Half-year Report

For Immediate Release 3 August 2018

MILLENNIUM & COPTHORNE HOTELS plc

INTERIM MANAGEMENT REPORT

Half year and second quarter results to 30 June 2018

LEI: 2138003EQ104LZ1JNH19

First half 2018:

Second quarter 2018:

Note 1: Pre-tax profit for H1 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.

· In reported currency, Group RevPAR decreased by 4.3% in H1 2018 to £75.29 (H1 2017: £78.69). In constant currency, it grew by 0.5%. Like-for-like* Group RevPAR for the six months of 2018 increased by 2.0%.

· RevPAR for the Group's London hotels in H1 2018 was down by 15.1% compared to H1 2017 mainly because of refurbishment work at our Mayfair hotel. Having been partially closed since November 2017, this property closed completely at the beginning of July 2018 to facilitate on-going refurbishment work to reposition the property as the Group's flagship property within a new luxury competitive set.

· Reported hotel revenue for H1 2018 fell by 3.3% to £404m (H1 2017: £418m). In constant currency, hotel revenue increased by 1.3%. Stronger sterling during the period had the effect of reducing our revenue from overseas hotels by £19m. 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 lower revenue from the Mayfair hotel and London hotels.

· Total revenue for H1 2018 fell by £8m or 1.6% to £477m (H1 2017: £485m). In constant currency, total revenue for H1 2018 increased by £14m or 3.0%. Increased residential section sales in New Zealand added £5m, whilst CDLHT added £3m, helped mainly by recently acquired hotels.

· In Q2 2018, Group RevPAR fell by 5.3% in reported currency and by 1.7% in constant currency. Like-for-like* Group RevPAR increased slightly by 0.8%.

· In reported currency, pre-tax profit for the first half of 2018 increased by £2m to £65m (H1 2017: £63m). In constant currency, pre-tax profit for the period increased by £4m to £65m (H1 2017: £61m).

· Pre-tax profit in Q2 2018 declined, on a constant currency basis, by £9m versus Q2 2017. This decline largely resulted from weaker hotel performance, notably in London, as well as a £3m reduction due to the timing of one-off gains.

· The Board declared an interim dividend of 2.08p per share.

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

Mr Kwek Leng Beng, Chairman commented: 

"I am pleased to welcome Jennifer Fox as Group CEO. I am working with her closely to expedite the changes we agree are necessary to improve performance as a niche owner-operator of hospitality assets. I am confident that her expertise in branding and marketing will bring benefits to the Group.

Results in the first half of 2018 were mixed. Whilst North Asia and New Zealand saw higher revenue, our London hotels under-performed partly due to their slow adjustment to competitive market conditions in addition to the impact of refurbishment at our Mayfair property. Although New York RevPAR was up, mainly due to improvements at Millennium Hilton New York One UN Plaza, the region remains unprofitable. Singapore was down slightly.

Since the close of the second quarter, we underlined our commitment to stepping up investment in Group assets by closing the Mayfair hotel entirely at the beginning of July. We look forward to its re-opening as our flagship property in Q1 next year. Additional refurbishment projects in London and New York will be announced in due course.

Given current volatile political and economic conditions - especially Brexit and the unfolding trade tensions between the United States, China and Europe - the Group continues to be cautious about the immediate future. However, this will not affect our plan to step up investment in our hotels, which we regard as essential to the Group's long-term health."

Ms Jennifer Fox, Group Chief Executive Officer commented:

"I am pleased to have joined M&C and see there is opportunity to strengthen the company and drive results for our shareholders. Since arriving on 19 June, I have reinforced the leadership team with two key appointments in a Group Chief Marketing Officer and a Head of Human Resources. In the past six weeks I have been reviewing the earnings profile and potential of our most important properties. A strategic plan currently is being developed."

Enquiries

Millennium & Copthorne Hotels plc Tel: +44 (0) 2078722444

Jennifer Fox, Group Chief Executive Officer

Kok-Kee Chong, Chief Financial Officer

Jonathon Grech, Group General Counsel and Company Secretary

Peter Krijgsman, Financial Communications (Media)

FINANCIAL PERFORMANCE

For the six months ended 30 June 2018, Group reported revenue decreased by 1.6% to £477m (H1 2017: £485m). On a constant currency basis, Group revenue increased by £14m or 3.0%.

In constant currency, hotel revenue for H1 2018 increased by 1.3% as compared to the first half last year with higher contributions from Millennium Hilton New York One UN Plaza (re-branded in August 2017) and M Social Auckland (opened in October 2017); partially offset by the reduced revenue from London, where the Mayfair hotel was partially closed from November 2017 and is now fully closed since the beginning of July 2018.

Increased residential section sales in New Zealand and CDLHT's recently acquired hotels contributed £5m and £3m respectively to the higher total revenue. Higher profits from these activities were offset by lower hotel operating profit.

Pre-tax profit for H1 2018 includes gain of £3m from CDLHT's disposal of two Australian hotels. 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 H1 2018 was flat at £75.29 (H1 2017: £74.95). Like-for-like* Group RevPAR increased by 2.0%.

# In constant currency whereby 30 June 2017 RevPAR and average room rates have been translated at average exchange rates for the period ended 30 June 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 H1 2018 increased by 2.5% to £83.52 (H1 2017: £81.50). Average room rate increased by 4.4% offset partially by decrease in occupancy of 1.3% points.

New York RevPAR increased by 6.0% as a result of increases in both occupancy and average room rate of 2.0% points and 3.4% respectively. RevPAR for Regional US decreased by 1.6% to £55.25 (H1 2017: £56.16) with higher average room rate of 3.3% and lower occupancy of 2.9% points.

In Q2 2018, US RevPAR increased by 1.1% with room rates up by 4.5% and occupancy down 2.4% points.

Europe

Europe RevPAR for H1 2018 fell by 8.2% with lower occupancy and average room rate.

RevPAR for London decreased by 15.1% due to the phased closure of our Mayfair hotel during the first half of the year. It was fully closed at the start of July 2018. The closure of the Mayfair hotel resulted in about 81% of the lower London revenue. There was weaker trading in the other London hotels during the period mainly due to a lower level of corporate business.

RevPAR for Rest of Europe during H1 2018 grew by 4.9% with increase in occupancy and average room rate of 1.0% points and 3.5% respectively.

Excluding the Mayfair hotel and Millennium Hotel Glasgow where 56 rooms were permanently removed from the hotel in connection to the development of Queen Street Station, Europe RevPAR decreased by 1.1%. On the same basis, RevPAR for London and Rest of Europe was down by 4.4% and up by 4.9% respectively.

In Q2 2018, Europe RevPAR fell by 11.1% with room rates down by 4.8% and occupancy down 5.4% points. On a like-for-like basis, Europe RevPAR fell by 1.7%.

Asia

Asia RevPAR for H1 2018 increased by 2.8% to £69.68 (H1 2017: £67.81) driven mainly by a 3.0% increase in average room rates.

Singapore RevPAR fell by 0.4% with an increase in average room rate of 2.1% offset by lower occupancy of 2.2% points.

Although visitor numbers are increasing and the growth in hotel rooms is levelling off, Singapore remains highly competitive with recent additions to hotel inventory seeking to build market share.

Rest of Asia saw an improvement in performance with higher RevPAR of 5.5% reflecting increases in both average room rate and occupancy of 3.7% and 1.2% points respectively. Grand Hyatt Taipei benefited from the Computex show held in June 2018 whilst Millennium Seoul Hilton gained from increased government business as a result of the North Korea/South Korea summit.

In Q2 2018, Asia RevPAR increased by 2.6% with room rates up by 3.3% and occupancy down 0.5% points.

Australasia

Like-for-like Australasia RevPAR grew by 4.5% during H1 2018. With the inclusion of M Social Auckland, Australasia RevPAR increased by 7.3% in H1 2018 with an increase in average room rate and occupancy of 5.8% and 1.2% points respectively.

In Q2 2018, Australasia RevPAR increased by 2.5% with room rates up slightly by 0.2% and occupancy up 1.7% points. Like-for-like RevPAR was flat, with decrease in average room rate by 2.4% and higher occupancy by 2.0%.

Developments

The construction of a 263-room hotel and a 250-unit residential apartment block on 35,717m2 mixed use freehold landsite at Sunnyvale, California has commenced this year with site preparation and pre-construction work. The construction cost is estimated at US$200m (£152m).

The Group is re-considering the design of the Yangdong development in Seoul, possibly with a view to increase the number of hotel rooms and apartment units. The construction cost will be determined once the new design is finalised.

Hotel refurbishments

The on-going refurbishment work at our Mayfair hotel started in November 2017 and will cost around £40m in total. The hotel ceased trading at the start of July 2018 and is scheduled to re-open in Q1 next year.

Refurbishment plans for Millennium Hotel London Knightsbridge are under review. As previously announced, the Group plans to spend about US$80m (£61m) to upgrade its New York properties over the next two years.

Orchard Hotel Singapore has commenced work on its lobby and food & beverage outlets, which is expected to complete by end 2018. The hotel remains fully operational but some disruption and revenue loss is anticipated. The guest rooms in the Orchard wing will be renovated progressively from 4Q 2018 to around 1Q 2019, as well as the ballroom and some meeting spaces in the hotel.

Other Group operations

Joint ventures and associates contributed £8m to profit in H1 2018 (H1 2017: £6m). 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 June 2018, the Group had net debt of £674m (Dec 2017: net debt of £650m). Excluding CDLHT, net debt at 30 June 2018 was £232m (Dec 2017: net debt of £186m).

Board and management changes

As previously announced, Jennifer Fox was appointed as the Group Chief Executive Officer and a member of the Board of Directors on 19 June 2018. The Group has also appointed a Group Chief Marketing Officer and a Head of Human Resources, both based in London.

Dividend

The Board has declared an interim dividend of 2.08 pence per share. The interim dividend will be paid on 28 September 2018 to shareholders on the register at the close of business on 17 August 2018. The ex-dividend date of the Company's shares is 16 August 2018. The Board will consider the full dividend for the year following the close of the financial year.

Current trading

In the first 21 days of trading in July 2018, Group RevPAR in constant currency decreased by 3.5%. RevPAR for New York down by 5.1%, Regional US down by 5.3%, London was flat, Rest of Europe up by 1.3%, Singapore down by 3.0%, Rest of Asia up by 8.1% and Australasia down by 9.9%.

Excluding Millennium Hotel Glasgow (116 rooms reduced to 60 rooms from July 2017), M Social Auckland (opened October 2017), our Mayfair hotel (closed from 1 July 2018) and Millennium New Plymouth NZ (acquired in February 2018), like-for-like Group RevPAR dropped by 1.0% with London up by 8.9%. Rest of Europe was up by 0.4%. Australasia was down by 10.6%, in part attributable to strong comparatives in 2017due to the British and Irish Lions rugby tour.

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 half year ended 30 June 2018

The financial results above were derived from continuing activities.

Condensed consolidated statement of comprehensive income (unaudited)

for the half year ended 30 June 2018

Condensed consolidated statement of financial position (unaudited)

as at 30 June 2018

Condensed consolidated statement of changes in equity (unaudited)

for the half year ended 30 June 2018

Condensed consolidated statement of cash flows (unaudited)

for the half year ended 30 June 2018

Notes to the condensed consolidated financial statements

1. General information

Basis of preparation

The consolidated financial statements in this interim management report for Millennium & Copthorne Hotels plc ("the Company") as at and for the half year ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as "the Group") and the Group's interests in joint ventures and associates.

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2017 and during the three month period ended 30 June 2018 ("Second Quarter 2018").

The comparative figures for the financial year ended 31 December 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These interim financial statements were authorised for issue by the Company's Board of Directors on 2 August 2018.

Use of judgements and estimates

The financial statements were prepared on a going concern basis supported by the Directors' assessment of the Group's current and forecast financial position and forecast for the foreseeable future; and are presented in the Company's functional currency of sterling, rounded to the nearest million.

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2017.

Significant accounting policies

The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2017.

New standards and interpretations

'IFRS 15 Revenue from Contracts with Customers' is effective from the start of the Group's current financial year. IFRS 15 provides a principles-based approach for revenue recognition and introduces the concept of recognising revenue for obligations as they are satisfied. The Group has assessed the requirements of the standard and the conclusion is that there is no material impact to revenue.

'IFRS 9 Financial Instruments: Recognition and Measurement' is effective from the start of the Group's current financial year. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. Debt instruments currently classified as held-to maturity and measured at amortised cost will meet the conditions for classification at amortised cost under IFRS 9. The Group believes that its current hedge relationships will qualify as continuing hedges, upon the adoption of IFRS 9. The impact of this accounting standard on the Group's accounts for the current year is considered immaterial.

'IFRS 16 Leases' is effective for annual periods beginning on or after 1 January 2019 and results in lessees accounting for most leases within the scope of the standard in a manner similar to the way in which finance leases are currently accounted for under IAS 17 Leases. The Group is currently assessing the impact of this standard but it is not practicable to quantify the effect as at the date of the publication of this report.

Notes to the condensed consolidated financial statements

2. Foreign currency translation

The Company publishes its Group financial statements in sterling. However, the majority of the Company's subsidiaries, joint ventures and associates report their revenue, costs, assets and liabilities in currencies other than sterling. The Company translates the revenue, costs, assets and liabilities of those subsidiaries, joint ventures and associates into sterling, and this translation of other currencies into sterling could materially affect the amount of these items in the Group's financial statements, even if their values have not changed in their original currencies. The following table sets out the sterling exchange rates of the other principal currencies of the Group.

3. Operating segment information

Disclosure of segmental information is principally presented in respect of the Group's geographical segments.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items principally comprise: interest-bearing loans, borrowings, cash and cash equivalents, net finance expense, taxation balances and corporate expenses.

Geographical segments

The hotel and property operations are managed on a worldwide basis and operate in seven principal geographical areas as follows:

· New York

· Regional US

· London

· Rest of Europe (including the Middle East)

· Singapore

· Rest of Asia

· Australasia

The segments reported reflect the operating segment information included in the internal reports that the Chief Operating Decision Maker ("CODM"), which is the Board, regularly reviews.

The reportable segments are aligned with the structure of the Group's internal organisation which is based according to geographical region. Discrete financial information is reported to and is reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers ("COOs") or equivalent who are directly accountable for the functioning of their segments and who maintain regular contact with the Chief Executive Officer and Chairman of the CODM to discuss the operational and financial performance. The CODM makes decisions about allocation of resources to the regions managed by the COOs.

The results of CDLHT have been incorporated within the existing geographical regions. In addition, CDLHT operations are reviewed separately by its board on a monthly basis.

Notes to the condensed consolidated financial statements

3. Operating segment information (continued)

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

2 See Note 4 for details of other operating income and expense.

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

Notes to the condensed consolidated financial statements

3. Operating segment information (continued)

Segmental assets and liabilities