MCK 2022 ASM Chairman’s Remarks and Presentation Slides

24/05/22
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37
th
Annual General Meeting
24
th
May 2022
WELCOME TO
OUR WORLD OF
HOSPITALITY
WELCOME
•Welcome to this Hybrid Meeting.
•This meeting is being held in person and is being webcast.
•The Meeting Chair is Graham McKenzie.
•Directors who are attending in person:
B K Chiu (Managing Director)
Eik Sheng Kwek (Director)
Leslie Preston (Independent Director)
•Directors who are attending remotely:
Colin Sim (Chairman)
Kevin Hangchi (Director)
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•Quorum.
•Apologies will be recorded in the minutes.
•Proxies.
•Minutes of the 36
th
Annual Meeting.
•Notice of Meeting taken as read.
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Summary of MCK’s 2021 Results
•The efforts of our team members in 2021 were no less
extraordinary than in 2020.
•The last two years have been nothing short of an
existential crisis for tourism.
•MCK has survived.
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Outlook for 2022
•The announcement earlier this month that the
international borders will reopen from the end of July is
very welcome.
•Nevertheless, the situation can change very rapidly.
•New surge of Covid could see the re-imposition of
restrictions on gatherings and on travel.
7
Outlook for 2022 (cont.)
•2022 would be another difficult year and this is proving to
be the case.
•Managing Director’s presentation to outline current
challenges.
8
Outlook for 2022 (cont.)
•Light at the end of the tunnel.
•Our land development operations through CDL Investments are doing
well, the reopening of the international border should help our
performance towards the end of this year.
•We are working on refurbishments to key properties.
•Major sporting events will be coming to New Zealand soon.
9
Outlook for 2022 (cont.)
•Thank you for your continued confidence in MCK.
•We remain well positioned for recovery.
•Demand for travel remains strong globally.
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MCK 2021 Group Results
2021 2020 2019
Group Revenue ($m): 164.8 172.0 229.7
EBITDA ($m):72.8 62.294.0
Profit Before Tax ($m):64.6 54.485.4
•Group revenue reduction from hotel operations. Border
closure & lockdown impacts.
•Ebitda $ PBT increase from sale of land in Christchurch.
•CDL Investments and KIN Holdings, Australia continue to
“soft-land” group’s results.
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Hotels: April 2022 YTD Trading
2022202120202019
•Hotel Revenue ($m):16.6 20.1 31.647.6
•Occupancy (%):35.839.9 57.589.1
•Average Room Rate ($):171158 184176
•RevPAR ($):61 63105 157
•Border closure and trading restrictions continued to impact hotel occupancy and
revenue.
•Four hotels practically closed.
•M Social Auckland and Grand Millennium remained managed isolation facilities.
•Hotels with corporate guests fared better. Domestic leisure improved except in
Queenstown.
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Unprecedented setback, even existential.

Stop-start disruptions.

Border now open to visa-waiver countries, August for visa countries.

Staffing challenges continue.

Cost-price squeeze; crisis mutation to food, fuel, energy inflation, debt
servicing storm?

Ongoing cash flow challenges.

MIQ/MIF ends with room supply increasing, notably in Auckland.
14
State of the Industry

Tourism spend: $41 billion

GST: $3.9 billion

Value added: 67 cents per dollar spent

Contribution to GDP : $16 billion

Direct employment : 230,000

Percentage of total people employed: 8.4%
15
Tourism Expenditure (Tourism Satellite Account 2019)

Tourism spend (%) of total by Product Category
%
Transport : 31
Retail: 28
F&B: 13
Accommodation: 9
Others : 19

Only 9 cents in every dollar spend were on accommodation.

But linkages go well beyond accommodation services, into & across communities.
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Economic (& social) Linkages from Tourism

NZ has more motels,3 & 4 star hotels, B&Bs, farm stays, holiday
parks, backpackers than luxury lodges and five star hotels.

A strategy centered on high end visitors is questionable in
generating optimum economic & social linkages for NZ.
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Economic (& social) Linkages from TourismAuckland Council Rates
1. Uniform Annual General Charge
2. General Rates – Urban Business
3. Waste Management – Base Service
Targeted Rate
4. Waste Management – Standard Refuse Targeted Rate
5. Natural Environment Targeted Rate – Business
6. Waste Quality
Targeted Rate – Business
7. Business Improvement District Heart of the City Targeted Rate
8. Swimming Spa Pool Compliance Targeted Rate
9. City Centre Targeted Rate
10.Accommodation ProviderTargeted Rate
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Auckland Accommodation Provider Targeted Rate (APTR)
•2017 – Targeted rate (based on Capital Value) on accommodation
providers to raise $28.7m pa. introduced by Auckland Council.
•2018 – Group of hotel owners’ challenged validity of the targeted
rate through a Judicial Review at the High Court – Unsuccessful.
•2020 – Notice of appeal to the Court of Appeal against the High
Court judgement.
•2021 – Court of Appeal reversed the High Court decision that the
APTR was legal/fair and reasonable.
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Court of Appeal Judgement (10 November 2021)
•“We (Court of Appeal) make declarations to impose the APTR in the
2017/2018 and 2018/2019 rating years were invalid. Those
decisions are set aside.”
•The Auckland Council had not complied with the Local Government
Act.
•Council should have conducted an assessment of the benefits to
the targeted group or how the benefit was distributed across other
ratepayers and the Auckland community.
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Court of Appeal Judgement (10 November 2021 (cont.))
•Council conducted the assessment at the end of the process to
“reverse engineer a justification for a scheme that had been
formulated without regard to those criteria in an attempt to
achieve an outcome that was beyond the scope of a rating
mechanism,”
•Auckland Council’s appeal to Supreme Court to be heard on 20/21
July 2022.
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MCK
WHAT MATTERS NOW
22
•Cash / term deposits: $50m ($39m 2020).
•Current Ratio:2.0 (1.9 in 2020).
•Debt to asset ratio: 7.5%* (3.0% in 2020).
•Bank line of credit: $25m ($55m in 2020)
•MCK has ability to access extra bank funding for growth
opportunities.
* Accounting policy on measurement of land and buildings changed
from revaluation to historical cost.
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Cash Management

Cash flow management.

Maintain operating margins.

Do not over-extend, optimize, live with not wish for.

Re-organisefor flexibility in staffing movements,
multi-task.

Promote, Promote, Promote.

Fish where the fish are.

Protect and enhance assets.
24
What Matters Now- the Recovery Runway

24/05/22
5
25

Cash flow management.

Maintain operating margins.

Do not over extend, optimize, live with not wish for.

Re-organise for flexibility in staffing movements,
multi-task.

Promote, Promote, Promote.

Fish where the fish are.

Protect and enhance assets.
26
What matters now - the Recovery Runway
Kingsgate to Copthorne Conversions
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Fifth Kingsgate to Copthorne Conversion
28
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Millennium Hotel Queenstown
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Millennium Hotel Rotorua

24/05/22
6
31
Copthorne Hotel Palmerston NorthCopthorne Hotel Bay of Islands
32
Corridor Carpets - DONE
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Mock-up Rooms for Refurbishment of Hotel (ongoing)
34
Redesign and Refurbish Waitaha Conference Centre
35
Waitaha Conference Centre Functions
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Golf Conference (Outdoor Function)
37
Swimming and Heated Spa Pool
38
39
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CDL Investments 2021 Sales
2021 2020 2019
Sales ($m)92.1 88.8 91.8
Profit before tax ($m)43.4 41.8 47.3
Section sales were from:

Prestons Park, Christchurch

Kewa Road, Auckland

Dominion Road, Auckland
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Annual Number of Homes Consented
Year-ending March 2022

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Record 50,858 new homes consented. 24% increase.

Multi-unit homes up 40%
Stand-alone homes up 12%

Auckland 21,477 (23% increase)
Canterbury 8,557 (41% increase)
Annual Number of Homes Consented (cont.)
Year-ending March 2022
April 2022 YTD Sales

Sales $41.4m ($35.7m in 2021)

Sales were from:
- Roscommon Road, Auckland
- Prestons Park, Christchurch
- Kewa Road, Auckland

Housing market easing

Building material supply & costs increases
44

Cash & term deposits: $87.5m (122.4m in 2021)
(as at 30 April 2022)

Quick ratio*10.3 (10.7 in 2021)

Bank borrowings Nil
*
Total current assets less Inventory
Total current liabilities
45
CDI Cash Position
Completed Subdivisions and Work in Progress
Christian/Tram Valley Road,
Swanson, Auckland
•Construction completed
•Titles in Q3, 2022
Kewa Road, North Shore
Auckland
•Construction completed
•Titles issued
•15 lots left for sale
Lot 4, Roscommon Road,
South Auckland
•Completed, Sold and Settled
Prestons Park – Stage 5
Christchurch
•90% completed
•Titles in Q3, 2022
•Balance 85 lots – earthworks and civil works under way
Prestons Park – Stage 6
Christchurch
•Construction of 54 lots completed.
•Tittles to issue in Q2, 2022
Prestons Park – Commercial
Christchurch
•Construction of units completed.
•10 units leased
46
Completed Subdivisions and Work in Progress (cont.)
Stonebrook, Rolleston
Commercial
•Construction of 5 units completed.
•All leased out
Lot 1, Warehouse
Development
Roscommon Road
South Auckland
•Warehouse No. 1, 90% completed
•Warehouse No. 2, 40% completed
•Both fully leased
Arataki Road, Havelock North
Hawkes Bay
•Subdivision consent lodged with council
Iona, Havelock North
Hawkes Bay
•Stage 1 subdivision consent lodged
47
Kewa and Tram Valley Road
48
Tram Valley Road Subdivision
Kewa Road Subdivision

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Prestons Park Commercial Centre, and
Stonebrook Commercial Centre
49
Preston Park Commercial Centre
Stonebrook Commercial Centre
Roscommon Road Warehouse
50
Hamilton Land
109 124 hectares for
development
Iona Land (69 hectares), Havelock North
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* Google Earth Image
Iona Land
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Iona Land (cont.)

24/05/22
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Iona Land (cont.)
Iona Land (cont.)

Unprecedented setbacks, hotel trading challenges continue.

Key experienced employees retained but scaled down
operations; fish where the fish are.

Protect/enhance assets.

Property operations in CDI & KIN to soft-land hotel.

CDI land acquisitions set up company for growth &
diversification.

Strong financial positions for recovery runway initiatives.
57
Summary
58
Election of Directors

Election of Graham McKenzie as a Director

All resolutions are being conducted by way of poll.
59
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 2022.
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Q & A
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CLOSE OF MEETING
Thank you for attending
62

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MILLENNIUM & COPTHORNE HOTELS NEW ZEALAND LIMITED
STOCK EXCHANGE ANNOUNCEMENT
2022 ANNUAL SHAREHOLDER MEETING – REMARKS BY THE MEETING CHAIR

On behalf of the Directors, I present the Annual Report and the Statement of Financial Accounts to 31 December
2021.

Review of 2021:
In our annual report, I said that the effort put in by our team members in 2021 was no extraordinary than in 2020
and I meant it.

The last two years have been nothing short of an existential crisis for tourism and accommodation globally and
while many companies have struggled to keep going and have had to exit these industries, we have survived.

That is a testament to the dedication and resilience our people have shown and continue to show every day. On
behalf of the Board and all MCK shareholders, I would like to offer my sincere thanks to all of our employees at
both our hotels and our corporate offices.

While the announcement earlier this month that the international borders will reopen from the end of July is very
welcome, we still remain cautious.

What we have learned over the last two years is that the situation can change very rapidly. At the same time, we
have learned to react to such changes very quickly.

Despite a highly vaccinated population in New Zealand and the majority of developed countries, we know that a
new surge of cases could see the re-imposition of restrictions on gatherings and on travel.

If that happens, and we hope it doesn’t, we will likely see yet another round of cancellations and a consequential
impact on our revenue and forward bookings.

We know what the likely impact of that lost business will be but the reality is that each time we try to build back
our business is usually more difficult than the last.

In our 2021 annual report, I noted that 2022 would be another difficult year and this is proving to be the case. Mr.
Chiu will provide more detail about our trading to date in his presentation but I note that our half year results
for the hotel operations will reflect the ongoing challenges all accommodation and tourism providers continue to
face.

We do, however, feel there is light at the end of the tunnel. Our land development operations through CDL
investment are doing well, the reopening of the international border will help our performance towards the end of
this year and we are working on refurbishments to key properties.

Major sporting events will be coming to New Zealand soon such as the Women’s Rugby World Cup later this year
and the FIFA Women’s World Cup in late 2023. We are really looking forward to welcoming supporters from
across the globe to New Zealand for those events and we believe that they will be well attended and well
supported.


To sum up, we thank all of our shareholders for the continued confidence in this company. As a Board, we want
to convey our belief that we have great confidence in MCK and its people across all our hotels and other business
divisions now and into the future.

We remain well positioned for recovery and we expect things to improve over the next few years as New Zealand
tourism starts to grow once again. The demand for travel remains strong globally and New Zealand remains a
very desirable destination.

We look forward to having you join us on our recovery journey and to your future support both as shareholders
and as guests at our Millennium, Grand Millennium, M Social, Copthorne and Kingsgate hotels across New
Zealand. You can be assured of a warm and friendly welcome at any of our hotels.

Managing Director succession:
BK, as this is your last annual meeting, on behalf of the Board and, I am sure on behalf of all MCK shareholders, I
would like to thank you for your service to the Company over the past seventeen years.

You have led our group through very interesting and challenging times, not least after the GFC and after the
Canterbury Earthquakes as well as during the pandemic. You have provided the Management Team with excellent
leadership and I know that your presentations at these annual meetings are something that our shareholders have
looked forward to.

I’m sure that everyone will want me to thank you on their behalf and wish you well for the future.

We are pleased to have appointed Stuart Harrison as the new Managing Director and I am told that he will be a
familiar face to some of you here today. Stuart’s appointment has been warmly welcomed by our operational and
corporate office teams and the Board is looking forward to working with him when he starts with us fully in June.