MCK: 2019 Interim Results Announcement

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)


Results for announcement to the market
Name of issuer Millennium & Copthorne Hotels New Zealand Limited
Reporting Period 6 months to 30 June 2019
Previous Reporting Period 6 months to 30 June 2018
Currency NZD

Amount (000s) Percentage change
Revenue from continuing
operations
$110,611 (13.3)%
Total Revenue $110,611 (13.3)%
Net profit/(loss) from
continuing operations
$23,805 (21.0)%
Total net profit/(loss) $23,805 (21.0)%
Interim Dividend
Amount per Quoted Equity
Security
No interim has been declared
Imputed amount per Quoted
Equity Security
Not applicable
Record Date
Not applicable
Dividend Payment Date
Not applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$4.08 $3.84
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to Chairman’s Statement and Media Release
Authority for this announcement
Name of person

authorised
to make this announcement
Takeshi Ito – Company Secretary

Contact person for this
announcement
Takeshi Ito – Company Secretary

Contact phone number +64 9 353 5005
Contact email address takeshi.ito@millenniumhotels.com
Date of release through MAP

1 August 2019

Unaudited financial statements accompany this announcement.

---

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Condensed Interim Income Statement
FOR THE SIX MONTHS ENDED 30 JUNE 2019UnauditedUnaudited
6 months6 months
DOLLARS IN THOUSANDSNOTEto 30/06/19to 30/06/18
Revenue110,611 127,506
Cost of sales(46,512) (49,850)
Gross profit64,099 77,656
Other income4OIN-
Administrative expenses(12,157) (12,408)
Other operating expenses(11,376) (11,413)
Operating profit before finance income40,566 53,835
Finance income1,874 1,687
Finance costs(1,441) (858)
Net finance income433 829
Profit before income tax40,999 54,664
Income tax expense(11,301) (15,043)
Profit for the period29,698 39,621
Profit for the period attributable to:
Equity holders of the parent23,805 30,147
Non-controlling interests5,893 9,474
Profit for the period 29,698 39,621
Basic earnings per share (cents)
415.05c19.05c
Diluted earnings per share (cents)415.05c19.05c
The attached notes form part of, and are to be read in conjunction with, these financial statements.
Page 1

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Condensed Interim Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 30 JUNE 2019UnauditedUnaudited
6 months6 months
DOLLARS IN THOUSANDSNoteto 30/06/19to 30/06/18
Profit for the period29,698 39,621
Other comprehensive income
Movement in revaluation reserve
- Recognised in equity9 (a)(7,565) -
Items that are or may be reclassified to profit or loss
Movement in exchange translation reserve
- Recognised in equity39 (1,535)
Total comprehensive income for the period22,172 38,086
Total comprehensive income for the period attributable to:
Equity holders of the parent17,098 28,612
Non-controlling interests5,074 9,474
Total comprehensive income for the period22,172 38,086
DETAILS OF SPECIFIC RECEIPTS/OUTLAYS, REVENUE/EXPENSES
Classified under:
Administrative expenses
Audit fees(164) (158)
Other operating expenses
Depreciation of Property, Plant & Equipment(4,217) (4,186)
Amortisation of Right-Of-Use Assets 9 (c)(645) -
Leasing and rental expenses9 (d)(106) (1,208)
Finance income
Interest income1,868 1,687
Foreign exchange gain6 -
Finance costs
Interest expense(867) (843)
Interest expense on lease liability9 (c)(512) -
Foreign exchange loss(62) (15)
The attached notes form part of, and are to be read in conjunction with, these financial statements.
Page 2

Millennium & Copthorne Hotels New Zealand Limited a
nd Subsidiaries
Condensed Interim Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 30 JUNE 2019
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Share
Revaluation
Exchange
Accumulated
Treasury
Unaudited
No
n-controlling
Total
DOLLARS IN THOUSANDS
NOTE
Capital
Reserves
Reserves
Losses
Stock
Total
Interests
Equit
y
Balance at 1 January 2018
383,266

222,465

114

(16,939)

(26)

588,880

74,810

663,690

Movement in exchange translation reserve
-

-

(1,535)

-

-

(1,535)

-

(1,535)

Income and expense recognised directly in equity
-

-

(1,535)

-

-

(1,535)

-

(1,535)

Profit for the period
-

-

-

30,147

-

30,147

9,474

39,621

Total comprehensive income for the period
-

-

(1,535)

30,147

-

28,612

9,474

38,086

Transactions with owners, recorded directly in equi
ty :
Dividends paid to:
Equity holders of the parent
5
-

-

-

(9,493)

-

(9,493)

-

(9,493)

Non-controlling interests
-

-

-

-

-

-

(3,655)

(3,655)

-

-

-

99

-

99

454

553

Supplementary dividends
5
-

-

-

(242)

-

(242)

-

(242)

Foreign investment tax credits
-

-

-

242

-

242

-

242

Balance at 30 June 2018
383,266

222,465

(1,421)

3,814

(26)

608,098

81,083

689,181

Balance at 1 January 2019
383,266

236,999

(3,022)

23,042

(26)

640,259

83,614

723,873

Movement in revaluation reserve
9 (a)
-

(6,746)

-

-

-

(6,746)

(819)

(7,565)

Movement in exchange translation reserve
-

-

39

-

-

39

-

39

Income and expense recognised directly in equity
-

(6,746)

39

-

-

(6,707)

(819)

(7,526)

Profit for the period
-

-

-

23,805

-

23,805

5,893

29,698

Total comprehensive income for the period
-

(6,746)

39

23,805

-

17,098

5,074

22,172

Transactions with owners, recorded directly in equi
ty :
Dividends paid to:
Equity holders of the parent
5
-

-

-

(11,866)

-

(11,866)

-

(11,866)

Non-controlling interests
-

-

-

-

-

-

(3,691)

(3,691)

-

-

-

(1)

-

(1)

511

510

Supplementary dividends
5
-

-

-

(311)

-

(311)

-

(311)

Foreign investment tax credits
-

-

-

311

-

311

-

311

Balance at 30 June 2019
383,266

230,253

(2,983)

34,980

(26)

645,490

85,508

730,998

Attibutable to Equity Holders of the Group
The attached notes form part of, and are to be read
in conjunction with, these financial statements.
Movement of non-controlling interests without a cha
nge in
controlMovement of non-controlling interests without a cha
nge in
control
Page 3

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Condensed Interim Statement of Financial Position
AS AT 30 JUNE 2019UnauditedAuditedUnaudited
as atas atas at
DOLLARS IN THOUSANDSNOTE30/06/1931/12/1830/06/18
SHAREHOLDERS' EQUITY
Issued capital3383,266 383,266 383,266
Reserves262,250 257,019 224,858
Treasury stock3(26) (26) (26)
Non-controlling interests85,508 83,614 81,083
Total equity730,998 723,873 689,181
Represented by:
NON CURRENT ASSETS
Property, plant and equipment
9(a),9(b)539,492 532,124 514,355
Development properties 186,216 163,106 174,747
Investment in associates2 2 2
Total non-current assets725,710 695,232 689,104
CURRENT ASSETS
Cash and cash equivalents25,441 14,437 28,976
Short term bank deposits116,812 108,289 98,749
Trade and other receivables14,296 21,515 14,257
Trade receivables due from related parties
610 - 15
Loans due from related parties- - -
Inventories1,518 1,684 1,493
Income tax receivable- - 163
Development properties41,377 57,025 29,229
Total current assets199,454 202,950 172,882
Total assets925,164 898,182 861,986
NON CURRENT LIABILITIES
Interest-bearing loans and borrowings64,000 64,000 66,000
Lease Liabilities
914,541 - -
Provision for deferred taxation75,972 75,844 70,596
Total non-current liabilities154,513 139,844 136,596
CURRENT LIABILITIES
Interest-bearing loans and borrowings3,000 - -
Trade and other payables22,431 25,132 21,715
Trade payables due to related parties
63,686 2,364 1,612
Loans due to related parties69,000 - 7,100
Lease Liabilities
9411 - -
Income tax payable1,125 6,969 5,782
Total current liabilities39,653 34,465 36,209
Total liabilities194,166 174,309 172,805
Net assets730,998 723,873 689,181
Net Asset Backing before Distributions (cents per share)
The attached notes form part of, and are to be read in conjunction with, these financial statements.
Page 4

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Condensed Interim Statement of Cash Flows
FOR THE SIX MONTHS ENDED 30 JUNE 2019UnauditedUnaudited
6 months6 months
DOLLARS IN THOUSANDSNOTEto 30/06/19to 30/06/18
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Receipts from customers115,797 130,779
Interest received2,242 1,871
118,039 132,650
Cash was applied to:
Payments to suppliers and employees(66,182) (59,063)
Purchase of development land(7,624) (36,354)
Interest paid(900) (865)
Income tax paid(17,017) (13,461)
(91,723) (109,743)
Net cash inflow from operating activities26,316 22,907
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from/(applied to):
Purchase of property, plant and equipment(3,037) (12,635)
Increase in short term bank deposits(8,523) (9,859)
Net cash outflow from investing activities(11,560) (22,494)
Drawdown of borrowings3,000 -
Advance/(repayment) of related parties loans
69,000 7,100
Principal repayment of lease liability
9 (c)(676) -
Dividends paid to shareholders of Millennium & Copthorne
Hotels New Zealand Ltd
5(11,866) (9,493)
Dividends paid to non-controlling interests (3,691) (3,655)
Net cash outflow from financing activities(4,233) (6,048)
Net (decrease)/increase in cash and cash equivalents10,523 (5,635)
Add opening cash and cash equivalents14,437 34,195
Exchange rate adjustment481 416
Closing cash and cash equivalents25,441 28,976
The attached notes form part of, and are to be read in conjunction with, these financial statements.
Page 5

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Condensed Interim Statement of Cash Flows
FOR THE SIX MONTHS ENDED 30 JUNE 2019UnauditedUnaudited
6 months6 months
DOLLARS IN THOUSANDSNOTEto 30/06/19to 30/06/18
RECONCILIATION OF NET PROFIT FOR THE PERIOD
TO CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period29,698 39,621
Adjusted for non cash items:
(Gain)/Loss on Sale of Fixed Assets6 -
Foreign Exchange (Gain)/ Loss56 -
Depreciation4,217 4,186
Amortisation of Right-Of-Use Assets 9 (c)645 -
Income tax expense11,301 15,043
Adjustments for movements in working capital:
Decrease in receivables5,560 3,457
Decrease in inventories166 153
(Increase)/Decrease in development properties(7,449) (25,011)
Increase/(Decrease) in payables(1,289) 153
Increase/(Decrease) in related parties1,322 (369)
Cash generated from operations44,233 37,233
Interest paid(900) (865)
Income tax paid(17,017) (13,461)
Net cash inflow from operating activities26,31622,907
The attached notes form part of, and are to be read in conjunction with, these financial statements.
Page 6

Page 7

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)


1. Significant accounting policies

Millennium & Copthorne Hotels New Zealand Limited is a company domiciled in New Zealand, registered under the
Companies Act 1993 and listed on the New Zealand Stock Exchange. Millennium & Copthorne Hotels New Zealand
Limited (the “Company”) is a Financial Markets Conduct Reporting Entity in terms of Financial Markets Conduct Act
2013 and the Financial Reporting Act 2013. The condensed interim financial statements of the Company for the six
months ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the “Group”). The
registered office is located at level 13, 280 Centre, 280 Queen Street, Auckland, New Zealand.

The principal activities of the Group are ownership and operation of hotels in New Zealand; residential development
and sale of land in New Zealand; and development and sale of residential units in Australia.

The condensed interim financial statements were authorised for issuance on 1 August 2019.

(a) Statement of compliance

The condensed interim financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (NZ GAAP). They comply with NZ IAS 34 Interim Financial Reporting. The condensed interim
financial statements do not include all of the information required for full annual financial statements.

The accounting policies and methods of computation applied by the Group in these condensed interim financial
statements are the same as those applied by the Group in its financial statements for the year ended 31 December
2018 except for the adoption of one new accounting standard (see Note 9).


2. Segment reporting

Segment information is presented in the condensed interim financial statements in respect of the Group’s reporting
segments. Operating segments are the primary basis of segment reporting. The Group has determined that its chief
operating decision maker is the Board of Directors on the basis that it is this group which determines the allocation of
resources to segments and assesses their performance.

Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected
to be used for more than one period.

Operating segments
The Group consisted of the following main operating segments:
• Hotel operations, comprising income from the ownership and management of hotels.
• Residential land development, comprising the development and sale of land.
• Residential property development, comprising the development and sale of residential apartments.

Geographical segments
The Group operates in the following main geographic segments:
• New Zealand
• Australia

Segment revenue is based on the geographical location of the asset. The Group has no major customer representing
greater than 10% of the Group’s total revenue.

Page 8

Millennium & Copthorne Hotels New Zealand Limited a
nd Subsidiaries
Notes to the Condensed Interim Financial Statements

for the six months ended 30 June 2019 (unaudited)

2.
Segment reporting -
continued
(a) Operating Segments

Hotel Operations
Residential Land Development
Residential Property
Development
Group

Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
U
naudited
Unaudited
Unaudited

6 months
6 months
6 months
6 months
6 months
6 mont
hs
6 months
6 months
Dollars in thousands
to 30/06/19
to 30/06/18
to 30/06/19
to 30/06/18
to
30/06/19
to 30/06/18
to 30/06/19
to 30/06/18
External revenue
64,463
64,267
40,291
60,226
5,857
3,013
110,611
127
,506
Earnings before interest, depreciation & amortisation
22,636
22,534
20,494
34,652
2,298
835
45,428
58,021

Finance income
1,172
877
524
726
178
84
1,874
1,687
Finance expense
(1,437)
(858)
(2)
-
(2)
-
(1,441)
(858)
Depreciation and amortisation
(4,846)
(4,184)
(7)
-

(9)
(2)
(4,862)
(4,186)
Profit before income tax
17,525
18,369
21,009
35,37
8
2,465
917
40,999
54,664
Income tax expense
(4,720)
(4,883)
(5,873)
(9,908)
(708)
(252)
(11,301
)
(15,043)
Profit after income tax
12,805
13,486
15,136
25,470

1,757
665
29,698
39,621









Segment assets
638,961
587,430
220,560
210,625
65,641
63,766
925,1
62
861,821
Tax assets
-
-
-
-
-
163
-
163
Investment in associates
-
-
2
2
-
-
2
2
Total assets
638,961
587,430
220,562
210,627
65,641
63,929
925,1
64
861,986









Segment liabilities
(112,922)
(92,477)
(2,955)
(2,766)
(1,192)
(1,184)
(117,069)
(96,427)
Tax liabilities
(75,704)
(70,766)
(1,135)
(5,438)
(258)
(174)
(77,0
97)
(76,378)
Total liabilities
(188,626)
(163,243)
(4,090)
(8,204)
(1,450)
(1,358)

(194,166)
(172,805)









Property, plant and equipment expenditure
3,025
12,
635
2
-
10
-
3,037
12,635
Residential land development expenditure
-
-
19,874

12,568
-
-
19,874
12,568
Purchase of land for residential land development
-

-
7,624
36,354
-
-
7,624
36,354

Page 9

Millennium & Copthorne Hotels New Zealand Limited a
nd Subsidiaries
Notes to the Condensed Interim Financial Statements

for the six months ended 30 June 2019 (unaudited)
2.
Segment reporting -
continued



(b) Geographic Segments
New Zealand
Australia
Group


Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
U
naudited

6 months
6 months
6 months
6 months
6 months
6 mont
hs
Dollars in thousands
to 30/06/19
to 30/06/18
to 30/06/19
to 30/06/18
to
30/06/19
to 30/06/18
External revenue
104,754
124,493
5,857
3,013
110,611
127,506
Earnings before interest, depreciation & amortisation
43,215
57,163
2,213
858
45,428
58,021
Finance income
1,696
1,603
178
84
1,874
1,687
Finance expense
(1439)
(858)
(2)
-
(1,441)
(858)
Depreciation and amortisation
(4,853)
(4,184)
(9)
(
2)
(4,862)
(4,186)
Profit before income tax
38,619
53,724
2,380
940
40
,999
54,664
Income tax expense
(10,596)
(14,793)
(705)
(250)
(1
1,301)
(15,043)
Profit after income tax
28,023
38,931
1,675
690
29,
698
39,621







Segment assets
859,742
798,164
65,420
63,657
925,162
861,821
Tax assets
-
-
-
163
-
163
Investment in associates
2
2
-
-
2
2
Total assets
859,744
798,166
65,420
63,820
925,164
861,986







Segment liabilities
(115,918)
(95,280)
(1,151)
(1,147)
(117,069)
(96,42
7)
Tax liabilities
(76,839)
(76,199)
(258)
(179)
(77,097)
(76,378)
Total liabilities
(192,757)
(171,479)
(1,409)
(1,326)
(194,166)
(172,
805)







Property, plant and equipment expenditure
3,027
12
,635
10
-
3,037
12,635
Residential land development expenditure
19,874
12,
568
-
-
19,874
12,568
Purchase of land for residential land development
7
,624
36,354
-
-
7,624
36,354

Page 10


Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)


3. Share capital


Ordinary shares Redeemable preference shares
Shares $ 000s Shares $ 000s
Total shares issued – fully paid

Balance at 30 June 2018 105,578,290 350,048 52,739,543 33,218
Balance at 30 June 2019 105,578,290 350,048 52,739,543 33,218


Ordinary shares repurchased and held as
treasury stock



Balance at 30 June 2018 (99,547) (26) - -
Balance at 30 June 2019 (99,547) (26) - -


Shares issued – fully paid

Balance at 30 June 2018 105,478,743 350,022 52,739,543 33,218
Balance at 30 June 2019 105,478,743 350,022 52,739,543 33,218



At 30 June 2019, the authorised share capital consisted of 105,578,290 ordinary shares (2018: 105,578,290 ordinary
shares) with no par value and 52,739,543 redeemable preference shares (2018: 52,739,543) with no par value.




4. Earnings per share

The basic earnings per share of 15.05 cents (30 June 2018: 19.05 cents) is based on the profit attributable to ordinary
shareholders of $23.81 million (30 June 2018: $30.15 million) and weighted average number of ordinary shares and
redeemable preference shares outstanding during the period ended 30 June 2019 of 158,218,286 (30 June 2018:
158,218,286).

The redeemable preference shares are included in the computation of earnings per share as they rank equally with
ordinary shares in respect of distributions made by the Company except any distribution in the case of liquidation.

The calculation of diluted earnings per share of 15.05 cents (30 June 2018: 19.05 cents) is the same as basic earnings
per share.



5. Dividends

The following dividends were paid during the interim periods:



Group
Dollars In Thousands
Unaudited
30/06/19
Unaudited
30/06/18


Ordinary dividend: 7.5 cents per qualifying share (2018: 6.0 cents) 11,866 9,493
Supplementary dividend: 1.3235 cents per qualifying share (2018:
1.0588 cents)

311

242

12,177 9,735

Page 11


Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)



6. Related party transactions

Millennium & Copthorne Hotels New Zealand Limited is a 75.78% (2018: 75.78%) (economic interests from both
ordinary and preference shares) owned subsidiary of CDL Hotels Holdings New Zealand Limited which is a wholly
owned subsidiary of Millennium & Copthorne Hotels plc in the United Kingdom. The ultimate parent company is Hong
Leong Investment Holdings Pte Limited in Singapore.


At balance date there were related party advances owing from/(owing to) the following related companies:


Group
Dollars In Thousands
Nature of balance Unaudited
30/06/19
Unaudited
30/06/18
Trade payables and receivables due to
related parties

Millennium & Copthorne Hotels plc Recharge of
expenses
(2,791) (899)

Millennium & Copthorne International
Limited
Recharge of
expenses
& provision of
management and
marketing support



(27)



-

CDL Hotels Holdings New Zealand Limited Recharge of
expenses
10 15

CDLH (BVI) One Limited Rent payment (868) (713)

(3,676) (1,597)
Loans due to related parties
CDL Hotels Holdings New Zealand
Limited

Inter-company loan
(9,000) (7,100)

(9,000) (7,100)

No debts with related parties were written off or forgiven during the period. No interest was charged on these payables
during 2019 and 2018. There are no set repayment terms. During this period, costs amounting to $125,000 (2018:
$125,000) have been recorded in the income statement in respect of fees payable to Millennium & Copthorne
International Limited for the provision of management and marketing support.

As at balance date, CDL Hotels Holdings New Zealand Limited has lent a total of $9.00 million (30 June 2018: $7.10
million) to Millennium & Copthorne Hotels New Zealand Limited. The interest rates are fixed at 2.20% (30 June 2018:
2.07%) until the loans are reviewed on 20 September 2019. The unsecured loans are repayable on demand.

7. Capital commitments

As at 30 June 2019, the Group has entered into contractual commitments for capital expenditure and development
expenditure.


Group
Dollars In Thousands
Unaudited
30/06/2019
Unaudited
30/06/2018
Capital expenditure 4,425 3,010
Development expenditure 21,252 26,830
Land purchases 33,717 -

59,394 29,840


8. Changes in contingent liabilities and contingent assets since last annual balance sheet date

The Group has an outstanding claim from the main contractor of the Copthorne Hotel Harbourcity City project. The
Group received the notice for an arbitration but no date has been set. The total of the claim is unknown and the
outcome of the arbitration is indeterminate at present, hence no liability has been recognised in the financial
statements at balance date.

Page 12


Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)



9. New accounting standard

During the period, the Group adopted one new accounting standard, NZ IFRS 16 “Leases”, using the modified
retrospective approach. This standard requires a right-of-use asset and a corresponding lease liability to be
recognised on the balance sheet in respect of the leased assets. The lease expenses will be replaced with an interest
expense and an amortization expense in the income statement.


9(a) Summary of the effect of NZ IFRS 16 on the Condensed Interim Statement of Financial Position on transition

Statement of Financial Position
Dollars In Thousands
Note Reverse interests in long
term leased assets and
adjust the asset
revaluation reserves.
Record new assets and
new liabilities
Impact on opening
balances @
01/01/19
Revaluation reserve 9(a)(i) (7,565) - (7,565)
Equity (7,565) - (7,565)

Property, plant and equipment 9(a)(i) (7,565) - (7,565)
Right-of-use assets 9(a)(ii) - 16,701 16,701
Prepayments - (1,649) (1,649)
Total assets (7,565) 15,052 7,487

Current lease liabilities 9(a)(ii) - 404 404

Non current lease liabilities 9(a)(ii) - 14,648 14,648
Total liabilities - 15,052 15,052
Net Assets (7,565) - (7,565)

Net Asset Value

(4.781) cents per
share

Based on above table, this standard has a material impact on the Net Assets in the Statement of Financial Position
on transition.

9(a)(i) The Group have several long-term leases which renew at 21 year cycles for perpetuity at the discretion of the Group
on the land: at Copthorne Hotel Auckland City; at Kingsgate Hotel Greymouth; and a motel, manager’s house, and
land at Millennium Hotel Rotorua. In addition, there is a long-term lease of the basement carpark at M Social Auckland,
the lease of corporate office, and a long term lease of the land at Copthorne Hotel & Resort Bay of Islands. The
interests in long term leases have been recorded and classified as leasehold land in property, plant and equipment
as at 31 December 2018. On transition to NZ IFRS 16, these interests totalling $7.57 million were reversed out of
property plant, equipment with the corresponding total of $7.57 million reversed out of the asset revaluation reserves.

9(a)(ii)
The long term leases of the land and carpark at the hotels and the motor vehicles were recorded as right-of-use
assets totalling $16.70 million and classified under property, plant and equipment. Their corresponding lease liabilities
were recorded under current liabilities of $0.40 million and non-current liabilities of $14.65 million.
The lease payments
for the land at Copthorne Hotel & Resort Bay of Islands were prepaid up to May 2021.

When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rates at 1
January 2019. The weighted average rate applied is 6.70%. The increment borrowing rates used to discount the
leased assets and liabilities required significant judgement and had a material impact on the calculation of the lease
liability and right-of-use asset. The incremental borrowing rates used in the transition are subject to further review
and refinement.

Page 13


Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)



9. New accounting standard -continued

9(b) Schedule of right-of-use assets by class

Right-of-use Assets
Dollars In Thousands
Carrying value
recognized on
transition @
01/01/19
Amortization on
right-of-use asset
for the period
Addition
during the
period

Carrying value @
30/06/19

Land sites at hotels
12,352

427


-

11,925
Motel buildings and land
1,893


11

-


1,882
Corporate office building and hotel
carpark
2,128 141 - 1,987
Motor vehicles 328 66 63 325
Totals 16,701 645 63 16,119


9(c) Summary of the effect of NZ IFRS 16 on the Condensed Interim Income Statement for the period

Income Statement


Dollars In Thousands
Lease payments
booked to lease
liabilities in the
Balance Sheet
Additional amortization
of right-of-use assets
booked to the Profit &
Loss
Additional interest on
lease liabilities booked
to Profit & Loss
Impact on
performance-
6 months to 30/06/19
Other operating
expenses (676) 645 - (31)
EBITDA 676 (645) - 31

Net finance income - - (512) (512)

Net profit/(loss) before
tax 676 (645) (512) (481)
Less income tax
(expense)/credit (189) 181 143 135
Net profit/(loss) after
tax 487 (464) (369) (346)

Earnings per Share

(0.2187) cents per
share

Based on the above table, this standard has an immaterial impact on the Net Profit after Tax in the Income Statement
for the 6 months period ended 30 June 2019.

9(c)(i) On application of NZ IFRS 16, lease payments were longer expensed into the income statement. Instead,
they were accounted as reductions in the lease liabilities in the statement of financial position. There were
additional expense of $0.645 million (Note 9(b)), due to the straight line amortization of the right-of-use
assets over the term of the leases. Interest costs, computed at the relevant incremental borrowing rates
totalling $0.512 million were additional expenses in the income statement.

Page 14

Millennium & Copthorne Hotels New Zealand Limited and Subsidiaries
Notes to the Condensed Interim Financial Statements
for the six months ended 30 June 2019 (unaudited)


9. New accounting standard -continued

9(d) Exemptions and exclusions

Exempted were motor vehicle leases shorter than 12 months and leased assets with value below $8,000. Excluded
were variable rentals and lease payments. The following table summarizes these leases by class:


Dollars In Thousands
Expense
recognized in
the Profit &
Loss

Lease
commitments @
30/06/19
Lease
commitments
within one year
Lease
commitments
between one
and 5 years
Lease
commitments
more than 5
years
Short term leases
<12 months

50

36

36

-

-
Low value leased
assets

3

3

3
- -
Variable lease
payments under
service and
management
contracts


53


388


106


282


-
Total 106 427 145 282 -

Grand Millennium Auckland and Kingsgate Hotel Autolodge Paihia, both of which are under service and management
contracts are accounted on a net basis and therefore their rentals are excluded from leases.


9(e) Summary of the effect of NZ IFRS 16 on the Condensed Statement of Cash Flows

There are no impacts on the cash flows and the loan covenants of the Group. However, NZ IFRS requires separate
classifications:
• Cash payments for the principal portion of the lease liability within financing activities;
• Cash payments for the interest portion of the lease liability applying the requirements in NZ IAS 7 “Statement
of Cash Flows” for interest paid; and
• Short-term lease payments, payments for low value assets and variable lease payments excluded from
lease liabilities within operating activities.

The cash outflow for leases of right-of-use assets for the six months period ended 30 June 2019 totalled $0.676
million.


9(f) Reconciliation between operating lease commitments under NZ IAS 17 at 31 December 2018 and
lease liabilities recognised on transition at 1 January 2019


Dollars In Thousands
Unaudited @
01/01/19
Operating lease commitments at 31 December 2018 as disclosed in the Group’s consolidated
financial statements

6,280
Discounted using incremental borrowing rates at 1 January 2019 4,452

Less recognition exemption for:
- Short term leases <12 months (16)
Add extension options reasonably certain to be exercised on long term leases 10,616
Lease liabilities recognised at 1 January 2019 15,052

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CHAIRMAN’S REVIEW

Financial Performance:

Millennium & Copthorne Hotels New Zealand Limited (“MCK”) announced an unaudited profit after tax
and non-controlling interests of $23.81 million for the six month period ended 30 June 2019 (2018: $30.15
million). Profit before income tax and non-controlling interests was $41.00 million (2018: $54.66 million).
Group revenue and other income for this period was $110.61 million (2018: $127.51 million) and gross
profit for the period was $64.10 million (2018: $77.66 million). Earnings per share for the period were
15.05 cents per share (2018: 19.05 cps).

The main contributor to these results was CDL Investments’ slower section sales reflecting a number of
current market factors which are outlined below.

New Zealand Hotel Operations:

2019 has seen increased competition in the New Zealand hotel market across the country with occupancy
declining slightly to 82.5% (2018: 83.2%)) but with continued downward pressure on room rates. New
additional inventory in Auckland has also contributed to the mix. Revenue from hotels for the period was
$64.46 million (2018: $64.27 million) for MCK’s 14 owned / leased and operated hotels (excluding 5
franchised and 2 managed hotels). RevPAR (Revenue per available room) was $135.85 (2018: $133.12).

MCK is conscious that it must remain competitive in terms of its product and service standards and MCK
will continue to invest in refurbishments during the second half of this year with programmes at Millennium
Hotel Rotorua and Millennium Hotel Queenstown and the conversion of Kingsgate Greymouth to the
Copthorne brand. Further improvements are being planned at other hotels in response to customer
demand and guest feedback.

The judicial review action brought by several Auckland hotel owner / operators including MCK against
Auckland Council in relation to the Accommodation Provider Targeted Rate (APTR) was heard in the High
Court in late May. A decision is expected before the end of the year but, as advised previously, will not
materially impact on MCK’s financial position or the 2019 year end results.

CDL Investments New Zealand Limited (‘CDL’):

CDL announced an unaudited operating profit after tax for the six months ended 30 June 2019 of $15.10
million (2018: $25.47 million). The results reflect a softer market for residential sections in some areas
and CDL’s management are focused on a sales strategy to maximise sales from areas which are selling
well for the remainder of 2019.

Offshore investments – Australia:

Occupancy at the Zenith Residences, Sydney was steady at 94.2% across the complex. Three apartments
were sold in the first half of 2019. Further sales are expected before the end of the year.

Outlook:

The current competitive environment will continue for the rest of the year but we expect our hotels to
perform well against their competitors despite increasing input and utility costs which are having an impact
on operational performance. We are confident that CDL Investments’ sales will improve before the end
of 2019 as they optimize their sales programmes for the remainder of the year.

The Board believes that a year-end result for 2019 in line with 2018 is achievable and has directed
Management to focus on maintaining market share and improving productivity as well as careful cost
management across all operations over the coming months.



Colin Sim
Chairman
1
August 2019

---

1 August 2019



INCREASING COSTS AND SLOWER SECTION SALES
IMPACT ON MCK’S INTERIM RESULTS

New Zealand hotel owner / operator, Millennium & Copthorne Hotels New Zealand Limited (NZX:MCK),
today announced its (unaudited) results for the six months to 30 June 2019:

MCK Chairman & Independent Director Colin Sim said that majority-owned CDL Investments slower sales
coupled with a highly competitive environment for the company’s hotels was reflected in the results
announced today.

“Our hotels are holding their own despite a more challenging market but the results clearly reflect the
softer market for our land development operations and that was the biggest factor which affected our 2019
interim results”, he said.

MCK’s Managing Director Mr. BK Chiu also noted that the increasing input costs were being seen and felt
within MCK’s operations.

“Already apparent are the first impacts of a cost-price squeeze cycle and it is impossible to ignore these
cost increases. But we are dealing with these challenges just like every other business in New Zealand
and we are making the necessary adjustments effectively”, he said.

In this regard, MCK was continuing with its continuous capital expenditure programme of refurbishing its
hotels and announced that work was being done at Millennium Hotel Rotorua, Millennium Hotel
Queenstown and the conversion of Kingsgate Hotel Greymouth to a Copthorne-branded property.

“To be competitive means reinvesting in our product and service standards and we are sensitive to
customer demand and guest feedback. We are confident that this work will deliver improved rates in the
future”, said Mr. Chiu.

MCK also noted that the judicial review brought by several Auckland hotel owner / operators including
MCK had been heard in late May with an decision expected before the end of the year.

Looking at the remainder of this year, Mr. Sim said that MCK’s Board remained positive about the outlook

“The Board believes that a year-end result in line with the last two years is achievable. We are confident
that CDL Investments sales will improve and our hotels team is focused on what it takes to maintain our
market share, lift our productivity and carefully manage our costs at all of our properties”, he said.

Summary of results:
• Average hotel occupancy across the Group 82.5% (2018: 83.2%)
• Group revenue and other income $110.61million (2018: $127.51 million)
• Operating profit before finance income $40.57 million (2018: $53.84 million)
• Profit before income tax and non-controlling interests $41.00 million (2018: $54.66 million)
• Profit after tax and non-controlling interests $23.81 million (2018: $30.15 million)

ENDS

Issued by Millennium & Copthorne Hotels New Zealand Ltd

Any inquiries please contact:
B K Chiu, Managing Director
Millennium & Copthorne Hotels New Zealand Ltd
(09) 353 5058