Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

Financial Review
Accounting policies
The Directors continue to review the appropriateness
of the accounting policies adopted by the Group having
regard to developments in International Financial
Reporting Standards (‘IFRS’). The accounting policies
adopted are consistent with those of the previous
year, except that the Group has adopted two new
interpretations to IFRS effective on 1st January 2008,
as more fully detailed in the ‘basis of preparation’ note
in the financial statements.
Results
Overall
The Group uses earnings before interest, tax,
depreciation and amortization (‘EBITDA’) to analyze
operating performance. Total EBITDA including the
Group’s share of EBITDA from associates and joint
venture is shown below:
2008 2007
US$m US$m
Subsidiaries 125.5 146.2
Associates and joint venture 38.4 44.0
Total EBITDA 163.9 190.2
Subsidiaries
2008 2007
US$m US$m
EBITDA
Less depreciation and
125.5 146.2
amortization expenses (39.3 ) (38.5 )
Operating profit 86.2 107.7
EBITDA from subsidiaries in 2008 was down
US$20.7 million or 14% from 2007. Notwithstanding
decreases in occupancy, mainly from September
onwards, Mandarin Oriental, Hong Kong and The
Excelsior maintained their contributions to the Group
at similar levels to the previous year. Elsewhere in Asia,
Tokyo’s contribution fell significantly due to weakening
demand in the corporate sector throughout the year.
Manila’s contribution also declined in line with market
conditions. Jakarta was closed throughout the year for
renovation. In 2007, its contribution was negatively
impacted by closure costs.
In Europe, London’s decreased contribution to
EBITDA was attributable to two factors. Firstly in
2007, the Group benefited from a US$8.3 million
exchange gain on the refinancing of the London hotel.
Secondly, in 2008, a drop in occupancy in the last
quarter together with the impact of the weakening of
Sterling on the US dollar reported results, had a negative
impact on London’s contribution.
Also in Europe, Munich’s contribution increased by
almost 40% in 2008 as the hotel was under renovation
in 2007. In Geneva, the hotel underwent a significant
eight month renovation in 2008, which saw its
contribution to Group performance decline by
approximately US$7 million, due to the disruption
to operations.
In The Americas, Washington D.C.’s contribution
declined as a result of the weakening US economy.
All Group hotels (including associates and managed
only hotels) have introduced cost saving measures in
order to partially offset the impact of revenue reductions
on profitability.
Annual Report 2008 19