International Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has
been based on the audited results for the year ended 31st December
2022 which have been prepared in conformity with International
Financial Reporting Standards, including International Accounting
Standards ('IAS') and Interpretations adopted by the International
Accounting Standards Board.
The Group has adopted the following amendments for the annual
reporting period commencing 1st January 2022.
Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a
Contract (effective from 1st January 2022)
The amendments clarify that for the purpose of assessing whether
a contract is onerous, the cost of fulfilling the contract includes
both the incremental costs of fulfilling that contract and an
allocation of other costs that relate directly to fulfilling
contracts. The Group applied the amendment from 1st January 2022
and there was no material impact on the Group's consolidated
financial statements.
Apart from the above, there are no other amendments which are
effective in 2022 and relevant to the Group's operations, that have
a significant impact on the Group's results, financial position and
accounting policies.
The Group has not early adopted any standard, interpretation or
amendments that have been issued but not yet effective.
2. REVENUE
2022 2021
US$m US$m
By business activity:
Hotel ownership 400.9 278.9
Hotel & Residences branding and management 68.5 48.5
Less: intra-segment revenue (15.3) (10.5)
454.1 316.9
------ ------
By geographical area:
Asia 141.4 132.4
Europe, Middle East and Africa ('EMEA') 239.7 137.8
America 73.0 46.7
454.1 316.9
------ ------
From contracts with customers:
Recognised at a point in time 140.8 111.5
Recognised over time 295.2 185.6
------ ------
436.0 297.1
From other sources:
Rental income 18.1 19.8
------ ------
454.1 316.9
------ ------
3. EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTISATION) AND OPERATING LOSS FROM SUBSIDIARIES
2022 2021
US$m US$m
By business activity:
Hotel ownership 45.3 25.9
Hotel & Residences branding and management 33.8 16.6
------- ------
Underlying EBITDA from subsidiaries 79.1 42.5
Non-trading items (note 7)
------- ------
Change in fair value of investment property under
development (104.1) (73.9)
Change in fair value of other investments - 0.6
Gain on asset disposals 40.6 -
(63.5) (73.3)
------- ------
EBITDA from subsidiaries 15.6 (30.8)
Underlying depreciation and amortisation from
subsidiaries (58.2) (68.5)
------- ------
Operating loss (42.6) (99.3)
------- ------
By geographical area:
Asia (8.7) (8.6)
EMEA 82.8 59.7
America 5.0 (8.6)
------- ------
Underlying EBITDA from subsidiaries 79.1 42.5
------- ------
The Group had received government grants of US$4.3 million
(2021: US$35.8 million) and rent concessions of US$0.4 million
(2021: US$3.4 million) for the year ended 31st December 2022,
respectively. These amounts were in relation to the COVID-19
pandemic and were accounted for as other operating income.
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Depreciation Operating Net Net
and profit/ financing profit/
EBITDA amortisation (loss) charges Tax (loss)
US$m US$m US$m US$m US$m US$m
2022
By business activity:
Hotel ownership 32.3 (15.4) 16.9 (5.6) (1.0) 10.3
Other - (0.5) (0.5) (0.1) - (0.6)
------ ------------ --------- --------- ----- -------
32.3 (15.9) 16.4 (5.7) (1.0) 9.7
------ ------------ --------- --------- ----- -------
By geographical
area:
Asia 19.2 (10.4) 8.8 (2.4) (1.1) 5.3
EMEA 4.0 (3.4) 0.6 (1.1) 0.1 (0.4)
America 9.1 (2.1) 7.0 (2.2) - 4.8
------ ------------ --------- --------- ----- -------
32.3 (15.9) 16.4 (5.7) (1.0) 9.7
------ ------------ --------- --------- ----- -------
2021
By business activity:
Hotel ownership (1.7) (14.5) (16.2) (4.5) (0.4) (21.1)
Other (0.1) (0.6) (0.7) - - (0.7)
------ ------------ --------- --------- ----- -------
(1.8) (15.1) (16.9) (4.5) (0.4) (21.8)
------ ------------ --------- --------- ----- -------
By geographical
area:
Asia (2.2) (10.0) (12.2) (2.3) 1.5 (13.0)
EMEA (2.5) (2.8) (5.3) (0.7) (1.9) (7.9)
America 2.9 (2.3) 0.6 (1.5) - (0.9)
------ ------------ --------- --------- ----- -------
(1.8) (15.1) (16.9) (4.5) (0.4) (21.8)
------ ------------ --------- --------- ----- -------
The results of associates and joint ventures included the
Group's share of government grants of US$0.2 million (2021: US$1.4
million) and rent concessions of US$0.1 million (2021: US$0.1
million) for the year ended 31st December 2022, respectively. These
amounts were in relation to the COVID-19 pandemic.
5. TAX
2022 2021
US$m US$m
Tax (charged)/credited to profit and loss is
analysed as follows:
Current tax (12.0) (2.5)
Deferred tax 9.9 (5.1)
------ -----
(2.1) (7.6)
------ -----
By business activity:
Hotel ownership 5.3 (5.8)
Hotel & Residences branding and management (7.4) (1.8)
------ -----
(2.1) (7.6)
------ -----
By geographical area:
Asia (0.2) (2.0)
EMEA (5.2) (4.8)
America 3.3 (0.8)
------ -----
(2.1) (7.6)
------ -----
Tax relating to components of other comprehensive income is
analysed as follows:
Remeasurements of defined benefit plans 0.3 (0.6)
Cash flow hedges (2.4) (1.3)
----- -----
(2.1) (1.9)
----- -----
Tax on profits has been calculated at rates of taxation
prevailing in the territories in which the Group operates.
In 2022, current tax included a capital gain tax charge of
US$4.3 million and deferred tax included a credit of US$10.7
million in relation to the sale of Mandarin Oriental, Washington
D.C. (note 7).
Share of tax charges of associates and joint ventures of US$1.0
million (2021: US$0.4 million) is included in share of results of
associates and joint ventures (note 4).
6 . (LOSS)/EARNINGS PER SHARE
Basic loss per share is calculated using loss attributable to
shareholders of US$49.5 million (2021: US$141.4 million) and the
weighted average number of US$1,263.7 million (2021: 1,263.4
million) shares in issue during the year.
Diluted loss per share is calculated using loss attributable to
shareholders of US$49.5 million (2021: US$141.4 million) and the
weighted average number of 1,263.8 million (2021: 1,263.8 million)
shares in issue after adjusting for the number of shares which are
deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during
the year.
The weighted average number of shares is arrived at as
follows:
Ordinary shares in millions
2022 2021
Weighted average number of shares for basic
loss
per share calculation 1,263.7 1,263.4
Adjustment for shares deemed to be issued
for no consideration under the share-based
long-term incentive plans 0.1 0.4
------- -------
Weighted average number of shares for diluted
loss
per share calculation 1,263.8 1,263.8
------- -------
Additional basic and diluted loss/earnings per share are also
calculated based on underlying profit/loss attributable to
shareholders. A reconciliation of loss/earnings is set out
below:
2022 2021
Basic Diluted
(loss)/ (loss)/ Basic Diluted
earnings earnings loss loss
per share per share per share per share
US$m USc USc US$m USc USc
Loss attributable
to shareholders (49.5) (3.92) (3.92) (141.4) (11.19) (11.19)
Non-trading items
(note 7) 57.1 73.3
Underlying profit/(loss)
attributable
to shareholders 7.6 0.60 0.60 (68.1) (5.39) (5.39)
------ -------
7 . NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investment properties and investments which are
measured at fair value through profit and loss; gains and losses
arising from the sale of businesses, investments and properties;
impairment of non-depreciable intangible assets and other
investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other
credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2022 2021
US$m US$m
Change in fair value of investment property
under development (note 9) (104.1) (73.9)
Change in fair value of other investments - 0.6
Gain on asset disposals 47.0 -
------- ------
(57.1) (73.3)
------- ------
On 8th September 2022, the Group completed the sale of Mandarin
Oriental, Washington D.C., including tangible assets and stocks of
US$90.8 million, for gross proceeds of US$139.0 million. After
taking into account the selling expenses and sales related taxes of
US$7.6 million, the net proceeds were US$131.4 million. As a
result, the Group has recognised a post-tax, non-trading gain of
US$47.0 million.
8 . TANGIBLE ASSETS
2022 2021
US$m US$m
Opening net book value 1,098.2 1,181.5
Exchange differences (58.5) (42.3)
Additions 12.8 14.0
Disposals (note 7) (90.3) -
Transfer to investment properties (0.6) -
Depreciation charge (45.3) (55.0)
------- -------
Closing net book value 916.3 1,098.2
------- -------
9. INVESTMENT PROPERTIES
2022 2021
US$m US$m
Opening fair value 2,462.0 2,528.3
Exchange differences 0.6 (15.0)
Additions 26.4 22.6
Transfer from tangible assets 0.6 -
Transfer from right-of-use assets 87.1 -
Decrease in fair value (104.1) (73.9)
Closing fair value 2,472.6 2,462.0
------- -------
In 2022, an own-use property, including tangible assets of
US$0.6 million and right-of-use assets of US$87.1 million, was
transferred to a completed residential investment property
following a change of its future use determined by the
Directors.
At 31st December 2022, investment properties comprised a
commercial investment property under development of US$2,384.9
million (2021: US$2,462.0 million) and a completed residential
investment property of US$87.7 million (2021: nil).
10. BORROWINGS
2022 2021
US$m US$m
Bank loans 599.8 726.5
Other borrowings 2.2 3.8
602.0 730.3
----- -----
Current 2.2 2.5
Long-term 599.8 727.8
----- -----
602.0 730.3
----- -----
11. DIVIDS
No interim and final dividends in respect of the 2022 and 2021
financial years have been declared or proposed by the Board.
12. CAPITAL COMMITMENTS
At 31st December 2022, total capital commitments of the Group
amounted to US$512.2 million (2021: US$550.3 million).
13. RELATED PARTY TRANSACTIONS
The parent company of the Group is Jardine Strategic Limited
('JSL') and the ultimate holding company of the Group is Jardine
Matheson Holdings Limited ('JMH'). Both JMH and JSL are
incorporated in Bermuda.
In the normal course of business, the Group undertakes a variety
of transactions with its associates and joint ventures and with
JMH's subsidiaries, associates and joint ventures. The more
significant of these transactions are described below:
The Group managed six (2021: six) associate and joint venture
hotels and received management fees of US$14.7 million (2021:
US$6.6 million) based on long-term management agreements on normal
commercial terms.
The Group provided hotel management services to Hongkong Land
group ('HKL'), a subsidiary of JMH. Total management fees received
from HKL in 2022 amounted to US$1.4 million (2021: US$2.3 million),
based on long-term management agreements on normal commercial
terms.
The Group pays a management fee to Jardine Matheson Limited, a
subsidiary of JMH, in consideration for certain management
consultancy services. The fee is calculated as 0.5% of the Group's
net profit. No fee was paid in 2022 and 2021 (due to net
losses).
The Group rented a property to DFI Retail Group, a subsidiary of
JMH, and received rental income of US$0.7 million (2021: US$0.7
million), based on lease agreements on normal commercial terms.
In respect of the Causeway Bay site under development, the Group
paid consultancy fees of US$3.2 million (2021: US$1.2 million) to
HKL in consideration for project management consultancy services.
In addition, Gammon Construction Limited ('GCL'), a joint venture
of JMH, completed value of works of US$13.6 million (2021: US$17.9
million). The HKL agreement and GCL contract were arranged on
normal commercial terms.
There were no other related party transactions that might be
considered to have a material effect on the financial position or
performance of the Group that were entered into or changed during
the year.
The outstanding balances with associates and joint ventures are
included in debtors as appropriate.
Mandarin Oriental International Limited
Principal Risks and Uncertainties
The following are the principal risks and uncertainties facing
the Company as required to be disclosed pursuant to the Disclosure
Guidance and Transparency Rules issued by the Financial Conduct
Authority in the United Kingdom and are in addition to the matters
referred to in the Chairman's Statement, Group Chief Executive's
Review and other parts of the Company's 2022 Annual Report (the
'Report').
1. Reputational Risk and Value of the Brand
The Group's brand equity and global reputation is fundamental in
supporting its ability to offer premium products and services and
to achieving acceptable revenues and profit margins. Accordingly,
any damage to the Group's brand equity or reputation, including as
a result of adverse effects relating to health and safety, acts or
omissions by Group personnel, and any allegations of socially
irresponsible policies and practices, might adversely impact the
attractiveness of the Group's properties or the loyalty of the
Group's guests.
Mitigation
-- Engage external consultants and experts where necessary.
-- Perform regular cybersecurity and data vulnerability
assessment at least annually and/or penetration testing to identify
weaknesses.
-- Active monitoring and use of social media.
2. Concentration Risk
Certain locations in Asia contribute a significant portion of
the Group's underlying profit. Adverse conditions such as social
upheaval, erosion of the rule of law or travel restrictions could
reduce a location's competitiveness and impact the Group's
businesses which have concentrated operations in that
jurisdiction.
Mitigation
-- Geographical diversification of the business through organic growth.
-- Maintaining financial strength under challenging scenarios.
-- Further strengthening the Group's brand to sustain competitiveness and resilience.
3. Commercial Risk
The Group operates within the highly competitive global hotel
industry. Failure to compete effectively in terms of product
quality, service levels, or price can adversely affect earnings.
This may also include failure to adapt to rapidly evolving customer
preferences and expectations. Significant competitive pressure or
the oversupply of hotel rooms in a specific market can reduce
margins. Advances in technology creating new or disruptive
competitive pressures might also negatively affect the trading
environment.
The Group competes with other luxury hotel operators for new
opportunities in the areas of hotel management, residences
management and residences branding. Failure to establish and
maintain relationships with hotel owners or developers could
adversely affect the Group's business.
The Group also makes investment decisions regarding acquiring
new hotel properties and undertaking significant renovations or
redevelopments in its owned properties, exposing it to construction
risks. The success of these investments is measured over the longer
term and, as a result, is subject to market risk.
Mandarin Oriental's continued growth depends on opening of new
hotels and branded residences. Most of the Group's new developments
are controlled by third-party owners and developers. As a result,
they can be subject to delays due to issues attributable to
planning and construction, sourcing of finance, and the sale of
residential units. In extreme circumstances, such factors might
lead to the cancellation of a project.
Mitigation
-- Utilise market intelligence and deploy strategies for business-to-consumer business.
-- Establish customer relationship management and digital commerce capabilities.
-- Engage in longer-term contracts and proactively approach suppliers for contract renewals.
-- Re-engineer existing business processes to take advantage of new technological capabilities.
-- Invest in and partner with companies that can provide the
Group access to different capabilities and technologies.
4. Environmental and Climate Risk
Environmental disasters such as earthquakes, floods and typhoons
can damage the Group's assets and disrupt operations. Global
warming-induced climate change has increased the frequency and
intensity of storms, leading to higher insurance premiums or
reduced coverage for such natural disasters.
With governments also taking a more proactive approach towards
carbon taxes, renewable energies and electric vehicles, additional
investments, and efforts to address physical and transition risks
of climate change are anticipated from businesses.
With interest in sustainability surging in recent years from
investors, governments and the general public, expectations by
regulators and other stakeholders for accurate corporate
sustainability reporting and commitments towards carbon neutrality
to address climate change are also growing. This brings increasing
challenges to the Group to meet key stakeholders' expectations.
There is potential for negative publicity and operational
disruption arising from conflict between activists and the Group's
business that is perceived to be engaged in trade and activities
that are environmentally unfriendly.
Mitigation
-- Executive Advisory Panel, Sustainability Leadership Council and Hotel Sustainability
Committees have been in place to mobilise and coordinate sustainability efforts across
the Group.
-- A sustainability strategy framework, including a pillar for the planet, drives the
Group's sustainability agenda.
-- Renewed environmental targets for 2025 and 2030 have been determined per property
through a Group-wide inventory management plan.
-- Identify environmental impact opportunities that address multiple problems and risks
and gaps that are generally relevant to all properties and society in general.
-- Assess emerging Environmental, Social and Governance (ESG) reporting standards and
requirements, to align Group disclosures to best market practice.
-- Conduct climate risk assessments and adaptation action plans based on recommendations
of Task Force on Climate-Related Financial Disclosures (TCFD), including implementing
measures to address physical risks posed by climate change and identifying opportunities
in global transition to a low carbon economy.
5. Financial Strength and Funding
The Group's activities expose it to a variety of risks to its
financial strength and funding, including market risk, credit risk
and liquidity risk.
The market risk the Group faces includes i) foreign exchange
risk from future commercial transactions, net investments in
foreign operations and net monetary assets and liabilities that are
denominated in a currency that is not the entity's functional
currency; ii) interest rate risk through the impact of rate changes
on interest bearing assets and liabilities; and iii) securities
price risk as a result of its equity investments and limited
partnership investment funds which are measured at fair value
through profit and loss, and debt investments which are measured at
fair value through other comprehensive income.
The Group's credit risk is primarily attributable to deposits
with banks, contractual cash flows of debt investments carried at
amortised cost and those measured at fair value through other
comprehensive income, credit exposures to customers and derivative
financial instruments with a positive fair value.
The Group may face liquidity risk if its credit rating
deteriorates or if it is unable to meet its financing
commitments.
Mitigation
-- Set clear policies and limits on market, credit, and liquidity risks, including in
relation to foreign exchange exposure, interest rate risks, cash management and prohibition
on derivatives not used in hedging.
-- Regular internal audits of compliance with treasury policies.
-- Adopt appropriate credit guidelines to manage counterparty risk.
-- When economically feasible, take borrowings in local currency to hedge foreign exchange
exposures on investments.
-- Fix a portion of borrowings in fixed rates.
-- Maintain adequate headroom in committed facilities to facilitate the Group's capacity
to pursue new investment opportunities and to provide some protection against market
uncertainties.
-- Keep an appropriate funding balance between equity and debt from banks and capital
markets, both short and long term in tenor, to give flexibility to develop the business.
-- Maintain sufficient cash and marketable securities, and availability of funding from
an adequate amount of committed credit facilities and the ability to close out market
positions.
-- The Group's treasury operations are managed as cost centres and are not permitted
to undertake speculative transactions unrelated to underlying financial exposures.
The detailed steps taken by the Group to manage its exposure to
financial risk are set out in the Financial Review and a note to
the financial statements in the Report.
6. Governance and Misconduct
Effective management of the Group's risks depends on the
existence of an appropriate governance structure, tone from top
leadership, and functioning system of internal controls. Ethical
breaches, management override of controls, employee fraud and
misconduct, or other deficiencies in governance and three lines of
internal controls may result in financial loss and reputational
damage for the Group.
Inadequate capability and diversity in management or the Board
may also lead to sub-optimal deliberations and decisions.
Mitigation
-- Established Group-wide mandatory code of conduct.
-- Maintain a robust Corporate Governance Framework which includes a whistle-blowing
channel.
-- Maintain functionally independent internal audit function that reports to the Group
Audit Committee on risk management, the control environment and significant non-compliance
matters.
-- Maintain Professional Indemnity, Crime and General Liability insurance policies with
adequate coverage.
7. Health, Safety and Product Quality
The Group's colleagues engage in physical activities that may
lead to serious injury or fatal incidents if work conditions are
unsafe or workers do not take due care to observe safety
procedures.
The safety and quality of food products and other items provided
by the Group are fundamental to its reputation with customers. Any
actual or perceived deficiency in product safety or quality may
damage consumer confidence and the brand's reputation, leading to
financial loss.
Mitigation
-- Establish safe working environments and regular safety training for all employees
and subcontractors.
-- Establish contractual requirements for contractors to comply with high expected levels
of safety standards.
-- Conduct occupational health and safety awareness campaigns.
-- Establishing product quality and safety standards, guidelines.
-- Ensure suppliers follow the Group's guidelines, principals' requirements, and local
regulations.
8. IT and Cybersecurity
The Group's business is ever more reliant on technology in their
operations and face increasing cyber-attacks from groups targeting
both individuals and businesses. As a result, the privacy and
security of customer and corporate information are at risk of being
compromised through a breach of our or our suppliers' IT systems or
the unauthorised or inadvertent release of information, resulting
in brand damage, impaired customer trust, loss of competitiveness
or regulatory action.
Cyber-attacks stemming from inadequate cybersecurity or lack of
employee cybersecurity awareness may also adversely affect the
Group' ability to manage daily business operations, resulting in
business interruption, reputational damage, regulatory penalties,
lost revenues, repair or other costs.
Mitigation
-- Engage external consultants to perform assessments on the business with industry
benchmarks.
-- Define cybersecurity programme and centralised function to provide oversight, promote
cybersecurity hygiene, strengthen cybersecurity defences and manage cybersecurity
incidents.
-- Perform regular vulnerability assessment and penetration testing to identify weaknesses.
-- Maintain disaster recovery plans and backup for data restoration.
-- Arrange regular security awareness training at least annually and phishing testing
to raise users' cybersecurity awareness.
-- Conduct regular internal audits of IT general controls and cybersecurity.
9. Pandemic
COVID-19 has demonstrated the wide-ranging and long-lasting
impacts and disruptions for businesses, communities and employees
that may result from the spread of a pandemic. While the
governments and businesses have gained experience from COVID-19 in
preparing for and responding to future pandemic scenarios,
nevertheless significant disruptions and uncertainties would likely
result from global or regional pandemics of a similar nature if
they raise the prospect of lockdowns, restrictions on cross-border
mobility, interruptions to supply chains, and dampened consumer
sentiment while vaccines are unavailable.
Mitigation
-- Increase flexibility and resilience of work arrangements, including tools that enable
employees to effectively work from home, where possible.
-- Test business continuity plans periodically for various scenarios including loss
of premises, systems, people, and extended periods of split teams.
-- Increase resilience of supply chain with sourcing alternative suppliers for key inputs
and close coordination with logistics partners.
10. Political and Economic Risk
Changes and uncertainties in the political landscape pose risks
for business activity and sentiment in the territories where the
Group operates and consequently for the current investments and
future growth of the Group. In recent years, sources of uncertainty
include geopolitical tensions between China and the United States,
terrorism and government instability in parts of Southeast Asia.
Rising costs of fuel and staple foods are particularly sensitive
for developing markets where the Group operates, heightening the
risk of civil discontent and political instability. The imposition
of export bans by some governments on food and raw materials adds
further uncertainties in the availability and cost of supplies for
the Group's hotels and residences that import these items.
The Group's business is exposed to the risk of adverse
developments in global and regional economies and financial
markets, either directly, or through the impact such developments
might have on the Group's joint venture partners, associates,
bankers, suppliers, or customers. These developments could include
recession, inflation, deflation, currency fluctuations,
restrictions in the availability of credit, business failures, or
increases in financing costs, oil prices or the cost of raw
materials. Such developments might increase operating costs, reduce
revenues, lower asset values or result in some or all of the
Group's hotels and residences being unable to meet their strategic
objectives.
Mitigation
-- Maintain the Group's financial strength and funding sources under scenarios of economic
downturn and other stresses.
-- Monitor the volatile macroeconomic environment and consider economic factors in strategic
and financial planning processes.
-- Make agile adjustments to existing business plans and explore new business streams
and new markets.
-- Review pricing strategies and keep conservative assumptions on global commodity prices.
-- Insurance programme covering business interruption due to civil unrest.
11. People and Talent
The competitiveness of the Group depends on the quality of the
people that it attracts and retains. The unavailability of needed
human resources may impact the ability of the Group to operate at
capacity, implement initiatives and pursue opportunities.
The pandemic has accelerated corporate investments in digital
projects and stimulated global consumer demand for e-commerce. This
has created heightened demand and competition across industries for
various skillsets. Pandemic-related travel restrictions and a more
stringent approach to issuing work visas to non-locals in some of
the key markets have also disrupted the availability of labour
across borders, exacerbating labour shortages as economies
rebound.
Recent and future workforce rationalisation may raise the
potential for organisational gaps in capabilities, succession and
controls.
With worker preferences shifting towards greater importance
attached to mental health and well-being, the Group faces
heightened risk for talent attraction and retention if they cannot
adapt their propositions for workers.
Mitigation
-- Support workforce practices that promote well-being and flexible work arrangements
that are competitive with the market.
-- Ensure proactive manpower planning and succession planning are in place.
-- Enhance modern employer branding, training for staff members, compensation, and benefits,
including retention incentives.
-- Implement strategy to promote diversity and inclusion across the Group.
-- Establish employee assistance and counselling programmes.
-- Enhance talent development plans to increase employees' visibility on future career
paths, including identifying strategic talent pools.
-- Delivering new learning programmes to equip staff with finance, procurement, HR,
digital, IT and innovation technical capabilities for business transformation.
12. Compliance with and Changes to Laws and Regulations
The Group's business is subject to several regulatory regimes in
the territories they operate in. New or changing laws and
regulations in a wide range of areas such as foreign ownership of
assets and businesses, exchange controls, building and
environmental standards, competition, tax, employment, and data
privacy could potentially impact the operations and profitability
of the Group's business. Non-compliance may lead to reputational
damage from media exposure and financial loss due to litigation or
penalties by government authorities.
Mitigation
-- Engage legal experts at early stage to assess implications of new rules.
-- Stay connected and informed of relevant new and draft regulations.
-- Engage external consultants where necessary.
-- Raise awareness via principals' brand conference with an annual update on new regulations
that may have been implemented in other markets.
-- Lobby relevant associations and authorities through appropriate channels.
-- Perform early scenario planning to assess implications of new rules and prepare for
contingencies.
Mandarin Oriental International Limited
Responsibility Statements
The Directors of the Company confirm to the best of their
knowledge that:
a) the consolidated financial statements prepared in accordance
with International Financial Reporting Standards, including
International Accounting Standards and Interpretations adopted by
the International Accounting Standards Board, give a true and fair
view of the assets, liabilities, financial position and profit and
losses of the Group; and
b) the Chairman's Statement, Group Chief Executive's Review,
Financial Review and the Principal Risks and Uncertainties of the
Company's 2022 Annual Report, which constitute the management
report required by the Disclosure Guidance and Transparency Rule
4.1.8, include a fair review of all information required to be
disclosed under Rules 4.1.8 to 4.1.11 of the Disclosure Guidance
and Transparency Rules issued by the Financial Conduct Authority in
the United Kingdom.
For and on behalf of the Board
James Riley
Matthew Bishop
Directors
Dividend Information for Shareholders
In light of the modest level of underlying profit, no final
dividend in respect of the 2022 financial year will be paid
Mandarin Oriental International Limited
About Mandarin Oriental Hotel Group
Mandarin Oriental Hotel Group is an international hotel
investment and management group with luxury hotels, resorts and
residences in sought-after destinations around the world. Having
grown from its Asian roots over 60 years ago into a global brand,
the Group now operates 36 hotels and nine residences in 24
countries and territories, with each property reflecting the
Group's oriental heritage, local culture and unique design.
Mandarin Oriental regularly receives international recognition and
awards for outstanding service and quality management, and has a
strong pipeline of hotels and residences under development. The
Group has equity interests in a number of its properties and
adjusted net assets worth approximately US$4.9 billion as at 31st
December 2022.
Mandarin Oriental continues to drive its reputation as an
innovative leader in luxury hospitality, seeking selective
opportunities to expand the reach of the brand, with the aim to
maximise profitability and long-term shareholder value .
The parent company, Mandarin Oriental International Limited, is
incorporated in Bermuda and has a primary listing in the standard
segment of the London Stock Exchange, with secondary listings in
Bermuda and Singapore. Mandarin Oriental Hotel Group International
Limited, which operates from Hong Kong, manages the activities of
the Group's hotels. Mandarin Oriental is a member of the Jardine
Matheson Group.
- end -
For further information, please contact:
Mandarin Oriental Hotel Group International
Limited
James Riley / Matthew Bishop (852) 2895 9288
Chris Orlikowski (852) 2895 9167
Brunswick Group Limited
William Brocklehurst (852) 5685 9881
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2022 can be accessed via the Mandarin Oriental corporate website at
'https://www.mandarinoriental.com/en'.
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