M&C earnings more than double in Q2 and H1

Source : The Business Times, August 8, 2007

Hotel group's CEO, who took up post in March, quits; search for successor starts

SECOND-QUARTER and first-half net earnings have more than doubled for Millennium & Copthorne Hotels plc.

Mr Kwek: H1 results were strong particularly in London, New York, S'pore

The year-on-year jump in profit after tax and minority interests came on the back of tax credits, higher gross operating margins through better cost control, and a strong showing by its 39 per cent-owned associate CDL Hospitality Trusts.

M&C, the London-listed hotel arm of Singapore property group City Developments, also announced that group chief executive officer Peter Papadimitropoulos has left the company 'by mutual consent with immediate effect'. He took up the top post only in March this year and was the company's third CEO in just three years.

Many hotel analysts were critical of his leaving. 'This is likely to disappoint bulls of the stock who had expected Papas, with his corporate finance and private equity background, to act as a catalyst for the crystallisation of M&C's asset value,' a Reuters report quoted Merrill Lynch analysts as saying.

'When Papas' replacement is appointed it will be M&C's fifth CEO in just five years...we believe today's departure once again highlights the corporate governance concerns at M&C,' Merrill Lynch said.

M&C said the search for a new chief executive is underway. In the meantime, executive director Wong Hong Ren will once more step in as interim group CEO.

The hotel group reported a 123.8 per cent jump in net profit to £40.5 million (S$124 million) for the second quarter ended June 30, 2007, compared with Q2 last year.

Net earnings for the first six months of 2007 also increased 122.4 per cent to £52.7 million, from £23.7 million in H1 2006.

M&C said that group revenue per available room (RevPAR) increased 9.3 per cent (at constant exchange rates) in Q2 and by 8.9 per cent for H1. RevPAR for Asia increased by 13.5 per cent to £46.98 in H1 2007 compared with the corresponding period last year.

Over the same period, RevPAR for the group's Singapore properties, on a like-for-like basis, jumped 28.8 per cent, fuelled by a 21.4 per cent hike in average room rates and a 4.9 percentage point increase in occupancy to 85.5 per cent.

'Overall, the half-year results were strong, particularly in London, New York and Singapore, where we have experienced buoyant market conditions,' M&C chairman Kwek Leng Beng said in a statement. 'As outlined in May, the group has focused on actively maximising yield management opportunities and I am pleased to say that we have achieved our targets so far. The third quarter has begun well with RevPAR up by 7.6 per cent in the first four weeks of July. The outlook for the year as a whole remains positive and our expectations are unchanged,' Mr Kwek added.

Revenue rose 4 per cent in Q2 to £169.3 million, while H1 revenue inched up 3.1 per cent to £322.4 million.

M&C's bottomline benefited from an overall tax credit of £8.2 million in Q2 2007 and £3.2 million in H1 2007, primarily due to a change in UK tax legislation in respect of the removal of a clawback on hotel tax allowances.

Basic earnings per share increased to 13.8 pence in Q2 2007, from 6.3 pence in Q2 2006. First-half 2007 EPS was 18.0 pence, up from 8.2 pence in H1 2006. M&C shareholders will receive an unchanged interim dividend of 2.08 pence per share.