MCK: 2018 Full Year Results

--CHAIRMAN'S REVIEW-- --Financial Performance & Financial Position Millennium & Copthorne Hotels New Zealand Limited (NZX:MCK) is pleased to report a profit attributable to owners of the parent of $49.4 million (2017: $43.1 million) for the year ended 31 December 2018. MCK's revenue for the year increased to $218.8 million (2017: $187.3 million) and profit before tax and non-controlling interests totaled $85.1 million (2017: $74.9 million) reflecting positive hotel performance. Together with the contribution from majority-owned residential property developer CDL Investments New Zealand Limited, earnings per share increased to 31.21 cents per share (2017: 27.25 cents per share). Shareholders' funds excluding non-controlling interests as at 31 December 2018 totaled $640.3 million (2017: $588.9 million). MCK's total assets at 31 December 2018 was $898.2 million (2017: $828.2 million) with net asset backing (with land and building revaluations and before distributions) as at 31 December 2018 also increasing to 404.41 cents per share (2017: 371.96 cents per share). --New Zealand Hotel Operations It was pleasing to see further improvements in hotel revenue growth in 2018 which reflected both tourism growth and MCK's competitiveness. Our Gross Operating Profit increased by 21.7% with a 1.9 % point increase in total occupancy throughout the New Zealand Hotels. Both increases reflect positive contributions from M Social Auckland and Millennium Hotel New Plymouth Waterfront and the overall results were underpinned by the steady performances from MCK's Queenstown and Rotorua hotels throughout the year. Tourism is tied to international events, both positive and negative but even more so in New Zealand given its location. New Zealand is particularly sensitive to negative wealth effects from the economies of our visitor countries. However domestic conditions have had more significant impacts on the accommodation sector in 2018 and will continue into 2019. The tight supply of skills continues and changes to the immigration policies on work visas have not helped. These have immediate flow through effects on the quality of service and costs of doing business going beyond wage or salary rates. Another domestic dampener affecting our cost of doing business is the Auckland Council's Accommodation Provider Targeted Rate (APTR) continues to impact the performance and profitability of MCK's Auckland hotels. The cost of the council rates, including APTR, to MCK in 2018 was 63% more in 2018 than the previous year. To-date council rates have increased by 109% from 2016 before the APTR was imposed. This targeted rate, used to fund ATEED activities, cannot be passed through to guests as Council had anticipated erroneously. The direct effect of the APTR is the erosion of our operational productivity gains we have made. The judicial review action initiated by various Auckland hotel owner / operators to which MCK is a party is now well advanced and will be heard in the High Court later in 2019. 2019 will see new challenges for tourism and accommodation providers across New Zealand. Increased inventory in key markets such as Auckland will drive new competitive pressures from new entrants and existing operators. These international and domestic shifts necessitates on an urgent change in managing costs and revenue in 2019 and into 2020. --CDL Investments New Zealand Limited ("CDLI") CDLI continued to perform strongly announcing another record operating profit after tax for the year ended 31 December 2018 of $33.6 million (2017: $32.2 million). Although it has seen signs of markets starting to slow down in some areas, CDLI is well positioned for the medium term having acquired additional land for development during 2018 and has a good pipeline of sections for sale across New Zealand. CDLI maintained its ordinary dividend at 3.5 cents per share which MCK will take in cash when paid in May this year. --Australia Update During 2018, two apartments at the Zenith Residences were sold and further units are being advertised for sale progressively as their leases come to an end. The rooftop penthouse area is also available for sale. Of the remaining leased apartments, occupancy continued to be positive at 98%. The Board is targeting further sales in 2019. --Dividend Announcement In view of the improved result in 2018, MCK's Board has resolved to declare and pay all shareholders a fully imputed dividend of 7.5 cents per share (2017: 6.0 cents per share). The increased dividend reflects a sound trading result over the past 12 months, feedback from shareholders and the Board's progressive dividend policy. The dividend, payable to all shareholders, will be paid on 17 May 2019. The record date will be 10 May 2019. --Outlook Although there are significant challenges ahead, the Board is confident that MCK will do well in 2019. We remain positive about the year ahead and expect growth in 2019 although slower. On behalf of the Board, I would like to thank all of MCK's management and staff for their work in 2018. Colin Sim Chairman 13 February 2019 --MEDIA RELEASE-- MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND REPORTS A POSITIVE 2018 RESULT Millennium & Copthorne Hotels New Zealand Limited (NZX: MCK) today reported its preliminary results for the year ended 31 December 2018 and announced a profit after tax and attributable to owners of the parent of $49.4 million (2017: $43.1 million) on total revenue of $218.8 million (2017: $ 187.3 million). "MCK's 2018 results reflect the growth of the New Zealand tourism and property markets over the last year with significant contributions from two hotel investments", said MCK's Chair Colin Sim. MCK also reported increases in its occupancy, gross profit and yield across its hotel portfolio which were assisted by contributions from its M Social Auckland and the acquisition of Millennium Hotel Waterfront New Plymouth. The steady growth in the company's hotels in Rotorua and Queenstown underpinned the performance of its hotels and MCK's majority-owned property development subsidiary CDL Investments New Zealand Ltd delivered its ninth year of profit growth despite a slowing of the residential property market. While pleased with the positive results, MCK's Managing Director BK Chiu highlighted some challenging factors that MCK had had to deal with over the past year. "Costs have escalated eroding much of the productivity gains we have made in 2018. The doubling of local body rates since 2016 primarily due to the targeted rate on Auckland accommodation providers has eroded productivity gains achieved by our operations. New work visa policies have squeezed availability of labour in the hospitality industry which is already very tight. Add to that the cross currents from overseas and uncertainty in a cyclical tourism sector is hardly surprising", he said. Mr. Chiu said that 2019 would see additional challenges in the form of increased inventory in key markets such as Auckland. "There will be more competition. But we are up to the challenge. The diversity and competitiveness of our portfolio of well-located hotels across New Zealand and the agility of our operations to flex costs and revenues will be key in 2019. Our two new hotels, M Social Auckland and Millennium Waterfront, New Plymouth, together with further sales of the Zenith Apartments in Sydney will help manage MCK's growth into the next cycle," he added. Reflecting its 2018 results, MCK has resolved to declare an increased and fully imputed dividend of 7.5 cents per share to all shareholders (2017: 6.0 cents per share). The dividend will be paid to shareholders on 17 May 2019. The record date will be 10 May 2019. Summary of results: o Profit after tax and non-controlling interests $49.4 million (2017: $43.1m) o Profit before tax and non-controlling interests $85.1 million (2017: $74.9m) o Group revenue $218.8 million (2017: $187.3m) o Shareholders' funds excluding non-controlling interests $640.3 million (2017: $588.9m) o Total assets $898.2 million (2017: $828.2m) o Earnings per share (cents per share) 31.21 cents (2017: 27.25 cents) ENDS Issued by Millennium & Copthorne Hotels New Zealand Limited Enquiries to: B K Chiu Managing Director (09) 353 5058 End CA:00330514 For:MCK Type:FLLYR Time:2019-02-13 14:02:58