LONDON (Alliance News) – Millennium Copthorne Hotels Group PLC Friday reported higher revenues and profits for 2013, solely due to a one-off profit boost from the Glyndebourne property development in Singapore at the end of the fourth quarter, and said its room refurbishment programme would continue to weigh on its results this year.
Millennium Copthorne reported a pretax profit of GBP167.7 million for the fourth quarter of 2013, up from only GBP54.2 million a year earlier, and a pretax profit of GBP263.6 million for the year as a whole, compared with a profit of GBP171.3 million in 2012.
The improvement was driven by a GBP139.3 million one-off profit recognition, after the unit developing a residential property in Singapore was awarded a temporary occupation permit, meaning it could recognise revenues and costs arising from the development.
Going forward, the group said it remains cautiously optimistic about is full year performance for the current financial year, although revenue and capacity will continue to take a hit from its ongoing refurbishment programme.
“We remain cautiously optimistic about the Group’s full year performance in 2014 despite uncertainty affecting some regions, and poor weather conditions in US and UK in the first quarter. The group’s performance will be further impacted by our refurbishment programme and the resulting temporary removal of rooms from inventory,” said Chairman Kwek Lend Beng in the company’s full year report.
However, in a call with journalists Friday morning Kwek Lend Beng did not disclose how much he expects the refurbishments to hit revenue by.
Millennium Copthorne said group revenue increased to the record level of GBP1.04 billion in 2013, due to a GBP273.7 million revenue boost from the Glyndebourne development in Singapore. It has sold 147 out of 150 apartments built on the site of the former Copthorne Orchid Hotel in Singapore.
Although there was a 3.4% rise in group revenue per available room during the year to GBP69.58, up from GBP67.32 the prior year, driven by overall improvements in room rates in the US and increased occupancy in all regions, bar Singapore and some Asian destinations, the group’s hotel revenue declined.
It said positive RevPAR performance in London, New Zealand, New York and regional US, was outweighed by RevPAR falls in Singapore, Rest of Asia and UK regional hotels outside of London.
It said hotel revenue fell by 1.5% to GBP738.0 million, from GBP749.4 million in 2012, due to continued challenging conditions in Asian markets, and reduced capacity due to temporary room closures as the group continues to refurbish its hotels.
The group has been experiencing soft trends in Asia for some time, which is still offsetting strength in its London hotels. Many analysts expect this trend to continue to track on the group’s earnings momentum, with continued strength in the US and in London but, weakish trends to remain in Singapore, due to lower tourist arrivals and capacity increase, as well as the Rest of Asia, due to political tensions in the region.
Millennium Copthorne made some big changes to its portfolio at the end of last year and so far this year, including buying up a Chelsea Harbour hotel in London for GBP65 million.
Since the year-end, the hotel group bought the Novotel New York Times Square for USD273.6 million, from Apollo Global Management LLC and Chartres Lodging Group. The group’s hospitality real estate investment trust associate, CDL Hospitality Trusts acquired its second luxury resort hotel in the Maldives.
From the two recent acquisitions the group said its spent a total of GBP220 million.
“We are continuing to look at opportunities. Late last year there was more hotels coming onto the market, and we think now is good timing for us,” Kwek Lend Beng said.
The hotel group started a refurbishment programme back in 2011, and up to the end of 2013 had spent GBP87.8 million of the programme’s GBP240 million capital expenditure, mainly on the refurbishment of several key hotels. In 2013 alone, GBP41.6 million was spent under the programme, of which GBP3.5 million was spent in the fourth quarter, it said.
“The programme will last five years, and we expect 2013 and 2014 will be peak years for this programme. We expect another GBP18 million this year, and will taper in 2015, ” said Kwek Lend Beng.
“The group considers that in the current hotel trading environment it is vital to invest in our asset portfolio in order to enhance trading performance, especially in our main gateway city properties. Results from those hotels where we have completed significant renovations have generated higher room rates and RevPAR compared to their pre-renovation performance,” the company said in its statement.
Millennium Copthorne said it will continue to upgrade its hotel portfolio, although at the expense of short-term revenue and capacity loss.
The hotel group said group revenue per available room was up 5.3% in the first six weeks of trading in the current financial year, on a reported currency basis, compared to the same period last year, with London down by 0.7%, New York up 5.8% and Singapore down 4.4%.
Shares in Millennium Copthorne were trading 4.6% higher at 598.00 pence per share Friday morning.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
Copyright © 2014 Alliance News Limited.
UPDATE: Millennium & Copthorne Hotels 2013 Profits Buoyed By Late One-Off ...
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