The Hongkong and Shanghai Hotels, Limited Annual Results for the Year Ended 31 December 2021.
ENPNewswire-March 17, 2022--The Hongkong and Shanghai Hotels, Limited Annual Results for the Year Ended 31 December 2021
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Release date- 16032022 - Key highlights
The 2021 results continued to be severely impacted by COVID, particularly in our home market of Hong Kong.
Despite the challenging environment, the group's consolidated revenue increased by 28% to HK$3,461 million due to an initial mild recovery in our US and Chinese mainland hotels, although the effects of the Omicron variant are causing concern.
Due to the increase in revenue and coupled with effective cost control measures undertaken by the group, the group's consolidated EBITDA before pre-opening and project expenses amounted to HK$457 million compared to an EBITDA loss of HK$11 million in 2020.
The loss attributable to shareholders includes a revaluation gain on investment properties of HK$670 million net of an impairment provision of HK$679 million relating to The Peninsula Yangon project which was suspended in June 2021 due to the unfortunate situation in Myanmar.
Excluding the non-operating items of revaluation movements of investment properties, impairment provision and pre-opening and project expenses, the group's underlying loss amounted to HK$255 million compared to an underlying loss of HK$814 million in 2020.
Construction progress of The Peninsula London, The Peninsula Istanbul and the Peak Tram upgrade project experienced delays due to COVID-related disruptions and/or site conditions and other issues. The group management is spending a considerable amount of time and effort on strategic planning, solving issues and making every effort to mitigate the delays and associated cost implications as a priority.
The group's financial position as at 31 December 2021 remained robust, with net debt to total assets at an acceptable level of 23%.
The group has sufficient committed facilities to cover all of its capital commitments (including the two new hotel projects and the Peak Tram upgrade project) as well as provide a liquidity cover of well over two years at current cash burn levels.
HSH'S 2021 ANNUAL RESULTS
Hong Kong, 16 March 2022
The Hongkong and Shanghai Hotels, Limited today announced its annual financial results for 2021. We are pleased to share a CEO Statement and Strategic Review from Mr Clement K.M. Kwok, Managing Director and Chief Executive Officer of The Hongkong and Shanghai Hotels, Limited (HSH), as well as the HSH Group Operational Review.
CEO STATEMENT AND STRATEGIC REVIEW
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Managing the COVID-19 Crisis
2021 was another very challenging year for our group and for the hospitality industry due to the continued impact of the COVID-19 pandemic, particularly in our home market of Hong Kong, which had already suffered from serious social unrest and mass protests in 2019 and early 2020.
As mentioned in our 2020 annual report, we had expected that the rollout of vaccines would lead to the gradual resumption of travel around the world, but unfortunately the level of recovery in 2021 was not what we had hoped for.
The situation is still very unstable and we are concerned about the impact of the Omicron variant. At the time of writing, stringent social distancing measures and lengthy quarantine regimes in Hong Kong and the Chinese mainland remain the strictest in the world, and this has dramatically impacted tourism arrivals into Hong Kong for the past two years. The restrictions continue to seriously affect our business at The Peninsula Hong Kong and the Peak Complex, although our residential leasing business at The Repulse Bay has been less affected. During the year, several of our properties in key markets had to temporarily close, including The Peninsula New York, The Peninsula Bangkok and The Peninsula Manila. We saw a promising recovery in our US and Chinese mainland hotels during 2021, and Paris is starting to show signs of business resuming and tourists returning. Business remained weak in Tokyo and our hotel in Bangkok was closed for an extensive period.
We made significant efforts to control costs, drive local business and manage the rollercoaster of ever-changing regulations to the best of our ability. In the light of the very difficult market environment which we continued to face, our financial results were creditable, with a strong rebound from a combined EBITDA loss of HK$53 million in 2020 to a positive combined EBITDA of HK$526 million. It should be noted that the cashflow from existing operations after tax, normal capital expenditure and interest (excluding cash expended on the two new hotel projects and the Peak Tram upgrade project and related interest) was positive HK$69 million as compared to a cash outflow of HK$808 million in 2020.
Our immediate development focus remains on delivering our new Peninsula hotel projects in London and Istanbul, as well as the Peak Tram upgrade project, which have suffered pandemic-related delays and other project challenges, as explained in section 4 of this review.
The group came into this crisis with low gearing and considerable liquidity, which we bolstered by arranging further facilities to cover our group's cash needs. Together with the actions that we have taken to minimise our operating cash outflows, we believe our financial resources are currently sufficient to meet the group's operating cash requirements.
The pandemic has been particularly hard on our people, following last year's painful job losses and voluntary unpaid leave across the group. I believe our staff members' combined efforts, perseverance and loyalty to the company, in spite of the current business environment, has been commendable and this has significantly contributed to the group's stability during this crisis period.
In terms of business strategy, we are a company that focuses on the very long term, and we must be prepared to weather the downturns that are inevitable when one looks to invest over periods of fifty years or more. As a long-term investor, thanks to our people and culture, we have proven to be resilient and will be able to withstand downturns such as the one we are currently experiencing and I am confident that we will see better years ahead. This resilience is part of our long-term strategy as we move towards a global recovery. I will summarise this strategy in the following pages.
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Our culture, vision and development strategy
The Hongkong and Shanghai Hotels, Limited has a heritage of more than 155 years. Whilst we have witnessed profound political and economic changes since we were first established in 1866, both in our home market of Hong Kong and around the world, our company remains steadfast in our key philosophies and values which are:
to conduct business with the highest levels of integrity;
to build on our heritage while continuing to invest in and develop our people;
to maintain and enhance the quality of our assets;
to continuously improve the service we offer to our guests, and
to contribute positively to the cities in which we operate.
Maintaining a unique and robust company culture is very important to us and we are fortunate to have a family-like culture where our employees are proud to work for the company. Our culture and values help us to deliver on our vision which is: to develop, own and operate a small number of the highest quality hotels and luxury properties which we believe are considered to be amongst the finest in the world.
Having ownership or part-ownership of each hotel is an important part of our strategy and allows us to maintain an appropriate degree of control over the design, quality, operations and capital spending in our hotels. By taking such a long-term view and by maintaining and enhancing the quality of our assets and operations, we seek to create significant value for our shareholders from the long-term appreciation in the capital value of our properties, as well as from the increasing operating yield as each property grows its income over time.
The best example of this is our flagship property, The Peninsula Hong Kong, which in 1928 was built for what was regarded in those days as an enormous sum of HK$3 million and today is valued at over HK$12 billion.
This is the approach which we believe has enabled us to establish and sustain a brand which is now recognised as being possibly the leading luxury hotel brand in the world.
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Business overview
Our group currently owns and operates ten Peninsula hotels which are located in Hong Kong, Shanghai, Beijing, Tokyo, New York, Chicago, Beverly Hills, Paris, Bangkok and Manila. Throughout the years we have maintained a significant investment programme to enhance the physical condition and quality of these properties, for example, by completing major renovations at The Peninsula Hong Kong in 2014, The Peninsula Chicago in 2016 and The Peninsula Beijing in 2017. In 2021 we undertook a major renovation of the Peninsula Arcade in Hong Kong with the objective of providing high-end lifestyle amenities and retail offerings for local guests. We are in the midst of an ambitious hotel expansion programme, with investment in two new Peninsula hotel development projects in London and Istanbul.
Our strategy is to operate only one Peninsula hotel in each city and we have the ability to take a long-term view on real estate capital appreciation. Our hotels are considered 'trophy assets' in these cities and will continue to create value over time, while generating additional returns from shopping arcades or residential apartments as part of the hotel complex. We enter into long-term partnerships with our co-owners who value the benefits of creating a high quality long-term asset. Our objective is to build up a long-term loyal clientele who are willing to pay premium prices for a superior luxury product and services. We achieve this by offering a high level of personalised service and attention to detail.
Our objective is to build up a long-term loyal clientele...
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