Annual Report & Accounts 2017
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& Accounts 2017 Annual Report Millennium & Copthorne Hotels plc Annual Report & Accounts 2017 Our hotel collections Our Millennium and Grand The M Collection showcases Millennium hotels offer timeless stylish and vibrant design with elegance and personalised, strong local influence, offering gracious service to the guests a new, urban, and seasoned global traveller. stimulating lodging experience. They are brilliant for corporate These conveniently located guests and groups as they are hotels are colourful, lively, and seen as a great place to meet technologically equipped with and network in the world’s most the aim of helping guests tap fascinating cities. Millennium Biltmore Hotel into their own creative and Los Angeles adventurous spirits. Leng’s Collection is a legacy of our founders, the Leng generation of the Kwek family. Unique, authentic and elegant, these iconic hotels offer guests a most distinctive hospitality experience and provide the sense of being part of a club. They are beautifully situated, characterful properties in some of the world’s most M Social Singapore desirable destinations. Our collection of Grand Copthorne, Copthorne and Kingsgate properties comprises comfortable and competitively priced hotels, where friends and families are welcomed with a warm smile and helpful service. As with all of The Bailey’s Hotel London our properties, Copthorne hotels are in locations that put our guests close to the heart of their chosen destinations. Cover: Millennium Hotel London Mayfair CONTENTS HEAD_0 2ND LINE Millennium & Copthorne Hotels plc Annual Report & Accounts 2017 1 CONTENTS Strategic Report 4 Chairman’s statement 6 Business review and strategy 9 Key performance indicators 10 Financial performance 12 Our global reach STRATEGIC REPORT 14 Regional performance 16 Corporate responsibility 23 Our risks Governance 32 Board of Directors 34 Directors’ report 40 Corporate governance statement 48 Audit Committee report 51 Directors’ remuneration report 67 Nominations Committee report 71 Statement of Directors’ responsibilities 72 Independent auditor’s report GOVERNANCE Financial Statements 80 Consolidated income statement 81 Consolidated statement of comprehensive income 82 Consolidated statement of financial position 84 Consolidated statement of changes in equity 85 Consolidated statement of cash flows 87 Notes to the consolidated financial statements 150 Company statement of financial position 151 Company statement of changes in equity 152 Notes to the Company financial statements Further Information 154 Group financial record 155 Key operating statistics FINANCIAL STATEMENTS 157 Major Group properties 165 Millennium & Copthorne hotels worldwide 168 Shareholder information 171 Financial calendar Millennium & Copthorne Hotels plc 2 Annual Report & Accounts 2017 Millennium & Copthorne Hotels plc Strategic Report Governance Financial statements Further information Annual Report & Accounts 2017 3 STRATEGIC REPORT 4 Chairman’s statement 6 Business review and strategy 9 Key performance indicators 10 Financial performance 12 Our global reach 14 Regional performance 16 Corporate responsibility 23 Our risks M Social Auckland CHAIRMAN’S HEAD_0 2ND LINE STATEMENT Millennium & Copthorne Hotels plc 4 Annual Report & Accounts 2017 CHAIRMAN’S STATEMENT Underlying hotel performance was flat last KWEK LENG BENG year. Foreign exchange gains relating to Chairman hotel revenue totalled £39m arising from weaker sterling, which is our reporting currency, against currencies in the regions where we operate. The increase in 2017 hotel revenue was attributable mainly to a full year of trading at two of our hotels: Millennium Hilton New York One UN Plaza, which re-opened post- refurbishment in September 2016, and Grand Millennium Auckland, which joined the Group in September 2016. Performance was impacted by industry- wide factors, including political instability in Korea, the unabated growth in popularity amongst customers of online travel agents and alternative lodging options; and rising costs, especially in London, where Brexit is impacting a hospitality labour market already affected by minimum wage legislation. Our New York business will take some time to restore profitability in light of a strong union operating environment, union-driven wage increases and the continuing growth in room supply. The Group expects to make significant capital investment for a needed transformation to the repositioning of our hotels so as to keep pace with guest expectations. Increased expenditure on both maintenance and product improvement will therefore be necessary for the Group to stay relevant and competitive. We also remain alert to opportunities to grow by acquisition. We respect the decision by shareholders Source: The Straits Times © Singapore Press Holdings Limited. Permission required for reproduction. This in the recent lapsed offer by City photo has been modified for Annual Report use. Developments Limited. During 2017, the Group struggled to make headway against a number of challenges. In New York, Millennium The Group expects to make significant capital investment for Broadway continued to under-perform, a needed transformation to the repositioning of our hotels. whilst the recent operating transfer of ONE UN to Hilton will take some time to yield results. The recent growth in local hotel room inventory constrained our ability to HEAD_0 1ST LINE HEAD_0 1ST LINE CONTINUED HEAD_0 2ND LINE 2ND LINE CONTINUED Millennium & Copthorne Hotels plc Strategic Report Governance Financial statements Further information Annual Report & Accounts 2017 5 Revenue increase room rates in Singapore, whilst Subject to approval by shareholders at the performance of the other Asian hotels the Annual General Meeting to be held was flat overall. on 4 May 2018, the final dividend will be paid on 11 May 2018 to shareholders on the £1,008M Concerns about Brexit have affected our register on 16 March 2018. UK hotels especially in London, where there were already pressures on labour The Group refreshed its Board of Directors +8.9% costs from a recent minimum wage during the year. With Aloysius Lee having increase. More positively, our hotels in New retired as a Director and the Group Chief £1,064m £1,008m Zealand continued their recent run of good Executive Officer at the end of February £926m RevPAR growth, reflecting higher visitor 2017 and with Alexander Waugh and £826m £847m numbers in the country, as well as the Nicholas George stepping down from inclusion of Grand Millennium Auckland in the Board at last year’s annual general September 2016. meeting, we welcomed Martin Leitch and Christian de Charnacé as Independent Total revenue for the year increased by Non-Executive Directors on 22 May and £82m or 8.9% to £1,008m (2016: £926m). 16 August 2017 respectively. Howard Wu, Hotel revenue contributed most of this who joined the Board as an Independent growth i.e. £66m. REIT revenue increased Non-Executive Director on 17 February by £10m to £66m (2016: £56m) mainly 2017, stepped down from the Board as of 2013 2014 2015 2016 2017 due to contributions from newly acquired 3 August 2017 in order to take on executive hotels. Increased land bank sales in New responsibilities within the Group. Zealand added £5m to total revenue. Following the annual general meeting RevPAR* Pre-tax profit grew by 36.1% to £147m on 5 May 2017, His Excellency Shaukat (2016: £108m). Part of the increase Aziz was appointed Senior Independent was driven by lower impairment losses Director, succeeding Nicholas George. compared to the previous year and Following these and other changes, the £82.78 the reversal of a £12m loan impairment compositions of the Audit, Nominations, following the sale of the Group’s interest in Risk and Remuneration Committees were its Thailand joint venture, Fena, the owner updated further, as explained in the +3.2% of Pullman Bangkok Grande Sukhumvit Corporate Governance Statement starting (formerly Grand Millennium Sukhumvit on page 40. 2016: £80.19 Bangkok). In the first 31 days of trading in 2018, Group The Group’s share of profit from joint RevPAR in constant currency increased by ventures and associates fell by £4m to 3.6%. New York up by 4.5%, Rest of Asia up PBT £22m (2016: £26m). The decrease was 14.2%, Australasia up 10.3%, Rest of Europe principally due to a gain recognised by up 1.2% but London down 3.2%, Singapore First Sponsor Group Limited (“FSGL”) in the down 2.0% and Regional US down 2.5%. comparative year 2016 relating to a project £147M based in Dongguan, China. Excluding Millennium Hotel Glasgow (116 rooms reduced to 60 rooms from July 2017), The Board recommends a final ordinary M Social Auckland (opened October 2017) +36.1% dividend of 4.42p per share (2016: 5.66p) and Millennium Hotel London Mayfair taking into account the Group’s current cash (refurbishment commenced in November 2016: £108M position and future capital expenditure 2017), like-for-like Group RevPAR increased requirements. Together with the interim by 4.0% with London up 0.9%, Rest of ordinary dividend of 2.08p per share Europe up 0.2% and Australasia up by (2016: 2.08p), the total ordinary dividend for 9.9%. 2017 is 6.50p per share (2016: 7.74p). *2016 figure shown in constant currency BUSINESS REVIEW AND STRATEGY Millennium & Copthorne Hotels plc 6 Annual Report & Accounts 2017 BUSINESS REVIEW AND STRATEgy BUSINESS MODEL Our business model generates earnings predominately through acquiring and owning hotels and managing them profitably over the long term. This distinctive owner/operator