Orient-Express Hotels announced its results for the fourth quarter and full year showing a 28 percent rise in profits before tax.For the fourth quarter net earnings were $6.7 million ($0.16 per common share) on revenue of $138.6 million compared with restated earnings of $4.5 million ($0.12 per common share) on revenue of $102.5 million in the prior year period.
Adjusted net earnings (before foreign exchange losses and refinancing costs) for the quarter were $9.2 million ($0.22 per common share), an increase of 138% over restated adjusted net earnings of $3.8 million ($0.10 per common share) the previous year. Adjusted earnings per common share were up 120% and revenue was up 35% over the fourth quarter of 2005. EBITDA increased from $22.1 million in 2005 to $32.4 million. Adjusted EBITDA increased by 50% to $33.2 million.
For the year ended December 31, 2006 net earnings were $39.8 million ($0.98 per common share) compared with restated earnings of $41.5 million ($1.09 per common share) in 2005. Revenue increased 14% from $447.7 million in 2005 to $510.5 million in 2006. Same store RevPAR increased 10% (11% in local currency) and EBITDA rose 28% from $108.3 million to $138.1 million.
EBITDA margins for the full year grew 300 bps from 24% in 2005 to 27% in 2006. For the fourth quarter EBITDA margins grew 190 bps.
Mr. Simon Sherwood, Chief Executive Officer, said “The increase in EBITDA over the prior year period in all regions is particularly encouraging. With the exception of the newly acquired Asian portfolio, the results can be considered same store. The overall EBITDA growth of $10.3 million was driven primarily by $7.9 million of growth for owned hotels and $1.4 million for the trains and cruises portfolio.”
Overall RevPAR growth was 15% in U.S. dollars (13% in local currency), driven equally by rate and occupancy.
The RevPAR growth was strongest in the Rest of the World region, which experienced 17% growth in U.S.dollars (19% in local currency), with Europe at 14% (6% in local currency) and the North America region at 8%.
Performance highlights by region, include:
Europe: Revenues were up 28% from $26.7 million in 2005 to $34.2 million in 2006. EBITDA increased $1.4 million or 81% to $3.1 million, with all properties in the region showing good revenue growth. Reid’s Palace and the Hotel Cipriani produced particularly strong results, as did Le Manoir aux Quat’Saisons.
North America: EBITDA of owned hotels was $5.6 million, up $3.0 million on the 2005 result of $2.6 million. The Windsor Court Hotel experienced revenue growth of 24% in a quarter which saw all U.S. properties show revenue growth. El Encanto was closed during the fourth quarter.
Southern Africa: EBITDA in South Africa grew $0.6 million to $4.6 million in the quarter, primarily due to better earnings at the Mount Nelson Hotel. The Westcliff Hotel had another good quarter, showing 40% revenue growth.
South America: Revenues at the South American properties grew 26% to $12.3 million. EBITDA grew $1.5 million to $5.3 million, a 4% increase. The Copacabana Palace Hotel accounted for all the growth.
Asia Pacific: The Observatory and Lilianfels both showed good growth combined with a strong quarter for several of the former Pansea properties, particularly in Koh Samui and Bali. EBITDA for the region increased $1.5 million up to $2.8 million.
Hotel management and part-ownership interests: EBITDA was $5.6 million compared with $5.0 million in the year earlier period. Charleston Place and the hotels in Peru were largely responsible for the gains.
Restaurants: EBITDA was $4.1 million compared with $3.1 million in the same period last year. This was primarily due to the results of the ‘21’ Club.
Tourist trains and river cruises: EBITDA was $5.8 million compared with $4.4 million in the prior year period. Improvements from the U.K. day trains and the Road to Mandalay are primarily responsible for this increase.
Key financial highlights:
The company has continued its strategy of refinancing core assets. The quarter included a $1.5 million write-off linked to the refinance of a number of the European and U.S. hotels. This refinancing resulted in an average reduction in the company’s debt margins of 25 bps.
The company closed its U.K. defined benefit pension plan in 2006 and replaced it with a defined contribution plan. Costs associated with this restructure totaled $0.8 million. Of the company’s 6000 employees fewer than 50 remain in defined benefit schemes.
In the fourth quarter the South African rand stabilized against the U.S. dollar, resulting in a non-cash gain of $0.9 million.
Mr. Paul White commented: “The tax rate was 34% in the fourth quarter and 25% for the year, net of one-time credits on recognition of certain deferred tax benefits. The company will be adopting FASB Interpretation no. 48 “Accounting for Uncertainty in Income Taxes” effective January 1, 2007 and expects to make an initial provision on adoption in the range of $27 million to $30 million.
Mr. Simon Sherwood reflected on 2006: “It has been a year of tremendous activity for the company. We undertook major refurbishment work in the year some of which had a material impact on the year’s results, particularly at Reid’s Palace in Madeira. We are already starting to see the benefit of this work both in results and forward bookings for 2007. In addition we completed refurbishment of another 120 rooms at the Grand Hotel Europe in St Petersburg, added meeting space and refurbished 36 suites at the Copacabana Palace in Rio de Janeiro, and made major improvements at several other hotels.
We have completed the acquisition of 7 hotels further expanding the Orient-Express Hotels portfolio and bringing extra earnings growth potential for the future. El Encanto, our hotel in Santa Barbara, is under refurbishment and will give us a very high quality property on the U.S. west coast. This combined with our stronger presence in Asia means we now have established a global platform that should facilitate our expansion over the next few years.”
He added: “Our property development business continues to show great promise. At St Martin the Cupecoy condominiums are now coming out of the ground. In addition, of the 8 new large villas we have under construction on the French side of the island, we initially put 6 on the market and all have already sold pre-construction at prices ranging from $5 million to $7 million each. We are also starting development of our land in Maroma, on the Mayan Riviera in Mexico where construction of the first model villa (of 27 planned) should start shortly.”