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Mandarin Oriental International Limited’s Latest Earnings: Revenue and Profit Stumbles

Mandarin Oriental International Limited (SGX: M04) reported its earnings for the first-half of 2015 yesterday evening. The reporting period was for 1 January 2015 to 30 June 2015.

Mandarin Oriental is an international hotel investment and management group with properties all over the globe. Jardine Strategic Holdings Limited (SGX: J37) is a majority owner of the company with a 74% stake.

You can read more about Mandarin Oriental in here or catch up with its previous earnings report here.

By the numbers

The following’s a quick take of Mandarin Oriental’s latest figures:

  1. Revenue for the first half of 2015 was US$295.2 million, down 13.4% compared to the same period last year.
  2. Profit attributable to shareholders declined sharply by 29% year over year to US$32.4 million.
  3. As such, earnings per share (EPS) for the reporting period followed suit with a 35% plunge from 4.37 US cents in the first half of 2014 to just 2.84 cents for the first half of 2015.
  4. Cash flow from operations came in at US$46.2 million with the purchase of tangible assets clocking in at US$14.1 million. The lower spending gave the hotel management outfit US$32.1 million in free cash flow, down from the US$42.7 million seen a year ago.
  5. As of 30 June 2015, the firm had US$281.3 million in cash and equivalents and US$445.8 million in borrowings. This is a solid improvement from a year ago on 30 June 2014 when it had US$296.4 million in cash and equivalents and US$804 million in borrowings.

In all, Mandarin Oriental appears to have stumbled out the gate for 2015 with a lower top-line and a fall in the bottom-line. The good thing is that the firm still maintains positive free cash flow which is important as its balance sheet is in a net debt position.

Speaking of debt, the group raised US$316 million through a one for four rights issue to fund its reduction in borrowings and an investment in Spain (more on this below). The rights issue increased the number of shares outstanding and acted as a drag on the earnings per share figure.

Mandarin Oriental’s board of directors proposed an interim dividend of US$0.02 cents per share for the first half of 2015, unchanged from the same period last year.

A peek into operations

Revenue for the period was affected by softer demand in Hong Kong and Paris as well as ongoing renovations. Revenue in Hong Kong and Europe fell 8.5% and 19.7% year over year, respectively, in the first half of 2015.

For the first half of 2015, the firm acquired Hotel Ritz (Madrid) for €130 million in a joint venture deal with The Olayan Group. The joint venture is expected to spend €90 million in a comprehensive renovation of the hotel in 2017. The total expenditure for this deal will cost Mandarin Oriental around €111 million (US$126 million).

Elsewhere, Mandarin Oriental secured a new management contract for a 74-room hotel in Beijing which will open in 2017. The firm also plans to undertake a £85 million renovation of its namesake hotel at Hyde Park, London in 2016. Mandarin Oriental has also ceased management of its San Francisco hotel.

Overall, Mandarin Oriental currently has 28 properties in operations with a further 17 properties under development. The total of 45 properties represent 11,000 rooms in 24 countries, with 21 hotels in Asia, nine in the Americas and 15 in Europe, Middle East, and North Africa.

In a short snippet, Ben Keswick, the Chairman of Mandarin Oriental, added his thoughts on the outlook ahead:

“While challenging conditions in some of Mandarin Oriental’s key markets are expected to influence full-year performance, the Group should continue to benefit from its strong overall competitive and financial position.”

Foolish summary

At its closing price of US$1.61 yesterday, Mandarin Oriental traded at 19.8 times its trailing earnings and has a dividend yield of about 4.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.