Half-year Report

For Immediate Release 2 August 2019

MILLENNIUM & COPTHORNE HOTELS plc

Half year and second quarter results to 30 June 2019

LEI: 2138003EQ104LZ1JNH19

First half 2019:

Second quarter 2019:

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

·; On 7 June 2019, the Group announced that the Boards of Directors of City Developments Limited ("CDL") and Agapier Investments Limited, a company indirectly and wholly-owned by CDL ("Bidco"), and the Company's independent non-executive directors had reached agreement on the terms of a recommended pre-conditional final cash offer (the "Offer") pursuant to which Bidco will acquire the entire issued and to be issued ordinary share capital of the Company not already held by CDL and its subsidiaries (and persons acting in concert with them) (the "CDL Parties"). Under the Offer, shareholders will be entitled to receive 685 pence per share in cash. The Offer is conditional on, amongst other things, (i) Bidco securing valid acceptances of the Offer in respect of more than 50 per cent in nominal value of the Company's shares not already owned by the CDL Parties and of the voting rights attached to those shares; (ii) the granting of consent and/or receipt of applicable exemptions, under the New Zealand Overseas Investment Act 2005 and the New Zealand Overseas Investment Regulations 2005, for the indirect acquisition of interests in sensitive land and significant business assets in New Zealand; and (iii) the granting by the Takeovers Panel of New Zealand of an unconditional exemption from the requirements of rule 6(1) of the New Zealand Takeovers Code. The complete announcement relating to the Offer can be found at: https://investors.millenniumhotels.com/regulatory-announcements-and-news/city-developments-ltd-offer-documents.

·; No interim dividend will be declared as the terms of the Offer stipulated that any dividends or distribution declared or made on or after 7 June 2019 will result in the Offer price being reduced proportionately.

·; Group RevPAR in constant currency for H1 2019 increased by 0.2% to £77.82 (H1 2018: £77.68). Excluding the impact of the closure of the Mayfair hotel and addition of the Millennium New Plymouth New Zealand as of 1 February 2018, like-for-like* Group RevPAR decreased by 0.3%.

·; Refurbishment at the Mayfair hotel and Orchard Hotel Singapore negatively impacted the Group's performance during H1 2019. The Mayfair hotel has been closed since July 2018 and is expected to re-open in September 2019. The Orchard Hotel Singapore has been closed on a phased basis since Q4 2018 and refurbishment work completed in July 2019. The total impact was a reduction in revenue and profit by £7m and £6m respectively.

·; For the first 21 days of July 2019, like-for-like* Group RevPAR increased by 1.6%.

Enquiries

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

Tan Kian Seng, Interim Group Chief Executive Officer

Jonathon Grech, Group General Counsel and Company Secretary

Matthew Smallwood, Instinctif Partners Tel: +44 (0) 2074572020

FINANCIAL PERFORMANCE

For the six months ended 30 June 2019, Group reported total revenue decreased by £5m or 1.0% to £472m (H1 2018: £477m). On a constant currency basis, Group total revenue decreased by £19m or 3.9%.

For H1 2019, hotel revenue in constant currency was down by £8m or 1.9% compared to the same period last year. Impact from Mayfair hotel closure was £5m. Revenue impact from the Orchard Hotel refurbishment was £2m.

Property revenues in constant currency were lower by £9m or 21.4% in H1 2019 as compared to the same period last year due principally to lower sales of residential sections in New Zealand.

Hotel operation

In constant currency, Group RevPAR for H1 2019 increased slightly by 0.2% to £77.82 (H1 2018: £77.68). Like-for-like* Group RevPAR decreased by 0.3%.

# In constant currency whereby 30 June 2018 RevPAR and average room rates have been translated at average exchange rates for the period ended 30 June 2019.

* 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 2019 decreased by 0.7% to £88.18 (H1 2018: £88.79). Average room rate dropped by 0.8% offset partially by a slight increase in occupancy of 0.1% points. The shut-down of the federal government and extreme cold weather arising from the polar vortex during Q1 2019 negatively impacted demand, especially corporate transient and group travel business.

New York RevPAR was down by 1.5% principally due to the lower average room rate of 1.7%. In order to fast track the Group's revenue recovery strategy for Millennium Times Square New York (formerly the Millennium Broadway New York Times Square) the hotel has joined Hilton as an affiliate with access to its reservation channels and loyalty programme, while remaining under management by the Group.

Regional US RevPAR for H1 2019 was flat.

In Q2 2019, US RevPAR decreased by 0.2% with occupancy down by 1.0% points and average room rate up by 1.2%.

Europe

London RevPAR grew by 12.8% to £97.11 (H1 2018: £86.06) with increases in occupancy and average room rate of 6.2% points and 4.0% respectively. Excluding the Mayfair hotel which has been closed for refurbishment since July 2018, like-for-like London RevPAR increased by 7.4% with average room rate up by 8.2% offset by a slight drop in occupancy by 0.6% points. The higher room rates achieved by the London hotels in H1 2019 was partly a result of rate driven initiatives in Q2 2019 after a drop in Q1 2019 including re-allocation of Mayfair business to the Knightsbridge hotel.

RevPAR for Rest of Europe during H1 2019 was down by 5.9% with decreases in occupancy and average room rate of 2.4% points and 2.7% respectively.

Europe RevPAR for H1 2019 increased by 3.3% to £73.08 (H1 2018: £70.73). Like-for-like RevPAR increased by 2.2%.

In Q2 2019, Europe and London RevPAR increased by 6.3% and 19.1% respectively. On a like-for-like basis excluding the Mayfair hotel, Europe RevPAR was up by 2.7% with London RevPAR increased by 9.3%.

Asia

Asia RevPAR for H1 2019 was down by 1.5% to £70.33 (H1 2018: £71.41) due to decreases in both occupancy and average room rate of 0.4% points and 1.0% respectively.

Singapore RevPAR fell by 1.4% with lower average room rate of 2.3% offset by a slight increase of 0.8% points in occupancy. Singapore remains highly competitive with additions to new inventory in preferred locations. The Group's performance was also significantly affected by the refurbishment work at Orchard Hotel.

Rest of Asia hotels' performance was also generally lacklustre. RevPAR dropped by 1.6% mainly due to 1.1% points decrease in occupancy; with most hotels registering negative RevPAR growth.

In Q2 2019, Asia RevPAR was down by 0.2% with Singapore down by 0.4% and Rest of Asia flat.

On 26 July 2019, the Company's South Korean operating subsidiary entered into a management agreement with a subsidiary of Hilton for the operation of the Millennium Seoul Hilton for a term of 10 years. As part of the transition from a franchise agreement to a management agreement, the hotel will be renamed as the Millennium Hilton Seoul and the parties are reviewing the scope of a property improvement plan for the hotel. It is anticipated that Hilton will assume management control of the hotel on 1 September 2019.

Australasia

Australasia RevPAR grew by 0.7% during H1 2019 with average room rate up by 1.3% offset by lower occupancy of 0.5% points. Excluding Millennium New Plymouth which was acquired in February last year, like-for-like Australasia RevPAR increased by 0.6%

In Q2 2019, Australasia RevPAR was down by 1.6%.

Developments

The Sunnyvale California project comprises the construction of a 263-room hotel and a 250-unit residential apartment block on a 35,717m2 mixed use freehold landsite. Construction of the apartment element commenced in July 2019 and the whole project is expected to complete in Q1 2021. The hotel will be branded as an M Social to fit with the expected guest profile for the location. Total construction cost is estimated at US$180m (£142m).

Architecture and engineering designs in relation to the construction of a 300-room hotel and a 250-unit serviced apartment complex on Yangdong development land, situated adjacent to Millennium Seoul Hilton, are still to be finalised to ensure efficiency in the design with minimum basement excavation due to the challenging surrounding site and soil conditions. Total construction cost is anticipated to be around KRW130b (£88m). 

Hotel refurbishments

The Mayfair hotel is currently closed for refurbishment pending its re-opening in September 2019 as The Biltmore, Mayfair. Originally proposed as a five-star entry level hotel, the Group subsequently opted to place it in the five-star deluxe segment. This has extended the time and cost of the project due to the very high level of specifications demanded in this market. The revamped property will initially be managed by Hilton under its LXR Hotels & Resorts brand - its first in Europe - with 257 luxurious guest rooms and 51 designer suites as well as a prestigious new London restaurant led by celebrity chef Jason Atherton. In addition to enhancing the London revenue stream, the investment offers the Group a valuable opportunity over the medium term to develop its management expertise in the five-star deluxe segment.

The required testing and commissioning works have been carried out, and, save for a limited number of guest rooms that are subject to further works, the hotel has undergone and passed Building Control inspections.

Refurbishment work to the public areas and guestrooms at the Orchard Hotel in Singapore is complete, with the final phase of work on the Orchard wing guestrooms having finished and the rooms having re-opened in early July 2019.

Disposals

During Q1 last year, CDLHT disposed of its investment in two hotels in Australia, the Mercure Brisbane and Ibis Brisbane for A$77m (£45m) generating a profit of £3m.

Property and REIT operations

Property revenues in constant currency were lower by £9m or 21.4% in H1 2019 as compared to the same period last year due principally to lower sales of residential sections in New Zealand reflecting challenging market conditions. This resulted in lower property operating profit by £7m or 28.0% to the Group.

Revenue and operating profit from the REIT hotels decreased by £2m or 6.1% and £4m or 46.2% respectively in H1 2019; mainly resulted from the closure of Raffles Maldives Meradhoo due to refurbishment works and lower net contribution from its overseas properties.

Other Group operations

Joint ventures and associates contributed £10m to profit in H1 2019 (H1 2018: £8m). The Group has an effective interest of 36% in First Sponsor Group Limited ("FSGL"), which is listed on the Singapore Exchange and reports its results publicly.

On 3 June 2019, the Group took up its full entitlement of FSGL's rights issue of new Perpetual Convertible Capital Securities ("PCCS") for a total cost of S$53m (£30m). As part of the capital funding exercise, 1 new free warrant was issued for every 1 new PCCS subscribed for; in addition, 1 new bonus warrant was issued for every 10 existing ordinary shares held in FSGL.

Financial position

At 30 June 2019, the Group had net debt of £806m (Dec 2018: net debt of £727m). Excluding CDLHT, net debt at 30 June 2019 was £279m (Dec 2018: net debt of £226m).

Board and management changes

As previously announced, Mrs Vicky Williams joined M&C's Board of Directors as an independent Non-Executive Director immediately following the Company's Annual General Meeting on 10 May 2019. Ms Paola Bergamaschi Broyd joined the Board as an independent Non-Executive Director on 21 March 2019.

The search for a permanent Group Chief Executive Officer has been suspended pending the outcome of the conditional Offer by CDL.

This interim management report 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 2019

The financial results above were derived from continuing activities.

Condensed consolidated statement of comprehensive income (unaudited)

for the half year ended 30 June 2019

Condensed consolidated statement of financial position (unaudited)

as at 30 June 2019

Condensed consolidated statement of changes in equity (unaudited)

for the half year ended 30 June 2019

Condensed consolidated statement of cash flows (unaudited)

for the half year ended 30 June 2019

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 2019 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 2018 and during the three-month period ended 30 June 2019 ("Second Quarter 2019").

The comparative figures for the financial year ended 31 December 2018 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 1 August 2019.

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 2018.

Significant accounting policies

Except changes described below, 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 2018.

New standards and interpretations

(i) IFRIC 23 Uncertainty over Income Tax Treatments

The Group adopted "IFRIC 23 Uncertainty over Income Tax Treatments" with effect from 1 January 2019. The interpretation clarifies how the recognition and measurement requirements of "IAS 12 Income Taxes" should be applied when there is uncertainty over income tax treatments. The interpretation provides guidance to determine whether uncertain tax treatments should be considered separately or together as a group. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation also clarifies how to consider assumptions about the examination of uncertain tax treatments by taxation authorities and measurement methods of uncertain tax positions. The reassessment of current and deferred taxes in accordance with IFRIC 23 resulted in a reduction of £4m income taxes payable to retained earnings on transition.

(ii) IFRS 16 Leases

The Group adopted "IFRS 16 Leases" with effect from 1 January 2019 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Comparative information has therefore not been restated and is reported under "IAS 17 Leases" and "IFRIC 4 Determining whether an Arrangement contains a Lease".

IFRS 16 results in lessees accounting for operating leases within the scope of the standard in a manner similar to the way in which finance leases were previously accounted for under IAS 17 Leases. Lessees will recognise a 'right of use' ("ROU") asset and a corresponding financial liability on the balance sheet. ROU assets are initially measured at cost, comprising the initial measurement of the lease liability, plus any initial direct costs and an estimate of asset retirement obligations, less any lease incentives. Subsequently, ROU assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. The ROU asset will be amortised over the period of the lease.

The lease liability is initially measured at the present value of lease payments, discounting using the Group's incremental borrowing rate specific to the asset and length of lease. The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option. Subsequently the lease liability is re-measured by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability is measured when the Group changes its assessment of whether it will exercise an extension or termination option.

Notes to the condensed consolidated financial statements

1. General information (continued)

New standards and interpretations (continued)

The Group has elected to apply exemptions for short term leases and leases for which the underlying asset is of low value. For these leases the lease payments are charged to the income statement on a straight-line basis over the term of the relevant lease. ROU assets are presented within non-current assets on the face of the Statement of Financial Position and lease liabilities are shown separately on the Statement of Financial Position in current liabilities and non-current liabilities depending on the length of the lease term. The Group's existing lease expenses for operating lease arrangements under IFRS 16 are replaced with depreciation charge of ROU assets related to property, plant and equipment or investment properties; and interest expense on lease liabilities.

The impact arising from the adoption of IFRS 16 is shown below:

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 namely New York, Regional US, London, Rest of Europe, Singapore, Rest of Asia and 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, property rent, taxes, insurance 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