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RNS

Preliminary Results Announcement

Released 07:00 08-Feb-2018

RNS Number : 2514E
Millennium & Copthorne Hotels PLC
08 February 2018
 

                                                                                                                       

                                                                                             8 February 2018

 

 

 

MILLENNIUM & COPTHORNE HOTELS PLC

 

PRELIMINARY RESULTS ANNOUNCEMENT

 

Full year and fourth quarter results to 31 December 2017

 

 

Highlights for the full year 2017:

 

 

Full year

2017

Reported Currency

Constant Currency

Full year

2016

Change

 

Full year

2016

Change

RevPAR

£82.78

£76.71

£6.07

7.9%

£80.19

£2.59

3.2%

Revenue - total

£1,008m

£926m

£82m

8.9%

£972m

£36m

3.7%

Revenue - hotel

£880m

£814m

£66m

8.1%

£853m

£27m

3.2%

Profit before tax

£147m

£108m

£39m

36.1%

£114m

£33m

28.9%

Basic EPS

38.1p

24.0p

14.1p

58.8%

 

 

 

Ordinary dividends

6.50p

7.74p

(1.24)p

(16.0)%

 

 

 

 

 

 

Highlights for the 4th quarter 2017:

 

 

Q4

2017

Reported Currency

Constant Currency

Q4

2016

Change

 

Q4

2016

Change

RevPAR

£83.88

£84.79

£(0.91)

(1.1)%

£82.87

£1.01

1.2%

Revenue - total

£260m

£261m

£(1)m

(0.4)%

£256m

£4m

1.6%

Revenue - hotel

£231m

£233m

£(2)m

(0.9)%

£229m

£2m

0.9%

Profit before tax

£29m

£6m

£23m

383.3%

£5m

£24m

480.0%

Basic EPS

9.8p

5.8p

4.0p

69.0%

 

 

 

 

 

·     

Group RevPAR for 2017 increased by 7.9% to £82.78 (2016: £76.71). In constant currency, RevPAR increased by 3.2%. For the fourth quarter of 2017, RevPAR fell by 1.1% to £83.88 (2016: £84.79) in reported currency and increased by 1.2% in constant currency.

 

·     

Hotel revenue increased by 8.1% to £880m (2016: £814m).  The growth was due mainly to foreign exchange gains of £39m and full-year contributions from Millennium Hilton New York One UN Plaza (re-opened in September 2016 after refurbishment) and Grand Millennium Auckland (joined the Group in September 2016).

 

·     

Total revenue for 2017 grew by 8.9% to £1,008m (2016: £926m), including foreign exchange gains of £46m.

 

·     

Profit before tax for the year increased by 36.1% to £147m (2016: £108m) and included impairment charges of £38m, net revaluation gains of £9m and reversal of impairment of the Group's shareholder loan to Fena Estate Co. Ltd ("Fena") of £12m. The REIT's portion of asset impairment was £7m. After removing the effects of the impairment losses and revaluation gains, the Group's reported profit before tax was £176m (2016: £152m).

 

·     

In light of anticipated capital spending requirements, the Board recommends a final ordinary dividend of 4.42p per share (2016: 5.66p per share), giving a total ordinary dividend for the year of 6.50p per share (2016: 7.74p per share).

 

 

Mr Kwek Leng Beng, Chairman commented:

"Underlying hotel performance was flat last year.  Foreign exchange gains relating to hotel revenue totalled £39m arising from weaker sterling, which is our reporting currency, against currencies in the regions where we operate. The increase in 2017 hotel revenue was attributable mainly to a full year of trading at two of our hotels: Millennium Hilton New York One UN Plaza, which re-opened post-refurbishment in September 2016, and Grand Millennium Auckland, which joined the Group in September 2016. 

Performance was impacted by industry-wide factors, including political instability in Korea, the unabated growth in popularity amongst customers of online travel agents and alternative lodging options; and rising costs, especially in London, where Brexit is impacting a hospitality labour market already affected by minimum wage legislation.  Our New York business will take some time to restore profitability in light of strong union operating environment, union driven wage increases and the continuing growth in room supply.

The Group expects to make significant capital investment for a needed transformation to the repositioning of our hotels so as to keep pace with guest expectations.  Increased expenditure on both maintenance and product improvement will therefore be necessary for the group to stay relevant and competitive.   We also remain alert to opportunities to grow by acquisition.

We respect the decision by shareholders in the recent lapsed offer by City Developments Limited."

 

Enquiries:

Millennium & Copthorne Hotels plc                                                                                                              Tel: +44 (0) 2078722444

Tan Kian Seng, Interim Group Chief Executive Officer

Kok-Kee Chong, Chief Financial Officer

Jonathon Grech, Group General Counsel and Company Secretary

Peter Krijgsman, Financial Communications (Media)               

 

Media Enquiries:

Instinctif Partners Limited                                                                                                                                 Tel: +44 (0) 2074572020

Matthew Smallwood

Mark Reed                           

 

 

BUSINESS REVIEW

 

During 2017, the Group struggled to make headway against a number of challenges. In New York, Millennium Broadway continued to under-perform, whilst the recent operating transfer of ONE UN to Hilton will take some time to yield results. The recent growth in local hotel room inventory constrained our ability to increase room rates in Singapore, whilst the performance of the other Asian hotels was flat overall.

 

Concerns about Brexit have affected our UK hotels especially in London, where there were already pressures on labour costs from a recent minimum wage increase. More positively, our hotels in New Zealand continued their recent run of good RevPAR growth, reflecting higher visitor numbers in the country, as well as the inclusion of Grand Millennium Auckland in September 2016.

 

Total revenue for the year increased by £82m or 8.9% to £1,008m (2016: £926m). Hotel revenue contributed most of this growth i.e. £66m. REIT revenue increased by £10m to £66m (2016: £56m) mainly due to contributions from newly acquired hotels. Increased land bank sales in New Zealand added £5m to total revenue.

 

Pre-tax profit grew by 36.1% to £147m (2016: £108m). As previously noted part of the increase was driven by lower impairment losses compared to the previous year and the reversal of a £12m loan impairment following the sale of the Group's interest in its Thailand joint venture, Fena, the owner of Pullman Bangkok Grande Sukhumvit (formerly Grand Millennium Sukhumvit Bangkok).

 

The Group's share of profit from joint ventures and associates fell by £4m to £22m (2016: £26m). The decrease was principally due to a gain recognised by First Sponsor Group Limited ("FSGL") in the comparative year 2016 relating to a project based in Dongguan, China.

 

Hotel operations

 

Hotel revenue increased by £66m or 8.1% to £880m (2016: £814m) mainly because of favourable foreign exchange movements of £39m. In constant currency, hotel revenue grew by £27m or 3.2% due largely to full-year contributions from two new or refurbished properties in New York and Auckland. Otherwise hotel revenue was flat compared to last year.

 

Group RevPAR increased by 7.9% and 3.2% in reported currency and constant currency respectively. Hotel gross operating margin was slightly higher at 32.2% (2016: 31.6%).

 

Developments

 

The Group received building permit approval for the Yangdong development project in Seoul on 25 January 2017.  Construction is intended to commence after fine tuning the design for optimal efficiency.

 

The Group continues to review the project cost and specification for a 263-room hotel and a 250-unit residential apartment block on its 35,717m2 mixed use freehold landsite at Sunnyvale, California, and intends to start construction in 2018.  The Group may modify certain aspects of the development, which is anticipated to take about 18 months to complete after commencement. Final planning approval for the project was received in December 2016.

 

Management continues to explore options in relation to the freehold site occupied by the Millennium Hotel St. Louis, which was closed in January 2014.

 

Hotel refurbishments

Phased refurbishment work on Millennium Hotel London Mayfair commenced in the fourth quarter of 2017 and is scheduled to complete in Q2 2019. Refurbishment of Millennium Hotel London Knightsbridge is planned to commence next year.

Refurbishment of 260 deluxe guest rooms in the Orchard Wing of the Orchard Hotel Singapore has been re-scheduled to commence in the second half of this year to accommodate customer demand.  Refurbishment is also planned for the lobby area and F&B outlets at the ground level. Renovation of the hotel's Hua Ting Restaurant, which started in August 2017, is complete, with the facility re-opened on 7 December 2017. 

 

The final phase of the refurbishment of Grand Millennium Kuala Lumpur, relating to the guestrooms at levels 7 and 8, is under review.  Guest rooms on levels 9 to 19 were completed in late 2016.

 

In October 2017, the 190-room M Social Auckland (previously known as Copthorne Hotel Auckland Harbourcity) was opened and benefited from keen demand for the hotel's innovative design, social spaces and service ethos. Initial feedback from key markets, including International and New Zealand business and leisure travellers has been positive.

 

Acquisition

 

On 4 May 2017, CDL Hospitality Trusts ("CDLHT") completed the acquisition of the 165-room The Lowry Hotel in Manchester for a purchase consideration of £53m.

 

On 14 July 2017, CDLHT completed the acquisition of an effective interest of 94.5% in the 337-room Pullman Hotel Munich and its office and retail components and the fixtures, furniture and equipment used by the hotel for a purchase consideration of €101m (£89m).

 

On 1 February 2018, the Group acquired The Waterfront Hotel in New Plymouth, New Zealand, for a purchase consideration of NZ$11 (£6m). The iconic 42-room hotel will be rebranded a Millennium hotel in Q2 of 2018.

Disposals

The Group continues to engage with the developer of Birmingham's Paradise Circus redevelopment scheme, under previously agreed commercial arrangements, regarding the closure and acquisition by the developer of the Copthorne Hotel Birmingham and possible acquisition by the Group of an alternative site for development of a new hotel within the scheme.

 

As previously reported, in March 2017 Scottish Ministers approved an order that allows Network Rail Infrastructure Limited ("Network Rail") to take permanently and to demolish the 1970s-built, 51-room extension of the Millennium Hotel Glasgow, in connection with the redevelopment of Queen Street Station. In July 2017, 56 guestrooms were permanently removed from the hotel in connection with the development. The property now has 60 guestrooms compared to 116 previously.

 

The Group is entitled to compensation, which will either be negotiated with Network Rail or settled at the Lands Tribunal.  Separation and other works arising from the order were completed at the end of 2017, with demolition of the extension anticipated to commence in Q1 2018. The Group is continuing to consider its options with respect to the refurbishment of the remaining hotel areas.

 

On 11 January 2018, CDLHT completed the divestment of two hotels in Australia, the Mercure Brisbane and Ibis Brisbane for A$77m (£45m) to an independent third party. Accordingly these investment properties were reclassified as assets held for sale on the balance sheet as at 31 December 2017.

 

Other Group operations

 

Joint ventures and associates contributed £22m to profit in 2017 (2016: £26m). The Group has an effective interest of 36% in First Sponsor Group Limited ("FSGL"), which is listed on the Singapore Exchange and reports its results independently.

 

On 11 January 2018, a partnership comprised of a subsidiary of FSGL together with subsidiaries of CDL and another substantial shareholder of FSGL acquired a 300-room hotel currently operated by a tenant as the "Le Meridien Frankfurt" situated in Frankfurt for €79m (£70m), excluding certain transaction related expenses.

 

On 1 February 2018, FSGL together with four other co-investors acquired all the issued shares of Hotelmaatschappij Rotterdam B.V which owns the 254-room Hilton Rotterdam Hotel in the Netherlands for €51m (£45m). Following the completion of the transaction, FSGL owns 24.7% interest in the acquired company.

 

On 7 February 2018, the Group has provided an irrevocable undertaking to take up its full entitlement of FSGL's proposed rights issue of new perpetual convertible capital securities for a total cost of S$58.2m (£32m) and a proportion of the excess rights not subscribed by other shareholders for a cost of up to S$31.0m (£17m).

 

Dividends

 

The Board recommends a final ordinary dividend of 4.42p per share (2016: 5.66p) taking into account the Group's current cash position and future capital expenditure requirements. Together with the interim ordinary dividend of 2.08p per share (2016: 2.08p), the total ordinary dividend for 2017 is 6.50p per share (2016: 7.74p).

 

Subject to approval by shareholders at the Annual General Meeting to be held on 4 May 2018, the final dividend will be paid on 11 May 2018 to shareholders on the register on 16 March 2018.

 

Current trading

 

In the first 31 days of trading in 2018, Group RevPAR in constant currency increased by 3.6%. New York up by 4.5%, Rest of Asia up 14.2%, Australasia up 10.3%, Rest of Europe up 1.2% but London down 3.2%, Singapore down 2.0% and Regional US down 2.5%.

 

Excluding Millennium Hotel Glasgow (116 rooms reduced to 60 rooms from July 2017), M Social Auckland (opened October 2017) and Millennium Hotel London Mayfair (refurbishment commenced in November 2017), like-for-like basis, Group RevPAR increased by 4.0% with London up 0.9%, Rest of Europe up 0.2% and Australasia up by 9.9%.

 

 

HOTEL OPERATIONS

 

For comparability, the following performance review is based on calculations in constant currency whereby 31 December 2016 hotel revenue, RevPAR and average room rates have been translated at average exchange rates for the year ended 31 December 2017. 

 

In constant currency, Group RevPAR increased by 3.2% to £82.78 for the year ended 31 December 2017, with occupancy up by 1.7% points and average room rate up 0.9%.

 

During Q4 2017, RevPAR improved in all regions except for Europe which fell by 2.9% due to the drop in occupancy. RevPAR for London was down by 4.5% and Rest of Europe down by 0.6%. 

 

 

 

RevPAR

Occupancy

Average Room Rate

Full year 2017

FY 2017

£

#FY 2016

£

Change

%

FY 2017

%

FY 2016

%

Change

%pts

FY 2017

£

#FY 2016

£

Change

%

  New York

164.84

153.03

7.7

85.3

77.9

7.4

193.18

196.33

(1.6)

  Regional US

61.90

60.41

2.5

60.0

58.6

1.4

103.23

103.11

0.1

Total US

95.79

90.91

5.4

68.3

65.0

3.3

140.23

139.94

0.2

  London

109.98

107.18

2.6

83.0

81.9

1.1

132.47

130.83

1.3

  Rest of Europe

53.66

53.83

(0.3)

70.5

72.2

(1.7)

76.16

74.55

2.2

Total Europe

82.35

80.85

1.9

76.9

77.1

(0.2)

107.15

104.83

2.2

  Singapore

83.83

84.58

(0.9)

85.6

84.2

1.4

97.91

100.41

(2.5)

  Rest of Asia

64.39

65.05

(1.0)

66.4

65.4

1.0

96.93

99.43

(2.5)

Total Asia

71.91

72.61

(1.0)

73.9

72.7

1.2

97.37

99.87

(2.5)

Australasia

73.06

62.84

16.3

81.2

81.3

(0.1)

90.01

77.31

16.4

 

 

 

 

 

 

 

 

 

 

Total Group

82.78

80.19

3.2

73.5

71.8

1.7

112.68

111.63

0.9

 

 

 

 

RevPAR

Occupancy

Average Room Rate

Q4 2017

Q4 2017

£

#Q4 2016

£

Change

%

Q4 2017

%

Q4 2016

%

Change

%pts

Q4 2017

£

#Q4 2016

£

Change

%

  New York

189.99

185.44

2.5

89.3

87.2

2.1

212.70

212.70

-

  Regional US

50.31

49.30

2.0

51.3

51.1

0.2

98.12

96.50

1.7

Total US

96.30

94.13

2.3

63.8

63.0

0.8

150.94

149.47

1.0

  London

107.73

112.82

(4.5)

79.3

84.3

(5.0)

135.80

133.84

1.5

  Rest of Europe

52.53

52.83

(0.6)

67.9

70.3

(2.4)

77.37

75.13

3.0

Total Europe

80.82

83.21

(2.9)

73.8

77.4

(3.6)

109.58

107.51

1.9

  Singapore

81.35

80.74

0.8

82.2

82.4

(0.2)

98.93

97.94

1.0

  Rest of Asia

71.16

68.65

3.7

71.7

69.3

2.4

99.19

99.06

0.1

Total Asia

75.10

73.33

2.4

75.8

74.4

1.4

99.08

98.58

0.5

Australasia

76.27

72.75

4.8

83.2

85.7

(2.5)

91.67

84.84

8.1

 

 

 

 

 

 

 

 

 

 

Total Group

83.88

82.87

1.2

72.1

72.3

(0.2)

116.39

114.55

1.6

 

#       In constant currency whereby 31 December 2016 RevPAR and average room rates have been translated at average exchange rates for the year ended 31 December 2017. 

 

US

 

RevPAR for the US region during 2017 grew by 5.4% to £95.79, driven by small increases in both occupancy and average room rate. 

 

New York RevPAR increased by 7.7%. The increase can be attributed to a full year of operation by ONE UN, now trading as Millennium Hilton New York One UN Plaza, which was fully re-opened in Q4 2016 following refurbishment of the east tower.  Excluding this property, US RevPAR was up slightly by 1.3% and New York RevPAR up by 0.2%. Regional US RevPAR grew by 2.5%, resulting from a mix of strong and weak hotel performances. 

 

For Q4 2017, US RevPAR increased by 2.3% continuing the pattern of the year as a whole.

 

Europe

 

Europe RevPAR for 2017 increased by 1.9%, with a 2.2% increase in average room rate compensating for a small drop in occupancy.  Our London hotels were resilient, despite a number of terrorist attacks in the city during the year with RevPAR growing 2.6% year-on-year, driven by both higher room rates and occupancy. Outside of London, the Group's European region hotel's trod water throughout the year with RevPAR falling by 0.3% compared to 2016. Rome suffered a double digit decline in RevPAR during the year due mainly to a significant drop in occupancy with rates flat.    

 

The fourth quarter saw a 5% drop in occupancy dragging RevPAR down in the London hotels by 4.5%. Millennium Hotel London Mayfair which started its phased refurbishment during the quarter saw a 7.9% drop in RevPAR, although occupancy was also down in the other London hotels for the period.  This partly reflects the post-Referendum spike in visitors during the second half of 2016, following the steep fall in the value of the pound on foreign exchanges.  Regional UK and continental hotels also saw occupancy fall during the fourth quarter.

 

Asia

 

The long-running decline in Singapore hotel room revenue slowed during 2017, with RevPAR down by just 0.9% compared to the previous year. Lower room rates were offset by higher occupancy, reflecting the increase in foreign visitors to Singapore, notably from China.   In the fourth quarter Singapore RevPAR grew by 0.8%.  Despite the increase in visitor numbers, there is still over-capacity in the Singapore hotel room market, although the rate of construction of new hotels has passed its peak.

 

RevPAR fell by 1.0% in the Group's Rest of Asia region, with majority of the hotels contributing to the decline. 

 

For Q4 2017, Rest of Asia RevPAR improved by 3.7%, with increases in both occupancy and average room rate.  

 

Australasia

 

Australasia RevPAR grew by 16.3% in 2017 with significant contribution from Grand Millennium Auckland which traded its first full year in 2017. Average room rate increased by 16.4% against flat occupancy compared to the previous year.

 

In October 2017, the 190-room new M Social Auckland was opened. Excluding Grand Millennium Auckland and M Social Auckland, RevPAR for 2017 increased by 7.7%.

 

For Q4 2017, Australasia RevPAR increased by 4.8% with an increase in average room rate of 8.1% offset by a decrease in occupancy of 2.5% points.

 

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of Millennium & Copthorne Hotels plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on forward looking statements which speak only as of the date of this document. The Group accepts no obligation to publicly revise or update these forward-looking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

 

 

FINANCIAL PERFORMANCE

 

 

 

FY 2017

£m

Reported Currency

Constant Currency

FY 2016

£m

Change

FY 2016

£m

Change

£m

%

£m

%

Hotel

880

814

66

8.1

853

27

3.2

Property

62

56

6

10.7

60

2

3.3

REIT

66

56

10

17.9

59

7

11.9

Total Revenue

1,008

926

82

8.9

972

36

3.7

 

 

 

Q4 2017

£m

Reported Currency

Constant Currency

Q4 2016

£m

Change

Q4 2016

£m

Change

£m

%

£m

%

Hotel

231

233

(2)

(0.9)

229

2

0.9

Property

11

14

(3)

(21.4)

13

(2)

(15.4)

REIT

18

14

4

28.6

14

4

28.6

Total Revenue

260

261

(1)

(0.4)

256

4

1.6

 

Financial performance - full year overview

 

For the full year to 31 December 2017, total revenue increased by 8.9% to £1,008m (2016: £926m) mainly due to favourable foreign currency movements as a result of the weak pound against major currencies and higher hotel revenue. The Group's reported revenue benefitted from a positive foreign exchange impact of £46m during the year. Total revenue in constant currency was 3.7% higher as compared to last year.

 

On a constant currency basis, hotel revenue increased by 3.2% to £880m principally due to the inclusion of new and refurbished hotels. During the year, New York region remained in a loss position. Performance by the Group's hotels in Singapore continued to decline with RevPAR down by 0.9%.

 

Reported profit before tax increased by 36.1% to £147m (2016: £108m). During the year, a total of £29m (2016: £44m) of net revaluation and impairment losses were charged to the income statement. The impairment losses are a result of M&C's impairment testing whereby the carrying amount of M&C's assets is 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.

 

After removing the effects of the impairment losses and revaluation gains, the Group's reported profit before tax is £176m (2016: £152m). Profit was also impacted by the release of £3m accruals no longer required in relation to the Glyndebourne project which was completed in 2013. Finance cost was also lower by £5m in 2017.

 

Basic earnings per share increased by 58.8% to 38.1p (2016: 24.0p).

 

Financial performance - fourth quarter 2017

 

Revenue for the fourth quarter was flat at £260m (Q4 2016: £261m). Pre-tax profit increased to £29m from £6m last year. Excluding impairment loss, revaluation gain/deficit and reversal of impairment, pre-tax profit was £49m versus £46m last year.  

 

Foreign exchange translation

 

The Company publishes its Group financial statements in sterling. However, the majority of the Company's subsidiaries, joint ventures and associates report their revenue, costs, assets and liabilities in currencies other than sterling. The Company translates the revenue, costs, assets and liabilities of those subsidiaries, joint ventures and associates into sterling and this translation of other currencies into sterling could materially affect the amount of these items in the Group's financial statements, even if their values have not changed in their original currencies.

 

The table set out in Note 2 to the financial statements sets out the sterling exchange rates of the other principal currencies in the Group. Sterling weakened compared to other major currencies during the financial year, the impact of which is reflected in the translation reserve on page 10.

 

Financial Position and Resources

 

 

2017

£m

 

2016

£m

 

Change

 £m

Property, plant and equipment and lease premium prepayment

3,232

3,345

(113)

Investment properties

577

534

43

Investment in joint ventures and associates

324

320

4

Non-current assets

4,133

4,199

(66)

Current assets excluding cash

228

195

33

Provisions and other liabilities excluding borrowings

(274)

(297)

23

Net debt

(650)

(707)

57

Deferred tax liabilities

(188)

(220)

32

Net assets

3,249

3,170

79

 

 

 

 

Equity attributable to equity holders of the parent

2,676

2,668

8

Non-controlling interests

573

502

71

Total equity

3,249

3,170

79

 

Non-current assets

 

The Group states property, plant and equipment at cost, less depreciation or provision for impairment. Investment properties are held at fair value. External professional open market valuations took place at the end of 2017 for all investment properties and those property assets identified as having impairment risks.

 

Non-current assets decreased slightly by 1.6% compared to last year, principally due to the impact of exchange translation on property, plant and equipment.

 

Financial position

 

Group interest cover ratio for the year ended 31 December 2017 (excluding share of results of joint ventures and associates, and other operating income and expense) is 8 times (2016: 6 times).

 

At 31 December 2017, the Group had £354m cash and £292m of undrawn and committed facilities available comprising revolving credit facilities which provide the Group with financial flexibility. Most of the facilities are unsecured with unencumbered assets representing 88% (2016: 86%) of fixed assets and investment properties. At 31 December 2017, gross borrowing amounted to £1,004m of which £155m was drawn under £176m of secured bank facilities.

At 31 December 2017, the Group had net debt of £650m (Dec 2016: net debt £707m). Excluding CDLHT, the net debt was £186m (Dec 2016: net debt £232m).

Future funding

 

Of the Group's total facilities of £1,603m, £599m matures within 12 months. Excluding CDLHT, the Group's total facilities were £819m of which £171m matures within the next 12 months. Plans for refinancing of the facilities are underway.

 

Treasury risk management

 

Group treasury matters are governed by policies and procedures approved by the Board of Directors. The treasury committee monitors and reviews treasury matters on a regular basis. A written summary of major treasury activity is presented to the Board on a regular basis.

 

Consolidated income statement (unaudited)

for the year ended 31 December 2017

 

 

 

 

Notes

 

 

 

Fourth

 Quarter

2017

£m

 

 

Fourth

 Quarter

2016

£m

 

 

Full

Year

2017

£m

 

 

Full

Year

2016

£m

 

Revenue

 

3

260

261

1,008

926

Cost of sales

 

(107)

(112)

(431)

(395)

Gross Profit

 

153

149

577

531

 

 

 

 

 

 

Administrative expenses

 

(111)

(108)

(415)

(382)

Other operating income

4

18

11

30

13

Other operating expense

4

(38)

(51)

(47)

(55)

Operating profit

 

22

1

145

107

 

 

 

 

 

 

Share of profit of joint ventures and associates

 

11

17

22

26

 

 

 

 

 

 

Finance income

 

1

-

11

7

Finance expense

 

(5)

(12)

(31)

(32)

Net finance expense

3

(4)

(12)

(20)

(25)

 

 

 

 

 

 

Profit before tax

3

29

6

147

108

Income tax credit/(expense)

5

10

5

12

(10)

Profit for the year

 

39

11

159

98

 

Attributable to:

 

 

 

 

 

Equity holders of the parent

 

32

19

124

78

Non-controlling interests

 

7

(8)

35

20

 

 

39

11

159

98

 

 

 

 

 

 

Basic earnings per share (pence)

6

9.8p

5.8p

38.1p

24.0p

Diluted earnings per share (pence)

6

9.8p

5.8p

38.1p

24.0p

 

 

 

 

 

 

 

The financial results above derive from continuing activities.

 

 

Consolidated statement of comprehensive income (unaudited)

for the year ended 31 December 2017

 

 

 

Full

Year

2017

£m

 

Full

Year

2016

£m

 

Profit for the year

159

98

 

 

 

Other comprehensive income/(expense):

 

 

Items that are not reclassified subsequently to income statement:

 

 

Remeasurement of defined benefit plan actuarial net gains/(losses)

4

(8)

 

4

(8)

Items that may be reclassified subsequently to income statement:

 

 

Foreign currency translation differences - foreign operations

(102)

422

Foreign currency translation differences - equity accounted investees

(16)

41

Net gain/(loss) on hedge of net investments in foreign operations

12

(33)

 

(106)

430

Other comprehensive income/(expense) for the year, net of tax

(102)

422

Total comprehensive income for the year

57

520

 

 

 

Total comprehensive income attributable to:

 

 

Equity holders of the parent

22

411

Non-controlling interests

35

109

Total comprehensive income for the year

57

520

 

 

Consolidated statement of financial position (unaudited)

as at 31 December 2017

 

 

 

 

 

 

 

As at

31 December

 2017

£m

 

 

As at

31 December

 2016

£m

Non-current assets

 

 

 

Property, plant and equipment

 

3,129

3,238

Lease premium prepayment

 

103

107

Investment properties

 

577

534

Investment in joint ventures and associates

 

324

320

 

 

4,133

4,199

Current assets

 

 

 

Inventories

 

4

5

Development properties

 

93

93

Lease premium prepayment

 

2

2

Trade and other receivables

 

88

95

Cash and cash equivalents

 

354

337

 

 

541

532

Assets held for sale

 

41

-

 

 

582

532

Total assets

 

4,715

4,731

 

Non-current liabilities

 

 

 

Interest-bearing loans, bonds and borrowings

 

(791)

(951)

Employee benefits

 

(19)

(23)

Provisions

 

(9)

(10)

Other non-current liabilities

 

(13)

(14)

Deferred tax liabilities

 

(188)

(220)

 

 

(1,020)

(1,218)

Current liabilities

 

 

 

Interest-bearing loans, bonds and borrowings

 

(213)

(93)

Trade and other payables

 

(208)

(214)

Provisions

 

(2)

(1)

Income taxes payable

 

(23)

(35)

 

 

(446)

(343)

Total liabilities

 

(1,466)

(1,561)

Net assets

 

3,249

3,170

 

Equity

 

 

 

Issued share capital

 

97

97

Share premium

 

843

843

Translation reserve

 

431

537

Treasury share reserve

 

(4)

(4)

Retained earnings

 

1,309

1,195

Total equity attributable to equity holders of the parent

 

2,676

2,668

Non-controlling interests

 

573

502

Total equity

 

3,249

3,170

 

  

Consolidated statement of changes in equity (unaudited)

for the year ended 31 December 2017                                                                                                                                                                                                                                                                                                                                                                                          

 

Share

capital

£m

Share

premium

£m

Translation

reserve

£m

Retained

earnings

£m

Total excluding non-controlling

interests

£m

 

 

 

Non- controlling interests

£m

Total equity

£m

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

97

843

537

(4)

1,195

2,668

502

3,170

Profit

-

-

-

-

124

124

35

159

Other comprehensive income/(expense)

-

-

(106)

-

4

(102)

-

(102)

 Total comprehensive income/(expense)

-

-

(106)

-

128

22

35

57

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

Dividends - equity holders

-

-

-

-

(25)

(25)

-

(25)

Dividends - non-controlling interests

-

-

-

-

-

-

(40)

(40)

Changes in ownership interests

 

 

 

 

 

 

 

 

Change in interests in subsidiaries without loss of control

-

-

-

-

11

11

(11)

-

Return of capital to non-controlling interests

-

-

-

-

-

-

(2)

(2)

Rights issue by subsidiary with non-controlling interests

-

-

-

-

-

-

89

89

Total transactions with owners

-

-

-

-

 

(14)

(14)

36

22

Balance at 31 December 2017

97

843

431

(4)

1,309

2,676

573

3,249

 

 

Share

capital

£m

Share

premium

£m

Translation

reserve

£m

Retained

earnings

£m

Total excluding non-controlling

interests

£m

 

 

 

Non- controlling interests

£m

Total equity

£m

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016

97

843

196

(4)

1,144

2,276

436

2,712

Profit

-

-

-

-

78

78

20

98

Other comprehensive income

-

-

341

-

(8)

333

89

422

 Total comprehensive income

-

-

341

-

70

411

109

520

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

Dividends - equity holders

-

-

-

-

(21)

(21)

-

(21)

Dividends - non-controlling interests

-

-

-

-

-

-

(35)

(35)

Changes in ownership interests

 

 

 

 

 

 

 

 

Change in interests in subsidiaries without loss of control

-

-

-

-

2

2

(4)

(2)

Return of capital to non-controlling interests

-

-

-

-

-

-

(4)

(4)

Total transactions with owners

-

-

-

-

 

(19)

(19)

(43)

(62)

Balance at 31 December 2016

97

843

537

(4)

1,195

2,668

502

3,170

 

 

Consolidated statement of cash flows (unaudited)

for the year ended 31 December 2017

 

 

 

2017

£m

 

2016

£m

Cash flows from operating activities

 

 

Profit for the year

159

98

Adjustments for:

 

 

Depreciation and amortisation

75

73

Share of profit of joint ventures and associates

(22)

(26)

Other operating income

(30)

(13)

Other operating expense

47

55

Finance income

(11)

(7)

Finance expense

31

32

Income tax expense

(12)

10

Operating profit before changes in working capital and provisions

237

222

Movement in inventories, trade and other receivables

9

(20)

Movement in development properties

(4)

4

Movement in trade and other payables

(13)

15

Movement in provisions and employee benefits

1

(1)

Cash generated from operations

230

220

Interest paid

(21)

(21)

Interest received

4

4

Income tax paid

(33)

(33)

Net cash generated from operating activities

180

170

 

Cash flows from investing activities

 

 

Dividends received from joint ventures and associates

2

2

Proceeds from settlement of shareholder's loan

12

-

Proceeds from insurance claim

-

2

Acquisition of a subsidiary, net of cash acquired

(52)

-

Acquisition of property, plant and equipment, lease premium prepayment and investment properties

(142)

(100)

Net cash used in investing activities

(180)

(96)

 

 

 

Cash flows from financing activities

 

 

Repayment of borrowings

(306)

(339)

Drawdown of borrowings

309

377

Dividends paid to non-controlling interests

(40)

(35)

Return of capital to non-controlling interests

(2)

(4)

Acquisition of non-controlling interests

-

(2)

Dividends paid to equity holders of the parent

(25)

(21)

Proceeds from issue of share capital

89

 

Net cash generated/(used in) financing activities

25

(24)

 

 

 

Net increase in cash and cash equivalents

25

50

Cash and cash equivalents at beginning of the year

337

238

Effect of exchange rate fluctuations on cash held

(8)

49

Cash and cash equivalents at end of the year

354

337

 

 

 

Reconciliation of cash and cash equivalents

 

 

Cash and cash equivalents shown in the consolidated statement of financial position

354

337

Bank overdrafts included in borrowings

-

-

Cash and cash equivalents for consolidated statement of cash flows

354

337

 

 

 

 

 

Notes to the consolidated financial statements (unaudited)

 

1. General information

Basis of preparation

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2017 or 2016. The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the registrar of companies. The auditor has reported on the 2016 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2017 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course. The consolidated financial statements of the Group as at and for the financial year ended 31 December 2016 are available from the Company's website at:

 

https://investors.millenniumhotels.com/financial/annual-reports

 

The financial information presented in these preliminary announcements was prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU and by applying the accounting policies and presentation that were used in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2016.

 

The financial information was prepared on a going concern basis, supported by the Directors' assessment of the Group's current and forecast financial position, and forecast trading for at least the next 12 months from the date they were approved; and are presented in the Company's functional currency of sterling, rounded to the nearest million.

 

Notes to the consolidated financial statements (unaudited)

 

2. Foreign currency translation

 

The Company publishes its Group financial statements in sterling. However, the majority of the Company's subsidiaries, joint ventures and associates report their revenue, costs, assets and liabilities in currencies other than sterling. The Company translates the revenue, costs, assets and liabilities of those subsidiaries, joint ventures and associates into sterling, and this translation of other currencies into sterling could materially affect the amount of these items in the Group's financial statements, even if their values have not changed in their original currencies. The following table sets out the sterling exchange rates of the other principal currencies of the Group.

 

 

As at

31 December

Average for 12 months

January-December

Average for 3 months

October-December

Currency (=£)

2017

2016

2017

2016

2017

2016

 

US dollar

 

1.339

 

1.228

 

1.290

 

1.355

 

1.327

 

1.241

Singapore dollar

1.796

1.781

1.782

1.879

1.798

1.766

New Taiwan dollar

40.083

39.679

39.338

43.7000

40.199

39.496

New Zealand dollar

1.896

1.772

1.814

1.952

1.903

1.757

Malaysian ringgit

5.473

5.503

5.544

5.640

5.515

5.424

Korean won

1,438.03

1,486.48

1,455.88

1,576.43

1,454.35

1,457.14

Chinese renminbi

8.779

8.537

8.722

9.008

8.786

8.532

Euro

1.127

1.174

1.143

1.231

1.131

1.163

Japanese yen

151.569

144.311

144.878

147.961

149.641

135.462

 

3. Operating segment information

 

Disclosure of segmental information is principally presented in respect of the Group's geographical segments.

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise: interest-bearing loans, borrowings, cash and cash equivalents, net finance expense, taxation balances and corporate expenses.

 

Geographical segments

The hotel and property operations are managed on a worldwide basis and operate in seven principal geographical areas as follows:

·  New York

·  Regional US

·  London

·  Rest of Europe (including the Middle East)

·  Singapore

·  Rest of Asia

·  Australasia

 

The segments reported reflect the operating segment information included in the internal reports that the Chief Operating Decision Maker ("CODM"), which is the Board, regularly reviews.

 

The reportable segments are aligned with the structure of the Group's internal organisation which is based according to geographical region.  Discrete financial information is reported to and is reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers ("COOs") or equivalent who are directly accountable for the functioning of their segments and who maintain regular contact with the Chief Executive Officer and Chairman of the CODM to discuss the operational and financial performance. The CODM makes decisions about allocation of resources to the regions managed by the COOs.

 

The results of CDLHT have been incorporated within the existing geographical regions. In addition, CDLHT operations are reviewed separately by its board on a monthly basis.

 

 

Notes to the consolidated financial statements (unaudited)

 

3. Operating segment information (continued)

 

Segment results

 

Full Year 2017

 

 

New York

£m

Regional US

£m

London

£m

Rest of Europe

£m

 

Singapore

£m

Rest of Asia

£m

Australasia

£m

Central

Costs

£m

Total Group

£m

Revenue

 

 

 

 

 

 

 

 

 

Hotel

156

144

122

70

132

176

80

-

880

Property operations

-

5

-

-

3

9

45

-

62

REIT

-

-

-

23

16

19

8

-

66

Total revenue

156

149

122

93

151

204

133

-

1,008

Hotel gross operating profit

23

31

60

16

54

60

39

-

283

Hotel fixed charges 1

(33)

(26)

(23)

(10)

(4)

(35)

(6)

-

(137)

Hotel operating profit

(10)

5

37

6

50

25

33

-

146

Property operating profit/(loss)

-

-

-

-

5

8

24

-

37

REIT operating profit/(loss)

-

-

-

5

(3)

5

7

-

14

Central costs

-

-

-

-

-

-

-

(35)

(35)

Other operating income 2

-

-

-

-

-

21

-

-

21

Other operating expense 2

(11)

(8)

-

(4)

-

(8)

-

-

(31)

Other operating income - REIT 2

-

-

-

-

-

-

9

-

9

Other operating expense - REIT 2

-

-

-

(5)

-

(11)

-

-

(16)

 Operating profit/(loss)

(21)

(3)

37

2

52

40

73

(35)

145

Share of joint ventures and

 

 

 

 

 

 

 

 

 

associates profit

-

-

-

3

-

19

-

-

22

Add: Depreciation and amortisation

9

13

6

6

13

22

3

3

75

Add: Net revaluation deficit & impairment

11

8

-

9

-

10

(9)

-

29

EBITDA 3

(1)

18

43

20

65

91

67

(32)

271

Less: Depreciation, amortisation, net revaluation deficit & impairment

 

 

 

 

 

 

 

 

(104)

Net finance expense

 

 

 

 

 

 

 

 

(20)

Profit before tax

 

 

 

 

 

 

 

 

147

                     

 

 

 

Full Year 2016

 

 

New York

£m

Regional US

£m

London

£m

Rest of Europe

£m

 

Singapore

£m

Rest of Asia

£m

Australasia

£m

Central

Costs

£m

Total Group

£m

Revenue

 

 

 

 

 

 

 

 

 

Hotel

136

136

121

76

127

163

55

-

814

Property operations

-

4

-

-

3

9

40

-

56

REIT

-

-

-

11

14

19

12

-

56

Total revenue

136

140

121

87

144

191

107

-

926

Hotel gross operating profit

21

28

60

15

52

55

25

-

256

Hotel fixed charges 1

(30)

(23)

(21)

(7)

(5)

(37)

(4)

-

(127)

Hotel operating profit

(9)

5

39

8

47

18

21

-

129

Property operating profit/(loss)

-

(1)

-

-

2

8

21

-

30

REIT operating profit/(loss)

-

-

-

3

(5)

7

11

-

16

Central costs

-

-

-

-

-

-

-

(26)

(26)

Other operating income 2

-

3

-

-

-

8

2

-

13

Other operating expense 2

(15)

(2)

-

(5)

(4)

(2)

-

-

(28)

Other operating expense - REIT 2

-

-

-

(4)

(10)

(13)

-

-

(27)

 Operating profit/(loss)

(24)

5

39

2

30

26

55

(26)

107

Share of joint ventures and

 

 

 

 

 

 

 

 

 

associates profit

-

-

-

3

-

23

-

-

26

Add: Depreciation and amortisation

8

12

6

6

12

25

2

2

73

Add: Net revaluation deficit & impairment

15

(1)

-

9

14

7

-

-

44

EBITDA 3

(1)

16

45

20

56

81

57

(24)

250

Less: Depreciation, amortisation, net revaluation deficit & impairment

 

 

 

 

 

 

 

 

(117)

Net finance expense

 

 

 

 

 

 

 

 

(25)

Profit before tax

 

 

 

 

 

 

 

 

108

                     

 

1 Hotel fixed charges include depreciation, amortisation of lease premium prepayments, property rent, taxes and insurance, operating lease rentals and management fees.

 

2 See Note 4 for details of other operating income and expense.

 

3 EBITDA is earnings before interest, tax and, depreciation and amortisation.

 

 

Notes to the consolidated financial statements (unaudited)

 

3. Operating segment information (continued)

 

Segmental assets and liabilities

 

At 31 December 2017

New

York

£m

Regional US

£m

London

£m

Rest of Europe

£m

 

Singapore

£m

Rest of Asia

£m

Australasia

£m

Total Group

£m

Hotel operating assets

613

320

496

232

21

670

181

2,533

REIT operating assets

-

-

-

207

598

117

194

1,116

Hotel operating liabilities

(29)

(39)

(13)

(36)

(23)

(68)

(10)

(218)

REIT operating liabilities

-

-

-

(8)

(8)

(3)

(6)

(25)

Investment in joint ventures

 

 

 

 

 

 

 

 

and associates

-

-

-

-

-

152

-

152

Total hotel operating net assets

584

281

483

395

588

868

359

3,558

Property operating assets

-

36

-

-

84

176

92

388

Property operating liabilities

-

(1)

-

-

(2)

(3)

(2)

(8)

Investment in joint ventures

 

 

 

 

 

 

 

 

and associates

-

-

-

31

-

141

-

172

Total property operating net assets

-

35

-

31

82

314

90

552

Deferred tax liabilities

 

 

 

 

 

 

 

(188)

Income taxes payable

 

 

 

 

 

 

 

(23)

Net cash

 

 

 

 

 

 

 

(650)

Net assets

 

 

 

 

 

 

 

3,249

 

 

 

At 31 December 2016

New

York

£m

Regional US

£m

London

£m

Rest of Europe

£m

 

Singapore

£m

Rest of Asia

£m

Australasia

£m

Total Group

£m

Hotel operating assets

674

365

502

235

21

691

187

2,675

REIT operating assets

-

-

-

61

606

139

195

1,001

Hotel operating liabilities

(33)

(47)

(14)

(34)

(21)

(69)

(11)

(229)

REIT operating liabilities

-

-

-

(2)

(9)

(2)

(8)

(21)

Investment in joint ventures

 

 

 

 

 

 

 

 

and associates

-

-

-

-

-

159

-

159

Total hotel operating net assets

641

318

488

260

597

918

363

3,585

Property operating assets

-

43

-

-

85

176

94

398

Property operating liabilities

-

(1)

-

-

(5)

(3)

(3)

(12)

Investment in joint ventures

 

 

 

 

 

 

 

 

and associates

-

-

-

20

-

141

-

161

Total property operating net assets

-

42

-

20

80

314

91

547

Deferred tax liabilities

 

 

 

 

 

 

 

(220)

Income taxes payable

 

 

 

 

 

 

 

(35)

Net cash

 

 

 

 

 

 

 

(707)

Net assets

 

 

 

 

 

 

 

3,170

 

 

 

Notes to the consolidated financial statements (unaudited)

 

 

4. Other operating income and expense

 

 

2017

 

 2016

 

Notes

£m

£m

 

 

 

 

Gain on insurance claim

(a)

-

2

Reversal of impairment of loan

(b)

12

-

Revaluation gain of investment properties

(c)

18

11

Revaluation deficit of investment properties

(c)

(9)

(31)

Impairment of assets

(d)

(38)

(24)

 

(a) Gain on insurance claim

In May 2016, a settlement was reached with the insurers in relation to Millennium Hotel Christchurch which was one of the hotels affected by the 2011 New Zealand earthquake. A gain of £2m in respect of material damage claim relating to fixtures, fittings and equipment was recognised by the Group in 2016. The lease for this property has expired and this 2016 settlement was the last insurance claim relating to the Christchurch earthquake damage.

 

(b) Reversal of impairment of loan

On 31 July 2017, the Group disposed of its 50% interest in Fena in exchange for a token sum and repayment of the shareholder loan, which had been impaired in earlier years. The Group re-instated the loan on its balance sheet with an income of £12m recognised in the income statement. This amount was settled during the year.

 

(c) Revaluation gain/deficit of investment properties

At the end of the financial year, in accordance with the Group's policy its investment properties were subject to external professional valuation on an open-market existing use basis. Based on these valuations, the revaluation gain or deficit was recorded as considered appropriate by the Directors.

 

(d) Impairment of assets

The Directors undertook their annual review of the carrying value of hotels and property assets for indication of impairment and where appropriate, external valuations were also obtained. As a result of this review, the total impairment charge for the year ended 31 December 2017 was £38m (2016: £24m) consisting of £11m in New York, £6m in Rest of US, £4m in Rest of Europe and £13m in Rest of Asia. Also included is £4m of goodwill impaired in relation to the acquisition by CDLHT of The Lowry Hotel in Manchester in 2017.

 

5. Income tax expense

 

For the year ended 31 December 2017, the Group has an underlying tax charge of £5m (2016: £10m) excluding the tax relating to joint ventures and associates. Together with the release of a total of £17m provision in relation to exposures in Singapore that were finalised in 2017, the Group recorded a tax credit of £12m.

 

The effective tax rate relating to the tax charge of £5m before the release of provision is 4.2% (2016: 12.2%). The effective tax rate has been affected by a number of factors which include the following items:

 

·      Other income and expense of the Group; and

·      Reduced tax rates applied to brought forward net deferred tax liabilities in the US; and

·      Tax adjustments in respect of previous years.

 

Excluding the impact of the items noted above, the Group's underlying effective tax rate is 9.2% (2016: 15.4%).

 

For the year ended 31 December 2017, a tax charge of £7m (2016: £3m) relating to joint ventures and associates is included in the profit before tax.

 

Notes to the consolidated financial statements (unaudited)

 

6.  Earnings per share

 

Earnings per share are calculated using the following information:

 

 

Fourth

 Quarter

2017

 

Fourth

 Quarter

2016

 

Full

Year

2017

 

Full

Year

2016

(a) Basic

 

 

 

 

Profit for the year attributable to holders of the parent (£m)

32

19

124

78

Weighted average number of shares in issue (m)

325

325

325

325

 

 

 

 

 

Basic earnings per share (pence)

9.8p

5.8p

38.1p

24.0p

 

 

 

 

 

(b) Diluted

 

 

 

 

Profit for the year attributable to holders of the parent (£m)

32

19

124

78

Weighted average number of shares in issue (m)

325

325

325

325

Potentially dilutive share options under the Group's share option schemes (m)

-

-

-

-

Weighted average number of shares in issue (diluted) (m)

325

325

325

325

 

 

 

 

 

Diluted earnings per share (pence)

9.8p

5.8p

38.1p

24.0p

 

 

7.  Related parties

 

Identity of related parties

 

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. All transactions with related parties were entered into in the normal course of business and at arm's length.

 

The Group has a related party relationship with its joint ventures, associates and with its Directors and executive officers.

 

Transactions with ultimate holding company and other related companies

 

The Group has a related party relationship with certain subsidiaries of Hong Leong Investment Holdings Pte. Ltd ("Hong Leong") which is the ultimate holding and controlling company of Millennium & Copthorne Hotels plc and holds 65.2% (2016: 64.9%) of the Company's shares via CDL, the intermediate holding company of the Company. During the year ended 31 December 2017, the Group had the following transactions with those subsidiaries.

 

The Group deposited certain surplus cash with Hong Leong Finance Limited, a subsidiary of Hong Leong, on normal commercial terms. As at 31 December 2017, £4m (2016: £4m) of cash was deposited with Hong Leong Finance Limited.

 

Fees paid/payable by the Group to CDL and its other subsidiaries were £3m (2016: £2m) which included rentals paid for the Grand Shanghai restaurant and Kings Centre; property management fees for Tanglin Shopping Centre; charges for car parking, leasing commission and professional services.

 

There are no material transactions with joint ventures and associates.

 

 

Notes to the consolidated financial statements (unaudited)

 

8. Financial commitments, contingencies and subsequent events

 

Capital commitments at 31 December 2017 which are contracted but not yet provided for in the financial statements amount to £70m (2016: £37m). There were no contingent liabilities or guarantees other than those arising in the ordinary course of business and on these no material losses are anticipated.

 

There are no events subsequent to the balance sheet date which require adjustments to or disclosure within these consolidated financial statements except for those stated below:

 

1)    On 11 January 2018, CDLHT completed the divestment of two hotels in Australia, the Mercure Brisbane and Ibis Brisbane for A$77m (£45m) to an independent third party.

 

2)    On 11 January 2018, a partnership comprised of a subsidiary of FSGL together with subsidiaries of CDL and another substantial shareholder of FSGL acquired a 300-room hotel currently operated by a tenant as the "Le Meridien Frankfurt" situated in Frankfurt for €79m (£70m), excluding certain transaction related expenses.

 

3)    On 1 February 2018, FSGL together with four other co-investors acquired all the issued shares of Hotelmaatschappij Rotterdam B.V which owns the 254-room Hilton Rotterdam Hotel in the Netherlands for €51m (£45m). Following the completion of the transaction, FSGL owns 24.7% interest in the target company.

 

4)    On 1 February 2018, the Group acquired the 42-room The Waterfront Hotel in New Plymouth, New Zealand, for a purchase consideration of NZ$11m (£6m).

 

5)    On 7 February 2018, the Group has provided an irrevocable undertaking to take up its full entitlement of FSGL's proposed rights issue of new perpetual convertible capital securities for a total cost of S$58m (£32m) and a proportion of the excess rights not subscribed by other shareholders for a cost of up to S$31m (£17m).

 

 

 

APPENDIX 1: Key OPERATING STATISTICS

for the year ended 31 December 2017

 

Owned or leased hotels*

 

Year ended

2017

Reported

currency

Year ended

2016

Constant

currency

Year ended

2016

Reported

currency

Occupancy (%)

 

 

 

 

New York

85.3

 

77.9

Regional US

60.0

 

58.6

Total US

68.3

 

65.0

London

83.0

 

81.9

Rest of Europe

70.5

 

72.2

Total Europe

76.9

 

77.1

Singapore

85.6

 

84.2

Rest of Asia

66.4

 

65.4

Total Asia

73.9

 

72.7

Australasia

81.2

 

81.3

Total Group

73.5

 

71.8

 

 

 

 

Average Room Rate (£)

 

 

 

 

New York

       193.18

196.33

186.85

Regional US

       103.23

103.11

98.12

Total US

       140.23

139.94

133.18

London

       132.47

130.83

130.83

Rest of Europe

         76.16

74.55

72.86

Total Europe

       107.15

104.83

104.04

Singapore

         97.91

100.41

95.22

Rest of Asia

         96.93

99.43

92.66

Total Asia

         97.37

99.87

93.81

Australasia

         90.01

77.31

71.84

Total Group

       112.68

111.63

106.78

 

 

 

 

RevPAR (£)

 

 

 

 

New York

       164.84

153.03

145.64

Regional US

         61.90

60.41

57.49

Total US

         95.79

90.91

86.52

London

       109.98

107.18

107.18

Rest of Europe

         53.66

53.83

52.61

Total Europe

         82.35

80.85

80.24

Singapore

         83.83

84.58

80.21

Rest of Asia

         64.39

65.05

60.63

Total Asia

         71.91

72.61

68.21

Australasia

         73.06

62.84

58.40

Total Group

         82.78

80.19

76.71

 

 

 

 

Gross Operating Profit Margin (%)

 

 

 

 

New York

15.1

 

 

15.9

Regional US

21.2

 

 

20.9

Total US

18.0

 

 

18.4

London

49.5

 

49.8

Rest of Europe

22.2

 

 

19.1

Total Europe

39.6

 

 

37.8

Singapore

40.5

 

40.8

Rest of Asia

34.1

 

 

34.0

Total Asia

36.9

 

 

37.0

Australasia

49.1

 

 

46.5

Total Group

32.2

 

 

31.6

 

For comparability, the 31 December 2016 Average Room Rate and RevPAR have been translated at average exchange rates for the period ended 31 December 2017.

 

* excluding managed, franchised and investment hotels.

 

 

APPENDIX 2: Key OPERATING STATISTICS

for the quarter ended 31 December 2017

 

Owned or leased hotels*

 

Fourth Quarter

2017

Reported

Currency

Fourth Quarter

2016

Constant

 currency

Fourth Quarter

2016

Reported

 currency

 

Occupancy (%)

 

 

 

New York

89.3

 

87.2

Regional US

51.3

 

51.1

Total US

63.8

 

63.0

London

79.3

 

84.3

Rest of Europe

67.9

 

70.3

Total Europe

73.8

 

77.4

Singapore

82.2

 

82.4

Rest of Asia

71.7

 

69.3

Total Asia

75.8

 

74.4

Australasia

83.2

 

85.7

Total Group

72.1

 

72.3

 

 

 

 

Average Room Rate (£)

 

 

 

New York

       212.70

       212.70

219.35

Regional US

         98.12

         96.50

104.87

Total US

       150.94

       149.47

157.06

London

       135.80

       133.84

133.84

Rest of Europe

         77.37

         75.13

74.54

Total Europe

       109.58

       107.51

107.25

Singapore

         98.93

         97.94

99.50

Rest of Asia

         99.19

         99.06

99.30

Total Asia

         99.08

         98.58

99.38

Australasia

         91.67

         84.84

86.15

Total Group

       116.39

       114.55

117.20

 

 

 

 

RevPAR (£)

 

 

 

New York

       189.99

       185.44

191.24

Regional US

         50.31

         49.30

53.58

Total US

         96.30

         94.13

98.90

London

       107.73

       112.82

112.82

Rest of Europe

         52.53

         52.83

52.42

Total Europe

         80.82

         83.21

83.00

Singapore

         81.35

         80.74

82.03

Rest of Asia

         71.16

         68.65

68.81

Total Asia

         75.10

         73.33

73.93

Australasia

         76.27

         72.75

73.87

Total Group

         83.88

         82.87

84.79

 

 

 

 

Gross Operating Profit Margin (%)

 

 

 

New York

21.0

 

24.2

Regional US

14.3

 

15.7

Total US

18.3

 

20.6

London

48.9

 

47.7

Rest of Europe

21.5

 

8.4

Total Europe

38.9

 

32.4

Singapore

40.1

 

40.2

Rest of Asia

37.2

 

36.8

Total Asia

38.5

 

38.2

Australasia

50.7

 

52.5

Total Group

33.1

 

32.2

 

For comparability, the 31 December 2016 Average Room Rate and RevPAR have been translated at average exchange rates for the period ended 31 December 2017.

 

* excluding managed, franchised and investment hotels.

 

APPENDIX 3: HOTEL ROOM COUNT AND PIPELINE

as at 31 December 2017

 

 

Hotels

 

Rooms

 

Hotel and room count

31 December

 2017

31 December

 2016

Change

31 December

2017

31 December

2016

Change

 

 

 

 

 

 

 

Analysed by region:

 

 

 

 

 

 

New York

4

4

-

2,238

2,238

-

Regional US

15

15

-

4,559

4,559

-

London

8

8

-

2,649

2,651

(2)

Rest of Europe

21

19

2

3,528

3,081

447

Middle East

31

26

5

10,346

7,805

2,541

Singapore

7

7

-

3,011

3,011

-

Rest of Asia

25

27

(2)

9,240

10,036

(796)

Australasia

25

25

-

3,831

3,641

190

Total

136

131

5

39,402

37,022

 2,380

 

 

 

 

 

 

 

Analysed by ownership type:

 

 

 

 

 

 

Owned or Leased

66

66

-

19,672

19,534

138

Managed

15

42

(27)

4,098

11,924

(7,826)

Franchised

38

7

31

10,982

1,091

9,891

Investment

17

16

1

4,650

4,473

177

Total

136

131

5

39,402

37,022

2,380

 

 

 

 

 

 

 

Analysed by brand:

 

 

 

 

 

 

Grand Millennium

9

9

-

3,734

3,732

2

Millennium

52

49

3

17,415

15,960

1,455

Copthorne

33

35

(2)

6,469

6,944

(475)

Kingsgate

7

7

-

671

671

-

Other M&C

15

12

3

4,838

3,617

1,221

Third Party

20

19

1

6,275

6,098

177

Total

136

131

5

39,402

37,022

2,380

               

 

 

 

 

Hotels

Rooms

Pipeline

31 December 2017

31 December 2016

Change

31 December

 2017

31 December 2016

Change

 

 

 

 

 

 

 

Analysed by region:

 

 

 

 

 

 

Middle East

10

17

(7)

3,239

5,465

(2,226)

Asia

4

4

-

1,594

1,608

(14)

Regional US

1

1

-

263

263

-

Rest of Europe

1

1

-

184

153

31

Australasia

1

-

1

42

-

42

Total

17

23

(6)

5,322

7,489

(2,167)

 

 

 

 

 

 

 

Analysed by ownership type:

 

 

 

 

 

 

Managed

3

21

(18)

1,052

6,684

(5,632)

Franchised

11

-

11

3,423

-

3,423

Owned

3

2

1

847

805

42

Total

17

23

(6)

5,322

7,489

(2,167)

 

 

 

 

 

 

 

Analysed by brand:

 

 

 

 

 

 

Grand Millennium

1

2

(1)

251

847

(596)

Millennium

9

11

(2)

2,789

3,079

(290)

Copthorne

2

2

-

666

666

-

Kingsgate

-

2

(2)

-

559

(559)

Other M&C

5

6

(1)

1,616

2,338

(722)

Total

17

23

(6)

5,322

7,489

(2,167)

               

 

 

 

 

 

 

 

 


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