Discontinued operations

9 Months Ended

Sep. 30, 2011

Discontinued operations

Discontinued operations

2.         Discontinued operations

At January 1, 2010, Bora Bora Lagoon Resort, Lilianfels Blue Mountains hotel and La Cabana restaurant had been classified as held for sale. During the year ended December 31, 2010, OEH sold La Cabana and Lilianfels Blue Mountains, and classified Hôtel de la Cité and the Internet-based companies O.E. Interactive Ltd. and Luxurytravel.com UK Ltd. as held for sale. During the nine months ended September 30, 2011, Hôtel de la Cité was sold and the Internet-based companies were transferred back to continuing operations, leaving Bora Bora Lagoon Resort as the only property held for sale and included within discontinued operations as at September 30, 2011.

(a)          Hôtel de la Cité

On August 1, 2011, OEH completed the sale of the property and operations of Hôtel de la Cité in Carcassonne, France for a cash consideration of €9,000,000 ($12,933,000). The hotel was a part of OEH’s hotels and restaurants segment. The disposal resulted in a gain of $2,182,000 (including a $3,018,000 transfer of foreign currency translation gain from other comprehensive income), which is reported within earnings from discontinued operations, net of tax.

The following is a summary of the net assets sold and gain on sale:

	August 1, 2011
	$’000
Property, plant and equipment, net	13,147
Net working capital surplus	266
Net assets	13,413
Transfer of foreign currency translation gain	(3,018	)
	10,395
Consideration:
Cash	12,933
Less: Costs to sell	(356	)
	12,577
Gain on sale	2,182

Results of discontinued operations of Hôtel de la Cité were as follows:

	Three months ended				Nine months ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
	$‘000		$‘000		$‘000		$‘000
Revenue	1,238		2,682		3,782		5,015
Earnings/(loss) before provision for income taxes, gain on sale and impairment	193		584		(303	)	(39	)
Impairment	—		(5,989	)	—		(5,989	)
Gain on sale	2,182		—		2,182		—
Earnings/(loss) before provision for income taxes	2,375		(5,405	)	1,879		(6,028	)
(Provision for)/ benefit from income taxes	(795	)	1,684		(795	)	1,684
Earnings/(loss) from discontinued operations, net of tax	1,580		(3,721	)	1,084		(4,344	)

In the three and nine months ended September 30, 2010, OEH identified and recorded a non-cash property, plant and equipment impairment charge of $5,989,000 in respect of Hôtel de la Cité. The carrying values of the assets were written down to the fair value to reflect the level of offers being received at that time for the purchase of the hotel.

(b)         Assets held for sale: Bora Bora Lagoon Resort

As previously reported, OEH is selling its investment in Bora Bora Lagoon Resort, which is included in the hotels and restaurants segment. The property sustained damage as a result of a cyclone in February 2010 and is currently closed.  The property continues to be actively marketed and is saleable in its current condition as land for future development. OEH engaged additional selling agents who are appropriately incentivized to sell the property within one year, which OEH expects to achieve, and is currently in discussions with interested parties.

Bora Bora Lagoon Resort has been classified as held for sale and its results have been presented as discontinued operations for all periods presented.

Summarized operating results of the hotel held for sale at September 30, 2011 and the hotels and restaurants held for sale at September 30, 2010 are as follows:

	Three months ended			Nine months ended
	September 30, 2011		September 30, 2010	September 30, 2011		September 30, 2010
	$‘000		$‘000	$‘000		$‘000
Revenue	—		—	—		992
(Losses)/earnings before provision for income taxes, (impairment)/impairment reversal and gain on sale	(171	)	2,358	(364	)	(476	)
(Impairment)/ impairment reversal	(2,150	)	1,550	(2,150	)	1,550
Gain on sale	—		562	—		6,756
(Losses)/earnings before provision for income taxes	(2,321	)	4,470	(2,514	)	7,830
Provision for income taxes	—		—	—		—
Net (losses)/earnings from discontinued operations	(2,321	)	4,470	(2,514	)	7,830

In the three and nine months ended September 30, 2011, OEH identified and recorded a non-cash property, plant and equipment impairment charge of $2,150,000 in respect of Bora Bora Lagoon Resort. The carrying values of the assets were written down to the fair value to reflect the level of offers received for the purchase of the hotel. In the three and nine months ended September 30, 2010, the assets of Bora Bora Lagoon Resort were increased to their fair value, resulting in a gain of $1,550,000 from foreign currency fluctuations, which were included in earnings/(losses) from discontinued operations for the period.

For the three months ended September 30, 2010, a gain on sale of $562,000 was recorded on the disposal of Lilianfels Blue Mountains. For the nine months ended September 30, 2010, a gain of $7,183,000 (including a $7,292,000 transfer of foreign currency translation gain from other comprehensive income) was recorded on the disposal of Lilianfels Blue Mountains and a loss of $427,000 was recorded on the disposal of La Cabana. These gains and the loss are reported within earnings/(losses) from discontinued operations, net of tax.

Assets and liabilities classified as held for sale at September 30, 2011 and December 31, 2010 consisted of the following:

	September 30, 2011		December 31, 2010
	$’000		$’000
Current assets	1,086		4,499
Other assets	—		9
Property, plant and equipment, net of depreciation	16,981		28,336
Total assets held for sale	18,067		32,844
Liabilities held for sale	(1,808	)	(2,792	)

Assets and liabilities of Bora Bora Lagoon Resort are subject to foreign currency movements which result in corresponding and offsetting amounts within the currency translation adjustments account.

The current assets balance at September 30, 2011 includes residual assets of Hôtel de la Cité, which was sold in August 2011. Prior year comparatives include balances of Hôtel de la Cité and residual current assets of Windsor Court hotel, which was sold in October 2009.

(c)          Internet-based companies: O.E. Interactive Ltd. and Luxurytravel.com UK Ltd.

In December 2010, OEH decided to sell its Internet-based companies O.E. Interactive Ltd. and Luxurytravel.com UK Ltd. which are included in the trains and cruises segment.  These companies became held for sale based on a purchase offer from a third party.  However, the sale agreement has not been completed, and a lease transaction (with a purchase option) has been entered into instead. Therefore, these companies were transferred back to continuing operations as they no longer meet the criteria for held for sale treatment.  Results previously classified within discontinued operations have been transferred back into continuing operations for all periods presented.