RNS Number:3018I
Millennium & Copthorne Hotels PLC
05 March 2003
5 March 2003
MILLENNIUM & COPTHORNE HOTELS PLC
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Millennium & Copthorne Hotels plc today announces results for the year ended 31
December, 2002. The Group owns and/or operates 91 hotels located in the
Americas, Europe, The Middle-East, North Africa, Asia and Australasia.
Group results
* Group turnover #567.5m (2001: #594.6m)
* Group operating profit #96.3m (2001: #100.4m)
* Hotel gross operating profit margin 35.1% (2001: 34.6%)
* Pre-tax profit #60.2m (2001: #54.2m)
* Earnings per share 13.4p (restated 2001: 10.9p)
* Total dividend of 12.5p per share (2001: 12.5p)
Operating highlights
* Increasing market share
- Driving sales at a local level
- Improving occupancy levels
* Ongoing cost saving initiatives leading to improved operating margins
* Asset review
- Millennium Hotel Sydney - conversion to apartments: pre-selling of
apartments has commenced
- Staff hostel in London - sale completed for #4.2m; profit of #4.0m
to be recognised in 2003
- Part completed property in Suzhou, China - sale completed: Group
share of profit is #2.1m to be recognised in 2003
Commenting today, Mr Kwek Leng Beng, Chairman, said:
"Our focus on maintaining market share coupled with tight cost control has
enabled us to achieve a very creditable set of results in challenging conditions
and to make good our stated belief that the Group's performance for 2002 would
be ahead of last year. The geographic spread of the Group's hotel properties in
key gateway cities around the world has mitigated the impact on the Group of the
downturn in the hotel sector which has been particularly severe in the western
hemisphere.
The prospect of war in Iraq combined with continued worldwide economic
uncertainty means that we expect 2003 to be another challenging year for the
sector and hence the Group.
We are well positioned to meet the immediate challenges which we face in the
global marketplace. Our property portfolio is primarily owned which means that
we are not exposed to the impact of onerous financing arrangements such as sale
and leaseback. We are financially sound, have an experienced management team
supported by dedicated staff and our properties are in good condition. We will
continue our successful strategy of maintaining and improving market share.
While in the short term trading conditions are likely to remain difficult, we
are confident that our longer term prospects are excellent."
Enquiries to:
John Wilson, Chief Executive 020 7404 5959 (5 March 2003)
Millennium & Copthorne Hotels plc
David Thomas, Finance Director 020 7404 5959 (5 March 2003)
Millennium & Copthorne Hotels plc
Nick Claydon/Kate Miller/Chi Lo 020 7404 5959
Brunswick Group Limited
A copy of the press release and analyst presentation will be available on http:/
/www.millenniumhotels.com/ from 9.15am on 5 March 2003. An audio webcast of the
results presentation to analysts and investors will be available later this
morning on www.millenniumhotels.com and www.cantos.com
Photographs are available on www.newscast.co.uk
CHAIRMAN'S STATEMENT
GROUP RESULTS
At the beginning of 2002 there were differing views regarding the timing of the
recovery within the hospitality sector. Some hotel companies were more
optimistic than others, but many shared the view that, at best, a slow recovery
would emerge during the year.
We started the year with confidence. We had seen our Group begin a recovery in
early 2002 and, although the operating environment remained challenging, our
performance for the period to 30 June 2002 was better than we had expected.
This recovery continued steadily during the summer and autumn of 2002 despite
the shrinking volume of the corporate market and some aggressive rate cutting
within the industry. However, following the escalation of the Iraq crisis from
mid-November onwards, business volumes began to deteriorate. Despite this, the
Group has progressed in a number of areas such as securing further management
contracts and starting to unlock the value within our non-core assets.
Group turnover for the year ended 31 December 2002 was #567.5m (2001: #594.6m).
Group operating profit decreased by 4% to #96.3m (2001: #100.4m) and profit
before tax increased by 11% to #60.2m (2001: #54.2m). Earnings per share were
13.4p (restated 2001: 10.9p).
The Group's balance sheet is strong with net assets at #1.5bn (restated 2001:
#1.6bn) and gearing at 50% (restated 2001: 49%). Our cash inflow from
operations was #122.2m (2001: #136.0m). The directors are therefore again
recommending a final dividend of 8.3p per share (2001: 8.3p per share)
reflecting our confidence in the underlying strength of the Group. This results
in a total dividend for the year of 12.5p per share (2001:12.5p).
RESPONSE TO MARKET CONDITIONS
The overall performance for the year under review demonstrated our prompt and
effective response to the turbulent conditions under which we operated. Our
cost control initiatives which we introduced in late 2001 were continued in 2002
and this, together with our aggressive tactical marketing, stood us in good
stead. We increased our market share in both New York and London, saw an
encouraging performance overall from Asia and had another excellent year in
Australasia.
We have seen considerable variations in regional performance and future trends
remain difficult to predict due to global economic conditions and the political
tensions relating to Iraq. The geographic diversification of the Group in 1999
has reduced our dependency on the London and New York markets. In 2002, London
and New York accounted for 25% of the Group's revenue and 43% of its total
operating profit, compared to a far more significant 69% and 83% respectively in
1998.
Our strategic response to the weak trading conditions that the hospitality
industry is facing has been to maintain and increase market share by driving
sales at a local level, as well as securing further management contracts to
access new revenue streams. In addition, we continue to monitor our cost base
carefully with targeted reductions. Service to our customers is paramount, but
we are committed to reducing costs as far as possible without damaging our
standards and reputation or losing our ability to react positively when the
market recovers.
The management contract hotels in Abu Dhabi, Sharjah and the Galapagos Islands
opened during 2002. In January 2003 we announced that the Group had secured the
management of the Millennium Airport Hotel Dubai, our third hotel in the United
Arab Emirates. The Millennium Hotel Agadir had a soft opening on 14 February
2003, the hotel in Marrakech is scheduled to open later this year and our two
hotels in Turkey will open in 2004/5 following refurbishment.
Our assets are well maintained and this has enabled us to reduce overall capital
expenditure and to target specific areas that need capital. As well as service
standards, the superior location and quality of our properties are key to
maximising the upside when economic recovery gathers pace. Our policy of
maintaining market share, combined with the substantial targeted capital
investment programme that we have followed since flotation in 1996, means that
we are well positioned to take maximum advantage of the upturn when it comes.
ASSET REVIEW
Despite the current economic and geopolitical risks, hotel values have held up
reasonably well as a result of low interest rates, moderate industry gearing and
limited new room supply in many cities. The Group is continually reviewing its
portfolio of non-core assets and seeking opportunities to realise shareholder
value.
Millennium Hotel Sydney
At the time of our interim results we stated that we continued to consider
alternative development opportunities for the Millennium Hotel Sydney. The
hotel is located on the edge of the main business centre in an area which has
become a good residential district and is suitable for development into high
class apartments. South Sydney Council has approved our application to convert
part of the hotel property to residential units and therefore the hotel will
close on 31 March 2003. The expertise of our majority shareholder, City
Developments Limited, will be invaluable in maximising the return from this
project. We have begun pre-selling and the response has been encouraging with
nearly half the apartments taken. We will evaluate the best use of the
remaining tower in due course. The profit to be recognised in 2003 and 2004
will depend on the unit sales and the progress of construction.
London staff hostel
In order to take advantage of the high value of London's residential property we
decided to dispose of one of our two staff hostels. The sale completed in
January 2003 for a consideration of #4.2m. A net profit of #4.0m will be
recognised in 2003.
Suzhou, China
A partly completed property in Suzhou in China was sold in early 2003. The
property was acquired as part of the Asia Pacific purchase of assets in June
1999. No value was attributed to the property at acquisition and therefore M&C
will recognise its #2.1m share of the profit on sale in 2003.
BRANDING
During the year, group management engaged actively with branding consultants and
specialist designers to create new concepts that could be introduced to
reposition our global portfolio of Millennium hotels. Ideas being explored have
the potential to be adopted worldwide and to provide long-term sustainable
advantages for the Group.
We plan to introduce some of the new thinking and ideas by the end of 2003. This
work will be important in further enhancing our existing brand assets, as we
strive to deliver added value to our customers, investors and business partners.
MILLENIUM HILTON
The Millenium Hilton, New York has been closed since 11 September 2001. Work on
the renovation has been underway for some time and we expect a partial
re-opening of the hotel during the second quarter of 2003. We plan to have all
of the rooms open by the end of the third quarter of 2003.
Proceeds of US$49.5m from the insurance claim have now been received in respect
of the capital and business interruption claims. However, the insurance company
has taken legal action to seek clarification on certain aspects of the policy.
The Board has taken legal advice and based on this, and its own information,
considers that the Group's interpretation of the policy is correct.
The Board has decided that until the dispute is settled it would be prudent not
to recognise any further business interruption income from 1 January 2003. In
the first six months of 2002 we recognised US$4.5m of operating profit after the
recognition of business interruption income (net of depreciation and expenses)
with US$9.7m of operating profit being recognised for the full year. We
anticipate the operating loss before interest for the first six months of 2003
to be US$9.1m which fully provides for all fixed costs such as insurance,
pre-opening costs, marketing and normal operating expenses. The Group believes
that this amount will be recoverable on the successful completion of the legal
case.
PROSPECTS AND CURRENT TRADING
I would like to thank our management and staff for all of their cooperation and
hard work which has enabled us to limit the effects on our business in the
current trading environment.
The prospect of war in Iraq, combined with continued worldwide economic
uncertainty, means that we expect 2003 to be another challenging year for the
sector and hence the Group.
The trading pattern in the final few weeks of 2002 has continued into 2003. For
the period from 1 January to 21 February 2003 Group occupancy was slightly
higher than the equivalent period in 2002 but average rate was lower. There
were significant variations in performance across the regions resulting in a
reduction in RevPAR of 2% compared to 2002.
In the USA, we are seeing significant rate pressure in 2003 but occupancies have
improved outside New York. In Europe both our occupancy and rates are under
pressure, particularly in London. In Asia, RevPAR is marginally down on 2002
whilst in Australasia we are seeing significant improvements in both occupancy
and average rate. It is too early to predict the performance of the Group for
2003 as a whole.
The Board remains confident that the Group is well positioned to enable it to
meet the immediate challenges which it faces in the global marketplace. We are
financially sound, have an experienced management team supported by dedicated
staff and our properties are in good condition. We will continue our successful
strategy of maintaining and improving market share. While in the short term
trading conditions are likely to remain difficult, we have already taken steps
to cushion the impact by realising value from our non-core property portfolio
and we are confident that our longer term prospects are excellent.
Kwek Leng Beng
Chairman
5 March 2003
CHIEF EXECUTIVE'S REPORT
GROUP PERFORMANCE
The Group's results for 2002 reflect the challenging business environment and
worldwide political uncertainty that existed throughout the year. RevPAR trends
were not easy to predict, bookings had a very short lead time and forecasting
revenues was difficult. However, the Group's focus on maintaining market share
and reducing costs means that we have achieved a very creditable set of results
for the year.
In order to assist the understanding of our key operating statistics we are
presenting "like for like" ('LFL') comparatives in constant currency. To
achieve this we have excluded from the prior year comparatives the Millenium
Hilton New York and the properties we sold in the United States last year, but
included the full year effect of the Millennium Hotel Stuttgart, which was
consolidated from 1 October 2001.
Occupancy for the Group was 67.2% (2001: 65.1%; LFL 65.1%); the average room
rate was #65.73 (2001: #71.39; LFL #68.33) producing a RevPAR of #44.17 (2001:
#46.47; LFL #44.48). The gross operating profit margin for the Group was 35.1%
(2001: 34.6%). At our interim results we reported a like for like decline of 6%
in RevPAR for the Group. This has reduced to 1% for the full year.
Our Group turnover fell by #27.1m to #567.5m (2001: #594.6m) whereas Group
operating profit only fell by #4.1m to #96.3m (2001: #100.4m). This
performance demonstrates the effectiveness of the cost control procedures that
we put in place in late 2001 and has been achieved despite significant rises in
insurance costs, increased depreciation as a result of our capital expenditure
programmes and the full year consolidation of the Millennium Hotel Stuttgart.
In line with previous years, the results of our joint venture and associate
hotels are not included in the Group operating statistics.
NEW YORK
Our policy in New York City has been to target volume through tactical marketing
and as a consequence LFL occupancy has risen by 10 percentage points to 83.3%
(2001: 75.3%; LFL 73.3%) due primarily to an increase in leisure business.
This, combined with lower corporate rates, has reduced the average room rate to
#120.28 (2001: #139.28; LFL: #129.79). However, by successfully driving volume
the resultant LFL RevPAR increased by 5% to #100.19 (2001: #104.88; LFL #95.14)
and the gross operating profit margin improved to 32.5% (2001: 27.0%).
Corporate booking patterns were unpredictable during the year but we were
encouraged by the gradual improvement that we saw, particularly as a result of
our intensive efforts to attract the conference and meetings market to the
Millennium Broadway Hotel New York. The Millennium Hotel New York UN Plaza has,
by focusing its occupancy more towards the leisure sector, improved its RevPAR
by 3% compared to 2001.
We have included US$9.7m of business interruption income (net of depreciation
and expenses) from the Millenium Hilton insurance claim in our results for the
year (11 September 2001 to 31 December 2001: US$ 1.8m). Due to the current
legal dispute with the insurer, it is anticipated that no further income will be
recognised pending resolution of this dispute and that all pre-opening costs for
2003 will be charged to the profit and loss account.
As a response to the difficult conditions which exist across the United States
we carried out a review of centralised costs in the region. In order to reduce
our operating costs in the USA, we relocated most of our regional office
activity from Denver and Washington to our existing offices in New York and
London.
The City of New York has announced 18% increases in real estate taxes from 2003.
The effect on our properties will be an increased cost of some US$ 2.7m.
REGIONAL US
The Regional US remains challenging primarily due to the reduction in both
domestic air travel and the demand for convention business.
Occupancy for the region was 54.0%, broadly the same as last year (2001: 53.9%;
LFL 54.1%). Average room rate fell to #70.83 (2001: #73.49; LFL #72.57) and the
resulting RevPAR was #38.25 (2001: #39.61; LFL #39.26). The gross operating
profit margin was 23.7% (2001: 24.1%).
Our hotels which depend on the convention business, namely in St Louis, Los
Angeles and Cincinnati, account for 48% of our rooms in this marketplace. The
properties in St Louis and Los Angeles have seen signs of improved occupancy
during 2002 but they have still shown an aggregate RevPAR decline of 7% compared
to 2001. At the half year this was a RevPAR decline of 21%. The Millennium
Hotel Cincinnati has improved RevPAR by 5% compared to the prior year, although
its EBITDA is 6% lower than in 2001 due to higher property taxes and insurance.
Our Millennium hotels in Minneapolis and Chicago also both achieved improved
RevPAR in 2002.
We carried out major refurbishment work in our hotel in Nashville and it has now
been rebranded as a Millennium property. Our property in Buffalo, branded as a
Sheraton Four Points, has also been renovated during 2002.
LONDON
London average rates have been under pressure all year, with inbound business
from the United States particularly badly hit, although occupancy levels have
remained high. We have gradually seen the RevPAR decline of 11% in the first
half year being reduced to 5% for the year as a whole. Overall occupancy for
London was 83.1% (2001: 80.4%) with an average room rate of #79.86 (2001:
#87.32) producing a RevPAR of #66.36 (2001: #70.21). The gross operating profit
margin was 51.4% (2001: 50.4%).
As in New York, our policy during the year has been to maintain occupancy at a
high level by tactical price reductions, rather than wholesale cuts in room
rates. At the same time, all of our properties have implemented tight cost
control measures and we have been able to convert a reduction in RevPAR for the
region into an overall improvement in the gross operating profit margin.
We have continued to maintain the high standard of our London hotels with two
floors of bedrooms being refurbished at The Copthorne Tara Hotel London
Kensington as well as upgrading essential facilities at The Millennium
Gloucester Hotel London Kensington. We have engaged the well known chef Brian
Turner to operate our a la carte dining at the Millennium Hotel London Mayfair.
His unique style will attract more non residents to the hotel restaurant and
improve the profitability of its food and beverage department.
REST OF EUROPE
The performance of our Regional UK and Continental European hotels was mixed.
Occupancy was 68.6% (2001: 71.2%; LFL 71.4%) with an average room rate of #68.94
(2001: #72.35; LFL #70.75) producing a RevPAR of #47.29 (2001: #51.51; LFL
#50.52). The gross operating profit margin was 30.5% (2001: 35.9%).
The trading conditions were challenging but we were particularly pleased to see
improvements in RevPAR in the Copthorne hotels in Birmingham, Cardiff and Merry
Hill. A number of other hotels held their RevPAR at approximately the same
level as in 2001 despite difficult local market conditions.
Our two hotels close to Gatwick airport have suffered from the general decline
in air travel and showed an aggregate RevPAR decline of 23%. This was due to
falls in both occupancy and average rate.
Our other European airport hotel at Paris Charles de Gaulle saw a significant
reduction in its occupancy but managed to marginally increase its average rate.
Overall its RevPAR fell by 10% compared to 2001. This property was rebranded as
a Millennium in the autumn and we expect to see a better performance in 2003.
The results of our two hotels in Germany continue to be disappointing due to
local economic conditions and both properties recorded falls in RevPAR. The
Millennium Hotel Stuttgart has a relatively high level of fixed costs because it
is leased and the impact of this high operational gearing in the current trading
environment resulted in net losses before interest from this hotel of #3.0m.
ASIA
Across the seven Asian countries in which we operate we saw a mixed picture,
although generally we are encouraged by the region's performance, particularly
in our large profit contributing properties in Seoul and Taipei. The Bali bomb
in October did not have a major impact on our business in the region.
Occupancy for the region was 66.4% (2001: 62.5%; LFL 62.5%). The average room
rate fell to #59.26 (2001: #64.19; LFL #61.71) producing a RevPAR of #39.35
(2001: #40.12; LFL #38.57). The gross operating profit margin for the region
was 38.8% (2001: 38.2%).
The decline in visitors to Singapore from the USA and Japan has been countered
by increased inbound traffic from other Asian countries, particularly China.
The effect of this is that three of our four owned properties in Singapore
showed increases in occupancy but reductions in average rate, leading to an
overall reduction in RevPAR in Singapore of 6%. The fourth, Copthorne Kings
Hotel, began a major renovation during the second half of the year which will
reposition it more directly within the business market. We expect the work to
be completed in mid- 2003 at a cost of S$13m. We will also be refurbishing the
second tower at the Orchard Hotel Singapore in 2003.
Our hotel in Seoul produced an increase in RevPAR of 7% reflecting the good
performance of the South Korean economy, the strongest in North Asia, which was
somewhat helped by the football World Cup and the Asian Games. The other large
hotel that we own in this region, the Grand Hyatt Taipei, achieved a RevPAR
increase of 4%. This is an encouraging performance in light of the economic
environment in Taiwan which has been difficult.
In Hong Kong our two hotels competed effectively in a marketplace that was
severely affected by the reduced levels of international air travel as a
consequence of the opening up of mainland China but which has now stabilised.
They experienced a 5% increase in RevPAR which, combined with very effective
cost control, increased our share of their operating profits from #5.8m in 2001
to #7.1m in 2002. The Millennium Sirih Jakarta and the Regent Kuala Lumpur both
showed improvements in RevPAR during 2002.
AUSTRALASIA
The overall operation in Australasia reported record profits.
Hotel operations
Our hotels in this region continue to perform very well. Occupancy increased to
70.4% (2001: 67.1%; LFL 67.1%). The average rate was #31.46 (2001: #28.56; LFL
#30.36) and the resultant RevPAR increased to #22.15 (2001: #19.16; LFL #20.37).
The gross operating profit margin continued to improve to 37.3% (2001: 35.1%)
clearly demonstrating our ongoing and effective cost control. Since we
acquired these hotels in 1999 the gross operating profit margin has increased by
more than four percentage points. The leisure business has been helped by
intensive marketing of their country by the New Zealand tourist authorities.
Major refurbishment work was carried out to the bedrooms at Copthorne
Christchurch Central and airconditioning was installed in all of the guest
rooms. In addition the Group purchased the freehold of the Quality Hotel Logan
Park in Auckland New Zealand for NZ$ 2.4m. The Group already held a lease on
this property.
We have decided to convert one tower of the Millennium Hotel Sydney into
residential apartments and the property will close on 31 March 2003.
Non-hotel operations
This region generates a significant proportion of its profits from non-hotel
operations.
Our retail operations in Sydney have continued to perform well with very high
occupancy. The Birkenhead Point Marina has been refurbished during this year,
which will allow us to generate increased revenues and reduce operating costs.
CDL Investments New Zealand, whose primary business is the sale of land, has
reported a profit of #2.9m for the year following the sale of its loss making
Knight Frank New Zealand business at book value.
CURRENT TRADING
In the period to 21 February 2003 our like for like Group RevPAR (compared to
2002 at constant rates of exchange) was 2% down, although there are significant
regional variations.
There was a 9% fall in RevPAR in New York due to significant pressure on average
rate and a 2 percentage point fall in occupancy, mainly as a result of the
severe weather conditions experienced in that city. We are encouraged that in
the rest of the United States RevPAR was up 1% as a reduction in average rate
was more than compensated for by better occupancy.
In Europe, London has seen falls in both occupancy and average rate translate
into a RevPAR reduction of 7%. Excluding the effect of our airport hotels at
Gatwick and Paris - Charles de Gaulle, the RevPAR for the rest of our portfolio
in Europe (including Regional UK) is the same as in the equivalent period in
2001. Including the airport hotels, RevPAR was down by 6%.
In Asia, we see encouraging results from our Taiwan and Malaysia hotels although
the overall RevPAR for the region was down by 2%. Australasia is again showing
increased occupancy and average rate to improve on last year with RevPAR ahead
by 11%.
Our strategy is to maintain and improve market share without wholesale cuts in
average rates. We are confident that this is the right course for the Group and
will pursue it during 2003, a year in which trading conditions will be
challenging.
John Wilson
Chief Executive Officer
5 March 2003
Finance report
Results
The total group turnover for the year was #641.1m (2001: #670.5m) including
#73.6m as a share of the turnover of joint ventures (2001: #75.9m). The total
Group Operating Profit was #96.3m (2001: #100.4m). The Group share of operating
profits of joint ventures and associates was #12.6m (2001: #12.2m) to give a
total operating profit of #108.9m (2001: #112.6m).
Interest
Total interest receivable and similar income was #9.3m (2001: #9.4m) of which
#0.7m (2001: #0.9m) was received from joint ventures.
Total interest payable was #58.0m (2001: #67.8m). The main reason for the
reduction is the fall in interest rates, particularly in the USA and United
Kingdom. The Group interest payable (excluding joint ventures and associates)
was #51.1m (2001: #56.5m).
Of the total interest payable, #0.4m (2001: #0.8m) was payable in respect of the
Group's share of the interest payable by associated undertakings and #6.5m
(2001: #10.5m) was in respect of the Group's share of the interest payable by
joint ventures. The lower joint venture interest cost reflects the reduction in
US interest rates.
A total of #0.1m (2001: #0.7m) of interest has been capitalised in relation to
major development capital expenditure.
The total net interest cost for the year was #48.7m (2001: #58.4m), which was
covered 2.2 times (2001: 1.9 times) by profits, including our share of operating
profits of joint ventures and associated undertakings, of #108.9m (2001:
#112.6m).
Assuming that prevailing interest rates remain largely unchanged, we expect our
interest cost in 2003 to be very similar to the charge for 2002.
Prior year adjustment
The Group has adopted Financial Reporting Standard 19 (FRS 19) - Deferred Tax,
in 2002. This requires full provision to be made for deferred tax on most types
of timing differences. The previous accounting standard required provision only
to the extent that it was probable that the liability would crystallise in the
future. FRS 19 allows companies the choice of whether to discount their
deferred tax balances. The Group has decided not to discount.
Adoption of FRS 19 has been dealt with by way of a prior period adjustment which
has given rise to a reduction in shareholders' funds of #62.5 million at 31
December 2001 and the tax charge for the year ended 31 December 2001 has
increased by #5.4 million.
Taxation
The effective rate of tax for the Group is 23.9% (restated 2001: 27.9%). We
expect the future effective rate to be around 28%.
Minority interests
The minority interests' share of Group profits arises due to the equity interest
that external shareholders hold in subsidiaries and joint ventures of the Group.
The equity minority interest charge was #7.8m (restated 2001: #8.2m) which
largely arises in Asia and Australasia. The acquisition of the 15% minority
share in Republic Hotels and Resorts (see below) has reduced the minority
interest charge in the second half of the year.
Dividends and earnings per share
The directors are proposing a final dividend of 8.3p per share (2001: 8.3p).
This means that the total dividend per share for the full year will be 12.5p
(2001: 12.5p).
The earnings per share were 13.4p (restated 2001: 10.9p).
Acquisitions and disposals
On 28 May 2002 we announced our intention to make an unconditional voluntary
cash offer for the minority shareholding in Republic Hotels and Resorts ('RHR').
At that time it was an 85% subsidiary of the Group listed on the Singapore
Stock Exchange. The offer was made on 17 June. On 28 June we announced that we
had received sufficient acceptances to make a compulsory acquisition of the
outstanding minority shares. RHR is now a wholly owned subsidiary and has been
delisted from the Singapore Stock Exchange. This acquisition will provide the
Group with more flexibility and efficiency in managing its resources. The
consideration for the acquisition was #37.4m.
The Group purchased the freehold of Quality Hotel Logan Park in Auckland New
Zealand for NZ$ 2.4m. The Group already held a lease on this property. The
loss making Knight Frank operation in New Zealand was disposed of during the
first half of the year at book value.
In December 2002 the Group exchanged contracts on the sale of a staff hostel in
London for a consideration of #4.2m. The sale was completed in January 2003 and
a profit of #4.0m will be recognised in 2003.
In early 2003 a partly completed property in Suzhou in China, acquired as part
of the Asia Pacific purchase of assets, was sold. No value was attributed to
the property at acquisition and there has been no expenditure on it by the
Group. A net profit of #2.1m will be recognised by the Group in 2003.
Millenium Hilton
The Millenium Hilton remained closed throughout the period. A total of US$
49.5m has been received to date relating to the insurance claim for damage and
business interruption on this property. These receipts have been used in part
to make payments in respect of employment expenses, other variable and fixed
costs and on the renovation of the property.
Insurance proceeds from the property damage claim of US$28.4m have been credited
to the profit and loss account. Fixed assets with a net book value of US$ 27.4m
have been written off to the profit and loss account during the period. At 31
December 2002 a total of US$8.7m had been spent on the renovation and is
included in capital work in progress.
The Group has recognised profit of US$9.7m relating to the business interruption
claim in the year ended 31 December 2002 (11 September 2001 - 31 December 2001:
US$1.8m).
Capital expenditure
The Group's properties are generally in excellent condition as a result of the
substantial capital investment made since the flotation in 1996. We have
therefore been able to reduce capital expenditure in 2002 to much lower levels
than we have historically seen.
In Europe, two floors of the Copthorne Tara Hotel London Kensington have been
renovated and we have begun the remodeling of our a la carte dining at the
Millennium Hotel London Mayfair under the guidance of the chef Brian Turner who
will now operate this restaurant.
We refurbished 289 rooms of our hotel in Nashville before rebranding it as a
Millennium and made a start on improving the bedrooms, bathrooms and corridors
at the Sheraton Four Points in Buffalo.
The Copthorne Kings Hotel in Singapore is undergoing a S$13m refurbishment after
which it will be repositioned more directly in the business market. On-going
rolling refurbishment was carried out in Seoul and Taipei.
In Australasia, major work was carried out to 92 bedrooms at Copthorne
Christchurch Central and airconditioning was installed in all of the guest
rooms. The marina at Birkenhead in Sydney was upgraded at a cost of #0.9m.
In 2003 Group capital expenditure will be around #48m, including #13m on the
Millenium Hilton, New York and the Group depreciation charge will be around
#42m.
Cashflow and gearing
Net cash inflow from operations was #122.2m (2001: #136.0m).
The other predominant features of the Group cashflow are the reduction in
capital expenditure from #67.1m in 2001 to #33.7m (including the Millenium
Hilton) in 2002, the purchase of the minority interest in Republic for #37.4m
and the receipt of #18.9m of insurance proceeds relating to the Millenium Hilton
claim.
There was an overall net increase in cash of #14.9m (2001: decrease #30.2m)
which, together with the reduction of #30.6m in the short term deposits, gives
rise to a cash balance at 31 December 2002 of #59.1m (2001: #78.0m).
The Group gearing as at 31 December 2002 was 50% (restated 2001: 49%).
David Thomas
Group Finance Director
5 March 2003
Consolidated profit and loss account for the year ended 31 December 2002
Restated Restated
2002 2002 2001 2001
#m #m #m #m
TURNOVER
Group and share of joint ventures 641.1 670.5
Less share of turnover of joint ventures (73.6) (75.9)
GROUP TURNOVER 567.5 594.6
Cost of sales (252.1) (259.5)
GROSS PROFIT 315.4 335.1
Administrative expenses (225.6) (235.9)
Other operating income 6.5 1.2
GROUP OPERATING PROFIT 96.3 100.4
Share of operating profits of joint ventures 12.2 11.3
Share of operating profits of associated undertakings 0.4 0.9
TOTAL OPERATING PROFIT 108.9 112.6
Interest receivable and similar income
Group 9.3 9.4
9.3 9.4
Interest payable and similar charges
Group (51.1) (56.5)
Joint ventures (6.5) (10.5)
Associated undertakings (0.4) (0.8)
(58.0) (67.8)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 60.2 54.2
Tax on profit on ordinary activities (14.4) (15.1)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 45.8 39.1
Minority interests - equity (7.8) (8.2)
Profit for the financial year 38.0 30.9
Dividends paid and proposed (35.3) (35.3)
RETAINED PROFIT/(LOSS) FOR THE FINANCIAL YEAR 2.7 (4.4)
Basic earnings per share 13.4p 10.9p
Diluted earnings per share 13.4p 10.9p
Dividends per share 12.5p 12.5p
All turnover and group operating profit derive from continuing operations in the current and prior years.
Consolidated statement of total recognised gains and losses for the year ended 31 December 2002
Restated
2002 2001
#m #m
Profit for the financial year 38.0 30.9
(Loss)/gain on foreign currency translation (62.6) 3.3
(Deficit)/surplus on revaluation of fixed assets (0.3) 0.5
Total gains and losses relating to the financial year (24.9) 34.7
Prior year adjustments (62.5) -
Total gains and losses recognised since last annual report (87.4) 34.7
Note of historical cost profits and losses for the year ended 31 December 2002
Restated
2002 2001
#m #m
Reported profit on ordinary activities before taxation 60.2 54.2
Difference between a historical cost depreciation charge
and the actual depreciation charge for the year calculated
on the revalued amount 0.5 0.4
Historical cost profit on ordinary activities before taxation 60.7 54.6
Historical cost profit/(loss) for the year retained after taxation,
minority interests & dividends 3.2 (4.0)
Consolidated balance sheet for the year ended 31 December 2002
Restated
2002 2002 2001
#m #m #m
FIXED ASSETS
Tangible assets 2,185.4 2,303.5
Investments in joint ventures
Share of gross assets 288.1 318.9
Share of gross liabilities (205.1) (230.0)
Share of minority interests (21.2) (21.8)
Loans to joint ventures 36.1 39.9
97.9 107.0
Investment in associated undertakings 6.2 4.9
Investments 0.3 0.4
104.4 112.3
2,289.8 2,415.8
CURRENT ASSETS
Stocks 15.7 17.9
Debtors falling due within one year 75.6 64.3
Debtors falling due after more than one year 2.0 9.7
77.6 74.0
Cash at bank and in hand 59.1 78.0
152.4 169.9
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (292.2) (283.4)
NET CURRENT LIABILITIES (139.8) (113.5)
TOTAL ASSETS LESS CURRENT LIABILITIES 2,150.0 2,302.3
CREDITORS: AMOUNTS FALLING DUE AFTER MORE
THAN ONE YEAR (634.0) (692.0)
PROVISIONS FOR LIABILITIES AND CHARGES (49.7) (46.1)
NET ASSETS 1,466.3 1,564.2
CAPITAL AND RESERVES
Called up share capital 84.8 84.7
Share premium account 845.6 845.5
Revaluation reserve 308.4 320.3
Profit and loss account 112.1 160.4
SHAREHOLDERS' FUNDS - EQUITY 1,350.9 1,410.9
MINORITY INTERESTS - EQUITY 115.4 153.3
TOTAL CAPITAL EMPLOYED 1,466.3 1,564.2
2002 2002 2001 2001
#m #m #m #m
CASH FLOW STATEMENT
Net cash inflow from operating activities 122.2 136.0
Dividends received from associated undertakings 0.2 0.5
Dividends received from joint ventures 0.1 0.3
Returns on investments and servicing of finance (50.0) (49.1)
Taxation paid (11.6) (7.2)
Capital expenditure and financial investment (12.2) (20.9)
Acquisitions and disposals - (6.6)
Equity dividends paid (35.3) (35.3)
Cash inflow before use of liquid resources and financing 13.4 17.7
Management of liquid resources 30.6 11.1
Financing
Net cash from the issue of shares and purchase
of minority interests (37.2) (1.2)
Increase/(decrease) in debt and lease financing 8.1 (57.8)
Net cash outflow from financing (29.1) (59.0)
Increase/(decrease) in cash in the period 14.9 (30.2)
2002 2002 2001 2001
#m #m #m #m
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Increase/(decrease) in cash in the period 14.9 (30.2)
Cash inflow from decrease in
liquid funds (30.6) (11.1)
Cash (inflow)/outflow from the (increase)/decrease
in debt and lease financing (8.1) 57.8
Change in net debt resulting from cash flows (23.8) 16.5
Acquisitions - (1.1)
Deferred finance costs 0.2 0.3
Translation differences and other non cash movements 33.5 (4.3)
Movement in net debt in the period 9.9 11.4
Net debt at 1 January 2002 (685.4) (696.8)
Net debt at 31 December 2002 (675.5) (685.4)
RECONCILIATION OF OPERATING PROFIT
TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
31 December 2002 31 December 2001
#m #m
Operating profit 96.3 100.4
Depreciation 39.8 36.4
Loss on disposal of fixed assets 0.4 0.4
Decrease in stocks 0.1 0.7
Increase in debtors (4.3) (4.4)
(Decrease)/increase in creditors (9.7) 3.0
Decrease in provisions (0.4) (0.5)
Net cash inflow from operating 122.2 136.0
activities
ANALYSIS OF NET DEBT Translation
differences
As at and other As at
1 January Deferred finance non cash 31 December
2002 Cash flow costs movements 2002
#m #m #m #m #m
Cash 34.2 15.5 (3.5) 46.2
Overdrafts (1.3) (0.6) 0.1 (1.8)
14.9
Short term deposits 43.8 (30.6) (0.3) 12.9
Debt due after one year (572.8) 33.9 73.9 (465.0)
Debt due within one year (33.1) (13.3) 0.2 (40.3) (86.5)
Finance Leases (19.6) 2.1 (0.8) (18.3)
Bonds due after one year (83.9) (66.7) 3.2 (147.4)
Bonds due within one year (52.7) 35.9 1.2 (15.6)
(8.1)
(685.4) (23.8) 0.2 33.5 (675.5)
ANALYSIS OF CASH FLOW FOR HEADINGS 31-Dec 31-Dec
NETTED IN THE CASH FLOW STATEMENT 2002 2001
#m #m
Returns on investment and
servicing of finance
Interest received 4.6 7.2
Interest paid (46.5) (51.0)
Loan arrangement fees paid (2.9) (0.3)
Interest element of finance lease (1.2) (0.9)
rental payments
Dividends paid to minorities (4.0) (4.1)
Net cash outflow for returns on
investments and servicing of
finance (50.0) (49.1)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (28.6) (67.1)
Hilton capital expenditure (5.1) -
Insurance capital claim receipts 18.9 -
Purchase of development properties (2.1) (5.7)
Proceeds from the sale of 0.3 36.0
development properties
Sale of properties held for resale 3.2 8.1
Sale of other fixed assets 0.3 0.5
Repayment in loans to associated 0.9 7.3
undertakings and joint ventures
Net cash outflow for capital (12.2) (20.9)
expenditure and financial
investment
Acquisitions and disposals
Acquisition of subsidiary - (6.6)
undertakings
Net cash outflow for acquisitions - (6.6)
and disposals
Management of liquid resources
Cash withdrawn from short term 30.6 11.1
deposit
Net cash inflow from management of 30.6 11.1
liquid resources
Financing
Issue of shares from the exercise 0.2 0.9
of options
Purchase of shares in minorities (37.4) (2.1)
(37.2) (1.2)
Drawdown of third party loans 165.2 79.0
Repayment of third party loans (155.0) (134.7)
Capital element of finance lease (2.1) (2.1)
repayment
8.1 (57.8)
Net cash outflow from financing (29.1) (59.0)
1 Segmental information
New York Rest of USA London Rest of Europe Asia Australasia Group
2002 2002 2002 2002 2002 2002 2002
#m #m #m #m #m #m #m
Turnover
Hotel 68.0 115.9 75.3 88.6 155.8 40.8 544.4
Non-hotel - 3.8 - - 1.8 17.5 23.1
Total 68.0 119.7 75.3 88.6 157.6 58.3 567.5
Hotel gross 22.1 27.5 38.7 27.0 60.5 15.2 191.0
operating profit
Hotel fixed charges (4.9) (20.9) (14.1) (17.7) (26.8) (8.2) (92.6)
Hotel operating 17.2 6.6 24.6 9.3 33.7 7.0 98.4
profit
Non-hotel - 1.5 - - 1.2 7.4 10.1
operating profit
Profit before 17.2 8.1 24.6 9.3 34.9 14.4 108.5
central costs
Central costs (12.2)
Group operating 96.3
profit
Share of operating
profit of joint
ventures 5.1 7.1 12.2
Share of operating
profits
of associated
undertakings 0.4 0.4
Net interest (48.7)
payable
Profit on ordinary
activities
before taxation 60.2
Hotel fixed charges include property rent, taxes and insurance, depreciation and amortisation, operating lease
rentals and management fees. There are no inter segment sales.
Turnover by origin is not significantly different from turnover by destination.
Turnover derives from two classes of business; hotel operations and property transactions
Restated Restated Restated Restated Restated Restated Restated
New York Rest of USA London Rest of Europe Asia Australasia Group
2001 2001 2001 2001 2001 2001 2001
#m #m #m #m #m #m #m
Turnover
Hotel 84.9 127.7 80.0 78.4 159.6 35.9 566.5
Non-hotel - 3.8 - - 1.8 22.5 28.1
Total 84.9 131.5 80.0 78.4 161.4 58.4 594.6
Hotel gross 23.0 30.8 40.3 28.2 61.0 12.6 195.9
operating profit
Hotel fixed charges (10.5) (19.5) (13.9) (12.6) (25.9) (7.4) (89.8)
Hotel operating 12.5 11.3 26.4 15.6 35.1 5.2 106.1
profit
Non-hotel - 1.3 - - 1.3 4.5 7.1
operating profit
Profit before 12.5 12.6 26.4 15.6 36.4 9.7 113.2
central costs
Central costs (12.8)
Group operating 100.4
profit
Share of operating
profit of joint
ventures 5.5 5.8 11.3
Share of operating
profits
of associated 0.9 0.9
undertakings
Net interest (58.4)
payable
Profit on ordinary
activities
before taxation 54.2
2 Taxation Restated
2002 2001
#m #m
The tax charge
comprises:
Current tax
UK Corporation tax on profits for the year at 30% 2.9 3.0
(2001: 30%)
Overseas taxation 11.8 9.3
Taxation attributable to profits of joint 0.7 0.4
ventures
15.4 12.7
Under/(over) provision in
respect of prior years
UK taxation 0.3 (3.0)
Overseas taxation (4.5) -
Total current tax 11.2 9.7
Deferred tax
Origination and reversal of timing 2.1 3.9
differences
Effect of decreased rate on (1.5) (0.1)
opening liability
Deferred taxation attributable to joint 1.7 1.5
ventures
Deferred taxation 0.9 0.1
attributable to associates
Total deferred tax 3.2 5.4
Tax on profit on ordinary 14.4 15.1
activities
3. DIVIDENDS - EQUITY
The final dividend of 8.3p per share will be paid on 22 May 2003 to
shareholders on the register as at close of business on 2 May 2003.
4. EARNINGS PER SHARE
The basic earnings per share are based on earnings of #38.0m (restated 2001:
#30.9m) and a weighted average number of shares in issue during the period of
282.6m (2001: 282.4m). Fully diluted earnings per share are based on a
weighted average number of shares in issue during the year,
as adjusted for the exercise of options, of 282.7m (2001: 282.6m).
5. BASIS OF PREPARATION
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the periods ended 31 December 2002 or 31
December 2001 but is derived from those accounts. Statutory accounts for 2001
have been delivered to the Registrar of Companies and those for 2002 will be
delivered following the Company's Annual General Meeting. The auditors have
reported on those accounts. Their reports were unqualified and did not contain
a statement under section 237(2) or (3) of the Companies Act 1985.
6. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on 21 May 2003.
7 KEY OPERATING STATISTICS
2002 2001 2001 2000
Like for Reported Like for
like currency like
Occupancy (%)
New York 83.3 73.3 75.3 83.3
Rest of USA 54.0 54.1 53.9 64.3
USA 59.7 57.8 58.8 68.1
London 83.1 80.4 80.4 85.7
Rest of Europe 68.6 71.4 71.2 71.8
Europe 75.0 75.3 75.5 78.0
Asia 66.4 62.5 62.5 68.9
Australasia 70.4 67.1 67.1 64.4
Group 67.2 65.1 65.1 70.3
Average room rate (#)
New York 120.28 129.79 139.28 156.37
Rest of USA 70.83 72.57 73.49 73.13
USA 84.29 86.74 92.93 93.32
London 79.86 87.32 87.32 93.63
Rest of Europe 68.94 70.75 72.35 69.35
Europe 74.30 78.59 79.92 81.18
Asia 59.26 61.71 64.19 60.20
Australasia 31.46 30.36 28.56 29.05
Group 65.73 68.33 71.39 71.35
RevPAR (#)
New York 100.19 95.14 104.88 130.26
Rest of USA 38.25 39.26 39.61 47.02
USA 50.32 50.14 54.64 63.55
London 66.36 70.21 70.21 80.24
Rest of Europe 47.29 50.52 51.51 49.79
Europe 55.73 59.18 60.34 63.32
Asia 39.35 38.57 40.12 41.48
Australasia 22.15 20.37 19.16 18.71
Group 44.17 44.48 46.47 50.16
Gross Operating Profit margin (%)
New York 32.5 27.0
Rest of USA 23.7 24.1
USA 27.0 25.3
London 51.4 50.4
Rest of Europe 30.5 35.9
Europe 40.1 43.2
Asia 38.8 38.2
Australasia 37.3 35.1
Group 35.1 34.6
8 PRIOR PERIOD ADJUSTMENT
During the period the Group has adopted FRS 19: Deferred Tax. This requires
full provision to be made for deferred tax on most types of timing
differences. The previous accounting standard required provision only
to the extent that it was probable that the liability would crystallise in the
future. Adoption of FRS 19 has been dealt with by way of a prior period
adjustment which has given rise to a reduction in shareholders' funds of #62.5
million at 31 December 2001. As a result the tax charge for the year ended 31
December 2001 has increased by #5.4 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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