UPDATE 1-M&C Hotels cuts profit target as Asia slowdown bites

Thu May 2, 2013 10:18am BST

* Q1 pretax profit down 34.7 pct to 16.9 mln stg

* Q1 Revpar up 1.6 pct

* FY profit to be 140-150 mln stg vs 160 mln stg consensus

* Shares down 4 pct

By Neil Maidment

LONDON, May 2 (Reuters) – Hotelier Millennium Copthorne

said full-year profit would fall below expectations in

2013 after warning the worst of a slowdown in its core Asian

market was not yet over.

MC, with 100 hotels globally, on Thursday said trading in

Asia, where it makes 40 percent of its revenue, had suffered

from slower growth in China, falling tourist numbers in South

Korea and a host of problems in its biggest market, Singapore.

“Singapore will see another increase in the number of hotel

rooms this year, which is putting pressure on revenues, whilst

government’s tighter foreign labour quotas are putting pressure

on costs,” Chairman Kwek Leng Beng told reporters.

“We also have the spectre of Avian flu returning in Asia, so

all in all the continent looks like it will remain a more

challenging hospitality market for the time being … The worst

in Asia, I think, is not over.”

Shares in the firm, whose profit has also been hit by a 240

million pound hotel refurbishment roll-out, fell 4 percent to

533 pence after the group said the slowdown in Asia – a region

that has led growth in recent years – would hit annual profit.

“I would recommend that the 160 million pounds (full-year)

profit before tax figure to be adjusted downwards to in the

region of 140 million pounds to 150 million pounds,” Chief

Financial Officer John Chang told reporters.

According to a Reuters poll of nine analysts, MC had on

average been expected to post a full-year pretax profit of

161.25 million pounds.

MC’s warning contrasts with more upbeat recent statements

from larger rivals including Intercontinental Hotels,

Starwood Hotels and Marriott.

MC’s pretax profit for the first quarter to March 31,

posted on Thursday, fell by 34.7 percent to 16.9 million pounds

after revenues were hit by the impact of a slowing economy and

less corporate spending in Singapore, poor weather and austerity

measures in Europe, as well as the closure of hotels for

refurbishment.

The firm added its Seoul hotel in South Korea had also been

effected by geo-political tensions, and was gloomy on prospects

in South East Asia, where markets like Malaysia, Thailand and

Jakarta in Indonesia had improved year-on-year but could soon

see a slowdown due to changing macroeconomic environments.

“The outlook is more cautious than normal … In terms of

trading it looks pretty soft and I wasn’t expecting it (the

profit downgrade) to be as severe a drop as it was,” Liberum

analyst Patrick Coffey said.

MC, whose brands include Millennium, Grand Millennium,

Copthorne and Kingsgate, said global revenue per available room

(RevPAR) – a key hotel measure – grew by 1.6 percent in the

first quarter, however, on improved trading in the United States

and Australasia.

It was also up 1.9 percent in the first four weeks of its

second quarter, it said, with its important London and New York

markets both up, but Singapore and the rest of Asia down.

“The group’s financial strength will get us through any

economic storms ahead, we remain focused on repositioning and

upgrading a number of our properties,” said Beng, whose firm

ended the first-quarter with net cash of 56.4 million pounds.

UPDATE 1-M&C Hotels cuts profit target as Asia slowdown bites