Millennium & Copthorne halves dividend after hotel revenues dive
Thursday 19 February 2009
The troubles facing the international hotelier Millennium & Copthorne Hotels (M&C) were laid bare yesterday when it revealed dreadful revenues in the US and Asia this year, tumbling profits and a halving of its full-year dividend.
The hotelier said it had also put a freeze on recruitment and virtually halted all new capital expenditure.
Kwek Leng Beng, the chairman of the hotelier, said: “The group is anticipating that the next few quarters will present challenging trading conditions.”
M&C said that group revenues per available room (revpar), a critical indicator of performance in the industry, tumbled by 21.2 per cent in the first five weeks of 2009. In the US, revpar at its New York hotels plummeted by 41 per cent and by 23 per cent at regional US hotels. Revpar at M&C’s Asian hotels fell by 20 per cent, but those in London fared better by being down by only 4 per cent.
The results from M&C come hard on the heels of Tuesday’s statement from InterContinental Hotels, the world’s largest hotelier, which warned of a continuing marked slowdown during its fourth quarter, particularly in New York and China.
The awful numbers and a surprise halving of M&C dividend spooked investors, who sent its shares down by 38p, or 17 per cent, to 190p. M&C cut the final dividend to 4.17p a share, taking its full-year dividend down by half to 6.25p compared with 12.5p in 2008.
Mark Reed, an analyst at Teathers, said: “Current trading is dire and while not too much weight should be given to just five weeks trading, the economic backdrop suggests things will not improve. We have previously estimated that without cost cuts Ebitda [underlying earnings] would be eliminated with a 20 per cent sales fall.” He said the slashing of the dividend was a “surprise”, given that Teathers had expected it to be held flat.
For the year to 31 December, M&C’s revpar increased to 7.6 per cent. Group revenues rose by 5 per cent to £702.9m, but actually fell by 1.2 per cent in constant currency terms. Its pre-tax profits slumped by 34.5 per cent to £102.8m.
Despite the turbulent economic conditions, M&C grew revenues in 2008 at its London hotels by 2 per cent to £93.8m and their annual revpar rose by 4 per cent to £85.5m. But regional UK revpar fell by 6.2 per cent, driven by a 4.5 per cent fall in occupancy rates.
Mr Beng said: “In this current uncertain climate, it is difficult to predict with accuracy how long these [global] conditions will continue to exist and when a correction and improvement in market sentiment can be expected.”
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