Covid-19 hit Millennium & Copthorne Hotels NZ Ltd’s returns for the June half-year because its main business is international tourism, but the company stayed ahead through the returns from its residential development subsidiary, CDL Investments NZ Ltd, and a tax credit.
In addition, it benefited from a $20.06 million one-off non-cash tax credit arising out of the Government’s Covid-19 business continuity package.
Millennium & Copthorne holds 66% of CDL’s shares and both NZX-listed companies’ ultimate parent company is Hong Leong Investment Holdings Pte Ltd in Singapore.
The hotel company said in May it had to cut over 900 jobs because of the closures forced by Covid-19, but the land development subsidiary was able to continue working. The Copthorne Hotel & Resort Bay of Islands, Copthorne Hotel Rotorua, Kingsgate Hotel Greymouth & Kingsgate Hotel Te Anau will remain closed until the fourth quarter of this year.
2 Auckland hotels, the Grand Millennium (managed by a Millennium & Copthorne subsidiary) & M Social Auckland, have managed isolation facility business.
In the group’s half-year results announcement last week, chair Colin Sim & managing director BK Chiu said: “We can say that our senior leadership team have done what they can to retain as many employees as possible, but without the level of guests and with the borders to New Zealand closed to overseas travel since March & for the foreseeable future, we do not and will not have anywhere near the amount of business to sustain pre-Covid employment levels. There is no ‘normal’ anymore and predictions of a ‘new normal’ seem premature….
“No-one should be in any doubt that the outlook ahead for Millennium & Copthorne’s New Zealand hotel operations will continue to be grim. The reality for the foreseeable future is lower occupancy, lower margins & minimal profit. We also believe that we have not yet seen the full extent of the economic effects of Covid-19. As economic conditions globally get worse, we expect still further falls in demand for travel & accommodation as people tighten their belts once again. The announcement that the APEC 2021 leaders’ meetings & associated events are to shift to virtual meetings is one indication as to where things are likely to head for our traditional conferencing & meetings business in the immediate term.”
Revenue, down 23.4% to $84.74 million ($110.6 million)
Gross profit, down 29% to $45.48 million ($64.1 million)
Pretax profit, down 36% to $26.26 million ($41 million)
After-tax profit, up 31.2% to $38.95 million ($29.7 million) – including $20.06 million income tax credit this year arising from change in building depreciation
Basic & diluted earnings/share, up 43.2% to 21.55c (15.05c), reflecting the impact of the tax credit from the Covid-19 business continuity package
Devaluation of property, plant & equipment, after tax, up 375.5% to $35.97 million ($7.6 million devaluation)
Net assets, up 9% to $797.1 million ($731 million)
Net tangible assets/share, up 8.8% to $4.44 ($4.08)
Hotel operations pretax profit, down 79% to $3.69 million ($17.53 million)
Related story today: CDL profit slips on steady revenue
27 May 2020: Hotelier to cut over 900 jobs, land developer CDL in good shape
Attribution: Company release & financial report.