MCK 2019 Results Announcement

--Chairman's Review-- Financial Performance & Financial Position Millennium & Copthorne Hotels New Zealand Limited (NZX:MCK) is pleased to report that, for the year ended 31 December 2019, it generated a profit attributable to owners of the parent of $49.7 million (2018: $49.4 million). MCK also noted an increase in revenue for the year to $229.7 million (2018: $218.8 million). Its 2019 profit before tax and non-controlling interests was $85.4 million (2018: $85.1 million) reflecting consistent performance in more challenging market conditions for its hotel and residential property development operations. Despite these challenges, MCK's earnings per share increased to 31.39 cents per share (2018: 31.21 cents per share). As at 31 December 2019, MCK recorded shareholders' funds excluding non-controlling interests of $715.3 million (2018: $640.3 million) and total assets of $1,008.2 million (2018: $898.2 million) with net asset backing (with land and building revaluations and before distributions) increasing to 451.78 cents per share (2018: 404.41 cents per share). New Zealand 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 New Zealand hotels were able to maintain their revenue at levels seen over the past three years which totaled $126.6 million (2018: $126.5 million) and Revenue per Available Room (RevPAR) increasing slightly to $132.46 (2018: $130.63). Occupancy for the year remained steady at 80.8% (2018: 80.9%). Gross Operating Profit decreased by 1.9 %. This was due to increasing cost pressures during 2019 such as utility and payroll cost increases which are expected to continue into 2020. In 2019 MCK's "book direct" and "think local" initiatives saw increases in the number of bookings made by customers directly with MCK. This is an encouraging trend and one which MCK is keen to see improve further. Geographically, MCK's marketing operations focused on diversifying its customer base originating from new and emerging markets such as South-East Asia and 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, MCK 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 MCK's talent pool upskilling with completions through the Service IQ programmes which assisted with retaining key operational staff at a number of our hotels. MCK continues to be focused on development of employees in an environment where attracting and retaining skilled employees will continue to contribute to productivity gains. MCK is disappointed by the judgment in relation to the Accommodation Provider Targeted Rate handed down by the High Court last week. We are reviewing our options with our external lawyers and will determine whether an appeal should be pursued in the next few weeks. CDL Investments New Zealand Limited ("CDLI") CDLI announced an operating profit after tax for the year ended 31 December 2019 of $34.1 million (2018: $33.6 million). This marks ten successive years of profit growth. Given slowing markets, this is a very creditable result and reflected a resourceful sales strategy in the latter half of 2019. MCK is encouraged that CDLI is progressing well with development works and has commenced sales at Dominion Road (South Auckland) and Kewa Road (North Shore) already. CDLI maintained its ordinary dividend to 3.5 cents per share which MCK will again take in cash when paid in May this year. Australia Update During 2019, six apartments at the Zenith Residences were sold and achieved attractive margins. Other units are being actively marketed for sale and we expect that these sales will boost MCK's 2020 results. Leasing of the remaining portfolio continues at an annual average occupancy rate of 92.6%. The Board is targeting further sales in 2020. Dividend Announcement MCK's Board has resolved to declare and pay all shareholders a fully imputed dividend of 7.5 cents per share which is the same as 2018 and reflects MCK's stable earnings profile. The dividend, payable to all shareholders, will be paid on 15 May 2020 with a record date of 8 May 2020. Outlook The recent travel issues associated with the Novel Coronavirus will impact on MCK's first quarter operations and results. A number of our hotels in high tourism areas are receiving cancellations from several Chinese operators as the Chinese and New Zealand Governments' travel bans and other containment measures come into effect. Cancellations received to date will result in revenue loss of between NZ$2 million and NZ$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 and safety plan is now in full effect at MCK's hotels. Given that the situation is extremely fluid, the Board will monitor the situation carefully and will update shareholders if the position changes. With increased hotel inventory in Auckland and other key tourism hotspots in New Zealand, MCK's hotels will need to work resourcefully to ensure that they are well positioned in key segments throughout this year without the benefit of any major events in New Zealand until 2021 and with tourism coming off its historic peak. We expect that MCK's land development operations will deliver positive contributions to the bottom line during the coming year and sales of the Zenith Residences units will add to overall profitability. The Board will continue to oversee progress against Management's targets closely to ensure that shareholders are able to receive positive returns despite what are expected to be difficult trading conditions during this year. On behalf of my fellow MCK directors, I thank all of MCK's management and staff for their efforts in 2019. Colin Sim Chairman 10 February 2020 --Media Release__ MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND DELIVERS CONSISTENT PROFIT AND DIVIDEND TO SHAREHOLDERS Millennium & Copthorne Hotels New Zealand Limited (NZX: MCK) today reported its preliminary results for the year ended 31 December 2019 and announced a profit after tax and attributable to owners of the parent of $49.7 million on total revenue of $229.7 million. "The Board and I are pleased that we have been able to deliver a consistent profit result in what was a difficult year for our property development and hotel operations", said MCK's Chair Colin Sim. MCK's results showed consistent occupancy, gross profit and yield across its hotel portfolio despite falling overseas visitor numbers. Its majority-owned subsidiary CDL Investments also contributed to the profit result having made good sales progress in the second half of 2019. MCK's Managing Director BK Chiu noted that the challenging factors that MCK had to overcome over the last two years would continue to have an effect for the foreseeable future. "Cost increases, a tight employment market and government policies impacted on our results during 2019. Tourism and the residential property market are now into their slower stages of the business cycle. Being nimble and the ability to flex our organization and processes on both costs and revenue, will help us to achieve meaningful productivity gains. These are being implemented with People, Planet and Profit lines of sight metrics and to deliver outstanding service experiences to our guests and customers," he said. Mr. Chiu said that MCK was disappointed by the judgment in relation to the Accommodation Provider Targeted Rate handed down by the High Court last week and would review its options with MCK's external lawyers as to whether to appeal the decision. MCK has resolved to maintain its fully imputed dividend of 7.5 cents per share to all shareholders. The dividend will be paid to shareholders on 15 May 2020. The record date will be 8 May 2020. Mr. Sim noted that the Novel Coronavirus issues including the government travel bans were impacting on MCK's operations and future bookings. Several MCK hotels had received cancellations and the revenue lost to date would be between $2 million to $3 million which would not be covered by insurance. MCK was therefore implementing mitigation measures in place urgently and the Board would be monitoring the situation carefully. He also said that the MCK Board would continue to oversee progress to ensure that shareholders were able to receive positive returns despite what are expected to be difficult trading conditions during this year. Summary of results: o Profit after tax and non-controlling interests $49.7 million (2018: $49.4m) o Profit before tax and non-controlling interests $85.4 million (2018: $85.1m) o Group revenue $229.7 million (2018: $218.8m) o Shareholders' funds excluding non-controlling interests $715.3 million (2018: $640.3m) o Total assets $1,008.2 million (2018: $898.2m) o Earnings per share (cents per share) 31.39 cents (2018: 31.21 cents) ENDS Issued by Millennium & Copthorne Hotels New Zealand Limited Enquiries to: B K Chiu Managing Director (09) 353 5058 End CA:00348166 For:MCK Type:FLLYR Time:2020-02-10 15:36:33