MCK - Millennium & Copthorne Hotels.

[Southern Lad]

Hopefully we will see a presentation from MCK on the proposed acquisition and the expected returns.

Based on the segment disclosures in Note 1 to the December 2022 Annual Report, I see that the Australian geographical segment (which is also the residential property development operating segment) had cash on hand of NZ$56.4 million as at 31 December 2022. Additionally the Hotel operations segment (which is currently solely NZ based) had cash on hand of NZ$45.1m, so all up MCK excluding CDI had cash on hand of NZ$101.5m. This is more than enough to fund the purchase price of 50% of the property for A$88.85m (or approximately NZ$95.9m at today's exchange rate). No doubt some debt will be raised to cover other capex and provide some operating cashflow cover, but presumably not a large amount.

MCK could always tap CDI for a special dividend, however I assume there will be plenty of good bare residential development land purchase opportunities out there over the coming months.

[Sideshow Bob]

MCK slides and address

http://nzx-prod-s7fsd7f98s.s3-websit...877/394903.pdf

http://nzx-prod-s7fsd7f98s.s3-websit...877/394904.pdf

[Sideshow Bob]

https://www.nzx.com/announcements/415969

Summary of Unaudited 1H23 results:

• Strong progress on Revive and Thrive strategy; Hotel operations on track for profit
• Average hotel occupancy across the Group 59.8% (2022: 38.3%)
• Group revenue $60.05 million (2022: $83.66 million)
• Profit before income tax and non-controlling interests $11.47 million (2022: $32.05 million)
• Profit after tax and non-controlling interests $6.18 million (2022: $15.40 million)

New Zealand hotel owner / operator, Millennium & Copthorne Hotels New Zealand Limited(NZX:MCK), has today announced its unaudited results for the six months to 30 June 2023, with itsNew Zealand hotel operations showing a positive recovery to near pre-pandemic levels, and currentlyon track for a return to profit in FY23.

MCK Chairman Colin Sim said that this was encouraging after a very challenging environment over thelast three years.“A tremendous amount of work is being done on the hotels’ side of the business as part of our Reviveand Thrive strategy, and our performance and improving results confirm that we are on the right track.We have seen a healthy increase in hotel occupancy over the past year as tourism has resurged.

Whilevarious challenges remain, we are expecting our hotel operations to return to profitability this year. Weare continuing to progress the acquisition of Sofitel Brisbane Central Hotel, with a number of conditionsnow met. This will provide MCK with a beachhead into Australia which we have sought for some timeand we consider it to be an important part of our future growth strategy.”

“On the property development side, CDL Investments (CDI) did not have the benefit of any uplift fromland sales as it did last year. Our prior year results included a one-off contribution from CDI from a highvalue land sale which boosted the results by $29.0 million. CDI’s results for 2023 reflect the downturnwhich started last year and has continued into 2023.”

MCK Managing Director Stuart Harrison said that MCK’s New Zealand hotel operations were on track tobe independently profitable by the end of the year.“Ensuring that our hotels are able to make and maintain consistent profitability is a key pathway to oursuccess over the next two years. Pleasingly, we are seeing increases in our revenues and occupancy,however, ongoing staff shortages continue to limit our ability to maximise occupancy and parts of ourfood and beverage operations. Our expectation is that there will be some improvement of theseconstraints by the end of the year”.

“We saw a further resurgence of business into leisure locations such as the Bay of Islands, Rotorua,Queenstown and Te Anau, and we expect to see an additional uplift across our hotel network as wehead towards summer. Considering the effects of the severe weather incidents which affected ourAuckland and Northland hotels in January and February, the 1H23 performance was a good result inunexpectedly challenging circumstances”, he said.

Highlights for the six months include the condiJonal acquisiJon of Sofitel Brisbane Central hotel, forAUD$177.7 million as a 50:50 joint venture with MCK’s parent company, Millennium & CopthorneHotels Limited; and conJnued investment into the refurbishment of the New Zealand hotel network.

While there were no new sales of the Zenith Apartments in Sydney in the last six months, contractshave been exchanged for the sale of one sub-penthouse apartment with seNlement scheduled forSeptember 2023. MCK’s aim is to complete sales of the remaining apartments over the next twoyears as the operaJonal focus shiOs towards the Brisbane investment.

Results SnapshotFor the six month period ended 30 June 2023, MCK has reported an unaudited profit before tax andnon-controlling interests of $11.47 million (2022: $32.05 million). Group revenue for the period was$60.05 million (2022: $83.66 million), with profit after tax and non-controlling interests of $6.18 million(2022: $15.40 million). The reductions are primarily due to lower sales activity recorded by MCK’smajority-owned subsidiary CDL Investments New Zealand Limited (“CDI”) which reported revenue of$11.97m (2022: $47.81m); and no one-off apartment sales (2022: $8.58m).Earnings per share for the period was 3.90 cents per share (2022: 9.74 cps). Net Tangible Assets pershare as at 30 June 2023 remained stable at $3.37 per share (2022: $3.33 per share).

Update on Sofitel Brisbane Central acquisitionIn relation to its purchase agreement for the Sofitel Brisbane Central hotel, MCK notes that approvalfrom Australia’s Foreign Investment Review Board has been obtained and that the parties are makingprogress towards settlement.“There are still a number of conditions that need to be completed before we can settle the transactionbut we believe that we remain on track to do so before the end of the calendar year”, said Mr. Harrison.

“We are excited to complete the purchase and to provide more information when we can on how thispurchase will benefit all of MCK’s shareholders”.

Outlook

MCK’s board and management remain focused on building on the positive momentum now being seenby the New Zealand hotel operations and maximising returns over the coming months.“We are targeting our New Zealand hotel operations to be profitable in their own right for the year.

Thiswill be critical as we expect profit contributions from CDI and our Zenith Apartments sales to be softerthan previous years. CDI are optimistic that sales will increase in the second half of this year butrecognise that the total number of section sales for 2023 will be below the number seen in previousyears.

CDI are actively looking at opportunities to add to their land portfolio including projects whichcan be brought to market relatively quickly”.“One-off events this year will provide a timely influx of overseas visitors across our hotel network andthe addition of new air services from later this year from key destinations in North America and Asia willalso help boost occupancies around the country”, he said.

“We have initiatives in place to manage market and economic challenges and we believe thatshareholders should be optimistic about MCK’s future as we look to revive and grow our core business.”ENDS

[Sideshow Bob]

https://www.nzx.com/announcements/426801

MCK’S FY23 RESULT DELIVERS RETURN TO PROFIT FOR HOTEL OPERATIONS

Millennium & Copthorne Hotels New Zealand Limited (NZX: MCK) announced its 2023 results today and recorded a profit after tax and non-controlling interests of $21.6 million.

Mr. Sim noted that the New Zealand hotel operations had made real progress on its “Revive and Thrive” strategy, returning to profit after recording a loss for the 2022 financial year.

“2023 was a year of trading uninterrupted by Covid lockdown measures”, said MCK Chair Colin Sim. “The increased number of international flights returning to New Zealand has improved the visitor numbers and has translated into more demand, additional revenue and more profit but we are still short of the pre Covid level of tourists”, he said.

“We are particularly pleased that we were able to increase the hotel operations’ profit by 69% this year. That figure reflects better trading conditions from a 17.5% year-on-year overall increase in occupancy (to 61.2%) but it also reflects the hard work that has gone in to making each room as profitable as possible”, he said.

Highlights during the year included:

• Settling the acquisition of the Sofitel Brisbane Central Hotel in December 2023;
• Copthorne Hotel Palmerston North hosting the winning Spanish Women’s National Football Team during the key group stages of the 2023 FIFA Women’s World Cup held in New Zealand and Australia;
• Hotel room refurbishments with 132 rooms completed at Millennium Hotel Queenstown, and work continuing on the remaining 70 rooms plus commencing refurbishment of 99 rooms in Millennium Hotel Rotorua;
• Commencing the recladding, reglazing and installation of air-conditioning into the Copthorne Hotel Palmerston North;
• Renewal of bank facility through to January 2027 with an increased limit of $120.0m;
• Restaurant One80 (located in Copthorne Hotel Oriental Bay) winning the Burger Wellington competition, part of the annual Visa Wellington On a Plate food festival, beating over 200 entries from across the city.

--Financial Performance & Financial Position

For the year ended 31 December 2023, MCK recorded a profit attributable to owners of the parent of $21.6 million (2022: $21.7 million). Of particular note, MCK’s New Zealand hotel operations contributed a profit before tax of $11.6 million (2022: $4.0 million loss), as the 2026 Revive and Thrive strategy continues to be rolled out.

This positive turnaround reflects not only the return to open borders and uninterrupted trading, but also the sharp focus on improving profitability across our network during the year. Building on this profit growth will be key to our 2024 results. The results for CDL Investments New Zealand Limited (“CDI”), our majority-owned subsidiary, reflected a softness in the residential property markets which resulted in contributing $18.7 million (2022: $43.3 million) to our overall pre-tax profit numbers.

Our total revenue in 2023 was $145.7 million (2022: $144.2 million) and our earnings per share was 13.65 cents per share (2022: 13.72 cents per share). At 31 December 2023, MCK’s shareholders’ funds excluding non-controlling interests was $547.9 million (2022: $531.0 million). Total assets increased to $746.8 million (2022: $709.2 million) with net asset backing (with land and building at cost and before distributions) also increasing to 345.8 cents per share (2022: 335.4 cents per share).

--New Zealand Hotel Operations

In 2023, our New Zealand hotels recorded an operating revenue of $101.1 million (2022: $65.2 million) for the year. This increase is pleasing and reflects a return to pre-pandemic demand patterns both domestically and internationally.

Overall, we recorded an occupancy percentage of 61.2% (2022: 43.7%) across all of our hotels and we also saw a healthy increase in average RevPAR (Revenue Per Available Room) of $120.03 (2022: $76.59). The RevPAR increase is pleasing given our efforts to improve the profitability of each room sold. This had been particularly challenging at the commencement of the year with a shortage in staffing levels and severe weather events impacting the ability to sustain the business demand.

Ensuring that our physical product remains competitive is important to reviving our future revenues and profits. The second stage of our refurbishment at Millennium Hotel Queenstown was completed at the end of 2023 with a further 132 rooms completed. 2024 will see additional work done on the remaining 70 rooms and 18 suites which are expected to be completed by Q3 2024. The first stage of the guest room refurbishment at Millennium Hotel Rotorua of 99 rooms is reaching completion and will be ready before the end of Q1 2024.  

--CDL Investments New Zealand Limited (“CDLI”)

As noted above, CDLI’s 2023 results reflected some weakness in the property markets seen from the end of 2022 which carried over into part of 2023. Despite this, CDLI was still able to record an operating profit after tax for the year of $13.5 million (2022: $31.2 million).

CDLI has kept its dividend at 3.5 cents per share and is due to be paid in May.

--Australia Update

We were delighted to complete the acquisition of the Sofitel Brisbane Central in December 2023 after announcing the acquisition in March together with our immediate parent company Millennium & Copthorne Hotels Limited (UK). While there was minimal benefit to our 2023 results given the timing of completion, we are looking forward to seeing the hotel do well over the next twelve months given its strong performance in its key market segments and very positive occupancy and room rates. As announced previously, the hotel will continue to be managed under its existing hotel management agreement and branding.

MCK continues to sell down its Zenith Residency apartments in Sydney with a total of five (2022: 5) apartments sold during 2023. We continue to own and manage 31 apartments being predominantly one bedroom units with some two – three bedrooms units. MCK will continue to sell down its interest in the Zenith Residences in 2024 and utilize these funds within its Australian operations.

Dividend Announcement

MCK’s Board has resolved to declare and pay all shareholders a fully imputed dividend of 3 cents per share for 2023. The dividend, payable to all shareholders, will be paid on 17 May 2024 with a record date of 10 May 2024.
The Board has determined that the dividend balances provide a consistent level of returns to shareholders and retain sufficient cash resources required for ongoing refurbishment and other projects.

--Outlook

We are entering the 2024 year with a sense of optimism, with many things to look forward to. MCK remains on track with its “Revive and Thrive” strategy with the completion of key refurbishments in Queenstown and Rotorua. New refurbishment projects at Copthorne Hotel & Resort Bay of Islands (and others currently being assessed) will see commencement during 2024 and are expected to be completed within the year. We expect them to deliver additional revenue growth as soon as they become available.

Even though we have not noticed a meaningful return of Chinese visitors, with visitor numbers steadily improving and more flight capacity into New Zealand, particularly in the high seasons, we are expecting this growth in numbers to translate into additional demand for accommodation at our key properties. We are working hard across all of our business segments to maximise the number of confirmed bookings at our properties and improve our market share throughout.

We will also have the benefit of a full year’s trading from Sofitel Brisbane Central which we expect to be strong.

Our optimism is tempered with a note of caution – the cost of doing business continued to increase in 2023 and we expect these increases to continue to a lesser extent in 2024. While some of these increases can and will be partially offset by the ability to increase room rates in response to demand, we are conscious of optimising our business to ensure that our growth opportunities are not adversely affected.

We believe we are on track with our Strategy to Revive and shift to Thrive. We continue to be focused on reviving our people, products and profits throughout 2024.

--Thank you