Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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22 FINANCIAL REVIEW CONTINUED Cash flow The Group’s consolidated cash flows are summarized as follows: MANDARIN ORIENTAL INTERNATIONAL LIMITED 2005 2004 US$m US$m Operating activities 73 47 Investing activities: • Capital expenditure on existing properties (28) (11) •Mezzanine loan to Boston hotel (12) – • Investment in Tokyo (12) – •Proceeds on disposal of associates 95 – •Washington D.C. investment – (30) • Other – 13 Financing activities: •Drawdown of borrowings 115 29 • Repayment of borrowings (117) (52) • Dividend paid (10) – • Other (1) 4 Net movement in cash in the year 103 – The cash flows from operating activities increased as performance improved from 2004 levels. Capital expenditure on existing properties totalled US$28 million as compared with US$11 million in 2004. In 2005,US$7million was included in relation to initial works for the renovation at Mandarin Oriental, Hong Kong. During the year, the Group advanced its US$12 million mezzanine loan commitment to the owners of the Boston hotel to assist in financing of the construction of the hotel.The Group also spent US$12 million in respect of its investment in furniture and equipment for the new Tokyo hotel, which it was required to fund under the terms of the 30-year lease for the hotel. In June 2005, the Group completed the sale of its 40% investment in the partnership that leases the Kahala Mandarin Oriental hotel in Hawaii to its 60% partner, Kahala Royal Corporation. On completion, the Group received a gross consideration of US$97 million, which included the repayment of loans to associates of US$4 million.The post-tax gain on this disposal was US$36 million. Proceeds on disposal of associates of US$95 million primarily relate to the Hawaii sale together with US$2 million in relation to the Group’s July 2005 disposal of its investment in Reid Street Properties. Under financing activities, the Group refinanced the Washington D.C. hotel on favourable terms with a new US$100 million five-year syndicated loan facility. The Group also drew down US$10 million in respect of a loan facility established to finance the investment in the Tokyo hotel. During the year the Group repaid US$117 million of bank borrowings, and paid a final dividend of US$10 million in respect of 2004. The total cash inflow for the year was US$103 million. Dividends The Board is recommending a final dividend of US¢1.50 per share (2004: US¢1.00 per share). No scrip alternative is being offered in respect of the dividend.
Property Valuation The Group’s accounting policy requires independent valuations of the Group’s hotel property interests to be carried out at intervals not exceeding three years, with the exception of hotels within the first three years of operations which have not yet stabilized.The last full independent valuation was carried out at 31st December 2004. In the intervening years, the Directors review the carrying values of the underlying properties in consultation with the Group’s independent appraisers and adjustment is made where there has been a material change. As a result of the 2005 review, the Directors have concluded that there were significant movements in the valuations of certain underlying properties giving rise to a revaluation surplus of US$26 million (net of deferred tax), which has been credited to the Group’s property revaluation reserves. In addition, the Group’s leasehold land has been revalued upwards by US$122 million, with the increase primarily attributable to the Group’s two long leaseholds in Hong Kong. This US$122 million uplift, however, is not recognized in the financial statements as, under IFRS, interests in land held under long-term leases must be stated at cost and amortized over the period of the lease. POST BALANCE SHEET EVENT On 16th February 2006, the Group completed the sale of its 100% leasehold interest in The Mark, New York for a gross consideration of US$150 million.The hotel was originally acquired in 2000 as part of the US$142.5 million acquisition of The Rafael Group. After transaction costs and tax, the post-tax gain arising on the disposal is approximately US$35 million, which will be recognized in the 2006 results.The consideration was paid in cash and will be applied towards the Group’s general corporate purposes, including pursuing its development strategy. Had the proceeds been received on 31st December 2005, the Group’s gearing based on adjusted shareholders’ funds would have been further reduced to 14% from 22%. ANNUAL REPORT 2005 23
Page 1: MANDARIN ORIENTAL INTERNATIONAL LIM
Page 4 and 5: 2 CONTENTS 01 Corporate Overview 03
Page 6 and 7: 4 HIGHLIGHTS MANDARIN ORIENTAL INTE
Page 8 and 9: 6 CHAIRMAN’S STATEMENT OVERVIEW M
Page 10 and 11: 8 GROUP CHIEF EXECUTIVE’S REVIEW
Page 16 and 17: 14 OPERATING SUMMARY The operating
Page 18 and 19: 16 OPERATING SUMMARY CONTINUED EURO
Page 20 and 21: 18 INTERNATIONAL RECOGNITION Mandar
Page 22 and 23: 20 FINANCIAL REVIEW A CCOUNTING POL
Page 26 and 27: 24 FINANCIAL REVIEW CONTINUED TREAS
Page 28 and 29: 26 DIRECTORS’ PROFILES Simon Kesw
Page 30 and 31: 28 CONSOLIDATED PROFIT AND LOSS ACC
Page 32 and 33: 30 CONSOLIDATED STATEMENT OF RECOGN
Page 34 and 35: 32 PRINCIPAL ACCOUNTING POLICIES A
Page 36 and 37: 34 PRINCIPAL ACCOUNTING POLICIES CO
Page 42 and 43: 40 NOTES TO THE FINANCIAL STATEMENT
Page 72 and 73: 70 PRINCIPAL SUBSIDIARIES, ASSOCIAT
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72 INDEPENDENT AUDITORS’ REPORT T
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74 CORPORATE GOVERNANCE The Group
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76 CORPORATE GOVERNANCE CONTINUED D
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78 CORPORATE GOVERNANCE CONTINUED D
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80 SHAREHOLDER INFORMATION Financia
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82 MANDARIN ORIENTAL HOTEL GROUP CO
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84 SALES AND RESERVATIONS OFFICES C
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