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CityDev's M&C posts weaker Q1 net profit due to challenging hospitality markets
MILLENNIUM & Copthorne Hotels plc (M&C) on Thursday posted a net profit of £6 million (S$11.8 million) for the first quarter of 2016, down from £8 million a year ago.
The London-listed hotel arm of Singapore's City Developments (CDL) generated £192 million in revenue during the quarter, up from £189 million a year ago. It saw higher contributions from property income and the real estate investment trust (Reit) as well as a weaker pound sterling versus US dollar exchange rate compared with a year ago. However, these gains were partially offset by lower hotel revenue, which fell by 2.9 per cent in Q1 2016.
Kwek Leng Beng, M&C's chairman, said that its hotel trading performance in the first quarter of 2016 was weaker than last year, with disappointing results from a number of hotels in major gateway cities.
"The decline in performance reflects challenging conditions facing some hospitality markets as a result of political and economic uncertainty, structural change within the industry including the growth of 'sharing economy' lodging, online travel agencies and industry consolidation," Mr Kwek said.
Group revenue per available room (RevPAR) fell by 2.6 per cent in Q1 2016, driven by lower occupancy and room rates in most regions, including the key gateway cities of New York, London and Singapore. In constant currency, RevPAR decreased by 4.7 per cent.
The property income relates mainly to a land sale in Christchurch, New Zealand and an increased contribution from Millennium Mitsui Garden Hotel Tokyo. The increase in Reit revenue came from the contribution from Hilton Cambridge City Centre which was acquired in October 2015.
Hotel revenue was lower because of weak trading performance by the hotels located mainly in major cities. Disruption from the refurbishment work at the lobby and food and beverage (F&B) outlets of Grand Copthorne Waterfront Hotel Singapore affected the hotel's F&B and meetings & events revenues. In addition, the closure of the east tower of ONE UN New York for renovation during Q1 2016 also affected hotel revenue.
On Dec 31, 2016, the group had net debt of £656 million, compared to a net debt of £605 million in Dec 2015. Excluding CDL Hospitality Trusts, the net debt on March 31, 2016 was £210 million and the total undrawn committed bank facilities was £237 million. Most of the facilities are unsecured, with unencumbered assets representing 92 per cent of fixed assets and investment properties.