of $8.2 million Compared with Net Income of $9.1 million
For Acquisition Of Hotel Group
HAMILTON, Bermuda, Nov. 12, 2003 - Orient-Express Hotels Ltd. (NYSE: OEH, www.orient-express.com), owner of 39 deluxe hotel, restaurant, tourist train and river cruise properties in 17 countries, today announced its results for the third quarter and nine months ended September 30, 2003.
Net earnings for the quarter were $8.2 million ($0.27 per common share) on revenue of $91.1 million, compared with net earnings of $9.1 million ($0.30 per common share) on revenue of $83.1 million in the third quarter of 2002. For the nine months net earnings were $15 million ($0.49 per common share) on revenue of $244.6 million, compared with net earnings of $21.1 million ($0.69 per common share) on revenue of $215.9 million in the first nine months of 2002.
Mr. James B. Sherwood, Chairman, said that third quarter results were adversely impacted by Hurricane Isabel in September which caused heavy cancellations at Charleston Place in Charleston, S.C., The Inn at Perry Cabin in St. Michael's, Maryland and Keswick Hall in Charlottesville, Virginia. "Had it not been for this hurricane Orient-Express Hotels would have achieved third quarter earnings on a par with those in the third quarter of 2002," he said.
Mr. Sherwood said that the new La Cabana restaurant in Buenos Aires held its official opening on October 16th with a gala black tie party attended by many of Argentina's most distinguished residents. La Cabana originally opened in 1933 and is the most famous restaurant in Argentina. It ceased operations in the 1990s and the name and contents were acquired by Orient-Express Hotels, a new location was purchased in the most fashionable district of Buenos Aires and the restaurant was reconstructed at reasonable cost after the collapse of the peso. Buenos Aires had 1.9 million visitors in 2002 and should achieve 3 million in 2003 and possibly 4 million in 2004. In addition to the main a la carte restaurant there are four banqueting rooms and an outdoor terrace offering a total of 200 covers.
Mr. Sherwood announced that the board has decided to implement a program of quarterly cash dividends. Until now the company has not paid dividends since its initial public offering in August, 2000. The initial quarterly dividend has been set at 2.5 cents per common share. "Although it was fashionable during the last stock market "bubble" to reinvest all cash in the business for earnings growth, the new low U.S. tax rate on dividends and the fact that our competitors pay cash dividends have convinced the board it is time to commence a cash dividend payout to shareholders," Mr. Sherwood said. The first quarterly dividend will be paid on January 20, 2004 to shareholders of record January 5, 2004.
Mr. Sherwood indicated that planning issues at the company's Hotel Caruso property in Ravello, Italy are finally being resolved and construction will shortly recommence. The hotel is expected to open in the spring of 2005.
He also indicated that the company has signed a letter of intent which should lead to the acquisition of a group of unique hotel properties. Completion of the transaction is planned before year end. The confidentiality agreement signed with vendors prohibits disclosure until a binding contract is executed.
Mr. Sherwood said that worldwide tourism and local conference and banqueting markets are holding up well, while international business travel is still weak. He said that Orient-Express Hotels is less reliant on international business travel than many other operators in the luxury market.
On November 6th the company announced it had sold the Quinta do Lago Hotel in the Algarve, Portugal for strategic reasons and would report a significant gain in the fourth quarter. The price achieved was 16 times current year EBITDA. It also announced it had filed a registration statement for the sale of 3 million Class A common shares. The proceeds of these sales will be used primarily to fund acquisitions and expansion. "A number of interesting opportunities for investment are currently available and there are several important improvements to existing properties which will need funding additional to mortgage finance," he said.
Mr. Simon M.C. Sherwood, President, said that average daily room rate of owned hotels in U.S. dollars was up 19% in the third quarter to $382 from $321 in the year earlier period. Same store RevPAR in U.S. dollars was up 9% to $212 from $194 in the year earlier period.
He reviewed performance by region as follows:
Europe. EBITDA of owned hotels in Europe was $19 million in the third quarter compared with $16.6 million in the year earlier period. Italy and Spain were very strong, Portugal and France were weak and the U.K. was flat. Interestingly, there was a large increase in affluent Russian guests which helped to offset weaker demand from the U.S.
North America. EBITDA for the third quarter of owned hotels in North America was close to breakeven, slightly up on the year earlier period. This is low season for the company's Caribbean hotels and New Orleans because of the heat.
Southern Africa. EBITDA was close to breakeven in the third quarter, about $0.7 million worse than the year earlier period. The paucity of American tourists to African game reserves reduced earnings at the company's Botswana game lodges.
South America. EBITDA of owned hotels was $1 million compared with $1.5 million in the year earlier period, however, joint venture hotels and PeruRail results fully compensated for the decline so taken together the results were flat.
South Pacific. EBITDA for the third quarter was breakeven, down $0.8 million from the year earlier period. Major works are being undertaken at the Lilianfels and Bora Bora properties.
Hotel management and part ownership. Income was $3 million in the third quarter compared with $2.8 million in the year earlier period. Weakness in Charleston caused by the hurricane was more than offset by the Hotel Ritz in Madrid and Peruvian hotels.
Restaurants. EBITDA from restaurants in the third quarter was a loss of $0.5 million, a $0.2 million improvement over the prior year period. Both '21' Club and Harry's Bar are closed for part of the third quarter each year.
Tourist trains and river cruises. EBITDA in the third quarter was $1.9 million compared with $2.5 million in the year earlier period. Fewer Americans travelling on the Venice Simplon-Orient-Express were largely responsible for the decline. This was part of the general shunning of France by Americans which occurred this year due to French policy with respect to the Iraq war.
Simon Sherwood indicated that depreciation in the third quarter had increased by $1.6 million over the prior year period, taxes were $0.2 million higher and finance costs were $0.7 million lower.
"Revenue in the third quarter showed a healthy 10% increase over the prior year period from $83.1 million to $91.3 million but much of this increase was exchange rate related and was accompanied by corresponding cost increases. EBITDA was up 1% but larger depreciation and tax charges resulted in a 10% decline in net earnings. I think it is important to note that we have made a material increase in capacity this year which will translate into improved profits when that capacity is filled," he concluded.
Management believes that EBITDA (earnings before interest, tax, depreciation
and amortization) is a useful measure of operating performance, to help
determine the ability to incur capital expenditure or service indebtedness,
because it is not affected by non-operating factors such as leverage and
the historic cost of assets. EBITDA is also a financial measure commonly
used in the hotel and leisure industry. However, EBITDA does not represent
cash flow from operations as defined by U.S. generally accepted accounting
principles, is not necessarily indicative of cash available to fund all
cash flow needs and should not be considered as an alternative to earnings
from operations under U.S. generally accepted accounting principles for
purposes of evaluating results of operations.
This news release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties.
Orient-Express Hotels Ltd.
|Also See:||Orient-Express Hotels Ltd. Sells the Hotel Quinta do Lago, Algarve, Portugal for $40 million; 16 times Current Year EBITDA / November 2003|
|Orient-Express Hotels Ltd. Reports Net Earnings of $25.3 million for Year Ending 2002; RevPAR Down 2% for the Year / March 2003|