M&C sinks into red with Q4 net loss of £5m, cuts dividend

LONDON-LISTED Millennium & Copthorne Hotels (M&C) has posted a fourth-quarter net loss of £5 million (S$8.7 million), compared to a net profit of £32 million the year before. This was on the back of net revaluation and impairment losses.

Losses per share were at 1.7 pence, down from earnings per share (EPS) of 9.8 pence the year before.

The board of M&C is recommending a final ordinary dividend of 2.15 pence per share, down from 4.42 pence per share the year before. Together with the interim ordinary dividend of 2.08 pence per share which remains unchanged from the year before, the total ordinary dividend for the year is 4.23 pence per share, compared with 6.50 pence per share the year before.

Shareholders are expected to be paid on May 17.

The company saw revenue rise to £267 million, up from £260 million the year before, with contributions from its hotel business which saw a 3.9 per cent or £9 million rise in revenue to £240 million from £231 million the year before. This was offset by losses in its property and REITs business, which garnered revenues of £10 million and £17 million respectively, compared with £11 million and £18 million respectively the year before.

For the full year, net profit was down to £43 million from £124 million the year before. M&C said that during the year, a total of £36 million of net revaluation and impairment losses were charged to the income statement, compared with £29 million the year prior.

These were the result of the company's impairment testing which saw the carrying amount of M&C's assets being compared against the estimated recoverable amount - which is the greater of the fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to each asset.

EPS was at 13.1 pence for the full year, down 38.1 pence the year before. In addition, the company saw a 1.1 per cent or £11 million drop in revenue to £997 million from around £1 billion the year before, reflecting a stronger pound sterling against the group's main trading currencies, it said in a regulatory filing.

Reported hotel revenue fell by £13 million or 1.5 per cent to £867 million, compared with £880 million the year before, with the impact from a stronger pound sterling against the group's main trading currencies. The increase of £5 million in hotel revenue in 2018 was due principally to higher contributions from Millennium Hilton New York UN Plaza and M Social Auckland in New Zealand, but was offset partially by the loss of revenues from the closure of the Mayfair hotel in London.

REIT revenue fell by £1 million or 1.5 per cent to £65 million from £66 million the year before.

Meanwhile, property revenue of £65 million was higher by £3 million or 4.8 per cent, up from £62 million the year prior. This was due mainly to higher sales of residential sections in New Zealand of £3 million and the sale of two units of apartments in Australia of £2 million.

Chairman Kwek Leng Beng said the company is continuing to invest in and reposition its hotels. It is looking forward to its Mayfair hotel being rebranded and opened as The Biltmore, Mayfair in the second quarter of this year which is the first opening under Hilton's new LXR Hotels & Resorts collection in Europe.

Through the move, the group will debut in the London five-star deluxe market and aims to "fast-track [its] lost earnings growth at this hotel after it reopens".

"2019 will be another challenging year for the group, with significant capital projects underway and several large hotels earmarked for major renovations. These investments will be carefully managed and phased to deliver the right returns for shareholders and underline the group's intention to maintain strict control of costs throughout the business," Mr Kwek added.