MCK – Annual Meeting Presentation Slides and Remarks

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34
th
Annual General Meeting
28
th
May 2019
WELCOME TO
OUR WORLD OF
HOSPITALITY
WELCOME
•Quorum
•Board of Directors
Colin Sim (Chairman)
B K Chiu (Managing Director)
Kevin Hangchi (Director)
Richard Bobb (Independent Director)
Graham McKenzie (Independent Director)
WELCOME
•Apologies
•Proxies
•Minutes of the 33
rd
Annual Meeting
•Notice of Meeting
Annual Report and Financial Statements
For 2018, MCK reported:
•A profit of $49.4 million
•Increased revenue to $218.8 million
•Increased earnings per share to 31.21 cps
•21.7% increase in gross operating profit
•Dividend increased to 7.5 cents per share
Financial Summary
20142015201620172018
Revenue ($m)130.1 136.5 172.0 187.3 218.8
Profit before tax ($m)45.0 40.0 70.5 74.9 85.1
Earnings per share (cents)9.54 13.70 25.56 27.25 31.21
Dividends per share (cents)2.42.85.06.07.5
Total Assets ($m)585.4 590.0 713.9 828.2 898.2
Group Equity371.4 389.3 489.1 588.9 640.3

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MCK 2018 Results
•Hotel Revenue:$126.5m ($105.6m in 2017)
•Occupancy:80.9% (79.0% in 2017 )
•RevPar:11.5% increase
•Average Daily Rate: $161.54 ($148.25 in 2017)
•Trading growth in Auckland, Rotorua and Queenstown
•M Social Auckland first full year & excellent results
•Millennium New Plymouth within expectations
March 2019 YTD Trading
•Revenue increase 2.4%
M Social +11%
Millennium Waterfront +31%
Millennium Queenstown +6%
•Occupancy 91.3%
•2% increase in ADR and RevPar
•3 consecutive months of declining occupancy &
rates in Auckland
-No major events
-Increasing hotel room inventory
•Rotorua, Wellington, Queenstown fared better than
Auckland.
International Visitor Arrivals
Year ended March Change 2018 to 2019
201720182019NumberPercent
Total 3,543,6313,819,8173,867,75647,9391.3
Australia1,406,256 1,495,392 1,491,000-4,392-0.3
China404,384437,696434,323-3,373-0.8
USA312,816340,144362,39422,2506.5
UK222,784254,832230,307-24,525-9.6
South East Asia180,032192,240200,9758,7354.5
Germany102,608102,864102,107-757-0.7
Japan102,320102,41699,300-3,116-3.0
Korea82,44893,93688,963-4,973-5.3
ROW729,983800,297858,38758,0907.2
Source: Stats NZ
Managing Growth from Hotels
Millennium New Plymouth, Waterfront and M Social Auckland
● Product and Design ●Location, location ● Service
Millennium New Plymouth, Waterfront M Social Auckland Suite
Refurbishments Plan 2019 -2020
•Millennium Rotorua
•Millennium Queenstown
•Kingsgate Greymouth conversion to Copthorne
Land on Current Hotel Sites for
New Hotels/Expansion
•Christchurch
•Queenstown
•Rotorua
•Wellington
•Palmerston North

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Christchurch and Queenstown
Copthorne Hotel Palmerston North
Copthorne Hotel Rotorua
Copthorne Hotel Wellington Oriental Bay
Zenith Residence, SydneyPenthouse for Sale – Zenith Residence, Sydney
Penthouse for Sale – Zenith Residence, Sydney1 & 2 Bedroom Unit – Zenith Residence, Sydney
Joshua Tan
Zenith Apartments
Ph: +61 2 9358 6855
Mob: +61 413369123

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What is and what lies ahead?
•Benefits and the linkages of tourism
•Skillsets in a changing economy; technology
•Productivity gains & losses, duplication,
waste & pseudo-activities
•Central & local government impacts
•Managing growth in turbulent times
•Cost of doing business
•Working together with Tourism NZ,
Air NZ, CINZ, TIA, TRENZ, Suppliers.
•REMEMBER THE CUSTOMER
Hospitality, Tourism and the NZ Business EnvironmentProposed Queenstown bed tax disguised as a “visitor levy”
“A bed tax is being suggested as the solution.....and again the burden
is put on the accommodation industry when the wider community
benefits. (Tourism) is an industry that brings spenders to the country,
regions, cities, towns, villages and rural areas. And all New Zealanders
benefits in some form or another from the industry.”
Rayma Jenkins, President of the
Bed & Breakfast Association, NZ
What is and what lies ahead?
•Benefits and the linkages of tourism
•Skillsets in a changing economy; technology
•Productivity gains & losses, duplication,
waste & pseudo-activities
•Central & local government impacts
•Managing growth in turbulent times
•Cost of doing business
•Working together with Tourism NZ,
Air NZ, CINZ, TIA, TRENZ, Suppliers.
•REMEMBER THE CUSTOMER
Hospitality, Tourism and the NZ Business EnvironmentQueenstown bed tax: Voting papers are out
20 May 2019 By Bridget O'Connell | bridget@tourismticker.com | @tourismticker
“Residents from across the southern lakes region have been asked to vote to show that they
either support or oppose ‘the introduction of a visitor levy as an additional charge on short
term accommodation throughout the district’.”
The document confirms, as previously announced by the council, that the proposed levy will
be a 5% charge on commercial accommodation .......which would raise $22.5m annually.
“Should the poll (Queenstown’s bed tax referendum) receive the support of ratepayers in the
district, ........., government has indicated that it will consider the legislative change necessary
to allow the imposition of a local visitor levy.”
The QLDC referendum - “Better you pay than I, you, not
me.”
“There’s nothing more powerful than a good story *.”
-Tyrion Lannister, Game of Thrones
“They don’t get to choose.”
-Daenerys Targaryen, Game of Thrones
* Read the narrative in Proposed Visitor Levy
Information Sheet, Queenstown Lake District Council
“If support is not clearly demonstrated through the referendum and the proposed
levy is not implemented, the alternative would be to significantly increase rates....of
up to 35% over a ten year period...” or “a detrimental effect on the district as a
whole, and reduce levels of service and investments for locals.”
New Zealand Treasury Paper
“Strategic Intention: An Internationally Connected and Competitive
Business Environment” October 20, 2016
4. New Zealand is very fortunate to have a clear and coherent broad-base, low-
rate framework for taxation (BBLR). This BBLR framework was introduced in
the mid-1980s and has a lot of buy-in from the wider New Zealand public.
Reviews of taxation have consistently stated there should be a high burden of
proof before moving away from BBLR principles.
7. .......considering whether to implement a new tax, the standard tax policy
objectives of coherence, efficiency, equity, revenue integrity, fiscal cost, and
compliance and administration costs must be considered.

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Conclusion(Source: Treasury Papers 2016, 2017)
25.Maintaining a clear and coherent framework is very important for good tax policy. New
Zealand is well served by its BBLR tax framework and we would caution against measures
that are inconsistent with this. On our initial consideration we do not consider that a
border or bed tax meets the burden of proof for departing from BBLR principles. The
measures have the potential to reduce efficiency, productivity, and growth, and to erode
the coherence of our BBLR framework.
•
26.If it is considered that there is a need to centrally fund additional infrastructure, we
consider that existing tax bases would be a better source of funding rather than
introducing new tax types. If there is concern about the overuse of infrastructure by
tourists then we consider the better approach is likely to becharging them for the use of
infrastructure directly or through targeted regulation.
Taxation Principles, OECD 2001
1. Efficiency through broadening tax bases by
eliminatingexemptions.
2. Equity, fairness
a) Horizontal equity
Parties in similar positions to pay similar taxes.
b) Vertical equity
higher incomes to attract higher taxes.
3. Enforceability
New regime, new norms: casting aside
principles of public policies, taxation
WE MUST QUESTION MORE
Opposition to increased DQ funding
https://www.odt.co.nz/regions/queenstown/opposition-
increased-dq-funding
A joint submission by the general managers of the resort's two Copthorne Hotels and
Millennium Hotel was one of several that suggested the council bring the organisation in-
house.
The trio of Jackie Guiney, Robert Oakes and Paul Philp said the district was so busy with
tourists it did not need more promotion, particularly during the high season.
''The funding model for DQ looks either out of touch or irrelevant in relation to what it does.''
Glenorchy Community Association chairman John Glover said it supported DQ's focus on
targeting the domestic and Australian markets, but believed its staff numbers and funding
were adequate.
Glenorchy commercial landlord and accommodation provider Trish Fraser said she wanted
rates funding for DQ to be significantly reduced, or preferably for the organisation to ''not
exist at all''.
A former DQ board member, Doug Champion, said it had done a ''great job'' in the past.
However, it had been overtaken by the rise of the internet, social media and digital booking
platforms, and consequent changes in companies' marketing practices.
It needed to be restructured and placed within the council.
What is and what lies ahead?
•Benefits and the linkages of tourism
•Skillsets in a changing economy; technology
•Productivity gains & losses, duplication,
waste & pseudo-activities
•Central & local government impacts
•Managing growth in turbulent times
•Cost of doing business
•Working together with Tourism NZ, Air NZ,
CINZ, TIA, TRENZ, Suppliers.
•REMEMBER THE CUSTOMER
Hospitality, Tourism and the NZ Business Environment
At MCK, we ask and remind ourselves:
- What eats you? What feeds you?
- What do we do well?
What can we do better?
What we must stop doing?
- Culture of self-awareness, ownership
- We engage, enlist, collaborate
Teamwork
Productivity

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Financial Summary
20142015201620172018
Revenue ($m)44.2 47.6 74.5 78.7 85.0
Profit before tax ($m)20.5 24.2 37.5 44.7 46.7
Earnings per share (cents)5.35 6.33 9.77 11.60 12.10
Dividends per share (cents)2.22.23.03.53.5
Total Assets ($m)130.5 142.7 168.3 191.7 217.6
Group Equity128.5 140.3 161.8 186.1 210.6
Source: CDL Investments NZ Ltd Annual Report
2018 Sales

Sales from:

Greville Road, Auckland

Magellan, Hamilton

Prestons Park, Christchurch
MARCH 2019 YTD TRADING

Sales $14.1m ($18.2m in 2018)

Sales settled from:
Greville Road, Auckland
Magellan Heights, Hamilton
Prestons Park, Christchurch

Property market continues to soften. Risk off
approach by buyers and banks.

Underlying demand factors of home ownership
are positive.
New Homes Consented
January 1995 to March 2019 (Monthly)

New dwelling consents up 10% (34,516) for
March 2019 YTD

40% of consents in Auckland

14% in Canterbury

11% in Waikato

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New Homes Consented (selected regions)
Year ended March 2015 to 2019
Net Migration (Mean Estimate)
June 2014 to March 2019

Annual net migration gain: 56,100 from 50,600
WORK IN PROGRESS
Greville Road, Auckland
All stages titled and sold.
Kewa Road, Auckland
Earthworks complete.
Road upgrade complete.
Stage 1 infrastructure underway.
Titles expected November 2019.
Dominion Road, Papakura
Earthworks, infrastructure underway.
Titles expected December 2019.
Crestview, Auckland
Complete, titles in March 2019.
Sold.
Roscommon Road, Auckland
Earthworks, stormwater work near completion.
Titles in September 2019.
Christian Road, Swanson
Resource consent granted. Construction can start October
2019.
WORK IN PROGRESS
Magellan Heights, Hamilton
Titles for stages 1 – 3 issued.
Stage 4 earthworks & infrastructure complete.
Retaining walls underway.
Northwood, Hastings
Stage 8B – Complete, titled May 2019.
Stage 8C – Titles October 2019.
Prestons Park, Christchurch
Earthworks close to completion.
Remaining stages for infrastructure underway.
Prestons Park Urban Village resource consent being
processed.
Scheme plans for recently acquired land underway.
Stonebrook, Rolleston
Construction of last 34 lots completed, on sale now.
Resource and Building consent Commercial Centre being
processed.
Prestons Park Commercial Village
Site area 6506 sqm
Building area 2608 sqm
No. of units 15
Tenancy from Q3 (2020)
Stonebrook Commercial Area
Site area 1802 sqm
Building area 713 sqm
No. of units 5
Tenancy from Q3 (2020)

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Land acquisitions

Excellent 2018 results from Hotels, CDL Investments,
KIN Australia

Easing residential sections and accommodation market
in 2019

Plans for hotels and land acquisitions at CDL Land

Zenith Apartments, Sydney on the market

New business environment
SUMMARY
ELECTION OF DIRECTORS

Election of Mr Kian Seng Tan as a Director

Re-election of Mr Graham McKenzie as a Director
Election of Director
Election of Mr Kian Seng Tan as a Director
Re-election of Director
Re-election of Mr Graham McKenzie as a Director
Constitution
That the existing constitution be revoked
and the company adopt a new constitution
in the form tabled at the meeting and
signed by the Chairman for the purpose of
identification.

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AUDITORS APPOINTMENT & REMUNERATION

No other nomination received - KPMG are
reappointed as the Company’s auditors

Resolution that the Directors be empowered to
fix the remuneration of the Auditors for the
year ending 31 December 2019.
General
Business
CLOSE OF MEETING
Thank you for attending

---

MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND LIMITED
STOCK EXCHANGE ANNOUNCEMENT
2019 ANNUAL SHAREHOLDER MEETING – REMARKS BY THE CHAIR

On behalf of the Directors, I present the Annual Report and the Statement of Financial Accounts to 31
December 2018.

As I said in the annual report, the Board was pleased to see increases in revenue and profit which
reflected tourism growth and MCK’s continued competitiveness. In summary:

• MCK recorded an increased profit after tax of $49.4 million;
• increased revenue of $218.8 million; and
• a 21.7% increase gross operating profit.

These results allowed the Board to increase the dividend to shareholders to 7.5 cents per share which
was paid to you on 17 May.

While we are pleased with the performance of the group in 2018, we cannot ignore more difficult
trading conditions ahead in 2019. There are challenges ahead in the form of increasing numbers of
hotel rooms in major cities, a very tight labour market which shows no sign of improving and the after
effects of the tragic events in Christchurch in March of this year.


We do expect growth in the next two years to be slower than what we have seen in the past two or
three years. This will translate through to our results but the Board remains confident that MCK can
sustain its current level of earnings and market share in key segments.


MCK is also in a sound position to seek out opportunities to add to its portfolio and as I stated last
year, I am keen to see MCK seek out appropriate opportunities in Australia if these are feasible.


As you know, the board has a long-term vision and we are mindful of shareholder feedback. I want
to assure shareholders that we will not embark on any acquisition or transaction that will not bring
significant long-term value to MCK and shareholders. The management team monitors the hotel and
property markets closely on both sides of the Tasman and has looked at potential acquisitions for
MCK. Nothing to date has met our investment criteria or our strategic requirements.


Our immediate focus in Australia therefore is the sale of our apartments at the Zenith Residences in
Sydney and ensuring that we get the best possible returns for those.