Millennium & Copthorne Hotels Regulatory News (MLC)

4 Aug 2005 07:00

Millennium & Copthorne Hotels PLC04 August 2005 4 August 2005 MILLENNIUM & COPTHORNE HOTELS PLC TRADING UPDATE AND RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 Millennium & Copthorne Hotels plc today presents its results for the six monthsended 30 June 2005. The Group owns, asset manages and/or operates 91 hotelslocated in the Americas, Europe, The Middle-East, Asia and New Zealand. The results presented today are under International Financial ReportingStandards ('IFRS') and the 2004 comparatives have been restated. Group results • Like for like revenue* up 8% to £281.0m (2004 restated: £260.9m)• Group revenue up 7% to £281.0m (2004 restated: £ 263.6m)• Like for like* Group operating profit before other operating income and expenses up 24% to £40.4m (2004 restated: £32.7m)• Group operating profit before other operating income up 18% to £40.4m (2004: £34.3m)• Hotel operating profit up 22% to £44.6m (2004 restated: £36.5m)• Profit before tax excluding other operating income up 51% to £27.3m (2004 restated: £18.1m)• Other operating income of £12.8m from final payment of Millenium Hilton insurance claim• Profit before tax £40.1m (2004 restated: £18.6m) * Like for like revenue and operating profit before other operating income andexpenses exclude revenue of £2.7m and operating profit of £1.6m from rentalincome from Birkenhead Shopping Centre and Marina which were disposed of inNovember 2004 Overview • Group RevPAR for the six months in constant currency up 7.1% - Stronger RevPAR increases in all regions in the second quarter with Group RevPAR up 9.3% - Strongest performance was in New York with rates up 16.8% for the six months - Continuation of encouraging occupancy lead improvements in regional US - Good performance from Asia and London • New management contract signed to manage a five star property in Qatar. We have now signed nine new management and franchise contracts worldwide during this half year. Commenting today, Mr Kwek Leng Beng, Chairman said: "We have continued our focus on driving the operational performance of ourhotels to maximise returns and have delivered first half results in line withour expectations. The Group continues to benefit from a diversified globalportfolio with our hotels continuing their upward trends, leaving us wellpositioned for the second half. " Enquiries: Tony Potter, Group Chief Executive 020 7404 5959 (4 August)David Cashman, Group Chief Financial 020 7404 5959 (4 August)OfficerMillennium & Copthorne Hotels plc Nick Claydon/Kate Miller/Ruban Yogarajah 020 7404 5959Brunswick Group Limited MILLENNIUM & COPTHORNE HOTELS PLC RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 OVERVIEW Our results for the first half of 2005 are in line with our expectations and weare well positioned for the second half. For the six months to 30 June 2005 werecorded a pre tax profit of £40.1m (2004 restated: £18.6m). The earnings pershare was 8.2p (2004 restated: 3.5p). We are declaring an interim ordinarydividend at 2.08p per share (2004: 2.08p per share). +--------------------------+--------------+--------------+--------------+--------------+| | Three months| Three months| Six months to| Six months to|| | to 30 June| to 30 June| 30 June 2005| 30 June 2004|| | 2005| 2004| | |+--------------------------+--------------+--------------+--------------+--------------+| | £m| £m| £m| £m|+--------------------------+--------------+--------------+--------------+--------------+| | | Restated| | Restated|+--------------------------+--------------+--------------+--------------+--------------+|Revenue | 151.5| 136.6| 281.0| 263.6|+--------------------------+--------------+--------------+--------------+--------------+|Group operating profit | | | | ||before other operating | | | | ||income | 27.0| 21.3| 40.4| 34.3|+--------------------------+--------------+--------------+--------------+--------------+|Profit before tax | | | | ||excluding other operating | | | | ||income | 19.8| 14.1| 27.3| 18.1|+--------------------------+--------------+--------------+--------------+--------------+|Profit before tax | 19.8| 14.1| 40.1| 18.6|+--------------------------+--------------+--------------+--------------+--------------+ In our first quarter trading update on 5 May 2005 we stated that we had seensteady progress with a RevPAR growth of 4.4%. The second quarter has seenstronger RevPAR improvements across all regions over the prior year than in thefirst quarter. Group RevPAR for the first six months is up 7.1% on the prioryear and 9.3% up in the second quarter. Group occupancies for the second quarterincreased to 73.9% compared to 70.3% in the equivalent period in 2004. New York has continued to see the strongest growth with RevPAR up 17.8% in thesecond quarter In addition to a buoyant market, the renovated rooms at theMillennium Broadway have made a significant contribution to rate increases. Wehave also seen continued improvements in Regional US with RevPAR up 10.7%. Asiacontinued to show good growth with RevPAR up 8.3% and London increased RevPAR by7.3%. Within Rest of Europe in the second quarter, Regional UK increased RevPARby 8.9%. In France and Germany, which showed a 5.1% decline in the firstquarter, RevPAR grew by 11.8%. In line with our succession planning we have appointed new presidents in Europe,US and New Zealand. We have continued to focus on our strategy for improving theoperational performance of our properties, and are mindful of the best ways toexpand our on-going hotel business. We have signed nine new management andfranchise contracts during this half year at Southampton and Reading in the UK,Bangkok in Thailand, Sharm el-Sheikh in Egypt, Doha in the UAE and Hokianga, NewPlymouth, Wanganui and Nelson in New Zealand. At the same time we monitorclosely the value of our assets and when opportunities arise to maximise valuethrough sales or development, we will take them. REVIEW OF OPERATIONS Group performance Group RevPAR for the six months to 30 June has increased by 7.1% over the sameperiod in 2004 at constant rates of exchange. Group occupancies increased by 2.6percentage points, while average rate increased 3.3%. As a result, at constantrates of exchange, total hotel revenues increased by £20.3m and the subsequenthotel operating profit by £6.8m to £44.6m. Year on year revenues and profits from our non hotel operations have declinedwith the sale of the Birkenhead shopping centre and marina in the last quarterof 2004. Our non-hotel operating profits in 2005 are now primarily from our landbank operation in New Zealand. Operating profits here are below last year as aresult of the timing of projects in 2005. For the six months to 30 June, revenue increased to £281.0m (2004 restated:£263.6m). Operating profit before other operating income and expenses increasedto £40.4m (2004 restated: £34.3m). Like for like revenue which excludes Birkenhead increased by £20.1m to £281.0m.The like for like operating profit before other operating income and expensesincreased to £40.4m. (2004 restated: £32.7m). As stated in the first quarter trading update, the Group settled the September11 Business Interruption/property damage insurance claim regarding theMillennium Hilton for $85.0m. The final proceeds received and recognised in 2005of US$25.0m (£12.8m) are disclosed within other operating income. As a result, Group operating profit was £53.2m (2004 restated: £34.8m) and theprofit before tax increased to £40.1m (2004 restated: £18.6m). UNITED STATESNew York RevPAR growth in New York has been strong, built upon continued improvingaverage rates. In the six months to 30 June, average rates have increased by16.8% against 2004. Occupancy saw a small decline, due in part to the roomrenovation at the Millennium Broadway, resulting in a RevPAR improvement of15.6%. Average rates have improved in all market segments across the hotelswhilst the ratio of business to leisure has increased, further enhancing rategrowth. GOP increased from 25.6% in 2004 to 28.8% in 2005. Regional US As anticipated improvements in our Regional US business have continued to bedriven by increased volume. RevPAR has increased by 7.3% to £30.86 in the sixmonths to 30 June with occupancy up by 8.6 percentage points. The occupancyincrease has been almost universal across the region. The largest overall RevPARimprovement was at the Millennium Biltmore in Los Angeles, where a combinationof occupancy and rate growth has resulted in a significant improvement in thehotel's performance. All market segments, with the exception of exhibition, have increased revenueyear on year. We still see room for further increases in occupancy and as thisis achieved we will be moving towards a strategy of rate improvement. OverallGOP for the hotels has increased by 1.1 percentage points to 18.4% for the sixmonths to June 30. EUROPE London London continued during the first half to achieve ongoing growth primarilydriven by volume. Every hotel increased occupancy resulting in an overalloccupancy rise of 6.4 percentage points to 84.9%. As a result RevPAR increased8.1% to £67.40 in the six months to 30 June. Further comment is made in ourprospects on the impact of recent incidents in London. Rest of Europe RevPAR has increased by 5.8% to £51.21 with occupancy up by 1.2 percentagepoints to 72.5%, and average rate up 4.1% to £70.64. Regional UK The first half saw growth in most of our Regional UK hotels. RevPAR increased7.6% to £51.46 through a combination of both volume and rate increases.Occupancy increased by 2.3 percentage points to 75.5% while average rateincreased by 4.3% to £68.16. We have seen increased occupancies and rates at themajority of our hotels in this region. France & Germany Our presence in these two countries remains low with just two properties ineach. RevPAR has increased by 3.2% to £50.88 through rate increases up 4.0% to£75.05. There was a small occupancy drop of 0.5 percentage points to 67.8%. Rateincreased in each property although there were mixed results in terms ofoccupancy. Stuttgart has produced a strong performance to date as a result ofimproved attendances at the two musicals and our management strategy implementedin 2004. ASIA We have continued our management focus in Asia on driving rates. Average rateincreased by 7% to £51.80 whilst occupancy remained flat resulting in RevPAR up7.0% to £36.99. Our Singapore properties have grown RevPAR by 13.9% through improved rate. Therefurbishment at the Orchard hotel resulted in the loss of 15,000 room nights(12,000 in quarter one) for refurbishment, as indicated in the quarter oneannouncement. This has impacted regional occupancy by 0.7 of a percentage point.The refurbishment is now starting to yield further improvements in average rate. The Grand Hyatt hotel in Taipei has experienced steady growth, with higheroccupancy coming through the corporate segment while the improved rate was inthe full price segment. The Millennium Seoul Hilton in Korea maintained itsperformance and our Hong Kong joint venture hotels saw strong growth. NEW ZEALAND In New Zealand, where we operate under the Millennium, Copthorne and Kingsgatebrands, RevPAR has increased 3.5% to £30.56. This was achieved as a result of6.4% increase in average rate to £42.92. Occupancy remains strong with anaverage figure of 71.2% across the region, bolstered by a very successful recentsporting tour. The Millennium, Copthorne and Kingsgate hotels all performedwell, with the Copthorne branded hotels experiencing pleasing growth and yield. MANAGEMENT CONTRACTS We have continued to develop the management contract side of our business,thereby increasing our visibility to existing and new customers. United Kingdom We announced in our May trading statement the signing of two new managementcontracts for hotels in the UK. We have signed a contract with MarineDevelopment to manage a 200 bedroom 4-star luxury Millennium Hotel located inOcean Village on the waterfront in Southampton, scheduled to open in 2007.We also signed a management contract for a new Copthorne hotel in Reading, the83 bedroom Kirtons Farm property close to the M4. On completion of a fullrefurbishment the hotel will be rebranded as the Copthorne Hotel Reading. Asia, Middle East and New Zealand In addition we signed two landmark, 5-star Millennium management contractsoverseas in the first quarter. The first is to operate a 328 bedroom hotel inBangkok, Thailand, scheduled to open in December 2007. The second is to operatea luxury hotel resort and residence in Sharm el Sheikh for 350 hotel bedroomsand 92 duplex apartments (scheduled to open in late 2006/early 2007). In thesecond quarter, we have signed one further management contract, to operate theMillennium Hotel Dohar in Qatar. This will be a 270 bedroom, 5 star property andis scheduled to open in the late autumn of 2006. As announced in our May trading statement we have also signed management andfranchise contracts for two new Copthorne and two new Kingsgate hotels in NewZealand. CURRENT TRADING AND PROSPECTS Group RevPAR for 4 weeks to 28 July was up 7.9%. As far as London is concerned,we saw a short term slowdown in business following the recent events and believethat, in the absence of further such incidents, we will see a gradual return tonormal trading levels. The Group continues to benefit from a diversified global portfolio with themajority of our hotels continuing their upward trends, leaving us wellpositioned for the second half. Kwek Leng BengChairman4 August 2005 REVIEW OF FINANCE Results The total revenue for the six months was £281.0m (2004 restated: £263.6m). TheGroup operating profit before other operating income and other operatingexpenses was £40.4m (2004 restated: £34.3m). Group operating profit was £53.2m(2004 restated: £34.8m). Joint ventures Under IFRS the Group's share of interest paid by joint ventures and the Group'sshare of the taxation charge of joint ventures are now disclosed within theshare of profit of joint ventures. The joint venture results for 2005 representthe joint venture in Hong Kong, which has interests in two hotel properties. The2004 results include the USA joint venture which held the interest in The Plaza,New York. This joint venture was disposed of in October 2004. The share of operating profits of joint ventures for the six months was £3.7m(2004 restated: £3.9m). The Group's share of the interest payable by jointventures was £0.5m (2004: £1.8m) and the Group's share of joint venture taxationis £0.4m (2004: £0.4m). Other operating income/expenses. The other operating income of £12.8m in the period represents businessinterruption proceeds following the settlement of the New York Millenium Hiltoninsurance dispute. Further details of other operating income/expenses in thecurrent and comparative periods are set out in note 2. Finance expenses/income Group interest receivable and similar income was £3.5m (2004: £1.3m). The Group interest payable was £19.4m (2004: £19.2m). Interest payable increasedin comparison to last year due to higher average interest rates during theperiod and a cost of £0.9m associated with the planned termination of the USinterest hedging arrangements. However, this increase was largely offset by areduction in net debt. The net interest cost for the period was £15.9m (2004: £17.9m), which wascovered 2.5 times (2004: 1.9 times) by Group operating profit before otheroperating income/expenses. Taxation We have reported a tax charge of £13.0m (including £0.4m attributable to jointventures). The tax expense for the six months ended 30 June 2005 and 30 June 2004 wascalculated based on the estimated average annual effective income tax rate(excluding the estimated tax expense relating to the Millenium Hilton insuranceproceeds and other operating income). The estimated tax rate calculated on thisbasis is 25.3% (restated six months to 30 June 2004: 20.5%). The estimated tax charge relating to the insurance proceeds has been calculatedseparately and has been recognised in full in the six month period ended 30 June2005. The taxation arising in respect of these insurance proceeds is estimatedat £6.0m. Capital expenditure The cash outflow on capital expenditure for the period was £13.9m (2004: £6.4m). Dividends and earnings per share The directors are proposing an interim ordinary dividend of 2.08p per share(2004: 2.08p per share). The interim ordinary dividend will be paid on 5 October2005 to shareholders on the register as at close of business on 12 August 2005.The Group will again be offering shareholders the option of a scrip dividend. Under IFRS dividends are recorded as liabilities in the period in which they aredeclared. Under UK GAAP dividends were previously recorded when proposed. The basic earnings per share was 8.2p (2004 restated: 3.5p). Treasury Net borrowings of the Group comprise interest bearing loans and bonds net ofcash and cash equivalents and other current financial assets. Net borrowings asat 30 June 2005 were £512.3m (31 December 2004: £478.9m). Cash flow and gearing Net cash inflow from operating activities was £19.3m (2004: £21.7m). There wasan overall net decrease in cash and cash equivalents of £3.6m (2004: netincrease of £11.5m) which, together with a translation gain of £4.1m (2004: loss£2.1m), gives rise to cash balances at 30 June 2005 of £91.2m (December 2004:£90.7m). The Group gearing as at 30 June 2005 was 43% (31 December 2004 restated: 41%). David CashmanGroup Chief Financial Officer4 August 2005 Consolidated interim income statementFor the six months ended 30 June 2005 (unaudited) Note 6 months 6 months Year ended 30 ended 30 ended 31 June 2005 June 2004 December 2004 £m £m £m Unaudited Unaudited Unaudited Revenue 281.0 263.6 551.0 Cost of sales (125.4) (119.7) (246.2) ------- -------- --------Gross profit 155.6 143.9 304.8 Administrative expenses (115.2) (109.6) (219.6) ------- -------- --------Group operating profit before other operating income and expenses 40.4 34.3 85.2 Other operating income 2(a) 12.8 0.5 55.0Other operating expenses 2(b) - - (15.2) ------- -------- --------Group operating profit 53.2 34.8 125.0 Share of profit of joint venturesand associates-------------------------------------------------------- ------ -------- --------- operating profit 3.7 3.9 7.8- interest (0.5) (1.8) (3.2)- taxation (0.4) (0.4) (0.8)-------------------------------------------------------- ------ -------- -------- 2.8 1.7 3.8 Finance expenses (19.4) (19.2) (41.5)Finance income 3.5 1.3 5.8 ------- -------- --------Profit before tax 40.1 18.6 93.1 Income tax expense 4 (12.6) (3.4) (31.4) ------- -------- --------Profit for the period 27.5 15.2 61.7 ------- -------- --------Attributable to:Equity holders of the parent 23.4 9.9 50.9Minority interest 4.1 5.3 10.8 ----------------- --------Profit for the period 27.5 15.2 61.7 ------- -------- --------Basic earnings per share (pence) 5 8.2 3.5 17.9 ------- -------- --------Diluted earnings per share (pence) 5 8.1 3.5 17.8 ------- -------- -------- Consolidated interim statement of recognised income and expenseFor the six months ended 30 June 2005 Note 6 months 6 months Year ended 30 ended 30 ended 31 June 2005 June 2004 December 2004 £m £m £m Unaudited Unaudited Unaudited Foreign exchange translation differences 39.2 (30.3) (45.6)Cash flow hedges: amounts recycled to income statement 3.5 - -Actuarial gains and losses arising in respect (1.7) (1.6) (3.3)of defined benefit pension schemesRevaluation of property, plant and equipment - Group - - 12.7- Joint ventures - - 17.7Taxation charge arising: - On revaluation of hotel assets - - (1.1)- On defined benefit pension schemes 0.4 0.5 1.0 ------- -------- --------Income and expense for the period recognised directly in equity 41.4 (31.4) (18.6) Profit for the period 27.5 15.2 61.7 ------- -------- --------Total recognised income and expense for the period 6 68.9 (16.2) 43.1 First time adoption of IAS 39 7e (5.4) - - ------- -------- --------Total recognised income and expense 63.5 (16.2) 43.1 ------- -------- --------Attributable to:Equity holders of the parent 53.5 (15.7) 29.5Minority interest 10.0 (0.5) 13.6 ------- -------- --------Total recognised income and expense 63.5 (16.2) 43.1 ------- -------- -------- Consolidated interim balance sheetAs at 30 June 2005 (unaudited) Note 30 June 30 June 31 December 2005 2004 2004 £m £m £m Unaudited Unaudited Unaudited AssetsProperty, plant and equipment 1,880.9 1,863.0 1,821.9Lease premium prepayment 89.6 90.7 90.5Investment properties 44.3 85.9 43.7Investments in joint ventures and associates 44.8 44.4 40.7Loans due from joint ventures and associates 23.8 31.7 22.3Other non-current financial assets 2.7 2.6 2.8 ------- -------- --------Total non-current assets 2,086.1 2,118.3 2,021.9 ------- -------- -------- Assets held for sale 3 9.3 - 14.5Inventories 4.0 3.6 3.9Development properties 44.6 17.0 32.3Trade and other receivables 64.9 66.1 49.8Cash and cash equivalents 91.2 49.9 90.7Other current financial assets 3.9 0.3 4.1 ------- -------- --------Total current assets 217.9 136.9 195.3 ------- -------- --------Total assets 2,304.0 2,255.2 2,217.2 ------- -------- -------- LiabilitiesInterest-bearing loans, bonds and borrowings 314.4 685.0 248.0Employee benefits 15.9 11.7 13.3Other non-current liabilities 6.2 7.1 6.7Provisions 2.2 2.6 2.4Deferred tax liabilities 233.6 194.7 216.5 ------- -------- --------Total non-current liabilities 572.3 901.1 486.9 ------- -------- -------- Interest-bearing loans, bonds and borrowings 293.0 21.0 325.7Trade and other payables 98.7 92.8 99.0Income taxes payable 22.9 15.7 22.6Other financial liabilities - hedging 1.9 - -derivatives ------- -------- --------Total current liabilities 416.5 129.5 447.3 ------- -------- --------Total liabilities 988.8 1,030.6 934.2 ------- -------- --------Net assets 1,315.2 1,224.6 1,283.0 ------- -------- -------- EquityIssued capital 86.0 85.5 85.9Share premium 847.4 846.5 846.1Revaluation reserves 246.0 247.3 246.0Retained earnings 6.5 (62.7) (17.4) ------- -------- --------Total equity attributable to equity holders 6 1,185.9 1,116.6 1,160.6of the parentMinority interest 129.3 108.0 122.4 ------- -------- --------Total equity 6 1,315.2 1,224.6 1,283.0 ------- -------- -------- Consolidated statement of cash flowsFor the six months ended 30 June 2005 (unaudited) 6 months 6 months Year ended 30 ended 30 ended 31 June 2005 June 2004 December 2004 £m £m £m Unaudited Unaudited Unaudited Cash flows from operating activitiesProfit for the period 27.5 15.2 61.7Adjustments for:Depreciation and amortisation 17.5 18.4 37.1Property, plant and equipment written off - - 0.2Share of profit of joint ventures and associates (2.8) (1.7) (3.8)Impairment losses for property, plant and equipment - - 15.2Profit on sale of property, plant and equipment - (0.5) (3.2)Gain on sale of joint venture - - (51.8)Employee stock options 0.2 0.2 0.4Investment income (3.5) (1.3) (5.8)Interest expense 19.4 19.2 41.5Income tax expense 12.6 3.4 31.4 ------- ------- ---------Operating profit before changes in working capital and provisions 70.9 52.9 122.9Increase in stocks, trade and other receivables (19.8) (12.2) (6.9)(Increase)/decrease in development properties (12.5) 1.3 2.4(Decrease)/increase in trade and other payables (0.3) (2.0) 4.0Decrease in provisions and employee benefits 0.2 0.2 0.4 ------- ------- ---------Cash generated from the operations 38.5 40.2 122.8Net interest paid (13.6) (17.2) (35.5)Income taxes paid (5.6) (1.3) (10.5) ------- ------- ---------Net cash from operating activities 19.3 21.7 76.8 ------- ------- --------- Cash flows from investing activitiesProceeds from sale of property, plant and equipment 6.0 1.5 45.1Change in other current financial assets 0.2 4.1 0.3Disposal of joint venture 5.3 - 90.8Acquisition of property, plant and equipment (13.9) (6.4) (25.4) ------- ------- ---------Net cash from investing activities (2.4) (0.8) 110.8 ------- ------- --------- Consolidated statement of cash flows (continued)For the six months ended 30 June 2005 (unaudited) 6 months 6 months Year ended 30 ended 30 ended 31 June 2005 June 2004 December 2004 £m £m £m Unaudited Unaudited Unaudited Cash flows from financing activitiesProceeds from the issue of share capital 1.4 1.4 1.4Purchase of shares from minority interests - (4.2) (5.9)Repayment of borrowings (117.5) (198.0) (396.9)Drawdown of borrowings 128.7 195.3 273.1Payment of finance lease liabilities (0.9) (0.7) (1.6)Payment of finance costs (0.3) (0.5) (0.6)Dividends paid to minorities (2.1) (1.2) (1.6)Equity dividends paid (29.8) (1.5) (3.0) ------- ------- --------Net cash from financing activities (20.5) (9.4) (135.1) ------- ------- -------- Net (decrease)/increase in cash and cash equivalents (3.6) 11.5 52.5Cash and cash equivalents at beginning of period 90.7 40.5 40.5Effect of exchange rate fluctuations on cash held 4.1 (2.1) (2.3) ------- ------- --------Cash and cash equivalents at period end 91.2 49.9 90.7 ------- ------- -------- Segmental informationFor the six months ended 30 June 2005 (unaudited) New Regional London Rest of Asia Austra- Total York US Europe lasia Group 2005 2005 2005 2005 2005 2005 2005 £m £m £m £m £m £m £m REVENUEHotel 39.9 52.1 38.6 47.6 71.9 24.2 274.3Non-hotel - 1.2 - - 0.7 4.8 6.7------------------------------ ------ ------ ------ ------ ------ ------ ------Total 39.9 53.3 38.6 47.6 72.6 29.0 281.0------------------------------ ------ ------ ------ ------ ------ ------ ------HOTEL GROSS OPERATING PROFIT 11.5 9.6 18.6 14.2 26.0 10.2 90.1Hotel fixed charges (5.6) (8.8) (6.9) (8.6) (10.8) (4.8) (45.5)------------------------------ ------ ------ ------ ------ ------ ------ ------HOTEL OPERATING PROFIT 5.9 0.8 11.7 5.6 15.2 5.4 44.6NON-HOTEL OPERATING PROFIT - 0.3 - - 0.4 1.8 2.5Central Costs - - - - - - (6.7)------------------------------ ------ ------ ------ ------ ------ ------ ------GROUP OPERATING PROFIT BEFORE OTHER OPERATING INCOME ANDEXPENSES - - - - - - 40.4Other operating income 12.8 - - - - - 12.8Other operating expense - - - - - - -Share of operating profits of - - - - 2.8 - 2.8joint ventures ------------------------------ ------ ------ ------ ------ ------ ------ ------PROFIT BEFORE FINANCING COSTS - - - - - - 56.0Net financing costs - - - - - - (15.9)------------------------------ ------ ------ ------ ------ ------ ------ ------PROFIT BEFORE TAX - - - - - - 40.1------------------------------ ------ ------ ------ ------ ------ ------ ------ Segmental informationFor the six months ended 30 June 2004 (unaudited and restated) Reported Currency New Regional London Rest of Asia Austra- Total York US Europe lasia Group 2004 2004 2004 2004 2004 2004 2004 £m £m £m £m £m £m £m REVENUEHotel 36.3 46.8 36.2 44.6 66.6 22.4 252.9Non-hotel - 1.2 - - 0.7 8.8 10.7------------------------------ ------ ------ ------ ------ ------ ------ ------Total 36.3 48.0 36.2 44.6 67.3 31.2 263.6------------------------------ ------ ------ ------ ------ ------ ------ ------ HOTEL GROSS OPERATING PROFIT 9.3 8.1 18.3 13.0 23.8 9.4 81.9Hotel fixed charges (6.2) (8.7) (6.9) (8.8) (10.5) (4.3) (45.4)------------------------------ ------ ------ ------ ------ ------ ------ ------HOTEL OPERATING PROFIT 3.1 (0.6) 11.4 4.2 13.3 5.1 36.5NON-HOTEL OPERATING PROFIT - 0.1 - - 0.4 3.7 4.2Central costs - - - - - - (6.4)------------------------------ ------ ------ ------ ------ ------ ------ ------GROUP OPERATING PROFIT BEFORE OTHER OPERATING INCOME ANDEXPENSES - - - - - - 34.3Other operating income - - - - 0.5 - 0.5Other operating expense - - - - - - -Share of operating profits of (0.8) - - - 2.5 - 1.7joint ventures ------------------------------ ------ ------ ------ ------ ------ ------ ------PROFIT BEFORE FINANCING COSTS - - - - - - 36.5Net financing costs - - - - - - (17.9)------------------------------ ------ ------ ------ ------ ------ ------ ------PROFIT BEFORE TAX - - - - - - 18.6------------------------------ ------ ------ ------ ------ ------ ------ ------ Key operating statisticsFor the six months ended 30 June 2005 (unaudited) 6 months 6 months 6 months Year ended ended ended ended 30 June 2005 30 June 2004 30 June 2004 31 December 2004 Reported Constant Reported Reported currency currency currency currencyOccupancy (%)New York 82.8 83.7 83.7 84.0Regional US 64.9 56.3 56.3 61.2USA 69.0 63.1 63.1 66.9London 84.9 78.5 78.5 83.5Rest of Europe 72.5 71.3 71.3 72.8Europe 78.0 74.5 74.5 77.6Asia 71.4 71.4 71.4 73.2New Zealand 71.2 73.2 73.2 71.5Group 72.1 69.5 69.5 71.8 -------- -------- -------- --------- Average room rate (£)New York 113.79 97.40 100.66 108.77Regional US 47.55 51.10 52.81 52.91USA 65.72 66.44 68.66 70.43London 79.39 79.45 79.45 79.79Rest of Europe 70.64 67.86 67.44 66.67Europe 74.86 73.28 73.05 72.93Asia 51.80 48.42 46.93 46.76New Zealand 42.92 40.33 38.02 38.77Group 61.71 59.76 59.68 60.59 -------- -------- -------- --------- RevPAR (£) New York 94.22 81.52 84.25 91.37Regional US 30.86 28.77 29.73 32.38USA 45.35 41.92 43.32 47.12London 67.40 62.37 62.37 66.62Rest of Europe 51.21 48.38 48.08 48.54Europe 58.39 54.59 54.42 56.59Asia 36.99 34.57 33.51 34.23New Zealand 30.56 29.52 27.83 27.72Group 44.49 41.53 41.48 43.50 -------- -------- -------- --------- Gross operating profit%New York 28.8 25.6 28.9Regional US 18.4 17.3 21.0USA 22.9 20.9 24.4London 48.2 50.6 51.2Rest of Europe 29.8 29.1 30.0Europe 38.1 38.7 39.5Asia 36.2 35.7 35.4New Zealand 42.1 42.0 41.6Group 32.8 32.4 33.6 -------- -------- -------- --------- Notes to the consolidated interim financial statements 1. Basis of preparation Millennium & Copthorne Hotels plc (the "Company") is a company domiciled in theUnited Kingdom. The consolidated interim financial statements of the Company forthe six months ended 30 June 2005 comprise the Company and its subsidiaries(together referred to as the "Group") and the Group's interest in associates andjointly controlled entities. EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Company, for the year ending 31 December 2005, beprepared in accordance with International Financial Reporting Standards (IFRSs)adopted for use in the EU ("adopted IFRSs"). This interim financial informationhas been prepared on the basis of the recognition and measurement requirementsof IFRSs in issue that either are endorsed by the EU and effective (or availablefor early adoption) at 31 December 2005 or are expected to be endorsed andeffective (or available for early adoption) at 31 December 2005, the Group'sfirst annual reporting date at which it is required to use adopted IFRSs. Based on these adopted and unadopted IFRSs, the directors have made assumptionsabout the accounting policies expected to be applied, as set out in the Group'squarterly financial information for the three month period ended 31 March 2005,when the first annual IFRS financial statements are prepared for the year ending31 December 2005. In particular, the directors have assumed that IAS 19:Employee Benefits (as amended) will be adopted by the EU in sufficient time thatthey will be available for use in the annual IFRS financial statements for theyear ending 31 December 2005. In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 December2005 are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31 December 2005. The consolidated interim financial statements do not include all of theinformation required for full annual financial statements and none of thefinancial information included within the consolidated interim financialstatements has been subject to audit. The comparative figures for the financial year ended 31 December 2004 are notthe Company's statutory accounts for the financial year. These accounts, whichwere prepared under UK GAAP, have been reported on by the company's auditors anddelivered to the registrar of companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. 2. Other operating income/other operating expenses 6 months 6 months Year ended ended 30 ended 30 31 December June 2005 June 2004 2004 £m £m £m Unaudited Unaudited Unaudited(a) Other operating income (i) Business interruption insurance proceeds 12.8 - - (ii) Profit on disposal of fixed assets - 0.5 3.2 (iii) Profit on disposal of - - 51.8 joint venture --------- --------- ---------- 12.8 0.5 55.0 --------- --------- ----------(b) Other operating expenses Impairment of US hotel properties - - (15.2) --------- --------- ---------- 3. Assets held for sale At 31 December 2004, the following assets were presented as held for sale with atotal carrying value of £14.5m: • Commercial property assets held in Sydney, comprising part of the former Millennium Sydney hotel property and the adjoining retail and conference centre: this asset is expected to be sold during the second half of 2005 and it is presented as held for sale at 30 June 2005. • Kingsgate Hotel Greenlane, Auckland: this asset was sold in January 2005 No impairment loss was required to be recognised in the prior or current periodin respect of these properties. The total carrying amount of assets held forsale as at 30 June 2005 is £9.3m. 4. Income taxes Income tax expense for the six month period presented is the expected taxpayable on the taxable income for the period, calculated as the estimatedaverage annual effective income tax rate applied to the pre-tax income of theinterim period. The current tax expense for the six months ended 30 June 2005 and 2004 wascalculated based on the estimated average annual effective income tax rate(excluding the estimated tax expense relating to the Millenium Hilton businessinterruption insurance proceeds and other operating income set out in note 2).The estimate annual effective income tax rate calculated on this basis is 25.3%(restated six months ended 30 June 2004: 20.5%). In the six months to 30 June 2005, the average annual effective income tax ratehas been applied to profits excluding the Millenium Hilton business interruptioninsurance proceeds. The tax charge relating to the insurance proceeds income hasbeen calculated separately and has been recognised in full in the six monthperiod ended 30 June 2005. The taxation arising in respect of these insuranceproceeds is estimated at £6.0m. 5. Earnings per share Six months ended 30 June The basic earnings per share of 8.2p (2004: earnings per share of 3.5p) arebased on a profit attributable to equity holders of the parent of £23.4m (2004:profit of £9.9m) and a weighted average number of shares in issue of 286.6million (2004: 283.4 million) being the average number of shares in issue in theperiod. The diluted earnings per share of 8.1p (2004: earnings per share of 3.5p) arebased on a weighted average number of shares in issue of 287.6 million (2004:284.1 million) being the average number of shares in issue in the periodadjusted for the exercise of dilutive share options. 6. Reconciliation of equity (unaudited) Share Share Reval Translation Hedging Retained Total Minority Total capital premium reserve reserve reserve earnings interest equity £m £m £m £m £m £m £m £m £m Balance at 1 January 2004 84.8 845.8 247.3 - - (45.6) 1,132.3 117.2 1,249.5Total recognised income and expense - - 21.6 (40.7) - 48.6 29.5 13.6 43.1Dividends to shareholders - - - - - (11.7) (11.7) - (11.7)Dividends paid - minority interests - - - - - - - (1.6) (1.6)Issue of shares in lieu of dividends 0.9 (0.9) - - - 8.7 8.7 - 8.7Minority interest attributable tojoint venture - - - - - - - (2.1) (2.1)Share options exercised 0.2 1.2 - - - - 1.4 - 1.4Equity settled transactions - - - - - 0.4 0.4 - 0.4Purchase of minority interest - - - - - - - (4.7) (4.7)Transfer of realisedprofit- annual depreciation charge - - (0.5) - - 0.5 - - -- Profit on disposal of fixed assets - - (22.4) - - 22.4 - - - ------ ------- ------ ------- ------ ------ ------ ------ ------Balance at 31 December 2004 85.9 846.1 246.0 (40.7) - 23.3 1,160.6 122.4 1,283.0 Balance at 1 January 2005 85.9 846.1 246.0 (40.7) - 23.3 1,160.6 122.4 1,283.0First time adoption of IAS39 - - - - (4.0) (1.4) (5.4) - (5.4) ------ ------- ------ ------- ------ ------ ------ ------ ------Balance restated at 1 January 2005 85.9 846.1 246.0 (40.7) (4.0) 21.9 1,155.2 122.4 1,277.6Total recognised income & expense forthe period - - - 33.3 3.5 22.1 58.9 10.0 68.9Dividends to shareholders - - - - - (29.8) (29.8) - (29.8)Dividends paid - minority interests - - - - - - - (2.1) (2.1)Minority interest attributable tojoint venture - - - - - - - (1.0) (1.0)Issue of share options 0.1 1.3 - - - - 1.4 - 1.4Equity settled transactions - - - - - 0.2 0.2 - 0.2 ------ ------- ------ ------- ------ ------ ------ ------ ------Balance at 30 June 2005 86.0 847.4 246.0 (7.4) (0.5) 14.4 1,185.9 129.3 1,315.2 ------ ------- ------ ------- ------ ------ ------ ------ ------ 7. Explanation of the transition to IFRS (a) Explanation of transition to IFRSs (i) Accounting policiesThe IFRS accounting policies adopted in this interim statement are consistentwith those published in the Group's quarterly announcement for the three monthperiod ended 31 March 2005, dated 5 May 2005. These accounting policies havebeen consistently applied in preparing the consolidated interim financialstatements for the six months ended 30 June 2005, the comparative informationfor the six months ended 30 June 2004, the financial statements for the yearended 31 December 2004 and the preparation of an opening IFRS balance sheet at 1January 2004 (the Group's date of transition). The Group has applied the transition adoption rules of IAS 32: FinancialInstruments (Disclosure and presentation) and IAS 39: Financial Instruments(Recognition and measurement). The Group has therefore applied these standards,and the related accounting policies only with effect for the current period from1 January 2005 and not within the 2004 comparative financial periods. (ii) Transition to IFRSAn explanation of how the transition from UK GAAP to IFRSs has affected theGroup's financial position, financial performance and cash flows for the yearended 31 December 2004 is set out in Group's quarterly announcement for thethree month period ended 31 March 2005. The transition adjustments in respect ofthe financial position at 30 June 2004 and the financial performance to theperiod then ended are set out in notes 7(b) to 7(f). (b) Balance sheet at 30 June 2004 (unaudited) UK Lease Assets New Employee Deferred Dividend Translation IFRS GAAP premium held Zealand benefits taxes reserve pre for land reclass payment sale bank sales £m £m £m £m £m £m £m £m £m (d)i (d)iii (d)iv (d)v (d)vii (d)viiiAssetsProperty, plant and 1,955.6 (92.6) - - - - - - 1,863.0equipmentLease premium prepayment - 90.7 - - - - - - 90.7Investment properties 85.9 - - - - - - - 85.9Investments in joint ventures andassociates 57.5 (0.1) - - - (13.0) - - 44.4Loans due from joint ventures andassociates 31.7 - - - - - - - 31.7Other non-current assets 2.6 - - - - - - - 2.6 ------- ------ ------ ------ ------ ------ ------ ------- -------Total non-current assets 2,133.3 (2.0) - - - (13.0) - - 2,118.3 ------- ------ ------ ------ ------ ------ ------ ------- -------Assets held for sale - - - - - - - - -Inventories 3.6 - - - - - - - 3.6Development properties 15.7 - - 1.3 - - - - 17.0Trade and other receivables 68.5 1.3 - (3.7) - - - - 66.1Cash and cash equivalents 49.9 - - - - - - - 49.9Financial assets 0.3 - - - - - - - 0.3 ------- ------ ------ ------ ------ ------ ------ ------- -------Total current assets 138.0 1.3 - (2.4) - - - - 136.9 ------- ------ ------ ------ ------ ------ ------ ------- -------Total assets 2,271.3 (0.7) - (2.4) - (13.0) - - 2,255.2 ------- ------ ------ ------ ------ ------ ------ ------- -------LiabilitiesLong term borrowings 685.0 - - - - - - - 685.0Employee benefits 4.2 - - - 7.5 - - - 11.7Other non-current liabilities 7.1 - - - - - - - 7.1Provisions 2.6 - - - - - - - 2.6Deferred tax liabilities 49.5 - - - - 145.2 - - 194.7 ------- ------ ------ ------ ------ ------ ------ ------- -------Total non-current liabilities 748.4 - - - 7.5 145.2 - - 901.1