Orient-Express Hotels Ltd, owners or part-owners and managers of 50 luxury hotels, restaurants, tourist trains and river cruise properties operating in 24 countries, today announced its results for the fourth quarter and full year ended December 31, 2009.
Fourth Quarter Earnings Summary
- Fourth quarter total revenues, excluding Real Estate, up 17%
to $113.6 million
- Same store revenue from owned hotels up 13%
- Same store RevPAR down 7% in local currency, up 11% in US dollars
- Trains and cruises revenue up 7%
- Adjusted EBITDA before Real Estate, up $3.3 million to $13.5
- In January 2010, raised $131 million of cash in common share
offering for acquisition of strategic assets in Sicily, debt reduction
and general corporate purposes
- In January 2010, acquired Grand Hotel Timeo and Villa Sant’Andrea
in Taormina, Sicily for EUR81 million ($117 million)
- Joint venture in Peru acquired fourth property, Hotel Rio Sagrado
in the Sacred Valley of the Incas, between Cuzco and Machu Picchu
- Sold Lilianfels Blue Mountains, Australia for AUD21 million
- Concluded sale of Windsor Court Hotel, New Orleans for $44.25
- Total proceeds from non-core asset sales agreed in 2009 of $108
- Sold a further 10 apartments at Porto Cupecoy, St. Martin for
For the fourth quarter, the Company reported a net loss of $16.8 million (loss of $0.22 per common share) on revenue of $113.6 million, compared with a net loss of $48.1 million (loss of $1.04 per common share) on revenue of $70.7 million in the fourth quarter of 2008. The net loss from continuing operations for the period was $9.1 million (loss of $0.12 per common share), compared with a net loss of $39.8 million (loss of $0.86 per common share) in the fourth quarter of 2008. The adjusted net loss from continuing operations for the period was $9.6 million ($0.12 per common share), compared with adjusted net earnings of $0.1 million ($0.00 per common share) in the fourth quarter of 2008.
Paul White, President and Chief Executive Officer said, “The early signs of stability seen at the end of the third quarter continued through quarter four, with growth in hotel revenues in all regions and overall revenues (pre Real Estate) up 17%. EBITDA margin was ahead of 2008, with the result that adjusted EBITDA (pre Real Estate) grew by $3.3 million to $13.5 million. Whilst we cannot yet celebrate the end of these challenging times, these results, coupled with improved bookings pace, are strong indicators that the revenue and RevPAR declines of 2009 will not be repeated in 2010.
“In January 2010, we completed the acquisition of two rare assets in Italy, supported by a $131 million equity raise. Elements of this purchase meet every one of Orient-Express Hotels’ investment criteria, including the unique and iconic status of the Grand Hotel Timeo, the location of the properties, the financial upside and barriers to entry. They typify Orient-Express Hotels’ core business - established properties with history and personality. Currently, they both punch below their weight and because they occupy a premier position in the Sicilian market, we are confident we can make significant improvements in performance, as we integrate the properties into the Orient-Express Hotels collection and bring RevPAR and operating margins in line with our existing Italian portfolio. The two hotels will open, post initial renovations, in May 2010.
“2009 has been a very challenging year,” White continued, “with revenues from continuing operations (pre Real Estate) down 14%, or $76.8 million. We have maintained discipline in all areas of expenditure, and most importantly we have made good progress in the management of the portfolio. Hotel das Cataratas was renovated to Orient-Express standards, we increased the number of keys at Jimbaran Puri Bali by 22 and we relaunched an improved Road to Mandalay after it was badly damaged in Cyclone Nargis. Porto Cupecoy, our Real Estate development in St. Martin, successfully opened in January 2010.”
Revenue, excluding Real Estate revenue, was $113.6 million in the fourth quarter of 2009, up $16.8 million from the fourth quarter of 2008. On a same store basis, revenue, excluding Real Estate revenue, was up 9% in US dollars or by $8.7 million.
Revenue from Owned Hotels for the fourth quarter was $90.5 million, including $11.6 million from Charleston Place, South Carolina, which was consolidated from January 1, 2009. On a same store basis, revenue from Owned Hotels increased by 13% year over year. Owned Hotels same store RevPAR was down 7% in local currency. However, because of a weakening of the US dollar in the last quarter, RevPAR in US dollars was up 11% compared to the fourth quarter of last year.
Trains and Cruises revenue in the fourth quarter was $16.2 million, an increase of 7% over the prior year.
Adjusted EBITDA before Real Estate and Impairment was $13.5 million compared to $10.2 million in the prior year. The principal variances from the fourth quarter of 2008 included results from owned hotels in Italy (up $3.8 million), Grand Hotel Europe, St Petersburg (up $1.8 million), La Samanna, St. Martin (down $1.5 million), Mount Nelson Hotel, Cape Town (down $1.6 million), and Venice Simplon-Orient-Express (up $1.1 million).
In October, the Company entered into conditional agreements to purchase two hotels in Taormina, Sicily - the 83-room Grand Hotel Timeo, widely considered the most luxurious hotel in Taormina, and the 78-room Villa Sant’Andrea, a nearby hotel on the city’s Bay of Mazzaro with a private beach. The acquisition was completed in January 2010. The total price of the two hotels was approximately $117 million, of which $37 million was paid in cash and the balance was in the form of assumption of existing and new indebtedness relating to the two properties.
In December, the Company’s 50% joint venture company, Peru OEH SA, acquired a fourth property in Peru, the existing Hotel Rio Sagrado in the Sacred Valley of the Incas. The 21 suite property, which opened in April 2009, was acquired for US$7 million, funded from the joint venture’s cash reserves plus long term debt of $2.5 million. This brings to five the number of Orient-Express hotels in Peru.
Also in December, agreement was reached to sell Lilianfels Blue Mountains, Australia for AUD21 million ($19.3 million). The cash proceeds from this sale were received in January 2010.
Finally in December, the Company signed an agreement to sell its La Cabana restaurant in Buenos Aires including the real estate for $2.7 million. Completion is scheduled to take place in March 2010.
The sale of the Windsor Court Hotel, New Orleans to The Berger Company, Inc. was concluded in October for $44.3 million.
After taking account of the sale of Lapa Palace, Lisbon, in June 2009 for $42 million, the Company executed during the year four sales of non-core assets for a total amount of $108 million, of which a balance of $19 million will be received later in 2010.
In October, La Residence d’Angkor in Siem Reap, Cambodia, opened eight luxury suites in a new wing of this boutique city resort, bringing the total number of rooms at the property to 62. The rooms are located above a new Kong Kea Spa, which has six treatment rooms.
During the quarter, Hotel das Cataratas was relaunched under the Orient-Express brand, following a $27 million renovation to raise the hotel to international standards of style, design and service.
In December, the Company entered into a deferred sale agreement with the luxury destination club Quintess, The Leading Residences of the World, which has the option to purchase four of La Samanna’s free-standing villas for proceeds of $16 million in the first year, $17 million in the second year or $18 million in the third year and will make option payments of up to approximately $0.9 million on each villa.
Porto Cupecoy enjoyed strong sales in the run-up to completion of the construction, with ten apartment contracts signed during the quarter, and a further five units sold since the end of the year. This means that 99 units or 54% of the total are now sold. The grand opening of the development took place in January 2010.
On January 19, 2010, the Company completed its public offering of 13.8 million class A common shares including 1.8 million shares covered by the underwriters’ over-allotment option which was exercised in full. The Company intends to use the net proceeds, $131 million, primarily to pay the cash portion of the purchase price of the two hotels in Taormina, Sicily, and for debt reduction and general corporate purposes.
Europe: In the fourth quarter, revenues from Owned Hotels were $28.2 million, up 23% from $23.0 million in the fourth quarter of 2008. Same store RevPAR for the region fell by 7% in local currency. EBITDA was $1.0 million in 2009 versus an EBITDA loss of $4.1 million in the prior year. For the region, the effect of the weakening US dollar in the fourth quarter of 2009 compared to a strengthening US dollar in the fourth quarter of 2008 had a $3.2 million positive impact on EBITDA versus the prior year.
North America: Revenue was $24.6 million in the fourth quarter, including $11.6 million from Charleston Place. Excluding this hotel, revenue was $1.5 million lower than the fourth quarter of 2008. Excluding EBITDA of $3.2 million from Charleston Place, there was an EBITDA decrease of $1.1 million. Same store RevPAR for the region fell by 18%.
Southern Africa: Revenue of $9.2 million was 9% lower year over year, and EBITDA of $2.6 million was $1.6 million lower than the fourth quarter of 2008.
South America: Revenue was $19.6 million in the fourth quarter, compared to $14.7 million in the prior year. EBITDA was unchanged at $4.1 million. Copacabana Palace had a RevPAR increase of 27% in local currency, and EBITDA was up by $0.4 million. Hotel das Cataratas, which was relaunched as an Orient-Express hotel in October 2009, contributed an EBITDA loss of $1.2 million, compared to an EBITDA loss of $0.6 million in the prior year.
Asia Pacific: Revenue for the fourth quarter of 2009 was $5.2 million, an increase of 7% year over year. EBITDA was $1.7 million compared to $1.5 million in the fourth quarter of 2008. Same store RevPAR in local currency for the region increased by 4%.
Hotel management and part-ownership interests: EBITDA for the fourth quarter of 2009 was $1.2 million compared to $5.7 million in the fourth quarter of 2008, which included $3.5 million of EBITDA from Charleston Place. The fall in EBITDA on a same store basis was mostly attributable to Hotel Ritz Madrid, which continues to operate in adverse market conditions.
Restaurants: Revenue from restaurants in the fourth quarter of 2009 was $5.7 million, compared to $6.3 million in the fourth quarter of 2008, and EBITDA was $1.7 million compared to $2.0 million in the prior year.
Trains and Cruises: Revenue increased by 7% to $16.2 million in the fourth quarter of 2009. EBITDA increased by $1.9 million to $4.6 million. The prior year quarter included a non-recurring restructuring charge of $0.8 million.
Central costs: In the fourth quarter of 2009, central costs were $6.5 million compared with $11.0 million in the prior year period. The prior year quarter included $3.3 million of restructuring charges and other non-recurring costs.
Real Estate: In the fourth quarter of 2009 there was an EBITDA loss of $1.9 million from real estate activities, primarily relating to sales and marketing costs for Porto Cupecoy, which have been expensed in the current year in line with US GAAP. During the quarter, a further ten units were sold for a total value of $6.7 million.
Depreciation and amortization: The depreciation and amortization charge for the fourth quarter of 2009 was $11.3 million compared with $7.7 million in the fourth quarter of 2008. The current quarter includes $1.4 million relating to Charleston Place, which was consolidated from January 1, 2009. Additionally, there was a $0.4 million impact from the effect of the weakening US dollar in the fourth quarter of 2009 compared to a strengthening US dollar in the fourth quarter of 2008.
Interest: The interest charge for the fourth quarter of 2009 was $6.7 million compared to $13.8 million in the fourth quarter of 2008. The prior year quarter included a non-cash charge of $4.3 million arising on interest rate swaps that did not qualify for hedge accounting.
Tax: The tax charge for the fourth quarter of 2009 was $2.6 million, including ASC 740 credits of $0.1 million and excluding a tax charge in respect of discontinued operations of $2.1 million, compared to a credit of $7.9 million in the same quarter in the prior year, which included ASC 740 credits of $12.7 million but excluded a tax charge in respect of discontinued operations of $1.6 million. Excluding ASC 740 credits, the Company’s reported tax charge would have been $2.7 million for the 2009 quarter and $4.8 million for the same quarter last year.
Discontinued operations: The charge for the fourth quarter of 2009 was $7.7 million. Discontinued operations in the fourth quarter include the results of Bora Bora Lagoon Resort, La Cabana and Lilianfels Blue Mountains. The charge includes an operating loss in the quarter, net of tax, of $3.6 million, a loss on sale of the Windsor Court Hotel of $1.1 million and an expense of $2.9 million in respect of an insurance claim relating to the Windsor Court.
Investment: The Company invested $11.0 million during the quarter in the Company’s development at Porto Cupecoy and $2.6 million in Hotel das Cataratas. There was additional capital expenditure in the fourth quarter of $5.3 million.
Liquidity and Capital Reserves
At December 31, 2009, the Company had long term debt of $811.7 million, working capital loans of $6.7 million and cash balances of $92.0 million (including $19.9 million of restricted cash), giving a total net debt of $726.4 million compared with total net debt of $705.8 million at the end of the third quarter of 2009. Additionally, at December 31, 2009, Other Liabilities Held for Sale included $6.8 million of debt relating to Lilianfels Blue Mountains, which was repaid in January 2010 when the hotel was sold.
At December 31, 2009, undrawn amounts available to the Company under committed short-term lines of credit were $30.6 million and undrawn amounts available to the Company under secured revolving credit facilities were $12.0 million, bringing total cash availability at December 31, 2009, to $134.6 million, including restricted cash of $19.9 million. The Company’s liquidity was improved by $94 million after raising $131 million from its equity offering, which was completed on January 19, 2010, and after paying $37 million for the cash portion of the purchase price for the two hotels acquired in Taormina, Sicily. The acquisition of these two hotels included the assumption of existing and new indebtedness of $80.0 million relating to the properties maturing mostly in 2013.
At December 31, 2009, approximately 56% of the Company’s debt was at fixed interest rates and 44% was at floating interest rates. The weighted average maturity of the debt was approximately 2.8 years and the weighted average interest rate (including margin and swaps) was approximately 3.5%.
Recent Events in Peru, Bora Bora and Madeira
Heavy rains in late January 2010 caused flooding in the Machu Picchu region of Peru resulting in a series of landslides which severely damaged and eroded railway tracks of the Company’s rail joint venture between Cuzco, Ollantaytambo and Machu Picchu. Services are currently suspended and none of the joint venture’s trains has been able to operate between Ollantaytambo and Machu Picchu since January 23.
Engineers from the Company’s rail joint venture have repaired the track between Machu Picchu and Hydroelectrica, a town upriver from Machu Picchu, and estimate that works to the damaged tracks between Ollantaytambo and Machu Picchu, the main access route for tourist and local trains from Cuzco, will be completed by early April, subject to favorable weather conditions.
Management expects the cost of repairs and the disruption to rail operations to be covered by the rail joint venture’s insurance.
The 31 room Machu Picchu Sanctuary Lodge, part of the Company’s hotel joint venture in Peru was not damaged by the floods. Hotel Rio Sagrado, in the Sacred Valley, has reopened, having been evacuated when river levels were very high. The property was not damaged.
On February 4, 2010, Bora Bora Lagoon Resort & Spa, French Polynesia, was hit by tropical Cyclone Oli, with wind speeds reaching 160km per hour. The resort sustained damage and is not expected to re-open before September 2010. It is covered under the Company’s global insurance program.
On February 20, 2010, Madeira experienced heavy rains which temporarily closed the airport and caused major flooding in Funchal. Reid’s Palace was not damaged and is operating normally, but it is not yet known what the impact of cancellations may be. Guests who do not wish to travel in the next couple of weeks are being allowed to rebook during 2010.