Total full year revenue at Millennium & Copthorne Hotels declined by 6.4 per cent in 2012, despite an increase in revenue per available room (RevPAR).
Total revenue fell from £820.5m to £768.3m, while RevPAR on a constant currency basis rose 3.9% from £64.81 to £67.32, primarily because of higher average room rate, with a good performance seen in Singapore, Rest of Asia and London. Revenue from hotels alone dropped 2.1%.
On a like-for-like, constant currency basis, revenue rose 1.1% to £762.0m (2011: £753.8m).
Reported headline operating profit slid 14.7% to £163.3m, but on a like-for-like basis in constant currency terms increased by 6.6% to £158.9m (2011: £149.0m).
Headline profit before tax declined 14.6% to £157.7m.
Chairman gives upbeat statement
Chairman Kwek Leng Beng said: ‘The group increased RevPAR, kept firm control of costs and strengthened its financial position in 2012. Revenue and headline pre-tax profit increased on a like-for-like, constant currency basis, and our hotels achieved good operating profit margins.
‘Our asset management programme is building momentum and laying a strong foundation for future growth, supported by further strengthening of the management team.
‘Our operating strategy was consistent with previous years, with sales teams focused on achieving an optimal balance between occupancy and average room rate across the estate.
‘Management continued to achieve good levels of profitability despite a more challenging trading environment in the second half of 2012, with some regions seeing signs of economic uncertainty affecting personal and corporate hospitality budgets. Our consolidated hotel gross operating profit margin for the year was 38.5% (2011: 38.7%).’
Similar picture in fourth quarter results
It was a similar picture in the group’s fourth quarter results, with RevPAR up 0.9% on a constant currency basis, rising from £68.26 to £68.85 year-on-year, with trading said to be steady in all regions – although revenues in the ‘Rest of Asia’ region were affected by Grand Hyatt Taipei renovation and political tension reducing Millennium Seoul Hilton occupancy levels.
Like-for-like revenue in constant currency terms decreased by 2.1% to £201.3m (2011: £205.6m). Reported revenue was down 2.2% to £203.2m (2011: £207.8m). Like-for-like for the fourth quarter, in constant currency terms, excludes Kingsgate Hotel Parnell Auckland (lease expired in July 2012) and the three Christchurch hotels (closed in February 2011 due to earthquake damage).
Like-for-like headline operating profit in constant currency terms decreased by 18.6% to £39.9m (2011: £49.0m), while reported headline operating profit declined 16.8% to £41.7m (2011: £50.1m). Profit before tax rose 24.0%, as a result of a£10.5m gain arising from the insurance settlement for the Christchurch earthquake.
Beng continued, saying: ‘The group overcame more challenging conditions in some markets during the second half of 2012 to deliver an overall increase in like-for-like revenues and profits for the year. This illustrates the earnings benefit of a balanced portfolio of assets in good locations, as well as our ability to respond effectively to changes in the economic climate, whilst continuing to control costs, invest in our assets and improve our attractiveness to customers.’
Looking ahead, he said: ‘During the current year we will deploy our strong balance sheet to invest in our existing asset portfolio, thereby supporting the core earnings engine of the group. We continue to monitor acquisition opportunities, although prices continue to remain unjustifiably high.
‘Uncertain global economic conditions continue to cast shadows over the hospitality sector. The euro crisis, slower growth in China and the unresolved fiscal cliff in the US all contributed to this during 2012. The board considers that our owner/operator business model, combined with our strong balance sheet and a global spread of assets in many of the world’s most significant travel destinations equips us to withstand the pressure which may result from such conditions, whilst continuing to build a foundation for future growth.’
Total dividend increased by 1.09p
The total dividend was increased to 13.59p from 12.50p a year earlier, following a final dividend of 11.51p (2011: 10.42p plus a special dividend of 4.0p).
The group said strong cash flow from operating activities enabled it to turn cash-positive in 2012, ending the year with zero gearing.
Weak trading in early 2013
Like-for-like group RevPAR was down 1.1% in the first six weeks of the year, the company said, with falls in each of its three main gateway cities: Singapore was down 10.2%, London dropped 9.6% and New York declined 1.6%.
‘Whilst this reflects competitive trading conditions in some of our key markets, the period is not indicative for the year as a whole,’ it stressed.
The share price fell 2.64% to 553p by 08:43.