LONDON (Alliance News) - Millennium & Copthorne Hotels PLC slashed its dividend for 2015 after suffering a drop in profit amid difficult conditions in the Asian market, despite revenue benefiting from favourable movements in foreign exchange rates.
The hotel operator reported on Friday a 42% drop in pretax profit to GBP109 million in 2015 from GBP188 million in 2014, despite revenue growing 2.5% to GBP847 million from GBP826 million. In response, it cut its total dividend to 6.42 pence from 13.59p.
In the fourth quarter alone, pretax profit fell by a huge 86% to GBP11 million from GBP80 million, as revenue rose 1.3% to GBP232 million from GBP229 million.
Millennium & Copthorne said the fall in profit was because of a GBP43 million net charge as a GBP33 million net revaluation gain on investment properties failed to fully offset a GBP76 million impairment loss, relating to four of its properties located in New York, Rest of Europe and Rest of Asia.
The company had warned last Friday it would be making the charge and had said it was "considering appropriate strategies to further control costs and increase revenue, including exploring additional sales channels, enhanced sales and marketing efforts and the implementation of brand initiatives".
However, even without the charge, pretax profit still would have declined by 5.6% to GBP152 million from GBP161 million, which Millennium & Copthorne said was a result of consumer fears about travel following the various terrorist attacks which have shaken the whole tourism industry over the past year, as well as economic difficulties in the Asian market.
In the first half of 2015, pretax profit grew 6.9% to GBP62 million from GBP58 million the year before, but this started to go downhill thereafter. Pretax profit in the third quarter fell 28% to GBP36 million from GBP50 million, dragging down pretax profit for the nine months to the end of September by 9.3% to GBP98 million from GBP108 million.
Revenue growth in the full year was on the back of contributions from hotel acquisitions and the opening of the Millennium Mitsui Garden Hotel Tokyo, together with favourable foreign exchange rate movements, Millennium & Copthorne said.
Revenue per available room grew 0.6% in the full year to GBP71.98 from GBP71.55, although it did decline by 3.7% to GBP73.64 from GBP76.48 in the fourth quarter, partly due to refurbishments at Millennium Bailey's Hotel London and ONE UN New York, but also because of difficulties in the Asian market resulting from weakness in the Chinese economy.
In particular, Singapore suffered from reduced consumer spending and lower corporate travel demand against a backdrop of a regional economic slowdown, Millennium & Copthorne said. RevPAR in Singapore decreased 7.5% in the year, contributing to an overall 9% decline in Asia.
Meanwhile, RevPAR fell 0.1% in the US, but grew 2.2% in Europe despite a 3.4% fall in London. It increased 13% in Australasia.
"In 2015, global hospitality markets were impacted by falling commodity prices, mounting concern with regard to terrorism, health advisory travel alerts and uncertainty regarding growth of the Chinese market. These external factors, which negatively affected the year's performance, are expected to continue in the current year," Chairman Kwek Leng Beng said in a statement.
"Although the short-term trading outlook is uncertain, the group has a long-term perspective. Management considers that asset ownership is key to creating long-term value in a changing hospitality industry landscape. The group will therefore continue to focus on its strategy of ownership and management of hospitality real estate assets. In 2016, management will work on optimising returns on the group's assets by undertaking refurbishment projects, whilst remaining vigilant with regard to controlling costs," he added.
Shares in Millennium & Copthorne were trading down 4.2% at 373.60 pence on Friday morning, the fourth biggest faller in the FTSE 250 index.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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