LONDON (Alliance News) - Millennium & Copthorne Hotels PLC Thursday reported lower profits and revenue in the first half of 2014, as the strength of the pound reduced its overseas earnings, adding to challenging Asian markets and higher costs.
The hotel operator posted a pretax profit of GBP58.4 million for the six months to June 30, down from GBP68.6 million a year earlier. It said its lower profit was partly due to higher hotel operating costs, higher central costs, and a lower contribution from its joint ventures and associates.
Revenue in the period also fell to GBP380.6 million, down from GBP382.2 million last year. Revenue per available room, a key measure in the hotel industry, fell by 2.4% to GBP65.67, which it said was as a result of "foreign currency impact" and reduced RevPAR in Asia.
On a constant currency basis, group RevPAR grew by 3.6%, with gains in all regions except for Singapore and the rest of Europe, supported by increases in both average room rate and occupancy in the US, London, Australasia and rest of Asia.
"Group performance was disappointing in the first half of 2014. This was due to a broad range of factors including geopolitical events unsettling the hospitality sector - especially in Asia - and the rapid appreciation of our reporting currency, the pound sterling. Management is adopting a more cautious outlook and increasing its attention to cost control in uncertain markets," said Chairman Kwek Leng Beng in a statement.
The group maintained its dividend at 2.08 pence per share, but said it was cautiously optimistic about the full-year outlook for the group.
"It is too early to predict results for the full year, but the group is cautiously optimistic that with appropriate actions performance will meet management expectations," said Kwek Leng Beng.
Millennium & Copthorne said group RevPAR was down 1.6% for the three weeks ended July 21 on a reported basis, with Australasia up 9.6%, the US up 2.6% and Europe up 5%. Its Asian hotels continue to face "headwinds" it said, with Singapore down 17% and rest of Asia down 12%.
Excluding acquisitions, it said group RevPAR was down by 5.8% in the recent three weeks.
Regionally in the first half, Millennium & Copthorne said RevPAR was down 0.3% in the US in reported currency, but up 1.9% in the London region.
The group has been investing in refurbishing its hotels. Since its current refurbishment programme started in 2010, the group has spent GBP106 million up the end of June, it said.
"For the remainder of the year we are expecting a further GBP31 million of refurbishment spending on projects that have already commenced or are approved, with a further GBP22 million of spending on these projects in future years," the company said.
Earlier this month, the group said its New Zealand-listed subsidiary will buy up the remaining 30% of Quantum Ltd that it does not already own.
The group's chief financial officer and interim replacement both left the company earlier this year, and it is still searching for a permanent CFO. Andrew Cherry was appointed to the interim role on May 9, after the former Millennium & Copthorne CFO John Chang decided to leave the company at the end of April. However, Cherry also left the company in June. The group did not update on the management situation on Thursday.
Millennium & Copthorne were trading 0.2% higher at 578.00 pence Thursday morning.