CDL Hotels New Zealand Limited (“CDL”) recorded another sound earnings
performance with profit after tax increasing by 60% from $10.7 million to a record
$17.1 million for the year ended 31 December 2002. A satisfactory contribution was
made from all three of our operations – the New Zealand Hotel business, the
Australian operations of Kingsgate International Corporation Limited(“KIC”) and the
property investment and development of CDL Investments New Zealand
Limited(“CDLI”). The earnings increase was achieved despite a 6.0 % fall in revenue,
from $202.3 million to $190.1 million, due primarily to revenue attributable from the
sale of a larger number of apartments at Birkenhead Quays in 2001.
Shareholders’ funds including minority interest improved to $325.9 million on 31
December 2002, compared to $320.3 million a year earlier. Net asset backing per
share (excluding minority interests) increased to 63.9 cents per ordinary share (2001:
62.5cents). Total assets amounted to $455.8 million compared to $478.8 million a
year earlier. The reduction was due to the usage of cash funds received from the sale
of apartments to reduce bank borrowings and a reduction in development property
stock. Total liabilities reduced by 18.1% to $129.9 million (2001: $158.5 million).
CDL Hotels is the largest hotel operator in New Zealand with a portfolio of 28 hotels
with 3,576 rooms in 15 locations. It employs approximately 2,400 staff. The Group
continues to look for opportunities to expand its current portfolio.
OPERATING RESULTS
New Zealand Hotel Operations
CDL is a subsidiary of Millennium & Copthorne Hotels plc (M&C), which owns,
operates or manages hotels in Europe, Asia, the United States of America as well as
the recently opened hotels in the Middle East and North Africa. CDL owns, leases, franchises and manages a portfolio of 28 hotels in this region under the Millennium,
Copthorne and Quality Hotel brands. The New Zealand hotels continue to benefit
from the international relationship with the parent company, as it provides a key
strategic link to M&C’s global distribution and promotional network.
Turnover from the New Zealand hotel operations rose 8.5% over the 2002 calendar
year to $114.2 million. Average occupancy increased by 5.9% over the 2001 levels,
whilst the average room rate increased by 4.5%. In combination, this produced an
overall 10.4% increase in yield, endorsing our policy of focusing on the higher
yielding end of the market.
The overall trading activity of the New Zealand hotel sector was generally steady
throughout the year, although the industry had to cope with the major disruption
caused by the aftermath of the September 11 tragedy during the first quarter.
International visitors constituted 62.9% of our guest profile for the year (2001:
65.0%). This reflects a deliberate policy to manage our exposure to the international
market by continuing to develop the New Zealand domestic market. It should be
noted that the pickup in domestic activity was not at the expense of international
visitors.
Overall, the New Zealand hotel operations recorded positive revenue growth with all
regions – particularly Queenstown, Rotorua, Christchurch and the provinces –
performing well. This is despite the absence of any significant international events
being hosted outside the Auckland region during this period. The Louis Vuitton Cup
provided a major fillip to Auckland during the last quarter. Wellington maintained its
occupancy levels and average room rate.
From the brand perspective, the Millennium and Copthorne branded hotels improved
their position and recorded increased revenues and profits well in excess of 2001
levels. The Quality branded hotels continued to operate profitably in an increasingly
competitive environment. Choice Hotels International(“CHI”), the Licensor of the
Quality brand, have advised us that the Master Franchise Agreement with CDL would
not be renewed when it comes for review in August 2006. Instead CHI will franchise
the properties directly through their operations in Australia.
Some major renovation works were completed during the year. These included the
refurbishment and airconditioning of 142 guestrooms at the Copthorne Hotel Central
Christchurch, the upgrade of 30 rooms at the Quality Hotel Rotorua and the
installation of airconditioning in some of the guest rooms at the Quality Hotel
Palmerston North. These projects are already contributing to the improved revenue
and profitability of the group. Major refurbishment programmes for Copthorne
Durham Street Christchurch and Quality Hotel Oriental Bay are planned for the first
half of this year. The position of Millennium Queenstown and Millennium
Christchurch are presently under review.
Kingsgate International Corporation Limited (KIC)
Kingsgate International Corporation Limited, a 50.74% owned subsidiary of the company,
reported a net operating profit before tax of $12.5 million for the twelve months ended
31 December 2002, compared with $10.8 million for the equivalent period the
previous year. For many years KIC has had considerable income tax losses available
to it and hence has not paid income taxes. However, during 2002, all Australian
income tax losses available to the group were fully utilised, thus bringing KIC into a
tax payable position. KIC’s operating profit after tax of $10.2 million compares with
$10.8 million last year. Total operating revenue of $50.9 million was down 33% from
$76.4 million in 2001. Revenue attributable to the sale of apartments and land at
Birkenhead Quays was $12.6 million (2001: $37.2 million). With the sale of the last
unit in February 2003, Stages 1, 2 and 3 of the residential development project are
essentially complete.
The gross revenue of The Millennium Hotel Sydney for the year ended 31 December
2002 was up 3.2% compared to last year. Although occupancy of 77.7% for 2002 was
down on last year’s 80.4%, the average room rate increased 6.4% to bring in more
revenue per room.
Last year the board indicated it was considering whether to refurbish the hotel or
restructure it to enhance its value. During the year the decision was made to convert
part of the hotel into apartments. The hotel will cease operation on 31 March 2003.
The tower block of the existing hotel comprising of 250 rooms have been renamed
Zenith for the purposes of this development. Zenith development comprises 97
apartments. Initial expressions of interest in over 50% of the apartments have been
noted and this is most encouraging.
After strong growth in recent years, the Birkenhead Point Shopping Centre continued
its upward trend to report further increased revenues (4%) and profits (6%) for the
twelve months ended 31 December 2002. This result was excellent considering the
difficulties experienced with a flat retail market in Australia throughout 2002 and with
the opening of a competitive factory outlet centre. Average occupancy in the retail
space during the 12 months ended 31 December 2002 increased to 98% (2001: 97%)
and the centre achieved a 6% increase in the Australian dollar average rental rate per
square metre compared to the previous year.
The Kingsgate Shopping Centre at the Hotel continued to show an improved
performance during the period under review. Its turnover for 2002 was 1% higher
than that in the previous year, a good result notwithstanding that approximately 1,000
square meters of floor-space was held back mid-year pending redevelopment. In an
environment of increased competition, the average rental rate per square metre
decreased by 1%, however average occupancy increased 4.2% to 84.5%. The major
anchor tenants at the shopping centre continue to perform very well.
2002 saw the completion of the sale of all the apartments of the Birkenhead Quays
residential project. During the 12 months ended 31 December 2002, 11 units were
sold with the last remaining unit sold in February 2003. In October 2002, the land and
the Development Approval originally allocated to Stage 3 of the Project were sold to
an unrelated Sydney developer.
The refurbishment of the Birkenhead Point Marina was completed in September 2002 at a
cost of A$2.7 million. This has contributed to an increase in revenue for the year under
review of around 20% to 25%. This flowed into the full year performance which saw
revenue up 11% on last year. Occupancy remains at an excellent 98% on those 177
available berths demonstrating a high demand for such a facility in Sydney. Arising from the upgrade of the facility, the Sydney Waterways Authority has undertaken to grant an
extension of the lease for a further term of 20 years.
CDL Investments New Zealand Limited
CDL Investments New Zealand Limited (“CDLI”), the 60.12% owned subsidiary of
CDL, reported an operating profit before tax of $9.5 million (2001: loss of $0.3
million) for the year on a turnover of $23.88 million (2001 : $20.27 million). The
turnaround in profit performance reaffirms the decision to dispose of the loss making
property services subsidiary, Knight Frank (NZ) Limited. The sale of this asset was
settled on 28 March 2002.
CDL Land recorded annual sales of 221 sections during the year as compared with
163 in 2001. For this period, the gross margin increased by 32.6% on the previous
year. In line with the demand for residential properties, CDLI sold all but six of its
available sites at Waimanu Bay (Auckland). Elsewhere, all available sections at
Highfields (Waitekere City), Ranfurly Rise (Manukau) and Brookhaven
(Christchurch) were all sold plus strong sales in the Hamilton developments.
During the year under review, a further 10 hectares of land was acquired in Albany.
This helped to replenish CDLI's land bank that totalled 252 hectares as at 31
December 2002 which has a current market value of $59.185 million.
Dividend Announcement
The Company has resolved to pay a fully imputed dividend to the shareholders of
1.4 cents per ordinay share.
Sale of Quality Hotel Willis Street
The Company has entered into an unconditional contract to sell the Quality Hotel
Willis Street. The settlement date is 31 March 2003 and after that date the Hotel will
continue to be managed by Hospitality Services Limited, the management company of
the group.
Changes to the Board
The Board is pleased to announce that Mr Gordon Wilson has been appointed a
director of the Company with effect from 28 February 2003. Mr Wilson is currently
the Chief Operating Officer of Hospitality Services Limited, a subsidiary of the
Company, and he has been with the Company and group since 1994.
Outlook
The Board retains its positive long-term outlook. The New Zealand hotel market has
recovered from the effects of September 11 and visitor numbers are expected to
remain robust. Though the hotel market continues to be highly competitive, our
ongoing focus on yield growth in concert with a strategy of building our domestic
sales base through inovative marketing programs should continue to bear fruits.
Building up the domestic base will also provide a buffer for any fluctuations in
international visitor flows. At the same time our links to the international network of
our parent company, M&C, will ensure we maintain or improve market share.
Having taken the decision to close the Millennium Hotel Sydney, Kingsgate reported
a very encouraging response to the sales so far and active interest has been shown in
about 50% of the planned 97 apartment complex. In the immediate term this will
result in a drop in revenue. With an expected completion date by the end of 2004 for
the Zenith project, the full benefits from sales should begin to be realised in 2004.
The completion of the Birkenhead Point Marina refurbishment in August last year is
expected to increase its revenue by between 20% and 25%. The contribution from
both shopping centres in Sydney should remain steady.
Coming off a very good year, the board of CDLI are confident of another satisfactory
performance. However, there are signs that the market may ease in light of world-wide
political uncertainty. CDLI is on sound footing and well poised to take
advantage of opportunities as they arise.
The 2003 year has started postively with good initial trading results throughout the
group. Barring unforeseen circumstances, the board expects another profitable year.
John Wilson
CHAIRMAN
5 th March, 2003
Any inquiries please contact:
Tsang Jat Meng, Managing Director
CDL Hotels New Zealand Limited
Telephone: New Zealand (09) 913 8001
Facsimile: New Zealand (09) 309 3244
Email: tsang.jm@cdlhms.co.nz