This summary is based on the third quarter fiscal 2008 earnings call conducted by Orient-Express Hotels Limited. (OEH) on November 4, 2008.
Management:
President and CEO: Paul White
VP and CFO: Martin O’Grady
Founder and Director: James Sherwood
VP, General Counsel and Secretary: Ned Hetherington
VP, Corporate Communications: Pippa Isbell
Key Investor Issues:
- Third quarter reported EPS were 15 cents compared with 53 cents in the year ago period.
- Q3 adjusted EBITDA were $51.1 million versus $58.2 million in the previous year period.
- Q3 revenue from restaurants was $3.3 million versus $3.4 million last year.
- Year-over-year revenues from trains and cruises increased 5% to $31 million.
Nine Months Financial Highlights:
- Cash flows for the nine months, cash from operations was $80 million compares with $64 million for the first nine months of last year.
- Investment in real estate, primarily Porto Cupecoy, was $26 million and capital expenditure at the business unit level was $69 million.
- The company invested a further $6 million in Cataratas and El Encanto during the course of the year.
- Net cash provided by financing activities over the nine-month period was $7 million and net decrease in cash was $32 million.
- The effective tax rate for the first nine months was 32%.
- For the full year, the management expects the effective tax rate to be around 31% to 32%.
Third Quarter Financial Highlights:
In July and August, RevPAR continued to show solid growth.
- September, however, saw an unprecedented downturn with RevPAR dropping by 6% in local currency.
- The company advised that booking patterns in some regions are returning to those experienced a year ago.
As in Q2, the performance of properties in the rest of the world has been strong.
- Asia, Africa and Latin America were particularly leading the way.
- In Europe, the Grand Hotel Europe in St. Petersburg, La Residencia in Mallorca, and Reid''s Palace in Madeira all showed double-digit revenue growth.
- In Venice, the Cipriani revenues dropped back to 2006 levels due to the weak dollar, the U.S. recession and the decline in U.K. short break business.
- In Italy, the Splendido saw revenues for the third quarter grow by 8%.
- The Caruso in Ravello recovered from the impact of the Naples garbage crisis in April and closed the quarter with 8% revenue growth.
Third quarter revenues in U.S. dollars increased 5%, EBITDA was down 6% on prior year at $50 million, this again before real estate.
- In the year to September, EBITDA pre-real estate grew by 1% to $119.4 million.
- The growth in EBITDA demonstrates the resilience of the business model.
The management has implemented significant SG&A reductions, quantified in constant dollars at between $20 million and $22 million.
- This was driven by headcount reductions and involves leveraging off the regional structure introduced nine months ago.
- The cost reductions include savings in back office areas like finance, reservations, property sales and senior management in the regions.
- Central costs in the third quarter were $6.2 million compared with $7.7 million in the third quarter of 2007.
- The 2007 number included an exceptional $2 million of management restructuring-related costs.
- The full-year amount of central costs before any restructuring charges is forecast to be around $28 million.
The company reported that the real-estate portfolio is in a solid state.
- This will enable the management to reduce maintenance CapEx to $12 million in 2009 from the $25 million expected this year.
- The overall property-related CapEx is anticipated to reduce to $24 million in 2009 from the estimated $69 million in 2008.
- This is expected to more than offset any reduction in cash from operations in 2009.
- The company has made a decision to suspend development capital expenditure and dividend payments for the foreseeable future.
At the end of the quarter, the Company had $69 million of cash plus an additional $78 million of funds available under working capital and revolving credit facilities.
- Taking into account of the total debt of $791 million, outstanding working capital facilities of $49 million and a cash balance of $69 million, the net debt at the end of the quarter was $770 million.
- On a trailing 12-month basis, the EBITDA ratio was 5.3 times, unchanged from the last quarter.
- The current portion of long-term debt at the end of the quarter was $122 million.
- This is inclusive of the $89 million of borrowings under revolver facilities which are technically repayable within 12 months but in reality will be rolled over as they mature.
- At the end of September, approximately 42% of debt was fixed and the average cost of debt, including margin, was 5.5%.
