Millennium & Copthorne Hotels NZ Ltd lifted its income by 35% in 2019 and scored a net jump of over 150% in revaluations/impairments, but increased net profit by only $312,000.
The company had started widening its sources of tourists, but chair Colin Sim said in his results release yesterday the coronavirus that’s hit China had already cost $2-3 million in lost revenue for the first quarter of 2020.
The company’s financial results show after-tax profit for its New Zealand business down 1.3%, but up just over 50% for the much smaller Australian business.
Summary of results (2018 in brackets):
Gross profit, up 1.7% to $132 million ($129.8 million)
Operating profit, up 1.4% to $84.2 million ($83.1 million)
Pretax profit, up 0.35% to $85.4 million ($85.1 million)
Net profit, up 0.5% to $62.27 million ($61.96 million)
Profit after tax & non-controlling interests, up 0.6% to $49.7 million ($49.4 million)
Total comprehensive income, up 34.7% to $98.8 million ($73.4 million)
Revenue, up 4.95% to $229.7 million ($218.8 million)
Hotel revenue, $126.618 million ($126.478 million)
Property sales, up 12.3% to $100.4 million ($89.4 million)
Revaluations & impairments net of tax, up 153.3% to $36.8 million $14.5 million)
Shareholders’ funds excluding non-controlling interests, up 11.7% to $715.3 million ($640.3 million)
Total assets, up 12.25% to $1.008 billion ($898.2 million)
Net assets, up 11.5% to $807 million ($723.9 million)
Net asset backing (with land & building revaluations and before distributions), up 11.7% to 451.78c (404.41c)
Earnings/share, up 0.6% to 31.39c (31.21c)
Residential land development expenditure, up 52.3% to $44.7 million ($29.3 million)
Residential land development purchases, down 82.3% to $9.14 million ($51.6 million)
After-tax profit – NZ, down 1.3% to $59.2 million ($59.9 million)
After-tax profit – Australia, up 52.6% to $3.1 million ($2 million)
Revenue per available room (revpar), up 1.4% to $132.46 ($130.63)
Occupancy, 80.8% (80.9%)
Millennium & Copthorne chair Colin Sim said in the company’s annual result announcement yesterday: “The recent travel issues associated with the novel coronavirus will impact on Millennium & Copthorne’s first quarter operations & results. A number of our hotels in high tourism areas are receiving cancellations from several Chinese operators as the Chinese & NZ Governments’ travel bans & other containment measures come into effect.
“Cancellations received to date will result in revenue loss of between $2-3 million, with more cancellations expected for future months. We have been advised that this revenue loss will not be covered by insurance.
“Management is implementing urgent response plans to mitigate the effect of these cancellations. A health & safety plan is now in full effect at the company’s hotels.”
NZ hotel operations
“In an environment which has seen increased inventory in key tourism centres coupled with a slowing in the growth of international visitors to New Zealand, the NZ hotels were able to maintain their revenue at levels seen over the past 3 years.”
Mr Sim said pressures such as utility & payroll costs had increased last year and that was expected to continue. 2 positives were the company’s “book direct” & “think local” initiatives, which had lifted direct booking with the company.
Geographically, Millennium & Copthorne’s marketing operations focused on diversifying its customer base originating from new & emerging markets such as South-east Asia & India:
“With some key markets showing signs of weakness, we believe that growth from such emerging markets will be a key factor in maintaining market share and growing future revenues.
“Within New Zealand itself, Millennium & Copthorne was pleased with the performance of several of its regional hotels such as Kingsgate Hotel Dunedin, Copthorne Hotel Palmerston North and Kingsgate Hotel Te Anau, which traded positively during the year and indicate an increasing strength in such hotels.
“2019 also saw Millennium & Copthorne’s talent pool upskilling with completions through the service IQ programmes, which assisted with retaining key operational staff at a number of our hotels. Millennium & Copthorne continues to be focused on development of employees in an environment where attracting & retaining skilled employees will continue to contribute to productivity gains.”
Mr Sim was disappointed by the High Court rejection last Friday of a review of Auckland Council’s accommodation provider targeted rate – the bed tax – and said the company would decide whether to pursue an appeal in the next few weeks.
The company sold 6 apartments last year at the Zenith Residences at King’s Cross in Sydney “and achieved attractive margins. Other units are being actively marketed for sale and we expect that these sales will boost Millennium & Copthorne’s 2020 results. Leasing of the remaining portfolio continues at an annual average occupancy rate of 92.6%.”
Related story today: CDL sustains earnings, asset values jump
Attribution: Millennium & Copthorne, CDL.