8 May, 2012

Orient-Express Hotels Reports 1Q Earnings Growth, Net Loss

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HAMILTON, Bermuda, May 3, 2012 /PRNewswire/ — Orient-Express Hotels Ltd. (NYSE: OEH, http://www.orient-express.com) (the “Company”), owners or part-owners and managers of 46 luxury hotel, restaurant, tourist train and river cruise properties operating in 23 countries, today announced its results for the first quarter ended March 31, 2012.

“In the first quarter of 2012, the Company’s total revenue and adjusted EBITDA before real estate continued to grow, building on the momentum developed last year and providing a stable platform for our key second and third quarters,” said Bob Lovejoy, Chairman and Interim Chief Executive Officer. “Total revenue and adjusted EBITDA before real estate increased by 10% and 61%, respectively, over the first quarter of 2011. The first quarter of 2012 represents the ninth straight quarter of year-over-year growth in these two key metrics.

“We have continued our strategy of portfolio optimization, including completion of the sale of one of our Peruvian joint venture properties and making ongoing investments to improve our room product quality in several properties, including Hotel Cipriani, Venice, Hotel Splendido, Portofino, our two Sicilian properties, La Samanna in St. Martin and The Inn at Perry Cabin, St. Michael’s, Maryland. During 2012, we look forward to the opening in June of Palacio Nazarenas, our new all-suite property in Cuzco, Peru, and to the complete makeover of 121 rooms and suites and the arrival experience at Copacabana Palace in Rio de Janeiro.

“As we look forward in 2012, we see good demand continuing in North and South America and Asia, with some softening now in evidence in Europe. Overall, bookings pace for our owned hotels is currently 6% ahead of the same time last year. On the whole, our business outlook today is one of tempered optimism, based on our outstanding and improving portfolio, our good financial position and strong management team and a global economic outlook which is stabilizing and, in most geographies outside Europe, improving.”

First Quarter 2012 Earnings Summary

• Revenue, excluding real estate, was $107.0 million in the first quarter of 2012, up $9.3 million or 10% from the first quarter of 2011.

• Revenue from owned hotels for the first quarter was $93.9 million, up $7.0 million or 8% from the first quarter of 2011. On a same store basis, owned hotels RevPAR was up 10% in US dollars and up 11% in local currency.

• Trains & cruises revenue in the first quarter was $9.5 million compared to $7.6 million in the first quarter of 2011, an increase of 25%.

• Adjusted EBITDA before real estate was $3.7 million for the first quarter, up $1.4 million compared to $2.3 million in the prior year period. The principal increases were at Copacabana Palace (up $0.8 million compared to the same period in the prior year), Hotel das Cataratas, Iguassu Falls (up $0.7 million), Charleston Place, South Carolina (up $0.7 million) and from the Company’s share of earnings from PeruRail (up $0.8 million). Other notable improvements included Maroma Resort and Spa, Riviera Maya (up $0.5 million) and La Samanna (up $0.4 million), offset by Grand Hotel Europe, St Petersburg (down $0.4 million) and the Road To Mandalay cruise ship, Irrawaddy River (down $0.5 million).

• Adjusted net loss from continuing operations for the first quarter was $16.2 million ($0.16 per common share) compared with a loss of $13.6 million ($0.13 per common share) in the first quarter of 2011. There was a $0.2 million tax charge in the first quarter of 2012 compared to a tax credit of $5.0 million in the prior year, accounting for a net year-over-year difference of $0.05 per common share.

Net loss attributable to Orient-Express Hotels Ltd. for the first quarter was $15.7 million ($0.15 per common share) compared with a net loss of $14.9 million ($0.15 per common share) in the first quarter of 2011.

Company Highlights

The Company’s 50% Peru hotels joint venture concluded the sale of Las Casitas del Colca in April. Gross proceeds of $5.6 million (of which $1.0 million is due in six months) have largely been used to repay associated joint venture debt of $4.0 million and the remainder will be reinvested in other hotels owned by the joint venture.

During the quarter, the Company completed the third and final phase of refurbishments at the two properties in Sicily that it acquired in the first quarter of 2010.  At Grand Hotel Timeo, Taormina, all public areas, including the restaurant, were renovated, with a new bar that opens onto a terrace with views of Mount Etna and the Gulf of Naxos.  At Villa Sant’Andrea in Taormina Mare, the Company completed new restaurant and bar areas as well as a children’s club available to guests of both hotels. Also in Italy, five sumptuous new suites have been added at Hotel Splendido and a further six rooms were renovated at Hotel Cipriani.

Additionally during the quarter, we remodeled the Lobby Bar at Grand Hotel Europe.  A highlight of the $0.8 million project is a 10-meter-long backlit bar carved from alabaster marble topped with black granite. The Company also significantly improved two of its safari lodges in Botswana, Khwai River Lodge and Savute Elephant Camp, by installing floor-to-ceiling, sliding glass panels to the front of all 27 keys to enhance the accommodation and game-viewing experience for guests.

The Company announced in April the nomination of nine directors for election to its Board of Directors at the Annual General Meeting of Shareholders to be held on June 7, 2012. The slate includes two new independent director nominees: Ruth A. Kennedy, co-founder of Kennedy Dundas, a consulting firm advising clients in the luxury goods and services sectors, and Jo Malone, creator of one of the world’s most popular luxury fragrance and beauty product brands, “Jo Malone”. Ms. Kennedy and Ms. Malone will stand for election with the current directors, Chairman and Interim Chief Executive Officer J. Robert (Bob) Lovejoy, Harsha V. Agadi, John D. Campbell, Mitchell C. Hochberg, Prudence M. Leith, Philip R. Mengel and Georg R. Rafael.

Operating Performance

Europe:  

In the first quarter, revenue from owned hotels was $15.8 million, up $1.1 million or 7% from $14.7 million in the first quarter of 2011. Revenue growth in Europe was driven by the Italian properties, which opened for the season earlier this year than previously. Revenue at Hotel Cipriani increased by $0.6 million compared to the first quarter in 2011. Same store RevPAR in Europe was up 8% from the prior year in US dollars (up 11% in local currency), primarily due to an improvement in occupancy to 33% from 29% in the same period in the prior year.

EBITDA for the quarter was a loss of $7.6 million compared to an EBITDA loss of $6.9 million in the first quarter of 2011. This decline in EBITDA is largely due to a $0.8 million EBITDA decrease at Grand Hotel Europe, which included a $0.4 million non-recurring, non-cash write-off of fixed asset balances.

North America:

Revenue from owned hotels for the quarter was $29.1 million, up $1.8 million or 7% from $27.3 million in the first quarter of 2011, generated by revenue growth of $1.3 million at Charleston Place and $0.5 million at La Samanna. Charleston Place continues to deliver strong results, largely from corporate and group business, that is expected to continue during the rest of the year. La Samanna has recorded improved revenue following the refurbishment of 46 keys that was completed in the fourth quarter of 2011. Same store RevPAR in the region increased by 9% in both US dollars and local currency as a result of a 9% improvement in average daily rate (“ADR”) over the first quarter of 2011 to $440 from $402.

EBITDA in North America grew by 26% to $7.2 million compared to $5.7 million in the first quarter of 2011. This EBITDA growth includes $0.7 million at Charleston Place and $0.4 million at La Samanna, as well as a $0.5 million increase in EBITDA at Maroma Resort and Spa, as more positive press coverage for the region boosted visitor numbers from the key US market.

Rest of World:

Southern Africa:

First quarter revenue was unchanged from the first quarter of the prior year at $8.8 million. Same store RevPAR was up 4% in US dollars (up 14% in local currency) due to a small increase in ADR. EBITDA was up $0.5 million or 36% to $1.9 million compared to $1.4 million in the first quarter of 2011, as the properties benefited from labor and other cost savings.

South America:

Revenue increased $3.0 million or 12% to $27.4 million in the first quarter of 2012, from $24.4 million in the first quarter of 2011. Of this growth, $2.8 million came from the two Brazilian properties, where continued strong results reflected particularly high demand from local markets, with a 25% increase in the number of room nights sold to Brazilians compared to the same period of the prior year. Same store RevPAR in the region increased 16% in both US dollars and local currency as a result of a 7% increase in ADR and an increase in occupancy from 67% to 73% compared to the first quarter of 2011.

EBITDA for the quarter was $9.0 million, an increase of $1.6 million or 22% compared to $7.4 million in the first quarter of last year. The record results generated in 2011 at the Brazilian properties have continued into 2012 where, in their best ever quarter, the Company’s two properties delivered combined EBITDA of $8.3 million, representing growth of $1.5 million or 22% compared to the first quarter of 2011.

Asia-Pacific:

Revenue for the first quarter of 2012 was $12.8 million, an increase of $1.1 million or 9% compared to $11.7 million in the first quarter of 2011. Revenue growth was recorded in almost all operations and reflects a period of socio-economic stability in the region. The majority of the improvement came from Napasai, Koh Samui ($0.5 million), which benefited from its new lagoon, and The Governor’s Residence, Yangon ($0.4 million), as Myanmar further opens to international tourism. Same store RevPAR increased by 7% in US dollars (up 5% in local currency) due to a 10% increase in ADR in US dollar terms compared to the first quarter of 2011.

EBITDA was $3.4 million compared to $2.8 million in the first quarter of 2011. The Company’s Asian portfolio performed particularly well, with EBITDA growth of 30% compared to the same quarter of 2011, reflecting the continued strength of operations in the region.

Hotel management & part-ownership interests:  

EBITDA for the first quarter of 2012 was a loss of $0.7 million compared to a loss of $0.2 million in the first quarter of 2011. The quarterly result included a $0.3 million decline at Hotel Ritz, Madrid due to increased payroll costs.

Restaurants:  

Revenue from ’21’ Club, New York, in the first quarter of 2012 was $3.9 million compared to $3.3 million in the same quarter of 2011, reflecting growth in both the number of covers and average check. EBITDA was $0.3 million compared to $0.1 million in the same quarter of 2011.

Trains & cruises:  

Revenue increased by $1.9 million or 25% to $9.5 million in the first quarter of 2012 from $7.6 million in the prior year period, reflecting increases in all businesses except Road To Mandalay, where low water levels on the Irrawaddy River towards the end of the season and maintenance operations meant that trips were withdrawn and the ship was instead moored for use as a floating hotel. This shortfall is expected to be recovered over the remainder of the year.

EBITDA was a loss of $0.3 million compared to a loss of $0.8 million in the first quarter of 2011. This improvement was largely due to a $0.8 million increase in share of results from PeruRail compared to the first quarter of 2011, which was still impacted by the effects of the 2010 floods and landslides in Peru, offset by a $0.5 million decrease from Road To Mandalay.

Central overheads:

In the first quarter of 2012, central costs were $9.5 million compared with $7.7 million in the prior year period. This increase is attributable to a $1.1 million increase in compensation costs, a $0.4 million increase in stock option expenses and a $0.3 million increase in professional fees. In addition, the Company incurred $0.3 million of central marketing costs as it continues to invest in the Orient-Express brand.

Real estate:  

In the first quarter of 2012, there was an EBITDA loss of $1.5 million from real estate activities, primarily related to Porto Cupecoy, Sint Maarten, compared with a loss of $1.0 million in the first quarter of 2011. Six condominium units were sold at Porto Cupecoy during the quarter, bringing cumulative sales at the end of the quarter to 117, or 64% of the total number of units.

Depreciation and amortization:  

The depreciation and amortization charge for the first quarter of 2012 was unchanged from the first quarter of 2011 at $11.0 million.

Interest:

The interest charge for the first quarter of 2012 was $7.5 million, down $1.8 million from $9.3 million in the prior year quarter due to the reduction in net debt over the last 12 months and $0.9 million of capitalized interest in the first quarter of 2012 related to the construction of El Encanto.

Tax:

The tax charge for the first quarter of 2012 was $0.2 million, compared to a credit of $5.0 million for the same quarter in the prior year. The primary reason for this movement is that the first quarter of 2012 included a charge for uncertain tax provisions of $0.3 million while the first quarter of 2011 recorded a corresponding credit of $2.1 million. Additionally, the first quarter tax charge in 2012 included a deferred tax charge of $0.8 million versus $0.4 million in the first quarter of 2011, arising in respect of fixed asset timing differences following the appreciation of local currencies against the US dollar.

Investment:

The Company invested a total of $19.6 million during the first quarter of 2012, including $8.0 million for the ongoing restoration of El Encanto, $1.2 million primarily for the refurbishment of 39 rooms at The Inn at Perry Cabin, $1.1 million at La Samanna largely for the completion of the rooms refurbishment, $1.1 million at Hotel Splendido primarily for the construction of five new suites on the top floor of the existing building, $1.0 million at Hotel Cipriani largely for the renovation of six rooms, and the balance for routine capital expenditures.

Balance Sheet

At March 31, 2012, the Company had long-term debt (including the current portion and debt of consolidated variable interest entities) of $627.2 million, working capital loans of $0.1 million and cash balances of $81.7 million (including $15.2 million of restricted cash), resulting in total net debt of $545.6 million compared with total net debt of $531.1 million at the end of the fourth quarter of 2011. At March 31, 2012, the ratio of net debt to trailing 12-month adjusted EBITDA (before real estate) was 4.9 times compared to 4.8 times at December 31, 2011.

Undrawn amounts available to the Company at March 31, 2012 under short-term lines of credit were $4.3 million, bringing total cash availability (excluding restricted cash) at March 31, 2012 to $70.8 million.

At March 31, 2012, approximately 51% of the Company’s debt was at fixed interest rates and 49% was at floating interest rates. The weighted average maturity of the debt was approximately 2.9 years and the weighted average interest rate was approximately 4.1%. The Company had $68.0 million of debt repayments due within 12 months. These amounts are expected to be met through a combination of operating cash flow, refinancing of the facilities and utilization of available cash.