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Millennium & Copthorne struggles in London

Bad weather at the beginning of the year and hotel refurbishment made the first half tough for the hotel group
August 6, 2018

London is a competitive market for accommodation, as demonstrated by the half-year results from Millennium & Copthorne Hotels (MLC). Revenue per available room across its London hotels fell 15.1 per cent during the period. Chief financial officer Kok-Kee Chong said the snowy weather discouraged tourism at the beginning of the year, but the refurbishment of its Mayfair hotel also took its toll. It had been partially closed since November 2017, and has been fully out-of-action since the beginning of July. The hotel is rescheduled to reopen sometime during the first quarter next year, but the combination of factors meant that the occupancy rate in the group's London suites fell 9.6 percentage points to 71.9 per cent.

IC TIP: Hold at 520p

New York is also a tough one for hotels. Although revenue per available room in New York improved, mainly due to refurbishments there, the division was still unprofitable. Mr Chong said New York is a challenging market with steep competition, but added that the group would not consider selling its hotels there. Foreign exchange also had a negative impact, with stronger sterling wiping around £19m off revenue from overseas hotels. At constant currency, group sales would have been up 3 per cent.

Analysts at Credit Suisse expect pre-tax profit of £162m during 2018, giving EPS of 29.9p, compared with £147m and 43.4p in 2017.

MILLENNIUM & COPTHORNE HOTELS (MLC) 
ORD PRICE:520pMARKET VALUE:£1.69bn
TOUCH:516-520p12-MONTH HIGH:630pLOW: 430p
DIVIDEND YIELD:1.3%PE RATIO:15
NET ASSET VALUE:831pNET DEBT:21%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201748563.012.82.08
201847765.08.502.08
% change-2+3-34-
Ex-div:16 Aug   
Payment:28 Sep