Ann: FLLYR: MCK: MCK: FY2012 Chairman's Revie

• Release Date: 22/02/13 15:46
• Summary: FLLYR: MCK: MCK: FY2012 Chairman's Review
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MCK
22/02/2013 13:46
FLLYR

REL: 1346 HRS Millennium & Copthorne Hotels New Zealand Limited

FLLYR: MCK: MCK: FY2012 Chairman's Review

CHAIRMAN'S REVIEW

Financial Performance & Financial Position

For the year ended 31 December 2012, Millennium & Copthorne Hotels New
Zealand Limited ("MCHNZ") has reported a record profit attributable to owners
of the parent of $46.1 million (2011: $20.6 million), an increase over the
2011 results of 123%. .  The most significant contributors to the improved
results were from First Sponsor Capital Limited, the Company's investment in
China and from CDL Investments New Zealand Limited, its land development
subsidiary.

Revenue and other income for the year increased to $116.5 million (2011:
$111.9 million) and this helped increase MCHNZ's profit before tax,
non-controlling interests and associates to $49.5 million (2011: $28.9
million).  Again, the Company benefitted from some one-off gains relating to
the 2011 Canterbury Earthquake as insurance settements were finalised. A gain
on disposal of $18.4 million in respect of Copthorne Hotel Christchurch
Central was recorded after the settlement of the material damage insurance
claim.

Earnings per share reflected the increased profit and revenue at 13.19 cents
per share (2011: 5.90 cents per share).

Shareholders' funds excluding non-controlling interests as at 31 December
2012 totaled $443.3 million (2011: $419.1 million) with total assets at
$686.1 million (2011: $660.3 million). Net asset backing (with land and
building revaluations and before distributions) as at 31 December 2012
increased to 126.8 cents per share (2011: 119.9 cents per share).

Ongoing effects of the 2011 Canterbury Earthquakes

By way of update:

--Millennium Hotel Christchurch and Copthorne Hotel Christchurch Central
remain closed for the foreseeable future and reservations will not be taken
until further notice.  While repair works have commenced at Millennium Hotel
Christchurch, the insurers are working with the landlord on the extent and
scope of the works required and on current estimates will take at least two
years to complete;

--During the year, confidential settlements for the business interruption
insurance claims for both Millennium Hotel Christchurch and Copthorne Hotel
Christchurch Central relating to the 2011 earthquakes were reached with the
Company's insurers.  The Company has received the proceeds from these
settlements.  The only outstanding claim is the material damage claim for
Millennium Hotel Christchurch. The hotel is understood to be repairable and
further work has been completed to establish the scope and cost of repairs
but work on site has been suspended pending further discussions between the
owner of the building and the insurers;

--The land on which Copthorne Hotel Christchurch Central was located was
identified by the Canterbury Earthquake Recovery Authority's Central
Christchurch Development Unit (CCDU) for compulsory acquisition for the
Cultural Precinct.  As at 31 December 2012, discussions were continuing with
CCDU in relation to the site;

--Insurance cover for the New Zealand hotels continues to remain in place and
the Company has the benefit of continuing to access the Millennium &
Copthorne Hotels' global insurance policy wordings and insurers.

New Zealand Hotel Operations

Revenue for the New Zealand hotel operations (16 owned / leased / operated
hotels excluding 12 franchised properties) for the period under review was
$87.1 million (2011: $97.4 million).  Hotel occupancy for the period was down
to 63.6% across the Group (2011: 64.3%).

The ongoing effects of the 2011 Canterbury Earthquakes continue to be felt
and visitor numbers, particularly from key destinations such as North
America, Europe and Japan show little or no growth.  The Company has been
able to secure its share of inbound business from China and is concentrating
on increasing market share for conference and incentive business.  In 2013,
it will conduct a comprehensive review of its operations, sales and marketing
functions to improve its performance across all of these areas.

CDL Investments New Zealand Limited ("CDLI")

CDLI announced an increased operating profit after tax for the year ended 31
December 2012 of $9.3 million (2011: $3.8 million) and reported an increase
in its section sales from 77 in 2011 to 123 in 2012 reflecting a more
positive market in general, CDLI is targeting to better its 2012 results in
2013.

CDLI increased its ordinary dividend to 1.7 cents per share from 1.4 cents
per share for 2011.  MCHNZ's stake in CDLI is currently 66.83%.

Offshore Operations - Australia & China

In Australia, short term leasing of the units at the Zenith Residences
continued during the year with occupancy of over 90% recorded.  While
marketing of the units is ongoing, no sales were made in 2012.

The Company's 34% associate, First Sponsor Capital Limited (FSCL), reported a
net profit of US$ 24.3 million for the financial year ended 31 December 2012
(2011: US$9.4 million). The Company's share of the profit is NZ $10.1 million

As at 31 December 2012, the residential component of Chengdu Cityspring was
substantially sold.  With the handover of the residential units sold in April
2012, FSCL recognized profit from these residential sales, thus contributing
to the significant increase in profit for the year. The 195-room M Hotel
Chengdu is scheduled to open in 2013 and will be managed by the Millennium &
Copthorne Group. The remaining portion of the development comprises
small-office home-office (SOHO) and retail units which are available for sale
or rental.  The SOHO units for sale are 77% sold under option agreements or
sale and purchase agreements to-date.  These SOHO units are expected to be
handed over to the buyers in mid-2013 when upon profit will be recognized.

Progress on the Wenjiang development site in Chengdu, purchased in November
2011 and named as Millennium Waterfront, is on track.  The land is intended
for residential, commercial and hotel development.  The total residential
component comprises 50 apartment blocks with 7,110 units.  The sale of 5
blocks of 779 residential units was launched since 24 November 2012. As at 31
December 2012, 370 out of the 779 residential units launched have been sold
under option agreements or sale and purchase agreements.  Development will be
phased according to demand.  Construction of the Millennium branded hotel
with convention facilities is scheduled to commence in 2013.

FSCL continued with further sales of its Lianzhou Cityspring development in
Guangdong Province during FY2012.  Subsequent to the year end, FSCL entered
into an agreement with a third party to inter alia, dispose of its entire 70%
equity interest in a subsidiary which developed the Fogang Cityspring
project.  The residential component of Fogang Cityspring has been
substantially sold and a commercial centre has been retained for rental as an
investment property.  The implied sale consideration for the commercial
centre is more than double that of its historical cost but below its carrying
book value.  The transaction is considered an adjusting event and the
financial impact of same was recorded in 2012.

Development planning work for the mixed use Dongguan Humen site is
progressing well.  FSCL will time its sales launch taking into consideration
market conditions and local development rules.

Dividend Announcement

The Company has resolved to pay a fully imputed ordinary dividend of 1.2
cents per share and a fully imputed special dividend of 1.2 cents per share.
The total dividend of 2.4 cents per share (2011: 1.2 cents per share) will be
paid on 10 May 2013.  The record date will be 3 May 2013.

Outlook

One-off gains and exceptional contributions from First Sponsor Capital
Limited and CDL Investments New Zealand Limited boosted the Company's 2012
results and some of these contributions are unlikely to be repeated in 2013.
That said, the Company is well-placed for future profitability from all of
its business activities over the medium term and is focused on improvements
to deliver consistent results to shareholders.

There are still many challenges in 2013, particularly in respect of the core
hotel business.  Management is looking carefully at how it can increase sales
and better target marketing to ensure that its properties are well patronised
and delivering an outstanding service experience.

The Board and Management are therefore positive about the Company's overall
prospects over the next twelve months.

Management and staff

On behalf of the Board, I thank the Company's management and staff for their
work and commitment during another positive year for the Company.

Wong Hong Ren
Chairman
22 February 2013
End CA:00233345 For:MCK    Type:FLLYR      Time:2013-02-22 13:46:38