Orient-Express profits increased in the second quarter due to the excellent results of its European portfolio.
For the second quarter net earnings were US$19.7 million (US$0.46 per common share) on revenue of US$168.0 million, a decrease of 2% against net earnings of US$20.1 million (US$0.51 per common share) in the same quarter in 2006.
Adjusted net earnings were US$20.3 million (US$0.48 per common share) compared to adjusted net earnings of US$19.6 million (US$0.50 per common share) in the prior year period. In 2006 the quarter results included the impact of the sale of the company’s interest in Harry’s Bar.
Net earnings for the six months were US$16.0 million (US$0.38 per common share) on revenue of US$267.4 million, an increase in net earnings of 26% from US$12.7 million in the year earlier period. Earnings per common share increased 19% and revenue was up 21% over the first six months of 2006.
Adjusted net earnings for the six months were US$16.8 million (US$0.40 per common share), compared to adjusted net earnings of US$11.6 million (US$0.29 per common share) in the first six months of 2006.
President and CEO designate, Paul White, said, “Overall, the results of the quarter showed good growth and the performance of the European portfolio was excellent. Worldwide same store RevPAR growth in local currency increased 12% over the same period in 2006. South Africa, Asia and Trains and Cruises reported particularly strong results. The results of the quarter were underpinned by strong European and US demand. EBITDA margins grew to 30% in the quarter.”
In Brazil, Orient-Express Hotels expects to take over the operation of the 203 room Hotel Des Cataratas in Iguaçu, the only hotel located in the national park and adjacent to Iguaçu Falls, in early September 2007. A plan to renovate the hotel has been submitted and, subject to approval, works will begin in early 2008. It is not anticipated that any closure of the hotel will be required.
Progress has also been made on the acquisition of a 185,000 sq. m. (46 acres) parcel of land in Buzios, one of the most popular upscale destinations in Brazil, 180 km. (112 miles) north-east of Rio de Janeiro. The land will be used for the development of an all suite boutique resort of 40 rooms, along with a real estate development of 17 villas varying in size from 200-400 sq. m. (2,200-4,400 sq.ft.) Once the necessary permits have been granted, it is estimated that the resort will take 20 months to construct.
In addition, the company has successfully leased an additional 11,300 sq. m. (3 acres) of land abutting its hotel Jimbaran Puri Bali in Bali, Indonesia. Plans are being developed to build 22 new pool villas on this site to meet strong demand at this property.
Mr. White reviewed performance by region, as follows:
Europe: EBITDA of owned hotels grew 31% to US$31.8 million. Key contributors to the growth were the Italian hotels (up US$4.1 million), the Portuguese properties (up US$1.7 million) and the Grand Hotel Europe (up US$1.9 million). Same store RevPAR in Europe grew by 13% in local currency and 20% in U.S. dollars.
North America: EBITDA of owned hotels was US$3.3 million, a drop of US$1.0 million over the prior year period. This was primarily due to the results of the Windsor Court Hotel in New Orleans. The city continues to recover more slowly than originally expected following the 2005 hurricanes. Maroma Resort and Spa in Mexico recorded EBITDA growth of US$0.5 million in the quarter as it continues to show recovery post hurricane. Same store RevPAR in North America grew 6%.
Southern Africa: EBITDA of the Southern Africa portfolio grew by US$1.4 million to US$2.0 million, in what is traditionally the low season. The performance was underpinned by a strong quarter for the Mount Nelson.
South America: EBITDA for the quarter was US$0.2 million below that of the same period in 2006, due mainly to the impact of a very strong Brazilian Real on the U.S. dollar earnings of the Copacabana Palace.
Asia Pacific: EBITDA of owned hotels was US$0.2 million ahead of the prior year period at US$0.8 million. The Asian properties performed well, with positive rate movement in the region.
Hotel management fees and part-ownership interests: EBITDA was US$7.0 million compared with US$6.3 million in the year earlier period. Earnings from Charleston Place were up 6% and earnings from Hotel Ritz Madrid were up 69%, as the hotel and city of Madrid see market improvements.
Restaurants: EBITDA decreased US$0.2 million to US$1.3 million. The decrease in EBITDA was primarily due to the loss of earnings from Harry’s Bar following the sale of the company’s interest during the second quarter of 2006.
Tourist trains and river cruises: EBITDA was US$8.7 million compared with a prior year EBITDA of US$5.4 million, a 61% increase. The performance of the Venice Simplon-Orient-Express, the U.K. day trains and the fully acquired Royal Scotsman have contributed to this result. The company’s Peruvian rail operations contributed US$3.0 million, a growth of US$1.0 million over the same period in 2006.
Real Estate: The company recorded US$0.8 million of real estate revenues in the second quarter relating to sales at Keswick Hall, Virginia. Both Cupecoy and the French-side villa developments in St. Martin continue to progress in line with management’s expectations.
Earnings before tax for the six months were US$24.6 million, an increase of US$8.8 million from US$15.8 million in the first six months of 2006. The tax charge for the six months was US$8.6 million compared to US$3.1 million in the prior year. The 2007 charge reflects continued net operating loss utilization and increased profitability in tax paying countries, particularly in Europe. The 2007 charge includes a tax charge of US$0.7 million in respect of the company’s FIN 48 liability. The company adopted FIN 48 on January 1, 2007, so there was no comparable tax cost in the prior year. The 2006 tax charge included a US$3 million tax credit arising on the recognition of tax losses carried forward at Bora Bora Lagoon Resort.
Executive Succession: As previously announced, the Board of Directors of Orient-Express Hotels has appointed Paul White as President and Chief Executive Officer, effective August 10, 2007, to succeed Simon Sherwood.
James B. Hurlock, Chairman of the Board of Orient-Express Hotels, said, “Our customers, shareholders, and employees will benefit from Paul’s 16 years’ experience with Orient-Express Hotels. He is steeped in its culture and has already proved his ability to deliver profits in the regions he has managed. Paul and the Board have a shared vision for the future and we have every confidence that he will lead the company very successfully into its next stage of growth.”
The Board of Directors, working closely with management, is in the process of recruiting a new Chief Financial Officer.
Mr. Hurlock concluded, “The Board of Orient-Express Hotels sincerely thanks Simon Sherwood for his exceptional contribution in positioning the company at the forefront of luxury tourism and wishes him well in his future endeavors.”