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Mandarin Oriental International Limited’s Latest Earnings: Another Year in the Doldrums

Yesterday, Mandarin Oriental International Limited (SGX: M04) reported its earnings. The reporting period was for 1 January 2016 to 31 December 2016.

As a brief background, Mandarin Oriental is an international hotel investment and management group with properties all over the globe. The group’s main shareholder, Jardine Strategic Holdings Limited (SGX: J37), holds about 74% of its ordinary shares and the associated voting rights.

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

By the numbers

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

  1. Revenue for 2016 was US$597.4 million, down 1.6% compared to 2015.
  2. Underlying profit attributable to shareholders fell 37% year-on-year, declining from US$90.3 million in 2015 to US$57.3 million in 2016.
  3. Underlying earnings per share (EPS) for the reporting period followed suit with a 39% decline from US$0.0753 in 2015 to US$0.0456 in 2016.
  4. Cash flow from operations came in at US$107.7 million with purchase of tangible and intangible assets clocking in at US$79.7 million. The lower spending gave the hotel management outfit US$28 million in free cash flow. This is much lower than the free cash flow of US$88.7 million that Mandarin Oriental generated in 2015.
  5. As of 31 December 2016, the firm had US$182.5 million in cash and equivalents and US$479.9 million in borrowings. This is a step back from the US$308.6 million in cash and equivalents and US$440.4 million in borrowings recorded at the end of 2015.

In all, Mandarin Oriental endured another tough year in 2016. Both revenue and profit came in lower compared to 2015, a year which also saw top-line and bottom-line declines. The firm’s free cash flow in 2016 was also substantially lower while its net debt rose.

The board of directors had proposed a final dividend of US$0.025 per share for 2016. Together with the interim dividend of US$0.015, Mandarin Oriental will be paying out US$0.04 per share in dividend for 2016, down 20% from 2015’s dividend.

A peek into operations

Revenue for the period was impacted by softer demand in Hong Kong, London and Paris. London was impacted more due to ongoing renovations.

Revenue from Hong Kong fell from US$238.6 million in 2015 to US$224.5 million in 2016. The results from the special administrative region were affected by a decline in visitor arrivals and a softening corporate sector. Meanwhile, the Europe segment’s revenue fell 13.2% from US$204.9 million in 2015 to US$177.8 million in 2016. Paris continues to be weak due to ongoing travel security concerns.

The aforementioned revenue declines were offset by better sales performance from the Other Asia segment and the Americas segment. The former recorded US$106.4 million in revenue while the latter pitched in with US$88.7 million.

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

“Challenging market conditions are expected to continue to impact the Group, and earnings will also be disrupted by the renovation of the London hotel. Nevertheless, the Group’s strong brand position, healthy balance sheet and continued portfolio development will underpin its future performance.”

Mandarin Oriental currently operates 29 properties and eight residences in 19 countries.

At its closing share price of US$1.28 yesterday, Mandarin Oriental traded at 28.1 times trailing earnings and has a dividend yield of 3.1%.

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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.