The Hongkong and Shanghai Hotels, Ltd interim results for the six months ended 30 June 2014

HONG KONG - On 1 August 2014, the The Hongkong and Shanghai Hotels, Ltd's magnificent new property in France, The Peninsula Paris, opened. The Group has made significant progress with Grosvenor, its partner in London, on the design and planning for the future development of The Peninsula London.

On 28 January 2014, the Group announced a definitive conditional shareholders' agreement with its partners Yoma Strategic Holdings Ltd. for the purpose of restoring the former Myanmar Railway Company headquarters into a hotel to be called The Peninsula Yangon.

Underlying profit attributable to shareholders increased by 73% to HK$293 million.
Profit attributable to shareholders amounted to HK$452 million, after including property revaluation gains (net of tax and non-controlling interests).
Total revenue increased by 7% to HK$2,718 million.
Earnings before interest, tax, depreciation and amortisation (EBITDA) increased byHK$105 million or 19% to HK$660 million.
Earnings per share and underlying earnings per share of HK$0.30 (2013: HK$0.56) and HK$0.19 (2013: HK$0.11) respectively.
Interim dividend of 5 HK cents per share (2013: 4 HK cents per share).
Shareholders' funds as at 30 June 2014 amounted to HK$35,416 million or HK$23.41 per share (31 December 2013: HK$35,105 million or HK$23.37 per share).
The overall Group EBITDA margin was 24%.
Adjusted net assets value as at 30 June 2014 amounted to HK$38,914 million (HK$25.72 per share).
Gearing ratio at 10% (31 December 2013: 10%).
Overview
Mr Clement Kwok, Managing Director and Chief Executive Officer of HSH, commented: "The past six months has been a very busy and exciting period for the Company's development. I am excited to announce that our magnificent new property inFrance, The Peninsula Paris, held its soft opening on 1 August 2014. It has taken us more than 20 years to identify an opportunity which we considered to be appropriate for Peninsula's first hotel inEurope and I am delighted that we are now making our entry in one of the most magical cities in the world -Paris.

"We have made significant progress with Grosvenor, our partner in London, on the design and planning for the future development of The Peninsula London. We are also expanding our global presence into one of the world's most exciting emerging markets -Myanmar. In January, we announced a definitive conditional shareholders' agreement with our partners Yoma Strategic Holdings Ltd. for the purpose of restoring the former Myanmar Railway Company headquarters into a hotel to be called The Peninsula Yangon."

Mr Kwok continued: "The operating results for the period were pleasing, with revenue increasing by 7% toHK$2,718 million and EBITDA increasing by 19% from the previous year to HK$660 million. Underlying profit increased 73% toHK$293 million. These results were achieved despite challenging market conditions, with continued intense competition in many of our markets, political instability inThailand and unusually severe winter weather in the northeast United States during the first quarter. We continue to face the challenge of rising costs, not only from inflation but also as we bring assets back into operation after renovation and expand our offerings and services to cater for increased demand and to continue providing delightful experiences for our guests."

Outlook
Mr Kwok added: "The strength of our Group continues to emanate from our genuine commitment to the long-term future. This provides the vision and willingness to invest in assets for their long-term value creation and the staying power to ride through shorter-term cycles in the economy without compromising the quality of our products and services. In the volatile economic circumstances that we regularly encounter in today's environment, this commitment has enabled us to make investment and capital expenditure decisions with a very long-term outlook and to maintain our service quality and the continuity of our people. With this in mind, I remain optimistic that we are continuing to chart a course which will maximise the quality and value of our assets and deliver long-term returns to our shareholders.

"Our corporate development and investment strategy continues to focus on the enhancement of our existing assets, seeking opportunities to increase their value through new concepts or improved space utilisation, and the development of a small number of the highest quality Peninsula hotels in the most prime locations with the objective of being a long-term owner-operator. This is the approach which we believe has enabled us to establish and sustain a brand which is now recognised as possibly the leading luxury hotel brand in the world, thereby creating value in each Peninsula hotel through both asset value appreciation and operational earnings growth.

"In 2014 to date, we have seen improvements in most of our key hotel markets, with the exception of the situation inThailand, although room rates and margins continue to be under pressure from intense competition and increasing costs. We hope to see good pickup in the traditional autumn high season for many of our hotels.

"We expect our second half results to be negatively affected by our share of the operating results of The Peninsula Paris following its soft opening on1 August 2014, as we will open with a full staff establishment whereas it will take time to bring all the guestrooms into inventory and build up our revenues.

"The Hong Kong residential sector, on which we rely for the bulk of revenue at The Repulse Bay, is facing a challenging environment this year, with reduced demand from finance professionals and expatriates. We expect this weaker demand to continue for the time being.

"We have submitted a proposal to the Hong Kong Government to improve and enlarge the capacity of The Peak Tram for the long-term future. In the meantime, our right to operate The Peak Tram has been extended for another two years to the end of 2015. The long term operating right is under discussion with the government.

"Overall, our company remains in a strong financial position, with the Peninsula brand enjoying recognition as one of the best luxury brands in the world. With our long-term outlook and the exciting new projects we are developing, we remain confident and positive about the future, whilst being ready and able to ride out the shorter term fluctuations in the markets in which we operate."

sourced:traveldailynews.asia