Mandarin Oriental International : 2023 Preliminary Financial Statements

MANDARIN ORIENTAL INTERNATIONAL LIMITED

Preliminary Financial Statements

for the year ended 31st December 2023

Consolidated Profit and Loss Account

for the year ended 31st December 2023

			2023			2022
		Underlying			Underlying
		business	Non-trading		business	Non-trading
		performance	items	Total	performance	items	Total
	Note	US$m	US$m	US$m	US$m	US$m	US$m
Revenue	2	558.1	-	558.1	454.1	-	454.1
Cost of sales		(308.7)	-	(308.7)	(302.7)	-	(302.7)
Gross profit		249.4	-	249.4	151.4	-	151.4
Selling and distribution costs		(35.6)	-	(35.6)	(27.0)	-	(27.0)
Administration expenses		(116.7)	-	(116.7)	(109.2)	-	(109.2)
Other operating income/(expense)		5.2	(0.4)	4.8	5.7	-	5.7
Change in fair value of
investment properties	12	-	(486.7)	(486.7)	-	(104.1)	(104.1)
Gain on sale of
a subsidiary/asset disposals	8	-	43.8	43.8	-	40.6	40.6
Operating (loss)/profit	3	102.3	(443.3)	(341.0)	20.9	(63.5)	(42.6)
Financing charges		(17.6)	-	(17.6)	(16.7)	-	(16.7)
Interest income		7.7	-	7.7	2.3	-	2.3
Net financing charges	4	(9.9)	-	(9.9)	(14.4)	-	(14.4)
Share of results of associates
and joint ventures	5	(0.3)	(0.6)	(0.9)	9.7	-	9.7
(Loss)/profit before tax		92.1	(443.9)	(351.8)	16.2	(63.5)	(47.3)
Tax	6	(11.0)	(2.5)	(13.5)	(8.5)	6.4	(2.1)
(Loss)/profit after tax		81.1	(446.4)	(365.3)	7.7	(57.1)	(49.4)
Attributable to:
Shareholders of the Company	7&8	81.0	(446.4)	(365.4)	7.6	(57.1)	(49.5)
Non-controlling interests		0.1	-	0.1	0.1	-	0.1
		81.1	(446.4)	(365.3)	7.7	(57.1)	(49.4)
		US¢		US¢	US¢		US¢
(Loss)/earnings per share	7
- basic		6.41		(28.91)	0.60		(3.92)
- diluted		6.41		(28.91)	0.60		(3.92)

1

Consolidated Statement of Comprehensive Income

for the year ended 31st December 2023

		2023	2022
	Note		US$m	US$m
Loss for the year		(365.3)	(49.4)
Other comprehensive expense
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans	16		(2.5)	(2.1)
Revaluation surplus of right-of-use assets before transfer to investment properties	11		-	79.8
Tax on items that will not be reclassified	6		0.4	0.3
		(2.1)	78.0
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
- net gain/(loss) arising during the year			34.0	(58.2)
- transfer to profit and loss			33.5	-
Cash flow hedges
- net (loss)/gain arising during the year			(15.1)	16.6
Tax relating to items that may be reclassified	6		1.3	(2.4)
Share of other comprehensive income of associates and joint ventures			0.4	0.7
		54.1	(43.3)
Other comprehensive income for the year, net of tax		52.0	34.7
Total comprehensive expense for the year		(313.3)	(14.7)
Attributable to:
Shareholders of the Company		(314.2)	(14.7)
Non-controlling interests		0.9	-
		(313.3)	(14.7)

2

Consolidated Balance Sheet

at 31st December 2023

		2023	2022
	Note	US$m	US$m
Net assets
Intangible assets	9	43.7	45.7
Tangible assets	10	618.6	916.3
Right-of-use assets	11	229.1	242.4
Investment properties	12	2,060.3	2,472.6
Associates and joint ventures	13	155.8	203.8
Other investments	14	14.0	14.0
Deferred tax assets	15	14.0	14.2
Pension assets	16	0.6	3.0
Non-current debtors	17	10.9	12.2
Non-current assets		3,147.0	3,924.2
Stocks		5.0	5.0
Current debtors	17	80.3	90.5
Current tax assets		1.7	6.8
Cash and bank balances	18	178.8	226.2
		265.8	328.5
Assets classified as held for sale	19	331.9	-
Current assets		597.7	328.5
Current creditors	20	(158.0)	(159.1)
Current borrowings	21	(414.9)	(2.2)
Current lease liabilities	22	(5.8)	(5.9)
Current tax liabilities		(22.1)	(18.4)
		(600.8)	(185.6)
Liabilities directly associated with assets classified as held for sale	19	(24.1)	-
Current liabilities		(624.9)	(185.6)
Net current (liabilities)/assets		(27.2)	142.9
Long-term borrowings	21	(0.6)	(599.8)
Non-current lease liabilities	22	(110.6)	(123.5)
Deferred tax liabilities	15	(42.0)	(41.6)
Pension liabilities	16	-	(0.1)
Non-current creditors	20	(1.1)	(4.5)
Non-current liabilities		(154.3)	(769.5)
		2,965.5	3,297.6
Total equity
Share capital	24	63.2	63.2
Share premium	25	500.9	500.7
Revenue and other reserves		2,396.3	2,730.2
Shareholders' funds		2,960.4	3,294.1
Non-controlling interests		5.1	3.5
		2,965.5	3,297.6

Approved by the Board of Directors

Laurent Kleitman

Matthew Bishop

Directors

7th March 2024

3

Consolidated Statement of Changes in Equity

for the year ended 31st December 2023

					Asset			Attributable to	Attributable to	Total
	Share	Share	Capital	Revenue	revaluation	Hedging	Exchange	shareholders of	non-controlling
	equity
	capital	premium	reserves	reserves	reserves	reserves	reserves	the Company	interests
	US$m	US$m	US$m	US$m	US$m	US$m	US$m	US$m	US$m	US$m
2023
At 1st January	63.2	500.7	258.9	(428.8)	3,023.2	15.4	(138.5)	3,294.1	3.5	3,297.6
Total comprehensive
income	-	-	-	(367.6)	-	(13.7)	67.1	(314.2)	0.9	(313.3)
Dividends paid by
the Company	-	-	-	(19.0)	-	-	-	(19.0)	-	(19.0)
Unclaimed dividend
forfeited	-	-	-	0.1	-	-	-	0.1	-	0.1
Subsidiary
disposed of	-	-	0.2	(0.6)	-		(0.2)	(0.6)	0.7	0.1
Transfer	-	0.2	(0.2)	-	-	-	-	-	-	-
At 31st December	63.2	500.9	258.9	(815.9)	3,023.2	1.7	(71.6)	2,960.4	5.1	2,965.5
2022
At 1st January	63.2	500.5	259.1	(377.7)	2,943.4	0.9	(80.6)	3,308.8	3.5	3,312.3
Total comprehensive
income	-	-	-	(51.1)	79.8	14.5	(57.9)	(14.7)	-	(14.7)
Transfer	-	0.2	(0.2)	-	-	-	-	-	-	-
At 31st December	63.2	500.7	258.9	(428.8)	3,023.2	15.4	(138.5)	3,294.1	3.5	3,297.6

Revenue reserves as at 31st December 2023 included cumulative fair value losses on the investment property under development of US$1,207.8 million (2022: US$720.2 million).

4

Consolidated Cash Flow Statement

for the year ended 31st December 2023

		2023	2022
	Note	US$m	US$m
Operating activities
Operating loss	3	(341.0)	(42.6)
Depreciation, amortisation and impairment		51.1	58.2
Other non-cash items	28a	440.3	63.5
Movements in working capital	28b	(2.8)	(1.1)
Interest received		8.5	2.1
Interest and other financing charges paid		(17.6)	(15.6)
Tax paid		(2.6)	(8.0)
		135.9	56.5
Dividends and interest from associates and joint venture		5.3	-
Cash flows from operating activities		141.2	56.5
Investing activities

Purchase of tangible assets
Additions to investment properties
Purchase of intangible assets
Additions to right-of-use assets
Refund on Munich expansion	28c
Purchase of other investments
Purchase of an associate	28d
Advance to associates and joint ventures	28e
Repayment of loans to associates and joint ventures	28f
Sale of a subsidiary	28g
Net proceeds from asset disposals	8
Cash flows from investing activities
Financing activities

(13.7)	(12.8)
(71.0)	(30.2)
(6.4)	(6.1)

• (0.2)
• 4.0

(0.1)(0.2)

• (1.0)

(20.7)(2.4)

67.24.2

75.6-

• 131.4

30.986.7

Drawdown of borrowings	21	58.1	23.0
Repayment of borrowings	21	(247.9)	(139.5)
Principal elements of lease payments	28h	(6.2)	(5.7)
Dvidends paid by the Company	27	(19.0)	-
Cash flows from financing activities		(215.0)	(122.2)
Net (decrease)/increase in cash and cash equivalents		(42.9)	21.0
Cash and cash equivalents at 1st January		226.2	212.8
Effect of exchange rate changes		7.0	(7.6)
Cash and cash equivalents at 31st December	28i	190.3	226.2

5

Notes to the Financial Statements

General information

Mandarin Oriental International Limited (the 'Company') is incorporated in Bermuda and has a primary listing in the standard segment of the London Stock Exchange, with secondary listings in Bermuda and Singapore.

1  Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), including International Accounting Standards ('IAS') and Interpretations as issued by the International Accounting Standards Board ('IASB').

At 31st December 2023, the current liabilities of the Group exceeded its current assets by US$27.2 million. Included in the current liabilities were the current portion of long-term bank loans of US$414.9 million due to mature within 2024. In February 2024, the Group has refinanced bank facilities of US$409.2 million to enable the Group to meet its obligations as and when they fall due. Accordingly, the financial statements have been prepared on a going concern basis.

The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies.

Details of the Group's material accounting policies are included in note 34.

The Group has adopted the following standard and amendments for the annual reporting period commencing 1st January 2023.

IFRS 17 'Insurance Contracts' (effective from 1st January 2023)

The standard covers recognition, measurement, presentation and disclosure for insurance contracts. The Group has assessed its performance guarantees provided to third-party hotel owners and concluded that current arrangements do not include significant insurance risk. They remain within the scope of the Group's existing revenue recognition accounting policies.

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 (effective from 1st January 2023) The amendments require entities to disclose material rather than significant accounting policies. The amendments define what is 'material accounting policy information' and explain how to identify when accounting policy information is material.

Material accounting policy information is information that, when considered together with other information included in an entity's financial statements, can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. IASB further clarifies that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures.

The material accounting policies following the adoption of IAS 1 are included in note 34.

Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective from 1st January 2023)

The amendment requires deferred tax to be recognised on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They typically apply to transactions such as leases of lessees and decommissioning obligations and require the recognition of additional deferred tax assets and liabilities. On adoption of the amendment, there is no impact on the Group's consolidated financial statements.

Amendment to IAS 12 - International Tax Reform - Pillar Two Model Rules (effective for annual reporting period commencing on or after 1st January 2023)

The amendment provides a temporary mandatory exception from deferred tax accounting in respect of Pillar Two income taxes and certain additional disclosure requirements. The Group is within the scope of the OECD Pillar Two model rules, and has applied the amendment from 1st January 2023.

Pillar Two legislation has been enacted or substantially enacted in certain jurisdictions in which the Group operates. The legislation will be effective for the Group's annual reporting period commencing 1st January 2024. Since the Pillar Two legislation was not effective at 31st December 2023, the Group has no related current tax exposure.

6

Notes to the Financial Statements Continued

1 Basis of preparation continued

The Group is in scope of the enacted or substantively enacted legislation and has performed an assessment of the Group's potential exposure to Pillar Two incomes taxes when the legislation comes into effect. The assessment of the potential exposure to Pillar Two income taxes is based on the latest financial information for the year ended 31st December 2023 of the constituent entities in the Group. Based on the assessment, the effective tax rates in most of the jurisdictions in which the Group operates are above 15%. However, there are a limited number of jurisdictions where the effective tax rate is slightly below or close to 15%. The Group does not expect a material exposure to Pillar Two income taxes in those jurisdictions.

Apart from the above, there are no other standard or amendments which are effective in 2023 and relevant to the Group's operations, that have a significant impact on the Group's results, financial position and accounting policies.

The	Group has not early adopted any standard, interpretation or amendments that have been issued but not yet effective
(refer note 35).
The	principal operating subsidiaries, associates and joint ventures have different functional currencies inl ine with the

economic environments of the locations in which they operate. The functional currency of the Company is United States dollars. The consolidated financial statements are presented inU nited States dollars.

The Group's reportable segments are set out in note 2.

2 Segmental information and revenue

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed

by the Executive Directors of the Company for the purpose of resource allocation and performance assessment. The Group has three (2022: three) distinct business activities: Hotel ownership, Hotel & Residences branding and management, and Property development which form the basis of its operating and reportable segments. The Property development segment represents the redevelopment of The Excelsior, Hong Kong as a commercial building following the closure of the hotel on 31st March 2019 (the 'Causeway Bay site under development'). The redevelopment is expected to complete in 2025.

In addition, The Group is operated on a worldwide basis in three (2022: three) regions: Asia, Europe, the Middle East and Africa ('EMEA'), and America. The Group's segmental information for non-current assets is set out in note 23.

2023	2022
US$m	US$m

Analysis by business activity

Hotel ownership

Hotel & Residences branding and management

Less: intra-segment revenue

Analysis by geographical area

Asia

EMEA

America

From contracts with customers

Recognised at a point in time

Recognised over time

From other sources

Rental income

486.8400.9

94.568.5

(23.2)(15.3)

558.1454.1

219.9141.4

288.6239.7

1. 73.0

1. 454.1

1. 140.8

375.8295.2

539.5436.0

18.618.1

558.1454.1

7

2  Segmental information and revenue continued

Contract balances

Setup costs in order to secure long-term hotel management contracts are capitalised under intangible assets and amortised in profit and loss when the related revenue is recognised. Management reviews the capitalised costs on a regular basis and expects the setup costs to be recoverable.

Contract liabilities primarily relate to the advance consideration received from customers relating to gift cards and advance customer deposits for hotel services.

Contract liabilities are further analysed as follows:

	2023	2022
	US$m	US$m
Contract liabilities (refer note 20)
- gift cards	10.1	10.9
- advance customer deposits and other	9.8	7.7
	19.9	18.6

Revenue recognised in relation to contract liabilities

Revenue recognised in the current year relating to carried-forward contract liabilities:

	2023	2022
	US$m	US$m
Gift cards	6.4	10.8
Advance customer deposits and other	5.5	9.6
	11.9	20.4

Revenue expected to be recognised on unsatisfied contracts with customers

Timing of revenue to be recognised on unsatisfied performance obligations:

		Advance
		customer
	Gift	deposits
	cards	and other	Total
	US$m	US$m	US$m
2023
Within one year	3.9	16.8	20.7
Between one and two years	4.2	-	4.2
Between two and three years	1.3	-	1.3
Between three and four years	0.5	-	0.5
Between four and five years	0.2	-	0.2
	10.1	16.8	26.9
2022
Within one year	4.2	9.6	13.8
Between one and two years	4.5	-	4.5
Between two and three years	1.4	-	1.4
Between three and four years	0.6	-	0.6
Between four and five years	0.2	-	0.2
	10.9	9.6	20.5

8

Notes to the Financial Statements Continued

3  EBITDA (earnings before interest, tax, depreciation and amortisation) and operating loss from subsidiaries

	2023	2022
	US$m	US$m
Analysis by business activity
Hotel ownership	101.9	45.3
Hotel & Residences branding and management	52.5	33.8
Property development	(1.0)	-
Underlying EBITDA from subsidiaries	153.4	79.1
Non-trading items (refer note 8)
- change in fair value of investment properties	(486.7)	(104.1)
- change in fair value of other investments	(0.4)	-
- gain on sale of a subsidiary/asset disposals	43.8	40.6
	(443.3)	(63.5)
EBITDA from subsidiaries	(289.9)	15.6
Underlying depreciation and amortisation from subsidiaries	(51.1)	(58.2)
Operating loss	(341.0)	(42.6)
Analysis by business activity
Hotel ownership	145.4	85.9
Hotel & Residences branding and management	52.4	33.8
Property development	(487.7)	(104.1)
EBITDA from subsidiaries	(289.9)	15.6
Hotel ownership	102.4	36.7
Hotel & Residences branding and management	44.3	24.8
Property development	(487.7)	(104.1)
Operating loss	(341.0)	(42.6)
Analysis by geographical area
Asia	41.5	(8.7)
EMEA	108.5	82.8
America	3.4	5.0
Underlying EBITDA from subsidiaries	153.4	79.1

9