Millennium & Copthorne Hotels Regulatory News (MLC)

For Immediate Release 4 August 2017

MILLENNIUM & COPTHORNE HOTELS plc

INTERIM MANAGEMENT REPORT

Half year and second quarter results to 30 June 2017

First half 2017:

Second quarter 2017:

Note 1: Profit before tax for H1 2017 includes impairment losses of £9m offset by the reversal of impairment of loan of £12m. Excluding these non-trading items, pre-tax profit for H1 2017 is £60m (H1 2016: £58m). Similarly Q2 2017, the reported pre-tax profit is £47m (Q2 2016: £40m).

· In constant currency, Group RevPAR grew by 4.9% during the first six months of 2017 with increases in occupancy and average room rate of 3.0% points and 0.5% respectively. In reported currency, Group RevPAR increased by 15.9%.

· In Q1 and Q2 of 2017, London RevPAR grew by 14.5% and 7.9% respectively. For the first half of 2017, London RevPAR grew by 10.7%, driven by higher tourist numbers as a result of the weaker pound.

· New York RevPAR grew by 10.0% for the six-month period, mainly reflecting the increased contribution from ONE UN New York whose East Tower was closed for refurbishment during the same period last year. Excluding this property, RevPAR for New York increased by 1.0%. Despite higher revenue, the New York region was still loss making for the period due to high operating costs, in particular payroll costs and travel agent commissions.

· Singapore RevPAR was down by 1.1% with a 4.1% points increase in occupancy more than offset by a 5.8% fall in average room rate.

· Group revenue increased by 16.0% to £485m or by 4.3% in constant currency, with increased contributions from hotel trading and property, offset by reduced revenue from CDL Hospitality Trusts ("CDLHT").

· Profit before tax increased by £7m or 12.5% for the six-month period. The result was impacted by a number of non-trading items, including impairment losses of £9m relating to a hotel in Rest of Asia and a hotel recently acquired by CDLHT in Europe (H1 2016: revaluation deficit of £4m offset by gain on insurance claim of £2m). As reported in Q1 2017, there was a one-off foreign exchange loss arising at CDLHT of £4m.

· On the other hand pre-tax profit was positively impacted by a £12m gain on the reversal of impairment of the Group's shareholder loan to Fena Estate Co. Ltd ("Fena"), owner of Pullman Bangkok Grande Sukhumvit (formerly Grand Millennium Sukhumvit Bangkok). 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 has re-instated the loan on its balance sheet as at 30 June 2017 with an income of £12m recognised in the income statement.

· The Board has declared an interim dividend of 2.08p per share.

Mr Kwek Leng Beng, Chairman commented:

"Group results improved in the first half of 2017 on both a reported and constant currency basis, by 12.5% and 1.6% respectively. However, there is continuing pressure on the profitability of our hotel operations, particularly in North Asia and New York.

The decline in Singapore RevPAR appears to be shallowing out. However RevPAR from Rest of Asia was down more sharply, in part as a result of geopolitical tensions impacting visitor arrivals in our hotels in Taipei and Seoul, especially from China.

The Group recognises that its New York region is under-performing. As part of our regional strategy, the Group has agreed a contract with Hilton for the management of ONE UN New York which will be re-branded as the Millennium Hilton New York One UN Plaza from 30 August 2017. In addition, management changes are currently underway, with increased focus on sales, costs and controls. These are significant steps in our strategy to strengthen our US operations."

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)

FINANCIAL PERFORMANCE

For the six months ended 30 June 2017, Group reported revenue increased by 16.0% to £485m (H1 2016: £418m). On a constant currency basis, Group revenue increased by 4.3%.

In constant currency, hotel revenue for H1 2017 increased by 4.5%, driven by higher contributions from the Group's hotels in London and New Zealand. Property revenue for the period increased by 11.8% in constant currency, mainly because of higher contribution from New Zealand land sales.

Profit before tax for the first half of 2017 increased by 12.5% to £63m (H1 2016: £56m). Excluding non-trading items of net impairment reversal of £3m (H1 2016: revaluation deficit of £4m offset by gain on insurance claim of £2m) as stated in Note 4 to the financial statements, pre-tax profit for H1 2017 is £60m (H1 2016: £58m). Pre-tax profit also includes £4m of foreign exchange losses arising at CDLHT and recorded as finance cost in the Group income statement as previously reported in Q1 2017.

Hotel operations

In constant currency, Group RevPAR increased by 4.9% to £78.69 (H1 2016: £75.04). Like-for-like1 RevPAR increased by 2.0%.

# In constant currency whereby 30 June 2016 RevPAR and average room rates have been translated at average exchange rates for the period ended 30 June 2017.

Note 1: Like-for-like comparisons exclude the impact of acquisitions, closures and refurbishments; and they are stated in constant currency terms.

US

US RevPAR for the period increased by 7.5% to £88.70 (H1 2016 £82.55). Occupancy and average room rate increased by 4.3% points and 0.6% respectively.

New York RevPAR increased by 10.0% as a result of a 9.1% points rise in occupancy which was partially offset by a 2.5% drop in average room rate. Excluding ONE UN New York where the east tower was closed for refurbishment during H1 2016, RevPAR for US and New York increased by 2.8% and 1.0% respectively.

RevPAR for Regional US increased by 4.7% to £61.12 (H1 2016: £58.40) with increases in both occupancy and average room rate.

Europe

Europe RevPAR for H1 2017 increased by 6.7%, reflecting the benefits arising from the weak pound making travel to UK attractive, resulting in higher tourist number especially from US and China. RevPAR for London grew by 10.7% to £101.38 (H1 2016: £91.54) with increases in both average room rate and occupancy. Both the average room rate and occupancy at The Bailey's Hotel London continued to improve after its refurbishment, completed in Q1 2016. UK hotels were impacted by increased security costs following recent terrorist attacks, as well as pressure on labour supply and operating costs.

RevPAR for Rest of Europe during H1 2017 fell by 0.7% as a result of weaker performance at Rome and the two Paris hotels.

Asia

Asia RevPAR for H1 2017 fell by 3.7% to £69.89 (H1 2016: £72.61). Occupancy increased slightly by 1.6% points and average room rate dropped by 5.9%.

Singapore RevPAR dropped by 1.1% with average room rate lower by 5.8% offset by higher occupancy of 4.1% points. The Group continues to deploy a competitive pricing strategy in growing its occupancy. Rest of Asia RevPAR decreased by 5.9% in H1 2017, mainly due to the lower number of Chinese visitors to the major cities. Revenue from Millennium Seoul Hilton was sharply down as a result of falling tourist numbers following recent geopolitical tensions. Room supply also increased in Seoul during the first half of 2017, putting additional pressure on occupancy and room rates.

Australasia

On a like-for-like basis, Australasia RevPAR grew by 8.2% during H1 2017 driven by demand for accommodation. With the inclusion of Grand Millennium Auckland, Australasia RevPAR increased by 23.4% in H1 2017 with a significant increase in average room rate of 22.0% and a small increase in occupancy of 1.0% points. Grand Millennium Auckland was added to the region's hotel portfolio at the end of 2016 contributed the bulk of the growth in the Australasian RevPAR.

Acquisition

CDLHT which is consolidated within the Group's accounts under IFRS 10 and in which the Group owns a 37% stake, acquired The Lowry Hotel in Manchester for £52.9m on 4 May 2017. The property is a 165-room purpose-built 5-star luxury hotel, which was opened in 2001.

The Group took up its full entitlement of new stapled securities for a total cost of S$94.4m (£53m) in the rights issue launched by CDLHT on 27 June 2017.

Developments

Design for the Yangdong development project in Seoul is under review. This may delay the commencement of construction, which had been scheduled for the end of 2017.

Design of the proposed mixed-use development of the Group's 35,717m2 freehold landsite at Sunnyvale, California is also under review by the new US management team.

Hotel refurbishments

Refurbishment of Millennium Hotel London Mayfair is planned to commence later this year. The Group estimates total cost of the refurbishment at £40m. Refurbishment of Millennium Hotel London Knightsbridge is anticipated to commence in 2018.

Orchard Hotel Singapore plans to commence renovation of its Orchard Wing guestrooms and the Hua Ting Restaurant in the last quarter of this year for completion in early 2018. Work on the reception lobby, all day dining restaurant and bar is planned for the later part of next year.

The final phase of the refurbishment of Grand Millennium Kuala Lumpur relating to the guestrooms at levels 7 and 8 is scheduled for completion by the end of this year. The guestrooms on levels 9 to 19 were refurbished last year.

Copthorne Hotel Auckland Harbourcity will soft-open in October 2017 and be rebranded M Social Auckland.

Asset disposals

On 31 July 2017 the Group, via its subsidiary company, City Hotels Pte Ltd., disposed of its 50% interest in Fena Estate Co.,Ltd. in exchange for a token payment ("Disposal of Fena"). Fena is the owner of Pullman Bangkok Grande Sukhumvit (formerly "Grand Millennium Sukhumvit Bangkok"). There was no carrying book value on the Group's balance sheet for this investment, which had been impaired in previous years. In conjunction with the transaction, there was repayment of a shareholder's loan which had also been fully impaired. The Group re-instated the loan on its balance sheet at 30 June 2017 and an income of £12m was recognised in the income statement.

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 the 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. The Group is entitled to compensation, which will either be negotiated with Network Rail or settled at the Lands Tribunal. Separation works arising from the order have commenced and are anticipated to be completed in October 2017. The Group is continuing to consider its options with respect to the refurbishment of the remaining hotel areas.

Other Group operations

Joint ventures and associates contributed £6m to profit in H1 2017 (H1 2016: £5m). The Group has an effective interest of 36% in First Sponsor Group Limited, which is listed on the Singapore Exchange and reports its results publicly.

Financial position

At 30 June 2017, the Group had net debt of £734m (Dec 2016: net debt £707m). Excluding CDLHT, net debt at 30 June 2017 was £203m (Dec 2016: net debt £232m).

Board and management changes

Martin Leitch was appointed as an Independent Non-Executive Director on 22 May 2017. Howard Wu, as announced previously, resigned from the Board with effect from the close of the Board meeting on 3 August 2017 in order to take up executive responsibility as President, North America, and Chief Technology and Solutions Officer.

Dividend

The Board has declared an interim dividend of 2.08 pence per share. The interim dividend will be paid on 29 September 2017 to shareholders on the register at the close of business on 18 August 2017. The ex-dividend date of the Company's shares is 17 August 2017. The Board will consider the full dividend for the year following the close of the financial year.

Current trading

On a constant currency basis, Group RevPAR was up by 4.3% for the three weeks ended 21 July 2017 with growth in all regions apart from Asia. RevPAR for Singapore and Rest of Asia were down by 0.1% and 3.2% respectively. RevPAR for New York was up by 9.1%, Regional US up by 1.7%, London up by 4.8%, Rest of Europe up by 4.0% and Australasia up by 32.4%.

On a like-for-like basis excluding One UN New York and Grand Millennium Auckland, Group RevPAR increased by 2.0% with New York up by 0.8% and Australasia up by 14.1%.

The Group has signed an agreement with Hilton under which Hilton will take on management of ONE UN New York from 30 August 2017. The hotel will be branded Millennium Hilton New York One UN Plaza. Hilton has also renewed its contract with the Group to manage Millennium Hilton New York Downtown.

This trading update 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.

Condensed consolidated income statement (unaudited)

for the half year ended 30 June 2017

The financial results above were derived from continuing activities.

Condensed consolidated statement of comprehensive income (unaudited)

for the half year ended 30 June 2017

Condensed consolidated statement of financial position (unaudited)

as at 30 June 2017

Condensed consolidated statement of cash flows (unaudited)

for the half year ended 30 June 2017

Condensed consolidated statement of changes in equity (unaudited)

for the half year ended 30 June 2017

Notes to the condensed consolidated financial statements

1. General information

Basis of preparation

The consolidated financial statements in this interim management report for Millennium & Copthorne Hotels plc ("the Company") as at and for the half year ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as "the Group") and the Group's interests in joint ventures and associates.

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2016.

The comparative figures for the financial year ended 31 December 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor 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.

These interim financial statements were authorised for issue by the Company's Board of Directors on 3 August 2017.

Use of judgements and estimates

The financial statements were prepared on a going concern basis supported by the Directors' assessment of the Group's current and forecast financial position, and forecast for the foreseeable future; and are presented in the Company's functional currency of sterling, rounded to the nearest millions.

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2016.

Significant accounting policies

The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2016.

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.

Notes to the condensed consolidated financial statements

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

· 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 condensed consolidated financial statements

3. Operating segment information (continued)

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 condensed consolidated financial statements

3. Operating segment information (continued)

Segmental assets and liabilities