HONG KONG, Aug. 27, 2009
Highlights
Key financial results
* Turnover decreased by 18% to HK$1,962 million.
* EBITDA decreased by 41% to HK$411 million.
* Profit before non-operating items and taxation decreased by
62% to HK$182 million.
* Profit attributable to shareholders decreased by 71% to HK$462
million.
* Earnings per share decreased by 71% to HK$0.32.
* Shareholders' funds as at 30 June 2009 amounted to HK$21.3
billion (HK$14.49 per share).
* Adjusted net asset value as at 30 June 2009 amounted to HK$26.3
billion (HK$17.96 per share).
* Gearing ratio increased to 9% (2008: 5%).
* Interim dividend of 3 HK cents (2008: 6.5 HK cents) per share.
Milestones
* Construction and fit-out of The Peninsula Shanghai
hotel is close to completion for soft opening in the last quarter of 2009.
* HSH entered into definitive agreements with Qatari Diar Real
Estate Investment Company for the development of a Peninsula hotel in Paris,
France. Design and construction of this hotel is underway with the opening
of the hotel scheduled in 2012.
* Renovation of The Repulse Bay Arcade is nearing completion
and the Arcade will be re-opening in phases during the autumn of this year.
* HSH's wholly-owned subsidiary, HSH Financial Services Limited,
signed a HK$1.225 billion four year term loan facility with a group of
seven international banks.
The unaudited interim results announced today by The Hongkong and Shanghai
Hotels, Limited (HSH) reflect the difficult business environment in which
the Group has operated for the first six months of 2009.
Commenting on the Group's interim results, Managing Director and Chief
Executive Officer Mr. Clement K.M. Kwok said, "The Hotels division suffered
a significant drop in revenue as compared to the first six months of last
year, as occupancies and room rates continued to be adversely affected
by the global economic crisis, while our hotel properties in Asia have
suffered during the latter part of the first half-year from travel being
deterred or curtailed due to the human H1N1 virus precautionary measures
imposed by various governments. In the Commercial Properties division,
where our principal assets are located in Hong Kong, rental rates and occupancies
have held up relatively well. The Clubs and Services division has maintained
a reasonable performance in this economic environment, with consistent
revenue being achieved by the Peak Tram."
The total turnover for the period amounted to HK$1,962 million, down
18% over the same period in 2008. EBITDA (earnings before interest, tax,
depreciation and amortisation) decreased by 41% to HK$411 million.
After taking into account depreciation and net financing charges, profit
before non-operating items and taxation amounted to HK$182 million. Revaluation
gains on investment properties amounted to HK$413 million (2008: HK$1,267
million).
Profit attributable to shareholders in the six months amounted to HK$462
million. The total tax charge was HK$116 million (2008: HK$112 million),
including the impact of deferred taxation.
Earnings per share were HK$0.32 (2008: HK$1.12). Excluding non-operating
items and the related tax and minority interests, earnings per share decreased
by 78% to HK$0.08 (2008: HK$0.37).
Shareholders' funds increased to HK$21.3 billion or HK$14.49 per share.
Net borrowings increased to HK$2.1 billion and the Group's gearing ratio
increased to 9% mainly due to the investment of HK$1,044 million made in
respect of the Peninsula Paris project. The Company has also provided a
calculation of the adjusted net assets attributable to shareholders, which
after taking into account the fair market valuations of hotel properties
and golf courses and a write-back of deferred taxation on property revaluation
surpluses arising in Hong Kong, amounted to HK$26.3 billion or HK$17.96
per share.
The Directors have resolved to pay an interim dividend of 3 HK cents
per share (2008: 6.5 HK cents per share).
Business Overview
Hotels Division
Revenue for the Hotels division in the first six months of 2009 was
22% below the same period last year. Revenue per available room (RevPAR)
fell 31% in the US and 32% in Asia. Continuing strong revenue from the
commercial arcades in The Peninsula Hong Kong and The Peninsula Beijing
was helpful in supporting the profitability of those hotels.
In Asia, turnover for The Peninsula Hong Kong decreased by 16% compared
to the same period in 2008. Business at this hotel was holding up relatively
well during the early part of the year but was significantly adversely
affected by the government's precautionary measures imposed to control
the spread of the human H1N1 virus, which led to a marked reduction in
room bookings. Demand has so far held up in the hotel's office and retail
arcade spaces, which posted higher revenues than last year. At The Peninsula
Tokyo, the revenue shortfall was 8% against 2008. An increase in the number
of luxury hotels in Tokyo has led to intense pricing competition to offset
the weak demand from domestic and international visitors. At The Peninsula
Bangkok, the hotel's turnover was 46% below the same period in 2008. Following
the political unrest in November 2008, there was a dramatic slowdown in
arrivals from both domestic and long haul markets and this was further
exacerbated by the civil unrest experienced in April 2009. At The Peninsula
Beijing, there was a 32% revenue shortfall compared to the same period
in 2008. The commercial operations of the hotel remained strong, with the
retail arcade achieving the same level of revenue as it did in the same
period last year. The Peninsula Manila recorded a 22% shortfall in revenue
compared to the same period in 2008, impacted by the prevailing weak economic
conditions.
In the US, revenue at The Peninsula New York was 15% below the same
period in 2008. Although RevPAR decreased by 25%, the hotel has improved
its position relative to its main competitors. The Peninsula Chicago's
revenue decreased by 31% compared to the same period in 2008. The hotel's
RevPAR was 37% lower, with the greatest impact on occupancy levels being
in the group and negotiated corporate segments. At The Peninsula Beverly
Hills, the hotel's revenue reduced by 28% as compared to the same period
in 2008. Corporate business travellers reduced their length of stay leading
to suite sales being down by 15%. At Quail Lodge Resort, room occupancy
was 14 percentage points lower than the same period last year and average
room rate fell by 15%, driving all other revenues down.
Key Statistics for the six
months
ended June 30, 2008
(1 HKD = 0.129021 USD)
. |
Occupancy % for the six months ended
June 30, 2009 |
Occupancy % for the six months ended
June 30, 2008 |
Average Room Rate for the six months
ended June 30, 2009 (USD) |
Average Room Rate for the six months
ended June 30, 2008 (USD) |
% RevPAR Change |
The Peninsula Hong Kong |
52% |
73% |
US$ 505 |
US$ 524 |
-31% |
The Peninsula New York |
53% |
60% |
US$ 645 |
US$ 766 |
-25% |
The Peninsula Chicago |
49% |
65% |
US$ 379 |
US$ 454 |
-37% |
The Peninsula Beverly Hills |
58% |
82% |
US$ 674 |
US$ 696 |
-31% |
The Peninsula Tokyo |
56% |
62% |
US$ 457 |
US$ 493 |
-15% |
The Peninsula Bangkok |
45% |
76% |
US$ 199 |
US$ 226 |
-47% |
The Peninsula Beijing |
32% |
49% |
US$ 182 |
US$ 239 |
-50% |
The Peninsula Manila * |
56% |
63% |
US$ 129 |
US$ 147 |
-23% |
Quail Lodge Resort |
50% |
64% |
US$ 210 |
US$ 247 |
-33% |
.
The following is a summary of the performances of our hotels.
The Peninsula Hong Kong Turnover for The Peninsula Hong Kong
decreased by 16% compared to the same period in 2008. Business at this
hotel was holding up relatively well during the early part of the year
but was significantly adversely affected by the government�s precautionary
measures imposed to control the spread of the human H1N1 virus, which led
to a marked reduction in room bookings. Demand has so far held up in the
hotel�s office and retail arcade spaces, which posted higher revenues than
last year.
The Peninsula New York The hotel�s revenue was 15% below the
same period in 2008. Although RevPAR decreased by 25%, the hotel has improved
its position relative to its main competitors. The hotel is undertaking
several capital improvement projects including guestroom refurbishments
and a renovation of its meeting rooms floor. The newly opened and completely
renovated Peninsula Spa has attracted favourable guest comments although
it will take some time to build up its business under the current economic
conditions.
The Peninsula Chicago The hotel�s revenue decreased by 31% compared
to the same period in 2008. The hotel�s RevPAR was 37% lower, with the
greatest impact on occupancy levels being in the group and negotiated corporate
segments. In terms of requisite capital improvement work, the hotel�s guestrooms
and suites were enhanced with new technological features and soft furnishings.
The Peninsula Beverly Hills The hotel�s revenue reduced by 28%
as compared to the same period in 2008. Corporate business travellers reduced
their length of stay leading to suite sales being down by 15%. The hotel�s
payroll was 10% lower than the same period last year, and other operating
expenses dropped 28%.
The Peninsula Tokyo The revenue shortfall at the hotel was 8%
against 2008. An increase in the number of luxury hotels in Tokyo has led
to intense pricing competition to offset the weak demand from domestic
and international visitors. The hotel has been working hard in its second
full-year of operation to reduce its cost base and improve productivity
and this has been beneficial in improving the hotel�s operating results.
The Peninsula Bangkok The hotel�s turnover was 46% below the
same period in 2008. Following the political unrest in November 2008, there
was a dramatic slowdown in arrivals from both domestic and long haul markets
and this was further exacerbated by the civil unrest experienced in April
2009. An aggressive approach has been taken to manage operating costs,
in particular energy conservation and purchases.
The Peninsula Beijing The hotel�s cost reduction efforts helped
to mitigate the profit impact from the 32% revenue shortfall compared to
the same period in 2008. The commercial operations of the hotel remained
strong, with the retail arcade achieving the same level of revenue as it
did in the same period last year.
The Peninsula Manila Although the renovation of all guestrooms
was completed last October, we have not yet seen the expected growth due
to the prevailing weak economic conditions, with a 22% shortfall in revenue
compared to the same period in 2008. Nielsen's restaurant is under renovation
for five months and will re-open in October 2009 as a new concept restaurant,
to be called Escolta.
Quail Lodge Room occupancy was 14 percentage points lower than
the same period last year and average room rate fell by 15%, driving all
other revenues down, most notably banquet and catering revenues. Compared
to last year, revenues were HK$18 million (31%) lower but gross operating
profit was only HK$6 million less.
Commercial Properties Division
Turnover from the Commercial Properties division was 2% lower than the
first six months of 2008.
Turnover for The Repulse Bay Complex decreased by 5% compared to the
same period in 2008. Whilst there has been a general drop in demand and
tenant enquiries for residential property in Hong Kong, our occupancy levels
have held up reasonably well and rental rates have remained stable.
Total revenue from The Peak Tower and St. John's Building increased
by 1% and 9% respectively over the same period in 2008, with the Peak Tower
remaining fully let. Revenue from the Sky Terrace was maintained at the
same level although the number of visitors was 3% higher. Stronger rental
rates in St. John's Building were sufficient to offset the reduced occupancy.
Total revenue for The Landmark increased by 23% compared to the same
period in 2008. Residential and office spaces in the complex remained fully
let. The monthly yield per square foot has increased substantially year-on-
year due to higher demand especially for office spaces.
Clubs and Services Division
Revenue from the Clubs and Services division was 9% below the same period
in 2008, with lower revenue in all businesses apart from the Peak Tram.
Although there has been a drop in overall tourist arrivals to Hong Kong,
revenue from the Peak Tram was consistent with the same period in 2008,
with 2.3 million passengers in each period.
Revenue from Peninsula Clubs and Consultancy Services was in line with
the same period in 2008, with increased revenue from consultancy fees and
Cathay Pacific Lounges offsetting reduced management fees from other businesses.
There has been a 13% drop in revenue in Peninsula Merchandising, which
has wholesale and retail merchandise operations in Hong Kong, Japan and
other countries. Revenue in Tai Pan Laundry has fallen by 12% compared
to 2008, although lower diesel oil prices and controlled costs resulted
in similar profit levels to 2008.
New Hotel Projects
Significant progress has been made in The Peninsula Shanghai project
in the first six months of the year. The construction and fit-out of the
hotel tower is close to completion and on schedule to begin operation with
a soft opening in the last quarter of 2009. Guestroom floors were handed
over in phases and the operations management team moved into the hotel
in mid May to begin pre-opening preparations. By the end of June, the number
of staff had grown to 171. Marketing for the hotel also commenced with
the hotel starting to accept reservations in early June, while senior executives
travelled to Europe, the United States, as well as key cities in Asia and
mainland China to promote the hotel. In the hotel apartment tower, final
designs and fit-out for the 39 apartments are underway. It is expected
that the grand opening of the entire complex will take place in spring
2010, prior to the commencement of the World Expo in Shanghai.
In January 2009, HSH entered into definitive agreements with Qatari
Diar Real Estate Investment Company (Qatari Diar) for the development of
a Peninsula hotel in Paris, France in an historic building located on Avenue
Kleber, close to the Arc de Triomphe. HSH has invested a total amount of
Euro 102 million (HK$1.04 billion) into a subsidiary of Qatari Diar, called
Al Maha Majestic S.a r.l., in which HSH has a 20% shareholding interest
and which owns the building to be developed into The Peninsula Paris hotel.
The total renovation cost of the project is expected to be in the region
of Euro 250 million (HK$2.7 billion), in relation to which HSH's expected
commitment is Euro 50 million (HK$0.6 billion). It is expected that the
renovation cost will be substantially financed by borrowings at the project
level. The hotel will be constructed in accordance with Peninsula standards
and will be managed by Peninsula for a period of 50 years.
Design and construction of this hotel is underway with the appointment
of an architect, interior designer and project manager. The hotel is expected
to open in 2012 and will be Peninsula's first hotel in Europe.
Outlook
Looking ahead, Mr. Kwok said: "Economic conditions in the countries
and regions where we operate remain uncertain, posing continuous pressure
for our hotels business. While there have been occasional improvements
in markets and consumer sentiment, economic data remains volatile while
the demand for regional and international travel continues to be depressed.
"The immediate outlook is that business will remain soft across our
main markets. Beijing continues to be impacted by an over-supply in high-end
lodgings following the 2008 Summer Olympics and Bangkok continues to be
depressed within an uncertain political climate, while Tokyo battles the
severe economic downturn in Japan. Hong Kong, which had been hit by a decline
in long-haul arrivals while regional visitors interrupted their travel
plans due to the human H1N1 virus, has seen some initial signs of a moderate
pick- up.
"With the hotels business under pressure, we are fortunate to have a
diversified base of earnings with our non-hotel businesses - most notably
The Repulse Bay, the Peak Complex including the Peak Tram, the Landmark
in Vietnam and clubs and consultancies - holding up reasonably well. We
expect these businesses to remain steady in the second half of the year.
"In these uncertain times, cost control remains our top priority. All
operations have been working assiduously to find ways of generating revenue,
improving productivity and containing costs, while maintaining the exceptional
service standards for which we are known.
Through these efforts, we have been able to mitigate the flow-through
of revenue shortfall down to the operating profit line. It is also an important
consideration that our Group remains conservatively geared, with a gearing
ratio of only 9% after accounting for the investment made into The Peninsula
Paris project. As a result, exclusive of the Paris investment, the Group's
operational cash flows continue to be sufficient to cover its capital expenditure
programme, financing charges and dividends."
About The Hongkong and Shanghai Hotels, Limited (HSH)
Incorporated in 1866 and listed on the Hong Kong Stock Exchange (00045),
HSH is a holding company whose subsidiaries and its jointly controlled
entity are engaged in the ownership and management of prestigious hotel,
commercial and residential properties in key destinations in Asia and the
USA. The hotel portfolio of the Group comprises The Peninsula Hong Kong,
The Peninsula New York, The Peninsula Chicago, The Peninsula Beverly Hills,
The Peninsula Tokyo, The Peninsula Bangkok, The Peninsula Beijing, The
Peninsula Manila, The Peninsula Shanghai (opening in late 2009) and Quail
Lodge Resort and Golf Club in Carmel, California. The property portfolio
of the Group includes The Repulse Bay Complex, The Peak Tower and The Peak
Tramways, St. John's Building, The Landmark in Ho Chi Minh City, Vietnam
and the Thai Country Club in Bangkok, Thailand.
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