Mandarin Oriental International Limited’s Latest Earnings: Profit Stumbles (Again)

Mandarin Oriental International Limited (SGX: M04) reported its latest earnings yesterday evening. The reporting period was for the six month period from 1 January 2016 to 30 June 2016.

As a brief background, Mandarin Oriental is an international hotel investment and management group with properties all over the globe. Its main shareholder, Jardine Strategic Holdings Limited (SGX: J37), holds about three-quarters of its ordinary shares and the associated voting rights.

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

By the numbers

The following’s a quick rundown on some of the latest financial figures for Mandarin Oriental:

  • Revenue for the first-half of 2016 was US$288.2 million, down 2.4% compared to the same period last year.
  • Underlying profit attributable to shareholders was down sharply, declining by 26% from US$33.4 million in the first-half last year to US$24.7 million for the reporting period.
  • As such, underlying earnings per share (EPS) for the reporting period plunged 33% from US$0.0292 in the first-half of 2015 to US$0.0197.
  • Cash flow from operations came in at US$32.2 million with purchase of tangible assets clocking in at US$31.2 million. The lower spending gave the hotel management outfit US$1 million in free cash flow. This is much lower than the US$32.1 million seen a year ago (US$46.2 million in cash flow from operations and US$14.1 million in purchase of tangible assets.)
  • As of 30 June 2016, the firm had US$181.5 million in cash and equivalents and around US$485.3 million in borrowings. This was a reduction from the US$281.3 million in cash and equivalents and US$446 million in borrowings that were recorded on 30 June 2015.

In all, Mandarin Oriental was lackluster in the first-half of 2016 with its sales and profit declining. The firm was also barely free cash flow positive and saw a reduction its cash position and an increase in debt.

The board of directors proposed an interim dividend of US$0.015 per share for the first-half of 2016, down from the US$0.02 seen in the same period last year.

A peek into the operations

Revenue for the period was affected by softer demand in Hong Kong, London and Paris. Revenue in Hong Kong and Europe fell by 4.7% and 10.6% year-on-year, respectively, in the first-half of 2016.

During the reporting period, the firm acquired Mandarin Oriental (Boston) for US$140 million. The firm also plans to undertake a £85 million renovation of its namesake hotel at Hyde Park, London. The renovation is expected to take 18 months, beginning in September 2016.

Mandarin Oriental currently has 29 hotels and eight residences in operations and has a “strong pipeline of hotels and residences under development.”

In a short snippet, the chairman of Mandarin Oriental, Ben Keswick, shared his thoughts on the company’s outlook ahead:

“Challenging trading conditions are expected to continue to impact the Group’s performance during the second half of the year. Nevertheless, the Group benefits from its strong competitive position and balance sheet.”

At its closing price of US$1.36 yesterday, Mandarin Oriental traded at 20.7 times trailing price to earnings.

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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.