Millennium & Copthorne Hotels has released full year and fourth quarter results to 31 December 2014, with Mr Kwek Leng Beng, Chairman commenting:
“The Group continues to build strong foundations for further growth through a carefully executed asset management strategy. Results from this in 2014 included the completion of the guest room refurbishment at the Grand Hyatt Taipei, the acquisition of new properties in London, New York and Rome, as well as the opening of a newly constructed hotel in Tokyo’s Ginza district. Our results in 2013 were boosted significantly by the recognition of revenue and profit on the Glyndebourne development. Our hotel trading results were positive, despite revenue and profit being adversely affected by the strength of the pound sterling, especially during the earlier part of the financial year.”
Positive hotel trading results
Fiona Cincotta, senior market analyst at www.finspreads.com commented:
“Millennium and Copthorne announced pretax profits of ₤188 million, significantly less than the ₤295 million reported for the previous year and revenues of ₤826 million compared to ₤1.06 billion. However the 2013 results were significantly boosted by revenue and profit from Glynebourne development, so perhaps a direct comparison with the previous year doesn´t give a full picture of the position of Millennium and Copthorne, who actually saw positive hotel trading results in 2014. A strong pound also did little to help the hotel group especially during the first part of 2014.
“The CEO delivered an upbeat statement however the markets were a little more cautious pulling the stock marginally lower to 572p per share. Despite some volatility during the year the stock is back trading at the same level 12 months earlier. The outlook going forward remains positive and with the prospect of lower oil prices, higher wages and therefore more disposable income, Millennium and Copthorne should be well positioned to reap the benefits.”
Outlook
“In 2015 the Group will continue to focus on ownership and management of hospitality real estate assets, and will commit significant capital to the refurbishment of key gateway city and other properties, further strengthening the business. The Group’s strong financial position also enables it to continue seeking out attractive acquisition opportunities. The Group is well positioned to generate further improvement in operating performance in 2015, subject to ongoing concern about the sustainability of economic recovery and other factors affecting the world travel and hospitality markets. In the first 31 days of trading in 2015 Group RevPAR increased by 6.9%, with Europe up by 9.1%, the United States up by 13.1%, Australasia up by 13% and Asia down by 1.6%.”
Highlights for the full year 2014
|
|
Full
Year 2014 |
Full
Year 2013 |
Change |
|
| RevPAR | £71.55 | £69.58 | £1.97 | 2.8% |
| Revenue | £826m | £1,064m | (£238m) | (22.4%) |
| Revenue excluding Glyndebourne | £820m | £790m | £30m | 3.8% |
| Profit before tax | £188m | £295m | (£107m) | (36.3%) |
| Profit before tax excluding Glyndebourne | £183m | £156m | £27m | 17.3% |
| Basic earnings per share | 34.0p | 69.4p | (35.4p) | (51.0%) |
| Ordinary Dividend | 13.59p | 13.59p | - | |
| Special Dividend | - | 9.15p | (9.15p) | |
- Profit before tax excluding Glyndebourne increased by 17.3% to £183m (2013: £156m) at reported rates. This included net revaluation gains of £27m (2013: £19m) and no impairment losses for the year (2013: £21m).
- Group RevPAR increased by 2.8% to £71.55 (2013: £69.58) and by 6.9% in constant currency (2013: £66.95). Average room rate in constant currency increased by 4.2% and occupancy rose by 1.9 percentage points.
- The United States was the strongest performing region with RevPAR growth exceeding 13.0% in constant currency. Excluding the impact of the 2014 acquired Novotel Times Square New York and the closure of Millennium Hotel St Louis, US RevPAR increased 4.9%. RevPAR increased in all operating segments, except Singapore.
- Total revenue of £826m is £238m lower than 2013 (£1,064m), principally due to recognition of Glyndebourne revenue in 2013.
- Total revenue excluding Glyndebourne was £820m – an increase of 3.8% compared to 2013 (£790m). Hotel revenue increased by 2.6% to £750m (2013: £731m), driven mainly by acquisitions and positive results from recently refurbished hotels.
- Hotel operating margins increased to 36.0% (2013: 35.0%) reflecting good cost control and the impact of acquisitions.
- The Board recommends a final ordinary dividend of 11.51p per share, giving a total ordinary dividend for the year of 13.59p per share. There is no special dividend. In 2013 a special dividend of 9.15p pence per share was paid which reflected the profit from the Glyndebourne sale.
BUSINESS REVIEW
Underlying performance was positive, with hotel revenue up by 2.6% at £750m (2013: £731m) and hotel operating profit up by 5.7% at £168m (2013: £159m), mainly reflecting the positive impacts of acquisitions and hotel refurbishments.
Group profit before tax was 36.3% lower in 2014 at £188m (2013: £295m). Revenue was down by 22.4% to £826m (2013: £1,064m). The falls were largely due to the previous year’s recognition of results from the sale of Glyndebourne condominium development in Singapore, which yielded a revenue and profit of £274m and £139m respectively in 2013. Reported results were also adversely affected during the early part of the year by the translation effect of the strong pound sterling, our reporting currency.
Hotel operations
Revenue per available room (RevPAR) increased by 2.8% to £71.55, or by 6.9% in constant currency. The improvement in performance was driven mainly by acquisitions and the impact of our refurbishment programme, especially at Millennium Hotel Minneapolis and Grand Hyatt Taipei. Closure of the poorly performing Millennium Hotel St Louis in January 2014 also helped to improve RevPAR.
The increase in hotel revenue was driven mainly by improved RevPAR and acquisitions. The Group’s refurbishment programme also benefited hotel revenue through a net increase in the number of room nights available for sale from existing hotels compared to 2013, as well as through higher average room rates.
Acquisitions
The Group remained on alert for acquisition opportunities throughout 2014. In general, prices demanded by owners of hotel assets remained higher than justified by hotel operating performance. Despite this overall trend, the Group succeeded in acquiring three value-adding properties during the year:
On 25 March 2014, the Group completed its purchase of the long leasehold interest in a 5-star, all-suite hotel located within London’s Chelsea Harbour district for £65m. Situated in a prestigious and improving riverside location, the property – now renamed as The Chelsea Harbour Hotel – offers 154 suites and 4 penthouses.
On 12 June 2014, the Group completed its acquisition of the 480-room 4-star Novotel New York Times Square, for which it paid $274m (£161m). The property is situated at a location that is consistently voted amongst the world’s most important tourist destinations. It will continue to be managed by Accor under the Novotel brand.
On 9 October 2014, the Group completed the purchase of its first hotel in Italy, for €66m (£51m). This is a 5-star, 87-room property, located on Rome’s Via Veneto and the hotel is now renamed as Grand Hotel Palace Rome.
The three acquisitions added £32m to revenue and £6m to operating profit in 2014. Proportionately greater contributions are anticipated in 2015, which will be their first full year of ownership by the Group.
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