M&C Q3 profit before tax falls 36%

MILLENNIUM & Copthorne Hotels (M&C) posted a profit before tax of £34 million (S$60.7 million) for the third quarter ended Sept 30, down 35.8 per cent from a year ago in constant currency terms.

Hotel revenue dipped 2.2 per cent to £223 million, while total revenue declined 2.3 per cent to £253 million.

In constant currency terms, group revenue per available room (RevPAR) also fell 1.6 per cent to £87.23 for the quarter.

For the nine months ended Sept 30, profit before tax fell 13.2 per cent to £99 million, mostly due to the closure of the Mayfair hotel, with the group continuing to incur certain fixed costs. In addition, the group saw an increase in its operating costs mainly due to payroll expenditure.

Hotel revenue remained flat in constant currency terms for the nine months, as higher contributions from Millennium Hilton New York One UN Plaza (rebranded in August 2017) and M Social Auckland (opened in October 2017) were partially offset by the closure of the Mayfair hotel due to refurbishment.

Total revenue edged up 1.1 per cent to £730 million while RevPAR eased 0.4 per cent to £79.26 for the nine months.

Kwek Leng Beng, M&C's chairman, said: "The group experienced mixed trading results for the first nine months of the year, with hotel revenues flat for the period on a like-for-like basis and lower profit due to continuing cost pressures."

He noted that the hospitality sector is facing challenging trading conditions, including significant supply growth, technological disruption, industry consolidation and rising minimum wage requirements and labour costs in key jurisdictions.

These challenges, which are impacting the availability of talent and reducing margins, are exacerbated by geopolitical headwinds, such as the uncertainty surrounding Brexit and global trade tensions, Mr Kwek added.

"The group will address these issues through product innovation, tighter cost control and by flattening the management structure to enhance our competitiveness," he said.

M&C will also focus on delivering value from significant capital expenditure projects in addition to the repositioning of the Mayfair property as a five-star deluxe hotel and the development of its new hotel and residential apartment complex in Sunnyvale California, which broke ground in October 2018.

Mr Kwek also said that with the departure of the last Group CEO Jennifer Fox in September, Tan Kian Seng has been reappointed interim Group CEO.

He said that the board will take time to consider and search carefully for the next Group CEO, who must not only have relevant experience, but must also embrace and drive forward the group's business model as a niche owner-operator.