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Why Millennium is struggling in its major cities

There are myriad problems over at the hotel group, and currency's just the tip of the iceberg
February 20, 2017

Even a big chunk of non-sterling revenues couldn't help hotel group Millennium & Copthorne (MLC) in the reported period. Pre-tax profits were still flat at floating currencies, as costs moved higher and hotel margins moved lower. At constant currencies, revenue per available room (RevPAR) fell 2.3 per cent, while pre-tax profits fell as much as 13 per cent.

IC TIP: Sell at 425p

New York and Singapore were among its worst-performing locales. RevPAR for the US region as a whole fell 4.2 per cent, with New York down 10 per cent following a contraction in both occupancy and average room rates, partly due to refurbishment work. RevPAR across Singapore fell steadily quarter by quarter due to increased competition and a decline in corporate business.

The picture isn't much better in Europe, where management believes the 2 per cent dip in RevPAR was linked to last year's terrorist attacks in Paris and Brussels. Even tourists flocking to Britain to take advantage of the weak pound couldn't offset a noticeable slowdown in corporate travel bookings.

Analysts at Credit Suisse expect pre-tax profits of £133m for the year ending December 2017, giving EPS of 22p, compared to £108m and 37p in 2016.

MILLENNIUM & COPTHORNE (MLC)
ORD PRICE:425pMARKET VALUE:£1.38bn
TOUCH:425-426p12-MONTH HIGH:484pLOW: 360p
DIVIDEND YIELD:1.8%PE RATIO:18
NET ASSET VALUE:822pNET DEBT:22%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20120.7717142.013.6
20131.0629569.413.6
20140.8318834.013.6
20150.8510919.96.42
20160.9310824.07.74
% change+9-1+21+21

Ex-div: 16 Mar

Payment: 12 May