3rd Quarter Results

For Immediate Release 2 November 2018

MILLENNIUM & COPTHORNE HOTELS plc

TRADING UPDATE

Nine months and third quarter results to 30 September 2018

LEI: 2138003EQ104LZ1JNH19

Nine months 2018:

Third quarter 2018:

Note 1: Pre-tax profit for the nine months of 2018 includes gain of £3m from the disposal of two Australian hotels that were owned by CDL Hospitality Trusts ("CDLHT"). During the same period last year, pre-tax profit included reversal of loan impairment of £12m and impairment of assets of £9m, with a net credit of £3m recognised in the income statement.

* Like-for-like comparisons exclude the impact of acquisitions, closures and refurbishments; and they are stated in constant currency terms.

· In reported currency, Group RevPAR for the nine months of 2018 decreased by 3.8% to £79.26 (2017: £82.41). In constant currency, it fell by just 0.4% mainly reflecting a stronger pound sterling against the Group's main trading currencies.

· Like-for-like* Group RevPAR for the nine months of 2018 increased by 1.5%. Like-for-like comparison excludes the Mayfair hotel which was impacted by its closure in July this year, the Millennium New Plymouth New Zealand which was acquired in March this year, and M Social Auckland which was re-opened in October 2017.

· In constant currency, hotel revenue for the nine months of 2018 was flat. Reported hotel revenue was down by £22m or 3.4%, reflecting the stronger pound.

· Reported total revenue for the first nine months of 2018 fell by £18m or 2.4% to £730m (2017: £748m). The impact from the strengthening of the pound sterling was £26m. In constant currency, total revenue for the period increased by £8m or 1.1%.

· In reported currency, pre-tax profit for the nine months of 2018 decreased by £19m to £99m (2017: £118m). In constant currency, pre-tax profit for the period decreased by £15m (2017: £114m). As previously disclosed, the closure of the Mayfair hotel resulted in the reduction of the Group's revenue and a commensurate reduction in profit. The Group continued to incur certain fixed costs at the Mayfair hotel. In addition, the Group saw an increase in its operating costs mainly due to payroll expenditure.

· In Q3 2018, Group RevPAR fell by 2.8% in reported currency and down by 1.6% in constant currency. Like-for-like* Group RevPAR increased slightly by 0.6%. Excluding Mayfair, RevPAR for London was up by 5.6%. RevPAR for Australasia was up by 2.9%. RevPAR for New York and Singapore were flat.

· For the first 21 days of October 2018, like-for-like Group RevPAR was up by 7.3%.

Mr Kwek Leng Beng, Chairman commented: 

"The Group experienced mixed trading results for the first nine months of the year, with hotel revenues flat for the period on a like-for-like basis and lower profit due to continuing cost pressures.

The hospitality sector is facing challenging trading conditions, including significant supply growth, technological "disruption", industry consolidation and rising minimum wage requirements and labour costs in key jurisdictions. These challenges, which are impacting the availability of talent and reducing margins, are exacerbated by geopolitical headwinds, such as the uncertainty surrounding Brexit and global trade tensions.

The Group will address these issues through product innovation, tighter cost control and by flattening the management structure to enhance our competitiveness. The Group also continues to focus on delivering value from significant capital expenditure projects in addition to the repositioning of the Mayfair property as a 5-star deluxe hotel and the development of our new hotel and residential apartment complex in Sunnyvale California, which broke ground in October 2018.

After the departure of the last Group Chief Executive Officer in September, Tan Kian Seng has been reappointed as the interim Group Chief Executive Officer. The Board is confident that Mr Tan will provide stability during the transition with his experience and knowledge accumulated over the past two years as interim Group CEO, Group Chief of Staff and President of Asia. Mr Tan, a chartered accountant with more than 30 years of business experience, had been CFO and President of one of the largest electronic manufacturing companies listed on the Singapore stock exchange. His overall management skills and strong financial background will contribute positively to the Group. The Board will take time to consider and search carefully for the next Group CEO, who must not only have relevant experience, but must also embrace and drive forward the Group's business model as a niche owner-operator."

Enquiries

Millennium & Copthorne Hotels plc Tel: +44 (0)20 7872 2444

Tan Kian Seng, Interim Group Chief Executive Officer

Kok-Kee Chong, Chief Financial Officer

Jonathon Grech, Group General Counsel and Company Secretary

David Allchurch, Tulchan Communications LLP Tel: +44 (0)20 7353 4200

FINANCIAL PERFORMANCE

For the nine months ended 30 September 2018, Group reported revenue decreased by 2.4% to £730m (2017: £748m). On a constant currency basis, Group revenue increased by £8m or 1.1%.

In constant currency, hotel revenue for the first nine months of 2018 was flat compared to the same period last year. Higher contributions from Millennium Hilton New York One UN Plaza (re-branded in August 2017) and M Social Auckland (opened in October 2017); were partially offset by the closure of the Mayfair hotel due to refurbishment. In reported currency, hotel revenue for the nine months of 2018 decreased by £22m or 3.4% reflecting a stronger pound sterling against the Group's main trading currencies.

Revenues from property sector and CDL Hospitality Trusts ("CDLHT") increased by £7m and £1m respectively compared to the first nine months of 2017.

Central costs for the nine months of 2018 increased by £5m or 20% to £30m (2017: £25m) due mainly to higher payroll related costs.

As disclosed previously, the Group recorded a gain of £3m from the disposal of two Australian hotels that were owned by CDLHT. During the same period last year, pre-tax profit included reversal of loan impairment of £12m and impairment of assets of £9m, with a net credit of £3m recognised in the income statement.

Hotel operation

In constant currency, Group RevPAR for the nine months of 2018 decreased by 0.4% to £79.26 (2017: £79.56). However, like-for-like* Group RevPAR increased by 1.5%.

# In constant currency whereby 30 September 2017 RevPAR and average room rates have been translated at average exchange rates for the period ended 30 September 2018.

* Like-for-like comparisons exclude the impact of acquisitions, closures and refurbishments; and they are stated in constant currency terms.

US

US RevPAR for the first nine months of 2018 increased by 1.3% to £91.51 (2017: £90.34). Average room rate increased by 3.8% offset partially by decrease in occupancy of 1.7% points.

New York RevPAR increased by 3.7% as a result of increases in both occupancy and average room rate of 1.1% points and 2.3% respectively. RevPAR for Regional US decreased by 1.5% to £61.21 (2017: £62.17) due to decrease in occupancy by 3.1% points offset partially by increase in average room rate of 3.6%.

In Q3 2018, US RevPAR fell by 0.5%. For New York, RevPAR was higher slightly by 0.3%.

Europe

Europe RevPAR for the first nine months of 2018 fell by 6.8%. Excluding the Mayfair hotel, like-for-like RevPAR increased by 1.1% helped by the warm summer.

Like-for-like RevPAR for the nine months of 2018 for London decreased by 0.5% with lower occupancy of 1.9% points partially offset by higher average room rate of 1.7%. Like-for-like RevPAR for Rest of Europe during the first nine months of 2018 grew by 3.8% with increases in both occupancy and average room rate of 0.7% points and 2.8% respectively.

In Q3 2018, Europe RevPAR fell by 3.8%. On a like-for-like basis, Europe RevPAR was up by 4.6% reversing the trend in H1 2018.

Asia

Asia RevPAR for the first nine months of 2018 increased by 1.5% to £70.40 (2017: £69.39) driven by increases in both average room rates and occupancy of 0.2% and 0.9% points respectively.

Singapore RevPAR is relatively flat, reflecting a 0.6% points fall in occupancy offset by a 0.5% increase in average room rate. Rest of Asia saw an improvement in performance with higher RevPAR of 2.8% contributed mainly by the Group's hotels in Taipei and Beijing.

In Q3 2018, Asia RevPAR decreased by 1.0% with room rates down by 4.8% partially offset by an increase in occupancy of 3.0% points.

Australasia

Like-for-like Australasia RevPAR grew by 3.0% during the first nine months of 2018. With the inclusion of M Social Auckland and Millennium New Plymouth, Australasia RevPAR increased by 5.9%; with average room rate and occupancy increasing by 4.8% and 0.9% points respectively. The softness in the market, first seen in April this year, has receded in July. International visitor arrivals grew by 2.9% for the first nine months of this year. However, competition is increasing both from new inventory and non-traditional supply.

In Q3 2018, Australasia RevPAR increased by 2.9% with room rates up by 2.4% and occupancy up by 0.3% points. Like-for-like RevPAR was down by 0.2% with the exclusion of M Social Auckland which opened in early October last year.

Developments

The Sunnyvale California project comprises the construction of a 263-room hotel and a 250-unit residential apartment block on 35,717m2 mixed use freehold landsite. The ground-breaking ceremony was held on 16 October 2018. The project is scheduled to complete in Q1 2021. The construction cost is estimated at US$200m (£155m).

Key specialist consultants, including architect and engineers, have started to work and improve on the design proposal relating to the Yangdong development in Seoul. The construction cost will be determined once the new design is finalised.

Hotel refurbishments

The on-going refurbishment work at the Mayfair hotel, which started in November 2017, is on track, with the hotel to be re-opened as a 5-star deluxe property during Q1 2019. The total cost is now estimated to be around £50m following upgrades to the scope of the work.

The Group continues to work on plans for the staged refurbishment of key hotels in London, New York and Singapore.

Orchard Hotel Singapore has commenced work on its lobby and food & beverage outlets, which is expected to complete by Q4 2018. The hotel remains fully operational. In addition, the guest rooms in the Orchard wing and the ballroom & meeting spaces will also be renovated from Q4 2018 to Q2 2019.

Other Group operations

Joint ventures and associates contributed £14m to profit during the nine months of 2018 (2017: £11m).The Group has an effective interest of 36% in First Sponsor Group Limited, which is listed on the Singapore Exchange and reports its results publicly.

In April 2018, the Group subscribed for its full entitlement of FSGL's rights issue of new perpetual convertible capital securities ("PCCS") for a total cost of S$58.2m (£32m) and the PCCS were allotted on 19 April 2018.

Financial position

At 30 September 2018, the Group had net debt of £675m (Dec 2017: net debt of £650m). Excluding CDLHT, net debt at 30 September 2018 was £212m (Dec 2017: net debt of £186m).

Board and management changes

As previously announced, Jennifer Fox stepped down as Group Chief Executive Officer and as a member of the Board of Directors on 27 September 2018. Tan Kian Seng resumed the role of interim Group Chief Executive Officer on 28 September 2018. Sue Farr resigned as a non-executive director of the Company with effect from 31 October 2018.

Gervase McGregor notified the Company on 1 November 2018 of his intention to resign as a non-executive director with effect from 1 December 2018. Following these changes, the Board continues to be comprised of a majority of independent non-executive directors.

This trading update contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of Millennium & Copthorne Hotels plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on forward looking statements which speak only as of the date of this document. The Group accepts no obligation to publicly revise or update these forward-looking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

Condensed consolidated income statement (unaudited)

for the nine months ended 30 September 2018

The financial results above were derived from continuing activities.

Condensed consolidated statement of financial position (unaudited)

as at 30 September 2018

Notes to the condensed consolidated financial statements

1. Operating segment information

1 Hotel fixed charges include depreciation, amortisation of lease premium prepayments, property rent, taxes and insurance, operating lease rentals and management fees.

2 EBITDA is earnings before interest, tax and, depreciation and amortisation.

APPENDIX 1: Key OPERATING STATISTICS

for the nine months ended 30 September 2018

For comparability, the 30 September 2017 Average Room Rate and RevPAR have been translated at average exchange rates for the period ended 30 September 2018.

* excluding managed, franchised and investment hotels.

APPENDIX 2: Key OPERATING STATISTICS

for the quarter ended 30 September 2018

For comparability, the 30 September 2017 Average Room Rate and RevPAR have been translated at average exchange rates for the period ended 30 September 2018.

* excluding managed, franchised and investment hotels.

APPENDIX 3: HOTEL ROOM COUNT AND PIPELINE

as at 30 September 2018

The Group's worldwide pipeline comprises 20 hotels offering 6,963 rooms, which are mainly franchise contracts.