M andarin Oriental
Inter national Limited
Annual Report 2018

Mandarin Oriental Hotel Group is an international hotel investment and management groupwith deluxe and first class hotels, resorts and residences in sought-after destinations around the world.
Having grown from its Asian roots into a global brand, the Group now operates 32 hotels and six
residences in 23 countries and territories, with each property reflecting the Group’s oriental heritage
and unique sense of place. Mandarin Oriental has a strong pipeline of hotels and residences underdevelopment. The Group has equity interests in a number of its properties and adjusted net assets
worth approximately US$5.8 billion as at 31st December 2018.
Mandarin Oriental’s aim is to be recognised as the world’s best luxury hotel group. This will beachieved by investing in the Group’s exceptional facilities and its people, and seeking selective
opportunities for expansion around the world, while maximising profitability and long-term
shareholder value. The Group regularly receives recognition and awards for outstanding service
and quality management. The Group is committed to exceeding its guests’ expectations throughexceptional levels of hospitality, while maintaining its position as an innovative leader in the
hotel industry.
The parent company, Mandarin Oriental International Limited, is incorporated in Bermuda and has
a standard listing on the London Stock Exchange, with secondary listings in Bermuda and Singapore.
Mandarin Oriental Hotel Group International Limited, which operates from Hong Kong, manages
the activities of the Group’s hotels. Mandarin Oriental is a member of the Jardine Matheson Group.

2 Mandarin Oriental International Limited

Contents

1

Corporate Overview

3

Corporate Information

4

Highlights

6

Chairman’s Statement

9Group Chief Executive’s Review

14

Operating Summary

16

Development Portfolio

18

International Brand Recognition

21

Financial Review

26

Directors’ Profiles

28

Financial Statements

89

Independent Auditors’ Report

94

Five Year Summary

95

Responsibility Statement

96

Corporate Governance103

Principal Risks and Uncertainties

105

Shareholder Information

106

Mandarin Oriental Hotel Group Contact Addresses

Annual Report 2018

Corporate Information

Directors
Ben Keswick Chairman and Managing Director
James Riley Group Chief Executive
Craig Beattie
Jack Yilun Chen
Edouard Ettedgui
Mark Greenberg
Julian Hui
Adam Keswick
Simon Keswick
Lincoln K.K. Leong
Anthony Nightingale
Y.K. Pang
Jeremy Parr
Lord Sassoon, kt
James Watkins
Percy Weatherall
Company Secretary
Jonathan Lloyd
Registered Office

Mandarin Oriental Hotel GroupInternational Limited
Directors
Ben Keswick Chairman
James Riley Group Chief Executive
Craig Beattie Chief Financial Officer
Richard Baker
Kieren Barry
Paul Clark
Jan Goessing*Mark Greenberg
Jill Kluge
Christoph Mares
Vincent MarotPaul Massot
Y.K. Pang
Jeremy ParrJohn WittCorporate Secretary
Jonathan Lloyd

Jardine House
33-35 Reid Street
Hamilton
Bermuda* Jan Goessing will retire as a director with effectfrom the close of business on 28th February 2019.

3

4 Mandarin Oriental International Limited

Highlights

Mandarin Oriental International Limited• 19% increase in underlying profit• Group to redevelop The Excelsior, Hong Kong as a commercial building• Mandarin Oriental Hyde Park, London to fully re-open in April 2019
• Seven new management contracts signed

Results
Year ended 31st December
2018		
2017		
US$m		
US$m		

Change%1,397.6

1,380.4		

1

179.1

157.9		

13

65.154.9		

19

43.6

54.9		

(21)

US¢		

US¢		

%

Underlying earnings per share3

5.16

4.37		

18

Earnings per share

3.46

4.37		

(21)

Dividends per share

3.00

3.00		

–

US$		

%

Combined total revenue of hotels under management1
Underlying EBITDA (Earnings before interest, tax,
depreciation and amortisation) 2
Underlying profit attributable to shareholders
Profit attributable to shareholders

3

US$		

Net asset value per share

0.98

1.01		

(3)

Adjusted net asset value per share 4

4.62

4.57		

1

Net debt/shareholders’ funds

23%

26%

Net debt/adjusted shareholders’ funds4

5%

6%

1

Combined revenue includes turnover of the Group’s subsidiary hotels in addition to 100% of revenue from associate,joint venture and managed hotels.

2

EBITDA of subsidiaries plus the Group’s share of EBITDA of associates and joint ventures.

3

The Group uses ‘underlying profit’ in its internal financial reporting to distinguish between ongoing business performanceand non-trading items, as more fully described in note 31 to the financial statements. Management considers this to be a key
measure which provides additional information to enhance understanding of the Group’s underlying business performance.

4

The adjusted net asset value per share and net debt/adjusted shareholders’ funds have been adjusted to include the market valueof the Group’s freehold and leasehold interests which are carried in the consolidated balance sheet at amortised cost.

Annual Report 2018

Combined total revenue

Combined total revenue

US$m

US$m

by geographical area

1,389.9by type of business

1,380.4

1,397.6

1,389.9

278.3

289.4

755.1

440.6

469.3

349.8

358.2

358.0

297.4

303.3

280.9

1,335.3

1,323.7

277.6

264.6

410.9

411.9

368.6

349.7

287.9

297.1

290.9

442.5

2014

2015

2016

2018

2017

1,380.4

1,397.6

737.4

763.1

501.5

516.9

514.8

122.2

122.2

126.1

119.7

2015

2016

2017

2018

1,335.3

1,323.7

709.9

700.0

508.6

503.2

126.2

2014

Hong Kong

America

Rooms

Other Asia

EuropeFood and beverage

OthersUnderlying EBITDA andnet interest expense

Net debt/adjusted
shareholders’ funds

US$m

US$m

5,833.4

5,746.6

217.3

188.4
179.1
158.2

157.9

3,888.3
3,568.9
3,152.4

20.8

2014

12.8%
15.3

2015

14.5

2016

14.8

2017

Underlying earnings before interest, tax,
depreciation and amortisation (EBITDA)
Net interest expense

16.4

2018

403.1

2014

3.7%

7.6%

5.7%

4.9%

131.8

297.3

326.8

284.7

2015

2016

Adjusted shareholders’ funds
Net debt

2017

2018

5

6 Mandarin Oriental International Limited

Chairman’s Statement

Overview
Underlying profit for the year was 19% higher than the prior year due to generally improved trading acrossthe portfolio, with particularly strong performances from the Group’s owned properties in Hong Kong and
its Singapore hotel. Results also benefited from the receipt of one-off fees in respect of Las Vegas and Atlanta.
The impact of the fire in London in June 2018 was mitigated by insurance proceeds.
During the year, the Group completed its review of strategic options for The Excelsior, Hong Kong and announced
that the site will be redeveloped as a commercial building, with the project expected to complete in 2025. The hotel
will close on 31st March 2019.

Performance
Underlying earnings before interest, tax, depreciation and amortisation were higher at US$179 million, compared
to US$158 million in 2017. The Group’s underlying profit increased to US$65 million, from US$55 million in2017 with underlying earnings per share at US¢5.16, compared with US¢4.37 in 2017. After taking into account a
net non-trading loss primarily relating to accelerated asset write-downs due to the planned closure of The Excelsior,profit attributable to shareholders was US$44 million. This compares with US$55 million in 2017, which included
no non-trading items.
Following an independent valuation of the Group’s owned properties, the adjusted net asset value per share was
US$4.62 at 31st December 2018, compared with US$4.57 per share at the end of 2017.
The Directors recommend a final dividend of US¢1.50 per share. This, together with the interim dividend ofUS¢1.50 per share, will make a total annual dividend of US¢3.00 per share, unchanged from 2017.
At 31st December 2018, the Group’s net debt was US$285 million, compared to US$327 million at the end of
2017. Gearing as a percentage of adjusted shareholders’ funds at 31st December 2018, after taking into accountthe market value of the Group’s property interests, was 5% compared to 6% at the end of 2017.

The year in review
In Asia, results across the region were generally higher. The Group’s two wholly-owned hotels in Hong Kong
performed well, with a record year for Mandarin Oriental, Hong Kong. The Singapore hotel also had a very strong
year while Jakarta showed notable improvement.
In Europe, the Paris hotel delivered a better performance, although results during the final quarter of the year wereaffected by demonstrations in the city. Following the fire in June 2018 repairs at Mandarin Oriental Hyde Park,
London are progressing well, and the hotel re-opened its public areas and facilities on 4th December 2018. All
guestrooms are scheduled to re-open in April 2019. The hotel’s 2018 results include interim cash payments received
during 2018 from insurers, which have financed the replacement of fixed assets and provided some compensation
for the loss of profits, as the hotel was originally due to fully open in mid-2018, following the completion of its
22-month renovation programme. Discussions on both property damage and business interruption claims with
the Group’s insurers are expected to be concluded in 2019. Elsewhere, results in Munich and Geneva were weaker
while Hotel Ritz, Madrid closed in February 2018 for restoration. It is expected to re-open in 2020.

Annual Report 2018

In America, the performance of the Washington D.C. hotel was slightly lower than the prior year, when it benefited
from the Presidential Inauguration, but overall results for the region were broadly in-line with 2017. Termination
fees were received in respect of the hotels in Las Vegas and Atlanta which the Group ceased to manage following
a change in the ownership of each property.

Strategic review of The Excelsior, Hong Kong
On 9th October 2018, the Group announced that The Excelsior, Hong Kong will close on 31st March 2019 inorder for the site to be redeveloped as a commercial building. The decision to close the hotel follows a review of thestrategic options for the site. While the Group’s underlying profit will be adversely affected until the site re-opens
as a commercial building (The Excelsior contributed US$24 million to underlying profit in 2018), the decision toclose the hotel reflects strong commercial property values in Hong Kong and the expected higher yield associatedwith a commercial building at a time when the hotel requires significant investment. The redevelopment is expected
to take up to six years to complete and to cost some US$650 million.
Upon closure, the Group will be required to recognise a one-time accounting valuation gain associated withreclassifying the asset as a commercial investment property on its balance sheet. Based on current market
conditions, this gain is estimated to be some US$2.9 billion and will be reflected in the Group’s 2019 results.
In 2019, the Group will also recognise estimated non-trading costs of some US$30 million, primarily relating
to the balance of accelerated asset write-downs.

Business developments
Seven new management contracts were signed and announced in 2018 while the Group’s management of two hotels
ceased. New Mandarin Oriental hotels are scheduled to open in Ho Chi Minh City, Grand Cayman, Moscow,
Muscat and Phuket over the next five years. In Barcelona, a standalone branded Residences by Mandarin Oriental
is scheduled to open in 2020. During the course of 2018, the Group also took over the management of a luxury
resort on Lake Como in northern Italy. In 2019, the Group recently opened its first two hotels in the Middle East,in Dubai and Doha, and also announced an agreement to brand and manage Mandarin Oriental Residences at
685 Fifth Avenue in New York, scheduled to open in 2021.
The Group expects to open its first property in Beijing, Mandarin Oriental Wangfujing, in the coming weeks aswell as potentially a second in Beijing in the next 12 months. Mandarin Oriental, Bangkok, in which the Group
has a 48% interest, will partially close in March 2019 for a ten-month US$60 million renovation.

PeopleOn behalf of the Directors, I would like to thank colleagues throughout the Group for their contribution during
the year which has made the exceptional experiences we provide to our guests possible.
Dr Richard Lee and Lord Powell stepped down as Directors on 9th May 2018, and Sir Henry Keswick retired
from the Board on 31st December 2018. We would like to record our gratitude to all of them for their significant
contributions to the Group over many years. We were pleased to welcome Jack Yilun Chen to the Board in May 2018.
Stuart Dickie stepped down as Chief Financial Officer on 31st October 2018 and was succeeded by Craig Beattie.
We would like to thank Stuart for his contribution to the Company.

78 Mandarin Oriental International Limited

Chairman’s Statement Continued

Outlook
The outlook for 2019 remains positive. The planned closure of The Excelsior for redevelopment in March 2019,
however, will substantially reduce the Group’s underlying profit. Results will benefit from the full opening inthe spring of the newly renovated London hotel, partially offset by the impact of the renovations in Bangkok
and Madrid. These major investments, together with the Group’s pipeline of new hotels under development,
will position the Group for long-term growth.

Ben Keswick
Chairman
28th February 2019

Annual Report 2018

Group Chief Executive’s Review

The Group’s overall performance in 2018 was pleasing and stronger financial performance was accompanied bysignificant progress in a number of areas. Almost all of the Group’s hotels had a better year in terms of Revenue
Per Available Room (‘RevPAR’) and RevPAR for the Group increased by 9% in US dollar terms on a like-for-likebasis1 . Similarly, underlying EBITDA 2 improved by 13% over the prior year, led by better performances in ourwholly-owned Hong Kong properties, Singapore and Paris. Spirits were temporarily dampened by the fire at
the Group’s London property and our London colleagues deserve special mention for their response to the crisis.
The hotel is on schedule to re-open fully in April 2019. The restoration of Madrid, though delayed, is progressing
and the Group has also announced a major renovation in Bangkok for 2019.
During the year the Group completed its review of long-term strategic options for The Excelsior hotel in HongKong. The hotel will close on 31st March 2019 to enable the Group to redevelop the site as a commercial building.
We were also excited to launch our unique guest recognition programme, Fans of M.O., which is designed to elevate
guests’ experience and recognition. The growth of our development pipeline continued, with seven new projects
announced during the year.
There are promising long-term prospects for growth in the luxury travel industry. In particular, experiential
luxury is expected to account for an increasing portion of the luxury travel market and the Group will benefit
from this evolution. Competition is, however, ever-present and growing more intense as global high net worth
luxury travellers look for unique and memorable experiences. Luxury travellers continue to have a wealth ofoptions to choose from, provided by both traditional luxury hotel operators and alternative accommodation
facilities. We also expect to see a growing competitive threat from non-traditional competitors, such as large
multi-brand hotel conglomerates and broader luxury brand companies. As in other industries, technology will
be an ongoing area of focus, particularly as hotel operators look to identify which technologies will last and truly
make a material difference for guests. We are also ever alert to the economic and political developments which
are creating uncertainty in a number of the markets in which the Group operates.

Strategy
In the context of the evolving market environment, Mandarin Oriental’s consistent vision – to be recognised as
the world’s best luxury hotel group – remains paramount. Throughout the organisation, this vision is passionately
embraced by all of our 12,000 colleagues and keeps us focused on what we do best. This consistency, I believe,
also positions the Group well for growth. Having expanded from our Asian roots into a global brand, we currently
operate 32 hotels and six residences in 23 countries and territories. The Group holds equity interests in many of
its hotels and also manages hotels on behalf of third-party owners.

1

The like-for-like comparison includes all hotels that were operational for the entire year of both 2017 and 2018. Mandarin Oriental
Hyde Park, London is included up until the hotel closed following the fire on 6th June 2018. All references to RevPAR are in US dollar
terms, unless stated otherwise.

2

The Group uses earnings before interest, tax, depreciation and amortisation (‘EBITDA’) to analyse operating performance.

910 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

Expanding the Mandarin Oriental portfolio is a key priority over the coming years. Since its establishment, the Grouphas carefully and consistently invested in the brand so that today it is recognised around the world. The modest
size of our portfolio belies the global reputation the brand enjoys and the continuing strong interest in the brandfrom owners and developers. This provides the Group with a broad platform for growth, in both existing and newmarkets. While for various reasons properties may from time to time fall out of the portfolio or pipeline, our target
is consistently to grow the overall Mandarin Oriental portfolio by three properties each year. The starting point for
growth is to build a stronger pipeline of openings and we have successfully executed this over the past two years byannouncing 13 new management agreements. Growth through management agreements is an important part of
the Group’s strategy and the management business is therefore likely to account for an increasing proportion of the
Mandarin Oriental portfolio.
Nonetheless, owned assets remain at the heart of the Group’s portfolio and if we are to sustain our market position,
it is crucial that we re-invest appropriately in these owned properties. Recent and ongoing renovations include
Tokyo, Kuala Lumpur, London, Madrid and, in 2019, Bangkok. Mandarin Oriental’s strong balance sheet makes
it well placed to fund these renovations, while providing the means to consider selective investment opportunities
in strategic destinations that have long-term asset value growth potential.
With many of its properties located at the heart of business districts, corporate business remains significant for us.
However, leisure travel is an increasingly important segment and our hotels are adapting to offer a broader rangeof luxury leisure experiences. We would also like to build on our reputation as an operator of resort properties andnew development announcements in locations such as Phuket and Lake Como will help.
At the same time, new trends in luxury travel are constantly emerging and our guests are increasingly multi-generational,
so we must ensure that we are in a position to benefit from these new opportunities. Fans of M.O., our unique guest
recognition programme launched in 2018, will allow us to forge deeper and more meaningful relationships with all
our guests and help us ensure that we continue to delight during each and every stay.
A significant component of the luxury hospitality business today is the branding and management of residential
developments. The majority of the Group’s recently announced developments incorporate a residential component.
The Group remains focused on ensuring that its hotels are positioned amongst the leaders in their individual
markets. These leadership positions are developed by our differentiated approach to curating the very best luxury
hospitality experiences: we continually invest and innovate in the core brand attributes of exceptional design andarchitecture, restaurant and bar concepts and spa and wellness facilities, all of which are underpinned by intuitive
personalised service. I believe this will help us maintain a ‘luxury edge’ over our competitors.
The Group’s global reputation continues to be reflected in numerous awards from respected associations – Group
restaurant outlets across the portfolio currently hold 23 Michelin stars, more than any other hotel brand in
the world.
As the Group’s global reach grows, so too does its responsibility towards the communities in which it is present
and its need to drive sustainability in how it operates. Corporate responsibility values are deeply engrained in
Mandarin Oriental’s heritage. The Group focuses its sustainability efforts around the United Nations Sustainable
Development Goals and our 2020 vision clearly sets out the measurable near-term priorities.

Annual Report 20182018 Performance
Underlying EBITDA was US$179 million in 2018, compared to US$158 million in 2017, as the majority of theGroup’s owned properties delivered better results. Underlying profit was US$65 million in 2018, compared to
US$55 million in 2017.
Turning to the RevPAR performance for the portfolio, highlighting the Group’s owned hotels in particular:
In Asia, RevPAR was up 9% overall in 2018 on a like-for-like basis, as demand trends improved generally acrossthe region. Several properties delivered double-digit RevPAR growth.
Mandarin Oriental, Hong Kong achieved a 12% increase in RevPAR over the previous year. This was one of thebest RevPAR results the hotel has achieved in recent years, spurred by continued improvement in the overall
demand conditions in Hong Kong. With corporate demand broadly stable, higher leisure demand was a major
contributing factor to the improved performance. However, it is worth noting that the hotel’s competitors are likely
to have experienced similarly positive trends through 2018.
The Excelsior, Hong Kong also benefited from improved city-wide demand, with increased occupancy and Average
Daily Rates (‘ADR’) leading to an 11% uplift in RevPAR. On 9th October 2018, the Group announced thatThe Excelsior, Hong Kong will close on 31st March 2019 in order for the site to be redeveloped as a commercial
building. The Excelsior has always been an important and much-loved hotel in the Group’s portfolio and theextraordinary service provided by our loyal colleagues through the years will always be remembered. While thiswas not an easy decision, it was the right one and reflects the ageing of the current building, the opportunity torealise unutilised gross floor area and the strong commercial property values in Hong Kong, with their higher
commensurate yield. The Group is committed to ensuring that all Excelsior colleagues are treated fairly.
In Jakarta, the Group’s hotel had a much improved year, with RevPAR growth of 9%. This was driven by substantiallybetter occupancy levels, although there continues to be pressure on average rates in the city. In Tokyo, higher
average rates helped increase RevPAR by 4%.
Singapore had one of its best performances in recent years, while Bangkok and Kuala Lumpur also performed well.
Singapore and Kuala Lumpur both delivered double-digit growth in RevPAR. A major renovation is scheduled
to begin at Mandarin Oriental, Bangkok in March 2019 and will complete in December 2019. While the River
Wing building will be closed during the renovation period, the Authors’ and Garden Wings will remain open.
The renovation will ensure that Mandarin Oriental, Bangkok retains its long-standing reputation as the leading
hotel in the city.
In Europe, while there were mixed performances at individual hotels, a substantial improvement in a handful of
hotels led to an overall RevPAR increase of 14% on a like-for-like basis.
Prior to the fire on 6th June 2018, results for the year in London benefited from the completion of the new
Knightsbridge wing rooms in September 2017, leading to RevPAR growth of 28%. I have been extremely proudof the response from all of our colleagues in London – during the closure, the FANtastic London community
initiative has contributed over 40,000 hours of our colleagues’ time and passion to community work in London.
We are also grateful to the emergency services for their part in ensuring the safety of guests and staff during theincident. In December 2018, the hotel re-opened its dining, entertaining and spa facilities and the guestrooms
and suites will follow in the spring of 2019. We are all looking forward to the full re-opening of this iconic hotelin London and I am confident that the hotel will soon re-establish its position as a leader in luxury hospitality inthe city.

11

12 Mandarin Oriental International Limited

Group Chief Executive’s Review Continued

The Group’s properties in Munich and Geneva both had a relatively flat year in terms of RevPAR, affected by adecline in Middle East business and generally softer demand from the group segment. These challenging market
conditions are expected to persist in 2019. Meanwhile, Hotel Ritz, Madrid remains closed for restoration. Due to a
construction accident, the work has been delayed by some months and the hotel is now expected to re-open in 2020.
The Group’s hotels in America performed better than 2017, with RevPAR for the region up 4% on a like-for-likebasis. New York and Miami both performed well, increasing RevPAR by 6%, primarily driven by improved ADR.
Washington D.C. had a tougher year as its performance in 2017 had benefited from the Presidential Inauguration,
while Boston’s performance was slightly better compared to the previous year.

Business developments
The Group has 15 hotels and 12 residences under development which are likely to become operational within
five years. All are management contracts with no equity participation, but we continue to look at investing inproperties on an exceptional basis where they are felt to be strategic to our long-term positioning. The Groupis focused on building its portfolio in major global city centre locations where the brand is currently absent,
on developing a strong resort portfolio and on reinforcing the Group’s position in existing markets by expanding
its presence with new properties.
Seven new management contracts were announced in 2018 as follows:• Standalone residences in Barcelona, Spain• Resort and residences in Muscat, Oman
• A hotel in Ho Chi Minh City, Vietnam• Resort and residences in Grand Cayman, Cayman Islands• A re-branding in Lake Como, Italy• Hotel and residences in Moscow, Russia• A resort in Phuket, Thailand

These announcements exemplify both the growth opportunities and the strategy that I have outlined with regards
to development. Six of the developments are in cities that are new to Mandarin Oriental while four – Grand Cayman,
Ho Chi Minh City, Muscat and Moscow – will be the first Mandarin Oriental hotels in their respective territories.
Four of the developments – Grand Cayman, Lake Como, Muscat and Phuket – are resorts, reflecting our aim
to build our reputation as operators of world-class luxury resorts. Several of the developments also include
a Residences component.
In the second half of 2018, we were disappointed to cease management of the Group’s properties in Las Vegas
and Atlanta following a change in ownership of both properties. In addition, our previously announced projectin Melbourne is now on hold. The cessation of property management arrangements and setbacks to announced
new developments can sometimes happen – that is why it is so critical that we build a strong and purposefulpipeline of new developments.
In 2019, we have already announced a new Mandarin Oriental Residences at 685 Fifth Avenue in New York andI expect the momentum in making additions to the Group’s development pipeline to continue. I also look forward
to the opening of new hotels within the portfolio. We recently opened our first two properties in the Middle East,in Dubai and Doha. We will open at least one property in Beijing.

Annual Report 2018

Structure2018 was a year of transition for the Group’s structure. We appointed a Chief Operating Officer, responsible for all
operating hotels, and a Chief Relationship Officer, responsible for key owner relationships as well as the developmentof new properties. We have strengthened the Group’s management structure further through the promotion ofseveral General Managers to Area Vice Presidents, who will take on responsibility for a group of hotels and report to
the Chief Operating Officer. Through the Chief Relationship Officer, our pre-opening teams have been reorganised
and streamlined, which I believe has prepared us better than ever for the many upcoming new hotel openings.
In addition, we combined the roles of Chief Marketing Officer and Group Director of Brand Communications
to drive a more unified approach to sales, marketing, branding and communications.

CultureAt the heart of Mandarin Oriental’s reputation as a luxury hotel group is its culture, derived from its oriental
heritage and an unwavering focus on exceptional service that delivers personal experiences and moments of delight.
Our vision – to be recognised as the world’s best luxury hotel group – is something that can only be achieved
through our people. I am consistently impressed by the commitment of our colleagues to delivering exemplary
service and the growing culture of innovation as our people seek to provide points of differentiation and exceptional
experiences. I would like to thank each and every one of my 12,000 colleagues for their dedication, ambition andloyalty as we all strive to achieve this vision.

The year ahead
2019 is set to be another very busy year for the Group. We expect to open at least four new properties, re-open
the London hotel, progress the major renovation in Madrid and complete a renovation in Bangkok, and begin theredevelopment of the site occupied by The Excelsior in Hong Kong. Our development pipeline remains a priority
and I am confident that we will maintain the recent momentum and announce several new projects. Many of theGroup’s properties had a good operating performance in 2018 and we will look to sustain that in 2019, albeit in
the context of continuing economic and political uncertainties which will create challenging conditions in many ofour markets. Earnings will be substantially impacted by the closure of The Excelsior, Hong Kong. The renovationsin Madrid and Bangkok will also have an impact, although results will benefit from the re-opening of London.
With all of this I feel that we are building a very strong platform from which to deliver meaningful growth overthe long-term.

James Riley
Group Chief Executive
28th February 201913

14 Mandarin Oriental International Limited

Operating Summary

Total portfolio RevPAR
US dollar

Constant currency
2018		
US$		

2017		 % Change
US$2018		
US$		

2017		 % Change
US$

Asia

209

192		

9

Asia

207

192		

8

Europe

503

441		

14

Europe

510

441		

16

America

382

368		

4

America

382

368		

4

Total

277

254		

9

Total

277

254		

9

The like-for-like RevPAR presented in the table above includes all hotels that were in the Group’s portfolio for theentire year of both 2017 and 2018. As Mandarin Oriental Hyde Park, London and Hotel Ritz, Madrid were bothclosed for part of 2018, the 2017 comparatives have been adjusted to align with the 2018 trading periods in thislike-for-like comparison.

Group’s subsidiary hotels RevPAR
ASIA
Mandarin Oriental, Hong Kong 100% ownership

Mandarin Oriental, Tokyo 100% leasehold2018		

2017		 % Change

2018		

2017		 % Change

Available rooms

501

501		

0

Available rooms

179

179		

0

Average occupancy (%)

77.1

70.8		

9

Average occupancy (%)

78.3

80.3		

(2)

Average room rate (US$)

488

476		

3

Average room rate (US$)

622

585		

6

RevPAR (US$)

376

337		

12

RevPAR (US$)

487

469		

4

The Excelsior, Hong Kong 100% ownership

Mandarin Oriental, Jakarta 96.9% ownership2018		

2017		 % Change

2018		

2017		 % Change

Available rooms

869

869		

0

Available rooms

272

272		

0

Average occupancy (%)

83.5

79.1		

6

Average occupancy (%)

51.3

43.4		

18

Average room rate (US$)

207

197		

5

Average room rate (US$)

140

152		

(8)

RevPAR (US$)

173

156		

11

RevPAR (US$)

72

66		

9

Annual Report 2018 15

EUROPEAMERICA

Mandarin Oriental Hyde Park, London 100% ownership

Mandarin Oriental, Boston 100% ownership2018		

2017		 % Change

2018		

2017		 % Change

Available rooms

181

181		

0

Available rooms

148

148		

0

Average occupancy (%)

33.3

30.8		

8

Average occupancy (%)

69.5

70.4		

(1)

Average room rate (US$)

857

723		

19

Average room rate (US$)

629

602		

4

RevPAR (US$)

285

223		

28

RevPAR (US$)

437

424		

3

* Mandarin Oriental Hyde Park, London closed for restoration
following a fire on 6th June 2018. Comparatives for 2017 havebeen restated to show a comparison on a like-for-like basis.

Mandarin Oriental, Munich 100% ownership2018		

Mandarin Oriental, Washington D.C. 89.1% ownership2017		 % Change

2018		

2017		 % Change

73

73		

0

Available rooms

373

373		

0

Average occupancy (%)

75.5

76.1		

(1)

Average occupancy (%)

66.6

64.9		

3

Average room rate (US$)

902

877		

3

Average room rate (US$)

334

352		

(5)

RevPAR (US$)

681

667		

2

RevPAR (US$)

222

229		

(3)

Available rooms

Mandarin Oriental, Paris 100% ownership2018		

2017		 % Change

Available rooms

138

138		

0

Average occupancy (%)

55.1

50.0		

10

Average room rate (US$)

1,088

1,021		

6

599

511		

17

RevPAR (US$)

Mandarin Oriental, Geneva 92.6% ownership2018		

2017		 % Change

Available rooms

181

189		

(4)

Average occupancy (%)

63.8

63.9		

0

Average room rate (US$)

615

634		

(3)

RevPAR (US$)

392

405		

(3)

16 Mandarin Oriental International Limited

Development Portfolio

The following 15 hotels and 12 Residences at Mandarin Oriental are expected to open in the next five years.
Asia-PacificMandarin Oriental, Bali
An 88-room resort and 89 Residences at Mandarin Oriental located on Bali’s southern Bukit Peninsula. Perched on a cliffside plateau, the resort will offer
dramatic views with direct access to a secluded and protected white-sand beach.

The Residences at Mandarin Oriental, Bangkok
146 luxury residences located across the Chao Phraya River from Mandarin Oriental, Bangkok, part of an iconic mixed-use riverfront development.

Mandarin Oriental Qianmen, Beijing
72 courtyard suites located in a traditional hutong quarter, providing a rare opportunity to experience living in an authentic Beijing residential district,close to Tiananmen Square.

Mandarin Oriental Wangfujing, Beijing
A 74-room hotel located in a premier mixed-use development WF CENTRAL, with impressive views overlooking the Forbidden City.

Mandarin Oriental, Manila
A 275-room hotel located within the Ayala Triangle in Makati central business district.

Mandarin Oriental, Phuket
A 107-room beachfront resort located on the island’s west coast in picturesque Laem Singh Bay on Millionaire’s Mile, with panoramic views of
the Andaman Sea.

Mandarin Oriental, Saigon
A 228-room hotel located in a mixed-use development in the heart of Ho Chi Minh City, and close to key landmarks.

Mandarin Oriental, Shenzhen
A 191-room hotel situated on the top of an impressive 400-metre tower with outstanding views of the city skyline and the surrounding city parks.

Europe, Middle East & Africa
The Residences by Mandarin Oriental, Barcelona
34 luxury residences housed in a 20-storey tower, with a prime location just a short walk from Mandarin Oriental, Barcelona.

Mandarin Oriental, Dubai, Sheikh Zayed RoadA 259-room hotel and 158 Residences at Mandarin Oriental located on Sheikh Zayed Road with views over downtown Dubai and direct access to the area’s
business and leisure attractions.

Mandarin Oriental Bosphorus, Istanbul
A 123-room hotel prominently located on the banks of the Bosphorus, with panoramic vistas of the famed strait, surrounding hills and the city’s historical sites.

Mandarin Oriental Mayfair, London
A 48-room boutique hotel and 80 Residences at Mandarin Oriental located on Hanover Square in the heart of London’s Mayfair District.

Mandarin Oriental, Moscow
A 65-room hotel and 137 Residences at Mandarin Oriental with a prime riverfront location on the Sofiyskaya embankment in the heart of the city, directly
facing the Kremlin.

The Residences at Mandarin Oriental, Munich
17 luxury Residences at Mandarin Oriental located in a mixed-use complex being developed opposite Mandarin Oriental, Munich, which will include
51 additional hotel rooms.

Mandarin Oriental, Muscat
A 151-room resort and 150 Residences at Mandarin Oriental located on the beach in a prime city location, with views over the Arabian Sea.

Annual Report 2018

America
Mandarin Oriental, Boca Raton
A 164-room hotel and 91 Residences at Mandarin Oriental as part of a mixed-use complex, surrounded by Boca Raton’s most affluent, residential
neighbourhoods and a short walk from miles of pristine beaches.

Mandarin Oriental, Grand Cayman
A 100-room beachfront resort with 89 branded Residences at Mandarin Oriental situated on 67 acres at St James Point, on the southern shore of the island.

Mandarin Oriental, Honolulu
A luxury 125-room hotel and 102 Residences at Mandarin Oriental, located on the Hawaiian island of Oahu, in the heart of the Ala Moana District.

Mandarin Oriental Residences at 685 Fifth Avenue, New York
69 luxurious residences located on Fifth Avenue New York housed in an elegant 1920’s building on the corner of Fifth Avenue and 54th Street.
Opening dates are determined by each project’s owner/developer. All of the above projects will be managed by Mandarin Oriental Hotel Group with no equity
investment from the Group.
Room numbers reflect the latest estimate from each project’s owner/developer, and may therefore differ from the original announcements and the final
number once the project is completed.

17

18 Mandarin Oriental International Limited

International Brand Recognition

The recognition of Mandarin Oriental as one of
the world’s best luxury hotel groups continued to bereflected in the awards received from respected travelassociations and publications worldwide. Highlights
in 2018 include the Group being awarded for ‘Best
Service’ as well as ‘Best Hotel Brand’ in the Cathay
Pacific Marco Polo Club ‘Members Choice Awards’.
In addition, the Condé Nast Traveler, US ‘Readers’
Choice Awards’ and the US News & World Reportlisted 11 and 12 Mandarin Oriental hotels respectively
as among the ‘Best in the World’. Mandarin Oriental,
Bangkok was recognised once again as the ‘Best Hotelin the World’ in several noteworthy publications
including, the Tatler Travel Guide, Conde Nast Traveler,
US ‘Readers’ Choice Awards’, The Telegraph ‘Ultra
Awards’ and Travel + Leisure’s ‘World’s Best Awards’.
During its first year of operation as a Mandarin
Oriental property, the Group’s newest luxury resort
Mandarin Oriental, Canouan, won ‘Best Hotel Spa’in the World Spa Awards.
In the 2019 Michelin guides, a total of 16 restaurants
were honoured, with 23 stars being granted acrossthe Group. The Group’s spa operations were also
acknowledged as being among the best, with a record
13 hotels gaining the prestigious Forbes ‘Five Star
Spa’ award.

Mandarin Oriental Hotel GroupThe celebrated Mandarin Oriental Hotel Group is abyword for luxury and exceptional service.

If you have ever been fortunate enough to be a guestof Mandarin Oriental, you know they do things witha certain graceful charm. The attention to detail is
what makes your stay memorable. The stationery
with your initials embossed, gifts left on your pillow
at turn-down, and the simple skill of anticipating yourneeds before they arise!
Spa & Wellness International

Mandarin Oriental, Bangkok
Polished white-gloved service, elegant interiors,
a riverside location plus 140-years of history combine
to make Mandarin Oriental, Bangkok one of theclassiest hotels in Asia. Formal and fabulous, without
ever feeling fusty.
The Independent

I cannot think of a hotel that delights me more than
this consummate urban resort…I know that whenI return I will fall in love all over again with thisextraordinary hotel.
The Gallivanter’s Guide

Mandarin Oriental, Hong Kong
Drinking from silver tankards in the Captain’s Bar,taking afternoon tea at the Clipper Lounge, devouring
dim sum at Man Wah – all have become Hong Kong
institutions over Mandarin Oriental, Hong Kong’s
six-decade-long history.
Sunday Times Travel Magazine

Country & Town House

The Landmark Mandarin Oriental, Hong Kong

Inspired by the Orient, Mandarin Oriental operates
some of the world’s most acclaimed hotels inprestigious destinations around the globe. Each hotel
offers a strong sense of place and top amenities – someof the best spas around are found inside the walls of
Mandarin Oriental hotels.

With a modern, streamlined look, The Landmark
Mandarin Oriental, Hong Kong is an oasis for travelers
with discriminating taste who appreciate excellent
service and who want to be as centrally located as
possible. Staff will remember you by name throughout
your stay, and service is some of the best in the city.

Pursuitist

Forbes Travel Guide

Annual Report 2018

Mandarin Oriental Pudong, Shanghai
Basing yourself on the Pudong side of the Huangpu
River? There are plenty of big-name hotels to choose
from, but we love Mandarin Oriental Pudong,Shanghai for its generously sized rooms, sleek
contemporary style, museum-quality art collection,
excellent restaurants and luxurious spa.
Travel & Lifestyle

Mandarin Oriental, Taipei
My 86 sqm one-bedroom Club City Suite was beautiful.
The bedroom was steeped in Parisian elegance with
Oriental flourishes, and the king-size bed was possibly
the most comfortable bed I’ve ever slept in. Fantastic.
I couldn’t find anything to fault during my stay, fromthe design and facilities to the service – top marks
all round.
Business Traveller

Mandarin Oriental, Tokyo
Mandarin Oriental, Tokyo is a world in itself. Guests
are disinclined to leave the hotel because they are madeto feel so fabulous and welcome. Even the smallestof the 179 bedrooms is vast, with glamorous touches.
The reason everyone loves it here is down to the service:
nobody has to carry a heavy parcel for long, or needs
to wait for more than a couple of seconds for a lift, or
queue at the front desk. Could things get any better?
Absolutely, evidently not.
Condé Nast Traveller

Mandarin Oriental, Barcelona
Nearly ten years after opening, Mandarin Oriental,
Barcelona still astounds. From its gently sloping
walkway that gradually silences the racket of the
Passeig de Gracia upon entering, to the grand Patricia
Urquiola-designed Blanc restaurant. This hotel is theultimate word in luxury.
Wallpaper*

There is a reason why Mandarin Oriental, Barcelona,
figures year after year on lists of the best hotels in
Barcelona, Spain, and even the world. Every detail isabsolutely flawless, from the friendly doormen to theimpeccable lobby. It is almost impossible to fault. If I
had to think of something, it would be that I can’t help
but wonder whether I’m beautiful enough to stay here.
Condé Nast Traveler

Mandarin Oriental, Bodrum
Wrapped around its own private bay on the northernshores of a rugged peninsula jutting-out from Turkey’s
beautiful Aegean coast, it’s hard to imagine a morelaid-back yet sophisticated and exclusive retreat than
Mandarin Oriental, Bodrum. Once you enter the
grounds of the resort there’s nothing to remind youof the outside world.
The Telegraph

Mandarin Oriental Hyde Park, London
The atmosphere at Mandarin Oriental Hyde Park,
London is gracious without being stuffy from themoment the red-coated, top-hatted doorman opens
the door. Guestrooms eschew glitz for subtle décor andcontemporary comforts while retaining historic charm.
Despite the Asian origins of the hotel group, it feels likethe best of British.
Sydney Morning Herald

Mandarin Oriental, Marrakech
With hotels so perfect that the very words ‘Mandarin
Oriental’ have become synonymous with unparalleledluxury, it should come as little surprise that thisMarrakech edition would be one of the mostspectacular residences in the city. While the stunning
grounds, impressive facilities and top-tier service are all
well worth noting, for GQ, it’s the pool villas that takethis hotel from great to exceptional. The palatial villas
are mind-blowingly beautiful. The two bedrooms are
perfectly lovely, but it’s the master bathroom you’ll
fantasise about for months after your stay.
GQ

1920 Mandarin Oriental International Limited

International Brand Recognition Continued

Mandarin Oriental, Milan

Mandarin Oriental, Miami

Milan is full of loud labels and big brands, but for those
who prefer their luxury to whisper instead of shout then
Mandarin Oriental, Milan is the discreet-but-deluxe
spot for you. Tastefully tucked off a main thoroughfare
in the prime shopping district, Mandarin Oriental,
Milan has quiet wow-factor.

The bridge that connects Brickell Key to downtown
Miami may not be a long one, but it’s enough to makeguests of Mandarin Oriental, Miami feel as if they’reentering their own little private sanctuary. Cutting
a fanned shape into the skyline, the hotel’s striking
design and unique location set it apart as unique fromthe get-go.

ForbesCondé Nast Traveler

Mandarin Oriental, Paris
Transport yourself out of Paris with this high-gloss
hotel. You might call it another elegance; but it makes
sense that this would be the case at a Mandarin, where
the codes for ‘luxury’ are different, where guests andstaff alike swear by impeccable service from start tofinish; stylish modern décor; and high-class dining
and spa options.
Condé Nast Traveler

Mandarin Oriental, Prague
One of the coziest places to wake up in the morning
in Prague is at Mandarin Oriental. Set in a former
monastery in the charming and centrally located
Mala Strana district, the hotel is a bastion of luxury
and comfort.
The Travel Channel

Mandarin Oriental, Boston
There is no hotel chain more synonymous with eleganceand sophistication than Mandarin Oriental, and its
Boston outpost sits among the U.S. elites.
Time Out

Mandarin Oriental, CanouanThis luxurious, all-suite resort lies in a Caribbean
setting of dreams, overlooking a white sandy bay backed
by forested hillside. Tranquility abounds on the lush
1200-acre estate, with tortoises – the small island’s
predominant residents – setting the tone, which isrelaxed and unhurried.
The Telegraph

Mandarin Oriental, New York
Every element at Mandarin Oriental, New York reflects
a sophisticated Asian aesthetic that recognizes the hotel
chain’s Far Eastern heritage while simultaneously
capturing the individuality of New York. What’s more,
the Five-Star hotel is dedicated to Asian-style service,
which is polished, professional, and unparalleled.
Forbes Travel Guide

They call it the city that never sleeps because of thehustle and bustle, the action and energy, the cars andthe noise. Imagine a place in New York City where
you can watch all of it unfold, while still relaxing in
exquisite, luxurious surroundings. That is Mandarin
Oriental, New York, an escape located directly in thecenter of it all. Situated in the Time Warner Center on
Columbus Circle, the Modern Asian-influenced décor
provides the perfect urban oasis. With impeccable
service as icing on the cake, the Mandarin Oriental
is a must-stay in NYC.
Pursuitist

Annual Report 2018

Financial Review

Accounting policies
The Directors continue to review the appropriatenessof the accounting policies adopted by the Group withregard to developments in International Financial
Reporting Standards (‘IFRS’).
The accounting policies adopted are consistent withthose of the previous year, except that the Group
has adopted two new standards to IFRS effective
on 1st January 2018, as more fully detailed in the‘Basis of preparation’ note in the financial statements.
The adoption of these new standards does not havea material effect on the financial statements and havebeen applied retrospectively, although the comparative
financial statements have not been restated. In addition,
additional disclosures have been made in the financial
statements in respect of revenue from contracts withcustomers and impairment of debtors in accordancewith the requirements under IFRS.

Results
Overall
The Group uses underlying earnings before interest,
tax, depreciation and amortisation (‘EBITDA’) to
analyse operating performance. Total underlying
EBITDA including the Group’s share of underlying
EBITDA from associates and joint ventures isshown below:				

2018		
US$m		

2017
US$m

Subsidiaries

153.5

127.8

Associates and joint ventures

25.6

30.1

Underlying EBITDA

179.1

157.9

Subsidiaries				2018		
US$m		

2017
US$m

Underlying EBITDA from subsidiaries

153.5

127.8

Less: underlying depreciation
and amortisation(62.9 )

(58.8 )

Underlying operating profit

90.6

69.0

In 2018, underlying EBITDA from subsidiaries increased
by US$25.7 million, or 20%, to US$153.5 million.
Results benefited primarily from strong performancesin Hong Kong and the assumed return to full inventoryof the newly renovated London hotel. Although theLondon hotel closed following the fire in June 2018,
insurance proceeds have compensated for the loss ofanticipated profits as the hotel had been due to fully
re-open in mid-2018 following renovation. In 2017,
results in London were lower due to the full year
impact of the renovation, which commenced in
September 2016.
In Asia, all subsidiary hotels improved their EBITDA
performance. Mandarin Oriental, Hong Kong delivereda record performance and The Excelsior hotel performed
well in its final year prior to closure. There was also
a notably improved performance in Jakarta, owing
to higher occupancy levels, while Tokyo’s performance
improved slightly despite an ongoing rooms renovation.
In Europe, while individual hotel EBITDA results weremixed, the region overall benefited significantly fromthe better results in London. Despite the politicaldemonstrations in the final quarter of 2018, the Paris
hotel also had a better year with higher occupancy.
Munich’s result was slightly weaker than 2017 while
Geneva had a softer year primarily due to weaker
demand and strong competition.
In America, overall EBITDA performance was flat year
on year, with an improvement in Boston offset by lower
results in Washington D.C. as 2017’s performance
benefited from the Presidential Inauguration.
In 2018, the EBITDA contribution from management
activities increased by US$9.1 million to US$31.7 million.
While the management business generally performed
better, a significant portion of the increase was related
to one-off termination fees received in respect of the
cessation of management contracts for the Las Vegas
and Atlanta hotels.

21

22 Mandarin Oriental International Limited

Financial Review Continued

Associates and joint ventures
The Group’s share of results from associates and joint
ventures was as follows:				2018		
US$m		2017
US$m

EBITDA from associates
and joint ventures

25.6

30.1

Less: depreciation and amortisation(13.3 )

(12.1 )

Operating profit

12.3

18.0

Less: net financing charges(3.5 )(3.8 )   tax(3.0 )(2.7 )

Share of results of associates
and joint ventures

5.8

11.5

In total, the Group’s share of EBITDA from associates
and joint ventures decreased by US$4.5 million, or15%, to US$25.6 million in 2018. The decrease wasprimarily due to the planned closure of Hotel Ritz,
Madrid in February 2018 for a full restoration thatis now due to complete in 2020.
Singapore had one of its best performances in recent
years, with strong market demand enabling the hotel
to increase EBITDA. Bangkok and Kuala Lumpur alsodelivered better results while in America, both New Yorkand Miami performed in-line with the prior year.
Depreciation and amortisation of associates and joint
ventures was 10% higher in 2018, primarily due tothe write-off of fixed assets in preparation for therenovation in Madrid. The Group’s share of net
financing charges and tax from associates and joint
ventures were broadly in-line with the prior year.

Net financing charges
Net financing charges for the Group’s subsidiaries
increased to US$12.9 million in 2018, from
US$11.0 million in 2017. The increase was primarily
due to higher borrowing costs for the Group’s
US$447 million facility in Hong Kong, following several
increases in the reference rate over the course of 2018.

Interest cover
EBITDA is used as an indicator of the Group’s
ability to service debt and finance its future capital
expenditure. Interest cover in 2018, calculated asunderlying EBITDA (including the Group’s shareof underlying EBITDA from associates and joint
ventures) over net financing charges (including
capitalised interest and the Group’s share of net
financing charges from associates and joint ventures),was 10.7 times compared with 10.6 times in 2017.
Tax
Taxation for 2018 of US$18.6 million, excluding
tax charges on non-trading items of US$0.5 million,
was higher than the US$15.0 million charge in 2017,reflecting improved results at the Group’s subsidiary
hotels, notably in Hong Kong and London. The
underlying effective tax rate for 2018 slightly increased
to 21% from 20% in 2017.
Non-trading items				2018		
US$m		

2017
US$m

Fire at Mandarin Oriental
Hyde Park, London– repair expenses and write-off
	  of tangible assets and	  other incidental expenses(28.6 )–

– insurance recovery for	  replacement of tangible assets
	  and other incidental expenses

29.6

–

Closure of The Excelsior, Hong Kong
– accelerated depreciation
	  and amortisation(23.6 )–– other costs(2.8 )–

Change in fair value ofother investments

4.4–(21.0 )–

Tax

(0.5 )–Net non-trading losses(21.5 )–

Non-trading items before tax

Annual Report 2018

Net non-trading losses of US$21.5 million wererecorded in 2018. As the non-trading expenses relating
to the repair expenses and write-off of tangible assets
due to the fire at the London hotel were fully coveredby insurance compensation, the net non-trading losses
were primarily due to the accelerated asset write-downs
related to the closure of The Excelsior hotel. Underaccounting standards, the accelerated write-downs
are recognised on a straight-line basis from the dateof announcement until the date of closure of the hotel.
These non-trading costs, which are non-cash in nature,
will also impact results in 2019. There were no nontrading items in 2017.

Under investing activities, capital expenditure on
existing properties was US$53 million in 2018,
compared to US$83 million in 2017. The decrease wasprimarily due to the completion of the renovation at
Mandarin Oriental Hyde Park, London in mid-2018.

Cash flow
The Group’s consolidated cash flows are summarised
as follows:• US$31 million for the reimbursement of operating2018		
US$m		

2017
US$mOperating activities

146

120

Investing activities
Net capital expenditure on
existing properties

		
		

(53 )

(83 )

Payment on Munich expansion

–

(3 )

Net advances to associates
and joint ventures

(8 )

(10 )

Purchase of intangible assets

(7 )

(6 )

Other

(1 )

–

Financing activities
Net drawdown of borrowings

28

28

Dividends paid

(38 )

(50 )

Net increase/(decrease) in cash

67

(4 )

Cash and cash equivalents
at 1st January

184

183

(4 )

5

247

184

Effect of exchange rate changes
Cash and cash equivalents
at 31st December

No significant acquisitions were made by the Group
in 2018 and 2017.

Fire at Mandarin Oriental Hyde Park, London
In 2018, the Group received interim insurance
payments covering both property damage and businessinterruption, totalling US$66 million. This amount
was recognised in the financial statements as follows:
expenditures and loss of profits in 2018 was recorded
as underlying business performance;• US$30 million for the replacement of damaged
tangible assets and other incidental expenses
incurred as a result of the fire was recognised as
non-trading income; and• US$5 million for the reimbursement of operating
expenditures expected in 2019 was recognised on
the balance sheet as cash received in advance.
The total property damage and business interruption
claims with the Group’s insurers are expected to beconcluded in 2019.
Looking ahead, the Group is committed to investing
US$774 million into previously announced significant
capital projects:
Significant capital commitments, as previously announced		

The Group’s cash flows from operating activities were
US$146 million in 2018, an increase of US$26 million
from the US$120 million inflow in 2017.

US$m		

TimingMadrid renovation (Group’s 50% share)44		

2019-20

Munich extension141		

2019-23

Redevelopment of The Excelsior site589		

2019-25

		

774

These projects will be funded through an appropriate
mixture of external debt and existing cash reserves.

23

24 Mandarin Oriental International Limited

Financial Review Continued

Dividends
The Board is recommending a final dividendof US¢1.50 per share for a full-year dividend ofUS¢3.00 per share (2017: US¢3.00 per share).
No scrip alternative is being offered in respectof the dividend. The final dividend is payable on
15th May 2019 to shareholders on the register ofmembers at the close of business on 15th March 2019.

Supplementary information
Although the Group’s accounting policy in respectof its freehold land and buildings and the building
component of owner-occupied leasehold properties
is based on the cost model, the Directors continue
to review the fair market values in conjunction withindependent appraisers on an annual basis. The fairmarket value of both freehold and leasehold land andbuildings is used by the Group to calculate adjusted
net assets, which the Directors believe gives important
supplementary information regarding net asset value
per share and gearing as outlined below:
2018

2017

			Per share		Per share
		
US$m
US$
US$m
US$

Shareholders’ funds/net
assets at amortised cost

1,239

0.98

1,274

1.01

Add: surplus for fairmarket value offreehold and leasehold
land and buildings

4,594

3.64

4,473

3.56

Adjusted shareholders’funds/net assets

5,833

4.62

5,747

4.57

In 2019, work will commence to redevelop the siteof The Excelsior hotel into a mixed-use commercial
building. When the hotel closes, the site will be
revalued and transferred from an owner occupied
property held at historical depreciated cost to an
investment property under development subject toregular valuation review. The initial revaluation gain,
estimated at some US$2.9 billion, will be recognisedin the property revaluation reserve through othercomprehensive income. This classification change has
no impact on the Group’s total adjusted shareholders’funds, however, the US$2.9 billion gain will bereclassified from adjusted shareholders’ funds toshareholders’ funds. Subsequent fair value changesof the investment property will be recognised as a
non-trading item in the profit and loss.
On an IFRS basis, the Group’s consolidated net debt
of US$285 million at 31st December 2018 was 23%
of shareholders’ funds, compared with consolidated
net debt of US$327 million at 31st December 2017
which was 26% of shareholders’ funds. Taking into
account the fair market value of the Group’s interests
in freehold and leasehold land, gearing was 5% ofadjusted shareholders’ funds at 31st December 2018,
compared with 6% at 31st December 2017.

Treasury activities
The Group manages its exposure to financial risk using
a variety of techniques and instruments. The main
objective is to manage exchange and interest rate risks
and to provide a degree of certainty in respect of costs.
The Group has fixed or capped interest rates on 44%
of its gross borrowings.
In respect of specific hotel financing, borrowings
are normally taken in local currency to hedge
partially the investment and the projected income.
At 31st December 2018, the Group’s net assets/(liabilities)
were denominated in the following currencies:
Net assets/(liabilities)
		

US$m		

Hong Kong dollar
Euro

Adjusted
net assets*%		

US$m		

(116 )(9 )3,854		

66

528		

42		

689		

12

United States dollar

373		

30		

430		

7

United Kingdom sterling

206		

17		

370		

6

Singapore dollar

59		

5		

209		

4

Thai baht

31		

2		

98		

2

Swiss franc

89		

7		

89		

1

Indonesian rupiah

21		

2		

41		

1

Others

48		

4		

53		

1

1,239		

100		

5,833		

100		

* See supplementary information section above.

%Annual Report 2018

The Group, excluding associates and joint ventures,
had committed borrowing facilities totalling
US$610 million, of which US$532 million was drawn
at 31st December 2018. The principal amounts due
for repayment are as follows:
		
		
		

Within one year

Facilities		 Facilities		
committed		drawn		US$m		
US$m		

552		

525		

Unusedfacilities
US$m

27

Between one and two years

–		

–		

–

Between two and three years

57		

6		

51

Between three and four years

–		

–		

–

Between four and five years

–		

–		

–

Beyond five years

1		

1		

–

610		

532		

78

		

At 31st December 2018, the Group had US$78 millionof committed, undrawn facilities in addition to its cash
balances of US$247 million. The average tenor of theGroup’s borrowings was 0.8 years (2017: 1.6 years),with US$549 million of committed facilities due
to mature in mid-2019. The Group is in advanced
discussions with its key relationship banks to refinancethese facilities, which comprise a US$102 million
facility in London and a US$447 million facility in
Hong Kong. Based on the Group’s consistent trackrecord of securing external financing in a timely
manner, its operating performance and strong balance
sheet, the Group is confident that it will complete therefinancing of these bank facilities before their expiry.

Principal risks and uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on pages 103 and 104.

Craig Beattie
Chief Financial Officer
28th February 201925

26 Mandarin Oriental International Limited

Directors’ Profiles

Ben Keswick* Chairman and Managing Director
Mr Keswick joined the Board as Managing Director
in 2012 and became Chairman in 2013. He has held
a number of executive positions since joining theJardine Matheson group in 1998, including financedirector and then chief executive officer of Jardine
Pacific between 2003 and 2007 and, thereafter, groupmanaging director of Jardine Cycle & Carriage until
2012. He has an MBA from INSEAD. Mr Keswick ischairman of Jardine Matheson Limited, Jardine Cycle &Carriage and Yonghui Superstores and a commissionerof Astra. He is also executive chairman and managing
director of Jardine Matheson and Jardine Strategic,
chairman and managing director of Dairy Farm and
Hongkong Land, and a director of Jardine Pacific andJardine Motors.
James Riley * Group Chief Executive
Mr Riley joined the Board as Group Chief Executive
in 2016. He has previously held a number of senior
executive positions in the Jardine Matheson group sincejoining from Kleinwort Benson in 1993. A Chartered
Accountant, he was group finance director of Jardine
Matheson from 2005 to 2016. He has been a directorof Mandarin Oriental Hotel Group International
since 2005. He was a non-executive director of the
Hongkong and Shanghai Banking Corporation from2012 to 2016.
Craig Beattie* Chief Financial Officer
Mr Beattie joined the Board as Chief Financial Officer
in November 2018. He has previously held a numberof senior finance positions in the Jardine Matheson
group since joining from Ernst & Young in the UK in
2006, including group treasurer of Jardine Mathesonfrom 2016 to 2018. He was director of Corporate
Finance of the Group from 2011 to 2013. He is a
Chartered Accountant.

* Executive Director

Jack Yilun Chen
Mr Chen joined the Board in May 2018. He is a senior
executive within Taikang Insurance Group and a directorof China Guardian Auctions.
Edouard Ettedgui
Mr Ettedgui joined the Board in 1998 and wasGroup Chief Executive until he stepped down fromexecutive office in 2016. He was formerly group financedirector of Dairy Farm, prior to which he was businessdevelopment director of British American Tobacco.
He is also a director of Yum China Holdings.
Mark Greenberg
Mr Greenberg joined the Board in 2006. He isgroup strategy director of Jardine Matheson. He
previously spent 16 years in investment banking with
Dresdner Kleinwort Wasserstein in London. He is alsoa director of Jardine Matheson Limited, Dairy Farm,
Hongkong Land and Jardine Cycle & Carriage, anda commissioner of Astra and Permata Bank.
Julian Hui
Mr Hui joined the Board in 1994. He is an executive
director of Owens Company, and a director ofCentral Development and Jardine Matheson.
Adam Keswick
Mr Keswick joined the Board in 2012. Having joined
Jardine Matheson in 2001, he was appointed to theboard in 2007 and was deputy managing director from2012 to 2016. Mr Keswick is also deputy chairmanof Jardine Lloyd Thompson and a director of Dairy
Farm, Hongkong Land and Jardine Strategic. He is
also a director of Ferrari, and vice chairman of thesupervisory board of Rothschild & Co.

Annual Report 2018

Simon Keswick
Mr Keswick joined the Board in 1986 and was Chairmanof the Company from 1986 to 2013. He joined theJardine Matheson group in 1962 and is a director of
Dairy Farm, Hongkong Land, Jardine Matheson andJardine Strategic.
Lincoln K.K. Leong
Mr Leong joined the Board in 2012. He is a
Chartered Accountant and has extensive experiencein the accountancy and investment banking
industries. Mr Leong was also chief executive officer
of MTR Corporation until 1st April 2019.
Anthony Nightingale
Mr Nightingale joined the Board in 2006 and was
Managing Director of the Company from 2006
to 2012. He is also a director of Dairy Farm,
Hongkong Land, Jardine Cycle & Carriage, Jardine
Matheson, Jardine Strategic, Prudential, Schindler,
Shui On Land and Vitasoy, and a commissioner of
Astra. He is chairperson of The Sailors Home andMissions to Seafarers in Hong Kong.
Y.K. Pang
Mr Pang joined the Board in 2016. He is deputy
managing director of Jardine Matheson, chairman of
Jardine Pacific, and chairman and chief executive ofJardine Motors. He previously held a number of senior
executive positions in the Jardine Matheson group,
which he joined in 1984, including chief executive of
Hongkong Land between 2007 and 2016. Mr Pang is
also deputy chairman of Jardine Matheson Limited,
and a director of Dairy Farm, Hongkong Land, Jardine
Matheson (China), Jardine Strategic and Zhongsheng.
He is chairman of the General Committee andExecutive Committee of the Employers’ Federationof Hong Kong, Deputy Chairman of the Hong Kong
Management Association and a past chairman of
the Hong Kong General Chamber of Commerce.

Jeremy Parr
Mr Parr joined the Board in 2015. He is general
counsel of the Jardine Matheson group. He waspreviously a senior corporate partner with Linklaters,
where he was the global head of the firm’s corporate
division, based in London. Mr Parr is also a directorof Jardine Matheson Limited, Dairy Farm andJardine Matheson.
Lord Sassoon, kt
Lord Sassoon joined the Board in 2013. He began
his career at KPMG, before joining SG Warburg(later UBS Warburg) in 1985. From 2002 to 2006
he served as a civil servant in the United Kingdom
Treasury, where he had responsibility for financial
services and enterprise policy. He subsequently chaired
the Financial Action Task Force and conducted a reviewof the UK’s system of financial regulation. From 2010
to 2013 Lord Sassoon was the first Commercial Secretary
to the Treasury and acted as the Government’s Front
Bench Treasury spokesman in the House of Lords. He
is a director of Dairy Farm, Hongkong Land, Jardine
Lloyd Thompson and Jardine Matheson. He is alsochairman of the China-Britain Business Council.
James Watkins
Mr Watkins joined the Board in 1997. He was a director
and group general counsel of Jardine Matheson from1997 to 2003. Mr Watkins qualified as a solicitor in1969 and was formerly a partner of Linklaters. He is
also a director of Hongkong Land and IL&FS India
Realty Fund II.
Percy Weatherall
Mr Weatherall joined the Board in 2000 and was
Managing Director from 2000 to 2006. He first joined
the Jardine Matheson group in 1976 and retired fromexecutive office in 2006. He is also a director of Dairy
Farm, Hongkong Land, Jardine Matheson and Jardine
Strategic. He is chairman of Corney & Barrow and
the Nith District Salmon Fishery Board.

27

28 Mandarin Oriental International Limited

Consolidated Profit and Loss Accountfor the year ended 31st December 2018

		
		
		
Note

Underlying		
business		
performance		
US$m		

2018
Non-trading				Underlying		
items				business		
(Note 8)		Total		 performance		
US$m		
US$m		
US$m		

2017
Non-trading
items(Note 8)		US$m		

Total
US$m

610.8

2

613.7		

–		

613.7

610.8		

–		

Cost of sales		(389.1)–		(389.1)(389.7)–		(389.7 )Gross profit		

224.6		

–		

224.6

221.1		

–		

Selling and distribution costs		(42.4)–		(42.4)(38.2)–		(38.2 )Administration expenses		(122.2)–		(122.2)(113.9)–		(113.9 )Other operating income/(expense)		

30.6		

(21.0)

9.6

–		

–		

–

Operating profit

3

90.6		

(21.0)

69.6

69.0		

–		

69.0

Financing charges		(15.1)–		(15.1)(12.3)–		(12.3 )Interest income		

2.2		

–		

2.2

1.3		

Revenue

–		

221.1

1.3

Net financing charges

4(12.9)–		(12.9)(11.0)–		(11.0 )Share of results of associates
and joint ventures

5

5.8		

–		

5.8

11.5		

–		

11.5

Profit before tax		

83.5		

(21.0)

62.5

69.5		

–		

69.5

Tax

6

(18.6)(0.5)(19.1)(15.0)–		(15.0 )Profit after tax		

64.9		

(21.5)

43.4

54.5		

–		

54.5

7&8

65.1		

(21.5)

43.6

54.9		

–		

54.9

Non-controlling interests		

(0.2)

–		

(0.2)

(0.4)

–		(0.4 )		
64.9		
(21.5)
43.4

54.5		

–		

54.5

		
US¢				US¢		

US¢				

US¢

Attributable to:Shareholders of the Company

Earnings per share7– basic		

5.16				3.46		

4.37				4.37– diluted		

5.15				3.45		

4.35				4.35Annual Report 201829

Consolidated Statement of Comprehensive Income
for the year ended 31st December 2018		
2018		
2017
Note
US$m		
US$m

Profit for the year		

43.4

54.5

Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans

14

(3.0)

7.7

Tax on items that will not be reclassified

6

0.5(1.2 )

		
(2.5)
6.5
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences(39.7)

87.1– net gains arising during the year		

0.6

0.8

Tax relating to items that may be reclassified

6

(0.1)

(0.2 )

Share of other comprehensive (expense)/income of associates and joint ventures		

(1.8)

8.4

– net (losses)/gains arising during the year		
Cash flow hedges

		(41.0)
96.1
Other comprehensive (expense)/income for the year, net of tax		

(43.5)

102.6

Total comprehensive (expense)/income for the year		

(0.1)

157.1

Shareholders of the Company		

0.2

157.3

Non-controlling interests		(0.3)(0.2 )

Attributable to:

		
(0.1)
157.1

30 Mandarin Oriental International Limited

Consolidated Balance Sheetat 31st December 2018		
2018		
2017
Note
US$m		US$m

Net assets
Intangible assets

9

53.0

47.7

Tangible assets

10

1,386.5

1,453.2

Associates and joint ventures

11

197.1

196.6

Other investments

12

15.2

11.0

Deferred tax assets

13

11.4

11.0

Pension assets

14

0.2

4.9

Non-current debtors

15

5.1

0.5

Non-current assets		

1,668.5

1,724.9

Stocks		
6.6
6.4
15

95.9

100.2

Current tax assets		

3.5

4.0

16

246.8

183.9

Current assets		

352.8

294.5

Current creditors

17(170.8)(151.4 )Current borrowings

18(524.2)(2.6 )

Current tax liabilities		

(14.0)(17.8 )

Current liabilities		

(709.0)(171.8 )Net current (liabilities)/assets		

(356.2)

122.7

Current debtors

Bank and cash balances

Long-term borrowings

18

(7.3)

(508.1 )Deferred tax liabilities

13(61.6)(58.6 )

Pension liabilities

14

(0.4)

(0.6 )

Non-current creditors

17–(0.2 )

		
1,243.0
1,280.1
Total equity
Share capital

21

63.1

62.9

Share premium

22

497.8

493.9

Revenue and other reserves		

678.3

717.2

Shareholders’ funds		

1,239.2

1,274.0

Non-controlling interests		

3.8

6.1

		
1,243.0
1,280.1

Approved by the Board of Directors
Ben Keswick
James Riley
Directors
28th February 2019

Annual Report 2018

Consolidated Statement of Changes in Equity
for the year ended 31st December 2018														Attributable to		Attributable to		Share		Share		Capital		
Revenue		Hedging		Exchange		shareholders of		non-controlling				
capital		premium		
reserves		
reserves		
reserves		
reserves		 the Company		interests		
Note
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		
US$m		

Total
equityUS$m2018
At 1st January		

62.9		

493.9		

265.9		

526.5		

0.1		(75.3 )

1,274.0		

6.1		

1,280.1

Total comprehensive
income		

–		

–		

–		

41.0		

0.5		(41.3 )

0.2		(0.3 )(0.1 )

Dividends paid by
the Company

24

–		

–		

–		

(37.8 )

–		–		(37.8 )

–		(37.8 )

Issue of shares		

0.2		

0.1		

–		

–		

–		

–		

0.3		

–		

0.3

Share-based long-term
incentive plans		

–		

–		

0.5		

–		

–		

–		

0.5		

–		

0.5

Change in interestin a subsidiary		

–		

–		

–		

2.0		

–		

–		

2.0		

(2.0 )–

3.8		

(3.9 )

0.1		

–		

–		

–		

–		

–

63.1		

497.8		

262.5		

531.8		

0.6		(116.6 )1,239.2		

3.8		

1,243.0

At 1st January		

62.8		

490.4		

286.2		

501.2		

(0.6 )(170.6 )1,169.4		

4.0		

1,173.4

Total comprehensive
income		

–		

–		

–		

61.3		

0.7		95.3		

157.3		

(0.2 )

157.1

Dividends paid by
the Company

24

–		

–		

–		

(50.3 )

–		–		(50.3 )

–		(50.3 )

Issue of shares		

0.1		

0.6		

–		

–		

–		

–		

0.7		

–		

0.7

Share-based long-term
incentive plans		

–		

–		

(0.8 )

–		

–		

–		

(0.8 )–		(0.8 )

Change in interestin a subsidiary		

–		

–		

–		

(2.3 )–		–		

(2.3 )

2.3		

–Transfer		

–		

2.9		

(19.5 )

16.6		

–		

–		

–		

–		

–

At 31st December		

62.9		

493.9		

265.9		

526.5		

0.1		(75.3 )

1,274.0		

6.1		

1,280.1

Transfer		–		At 31st December		2017

Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company
of US$43.6 million (2017: US$54.9 million) and net actuarial loss on employee defined benefit plans of US$2.6 million(2017: net actuarial gain of US$6.4 million).

31

32 Mandarin Oriental International Limited

Consolidated Cash Flow Statement
for the year ended 31st December 2018		
2018		
2017
Note
US$m		
US$m

Operating activities
Operating profit

3

69.6

69.0

Depreciation

10

81.6

56.7

Amortisation of intangible assets

9

4.9

2.1

Other non-cash items

25a

(4.0)

0.2

Movements in working capital

25b

17.5

9.6

Interest received		

1.9

1.3

Interest and other financing charges paid		

(14.4)(12.3 )Tax paid		

(18.8)(13.3 )

		
138.3
113.3
Dividends and interest from associates and joint ventures		

7.8

6.6

Cash flows from operating activities		

146.1

119.9

Purchase of tangible assets		(61.2)(82.6 )

Purchase of intangible assets		(7.4)(5.7 )

25c–(3.1 )

Purchase of other investments		

(1.1)(0.9 )

Advance to associates and joint ventures

25d

(9.1)

(11.4 )

Repayment of loans to associates and joint ventures

25e

1.2

1.3

Repayment of intangible assets		

0.8–

Sale of other investments		

–

0.4

25f

7.8

–

Cash flows from investing activities		

(69.0)(102.0 )Issue of shares		

0.1

0.6

Drawdown of borrowings

18

27.6

30.8

Repayment of borrowings

18

(0.2)

(2.5 )

Dividends paid by the Company

24(37.8)(50.3 )Cash flows from financing activities		(10.3)(21.4 )Net increase/(decrease) in cash and cash equivalents		

66.8(3.5 )Cash and cash equivalents at 1st January		

183.9

182.5

Effect of exchange rate changes		

(3.9)

4.9

246.8

183.9

Investing activities

Payment on Munich expansion

Insurance recovery received for purchase of tangible assets

Financing activities

Cash and cash equivalents at 31st December

25g

Annual Report 2018

Notes to the Financial Statements

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 adopted by the International AccountingStandards Board. The financial statements have been prepared on a going concern basis and under the historical costconvention except as disclosed in the accounting policies.
Details of the Group’s principal accounting policies are included in note 31.
This is the first set of the Group’s annual financial statements in which IFRS 9 ‘Financial Instruments’ and IFRS 15‘Revenue from Contracts with Customers’ have been applied. Changes to principal accounting policies are described
below. There are no other amendments relating to existing accounting standards, which are effective in 2018 andrelevant to the Group’s operations, that have a significant effect on the Group’s accounting policies. The Group has
not early adopted any standard, interpretation or amendment that have been issued but not yet effective.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with theeconomic environments of the locations in which they operate. The functional currency of the Company is United States
dollars. The consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in note 2.

Changes in principal accounting policies
The Group has adopted the following new accounting standards from 1st January 2018:
IFRS 9 ‘Financial Instruments’
Under IFRS 9, the gains and losses arising from changes in fair value of the Group’s investments, previously classified
as available-for-sale, have been recognised in profit and loss, instead of through other comprehensive income. Such fairvalue gains or losses on revaluation of these investments are classified as non-trading items, and do not have any impact
on the Group’s underlying profit attributable to shareholders and shareholders’ funds. The new forward-looking expectedcredit loss model, which replaces the incurred loss impairment model, has not resulted in a change to the Group’s
impairment provisions and earnings. The new hedge accounting rules, which align the accounting for hedging
instruments closely with the Group’s risk management practices, has no significant impact to the Group.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 establishes a comprehensive framework for the recognition of revenue. It replaces IAS 11 ‘Construction
Contracts’ and IAS 18 ‘Revenue’ which covers contracts for goods and services. The core principle in the framework isthat revenue is recognised when control of a good or service transfers to a customer. The new standard does not change
the Group’s revenue recognition from hotel ownership, hotel management, rendering of services, and sale of food andbeverages and goods.
Changes to accounting policies on adoption of IFRS 9 and 15 have been applied retrospectively although the comparative
financial statements have not been restated, other than certain comparative disclosures.

33

34 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

2 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 is operated on a worldwide basis in four regions: Hong Kong, Other Asia, Europe and America which form
the basis of its reportable segments. No operating segments have been aggregated to form the reportable segments.
In addition, the Group has two distinct business activities: Hotel ownership and Hotel & Residences branding andmanagement. The Group’s segmental information for non-current assets is set out in note 20.
2018		
US$m		

2017
US$m

– Hong Kong

245.5

235.8

– Other Asia

111.5

107.9

– Europe

143.7

163.8

– America

113.0

103.3

613.7

610.8

– Hotel ownership

570.3

577.6

– Hotel & Residences branding and management

74.6

62.1

Analysis by geographical area

Analysis by activity(31.2)(28.9 )

613.7

610.8

– Recognised at a point in time

222.5

234.6

– Recognised over time

370.1

354.1

592.6

588.7

– Less: intra-segment revenue

Revenue from contracts with customers

Revenue from other sources– Rental income

21.1

22.1

613.7

610.8

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 expects the setup costs to be recoverable.
Contract liabilities primarily relate to the advance consideration received from customers relating to gift cards andadvance customer deposits, for which revenue is recognised when the goods and services are provided to the customers.
Contract liabilities are further analysed as follows:
2018		
US$m		

2017
US$m

– Gift cards

12.3

11.4

– Advance customer deposits and other

11.1

9.2

23.4

20.6

Contract liabilities (refer note 17)

Increases in contract liabilities during the year were in line with the growth of the Group’s contracted sales.

Annual Report 2018

2 Revenue continued
Revenue recognised in relation to contract liabilities
Revenue recognised in the current year relating to carried-forward contract liabilities:
2018		
US$m		

2017
US$m

Gift cards

7.1

6.7

Advance customer deposits and other

7.5

8.7

14.6

15.4

Revenue expected to be recognised on unsatisfied contracts with customers
The following table shows the timing of revenue to be recognised on unsatisfied performance obligations at
31st December 2018:
			
			
			
Gift cards		
US$m		

Advancecustomer
deposits
and other		
US$m		

Total
US$m

Within one year

4.8		

15.1		

19.9

Between one and two years

5.1		

8.5		

13.6

Between two and three years

1.6		

–		

1.6

Between three and four years

0.6		

–		

0.6

Between four and five years

0.2		

–		

0.2

12.3		

23.6		

35.9

As permitted under the transitional provisions in IFRS 15, the transaction price allocated to unsatisfied performanceobligations at 31st December 2017 is not disclosed.

35

36 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

3 EBITDA (earnings before interest, tax, depreciation and amortisation)
	  and operating profit from subsidiaries
2018		
US$m		

2017
US$m

– Hong Kong

75.3

74.0

– Other Asia

32.6

29.6

– Europe

33.2

17.0

– America

12.4

7.2

Underlying EBITDA from subsidiaries

153.5

127.8

– repair expenses and write-off of tangible assets and other incidental expenses(28.6)–– insurance recovery for replacement of tangible assets and other incidental expenses

29.6

–

Closure of The Excelsior, Hong Kong – other costs

(2.8)

–

Change in fair value of other investments

4.4–

Analysis by geographical area

Non-trading items (refer note 8)Fire at Mandarin Oriental Hyde Park, London

2.6–

EBITDA from subsidiaries

156.1

127.8

Underlying depreciation and amortisation from subsidiaries(62.9)(58.8 )

(23.6)

–

69.6

69.0

– Hotel ownership

124.4

105.2

– Hotel & Residences branding and management

31.7

22.6

EBITDA from subsidiaries

156.1

127.8

– Hotel ownership

43.9

49.2

– Hotel & Residences branding and management

25.7

19.8

Operating profit

69.6

69.0

Non-trading items (refer note 8)
Closure of The Excelsior, Hong Kong
– accelerated depreciation and amortisation
Operating profit
Analysis by activity

Annual Report 2018

3 EBITDA (earnings before interest, tax, depreciation and amortisation)
	  and operating profit from subsidiaries continued
2018		
US$m		

2017
US$m

The following items have been credited/(charged) in arriving at operating profit:
Rental income (refer note 10)

21.1

22.1

Depreciation of tangible assets (refer note 10)(81.6)(56.7 )

Amortisation of intangible assets (refer note 9)(4.9)(2.1 )

Employee benefit expense(271.0)(248.9 )– share options and share awards granted(0.8)(2.3 )– defined benefit pension plans (refer note 14)(4.6)(4.7 )– defined contribution pension plans(1.6)(1.4 )(278.0)(257.3 )0.2

0.6– minimum lease payments(8.7)(8.7 )– contingent rents(6.2)(6.0 )– subleases

0.3

0.2

(14.6)(14.5 )

– audit(1.7)(1.6 )– non-audit services(0.9)(1.1 )(2.6)(2.7 )– salaries and benefits in kindNet foreign exchange gains
Operating leases

Auditors’ remuneration

3738 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

4 Net financing charges
2018		
US$m		

2017
US$m

– bank loans(13.3)(10.4 )

Commitment and other fees

(1.8)

(1.9 )

Financing charges(15.1)(12.3 )

Interest income

2.2

1.3

(12.9)(11.0 )

Interest expense

Net financing charges

5 Share of results of associates and joint ventures
			 Depreciation		
			
and		
EBITDA		 amortisation		
US$m		
US$m		

Operating		
profit/		(loss)		
US$m		Net				financing				charges		Tax		
US$m		
US$m		

Net
profit/(loss)
US$m

2018
Analysis by geographical area
– Other Asia

25.7		

(8.5)

17.2		

(1.3)

(3.0)

12.9

– Europe

(4.2)

(1.9)

(6.1)

–		

–		

(6.1 )– America

4.1		

(2.9)

1.2		

(2.2)

–		

(1.0 )

25.6		

(13.3)

12.3		

(3.5)

(3.0)

5.8

– Hotel ownership24.4		

(12.7)

11.7		

(3.4)

(2.9)

5.4

– Other

1.2		

(0.6)

0.6		

(0.1)

(0.1)

0.4

25.6		

(13.3)

12.3		

(3.5)

(3.0)

5.8

Analysis by activity

2017
Analysis by geographical area
– Other Asia

23.5		

(8.3)

15.2		

(1.4)

(2.3)

11.5

– Europe

2.7		

(0.8)

1.9		

–		

(0.1)

1.8

– America

3.9		(3.0)

0.9		(2.4)(0.3)(1.8 )

30.1		

(12.1)

18.0		

(3.8)

(2.7)

11.5

– Hotel ownership28.9		

(11.6)

17.3		

(3.6)

(2.6)

11.1

– Other

1.2		

(0.5)

0.7		

(0.2)

(0.1)

0.4

30.1		

(12.1)

18.0		

(3.8)

(2.7)

11.5

Analysis by activity

Annual Report 2018

6 Tax
2018		
US$m		

2017
US$m

– current tax(15.4)(23.6 )

– deferred tax (refer note 13)

(3.7)

8.6

(19.1)(15.0 )

– Hong Kong

(11.7)(10.3 )– Other Asia

(3.3)

3.9

– Europe(2.3)(7.2 )– America(1.8)(1.4 )(19.1)(15.0 )

– Hotel ownership(14.8)(9.1 )– Hotel & Residences branding and management(4.3)(5.9 )(19.1)(15.0 )

(7.2)

(4.3 )– Change in fair value of other investments

0.7–– Other items

0.9

0.8

– Closure of The Excelsior, Hong Kong

(4.8)

–

– Other items(3.4)(3.6 )Tax losses and temporary differences not recognised(4.9)(6.8 )

Utilisation of previously unrecognised tax losses and temporary differences

0.1

3.9

Recognition of previously unrecognised tax losses

1.4

3.8

Deferred tax assets written off

(0.3)

–

Withholding tax(2.2)(8.3 )

Over/(under) provision in prior years

0.6(0.5 )(19.1)(15.0 )

Remeasurements of defined benefit plans

0.5(1.2 )Cash flow hedges(0.1)(0.2 )

0.4(1.4 )Tax (charged)/credited to profit and loss is analysed as follows:

Analysis by geographical area

Analysis by activity

Reconciliation between tax expense and tax at the applicable tax rate*:
Tax at applicable tax rate
Income not subject to tax

Expenses not deductible for tax purposesTax relating to components of other comprehensive income is analysed as follows:

Share of tax charge of associates and joint ventures of US$3.0 million (2017: US$2.7 million) is included in share of
results of associates and joint ventures (refer note 5).
* The applicable tax rate for the year was 13% (2017: 7%) and represents the weighted average of the rates of taxation prevailing in the

territories in which the Group operates. The increase in applicable tax rate was mainly caused by a change in the geographic mix of theGroup’s profits.

3940 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

7 Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders of US$43.6 million(2017: US$54.9 million) and on the weighted average number of 1,260.6 million (2017: 1,257.7 million)
shares in issue during the year.
Diluted earnings per share are calculated on profit attributable to shareholders of US$43.6 million(2017: US$54.9 million) and on the weighted average number of 1,263.3 million (2017: 1,262.0 million)
shares in issue after adjusting for the numbers of shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on average share price during the year.
The weighted average number of shares is arrived at as follows:
Ordinary shares in millions
2018		
2017

Weighted average number of shares for basic earnings per share calculation

1,260.6

1,257.7

2.7

4.3

1,263.3

1,262.0

Adjustment for shares deemed to be issued for no consideration
under the share-based long-term incentive plans
Weighted average number of shares for diluted earnings per share calculation

Additional basic and diluted earnings per share are also calculated based on underlying profit attributable
to shareholders. A reconciliation of earnings is set out below:
			
			
			
US$m		

2018
Basic		earnings		
per share		
US¢		

Profit attributable to shareholders

43.6		

3.46		

Non-trading items (refer note 8)

21.5 					Underlying profit attributable
to shareholders

65.1		

5.16		

Diluted				earnings				per share				US¢		
US$m		

3.45

5.15

54.9		

2017
Basic		earnings		
per share		US¢		

Dilutedearnings
per shareUS¢

4.37		

4.35

4.37		

4.35–
54.9		

Annual Report 2018

8 Non-trading items
An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
2018		
US$m		

2017
US$m

– repair expenses and write-off of tangible assets and other incidental expenses(28.6)–– insurance recovery for replacement of tangible assets and other incidental expenses

29.6

–

– accelerated depreciation and amortisation(24.3)–– other costs

(2.6)

–

Change in fair value of other investments

4.4–(21.5)–

Fire at Mandarin Oriental Hyde Park, London*

Closure of The Excelsior, Hong Kong†

* Following the fire on 6th June 2018, Mandarin Oriental Hyde Park, London has closed for the necessary repairs in order to restore theproperty. The hotel re-opened its public areas and facilities on 4th December 2018. All guestrooms are scheduled to re-open in April 2019.
The repair expenses and write-off of damaged tangible assets, and other incidental expenses of US$28.6 million as a result of the fire
have been recognised as non-trading expenses. The Group received interim cash payments during 2018 from insurers. The insurancecompensation of US$29.6 million for the replacement of tangible assets and other incidental expenses has been recognised as non-trading
income. The insurance compensation for the reimbursement of operating expenditures and loss of profits of US$31.1 million has beenrecorded as underlying business performance. The total property damage and business interruption claims with the Group’s insurers are
expected to be concluded in 2019.
†

On 9th October 2018, the Group announced that The Excelsior, Hong Kong will close on 31st March 2019 in order for the site to be
redeveloped as a commercial building. An accelerated depreciation and amortisation charge as a result of the revision of the estimateduseful lives of the non-leasehold land assets of the hotel, together with additional costs in respect of the hotel closure, have been recognised
as non-trading expenses during the year. At the date of change in use, the site will be revalued and transferred from an owner occupied
property held at historical depreciated cost to an investment property under development subject to regular valuation review. The initial
revaluation gain will be recognised to the property revaluation reserve through other comprehensive income. Subsequent fair value changesof the investment property will be recognised as a non-trading item in the profit and loss.

41

42 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

9 Intangible assets										Leasehold		
Computer		Goodwill		land		
software		
US$m		
US$m		
US$m		Development
project
contract costs		
US$m		

Total
US$m

2018
23.9		

6.4		

23.5		

18.6		

72.4

Amortisation and impairment

–		

(2.5)

(19.1)(3.1)(24.7 )Net book value at 1st January

23.9		

3.9		

4.4		

15.5		

47.7

Exchange differences

–		

–		

–		

(0.2)

(0.2 )

Additions

–		

–		

5.5		

4.3		

9.8

Disposals

–		

–		

–		

(0.8)

(0.8 )

Transfer from tangible assets

–		

–		

1.4		

–		

1.4

Amortisation charge–		(0.2)

(1.9)

(2.8)

(4.9 )

Cost

Net book value at 31st December

23.9		

3.7		

9.4		

16.0		

53.0

Cost

23.9		

6.4		

28.1		

21.8		

80.2

–		

(2.7)

(18.7)(5.8)(27.2 )

23.9		

3.7		

9.4		

16.0		

53.0

23.9		

6.3		

17.8		

16.3		

64.3

Amortisation and impairment

–		

(2.2)

(15.1)(2.7)(20.0 )Net book value at 1st January

Amortisation and impairment

2017
Cost

23.9		

4.1		

2.7		

13.6		

44.3

Exchange differences

–		

–		

–		

0.4		

0.4

Additions

–		

–		

3.4		

2.5		

5.9

Transfer to tangible assets

–		

–		

(0.2)

–		

(0.2 )

Amortisation charge–		(0.2)

(1.5)

(0.4)

(2.1 )

Impairment charge

–		

–		

–		

(0.6)

(0.6 )Net book value at 31st December

23.9		

3.9		

4.4		

15.5		

47.7

Cost

23.9		

6.4		

23.5		

18.6		

72.4

–		

(2.5)

(19.1)(3.1)(24.7 )

23.9		

3.9		

4.4		

15.5		

47.7

Amortisation and impairment

Management has performed an impairment review of the carrying amount of goodwill at 31st December 2018.
For the purpose of impairment review, goodwill acquired has been allocated to the respective hotels and is reviewed
for impairment based on individual hotel forecast operating performance and cash flows. Cash flow projections forthe impairment reviews are based on updated individual hotel forecasts (including the following year’s individual
hotel budgets) with assumptions updated for the prevailing market conditions, and are discounted appropriately.
Key assumptions used for value-in-use calculations include average growth rates of between 4% to 8% to project cash
flows over a five-year period after which the growth rate is assumed to be up to 5% in perpetuity. Individual growth
assumptions vary across the Group’s geographical locations, and are based on management expectations for each market’s
development. Pre-tax discount rates of 7% to 13% are applied to each cash flow projections. The discount rates usedreflect business specific risks relating to the business life-cycle and geographical location. On the basis of these reviews,
management concluded that no impairment exists.
The amortisation charges are all recognised in arriving at operating profit and are included in cost of sales, selling anddistribution costs, administration expenses and other operating expense.

Annual Report 2018

9 Intangible assets continued
The amortisation periods for intangible assets are as follows:
Leasehold land

20 to 40 years

Computer software

3 to 5 years

Development project contract costs

15 to 40 years

10 Tangible assets
			Freehold		
properties		
US$m		

Leasehold				Furnitureproperties &		
Plant &		
equipment &improvements		
machinery		 motor vehicles		
US$m		
US$m		
US$m		

Total
US$m

2018
841.4		

744.0		

155.0		

291.6		

Depreciation(90.3)(199.8)(86.6)(202.1)(578.8 )Net book value at 1st January

751.1		

544.2		

68.4		

89.5		

1,453.2

Exchange differences(27.5)

(7.1)

(2.4)

(1.8)

(38.8 )

Additions17.4		

8.8		

3.5		

32.4		

62.1

Disposals and write-off

(3.8)

–		

(0.8)

(2.4)

(7.0 )

–		

–		

–		

(1.4)

(1.4 )

Reclassification

19.8		

(13.5)

0.2		

(6.5)

–

Depreciation charge(7.3)(41.9)(8.6)(23.8)(81.6 )Net book value at 31st December

749.7		

490.5		

60.3		

86.0		

1,386.5

Cost

837.1		

726.1		

132.0		

273.6		

1,968.8

Depreciation(87.4)(235.6)(71.7)(187.6)(582.3 )749.7		

490.5		

60.3		

86.0		

1,386.5

Cost

733.3		

743.3		

139.4		

260.2		

1,876.2

Depreciation(85.4)(182.6)(75.1)(181.0)(524.1 )Net book value at 1st January

647.9		

560.7		

64.3		

79.2		

1,352.1

Exchange differences

57.0		

10.5		

5.4		

2.3		

75.2

Additions34.8		

25.2		

2.7		19.8		

82.5

Disposals

–		

–		

–		

(0.1)

(0.1 )

Cost

Transfer to intangible assets

2,032.02017

Transfer from intangible assets

–		

–		

–		

0.2		

0.2

Reclassification

22.1		

(34.0)

3.1		

8.8		

–

Depreciation charge(10.7)(18.2)(7.1)(20.7)(56.7 )Net book value at 31st December

751.1		

544.2		

68.4		

89.5		

1,453.2

Cost

841.4		

744.0		

155.0		

291.6		

2,032.0

Depreciation(90.3)(199.8)(86.6)(202.1)(578.8 )751.1		

544.2		

68.4		

89.5		

1,453.2

Freehold properties include a property of US$105.0 million (2017: US$108.5 million), which is stated net oftax increment financing of US$20.5 million (2017: US$21.3 million) (refer note 19).
Net book value of leasehold properties acquired under finance leases amounted to US$180.6 million(2017: US$181.2 million).
Rental income from properties and other tangible assets amounted to US$21.1 million (2017: US$22.1 million)(refer note 3).

4344 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

10 Tangible assets continued
Future minimum rental payments receivable under non-cancellable leases are as follows:
2018		
US$m		

2017
US$mWithin one year

18.4

18.6

Between one and two years

18.0

16.8

Between two and five years

24.8

38.0

–

1.2

61.2

74.6

2018		
US$m		

2017
US$m

20.9

20.1

Beyond five years

Certain of the hotel properties are pledged as security for bank borrowings as shown in note 18.

11 Associates and joint ventures
Associates
Listed associate – OHTL
Unlisted associates

91.1

89.4

Share of attributable net assets

112.0

109.5

5.5

5.5

117.5

115.0

Share of attributable net assets of unlisted joint ventures

73.3

75.0

Goodwill on acquisition

6.3

6.6

79.6

81.6

197.1

196.6

Notional goodwill

Joint ventures

Associates

Joint ventures

2018
US$m

2017		
US$m		

2018
US$m

2017
US$m

115.0

93.5		

81.6

70.3

–

–		

(3.6)

9.4

Share of results after tax andnon-controlling interests

11.9

9.7		

(6.1)

1.8

Share of other comprehensive (expense)/income
after tax and non-controlling interests

(1.9)

8.4		

0.1

–

Dividends received

(7.7)

(5.2)

–

–

Interest received

–

–		

(0.1)

(1.4 )

Advance to associates and joint ventures(refer note 25d)

0.9

9.1		

8.2

2.3

Repayment of loans to associates andjoint ventures (refer note 25e)

(0.7)

(0.5)

(0.5)

(0.8 )At 31st December

117.5

115.0		

79.6

81.6

Fair value of listed associate

198.5

207.3		

N/A

N/A

Movements of associates andjoint ventures during the year:
At 1st January
Exchange differences

Annual Report 2018

11 Associates and joint ventures continueda) Investment in associates
The material associates of the Group are listed below. These associates have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material associates in 2018 and 2017:
				Name of entity
Nature of businessCountry of incorporation andprincipal place of business/place of listing

OHTL PCL (‘OHTL’)
Owner of Mandarin Oriental,
	 Bangkok

Thailand/Thailand

47.6%

47.6%

Marina Bay Hotel Private Ltd.
Owner of Mandarin Oriental,(‘Marina Bay Hotel’)	  Singapore

Singapore/Unlisted

50.0%

50.0%

% of ownership interest
2018		
2017

At 31st December 2018, the fair value of the Group’s interest in OHTL, which is listed on the Thailand Stock Exchange,
was US$198.5 million (2017: US$207.3 million) and the carrying amount of the Group’s interest was US$26.4 million(2017: US$25.6 million).
Summarised financial information for material associates
Summarised balance sheet at 31st December
OHTL

Non-current assets

2018
US$m

2017		
US$m		

Marina Bay Hotel2018		
2017		
US$m		
US$m		

2018		
US$m		

2017
US$m

69.5

69.1		

121.8

191.3

197.0

127.9		

Total

Current assets
Cash and cash equivalents

3.5

2.5		

9.9

4.8		

13.4

7.3

Other current assets

5.4

5.5		

5.7

4.0		

11.1

9.5

Total current assets

8.9

8.0		

15.6

8.8		

24.5

16.8

Financial liabilities*(10.8)(10.7)–(6.7)(10.8)(17.4 )

Other non-current liabilities*

(4.6)

(4.2)

(3.4)

(3.3)

(8.0)

(7.5 )

Total non-current liabilities(15.4)(14.9)(3.4)(10.0)(18.8)(24.9 )

Financial liabilities*(15.7)(16.4)(12.2)(11.1)(27.9)(27.5 )

Other current liabilities*

(3.4)

(3.6)

(7.1)

(5.8)

(10.5)(9.4 )

Total current liabilities(19.1)(20.0)(19.3)(16.9)(38.4)(36.9 )Net assets

43.9

42.2		

114.7

109.8		

158.6

152.0

Non-current liabilities

Current liabilities* Financial liabilities excluding trade and other payables and provisions, which are presented under other current and non-current liabilities.

45

46 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

11 Associates and joint ventures continueda) Investment in associates continued
Summarised financial information for material associates continued
Summarised statement of comprehensive income for the year ended 31st December
2018		
US$m		

OHTL
2017		
US$m		

Marina Bay Hotel2018		
2017		
US$m		
US$m		

2018		
US$m		

2017
US$m

Revenue

68.2

63.0		

86.0

77.6		

154.2

140.6

Depreciation and amortisation

(6.1)

(6.6)

(6.3)

(6.3)

(12.4)(12.9 )

Interest expense

(0.3)

(0.4)

(0.1)

(0.3)

(0.4)

(0.7 )

Profit from underlying
business performance

11.0

9.5		

20.4

17.5		

31.4

27.0

Income tax expense

(1.7)

(1.4)

(4.0)

(3.0)

(5.7)

(4.4 )

Profit after tax from underlying
business performance

9.3

8.1		

16.4

14.5		

25.7

22.6

Non-trading items

(0.1)

–		

–

–		

(0.1)

–

Profit after tax

9.2

8.1		

16.4

14.5		

25.6

22.6

–

3.5		

(3.1)

9.4		

(3.1)

12.9

Total comprehensive income

9.2

11.6		

13.3

23.9		

22.5

35.5

Dividends received from associates

7.5

5.3		

8.4

4.8		

15.9

10.1

Other comprehensive income/(expense)

Total

The information contained in the summarised balance sheet and statement of comprehensive income reflects theamounts presented in the financial statements of the associates adjusted for differences in accounting policies between
the Group and the associates, and fair value of the associates at the time of acquisition.

Annual Report 2018

11 Associates and joint ventures continueda) Investment in associates continued
Reconciliation of the summarised financial information
Reconciliation of the summarised financial information presented to the carrying amount of the Group’s interests
in its material associates for the year ended 31st December:
2018		
US$m		

OHTL
2017		
US$m		

Marina Bay Hotel2018		
2017		
US$m		
US$m		

2018		
US$m		

Total
2017
US$m

Net assets at 1st January

42.2

35.9		

109.8

90.7		

152.0

126.6

Profit for the year

9.2

8.1		

16.4

14.5		

25.6

22.6

–

3.5		

(3.1)

9.4		

(3.1)

12.9

Dividends paid

(7.5)

(5.3)

(8.4)

(4.8)

(15.9)(10.1 )Net assets at 31st December

43.9

42.2		

114.7

109.8		

158.6

152.0

Effective interest in associates (%)

47.6

47.6		

50.0

50.0

Other comprehensive income/(expense)

Group’s share of net assets in associates

20.9

20.1		

57.4

54.9		

78.3

75.0

Notional goodwill*

5.5

5.5		

–

–		

5.5

5.5

Carrying value

26.4

25.6		

57.4

54.9		

83.8

80.5

Fair value

198.5

207.3		

N/A

N/A		

198.5

207.3

The Group has interests in a number of individually immaterial associates. The following table analyses, in aggregate,
the share of profit and other comprehensive expense and carrying amount of these associates.
2018		
US$m		

2017
US$m

Share of loss

(0.7)

(1.3 )

Share of other comprehensive (expense)/income

(0.3)

2.1

Share of total comprehensive (expense)/income

(1.0)

0.8

Carrying amount of interests in these associates

33.7

34.5

* OHTL repurchased some of its own shares in 2013 which were subsequently cancelled in 2016. The number of OHTL shares held by theGroup remained unchanged. As a result of the share repurchase, notional goodwill of US$5.5 million was recognised and the Group’s
effective interest increased to 47.6%.

Contingent liabilities relating to the Group’s interest in associates

Financial guarantee in respect of facilities made available to an associate2018		
US$m		

2017
US$m

20.3

20.4

The guarantee in respect of facilities made available to an associate is stated at its contracted amount. The Directors areof the opinion that it is not probable that this guarantee will be called upon.

47

48 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

11 Associates and joint ventures continuedb) Investment in joint ventures
The material joint venture of the Group is listed below. This joint venture has share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investment in material joint venture in 2018 and 2017:		Name of entity
Nature of businessCountry of incorporation andprincipal place of business

Ritz Madrid, S.A.
(‘Ritz Madrid’)

Spain

Owner of Hotel Ritz, Madrid% of ownership interest
2018		
2017

50.0%

50.0%

Summarised financial information for material joint venture
Summarised balance sheet at 31st December
Ritz Madrid2018		
US$m		

2017
US$m

184.5

186.3

Cash and cash equivalents

6.7

7.8

Other current assets

0.7

2.4

Total current assets

7.4

10.2

Financial liabilities*†(162.8)(154.6 )Other non-current liabilities*(37.0)(38.5 )

Total non-current liabilities(199.8)(193.1 )Other current liabilities*(8.3)(8.1 )

Total current liabilities(8.3)(8.1 )Net liabilities(16.2)(4.7 )

Non-current assets
Current assets

Non-current liabilities

Current liabilities* Financial liabilities excluding trade and other payables and provisions, which are presented under other current and non-current liabilities.
†

Including shareholders’ loans from joint venture partners of US$162.8 million (2017: US$154.6 million).

Annual Report 2018

11 Associates and joint ventures continuedb) Investment in joint ventures continued
Summarised financial information for material joint venture continued
Summarised statement of comprehensive income for the year ended 31st December
Ritz Madrid2018		
US$m		

2017
US$m

Revenue

3.5

30.3

Depreciation and amortisation(3.8)(1.6 )(Loss)/profit after tax(12.2)

3.5

Other comprehensive income/(expense)

0.9(0.6 )

Total comprehensive (expense)/income(11.3)

2.9

0.2

2.8

Interest received from joint venture

The information contained in the summarised balance sheet and statement of comprehensive income reflects theamounts presented in the financial statements of the joint ventures adjusted for differences in accounting policies
between the Group and the joint ventures, fair value of the joint ventures at the time of acquisition, and eliminationof interest on shareholders’ loan.
Reconciliation of the summarised financial information
Reconciliation of the summarised financial information presented to the carrying amount of the Group’s interests in its
material joint venture for the year ended 31st December:
Ritz Madrid2018		
US$m		

2017
US$m

Net liabilities at 1st January(4.7)(4.8 )(Loss)/profit for the year

(12.2)

3.5

Other comprehensive income/(expense)

0.9(0.6 )

Interest paid

(0.2)

(2.8 )Net liabilities at 31st December(16.2)(4.7 )

Effective interest in joint venture (%)

50.0

50.0

Group’s share of net liabilities in joint venture(8.1)(2.3 )

Goodwill on acquisition

6.3

6.6

Shareholders’ loans

81.4

77.3

Carrying value

79.6

81.6

2018		
US$m		

2017
US$m

44.1

55.1

The Group has no other joint venture other than Ritz Madrid.
Commitments and contingent liabilities in respect of joint ventures
The Group has the following commitments relating to its joint ventures as at 31st December:Commitment to provide funding if called

There were no contingent liabilities relating to the Group’s interest in its joint ventures at 31st December 2018 and 2017.

49

50 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

12 Other investments
2018		
US$m		

2017
US$m

15.2

11.0

Investments measured at fair value through profit and loss
– unlisted investments

Movements of these investments which were valued based on unobservable inputs during the year are disclosed innote 33.

13 Deferred tax assets/(liabilities)									 Unremitted											earnings in		
Accelerated tax		
Fair value				Employee		
associates/		depreciation		 gains/losses		
Losses		benefits		 joint ventures		
US$m		
US$m		
US$m		
US$m		
US$m		

Provisions
and other
temporarydifferences		
US$m		

Total
US$m

2018
(54.2)

(0.1)

7.8		

(0.7)

(1.5)

1.1		

(47.6 )

Exchange differences

0.8		

0.1		

(0.2)

–		

(0.1)

0.1		

0.7

(Charged)/credited to
profit and loss

(4.1)

–		

1.4		

0.1		

–		

(1.1)

(3.7 )

–		

(0.1)

–		

0.5		

–		

–		

0.4

At 1st January(Charged)/credited to othercomprehensive income
At 31st December(57.5)

(0.1)

9.0		

(0.1)

(1.6)

0.1		

(50.2 )

Deferred tax assets

0.3		

–		

9.0		

0.6		

–		

1.5		

11.4

Deferred tax liabilities(57.8)

(0.1)

–		

(0.7)

(1.6)

(1.4)

(61.6 )

(57.5)

(0.1)

9.0		

(0.1)

(1.6)

0.1		

(50.2 )

At 1st January(52.6)

0.1		

1.1		

0.5		

(1.4)

(1.2)

(53.5 )

Exchange differences

(1.2)

–		

0.1		

–		

(0.1)

(0.1)

(1.3 )(Charged)/credited to
profit and loss

(0.4)

–		

6.6		

–		

–		

2.4		

8.6

–		

(0.2)

–		

(1.2)

–		

–		

(1.4 )(54.2)

(0.1)

7.8		

(0.7)

(1.5)

1.1		

(47.6 )

2017

Charged to othercomprehensive income
At 31st December
Deferred tax assets

0.3		

–		

7.8		

0.4		

–		

2.5		

11.0

Deferred tax liabilities(54.5)

(0.1)

–		

(1.1)

(1.5)

(1.4)

(58.6 )

(54.2)

(0.1)

7.8		

(0.7)

(1.5)

1.1		

(47.6 )

Deferred tax balances predominantly comprise non-current items. Deferred tax assets and liabilities are netted when
the taxes relate to the same taxation authority and where offsetting is allowed.
Deferred tax assets of US$42.9 million (2017: US$48.8 million) arising from unused tax losses of US$203.2 million(2017: US$198.2 million) have not been recognised in the financial statements. Included in the unused tax losses,
US$177.0 million have no expiry date and the balance will expire at various dates up to and including 2037.
Deferred tax assets of US$1.5 million (2017: US$1.1 million) have not been recognised in relation to temporary
differences in subsidiaries.
The Group has no unrecognised deferred tax liabilities arising on temporary differences associated with investments
in subsidiaries at 31st December 2018 and 2017.

Annual Report 201814 Pension plans
The Group operates defined benefit pension plans in the main territories in which it operates, with the majority ofthe plans in Hong Kong. Most of the pension plans are final salary defined benefit plans calculated based on a members’length of service and their salaries in the final years leading up to retirement. In Hong Kong, the pension benefits arepaid in one lump sum. With the exception of certain plans in Hong Kong, all the defined benefit plans are closed to
new members. In addition, although all plans are impacted by the discount rate, liabilities are driven by salary growth.
The Group’s defined benefit plans are either funded or unfunded, with the assets of the funded plans held independentlyof the Group’s assets in separate trustee administered funds. Plan assets held in trusts are governed by local regulations
and practice in each country. Responsibility for governance of the plans, including investment decisions and contribution
schedules, lies jointly with the Company and the boards of trustees. The Group’s major plans are valued by independentactuaries annually using the projected unit credit method.
The amounts recognised in the consolidated balance sheet are as follows:
2018		
US$m		

2017
US$m

Fair value of plan assets

62.9

73.1

Present value of funded obligations(62.7)(68.2 )

0.2

4.9

Present value of unfunded obligations(0.4)(0.6 )Net pension (liabilities)/assets

(0.2)

4.3

Analysis of net pension (liabilities)/assets
Pension assets

0.2

4.9

Pension liabilities(0.4)(0.6 )

(0.2)

4.3

51

52 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

14 Pension plans continued
The movement in the net pension (liabilities)/assets is as follows:
Fair value		of plan		assets		
US$m		

Present
value ofobligation		
US$m		

Total
US$m

73.1		

(68.8)

4.3–		(4.6)(4.6 )

2018
At 1st January
Current service cost
Interest income/(expense)

2.1		

(1.8)

0.3

Administration expenses

(0.3)

–		

(0.3 )

1.8		(6.4)(4.6 )

74.9		

(75.2)(0.3 )

(0.1)

0.1		

–

Exchange differences
Remeasurements– return on plan assets, excluding amounts   included in interest income

(4.6)

–		

(4.6 )– change in financial assumptions

–		

1.7		

1.7

– experience losses–		(0.1)(0.1 )

(4.6)

1.6		

(3.0 )

Contributions from employers

3.1		

–		

3.1

Contributions from plan participants

0.8		

(0.8)

–

(11.0)

11.0		–

Benefit payments
Transfer to other plans

(0.2)

0.2		

–

At 31st December

62.9		

(63.1)(0.2 )

65.6		

(68.8)(3.2 )–		2017
At 1st January
Current service cost
Interest income/(expense)

Exchange differences(4.5)(4.5 )

2.1		(2.3)(0.2 )

2.1		(6.8)(4.7 )

67.7		

(75.6)(7.9 )

(0.5)

0.5		

–

8.9		

–		

8.9

Remeasurements– return on plan assets, excluding amounts   included in interest income– change in financial assumptions

–		

(1.8)

(1.8 )– experience gains

–		

0.5		

0.5

– demographic assumption changes

–		

0.1		

0.1

8.9		

(1.2)

7.7

Contributions from employers

4.5		

–		

4.5

Contributions from plan participants

0.8		

(0.8)

–

Benefit payments

(8.5)

8.5		

–

Transfer from other plans

0.2		

(0.2)

–

At 31st December

73.1		

(68.8)

4.3

Annual Report 201814 Pension plans continued
The weighted average duration of the defined benefit obligation at 31st December 2018 is 5.8 years (2017: 5.6 years).
Expected maturity analysis of undiscounted pension benefits at 31st December is as follows:
2018		
US$m		

2017
US$m

8.5

9.6

Between one and two years

8.3

11.3

Between two and five years

25.6

21.6

Between five and ten years

35.7

39.1

Between ten and fifteen years

25.5

25.8

Between fifteen and twenty years

19.1

20.0

Beyond twenty years

21.2

21.9

143.9

149.3

Within one year

The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Hong Kong
2018		
%		

2017%

Discount rate

3.30

2.90

Salary growth rate

4.75

4.75

As participants of the plans relating to Hong Kong usually take lump sum amounts upon retirement, mortality is nota principal assumption for these plans.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:Change in		
assumption		%		

Increase/(decrease) on defined
benefit obligation
Increase in		
Decrease inassumption		assumption
US$m		
US$m

Discount rate

1		

(3.5)

3.8

Salary growth rate

1		

3.4		

(3.1 )

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating thesensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of thedefined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the pension liability recognised within the balance sheet.

53

54 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

14 Pension plans continued
The analysis of the fair value of plan assets at 31st December is as follows:
2018		
US$m		

2017
US$m

2.4

5.1

14.7

16.6

Equity investments– Asia-PacificInvestment funds– Asia-Pacific– Europe

6.8

4.9– North America

16.8

14.1

– Global

12.9

32.0

51.2

67.6

Total investments

53.6

72.7

Cash and cash equivalents

9.3

0.4

62.9

73.1

As at 31st December 2018, 100% of equity investments and 71% of investment funds were quoted on active markets(2017: 100% and 65% respectively).
The strategic asset allocation is derived from the asset-liability modelling (‘ALM’) review, done triennially to ensure
the plans can meet future funding and solvency requirements. The last ALM review was completed in 2018, withmodified strategic asset allocation adopted in 2018. The next ALM review is scheduled for 2021.
As at 31st December 2018, the Hong Kong plans had assets of US$62.9 million (2017: US$73.1 million).
The Group maintains an active and regular contribution schedule across all the plans. The contribution to all its plans
in 2018 were US$3.1 million and the estimated amount of contributions expected to be paid to all its plans in 2019is US$2.8 million.

Annual Report 201815 Debtors
2018		
US$m		

2017
US$m

– third parties

38.9

41.3

– associates and joint ventures

4.1

4.6

43.0

45.9

(3.4)

(1.5 )

39.6

44.4– third parties*

60.3

55.6

– associates and joint ventures

2.5

2.8

62.8

58.4

(1.4)

(2.1 )

Trade debtors– provision for impairment

Other debtors– provision for impairment

61.4

56.3

101.0

100.7

Non-current

5.1

0.5

Current

95.9

100.2

101.0

100.7

– Hong Kong

27.0

21.9

– Other Asia

12.1

12.2

– Europe

45.5

48.5

– America

16.4

18.1

101.0

100.7

Analysis by geographical area

*Included deposit of US$16.3 million (2017: US$17.1 million) in respect of the expansion project of Mandarin Oriental, Munich,pending transfer of title in the underlying land.

Derivative financial instruments are stated at fair value. Other debtors are stated at amortised cost. The fair values ofshort-term debtors approximate their carrying amounts.
2018		
US$m		

2017
US$m

39.6

44.4

22.5

21.6

62.1

66.0

Fair value– trade debtors– other debtors††

Excluding prepayments, rental and other deposits.

55

56 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

15 Debtors continued
Trade and other debtors
The average credit period on provision of services varies among Group businesses and is generally not more than 30 days.
Other debtors are further analysed as follows:
2018		
US$m		

2017
US$m

Derivatives financial instruments (refer note 26)

0.9

0.5

Other amounts due from associates and joint ventures

2.5

2.8

Other receivables

19.1

18.3

Financial assets

22.5

21.6

Prepayments

18.5

13.8

Rental and other deposits

20.3

20.8

Other

0.1

0.1

61.4

56.3

No debtors and prepayments have been pledged as security.

Impairment of trade debtors
Before accepting any new customer, the individual Group business assesses the potential customer’s credit quality andsets credit limits by customer using internal credit scoring systems. These limits and scoring are reviewed periodically.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,and default or delinquency in payment are considered indicators that the debtor is impaired. An allowance for impairmentof trade debtors is made based on the estimated irrecoverable amount determined by reference to past default experience.
The Group applied the simplified approach to measure expected credit loss, that is a lifetime expected loss allowancefor trade debtors. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the days past due.
The expected loss rates are based on the historical payment profiles of sales and the corresponding historical credit losses.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors andindustry trends affecting the ability of the customers to settle the receivables.

Annual Report 201815 Debtors continued
Impairment of trade debtors continued
On that basis, the loss allowances as at 31st December 2018 and 2017 based on the ageing of trade debtors are as follows:			Below		30 days		Between		
31 and		60 days		Between
61 and		120 days		More than
120 days		

Total

–		

2%		

5%		

51%		

8%

Gross carrying amount – trade debtors (US$m)

30.0		

4.9		

2.0		

6.1		

43.0

Loss allowance (US$m)

0.1		

0.1		

0.1		

3.1		

3.4

–		

1%		

8%		

71%		

3%

34.7		

6.9		

2.6		

1.7		

45.9

–		

0.1		

0.2		

1.2		

1.5

2018
Expected loss rate

2017
Expected loss rate
Gross carrying amount – trade debtors (US$m)
Loss allowance (US$m)

Movements in the provisions for impairment are as follows:
Trade debtors
2018		
2017
US$m		US$m

At 1st January(1.5)(1.8 )

Additional provisions

(2.0)

–

Unused amounts reversed

0.1–

Amounts written off–

0.3

At 31st December(3.4)(1.5 )

Trade debtors are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.

16 Bank and cash balances
2018		
US$m		

2017
US$m

Deposits with banks and financial institutions

137.8

75.0

Bank balances

107.8

107.8

Cash balances

1.2

1.1

246.8

183.9

– Euro30.1

26.9– Hong Kong dollar

15.6

16.1

– Indonesian rupiah

13.4

13.4

– Japanese yen

15.0

19.0

– Swiss franc

1.7

4.4

– United Kingdom sterling

28.7

15.1

– United States dollar

135.2

81.8

Analysis by currency– Other

7.1

7.2

246.8

183.9

The weighted average interest rate on deposits with banks and financial institutions is 1.8% (2017: 1.1%) per annum.

5758 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

17 Creditors
2018		
US$m		

2017
US$m

Trade creditors

22.7

22.2

Accruals

87.6

75.0

Rental and other refundable deposits

7.0

7.4

–

0.2

Other creditors

21.5

23.2

Financial liabilities

138.8

128.0

Contract liabilities (refer note 2)

23.4

20.6

Rental income received in advance

3.0

3.0

Other income received in advance

5.6

–

170.8

151.6

–

0.2

170.8

151.4

170.8

151.6

– Euro17.4

17.8– Hong Kong dollar

58.8

49.2

– Japanese yen

12.4

12.3

– Swiss franc

6.1

5.2

– United Kingdom sterling

21.9

11.4

– United States dollar

49.0

50.5

– Other

5.2

5.2

170.8

151.6

Derivative financial instruments (refer note 26)

Non-current
Current

Analysis by currency

Derivative financial instruments are stated at fair value. Other creditors are stated at amortised cost. The fair values ofthese creditors approximate their carrying amounts.

Annual Report 201818 Borrowings
2018

2017

Carrying		
amount		
US$m		

Fair		
value		US$m		

Carrying		
amount		
US$m		

Fair
value
US$m

521.6		

521.6

–		

–

– other borrowings

2.6		

2.6

2.6		

2.6

Current borrowings

524.2		

524.2

2.6		

2.6

– bank loans

5.8		

5.8

506.5		

506.5– other borrowings

1.5		

1.5

1.6		

1.6

Current portion of long-term borrowings– bank loans

Long-term borrowings

Long-term borrowings

7.3		

7.3

508.1		

508.1531.5		

531.5510.7		

510.7The Group is in advanced discussions with its key relationship banks regarding the refinancing of US$549 million ofcommitted facilities due to mature within 2019, comprising a US$102 million facility in London, and a US$447 million
facility in Hong Kong. Based on the Group’s consistent track record of securing external financing in a timely manner,
its operating performance and strong balance sheet, the Group is confident that it will complete the refinancing of thesebank facilities before their expiry.
The fair values are estimated using the expected future payments discounted at market interest rate less than 0.1%
(2017: less than 0.1%) per annum. This is in line with the definition of ‘observable current market transactions’ under
the fair value measurement hierarchy. The fair value of current borrowings approximates their carrying amount, as theimpact of discounting is not significant.

SecuredUnsecured2018		
US$m		

2017
US$m

523.2

508.2

8.3

2.5

531.5

510.7

Borrowings of US$523.2 million (2017: US$508.2 million) are secured against the tangible fixed assets ofcertain subsidiaries. The book value of these tangible fixed assets at 31st December 2018 was US$489.6 million(2017: US$477.7 million).

59

60 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

18 Borrowings continued
The borrowings at 31st December are further summarised as follows:
Fixed rate borrowings
Weighted		Weighted
average		 average period				interest rates		
outstanding				%		Years		US$m		

Floating rateborrowings		
US$m		

Total
US$m

2018
Euro

0.5		

–		

–		

5.8		

5.8

Hong Kong dollar

3.4		

0.5		

118.1		

302.0		

420.1Swiss franc

2.4		

13.0		

1.6		

2.5		

4.1

United Kingdom sterling

1.8		

–		

–		

101.5		

101.5

				

119.7		

411.8		

531.5302.5		

420.8

2017
Hong Kong dollar

2.7		

1.5		

118.3		

Swiss franc

2.6		

14.0		

1.7		

2.5		

4.2

United Kingdom sterling

1.5		

–		

–		

85.7		

85.7

					

120.0		

390.7		

510.7The weighted average interest rates and period of fixed rate borrowings are stated after taking into account of hedging
transactions (refer note 26).
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at 31st December
after taking into account hedging transactions are as follows:
2018		
US$m		

2017
US$m

411.8

390.7

118.1

–

–

118.3

1.6

1.7

119.7

120.0

531.5

510.7

Floating rate borrowings– Within one year
Fixed rate borrowings– Within one year
– Between one and two years– Beyond five years

Annual Report 201818 Borrowings continued
The movements in borrowings are as follows:
Bank		
overdrafts		
US$m		

Long-term
borrowings		
US$m		Total
US$m

At 1st January–		

510.7		

510.7Exchange differences–		(6.6)(6.6 )

Drawdown of borrowings–		

27.6		

27.6

Repayment of borrowings–		(0.2)(0.2 )At 31st December–		

531.5		

531.5

0.1		

479.8		

479.9

–		

2.6		

2.6

2018

2017
At 1st January
Exchange differences
Change in bank overdrafts

(0.1)

–		

(0.1 )

Drawdown of borrowings–		

30.8		

30.8

Repayment of borrowings

–		

(2.5)

(2.5 )At 31st December–		

510.7		

510.72018		
US$m		

2017
US$m

20.5

21.3

19 Tax increment financing
Netted off against the net book value of the property (refer note 10)

A development agreement was entered into between one of the Group’s subsidiaries and the District of Columbia(‘District’), pursuant to which the District agreed to provide certain funds to the subsidiary out of the net proceeds
obtained through the issuance and sale of certain tax increment financing bonds (‘TIF Bonds’) for the development
and construction of Mandarin Oriental, Washington D.C.
The District agreed to contribute to the subsidiary US$33.0 million through the issuance of TIF Bonds in addition
to US$1.7 million issued in the form of a loan, bearing simple interest at an annual rate of 6.0% which was repaid on
maturity on 10th April 2017.
The receipt of the TIF Bonds has been treated as a government grant and netted off against the net book value in respectof the property.

61

62 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

20 Segment information
Set out below is an analysis of the Group’s non-current assets, excluding other investments, deferred tax assets,pension assets and derivative financial instruments, by reportable segment.
2018		
US$m		

2017
US$m

– Hong Kong

334.4

372.3

– Other Asia

126.7

121.2

– Europe

919.3

937.8

– America

261.3

266.2

1,641.7

1,697.5

Analysis by geographical area

21 Share capital
Ordinary shares in millions
2018		
2017		
					2018		
US$m		

2017
US$m

Authorised
Shares of US¢5.00 each

1,500.0

1,500.0		

75.0

75.0

1,258.6

1,255.9		

62.9

62.8

2.8

2.7		

0.2

0.1

1,261.4

1,258.6		

63.1

62.9

2018		
US$m		

2017
US$m

Issued and fully paid
At 1st January
Issued under share-based long-term
incentive plans
At 31st December

22 Share premium
493.9

490.4

Issued under share-based long-term incentive plans

0.1

0.6

Transfer from capital reserves

3.8

2.9

497.8

493.9

At 1st January

At 31st December

Annual Report 201823 Share-based long-term incentive plans
Share-based long-term incentive plans have been set up to provide incentives for selected executives. Awards can takethe form of share options with an exercise price based on the then prevailing market prices or such other price set by
the Directors or share awards which will vest free of payment. Awards normally vest on or after the third anniversaryof the date of grant and may be subject to the achievement of performance conditions.
i) The Mandarin Oriental Share-based Long-term Incentive Plan (the ‘2014 Plan’) was adopted by the Company on
6th March 2014. Under these awards, the free shares are received by the participants to the extent the award vests.
Conditions, if any, are at the discretion of the Directors. No conditional share awards were awarded in 2018 and 2017
under the 2014 Plan.
Movements of the outstanding conditional awards during the year:
Conditional awards in millions
2018		

2017

At 1st January

3.5

5.3

Released(1.9)(1.7 )

Cancelled(0.1)(0.1 )At 31st December

1.5

3.5

Outstanding conditional awards at 31st December:
Ordinary shares in millions
2018		

2017

2018

–

1.6

2019

1.5

1.9

Total outstanding

1.5

3.5

Awards vest date63

64 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

23 Share-based long-term incentive plans continuedii) Prior to the adoption of the 2014 Plan, The Mandarin Oriental International Share Option Plan 2005 provided
selected executives with options to purchase ordinary shares in the Company. The exercise price of the granted
options was based on the average market price for the five trading days immediately preceding the date of grantof the options. Options are vested over a period of up to three years and are exercisable for up to ten years following
the date of grant.
Movements of the outstanding options during the year:
2018
Weighted average				exercise price		
Options		
US$		
in millions		2017
Weighted average
exercise price		
US$		

Optionsin millions

At 1st January

1.67		

8.3

1.61		

31.4

Exercised

1.70		

(3.5)

1.45		

(7.8 )

Cancelled

1.57		

(0.1)

1.66		

(15.3 )At 31st December

1.66		

4.7

1.67		

8.3

The average share price during the year was US$2.21 (2017: US$1.78) per share.
Outstanding options at 31st December:
Ordinary shares in millions
Expiry date

Exercise price		US$		

2018		

20172018

1.08-1.63		

–

0.5

2019

0.66		

0.3

0.2

2020

1.36		

0.1

0.7

2021

1.99		

1.4

2.8

2022

1.61		

1.9

2.5

2023

1.57		

1.0

1.6

Total outstanding			

4.7

8.3

of which exercisable			

4.7

8.3

2018		
US$m		

2017
US$mFinal dividend in respect of 2017 of US¢1.50 (2016: US¢2.50) per share

18.9

31.4

Interim dividend in respect of 2018 of US¢1.50 (2017: US¢1.50) per share

18.9

18.9

37.8

50.3

24 Dividends

A final dividend in respect of 2018 of US¢1.50 (2017: US¢1.50) per share amounting to a total of US$18.9 million(2017: US$18.9 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been
approved at the 2019 Annual General Meeting. The amount will be accounted for as an appropriation of revenue reservesin the year ending 31st December 2019.

Annual Report 2018

25 Notes to consolidated cash flow statementa) Other non-cash items
2018		
US$m		

2017
US$m

Share-based payment

1.4

2.3

Fair value gain on other investments

(4.4)

–

Others(1.0)(2.1 )(4.0)

0.2

2018		
US$m		

2017
US$m

Increase in stocks(0.3)(0.2 )

Increase in debtors(2.1)(0.3 )

Increase in creditors

18.4

9.9

1.5

0.2

17.5

9.6

b) Movements in working capital

Increase in pension obligationsc) The Group paid a further US$3.1 million instalment in respect of the land purchase price and related cost for the
expansion of Mandarin Oriental, Munich in 2017. As at 31st December 2018 and 2017, cumulative costs paid by
the Group amounted to US$20.0 million, the majority of which have been included within Other Debtors pendingtransfer of title in the underlying land.
d) During 2018, the Group provided shareholder loans to Mandarin Oriental, New York of US$0.9 million(2017: US$9.1 million) and Hotel Ritz, Madrid of US$8.2 million (2017: US$2.3 million).
e) During 2018, the Group received repayments on its shareholder loans previously provided to Hotel Ritz, Madrid of
US$0.5 million (2017: US$0.8 million) and Mandarin Oriental, Miami of US$0.7 million (2017: US$0.5 million).
f) The Group received US$66.3 million interim insurance payments in 2018, covering both property damage andbusiness interruption caused by the fire at Mandarin Oriental Hyde Park, London on 6th June 2018. Of thisUS$66.3 million, US$7.8 million was to cover the remedial capital expenditure of the tangible assets which wasrecorded under investing activities. The remaining balance was recorded under operating activities.
g) Analysis of balances of cash and cash equivalents

Bank and cash balances (refer note 16)2018		
US$m		

2017
US$m

246.8

183.9

65

66 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

26 Derivative financial instruments
The fair values of derivative financial instruments at 31st December are as follows:
2018
Positive		
fair value		
US$m		

2017
Negative		
fair value		
US$m		

Positive		
fair value		
US$m		

Negative
fair value
US$m

0.5		

0.2

Designated as cash flow hedges– interest rate swaps and caps

0.9		

–

The notional principal amounts of the outstanding interest rate swap and cap contracts at 31st December 2018 were
US$232.7 million (2017: US$236.1 million).
At 31st December 2018, the fixed interest rates relating to interest rate swaps and caps varied from 1.8% to 2.5%
(2017: 1.8% to 2.5%) per annum.
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from 2.2%
to 2.4% (2017: 1.3% to 1.7%) per annum.

27 Commitments
2018		
US$m		

2017
US$m

742.5

147.6

– joint ventures

44.1

55.1

– other

29.9

51.6

74.0

106.7

816.5

254.3

Capital commitments
Authorised not contracted– other
Contracted not provided

The increase in authorised not contracted capital commitments was primarily attributable to the planned redevelopmentof The Excelsior, Hong Kong as a commercial building following the hotel closure on 31st March 2019. The redevelopment
is expected to take up to six years to complete.
2018		
US$m		

2017
US$m

– due within one year

7.3

7.2

– due between one and two years

7.1

6.7

– due between two and three years

6.4

6.4

– due between three and four years

6.4

5.8

Operating lease commitments
Total commitments under operating leases– due between four and five years– due beyond five years

6.4

5.8

164.5

75.7

198.1

107.6

No future sublease payments are receivable relating to the above operating leases (2017: nil).
Operating lease commitments principally include payments in respect of the Group’s hotel in Tokyo. During 2018,the lease period has been extended by 15 years from 2035 to 2050.
In addition, the Group has operating lease commitments with rentals determined in relation to sales. It is not possible
to quantify accurately future rentals payable under such leases.

Annual Report 2018

28 Related party transactions
The parent company of the Group is Jardine Strategic Holdings Limited (‘JSH’) and the ultimate holding company of
the Group is Jardine Matheson Holdings Limited (‘JMH’). Both companies are incorporated in Bermuda.
In the normal course of business, the Group undertakes a variety of transactions with its associates and joint ventures andwith JMH and its subsidiaries, associates and joint ventures. The more significant of these transactions are described below:
During 2018, the Group managed six (2017: six) associate and joint venture hotels and received management fees of
US$14.8 million (2017: US$13.6 million) based on long-term management agreements on normal commercial terms.
The Group uses Jardine Lloyd Thompson (‘JLT’), an associate of JMH, to place certain of its insurance. Brokerage fees
and commissions, net of rebates, paid by the Group in 2018 to JLT amounted to US$1.6 million (2017: US$1.2 million).
The Group provides hotel management services to Hongkong Land (‘HKL’), a subsidiary of JSH. Total management
fees received from HKL in 2018 amounted to US$2.7 million (2017: US$2.5 million), based on long-term managementagreements on normal commercial terms.
In addition, the Group paid a management fee of US$0.2 million (2017: US$0.3 million) to Jardine Matheson Limited(‘JML’), a subsidiary of JMH, being a fee of 0.5% of the Group’s net profit in consideration for certain management
consultancy services provided by JML. The Group did not have any amount payable to JML as at 31st December 2018(2017: nil).
The outstanding balances with associates and joint ventures are set out in debtors in note 15.
Details of Directors’ emoluments (being the key management personnel compensation) are shown on page 98 under
the heading of ‘Directors’ appointment, retirement, remuneration and service contracts’.

29 Summarised balance sheet of the Company
Included below is certain summarised balance sheet information of the Company disclosed in accordance with
Bermuda Law.

Subsidiaries

2018		
US$m		

2017
US$m

975.5

964.3

(2.4)

(2.2 )Net assets

973.1

962.1

Share capital (refer note 21)

63.1

62.9

Share premium (refer note 22)

497.8

493.9

Revenue and other reserves

412.2

405.3

Shareholders’ funds

973.1

962.1

Net current liabilities

Subsidiaries are shown at cost less amount provided, and include amounts due from and due to subsidiaries.

6768 Mandarin Oriental International Limited

Annual Report 2018

Notes to the Financial Statements Continued

30 Principal subsidiaries, associates, joint ventures and managed hotels
The principal subsidiaries, associates, joint ventures and managed hotels of the Group at 31st December 2018 are set out below.
Proportion of ordinary sharesand voting powers
at 31st December 2018 held by			non-controlling
Principal place
Attributable interest %the Groupinterestsof business
Name of entity
Nature of business
2018
2017
%
%

Hotel profile

Subsidiaries
Hong Kong

Mandarin Oriental Hotel Group International Limited

Management

100

100

100

–

–

Hong Kong

Mandarin Oriental Hotel Group Limited

Management

100

100

100

–

–

Hong Kong

Mandarin Oriental, Hong Kong Limited

Owner: Mandarin Oriental, Hong Kong

100

100

100

–

501 rooms. Lease expiry 2895

Hong Kong

Excelsior Hotel (BVI) Limited

Owner: The Excelsior, Hong Kong

100

100

100

–

869 rooms. Lease expiry 2842 (refer note 8)Japan

Mandarin Oriental Tokyo KK

Owner: Mandarin Oriental, Tokyo

100

100

100

–

179 rooms. Lease expiry 2050

Indonesia

P.T. Jaya Mandarin Agung

Owner: Mandarin Oriental, Jakarta

96.9

96.9

96.9

3.1

272 rooms. Lease expiry 2023

United Kingdom

Mandarin Oriental Hyde Park Limited

Owner: Mandarin Oriental Hyde Park, London

100

100

100

–

Switzerland

Société Immobilière de Mandarin Oriental (Genèva) SA

Owner: Mandarin Oriental, Geneva

85.3

85.3

85.3

14.7

181 rooms. Freehold
181 rooms. Lease expiry 2040

Switzerland

Société pour l’ Exploitation de Mandarin Oriental (Genèva) SA		

100

100

100

–

–

Germany

Dinavest International Holdings B.V.

Owner: Mandarin Oriental, Munich

100

100

100

–

73 rooms. Freehold

FranceMOHG Hotel (Paris) Sarl

Owner: Mandarin Oriental, Paris

100

100

100

–

138 rooms. Freehold

United States

Boylston Street Hotel LLC

Owner: Mandarin Oriental, Boston

100

100

100

–

148 rooms. Freehold

United States

Portals Hotel Site LLC

Owner: Mandarin Oriental, Washington D.C.

89.1

83.6

89.1

10.9

373 rooms. Freehold

Associates and joint ventures
Singapore

Marina Bay Hotel Private Limited

Owner: Mandarin Oriental, Singapore

50

50

50

50

ThailandOHTL PCL

Owner: Mandarin Oriental, Bangkok

47.6

47.6

47.6

52.4

Malaysia

Asas Klasik Sdn Bhd

Owner: Mandarin Oriental, Kuala Lumpur

25

25

25

75

Thailand

Chaophaya Development Corporation Limited

Owner: River City Shopping Complex

49

49

49

51

–

Spain

Ritz Madrid, S.A.

Owner: Hotel Ritz, Madrid

50

50

50

50

162 rooms. Freehold

United States

ICD Columbus Centre Hotel LLC

Owner: Mandarin Oriental, New York

25

25

25

75

244 rooms. Freehold

United States

Swire Brickell Key Hotel Limited

Owner: Mandarin Oriental, Miami

25

25

25

75

326 rooms. Freehold

–

–

–

–

527 rooms. Lease expiry 2079
368 rooms. Various freehold/leasehold
629 rooms. Freehold

Managed hotels
Hong Kong

The Landmark Mandarin Oriental, Hong Kong		111 rooms

Macau

Mandarin Oriental, Macau		

–

–

–

–

213 rooms

China

Mandarin Oriental, Sanya		

–

–

–

–

281 rooms

China

Mandarin Oriental, Guangzhou		

–

–

–

–

263 rooms

China

Mandarin Oriental Pudong, Shanghai		

–

–

–

–

362 rooms

TaiwanMandarin Oriental, Taipei		

–

–

–

–

296 rooms

Czech Republic

Mandarin Oriental, Prague		

–

–

–

–

99 rooms

Spain

Mandarin Oriental, Barcelona		

–

–

–

–

120 rooms

TurkeyMandarin Oriental, Bodrum		

–

–

–

–

131 rooms

Italy

Mandarin Oriental, Milan		

–

–

–

–

104 rooms

Italy
Mandarin Oriental, Lago di Como
	  (previously CastaDiva Resort and Spa, Lake Como)		

–

–

–

–

76 rooms

MoroccoMandarin Oriental, Marrakech		

–

–

–

–

63 rooms

Chile

Hotel Santiago		

–

–

–

–

310 rooms

Saint Vincent and
the Grenadines

Mandarin Oriental, Canouan		

–

–

–

–

38 rooms

69

70 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

31 Principal accounting policies
Basis of consolidationi) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and theGroup’s interests in associates and joint ventures.
ii) A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost ofan acquisition includes the fair value at the acquisition date of any contingent consideration. The Group recognises
the non-controlling interest’s proportionate share of the recognised identifiable net assets of the acquired subsidiary.
In a business combination achieved in stages, the Group remeasures its previously held interest in the acquiree at its
acquisition-date fair value and recognises the resulting gain or loss in profit and loss. Changes in a parent’s ownershipinterest in a subsidiary that do not result in the loss of control are accounted for as equity transactions. When control
over a previous subsidiary is lost, any remaining interest in the entity is remeasured at fair value and the resulting gainor loss is recognised in profit and loss.
All material intercompany transactions, balances and unrealised surpluses and deficits on transactions between
Group companies have been eliminated. The cost of and related income arising from shares held in the Company
by subsidiaries are eliminated from shareholders’ funds and non-controlling interests, and profit, respectively.
iii) An associate is an entity, not being a subsidiary or joint venture, over which the Group exercises significant influence.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Associates and joint ventures are included on the equity basis of accounting.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates andjoint ventures are recognised in the consolidated financial statements only to the extent of unrelated investor’sinterests in the associates and joint ventures.
iv) Non-controlling interests represent the proportion of the results and net assets of subsidiaries and their associates
and joint ventures not attributable to the Group.
v) The results of subsidiaries, associates and joint ventures are included or excluded from their effective dates ofacquisition or disposal, respectively. The results of entities other than subsidiaries, associates and joint ventures
are included to the extent of dividends received when the right to receive such dividend is established.

Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.
Assets and liabilities of subsidiaries, associates and joint ventures, together with all other monetary assets and liabilities
expressed in foreign currencies, are translated into United States dollars at the rates of exchange ruling at the year end.
Results expressed in foreign currencies are translated into United States dollars at the average rates of exchange ruling
during the year, which approximate the exchange rates at the dates of the transactions.

Annual Report 201831 Principal accounting policies continued
Foreign currencies continued
Exchange differences arising from the retranslation of the net investment in foreign subsidiaries, associates and joint
ventures, and of financial instruments which are designated as hedges of such investments, are recognised in othercomprehensive income and accumulated in equity under exchange reserves. On the disposal of these investments,
such exchange differences are recognised in profit and loss. Exchange differences on other investments measured
at fair value through other comprehensive income are recognised in other comprehensive income as part of the gains
and losses arising from changes in their fair value. All other exchange differences are recognised in profit and loss.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treated as assets
and liabilities of the foreign entity and translated into United States dollars at the rate of exchange ruling at the year end.

Impairment of non-financial assets
Assets that have indefinite useful lives are not subject to amortisation and are tested for impairment annually andwhenever there is an indication that the assets may be impaired. Assets that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
For the purpose of assessing impairment, assets are grouped at the lowest level for which there is separately identifiable
cash flows. Cash-generating units or groups of cash-generating units to which goodwill has been allocated are tested
for impairment annually and whenever there is an indication that the units may be impaired. An impairment loss
is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of an asset’s fair value less costs to sell and value in use. Non-financial assets other than goodwill that sufferedan impairment are reviewed for possible reversal of the impairment annually.

Intangible assetsi) Goodwill represents the excess of the sum of the consideration transferred, the amount of any non-controllinginterests in the acquiree, and the acquisition-date fair value of any previously held equity interest in the acquiree over
the acquisition-date fair value of the Group’s share of the net identifiable assets acquired. Non-controlling interests
are measured at their proportionate share of the net identifiable assets at the acquisition date. If the cost of acquisitionis less than the fair value of the net assets acquired, the difference is recognised directly in profit and loss. Goodwill
on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and joint
ventures is included in investment in associates and joint ventures. Goodwill is allocated to cash-generating units
or groups of cash-generating units for the purpose of impairment testing and is carried at cost less accumulated
impairment loss.
The profit or loss on disposal of subsidiaries, associates and joint ventures is stated after deducting the carrying
amount of goodwill relating to the entity sold.
ii) Leasehold land represents payments to third parties to acquire short-term interests in property. These payments arestated at cost and are amortised over the useful life of the lease which includes the renewal period if the lease can be
renewed by the Group without significant cost.
iii) Computer software represents acquired computer software licences which are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software and are stated at cost less accumulated amortisation.
Amortisation is calculated on the straight line basis to allocate the cost over their estimated useful lives.
iv) Development project contract costs are setup costs in order to secure long-term hotel management contracts anddirectly attributable to hotel projects under development, which are capitalised to the extent that such expenditure is
expected to generate future economic benefits and upon completion of the project. Capitalised development projectcontract costs are amortised over the term of the management contracts when the related revenue is recognised.

71

72 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

31 Principal accounting policies continued
Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated at costless any accumulated depreciation and impairment. Long-term interests in leasehold land are classified as finance leases
and grouped under tangible assets if substantially all risks and rewards relating to the land have been transferred to theGroup, and are amortised over the useful life of the lease. Grants related to tangible assets are deducted in arriving at thecarrying amount of the assets. Other tangible fixed assets are stated at cost less amounts provided for depreciation.
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each asset to
its residual value over its estimated useful life. The residual values and useful lives are reviewed at each balance sheet date.
The estimated useful lives are as follows:
Freehold and long leasehold buildings
Properties on leases with less than 20 years
Surfaces, finishes and services of hotel properties
Leasehold improvements
Leasehold land
Plant and machinery
Furniture, equipment and motor vehicles

21 years to 150 years
over unexpired period of lease
20 years to 30 years
10 years or period of the lease
period of the lease
5 years to 15 years
3 years to 10 years

No depreciation is provided on freehold land as it is deemed to have an indefinite life.
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognised by reference to their carrying amount.

Investments
The Group classifies its investments into the following measurement categories:i) Those to be measured subsequently at fair value, either through other comprehensive income or through profit
and loss; andii) Those to be measured at amortised cost.
The classification is based on the management’s business model and their contractual cash flows characteristics.
Investments are measured at fair value with fair value gains and losses recognised in profit and loss, unless management
has elected to recognise the fair value gains and losses through other comprehensive income. For investments measured
at fair value through other comprehensive income, gains or losses realised upon disposal are not reclassified to profit
and loss.
At initial recognition, the Group measures an investment at its fair value plus, in the case of the investment not atfair value through profit or loss, transaction costs that are directly attributable to the acquisition of the investment.
Transaction costs of investments carried at fair value through profit and loss are expensed in profit and loss.
All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits topurchase or sell the investments.
Investments are classified as non-current assets.

Annual Report 201831 Principal accounting policies continued
LeasesLeases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases.
i) Amount due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investmentin the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of returnon the Group’s net investment outstanding in respect of the leases.
ii) Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss
on a straight line basis over the period of the lease. When a lease is terminated before the lease period has expired,any payment required to be made to the lessor by way of penalty is recognised as an expense in the year in which
termination takes place.

StocksStocks, which principally comprise beverages and consumables, are stated at the lower of cost and net realisable value.
Cost is determined by the first-in, first-out method.

Debtors
Trade debtors are recognised initially at the amount of consideration that is unconditional and measured subsequently
at amortised costs using effective interest method. All other debtors, excluding derivative financial instruments, aremeasured at amortised cost except where the effect of discounting would be immaterial. The impairment measurement issubject to whether there has been a significant increase in credit risk. For trade debtors, the Group applied the simplified
approach as permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the
debtors. Provision for impairment is established by considering potential financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments. The carrying
amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised inarriving at operating profit. When a debtor is uncollectible, it is written off against the allowance account. Subsequent
recoveries of amount previously written off are credited to profit and loss.
Debtors with maturities greater than 12 months after the balance sheet date are classified under non-current assets.

Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial
institutions and bank and cash balances, net of bank overdrafts. In the balance sheet, bank overdrafts are includedin current borrowings.

Provisions
Provisions are recognised when the Group has present legal or constructive obligations as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations,and a reliable estimate of the amount of the obligations can be made.

73

74 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

31 Principal accounting policies continued
Borrowings and borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. In subsequent periods, borrowings
are stated at amortised cost using the effective interest method.
Borrowing costs relating to major development projects are capitalised until the asset is substantially completed.
Capitalised borrowing costs are included as part of the cost of the asset. All other borrowing costs are expensed as incurred.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of theliability for at least 12 months after the balance sheet date.

Government grants
Grants from governments are recognised at their fair value when there is reasonable assurance that the grant will bereceived and the Group will comply with all attached conditions.
Grants relating to the development of hotel property are deducted in arriving at the carrying amount of the hotel property.

Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit and loss, except to the extent
that it relates to items recognised in other comprehensive income or direct in equity. In this case, the tax is also recognisedin other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets
and liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realisedor the deferred tax liability is settled.
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions, on
the difference between the fair value of the net assets acquired and their tax base. Deferred tax is provided on temporary
differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able tocontrol the reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that
it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

Annual Report 201831 Principal accounting policies continued
Employee benefitsi) Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in
trustee administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under thismethod, the costs of providing pensions are charged to profit and loss spreading the regular cost over the service livesof employees in accordance with the advice of qualified actuaries, who carry out a full valuation of major plans every
year. The pension obligations are measured as the present value of the estimated future cash outflows by reference tomarket yields on high quality corporate bonds which have terms to maturity approximating the terms of the related
liability. Plan assets are measured at fair value.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognisedin other comprehensive income in the year in which they occur.
Past service costs are recognised immediately in profit and loss.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year
to which they relate.
ii) Share-based compensation
Share-based long-term incentive plans have been set up to provide incentives for selected executives. Awards cantake the form of share options with an exercise price based on the then prevailing market prices or such other priceset by the Directors or they can be share awards which will vest free of payment. Awards normally vest after the third
anniversary of the date of grant and may be subject to the achievement of performance conditions.
The fair value of the employee services received in exchange for the grant of the share options or the share awards isrecognised as an expense. The total amount to be expensed over the vesting period is determined by reference to thefair value of the share options or the share awards granted as determined on the grant date. At each balance sheet date,the Group revises its estimates of the number of share options that are expected to become exercisable and the numberof share awards which will vest free of payment. The impact of the revision of original estimates, if any, is recognised
in profit and loss.

75

76 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

31 Principal accounting policies continued
Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures and not as
speculative investments. Derivative financial instruments are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting
gain or loss is dependent on the nature of the item being hedged. The Group designates certain derivatives as a hedge
of a forecasted transaction or of the foreign currency risk on a firm commitment (‘cash flow hedge’), or a hedge of a net
investment in a foreign entity.
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments
and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes
in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its
hedge transactions.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective,
are recognised in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fairvalue relating to the ineffective portion is recognised immediately in profit and loss. Where the hedged item results in therecognition of a non-financial asset or of a non-financial liability, the deferred gains and losses and included in the initial
measurement of the cost of the asset or liability. The deferred amounts are ultimately recognised in profit and loss as thehedged item affects profit and loss. Otherwise, amounts deferred in hedging reserves are transferred to profit and loss inthe same periods during which the hedged firm commitment or forecasted transaction affects profit and loss. The gain orloss relating to the effective portion of the interest rate swaps hedging variable rate borrowings is recognised in profit andloss within finance cost at the same time as the interest expense on the hedged borrowings. When a hedging instrument
expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existingin hedging reserves at that time remains in the hedging reserves and is recognised when the committed or forecasted
transaction ultimately is recognised in profit and loss. When a committed or forecasted transaction is no longer expected
to occur, the cumulative gain or loss that was reported in hedging reserves is immediately transferred to profit and loss.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies,
do not qualify for hedge accounting under the specific rules in IFRS 9. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting under IFRS 9 are recognised immediately in profit and loss.
Hedges of net investments in foreign entities are accounted for on a similar basis to that used for cash flow hedges. Anygain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive
income and accumulated in exchange reserves; the gain or loss relating to the ineffective portion is recognised
immediately in profit and loss.
The fair value of derivatives which are designated and qualify as effective hedges are classified as non-current assets
or liabilities if the remaining maturities of the hedged assets or liabilities are greater than 12 months after the balance
sheet date.

Annual Report 201831 Principal accounting policies continued
Financial guarantee contracts
Financial guarantee contracts under which the Group accepts significant risk from a third party by agreeing tocompensate that party on the occurrence of a specified uncertain future event are accounted for in a manner similar toinsurance contracts. Provisions are recognised when it is probable that the Group has obligations under such guarantees
and an outflow of resources embodying economic benefits will be required to settle the obligations.

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must
be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company
or the counterparty.

Non-trading items
Non-trading items are separately identified to provide greater understanding of the Group’s underlying businessperformance. Items classified as non-trading items include fair value gains or losses on revaluation of investments which
are fair value through profit and loss; gains and losses arising from the sale of businesses, investments and properties;
impairment of non-depreciable intangible assets and other investments; provisions for the closure of businesses;
acquisition-related costs in business combinations; and other credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying business performance.

Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders and on the weighted average number ofshares in issue during the year. For the purpose of calculating diluted earnings per share, the weighted average numberof shares is adjusted for the number of shares which are deemed to be issued for no consideration under the share-based
long-term incentive plans based on the average share price during the year.

Dividends
Dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date.

77

78 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

31 Principal accounting policies continued
Revenue recognition
Revenue is measured at the fair value of the consideration received and receivable and represents amounts receivablefor goods and services provided in the normal course of business, net of discounts, sales related taxes and other revenue
reducing factors.
i) Revenue from hotel ownership comprises amounts earned in respect of rental of rooms, food and beverage sales,
and other ancillary services and goods supplied by the subsidiary hotels.
Revenue is recognised over the period when rooms are occupied or services are performed.
Revenue from the sale of food and beverages and goods is recognised at the point of sale when the food and beverages
and goods are delivered to customers.
Payment is due immediately when the hotel guest occupies the room and receives the services and goods.
ii) Revenue from hotel and residences branding and management comprises gross fees earned from the branding andmanagement of all the hotels and residences operated by the Group.
Branding and management fees are recognised over time as determined by the relevant contract, taking into accountthe performance of the hotels, and the sales and operating expenses of the residences. Fees charged to the subsidiary
hotels are eliminated upon consolidation.
Hotels and residences are invoiced in accordance with the terms of contract and fees are payable when invoiced.
iii) Receipts under operating leases are accounted for on an accrual basis over the lease terms.

Pre-operating costs
Pre-operating costs are expensed as they are incurred.

32 Standards and amendments issued but not yet effective
A number of new standards and amendments relating to existing standards, which are effective for accounting periods
beginning after 2018, have been published and will be adopted by the Group from their effective dates. An assessment of
the impact of the standards and amendments, that are relevant and have a material impact to the Group, is set out below.
IFRS 16 ‘Leases’ (effective from 1st January 2019)
The standard replaces IAS 17 ‘Leases’ and related interpretations and introduces a comprehensive model for theidentification of lease arrangements and accounting treatments for both lessors and lessees. The distinction between
operating and finance leases is removed for lessee accounting, and is replaced by a model where a right-of-use asset anda corresponding lease liability have to be recognised on the balance sheet for all leases by lessees, except for leases witha term of less than 12 months or with low-value. The accounting for lessors will not change significantly.
IFRS 16 will affect primarily the accounting for the Group’s operating leases. The Group’s profit or loss and classificationof cash flows will be affected by the new standard. The Group will apply IFRS 16 based on a full retrospective approachfrom 1st January 2019.
Based on the current assessment, it is estimated that the change in accounting for the Group’s operating leases will result in
the recognition of right-of-use assets of US$159 million and lease liabilities of US$167 million as at 31st December 2018.
The Group’s underlying profit attributable to shareholders for the year ended 31st December 2018 would decrease by lessthan US$1 million and the impact to shareholders’ funds and gearing as at 31st December 2018 is insignificant.

Annual Report 201833 Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest raterisk and price risk), credit risk and liquidity risk.
The Group’s treasury function co-ordinates, under the directions of the board of Mandarin Oriental Hotel GroupInternational Limited, financial risk management policies and their implementation on a group-wide basis. The Group’s
treasury policies are designed to manage the financial impact of fluctuations in interest rates and foreign exchange rates
and to minimise the Group’s financial risks. The Group uses derivative financial instruments, principally interest rate
swaps and caps, and forward foreign exchange contracts as appropriate for hedging transactions and managing theGroup’s assets and liabilities in accordance with the Group’s financial risk management policies. Financial derivative
contracts are executed between third-party banks and the Group entity that is directly exposed to the risk being hedged.
Hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item.
The effective portion of the change in the fair value of the hedging instrument is deferred into the cash flow hedge reservethrough other comprehensive income and will be recognised in profit and loss when the hedged item affects profit andloss. This will effectively result in recognising interest expense at a fixed interest rate for the hedged loans.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectivenessassessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group enters into interest rate swaps and caps that have similar critical terms as the hedged item, such as reference
rate, reset dates, payment dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore
the hedged item is identified as a proportion of the outstanding loans up to the notional amount of the swaps. As all
critical terms matched during the year, the economic relationship was approximately 100% effective.
The Group performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged
item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group
uses the hypothetical derivative method to assess effectiveness.
Hedge ineffectiveness for interest rate swaps may occur due to: (i) the credit value/debit value adjustment on the interest
rate swaps which is not matched by the loan; and (ii) differences in critical terms between the interest rate swaps and loans.
There was no ineffectiveness during 2018 or 2017 in relation to the interest rate swaps.

7980 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

33 Financial risk management continued
Financial risk factors continuedi) Market risk
Foreign exchange risk
Entities within the Group are exposed to foreign exchange risk from future commercial transactions, net investments
in foreign operations and net monetary assets and liabilities that are denominated in a currency that is not the entity’sfunctional currency.
Group entities are required to manage their foreign exchange risk against their functional currency. To manage
their foreign exchange risk arising from future commercial transactions, entities in the Group use forward foreignexchange contracts in a consistent manner to hedge firm and anticipated foreign exchange commitments. The Group
does not usually hedge its net investments in foreign operations except in circumstances where there is a material
exposure arising from a currency that is anticipated to be volatile and the hedging is cost effective.
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency
that is not the functional currency. In 2018 and 2017, the Group’s principal foreign exchange exposure was with
the Euro. At 31st December 2018, if the United States dollar had strengthened/weakened by 10% against Euro withall other variables unchanged, the Group’s profit after tax would have been US$0.6 million (2017: US$0.1 million)
lower/higher, arising from foreign exchange losses/gains taken on translation. The impact on amounts attributable
to the shareholders of the Company would be US$0.6 million (2017: US$0.1 million) lower/higher. This sensitivity
analysis ignores any offsetting foreign exchange factors and has been determined assuming that the change in foreignexchange rates had occurred at the balance sheet date. The stated change represents management’s assessment of
reasonably possible changes in foreign exchange rates over the period until the next annual balance sheet date. There
are no other significant monetary balances held by Group companies at 31st December 2018 that are denominatedin a non-functional currency. Differences resulting from the translation of financial statements into the Group’s
presentation currency are not taken into consideration.

Annual Report 201833 Financial risk management continued
Financial risk factors continuedi) Market risk continued
Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets.
These exposures are managed partly by using natural hedges that arise from offsetting interest rate sensitive assets
and liabilities, and partly through fixed rate borrowings and the use of derivative financial instruments such as
interest rate swaps and caps. The Group monitors interest rate exposure on a monthly basis by currency and business
unit, taking into consideration proposed financing and hedging arrangements. The Group’s guideline is to maintain
40% to 60% of its gross borrowings, in fixed rate instruments. At 31st December 2018, the Group’s interest rate
hedge was 44% (2017: 47%), with an average tenor of 0.6 years (2017: 1.6 years). The interest rate profile of theGroup’s borrowings after taking into account hedging transactions are set out in note 18.
Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable
rate financial instruments. Borrowings at floating rates therefore expose the Group to cash flow interest rate risk. The
Group manages this risk by using forward rate agreements to a maturity of one year, and by entering into interest rate
swaps and caps for a maturity of up to seven years. Forward rate agreements and interest rate swaps have the economic
effect of converting borrowings from floating rate to fixed rate, caps provide protection against a rise in floating rates
above a pre-determined rate.
At 31st December 2018, if interest rates had been 100 basis points higher/lower with all other variables held constant,
the Group’s profit after tax would have been US$1.9 million (2017: US$2.4 million) lower/higher, and hedging
reserves would have been US$1.8 million (2017: US$2.8 million) higher/lower, as a result of fair value changes
to cash flow hedges. The sensitivity analysis has been determined assuming that the change in interest rates had
occurred at the balance sheet date and had been applied to the exposure to interest rate risk for both derivativeand non-derivative financial instruments in existence at that date. There is no significant sensitivity resulting frominterest rate caps. The 100 basis point increase or decrease represents management’s assessment of a reasonably
possible change in those interest rates which have the most impact on the Group, specifically the United States,
Hong Kong, United Kingdom and European rates, over the period until the next annual balance sheet date.
Changes in market interest rates affect the interest income or expense of non-derivative variable-interest financial
instruments, the interest payments of which are not designated as hedged items of cash flow hedges against interest
rate risks. As a consequence, they are included in the calculation of profit after tax sensitivities. Changes in the market
interest rate of financial instruments that were designated as hedging instruments in a cash flow hedge to hedge
payment fluctuations resulting from interest rate movements affect the hedging reserves and are therefore taken into
consideration in the equity-related sensitivity calculations.

81

82 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

33 Financial risk management continued
Financial risk factors continuedi) Market risk continued
Price risk
The Group is exposed to price risk from its investments which are measured at fair value through profit and loss.
Gains and losses arising from changes in the fair value of these investments are recognised in profit and loss or othercomprehensive income according to their classification. The performance of these investments are monitored
regularly, together with an assessment of their relevance to the Group’s long-term strategic plans. Details of theseinvestments are contained in note 12.
The Group’s interest in these investments are unhedged. At 31st December 2018, if the price of these investments had
been 25% higher/lower with all other variables held constant, non-trading operating profit and total equity would
have been US$3.8 million (2017: US$2.8 million) higher/lower. The sensitivity analysis has been determined basedon a reasonable expectation of possible valuation volatility over the next 12 months.
ii) Credit risk
The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers and derivative
financial instruments with a positive fair value. The Group has credit policies in place and the exposures to these
credit risks are monitored on an ongoing basis.
The Group manages its deposits with banks and financial institutions and transactions involving derivative financial
instruments by monitoring credit ratings and capital adequacy ratios of counterparties, and limiting the aggregate
risk to any individual counterparty. The utilisation of credit limits is regularly monitored. At 31st December 2018,
97% (2017: 85%) of deposits and balances with banks and financial institutions were made to institutions withcredit ratings of no less than A- (Fitch). Similarly transactions involving derivative financial instruments are withbanks with sound credit ratings and capital adequacy ratios. In developing countries it may be necessary to deposit
money with banks that have a lower credit rating, however the Group only enters into derivative transactions withcounterparties which have credit rating of at least investment grade. Management does not expect any counterparty
to fail to meet its obligations.
In respect of credit exposures to customers, the Group has policies in place to ensure that sales on credit without
collateral are made principally to travel agents and corporate companies with an appropriate credit history. Sales toother customers are made in cash or by major credit cards.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance
sheet after deducting any impairment allowance.

Annual Report 201833 Financial risk management continued
Financial risk factors continuediii) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources,
maintaining sufficient cash and marketable securities, and ensuring the availability of funding from an adequate
amount of committed credit facilities and the ability to close out market positions. The Group’s ability to fund its
existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate
committed funding lines from high quality lenders, and by monitoring rolling short-term forecasts of the Group’s
cash and gross debt on the basis of expected cash flows. In addition, long-term cash flows are projected to assist with
the Group’s long-term debt financing plans.
At 31st December 2018, total available borrowing facilities amounted to US$610 million (2017: US$560 million)of which US$532 million (2017: US$511 million) was drawn down. Undrawn committed facilities, in the form of
revolving credit and term loan facilities totalled US$78 million (2017: US$49 million), in addition to cash balancesof US$247 million (2017: US$184 million).
The table below analyses the Group’s non-derivative financial liabilities and net settled derivative financial liabilities
into relevant maturity groupings based on the remaining period at 31st December 2018 and 2017 to the contractual
maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential
for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows.
Within		one		
year		
US$m		

Between		
one and		
two years		
US$m		

Between		
two and		
three years		
US$m		

Between		
three and		
four years		
US$m		

Between		four and		
five years		
US$m		

Beyond		Totalfive		undiscounted
years		 cash flows
US$m		
US$m

Borrowings

533.2		

0.2		

5.9		

0.2		

0.2		

1.5		

541.2

Creditors

138.8		

–		

–		

–		

–		

–		

138.8

Borrowings

15.6		

513.6		

0.2		

0.2		

0.2		

1.7		

531.5

Creditors

127.8		

–		

–		

–		

–		

–		

127.8

0.5		

–		

–		

–		

–		

–		

0.5

2018

2017

Net settled derivative
financial instruments

Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst
seeking to maximise benefits to shareholders and other stakeholders. Capital is equity as shown in the consolidatedbalance sheet plus net debt.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure andshareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency,
prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projectedstrategic investment opportunities. In order to maintain or adjust the capital structure, the Group may adjust the amountof dividends paid to shareholders, purchase Group shares, return capital to shareholders, issue new shares or sell assets
to reduce debt.

83

84 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

33 Financial risk management continued
Capital management continued
The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover.
The gearing ratio is calculated as net debt divided by shareholders’ funds on an IFRS basis, where the Group’s freehold
and leasehold interests are carried in the consolidated balance sheet at amortised cost, or alternatively on an adjusted
shareholders’ funds basis which takes into account the fair market value of the Group’s freehold and leasehold interests.
Net debt is calculated as total borrowings less bank and cash balances. Interest cover is calculated as underlying operating
profit and the Group’s share of underlying results of associates and joint ventures divided by net financing charges
including capitalised interest. The Group does not have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2018 and 2017 are as follows:
2018		

2017

23%

26%

Gearing ratio– based on shareholders’ funds– based on adjusted shareholders’ funds
Interest cover

5%6%

7.3 times

7.2 times

Fair value estimationi) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value
measurements are disclosed by level of the following fair value measurement hierarchy:a) Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly(‘observable current market transactions’)
The fair values of derivative financial instruments are determined using rates quoted by the Group’s bankers
at the balance sheet date. The rates for interest rate swaps and caps and forward foreign exchange contracts arecalculated by reference to market interest rates and foreign exchange rates.
The fair values of unlisted investments, mainly include club and school debentures, are determined using prices
quoted by brokers at the balance sheet date.
b) Inputs for assets or liabilities that are not based on observable market data (‘unobservable inputs’)
The fair values of other unlisted investments, are determined using valuation techniques by reference toobservable current market transactions (including price-to earnings and price-to book ratios of listed securities
of entities engaged in similar industries) or the market prices of the underlying investments with certain degreeof entity specific estimates or discounted cash flow by projecting the cash inflows from these investments.
There were no changes in valuation techniques during the year.

Annual Report 201833 Financial risk management continued
Fair value estimation continuedi) Financial instruments that are measured at fair value continued
The table below analyses financial instruments carried at fair value at 31st December 2018 and 2017, by the levels in
the fair value measurement hierarchy.
Observablecurrent market		transactions		
US$m		

Unobservable
input		US$m		

Total
US$m

6.1		

9.1		

15.2

0.9		

–		

0.9

7.0		

9.1		

16.1

1.7		

9.3		

11.0

2018
AssetsOther investments
Derivative financial instruments at fair value– through other comprehensive income

2017
AssetsOther investments
Derivative financial instruments at fair value– through other comprehensive income

0.5		

–		

0.5

2.2		

9.3		

11.5

(0.2)

–		

(0.2 )

Liabilities
Derivative financial instruments at fair value– through other comprehensive income

There were no transfers among the two categories during the year ended 31st December 2018 and 2017.
Movements of financial instruments which are valued based on unobservable inputs during the year ended
31st December are as follows:
Unlisted investments
2018		
2017
US$m		
US$m

9.3

8.6

Additions–

0.7

Disposals

(0.2)

–

At 31st December

9.1

9.3

At 1st Januaryii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank and cash balances, current creditors and current borrowings are assumed
to approximate their carrying amounts due to the short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market prices or are estimated using the expected future
payments discounted at market interest rates.

85

86 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

33 Financial risk management continued
Financial instruments by category
The fair values of financial assets and financial liabilities, together with carrying amounts at 31st December 2018 and2017 are as follows:
Fair value of		Fair value		Financial		
hedging		through		
assets at		
instruments		 profit and loss		amortised cost		
US$m		
US$m		
US$m		

Other		financial		
liabilities		
US$m		

Total
carrying		
amount		
US$m		

Fair
value
US$m

2018
Financial assets measured at fair value
Other investments
Derivative financial instruments–		

15.2		

–		–		15.2		

15.2

0.9		

–		

–		

–		

0.9		

0.9

0.9		

15.2		

–		–		

16.1		

16.1

Financial assets not measured at fair value
Debtors–		–		

61.2		

–		61.2		

61.2

Bank and cash balances

–		

–		

246.8		

–		

246.8		

246.8

–		

–		

308.0		

–		

308.0		

308.0Borrowings

–		

–		

–		

(531.5)(531.5)(531.5 )Trade and other payables excluding
non-financial liabilities

–		

–		

–		

(138.8)(138.8)(138.8 )

–		

–		

–		

(670.3)(670.3)(670.3 )–		

11.0		

–		–		

11.0		

11.0

0.5		

–		

–		

–		

0.5		

0.5

0.5		

11.0		

–		–		11.5		

11.5

–		

–		

65.5		

–		65.5		

65.5

Financial liabilities not measured
at fair value

2017
Financial assets measured at fair value
Other investments
Derivative financial instruments

Financial assets not measured at fair value
Debtors
Bank and cash balances

–		

–		

183.9		

–		

183.9		

183.9

–		

–		

249.4		

–		

249.4		

249.4

(0.2)

–		

–		

–		

(0.2)

(0.2 )

Borrowings

–		

–		

–		

(510.7)(510.7)(510.7 )Trade and other payables excluding
non-financial liabilities

–		

–		

–		

(127.8)(127.8)(127.8 )

–		

–		

–		

(638.5)(638.5)(638.5 )Financial liabilities measured at fair value
Derivative financial instruments
Financial liabilities not measured
at fair value

Annual Report 2018

34 Critical accounting estimates and judgements
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be reasonable.
The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates andassumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below.

Acquisition of subsidiaries, associates and joint ventures
The initial accounting on the acquisition of subsidiaries, associates and joint ventures involves identifying anddetermining the fair values to be assigned to the identifiable assets, liabilities and contingent liabilities of the acquired
entities. The fair values of leasehold land and tangible assets are determined by independent valuers by reference tomarket prices or present value of expected net cash flows from the assets. Any changes in the assumptions used andestimates made in determining the fair values, and management’s ability to measure reliably the contingent liabilitiesof the acquired entity will impact the carrying amount of these assets and liabilities.

Impairment of assets
The Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment.
Other assets such as tangible fixed assets and development project contract costs are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount of an asset or a cash generating unit is determined based on the higher of its fair value less cost to selland its value in use, calculated on the basis of management’s assumptions and estimates. Changing the key assumptions,
including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect thevalue-in-use calculations.
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group
uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s
past history, existing market conditions as well as forward looking estimates at the balance sheet date (refer note 15).

Tangible fixed assets and depreciation
Management determines the estimated useful lives and related depreciation charges for the Group’s tangible fixed assets.
Management will revise the depreciation charge where useful lives are different to those previously estimated, or it will
write off or write down technically obsolete or non-strategic assets that have been abandoned.
On 9th October 2018, the Group announced that The Excelsior, Hong Kong will close on 31st March 2019 in orderfor the site to be redeveloped as a commercial building. The tangible fixed assets of The Excelsior, Hong Kong compriselong-term interest in leasehold land, hotel property, leasehold improvements, plant and machinery, and furniture andequipment. Change in the intended use of the site causes the estimated period of use of the non-leasehold land assets tochange. The estimated useful lives for these assets were revised resulting in an additional depreciation charge from thedate of announcement to the date of hotel closure. This charge for the current year has been recorded as a non-trading
expense in the profit and loss (refer note 8).

8788 Mandarin Oriental International Limited

Notes to the Financial Statements Continued

34 Critical accounting estimates and judgements continued
Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters isdifferent from the amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Provision of deferred tax follows the way management expects to recover or settle the carrying amount of the related
assets or liabilities, which the management may expect to recover through use, sale or combination of both. Accordingly,
deferred tax will be calculated at income tax rate, capital gains tax rate or combination of both.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectationof future taxable profit that will be available against which the tax losses can be utilised. The outcome of their actual
utilisation may be different.

Pension obligations
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis
using a number of assumptions. The assumptions used in determining the net cost/income for pensions include thediscount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used
to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations.
In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds thatare denominated in the currency in which the benefits will be paid and that have terms to maturity approximating theterms of the related pension obligation.
Other key assumptions for pension obligations are based in part on current market conditions.

Revenue recognition
For contracts with customers which include multiple deliverables, the separate performance obligations are identified.
The transaction price is then allocated to each performance obligation based on their stand-alone selling prices. From
time to time, when a stand-alone selling price may not be directly observable, the Group estimated the selling price using
expected costs of rendering such services and adding an appropriate margin.

Insurance recovery recognition
Following the fire at Mandarin Oriental Hyde Park, London on 6th June 2018, the Group received interim cash
payments during 2018 from the insurers in respect of the cover available under the insurance policies. The insurancecompensation for the replacement of tangible assets and other incidental expenses has been based on the costs incurredand has been recognised as non-trading income in the profit and loss (refer note 8). The insurance compensation for theloss of profits has been estimated with reference to the historical track record of hotel performance and has been recorded
as underlying business performance in the profit and loss. The total property damage and business interruption claims
with the Group’s insurers are expected to be concluded in 2019.

Non-trading items
The Group uses underlying business performance in its internal financial reporting to distinguish between theunderlying profits and non-trading items. The identification of non-trading items requires judgement by management,
but follows the consistent methodology as set out in the Group’s accounting policies.

Annual Report 2018

Independent Auditors’ Report

To the members of Mandarin Oriental International Limited
Report on the audit of the financial statements
OpinionIn our opinion, Mandarin Oriental International Limited’s Group (‘the Group’) financial statements(the ‘financial statements’):• give a true and fair view of the state of the Group’s affairs as at 31st December 2018 and of its profit and cash flows
for the year then ended;• have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by
the International Accounting Standards Board (IASB); and• have been prepared in accordance with the requirements of the Companies Act 1981 (Bermuda).
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated
Balance Sheet as at 31st December 2018; the Consolidated Profit and Loss Account, the Consolidated Statement ofComprehensive Income, the Consolidated Cash Flow Statement, and the Consolidated Statement of Changes in Equity
for the year then ended; and the Notes to the Financial Statements, which include the Principal Accounting Policies.
Certain required disclosures have been presented in the Corporate Governance section of the Annual Report on page 98,
rather than in the notes to the financial statements. These disclosures are cross-referenced from the financial statements
and are identified as audited.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the Financial Reporting Council’s (‘FRC’s’) Ethical Standard as
applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Materiality• Overall Group materiality: US$4.2 million (2017: US$3.5 million).
• Based on 5% of underlying profit before tax.
Audit scope• A full scope audit of 12 of the Mandarin Oriental hotels was performed. These hotels, together with procedures
performed on central functions and at the Group level, accounted for 95% of the Group’s revenue, 89% of the Group’s
profit before tax and underlying profit before tax.
Key audit matter• Recoverability of the carrying amounts of hotel properties.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating
whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

89

90 Mandarin Oriental International Limited

Independent Auditors’ Report Continued

Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the auditof the financial statements of the current period and include the most significant assessed risks of material misstatement(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter

How our audit addressed the key audit matter

Recoverability of the carrying amounts of hotel properties
Refer to note 31 (Principal accounting policies),
note 34 (Critical accounting estimates and judgements),
note 10 (Tangible assets) and note 11 (Associates andjoint ventures) of the financial statements.

We discussed triggering events and indicators ofpotential impairment of hotel properties withmanagement and inspected the operating results
and forecasts of the respective hotels.

The Group’s hotel properties are stated at cost lessdepreciation and impairment. As at 31st December 2018,
the carrying value of the hotel properties held throughthe Group’s subsidiaries was US$1,386.5 million. The
Group also has interests in a number of hotel properties
held through its associates and joint ventures.

We evaluated management’s future cash flow forecasts
and the process by which they were prepared, including
testing the mathematical accuracy of the underlying
calculations and compared the future cash flow forecasts
to the Board approved budgets.

Given the different political and economic environments
in which the Group operates, the trading performance of
these hotels varies. Management considers each hotel tobe a separate cash-generating unit (‘CGU’) and performs
an impairment assessment, where impairment indicators
exist, to determine the recoverable amount of the hotel
properties. The recoverable amount is determined as
the higher of the CGU’s value-in-use and fair value lesscosts to sell. In determining the fair value less cost to sell,management involved third-party valuers (‘valuer’) toperform valuation of the hotel properties. Except for theassets write-off of US$6.8 million recorded against theGroup’s carrying amount of its London hotel property,
triggered by a fire that took place during the year ended
31st December 2018, management concluded that nofurther impairment of hotel properties was required as
at 31st December 2018.
We focused on this area as the impairment assessment
involves significant judgements and estimation
uncertainty in respect of future business performanceand key assumptions including discount rates, terminal
yield, occupancy rate, sales growth rate and capital
expenditure necessary to maintain the service standard.

We assessed the assumptions used by the valuer andmanagement in the calculations of the recoverable
amounts, such as the country specific discount rate
and terminal yield with reference to market data.
We assessed the reasonableness of the occupancy rate,
sales growth rate and capital expenditure by comparing
them to historical results and latest economic andindustry forecasts.
We assessed the qualifications, competence andobjectivity of the valuer and read the valuation reports
prepared by the valuer and considered the appropriatenessand consistency of valuation methodologies.
We performed sensitivity analyses where there wereindicators of impairment. This was undertaken by making
adjustments to the key assumptions in management’s
impairment assessments and considered whether, in
isolation or as a combination, any reasonably possible
adjustments would result in a material impairment.
We evaluated management’s process of identifying thetangible assets to be impaired as a result of the fire thatbroke out at the Group’s London property, and checked,
on a sample basis, the carrying amounts of those assets tothe fixed assets register of that property.
Based on our work and the evidence obtained, we foundthat the methodologies were applied consistently andappropriately, and the significant judgements andestimates adopted by management were appropriate.

Annual Report 2018

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough audit work to be able to give an opinion on thefinancial statements as a whole, taking into account the structure of the Group, the accounting processes and controls,
and the industry in which it operates.
The Group’s accounting processes are structured around entities’ finance functions, which are responsible for theirown accounting records and controls, which in turn report financial information to the Group’s finance function in
Hong Kong to enable them to prepare financial statements.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed bymembers of the Group engagement team or by component auditors from within the PwC Network and other auditors
operating under our instruction. Where the work was performed by component auditors, we determined the level ofinvolvement we needed to have in the audit work at those components to be able to conclude whether sufficient appropriate
audit evidence had been obtained as a basis for our opinion on the financial statements as a whole. The Group engagement
team was involved in the significant reporting entities in scope for Group reporting during the audit cycle througha combination of meetings, visits and conference calls. The lead Group audit partner and other senior team members
undertook multiple visits to Hong Kong during the audit and were involved throughout the year in regular conference
calls and other forms of communication to direct and oversee the audit. Senior team members visited component teamsin the UK and Paris during the audit to review the work of component teams with regular communication throughout
the year.
A full scope audit of 12 of the Mandarin Oriental hotels was performed. These hotels, together with procedures
performed on central functions and at the Group level (on the consolidation and other areas of significant judgement),
accounted for 95% of the Group’s revenue, 89% of the Group’s profit before tax and underlying profit before tax.
This gave us the evidence we needed for our opinion on the financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds formateriality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality

US$4.2 million (2017: US$3.5 million)

How we determined it

5% of underlying profit before tax.

Rationale for benchmark applied

Based on the benchmarks used in the Annual Report, profit before tax isthe primary measure used by the shareholders in assessing the performanceof the Group.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Groupmateriality. The range of materiality allocated across components was US$0.5 million to US$3.5 million.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
US$0.4 million (2017: US$0.3 million) as well as misstatements below that amount that in our view, warranted
reporting for qualitative reasons.

9192 Mandarin Oriental International Limited

Independent Auditors’ Report Continued

Conclusions relating to going concern
ISAs (UK) require us to report to you when the Directors’ use of the going concern basis of accounting in the preparationof the financial statements is not appropriate; or the Directors have not disclosed in the financial statements any identified
material uncertainties that may cast significant doubt about the Group’s ability to continue to adopt the going concern
basis of accounting for a period of at least 12 months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from theEuropean Union or the outcome of ongoing US and China trade relationships, are not clear, and it is therefore difficult
to evaluate potential implications.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements andour auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to theextent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doingso, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of
the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We havenothing to report based on these responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Responsibility Statement set out on page 95, the Directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they givea true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unlessthe Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK)will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Annual Report 2018

Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordancewith Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
The engagement partner responsible for this independent auditors’ report is John Baker.

PricewaterhouseCoopers LLP
Chartered Accountants
London28th February 2019a) The maintenance and integrity of the Mandarin Oriental International Limited website is the responsibility of
the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may have occurred to the financial statements since they
were initially presented on the website.
b) Legislation in Bermuda governing the preparation and dissemination of financial statements may differ fromlegislation in other jurisdictions.

9394 Mandarin Oriental International Limited

Five Year Summary

Consolidated Profit and Loss Account2014		
US$m		

2015		
US$m		

2016		
US$m		

2017		
US$m		

2018
US$m

Revenue

679.9		

607.3		

597.4		

610.8		

613.7Operating profit

120.8		

107.3		

68.0		

69.0		

69.6

Net financing charges(17.3)(11.8)(10.8)(11.0)(12.9)

Share of results of associates and joint ventures

12.3		

10.5		

10.9		

11.5		

5.8

Profit before tax

115.8		

106.0		

68.1		

69.5		

62.5

Tax

(19.0)(16.6)(13.7)(15.0)(19.1)

Profit after tax

96.8		

89.4		

54.4		

54.5		

43.4

Profit attributable to shareholders

97.0		

89.3		

55.2		

54.9		

43.6

Underlying profit attributable to shareholders

97.0		

90.3		

57.3		

54.9		

65.1

Earnings per share (US¢)*9.29		

7.44		

4.40		

4.37		

3.46

Underlying earnings per share (US¢)*9.29		

7.53		

4.56		

4.37		

5.16

Dividends per share (US¢)

7.00		

5.00		

4.00		

3.00		

3.00

2014		
US$m		

2015		
US$m		

2016		
US$m		

2017		
US$m		

2018
US$m

Intangible assets

45.6		

44.1		

44.3		

47.7		

53.0

Tangible assets

Consolidated Balance Sheet

1,315.1		

1,255.0		

1,352.1		

1,453.2		

1,386.5

Associates and joint ventures

101.6		

164.4		

163.8		

196.6		

197.1Other investments

10.5		

10.2		

10.7		

11.0		

15.2

Deferred tax assets

2.2		

2.8		

2.6		

11.0		

11.4

Pension assets

7.3		

–		

–		

4.9		

0.2

–		

–		

–		

0.5		

5.1

55.1		

254.2		

136.6		

122.7		

(356.2)Long-term borrowings(510.7)(436.2)(477.4)(508.1)(7.3)

Deferred tax liabilities(62.3)(59.8)(56.1)(58.6)(61.6)

Non-current debtors
Net current assets/(liabilities)

–		

–		

(3.2)

(0.6)

(0.4)

(3.0)

(3.0)

–		

(0.2)

–

Net assets

961.4		

1,231.7		

1,173.4		

1,280.1		

1,243.0

Share capital

50.2		

62.8		

62.8		

62.9		

63.1

Pension liabilities
Non-current creditors

Share premium

188.2		

490.3		

490.4		

493.9		

497.8Revenue and other reserves

718.0		

673.6		

616.2		

717.2		

678.3Shareholders’ funds

956.4		

1,226.7		

1,169.4		

1,274.0		

1,239.2

5.0		

5.0		

4.0		

6.1		

3.8

Total equity

961.4		

1,231.7		

1,173.4		

1,280.1		

1,243.0

Net asset value per share (US$)*0.92		

0.98		

0.93		

1.01		

0.98

2014		
US$m		

2015		
US$m		

2016		
US$m		

2017		
US$m		

2018
US$m

Non-controlling interests

Consolidated Cash Flow Statement
Cash flows from operating activities

159.5		

140.2		

107.7		

119.9		

146.1Cash flows from investing activities(45.6)(124.4)(222.8)(102.0)(69.0)Net cash flow before financing activities

113.9		

15.8		

(115.1)17.9		

77.1

Cash flow per share from operating activities (US¢)*15.27		

11.69		

8.58		

9.53		

11.59

* The comparative figures in 2014 have been adjusted in 2015 to reflect the effect of the rights issue completed in April 2015.

Annual Report 2018

Responsibility Statement

The Directors of the Company confirm to the best of their knowledge that:a) the consolidated financial statements have been prepared in accordance with International Financial ReportingStandards, including International Accounting Standards and Interpretations adopted by the International
Accounting Standards Board; andb) the sections of this Report, including the Chairman’s Statement, Group Chief Executive’s Review and the Principal
Risks and Uncertainties, which constitute the management report, include a fair review of all information required
to be disclosed by the Disclosure Guidance and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Conduct
Authority in the United Kingdom.

For and on behalf of the Board

James Riley
Craig Beattie
Directors
28th February 201995

96 Mandarin Oriental International Limited

Corporate Governance

Mandarin Oriental International Limited is incorporated in Bermuda. The Company was established as an Asian-based
hotel group and has since extended its operations to key locations around the world. The Company’s equity shares havea standard listing on the Main Market of the London Stock Exchange, and secondary listings in Bermuda and Singapore.
The Disclosure Guidance and Transparency Rules (the ‘DTRs’) issued by the Financial Conduct Authority in the
United Kingdom (the ‘FCA’) require that this Report address all relevant information about the corporate governancepractices applied beyond the requirements under Bermuda law.
The Company attaches importance to the corporate stability and opportunities that result from it being part of theJardine Matheson group, which is considered to be fundamental to the Company’s ability to pursue its long-term
development strategy. By coordinating objectives, establishing common values and standards, and sharing experience,contacts and business relationships, the Jardine Matheson group companies aim to optimise their opportunities acrosscountries where they operate, particularly in Asia.
The Group is committed to high standards of governance. The system of governance it has adopted is based on awell-tried approach to oversight and management that has been developed over many years by the members of theJardine Matheson group. It enables the Company to benefit from Jardine Matheson’s strategic guidance and professional
expertise, while at the same time ensuring that the independence of the Board is respected and clear operational
accountability rests with the Company’s executive management team.

The Management of the GroupThe Company has a dedicated executive management team led by the Group Chief Executive. The Memorandum of
Association of the Company, however, provides for the chairman of Jardine Matheson to be, or to appoint, the Managing
Director of the Company. Reflecting this, and the Jardine Matheson group’s 78% interest in the Company’s share capital,
the Group Chief Executive and the Managing Director meet regularly. Similarly, the board of the Hong Kong-basedGroup management company, Mandarin Oriental Hotel Group International Limited (‘MOHG’), and its financecommittee are chaired by the Managing Director and include Group executives as well as Jardine Matheson’s deputy
managing director, group finance director, group strategy director and group general counsel.
The presence of Jardine Matheson representatives on the Board of the Company and on the board of MOHG, as wellas on its audit and finance committees, provides an added element of stability to the Company’s financial planningand supervision, enhancing its ability to raise finance and take a long-term view of business development. It also eases
the ability of management to work effectively together in exploiting the full range of the Jardine Matheson group’scommercial strengths.
The Directors of the Company retain full power to manage the business affairs of the Company, other than mattersreserved to be exercised by the Company in general meeting under Bermuda legislation or the Company’s Bye-laws.
Among the matters on which the Board decides are the Group’s business strategy, its annual budget, dividends andmajor corporate activities.

Annual Report 2018

The Board
The Company currently has a Board of 16 Directors. Their names and brief biographies appear on pages 26 and 27of this Report. The Chairman has been appointed in accordance with the provisions of the Bye-laws of the Company,
which provide that the chairman of Jardine Matheson, or any Director nominated by him, shall be the Chairman of theCompany. The Board composition and operation helps to provide the Company with the necessary stability as it seeks
to grow its business.
The role of the Chairman is to lead the Board as it oversees the Group’s strategic and financial direction, while theprincipal role of the Managing Director is to act as chairman of MOHG and of its finance committee. Ben Keswick iscurrently appointed to both positions. The responsibility for running the Group’s business and all the executive mattersaffecting the Group rests with the Group Chief Executive, James Riley. The implementation of the Group’s strategy
is delegated to the Company’s executive management, with decision-making authority within designated financial
parameters delegated to the MOHG finance committee.
The Board is scheduled to hold four meetings in 2019 and ad hoc procedures are adopted to deal with urgent matterswhich arise between scheduled meetings. In 2018 one meeting was held in Bermuda and three were held in Asia.
The Board receives high quality, up to date information for each of its meetings. In addition, certain Directors of theCompany who do not serve on the board of MOHG and who are based outside Asia regularly visit Asia and Bermuda
to discuss the Group’s business, as well as to participate in the four strategic reviews that precede the regular Board
meetings. These Directors are not directly involved in the operational management of the Group’s business activities,
but their knowledge and close oversight of the Group’s affairs, as well as their knowledge and experience of the wider
Jardine Matheson group, reinforces the process by which business is reviewed before consideration at Board meetings.

Directors’ appointment, retirement, remuneration and service contracts
Candidates for appointment as executive Directors of the Company, as executive directors of MOHG or as senior
executives elsewhere in the Group may be sourced internally, or from the wider Jardine Matheson group or externally,
including by using the services of specialist executive search firms. The aim is to appoint individuals who combine
international best practice with familiarity with, or adaptability to, Asian markets. When appointing non-executive
Directors, the Board pays particular attention to the Asian business experience and relationships that they can bring.
Each new Director is appointed by the Board and, in accordance with the Company’s Bye-laws, each new Director so
appointed is subject to retirement and re-appointment at the first annual general meeting after appointment. Thereafter,
Directors are subject to retirement by rotation under the Bye-laws whereby one-third of the Directors retire at the annual
general meeting each year. These provisions apply to both executive and non-executive Directors, but the requirement toretire by rotation does not extend to the Chairman or Managing Director.

97

98 Mandarin Oriental International Limited

Corporate Governance Continued

Dr Richard Lee and Lord Powell of Bayswater stepped down from the Board at the Annual General Meeting held on
9th May 2018, and Jack Yilun Chen joined the Board on the same day. On 31st October 2018, Stuart Dickie stepped
down as Chief Financial Officer and was succeeded by Craig Beattie. Sir Henry Keswick retired from the Board witheffect from 31st December 2018.
In accordance with Bye-law 85, Adam Keswick, Lincoln K.K. Leong, Anthony Nightingale and Lord Sassoon retire byrotation at this year’s Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with
Bye-law 92, Craig Beattie and Jack Yilun Chen will also retire and, being eligible, offer themselves for re-election. Craig
Beattie has a service contract with a subsidiary of the Company that has a notice period of six months. None of the other
Directors proposed for re-election has a service contract with the Company or its subsidiaries.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognised that,
due to the nature of the Group and its diverse geographic base, a number of its senior executives are required to beoffered international terms and the nature of the remuneration packages is designed to reflect this. Executive Directors
joining from outside the Group may be offered an initial fixed-term service contract to reflect any requirement forthem to relocate.
Recommendations and decisions on remuneration and other benefits payable or made available to executive Directors
result from consultations between the Chairman and other Directors as he considers appropriate. Directors’ fees, which
are payable to all Directors other than the Group Chief Executive and the Chief Financial Officer, are decided upon byshareholders in general meeting as provided for by the Company’s Bye-laws. A motion to increase the Directors’ fee to
US$55,000 each per annum and the fee for the Chairman and Managing Director to US$65,000 per annum with effectfrom 1st January 2019 will be proposed at the forthcoming Annual General Meeting.
For the year ended 31st December 2018, the Directors received from the Group US$6.7 million (2017: US$5.9 million)
in Directors’ fees and employee benefits, being US$0.8 million (2017: US$0.8 million) in Directors’ fees, US$5.6 million(2017: US$4.7 million) in short-term employee benefits including salary, bonuses, accommodation and deemed benefits
in kind, US$0.2 million (2017: US$0.2 million) in post-employment benefits and US$0.1 million (2017: US$0.2 million)in share-based payments. The information set out in this paragraph forms part of the audited financial statements.
Share-based long-term incentive plans have also been established to provide incentives for executive Directors and senior
managers. Share options and share awards are granted by the scheme trustee after consultation between the Chairman
and the Group Chief Executive as well as other Directors as they consider appropriate. Share options are granted at thethen prevailing market prices, while share awards will vest free of payment. The share options and share awards normallyvest on or after the third anniversary of the date of grant. Grants may be made in a number of instalments. Share options
and share awards are not granted to non-executive Directors.
The Company purchases insurance to cover its Directors against their costs in defending themselves in civil proceedings
taken against them in that capacity and in respect of damages resulting from the unsuccessful defence of any proceedings.
To the extent permitted by law, the Company also indemnifies its Directors. Neither the insurance nor the indemnity
provides cover where the Director has acted fraudulently or dishonestly.

Annual Report 2018

Audit Committee
The Board has established within MOHG an audit committee (the ‘Audit Committee’), the current members of which
are Y.K. Pang, Mark Greenberg, Jeremy Parr and John Witt; they have extensive knowledge of the Group while atthe same time not being directly involved in operational management. The chairman, group chief executive and chief
financial officer of MOHG, together with representatives of the internal and external auditors, also attend the Audit
Committee meetings by invitation. The Audit Committee meets and reports to the Board semi-annually.
Prior to completion and announcement of the half-year and year-end results, a review of the financial information and of
any issues raised in connection with the preparation of the results, including the adoption of new accounting policies, isundertaken by the Audit Committee with the executive management and a report is received from the external auditors.
The external auditors also have access to the full Board when necessary, in addition to the Group Chief Executive,
Chief Financial Officer and other senior executives.
The Audit Committee keeps under review the nature, scope and results of the audits conducted by the internal audit
function. The Audit Committee’s responsibilities extend to reviewing the effectiveness of both the internal and external
audit functions; considering the independence and objectivity of the external auditors; and reviewing and approving
the level and nature of non-audit work performed by the external auditors.
The terms of reference of the Audit Committee can be found on the Company’s website at www.mandarinoriental.com.

Risk management and internal control
The Board has overall responsibility for the Group’s systems of risk management and internal control. The Board
has delegated to the Audit Committee responsibility for providing oversight in respect of risk management activities.
The Audit Committee considers the Group’s principal risks and uncertainties and potential changes to the risk profile,and reviews the operation and effectiveness of the Group’s systems of internal control and the procedures by whichthese risks are monitored and mitigated. The Audit Committee considers the systems and procedures on a regular basis,and reports to the Board semi-annually. The systems of internal control are designed to manage, rather than eliminate,business risk; to help safeguard the Group’s assets against fraud and other irregularities; and to give reasonable, but not
absolute, assurance against material financial misstatement or loss.
Executive management is responsible for the implementation of the systems of internal control throughout the Group.
The internal audit function also monitors the effectiveness of the systems of internal control and the approach taken by
the business units to risk. The internal audit function is independent of the operating businesses and reports its findings,
and recommendations for any corrective action required, to the Audit Committee.
The Group has in place an organisational structure with defined lines of responsibility and delegation of authority.
There are established policies and procedures for financial planning and budgeting; for information and reporting
systems; for assessment of risk; and for monitoring the Group’s operations and performance. The information systems
in place are designed to ensure that the financial information reported is reliable and up to date.
The Company’s policy on commercial conduct underpins the Group’s internal control process, particularly in the areaof compliance. The policy is set out in the Group’s Code of Conduct, which is a set of guidelines to which every employee
must adhere, and is reinforced and monitored by an annual compliance certification process.
The Audit Committee has also been given the responsibility to oversee the effectiveness of the formal procedures for
employees to raise any matters of serious concern, and is required to review any reports made under those proceduresthat are referred to it by the internal audit function.
The principal risks and uncertainties facing the Company are set out on pages 103 and 104.

99

100 Mandarin Oriental International Limited

Corporate Governance Continued

Directors’ responsibilities in respect of the financial statements
The Directors are required under the Bermuda Companies Act to prepare financial statements for each financial year
and to present them annually to the Company’s shareholders at the annual general meeting. The financial statements
are required to present fairly, in accordance with International Financial Reporting Standards (‘IFRS’), the financial
position of the Group at the end of the year and the results of its operations and its cash flows for the year then ended.
The Directors consider that applicable accounting policies under IFRS, applied on a consistent basis and supported
by prudent and reasonable judgements and estimates, have been followed in preparing the financial statements.
The financial statements have been prepared on a going concern basis.

Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out
in its Code of Conduct, which is modelled on the Jardine Matheson group’s code of conduct. The Code of Conduct requiresthat all Group companies comply with all laws of general application, all rules and regulations that are industry specificand proper standards of business conduct. The Code of Conduct prohibits the giving or receiving of illicit payments, andrequires that all managers must be fully aware of their obligations under the Code of Conduct and establish procedures
to ensure compliance at all levels within their organisations.
The Code of Conduct also encourages inclusion and diversity, and requires all employees to be treated fairly, impartiallyand with dignity and respect. As a global hospitality employer, the Group believes in promoting equal opportunities
in recruiting, developing and rewarding its people regardless of race, gender, nationality, religion, sexual orientation,
disability, age or background. The high service expectations and overall quality of the Mandarin Oriental brandnecessitates that the Group seeks the best people from the communities in which it operates most suited to its needs.
The Group has in place procedures by which employees can raise, in confidence, matters of serious concern in areas suchas financial reporting or compliance.

Directors’ share interests
The Directors of the Company in office on 28th February 2019 had interests (within the meaning of the EU Market
Abuse Regulation (‘MAR’), which applies to the Company as it is listed on the London Stock Exchange) as set out below
in the ordinary share capital of the Company. These interests include those notified to the Company in respect of the
Directors’ closely associated persons (as that term is used under MAR).
James Riley
Edouard Ettedgui

180,450
13,507,229

Julian Hui

10,294

Lincoln K.K. Leong

129,756

Annual Report 2018

Substantial shareholders
As a non-UK issuer, the Company is subject to the DTRs pursuant to which a person must in certain circumstances
notify the Company of the percentage of voting rights attaching to the share capital of the Company that he holds. The
obligation to notify arises if that person acquires or disposes of shares in the Company which results in the percentage ofvoting rights which he holds reaching, exceeding, or falling below, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Company has been informed of the holding of voting rights of 5% or more attaching to the Company’s issued ordinary
share capital by Jardine Strategic Holdings Limited (‘Jardine Strategic’), which is directly interested in 986,147,366
ordinary shares carrying 78.16% of the voting rights. By virtue of its interest in Jardine Strategic, Jardine Matheson is
also interested in the same ordinary shares. Apart from this shareholding, the Company is not aware of any holders ofvoting rights of 5% or more attaching to the issued ordinary share capital of the Company as at 28th February 2019.
There were no contracts of significance with corporate substantial shareholders during the year under review.

Governance principles
The Company’s primary listing on the London Stock Exchange is a standard listing on the Main Market. Undera standard listing, the Company is subject to the UK Listing Rules (other than those which apply only to companies
with a premium listing), the DTRs, the UK Prospectus Rules and MAR. The Company, therefore, is bound by the rules
in relation to continuous disclosure, periodic financial reporting, disclosure of interests in shares and market abuse,including the rules governing insider dealing, market manipulation and the disclosure of inside information. The
Company is also subject to regulatory oversight from the FCA, as the Company’s principal securities regulator, and isrequired to comply with the Admission and Disclosure Standards of the Main Market of the London Stock Exchange.
When shareholders approved the Company’s move to a standard listing from a premium listing in 2014, the Company
stated that it intended to maintain certain governance principles on the same basis as was then applicable to the Company’s
premium listing, as follows:
1. When assessing a significant transaction, being a larger transaction which would be classified as a class 1 transaction
under the provisions of the UK Listing Rules, the Company will engage an independent financial adviser to provide
a fairness opinion on the terms of the transaction.
2. In the event of a related party transaction, being a transaction with a related party which would require a sponsor
to provide a fair and reasonable opinion under the provisions of the UK Listing Rules, the Company will engage
an independent financial adviser to confirm that the terms of the transaction are fair and reasonable as far as theshareholders of the Company are concerned.
3. Further, as soon as the terms of a significant transaction or a related party transaction are agreed, an announcement
will be issued by the Company providing such details of the transaction as are necessary for investors to evaluate
the effect of the transaction on the Company.
4. At each annual general meeting, the Company will seek shareholder approval to issue new shares on a non-pre-emptivebasis for up to 33% of the Company’s issued share capital, of which up to 5% can be issued for cash consideration.
5. The Company will continue to adhere to its Securities Dealing Rules. These rules, which were based on the UK
Model Code, have since been revised to follow the provisions of MAR with respect to market abuse and disclosureof interests in shares.
6. The Company will continue its policies and practices in respect of risk management and internal controls.

101102 Mandarin Oriental International Limited

Corporate Governance Continued

Related party transactions
Details of transactions with related parties entered into by the Company during the course of the year are included innote 28 to the financial statements on page 67.

Securities purchase arrangements
The Directors have the power under the Bermuda Companies Act and the Company’s Memorandum of Association
to purchase the Company’s shares. Any shares so purchased shall be treated as cancelled and, therefore, reduce theissued share capital of the Company. When the Board reviews the possibility for share repurchases, it will take into
consideration the potential for the enhancement of earnings or asset values per share. When purchasing such shares,
the Company is subject to the provisions of MAR.

Takeover Code
The Company is subject to a Takeover Code, based on London’s City Code on Takeovers and Mergers. The Takeover
Code provides an orderly framework within which takeovers can be conducted and the interests of shareholders protected.
The Takeover Code has statutory backing, being established under the Acts of incorporation of the Company in Bermuda.

Annual General Meeting
The 2019 Annual General Meeting will be held at Rosewood Bermuda, Bermuda on 8th May 2019. The full textof the resolutions and explanatory notes in respect of the meeting are contained in the Notice of Meeting whichaccompanies this Report. A corporate website is maintained containing a wide range of information of interest toinvestors at www.mandarinoriental.com.

Power to amend Bye-laws
The Bye-laws of the Company can be amended by the shareholders by way of a special resolution at a general meetingof the Company.

Annual Report 2018

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal control. The process by which the Groupidentifies and manages risk is set out in more detail on page 99 of the Corporate Governance section of this Report.
The following are the principal risks and uncertainties facing the Company as required to be disclosed pursuant to theDisclosure Guidance and Transparency Rules issued by the Financial Conduct Authority in the United Kingdom andare in addition to the matters referred to in the Chairman’s Statement and Group Chief Executive’s Review.

Economic and financial risk
The Group’s business is exposed to the risk of negative developments in global and regional economies and financial
markets, either directly or through the impact on the Group’s investment partners, third-party hotel owners anddevelopers, bankers, suppliers or customers. These developments can result in recession, inflation, deflation, currency
fluctuations, restrictions in the availability of credit, business failures, or increases in financing costs. Such developments
may increase operating costs, reduce revenues, lower asset values or result in the Group being unable to meet in full its
strategic objectives. These developments could also adversely affect travel patterns which would impact demand for theGroup’s products and services.
The steps taken by the Group to manage its exposure to financial risk are set out in the Financial Review on pages 24
and 25 and note 33 to the financial statements on pages 79 to 86.

Commercial and market risk
Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks.
The Group operates within the global hotel industry which is highly competitive. Failure to compete effectively in termsof quality of product, levels of service or price can have an adverse effect on earnings. This may also include failure toadapt to rapidly evolving customer preferences and expectations. Significant competitive pressure or the oversupplyof hotel rooms in a specific market can lead to reduced margins. Advances in technology creating new or disruptivecompetitive pressures might also negatively affect the trading environment.
The Group competes with other luxury hotel operators for new opportunities in the areas of hotel management,
residences management and residences branding. Failure to establish and maintain relationships with hotel owners
or developers could adversely affect the Group’s business. The Group also makes investment decisions in respect ofacquiring new hotel properties and undertaking major renovations at hotels in which it has an ownership interest.
The success of these investments is measured over the longer term and as a result is subject to market risk.
Mandarin Oriental’s continued growth depends on the opening of new hotels and branded residences. Most of theGroup’s new developments are controlled by third-party owners and developers and can be subject to delays due toissues attributable to planning and construction, sourcing of finance, and the sale of residential units. In extreme
circumstances, such factors might lead to the cancellation of a project.

Pandemic, terrorism and natural disasters
The Group’s business would be impacted by a global or regional pandemic as this would impact travel patterns, demand
for the Group’s products and services and could also affect the Group’s ability to operate effectively. The Group’s hotels
are also vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism or indirectly
through the impact of generally reduced economic activity in response to the threat of or an actual act of terrorism.
In addition, a number of the territories in which the Group operates can experience from time to time natural disasters
such as typhoons, floods, earthquakes and tsunamis.

103104 Mandarin Oriental International Limited

Principal Risks and Uncertainties Continued

Key agreements
The Group’s business is reliant upon joint venture and partnership agreements, property leasehold arrangements,
management, license, branding and services agreements or other key contracts. Cancellation, expiry or termination, or
the renegotiation of any of these key agreements and contracts, could have an adverse effect on the financial performanceof individual hotels as well as the wider Group.

Reputational risk and value of the brand
The Group’s brand equity and global reputation is fundamental in supporting its ability to offer premium products andservices and to achieving acceptable revenues and profit margins. Any damage to the Group’s brand equity or reputation,
including as a result of negative effects relating to health and safety, acts or omissions by Group personnel, information
system and cybersecurity breaches, loss or misuse of personal data, and any allegations of socially irresponsible policies
and practices, might adversely impact the attractiveness of the Group’s properties or the loyalty of the Group’s guests.

Regulatory and political risk
The nature of the Group’s global operations mean that it is subject to numerous laws and regulations, including but
not limited to those covering employment, competition, taxation, data privacy, foreign ownership, town planning,anti-bribery, money laundering and exchange controls. Changes to laws and regulations have the potential to impact
the operations and profitability of the Group’s business. Changes in the political environment, including prolonged civil
unrest, could also affect the Group’s business.

Annual Report 2018

Shareholder Information

Financial calendar
2018 full-year results announced
Shares quoted ex-dividend
Share registers closed
Annual General Meeting to be held
2018 final dividend payable2019 half-year results to be announced
Shares quoted ex-dividend
Share registers to be closed
2019 interim dividend payable

28th February 201914th March 201918th to 22nd March 2019
8th May 201915th May 2019
1st August 2019*22nd August 2019*
26th to 30th August 2019*17th October 2019** Subject to change

Dividends
Shareholders will receive their cash dividends in United States Dollars, unless they are registered on the Jersey branchregister, in which case they will have the option to elect for their dividends to be paid in Sterling. These shareholders may
make new currency elections for the 2018 final dividend by notifying the United Kingdom transfer agent in writing by
18th April 2019. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference
to a rate prevailing on 2nd May 2019. Shareholders holding their shares through CREST in the United Kingdom will
receive their cash dividends in Sterling only. Shareholders holding their shares through The Central Depository (Pte)
Limited (‘CDP’) in Singapore will receive their cash dividends in United States Dollars unless they elect, through CDP,
to receive Singapore Dollars.

Registrars and transfer agent
Shareholders should address all correspondence with regard to their shareholdings or dividends to the appropriate
registrar or transfer agent.

Principal Registrar
Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, Bermuda

Jersey Branch Registrar
Link Market Services (Jersey) Limited, 12 Castle Street, St Helier, Jersey JE2 3RT, Channel Islands

Singapore Branch Registrar
M & C Services Private Limited, 112 Robinson Road #05-01, Singapore 068902

United Kingdom Transfer Agent
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, United Kingdom

Press releases and other financial information can be accessed through the internet at www.mandarinoriental.com.

105

106 Mandarin Oriental International Limited

Mandarin Oriental Hotel Group Contact Addresses

Hong Kong Corporate Office
8th floor One Island East
Taikoo Place
18 Westlands Road
Quarry Bay, Hong Kong
Telephone +852 2895 9288
mandarinoriental.com

Asi a-PacificMandarin Oriental, Bangkok
48 Oriental Avenue
Bangkok 10500
Thailand
Telephone +66(2) 659 9000
Emailmobkk-reservations @mohg.com
Mandarin Oriental Wangfujing, Beijing
No. 269 Wangfujing Street
Dongcheng District
Beijing 100006, China
Telephone +86(10) 8509 8888
Emailmowfj-reservations @mohg.com
Mandarin Oriental, Guangzhou
389 Tianhe Road, Tianhe District
Guangzhou 510620, China
Telephone +86(20) 3808 8888
Emailmogzh-reservations @mohg.com
Mandarin Oriental, Hong Kong
5 Connaught Road
Central, Hong Kong
Telephone +852 2522 0111
Emailmohkg-reservations @mohg.com

The Landmark Mandarin Oriental, Hong Kong
The Landmark
15 Queen’s Road Central
Central, Hong Kong
Telephone +852 2132 0188
Emaillmhkg-reservations @mohg.com
Mandarin Oriental, Jakarta
Jalan M H Thamrin
PO Box 3392
Jakarta 10310
Indonesia
Telephone +62(21) 2993 8888
Emailmojkt-reservations @mohg.com
Mandarin Oriental, Kuala Lumpur
Kuala Lumpur City Centre
50088 Kuala Lumpur
Malaysia
Telephone +60(3) 2380 8888
Emailmokul-reservations @mohg.com
Mandarin Oriental, Macau
Avenida Dr Sun Yat Sen
NAPE, Macau
Telephone +853 8805 8888
Emailmomac-reservations @mohg.com
Mandarin Oriental, Sanya
12 Yuhai Road
Sanya 572000
Hainan, China
Telephone +86(898) 8820 9999
Emailmosan-reservations @mohg.com

Annual Report 2018

Mandarin Oriental Pudong, Shanghai
111 Pudong Road (S), Pudong
Shanghai 200120, China
Telephone +86(21) 2082 9888
Emailmopud-reservations @mohg.com
Mandarin Oriental, Singapore
5 Raffles Avenue, Marina Square
Singapore 039797
Telephone +65 6338 0066
Emailmosin-reservations @mohg.com
Mandarin Oriental, Taipei
158 Dunhua North Road
Taipei 10548, Taiwan
Telephone +886(2) 2715 6888
Emailmotpe-reservations @mohg.com
Mandarin Oriental, Tokyo
2-1-1 Nihonbashi Muromachi, Chuo-ku
Tokyo 103-8328, Japan
Telephone +81(3) 3270 8800
Emailmotyo-reservations @mohg.com

Europe, Middle E ast & A fr ic a
Mandarin Oriental, Barcelona
Passeig de Gràcia, 38-40
08007 Barcelona, Spain
Telephone +34 (93) 151 8888
Emailmobcn-reservations @mohg.com
Mandarin Oriental, Bodrum
Cennet Koyu Çomça Mevkii
314. Sokak No. 10, Göltürkbükü Mahallesi
48400, Bodrum, Mugla, Turkey
Telephone +90(252) 311 1888
Emailmobod-reservations @mohg.com

Mandarin Oriental, Doha
Barahat Msheireb Street
Msheireb Downtown Doha
PO Box 23643
Doha, Qatar
Telephone + 974 4008 8888
Emailmodoh-info @mohg.com
Mandarin Oriental Jumeira, Dubai
Jumeirah Beach Road, Jumeira 1
PO Box 62092
Dubai, United Arab Emirates
Telephone +971 4 777 2222
Emailmodub-reservations @mohg.com
Mandarin Oriental, Geneva
Quai Turrettini 1
1201 Geneva, Switzerland
Telephone +41(22) 909 0000
Emailmogva-reservations @mohg.com
Mandarin Oriental, Lago di Como
Via Caronti, 69
22020 Blevio
Lake Como, Italy
Telephone +39 031 32 511
Emailmocmo-reservations @mohg.com
Mandarin Oriental Hyde Park, London
66 Knightsbridge
London, SW1X 7LA
United Kingdom
Telephone +44(0) 20 7235 2000
Emailmolon-reservations @mohg.com

107

108 Mandarin Oriental International Limited

Mandarin Oriental Hotel Group Contact Addresses Continued

Hotel Ritz, Madrid
Plaza de la Lealtad 528014 Madrid, Spain
Telephone +34 (91) 701 67 67
Email
rzmad-reservations @mohg.com
Mandarin Oriental, Marrakech
Route du Golf Royal40 000 Marrakech, Morocco
Telephone +212 (5) 24 29 88 88
Emailmomrk-reservations @mohg.com
Mandarin Oriental, Milan
Via Andegari 920121 Milan, Italy
Telephone +39 (02) 8731 8888
Emailmomln-reservations @mohg.com
Mandarin Oriental, Munich
Neuturmstrasse 180331 Munich, Germany
Telephone +49 (89) 290 980
Emailmomuc-reservations @mohg.com
Mandarin Oriental, Paris251 rue Saint Honoré
75001 Paris, France
Telephone +33 (1) 70 98 78 88
Emailmopar-reservations @mohg.com
Mandarin Oriental, Prague
Nebovidská 459/1
11800 Prague 1, Czech Republic
Telephone +420(2) 33 088 888
Emailmoprg-reservations @mohg.com

A mer ic a
Mandarin Oriental, Boston
776 Boylston Street
Boston, Massachusetts 02199, USA
Telephone +1 (617) 535 8888
Emailmobos-reservations @mohg.com
Mandarin Oriental, Canouan
Carenage Bay, VC0450 Canouan Island
Saint Vincent and the Grenadines
Telephone +1 (212) 461 8068
Emailmocan-reservations @mohg.com
Mandarin Oriental, Miami
500 Brickell Key Drive
Miami, Florida 33131, USA
Telephone +1 (305) 913 8288
Emailmomia-reservations @mohg.com
Mandarin Oriental, New York80 Columbus Circle at 60th Street
New York, New York 10023, USA
Telephone +1 (212) 805 8800
Emailmonyc-reservations @mohg.com
Hotel Santiago
Presidente Kennedy Avenue #4601
Santiago, Chile, 756 0994
Telephone +56 (2) 2950 3088
Emailmostg-reservations @mohg.com
Mandarin Oriental, Washington D.C.
1330 Maryland Avenue, SW
Washington, District of Columbia 20024, USA
Telephone +1 (202) 554 8588
Emailmowas-reservations @mohg.com

Mandarin Oriental International Limited
mandarinoriental.com