Profits up at Millennium & Copthorne Hotels

5th May 2010

Hotel group Millennium & Copthorne (M&C) has reported a slight increase in profits for the first quarter of financial 2010, with a strong performance from properties in New York and Singapore key to success.

In a statement to markets this morning the London-based hotel group – which operates 120 properties in 19 countries – confirmed a profit of £18.7 million for the quarter.

This compares to a figure of £11 for the same period of 2009.

Overall RevPAR at the group increased in the first quarter, driven by a 3.1 per cent rise in occupancy, partially offset by a 1.5 per cent fall in average room rate. 

The trend was particularly pronounced in Singapore, where, in constant currency, RevPAR grew by 17.6 per cent over the quarter.

New York also recorded a 9.5 per cent increase in RevPAR, driven entirely by occupancy. 

Results were “in line with management expectations” explained M&C chairman Kwek Leng Beng.

“The results underline the strength of our owner-operator model,” added Mr Beng.

“Headline operating profit benefited from an improving trading environment in some regions and from our continuing focus on strong cost discipline.”



However, M&C suffered in its domestic market, with RevPAR in London down by three per cent on the back of a 4.6 per cent fall in occupancy.

This was principally due to the reduction in aircrew business.

Airlines have been exerting downward pressure on rates for aircrew accommodation as they seek to reduce their own costs in a difficult economic environment and in late 2009 this resulted in the group not renewing some aircrew business.

Excluding aircrew business, M&C’s RevPAR in London overcame the adverse weather conditions in January and grew by fiver due to rate growth in the small to medium enterprises and leisure segments and occupancy growth in the corporate segments.

Moving Forward

M&C was unwilling to predict trading performance for 2010 at this stage of the financial year.

However, the board considers the group’s rigorous analytical management, its geographically diversified revenues and strong balance sheet to place it in a strong competitive position.

“We expect management’s intense focus on cost control to continue delivering benefits to shareholders through our owner-operator model,” added a statement.

Credit Suisse said earlier this week M&C’s property portfolio saw left group best placed to capitalise on prospective gains in RevPAR during 2010.

“The Millennium & Copthorne investment story largely centres on its exposure to markets experiencing strong recovery with a prospectively encouraging outlooks for room rates,” the broker said.

“This backdrop in London, New York and Asia leads us to forecast five per cent RevPAR growth in 2010 for the group overall and 36 per cent growth in headline earnings before interest and tax – hence our above consensus earnings expectations.”

Raising its full-year earnings forecast by more than 40 per cent, the broker pegged peg its estimates some 34 per cent ahead of the market consensus.

Credit Suisse also raised its target price for the stock to 585p, implying a healthy return for shareholders.


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