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Millennium & Copthorne Hotels plc
Annual Report & Accounts 2016
A
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CREATING LONG-TERM
VALUE IN A CHANGING
HOSPITALITY WORLD
Our vision is to be the leading global hospitality
real estate ownership group for key gateway
cities with effective, in-built and unique asset
management skills.
INVENTORY: GROUP
4
3
1
131
2
2016
ANALYSED BY OWNERSHIP TYPE:
66
1. OWNED OR LEASED
42
2. MANAGED
7
3. FRANCHISED
16
4. INVESTMENT
131
TOTAL
HOTELS
+/-
2015
65
37
8
16
126
1
5
(1)
–
5
1
4
3
37,022
2
2016
19,534
11,924
1,091
4,473
37,022
ROOM COUNT
+/-
2015
18,984
10,212
1,206
4,316
34,718
550
1,712
(115)
157
2,304
For more information online at:
millenniumhotels.com
34-70
GOVERNANCE
04-30
STRATEGIC REPORT
74-142
FINANCIAL STATEMENTS
OUR HOTEL COLLECTIONS
Unique hotels with
powerfully distinct
personalities – from
historic properties to
trendy urban escapes.
The Leng’s Collection
hotels represent the
legacy of our founders,
the Leng generation of
the Kwek family. Brands
in the Leng’s Collection
include: The Bailey’s
Hotel London, The
Chelsea Harbour Hotel,
Grand Hotel Palace
Rome, M Hotels, Studio
M Hotels and M Social.
The global travellers’
choice in gateway
cities. The Millennium
Collection hotels are
created with timeless
elegance and famed for
their conference and
banquet offerings, world-
class facilities and the
ultimate in personalized,
gracious service. They
are perfect for corporate,
leisure, meetings and
conventions. Brands
in the Millennium
Collection include: Grand
Millennium Hotels and
Millennium Hotels.
Comfortable hotels at a
comfortable price. The
Copthorne Collection
hotels are firmly
established as a true
global brand recognized
across the world as the
preferred choice for both
business and leisure
travellers in providing
comfortable service.
Brands in the Copthorne
Collection include:
Copthorne Hotels and
Kingsgate Hotels.
Strategic Report
04 Chairman’s statement
06 Business review and strategy
09 Key performance indicators
10 Financial performance
12 Regional performance – Asia
14 Regional performance – Europe
16 Regional performance – United States
18 Regional performance – Australasia
20 Corporate responsibility
26 Our risks
Governance
34 Board of Directors
36 Directors’ report
40 Corporate governance statement
45 Audit Committee report
48 Directors’ remuneration report
65 Nominations Committee report
67 Statement of Directors’ responsibilities
68
Independent auditors’ report
Financial Statements
74 Consolidated income statement
75
76
78
79
81
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
139 Company statement of
financial position
140 Company statement of
changes in equity
141 Notes to the Company
financial statements
Further Information
143 Group financial record
144 Key operating statistics
146 Major Group properties
154 Millennium & Copthorne
hotels worldwide
157 Shareholder information
160 Financial calendar
1
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016
For more information online at:
millenniumhotels.com
2
M SOCIAL SINGAPORE
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportSTRATEGIC REPORT 3
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther informationStrategic Report04 Chairman’s statement06 Business review and strategy09 Key performance indicators10 Financial performance12 Regional performance – Asia14 Regional performance – Europe16 Regional performance – United States18 Regional performance – Australasia20 Corporate responsibility26 Our risks Chairman’s statement
Kwek Leng Beng
“Our trading performance in 2016 declined with Group RevPAR* in constant currency falling in each quarter of the year. Pressure on
revenue and profit was intense in all of our key gateway cities. In London, leisure business in the first quarter was impacted by the
November 2015 Paris terror attacks and in the second half of the year trading was affected by reduced corporate business. New York
results were affected by significant under-performance at Millennium Broadway as well as the refurbishment of ONE UN’s east tower,
which is now complete. In Singapore there was an overall increase in visitor numbers but a reduction in the average length of visitor
stay. Our rate strategy was not suited to Singapore market conditions. This resulted in less corporate business, compounding the
effect of the recent increase in available hotel rooms and further reducing average room rates and occupancy. However, New Zealand
performed very well.
In constant currency Group pre-tax profit dropped by 12.9%. The significant depreciation in Sterling resulted in reported profit before
tax (both before and after net revaluation deficit and impairment losses) remaining flat.
The Group is taking steps to increase revenue and profit across the estate, particularly in New York and Singapore. This includes an
ongoing restructuring of our sales function and strategy, and continuing improvement of our e-commerce capability.”
D uring 2016, the global hospitality
industry was affected by the
increased supply of rooms in
major cities, concern over
terrorist attacks in Europe and
increased competition from non-
traditional lodging options. This was
against a backdrop of considerable
political change and volatility in many
parts of the world.
In constant currency, total revenue was
flat compared to last year. Hotel
revenue fell by £19m and this was
offset by higher revenue from the
property division of £16m and increase
in REIT revenue of £3m. Pre-tax profit
for the Group decreased by 12.9%.
Most of this reduction came from hotels
in gateway cities, where average room
rates are under continuing pressure as
a result of significant growth in the
number of available hotel rooms.
Property revenue increased by 60.0%
to £56m (2015: £35m), mainly because
of increased land sales in New Zealand
and a higher contribution from
Millennium Mitsui Garden Hotel Tokyo.
The Group’s share of profit from joint
ventures and associates increased by
£9m to £26m (2015: £17m). The
increase was principally due to a gain
recognised by First Sponsor Group
Limited (“FSGL”) on the dilution of its
interest in a project based in Dongguan,
China.
Group RevPAR for 2016 increased by
6.6% to £76.71 (2015: £71.98). In
constant currency, RevPAR fell by
2.3%.
Total revenue in reported currency for
2016 grew by £79m or 9.3% to £926m
(2015: £847m). In constant currency,
revenue was flat indicating that
exchange translation contributed £79m
to total reported revenue. The fall in the
value of sterling against major
currencies during the year following the
23 June 2016 referendum had a
significant impact on Group’s results.
* Revenue per available room (“RevPAR”).
4
Company of their intention not to stand
for re-election at the Company’s
upcoming Annual General Meeting to
be held on 5 May 2017 and to retire
from the Board at that time. Mr George
presently serves as Senior Independent
Director and Mr Waugh chairs the
Company’s Remuneration Committee.
We also welcome Howard Wu as an
Independent Non-Executive Director on
17 February 2017, as part of the
Board’s efforts to expand its information
technology data security and
e-commerce experience.
In the first 31 days of trading in 2017
Group RevPAR increased by 4.5%.
London, which had a very poor
comparative quarter in 2016 was up by
19.5%. New York was up by 8.9% and
Australasia was up by 12.3%. RevPAR
for Singapore fell by 5.2%.
Kwek Leng Beng
Chairman
16 February 2017
Hotel revenue in constant currency
declined by 2.3% to £814m in 2016 as
a result of lower contributions from the
Group’s hotels in New York and
Singapore.
The Group recognised £44m (2015:
£43m) of net revaluation deficit and
impairment losses of which £27m
relates to properties held by CDL
Hospitality Trusts and the balance
primarily to several Group properties
located in New York and Rest of
Europe.
Reported profit before tax for the year
decreased slightly by 0.9% to £108m
(2015: £109m). In constant currency,
pre-tax profit dropped by 12.9% or
£16m.
The Board recommends a final ordinary
dividend of 5.66p per share (2015:
4.34p) taking into account the Group’s
current cash position and future capital
expenditure requirements. Together
with the interim ordinary dividend of
2.08p per share (2015: 2.08p), the total
ordinary dividend for 2016 is 7.74p per
share (2015: 6.42p) representing a
cover of approximately 3 times which is
in line with the Group’s dividend policy.
Subject to approval by shareholders at
the Annual General Meeting to be held
on 5 May 2017, the final dividend will be
paid on 12 May 2017 to shareholders
on the register on 17 March 2017.
As previously announced, Daniel
Desbaillets joined the Board on
14 September 2016 and Aloysius Lee,
Group Chief Executive Officer, will leave
the Group at the end of February 2017.
A search for his successor is underway.
In the meantime, Tan Kian Seng, Group
Chief of Staff, will with effect from
1 March 2017 be appointed as interim
Chief Executive Officer, currently a
non-Board position.
Alexander Waugh and Nicholas
George, who have been Independent
Non-Executive Directors of the
Company since June 2009, notified the
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report The Group is taking steps to increase revenue and
profit across the estate, particularly in New York and
Singapore. This includes an ongoing restructuring
of our sales function and strategy, and continuing
improvement of our e-commerce capability.
REVENUE
£926m
+9.3%
m
8
6
7
£
m
4
6
0
,
1
£
m
6
2
8
£
m
7
4
8
£
m
6
2
9
£
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
RevPAR
£76.71
2015: £78.49
-2.3%
PBT
£108m
2015: £109m
-0.9%
PBT#
£152m
2015: £152m
+0%
#Excluding revaluation gain/
deficit and impairment losses.
Source: The Straits Times © Singapore Press Holdings Limited.
Permission required for reproduction. This photo has been modified for annual report use.
5
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information The Group’s hospitality real estate ownership model enables investors
to participate in long-term asset value growth as well as hotel earnings.
The model is de-centralised with relatively low central overheads, the
core aim being to ensure that a high proportion of hotel revenues flow
directly to the Group’s bottom line. In some markets, where real estate
ownership is sub-optimal for fiscal or other reasons, the Group may
operate hotels under management contract or enter into franchise
agreements.
The core strategic objective of the Group is to provide long-term,
improving returns on shareholders’ capital, whilst growing the business
through asset acquisition and prudent investment in the existing asset
portfolio. The Board and executive management are focused on
capital allocation, promoting growth, controlling costs and fostering
efficient operating procedures. The Group is investing in its people,
brands and technology with the aim of providing a high quality, cost-
efficient guest experience to its customers.
The Group is taking appropriate steps to maintain or increase market
share and preserve profitability across the portfolio. These include
the continuing development of the Group’s e-commerce platform
and ongoing refurbishment of Group properties. 2016 was the first
full year of operation for the Group’s newly branded hotel “collections”
– Millennium, Copthorne and Leng’s – under the Millennium Hotels
and Resorts umbrella. These brands, which help to differentiate the
customer offering according to our guests’ type and taste, have been
well received by customers although it is too early to detect a material
impact on trading results.
Management remains vigilant on cost control. In many destinations,
and in common with other hospitality providers, labour and other
costs are increasing, both as a result of inflationary pressure and
Government intervention in some labour markets.
Business review
and strategy
Business Model
Strategy
Strategy in action
6
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report Hotel operations
Hotel revenue increased by 6.4% to £814m
(2015: £765m) mainly because of favourable
foreign exchange movements. In constant
currency, hotel revenue fell by £19m or 2.3%
due to weaker performance in London, New
York and Singapore.
Revenue per available room (RevPAR)
increased by 6.6% to £76.71 in 2016, but
decreased by 2.3% in constant currency. Both
like-for-like1 RevPAR and hotel revenue for the
year fell by 1.9%.
Hotel gross operating margin was lower at
31.6% (2015: 34.1%).
Developments
The Group received building permit approval
for the Yangdong development project in Seoul
on 25 January 2017.
Additional required certification processes are
underway and are expected to complete by the
middle of this year before construction work
starts. The main contract tender process is
planned to complete at the same time.
Having received final planning approval in
December 2016 for a 263-room hotel and a
250-unit residential apartment block on the
Group’s 35,717m2 mixed use freehold landsite
at Sunnyvale, California, the Group is reviewing
the project cost and specification. The Group
may modify certain aspects of the
development, which is anticipated to take
about 18 months to complete after
commencement.
Management continues to explore options in
relation to the freehold site occupied by the
Millennium Hotel St. Louis, which was closed in
January 2014.
Hotel refurbishments
The Group is continuing to review the scope
and cost of refurbishment at Millennium Hotel
London Mayfair. Work on the hotel is now
planned to commence later this year. To
minimise the impact on London occupancy,
there will be a gap of at least 12 months before
Millennium Hotel London Knightsbridge
undertakes smaller scale refurbishment work.
Refurbishment of guest rooms in the east
tower of ONE UN New York was completed in
early September 2016 and the tower was
re-opened in time for the UN General
Assembly. The Group spent US$32m (£24m)
on this project in 2016.
Work on the main lobby and food and
beverage outlets at the main entrance level of
the Grand Copthorne Waterfront Hotel
Singapore was substantially completed in May
2016 with the affected outlets re-opening for
business shortly afterwards. The remaining
work on the refurbishment of function rooms at
level two started in September 2016 and
completed in December 2016.
Grand Copthorne Waterfront Hotel Singapore
Grand Millennium Kuala Lumpur
ONE UN New York
1 Like-for-like comparisons exclude the impact of acquisitions, closures and refurbishments, and they are stated in constant currency terms.
7
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Business review
and strategy
continued
Soft refurbishment of all guestrooms at M Hotel
Singapore, from level 12 to level 28 is
complete, with the last phase completed in
December 2016.
Soft refurbishment of guestrooms at Grand
Millennium Kuala Lumpur, from level 9 to level
19, was completed at the beginning of the 4th
quarter of 2016, with the last phase at level 9
and level 10 returned to inventory in mid-
October. The remaining guestrooms to be
refurbished are at level 7 and level 8, work on
which will take place in the middle of this year
during the lower season.
Copthorne Hotel Auckland Harbourcity is
scheduled to re-open on completion of work in
the second quarter of 2017. The hotel was
closed in July 2015 for a refurbishment
programme estimated to cost NZ$40m (£22m)
and will be rebranded M Social Auckland.
Acquisition
In February 2017 a subsidiary of the Group
acquired the tenant’s interest in the lease on
the penthouse floor of the Novotel New York
Times Square for a gross purchase price of
US$6m. The lease has a term ending in 2080.
The Group acquired the hotel, subject to the
penthouse lease, in June 2014.
Disposals
The Group has in place a number of
contractual arrangements with the developer of
Birmingham’s Paradise Circus redevelopment
scheme. Pursuant to this scheme, under an
agreed process, the developer has a right to
acquire the existing site of the Copthorne Hotel
Birmingham and the Group has both an option
to sell the existing site to the developer and an
option to acquire an alternative site in the
redevelopment area for the construction of a
new hotel. The Group continues to consider
these options in discussion with the developer.
As previously reported, in September 2015 the
Group received notice of an application from
Network Rail Infrastructure Limited (“Network
Rail”) for an order to temporarily close and
possess the Millennium Hotel Glasgow, and to
permanently take a portion of the hotel, in
connection with the redevelopment of
Glasgow’s Queen Street Station. The Group
objected to various components of the
application and a public inquiry was held in
May and June 2016. This resulted in the
removal of the power to temporarily close and
possess the main part of the hotel. In February
2017, the Scottish Ministers stated their
intention to approve the draft order, including
the power to permanently take a portion of the
hotel, subject to some modifications. Following
the taking of the land, the Group will be entitled
to compensation, which will either be
negotiated or settled at the Lands Tribunal.
The Group is currently considering its options,
such as appealing the decision, whilst
maintaining a commercial dialogue with
Network Rail.
On 31 December 2016, the Group sold its
51% equity interest in Millennium & Copthorne
Middle East Holdings Limited (“MCMEHL”) to
the other existing shareholder. MCMEHL,
supported by the Group, will continue to trade
under the same name with rights to operate
and manage the existing portfolio and to
develop future business under the Group’s
brand names, in the Middle East, Africa and
Indian regions.
Other Group operations
Joint ventures and associates contributed
£26m to profit in 2016 (2015: £17m). The
Group has an effective interest of 36% in
FSGL, which is listed on the Singapore
Exchange and reports its results independently.
M Social Auckland
8
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report Key performance
indicators
We use a set of carefully selected key performance indicators
(“KPIs”) to monitor our success in executing our strategy set
out on page 6. These KPIs are used to measure the Group’s
progress year-on-year against those strategic priorities, and are
set out below:
Strategic priority
KPIs (in constant currency)
Growth
To achieve profitable growth for our
hospitality business. These are shown
at constant rates of exchange.
Revenue per
Available Room
Occupancy
Average room rate
Hotel revenue
Average room rate
multiplied by
occupancy
percentage.
Percentage of rooms
available for sale that
were actually sold to
our guests.
Revenue from room
sales, divided by the
number of room
nights sold.
Including room sales,
food and beverage
sales and meetings
and events.
Net Asset Value
Net debt
Basic earnings per share
Total assets less total
liabilities.
Total borrowings less
total cash.
Profit for the year
attributable to equity
holders of the parent
divided by weighted
average number of
shares in issue.
Operating profit
Profit before tax
Capital allocation
To ensure appropriate use of the
Group’s capital so that long-term
return on investment for the shareholders
is maximised, through a rigorous asset
management programme, selective
acquisitions, and an appropriate use
of equity investments.
Cost Control
To ensure costs remain in line with
revenue movements through a decentralised
model, technological enhancements to drive
efficiencies
and rigorous monitoring of spending.
The Group believes that the KPIs provide useful
and necessary information on underlying trends
to shareholders, the investment community
and are used by the Group for internal
performance analysis. The Group monitors Net
Asset Value to better reflect the property
ownership nature of the Group. Given the
decentralised model of the Group, regional
management focuses on operational KPIs as
well as the above. These include customer
feedback, hotel gross operating profit and staff
retention. General Managers report their
operating KPIs to Regional Managers on a
regular basis with comparison numbers for the
local competitive set of each hotel. The hotel
performance numbers are then consolidated
into regional and Groupwide figures.
9
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information0204060802015201678.4976.71£0204060802015201671.871.8%02040608010012020152016109.26106.78£0200400600800100020152016833814£m07001400210028003500201520162,7123,170£m016032048064080020152016605707£m0510152025302015201619.924.0p.030609012015020152016112107£m030609012015020152016109108£m
Financial performance
Financial performance
On a constant currency basis, hotel revenue
fell by 2.3% to £814m principally due to
poor trading by the Group’s hotels in New
York and Singapore. During the year, ONE
UN New York remained in a loss position
due to refurbishment of the east tower.
Performance by the Group’s hotels in
Singapore continued to be weak with
decreases in both room rates and
occupancy.
Reported profit before tax fell slightly by
0.9% to £108m (2015: £109m). During the
year, a total of £44m (2015: £43m) of net
revaluation deficit and impairment losses
were charged to the income statement.
They relate primarily to properties held by
the REIT of £27m (2015: net revaluation
gain £3m) and several hotels in New York
and Rest of Europe.
For the full year to 31 December 2016, total revenue
increased by 9.3% to £926m (2015: £847m) mainly due to
favourable foreign currency movements as a result of the
weak pound against major currencies and higher property
revenue. The Group’s reported revenue benefitted from a
positive foreign exchange impact of £79m during the year.
Total revenue in constant currency was flat compared to last
year.
Hotel
Property
REIT
Total Revenue
Reported Currency
Constant Currency
FY 2016
FY 2015
Change
FY 2015
Change
£m
814
56
56
926
£m
765
35
47
847
£m
49
21
9
79
%
6.4
60.0
19.1
9.3
£m
833
40
53
926
£m
(19)
16
3
–
%
(2.3)
40.0
5.7
–
The impairment losses are a result of M&C’s
annual impairment testing whereby the carrying
amount of M&C’s assets is compared against
the estimated recoverable amount, which is the
greater of the fair value less costs to sell and
value in use. In assessing the value in use, the
estimated future cash flows are discounted to
their present value using a discount rate that
reflects current market assessments of the time
value of money and the risks specific to each
asset.
After removing the effects of the impairment
losses and revaluation gains, the Group’s
reported profit before tax remained flat at
£152m (2015: £152m).
Basic earnings per share increased by 20.6%
to 24.0p (2015: 19.9p).
Foreign exchange translation
The Company publishes its Group financial
statements in sterling. However, the majority of
the Company’s subsidiaries, joint ventures and
associates report their revenue, costs, assets
and liabilities in currencies other than sterling.
The Company translates the revenue, costs,
assets and liabilities of those subsidiaries, joint
ventures and associates into sterling and this
translation of other currencies into sterling
could materially affect the amount of these
items in the Group’s financial statements, even
if their values have not changed in their original
currencies.
The table set out in Note 22 to the financial
statements sets out the sterling exchange rates
of the other principal currencies in the Group.
Sterling weakened compared to other major
currencies during the financial year, the impact
of which is reflected in the translation reserve
on page 75.
10
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report
Financial Position and Resources
Property, plant and equipment and lease premium prepayment
Investment properties
Investment in joint ventures and associates
Non-current assets
Current assets excluding cash
Provisions and other liabilities excluding borrowings
Net debt
Deferred tax liabilities
Net assets
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
2016
£m
2015
£m
Change
£m
3,345
2,858
534
320
506
255
4,199
3,619
195
(297)
(707)
(220)
163
(255)
(605)
(210)
3,170
2,712
2,668
502
3,170
2,276
436
2,712
487
28
65
580
32
(42)
(102)
(10)
458
392
66
458
Non-current assets
The Group states land and buildings at
depreciated deemed cost, being their UK
GAAP carrying value, including revaluations as
at 1 January 2004, together with additions
thereafter less subsequent depreciation or
provision for impairment. External professional
open market valuations took place at the end
of 2016 for all investment properties and those
property assets identified as having impairment
risks.
Non-current assets increased by 16.0%
compared to last year, principally due to the
additions to property, plant and equipment as
a result of hotel refurbishment of £100m (2015:
£85m), exchange gains of £574m (2015: £nil)
offset by net revaluation deficit & impairment
loss of £40m (2015: £43m).
Financial position
Group interest cover ratio for the year ended
31 December 2016 (excluding share of results
of joint ventures and associates, and other
operating income and expense) is 6 times
(2015: 8 times).
At 31 December 2016, the Group had £337m
cash and £546m of undrawn and committed
facilities available comprising revolving credit
facilities which provide the Group with financial
flexibility. Most of the facilities are unsecured
with unencumbered assets representing 86%
of fixed assets and investment properties. At
31 December 2016, total borrowing amounted
to £1,044m of which £72m was drawn under
£94m of secured bank facilities.
At 31 December 2016, the Group had net debt
of £707m (Dec 2015: net debt £605m).
Excluding CDL Hospitality Trusts (“CDLHT”),
the net debt was £232m (Dec 2015: net debt
£201m).
Future funding
Of the Group’s total facilities of £1,641m,
£434m matures within 12 months. Excluding
CDLHT, the Group’s total facilities was £899m
of which £266m matures within the next
12 months. Plans for refinancing of the facilities
are underway.
Treasury risk management
Group treasury matters are governed by
policies and procedures approved by the
Board of Directors. The treasury committee
monitors and reviews treasury matters on a
regular basis. A written summary of major
treasury activity is presented to the Board on a
regular basis.
11
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information
REGIONAL PERFORMANCE
ASIA
Asia RevPAR for 2016 fell by 4.0% to £68.21
contributed by lower room rate and occupancy.
Overall performance for the Rest of Asia was helped
by completion of the refurbishment of Millennium
Seoul Hilton, where visitor numbers also recovered
following the successful containment of the Middle
East Respiratory Syndrome outbreak in 2015.
Singapore
Singapore RevPAR performance, on the other hand, fell for
each quarter of the year, with increased competition and a
decline in the Group’s corporate business. In 2016, RevPAR
decreased by 10.1% with all five Singapore hotels showing
RevPAR declines. Weak demand from the corporate sector
and new room supply continued to have a significant impact
on hotel performance, with average room rate falling by 7.1%
and occupancy down by 2.9% points.
Rest of Asia
In Rest of Asia, RevPAR grew by 1.9% attributable to newly
refurbished guest rooms at Millennium Seoul Hilton and
Grand Hyatt Taipei.
INVENTORY: ASIA
1
34
4
3
1. OWNED OR LEASED
2. MANAGED
3. FRANCHISED
4. INVESTMENT
TOTAL
2016
12
10
2
10
34
12
1
13,047
4
3
2
2016
5,979
3,152
780
3,136
13,047
ROOM COUNT
CHANGE
2
290
–
609
901
2015
5,977
2,862
780
2,527
12,146
ASIA
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
SINGAPORE
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
REST OF ASIA
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
2
HOTELS
2015 CHANGE
–
1
–
1
2
12
9
2
9
32
2016
290
68.21
72.7
93.81
127
80.21
84.2
95.22
163
60.63
65.4
92.66
2015
CHANGE
299
71.03
73.2
97.00
136
89.26
87.1
102.48
163
59.52
64.5
92.32
(3.0)%
(4.0)%
(0.5)
(3.3)%
(6.6)%
(10.1)%
(2.9)
(7.1)%
–
1.9%
0.9
0.4%
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report
4
2 7 6
1
5
3
SINGAPORE
1.
Copthorne King’s Hotel Singapore
2. Grand Copthorne Waterfront Hotel Singapore
3. M Hotel Singapore
4.
Orchard Hotel Singapore
5.
Novotel Singapore Clarke Quay
6. Studio M Hotel Singapore
7.
M Social Singapore
M SOCIAL SINGAPORE
ORCHARD HOTEL SINGAPORE
13
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Regional Overview
REGIONAL PERFORMANCE
EUROPE
Europe RevPAR for 2016 decreased by 2.0%. Lower
average room rate of 2.7% was partially offset by an
increase in occupancy rate of 0.6% points. Slower
performance in Europe was consistent through the
year, with RevPAR falling in each quarter except for
Q4 2016. This was a result of the continuing impact
of terror attacks in Paris and Brussels during the first
half of the year, which prompted tour cancellations
by a significant number of Asian travel accounts. The
UK’s referendum on EU membership caused a spike
in London leisure sector visitors taking advantage of
the weak pound during the third quarter. However
this was offset by a noticeable slowdown in
corporate travel bookings.
London
London RevPAR for 2016 fell by 1.4%. All London hotels
registered RevPAR declines with the exception of The
Bailey’s Hotel London where the comparative year was
adversely affected by its refurbishment in 2015. Excluding
The Bailey’s Hotel London, RevPAR for London dropped by
5.0%.
INVENTORY: EUROPE (includes Middle East)
Rest of Europe
4
1
53
2
4
1
13,537
2
HOTELS
2015 CHANGE
–
5
–
–
5
21
26
–
1
48
2016
4,680
8,659
–
198
13,537
ROOM COUNT
CHANGE
–
1,569
–
–
1,569
2015
4,680
7,090
–
198
11,968
1. OWNED OR LEASED
2. MANAGED
3. FRANCHISED
4. INVESTMENT
TOTAL
2016
21
31
–
1
53
14
RevPAR for the rest of Europe fell by 1.6%. Copthorne Hotel
Aberdeen had a double digit RevPAR decrease reflecting
the fall in energy prices and the consequential impact on
room bookings from the oil and gas sector.
2016
2015
CHANGE
EUROPE
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
LONDON
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
REST OF EUROPE
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
197
80.24
77.1
104.04
121
107.18
81.9
130.83
76
52.61
72.2
72.86
201
81.84
76.5
106.93
124
108.68
80.2
135.51
77
53.47
72.7
73.58
(2.0)%
(2.0)%
0.6
(2.7)%
(2.4)%
(1.4)%
1.7
(3.5)%
(1.3)%
(1.6)%
(0.5)
(1.0)%
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report
Governance
Financial statements
Further information
4
3
1
5
6
2
7
LONDON
1.
Copthorne Tara Hotel London Kensington
2. Millennium Gloucester Hotel London Kensington
3.
Millennium Hotel London Knightsbridge
4. Millennium Hotel London Mayfair
5.
Millennium & Copthorne Hotels at
Chelsea Football Club
6. The Bailey’s Hotel London
7. The Chelsea Harbour Hotel
THE BAILEY’S HOTEL LONDON
THE CHELSEA HARBOUR HOTEL
15
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information
REGIONAL PERFORMANCE
UNITED STATES
RevPAR for the US region during 2016 decreased
by 4.2% to £86.52 with growth in the newly
refurbished regional US hotels being offset by slower
performance in the New York properties.
New York
New York RevPAR fell by 9.9% as a result of a 4.2% point
fall in occupancy and a 5.0% fall in average room rate. This
was driven by an increase in the city’s hotel room inventory,
the impact from the refurbishment of the east tower of ONE
UN New York and the conversion to theatre space of food &
beverage and conference areas at Millennium Broadway Hotel
New York. Excluding the impact of refurbishment at ONE UN
New York, US and New York RevPAR fell by 1.3% and 5.7%
respectively.
Regional US
RevPAR for the regional US estate increased by 4.0% to
£57.49 reflecting improved revenue performance at the
recently refurbished hotels.
UNITED STATES
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
NEW YORK
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
REGIONAL US
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
2016
272
86.52
65.0
133.18
136
145.64
77.9
186.85
136
57.49
58.6
98.12
2015
CHANGE
289
90.31
66.1
136.60
156
161.57
82.1
196.69
133
55.30
58.2
94.96
(5.9)%
(4.2)%
(1.1)
(2.5)%
(12.8)%
(9.9)%
(4.2)
(5.0)%
2.3%
4.0%
0.4
3.3%
INVENTORY: UNITED STATES
1
19
1. OWNED OR LEASED
2. MANAGED
3. FRANCHISED
4. INVESTMENT
TOTAL
2016
19
–
–
–
19
16
1
6,797
HOTELS
2015 CHANGE
–
–
–
–
–
19
–
–
–
19
2016
6,797
–
–
–
6,797
ROOM COUNT
CHANGE
96
–
–
–
96
2015
6,701
–
–
–
6,701
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report
1
3
5
4
2
NEW YORK
1.
Millennium Broadway Hotel New York
2.
Millennium Hilton
3. Novotel New York Times Square
4. ONE UN New York
5. The Premier Hotel New York
HUDSON THEATRE AT MILLENNIUM BROADWAY HOTEL NEW YORK
ONE UN NEW YORK
ONE UN
17
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information REGIONAL PERFORMANCE
AUSTRALASIA
The Group’s New Zealand estate was a consistently
strong performer through the year in RevPAR terms,
with strong increases in room rate and occupancy
for each quarter of the year, driven by increasing
international visitor arrivals. Australasia RevPAR
grew by 20.9% in 2016 driven by the growth in
New Zealand international tourism. Average room
rate and occupancy increased by 14.7% and 4.2%
points respectively. High demand was experienced
in the Auckland, Rotorua and Queenstown areas
with spill-over to destinations such as Te Anau and
Greymouth.
Copthorne Hotel & Resort Queenstown Lakefront continued
to perform well in its first full year of trading following its
refurbishment in November 2015.
As previously announced, the Group assumed the lease
of Rendezvous Grand Hotel Auckland with effect from 7
September 2016. The hotel, the largest in New Zealand with
a total of 452 guestrooms, is owned by the REIT and is the
Group’s first Grand Millennium hotel in New Zealand.
NEW ZEALAND
HOTEL REVENUE (£M)
REVPAR (£)
OCCUPANCY (%)
ARR (£)
2016
55
58.40
81.3
71.84
2015
CHANGE
44
48.32
77.1
62.64
25.0%
20.9%
4.2
14.7%
INVENTORY: AUSTRALASIA
1
25
4
3
2
1. OWNED OR LEASED
2. MANAGED
3. FRANCHISED
4. INVESTMENT
TOTAL
2016
14
1
5
5
25
18
1
3,641
4
3
2
HOTELS
2015 CHANGE
1
(1)
(1)
(1)
(2)
13
2
6
6
27
2016
2,078
113
311
1,139
3,641
ROOM COUNT
CHANGE
452
(147)
(115)
(452)
(262)
2015
1,626
260
426
1,591
3,903
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report
5
12
6
20
1
2
10
18
19
3
16
7
11
4
14
13
8
9
17
15
NEW ZEALAND
1.
Copthorne Hotel Auckland City
2.
Copthorne Hotel Auckland Harbourcity
(closed for refurbishment)
3. Copthorne Hotel Grand Central New Plymouth
4.
Copthorne Hotel Wellington Oriental Bay
5.
Copthorne Hotel & Resort Bay of Islands
6. Copthorne Hotel & Resort Hokianga
7. Copthorne Hotel Palmerston North
8.
Copthorne Hotel & Resort Queenstown Lakefront
9.
Copthorne Hotel & Apartments Queenstown
Lakeview
10. Copthorne Hotel Rotorua
11. Copthorne Hotel & Resort Solway Park Wairarapa
12. Kingsgate Hotel Autolodge Paihia
13. Kingsgate Hotel Dunedin
14. Kingsgate Hotel Greymouth
15. Kingsgate Hotel Te Anau
16. Kingsgate Hotel The Avenue Wanganui
17. Millennium Hotel Queenstown
18. Millennium Hotel Rotorua
19. Millennium Hotel & Resort Manuels Taupo
20. Grand Millennium Auckland
GRAND MILLENNIUM AUCKLAND
COPTHORNE HOTEL & RESORT BAY OF ISLANDS
19
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information CORPORATE RESPONSIBILITY
As an international hotel business operating in
over 20 countries, we remain committed to
supporting, protecting and contributing to the
environment and communities in which we
operate.
Corporate responsibility is considered in all
aspects of our business to ensure that
customers, colleagues, the environment, local
communities and all our stakeholders
understand and benefit from what we do. We
work hard to train and develop our colleagues
and as such, they provide a valuable
contribution to the industry. Our hotels support
local charities and community projects and we
actively seek ways to reduce our impact on the
environment in our own operations and
through engaging with our supply chain.
This report reviews our current systems and
performance for the financial year ending
31 December 2016 and highlights actions we
have taken to enhance our sustainability efforts.
Furthermore, no donations were made by the
Group for political purposes during the year
(2015: £nil). Further information is provided in
our ‘Caring for our colleagues’ section below.
Governance
Within our operations, we are fully committed
to meeting the highest standards of
compliance. We adhere to all applicable laws
and regulations, not just the letter of the law
but the spirit of the law.
In this financial year we have received no
material fines or penalties associated with
non-compliance to any law relating to the
environment, human rights violations, labour
standards, anti-corruption or tax.
In addition, we endeavour to report
transparently on tax policy and management,
more information of which can be found in our
Annual Report & Accounts.
Board Responsibility
The Board is responsible for the Group’s
corporate responsibility with the Group Chief
Executive Officer taking the lead. To support
our commitment to sustainability, the Board
supports a number of policies, collectively
referred to as Responsible Hospitality, which
are designed to recognise and manage the
20
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report our suppliers and business partners to align to
the standards set out within the Code. Further
guidance in specific areas is provided through
related global and regional policies and
guidance, such as our Anti-Bribery and
Business Hospitality and Gifts policies, of which
the Board has oversight. As mentioned, these
policies are translated into other languages
where appropriate such as Spanish in the US
and Chinese.
To further embed and raise awareness of key
operational risks, a global online compliance
training platform was launched in 2016, initially
focusing on anti-bribery training, including
money laundering and embezzlement. Our aim
is to expand this online training to include
competition law and data protection.
We have developed a group-wide Anti-Bribery
and Anti-Corruption Compliance Guide which
is available to all employees. This guide
highlights key risks relevant to M&C, such as
risks associated with corporate hospitality and
gifts and with operations in countries where
corruption is perceived to be a high risk. The
guide sets out a number of procedures for
managing these risks, including whistleblower
mechanisms and procedures for risk
assessments for operations or potential
business associates or counterparties.
In the reporting year, we are unaware of any
staff being disciplined or dismissed due to
non-compliance with our Anti-Bribery Policy.
We are committed to respecting the human
rights of our colleagues and others that we
engage with during the course of our business
operations, including customers, suppliers and
business partners. Our human rights policy
reflects our commitment to certain fundamental
human rights principles which are aligned with
those of the International Labour Organisation
and the UN Guiding Principles on Business and
Human Rights including freedom of association
and collective bargaining.
The Group has also adopted a formal slavery
and human trafficking statement which is
available at https://www.millenniumhotels.com/
en/supply-chain-transparency-statement/
Caring for our colleagues
Talent Development
We recognise the need to be able to attract,
develop and retain employees with the
potential, skills and experience necessary for
the continued development of our business.
This is achieved by providing a healthy, safe,
fair and happy working environment.
Diversity
Our employment policies not only comply with all
relevant legislation, but ensure that all areas of
our business embrace diversity and creates an
environment that fosters fairness and equal
opportunity in every aspect. For example, when
recruiting, all applicants are assessed fairly
regardless of race, gender, age, disability, marital
status, sexual orientation or religious belief.
A number of our hotels also help young people
from disadvantaged backgrounds into work by
providing employment skills training and
vocational opportunities, for example our US
hotels introduced paid internships for young
people in Alaska and also has in place a
training programme called Training Today
which helps supervisors to encourage and
support diversity in their work environment.
Our human resources procedures outline how
we conduct risk assessments for new hotels
and existing operations associated with a
range of labour standards and human rights
issues, including diversity and discrimination.
More information on equal opportunity can be
found in the Directors’ Report of our Annual
Report & Accounts.
Learning and Development
All staff are encouraged to gain industry
relevant qualifications where appropriate, both
to strengthen the business through a well-
trained and engaged workforce and to support
personal career development.
We believe that communication with our
employees is a priority and we actively seek
opportunities to engage with them. This can be
through staff outings and shared work
experiences which help to promote team
building and create a better understanding of
the Company.
We continue to have in place our global brand-
defining ‘Outstanding Service Excellence’
employee development training programme
where colleagues are empowered to adapt and
deliver a tailored service to each guest. This
inspiration-based service approach is designed
to engage both colleagues and guests on a
personal level, encouraging a genuine
connection and creating true ‘fans’ of our brand.
For the year ended to 31 December 2016, the
Group employed an average of 10,996 people
worldwide in over 20 countries (2015: 10,870).
Employees by gender
Directors
Senior managers1
Other employees
Male
8
211
5,674
Female
1
119
4,983
Note:
1
This excludes 34 subsidiary directors who were external non-
independent/independent appointments of which 26 were male
and 8 female.
21
Group’s wider impact on the environment and
the communities in which we operate. These
policies are reviewed regularly and are updated
as necessary. They are also translated into
relevant languages where appropriate. A list of
these policies can be found on our website at
https://www.millenniumhotels.com/en/
investors/policies/
Corporate Ethics and Business Conduct
The Group is committed to maintaining the
highest standards of ethics and integrity in the
way we do business. Our Code of Ethics and
Business Conduct (“Code”) sets out our
minimum expectations for all colleagues and
describes our most important legal obligations.
The Code reflects the responsibility we have,
not just to comply with the law, but also to do
the right thing for wider society. We also expect
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Corporate responsibility
continued
The average number of employees employed
by the Group (including the Company’s
Directors) during the year analysed by category
was as follows:
Hotel operating staff
Management/administration
Sales and marketing
Repairs and maintenance
2016
Number
2015
Number
8,397
1,481
468
650
8,399
1,385
466
620
10,996
10,870
A safe working environment
We strive to provide and maintain a safe
environment for all employees, customers and
other visitors to our premises. To ensure their
protection and well-being, our health and
safety functions have comprehensive
processes and procedures in place at all
properties to comply with relevant legislation.
Such measures also support our hotels to
identify hazards, assess risks and implement
appropriate controls to reduce occupational
injuries, accidents and fatalities.
Health and safety is a principal risk and as part
of our risk management, effective training,
supervision and regular communication on
health and safety matters is provided to our
employees. To support this, a comprehensive
schedule of audits, inspections and drills is
carried out both internally and by independent
bodies to check awareness, compliance and
readiness to deal with emergencies.
Our UK region, for example, has published and
launched health and safety management
policies and procedures certified to OHSAS
18001 (externally audited by the British
Standards Institution).
Management continues the process of rolling
out the system across the remaining UK
portfolio which is designed to ensure robust
and comprehensive risk assessment and
recognition across the business. These efforts
are supported by compliance management
software resulting in tighter control of statutory/
mandatory activities, inspections and creation
of audit trails.
Quarterly reports covering health and safety
matters are also presented to the Audit
Committee . These provide statistics on
accidents, incidents and progress in fulfilling
22
targets linked to continuous improvement,
reporting and review of health and safety
matters.
In the reporting year, 26% of our hotels across
the Group were covered by an Environmental
Management System.
Environmental Impact
Energy use
Energy consumption is the most significant
environmental impact of our business and we
continue to drive operational efficiency and
investment in energy efficient plant and
equipment in our hotels.
For instance as a result of the UK Energy
Savings Opportunity Scheme (ESOS)
undertaken in 2015, the recommendations
identified from hotel audits were implemented
across a number of our UK hotels. These
include the ongoing LED replacement
programme, upgrade of boiler equipment at
our Copthorne Gatwick and Effingham Park
hotels, the replacement of 35 chillers across
various sites and the installation of more energy
efficient motors and pumps.
Our energy consumption is shown below:
2016
2015
Absolute
(kWh)
Per room
(kWh)
Absolute
(kWh)
Per room
(kWh)
692,363,841
23,643
685,644,268
23,862
We also participate in various energy saving
initiatives. For example, globally, a number of
our hotels joined millions of people worldwide
in observing Earth Hour 2016 by switching off
unnecessary lights for an hour to raise
awareness of global warming and climate
change.
Recognitions
Our UK business is also
proud to have achieved
Carbon Trust Standard
certification for its
environmental efforts in
achieving a 10.9% reduction
in its carbon emissions over a two-year period
and for showing improvements to internal
governance, management and sustainability
practices.
In recognition of adopting sustainable
practices, a number of our hotels in Singapore
received Green Mark awards, an initiative set
up by the Building and Construction Authority
to encourage environmentally friendly buildings.
Since 2011, we have
been reporting our
emissions
performance annually
to the CDP’s climate change programme
(formerly the Carbon Disclosure Project). As a
result of the Group’s efforts to effectively
manage its climate change risks through
mitigation and adaptation, we were able to
significantly improve on last year’s score and
were shortlisted by the CDP for achieving the
best improvement in climate change score. We
hope to continue to build upon this success
over the coming year.
A number of our hotels have also implemented
an Environmental Management System that is
aligned with the requirements of ISO 14001
which requires each asset has a framework for
identifying and mitigating environmental impact,
as well as having processes for identifying
relevant environmental legislation and ensuring
compliance.
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report Greenhouse Gas Reporting
Details of our total carbon footprint for the
period 1 October 2015 to 30 September 2016
is summarised in the table below. The base
year was set as 2010 which was the first year
the Group reported greenhouse gas emissions.
For this reporting period our carbon footprint
was 362,071 tonnes. Our Scope 1, 2 and 3
emissions, as well as the underlying energy,
refrigerant, waste, water and travel data, have
been externally verified by an independent third
party, Carbon Credentials, in accordance with
ISO 14064-3. A copy of the Verification
Statement can be found at http://www.
millenniumhotels.com/en/investors/corporate-
responsibility.
To calculate our emissions, we have followed
the Greenhouse Gas (“GHG”) Protocol
Corporate Accounting and Reporting Standard
methodology and the operational control
approach to determine what properties are
included within the boundary. Franchise hotels
and investment hotels that are managed by
third party operators have not been included in
the data collation.
Global tonnes of CO2e
2016
2015
2010
Base year
58,783
60,524
73,309
274,498
282,765
235,916
Building on the success of reducing our carbon
footprint since 2010, we have set a target to
reduce our absolute Scope 1 and 2 operational
carbon emissions from energy use and
refrigerant losses by 10% by 2020, based on a
2015 baseline year.
Scope 11
Scope 22
Carbon intensity
(tonnes of CO2e/
room. Includes scope
one, two and three
emission but not travel)
Scope 33
No. of rooms
12.30
28,790
29,284
12.95
31,814
28,734
13.32
19,214
24,658
Total gross emissions
362,0714 375,1034,5
328,439
2
1 Direct emissions from activities owned or controlled by our
organisation that release emissions into the atmosphere.
Indirect emissions that are a consequence of our organisation’s
activities but which occur at sources we do not own or control.
3 Other indirect emissions that are a consequence of our activities
which occur at sources which we do not own or control and
which are not classed as scope 2 emissions.
Includes business travel.
4
5 Restated following external verification.
In the reporting period, absolute emissions
have decreased by 3% despite the opening of
several new hotels. Emissions per unit floor
area have decreased by 25% since the 2010
base year and emissions per room have
decreased by 8% since 2010.
Going forward, we plan to align our emission
reporting period with our financial reporting
year i.e.1 January to 31 December. For
the reporting period 1 January 2016 to
31 December 2016, our carbon footprint was
360,403 tonnes.
Waste and resource use
Increasing waste diverted from landfill remains
a key focus on our sustainability journey. By
sharing best practice and innovative ideas
among our hotels, waste reduction and
recycling initiatives have been spread across
our portfolio.
Our London hotels work closely with our UK
waste contractor to improve the recycle
facilities in the back of house areas and
conference rooms. For example, glass bottles
for drinking water are provided in the guest
rooms and function rooms, thereby eliminating
the use of their plastic counterparts. By
introducing this system, we significantly reduce
the amount of plastic waste that would be
generated as well as reducing the carbon
emissions associated with the production,
transportation and recycling of plastic water
bottles.
Other waste reduction activities implemented
across our hotels include collecting useful
items for donation, such as a number of our
hotels in Asia participated in “Clean the World
Volunteer Day” which supports the recycling of
soap bars and helps to promote hygiene
education.
Relative: Carbon Emissions by Source
kgCO²e/m²
180
170
164
162
13.32
13.28
148
12.66
143
12.28
12.95
132
12.38
129
160
150
140
130
120
110
100
2010
2011
2012
2013
2014
2015
2016
8.0
m² floor area
Room
tCO²e/Room
16.0
Waste data:
Our hotels have reduced the volume of waste
sent to landfill by 10% since 2015 on an
absolute basis and by 12% on a per room
basis.
15.0
14.0
13.0
12.0
12.30
123
11.0
10.0
9.0
2016
2015
Absolute
(tonnes to
landfill)
Per room
(tonnes to
landfill)
Absolute
(tonnes to
landfill)
Per room
(tonnes to
landfill)
14,386
0.49
15,979
0.56
Water
Water is a scarce resource and we recognise
that demand for water is likely to surge further
in the next few decades; we therefore actively
strive and encourage our colleagues to
conserve water usage throughout our
business, particularly where we operate in
water stressed regions.
23
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Wherever practical, we purchase products
made from local renewable and ethically sound
sources. Specific focus is placed on using
suppliers that reduce emissions and air
pollution from food miles and our aim is to use
suppliers with a demonstrable commitment to
sustainable production methods.
To demonstrate our commitment to
sustainable sourcing, one of our major
suppliers in the UK who provides us with a
variety of fresh, cold and frozen foods has
committed to reducing its carbon emissions by
reducing the total distance travelled by its fleet
through the introduction of a new vehicle which
has separate regulated varying temperatures in
each of its storage compartments. This,
combined with the use of the latest driver
performance software and rainwater-harvesting
facilities at their new sites represents a direct
investment in the sustainability of its operations
and in the health of the environment.
Corporate responsibility
continued
Based on the World Resources Institute’s
analysis of future water stress, we identified that
28% of our current operations are in countries
facing extremely high water stress by 2040.
Similarly, the Heritage Hotel Manila, Philippines
joined Philippine Coast Guard Auxiliary
Squadron 116th in a coastal cleanup removing
litter and debris from the Manila Bay Coastline.
We conduct risk assessments regarding water
issues as part of our on-going risk assessment
procedures at our existing hotels.
To further minimise consumption through
inadvertent water use, we seek customer
engagement by encouraging the reuse of
towels. We also have measures in place that
quickly identify leaks and potential problems, in
addition to providing water saving devices in
guestrooms and toilets.
Sourcing responsibly
As a global hotel company that purchases food
and beverage, linens, amenities, beds and
energy, sourcing is a complex and often
decentralised process. Our suppliers extend
beyond 20 countries and span multiple
industries, legal contexts and infrastructure
challenges. We work closely with our suppliers
to ensure that their products and services meet
the demands of our operations and the
expectations of our guests.
We therefore expect our suppliers to
demonstrate effective environmental
management of energy use, greenhouse gas
emissions, water use, waste, pollution,
resource use and biodiversity. We also
question whether suppliers have appropriate
corporate governance arrangements in place
to operate in an ethical and sustainable manner
while encouraging diversity and equal
opportunities throughout their business.
Our selection process for suppliers is stringent
and we request and review information on their
reduction of packaging, environmental policies
and sustainable transport plans prior to
contracts being signed. Since 2013, it has
been our aim to assess all new European
suppliers based on their environmental, labour,
corruption and human rights practices.
Water consumption:
2016
2015
Absolute
(m3 consumed)
Per room (m3
consumed)
Absolute
(m3 consumed)
Per room (m3
consumed)
6,092,639
208
6,099,614
212
Our water consumption data has been
independently verified.
Pollution
Our colleagues are encouraged to contribute
their time and effort to voluntarily participate in
both international and local clean-up activities.
These activities encourage and inspire our
teams and local people to truly make a
difference within their community by collecting
and removing rubbish from local parks, local
beaches, rivers and streets, promoting recycling
and awareness on climate change issues.
Volunteers from the Grand Millennium Dubai
Hotel participated enthusiastically in the ‘Clean
Up UAE’ 2016 campaign, organised by
Emirates Environmental Group (EEG). The
countrywide initiative attracts more than
125,000 people from all over the UAE who give
their time and energy to remove tonnes of
waste from various areas.
24
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report Supporting the community
We are committed to making positive and
lasting impacts on the communities in which
we operate. Our investment in local
communities is fundamental to our business
both from an ethical perspective, but also as
efforts to improve the prosperity and wellbeing
of our local communities will contribute to the
stability of the local tourism industry and
therefore to our resilience as a business.
We actively facilitate employee involvement
with charitable partners, as laid out in our
Group Charity policy. Our colleagues have
embraced this by helping the elderly, homeless,
hospital patients and people with disabilities.
two homes in Durham. This initiative is one of
many community service initiatives the hotel
has planned for this year.
Habitat for Humanity is a global non-profit
Christian housing organisation with a mission
to eliminate poverty housing worldwide by
building simple, decent houses with the help of
the homeowner families themselves and
volunteers.
The McCormick Scottsdale, USA banded
together as a team to help support and give
back to the community. Their recent
undertaking was a clothing drive for the
Salvation Army. The team was able to donate
453.6kg of clothing to the worthy organisation.
Other community projects undertaken by the
hotel include sponsoring a Red Cross Blood
Drive and assisting a therapy dogs organisation
to renovate their office and puppy facility.
Millennium Hotel Sirih Jakarta, Indonesia,
via the Jakarta Rotary Club, donated towels,
blankets, bath mats and clothes to flash flood
victims in Garut, a town in the west province of
Indonesia.
The Group’s operations in London donated
gifts for sick children and older patients for the
Bart’s Charity “Send a Smile with Santa”
campaign.
Millennium Residences Beijing – Organised
an “Annual Autumn Outing” for all staff in
September of which a total of 150 staff
participated.
The General Manager of our Millennium
Corniche Hotel, Abu Dhabi, Mr Nemo
Acimovic, encourages increased engagement
amongst management and his employees.
He recently held a breakfast session where all
management and staff shared a cooking
experience. This commitment to staff wellbeing
leads to positive attitudes and motivation
between management and staff which in turn
reflects positively on guests through
exceptional service, making them want to
return to the hotel again.
Millennium Hotel London Mayfair Executive
Chef, Paul Danabie, an active member of the
Royal Academy of Culinary Arts, raised £5,000
in donations from the generosity of guests for
the Academy’s “Adopt a School” programme.
Below are a few of the initiatives from our hotel
colleagues, who are helping to build a brighter
future in their communities.
Millennium Hotel Cincinnati, USA helped to
raise awareness of bullying in schools by
hosting a luncheon for a group of students
from two local public schools. Games and
activities were played to help foster positive
interaction and promote harmony and
tolerance among the children. The hotel also
provided books for them to choose for their
summer reading.
In another community outreach activity,
JW Marriott Hong Kong took part in the
annual Youth Outreach Flag Day to raise funds
to support the Youth Employment Start-up
Programme which provides young people with
basic working skills and the Crisis Residential
Centre which offers counselling sessions for
those who encounter personal crisis or
domestic violence. The hotel also supports the
All-night Outreaching Team operation, an
organisation which aims to search for youths
who are unwilling to go home and stay out late
by arranging regular midnight duty-tours.
The Heritage Hotel Manila, Philippines
arranged for 30 runners to participate in the
Million Volunteer Run held on 6 February 2016.
The run is organised by the Philippine Red
Cross to raise funds to purchase ambulances,
earthquake rescue trucks, food trucks, shelters
and other lifesaving vehicles and equipment.
Millennium Hotel Durham, USA spent a day
volunteering with Habitat for Humanity to build
Copthorne King’s Hotel, Singapore held a
post Chinese New Year (CNY) Hi-Tea session
for about 110 elderly residents at a home for
the aged in March 2016. The elderly residents
were given CNY Red Packets and entertained
with a singing session by the hotel. Kitchen
staff also prepared a sumptuous buffet spread
for the event.
Although we have made healthy strides within
our responsible hospitality programme, we
recognise that we still have much to improve.
We are working to set targets and action plans
for a cleaner and greener future. Our
colleagues continue to make us proud and we
look forward to continuing this journey in
creating a more socially and responsible
business together.
25
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Our risks
Like any other business, we are subject to a number of risks
and uncertainties, which are influenced by both internal and
external factors, often outside our control. In this section, we
describe the principal risks that could have a material effect
on the Group’s ability to deliver against its strategy together
with the controls and activities in place to mitigate such risks.
Risk factors
We provide information on the nature of each
principal risk. Not all potential risks are listed
below; some risks are excluded because the
Board considers that they are not material to
the Group as a whole. Our processes aim to
provide reasonable, not absolute, assurance
that the risks significant to our business have
been identified and addressed. Additionally,
there may be risks that are not reasonably
foreseeable at the date of this report such that
the Group can assess fully their potential
impact on the business.
The order in which risks are presented below is
not indicative of the relative potential impact on
the Group. The risks may, to varying degrees,
impact the Group’s revenues, profits, net
assets, financial and other resources and
reputation. It is often difficult for management
to assess with accuracy the likely impact of an
event on reputation, as any damage often may
be disproportionate to the event’s actual
financial impact.
Management of risk
In general, the geographical spread of the
Group provides a natural hedge against many
of the principal risks identified on the following
pages. During the year, the Board promoted
and renewed its focus on risk management
through the restructuring of its oversight and
management of risk with the formation of a
dedicated Board Risk Committee. A new
dedicated group management risk committee
also was established with the regional
operational heads and functional heads as
members and led by the Group Chief Executive
Officer, with assistance from the Internal Audit
function as shown in the diagram below. To
support this new structure, recruitment is
underway for a Group Risk Manager who will
take the lead on the Group’s programme of
workshops to review in detail and update risk
registers where necessary and follow up and
support management in measuring and
addressing the identified risks through
appropriate mitigation plans to ensure each risk
falls within the Group’s risk appetite.
Day-to-day management of the Group’s risks
is, and continue to be, owned by the relevant
management team. A member of the executive
management team is assigned responsibility for
devising risk treatment plans to eliminate,
minimise or transfer the relevant risks for which
they are responsible, and they undertake
regular reviews of the risk register and progress
with risk management plans.
The Board Risk Committee met three times
during 2016 and focused on embedding the
new structure, the recruitment of the new
Group Risk Manager and updating the Group’s
risk management framework, shown below.
The Board retains overall responsibility for risk
management and for ensuring that the Group’s
risks are managed appropriately.
Board of Directors
Overall accountability for strategic risk management
Board Risk Committee
Responsible for oversight of the Group’s
Enterprise Risk Management
Audit Committee
Support the oversight & challenge of the effectiveness of the
Group’s financial risk management & mitigating controls with
responsibility for the approval of the Group’s principal risks
Group Management Risk Committee
Group Internal Audit
Operational accountability for management and control
of risks and implementation of mitigation measures
Review of effectiveness of internal controls
26
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report VIABILITY STATEMENT
• In accordance with provision C.2.2 of the UK Corporate Governance Code, the
Directors have carried out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance, solvency
or liquidity. This assessment involved a review of the prospects of the Group over
the three year period to 31 December 2019 taking into account the Group’s strategy
and the Group’s principal risks and how these are managed over this time period, as
detailed above.
• The Directors believe the three year period to be appropriate for the reasons stated
above. The three year plan review is supported by regular Board briefings provided by
management and the discussion of any new initiatives undertaken by the Board in its
normal course of business.
• Based on this assessment, the Directors have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities, as they fall due, over the
period to 31 December 2019.
Viability risk assessment
Material risks are identified through a detailed
bottom up approach as well as a holistic top
down review.
The bottom up review encompasses the
identification, management and monitoring of
risks in each area of the business including the
hotels and ensures that risk management
controls are embedded in the businesses’
operations.
The top down review led by the Board Risk
Committee, supported by management,
evaluates the Group’s operating environment,
as explained above, with a particular focus, in
conjunction with the Audit Committee, on the
cash flows of the Group for the three financial
years ending 31 December 2019.
Such evaluation also includes sensitivity
analysis based on a significant decline in hotel
profit due to a combination of the principal
risks, as set out on pages 28 to 30,
materialising for a sustained period or failing to
renew debt facilities maturing in the period as
they fall due.
Review period
The Directors have assessed the viability of the
Group over a variety of periods. Whilst the
Directors have no reason to believe the Group
will not be viable over a longer period, given the
inherent uncertainty involved, the period over
which the Directors consider it possible to form
a reasonable expectation as to the Group’s
longer-term viability, is the three year period to
31 December 2019. This three-year period has
been selected for several reasons.
• First, the three-year period is in line with
the Group’s rolling strategic and financial
planning. Plans are reviewed by the Board on
an annual basis; and
• Second, the landscape of online competition
has been changing rapidly and is likely to
continue to change further in the foreseeable
future. It would be difficult to form a
reasonable judgment of how the online
marketplace will evolve beyond a period of
three years.
27
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Our risks
continued
Principal Risks and Uncertainties
Risk and Potential Impact
Mitigating Activities
Risk trend year
on year
Reputation and brand protection
Consistent delivery of service and product quality is vitally
important to creating and maintaining brand loyalty and value
perception and influencing consumer preference. Lack of
investment in the Group’s assets or the removal of a significant
number of rooms from inventory in order to complete needed
refurbishment programmes could have a significant impact on
those factors and therefore on the revenues that hotels are
able to achieve. As supply increases, particularly in our key
gateway cities, business may be lost to newer hotels and/or
rates may have to be reduced to remain competitive.
In addition, management of third-party owned hotels under
management agreements, particularly in the Middle East and
China regions, and the use of joint ventures in the Middle East
and other markets gives rise to the risk of non-performance on
the part of the hotel owners and joint venture partners, and the
ability of the relevant hotels to deliver service and product
quality to Group brand and operating standards, especially
when the strategic objectives of those parties are not fully
aligned with those of the Group
Future growth and pricing power and the image and
reputation of the Group in general will, in part, be dependent
on the recognition of the Group’s brands and perception of
the values inherent in those brands. The ability of the group to
protect its intellectual property rights in those brands is
instrumental in preventing them from deteriorating in value.
In addition, the proliferation of e-commerce and online sales
channels, whether through affiliates, online travel agencies,
meta search websites or otherwise, can give rise to brand
confusion and further dilution if the Group’s intellectual
property is not used appropriately and in accordance with the
Group’s brand and marketing standards.
The hotel industry operates within an inherently cyclical
marketplace where competition, both online and offline, is
increasing. An increase in market room supply, without
corresponding increases in demand, may lead to downward
pressure on rates, which in turn could negatively impact the
Group’s performance.
With regard to online competition, the Group’s hotel rooms
are booked through a number of distribution channels, one of
which is the online travel agency (“OTA”). OTAs tend to have
higher commission rates than more traditional distribution
channels and are taking an increasing share of bookings
across the sector. Over time, consumers may develop loyalties
to the OTAs rather than to our brands. These trends may
impact our profitability. In addition, sharing economy
platforms, such as Airbnb, may expand their market share and
compete with more traditional business and leisure
accommodations.
• Generally the Group operates properties which it owns,
and therefore is able to exercise control over the service
and product quality of those hotels.
• For those hotels we own but do not operate, such as
the Novotel New York Times Square, the Group asset
manages those properties to ensure compliance with its
service levels and contractual requirements.
• The Group continues to develop property specific
asset management plans which focus on the capital
requirements of each property in terms of regular
maintenance and product enhancement to help ensure
the products remain competitive. Refurbishments are
phased appropriately in order to minimise the impact of
those programmes on operations, to the extent possible.
• The Group currently endeavours to reinvest one-third of its
EBITDA into its hotel estate.
• The Group has in place brand and operating standards,
and regularly refreshes those, to provide for consistent
service delivery and product quality among its hotels, even
if they are owned by third parties and/or operated through
joint ventures.
• Management representatives are assigned to manage the
relationships with joint venture partners and third party
hotel owners.
• In 2015 the Group allocated its hotels and brands into
distinct collections and updated its brand and marketing
standards to enhance and clarify its brand portfolio.
• Substantial investment continues to be made in protecting
the Group’s brands from misuse and infringement, by
way of trade mark registration, enforcement of intellectual
property rights and domain name protection. The Group
utilises third party online brand monitoring and protection
agencies to assist with the Group’s enforcement activities.
• The Group’s flexible financial control and revenue
management systems help it to control costs and achieve
better yields in volatile trading conditions.
• The Group continues to refresh its digital marketing
strategy and invest in its e-commerce, customer
relationship management, revenue management and
reservations systems in order to help increase rates, retain
existing customers and generate new business.
• Since 2014, a new advanced central reservations
system has been in place providing a platform for future
enhancements. Additionally, the Group’s website and
loyalty programme are in the process of being upgraded
to help improve brand recognition and drive more
bookings through the Group’s own, less costly distribution
channels.
Quality of service delivery
and product
Intellectual property rights
and brands
Increasing competition
28
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report Risk and Potential Impact
Mitigating Activities
Risk trend year
on year
Talent management and succession
Financial
Execution of the Group’s strategy depends on its ability to
attract, develop and retain employees with the appropriate
skills, experience and aptitude. This becomes more difficult as
world travel becomes more prevalent and competition in the
hospitality industry increases.
Failure of the Group to properly plan for the succession of key
management roles may cause operational disruption,
potentially delaying the execution of the Group’s strategies
and increasing costs and inefficiencies.
• The Group has a strong service culture supported by
performance management and recognition systems,
compensation and benefits arrangements, and training
and development programmes. Labour relations are
actively managed on a regional and local basis.
• During 2016 the Group, implemented changes to its
below Board level executive compensation to enhance
employee engagement and performance.
The Group operates in numerous jurisdictions and trades in
various international currencies, but reports its financial results
in pounds sterling. Fluctuations in currency exchange rates
and interest rates may either be accretive or dilutive to the
Group’s reported trading results and net asset value.
Unhedged interest rate exposures pose a risk to the Group
when interest rates rise, resulting in increased costs of funding
and an impact on overall financial performance.
• The Group’s internal Treasury Management Committee
monitors and addresses treasury matters, including
investment and counterparty risks, in accordance with the
Group’s treasury policy. The Board and Audit Committee
receive regular updates on treasury matters.
• Foreign exchange exposure is primarily managed through
the funding of purchases and repayment of borrowings
from income generated in the same currency.
• Interest rate hedges are only used to manage interest rate
risk to the extent the perceived costs are considered to
outweigh the benefits of having flexible, variable-rate debt.
Compliance and corporate responsibility
Legal and regulatory
compliance
Health and safety and social
responsibility
The Group operates in many jurisdictions and is exposed to
the risk of non-compliance with increasingly complex statutory
and regulatory requirements, including competition law,
anti-bribery and corruption and data privacy compliance
regimes. Non-compliance with such regulations, which differ
by jurisdiction and are an area of increasing focus by
regulators, could result in fines and/or other damages,
including reputational damage, being incurred, particularly in
the event a data breach should occur.
In addition, the Group may be at risk of litigation from various
parties with which it interacts, either through direct contractual
arrangements or as a result of providing services to
customers. Significant costs could be incurred where claims
are not insured or are not fully insured, and litigation could give
rise to reputational damage being suffered and management
distraction.
In certain countries where the Group operates, particularly in
emerging markets, local practices and the legal environment
may be such that enforcement of the Group’s legal rights is
challenging.
The Group is exposed to a wide range of regulatory
requirements and obligations concerning the health and safety
of employees, visitors and guests. Failure to implement and
maintain sufficient controls regarding health and safety issues
could expose the Group to significant sanctions, both civil and
criminal, financial penalties and reputational damage.
Furthermore, as a significant property owner and operator of
hotels in multiple jurisdictions, the Group must do more than
simply comply with local regulations. We must act in a
responsible way towards our stakeholders and the
communities in which our hotels operate.
• The Group continues to monitor changes in the regulatory
environments in which it operates, identify its compliance
obligations and implement appropriate compliance and
training programmes. The Group has comprehensive
global and, where applicable, regional policies and
procedures in place to address competition law, data
privacy, ethical business conduct, whistle-blowing, anti-
corruption and bribery, gifts and hospitality and charitable
donations, among others.
• The Group maintains in place industry standard insurance
cover to mitigate many potential litigation risks, such as
employment practices liability, workers compensation and
general liability policies.
• The Group has controls in place to manage and help
mitigate the risks associated with its various contractual
relationships, from execution through to termination,
insured and uninsured litigation and other disputes.
Regular litigation reports are provided to the Board.
• The Group has established and maintains health and
safety and environmental management systems which it
seeks to align with the requirements of ISO 14001 and
OHSAS 18001. By using these standards the Group is
committed to working to the highest standards of health
and safety and to an internationally accredited system.
• The Group has adopted various corporate responsibility
initiatives in relation to its employees, guests and the
environment. The Group’s operating regions have flexibility
to tailor such initiatives and adopt new ones to better
conform to local and regional customs and practices.
29
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Our risks
continued
Risk and Potential Impact
Mitigating Activities
Risk trend year
on year
Vulnerability to cyber attacks or fraud
Increasing reliance on online distribution channels and
transactions over the internet and the aggregation and storage
of guest and other information electronically, both on
company-controlled servers and networks and in cloud-based
environments, present heightened risks of attacks affecting the
operation of those systems and networks and/or a potential
loss or misuse of confidential or proprietary information. The
occurrence of cyber risks could disrupt business, the ability of
the Group to take or fulfil bookings or lead to reputational and
monetary damages, litigation or regulatory fines.
In addition, various aspects of the Group’s operations are
required to achieve compliance with the payment card
industry data security standards (“PCI-DSS”), and failure to do
so could result in penalties and/or withdrawal of credit card
payment facilities.
• Periodically the Group engages external consultancy
firms to conduct security and penetration testing services
in relation to the Group’s websites and implements
enhancements where necessary. Also, as part of the
Group’s PCI-DSS compliance activities, all regions
conduct additional internal and external penetration
testing annually as required.
• The Company has in place, and regularly reviews, cyber
insurance coverage to protect against certain cyber risks.
• Software systems are regularly updated to allow for the
latest security updates and patches to be installed.
• Where the Group outsources critical information
technology systems, including its point of sale and property
management systems, the Group utilises reputable
suppliers that have industry-standard or best-in-class
data security protocols. The Group’s hotels utilise Oracle’s
MICROS property management system, for example.
• The regional information technology teams have
developed disaster recovery plans and guides with regard
to their high-priority systems that need to be up-and-
running, and tests are conducted on select mission-critical
systems annually to verify their recoverability offsite.
• Information technology policies and procedures have been
updated to reflect implementation of the latest PCI-DSS
compliance standards.
Natural, geopolitical and economic events
Sustained levels of occupancy and the Group’s ability to
optimise room rates and profitability can be adversely affected
by various external events that may reduce travel or increase
the Group’s operating costs.
• The Group has in place disaster recovery, crisis response
and business continuity plans to enable it to respond to
major incidents or emergencies.
• Management pro-actively monitors geopolitical
Such events, which often are beyond the control of
management, may be localised to a particular community, city
or country or they may have a wider international impact.
Examples of such events include severe weather conditions
and natural disasters, acts of terrorism, war or perceived risk
of armed conflict, epidemics, nationalisation of assets or
restrictions on the repatriation of funds, increased travel costs,
industrial action and political and/or social unrest. Notably the
UK referendum on EU membership and while we have not
seen any immediate or material impacts from that decision
aside from significant exchange rate fluctuations, we recognise
that the coming years will be challenging in the UK and are
monitoring political and macro-economic developments
closely. Appropriate insurance coverage may not be available
in the market in some instances or coverage may not be
available on commercially viable terms.
developments and seeks to identify emerging risks at the
earliest opportunity and implements ownership structures,
internal controls and other steps to minimise these
exposures to the greatest extent possible.
• The Group’s flexible financial and revenue management
systems help it to control costs and achieve better yields
in volatile trading conditions.
• The Group’s insurance requirements are regularly reviewed
by management to ensure that the coverages obtained
are appropriate to the company’s risk profile relative to the
cost of cover available in the relevant markets.
• The wide geographic spread of the Group’s properties is
a natural hedge against the impact of natural, geopolitical
and economic events.
Approval of Strategic Report
The Strategic Report comprises the following sections: Chairman’s statement, Business review and strategy, Key performance indicators,
Financial performance and regional performances, Corporate responsibility (which incorporates information relating to greenhouse gas
emissions required to be included in the Directors’ report) and Our risks sections. The Strategic Report was approved by the Board and
has been signed on its behalf by:
Aloysius Lee
Group Chief Executive Officer
16 February 2017
30
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic Report HARD DAYS NIGHT HOTEL LIVERPOOL
31
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016 For more information online at:
millenniumhotels.com
32
THE CHELSEA HARBOUR HOTEL
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceGOVERNANCE 33
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance34 Board of Directors36 Directors’ report40 Corporate governance statement45 Audit Committee report48 Directors’ remuneration report65 Nominations Committee report67 Statement of Directors’ responsibilities68 Independent auditors’ reportStrategic ReportGovernanceFinancial statementsFurther information Board of Directors
as at 31 December 2016
1
2
3
4
5
1 Kwek Leng BengN
Chairman of the Board and Chairman of the Nominations
Committee
Kwek Leng Beng has been the Chairman of Millennium & Copthorne
Hotels plc since its incorporation. He is also the executive chairman of
City Developments Limited and chairman and managing director of
Hong Leong Finance Limited. He is currently the non-executive
chairman of Hong Leong Asia Limited but will be stepping down as its
chairman and as a director at its upcoming annual general meeting in
April 2017. Mr Kwek was also the chairman and managing director of
City e-Solutions Limited until he stepped down in September 2016
after it ceased to be a subsidiary of City Developments Limited.
Mr Kwek holds an honorary doctorate in Business Administration
in Hospitality from Johnson & Wales University in the US and an
honorary doctorate from Oxford Brookes University in the UK. He
also serves as a member of the INSEAD East Asia Council.
Kwek Leng Beng has distinguished himself in property
investment and development, hotel ownership and management,
financial services and industrial enterprises. He leads a business
empire worth over US$32b in diversified premium assets worldwide
and comprising companies traded on six of the world’s stock
markets. Mr Kwek heads a worldwide staff of over 40,000 across a
range of businesses in Asia-Pacific, the Middle East, Europe and
North America.
2 Aloysius Lee Tse SangRc
Group Chief Executive Officer
Aloysius Lee Tse Sang was appointed to the Board and as Group
Chief Executive Officer on 1 March 2015. He is a non-executive
director of Millennium & Copthorne Hotels New Zealand and CDL
Investments New Zealand Limited, both of which are listed on the
New Zealand stock exchange, having been appointed on 1 April
2015, and he was appointed as a non executive director of First
Sponsor Group Limited, which is listed on the Singapore Exchange,
on 2 April 2015. Mr Lee serves as president and chairman of the
board of Grand Plaza Hotel Corporation, which is listed in the
Philippines, after his appointment on 15 May 2015.
Mr Lee was previously the Chief Executive Officer of South
Beach Consortium Pte Ltd., a joint venture established by City
Developments Limited and other parties to create a mixed-use real
estate development in Singapore. Prior to that, Mr Lee held senior
leadership positions at Shui On Land, Hong Kong Telecom, Star
Cruises and Singapore Airlines. He is a fellow of both the Chartered
Management Institute and the Chartered Institute of Marketing, and
earned a masters degree in business administration from the
University of Hong Kong. He also holds management qualifications
from Harvard University and the University of Hawaii.
JP Morgan Securities (previously Jardine Fleming) in Asia from 1993
to 2002 and a managing director of HSBC Securities in Asia from
2002 to 2003.
3 Nicholas GeorgeANRRc
Senior Independent Director
Nicholas George was appointed to the Board in June 2009. A
chartered accountant by profession, Mr George sits on the board of
G. K. Goh Holdings Limited a company listed in Singapore and
Henderson Far East Income Limited which is listed on the London
Stock Exchange. He also sits on the boards of euNetworks Group
Limited and Nutmeg Savings and Investments Limited.
Mr George was a founding partner of KGR Capital Management
Limited, a leading Asian funds of hedge funds, that was sold to LGT
Capital Partners (UK) Limited in 2008. He has over 30 years of
experience in investment banking and was a managing director of
4 Kwek Eik ShengRc
Non-Executive Director
Kwek Eik Sheng was appointed to the Board in April 2008. He has
been with the Hong Leong Group of companies in Singapore since
2006 and joined City Developments Limited in 2009, where he
currently serves as the Chief Strategy Officer and Head, Asset
Management.
Mr Kwek holds a Bachelor of Engineering in Electrical and
Electronics Engineering from Imperial College of Science,
Technology and Medicine and a MPhil in Finance from Judge
Business School, Cambridge University.
5 Kwek Leng PeckNRc
Non-Executive Director and Chairman of the Risk
Committee
Kwek Leng Peck was appointed to the Board in February 1995,
prior to the flotation of the Company on the London Stock
Exchange. He holds directorships on most of the listed companies
within the Hong Leong Group of companies in Singapore, including
City Developments Limited, Hong Leong Finance Limited and China
Yuchai International Limited. He also serves as an executive director
for Hong Leong Asia Limited and is the non-executive chairman of
Tasek Corporation Berhad.
34
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance 6
7
8
9
Committee membership:
A - Audit Committee
N - Nominations Committee
R - Remuneration Committee
Rc - Risk Committee
6 His Excellency Shaukat Aziz NR
Independent Non-Executive Director
Shaukat Aziz was appointed to the Board in June 2009. He was
elected as Prime Minister of Pakistan and served between 2004 and
2007, having previously held the post of Finance Minister for five
years.
banking for Central Eastern Europe, the Middle East and Africa and
later for Asia Pacific, followed by Chief Executive of Citibank’s global
wealth management business. A renowned public speaker on
economic and geopolitical affairs, Mr Aziz is a member of several
boards of directors and the advisory boards of various commercial
and non-profit entities around the world.
After graduating from Gordon College, Rawalpindi in 1967, Mr
Aziz earned a masters of business administration degree from the
Institute of Business Administration, University of Karachi. An
internship at Citibank marked the beginning of a 30 year career in
global finance.
As an Executive Vice President, he held several senior
management positions in Citibank, including head of institutional
7 Daniel Desbaillets
Independent Non-Executive Director
Daniel Desbaillets was appointed to the Board in September 2016.
Prior to his appointment Mr Desbaillets was an Independent
Non-Executive Director of M&C REIT Management Limited, the
manager for CDL Hospitality Real Estate Investment Trust
(“H-REIT”), and also of M&C Business Trust Management Limited,
the trustee-manager for CDL Hospitality Business Trust (“HBT”). He
resigned as from September 2016. Both H-REIT and HBT are
comprised as a stapled group in CDL Hospitality Trusts (“CDLHT”)
which is listed on the Singapore Exchange Securities Trading
Limited.
8 Susan FarrANR
Independent Non-Executive Director
Susan Farr was appointed to the Board in December 2013. She was
a business director of Chime Communication Limited (formerly Chime
Communication plc) from 2003 until 2015 and serves as a special
adviser on a part time basis. She also serves as a non-executive
director of British American Tobacco p.l.c., Dairy Crest plc, Accsys
Technologies plc and Dolphin Capital Investors Limited. A specialist
in business development and marketing, Ms Farr previously held a
number of senior management positions at Vauxhall Motors, the
BBC and Thames Television. She is also the former chair of The
Marketing Society and the Marketing Group of Great Britain.
9 Gervase MacGregorARRc
Independent Non-Executive Director and
Chairman of the Audit Committee
Gervase MacGregor was appointed to the Board in December
2014. He has been a partner of BDO LLP since 1991, where
he is currently the head of international advisory, risk and quality
services, specialising in forensic investigations and expert
witness services.
Prior to joining BDO LLP, Mr MacGregor worked as a
petroleum geologist in the North Sea, Australia and West Africa.
He has experience in the hospitality sector over the last 25
Mr Desbaillets has extensive hospitality experience. He has been
in the hospitality industry since 1973 holding senior positions with
InterContinental Hotel Group, Hilton and Shangri-La. He was
appointed to the boards of CDLHT as an Independent Non-
Executive Director in July 2010.
years, first as an auditor of international five star hotels and
more recently with investigations and disputes in the sector.
Gervase MacGregor is a fellow of the Institute of Chartered
Accountants in England and Wales and a graduate of the
University of Liverpool and he has a masters degree from HEC
in Paris.
10
10 Alexander WaughANR
Independent Non-Executive Director and
Chairman of the Remuneration Committee
Alexander Waugh was appointed to the Board in June 2009.
Mr Waugh has commercial experience in event management,
the media industry and is the founder of a successful publishing
business. Mr Waugh is also a well-known author, literary critic
and composer. He is Honorary President of the Shakespeare
Authorship Coalition and Senior Visiting Fellow at the University
of Leicester.
35
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ report
Introduction
The Directors submit their report for the
financial year ended 31 December 2016.
This report includes information required to be
disclosed under the Companies Act 2006 (the
“Act”), the UK Corporate Governance Code
(the “Code”), the Disclosure and Transparency
Rules and the Listing Rules. Certain information
required to be included in this report is set out
in other sections of the Annual Report, which
are cross-referenced and incorporated herein.
In particular, the Corporate Governance
Statement on pages 40 to 44 and the
Directors’ remuneration report on pages 48 to
64 form part of this report.
Disclosure
Section
Pages
Viability statement
Strategic Report
Future developments
Strategic Report
Greenhouse gas
emissions
Corporate
Responsibility
27
7
23
Financial instruments
Internal controls
Note 22 to the financial
statements
108
Corporate Governance
Statement
46
Charitable activities
Corporate
Responsibility
Policy on payment for
loss of office
Directors’
Remuneration Report
25
54
Changes to share
capital
Note 29 to the financial
statements
126
Going concern
disclosure
Note 3 to the financial
statements
90
Strategic Report
This report is found on pages 4 to 30, and
certain information required to be disclosed in
this report has been included within the Strategic
Report as noted above. The strategic report
prepared by the Directors is required by the Act
to provide a fair review of the Company’s
business, including an analysis of the
development and performance of the
Company’s business during the year and
position of its business at the end of the year
and a description of the Company’s strategy and
business model.
Board of Directors
The names and biographical details of the
Directors holding office as at 31 December
36
2016 – including identification of the Chairman,
Senior Independent Director, the other
Directors who are considered by the Board to
be independent and the chairs of the Board’s
standing committees – are shown on pages 34
to 35.
Except for Daniel Desbaillets who was
appointed as an Independent Non-Executive
Director with effect from 14 September 2016,
all Directors served on the Board during the
entire year.
Director shareholding
Details of the Directors’ shareholdings at the
year-end are shown on page 59. No changes
to these shareholdings have occurred between
31 December 2016 and the date of this report.
Appointment and removal of Directors
A Director may be appointed to fill a casual
vacancy or as an additional Director by an
ordinary resolution of shareholders. In addition,
the Directors may appoint a Director to fill a
casual vacancy or as an additional Director,
provided that the individual retires at the next
annual general meeting.
In line with the Code, which provides that all
directors of FTSE 350 companies should stand
for election or re-election by shareholders every
year, all current members of the Board, with
the exception of Alexander Waugh, Aloysius
Lee and Nicholas George, will retire and seek
election or re-election at this year’s annual
general meeting. Howard Wu who will join the
Board on 17 February will also retire and seek
election. The eligibility requirements for
directors to be appointed at a general meeting
are specified in the Company’s Articles of
Association.
A Director may be removed by the Company in
certain circumstances as set out in the
Company’s Articles of Association or the
Director’s appointment agreement, including
by an ordinary resolution of the Company,
upon being given written notice to resign
signed by all of the other Directors or in the
event the Director becomes prohibited by law
from acting as a Director.
Results and dividends
The results of the Group for the year ended
31 December 2016 are set out on pages 74 to
138.
An interim dividend for the year ended
31 December 2016 of 2.08p per share was
paid on 30 September 2016. The Directors are
recommending a final dividend of 5.66p per
share (2015: 4.34p), which, if approved at the
annual general meeting in May 2017, will be
paid on 12 May 2017 to shareholders on the
register on 17 March 2017.
Political donations and expenditure
No donations were made by the Group for
political purposes and the Group did not incur
any political expenditure during the year (2015:
£nil). The Company operates a politically
neutral policy with regard to political donations
and expenditure. See the Corporate
Responsibility review on page 20 for details of
the Company’s non-political charitable
activities.
Financial instruments
An indication of the Group’s financial risk
management objectives and policies in respect
of the use of financial instruments and
exposure of the Company to price risk, credit
risk, liquidity risk and cash flow risk are set out
in Note 22 to the consolidated financial
statements.
Greenhouse gas emissions
All disclosures concerning the Group’s
greenhouse gas emissions can be found in the
Corporate Responsibility review on pages 22 to
24.
Employee involvement and disabled
persons
We value highly the rich ethnic and cultural
diversity of our people. The Group operates in
over 20 countries and employs over 10,500
employees worldwide. We are an equal
opportunities employer and our objective is to
ensure that no employee or other worker or job
applicant receives less favourable treatment,
directly or indirectly, on the grounds of age,
disability, gender reassignment, marital or civil
partner status, pregnancy or maternity, race,
colour, nationality, ethnic or national origin,
religion or belief, sex or sexual orientation.
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Further, our policies encourage the
employment, training and advancement of
disabled persons, having regard to their
particular aptitudes and abilities, provided that
they can be employed in a safe working
environment. Suitable employment would, if
possible, be found for any employee who
becomes disabled during the course of
employment.
The Group values the engagement of its
employees and endeavours to keep employees
informed about matters of concern to them
and the performance of the Company, whether
through management presentations, regional
intranet sites and other communications.
Likewise, the Group seeks to consult with
employees on a regular basis so that their
views can be taken into account. The Group
operates an HM Revenue & Customs approved
Save as You Earn Scheme in the UK, a long
term incentive plan, executive share plan and
deferred share bonus plan for certain levels of
executives globally. The primary aims of these
plans are to incentivise and engage our
employees and align their interests with the
Group’s performance. Further details on
employee benefits are set out in Note 23 to the
consolidated financial statements.
Future developments
The Group’s strategy and business model
including proposed future developments can
be found in the Strategic Report on pages 4 to
30.
Research and development
Whilst we continue to review ways to improve
our service and product offering, the Group did
not conduct significant research and
development activities during the year.
Branches
The Company did not have any branches
outside the UK during the year.
Going concern
The Directors continue to adopt a going
concern basis in preparing the financial
statements of the Company and Group.
Information on the going concern assessment
is included on page 90, within Note 3 to the
Group financial statements.
Amendment to the Company’s Articles of
Association
The Company’s Articles of Association may
only be amended by special resolution of its
shareholders in accordance with the Act.
Significant agreements
There are no significant agreements to which
the Company is a party that take effect, are
altered or terminate upon a change of control
of the Company following a takeover bid.
However, as mentioned in the “Payment for
loss of office” section in this report, the
Company’s share plans include change of
control provisions.
Share capital and related matters
The Company’s issued share capital at
31 December 2016 consisted of 324,735,565
fully paid ordinary shares of 30 pence each.
The shares are traded on the Main Market of
the London Stock Exchange. During 2016,
5,264 new shares were issued under employee
share plans. Further details of the changes to
the ordinary issued share capital during the
year are shown in Note 29 to the Company’s
financial statements.
Rights attaching to shares
Rights and obligations attaching to the
Company’s ordinary shares are set out in the
Company’s Articles of Association, a copy of
which can be obtained from Companies House
or from the Company’s investor relations
website at www.millenniumhotels.com/en/
investors/corporate-governance. Each ordinary
share in the capital of the Company ranks
equally in all respects.
The voting rights attached to the Company’s
ordinary shares are not restricted and there are
no restrictions on the transfer of the
Company’s shares aside from certain
restrictions which may from time to time be
imposed by laws and regulations, such as
insider dealing laws. In addition, pursuant to
the Company’s share dealing code, the
Company’s Directors and persons discharging
managerial responsibility are required to seek
approval to deal in the Company’s shares.
None of the Company’s shares carry special
rights with regard to control of the Company.
Neither the Company’s management nor its
Directors are aware of any agreements
between shareholders that could result in
restrictions on the transfer of shares or voting
rights.
Employee share schemes
The Company has in place a discretionary
employee benefit trust (“EBT”), the Millennium
& Copthorne Hotels plc Employee Benefit Trust
2006, which is funded by loans or gifts in order
to acquire shares for the potential benefit of
employees. Details of shares held by the EBT
at 31 December 2016 are set out on page 127.
During 2016, 3,514 shares were allocated from
the EBT in respect of share schemes for
employees. The trustee of the EBT has the
power to exercise all voting rights in relation to
the Company’s shares held within the EBT, but
abstains from voting.
Payment for loss of office
The Company does not have agreements with
any Director or employee that would provide
compensation for loss of office or employment
resulting from a takeover bid. However, all of
the Company’s employee share plans contain
provisions relating to a change of control
pursuant to a general offer, scheme of
arrangement or similar event. On such a
change of control, options and awards granted
to employees under the Company’s share
plans may vest and become exercisable,
subject to the satisfaction of any applicable
performance conditions at that time.
37
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information No claim was made under any such indemnity
or insurance policy during the year.
Annual general meeting
The 2017 annual general meeting will be held
at the Millennium Hotel London Knightsbridge,
17 Sloane St, Knightsbridge, London SW1X
9NU on 5 May 2017 at 10.00am. The
Chairman’s letter and the Notice of Meeting
along with this report, with notes explaining the
business to be transacted at the meeting, will
be sent to shareholders.
At the meeting, resolutions will be proposed to,
among other things, declare a final dividend, to
receive the Annual Report and Accounts, to
approve the Directors’ remuneration report, to
re-elect all current Directors with the exception
of Alexander Waugh, Aloysius Lee and
Nicholas George and also elect Howard Wu, to
re-appoint KPMG LLP as auditors, and to
authorise the Directors to approve their fees.
Howard Wu’s biography will be available on the
website with effect from 17 February 2017 and
included in the Notice of Meeting. In addition,
shareholders will be asked to renew both the
general authority of the Directors to issue
shares and to authorise the Directors to issue
shares without applying the statutory pre-
emption rights. In this regard, the Company will
continue to adhere to the provisions in the
Pre-Emption Group’s Statement of Principles.
Directors’ report
continued
Further details about payments to be made to
Directors for loss of office can be found in the
Directors’ remuneration report on page 54.
Power of Directors
The Directors may exercise all the Company’s
powers that are not required by the law or the
Company’s Articles of Association to be
exercised in a general meeting. In particular,
the Directors may exercise all the powers of the
Company to borrow money, issue shares,
appoint and remove directors and recommend
and declare dividends.
At the Company’s annual general meeting in
May 2016 and in accordance with the
Company’s Articles of Association, the
Directors were authorised to allot new shares
pursuant to Section 551 of the Act up to a total
nominal amount of £32,473,243 and to
disapply the pre-emption provisions contained
in the Act in order to allot shares for cash up to
a nominal value of £4,870,986. In addition, the
Directors were authorised to make market
purchases of up to 10% of the Company’s
issued share capital. All of these authorities
remained in effect as at 31 December 2016
and shareholders will be asked to renew them
at the annual general meeting in 2017.
The Co-Operation Agreement between the
Company and City Developments Limited
(“CDL”), the Company’s controlling
Shareholder, contains a provision that requires
the Company to use all reasonable endeavours
to ensure that any issue of voting securities for
cash (other than pursuant to an employee or
executive share option scheme) which takes
place while the Company is on the Official List
of the London Stock Exchange, is carried out
in a manner that provides CDL with an
opportunity to acquire additional ordinary
shares at the time of such proposed issue for
cash in such amounts as are necessary to
enable it to maintain its voting rights in the
Company at the same percentage level as is
held immediately prior to such issue. These
pre-emption rights are put to a vote of
shareholders each year and most recently were
approved at the Company’s annual general
meeting in May 2016.
38
Controlling shareholder independence
disclosure
As of the date of this report, CDL is the
controlling shareholder of the Company. As
required under Listing Rule 9.2.2AR(2), the
Company and CDL have entered into the
Amended and Restated Co-operation
Agreement dated 14 November 2014 (the
“Co-Operation Agreement”), which is intended
to ensure that the Company’s controlling
shareholder complies with the independence
provisions set out in Listing Rules. The Co-
Operation Agreement allows CDL to appoint
up to five Directors to the Board. As at the date
of this report, CDL has appointed three
Directors.
The Company confirms that during the year it
has complied with the independence provisions
included within the Co-Operation Agreement
and, in so far as it is aware, CDL has complied
with such provisions as well.
Directors’ indemnities
The Articles of Association of the Company
permit it to indemnify the Directors of the
Company or any Group company against
liabilities incurred by them in relation to or in
connection with their duties, powers or office,
to the extent permitted by law. The Company
has provided each of its Directors with a
qualifying third-party indemnity, as defined in
section 234 of the Act. In addition, the
Company has provided qualifying pension
scheme indemnities to the directors of
Millennium & Copthorne Pension Trustee
Limited, which acts as trustee of the Group’s
UK pension plan, and qualifying third-party
indemnities to the directors of its European
subsidiary companies. The indemnities do not
apply in the event the relevant Director is
proved to have committed a criminal offence or
otherwise where indemnification is prohibited
by law. These indemnities remain in force as at
the date of this report.
In 2016, the Company purchased and
maintained Directors’ and Officers’ liability
insurance, which coverage has been renewed
for the current year.
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Essential contracts
The Group has contractual and other
arrangements with numerous third parties in
support of its business activities. Whilst the
termination of some of these contracts might
cause temporary disruption, none of the
arrangements are, individually, considered to
be essential to the Group’s business.
Re-appointment of auditor
KPMG LLP has expressed their willingness to
be reappointed as auditor of the Company.
Upon the recommendation of the Audit
Committee, resolutions to reappoint them as
auditor and to authorise the Directors to
determine their remuneration will be proposed
at the 2017 annual general meeting.
Statement of the Directors as to
disclosure of information to the auditor
Each Director who held office as at the date of
approval of this Directors’ report confirms that,
so far as he or she is aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and the
Director has taken all the steps that he or she
ought to have taken in order to make himself or
herself aware of any relevant audit information
and to establish that the Company’s auditor is
aware of that information.
Approval of Directors’ report
The Directors’ Report and Corporate
Governance Statement were approved by the
Board on 16 February 2017.
Significant holdings
As at the date of this report, the Company had
received formal notification, under the
Disclosure and Transparency Rules, of the
following significant holdings in its shares (the
percentages shown are the percentages at the
time of the disclosure and have not been
re-calculated based on the issued share capital
as at the date of the report).
By order of the Board
Jonathon Grech
Company Secretary
16 February 2017
Significant shareholder
# of ordinary
shares
Notified
Interest (%) Nature of holding
City Developments Limited
210,854,593
64.9
Indirect holding through various subsidiaries
International Value Advisers, LLC
19,490,496
6.0
Investment advisor
Aberdeen Asset Managers Limited
16,057,259
4.9 Discretionary investment manager on behalf of
multiple managed portfolios
39
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Corporate governance statement
We formed a new Risk Committee of the Board
with effect from 1 April 2016 to help the Group
establish a stronger risk management
framework. That Committee currently is chaired
by Mr Kwek Leng Peck and its other members
include Aloysius Lee, Nicholas George,
Gervase MacGregor and Kwek Eik Sheng.
As announced in August 2016, following a
recommendation from our Board evaluation,
we appointed a new Director, Daniel
Desbaillets, to the Board with effect from 14
September 2016 in an effort to increase the
hospitality experience on the Board. With a
background in hotels spanning over 40 years,
we are pleased that Daniel has joined us and
look forward to his continuing contribution in
2017 and beyond.
Further to the retirement of Aloysius Lee at the
end of February 2017 and Alexander Waugh
and Nicholas George not seeking re-election at
the 2017 AGM, the Nominations Committee
has been reviewing CEO and Board
succession and further details can be found in
the Nominations Committee report on page 65.
In light of this activity, I would like to take a
moment to thank the Directors for their time
and their commitment to helping the Group to
grow while effectively managing its risks.
Achieving a balance between these two
objectives is not easy.
In 2017 I will work with the Board to ensure
that we continue to focus on the challenges we
face, both internal and external, and that the
Board and Group have the proper mix of talent
and resources to allow it to execute its strategy
and develop the business over the coming
years.
Kwek Leng Beng
Chairman
16 February 2017
Compliance with the UK Corporate
Governance Code
Millennium & Copthorne Hotels plc (“M&C” or
the “Company”) is the holding company of the
Millennium Hotels & Resorts group of
companies (the “Group”). M&C is a premium
listed company with equity shares trading on
the Main Market of the London Stock
Exchange and therefore the Company is
subject to the UK Corporate Governance Code
(the “Code”). The Code sets out standards of
good practice in relation to Board leadership
and effectiveness, remuneration, accountability
and relations with shareholders. This year the
Board has assessed the Group’s compliance in
2016 against the version of the Code which
was last amended by the Financial Reporting
Council in April 2016, a copy of which is
available at www.frc.org.uk, and the Board has
determined that the Company has complied
with the provisions of the Code.
This statement forms a part of the Directors’
Report. The Strategic Report on pages 4 to 30
provides information about the Group’s strategy
and outlook, its businesses, the financial and
operating performance during the year, the
principal risks and uncertainties and its
corporate responsibility initiatives. A description
of the Group’s business model is included on
page 6 as required by provision C.1.2 of the
Code.
The role of the Board and its committees
The Board provides leadership to the Group. It
sets the Group’s strategy and oversees
implementation of that strategy, ensuring that
acceptable risks are taken and mitigated where
possible. The Board ensures that adequate
resources are in place in order to deliver
long-term value to shareholders and benefits to
the wider communities in which the Group
operates.
The activities of our Audit, Remuneration and
Nominations Committees are set out in the
reports of each committee, which reports are
deemed to be part of this report. Details on the
Risk Committee can be found in the “Our risks”
section of the Strategic Report on page 26.
The Company Secretary acts as secretary to all
standing committees of the Board.
Dear Shareholders,
While the Board has determined that the
Company has complied with the provisions of
the UK Corporate Governance Code in 2016,
as noted in this report, an effective governance
regime must go beyond an annual compliance
assessment. One size does not fit all and good
governance is a work in progress that must
evolve as the business evolves; it must be
practical and tailored to the needs of each
business.
It is along these lines that the Group’s
governance structure was enhanced during the
year to help the Company better cope in a
difficult trading environment, as outlined in my
Chairman’s statement on page 4, and further
develop its platform for future growth. They key
governance changes made in 2016—many of
which, it is worth noting, were
recommendations from our annual Board
evaluation completed during 2016 and the
previous year—are outlined below.
We continued to streamline Board meetings so
that the meetings we do have are more
effective and relevant. As part of this process,
we implemented small improvements in some
instances, such as the launch of electronic
Board portal software, while other
enhancements were more significant. For
example, we reduced the overall number of
meetings held during the year and the Board is
reviewing its schedule of Board reserved
matters. The primary objective of these
initiatives is to allow the Directors to focus more
on strategic matters—such as the Company’s
management structure, business models,
strategic plan and threats to the Company and
industry—and less on granular operational
items.
We increased the participation by senior
executive team members in Board meetings to
give the Directors greater exposure to those
who influence and shape our business and the
new members of the senior management
team. Also, several Directors visited the
Group’s operations in China, Singapore,
Europe and the U.S. over the year to gain a
better understanding of operations on the
ground.
40
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance The Board has a schedule of matters reserved
for its attention and which require its approval,
including the following:
• Long term objectives and commercial
strategy;
• Oversight over the Group’s operations and
internal controls;
• Annual operating and capital expenditure
budgets;
• Extension of the Group’s activities into new
business or geographic areas;
• Changes relating to the Group’s capital
structure, corporate structure and listing
status;
• The half-yearly report, interim management
statements and any preliminary
announcement of the final results;
• The annual report and accounts, including the
corporate governance statement and
• Directors’ remuneration report;
• Dividend policy, declaration of the interim
dividend and recommendation of the final
dividend;
• Significant changes in accounting policies or
practices;
• The Group’s treasury policies;
• Capital expenditure above £5m and material
contracts and leases;
• Any acquisition of land, property, or any
addition of a hotel into the portfolio by
acquisition or by means of a management
contract;
• Major investments, including the acquisition or
disposal of interests of more than five per cent
of the voting shares of any company or the
making of any takeover offer;
• Marketing campaigns or sponsorships where
expenditure exceeds £500,000;
The respective responsibilities of the Chairman
and Group Chief Executive Officer are set out
below and have been approved by the Board
again this year. The Board currently is
comprised of ten directors including the
Chairman, one Executive Director, six
independent Non-Executive Directors and two
other Non-Executive Directors who, like the
Chairman, are appointees of the majority
shareholder, City Developments Limited. Each
Director is expected to fulfil his or her duties for
the benefit of all shareholders.
Board and committee attendance
The Board generally meets up to ten times a
year. The actual number of regularly scheduled
Board and Committee meetings attended by
each Director during the year is shown below
next to the maximum number of such meetings
that each Director could have attended during
the year. In addition to regularly scheduled
meetings, the Board, Remuneration Committee
and Nominations Committee each held one ad
hoc meeting during the year, while the Audit
Committee held two. Risk Committee meetings
were scheduled as needed.
• Appointment, re-appointment and removal of
the external auditor to be put to shareholders
for approval, following the recommendation of
the Audit Committee;
• Determining the remuneration policy for the
directors, company secretary and other senior
executives; and
• The introduction of new share incentive plans
or major changes to existing plans, to be put
to shareholders for approval.
Certain of those reserved matters have been
delegated to the Board’s standing committees
with specific delegated authority. Copies of the
terms of reference for each committee can be
found on the investor relations section of the
Group’s website at www.millenniumhotels.
com/corporate.html.
The Group Chief Executive Officer, supported
by an executive committee comprised of the
regional heads of operation and key functional
heads, is responsible to the Board for the
Group’s operational performance, including:
• implementing the Group strategy as
determined by the Board;
• maintaining adequate internal control systems
and risk management processes;
• monitoring operational performance against
plans and targets and reporting to the Board
any significant variances; and
• maintaining an effective management team
and succession planning.
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Risk
Committee
• Approval of resolutions and corresponding
Kwek Leng Beng
documentation to be put forward to
shareholders at a general meeting;
• Approval of all circulars, prospectuses and
listing particulars;
• Changes to the structure, size and
composition of the board, following
recommendations from the Nominations
Committee;
• Appointments to the board, following
recommendations by the Nominations
Committee;
• Membership and chairmanship of Board
committees;
Aloysius Lee Tse Sang
Shaukat Aziz
Daniel Desbaillets1
Susan Farr2
Nicholas George
Gervase MacGregor
Kwek Leng Peck
Kwek Eik Sheng
Alexander Waugh
7 (7)
7 (7)
6 (7)
3 (3)
6 (7)
7 (7)
7 (7)
6 (7)
7 (7)
7 (7)
–
–
–
–
4 (4)
5 (5)
5 (5)
–
–
5 (5)
–
–
4 (4)
–
3 (4)
3 (4)
2 (4)
–
–
4 (4)
2 (2)
–
2 (2)
–
1 (2)
2 (2)
–
2 (2)
–
2 (2)
1
2
Daniel Desbaillets was appointed to the Board with effect from 14 September 2016.
Susan Farr was appointed to the Audit Committee with effect from 1 April 2016.
–
3 (3)
–
–
–
3 (3)
2 (3)
2 (3)
3 (3)
–
41
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Corporate governance statement
continued
The Chairman
The Chairman provides leadership to the Board
on all aspects of its role. His key duties are to:
strategic vision, develop the strategic plan,
business plan and budget and deliver the
same to the satisfaction of the Board;
of Association of the Company and any
necessary shareholder approval or ratification.
• formulate and set the strategic direction and
organisational structure of the Group, subject
to the Board’s approval;
• set a clear vision for the Group;
• mentor the Group Chief Executive Officer as
and when required;
• balance the interests of management and the
Board as well as the needs of shareholders
and management;
• act as a liaison between management and the
Board as well as between the Company and
its shareholders;
• manage communications and information
dissemination processes between the
Company and its shareholders and work
closely with the Company’s public relations
team to achieve this objective;
• establish the agenda and manage Board
meetings;
• offer advice and tap the collective wisdom
and experience of Board members;
• take a proactive role in the appointment of
Directors and, following such appointments,
oversee the development of individual
Directors; and
• develop the top management team, in
particular the Group Chief Executive Officer,
and establish a succession plan for the Group
Chief Executive Officer position.
There have been no material changes to the
Chairman’s other significant commitments
during the year.
The Group Chief Executive Officer
The Group Chief Executive Officer reports to
the Board and has ultimate accountability for
the day-to-day running of the Group. He is
responsible for leading the management team,
operational activities and performance of the
Group, including the effective delivery of the
Company’s strategy and business plan, as
agreed by the Board, while managing and
mitigating the principal risks faced by the
Group.
His duties are to:
• receive the strategic vision of the Group from
the Board of Directors and to implement such
42
• lead and act as an advocate for the executive
management team of the Group;
• oversee the execution of the strategic vision
and plans, and assess the Group’s
performance and progress in meeting them;
• promote the growth of the Group;
• develop the management team and establish
a succession plan for key management
appointments;
• act on the feedback of the Chairman;
• be responsible for the day-to-day
management of the Group’s business and
affairs and ensure that significant issues that
arise are resolved in an efficient and timely
manner; and
• lead the management team to improve
performance in every division.
Pursuant to Listing Rule 13.8.17 and based on
the principles outlined in provision B.1.1 of the
Code, the Board regularly assesses the
independence of each of the Company’s
Non-Executive Directors, taking into account
whether the Non-Executive Director is
independent in character and judgement, and
whether there are any relationships or
circumstances that are likely to affect, or could
appear to affect, their judgement. With regard
to Daniel Desbaillets’ appointment to the Board
in September 2016, the Directors were
satisfied that notwithstanding his previous
directorships with CDL Hospitality Trusts
(“CDLHT”), Mr Desbaillets met the
independence requirements based on the
following factors, among others:
The independent Non-Executive Directors
The majority of the Board is made up of
independent Non-Executive Directors who
have wide ranging international experience at
senior levels in areas of finance, accounting,
hospitality, fund management, media, branding
and international affairs. They bring strong,
independent judgement to the deliberations of
the Board, particularly in respect of the Group’s
corporate governance regime.
Nicholas George, as the Senior Independent
Director, is available to meet with our
institutional shareholders and shareholder
representative bodies and to discuss any
matters where it would be inappropriate for
conversations to be held with either the
Chairman or the Group Chief Executive Officer.
He also acts as a sounding board for the
Chairman and as an intermediary for other
Board members when necessary.
On appointment, each independent Non-
Executive Director receives a letter of
appointment setting out the terms of their
appointment, fees to be paid and matters such
as confidentiality of information, potential
conflicts of interest and share dealing
restrictions. Such letters of appointment are
subject to termination by either party giving one
month’s notice. Appointment and any
subsequent reappointment of a Non-Executive
Director are subject at all times to the Articles
• the ownership structure and composition of
the Board of CDLHT, and the fact that Mr
Desbaillets had resigned from his
directorships with CDLHT;
• Mr Desbaillets’ deep hospitality experience
and external business interests, which would
allow him to make reasoned judgements; and
• the lack of other relationships or arrangements
between Mr Desbaillets and the controlling
shareholder of the Company and its
connected parties.
In addition, the Board conducted its regular
independence review in December 2016 and
determined that there was no change to the
independent status of the five other
independent Non-Executive Directors. Their
diverse business backgrounds, skills and
experience enable all of them to continue to
bring independent judgement to bear on issues
of strategy, performance, resources, key
appointments, standards of conduct and other
matters presented to the Board.
At least once during the year the Chairman and
independent Non-Executive Directors met,
without the Executive Director being present, to
discuss the performance of senior
management, the Board and other matters of
importance.
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Director training and information
All Directors have access to the advice of the
Company Secretary, who is responsible for
ensuring the Board procedures and applicable
corporate governance rules and regulations are
observed. In addition, the Directors are able, if
necessary, to take independent professional
advice at the Company’s expense. The Non-
Executive Directors also have the opportunity
to meet separately with the Chairman during
the year.
The Chairman, in conjunction with the
Company Secretary, is also responsible for
ensuring that Directors receive appropriate
training at the Company’s expense where
specific expertise is required in the course of
the exercise of their duties. All Directors receive
a Board compendium detailing matters relating
to Board procedures. A bespoke induction
programme is established for any new directors
who are appointed, based on their needs and
experience.
Conflicts of interest
The Board has established agreed procedures
for managing potential operational conflicts of
interest. These procedures and any potential
conflicts authorised in accordance with section
175 of the Companies Act 2006, as permitted
by the Company’s Articles of Association, are
reviewed by the Board at least annually and
other potential conflicts are reviewed as they
may arise from time to time. The Board is
satisfied that the procedures for managing
potential conflicts remain effective.
Evaluation process
An independent, externally-facilitated Board
evaluation was once again conducted by
Lintstock Limited. This year the evaluation was
a continuation of the first part of the evaluation
that was completed in the fourth quarter of
2015, pursuant to which the Directors and
Company Secretary completed on-line
questionnaires. In the second part of the
evaluation, conducted over the first half of
2016, the Lintstock team held individual one-
on-one interviews with each Director—except
for Daniel Desbaillets, who had not yet joined
the Board—and the Company Secretary. The
evaluation process focused on the following
key themes:
principal risk factors and mitigating activities are
described on pages 26 to 30.
• board composition, expertise and dynamics;
• time management and Board support;
• the operation of Board committees;
• strategic oversight;
• risk management and internal controls; and
• succession planning and human resource
management.
As the Risk Committee was newly formed in
April 2016, the evaluation did not assess the
workings of that committee.
As part of the Lintstock exercise, an evaluation
of the Chairman was completed by the
independent Non-Executive Directors, led by
the Senior Independent Director, and individual
performance reviews were submitted by the
Directors.
A comprehensive report, prepared by Lintstock
based on feedback received, was then
reviewed by the Board. During the course of
the year, several changes were implemented
based on that feedback as noted in the
Chairman’s statement to this report.
Lintstock Limited has no other significant
connection with the Group.
Internal control and risk management
system in relation to preparation of
consolidated accounts
The Board is responsible for the Group’s
internal control and risk management systems,
including oversight over the processes and
procedures which are in place in connection
with the preparation of the Group’s
consolidated accounts. In establishing these
systems, the Directors have considered the
nature of the Group’s business, the principal
risks to which the business is exposed, the
likelihood of such risks occurring, their potential
impact and the costs of protecting against
such risks. However, such systems are
designed to manage or mitigate these principal
risks, rather than eliminate them, and can only
provide reasonable and not absolute assurance
against material misstatement. The Group’s
The main features of the Group’s internal
control and risk management framework are
set out below.
Strategy
• The Group’s strategic direction is reviewed by
the Board, generally on an annual basis. Often
as part of that process, a dedicated Board
strategy session is held with the Group Chief
Executive Officer and other senior
management as appropriate. Further detail
about the Group’s business model and
strategy can be found on page 6.
• Management prepares an annual budget for
each year, in line with the Group’s strategy,
and that budget is submitted to the Board for
its review and approval.
• The Board reviews, at least quarterly,
management’s progress in executing the
Group’s strategy and how the Group’s
performance is tracking against the annual
budget.
Internal controls
• The Company reviews and confirms its level
of compliance with the Code on an annual
basis.
• The matters reserved to the Board require
that significant transactions, projects and
programmes must have specific Board
approval.
• If Board approval is not required, authority
levels are prescribed and delegated to ensure
segregation among management and proper
escalation of approval limits.
• Group financial and treasury policies, controls
and procedures are in place and regularly
reviewed and updated.
• All financial information published by the
Group is subject to the approval of the Audit
Committee and the Board.
Risk management
• The principal risks of the Group are assessed
annually by the Risk Committee and
confirmed by the Audit Committee.
• During the year, there is an ongoing process
for identifying, evaluating and managing those
43
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Corporate governance statement
continued
risks and, if appropriate, modifying the risks in
light of changing conditions. This process is
reviewed by the Risk Committee on behalf of
the Board and has been in place for the year
under review and up to the date of approval of
the Annual Report and Accounts.
Operation
• Primary responsibility for the day-to-day
operation of the internal control and risk
management systems is delegated to the
Group’s Chief Executive Officer, who chairs
the management Risk Committee, and the
executive management team. The heads of
the Company’s operating regions and global
functions carry out regular reviews to ensure
appropriate actions are implemented to meet
the Group’s objectives and manage its
principal risks appropriately.
Assurance
• The effectiveness of the internal control and
risk management systems is reviewed by an
internal audit function and, where appropriate,
by the Group’s external auditor and/or
external consultants, who report to
management and to the Audit Committee. As
part of that process, the internal audit
department produces individual reports,
which are issued to appropriate senior
management, who are accountable to rectify
any deficiencies and implement any
recommendations. These reports are
summarised and distributed, as appropriate,
to the Audit Committee members, the Group
Chief Executive Officer, senior management
and the external auditors and, where
necessary, issues are drawn to the attention
of the full Board.
Communications with shareholders
The Board and executive management team
regularly interact with shareholders and
analysts. In particular:
• Presentations are made after the
announcement of the Group’s final and
half-yearly results. During these presentations,
analysts have the opportunity to ask questions
of the Group Chief Executive Officer and
Chairman of the Board.
• Management meets with institutional
shareholders on an ongoing basis to review
the Group’s performance, business model
and objectives. In addition, the Senior
Independent Director often conducts
meetings with a range of major shareholders
during the year; other Non-Executive Directors
have the opportunity to attend such meetings.
Significant feedback expressed by
shareholders during those meetings is then
provided to the Board in a timely manner.
• As part of the Company’s regular investor
relations activities, the Group Chief Executive
Officer, the Company Secretary and senior
finance personnel are available to answer
queries raised by analysts and institutional
investors from time to time.
• The Group’s website provides regular updates
for investors and contains all announcements
made by the Group.
• At the annual general meeting, all
shareholders have the opportunity to question
the Chairman and other Directors, including
the Chairs of the Audit, Remuneration, Risk
and Nominations Committees. The Company
prepares individual resolutions on each
substantially separate issue to be put to
shareholders and does not combine
resolutions together inappropriately, and the
Annual Report and Accounts is laid before the
shareholders at the annual general meeting.
Notice of the annual general meeting and
related papers are sent to shareholders at
least 21 working days prior to the date of the
meeting, and the Company encourages all
shareholders to make positive use of the
opportunity to communicate with the Board.
A schedule of the proxy votes cast at the
meeting is then made available on the
Company’s website after the conclusion of
the meeting.
44
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Audit Committee report
Annual chairman’s statement
Dear Shareholders,
On 3 May 2016, a Risk Committee was formed
with its own chairman and members. An
overview of our risk management and principal
risks can be found on pages 26 to 30.
Our objectives
The key objective of the Committee throughout
the year has remained the provision of effective
governance over the appropriateness of the
Group’s financial reporting including the
adequacy of related disclosures, the
performance of both the internal audit function
and the external auditor, and the oversight of
the Group’s systems of internal control,
business risks and related compliance
activities.
Our members
The Board believes that amongst the members
of the Committee they have suitable broad
commercial knowledge and significant
business experience. The Board has
determined that Gervase MacGregor has
recent and relevant financial experience as
required by the provisions of the UK Corporate
Governance Code.
The Group Chief Executive Officer, Chief
Financial Officer, senior finance managers,
Company Secretary and Head of Internal Audit,
although not members of the Committee, also
attend the meetings, as does the senior
statutory auditor from our external auditor, who
is not present when we discuss the auditor’s
performance and/or remuneration.
As part of this process of working with the
Board and to maximise effectiveness, meetings
of the Committee generally take place just prior
to a Company Board meeting. The Chairman
of the Committee reports to the Board as part
of a separate agenda item, on the activity of
the Committee and matters of particular
relevance to the Board in the conduct of their
work.
Our role
The Committee’s terms of reference are
available from the Group’s website at www.
millenniumhotels.com/corporate/ investors.
html.
The Audit Committee holds regular, structured
meetings and consults with senior
management. The Committee frequently
requests that senior operational and functional
heads attend meetings in order to update the
Committee with events in the business.
Occasionally external business consultants
were also invited to attend the meetings to
present specific projects. These meetings
provide the Committee an opportunity to
understand the projects and assess
management’s decisions.
The Committee regularly reviews strategic and
operational risks and the associated controls
and mitigating factors. The Committee receives
regular reports and briefings from internal audit
and has reviewed the level of internal audit
resource available within the Group and
believes that it is adequate for the size,
structure and business risks of the Group and
is supplemented with appropriate external
resources where needed.
Financial reporting
The Committee monitors the integrity, prior to
submission to the Board, of periodic financial
statements, annual accounts, reports to
shareholders and any other public
announcement concerning the Group’s
financial position, corporate governance
statements and statements on the Group’s
system of internal controls and reports its views
to the Board to assist in its approval of the
results announcements and the annual report.
The Committee performs a detailed review of
the content of the annual and half-yearly press
releases and annual report and accounts, as
well as trading updates. The Committee has
satisfied itself that controls over the accuracy
and consistency of information presented in the
annual report and accounts are robust, and
has confirmed to the Board that it believes this
annual report and accounts is fair, balanced
and understandable. The Committee’s review
of the financial statements for the year ended
31 December 2016 focused on the following
areas of significance:
• reviewed the Group’s hotel performance with
reference to RevPAR and hotel revenue;
• monitored the Group’s performance against
the previous year’s results and budget;
• monitored the performance of newly
refurbished hotels;
• reviewed the capital expenditure of the Group;
• reviewed the selection and testing of assets
for impairment purposes;
• assessed whether material judgemental
assumptions that were used in the valuations
were within reasonable parameters;
• monitored transactions with the Company’s
majority shareholder;
• reviewed the Group’s tax arrangements
including transfer pricing;
• reviewed the Group’s cash position and future
commitments, borrowings, facilities and
covenants; and
• reviewed debt recoverability and agree on
write-off, if deemed necessary.
Impairment of hotel assets
Note 12 to the consolidated financial
statements states that the carrying amount of
assets as at 31 December 2016 is £3,238m
(2015: £2,764m). The Group continues to
engage external valuation experts to assist with
the valuation exercise and impairment review.
Financial performance and sensitivity of the
valuation models to the other key inputs means
that the valuation remains inherently subjective.
The property, plant and equipment assets are
carried at historical cost, which mitigates the
risk of impairment of these assets.
During the year, the Committee examined
management’s recommendations in respect of
the valuation of the Group’s hotel and property
portfolio and agreed that:
• the selection of assets to be tested was done
appropriately, taking into account indicators of
impairment risk and materiality;
• there was the appropriate use of third party
valuation expertise;
• sufficient robust challenge was given to
management by the external auditors;
• material judgemental assumptions that were
used in the valuations were within reasonable
parameters; and
• conclusions have been appropriately drawn.
45
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Audit Committee report
continued
Annual chairman’s statement continued
Valuation & classification of investment
properties
In general, the carrying amount of investment
properties is the fair value of the properties as
determined by a registered independent
appraiser. Fair values were determined having
regard to recent market transactions for similar
properties in the same location as the Group’s
investment properties. Where a fair value
cannot be reasonably determined, the property
is held at cost.
Classification of an asset as investment
property requires judgement, and is determined
by reference to future intentions and the
Group’s business model. The total carrying
amount of investment properties as at
31 December 2016 is £534m (2015: £506m)
as shown in Note 14 to the consolidated
financial statements.
During the year, the Committee examined
management’s recommendations in respect to
the classification and valuation of investment
properties and agreed that:
• there was appropriate classification of assets
as investment properties;
• there was appropriate use of third party
valuation expertise;
• sufficient robust challenge was given to
management by the external auditors;
• material judgemental assumptions that were
used in the valuations were within reasonable
parameters; and
• conclusions have been appropriately drawn.
Internal controls and risks
The Committee is responsible for reviewing,
and conducting an annual review of the
effectiveness of the Group’s system of internal
control and risk management procedures.
46
Accepting that risk is an inherent part of doing
business, the Committee reviewed the Group’s
risk management strategy to ensure that any
required remedial action on any identified
weaknesses is taken. This includes a regular
review of the risk register which contains the
significant risks faced by the Group and
identifies their potential impact and likelihood.
Where specific actions are agreed to mitigate
risks to a level deemed acceptable, these are
agreed with specific timeframes for delivery and
are monitored closely until fully implemented.
The system of internal controls audited by
Internal Audit (and commented on by the
external auditor from time to time)
encompasses all controls including those
relating to financial reporting processes,
operational and compliance controls and those
relating to risk management processes.
The Committee ensures that arrangements are
in place for employees to raise concerns, in
confidence, about possible fraud risk or wrong-
doing in financial reporting or other matters.
Where a whistleblowing incident occurs, this is
investigated by Internal Audit on a confidential
basis and in a proportionate manner.
Appropriate actions are recommended and
undertaken which are reported to the
Committee which then reviews the
recommendations and focuses on possible
trends and potential systematic weaknesses.
The Committee had discussions with the
external auditor on audit planning, fees,
accounting policies, audit findings, internal
controls and non-audit services rendered by
them. The external auditor attended all of this
year’s Committee meetings. Meetings are also
held with the auditor without management
present. The effectiveness of audit was
assessed through the review of audit plans,
reports and conclusions and through
discussions with management and the external
auditor. The Committee was satisfied that the
audit was effective.
External auditor process
The Committee acknowledges the recent
change in the law requiring mandatory auditor
rotation. There has been regular partner
rotation, and Jonathan Downer took over from
Steve Masters after completion of the prior year
audit in February 2016. The Committee is
satisfied that KPMG continues to possess the
skills and experience required to fulfil its duties
effectively and efficiently.
The Committee is responsible for
recommending the appointment,
re-appointment and removal of the external
auditor. Consideration is given each year to an
audit tender process as KPMG LLP has been
the Group’s auditor since the listing of the
Company on the London Stock Exchange in
1996. Under the current transitional rules, the
latest year in which KPMG would be able to
undertake an audit of the Company is to
31 December 2022.
Non-audit services
In order to ensure the continued independence
and objectivity of the Group’s external auditor,
the Group has strict policies regarding the
provision of non-audit services rendered by the
external auditor. The Committee’s approval is
required in advance for the provision of non-
audit services if the fee exceeds £30,000 for an
individual assignment. The Committee reviews
non-audit fees regularly. The Group’s external
auditor is prohibited from providing any service
that would conflict with their statutory
responsibilities or which would otherwise
compromise their objectivity or independence.
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance In light of new requirements issued in the
revised Ethical Standard for EU auditors, with
effect from financial year commencing from
1 January 2017, KPMG is further prohibited
from providing tax compliance services and
other conflicting non-audit services directly or
indirectly to the Group’s controlled entities in
EU. The Committee’s advanced approval is
required for all non-audit services to be
rendered by KPMG if the fee exceeds £30,000
per assignment.
During the year ended 31 December 2016,
KPMG’s audit fee amounted to £2m and
KPMG’s non-audit fees were £1m in total.
Committee performance review
The Committee’s performance is reviewed
annually through a facilitated evaluation
conducted by Lintstock Limited, the results of
which showed that the Committee was
effective.
Gervase MacGregor
Chairman of the Audit Committee
16 February 2017
47
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
Annual chairman’s statement
Dear Shareholders,
2016 remained relatively quiet in terms of the Group’s remuneration.
During the year, the Committee conducted a detailed review of its
Directors’ Remuneration Policy which was approved by shareholders in
May 2014 and, as required by legislation, is set to expire at our May
2017 AGM.
Proposed Amendments to the Directors’ Remuneration Policy
This Remuneration Report contains details of the proposed
Remuneration Policy to be submitted to a binding shareholder vote at
the forthcoming 2017 AGM. The review conducted by the Committee
took into account shareholder feedback, evolving market best practice
and our desire to align measures and targets with the Company’s
strategic goals. As a result, the Committee concluded that the Policy
approved at the 2014 AGM remains broadly appropriate, and is
proposing only minor changes to the Policy for the next three-year
period.
The key proposed changes and amendments to the revised policy are as
follows:
• A maximum limit on executive director base salaries and benefits.
• Increased flexibility to align LTIP measures and targets with the
Company’s long-term financial and strategic goals at the start of each
cycle. A minimum weighting of 50% will be retained on earnings per
share growth.
• A higher shareholding requirement for Executive Directors of 200% of
salary.
• Clarification of the malus and clawback provisions in the Company’s
incentive schemes.
• Clarification of the Company’s position on non-executive director fees
and external and subsidiary director appointments.
• Removed the ability in exceptional cases to pay in lieu of pension a
cash contribution up to 30%.
The Committee believes that the proposed Policy is in the best interests
of the Company and its shareholders. We engaged with our largest
shareholders on the proposed changes in January 2017.
2016 Annual Bonus for the Group Chief Executive Officer
The Committee reviewed Mr Lee’s performance during 2016 and
adjudicated an award of £110,461 for his 2016 annual bonus (2015:
£127,122), which represents 14.73% of his maximum cash bonus
opportunity. This amount reflects the Committee’s assessment of the
performance of the Group and the achievements of Mr Lee over the
course of the year. Details of the calculation can be found on page 57 of
this report.
Developments under the Company’s Share Schemes
• The Committee reviewed the Company’s achievement of the
performance measures for the 2014 awards granted under the 2006
LTIP, including total shareholder return as assessed against the FTSE
250 (excluding investment trusts) and a hospitality peer group, growth
in the Company’s net asset value and cumulative earnings per share
growth for the three-year period ended 31 December 2016. The
Committee determined that the Company did not meet the required
minimum thresholds and accordingly awards will lapse in full.
• As the 2006 LTIP and 2006 Sharesave Plan both expired in May 2016,
revised plans were submitted for approval and approved by
shareholders at the Company’s 2016 AGM. As previously indicated, the
revised plans did not include material amendments, as the Committee
believed they continued to be effective and reflected best practice.
Under the 2016 LTIP the Committee now has discretion to apply an
additional two-year post-vesting holding period, in addition to the
standard three-year performance period. We sought feedback on the
new plans from our largest shareholders before the AGM and no
significant concerns were raised. Details of the revised plans can be
found in the notice of the 2016 AGM.
I would also like to thank the members for their contributions to the
Committee’s work over the past year, which is very much appreciated.
The remainder of this Directors’ Remuneration Report has been
prepared in compliance with applicable reporting requirements and I
hope you find it useful. The Committee welcomes any feedback from our
shareholders and we trust that you will support the policies and practices
outlined in this report.
Yours faithfully,
Other matters considered by the Committee in 2016
The following summarises the significant matters considered by the
Committee in respect of the 2016 financial year.
Alexander Waugh
Chairman of the Remuneration Committee
16 February 2017
Retirement of the Group Chief Executive Officer
As announced by the Company on 24 August 2016, Aloysius Lee, our
Group Chief Executive Officer, notified the Board of his intention to retire
in the first quarter of 2017, and the Board subsequently agreed with Mr
Lee a retirement date of 28 February 2017. On behalf of the Committee,
I’d like to thank Aloysius for his service to the Group over his two-year
tenure and wish him the best in his future endeavours. We look forward
to working with the Nominations Committee and wider Board on the
recruitment of Mr Lee’s successor and his or her remuneration
arrangements.
48
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Committee governance
Membership
Alexander Waugh chairs the Remuneration Committee (the “Committee”)
and the other members include Shaukat Aziz, Susan Farr, Nicholas
George and Gervase MacGregor. All Committee members served
throughout the full year. The Committee held four scheduled meetings in
2016 and one ad hoc meeting. Attendance of the regularly scheduled
meetings is shown on page 41. The Chairman of the Board and the
Group Chief Executive Officer are invited to attend meetings as
appropriate, but they are excluded when their own performance or
remuneration are being discussed.
No member of the Committee has any personal financial interest, other
than as a shareholder of the Company, in the matters to be decided by
the Committee or involvement in the day-to-day management of the
business of the Group.
Further information regarding the Committee’s advisors and its
evaluation can be found on page 63 of this report.
Our role
The Committee has delegated authority from the Board to determine, in
consultation with the Chairman of the Board and Group Chief Executive
Officer as appropriate, the broad remuneration policy and individual
remuneration arrangements of the Chairman, Executive Directors,
Company Secretary and senior management team. It also oversees the
Group’s share-based incentive arrangements.
In addition, the Committee is authorised to:
• administer the Company’s share option schemes;
• oversee major changes to employee benefit structures throughout the
Group;
• ensure that performance related elements of remuneration form a
significant proportion of the total remuneration of Executive Directors
and are designed to align their interests with those of shareholders;
• consider whether the Executive Directors should be eligible for annual
bonuses and benefits under long-term incentive schemes;
• provide packages needed to attract, retain and motivate Executive
Directors of the quality required;
• approve the terms and duration of any service agreement to be entered
into with an Executive Director;
• consider the compensation commitments payable to Executive
Directors under their service agreements or otherwise in the event of
early termination; and
• select and appoint consultants engaged to advise the Committee.
The Committee’s terms of reference are available at
www.millenniumhotels.com/corporate/investors.html.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information
Directors’ remuneration report
continued
Directors’ remuneration policy
The Company’s current Directors’ remuneration policy was approved by shareholders at the Company’s annual general meeting (AGM) held on
1 May 2014, and will expire at the AGM to be held on Friday, 5 May 2017.
The revised Directors’ remuneration policy (which is proposed to take effect from 5 May 2017 for a period of up to three years, subject to shareholder
approval at the 2017 AGM) is set out below.
During the year under review, the Committee conducted a detailed review of the remuneration policy in the context of its alignment with the
Company’s strategic aims, shareholder feedback, and institutional investor best practice. The Committee concluded that the policy approved at the
2014 AGM remains appropriate, and is therefore proposing only minor changes to the Policy for the next three-year period. As before, the Committee
retains discretion to make non-significant changes to the remuneration policy without reverting to shareholders.
Policy for Executive Directors
It is proposed the following policy will apply to all Executive Directors (presently the Group Chief Executive Officer is the only Executive Director).
Base salary
Purpose and link to strategy
Salaries are a key component of the reward package in attracting, motivating and retaining executives who are instrumental in driving
and growing the business and delivering the Company’s strategic goals.
Operation
Salaries in the Group are based on the value of the individual, the level of responsibility, experience and market conditions.
Salaries are reviewed at least annually but are not necessarily increased. The Committee may award salary increases at other times of
the year if it considers such an award to be appropriate. In reviewing salaries, account is taken of market conditions, significant
changes in role, pay and conditions elsewhere in the Group, inflation and budgets.
The salary payable to Executive Directors will normally be capped at the upper quartile of the relevant market benchmark for the role
under review. This maximum salary represents the highest end of the range at which the Committee would expect the base salary to
be set, rather than the actual amount to be paid. Salaries will be set on a case-by-case basis to reflect the role and the experience
and qualifications of the individual.
There is no separate cap on the annual increase to base salaries. However, the Committee will normally determine the appropriate
level of increase for Executive Directors taking into account the general level of increase for the broader workforce, but on occasion
may need to make a more significant increase to recognise additional responsibilities, or an increase in the scale or scope of the role.
Larger increases also may be considered appropriate if a Director initially had been appointed to the Board on a below-market salary.
The Committee will provide the rationale for any increase in excess of those for the wider workforce in the relevant year’s Annual
Report on Remuneration.
It is expected that the annual base salary for Executive Directors will be inclusive of director fees, but not reimbursable expenses,
payable in respect of directorships of subsidiary companies that may be held by the Executive Director.
Maximum
Annual bonus
Purpose and link to strategy
Executive Directors are eligible to participate in an annual bonus scheme to:
• incentivise executives to drive Group strategy and performance over the short term; and
• ensure that a significant proportion of the total reward of executives’ packages is linked to performance during the year.
The performance period for annual bonuses corresponds with the financial year. Bonus measures, weightings and targets are set
annually at the start of the financial year by the Committee which retains discretion to revise any calculated bonus downwards, but
not upwards, if it is felt to have become misaligned with the Group’s performance.
Payment of the annual bonus is normally contingent on the employee still being employed by the Group at the time of payment and
the employee or the Company not having served notice of termination.
Annual bonus is not pensionable. The Committee may defer and pay a proportion (up to 100% of the earned annual bonus) in shares
which must be held for up to three years before vesting. No performance conditions apply to such deferred bonus shares, but their
release is subject to continued employment over the vesting period. Deferred bonus share awards would be eligible, at the
Committee’s discretion, for a dividend equivalent.
The bonus plan includes clawback and malus provisions. See note 1 on page 52.1
Operation
50
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Maximum
The level of bonus opportunity for Executive Directors is:
Threshold
Target
Maximum
Group Chief
Executive
Officer’s Bonus
as a % of base
salary
Other Executive
Director’s Bonus
as a % of base
salary
0%
75%
150%
0%
50%
100%
Performance2
The maximum value of a deferred bonus share award is the value of the cash bonus that would otherwise have been paid.
70% of the bonus opportunity will be linked to financial performance, with the remainder linked to non-financial measures, which may
include personal objectives and other non-financial operational measures as determined by the Committee, such as corporate social
responsibility performance targets. However, the Committee has discretion to vary those percentages by plus or minus 10% for any
year to reflect particular corporate objectives. Financial measures may include, but are not limited to, operating profit, profit before
tax, revenue and revenue per available room.
The Committee determines bonus performance measures, weightings and targets annually which are closely aligned with the
Group’s short-term strategic priorities. Targets for financial measures are set by reference to the Group’s budget, while the personal
element of the bonus is driven by personal performance objectives set at the start of the year.
Further details will be disclosed in the relevant Annual Report on Remuneration.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Directors’ remuneration policy continued
Long-Term Incentive Plan
Purpose and link to strategy
Operation
Maximum
Performance
Pension
Purpose and link to strategy
Operation
Maximum
Other benefits
The Company’s 2016 Long-Term Incentive Plan (“LTIP”) forms the long-term variable element of executive remuneration at the Company
and is intended to incentivise long-term outperformance. The LTIP allows for the award of performance shares, nil cost share options and
deferred bonus shares.
For the three-year period over which this policy is intended to apply, LTIP awards will normally comprise awards of performance shares,
which are aimed at: driving and rewarding sustainable performance over the long term; aligning the interests of executives and shareholders;
and supporting retention.
Performance share awards are made annually and normally vest on the third anniversary of the date of grant, subject to the achievement of
performance conditions over three years, continued employment with the Group and the rules of the Plan. LTIP awards may additionally be
subject to an additional post-vesting holding period (of up to two years). There is no re-testing of performance conditions under the Plan.
The Plan allows dividends or dividend equivalents to accrue, subject to the Committee’s discretion.
The Plan includes clawback and malus provisions, see note below for details1
The maximum annual value of performance shares and nil cost share options awarded under the LTIP is 150% of base salary, although
awards with face values of up to 200% of salary may be awarded in exceptional circumstances including, but not limited to, the recruitment
of a new Executive Director. The level of award is otherwise determined by the Committee at the time of grant, details of which will be
disclosed in the relevant Annual Report on Remuneration.
The performance measures attached to LTIP awards will comprise a blend of measures determined by the Committee from time to time,
with at least a 50% weighting on Earnings Per Share (“EPS”). A small element, not exceeding 10% of any award, may be based on a
discretionary assessment of the achievement of key strategic objectives, such as those relating to asset management and the timely delivery
of key projects within budget.
Under each measure, entry level performance will result in 25% of maximum vesting for that element, rising on a straight-line basis to full
vesting.
Further details on LTIP awards, including the measures selected, their weightings and the performance targets set, will be disclosed in the
relevant Annual Report on Remuneration.
The provision of retirement benefits supports the Company in attracting and retaining executives and promoting long-term retirement
planning.
A defined cash contribution may be made into either a Company sponsored pension plan or a private pension plan or as cash in lieu of
pension.
up to 20% of base salary.
Purpose and link to strategy
Allows the Company to recruit and retain appropriate executive talent through the provision of cost effective benefits consistent with market
practice.
Operation
Maximum
Executive Directors also may also participate, along with other employees, in the Group’s tax advantaged United Kingdom Save as You
Earn (“SAYE”), or other equivalent savings-based share schemes to share in the success of the Group.
Standard benefits are offered to ensure they are competitive with market practice by location and the level and responsibilities of the
individual. These may comprise (although are not limited to) a motor vehicle and driver or an appropriate allowance, insurances for life,
personal accident, disability and family medical cover.
Special benefits such as relocation, removal, tax equalisation, house purchase/rental allowance and children’s education allowance may be
offered to attract the right candidate in the event that an Executive Director is appointed on expatriate or international assignment terms.
SAYE/savings-based schemes are subject to individual limits. In the UK the limit is set by the Committee up to the limits prescribed by
legislation.
The value of ‘standard benefits’ is consistent with relevant market practice and is kept under review by the Committee, but would not be
expected to exceed more than the equivalent of a month’s salary, other than in exceptional circumstances. The value of any ‘special
benefits’ is reviewed on a case-by-case basis but would not be expected to exceed more than the equivalent of three months’ base salary
other than in exceptional circumstances.
1 Clawback and malus provisions are included in the Group’s reward schemes to provide a means for the Company to correct any share award or bonus that may have incorrectly or unjustly been granted and/or
paid under any of the reward schemes. This may be through the adjustment of any share award, unvested long-term incentive award, annual bonus, or future annual bonus, prior to vesting/payment (malus) or
the return of any money or shares previously paid or granted (clawback).
Current examples of when these provisions could be applied include, without limitation: (i) where the Company is found to have materially misstated its financial results; (ii) where the assessment of any condition
imposed on an award is found to have been based on an error or on inaccurate or misleading information or assumptions; or (iii) if any other circumstances arise which the Committee considers to justify the
operation of the clawback/malus provisions (e.g. gross misconduct of a participant – as determined by the Committee – or a participant by act, or omission, contributes to serious reputational damage to the
Company). The Committee retains discretion to modify the terms and conditions of the clawback and malus provisions.
52
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Shareholding requirements
Within five years of being appointed to the Board, Executive Directors are required to build up, and retain, ordinary shares in the Company equivalent
in value to 200% of their base annual salary. Should an Executive Director not hold the required level of shares then at least 50% of any vesting under
a Company incentive plan is required to be retained until the requirement is met. Provided that Executive Directors hold and maintain the appropriate
level of shares, they may sell shares, subject to the normal requirement for directors’ dealings under applicable regulations.
Share interests which do not count towards the shareholding guidelines include:
• unvested performance share awards;
• SAYE options;
• unvested deferred bonus shares; and
• any notional accrued dividend equivalent shares with vesting subject to future performance.
Directors to whom this requirement applies are prohibited from engaging in any hedging transactions with respect to Company shares, including
trading in any derivative securities.
There are no formal shareholding guidelines for the Chairman, the Non-Executive Directors and the senior management, however, they are
encouraged to hold shares in the Company in order to align their interests with those of shareholders.
Non-Executive Director Policy
The remuneration policy for Non-Executive Directors is set out below:
Fees
Chairman fee
Basic fee
Additional fees
Other matters
In the case of the Chairman, the Chairman receives a set fee and the fee level is determined by the Committee. The Chairman’s fee is
determined taking into account the time commitment and responsibilities of the role, as well as the role holder’s skills, gravitas and
qualifications to lead the board.
Fees paid to Non-Executive Directors are determined by the Board as a whole taking into account the time commitment and
responsibilities. The policy is to set fees at or around the median for companies of a similar size and complexity. Their purpose is to
attract and retain Non-Executive Directors.
Non-Executive Directors are paid an additional fee for being Senior Independent Director, a member of a Board committee and for
chairing a Board committee.
The independent Non-Executive Directors each have rolling letters of appointment which may be terminated by either party on one
month’s notice.
Non-Executive Directors are not entitled to bonuses, benefits or pension scheme contributions or to participate in any share scheme
operated by the Company.
In addition to any remuneration payable, a Non-Executive Director may be paid reasonable travel, hotel and other expenses properly
incurred in discharging the Director’s duties.
Fees cease immediately in the event the Non-Executive Director ceases to be a Director.
All Non-Executive Director fees are paid in cash.
Remuneration on recruitment
Reward packages for new Executive Directors will be consistent with the policy set out on pages 50 to 53, which describes each component of
remuneration for the Executive Directors of the Company. Fixed remuneration elements would be paid only from the date of employment and any
bonus will be pro-rated to reflect the proportion of the year employed. The maximum level of variable remuneration is as stated in the policy table
above.
If, consequent to joining the Group, a new director forfeits elements of variable reward linked to their previous employment, the Committee reserves
the right to make compensatory awards up to the maximum amount of the individual’s actual or estimated loss. Any such awards would be made
taking into account the performance conditions and time horizon of the forfeited awards. In the event that an internal candidate is appointed as an
Executive Director, any contractual obligation in respect of a previous role will be honoured even if it is inconsistent with this policy at the time the
obligation is fulfilled.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Directors’ remuneration policy continued
The Committee retains discretion to use Listing Rule 9.4.2(2) (and for this purpose only) to compensate an Executive Director for long-term incentive
scheme awards forfeited on leaving a previous employer. Such buyout awards will have a fair value no greater than the awards forfeited. The
arrangements that exist for current Executive Directors, as set out in the Policy Table, would then apply to the balance of the individual’s remuneration
package.
Directors service agreements and letters of appointment
To reflect current practice, it is the Company’s policy for Executive Directors to have service contracts that provide for a notice period for termination
of up to 12 months.
The dates on which Directors’ initial service agreements/letters of appointment commenced and the current expiry dates are as follows:
Name
Chairman
Kwek Leng Beng
Executive Director
Aloysius Lee Tse Sang
Independent Non-Executive Directors
Shaukat Aziz
Daniel Desbaillets
Susan Farr
Nicholas George
Gervase MacGregor
Alexander Waugh
Other Non-Executive Directors
Kwek Eik Sheng
Kwek Leng Peck
Date of contract
Notice period / Unexpired term
–
Nominee of controlling shareholder
10 December 2014*
12 months’ written notice given by either party
16 June 2009
11 August 2016**
12 December 2013
16 June 2009
11 December 2014
16 June 2009
–
–
Rolling letters of appointment terminable by
either party on one month’s notice
Nominees of controlling shareholder
* The commencement date was 1 February 2015 and the effective date of Mr Lee’s appointment to the Board was 1 March 2015. Mr Lee will be stepping down from the Board on 28 February 2017.
** The commencement date of Mr Desbaillets’ appointment to the Board was 14 September 2016.
Service contracts are kept at the Group’s corporate headquarters at Millennium & Copthorne Hotels plc, Scarsdale Place, Kensington, London,
W8 5SR.
There exist no other obligations that might give rise to, or impact on, remuneration payments or payment for loss of office which are not disclosed
elsewhere in this report.
Subsidiary and outside board appointments
If an Executive Director wishes to take on an external non-executive appointment, the Company’s policy is to support an Executive Director with that
appointment provided that there is no conflict of interest and the role does not interfere with the executive’s commitment or duties. They may retain
any fees paid and generally the number of external non-executive appointments should be restricted to one such appointment.
For subsidiary directorships, the Committee retains the discretion to allow any Director to retain any fees paid for those appointments, subject to the
limits set out in the Executive Director policy above.
Termination payments
The Company’s normal policy is to limit payments to Executive Directors on termination to contractual entitlements under their service agreements
and the rules of any incentive and pension plans. There is no automatic entitlement to bonus as part of the termination arrangements, and the value of
any terminating arrangement will be at the discretion of the Committee, having regard to all relevant factors. This discretion allows the Committee to
determine good leaver status, the consequences of which are set out in the table on page 55.
54
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance
Incentive schemes
The rules of the incentive schemes currently provide that:
Performance Shares
Annual Bonus
Good leavers
Performance conditions applied
taking into account the foreshortened
performance period.
A time pro rata reduction is then
applied.
Performance conditions applied
taking into account the foreshortened
performance period.
A time pro rata reduction is then
applied.
Other leavers
Award lapses
No bonus payable
Change of Control
Discretion
Performance conditions
applied taking into account the
foreshortened performance period.
A time pro rata reduction is then
applied.
Performance conditions
applied taking into account the
foreshortened performance period.
A time pro rata reduction is then
applied.
To disapply the pro rata vesting, or
decide that the award will vest on
the normal vesting date.
To disapply pro rata reduction and
maintain original sum.
Deferred Bonus Shares
Vest in full
Award lapses
Vest in full
To determine the number of shares
that vest, up to the value of the
applicable bonus.
Reasons for “good leaver” status include death, ill health, retirement with the approval of the Company, office of employment ceases to be a part of
the business or any other reason determined by the Committee.
Pay Scenarios
The following chart shows the various remuneration scenarios for the existing remuneration package of the Group Chief Executive Officer on an
annualised basis and calculated based on the stated assumptions.
Fixed
Annual bonus
LTIP
Base
Target
Maximum
('000)
100%
£610
52%
29%
32%
16%
£1,173
35.5%
35.5%
£2,110
£0
£500
£1,000
£1,500
£2,000
£2,500
Assumptions:
Base – The ‘Base’ scenario reflects fixed remuneration, including basic salary, pension and benefits, which are the only elements of the Group Chief Executive Officer’s package not linked to performance.
Target – The ‘Target’ scenario reflects the fixed remuneration elements as set out above, plus a target bonus payout of 50% of maximum and LTIP threshold vesting at 25% of the maximum award.
Maximum – The ‘Maximum’ scenario reflects fixed remuneration, plus full payout of all incentives.
No share price growth has been assumed in any scenario.
Consideration of employment conditions in the Group
When setting the policy for executive remuneration, the Committee does not specifically consult employees. Management does, however, ensure that
the Committee is aware of pay and conditions throughout the Group and that these are taken into account when framing executive remuneration. As
a global group, in a sector with ready mobility, the more senior the role, the more a reward package needs to reflect the global market, whilst for the
majority of employees the package is set with greater consideration of local market conditions and practices. The annual bonus scheme and long-
term equity incentive awards (including under the LTIP) are limited to the senior management team and key employees responsible for managing the
hospitality business.
Shareholder views
When determining remuneration, the Committee takes into account the views of its key shareholders and investor representative bodies and is
committed to undertaking consultation before committing to significant changes in aspects of remuneration. Large shareholders were consulted prior
to submitting the 2016 LTIP rules for approval at the Company’s 2016 AGM, and also on the policy set out in this report (which will be put to a
binding shareholder vote at the 2017 AGM).
Legacy matters
If approved by shareholders at the 2017 Annual General Meeting, this remuneration policy will apply from the date of that meeting. However, any legacy
awards and other commitments, including those made prior to the adoption of this policy, may still be paid notwithstanding that they have only been
incorporated by reference and not been fully described in this Directors’ remuneration policy report. Such payments will be described in the relevant Annual
report on remuneration.
55
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Annual report on remuneration
Audited Information
Single total figure of remuneration for each Director in 2016
The total remuneration for each person who served as a Director of the Company during 2016 is set out in the table below.
Director
Chairman
Salary and fees1
All taxable benefits
Annual bonus
LTIP awards
Pension contributions2
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
Total
2015
Remuneration (£ ‘000)
Kwek Leng Beng3
271
268
–
–
–
–
Executive Directors
Aloysius Lee4
Non-Executive Directors
Shaukat Aziz
Daniel Desbaillets5
Susan Farr
Nicholas George
Kwek Eik Sheng6
Kwek Leng Peck6
Gervase MacGregor
Alexander Waugh
Past Directors
Wong Hong Ren7
500
458
12
11
110
127
57
15
61
74
54
66
72
72
57
–
57
72
52
59
68
72
108
663
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
110
136
–
–
–
–
–
–
–
–
–
–
–8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
271
268
100
92
722
688
–
–
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
57
15
61
74
54
66
72
72
57
–
57
72
52
59
68
72
22
114
108
701
1,572
2,094
Total
1,350
1,826
12
Notes:
1. Salaries and fees are shown inclusive of sums receivable by the Directors from the Company and any of its subsidiary undertakings.
2. Aloysius Lee received his pension contributions as a cash allowance equal to 20% of his basic salary.
3. In addition to his basic fee, Kwek Leng Beng received £21,225 in director fees from subsidiary companies.
4. Aloysius Lee is the highest paid Director. His biography on page 34 reports the directorships and positions he holds in other publicly-traded Group subsidiaries and associate companies.
5. Daniel Desbaillets joined the Board as a Non-Executive Director on 14 September 2016.
6. In addition to their basic fee, Kwek Leng Peck and Kwek Eik Sheng received £7,686 and £2,128 respectively in director fees from subsidiary companies.
7. As reported last year, Wong Hong Ren stepped down as Group Chief Executive Officer and a Director as of 28 February 2015. Until that time, his benefits comprised a motor vehicle and driver, medical, personal
accident and travel insurance. As indicated in this report and in line with previous disclosures, he was paid his basic salary in monthly instalments through February 2016 and accrued holiday pay of £12,500 in
accordance with his service agreement.
8. The 175,834 shares awarded to Mr Wong on 4 April 2014 under the Long Term Incentive Plan, will lapse on 4 April 2017 since the minimum performance conditions for this award, which were measured over the
three years ended on 31 December 2016, were not achieved and therefore have been valued at nil.
2016 annual bonus for Executive Directors
The annual performance bonus for the only Executive Director who served in 2016, Aloysius Lee, was divided into two components including financial
performance measures, which represented 60% of the bonus opportunity, and personal key performance indicators, which combined represented
40% of the bonus opportunity.
56
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance The following describes how the annual bonuses for Aloysius Lee was calculated for the year ended 31 December 2016, including a summary of the
Committee’s assessment of his personal objectives. The Committee considers that the specific financial target figures remain commercially sensitive
given their close alignment with the Company’s strategic plans. Additionally, the Committee continues to be of the view that disclosing the targets
could put the Company at a disadvantage to some of its competitors, which are not subject to similar reporting requirements. However, as with last
year, the Committee commits to disclose such targets when the Committee determines that they are no longer commercially sensitive, such
disclosure to be within the next two years in any event. As such, set out below are the targets set for 2016.
Financial Performance Objectives representing 60% of the opportunity
Financial Performance Measure
Target
Minimum and Maximum Thresholds
Weighting
Achievement
Group Revenue
Group Profit Before Tax
Not disclosed
Not disclosed
No payout below threshold of 95% of budget, rising on a straight line
basis to maximum payout for 105% of budget or more
No payout below threshold of 92% of budget, rising on a straight line
basis to maximum payout for 108% of budget or more
10%
50%
7.73%
nil%
Personal Objectives representing 40% of the opportunity.
Personal Key Performance Indicator
Aloysius Lee
Objectives concerning the development of the senior executive management team
US business development and performance objectives
Group growth, capital and asset management objectives
Room rate and room occupancy growth objectives
Total
Weighting
10%
15%
10%
5%
40%
The Committee assessed that Mr Lee achieved 7% out of the 40% of his bonus opportunity related to his personal key performance indicators (KPIs)
due to his achievements against the objectives agreed by the Committee. The Committee recognised Mr Lee’s efforts to implement some cohesion
and strength to the senior management team and structure and raise brand awareness and perception to Chinese outbound travellers. Also the
business has seen improvement in performance in the US region outside of New York.
Accordingly, after taking into account the Company’s achievement of the financial performance objectives and Mr Lee’s achievement of his personal
objectives, Mr Lee received a total bonus of £110,461 which constitutes the full bonus payable with respect to his 2016 annual bonus.
Reporting on 2014 annual bonus targets
As we indicated in our 2014 Annual Report and Accounts, the following describes the financial performance targets applicable to the annual bonus for
Wong Hong Ren for the year ended 31 December 2014. These were not disclosed in the 2014 Annual Report and Accounts due to their commercial
sensitivity.
2014 Financial Performance Measure
Target
Minimum and Maximum Thresholds
Weighting
Achievement
Group Revenue
Group Profit Before Tax
Min – £812.9m
Max – £898.5m
Min – £152.6m
Max – £179.2m
No payout below threshold of 95% of budget, rising on a straight line
basis to maximum payout for 105% of budget or more
No payout below threshold of 92% of budget, rising on a straight line
basis to maximum payout for 108% of budget or more
15%
55%
£826.5m
(2% payout)
£173.4m*
(43% payout)*
* The 2014 Group profit before tax was calculated using consolidated figures including CDL Hospitality Trusts (“CDLHT”) and only 20% of the revaluation gain recognised that year was taken into account, but the
gains affecting CDLHT were excluded.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Annual report on remuneration continued
Scheme interests awarded in 2014
Performance share awards made under the Long-Term Incentive Plan (“LTIP”) in 2014 were subject to performance conditions comprising both
earnings per share (“EPS”) and Net Asset Value (“NAV”) plus dividend growth, and relative total shareholder return (“TSR”) performance over the
three-year period ending 31 December 2016.
These awards were due to vest on the third anniversary of the awards being made, with 50% vesting on a straight line basis in the event the
Company’s cumulative EPS exceeded 104 pence at the end of the performance period, up to a maximum threshold of 132 pence. A further 20%
was to vest on a straight line basis in the event the Company’s NAV plus dividend growth exceeded 6% per year during the performance period, up
to a maximum threshold of 13% growth per year. The remaining 30% would vest if the Company’s TSR performance over the relevant period meets
or exceeds the median TSR performance of a comparator group comprising those companies within the FTSE 250 index, excluding investment
trusts, and the median TSR performance of a comparator group comprising those companies within the selected peer group1 over the period. The
TSR performance element, split equally between the two comparator groups, was to vest on a straight line basis between the index, as a minimum
threshold, and a maximum threshold of 9% growth per annum for each comparator group.
Based on the Company’s EPS, NAV plus dividend growth and relative TSR performance for the three years ended 31 December 2016, the
Committee has determined that the LTIP awards made on 4 April 2014 will lapse in full on 4 April 2017.
Scheme interests awarded during 2016
The only Director to be awarded performance shares under the Company’s LTIP during 2016 was Aloysius Lee. The award was made on 29 March
2016 and, subject to achievement of the relevant performance measures and LTIP rules, will vest on 29 March 2019. Details of the award and the
performance measures and targets attaching to this 2016 LTIP award are provided in the tables below. None of the Directors participated in any other
share-based incentive plans during the year.
Aloysius Lee
Date of award
Awards made during the year
Market price of shares used to calculate award1
Basis of award
Face value of award on date of grant (£ ‘000)
% vesting at threshold performance
Performance measures and targets
Performance period end date
Vesting date
Market price at the vesting date
Monetary value of vested award
Note:
1. The number of shares awarded was calculated using the 5 day average middle market share price ending on 24 March 2016, one business day prior to the date of grant.
29 March 2016
185,643
£4.0400
150% of salary
£750
25%
See following table
31 December 2018
29 March 2019
–
–
1
The names of the companies forming the peer group are shown in the 2014 Annual Report and Accounts.
58
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance The performance measures, targets and vesting thresholds are set out below.
Performance Measure
Cumulative EPS
Net Asset Value growth plus dividends
TSR – FTSE 2502
TSR – Peer group3
Weighting
Minimum Threshold
Level of Vesting
Maximum Threshold1
Level of Vesting
60%
20%
10%
10%
95 pence
5% p.a.
Index
Median
25%
25%
25%
25%
115 pence
11% p.a.
Index + 9% p.a.
Median + 9% p.a.
100%
100%
100%
100%
Notes:
1. Vesting levels between threshold and maximum will be assessed on a straight-line basis.
2. The FTSE 250 comparator group excludes investment trusts.
3. The peer group comprises Accor, Banyan Tree Holdings, Belmond, Choice Hotels International, Hongkong & Shanghai Hotels, Hotel Properties, Hyatt Hotels, InterContinental Hotels Group, Mandarin Oriental,
Marriott International, Melia Hotels International, NH Hotels, Overseas Union Enterprise, Rezidor, Shanghai Jin Jiang International, Shangri-La Asia, Starwood Hotels & Resorts*, Whitbread and Wyndham
Worldwide.
*Merged with Marriott International on 23 September 2016
Payments made to past directors
Except as disclosed elsewhere in this report, no payments to past Directors were made during 2016. As set out above, the LTIP award made in 2014
to, and held by, Wong Hong Ren will lapse in full on 4 April 2017.
Payments for loss of office
There were no payments for loss of office made during the year. The termination arrangements agreed with Aloysius Lee are set out in the
‘Implementation of Remuneration Policy in 2017’ section below. All sums paid to him, or which are to be paid to him, in respect of 2016 are included
in the single total figure of remuneration table.
Statement of directors’ shareholdings and share interests
The interests of the Directors who served during 2016, and their connected persons, in the ordinary shares of Millennium & Copthorne Hotels plc
were as follows:
Director
Chairman
Kwek Leng Beng2
Executive Directors
Aloysius Lee3
Non-Executive Directors
Shaukat Aziz
Daniel Desbaillets
Susan Farr
Nicholas George
Kwek Eik Sheng3
Kwek Leng Peck3
Gervase MacGregor
Alexander Waugh
Number of ordinary shares owned outright2
Number of scheme interests
Holding on
31 December 2016
Holding on
1 January 2016
LTIP awards which
are not subject to
performance conditions
at 31 December 2016
LTIP awards which
are subject to future
performance conditions
at 31 December 2016
Total interests as at
31 December 2016
Value of ordinary shares
owned outright as a
percentage of salary1
–
–
–
–
–
–
–
–
–
–
12,500
12,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
320,051
320,051
–
–
–
–
–
–
–
–
–
–
–
12,500
–
–
–
–
N/A
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Notes:
1. For the purposes of determining Executive Director shareholdings as a percentage of salary, the individual’s salary and the share price as at 31 December 2016 were used.
2. The interests of the Directors appointed by City Developments Limited in that company and its ultimate parent company, Hong Leong Investment Holdings Pte. Ltd, are disclosed in the accounts of those
companies.
3. LTIP interests comprise the 134,408 shares granted to Aloysius Lee pursuant to the 2015 LTIP award, details of which can be found in the 2015 Annual Report and Accounts, and 185,643 shares relating to the
LTIP award made during 2016, details of which can be found above. In addition to shares or scheme interests in the Company, Mr Lee due to his appointment as a director of the following subsidiaries of the
Company, holds 1 share in each such subsidiary: Grand Plaza Hotel Corporation, Rogo Realty Corporation and Harbour Land Corporation. These shares were transferred from Wong Hong Ren.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information
Directors’ remuneration report
continued
Annual report on remuneration continued
Director shareholding requirements are as disclosed earlier in this report, on page 53. As Mr Lee was appointed as an Executive Director with effect
from 1 March 2015, he was not required to have met the requirements by 31 December 2016.
There have been no changes to the Directors’ interests between 31 December 2016 and the date of this report.
Unaudited Information
Implementation of Remuneration Policy in 2017
This section provides an overview of how the Committee is proposing to implement our Remuneration Policy in 2017.
Retirement of the Group Chief Executive Officer
Given the impending retirement of Aloysius Lee in early 2017, his basic salary will remain unchanged at £500,000 per annum. No annual bonus will be
payable for 2017 and no performance share award made to him under the LTIP.
Mr Lee’s pay and allowances due under his service agreement will cease on 31 January 2017, and he will retire from the Board and as Group Chief
Executive Officer, as previously announced, at the end of 28 February 2017. He will retain the performance shares awards made to him under the
LTIP in 2015 and 2016 in accordance with the rules of the LTIP for a ‘good leaver’ by virtue of his forthcoming retirement with the consent of the
Company. The Committee has determined that the vesting of the awards will not be accelerated and will vest on their normal vesting date subject to
the relevant agreed performance conditions, time pro-rating and the rules of the scheme.
Remuneration of Executive Directors to be appointed in 2017
The basic salary of any other Executive Director appointed to the Board during the year will be agreed by the Committee at the appropriate time, in
conjunction with any appointment, and be aligned with the Company’s Remuneration policy.
The financial performance measures indicated below will apply to their annual bonus whilst such Director’s personal objectives will be agreed by the
Committee at the appropriate time.
The Committee believes that the specific financial targets are commercially sensitive given their alignment with the Company’s operating budget and
strategic plans for 2017, and that consequently it is not appropriate to disclose them in this report. The Committee will consider the extent such
targets and objectives will be disclosed in the 2017 Annual Report on Remuneration after the conclusion of the year.
Financial Performance Measures
Group Revenue
Underlying Group Profit Before Tax
Total
Personal Key Performance Objectives
To be agreed with any new Executive Director
Total
Weighting
10%
50%
60%
Weighting
40%
40%
2017 Long Term Incentive Plan award
The maximum value of any LTIP awards granted during the year will remain at 150% of basic salary for a Group Chief Executive Officer and 100% of
basic salary for any other Executive Director, subject to any recruitment considerations. The Committee has reviewed the current LTIP structure and
as such has proposed changes to the Remuneration Policy. These changes are set out in Remuneration Policy contained within this Directors’
remuneration report. Subject to the Policy being approved by shareholders at the 2017 Annual General Meeting, the performance conditions
attaching to any future award will be reviewed on the appointment of a new Executive Director and aligned with this new Policy. The performance
targets will reflect the Group’s three-year forecast, be based on its strategy and business plan over the coming years, and be appropriately stretching
when compared to other FTSE companies.
60
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance The vesting period and any additional holding period will be determined at the date of grant.
Pension and benefits
As in 2016, Aloysius Lee will receive a cash pension contribution worth 20% of his basic salary in 2017, up to the end of January 2017. He also will
continue to receive a standard package of other benefits consistent with those received in 2016 for this period.
The pension and benefits for any other Executive Director appointed during the year will be determined at that time and in compliance with the
approved Remuneration policy.
Non-Executive Director fees
The basic fee for the Non-Executive Directors will continue to be £50,000 per annum in 2017. Non-Executive Directors also will continue to receive
separate annual fees for their service as a member and, to the extent applicable, the chair of a Board committee, and the Senior Independent
Director, will be paid an additional fee of £10,000 per annum to serve in such capacity. Details of the additional committee fees are set out in the table
below.
Committee
Audit Committee
Remuneration Committee
Nominations Committee
Risk Committee
Annual fee for membership of a committee
Additional annual Chairman’s fee
£5,000
£5,000
£2,000
£3,000
£10,000
£10,000
–
£5,000
The annual fee for the Chairman of the Board, including the basic fee paid to Non-Executive Directors, will remain unchanged at £250,000 for 2017.
Also, the Chairman will continue to receive fees for serving as a director of certain subsidiary companies.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Annual report on remuneration continued
Additional disclosures
Performance of the Company and historic remuneration of the Group Chief Executive Officer
The following graph illustrates the total shareholder return of the Company’s shares and comparator indexes over the past seven years. As the
Company is a constituent of both the FTSE 250 and the FTSE Allshare Travel & Leisure index, the Directors consider these indices to be the most
appropriate broad equity market indices against which the Company’s performance should be compared for these purposes. The remuneration
history of the Group Chief Executive Officer over the same period also is provided.
Millennium & Copthorne 8-year TSR performance
Millennium & Copthorne Hotels plc
FTSE250 excluding investment trusts
FTSE Allshare Travel & Leisure
(£)
400
350
300
250
200
150
100
50
0
31 Dec
2008
31 Dec
2009
31 Dec
2010
31 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
Value of £100 invested on 31 December 2008
Remuneration history of the Group Chief Executive Officer
Total remuneration (£’000)
Annual bonus
(as a percentage of maximum opportunity)
LTIP vesting rates
(as a percentage of maximum opportunity)
2010
1,243
20111
4,404
2012
1,495
100%
63%
37%
0%
100%
100%
2013
2,287
67%
50%
2014
1,429
62%
0%
20152
1,389
19%
0%
20163
832
15%
0%
Notes:
1. Richard Hartman retired as Group Chief Executive Officer and Wong Hong Ren was appointed to the post on 27 June 2011. These figures are for both and are restated to be consistent with the other years.
2. Wong Hong Ren stepped down as Group Chief Executive Officer on 28 February 2015 and Aloysius Lee was appointed as Group Chief Executive Officer Designate from 1 February 2015 and assumed the full
role as of 1 March 2015. These figures are for both.
3. Includes final two months of payments under his service contract.
Percentage change in remuneration of the Group Chief Executive Officer
The tables below show the percentage change in remuneration (based on salary and fees, taxable benefits and annual bonus) between 2015 and
2016 for the Group Chief Executive Officer and employees within the Group’s bonus pool.
Group Chief Executive Officer2
Employees
% Change from 2015 to 20161
Basic Salary
Benefits
Bonus
–
2
–
4
(13)
(37)3
1. All percentages are based on converting relevant local currencies into pounds sterling using the average rates for the respective year.
2. Group Chief Executive Officer change is the percentage change between the remuneration paid to Mr Lee in 2015 and 2016. The salary and benefits paid to Mr Lee in 2015 have been trued up to equate to a full
year.
3. Change in bonus relates to payments made in the respective year.
62
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Relative importance of spend on pay
The table below illustrates the year-on-year change in total pay for colleagues across the Group (being the aggregate personnel expenses as set out
in Note 8 to the financial statements) and distributions to shareholders (being declared dividends). The average number of colleagues employed by
the Group in 2016 was 10,996 (2015: 10,870).
Employee remuneration costs
Dividends distributed
2015
(£m)
351
44
2016
(£m)
352
21
Change (%)
–
(52)
Statement of voting at general meeting
The following table sets out the proxy voting in respect of the resolutions to approve the Directors’ Remuneration Policy and the 2015 Directors’
remuneration report, which resolutions were put to shareholders at the Company’s Annual General Meetings held on 1 May 2014 and 5 May 2016,
respectively, and passed on a show of hands. The Directors were pleased with the support received from shareholders.
Resolution
Votes for*
% of vote
Votes against
% of vote
Votes withheld
% of vote
Approve the Directors’ Remuneration Policy
281,458,849
99.09%
2,573,555
0.91%
10,619,954
3.60%
Approve the Directors’ Remuneration Report for the year ended 31 December
2015
308,118,428
98.75%
3,914,366
1.25%
538,829
0.17%
* includes discretionary votes
This Directors’ remuneration report will be put to an advisory vote of the shareholders at the Company’s Annual General Meeting to be held on 5 May
2017. Changes to the Remuneration policy are being proposed and in line with best practice and as required by the regulations, the Remuneration
policy, as contained within this Directors’ remuneration report, also will be submitted to shareholders for approval at that Annual General Meeting.
Consideration by the Committee members of matters relating to directors’ remuneration
The Committee is authorised by the Board to appoint external advisers if it considers such an appointment to be beneficial. In 2012 the Committee
conducted a tender process and selected Kepler Associates as the Committee’s remuneration adviser. Kepler Associates, who are now known as
Kepler, a brand of Mercer, continued to act in that capacity during 2016, where over the course of the year, consultants from Kepler attended most of
the Committee’s meetings and provided advice on a range of topics, including remuneration trends and best practices and the design of the
performance share incentive plans.
Separately, the Company also received from Kepler advice on the accounting treatment of share options required by IFRS 2: Share-based payments.
Kepler provided no other services to the Company.
Kepler is a founding member and signatory to the Code of Conduct for Remuneration Consultants, details of which can be found at
www.remunerationconsultantsgroup.com. The consultants from Kepler are routinely asked to confirm any conflicts and the Committee is satisfied that
the advice received was objective and independent.
Kepler generally charges on an hourly basis. The aggregate amount of fees paid to Kepler during 2016 was £30,100 (2015: £62,000).
During 2017, the Committee intends to conduct a tender process for the advisory service it receives. The tender will include Kepler and a select group
of alternative advisers and the Committee will report on the result of that process in the 2017 Annual Report and Accounts.
The Company Secretary acts as secretary to the Committee. The Chairman of the Board and Group Chief Executive Officer are invited to attend
Committee meetings. In addition to the remuneration consultant, the Committee considers their views when reviewing the remuneration of Executive
Directors and other senior executives. Individuals who attend Remuneration Committee meetings do not participate in discussions concerning their
own remuneration.
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Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Directors’ remuneration report
continued
Annual report on remuneration continued
External appointments
The Company recognises that Executive Directors may be invited to become non-executive directors of other companies and that such appointments
can broaden the executives’ knowledge and experience, to the benefit of the Group. Fees payable to Executive Directors in connection with external
appointments may be retained by them with the approval of the Committee. As at the date of this report, Mr Lee does not hold any external
appointments.
Satisfaction of performance share awards
Performance share awards are made for nil consideration and are satisfied either by the issue of new shares or through market purchases of shares.
Currently the company has in place an employee benefit trust known as the Millennium & Copthorne Hotels plc Employee Benefit Trust 2006 (the
“EBT”), which was established to acquire shares to satisfy performance share awards that may vest from time to time. As at 31 December 2016, the
EBT held 2,244 unallocated shares (2015: 5,758 shares), representing approximately 0.00069% of the Company’s issued share capital as at the
same date. Executive Directors who participate in the LTIP, together with other employees of the Group who participate in the LTIP and other
performance share schemes, are potential beneficiaries of the EBT and, as such, are deemed to be interested in any shares held.
Dilution
The Company ensures that the level of shares granted under the Company’s share plans and the means of satisfying such awards remains within
best practice guidelines so that dilution from employee share awards does not exceed 10 per cent of the Company’s issued share capital for all-
employee share plans and 5 per cent in respect of executive share plans in any ten-year rolling period. The Company monitors dilution levels on a
regular basis and the Committee reviews these at least once a year.
Share price
The market price of a Millennium & Copthorne Hotels plc ordinary share at 31 December 2016 was 460.4 pence and the range during the year was
366.4 pence to 483.1 pence.
The Directors confirm that this report has been prepared in accordance with the Companies Act 2006, reflects the provisions of the Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and was approved at a meeting of the Board held on
16 February 2017.
On behalf of the Board
Alexander Waugh
Chairman of the Remuneration Committee
16 February 2017
64
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Nominations Committee report
Chairman’s Statement
Dear Shareholders,
I am pleased to report that the Board
experienced a stable year in 2016 and
welcomed the addition of Daniel Desbaillets in
September 2016. While the Committee formally
met three times during the year, I believe it is
beneficial for the full Board to participate in
discussions on significant Committee matters
and therefore I allocated time during several
regular Board meetings for such discussions.
The primary matters considered over the year
focused on Board and committee composition
and organisational structure and senior
management succession. The following
summarises the activities undertaken by the
Committee in 2016 and the Board changes that
occurred during the year.
Activities undertaken in 2016
Board and committee composition
With regard to the composition of the Board and
its committees, we took into account feedback
from our 2015 and 2016 Board evaluations and
looked to strengthen the hospitality experience
on the Board and the Group’s risk management
profile. This resulted in a few key actions.
First, a search was conducted for a new Director
with deep hospitality experience. Following that
search, Daniel Desbaillets was appointed as an
independent non-executive director in
September 2016. An external search agency
was not used for this appointment as the skills
and experience sought narrowed the pool of
potential candidates and Daniel Desbaillets was
one of the candidates known to some of the
Board by virtue of his directorship of M&C REIT
Management Limited, the manager for CDL
Hospitality Real Estate Investment Trust
(“H-REIT”), and also of M&C Business Trust
Management Limited, the trustee-manager for
CDL Hospitality Business Trust (“HBT”). Both
H-REIT and HBT are comprised as a stapled
group in CDL Hospitality Trusts (“CDLHT”).
Daniel has held senior positions with
InterContinental Hotels Group, Hilton and
Shangri-La since starting in the industry in 1973,
and most recently served as an independent
non-executive director on the boards of CDLHT.
Second, upon the recommendation of the Audit
Committee, a separate Risk Committee was
formed in April 2016 and the Committee
reviewed the initial membership for that
committee together with the membership of the
other committees of the Board. As a result and
upon the recommendation of the Committee,
Kwek Leng Peck, Kwek Eik Sheng, Nicholas
George, Aloysius Lee and Gervase MacGregor
were appointed to the newly formed Risk
Committee, with Mr Kwek Leng Peck serving as
its chairman. Susan Farr was appointed to the
Audit Committee from 1 April 2016, after having
attended and positively contributed to several
Audit Committee meetings prior to her
appointment.
Organisational structure and senior management
succession
With regard to organisational structure, the
Committee and broader Board identified the
need to further develop the Group’s asset
management, branding and marketing teams.
Several key hires and promotions were made
during the year, or are being contemplated, in
order to up-weight the Company’s capabilities in
those important areas. To assist with the
execution of the Company’s strategy and review
its processes and procedures, a Chief of Staff
joined us in October 2016, Tan Kian Seng. Mr
Tan has subsequently been appointed as interim
Chief Executive Officer, currently a non-Board
position, while the Committee carries a full and
detailed review of the skills and experience
required to lead the Group and deliver its
strategic goals.
The Committee also reviewed the succession
plans for the below-Board-level senior
management team. As a result, a new Group
Chief Financial Officer, Kok-Kee Chong, joined in
July 2016. Mr Chong has a wealth of experience
having worked in international accounting firms
and leading global financial institutions for 30
years, most recently as the Chief Operating
Officer at JP Morgan First Capital Securities and
Chief Administration Officer at JP Morgan Chase
Bank in Beijing.
Also, in light of the challenging conditions in Asia
and the United States, particularly in Singapore
and New York, the skills and experience
necessary to help turn around those regions was
reviewed and new appointments were made, or
are in process, to help refocus the business and
drive growth in those markets.
Changes to the Board
In August 2016 Aloysius Lee notified the Board
of his intention to retire as Group Chief Executive
Officer and a Director of the Company and the
Board agreed that he will step down effective as
at the end of February 2017. As stated above,
the Committee and the Board are reviewing the
optimal profile for Mr Lee’s successor and a
search is underway.
Daniel Desbaillets was appointed as an
independent non-executive director of the Board
with effect from 14 September 2016 to
strengthen the hospitality skills of the Board. In
addition, Howard Wu will join the Board on
17 February 2017 to further expand the Board’s
information technology, data security and
e-commerce experience.
Alexander Waugh and Nicholas George will
retire from the Board at the conclusion of the
2017 AGM and the Committee will be reviewing
the composition of the Board and Committees
in the meantime. Further details will be available
in due course.
Appointment procedure
There is a formal procedure for the appointment
of new Board Directors. As part of that
procedure, Committee members interview
suitable candidates who are proposed, either by
existing Board members, senior executives or by
an external search firm or contacts, and
extensive referencing is undertaken on each
candidate. Careful consideration is given to
ensure proposed appointees have sufficient time
available to devote to the role and that the
balance of skills, knowledge and experience on
the Board is maintained. When the Committee
has found a suitable candidate, a proposal is
made to the Board, which has retained the
responsibility to approve all such appointments.
Future priorities
The Company, like its competitors, must adapt
in order to grow in the current environment. The
Nominations Committee and Board continue to
keep the talent within the Board and senior
executive team under review and will look to
further enhance the human resources and
organisational structure of the Group in 2017.
Kwek Leng Beng
Chairman of the Nominations Committee
16 February 2017
65
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Nominations Committee report
continued
Committee Governance
Membership
The Nominations Committee comprises a
majority of independent Non-Executive
Directors and meets on such occasions as are
necessary, but at least twice each year. Kwek
Leng Beng chairs the Committee except when
the business of the meeting concerns his
succession. The Board considers that all
members have the experience and expertise
necessary to meet the Committee’s
responsibilities.
Role of the Committee
The role of the Committee is, among other
things, to:
• Review the structure, size and composition of
the Board, including the skills, knowledge,
experience and diversity of the Directors;
• consider succession planning for directors
and other senior executives, taking into
account the challenges and opportunities
facing the Company and the skills and
expertise needed;
• identify and nominate for approval by the
that this policy is reflected in all levels of the
organisation. As part of those efforts, we
support the aspirations espoused by Lord
Davies, in his review of ‘Women on Boards’
regarding the representation of women at the
highest level of the organisation. Selection of
candidates to join the Board is based on merit
and the contribution which they will bring to the
workings of the Board.
Advisors
The Company Secretary, the Group Chief
Executive Officer and other members of the
management team are invited to attend
meetings as appropriate. External advisers are
consulted when necessary to provide advice or
market perspective.
The Committee did not utilise any external
advisors or agencies during 2016. However,
management did engage recruitment firms
from time to time during the year, as
necessary, to identify qualified candidates to fill
senior executive positions within the Group.
Board candidates to fill Board vacancies when
they arise;
• keep under review the leadership needs of the
Terms of Reference
The Nominations Committee’s terms of
reference are available at:
www.millenniumhotels.com/corporate/
investors.html.
organisation, with a view to ensuring the
continued ability of the organisation to
compete effectively in the marketplace;
• review the time required from Non-Executive
Directors;
• in consultation with the Chairmen of the Board
committees, review and if appropriate
recommend changes to the composition of
the committees;
• consider the re-appointment of Non-Executive
Directors at the conclusion of their specified
terms of office, giving due regard to their
performance and ability to continue to
contribute to the Board; and
• assess the appointment of any Director to an
executive or other office.
Board diversity
The Committee recognises the value of
diversity and that it can only serve to
strengthen the Group. We continue to
incorporate all aspects of diversity as an
objective criterion for the selection of future
Board members and we also strive to ensure
66
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance Statement of Directors’ responsibilities in respect of the
annual report and accounts
The Directors are responsible for preparing the
annual report and the Group and parent
company financial statements in accordance
with applicable law and regulations.
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and the parent
company will continue in business.
Company law requires the Directors to prepare
Group and parent company financial
statements for each financial year. For the
Group financial statements, these are required
to be prepared in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union (EU) and
Article 4 of the IAS Regulation and have elected
to prepare the parent company financial
statements in accordance with UK Accounting
Standards including FRS 101 Reduced
Disclosure Framework.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the parent company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the parent company and enable them to
ensure that its financial statements comply with
the Companies Act 2006. They have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’
remuneration report and Corporate
Governance Statement that comply with that
law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
The Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs of
the Group and parent company and of their
profit or loss for that period. In preparing each
of the Group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and estimates that are
reasonable and prudent;
• for the Group financial statements, state
whether they have been prepared in
accordance with IFRSs as adopted by the
EU;
• for the parent company financial statements,
state whether applicable UK Accounting
Standards have been followed, subject to any
material departures disclosed and explained
in the parent company financial statements;
and
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial position
and profit or loss of the Company and the
undertakings included in the consolidation
taken as a whole;
• the strategic report includes a fair review of
the development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together with
a description of the principal risks and
uncertainties that they face; and
• the annual report and accounts, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s
position and performance, business model
and strategy
On behalf of the Board
Aloysius Lee Tse Sang
Group Chief Executive Officer
16 February 2017
67
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information Independent auditor’s report to the members of
Millennium & Copthorne Hotels plc only
Opinions and conclusions arising from our
audit
1 Our opinion on the financial statements
is unmodified
We have audited the financial statements of
Millennium & Copthorne Hotels Plc for the year
ended 31 December 2016 set out on pages 74
to 142. In our opinion:
• the financial statements give a true and fair
view of the state of the Group’s and of the
parent company’s affairs as at 31 December
2016 and of the Group’s profit for the year
then ended;
• the Group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union;
• the parent company financial statements have
been properly prepared in accordance with
UK Accounting Standards, including FRS 101
Reduced Disclosure Framework; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
2 Our assessment of risks of material
misstatement
We summarise below the risks of material
misstatement unchanged from prior year that
had the greatest effect on our audit (in
decreasing order of audit significance), our key
audit procedures to address those risks and
our findings based on those procedures in
order that the Company’s members as a body
may better understand the process by which
we arrived at our audit opinion. These
procedures were undertaken in the context of,
and solely for the purpose of, our statutory
audit opinion on the financial statements as a
whole and consequently the results of these
procedures are incidental to that opinion. We
do not express discrete opinions on separate
elements of the financial statements.
Valuation of hotel assets – 2016 - £3,238m
(2015 - £2,764m) – Risk vs 2015 - no
change
Refer to page 45 (Audit Committee Report),
Note 2.3 (Summary of significant accounting
policies), Note 3 (Accounting estimates and
judgments, and Note 12 (Financial Disclosures).
• The risk: The Group has significant hotel
assets which are carried at cost and are
subject to an annual review to assess whether
or not they may be impaired. The Group
applies a two-step process in assessing their
hotel assets for possible impairment. The first
step is to identify those properties at risk, i.e.
those where there is an indication of
impairment. Those hotels highlighted as being
at risk following this analysis are then
subjected to a detailed impairment review
which, for 2016, were all made with reference
to external valuations. Certain hotel assets
were considered at risk of impairment due to
being subject to impairment in previous years
(and therefore any decline in performance
compared to the projections used to
determine the previous impairment may result
in a further impairment being recorded) and
because the Group has experienced a difficult
trading environment in 2016, particularly in the
US and Asia, where some of the Group’s
largest hotel properties operate.
The estimated recoverable amount of an
asset is generally determined by forecasting
and discounting future cash flows. This
analysis is subjective due to the inherent
uncertainty involved in determining
appropriate assumptions such as discount
rates, growth rates, occupancy rates, revenue
per available room and terminal values.
Therefore, the review and challenge of these
assumptions is one of the key judgmental
areas that our audit is concentrated on.
• Our response: Our procedures included
challenging the directors’ initial risk
assessment process by which properties
were selected for further assessment of their
recoverable amount. This included
comparison of actual asset performance to
previous forecasts and to the market
performance and assessing the quantum of
available headroom. For those properties
selected for a detailed impairment review, we
used our own valuation specialists to assist us
in evaluating the assumptions and
methodologies used by the external valuers.
In particular, these included forecasted cash
flows as well as discount rates and terminal
multipliers. We compared the valuation
assumptions used to externally derived data
as well as our own assessments in relation to
key inputs such as projected economic and
market growth, occupancy and room rates,
cost forecasts, discount rates and terminal
multipliers. We considered the
appropriateness of the Group’s disclosures
about the impairments and the sensitivity of
the outcome of the impairment assessment to
changes in key assumptions.
• Our findings: We found the Group has a
robust, structured and comprehensive
process for appropriately identifying hotel
assets with impairment indicators. We found
that the methodologies used by the external
valuers were appropriate. As a result of our
work we found the assumptions used and the
resulting estimates to be slightly optimistic
although the quantum of impairment
recognised in 2016 continued to be
appropriate. We found that the disclosures
proportionately describe the inherent degree
of subjectivity in the estimates and the
potential impact on future periods of revisions
to these estimates.
Classification and valuation of investment
properties 2016 - £534m, (2015 - £506m) –
Risk vs 2015 - no change
Refer to page 46 (Audit Committee Report),
Note 2.3 (Summary of significant accounting
policies), Note 3 (Accounting estimates and
judgments), and Note 14 (Financial
Disclosures).
• The risk: Classification of an asset as
investment property (rather than as Property,
Plant & Equipment) requires judgment, and is
determined by reference to the Group’s future
intentions and business model. As discussed
in note 2.3, this classification results in a
different accounting treatment because
Property, Plant and Equipment is recorded at
depreciated cost whereas investment
properties are carried at fair value. The models
applied to determine the fair value of
investment properties are complex and
sensitive to assumptions around occupancy,
rental rates and future market growth. Most of
the investment properties are currently held in
Asia where the Group experienced economic
slowdown which may introduce increased
pressure and level of uncertainty around the
valuation of these assets.
68
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance
• Our response: The classification assessment
is most relevant upon acquisition of a new
property or when there is a significant change
in the manner in which the currently owned
properties are managed. In these situations,
our procedures included making enquiries of
the senior members of the finance team and
Directors, inspecting internal business plans,
and considering key terms of external
contracts and agreements. For the purposes
of the valuation assessment, we analysed the
appropriateness of the valuation methodology
applied, and considered whether it is in line
with accounting requirements and business
practice. We challenged the key assumptions
used in determining fair value. This included a
comparison of forecast rental rates, market
growth, occupancy rates, and real estate
sales prices with externally derived data and
internal budgets. We also performed our own
assessment of other key inputs such as
discount rates and terminal multipliers. Our
valuation specialists assisted in the evaluation
of the more subjective and complex
assumptions and analyses. Finally, we
assessed whether the Group’s disclosures
properly reflected the risks inherent in the
calculations and met the requirements of
relevant accounting standards.
• Our findings: We found the Group’s key
assumptions and the valuation methodology
applied to be appropriate, and the quantum of
the revaluation adjustments recorded were
balanced. We found that the disclosures
proportionately describe the inherent degree
of subjectivity in the estimates and the
potential impact on future periods of revisions
to these estimates. We found the classification
conclusions reached by the group in relation
to these properties continued to be
appropriate.
3 Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as
a whole was set at £7.0m (2015: £7.5m),
determined with reference to a benchmark of
group profit before tax normalised to exclude
this year’s impairments and revaluation
adjustments on investment properties as
disclosed in Note 7, of which it represents 5%
(2015: 5%). These Items are excluded due to
their volatility and for those items excluded from
the normalised PBT the component teams
perform procedures on items relating to their
components. The group audit team perform
procedures on the remaining excluded items.
We reported to the Audit & Risk Committee all
corrected and uncorrected misstatements we
identified through our audit with a value in
excess of £350,000, in addition to other audit
misstatements below that threshold that we
believed warranted reporting on qualitative
grounds.
The Group’s principal operations are in the
United Kingdom, Asia and the US which
represent over 91% of Group revenue (2015:
94%), 92% Group profit before tax (2015: 94%)
and 93% of Group total assets (2015: 92%). All
of these operations are scoped in for a full
scope audit to component materiality for the
Group audit purposes. Although not financially
significant, in agreement with the Audit
Committee, reviews of financial information
including inquiry were also performed on two
entities in Middle East and China by component
auditors simultaneously with the audit of the
Group and its financially significant operations.
The remaining 5% of total group revenue, 7%
of group profit before tax and 4% of total group
assets is represented by four other overseas
operations, none of which individually
represented more than 2% of any of total group
revenue, group profit before tax or total group
assets. For these remaining components, we
performed analysis at an aggregated group
level to re-examine our assessment that there
were no significant risks of material
misstatement within these operations.
The Group audit team instructed component
auditors as to the significant areas to be
covered, including the relevant risks detailed
above and the information to be reported back.
The Group audit team approved the
component materialities, which ranged from
£0.2 million to £4.5 million (2015: £0.2 million
to £5.0 million) having regard to the mix of size
and risk profile of the Group across the
components. The work on the five reporting
components was performed by component
auditors.
The Group audit team visited three component
locations in the UK, US and Asia. Telephone
conference meetings were also held with these
component auditors. At these visits and
meetings, the findings reported to the Group
audit team were discussed in more detail, and
any further work required by the Group audit
team was then performed by the component
auditor.
4 Our opinion on other matters prescribed
by the Companies Act 2006 is
unmodified
In our opinion:
• the part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the Companies
Act 2006;1 and
• the information given in the Strategic Report
and the Directors’ Report for the financial year
is consistent with the financial statements.
Based solely on the work required to be
undertaken in the course of the audit of the
financial statements and from reading the
Strategic report and the Directors’ report:
• we have not identified material misstatements
in those reports; and
• in our opinion, those reports have been
prepared in accordance with the Companies
Act 2006.
Number of
components
Audits for group reporting purposes
Three (Asia, US,
UK)
Reviews of financial information (including enquiry) Two (Middle East
and China)
Group
Revenue
%
91.0%
Group profit
before tax
%
Group total
assets
%
92.0%
93.0%
4.0%
1.0%
3.0%
Total
95.0%
93.0%
96.0%
69
Strategic ReportMillennium & Copthorne Hotels plc | Annual Report & Accounts 2016GovernanceFinancial statementsFurther information work we have undertaken and the basis of our
opinions.
Jonathan Downer
(Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
16 February 2017
Independent auditor’s report to the members of
Millennium & Copthorne Hotels plc only
continued
5 We have nothing to report on the
• adequate accounting records have not been
disclosures of principal risks
Based on the knowledge we acquired during
our audit, we have nothing material to add or
draw attention to in relation to:
• the directors’ statement of Risks on pages 26
to 30, concerning the principal risks, their
management, and, based on that, the
directors’ assessment and expectations of the
Group’s continuing in operation over the 1
years to 3; or
• the disclosures in note 1 of the financial
kept by the parent company, or returns
adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and
the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit
statements concerning the use of the going
concern basis of accounting.
Under the Listing Rules we are required to
review:
6 We have nothing to report in respect of
the matters on which we are required to
report by exception
• the directors’ statements, set out on pages
27 and 37, in relation to going concern and
longer-term viability; and
Under ISAs (UK and Ireland) we are required to
report to you if, based on the knowledge we
acquired during our audit, we have identified
other information in the annual report that
contains a material inconsistency with either
that knowledge or the financial statements, a
material misstatement of fact, or that is
otherwise misleading.
• the part of the Corporate Governance
Statement on page 40 relating to the
company’s compliance with the eleven
provisions of the 2014 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the
above responsibilities.
In particular, we are required to report to you if:
• we have identified material inconsistencies
between the knowledge we acquired during
our audit and the directors’ statement that
they consider that the annual report and
financial statements taken as a whole is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess the Group’s position and performance,
business model and strategy; or
• the Audit & Risk Committee Report does not
appropriately address matters communicated
by us to the Audit & Risk Committee report .
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
Scope and responsibilities
As explained more fully in the Directors’
Responsibilities Statement set out on page 66,
the directors are responsible for the preparation
of the financial statements and for being
satisfied that they give a true and fair view. A
description of the scope of an audit of financial
statements is provided on the Financial
Reporting Council’s website at www.frc.org.uk/
auditscopeukprivate. This report is made solely
to the company’s members as a body and is
subject to important explanations and
disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/
uk/auditscopeukco2014b, which are
incorporated into this report as if set out in full
and should be read to provide an
understanding of the purpose of this report, the
70
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Governance M SOCIAL SINGAPORE
71
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016 Financial statements
FINANCIAL
STATEMENTS
For more information online at:
millenniumhotels.com
72
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016
GRAND MILLENNIUM AUCKLAND
Strategic Report
Governance
Financial statements
Further information
Financial Statements
74 Consolidated income statement
75
76
78
79
81
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
139 Company statement of
financial position
140 Company statement of
changes in equity
141
Notes to the Company
financial statements
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016
73
Consolidated income
statement
For the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Other operating expense
Operating profit
Share of profit of joint ventures and associates
Finance income
Finance expense
Net finance expense
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings per share (pence)
Diluted earnings per share (pence)
The financial results above derive from continuing activities.
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
Notes
5
6
7
7
15
9
5
10
11
11
2016
£m
926
(395)
531
(382)
13
(55)
107
26
7
(32)
(25)
108
(10)
98
78
20
98
2015
£m
847
(350)
497
(342)
41
(84)
112
17
5
(25)
(20)
109
(12)
97
65
32
97
24.0p
24.0p
19.9p
19.8p
74
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Consolidated statement of
comprehensive income
For the year ended 31 December 2016
Profit for the year
Other comprehensive expense , net of tax:
Items that are not reclassified subsequently to income statement:
Remeasurement of defined benefit plan actuarial net losses
Items that may be reclassified subsequently to income statement:
Foreign currency translation differences – foreign operations
Foreign currency translation differences – equity accounted investees
Net loss on hedge of net investments in foreign losses
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income for the year, net of tax
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income for the year, net of tax
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
Note
23
2016
£m
98
(8)
(8)
422
41
(33)
430
422
520
411
109
520
2015
£m
97
(2)
(2)
(19)
4
(9)
(24)
(26)
71
49
22
71
75
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Consolidated statement of
financial position
As at 31 December 2016
Non-current assets
Property, plant and equipment
Lease premium prepayment
Investment properties
Investment in joint ventures and associates
Current assets
Inventories
Development properties
Lease premium prepayment
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Interest-bearing loans, bonds and borrowings
Employee benefits
Provisions
Other non-current liabilities
Deferred tax liabilities
Current liabilities
Interest-bearing loans, bonds and borrowings
Trade and other payables
Provisions
Income taxes payable
Total liabilities
Net assets
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
Notes
12
13
14
15
17
18
13
19
20
21
23
24
25
26
21
27
24
2016
£m
3,238
107
534
320
4,199
5
93
2
95
337
532
2015
£m
2,764
94
506
255
3,619
4
81
2
76
238
401
4,731
4,020
(951)
(23)
(10)
(14)
(220)
(1,218)
(93)
(214)
(1)
(35)
(343)
(1,561)
3,170
(665)
(13)
(8)
(12)
(210)
(908)
(178)
(187)
(2)
(33)
(400)
(1,308)
2,712
76
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Consolidated statement of
financial position continued
As at 31 December 2016
Equity
Issued share capital
Share premium
Translation reserve
Treasury share reserve
Retained earnings
Total equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Notes
29
30
30
2016
£m
97
843
537
(4)
1,195
2,668
502
3,170
2015
£m
97
843
196
(4)
1,144
2,276
436
2,712
These financial statements were approved by the Board of Directors on 16 February 2017 and were signed on its behalf by:
Kwek Leng Beng
Chairman
Aloysius Lee Tse Sang
Group Chief Executive Officer
Registered No: 3004377
77
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Consolidated statement of
changes in equity
For the year ended 31 December 2016
Balance at 1 January 2016
Profit
Other comprehensive income
Total comprehensive income
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends – equity holders
Dividends – non-controlling interests
Changes in ownership interests
Change in interests in subsidiaries without loss of control
Return of capital to non-controlling interests
Total transactions with owners
Balance at 31 December 2016
Balance at 1 January 2015
Profit
Other comprehensive expense
Total comprehensive income/(expense)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends – equity holders
Dividends – non-controlling interests
Share-based payment transactions (net of tax)
Changes in ownership interests
Change of interests in subsidiaries without loss of control
Total transactions with owners
Balance at 31 December 2015
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Treasury
share
reserve
£m
Retained
earnings
£m
Total excluding
non-controlling
interests
£m
Non-
controlling
interests
£m
97
–
–
–
–
–
–
–
–
97
97
–
–
–
–
–
–
–
–
843
–
–
–
–
–
–
–
–
196
–
341
341
–
–
–
–
–
(4)
–
–
–
–
–
–
–
–
1,144
78
(8)
70
(21)
–
2
–
(19)
843
537
(4)
1,195
843
–
–
–
–
–
–
–
–
210
–
(14)
(14)
–
–
–
–
–
(4)
–
–
–
–
–
–
–
–
1,117
65
(2)
63
(44)
–
2
6
(36)
2,276
78
333
411
(21)
–
2
–
(19)
2,668
2,263
65
(16)
49
(44)
–
2
6
(36)
97
843
196
(4)
1,144
2,276
436
20
89
109
–
(35)
(4)
(4)
(43)
502
472
32
(10)
22
–
(35)
–
(23)
(58)
436
Total
equity
£m
2,712
98
422
520
(21)
(35)
(2)
(4)
(62)
3,170
2,735
97
(26)
71
(44)
(35)
2
(17)
(94)
2,712
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
78
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Consolidated statement of
cash flows
For the year ended 31 December 2016
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Share of profit of joint ventures and associates
Other operating income
Other operating expense
Equity settled share-based transactions
Finance income
Finance expense
Income tax expense
Operating profit before changes in working capital and provisions
Movement in inventories, trade and other receivables
Movement in development properties
Movement in trade and other payables
Movement in provisions and employee benefits
Cash generated from operations
Interest paid
Interest received
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Dividends received from joint ventures and associates
Proceeds from insurance claim
Proceeds from sale of investment
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment, lease premium prepayment and investment properties
Net cash used in investing activities
Balance carried forward
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
Notes
2016
£m
2015
£m
12, 13
15
7
7
9
9
10
98
73
(26)
(13)
55
–
(7)
32
10
222
(20)
4
15
(1)
220
(21)
4
(33)
170
2
2
–
–
(100)
(96)
74
97
61
(17)
(41)
84
2
(5)
25
12
218
28
(14)
(4)
(8)
220
(20)
4
(27)
177
1
–
4
(61)
(85)
(141)
36
79
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Consolidated statement of
cash flows continued
For the year ended 31 December 2016
Balance brought forward
Cash flows from financing activities
Repayment of borrowings
Drawdown of borrowings
Dividends paid to non-controlling interests
Return of capital to non-controlling interests
Acquisition of non-controlling interests
Dividends paid to equity holders of the parent
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year
Reconciliation of cash and cash equivalents
Cash and cash equivalents shown in the consolidated statement of financial position
Bank overdrafts included in borrowings
Cash and cash equivalents for consolidated statement of cash flows
The notes on pages 81 to 138 are an integral part of these consolidated financial statements.
Notes
28
20
2016
£m
74
(339)
377
(35)
(4)
(2)
(21)
(24)
50
238
49
337
337
–
337
2015
£m
36
(724)
646
(35)
–
(17)
(44)
(174)
(138)
388
(12)
238
238
–
238
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Notes to the consolidated financial statements
Reporting entity
1
Millennium & Copthorne Hotels plc (the “Company”) is a limited company incorporated in England and Wales whose shares are publicly traded on the
London Stock Exchange. The registered office is located at Victoria House, Victoria Road, Horley, Surrey RH6 7AF, United Kingdom. These
consolidated financial statements comprise the Company and its subsidiaries (collectively the “Group”) . The consolidated financial statements of the
Group for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the Directors on 16 February 2017.
2.1 Basis of preparation
The consolidated financial statements are prepared on the historical cost basis except for investment properties and, from 1 January 2005, derivative
financial instruments, financial instruments held for trading and financial instruments classified as available-for-sale which are stated at their fair values.
Hotel properties are stated at cost or deemed cost. Deemed cost is calculated based on the hotel’s frozen valuation as at 1 January 2004. Non-
current assets held for sale are stated at the lower of carrying amount and fair value less costs to sell. The Group’s income statement and segmental
analysis separately identifies operating profit and other operating income and expense. This is in accordance with IAS 1 ‘Presentation of Financial
Statements’ and is consistent with the way that financial performance is measured by management and assists in providing a meaningful analysis of
the trading results of the Group. The financial statements are presented in the Company’s functional currency of sterling, rounded to the nearest
million.
The Company has elected to prepare its parent company financial statements in accordance with Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’.
Basis of accounting
These consolidated financial statements have been prepared in accordance with IFRS as required by EU law (IAS Regulation EC 1606/2002) . Details
of the Group’s accounting policies, including changes during the year, are included below.
Basis of consolidation
Subsidiaries
(i)
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
Interests in equity-accounted investees
(ii)
The Group’s interests in equity-accounted investees comprise interests in joint ventures and associates.
An associate is an entity in which the Group has significant influence but not control or joint control, over the financial and operating policies. A joint
venture is an arrangement in which the Group has joint control, and where the Group has rights to the net assets of the arrangement, rather than
rights to its assets and obligations for its liabilities.
Interests in joint ventures and associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction
costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive
income of equity-accounted investees, until the date on which significant influence or joint control ceases.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised
gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
2.2 Changes in accounting policies and disclosures
The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2016.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
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Notes to the consolidated financial statements
continued
The nature and the effect of these changes are disclosed below. Although these new standards and amendments applied for the first time in 2016,
they did not have a material impact on the annual consolidated financial statements of the Group. The nature and the impact of each new standard or
amendment are described below:
(i) Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS
The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation that constitutes a business.
The Group did not entered into such transactions during the year and thus this amendment did not impact the Group’s financial statements.
(ii) Annual Improvements to IFRSs – 2012-2014 Cycle
This cycle of improvements contains amendments to the following four standards:
• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Changes in method for disposal
• IFRS 7 Financial Instruments: Disclosures
–
– Offsetting disclosures in condensed interim financial statements
‘Continuing involvement’ for servicing contracts
• IAS 19 Employee Benefits – Discount rate in a regional market sharing the same currency
• IAS 34 Interim Financial Reporting – Disclosure of information ‘elsewhere in the interim financial report’
The Group has applied these improvements during the year.
2.3 Summary of significant accounting policies
Except for the changes explained in Note 2.2, the Group has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements.
Business combinations and goodwill
A
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the
acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed and identifiable net assets acquired are measured at the acquisition date fair value.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value as at that date through the income statement.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other
contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration
are recognised in profit or loss.
Goodwill is initially measured at cost, being the excess of the consideration transferred over the fair value of the Group’s net identifiable assets
acquired and liabilities assumed, and is allocated to each of the Group’s hotels that are expected to benefit from the combination. If the consideration
is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the
disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Foreign currency
B
The financial statements of each of the Group’s businesses are prepared in the functional currency applicable to that business.
Foreign currency translation
(i)
Transactions in foreign currencies other than the functional currency are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the foreign exchange rate at
that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated into sterling at foreign exchange rates ruling at the date the fair value was
determined.
(ii) Financial statements of foreign operations
On consolidation, the assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to sterling at
foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at rates
approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are
recognised directly in equity in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount
in the translation reserve is transferred to the income statement.
(iii) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges are taken to translation reserve.
They are released into the income statement upon disposal or partial disposal of the foreign operation.
C Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated
from the host contract and accounted for separately if certain criteria are met.
Derivatives are initially measured at fair value; any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to
initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss.
D Hedges
(i) Cash flow hedges
When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable
transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the forecast transaction
subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from equity
and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a forecast transaction subsequently results in
the recognition of a financial asset or a financial liability, then the associated gains and losses that were recognised directly in equity are reclassified to
the income statement in the same period or periods during which the asset acquired or liability assumed affects the income statement (i.e. when
interest income or expense is recognised) .
For cash flow hedges, other than those covered by the above policy, the associated cumulative gain or loss is removed from equity and recognised in
profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss is
recognised immediately in the income statement.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss
recognised in equity is recognised immediately in the income statement.
(ii) Hedge of monetary assets and liabilities
When a derivative financial instrument is used as an economic hedge of the foreign exchange exposure of a recognised monetary asset or liability,
hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in the income statement.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
(iii) Hedge of net investment in foreign operations
The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is
recognised directly in equity within the translation reserve. The ineffective portion is recognised immediately in the income statement.
E
Property, plant and equipment and depreciation
(i) Recognition and measurement
Land and buildings (other than investment properties) are stated at cost, except as allowed under IFRS 1 transition rules, less depreciation and any
provision for impairment. All other property, plant and equipment is stated at cost less depreciation and any provision for impairment. Any impairment
of such properties below depreciated historical cost is charged to the income statement.
Under the transition provisions of IFRS 1, land and buildings which were previously revalued under UK GAAP were measured on the basis of their
deemed cost, being their UK GAAP carrying value, including revaluations, as at 1 January 2004 being the effective date of the Group’s conversion to
IFRS.
(ii) Depreciation
Freehold land is not depreciated. All other assets are depreciated to their residual values on a straight-line basis over their estimated useful lives as
follows:
Building core
Building surface, finishes and services
Plant and machinery
Furniture and equipment
Soft furnishings
Computer equipment
Software
Motor vehicles
50 years or lease term if shorter
30 years or lease term if shorter
15 – 20 years
10 years
5 – 7 years
5 years
up to 8 years
4 years
No residual values are ascribed to building surface finishes and services. Residual values ascribed to building core depend on the nature, location and
tenure of each property.
(iii) Subsequent costs
Capital expenditure on major projects is recorded separately within property, plant and equipment as capital work in progress. Once the project is
complete the balance is transferred to the appropriate fixed asset categories. Capital work in progress is not depreciated.
Interest attributable to funds used to finance the construction or acquisition of new hotels or major extensions to existing hotels is capitalised net of
tax relief and added to the cost of the hotel core.
Operating supplies, which include china, linen, glass and silverware, were stated at their deemed costs as at 1 January 2008 and subsumed into the
costs of the hotel buildings. Subsequent renewals and replacements of such stocks and new supplies upon initial hotel opening are written off as
incurred to the income statement.
F
Leases
Leased assets
(i)
Leases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. The leased asset is initially
recorded at the lower of fair value and the present value of minimum lease payments.
The equivalent liability, categorised as appropriate, is included within current or non-current liabilities. Assets are depreciated over the shorter of the
lease term and their useful economic lives. Finance charges are allocated to accounting periods over the period of the lease to produce constant
rates of return on the outstanding balance.
Rentals payable by the Group under operating leases are charged to the income statement on a straight-line basis over the lease term even if
payments are not made on the same basis. In cases where rents comprise a fixed and a variable element, the fixed element only is charged to the
84
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements income statement on a straight-line basis with the variable amounts being charged as they become due. Lease incentives received are recognised as
an integral part of the total lease expense.
Rentals receivable by the Group as lessor under operating leases, including the sub-letting of retail outlets within hotel properties, are credited to the
income statement on a straight-line basis over the lease term even if the receipts are not made on such a basis. Costs, including depreciation incurred
in earning the lease income, are recognised as an expense.
(ii) Lease premium
The Group makes and receives initial payments on entering into both long and short leases of land and buildings. Where payment for leased land is
equivalent to the purchase of the freehold interest, the lease is classified as a finance lease. All other payments for leases of land are classified as
operating leases.
On the statement of financial position, finance lease payment attributable to the land is recorded as property, plant and equipment and for operating
leases, the land is recorded as a lease premium prepayment. Both lease types are charged to the income statement on a straight-line basis over the
term of the lease. Interest attributable to funds to finance the purchase or lease of land is capitalised gross of tax relief and added to the cost of lease.
In the case of lease premiums received, these are reflected on the statement of financial position as deferred income, appropriately classified between
current and non-current liabilities and are credited to the income statement on a straight-line basis over the term of the lease.
Impairment
G
The carrying amounts of the Group’s assets, other than investment properties, inventories, employee benefit assets and deferred tax assets are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated.
The recoverable amount of assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
Impairment is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are reversed if there has been a change in the estimates used to determine the recoverable amount. Where permissible
under IFRS, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment had been recognised.
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in fair value of the asset below its cost is considered
in determining whether the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the
difference between acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income
statement – is removed from equity and recognised in the income statement.
Investment properties
H
Investment properties held by the Group are properties which are held either to earn rental income or for capital appreciation or both. Investment
properties are stated at fair value. Any increase or decrease in the fair value on annual revaluation is recognised in the income statement in
accordance with IAS 40 Investment Property. In limited circumstances, the determination of fair value is uncertain, and these properties are carried at
cost. Impairment analysis over these properties is carried out annually.
An external independent valuer, having an appropriate recognised professional qualification and recent experience in the location and category of the
property being valued, values the portfolio annually. The fair values are based on market values, being the estimated amount for which a property
could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without compulsion.
Inventories
I
Inventories are recorded at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Development properties
J
Development properties are stated at the lower of cost and net realisable value. They are held for sale in the short term and are therefore classified as
current assets. The cost of development properties includes interest and other related expenditure incurred in order to get the asset ready for its
intended use. Borrowing costs payable on loans funding a development property are also capitalised, on a specific identification basis, as part of the
cost of the development property until the completion of development. Payments received from purchasers arising from pre-sales of the property
units prior to the completion are included as deferred income under other financial liabilities in the statement of financial position.
K Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and
cash equivalents.
Borrowings
L
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost: any
difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the
borrowings using the effective interest method.
Income tax
M
Income tax on profit or loss comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates
to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided for using the balance sheet method, providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: (i) the
initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and (ii) differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the benefit will be realised.
Deferred tax assets and liabilities are offset only to the extent that: (i) the Group has a legally enforceable right to offset current tax assets against
current tax liabilities; (ii) the Group intends to settle net; and (iii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by
the same taxation authority.
N
Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined benefit post-employment plans, including pension plans, is calculated separately for each plan by
estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is
discounted to determine its present value, and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary using
the projected unit credit method.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised immediately as an
expense in the income statement.
The Group recognises remeasurement gains and losses within the consolidated statement of comprehensive income in the period in which they
occur.
86
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements The Group determines the net interest expense (income) on the net defined benefit liabilities (asset) for the period by applying the discount rate used
to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) , taking into account any
changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other
expenses related to defined benefit plans are recognised in the income statement.
(iii) Long-term service benefits
The Group’s net obligation in respect of long-term service benefits, other than post-employment plans, is the amount of future benefit that employees
have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is
discounted to its present value and the fair value of any plan assets is deducted.
(iv) Share-based payment transactions
The share-based incentive schemes allow the Group’s employees to acquire shares of Millennium & Copthorne Hotels plc.
The cost of equity-settled transactions with employees for awards granted after 7 November 2002 is measured by reference to the fair value at the
date on which they are granted. The fair value is determined by using an appropriate pricing model, further details of which are given in Note 23.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/
or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that
period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or
non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all
other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been
modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the
share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met.
However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled
and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-
settled transaction awards are treated equally.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are
given in Note 11) .
Provisions
O
A provision is recognised on the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks
specific to the liability. Further details on provisions are given in Note 24.
Revenue and its recognition
P
Revenue comprises:
• Income from the ownership and operation of hotels – recognised at the point at which the accommodation and related services are provided;
• Management fees – earned from hotels managed by the Group, usually under long-term contracts with the hotel owner. Management fees include a
base fee, which is generally a percentage of hotel revenue, and/or an incentive fee, which is generally based on the hotel’s profitability; recognised
when earned on an accrual basis under the terms of the contract;
• Franchise fees – received in connection with licensing of the Group’s brand names, usually under long-term contracts with the hotel owner. The
Group charges franchise royalty fees as a percentage of room revenue; recognised when earned on an accrual basis under the terms of the
agreement;
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continued
• Income from property rental – recognised on a straight-line basis over the lease term, lease incentives granted are recognised as an integral part of
the total rental income; and
• Development property sales – recognised when the significant risks and rewards of ownership have passed to the buyer, which is usually when legal
title transfers depending on jurisdictions. The trigger for revenue recognition depends on the laws within each jurisdiction.
Q Dividend distribution
Dividend distribution to the shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are
appropriately authorised and approved for payment and are no longer at the discretion of the Company. Unpaid dividends that do not meet these
criteria are disclosed in the notes to the financial statements.
R Operating segment information
Disclosure of segmental information is principally presented in respect of the Group’s geographical segments. The segments reported reflect the
operating information included in internal reports that the Chief Operating Decision Maker (“CODM”) , which is the Board, regularly reviews. Further
details are given in Note 5.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group’s other components. Discrete financial information is reported to and is
reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers (“COOs”) or equivalent who are directly
accountable for the functioning of their segments and maintain regular contact with the Group Chief Executive Officer and Chairman of the CODM to
discuss the operational and financial performance. The CODM makes decisions about allocation of resources to the regions managed by the COOs.
No operating segments have been aggregated to form the reportable operating segments.
Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items principally comprise interest-bearing loans, borrowings, cash and cash equivalents, net finance expense, taxation balances
and corporate expenses.
Non-current assets held-for-sale
S
Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through
continuing use are classified as held-for-sale. Generally the assets (or disposal group) are measured at the lower of their carrying amount and fair
value less cost to sell. Any impairment loss on a disposal group is first allocated to property, plant and equipment and lease premium prepayment,
and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets,
employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment
losses on initial classification as held-for-sale and subsequent gains or losses on remeasurement are recognised in the income statement. Gains are
not recognised in excess of any cumulative impairment loss.
Other financial assets and liabilities
T
Trade investments are classified as available-for-sale assets and are included under non-current assets within ‘other financial assets’. They are
recorded at market value with movements in value taken to equity. Any impairment to value is recorded in the income statement.
Trade and other receivables are stated at their nominal amount (discounted if material) less any impairment. Trade and other payables are stated at
their nominal amount (discounted if material) .
Related parties
U
For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to
control the party or exercise significant influence over the party making financial and operating decisions, or vice versa, or where the Group and the
party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Accounting estimates and judgements
3
Management has discussed with the Audit & Risk Committee the selection and disclosure of the Group’s critical accounting policies and estimates
and the application of these policies and estimates.
The preparation of financial statements under IFRS requires the Group to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingencies and the reported amount of revenue and expenses during the year. The Group evaluates its
estimates and assumptions on an ongoing basis. Such estimates and judgements are based upon historical experience and other factors it believes
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements to be reasonable under the circumstances, which form the basis for making judgements about the carrying value of assets and liabilities that are not
readily apparent from other sources.
Certain critical accounting policies, among others, affect the Group’s more significant estimates and assumptions used in preparing the consolidated
financial statements. Actual results could differ from the Group’s estimates and assumptions. Key estimates and judgements have been made in the
following areas, of which the most significant are listed first:
Asset carrying values
Management performs an assessment at each balance sheet date of assets across the Group where risk of impairment has been identified. Key
judgement areas include the carrying values of property, plant and equipment and investment properties, investment in and loans to joint ventures
and associates, and development properties. The recovery of these assets is dependent on future cash flows being receivable and the provision of
future services or goods by third parties.
Where risk of impairment has been identified an impairment review has been performed on property, plant and equipment, lease premium
prepayments and investments in and loans to joint ventures and associates held across the Group on a cash generating basis. Where appropriate,
external evaluations are also undertaken. The impairment review is performed on a ‘value in use’ basis which requires estimation of future net
operating cash flows, the time period over which they will occur, an appropriate discount rate and appropriate growth rates. The discount rates used
reflect appropriate sensitivities involved in the assessment. Discount rates used for impaired properties and investment properties are disclosed in
Notes 12 and 14.
Investment properties
The Group holds a number of investment properties and accounts for such properties in accordance with the accounting policy set out in Note 2.3H.
The Group owns assets which are leased to external third parties with lease rentals and related charges varying according to the agreement involved.
The Group accounts for such assets in its financial statements in accordance with the accounting policy set out in Note 2.3H.
Where the indicators are such that on balance the Group is shown to be a passive investor, the relevant property is accounted for in accordance with
IAS 40 and the Group accounts for the fair value change through the income statement as other operating income or expense. Indicators considered
include (1) party that has the power to make the significant operating and financing decisions regarding the operations of the property in a
management contract, (2) calculation of the lessor’s return, (3) lessor’s power of intervention under the management contract, and (4) duration of the
contract.
Consolidation of entities in which the Group holds less than a majority of voting rights (de facto control)
In 2014, the new consolidation accounting standard, IFRS 10 introduced a new control model that focuses on whether the Group has power over an
investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.
This required the Group to consider whether it has de facto control over its investees, particularly when it owned less than 50% of the voting rights. In
2014, in accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees and changed its control
conclusion in respect of its investment in CDL Hospitality Trusts (“CDLHT”) , which was previously accounted for as an associate using the equity
method. Although the Group owns less than half of the voting power of the investee, management determined that, under IFRS 10, the Group has
had control over the investee since its inception. This is because a 100% owned subsidiary of the Group, M&C REIT Management Limited acts as
REIT Manager with its fees having a performance-based element and therefore the Group has exposure to variable returns from its involvement with
the investee. Accordingly, in 2014, the Group applied acquisition accounting to the investment from the year it was first established in 2006, and
restated the relevant amounts as if the investee had been consolidated from that year. This judgement was reconsidered this year and continues to
be appropriate.
Business combination
For each acquisition, the Group has to make a judgement whether to account the transaction as an asset purchase or a business combination, which
results in a different accounting treatment. In particular, under business combination accounting, goodwill and additional intangible assets may arise
and the valuation of acquired assets is complex. In addition, transaction costs can be capitalised in an asset acquisition, but have to be charged
through the income statement for a business combination. The classification of each acquisition and related accounting is highly judgemental.
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continued
Taxation
The tax charge for the year is recognised in the income statement and the statement of comprehensive income, according to the accounting
treatment of the related transaction. The tax charge comprises both current and deferred tax. The calculation of the Group’s total tax charge involves
a degree of estimation and judgement, particularly when tax treatment for certain items cannot be determined until a final resolution. In addition,
recognition of deferred tax assets is judgemental as it depends on expected timing and level of future taxable income.
Provisions for tax accruals require judgements on the interpretation of tax legislation, developments in tax case law and the potential outcomes of tax
audits and appeals. The final resolution of certain of these items may give rise to material income statement and/or cash flow variances.
Land leases classification
The Group holds a number of hotels with leases of land that are determined to have an indefinite economic life. These are classified as a finance
lease, even if at the end of the lease term title does not pass to the lessee. In determining whether the lease of land should be accounted for as a
finance or an operating lease, the following factors were considered:
• transfer of ownership
• purchase options
• present value of minimum lease payments in comparison to fair value of land.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic
Report on pages 4 to 30. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Strategic
Report – Financial performance on pages 10 to 11 and in the key performance indicators on page 9. In addition, Note 22 of the financial statements
includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group has considerable financial resources and plans for
refinancing maturing facilities are under way.
Cash flow forecasts for the Group have been prepared for a period in excess of twelve months from the date of approval of these consolidated
financial statements. These forecasts reflect an assessment of current market conditions. The forecasts completed on this basis show that the Group
will be able to operate within the current committed debt facilities and show continued compliance with the financial covenants. In addition,
management has considered various mitigating actions that could be taken in the event that market conditions are worse than their current
assessment. Such measures include further reduction in costs and in capital expenditure. On the basis of the exercise as described above and the
available committed debt facilities, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in
operational existence for at least 12 months from the signing of this annual report. Accordingly, they continue to adopt the going concern basis in
preparing the financial statements of the Group and the Company.
In assessing whether the Group is a going concern, the Directors follow a review process which is consistent with the principles set out in the
“Guidance on Risk Management, Internal Control and Related Financial and Business Reporting 2014” published by the Financial Reporting Council.
Defined benefit pension plans
The Group operates a number of defined benefit pension plans. As set out in Note 23, the calculation of the present value of the Group’s defined
benefit obligations at each period end is subject to significant estimation. An appropriately qualified, independent actuary is used to undertake this
calculation. The assumptions made by the actuary are the best estimates chosen from a range of possible actuarial assumptions, which due to the
timescale covered may not necessarily be borne out in practice. The valuation of scheme assets is based on their fair value at the balance sheet date.
As these assets are not intended to be sold in the short term, their values may be subject to significant change before they are realised. In reviewing
the work of the independent actuary, management is required to exercise judgement to satisfy themselves that appropriate weight has been afforded
to macro economic factors.
Details of the assumptions used are set out in Note 23.
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non financial liabilities.
The Group has an established control framework with respect to the measurement of fair values. Management reviews significant unobservable inputs
and valuations adjustments. If third party information is used to measure fair values, then management assesses the evidence obtained from third
parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in their fair value hierarchy in which such
valuations should be classified. Significant valuation issues are reported to the Group Audit & Risk Committee.
90
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements When measuring fair values, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuations techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
• Level 2: inputs other than quoted prices led in Level 1 that are observable for an asset or liability, either directly or indirectly.
• Level 3: inputs for an asset or liability that are not based on observable market data.
If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.
Further information about the assumptions made in measuring fair values is included in Note 14 ‘Investment Properties’ and Note 23 ‘Employee
Benefits’.
New standards and interpretations not yet adopted
4
The following standards and interpretations, which have been issued by the IASB, become effective after the current year end and have not been
early adopted by the Group:
International Accounting Standards (IAS/IFRS/IFRIC)
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments: Classification and measurement
IFRS 16 Leases
Effective date
1 January 2018
1 January 2018
1 January 2019
The Group is assessing the potential impact on its consolidated financial statements resulting from implementation of these standards.
5 Operating segment information
Disclosure of segmental information is principally presented in respect of the Group’s geographical segments.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items principally comprise: interest-bearing loans, borrowings, cash and cash equivalents, net financial expense, taxation balances and
corporate expenses.
Geographical segments
The hotel and property operations are managed on a worldwide basis and operate in seven principal geographical areas as follows:
• New York
• Regional US
• London
• Rest of Europe (including the Middle East)
• Singapore
• Rest of Asia
• Australasia
The segments reported reflect the operating segment information included in the internal reports that the Chief Operating Decision Maker (“CODM”) ,
which is the Board, regularly reviews.
The reportable segments are aligned with the structure of the Group’s internal organisation which is based according to geographical region. Discrete
financial information is reported to and is reviewed by the CODM on a geographical basis. Operating segments have Chief Operating Officers (“COOs”)
or equivalent who are directly accountable for the functioning of their segments and who maintain regular contact with the Group Chief Executive
Officer and Chairman of the CODM to discuss the operational and financial performance. The CODM makes decisions about allocation of resources
to the regions managed by the COOs.
The results of CDLHT have been incorporated within the existing geographical regions. In addition, CDLHT operations are reviewed separately by its
board on a monthly basis.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Segment results
Revenue
Hotel
Property operations
REIT
Total revenue
Hotel gross operating profit
Hotel fixed charges 1
Hotel operating profit
Property operating profit/(loss)
REIT operating profit/(loss)
Central costs
Other operating income 2
Other operating expense 2
Other operating expense – REIT 2
Operating profit/(loss)
Share of joint ventures and associates profit
Add: Depreciation and amortisation
Add: Net revaluation deficit & impairment
EBITDA 3
Less: Depreciation, amortisation, net revaluation deficit & impairment
Net finance expense
Profit before tax
New York
£m
Regional
US
£m
London
£m
Rest of
Europe
£m
Singapore
£m
Rest of Asia
£m
Australasia
£m
Central
Costs
£m
Total
Group
£m
2016
136
–
–
136
21
(30)
(9)
–
–
–
–
(15)
–
(24)
–
8
15
(1)
136
4
–
140
28
(23)
5
(1)
–
–
3
(2)
–
5
–
12
(1)
16
121
–
–
121
60
(21)
39
–
–
–
–
–
–
39
–
6
–
45
76
–
11
87
15
(7)
8
–
3
–
–
(5)
(4)
2
3
6
9
20
127
3
14
144
52
(5)
47
2
(5)
–
–
(4)
(10)
30
–
12
14
56
163
9
19
191
55
(37)
18
8
7
–
8
(2)
(13)
26
23
25
7
81
55
40
12
107
25
(4)
21
21
11
–
2
–
–
55
–
2
–
57
–
–
–
–
–
–
–
–
–
(26)
–
–
–
(26)
–
2
–
(24)
814
56
56
926
256
(127)
129
30
16
(26)
13
(28)
(27)
107
26
73
44
250
(117)
(25)
108
92
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements New York
£m
Regional
US
£m
London
£m
Rest of
Europe
£m
Singapore
£m
Rest of Asia
£m
Australasia
£m
Central
Costs
£m
Total
Group
£m
2015
Revenue
Hotel
Property operations
REIT
Total revenue
Hotel gross operating profit
Hotel fixed charges 1
Hotel operating profit
Property operating profit/(loss)
REIT operating profit/(loss)
Central costs
Other operating income 2
Other operating expense 2
Other operating income – REIT 2
Other operating expense – REIT 2
Operating profit/(loss)
Share of joint ventures and associates profit
Add: Depreciation and amortisation
Add: Net revaluation deficit & impairment
EBITDA 3
Less: Depreciation, amortisation, net
revaluation deficit & impairment
Net finance expense
Profit before tax
138
–
–
138
33
(27)
6
–
–
–
–
(23)
–
–
(17)
–
7
23
13
118
3
–
121
25
(18)
7
(1)
–
–
–
(1)
–
–
5
–
9
1
15
124
–
–
124
63
(20)
43
–
–
–
–
–
–
–
43
–
6
–
49
75
–
3
78
20
(10)
10
–
(1)
–
–
(15)
–
–
(6)
1
4
15
14
122
2
12
136
54
(3)
51
1
(3)
–
–
(1)
1
–
49
–
11
–
60
148
7
20
175
49
(33)
16
6
7
–
32
(37)
–
(4)
20
16
21
9
66
40
23
12
75
17
(6)
11
11
12
–
–
(1)
8
(2)
39
–
2
(5)
36
–
–
–
–
–
–
–
–
–
(21)
–
–
–
–
(21)
–
1
–
(20)
1 Hotel fixed charges include depreciation, amortisation of lease premium prepayments, property rent, taxes and insurance, operating lease rentals and management fees.
2 See Note 7 for details of other operating income and expense.
3 EBITDA is earnings before interest, tax, depreciation and amortisation.
765
35
47
847
261
(117)
144
17
15
(21)
32
(78)
9
(6)
112
17
61
43
233
(104)
(20)
109
93
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
New York
£m
Regional
US
£m
London
£m
674
–
(33)
–
–
641
–
–
–
–
365
–
(47)
–
–
318
43
(1)
–
42
502
–
(14)
–
–
488
–
–
–
–
New York
£m
Regional
US
£m
London
£m
540
–
(24)
–
–
516
–
–
–
–
293
–
(31)
–
–
262
33
(1)
–
32
490
–
(19)
–
–
471
–
–
–
–
2016
Rest of
Europe
£m
235
61
(34)
(2)
–
260
–
–
20
20
2015
Rest of
Europe
£m
248
62
(27)
(2)
–
281
–
–
–
–
Singapore
£m
Rest of Asia
£m
Australasia
£m
21
606
(21)
(9)
–
597
85
(5)
–
80
691
139
(69)
(2)
159
918
176
(3)
141
314
187
195
(11)
(8)
–
363
94
(3)
–
91
Singapore
£m
Rest of Asia
£m
Australasia
£m
17
528
(19)
(11)
–
515
75
(7)
–
68
602
127
(63)
(2)
112
776
135
(3)
143
275
138
158
(7)
(2)
–
287
81
(4)
–
77
Total
Group
£m
2,675
1,001
(229)
(21)
159
3,585
398
(12)
161
547
(220)
(35)
(707)
3,170
Total
Group
£m
2,328
875
(190)
(17)
112
3,108
324
(15)
143
452
(210)
(33)
(605)
2,712
Segmental assets and liabilities
Hotel operating assets
REIT operating assets
Hotel operating liabilities
REIT operating liabilities
Investment in joint ventures and associates
Total hotel operating net assets
Property operating assets
Property operating liabilities
Investment in joint ventures and associates
Total property operating net assets
Deferred tax liabilities
Income taxes payable
Net debt
Net assets
Hotel operating assets
REIT operating assets
Hotel operating liabilities
REIT operating liabilities
Investment in joint ventures and associates
Total hotel operating net assets
Property operating assets
Property operating liabilities
Investment in joint ventures and associates
Total property operating net assets
Deferred tax liabilities
Income taxes payable
Net debt
Net assets
94
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
Geographic information
Revenue from external customers
United States
United Kingdom
Singapore
New Zealand
Taiwan
South Korea
China
Maldives
Malaysia
France
Australia
Philippines
Italy
Indonesia
Other
Total revenue per consolidated income statement
2016
£m
276
183
144
98
62
47
25
14
15
11
9
6
6
5
25
926
2015
£m
259
175
136
66
55
40
24
15
14
12
9
6
5
5
26
847
The revenue information above is based on the location of the business. The £926m (2015: £847m) revenue is constituted of £814m (2015: £765m)
of hotel revenue, £56m (2015: £35m) of property operations revenue and £56m (2015: £47m) of REIT revenue. The property operations revenue
comprises £40m (2015: £23m) from New Zealand, £3m (2015: £2m) from Singapore and £13m (2015: £10m) from other countries.
Non-current assets
United States
United Kingdom
Singapore
Taiwan
China
New Zealand
South Korea
Japan
Australia
Maldives
Hong Kong
Malaysia
Italy
France
Philippines
Indonesia
Netherlands
Others
Total non-current assets per consolidated statement of financial position
2016
£m
1,053
699
702
286
286
242
199
215
122
94
113
64
42
36
12
13
20
1
4,199
2015
£m
849
693
610
238
257
185
176
166
101
90
89
55
52
34
12
11
–
1
3,619
Non-current assets for this purpose consist of property, plant and equipment, lease premium prepayment, investment properties, investment in joint
ventures and associates, loans due from associate and other financial assets.
95
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Administrative expenses
6
The following items are included within administrative expenses:
Included in administrative expenses is the auditor’s remuneration, for audit and non-audit services as follows:
Auditor’s remuneration
Statutory audit services:
– Annual audit of the Company and consolidated financial statements
– Audit of subsidiary companies
Non-audit related services:
– Tax advisory
Total
Repairs and maintenance
Depreciation
Lease premium amortisation
Rental paid/payable under operating leases
–
land and buildings
– plant and machinery
7 Other operating income and expense
Revaluation gain/(deficit) of investment properties
– REIT properties (Note 1)
– Millennium Mitsui Garden Hotel Tokyo
– Biltmore Court & Tower
– Tanglin Shopping Center
Impairment of property, plant & equipment
Gain on insurance claim
2016
£m
2015
£m
1
1
2
1
3
2016
£m
45
70
3
1
5
2016
£m
(27)
8
3
(4)
(24)
(44)
2
(42)
1
1
2
1
3
2015
£m
41
59
2
1
4
2015
£m
3
32
(1)
(1)
(76)
(43)
–
(43)
Notes
(a)
(b)
(c)
Note 1: Including impairment loss relating to a REIT property classified as property, plant & equipment of £4m (2015: £1m).
(a) Revaluation gain/deficit of investment properties
At the end of the financial year, in accordance with the Group’s policy its investment properties were subject to external professional valuation on an
open-market existing use basis. Based on these valuations, the revaluation gain or deficit was recorded as considered appropriate by the Directors.
Further details on these valuations are provided in Note 14.
Impairment
(b)
The Directors undertook their annual review of the carrying value of hotels and property assets for indication of impairment and where appropriate,
external valuations were also obtained. As a result of this review, the total impairment charge for the year ended 31 December 2016 was £24m
consisting of £15m in New York, £5m in Rest of Europe, £2m in Rest of Asia and £2m for Regional US. For 2015, a total impairment charge of £76m
was recognised in relation to £23m in New York, £15m in Rest of Europe, £37m in Rest of Asia and £1m for New Zealand. Further information is
given in Note 12.
96
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
(c) Gain on insurance claim
In May 2016, a settlement was reached with the insurers in relation to Millennium Hotel Christchurch which was one of the hotels affected by the
2011 New Zealand earthquake. A gain of £2m in respect of material damage claim relating to fixtures, fittings and equipment was recognised by the
Group in the first half of 2016. The lease for this property has expired and this 2016 settlement is the last insurance claim relating to the Christchurch
earthquake damage.
8
Personnel expenses
Wages and salaries
Compulsory social security contributions
Contributions to defined contribution schemes
Defined benefit pension cost/(gain) – recorded in the statement of comprehensive income
Defined benefit pension cost – recorded in the income statement
Equity-settled share-based payment transactions
2016
£m
277
49
14
10
2
–
352
The average number of employees employed by the Group (including Directors) during the year analysed by category was as follows:
Hotel operating staff
Management/administration
Sales and marketing
Repairs and maintenance
Directors’ remuneration
Remuneration
Received by the Directors under:
–
long-term incentive schemes
– Pensions
9
Net finance expense
Interest income
Interest receivable from joint ventures and associates
Foreign exchange gain
Finance income
Interest expense
Foreign exchange loss
Finance expense
Net finance expense
2015
£m
291
42
12
2
2
2
351
2015
Number
8,399
1,385
466
620
2016
Number
8,397
1,481
468
650
10,996
10,870
2016
£m
2015
£m
2
–
–
2
2016
£m
3
1
3
7
(23)
(9)
(32)
(25)
2
–
–
2
2015
£m
3
1
1
5
(20)
(5)
(25)
(20)
97
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
10
Income tax expense
Current tax
Corporation tax charge for the year
Adjustment in respect of prior years
Total current tax expense
Deferred tax (Note 26)
Origination and reversal of timing differences
Effect of change in tax rate on opening deferred taxes
Benefits of tax losses recognised
Over provision in respect of prior years
Total deferred tax credit
Total income tax charge in the consolidated income statement
UK
Overseas
Total income tax charge in the consolidated income statement
2016
£m
30
–
30
(2)
(3)
(15)
–
(20)
10
8
2
10
2015
£m
26
–
26
(9)
2
(5)
(2)
(14)
12
7
5
12
For the year ended 31 December 2016, the Group recorded a tax expense of £10m (2015: £12m) excluding the tax relating to joint ventures and
associates, giving rise to an effective tax rate of 12.2% (2015: 12.9%) . The effective tax rate has been affected by a number of factors which include
the following items:
• Other income and expense of the Group;
• Reduced tax rates applied to brought forward net deferred tax liabilities in the UK; and
• Tax adjustments in respect of previous years.
Excluding the impact of the items noted above, the Group’s underlying effective tax rate is 15.4% (2015: 18.4%) .
For the year ended 31 December 2016, a charge of £3m (2015: £6m) relating to joint ventures and associates is included in the profit before tax.
With regard to the UK, a reduction to 17% in the rate applicable from 1 April 2020 was substantively enacted during the year. This has reduced the
deferred tax liability as at 31 December 2016.
Adjustments in respect of settlement of prior years tax liabilities
The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge
necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution
has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may
give rise to material profit and loss and/or cash flow variances. The geographical complexity of the Group’s structure makes the degree of estimation
and judgement more challenging. The resolution of issues is not always within the control of the Group and it is often dependent on the efficacy of the
legal processes in the relevant tax jurisdictions in which the Group operates.
98
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Income tax reconciliation
Profit before income tax in consolidated income statement
Less share of profits of joint ventures and associates
Profit on ordinary activities excluding share of joint ventures and associates
Income tax on ordinary activities at the standard rate of
UK tax of 20.00% (2015: 20.25%)
Tax exempt income
Non-deductible expenses
Use of brought forward previously unrecognised tax losses
Other effect of tax rates in foreign jurisdictions
Effect of change in tax rate on opening deferred taxes
Other adjustments to tax charge in respect of prior years
Income tax expense per consolidated income statement
11 Earnings per share
Earnings per share are calculated using the following information:
(a) Basic
Profit for the year attributable to holders of the parent (£m)
Weighted average number of shares in issue (m)
Basic earnings per share (pence)
(b) Diluted
Profit for the year attributable to holders of the parent (£m)
Weighted average number of shares in issue (m)
Potentially dilutive share options under the Group’s share option schemes
Weighted average number of shares in issue (diluted) (m)
2016
£m
108
(26)
82
16
(11)
5
(1)
3
(3)
1
10
2015
£m
109
(17)
92
19
(21)
11
–
3
(2)
2
12
2016
2015
78
325
24.0p
78
325
–
325
65
325
19.9p
65
325
1
326
Diluted earnings per share (pence)
24.0p
19.8p
99
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
12 Property, plant and equipment
Cost
Balance at 1 January 2015
Additions – Acquisitions
Additions – Others
Transfers
Disposals
Written off
Foreign exchange adjustments
Balance at 31 December 2015
Balance at 1 January 2016
Additions – Others
Adjustments
Transfers from investment properties
Transfers
Disposals
Written off
Foreign exchange adjustments
Balance at 31 December 2016
Accumulated depreciation and impairment losses
Balance at 1 January 2015
Charge for the year
Impairment
Disposals
Written off
Foreign exchange adjustments
Balance at 31 December 2015
Balance at 1 January 2016
Charge for the year
Impairment
Disposals
Written off
Foreign exchange adjustments
Balance at 31 December 2016
Carrying amounts
At 31 December 2016
At 31 December 2015
Land and
buildings
£m
Capital work in
progress
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
and vehicles
£m
2,773
66
7
–
(2)
(1)
4
2,847
2,847
4
(7)
49
2
(1)
–
405
3,299
286
17
76
(2)
–
1
378
378
25
26
–
–
57
486
2,813
2,469
24
–
29
(10)
–
–
(1)
42
42
57
–
–
(12)
–
–
10
97
1
–
–
–
–
1
1
–
–
–
–
–
1
96
41
249
–
15
2
(1)
(4)
(3)
258
258
12
–
11
2
(1)
–
59
341
83
15
–
(1)
(4)
(1)
92
92
13
2
(1)
(1)
17
122
219
166
261
9
20
8
(3)
(5)
(1)
289
289
26
–
–
8
(3)
(16)
64
368
184
27
–
(2)
(4)
(4)
201
201
32
–
(3)
(15)
43
258
110
88
Total
£m
3,307
75
71
–
(6)
(10)
(1)
3,436
3,436
99
(7)
60
–
(5)
(16)
538
4,105
554
59
76
(5)
(8)
(4)
672
672
70
28
(4)
(16)
117
867
3,238
2,764
The carrying value of property, plant and equipment held under finance leases at 31 December 2016 was £nil (2015: £nil) .
100
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Impairment
a
Property, plant and equipment are reviewed for impairment based on each cash generating unit (“CGU”) . The CGUs are individual hotels. The carrying
value of individual hotels was compared to the recoverable amount of the hotels, which was predominantly based on value-in-use. For 2016, where
indicators of impairment were present, the Group estimated value-in-use through creation of discounted cash flow models, based on future trading
performance expected by management. The underlying basis for the impairment model involves each hotel’s projected cash flow for the financial year
ending 31 December 2017, extrapolated to incorporate individual assumptions in respect of revenue growth (principally factoring in room rate and
occupancy growth) and major expense lines. The future cash flows are based on assumptions about competitive growth rates for hotels in that area,
as well as internal business plans. These plans and forecasts include management’s most recent view of trading prospects for the hotel in the relevant
market. The forecasts cover a five to ten year period, and cash flows beyond this period are extrapolated using a growth rate ranging between 2%
and 3%, which is based upon the expected trading growth for each hotel and inflation in the country. Where appropriate, the Directors sought
guidance on value from a registered independent appraiser with an appropriately recognised professional qualification and recent experience in the
location and category of the hotel being valued.
On the basis of external valuations in 2016, the Group recorded an impairment charge of £28m (including the impairment of a REIT property of £4m)
consisting of £15m in relation to a New York hotel, £2m for a hotel in Regional US, £5m for three hotels in Rest of Europe and £6m for two hotels in
Rest of Asia. For 2015, a total impairment charge of £76m was recognised in relation to £23m in relation to a New York hotel, £15m for three hotels in
Rest of Europe, £37m for two hotels in Rest of Asia and £1m for a hotel in New Zealand. This reflected the challenging trading conditions in those
regions.
Circumstances and events that led to the impairment are disclosed in the Financial Performance review on page 10.
Key assumptions used by the external appraisers
b
The key assumptions used were as follows:
Pre-tax discount rate – The discount rate is based on the country in which the hotel is located and is adjusted for risks associated with the hotel.
Discount rates ranged from 8% to 12% in the US, 7% to 11% in Europe and 8% to 9% in Asia.
Occupancy rate – The occupancy growth rates ranged from 0% to 7% in the US, 0% to 8% in Europe and 0% to 3% in Asia.
Average room rate – The average room rate growth ranged from 0% to 5% in the US, 0% to 9% in Europe and 0% to 8% in Asia.
Sensitivities
c
The Group’s impairment review is sensitive to changes in the key assumptions used, most notably the discount rates and revenue growth
assumptions. Based on the Group’s sensitivity analysis, a reasonably possible change in a single factor could result in impairment in certain hotels in
London, Regional UK, Regional US, Asia and Australasia as their fair value currently exceeds their carrying value only by a small percentage.
Land and buildings
d
Land and buildings includes long leasehold building assets with a book value of £645m (2015: £606m) . The net book value of land and buildings held
under short leases was £109m (2015: £96m) , in respect of which depreciation of £2m (2015: £2m) was charged during the year.
No interest was capitalised within land and buildings during the year (2015: £nil) . The cumulative capitalised interest within land and buildings is £5m
(2015: £5m) .
Pledged assets
e
At year-end, the net book value of assets pledged as collateral for secured loans was £526m (2015: £263m) . The security for the loans is by way of
charges on the properties of the Group companies concerned.
101
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
f
Business combination
Acquisition of a subsidiary (CDL HBT Cambridge City Hotel (UK) Ltd)
On 1 October 2015, the Group through its investment in CDLHT acquired 100% of the shares and voting interests in CDL HBT Cambridge City Hotel
(UK) Ltd (“CCH”) (the “Acquisition”) . CDLHT acquired CCH in relation to the acquisition of the Cambridge City Hotel in Cambridge (the “Property”) . The
Acquisition marks CDLHT’s first investment in Europe.
Consideration transferred
Total consideration for 100% equity interest acquired
Acquisition costs
Less: Cash at bank of subsidiary acquired
Net cash outflow on acquisition
Acquisition-related costs
The Group incurred acquisition-related costs of £1m on legal fees and due diligence costs.
Identifiable assets and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Property, plant and equipment
Trade and other receivables
Cash at bank
Trade and other payables
Total identifiable net assets
Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Assets acquired
Valuation techniques
Property, plant and equipment
Market comparison technique and Discounted cash flow technique: The Market comparison valuation model considers quoted
market prices for similar items when they are available. The Discounted cash flow valuation model is based upon a ten year
forecast of the Property’s potential trading performance, having built into the calculations any capital expenditure required for the
hotel together with a Fixtures, Fittings & Equipment Reserve, based upon an appropriate percentage of the forecast turnover.
£’m
62
1
(2)
61
£’m
61
1
2
(2)
62
102
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Other acquisitions
g
Other acquisition in 2015
Hard Days Night Hotel in Liverpool
On 19 August 2015, the Group acquired a long leasehold interest in a hotel property located in Liverpool for a total consideration of £14m. The total
acquisition cost was capitalised as property, plant & equipment within the Group’s existing hotels portfolio.
The purchase price has been fully allocated to property, plant & equipment on the Group’s balance sheet.
13 Lease premium prepayment
Cost
Balance at 1 January 2016
Foreign exchange adjustments
Balance at 31 December 2016
Amortisation
Balance at 1 January 2016
Charge for the year
Foreign exchange adjustments
Balance at 31 December 2016
Carrying amount
Analysed between:
Amount due after more than one year included in non-current assets
Amount due within one year included in current assets
2016
£ m
111
18
129
15
3
2
20
109
107
2
109
Investment properties
14
Completed investment properties comprise Tanglin Shopping Centre, Biltmore Court & Tower, CDLHT properties and Millennium Mitsui Garden Hotel
Tokyo. Investment properties under construction represents the land site at Sunnyvale.
Movements in the year analysed as:
Balance at 1 January 2015
Disposals
Adjustment to fair value
Foreign exchange adjustment
Balance at 31 December 2015
Balance at 1 January 2016
Transfers
Additions
Adjustment to fair value
Foreign exchange adjustment
Balance at 31 December 2016
Completed
investment
properties
£m
Investment
properties
under
construction
£m
473
(1)
33
(6)
499
499
(60)
2
(12)
96
525
6
–
–
1
7
7
–
–
–
2
9
Total
£m
479
(1)
33
(5)
506
506
(60)
2
(12)
98
534
103
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
In general, the carrying amount of investment property other than those under construction is the fair value of the property as determined by a
registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of
the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the
Group’s investment property.
Only the land site at Sunnyvale, California, is classified as investment properties under construction at 31 December 2016 as the project of building a
hotel and an apartment complex is still in progress. This asset is carried at cost on the balance sheet.
The Group’s investment properties were subject to external professional valuation on an open market existing use basis by the following accredited
independent valuers:
Properties
Tanglin Shopping Centre, Singapore
Biltmore Court & Tower, Los Angeles
Land site at Sunnyvale, California
Millennium Mitsui Garden Hotel Tokyo
CDLHT – Singapore property
CDLHT – Australia properties
CDLHT – Maldives property
Valuers
Edmund Tie & Company (SEA) Pte Ltd
Sequoia Hotel Advisors, LLC
Sequoia Hotel Advisors, LLC
Jones Lang LaSalle KK
CBRE Pte Ltd
Jones Lang LaSalle Property Consultants Pte Ltd
Jones Lang LaSalle Property Consultants Pte Ltd
Based on these valuations together with such considerations as the Directors consider appropriate, Millennium Mitsui Garden Hotel Tokyo and
Biltmore Court & Tower recorded uplift in value of £8m (2015: revaluation gain £32m) and £3m (2015: revaluation deficit £1m) respectively. Tanglin
Shopping Centre Court recorded a revaluation loss of £4m (2015: revaluation loss £1m) . In addition, the REIT properties recorded a net revaluation
loss of £27m (2015: revaluation gain of £3m) . All the other investment properties recorded no change and no impairment was identified.
Fair value hierarchy
The fair value measurement for investment properties not under construction of £525m (2015: £499m) has been categorised as a Level 3 fair value
based on inputs to the valuation technique used.
Valuation technique and significant unobservable inputs
The following table shows the valuation technique used in measuring the fair value of investment property, as well as significant unobservable inputs
used.
Valuation technique
Significant unobservable inputs
The technique applied in the valuation of the Tanglin
Shopping Centre is based on market comparison of sales
of similar properties in the vicinity. Further adjustments are
made to this value to account for differences in location,
size, tenure, view, accessibility, condition and other factors.
Biltmore Court & Tower and Millennium Mitsui Garden
Hotel Tokyo were valued using a discounted cash flow
technique based on expected rental income and discount
rate appropriate for the property.
Tanglin Shopping Centre
Open market values for other properties.
Biltmore Court & Tower
Discount rate of between 8% to 10% and capitalisation
rate of 7% to 9%.
Millennium Mitsui Garden Hotel Tokyo
Discount rate of between 4% and 5% and capitalisation
rate of 4% to 5%.
Investment properties held by the REIT were valued using
the discounted cash flow, capitalisation or comparison
techniques.
CDLHT investment properties
Discount rate of between 10% and 13%, capitalisation
rate of 5% to 8% and terminal yield of 7% to 9%.
Further details in respect of investment property rentals are given in Note 31.
Inter-relationship between key unobservable inputs and
fair value measurement
The estimated fair value would increase/ (decrease) if:
Expected market rental growth were higher/(lower); and
Risk adjusted discount rate was lower/ (higher),
capitalisation rate was higher/ (lower) and terminal yield
was lower/ (higher).
104
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Investments in joint ventures and associates
15
The Group has the following investments in joint ventures and associates:
Joint ventures
New Unity Holdings Limited (“New Unity”)
Fena Estate Company Limited (“Fena”)
Associate
First Sponsor Group Limited (“First Sponsor”)
Principal place
of business
Hong Kong
Thailand
Fair value of
ownership
interest
£m
–
–
Effective Group interest
2016
50%
50%
2015
50%
50%
People’s Republic of China
159
36%
36%
The Group has 50% interest in both New Unity and Fena which operate the Group’s hotel business in Hong Kong and Bangkok respectively. First
Sponsor is a property company which is listed on the Singapore Exchange and has interests in China and the Netherlands. It is also involved in the
Chinese property financing business which carries additional risk of recoverability of certain assets.
Share of net assets/cost
Balance at 1 January 2015
Share of profit for the year
Foreign exchange adjustments
Other movements
Balance at 31 December 2015
Balance at 1 January 2016
Share of profit for the year
Dividends received
Foreign exchange adjustments
Balance at 31 December 2016
Joint
ventures
Associates
79
6
4
–
89
89
4
–
20
113
156
11
–
(1)
166
166
22
(2)
21
207
Total
£m
235
17
4
(1)
255
255
26
(2)
41
320
105
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
The following is summarised financial information for First Sponsor and New Unity based on their respective financial statements prepared in
accordance with IFRS.
The investment in Fena is not material to Group’s financial statements.
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Total assets less total liabilities
Less: Non-controlling interest
Net assets (100%)
Group’s share
Revenue
Operating profit
Interest income
Income tax expense
Profit for the year
Non-controlling interests
Profit for the year after non-controlling interests
Other comprehensive income
Profit and total comprehensive income (100%)
Group’s share of profit and total comprehensive income
Dividends received by the Group
First Sponsor
New Unity
2016
£m
262
749
(200)
(230)
581
(3)
578
207
101
52
11
(2)
61
(1)
60
(27)
33
12
2
2015
£m
347
512
(131)
(260)
468
(2)
466
167
102
43
–
(11)
32
–
32
10
42
15
–
2016
£m
414
108
(206)
(28)
288
(62)
226
113
2015
£m
325
53
(107)
(23)
248
(71)
177
89
118
106
24
(1)
(5)
18
(9)
9
–
9
4
–
24
–
(4)
20
(9)
11
–
11
6
–
At 31 December 2016, the Group’s share of the total capital commitments of joint ventures and associates amounted to £15m (2015: £27m) . At 31
December 2016, the Group’s joint ventures and associates had no contingent liabilities (2015: £nil) .
16 Other financial assets
There are no financial assets as at 31 December 2016 (2015: £nil).
17
Inventories
Consumables
106
2016
£m
5
2015
£m
4
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
18 Development properties
Development properties comprise:
Development land for resale
– New Zealand landbank
Development properties
– Zenith Residences
19 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2016
£ m
2015
£m
66
27
93
2016
£ m
39
27
29
95
58
23
81
2015
£m
35
23
18
76
2015
£m
235
118
(115)
238
–
238
Trade receivables are shown net of an impairment allowance of £2m (2015: £2m) relating to the likely insolvencies of certain customers and non-
recoverability of debts.
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 22.
20 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash pool overdrafts
Cash and cash equivalents on the statement of financial position
Overdrafts included in borrowings
Cash and cash equivalents shown in the cash flow statement
2016
£m
223
194
(80)
337
–
337
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets are disclosed in Note 22.
As at 31 December 2016, £nil (2015: £5m) of the cash balance was restricted. Previously, this forms part of the consideration for the acquisition of a
hotel in Rome in 2014 and was released upon settlement with the previous owner in 2016.
21
Interest-bearing loans, bonds and borrowings
Included within non-current liabilities:
Bank loans
Bonds payable
Included within current liabilities:
Bank loans and overdrafts
Bonds payable
Further details in respect of financial liabilities are given in Note 22.
2016
£ m
628
323
951
93
–
93
2015
£m
466
199
665
104
74
178
107
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
22 Financial instruments
Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk.
This note presents information about the Group’s exposure to each of the above risks, and the Group’s policies and processes for measuring and
managing risk.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and
arises principally from the Group’s receivables from customers and investment securities.
Exposure to credit risk is monitored on an ongoing basis, with credit checks performed on all clients requiring credit over certain amounts. Credit is
not extended beyond authorised limits, established where appropriate through consultation with a professional credit vetting organisation. Credit
granted is subject to regular review, to ensure it remains consistent with the client’s current creditworthiness and appropriate to the anticipated
volume of business.
Investments are allowed only in liquid short-term instruments within approved limits, with investment counterparties approved by the Board, such that
the exposure to a single counterparty is minimised.
The maximum exposure to credit risk is represented by the carrying value of each financial asset on the balance sheet, these being spread across the
various currencies and jurisdictions in which the Group operates.
The maximum exposure to credit risk at the reporting date was:
Cash at bank and in hand (see Note 20)
Short-term deposits (see Note 20)
Trade receivables (see Note 19)
Other receivables (see Note 19)
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
New York
Regional US
Rest of Europe
Singapore
Rest of Asia
Australasia
108
Carrying value
2016
£ m
223
194
39
27
483
Carrying value
2016
£ m
6
4
7
8
8
6
39
2015
£m
235
118
35
23
411
2015
£m
5
3
7
7
10
3
35
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements The ageing of trade receivables at the reporting date was:
Gross receivable
Impairment allowance
Carrying value
Not past due
Past due 0 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
More than 90 days
2016
£m
21
10
3
3
4
41
2015
£m
22
4
3
2
6
37
2016
£m
2015
£m
–
–
–
–
(2)
(2)
–
–
–
–
(2)
(2)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 January
Impairment released
Balance at 31 December
2016
£m
21
10
3
3
2
39
2016
£ m
2
–
2
2015
£m
22
4
3
2
4
35
2015
£m
2
–
2
109
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Contractual maturities of financial assets 2016
6 months
or less
£m
6 months
- 1 year
£m
1 - 5
years
£m
More than
5 years
£m
24
24
5
87
12
4
55
15
3
17
21
22
21
1
14
11
11
70
417
(33)
(6)
(28)
(13)
(80)
337
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
24
24
5
87
12
4
55
15
3
17
21
22
21
1
14
11
11
70
417
(33)
(6)
(28)
(13)
(80)
337
337
337
Notes to the consolidated financial statements
continued
Financial Assets
Fixed Rate
Sterling
US dollar
Korean Won
Singapore dollar
New Taiwan dollar
Australian dollar
New Zealand dollar
Malaysian Ringgit
Euro
Chinese Renminbi
Non Interest Bearing
Sterling
US dollar
Singapore dollar
Malaysian Ringgit
Euro
Japanese Yen
Others
Interest Bearing Cash Pool deposits
Singapore dollar
Total cash and other financial assets
Interest Bearing Cash Pool Overdrafts
Sterling
Euro
Hong Kong dollar
Non Interest Bearing Cash Pool Overdrafts
Sterling
Total overdrafts (Note 20)
Represented by:
Cash and cash equivalents (Note 20)
110
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Financial Assets
Fixed Rate
US dollar
Korean Won
Singapore dollar
New Taiwan dollar
Australian dollar
New Zealand dollar
Malaysian Ringgit
Euro
Chinese Renminbi
Non Interest Bearing
Sterling
US dollar
Singapore dollar
Malaysian Ringgit
Euro
Japanese
Other
Interest Bearing Cash Pool deposits
Singapore dollar
Total cash and other financial assets
Interest Bearing Cash Pool Overdrafts
Sterling
Euro
Japanese Yen
Hong Kong dollar
Non Interest Bearing Cash Pool Overdrafts
Sterling
Japanese Yen
Total overdrafts (Note 20)
Represented by:
Cash and cash equivalents (Note 20)
Contractual maturities of financial assets 2015
Total
£m
6 months
or less
£m
6 months
- 1 year
£m
1 - 5
years
£m
More than
5 years
£m
14
2
37
8
7
36
11
11
15
39
36
21
1
4
12
8
91
14
2
37
8
7
36
11
11
15
39
36
21
1
4
12
8
91
353
353
(33)
(5)
(13)
(28)
(28)
(8)
(115)
238
(33)
(5)
(13)
(28)
(28)
(8)
(115)
238
238
238
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is
to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities, including estimated interest payments using the interest rates prevailing as at the
reporting date.
Contractual maturities of financial liabilities
Carrying
amount
£m
Contractual
cash flows
£m
6 months
or less
£m
6-12
months
£m
72
387
19
163
261
67
75
35
59
14
78
399
25
170
279
68
80
35
59
14
6
26
1
1
3
–
1
35
53
–
2
62
1
1
3
–
1
–
6
–
1-2
years
£m
4
151
2
2
66
68
1
–
–
–
2-5
years
£m
66
160
21
166
207
–
77
–
–
3
1,152
1,207
126
76
294
700
Carrying
amount
£m
Contractual
cash flows
£m
6 months
or less
£m
6-12
months
£m
1-2
years
£m
Contractual maturities of financial liabilities
67
313
16
140
60
190
57
22
31
12
908
74
322
16
144
61
213
60
22
31
12
955
3
22
–
35
–
3
–
20
31
–
3
83
–
40
–
3
1
2
–
–
38
64
–
1
–
6
1
–
–
–
114
132
110
590
2-5
years
£m
30
153
16
68
61
201
58
–
–
3
More than
5 years
£m
–
–
–
–
–
–
–
–
–
11
11
More than
5 years
£m
–
–
–
–
–
–
–
–
–
9
9
31 December 2016
Floating rate financial liabilities
Secured loans
Unsecured loans
Secured bonds
Unsecured bonds
Fixed rate financial liabilities
Unsecured loans
Unsecured bonds
Secured bonds
Trade and other payables
Trade payables
Other creditors
Non-current liabilities
Other non-current liabilities
31 December 2015
Floating rate financial liabilities
Secured loans
Unsecured loans
Secured bonds
Unsecured bonds
Fixed rate financial liabilities
Secured bonds
Unsecured loans
Unsecured bonds
Trade and other payables
Trade payables
Other creditors
Non-current liabilities
Other non-current liabilities
112
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Undrawn committed borrowing facilities
At 31 December 2016, the Group had £546m (2015: £406m) of undrawn and committed facilities available, comprising committed revolving credit
facilities which provide the Group with financial flexibility. Maturities of these facilities are set out in the following table.
The conditions precedent to the availability of these facilities are all satisfied at the balance sheet date.
Expiring in one year or less
Expiring after more than one year but not more than two years
Expiring after more than two years but not more than five years
Expiring after more than five years
Total undrawn committed borrowing facilities
2016
£m
209
153
184
–
546
2015
3m
128
112
166
–
406
Security
Included within the Group’s total bank loans and overdrafts of £721m (2015: £570m) are £72m (2015: £67m) of secured loans and overdrafts. Total
bonds and notes payable of £230m (2015: £197m) are unsecured.
Loans, bonds and notes are secured on land and buildings with a carrying value of £526m (2015: £263m) and an assignment of insurance proceeds
in respect of insurances over the mortgaged properties.
Of the Group’s total facilities of £1,641m, £434m matures within 12 months comprising £nil unsecured bonds and notes, £191m committed revolving
credit facilities, £48m uncommitted facilities and overdrafts subject to annual renewal, £192m unsecured term loans and £3m secured term loans.
Plans for refinancing the facilities are underway.
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or
the value of its holdings of financial instruments.
The primary objectives of the treasury function are to provide secure and competitively priced funding for the activities of the Group and to identify and
manage financial risks, including exposure to movements in interest and foreign exchange rates arising from those activities. If appropriate, the Group
uses financial instruments and derivatives to manage these risks, as set out below.
Foreign currency risk
(i)
The Group is exposed to foreign currency risk on revenue, purchases, borrowings and cash deposits denominated in currencies other than the
functional currencies of the respective Group entities. The currencies giving rise to this risk are primarily US dollars, Singapore dollars, New Zealand
dollars, New Taiwan dollars, Korean won, Chinese renminbi, Japanese yen and Euro.
The Group’s principal policy, wherever possible, is to maintain a natural hedge whereby liabilities are matched with assets denominated in the same
currency. Foreign currency investment exposure is also minimised by borrowing in the currency of the investment.
To mitigate foreign currency translation exposure, an appropriate proportion of net assets are designated as hedged against corresponding financial
liabilities in the same currency.
Net investment hedging
The Group has US$162m (2015: US$167m) US dollar loans and overdrafts, €61m (2015: €61m) Euro loans and overdrafts, and JPYnil (2015:
JPY3,704m) Japanese yen overdrafts designated as hedges of corresponding respective proportions of its net investment in foreign operations
whose functional currencies are US dollars, Euros and Japanese yen. The risk being hedged is the foreign currency exposure on the carrying amount
of the net assets of the foreign operation upon consolidation. The fair value of the hedging instruments as at 31 December 2016 was £188m (2015:
£178m) .
There was no ineffectiveness recognised in the consolidated income statement that arose from hedges of net investments in foreign operations.
113
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
An analysis of borrowings by currency and their fair values as at 31 December is given below:
Sterling
Singapore dollar
Australia dollar
US dollar
New Zealand dollar
Chinese renminbi
Japanese yen
New Taiwan dollar
Korean Won
Euro
31 December 2016
31 December 2015
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
66
240
55
415
37
34
117
11
23
46
66
240
55
415
37
34
117
11
23
46
1,044
1,044
64
199
46
303
34
33
94
10
20
40
843
64
199
46
303
34
33
94
10
20
40
843
Exchange differences arising on foreign currency loans during each accounting period are recognised as a component of equity, to the extent that the
hedge is effective. The foreign exchange exposure arising on the Group’s net investment in its subsidiaries is expected to be highly effective in
offsetting the exposure arising on the Group’s foreign currency borrowings.
Foreign currency transaction exposure is primarily managed through funding of purchases from operating income streams arising in the same
currency.
Hedging of transaction exposure is undertaken with approved counterparties and within designated limits, using spot or short-term forward contracts
to buy or sell the currency concerned, once the timing and the underlying amount of exposure have been determined. Foreign exchange derivatives
may also be used to hedge specific transaction exposure where appropriate. There are no foreign exchange derivatives in place at 31 December
2016.
The following significant exchange rates applied during the year:
Average rate
Closing rate
2016
2015
2016
2015
1.355
1.879
43.700
1.952
5.640
1,576.43
9.008
1.231
147.961
1.532
2.101
48.623
2.176
5.934
1,730.23
9.640
1.375
185.880
1.228
1.781
39.679
1.772
5.503
1,486.48
8.537
1.174
144.311
1.490
2.103
48.923
2.167
6.403
1,742.09
9.668
1.358
179.411
US dollar
Singapore dollar
New Taiwan dollar
New Zealand dollar
Malaysian ringgit
Korean won
Chinese renminbi
Euro
Japanese yen
114
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Sensitivity analysis
With respect to the Group’s foreign currency exposure, and assuming that all other variables, in particular interest rates, remain constant, it is
estimated that a 10% strengthening of sterling against the following currencies at 31 December 2016 (31 December 2015: 10%) would have
increased/(decreased) equity and profit before tax by the amounts shown below:
US dollar
Australian dollar
Singapore dollar
New Taiwan dollar
New Zealand dollar
Euro
Chinese renminbi
Hong Kong dollar
Japanese Yen
Philippines peso
Other
31 December 2016
31 December 2015
Equity
£m
Profit
before tax
£m
Equity
£m
Profit
before tax
£m
38
(3)
5
–
(6)
9
(4)
–
2
–
–
41
1
–
1
1
3
–
–
1
1
–
–
8
28
(2)
4
–
(5)
8
(3)
–
3
–
–
33
1
–
(5)
1
(2)
1
–
(1)
(3)
2
(1)
(7)
A 10% weakening of sterling against the above currencies at 31 December 2016 (31 December 2015: 10%) would have had the equal but opposite
effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk and interest rate swaps
(ii)
The Group adopts a policy of ongoing review of its exposure to changes in interest rates on its borrowings, taking into account market expectations
with regard to the perceived level of risk associated with each currency, the maturity profile and cash flows of the underlying debt, and the extent to
which debt may potentially be either prepaid prior to its maturity or refinanced at reduced cost.
The Group’s policy is to maintain a mixture of its financial liabilities on a fixed and floating-rate basis with a greater emphasis on floating rates presently
as this flexibility is considered to be appropriate in the context of the Group’s overall geographical diversity, investment and business cycle and the
stability of the income streams, cash balances and loan covenants.
Interest rate derivatives are used to manage interest rate risk, to the extent that the perceived cost is considered to outweigh the benefit from the
flexibility of variable rate borrowings, and the Group actively monitors the need and timing for such derivatives. Where used, interest rate derivatives
are classified as cash flow hedges and stated at fair value within the Group’s consolidated statement of financial position. Further details of interest
rate derivatives in place at 31 December 2016 are provided hereafter.
Cash flow sensitivity analysis for variable rate instruments
Assuming that all other variables, in particular foreign currency rates, remain constant, a change of one percentage point in the average interest rates
applicable to variable rate instruments for the year would have increased/(decreased) the Group’s profit before tax for the year as shown below:
Variable rate financial assets
Variable rate financial liabilities
Cash flow sensitivity (net)
31 December 2016
31 December 2015
1% increase
£m
1% decrease
£m
1% increase
£m
1% decrease
£m
2
(11)
(9)
(2)
11
9
2
(9)
(7)
(2)
9
7
(d) Fair value
Set out below is a comparison of the fair and book values of all the Group’s financial instruments by category. Fair values are determined by reference
to market values, where available, or calculated by discounting cash flows at prevailing interest rates.
115
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
Financial assets
Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash pool overdrafts
Loans and receivables
Trade receivables
Other receivables
Financial liabilities
Overdrafts and borrowings
Trade payables
Other creditors
Other non-current liabilities
2016
Book value
£m
2016
Fair value
£m
2015
Book value
£m
2015
Fair value
£m
223
194
(80)
39
29
405
(1,044)
(35)
(59)
(14)
(1,152)
223
194
(80)
39
29
405
(1,044)
(35)
(59)
(14)
(1,152)
235
118
(115)
35
41
314
(843)
(22)
(31)
(12)
(908)
235
118
(115)
35
41
314
(843)
(22)
(31)
(12)
(908)
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.
Derivatives
Forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and deducting the
current spot rate. For interest rate swaps, bank valuations are used.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for similar lease agreements. The estimated
fair values reflect changes in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/
payables are discounted to determine the fair value.
Interest rates used for determining fair value
Prevailing market interest rates are used to discount cash flows to determine the fair value of financial assets and liabilities.
116
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Fair value hierarchy
As at 31 December 2016, the Group held certain financial instruments measured at fair value.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable market data
Assets measured at fair value
Investment properties
Assets measured at fair value
Investment properties
2016
£m
525
525
2015
£m
499
499
Level 1
£m
Level 2
£m
–
–
Level 1
£m
–
–
–
–
Level 2
£m
–
–
Level 3
£m
525
525
Level 3
£m
499
499
During the year ended 31 December 2016 there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and
out of Level 3 fair value measures.
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development
of the business. The Company’s objective for managing its capital is to ensure that Group entities will be able to continue as a going concern while
maximising the return to shareholders, as well as sustaining the future development of its business. In order to maintain or adjust the capital structure,
the Group may alter the total amount of dividends paid to shareholders, return capital to shareholders, issue new shares, draw down additional debt
or reduce debt.
The Group’s capital structure consists of debt, which includes the loans and borrowings disclosed in Note 21, cash and cash equivalents disclosed in
Note 20 and the equity attributable to the parent, comprising share capital, reserves and retained earnings, as disclosed in the consolidated statement
of changes in equity. The Group seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position.
One of the Group’s subsidiaries, CDLHT which is a stapled group comprising CDL Hospitality Real Estate Investment Trust (“H-REIT”) and CDL
Hospitality Business Trust (“HBT”) , a business trust, is required to maintain certain minimum base capital and financial resources.
H-REIT is subject to the aggregate leverage limit as defined in the Property Fund Appendix of the Code on Collective Investment Schemes (“CIS
Code”) issued by Monetary Authority of Singapore. The CIS Code stipulates that the total borrowings and deferred payments (together the
“Aggregate Leverage”) of a property fund should not exceed 35.0% of its Deposited Property except that the Aggregate Leverage of a property fund
may exceed 35.0% of its Deposited Property (up to a maximum of 60.0%) if a credit rating of the property fund from Fitch Inc., Moody’s or Standard
and Poor’s is obtained and disclosed to the public. The property fund should continue to maintain and disclose a credit rating so long as its
Aggregate Leverage exceeds 35.0% of its Deposited Property.
For this financial year, H-REIT has a credit rating of BBB- from Fitch Inc. The Aggregate Leverage of H-REIT as at 31 December 2016 was 36.8%
(2015: 36.4%) of H-REIT’s Deposited Property. This complied with the aggregate leverage limit as described above.
HBT, H-REIT and CDLHT have complied with the borrowing limit requirements imposed by the relevant Trust Deeds and all externally imposed capital
requirements for the financial years ended 31 December 2016 and 2015.
Except for the above, neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
117
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
23 Employee benefits
Pension arrangements
The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries
concerned. The most significant funds are described below.
United Kingdom
The pension arrangements in the United Kingdom operate under the ’Millennium & Copthorne Pension Plan’, which was set up in 1993. The plan
operates a funded defined benefit arrangement together with a defined contribution plan, both with different categories of membership. The defined
benefit section of the plan was closed to new entrants in 2001 and at the same time rights to a guaranteed minimum pension (”GMP“) under the
defined contribution scheme also ceased. The plan entitles a retired employee to receive an annual pension payment.
The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit credit method. The last full
actuarial valuation of this scheme was carried out by a qualified independent actuary as at 5 April 2014 and this has been updated on an approximate
basis to 31 December 2016. The contributions of the Group during the year were 24% (2015: 24%) of pensionable salary.
As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the
membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the
results of the valuation are those relating to the discount rate and the rates of increase in salaries and pensions.
South Korea
The Group operates a defined benefit pension plan for its employees in South Korea. The contributions required are determined by an external
qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December 2016. The assumptions which
have the most significant effect on the results of the valuations are those relating to the discount rate and rate of increase in salaries.
Taiwan
The Group operates a defined benefit pension plan for its employees in Taiwan. The contributions required are determined by an external qualified
actuary using the projected unit credit method. The most recent valuation was carried out on 31 December 2016. The contributions of the Group
were 6% (2015: 6%) of the employees’ earnings. The assumptions which have the most significant effect on the results of the valuations are those
relating to the discount rate and rate of increase in salaries.
The defined benefit plans are administered by pension funds that are legally separated from the Group. The boards of the pension funds are required
by law to act in the best interests of the plan participants.
These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market investment risk.
The above plans are substantially funded by the Group’s subsidiaries. The funding requirements are based on the pension funds’ actuarial
measurement framework set out in the funding policies of the plans.
The assets of each scheme have been taken at market value and the liabilities have been calculated using the following principal assumptions:
Inflation rate
Discount rate
Rate of salary increase
Rate of pension increases
Rate of revaluation
Annual expected return on plan assets
2016
UK
3.5%
2.7%
4.0%
3.5%
2.5%
2.7%
2016
South Korea
2016
Taiwan
3.0%
2.8%
4.0%
–
–
2.8%
–
1.0%
3.0%
–
–
1.0%
2015
UK
3.2%
3.6%
3.7%
3.2%
2.2%
3.6%
2015
South Korea
3.0%
2.8%
4.0%
–
–
2.8%
2015
Taiwan
–
1.6%
3.0%
–
–
1.6%
The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale
covered, may not necessarily be borne out in practice. The present values of the schemes’ liabilities are derived from cash flow projections over long
periods and are inherently uncertain.
118
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions consistent, would have
altered the defined benefit obligation by the amounts shown below:
Discount rate (1% movement)
Rate of salary increase (1% movement)
Defined benefit obligation
2016
Increase
£m
2016
Decrease
£m
(11)
2
11
(2)
2015
Increase
£m
(11)
2
2015
Decrease
£m
14
(2)
Although the analysis does not take account of the full distribution of cash flows expected under the plans, it does provide an approximation of the
sensitivity of the assumptions shown.
Amounts recognised on the balance sheet are as follows:
Present value of funded obligations
Fair value of plan assets
Plan deficit
2016
UK
£m
75
(60)
15
2016
South
Korea
£m
5
(5)
–
2016
Taiwan
£m
2016
Other
£m
11
(5)
6
2
–
2
2016
Total
£m
93
(70)
23
2015
UK
£m
61
(55)
6
Changes in the present value of defined benefit obligations are as follows:
Balance at 1 January
Current service cost
Interest cost
Benefits paid, death in service insurance
premiums and expenses
Remeasurement losses/ (gains) arising from:
– Financial assumptions
– Demographic assumptions
Foreign exchange adjustments
Balance at 31 December
2016
UK
£m
61
1
2
(2)
14
–
(1)
75
2016
South
Korea
£m
4
–
–
9
–
1
(1)
(1)
–
–
2
5
1
–
1
11
2016
Taiwan
£m
2016
Other
£m
2016
Total
£m
2015
UK
£m
1
–
–
–
–
–
1
2
75
1
3
(4)
15
–
3
93
60
1
2
(2)
1
(1)
–
61
2015
South
Korea
£m
4
(4)
–
2015
South
Korea
£m
7
1
–
(1)
(1)
–
(2)
4
2015
Taiwan
£m
9
(3)
6
2015
Other
£m
1
–
1
2015
Total
£m
75
(62)
13
2015
Taiwan
£m
2015
Other
£m
2015
Total
£m
8
–
–
1
–
–
–
9
1
–
–
–
–
–
–
1
76
2
2
(2)
–
(1)
(2)
75
119
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Changes in the fair value of plan assets are as follows:
Balance at 1 January
Interest income
Group contributions
Benefits paid
Remeasurement gains arising from:
– Return on plan assets excluding interest income
Foreign exchange adjustments
Balance at 31 December
Actual return on plan assets
The fair values of plan assets in each category are as follows:
Equities
Bonds
Cash and cash equivalents
The expense recognised in the income statement is as follows:
2016
UK
£m
55
2
-
(2)
5
–
60
7
2016
UK
£m
9
1
50
60
2016
South
Korea
£m
4
–
1
(1)
–
1
5
–
2016
South
Korea
£m
–
4
1
5
Current service cost
Interest cost
Interest income
2016
UK
£m
1
2
(2)
1
2016
South
Korea
£m
–
–
–
–
2016
Taiwan
£m
2016
Other
£m
–
1
–
1
–
–
–
–
Total cost is recognised within the following items in the income statement:
Cost of sales
Administrative expenses
120
2016
Taiwan
£m
2016
Total
£m
2015
UK
£m
2015
South
Korea
£m
2015
Taiwan
£m
2015
Total
£m
3
–
2
(1)
–
1
5
–
2016
Taiwan
£m
–
–
5
5
2016
Total
£m
1
3
(2)
2
62
2
3
(4)
5
2
70
7
2016
Total
£m
9
5
56
70
2015
UK
£m
1
2
(2)
1
54
2
4
(4)
(1)
–
55
1
2015
UK
£m
8
1
46
55
2015
South
Korea
£m
1
–
–
1
3
–
–
–
–
1
4
–
2015
South
Korea
£m
–
4
_
4
4
–
-
1
–
(2)
3
–
2015
Taiwan
£m
–
–
3
3
2015
Taiwan
£m
2015
Other
£m
–
–
–
–
–
–
–
–
2016
£m
1
1
2
61
2
4
(3)
(1)
(1)
62
1
2015
Total
£m
8
5
49
62
2015
Total
£m
2
2
(2)
2
2015
£m
1
1
2
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements The gains or losses recognised in the consolidated statement of comprehensive income are as follows:
Actual return less expected return on plan
assets
Remeasurement (losses)/ gains arising from
– Financial assumptions
– Demographic assumptions
Defined benefit plan remeasurement
gains/ (losses)
Actuarial losses recognised directly in equity are as follows:
Cumulative as at 1 January
Remeasurement losses recognised during the year
Cumulative as at 31 December
2016
UK
£m
5
(14)
(9)
2016
South
Korea
£m
–
–
–
–
2016
Taiwan
£m
2016
Other
£m
2016
Total
£m
2015
UK
£m
–
(1)
–
(1)
–
–
–
–
5
(15)
–
(10)
(1)
(2)
–
(3)
2015
South
Korea
£m
–
1
–
1
2015
Taiwan
£m
2015
Other
£m
2015
Total
£m
–
–
–
–
–
–
–
–
2016
£m
17
10
27
(1)
(1)
–
(2)
2015
£m
15
2
17
Mortality rates used reflect an industry wide recognition that life expectancy has increased. The life expectancies underlying the value of the accrued
liabilities for the UK Plan, based on retirement age of 65, are as follows:
Males
Females
2016
Years
25
27
2015
Years
24
27
The weighted-average duration of the defined benefit obligations as at 31 December 2016 was 26 years (2015: 26). The Group expects £1m in
contributions to be paid to the defined benefit plans in 2017.
Share-based payments
The Group operates a number of share option schemes, a majority being designed to link remuneration to the future performance of the Group.
Details of these schemes are given in the Remuneration Committee report.
In accordance with the Group’s accounting policy 2.3N(iv) on share-based payment transactions, the fair value of share options and long-term
incentive awards is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the share options and long-term incentive awards.
The charge to the income statement for the year was £nil (2015: £2m).
The Group has applied IFRS 2 to its active employee share-based payment arrangements from 1 January 2005 except for arrangements granted
before 7 November 2002.
121
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
(i) Millennium & Copthorne Hotels plc 2006 Long-Term Incentive Plan (“LTIP”)
Performance Share Awards under this scheme are awarded to Executive Directors and senior management of the Group.
Date of award
11.09.2013
21.11.2013
04.04.2014
03.08.2015
10.09.2015
29.03.2016
29.03.2016
29.03.2016
29.03.2016
Awards
outstanding
as at
1 Jan 2016
Awards
awarded
during the
year
Awards
vested
during the
year
Awards
forfeited
during the
year
Awards
expired
during the
year
Awards
outstanding
as at
31 Dec 2016
Credited to
share capital
£m
Credited to
share
premium
£m
362,965
21,055
525,785
251,122
11,867
–
–
–
–
–
–
–
–
–
111,386
18,564
18,564
37,129
1,172,794
185,643
–
–
–
–
–
–
–
–
–
–
(362,965)
(21,055)
(75,097)
(19,036)
–
–
–
–
–
(478,153)
–
–
–
–
–
–
–
–
–
–
–
–
450,688
232,086
11,867
111,386
18,564
18,564
37,129
880,284
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Vesting
date
11.09.2016
21.11.2016
04.04.2017
03.08.2018
10.09.2018
29.03.2019
29.03.2019
29.03.2019
29.03.2019
(ii) Millennium & Copthorne Hotels plc 2006 Sharesave Scheme
Share options under this scheme are granted to UK based employees.
Date of award
19.04.2011
19.04.2012
19.04.2012
19.04.2013
19.04.2013
06.05.2014
06.05.2014
14.04.2015
14.04.2015
12.04.2016
12.04.2016
Exercise
Price
per share
£
Awards
outstanding
as at
1 Jan 2016
4.1800
3.8800
3.8800
4.4800
4.4800
4.4600
4.4600
4.6900
4.6900
3.3000
3.3000
7,040
2,503
9,816
35,686
3,346
63,108
6,321
58,885
6,649
–
–
Awards
awarded
during
the year
–
–
–
–
–
–
–
–
–
125,036
4,545
Awards
vested
during
the year
(4,397)
(2,132)
(618)
(1,807)
–
–
–
–
–
–
–
Awards
forfeited
during
the year
(1,328)
(371)
(4,020)
(7,346)
(669)
(28,055)
(2,690)
(28,475)
–
(2,725)
–
193,354
129,581
(8,954)
(75,679)
Awards
expired
during
the year
Awards
outstanding
as at
31 Dec 2016
Credited
to share
capital
£m
Credited
to share
premium
£m
(31)
–
–
–
–
–
–
–
–
–
–
(31)
1,284
–
5,178
26,533
2,677
35,053
3,631
30,410
6,649
122,311
4,545
238,271
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exercise period
01.08.2016–31.01.2017
01.08.2015–31.01.2016
01.08.2017–31.01.2018
01.08.2016–31.01.2017
01.08.2018–31.01.2019
01.08.2017–31.01.2018
01.08.2019–31.01.2020
01.08.2018–31.01.2019
01.08.2020–31.01.2021
01.08.2019–31.01.2020
01.08.2021–31.01.2022
The weighted average share price at the dates of exercise of share options in the year was £4.26 (2015: £5.54).
The options outstanding at the year-end have an exercise price in the range of £3.30 to £4.69 (2015: £3.30 to £4.69) and a weighted average
contractual life of 2.4 years (2015: 1.6 years).
(iii) Annual Bonus Plan (“ABP”)
Under the ABP, deferred share awards are granted annually to selected employees of the Group. Shares in Millennium & Copthorne Hotels plc are
transferred to participants at the end of three years (for the 2016 awards 25% after years one and two, 50% after three years) if they continue to be
employed by the group.
The fair values for the deferred share awards were determined using the market price of the shares at the date of grant. The weighted average share
price for deferred share awards granted in 2016 was £4.39 (2015: £5.51).
122
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
2016 Awards
08.09.2015
06.11.2015
13.05.2016
12.08.2016
09.11.2016
Awards
outstanding
as at
1 Jan 2016
Awards
awarded
during the
year
76,868
4,325
–
–
–
81,193
–
–
76,798
2,377
977
80,152
Awards
vested
during the
year
(1,480)
–
(2,034)
–
–
Awards
forfeited
during the
year
(19,036)
–
(13,825)
–
–
(3,514)
(32,861)
Awards
expired
during the
year
Awards
outstanding
as at 31 Dec
2016
Credited to
Share Capital
£m
Credited to
Share Premium
£m
–
–
–
–
–
–
56,352
4,325
60,939
2,377
977
124,970
–
–
–
–
–
–
Vesting dates
08.09.2018
06.11.2018
13.05.2017/8/9
12.08.2017/8/9
09.11.2017/8/9
–
–
–
–
–
–
(iv) Executive Share Plan (“ESP”)
The ESP was approved by the Company on 18 February 2016 to replace participation in the LTIP by senior executive management. This is the first
award under the ESP. These awards will vest over a three year period (25% after years one and two, 50% after three years), subject to the rules of the
ESP.
The fair values for the awards were determined using the market price of the shares at the date of grant of £4.13.
2016 awards
29.03.2016
Awards
outstanding
as at
1 Jan 2016
–
Awards
awarded
during
the year
63,124
Awards
vested
during
the year
Awards
forfeited
during
the year
Awards
expired
during
the year
Awards
outstanding
as at
31 Dec 2016
–
(25,552)
–
37,572
Credited
to share
capital
£m
–
Credited
to share
premium
£m
Vesting dates
–
29.03.2017/8/9
Awards/options granted
The following awards/options were granted in the current and comparative years:
2016 Awards/options
LTIP – EPS
LTIP – TSR (FTSE 250)
LTIP – TSR (hotels)
LTIP – NAV
Executive Share Plan
Executive Share Plan
Executive Share Plan
Sharesave Scheme (3 year)
Sharesave Scheme (5 year)
Deferred Share Awards
Deferred Share Awards
Deferred Share Awards
Awards/options granted
Date of
grant
29.03.2016
29.03.2016
29.03.2016
29.03.2016
29.03.2016
29.03.2016
29.03.2016
12.04.2016
12.04.2016
13.05.2016
12.08.2016
09.11.2016
Directors
111,386
18,564
18,564
37,129
–
–
–
–
–
–
–
–
Non-
Directors
–
–
–
–
15,781
15,781
31,562
125,036
4,545
76,798
2,377
977
Share price
prevailing
on date of
grant
£
Exercise
price
£
4.13
4.13
4.13
4.13
4.13
4.13
4.13
4.26
4.26
4.40
4.21
4.40
–
–
–
–
–
–
–
3.30
3.30
–
–
–
Fair
value
£
3.94
1.14
1.41
3.94
4.07
4.00
3.94
1.08
1.21
4.40
4.21
4.40
Expected
term
(years)
3.00
2.63
2.63
3.00
3.00
3.00
3.00
3.55
5.55
3.00
3.00
3.00
Expected
volatility
–
22.6%
15.5% to
52.4%
–
–
–
–
22.1%
23.1%
–
–
–
Expected
dividend
yield
Risk-free
interest
rates
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
1.5%
1.5%
–
–
–
–
0.5%
0.5%
–
–
–
–
0.6%
0.9%
–
–
–
123
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
2015 Awards/options
LTIP – EPS
LTIP – EPS
LTIP – TSR (FTSE 250)
LTIP – TSR (FTSE 250)
Awards/options granted
Date of
grant
03.08.2015
10.09.2015
03.08.2015
10.09.2015
Directors
80,645
–
13,441
–
Non-
Directors
70,028
7,120
11,671
1,187
LTIP – TSR (hotels)
03.08.2015
13,441
11,671
LTIP – TSR (hotels)
LTIP – NAV
LTIP – NAV
Sharesave Scheme (3 year)
Sharesave Scheme (5 year)
Deferred Share Awards
Deferred Share Awards
10.09.2015
03.08.2015
10.09.2015
14.04.2015
14.04.2015
08.09.2015
06.11.2015
–
26,882
–
–
–
–
–
1,187
23,343
2,373
68,243
6,649
78,442
4,325
Share price
prevailing
on date of
grant
£
Exercise
price
£
5.55
5.53
5.55
5.53
5.55
5.53
5.55
5.53
5.75
5.75
5.55
4.76
–
–
–
–
–
–
–
–
4.69
4.69
–
–
Fair
value
£
5.16
5.13
1.22
1.36
2.28
2.83
5.16
5.13
1.21
1.45
5.55
4.76
Expected
term
(years)
3.00
3.00
2.28
2.18
2.28
2.18
3.00
3.00
3.55
5.55
3.00
3.00
Expected
volatility
–
–
19.5%
19.6%
17.7%
to 49.8%
17.6%
to 52.5%
–
–
21.7%
25.2%
–
–
Expected
dividend
yield
Risk-free
interest
rates
2.5%
2.5%
2.5%
2.5%
–
–
0.8%
0.7%
2.5%
0.8%
2.5%
2.5%
2.5%
2.4%
2.4%
–
–
0.7%
–
–
0.8%
1.1%
–
–
Measurement of fair value
The LTIP and Sharesave awards, which are subject to an EPS performance condition, were valued using the Black-Scholes valuation method. The
LTIP awards which are subject to a share price related performance condition (i.e. TSR) were valued using the Monte Carlo valuation method.
The option pricing model involves six variables:
• Exercise price
• Share price at grant
• Expected term
• Expected volatility of share price
• Risk-free interest rate
• Expected dividend yield
24 Provisions
Balance at 1 January 2016
Released/utilised
Foreign exchange adjustments
Balance at 31 December 2016
Analysed as:
Non-current provision
Current provision
Total provision
Legal
£m
Beijing indemnity
£m
Total
£m
2
(1)
–
1
–
1
1
8
–
2
10
10
–
10
10
(1)
2
11
10
1
11
Provision for legal fees as at 31 December 2016 of £1m (2015: £2m) relates to disputes in several hotels. The Beijing indemnity of £10m (2015: £8m)
relate to the tax indemnity to the former shareholders of Grand Millennium Hotel Beijing in which the Group acquired an additional 40% interest in
2010. During the year, a £1m legal provision has been released upon settlement in US.
25 Other non-current liabilities
Other liabilities
124
2016
£m
14
2015
£m
12
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
26 Deferred taxation
Movements in deferred tax liabilities and assets (prior to offsetting balances) during the year are as follows:
Deferred tax liabilities
Property assets1
Deferred tax assets
Tax losses
Employee benefits2
Others
Net deferred tax liabilities
Charged/(credited) to income statement
At
1 January
2016
£m
Change in
tax rate
£m
Other
adjustment
to opening
provision
£m
Current year
movement
£m
Charged to
reserves
£m
Exchange on
translation
£m
At
31 December
2016
£m
243
243
(25)
(4)
(4)
(33)
210
(3)
(3)
–
–
–
–
(3)
1
1
–
–
–
–
1
(5)
(5)
(15)
–
2
(13)
(18)
–
–
–
(2)
–
(2)
(2)
47
47
(14)
–
(1)
(15)
32
283
283
(54)
(6)
(3)
(63)
220
1 Property assets comprise plant, property and equipment, lease premium prepayment and investment properties.
2 Employee benefits comprise defined benefit pension schemes and share-based payment arrangements.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
deferred taxes relate to the same taxation authority.
Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profit will be available
against which the Group can utilise the benefits.
Deductible temporary differences
Adjustments due to:
– Deductible temporary differences in respect of prior year
– Tax losses in respect of prior year
2016
£m
1
1
14
15
2015
£m
–
–
13
13
The deductible temporary differences do not expire under current tax legislation. The tax losses are subject to agreement by the tax authorities and
compliance with tax regulations in the respective countries in which certain subsidiaries operate.
The gross tax losses with expiry dates are as follows:
Expiry dates:
– within 1 to 5 years
– after 5 years
– no expiry date
2016
£m
8
2
67
77
At 31 December 2016, a deferred tax liability of £12m (2015: £9m) relating to undistributed reserves of overseas subsidiaries and joint ventures of
£958m (2015: £662m) has not been recognised because the Group determined that the distributions will not be made and the liability will not be
incurred in the foreseeable future.
2015
£m
6
4
59
69
125
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the consolidated financial statements
continued
27 Trade and other payables
Trade payables
Other creditors including taxation and social security:
– Social security and other taxes
– Value added tax and similar sales taxes
– Other creditors
Accruals
Deferred income
Rental and other deposits
The Group’s exposure to currency and liquidity risks related to trade and other payables are disclosed in Note 22.
28 Dividends
Final ordinary dividend paid
Interim ordinary dividend paid
Total dividends paid
2016
pence
4.34
2.08
6.42
2015
pence
11.51
2.08
13.59
Subsequent to 31 December 2016, the Directors declared the following final dividends, which have not been provided for:
2016
pence
5.66
2015
pence
4.34
Final ordinary dividend
All dividends paid during 2016 and 2015 were in cash.
29 Share capital
Balance at 1 January 2016
Issue of ordinary shares on exercise of share options
Balance at 31 December 2016
2016
£m
35
12
13
29
101
19
5
214
2016
£m
14
7
21
2016
£m
18
2015
£m
22
9
12
31
90
19
4
187
2015
£m
37
7
44
2015
£m
14
Number of 30p
shares allotted,
called up and
fully paid
324,730,301
5,264
324,735,565
All of the share capital is equity share capital. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one
vote per share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares
are reissued.
At the year end, options over 238,271 ordinary shares remain outstanding under the Sharesave Scheme and are exercisable between now and 31
January 2022 at exercise prices between £3.30 and £4.69. In addition, awards made under the LTIP up to 880,284 ordinary shares remain unvested
and may potentially vest between 4 April 2017 and 29 March 2019. Lastly, 124,970 options under the Annual Bonus Plan may potentially vest
between 8 September 2018 and 9 November 2019.
During the year Millennium & Copthorne Hotels plc issued invitations to UK employees under the Sharesave Scheme to enter into a three-year savings
contract or a five-year savings contract with an option to purchase shares at an option price of £3.30 on expiry of the savings contract.
126
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements 30 Reserves
Cash flow hedge reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow instruments related to the hedged
transactions that have not yet occurred (net of tax) .
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well
as from the translation of liabilities that hedge the Group’s net investment in foreign operations (net of tax) .
Treasury share reserve
An employee benefit trust established by the Group held 4,345 shares at 31 December 2016 (2015: 5,758) to satisfy the vesting of awards under the
LTIP. During the year no shares (2015: nil shares) were purchased by the trust. At 31 December 2016, the cost of shares held by the trust was
£25,017 (2015: £33,153) , whilst the market value of these shares at 31 December 2016 was £20,004 (2015: £26,683) . Shares purchased by the
trust are treated as treasury shares which are deducted from equity and excluded from the calculations of earnings per share.
31 Financial commitments
(a) Capital commitments at the end of the financial year which are contracted but not provided for
The Group’s share of the capital commitments of joint ventures and associates is shown in Note 15.
(b) Total commitments under non-cancellable operating lease rentals are payable by the Group as follows:
– less than one year
– between one and five years
– more than five years
2016
£m
37
2016
£m
12
37
171
220
(c) The Group leases out certain of its properties under operating leases. The future minimum lease rentals receivable by the Group under non-
cancellable leases are as follows:
– less than one year
– between one and five years
– more than five years
2016
£m
35
108
59
202
2015
£m
44
2015
£m
11
33
141
185
2015
£m
30
91
55
176
Future minimum lease rentals receivable under non-cancellable leases includes all future rentals receivable up to the period when those leases expire
or become cancellable.
During the year ended 31 December 2016, £47m (2015: £42m) was recognised as rental income in the income statement and £2m (2015: £1m) in
respect of repairs and maintenance was recognised as an expense in the income statement relating to investment properties.
127
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
32 Contingencies and subsequent events
In the course of its operations the Group is routinely exposed to potential liabilities for claims made by employees and contractual or tortious claims
made by third parties. No material losses are anticipated from such exposures. There were no contingent liabilities or guarantees other than those
arising in the ordinary course of business and on these no material losses are anticipated. The Group has insurance cover up to certain limits for major
risks on property and major claims in connection with legal liabilities arising in the course of its operations. Otherwise the Group generally carries its
own risk. The Group believes that the accruals and provisions carried on the balance sheet are sufficient to cover these risks.
Other than the above transactions, there are no events subsequent to the balance sheet date which require adjustments to or disclosure within these
consolidated financial statements except for those stated below:
In January 2017 a subsidiary of the Group exercised a right of first refusal under a lease of the penthouse floor of the Novotel New York Times Square
pursuant to which the subsidiary entered into a sale and purchase agreement to acquire the tenant’s interest in the lease for a gross purchase price of
US$6m. The lease had a term ending in 2080 and the purchase completed in February 2017. The Group previously acquired the hotel, subject to the
penthouse lease, in June 2014.
33 Related parties
Identity of related parties
Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of
transactions between the Group and other related parties are disclosed below. All transactions with related parties were entered into in the normal
course of business and at arm’s length.
The Group has a related party relationship with its joint ventures, associates and with its Directors and executive officers.
Transactions with ultimate holding company and other related companies
The Group has a related party relationship with certain subsidiaries of Hong Leong Investment Holdings Pte. Ltd (“Hong Leong”) which is the ultimate
holding and controlling company of Millennium & Copthorne Hotels plc and holds 64.9% (2015: 65.3%) of the Company’s shares via City
Developments Limited (“CDL”) , the intermediate holding company of the Group. During the year ended 31 December 2016, the Group had the
following transactions with those subsidiaries.
The Group deposited certain surplus cash with Hong Leong Finance Limited, a subsidiary of Hong Leong, on normal commercial terms. As at
31 December 2016, £4m (2015: £3m) of cash was deposited with Hong Leong Finance Limited.
Fees paid/payable by the Group to CDL and its other subsidiaries were £2m (2015: £2m) which included rentals paid for the Grand Shanghai
restaurant and Kings Centre; property management fees for Tanglin Shopping Centre; charges for car parking, leasing commission and professional
services.
As at 31 December 2015, City e-Solutions Limited (“CES”), a fellow subsidiary of CDL held 1,152,031 ordinary shares in the Company. CES through
its subsidiaries provided consultancy, management and reservation services to M&C for the year ended 31 December 2015 for a total of £1m. In
2016, CES ceased to be a subsidiary of CDL.
Transactions with joint venture
City Hotels Pte. Ltd, a 100% subsidiary of the Group, provided a shareholder loan facility of 550m Thai Baht (£12m) to Fena Estate Company Limited
(“Fena”) , its 50% owned joint venture. At 31 December 2016 and 2015 all of this facility was fully drawn. The loan attracts interest of 4.5% (2015:
4.5%) per annum. This interest was rolled up into the carrying value of the loan. The total loan outstanding as at 31 December 2016, including rolled
up interest, was 779m Thai Baht (£18m) (2015: 754m Thai Baht (£14m) ) .
The Group provided a further US$2m (£1m) operator loan facility to Fena which was fully drawn down. This loan together with interest charged at
2.2% per annum was fully settled in 2015.
Transactions with key management personnel
The beneficial interest of the Directors and their connected persons in the ordinary shares of the Company was 0.16% (2015: 0.16%) .
In addition to their salaries, the Group also provides non-cash benefits to Directors and executive officers and contributes to a post-employment
defined contribution plan depending on the date of commencement of employment. The defined contribution plan does not have a specified pension
payable on retirement and benefits are determined by the extent to which the individual’s fund can buy an annuity in the market at retirement.
128
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Executive officers also participate in the Group’s share option programme, Long-Term Incentive Plan and the Group’s Sharesave schemes. The key
management personnel compensation is as follows:
Short-term employee benefits
Share-based payment
Directors
Executives
34 Related undertakings
The full list of the Company’s related undertakings as at 31 December 2016 are set out below:
2016
£m
2015
£m
6
–
6
1
5
6
5
2
7
2
5
7
Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
Indirect subsidiary
New Zealand
Indirect subsidiary
USA
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
1345 28th Street,
Boulder, CO 80302
Holding Company
Hotel ownership
Holding Company
Dormant
Hotel owner
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Full Name
Aircoa Equity Interests Inc.
Aircoa GP Corporation
Aircoa LLC
All Seasons Hotels & Resorts Limited
Anchorage Lakefront Limited Partnership
Archyield Limited
ATOS Holdings AG
Aurora Inn Operating Partnership L.P.
Avon Wynfield Inn. Ltd.
Avon Wynfield LLC
Beijing Fortune Hotel Co. Ltd.
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
70%
Direct subsidiary
Austria
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
People’s Republic
of China
Biltmore Place Operations Corporation
100%
Indirect subsidiary
USA
Birkenhead Holdings Pty. Ltd.
75%
Indirect subsidiary
Australia
Birkenhead Investments Pty. Ltd.
75%
Indirect subsidiary
Australia
Bostonian Hotel Limited Partnership
Buffalo Operating Partnership L.P.
Buffalo RHM Operating LLC
100%
100%
100%
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
Horley, Surrey RH6 7AF
Schulhof 6/1st fl , 1010 Vienna,
Austria
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Building No. 5, 7 DongSanHuan
Middle Road, Chaoyang District,
Bejing, P.R.China 100020
1345 28th Street,
Boulder, CO 80302
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Investment holding
Hotel ownership
Hotel ownership
Hotel owner
Hotel owner and operator
Liquor licence holder
Holding company
Property Investment &
Management
Hotel owner
Hotel ownership
Hotel owner
129
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Full Name
CDL (New York) LLC
CDL (NYL) Limited
CDL Entertainment & Leisure Pte Ltd
CDL Hospitality Trusts1
CDL Hotels (Chelsea) Limited
CDL Hotels (Korea) Limited
CDL Hotels (Labuan) Limited
CDL Hotels (Malaysia) Sdn. Bhd.
CDL Hotels (U.K.) Limited
CDL Hotels Holdings Japan Limited
Shareholding
percentage
Type
Registered office address
Principal Activities
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Country of
incorporation
USA
USA
Republic of
Singapore
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
Hotel owner
Investment holding
Provision of management
services and investment
holding
See note below1
Hotel owner and operator
Associated undertakings Republic of
Singapore
United Kingdom Victoria House, Victoria Road,
Indirect subsidiary
See note below 1
Indirect subsidiary
Republic of Korea Jung-gu Sowolro 50, Seoul,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
Malaysia
Indirect subsidiary
Malaysia
South Korea 04637
Tiara Labuan, Jalan Tanjung Batu,
87000 F.T. Labuan, Malaysia
Level 8, Symphony House, Pusat
Dagangan Dana 1,
Jalan PJU 1A/46,
47301 Petaling Jaya,
Selangor Darul Ehsan
Hotel owner and operator
Hotel owner and operator
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
100%
100%
100%
37%
100%
100%
100%
100%
100%
100%
Associated undertakings Republic of
Singapore
USA
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Hong Kong
New Zealand
New Zealand
New Zealand
Horley, Surrey RH6 7AF
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
36 Robinson Road #04-01 City
House Singapore 068877
36 Robinson Road #04-01 City
House Singapore 068877
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
United Kingdom Victoria House, Victoria Road,
Republic of
Singapore
Republic of
Singapore
Republic of
Singapore
New Zealand
USA
USA
USA
Investment holding
Investment holding
Investment holding
Hotel investment holding
company
investment and property
management company
Property investment and
development
Hotel owner
Hotel ownership
Hotel owner
Restaurateur
Restaurateur
Hotel operator
Investment holding
Investment holding
CDL Hotels Holdings New Zealand Limited
100%
Indirect subsidiary
CDL Hotels Japan Pte. Ltd.
CDL Hotels USA, Inc
CDL Investments New Zealand Limited
CDL Land New Zealand Limited
CDL West 45th Street LLC
Chicago Hotel Holdings Inc.
Cincinnati S.I. Co.
City Century Pte Ltd
City Elite Pte Ltd
City Hotels Pte Ltd
Context Securities Limited
40%
100%
50%
50%
100%
100%
100%
100%
100%
100%
75%
Copthorne (Nominees) Limited
100%
Indirect subsidiary
Copthorne Aberdeen Limited
Copthorne Hotel (Birmingham) Limited
Copthorne Hotel (Cardiff) Limited
130
Horley, Surrey RH6 7AF
83%
100%
100%
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel management
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Full Name
Copthorne Hotel (Effingham Park) Limited
Copthorne Hotel (Gatwick) Limited
Copthorne Hotel (Manchester) Limited
Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
100%
100%
100%
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Copthorne Hotel (Merry Hill) Construction Limited
100%
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Copthorne Hotel (Merry Hill) Limited
100%
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Copthorne Hotel (Newcastle) Limited
Copthorne Hotel (Plymouth) Limited
Copthorne Hotel (Slough) Limited
Copthorne Hotel Holdings Limited
Copthorne Hotels Limited
Copthorne Orchid Hotel Singapore Pte. Ltd.
Copthorne Orchid Penang Sdn. Bhd.
Diplomat Hotel Holding Limited
Durham Operating Partnership L.P.
Elite Hotel Management Services Pte. Ltd.
96%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road
Investment holding
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel investment holding
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
Malaysia
Horley, Surrey RH6 7AF
36 Robinson Road #04-01 City
House Singapore 068877
Level 8, Symphony House, Pusat
Dagangan Dana 1,
Jalan PJU 1A/46,
47301 Petaling Jaya,
Selangor Darul Ehsan
Property owner and
developer
Hotel owner
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Indirect subsidiary
USA
Indirect subsidiary
Republic of
Singapore
Fena Estate Company Limited2
50%
Associated undertakings Thailand
Ferguson Hotel Management Limited
50%
Associated undertakings Hong Kong
First 2000 Limited
100%
Indirect subsidiary
Hong Kong
First Sponsor Group Limited
36%
Associated undertakings Cayman Islands
Five Star Assurance Inc.
Four Peaks Management Company
Gateway Holdings Corporation I
Gateway Hotel Holdings Inc.
100%
100%
100%
100%
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
USA
Horley, Surrey RH6 7AF
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
No. 18/8 FICO Place Building, Floor
10 Sukhumvit 21 Road (Asoke),
Klongteuyneur Sub-
district, Wattana
District, Bangkok, Thailand
Unit 606, 6th Floor,
Alliance Building,
133 Connaught Road
Central, Hong
Kong
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
190 Elgin Avenue, George Town,
KY1-9005 Grand Cayman, Cayman
Islands
1401 Eye St., NW, Suite 600,
Washington D.C. 20005
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Hotel ownership
Hotel management
consultancy services
Investment holding
company
Investment holding
Investment holding
Investment Holding
Captive insurance
company
Arizona condominium
management
Holding company
Hotel ownership
131
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Full Name
Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
Gateway Regal Holdings LLC
100%
Indirect subsidiary
USA
Grand Plaza Hotel Corporation
66%
Indirect subsidiary
Philippines
Harbour Land Corporation
41%
Associated undertakings Philippines
Harbour View Hotel Pte. Ltd.
Harrow Entertainment Pte Ltd
Hong Leong Ginza TMK
Hong Leong Hotel Development Limited
100%
100%
70%
84%
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
Republic of
Singapore
Japan
Indirect subsidiary
Taiwan
Hong Leong Hotels Pte. Ltd.
100%
Indirect subsidiary
Cayman Islands
Hong Leong International Hotel (Singapore) Pte Ltd
97%
Indirect subsidiary
Hospitality Group Limited
75%
Indirect subsidiary
Hospitality Holdings Pte. Ltd.
100%
Indirect subsidiary
Republic of
Singapore
New Zealand
Republic of
Singapore
New Zealand
Indirect subsidiary
Indirect subsidiary
New Zealand
Hospitality Leases Limited
Hospitality Services Limited
Hospitality Ventures Pte. Ltd.
Hotel Liverpool Limited
Hotel Liverpool Management Limited
Hotelcorp New Zealand Pty. Ltd.
75%
75%
100%
100%
100%
75%
International Design Link Pte. Ltd.
100%
Indirect subsidiary
Republic of
Singapore
KIN Holdings Limited
75%
Indirect subsidiary
New Zealand
King’s Tanglin Shopping Pte. Ltd.
100%
Indirect subsidiary
Kingsgate Holdings Pty. Ltd
75%
Indirect subsidiary
Republic of
Singapore
Australia
Kingsgate Hotel Pty. Ltd.
75%
Indirect subsidiary
Australia
Kingsgate Hotels and Resorts Limited
Kingsgate Hotels Limited
Kingsgate International Corporation Limited
75%
75%
75%
Indirect subsidiary
New Zealand
Indirect subsidiary
New Zealand
Indirect subsidiary
New Zealand
132
1345 28th Street,
Boulder, CO 80302
10 Floor, Heritage Hotel Manila,
EDSA corner Roxas Boulevard,
Pasay City, Philippines 1300
10 Floor, Heritage Hotel Manila,
EDSA corner Roxas Boulevard,
Pasay City, Philippines 1300
36 Robinson Road #04-01 City
House Singapore 068877
36 Robinson Road #04-01 City
House Singapore 068877
4-1 Nihonbashi 1-chome, Chuo-ku,
Tokyo, Japan
2 Song Shou Road, Xinyi District,
Taipei 11051, Taiwan
PO Box 309 Ugland House, Grand
Cayman, KY1-1104 Cayman Islands
36 Robinson Road #04-01 City
House Singapore 068877
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
36 Robinson Road #04-01 City
House Singapore 068877
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
36 Robinson Road #04-01 City
House Singapore 068877
Hotel owner and operator
Hotel owner and operator
and investment holding
company
Land owner
Hotel operator
Investment holding
Property owner
Hotel owner and operator
Investment holding
company
Investment holding
Holding company
Investment holding
company
Lessee company
Hotel operation/
management
Investment holding
Property letting
Horley, Surrey RH6 7AF
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
36 Robinson Road #04-01 City
House Singapore 068877
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
36 Robinson Road #04-01 City
House Singapore 068877
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Holding company
Property project design
consultancy services
(currently dormant)
Holding company
Property owner
Holding company
Service company
Franchise holder (Quality)
Hotel owner and operator
Investment holding
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
United Kingdom Victoria House, Victoria Road,
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Operating company
Horley, Surrey RH6 7AF
Indirect subsidiary
Australia
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Full Name
Shareholding
percentage
Type
Country of
incorporation
Kingsgate Investments Pty. Ltd.
75%
Indirect subsidiary
Australia
Lakeside Operating Partnership L.P.
London Britannia Hotel Limited
London Tara Hotel Limited
M&C Asia Finance (UK) Limited
M&C Asia Holdings (UK) Limited
M & C (CB) Limited
M & C (CD) Limited
M & C Management Services (USA) Inc
M & C NZ Limited
M & C Reservations Services Limited
M&C Business Trust Management Limited
M&C Colorado Hotel Corporation
M&C Crescent Corporation
M&C Crescent Interests, LLC
M&C Finance (1) Limited
M&C Holdings (Thailand) Ltd.
M&C Holdings Delaware Partnership
M&C Holdings LLC
M&C Hotel Enterprises (Asia) Limited
M&C Hotel Interests Inc.
M&C Hotel Investments Pte. Ltd.
M&C Hotels France Management SARL
M&C Hotels France SAS
M&C Hotels Holdings Japan Pte. Ltd.
M&C Hotels Holdings Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Registered office address
Principal Activities
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
1345 28th Street,
Boulder, CO 80302
Investment company
Hotel ownership
Indirect subsidiary
USA
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel owner and operator
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Finance company
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Investment company
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Indirect subsidiary
USA
Horley, Surrey RH6 7AF
1345 28th Street,
Boulder, CO 80302
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Horley, Surrey RH6 7AF
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
USA
USA
USA
Horley, Surrey RH6 7AF
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Management services
company
Holding company
Provider of reservation
services to hotel owners
and operators
Provision of property fund
management services
Holding company
Investment holding
Property owner
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Finance company
Indirect subsidiary
Thailand
Indirect subsidiary
Indirect subsidiary
USA
USA
Indirect subsidiary
Hong Kong
Indirect subsidiary
USA
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
France
Indirect subsidiary
France
Horley, Surrey RH6 7AF
75 White Group Tower II, 11th
Floor, Soi Rubia, Sukhumvit 42
Road, Kwaeng Phrakanong Khet
Klongtoey, Bangkok 10110 Thailand
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
12 Boulevard Haussmann, 75009
Paris, France
12 Boulevard Haussmann, 75009
Paris, France
36 Robinson Road #04-01 City
House Singapore 068877
Horley, Surrey RH6 7AF
Investment holding and
hotel management
Property investment
Holding company
Investment holding
Hotel management
services company
Investment holding
Management company
Hotel owner
Investment holding
Investment holding
133
Indirect subsidiary
Direct subsidiary
Republic of
Singapore
United Kingdom Victoria House, Victoria Road,
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
Full Name
M&C Hotels Holdings USA Limited
M&C Hotels Japan Pte. Ltd.
M&C Hotels Partnership France SNC
M&C Hospitality Holdings (Asia) Limited
100%
100%
100%
100%
Direct subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
M&C Hospitality International Limited
100%
Indirect subsidiary
Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
Cayman Islands
Republic of
Singapore
France
PO Box 309 Ugland House, Grand
Cayman, KY1-1104 Cayman Islands
36 Robinson Road #04-01 City
House Singapore 068877
12 Boulevard Haussmann, 75009
Paris, France
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
United Kingdom Victoria House, Victoria Road,
Hong Kong
Hong Kong
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
REIT investment
management services
Investment holding
M&C Management Holdings Limited
M&C REIT Management Limited
M&C New York (Times Square), LLC
M&C New York Finance (UK) Limited
M&C New York (Times Square) EAT II LLC
M&C Singapore Finance (UK) Limited
M&C Singapore Holdings (UK) Limited
McCormick Ranch Operating Partnership L.P.
MHM Inc.
Millennium Bostonian, Inc.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Direct subsidiary
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
USA
Horley, Surrey RH6 7AF
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Finance company
Indirect subsidiary
USA
Horley, Surrey RH6 7AF
1345 28th Street,
Boulder, CO 80302
Hotel owner
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Finance company
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
Horley, Surrey RH6 7AF
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Hotel ownership
Hotel management
Holding company
Millennium & Copthorne (Austrian Holdings) Limited
100%
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Horley, Surrey RH6 7AF
Millennium & Copthorne (Jersey Holdings) Limited
100%
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Holding company
Millennium & Copthorne Hotel Holdings
(Hong Kong) Limited
100%
Indirect subsidiary
Hong Kong
Millennium & Copthorne Hotels (Hong Kong) Limited
100%
Indirect subsidiary
Hong Kong
Millennium & Copthorne Hotels Limited
75%
Indirect subsidiary
New Zealand
Millennium & Copthorne Hotels New Zealand Limited
75%
Indirect subsidiary
New Zealand
Millennium & Copthorne Hotels Pty. Ltd.
75%
Indirect subsidiary
Australia
Millennium & Copthorne International Limited
100%
Indirect subsidiary
Millennium & Copthorne Pension Trustee Limited
100%
Direct subsidiary
Republic of
Singapore
United Kingdom Victoria House, Victoria Road,
Millennium & Copthorne Share Trustees Limited
100%
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Millennium CDG Paris SAS
100%
Indirect subsidiary
France
Horley, Surrey RH6 7AF
12 Boulevard Haussmann, 75009
Paris, France
Horley, Surrey RH6 7AF
134
Horley, Surrey RH6 7AF
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
2803 Great Eagle Centre, 23
Harbour Road, Wanchai,
Hong Kong
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Suite 7B, Zenith Residences, 82-94
Darlinghurst Road, Potts Point,
Sydney 2011, Australia
36 Robinson Road #04-01 City
House Singapore 068877
Investment and
development of hotels
and hotel management
Provision of hotel
management and
consultancy services
Name-holding
Hotel investment holding
company
Name holding
Hotels and resorts
management
Pension trust acting
on behalf of company
trustees
Share trustee company
Hotel operator
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Full Name
Millennium Hotel Holdings EMEA Limited
Millennium Hotels & Resorts Services Limited
Millennium Hotels Europe Holdings Limited
Millennium Hotels Italy Holdings S.r.l.
Millennium Hotels Limited
Millennium Hotels Palace Management S.r.l.
Millennium Hotels Property S.r.l.
Millennium Hotels (West London) Limited
Millennium Hotels (West London)
Management Limited
Millennium Hotels London Limited
Millennium Opera Paris SAS
New Unity Holdings Ltd. 2
New York Sign LLC
Newbury Investments Pte Ltd
Park Plaza Hotel Corporation
PT Millennium Hotels & Resorts
PT. Millennium Sirih Jakarta
QINZ (Anzac Avenue) Limited
QINZ Holdings (New Zealand) Limited
Quantum Limited
Regal Grand Holdings Corporation I
Regal Harvest House L.P.
Regal Hotel Management Inc.
Republic Hotels & Resorts Limited
Republic Hotels Suzhou Pte Ltd
Republic Iconic Hotel Pte. Ltd.
RHH Operating LLC
Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
75%
75%
75%
100%
100%
100%
100%
100%
100%
100%
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Horley, Surrey RH6 7AF
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Italy
Horley, Surrey RH6 7AF
Via Vittoria Veneto, n. 70, Roma
00187, Italy
United Kingdom Victoria House, Victoria Road,
Italy
Horley, Surrey RH6 7AF
Via Vittoria Veneto, n. 70, Roma
00187, Italy
Via Vittoria Veneto, n. 70, Roma
00187, Italy
United Kingdom Victoria House, Victoria Road,
Italy
Management contract
holding company
Investment holding
Holding company
Investment holding
Hotel operator
Property owner
Property letting
Indirect subsidiary
United Kingdom Victoria House, Victoria Road,
Hotel operator
Horley, Surrey RH6 7AF
Direct subsidiary
United Kingdom Victoria House, Victoria Road,
Investment holding
Horley, Surrey RH6 7AF
Indirect subsidiary
France
Associated undertakings BVI
Associated undertakings USA
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
USA
Indirect subsidiary
Indonesia
Indirect subsidiary
Indonesia
Indirect subsidiary
New Zealand
Indirect subsidiary
New Zealand
Indirect subsidiary
New Zealand
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
Republic of
Singapore
Republic of
Singapore
Republic of
Singapore
USA
Horley, Surrey RH6 7AF
12 Boulevard Haussmann, 75009
Paris, France
PO Box 146 Road Town, Tortola,
British Virgin Islands
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
Jalan Fachrudin 3, Jakarta 10250,
Indonesia
Jalan Fachrudin 3, Jakarta 10250,
Indonesia
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
Level 13, 280 Queen Street,
Auckland 1010, New Zealand
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
36 Robinson Road #04-01 City
House Singapore 068877
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
Hotel operator
Investment holding
To lease, manage, and
otherwise deal
with certain
advertising signage space
at the Novotel hotel
Investment holding
Holding company
Management services
Hotel owner
Hotel owner
Holding company
Holding company
Holding company
Hotel ownership
Holding company
Hotel operator and
investment holding
company
Dormant
Hotel operator
Hotel owner
135
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Shareholding
percentage
Type
Country of
incorporation
Registered office address
Principal Activities
Notes to the consolidated financial statements
continued
Full Name
RHI Boston Holdings Corporation I
RHI Boston Holdings Corporation II
RHM Aurora LLC
RHM Holdings Corporation I
RHM Management LLC
RHM Ranch LLC
RHM Wynfield LLC
RHM-88 LLC
Richfield Holdings Corporation I
Richfield Holdings Corporation II
Richfield Holdings Inc
Rogo Investments Pte. Ltd.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Republic of
Singapore
Rogo Realty Corporation
24%
Associated undertakings Philippines
S.S. Restaurant Corporation
Sunnyvale Partners Ltd.
Tara Hotels Deutschland GmbH
100%
100%
100%
Indirect subsidiary
Indirect subsidiary
USA
USA
Indirect subsidiary
Germany
The Philippine Fund Limited
60%
Indirect subsidiary
Bermuda
100%
100%
100%
100%
100%
100%
100%
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Republic of
Singapore
USA
USA
USA
USA
USA
Republic of
Singapore
TOSCAP Limited
Trimark Hotel Corporation
WHB Biltmore LLC
WHB Corporation
Wynfield GP Corporation
Wynfield One Ltd.
Zatrio Pte Ltd
136
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
36 Robinson Road
#04-01 City House
Singapore 068877
10 Floor, Heritage Hotel Manila,
EDSA corner Roxas Boulevard,
Pasay City, Philippines 1300
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
Registered at the Trade register at
the local court of Hannover with the
legal form of Private limited
company (number HRB 209133).
C/o Coson Corporate Services
Limited, Cumberland House
9th Floor, 1 Victoria Street
Hamilton HM 11, Bermuda
36 Robinson Road #04-01 City
House Singapore 068877
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
1345 28th Street,
Boulder, CO 80302
36 Robinson Road #04-01 City
House Singapore 068877
Holding company
Holding company
Hotel ownership
Holding company
Hotel ownership
Hotel owner
Hotel ownership
Hotel owner and operator
Holding company
Holding company
Holding company
Investment holding
Real estate owner
Liquor license holder
Hotel ownership
Hotel investment holding
company
Investment holding
Investment holding
Hotel owner and operator
Hotel owner and operator
Holding company
Hotel ownership
Holding company
Investment holding
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Full Name
Shareholding
percentage
Type
Country of
incorporation
Zillion Holdings Limited
100%
Indirect subsidiary
Barbados
Registered office address
Principal Activities
The Phoenix Centre, George Street,
Belleville, St. Michael, Barbados
Investment holding
1
CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust (“H-REIT”), a real estate investment trust, and CDL Hospitality Business Trust (“HBT”), a business trust. H-REIT
has an investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate which is primarily used for hospitality and/or hospitality-related purposes, whether wholly or
partially, and real-estate related assets in relation to the foregoing. HBT is a business trust which was activated in December 2013. In addition to its function as a master lessee, HBT may also undertake certain
hospitality and hospitality-related development projects, acquisitions and investments which may not be suitable for H-REIT. The registered office address of M&C REIT Management Limited, Manager of H-REIT
and M&C Business Trust Management Limited, Trustee-Manager of HBT is 36 Robinson Road #04-01 City House Singapore 068877.
As disclosed in Note 3 to the consolidated financial statements, the Group has concluded that under IFRS10, it has de facto control over CDL Hospitality Trusts.
2
The Group has assessed the classification of its investments in First Sponsor Group Limited, New Unity Holdings Limited and Fena Estate Company Limited in accordance with IFRS10 and concluded that it
does not have control.
Exemption from statutory audit
Listed below are subsidiaries controlled and consolidated by the Group, where the Directors have elected to take the exemption from having an audit
of their financial statements for the year ended 31 December 2016. This exemption is taken in accordance with Companies Act s479A.
Archyield Limited (1747079)
CDL Hotels (Chelsea) Limited (2845022)
CDL Hotels (U.K.) Limited (2729520)
Copthorne Hotel (Birmingham) Limited (1816493)
Copthorne Hotel (Cardiff) Limited (2411296)
Copthorne Hotel (Effingham Park) Limited (1423861)
Copthorne Hotel (Gatwick) Limited (994968)
Copthorne Hotel (Manchester) Limited (1855800)
Copthorne Hotel (Merry Hill) Construction Limited (2649367)
Copthorne Hotel (Merry Hill) Limited (2590620)
Copthorne Hotel (Plymouth) Limited (3253120)
Copthorne Hotel (Slough) Limited (2300992)
Copthorne (Nominees) Limited (2574042)
Diplomat Hotel Holding Limited (1927463)
Hotel Liverpool Limited (9636541)
Hotel Liverpool Management Limited (9638688)
London Britannia Hotel Limited (744379)
London Tara Hotel Limited (1005559)
M&C Asia Finance (UK) Limited (8391037)
M&C Asia Holdings (UK) Limited (8382946)
Each company’s registered number is shown in brackets after its name.
M&C (CB) Limited (3846711)
M&C (CD) Limited (3846704)
M&C Finance (1) Limited (6783896)
M&C Hotels Holdings Limited (4407581)
M&C Management Holdings Limited (5832248)
M&C New York Finance (UK) Limited (9060415)
M&C NZ Limited (5159722)
M&C Singapore Finance (UK) Limited (8391052)
M&C Singapore Holdings (UK) Limited (8382985)
Millennium & Copthorne (Austrian Holdings) Limited (3757378)
Millennium & Copthorne (Jersey Holdings) Limited (5846574)
Millennium & Copthorne Pension Trustee Limited (6662791)
Millennium & Copthorne Share Trustees Limited (3320990)
Millennium Hotel Holdings EMEA Limited (4592877)
Millennium Hotels Limited (3141048)
Millennium Hotels Europe Holdings Limited (8844747)
Millennium Hotels London Limited (3691885)
Millennium Hotels (West London) Limited (8599282)
Millennium Hotels (West London) Management Limited (8891908)
Millennium Hotels & Resorts Services Limited (4601112)
137
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Notes to the consolidated financial statements
continued
35. Non-controlling interests (“NCI”)
The following subsidiaries have material NCI.
Name
Millennium & Copthorne Hotels New Zealand
Limited (“MCHNZ”)
CDL Hospitality Trusts (“CDLHT”)
Principal place of business/ Country of
incorporation
Principal activity
2016
2015
New Zealand
Singapore
Hotel investment holding company
Real estate investment trust
25%
63%
25%
64%
The following is summarised financial information for MCHNZ and CDLHT, prepared in accordance with local accounting standards. The information
is before inter-company eliminations with other companies in the Group.
Ownership interests
held by NCI
MCHNZ Subgroup
CDLHT Subgroup
2016
£m
88
26
5
33
59
5
80
286
(19)
(64)
283
32
36
(29)
(6)
1
1
2015
£m
63
13
3
2
15
3
60
212
(14)
(53)
205
26
3
(8)
1
(4)
1
2016
£m
96
26
16
10
36
23
61
1,362
(20)
(535)
868
546
71
(10)
(56)
5
33
2015
£m
82
28
18
–
28
18
44
1,168
(120)
(344)
748
479
63
(72)
6
(3)
32
Name
Revenue
Profit after tax
Profit attributable to NCI
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to NCI
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to NCI
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Dividends paid to NCI during the year1
1 Included in cash flows from financing activities.
138
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
Company statement
of financial position
As at 31 December 2016
Non current assets
Property, plant and equipment
Investments and other financial assets
Deferred tax asset
Current assets
Amounts owed by subsidiary undertakings falling due within one year
Other receivables
Cash and cash equivalents
Other current liabilities
Net current liabilities
Other non current liabilities
Net assets
Equity
Called up share capital
Share premium
Retained earnings
Treasury share reserve
Total equity
Notes
(E)
(F)
(G)
(H)
(I)
2016
£m
3
1,979
2
1,984
19
1
21
41
(163)
(122)
(505)
2015
£m
3
1,903
2
1,908
18
1
–
19
(202)
(183)
(391)
1,357
1,334
97
843
421
(4)
97
843
398
(4)
1,357
1,334
These financial statements were approved by the Board of Directors on 16 February 2017 and were signed on its behalf by:
Kwek Leng Beng
Chairman
Registered No: 3004377
Aloysius Lee
Group Chief Executive Officer
139
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Company statement of
changes in equity
For the year ended 31 December 2016
Balance at 1 January 2015
Profit
Other comprehensive income
Total comprehensive income
Purchase of own shares
Dividends
Balance at 31 December 2015
Balance at 1 January 2016
Profit
Other comprehensive expense
Total comprehensive income
Share-based payment transactions (net of tax)
Dividends
Balance at 31 December 2016
Share
capital
£m
Share
premium
£m
Treasury share
reserve
£m
Retained
earnings
£m
97
–
–
–
–
–
97
97
–
–
–
–
–
97
843
–
–
–
–
–
843
843
–
–
–
–
–
843
(4)
–
–
–
–
–
(4)
(4)
–
–
–
–
–
(4)
221
221
(2)
219
2
(44)
398
398
51
(7)
44
–
(21)
421
Total
equity
£m
1,157
221
(2)
219
2
(44)
1,334
1,334
51
(7)
44
–
(21)
1,357
The notes on pages 141 to 142 are an integral part of these Company’s financial statements.
140
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements Notes to the Company
financial statements
Authorisation of financial statements and statement of compliance with FRS 101
A
The parent company financial statements of Millennium and Copthorne Hotels plc (“the Company”) for the year ended 31 December 2016 were
authorised for issue by the board of Directors and signed on its behalf on 16 February 2017. The Company is incorporated and domiciled in England
and Wales. The Company’s ordinary shares are traded on the London Stock Exchange.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) . The
financial statements are prepared under the historical cost convention.
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of the financial statements.
The Company’s results are included in the consolidated financial statements of Millennium and Copthorne Hotels plc which are available from the
Group’s website www.millenniumhotels.com.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2016.
The financial statements are prepared in Sterling and are rounded to the nearest million except when otherwise indicated.
B Accounting policies
The parent company financial statements of Millennium and Copthorne Hotels plc have been prepared in accordance with the Companies Act 2006
and Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”) , which was first applied in 2015 after notifying shareholders of the
proposed change. FRS 101 enables the financial statements of the parent company to be prepared in accordance with EU-adopted IFRS but with
certain disclosure exemptions. The main areas of reduced disclosure are in respect of equity settled share based payments, financial instruments, the
cash flow statement, and related party transactions with Group companies.
The Company early adopted FRS 101 amendments before the effective date of 1 January 2016 regarding the presentation of financial statements in
compliance with the IAS 1 format.
The accounting policies adopted for the parent company are otherwise consistent with those used for the Group which are set out on pages 82
to 88.
C Dividends
Details of dividends paid and proposed in the current and prior year are given in Note 28 to the consolidated financial statements.
D Profit attributable to members of the parent company
The profit dealt with in the financial statements of the Company is £51m (2015: £221m) .
E
Property, plant and equipment
Cost at 1 January 2016
Transfers
Cost at 31 December 2016
Software
£m
Capital work
in progress
£m
–
3
3
3
(3)
–
Total
£m
3
–
3
141
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information
Notes to the Company
financial statements
continued
F
Investments and other financial assets
Cost and net book value at 1 January 2016
Reductions
Additions
Foreign exchange adjustments
Cost and net book value at 31 December 2016
Shares in
subsidiary
undertakings
£m
Loans to
subsidiary
undertakings
£m
Group settled
arrangements
£m
1,872
–
–
31
1,903
24
–
52
(7)
69
7
–
–
–
7
Total
£m
1,903
–
52
24
1,979
There were no provisions made against investments in subsidiary undertakings. Reductions and additions relate to internal restructuring transactions.
The Company’s subsidiary undertakings at 31 December 2016 are listed in Note 34 to the consolidated financial statements.
G Other current liabilities
Bank loans and overdrafts
Bonds payable
Amounts owed to subsidiary undertakings
Other payables
Accruals and deferred income
H Other non current liabilities
Bank loans
Bonds payable
Amounts owed to subsidiary undertakings
Net employee defined benefit liabilities
Other non current liabilities are repayable as follows:-
Between one and two years
Between two and five years
2016
£m
52
–
107
2
2
163
2016
£m
80
163
247
15
505
2016
£m
81
424
505
2015
£m
60
34
105
1
2
202
2015
£m
71
67
247
6
391
2015
£m
–
391
391
Share capital
I
Details of the Company’s share capital are given in Note 29 to the consolidated financial statements.
Related parties
J
For the year ended 31 December 2016, fees paid/payable by the Company to Hong Leong Management Services, a subsidiary of Hong Leong
Investment Holdings Pte. Ltd. amounted to £nil (2015: £nil) . At 31 December 2016, £nil (2015: £nil) of fees payable was outstanding.
142
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Financial statements
Group financial record
Income statement
Revenue
Operating profit
Net finance expense
Income tax expense
Profit for the year
Cash flow
Cash generated from operations
Statement of financial position
Property, plant, equipment and lease premium prepayment
Investment properties
Investment and loans in joint ventures and associates
Loans due from associate
Other financial assets
Non-current assets
Current assets excluding cash
Net cash/(debt)
Deferred tax liabilities
Provisions and other liabilities
Net assets
Share capital and share premium
Reserves
Total equity attributable to equity holders
Non-controlling interests
Total equity
Key operating statistics
Gearing
Earnings per share
Dividends per share1
Hotel gross operating profit margin
Occupancy
Average room rate (£)
RevPAR (£)
1 Dividends per share includes ordinary dividends and special dividends
2016
£m
926
107
(25)
(10)
98
220
3,345
534
320
–
–
4,199
195
(707)
(220)
(297)
3,170
940
1,728
2,668
502
3,170
2015
£m
847
112
(20)
(12)
97
220
2,858
506
255
–
–
3,619
163
(605)
(210)
(255)
2,712
940
1,336
2,276
436
2,712
2014
£m
826
195
(17)
(37)
151
330
2,851
479
235
–
5
3,570
182
(525)
(221)
(271)
2,735
940
1,323
2,263
472
2,735
Restated
2013
£m
1,064
294
(13)
(30)
265
204
2,457
414
203
–
5
3,079
259
(215)
(208)
(236)
2,679
940
1,236
2,176
503
2,679
2012
£m
768
140
(6)
(25)
147
196
2,096
169
440
29
8
2,742
264
52
(228)
(467)
2,363
940
1,236
2,176
187
2,363
2016
2015
2014
2013
2012
26%
24.0p
7.74p
31.6%
71.8%
£106.78
£76.71
27%
19.9p
6.42p
34.1%
71.8%
£100.19
£71.98
23%
34.0p
13.59p
36.0%
74.2%
£96.49
£71.55
10%
69.4p
22.74p
35.0%
72.3%
£96.25
£69.58
–
42.0p
13.59p
38.5%
70.8%
£95.08
£67.32
143
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Year ended
2016
Reported
currency
Year ended
2015
Constant
currency
Year ended
2015
Reported
currency
77.9
58.6
65.0
81.9
72.2
77.1
84.2
65.4
72.7
81.3
71.8
186.85
98.12
133.18
130.83
72.86
104.04
95.22
92.66
93.81
71.84
196.69
94.96
136.60
135.51
73.58
106.93
102.48
92.32
97.00
62.64
82.1
58.2
66.1
80.2
72.7
76.5
87.1
64.5
73.2
77.1
71.8
173.99
84.00
120.84
135.51
70.96
105.72
91.67
84.31
87.70
56.18
106.78
109.26
100.19
Key operating statistics
Owned or leased hotels*
Occupancy (%)
New York
Regional US
Total US
London
Rest of Europe
Total Europe
Singapore
Rest of Asia
Total Asia
Australasia
Total Group
Average Room Rate (£)
New York
Regional US
Total US
London
Rest of Europe
Total Europe
Singapore
Rest of Asia
Total Asia
Australasia
Total Group
144
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information
Owned or leased hotels*
RevPAR (£)
New York
Regional US
Total US
London
Rest of Europe
Total Europe
Singapore
Rest of Asia
Total Asia
Australasia
Total Group
Gross Operating Profit Margin (%)
New York
Regional US
Total US
London
Rest of Europe
Total Europe
Singapore
Rest of Asia
Total Asia
Australasia
Total Group
Year ended
2016
Reported
currency
Year ended
2015
Constant
currency
Year ended
2015
Reported
currency
145.64
57.49
86.52
107.18
52.61
80.24
80.21
60.63
68.21
58.40
76.71
15.9
20.9
18.4
49.8
19.1
37.8
40.8
34.0
37.0
46.5
31.6
161.57
55.30
90.31
108.68
53.47
81.84
89.26
59.52
71.03
48.32
78.49
142.92
48.92
79.89
108.68
51.56
80.92
79.85
54.35
64.23
43.33
71.98
23.9
21.2
22.7
50.8
26.7
41.7
44.3
33.1
38.1
42.5
34.1
For comparability, the 31 December 2015 Average Room Rate and RevPAR have been translated at average exchange rates for the year ended
31 December 2016.
*excluding managed, franchised and investment hotels.
145
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Major Group properties
Asia
Hotels
Grand Millennium Beijing
Fortune Plaza, 7 Dongsanhuan Middle Road
Chaoyang District, Beijing 100020 PRC
New World Millennium Hong Kong Hotel
(Owned by New Unity Holdings Limited)
72 Mody Road, Tsimshatsui East
Kowloon, Hong Kong
JW Marriott Hotel Hong Kong
(Owned by New Unity Holdings Limited)
Pacific Place, 88 Queensway,
Hong Kong
Millennium Hotel Sirih Jakarta
Jalan Fachrudin 3,
Jakarta 10250, Indonesia
Hotel MyStays Asakusabashi
1-5-5, Asakusabashi, Taito-ku,
Tokyo 111-0053, Japan
Hotel MyStays Kamata
5-46-5, Kamata, Ota-ku,
Tokyo 144-0052, Japan
Copthorne Orchid Hotel Penang
Jalan Tanjung Bungah, 11200 Penang, Malaysia
Grand Millennium Kuala Lumpur
160 Jalan Bukit Bintang,
55100 Kuala Lumpur, Malaysia
Angsana Velavaru
South Nilandhe Atoll,
Republic of Maldives
Jumeirah Dhevanafushi
Meradhoo Island,
Gaafu Alifu Atoll,
Republic of Maldives
The Heritage Hotel Manila
Roxas Boulevard at corner of EDSA Pasay City,
Metropolitan Manila, Philippines
Copthorne King’s Hotel Singapore
403 Havelock Road, Singapore
146
Tenure
Leasehold to year 2046 (hotel) ,
leasehold to year 2056
(underground car park)
Approximate
site area
(sq. metres)
9,268
Number
of rooms
514
75-year term from 28.11.1984 and may be
renewable for a further 75 years
2,850
464
75-year term from 18.04.1985 and may be
renewable for a further 75 years
10,690
(Part)
602
Effective
Group
interest
(%)
70
50
26
The title is held under a Hak Guna Bangunan
(i.e. Right to Build) and a 40-year lease
wef 14.04.1984 and 22.01.1986 for approximate
site area of 7,137 sq. metres and 212 sq. metres,
respectively
7,349
401
100
Freehold
Freehold
Freehold
Freehold
567
139
497
116
10,329
7,670
307
459
50-year title commencing from 26. 08.1997
67,717
113
50-year lease commencing from
15.06.2006
53,576
37
Fee simple
9,888
450
99-year lease commencing from
01.02.1968
5,637
310
37
37
100
100
37
37
66
37
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information
Hotels
Tenure
Grand Copthorne Waterfront Hotel Singapore
392 Havelock Road, Singapore
20 year lease commencing 19.07.2006 and
extendable for a further 20 years
M Hotel Singapore
81 Anson Road, Singapore
Novotel Singapore Clarke Quay
177A River Valley Road, Singapore
Orchard Hotel Singapore
442 Orchard Road, Singapore
Studio M Hotel Singapore
3 Nanson Road, Singapore
Millennium Seoul Hilton
50 Sowol-ro, Jung-gu,
Seoul, South Korea 100-802
Land Site in Seoul
Located at Chung-gu, Namdaeumro 5 Ga 652-1
Pullman Bangkok Grande Sukhumvit Hotel
(Owned by Fena Estate Company Limited)
Sukhumvit Soi 21, Asoke Road
Bangkok, Thailand
Grand Hyatt Taipei
2, SongShou Road
Taipei, Taiwan, 11051
* Includes Claymore Connect
Approximate
site area
(sq. metres) Number of rooms
Effective
Group
interest
(%)
10,860
2,134
12,925
8,588 *
2,932
18,787
1,564
5,052
574
415
403
656
360
680
–
325
37
37
37
37
37
100
100
50
Freehold
97 years and 30 days leasehold interest
commencing from 02.04.1980
Freehold
99-year lease commencing from
26.02.2007
Freehold
Freehold
30-year term from 02.02.2005 with option
to renew for a further term of 30 years
50 years starting from 7 March 1990
The lease agreement is extendable for another
30 years.
14,193
853
84
147
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Tenure
Freehold
Freehold
Freehold
Freehold
Freehold
Approximate
site area
(sq. metres)
1,302
Number
of rooms
87
Effective
Group
interest
(%)
83
2,188
211
100
26,305
135
100
161,878
122
100
404,694
227
100
Leasehold to year 2135
9,800
166
100
Freehold
Freehold
Leasehold to year 2110
Freehold
Freehold
13,734
138
100
9,200
156
96
1,853
6,880
135
219
100
100
7,535
833
100
Major Group properties
continued
Europe
Hotels
Copthorne Hotel Aberdeen
122 Huntly Street,
Aberdeen AB10 1SU, Scotland
Copthorne Hotel Birmingham
Paradise Circus,
Birmingham B3 3HJ, England
Copthorne Hotel Cardiff-Caerdydd
Copthorne Way, Culverhouse Cross,
Cardiff CF5 6DH, Wales
Copthorne Hotel Effingham Gatwick
West Park Road, Copthorne,
West Sussex RH10 3EU, England
Copthorne Hotel London Gatwick
Copthorne Way, Copthorne, West Sussex
RH10 3PG, England
Copthorne Hotel Manchester
Clippers Quay, Salford Quays,
Manchester M50 3SN, England
Copthorne Hotel Merry Hill-Dudley
The Waterfront, Level Street, Brierley Hill,
Dudley, West Midlands DY5 1UR, England
Copthorne Hotel Newcastle
The Close, Quayside, Newcastle upon Tyne
NE1 3RT, England
Copthorne Hotel Plymouth
Armada Way, Plymouth PL1 1AR, England
Copthorne Hotel Slough-Windsor
Cippenham Lane, Slough, Berkshire
SL1 2YE, England
Copthorne Tara Hotel London Kensington
Scarsdale Place, Kensington, London
W8 5SR, England
148
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Hotels
Hard Days Night Hotel Liverpool
Central Buildings North John Street
Liverpool, L2 6RR, England
Hilton Cambridge City Centre Hotel
Grand Arcade 20, Downing St,
Cambridge CB2 3DT, England
Millennium Gloucester Hotel London Kensington
Harrington Gardens
London SW7 4LH, England
Millennium Hotel Glasgow
George Square, Glasgow G2 1DS, Scotland
Millennium Hotel London Knightsbridge
17 Sloane Street, Knightsbridge,
London SW1X 9NU, England
Millennium Hotel London Mayfair
Grosvenor Square, Mayfair,
London W1K 2HP, England
Millennium Hotel Paris Opéra
12 Boulevard Haussmann,
75009 Paris, France
Millennium Hotel Paris Charles de Gaulle
Zone Hoteliere, Allée du Verger, 95700
Roissy-en-France, France
Grand Hotel Palace Rome
Via Veneto, 70, Rome, 00187, Italy
The Bailey’s Hotel London
140 Gloucester Road,
London SW7 4QH, England
The Chelsea Harbour Hotel
Chelsea Harbour, London, SW10 0XG, England
North America
Hotels
The Lakefront Anchorage
4800 Spenard Road, Anchorage,
AK 99517, USA
Millennium Biltmore Hotel Los Angeles
506 South Grand Avenue, Los Angeles,
CA 90071, USA
The Bostonian Boston
26 North Street
At Faneuil Hall Marketplace, Boston
MA 02109, USA
Tenure
Leasehold to year 2129
125-year lease commencing
from 25.12.1990 and extendable
for a further 50 years
Approximate
site area
(sq. metres)
5,275
Number
of rooms
110
Effective
Group
interest
(%)
100
3,600
198
37
Freehold
6,348
610
100
Leasehold to year 2109
Leasehold to year 2091
9,398
809
116
222
100
100
Leasehold to year 2096
4,260
336
100
Freehold
Freehold
Freehold
Freehold
1,093
163
100
11,657
239
100
801
1,923
87
211
100
100
Leasehold to year 2112
2,561
157
100
Tenure
Freehold
Freehold
Freehold
Approximate
site area
(sq. metres)
20,639
Number
of rooms
248
Effective
Group
interest
(%)
100
11,331
683
100
2,769
204
100
149
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Major Group properties
continued
Hotels
Millennium Buffalo
2040 Walden Avenue
Buffalo, NY 14225, USA
Millennium Harvest House Boulder
1345 28th Street
Boulder, CO 80302, USA
Millennium Knickerbocker Hotel Chicago
163 East Walton Place, Chicago,
IL 60611, USA
Millennium Hotel Cincinnati
150 West Fifth Street, Cincinnati,
OH 45202, USA
Millennium Hotel Durham
2800 Campus Walk Avenue, Durham,
NC 27705, USA
Millennium Hotel Minneapolis
1313 Nicollet Mall, Minneapolis,
MN 55403, USA
Millennium Maxwell House Nashville
2025 Rosa L. Parks Boulevard, Nashville
TN 37228, USA
Millennium Broadway Hotel NewYork
145 West 44th Street, New York,
NY 10036, USA
The Premier Hotel NewYork
133 West 44th Street, New York,
NY 10036, USA
ONE UN NewYork
1 UN Plaza, 44th Street at 1st Avenue,
New York, NY 10017, USA
Millennium Hotel St Louis (closed)
200 South 4th Street, St Louis,
MO 63102, USA
The McCormick Scottsdale
7401 North Scottsdale Road,
Scottsdale, AZ 85208, USA
Millennium Hilton
55 Church Street, New York, NY 10007, USA
Novotel New York Times Square
226 W 52nd Street, New York, NY 10019, USA
150
Tenure
Leasehold to year 2022
(with one 10-year option)
Freehold
Freehold
Freehold
Freehold
Approximate
site area
(sq. metres)
31,726
Number
of rooms
301
Effective
Group
interest
(%)
100
64,019
269
100
2,007
306
100
6,839
872
100
42,814
316
100
Leasehold to year 2030
4,537
321
100
Leasehold to year 2030
(with two 10-year options)
36,421
287
100
Freehold
Freehold
East tower freehold/
West tower leasehold to
year 2079
Freehold
Leasehold to year 2033
(with two 10-year options)
Freehold
Fee simple estate, a leasehold interest,
and a leased fee interest
1,762
626
100
360
124
100
4,554
439
100
17,033
780
100
32,819
125
100
1,680
1,977
569
480
100
100
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Hotels
Maingate Lakeside Resort
7769 W Irlo Bronson Memorial Highway,
Kissimmee, FL 34747, USA
Comfort Inn Near Vail Beaver Creek
161 West Beaver Creek Boulevard, Avon,
CO 81620, USA
Pine Lake Trout Club
17021 Chillicothe Road, Chagrin Falls
OH 44023, USA
Australasia
Hotels
Copthorne Hotel & Apartments Queenstown Lakeview
88 Frankton Road,
Queenstown, New Zealand
Copthorne Hotel & Resort Bay of Islands
Tau Henare Drive, Paihia,
New Zealand
Copthorne Hotel & Resort Queenstown Lakefront
Corner Adelaide Street & Frankton Road,
Queenstown, New Zealand
Copthorne Hotel Auckland City
150 Anzac Avenue
Auckland, New Zealand
Copthorne Hotel Auckland Harbourcity
(closed for refurbishment)
196-200 Quay Street
Auckland, New Zealand
Copthorne Hotel Palmerston North
110 Fitzherbert Avenue,
Palmerston North, New Zealand
Copthorne Hotel Rotorua
Fenton Street,
Rotorua, New Zealand
Copthorne Hotel Wellington Oriental Bay
100 Oriental Parade,
Wellington, New Zealand
Tenure
Freehold
Freehold
Freehold
Approximate
site area
(sq. metres) Number of rooms
93,796
475
Effective
Group
interest
(%)
100
11,209
146
100
331,121
6
100
Tenure
Freehold/Strata title
Leasehold land to year
2021 (with a 30-year option)
Approximate
site area
(sq. metres)
4,713
Number
of rooms
85
62,834
180
Freehold
18,709
240
Perpetual/Leasehold land
2,495
110
Freehold
Freehold
Freehold
Freehold
2,407
187
15,514
89
35,935
110
3,904
118
Effective
Group
interest
(%)
75
37
75
75
75
75
75
75
151
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Tenure
Freehold
Freehold
Freehold/Perpetual
leasehold land
Freehold
Interconnected at ground
level, situated on one
freehold title
Approximate
site area
(sq. metres)
Number of
rooms
1,480
192
2,193
2,807
8,819
55
98
94
3,845
194/218
Strata freehold
757
239
Freehold
7,453
220
Freehold/Perpetual
leasehold land
10,109
227
Strata volumetric freehold
6,235
296
Freehold
5,910
452
Effective
Group
interest
(%)
37
75
75
75
37
37
75
75
37
37
Major Group properties
continued
Hotels
Ibis Perth
334 Murray Street
Perth, Western Australia, Australia
Kingsgate Hotel Dunedin
10 Smith Street,
Dunedin, New Zealand
Kingsgate Hotel Greymouth
32 Mawhera Quay,
Greymouth, New Zealand
Kingsgate Hotel Te Anau
20 Lakefront Drive,
Te Anau, New Zealand
Mercure & Ibis Brisbane
85-87 North Quay/
27-35 Turbot Street
Brisbane, Queensland, Australia
Mercure Perth
10 Irwin Street
Perth, Western Australia, Australia
Millennium Hotel Queenstown
Corner Frankton Road & Stanley Street
Queenstown, New Zealand
Millennium Hotel Rotorua
Corner Eruera & Hinemaru Streets,
Rotorua, New Zealand
Novotel Brisbane
200 Creek Street
Brisbane, Queensland, Australia
Grand Millennium Auckland
71-87 Mayoral Drive, Auckland, New Zealand
152
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Investment Properties
Tanglin Shopping Centre
A shopping-cum-office complex situated at
Tanglin Road, Singapore, within the Orchard Road tourist district.
The Group owns 83 out of 362 strata-titled units and
325 car park lots.
Millennium Mitsui Garden Hotel Tokyo
5-11-1 Ginza, Chuo-Ku,
Tokyo 104-0061
329 bedroom hotel.
Biltmore Court & Tower
Situated at 500/520 South Grand Avenue, Los Angeles, CA 90071.
Comprising the Court which has 22,133 square metres Class “B”
lettable office space within the Biltmore hotel structure and the
Tower which has 12,116 square metres of Class “A” office space.
Land site in Sunnyvale
City of Sunnyvale, California, USA
Owned by First Sponsor Group Limited, an associate of the Company:
Chengdu Cityspring
North Yizhou Avenue, Gaoxin District, Chengdu, Sichuan Province,
the PRC.
Comprising 21,875 sq. metres commercial space in the
same building as M Hotel Chengdu (level 3-17) and
5,376 sq. metres of commercial and retail spaces.
Zuiderhof I
Jachthavenweg 121, Amsterdam, the Netherlands.
Comprising office space , archive space and 111 car park lots.
Arena Towers
(Holiday Inn/Holiday Inn Express Hotels)
Hoogoorddreef 66 and 68, Amsterdam, the Netherlands.
A hotel property comprising 443 hotel rooms and 509 car
park lots.
M Hotel Chengdu*
No. 388, North Yizhou Avenue, Gaoxin District, Chengdu, Sichuan Province,
the PRC.
Comprising 196 hotel rooms and suites.
Crowne Plaza Chengdu Wenjiang & Holiday Inn Express Chengdu
Wenjiang Hotspring Hotels
No 619 A/B North Phoenix Street,
Wenjiang District, Chengdu, Sichuan Province, the PRC.
Comprising 608 hotel rooms and suites.
*Hotel managed by the Millennium & Copthorne Hotels Group.
Tenure
Freehold
Approximate
lettable
strata area
(sq. metres)
6,285
Effective
Group
Interest
100
Freehold/
Leasehold – 30 years from 25 March 2009
1,040/130
(site area)
70
Freehold
Freehold
34,249
100
35,717
100
Leasehold to year 2049
27,251
36
Perpetual leasehold. Ground rent paid until 2050
12,538
Perpetual leasehold.
Ground rent paid until 2053
Leasehold to year 2049
Leasehold to year 2051
17,396
19,228
(Gross fl area)
81,041
(Gross fl area)
12
36
36
36
153
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Millennium & Copthorne hotels worldwide
ASIA
China
Copthorne Hotel Qingdao
Grand Millennium Beijing
Grand Millennium Shanghai Hongqiao
M Hotel Chengdu
Millennium Residences @ Beijing Fortune Plaza
Millennium Hotel Chengdu
Millennium Harbourview Hotel Xiamen
Millennium Hotel Fuqing
Millennium Resort Hangzhou
Millennium Hotel Wuxi
Crowne Plaza & Holiday Inn Express Chengdu Wenjiang Hotspring Hotels
Hong Kong
New World Millennium Hong Kong Hotel
JW Marriott Hotel Hong Kong
Indonesia
Millennium Hotel Sirih Jakarta
Japan
Hotel MyStays Asakusabashi
Hotel MyStays Kamata
Millennium Mitsui Garden Hotel Tokyo
Malaysia
Copthorne Orchid Hotel Penang
Copthorne Hotel Cameron Highlands
Grand Millennium Kuala Lumpur
Maldives
Angsana Velavaru
Jumeirah Dhevanafushi
Philippines
The Heritage Hotel Manila
Singapore
Copthorne King’s Hotel Singapore
Grand Copthorne Waterfront Hotel Singapore
M Hotel Singapore
Orchard Hotel Singapore
Novotel Singapore Clarke Quay
Studio M Hotel Singapore
M Social Singapore
South Korea
Millennium Seoul Hilton
Taiwan
Grand Hyatt Taipei
Millennium Vee Hotel Taichung
Thailand
Pullman Bangkok Grande Sukhumvit
Millennium Resort Patong Phuket
154
AUSTRALASIA
Australia
Ibis Perth
Mercure & Ibis Brisbane
Mercure Perth
Novotel Brisbane
New Zealand
Copthorne Hotel Auckland City
Copthorne Hotel Auckland Harbourcity
(closed for refurbishment)
Copthorne Hotel Grand Central New Plymouth
Copthorne Hotel Wellington Oriental Bay
Copthorne Hotel & Resort Bay of Islands
Copthorne Hotel & Resort Hokianga
Copthorne Hotel Palmerston North
Copthorne Hotel & Resort Queenstown Lakefront
Copthorne Hotel & Apartments Queenstown Lakeview
Copthorne Hotel Rotorua
Copthorne Hotel & Resort Solway Park Wairarapa
Kingsgate Hotel Autolodge Paihia
Kingsgate Hotel Dunedin
Kingsgate Hotel Greymouth
Kingsgate Hotel Hamilton (franchise ended 11 February 2016)
Kingsgate Hotel Te Anau
Kingsgate Hotel The Avenue Wanganui
Kingsgate Hotel Whangarei (franchise ended 25 January 2016)
Millennium Hotel Queenstown
Millennium Hotel Rotorua
Millennium Hotel & Resort Manuels Taupo
Grand Millennium Auckland
MIDDLE EAST
Iraq
Copthorne Hotel Baranan
Grand Millennium Sulaimani Hotel
Millennium Kurdistan Hotel and Spa
Jordan
Grand Millennium Hotel Amman
Kuwait
Al-Jahra Copthorne Hotel & Resort
Millennium Hotel and Convention Centre Kuwait
Oman
Grand Millennium Muscat
Millennium Executive Apartments Muscat
Millennium Resort Mussanah
Qatar
Copthorne Hotel Doha
Kingsgate Hotel Doha
Millennium Hotel Doha
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Saudi Arabia
Copthorne by Millennium Riyadh
Millennium Taiba Hotel Madinah
Millennium Al Aqeeq Hotel
Millennium Hail Hotel
United Arab Emirates
Copthorne Hotel Dubai
Copthorne Hotel Sharjah
Grand Millennium Dubai
Grand Millennium Al Wahda
Kingsgate Hotel Abu Dhabi
Millennium Airport Hotel Dubai
Millennium Corniche Hotel Abu Dhabi
Millennium Plaza Hotel Dubai
Millennium Hotel Fujairah
Bab Al Qasr Hotel
EUROPE
France
Millennium Hotel Paris Charles de Gaulle
Millennium Hotel Paris Opéra
Georgia
The Biltmore Hotel Tbilisi
Italy
Grand Hotel Palace Rome
UK
Copthorne Hotel Aberdeen
Copthorne Hotel Birmingham
Copthorne Hotel Cardiff-Caerdydd
Copthorne Hotel Effingham Gatwick
Copthorne Hotel London Gatwick
Copthorne Hotel Manchester
Copthorne Hotel Merry Hill-Dudley
Copthorne Hotel Newcastle
Copthorne Hotel Plymouth
Copthorne Hotel Sheffield
Copthorne Hotel Slough-Windsor
Copthorne Tara Hotel London Kensington
Hard Days Night Hotel Liverpool
Hilton Cambridge City Centre Hotel
Millennium Gloucester Hotel London Kensington
Millennium Hotel Glasgow
Millennium Hotel London Knightsbridge
Millennium Hotel London Mayfair
Millennium & Copthorne Hotels at Chelsea Football Club
Millennium Madejski Hotel Reading
The Bailey’s Hotel London
The Chelsea Harbour Hotel
THE AMERICAS
USA
Comfort Inn Near Vail Beaver Creek
Maingate Lakeside Resort
The McCormick Scottsdale
The Lakefront Anchorage
Millennium Biltmore Hotel Los Angeles
The Bostonian Boston
Millennium Broadway Hotel New York
Millennium Harvest House Boulder Millennium Hotel Buffalo
Millennium Hotel Cincinnati
Millennium Hotel Durham
Millennium Knickerbocker Hotel Chicago
Millennium Maxwell House Hotel Nashville
Millennium Hotel Minneapolis
Millennium Hotel St Louis (closed)
Millennium Hilton
Novotel New York Times Square
ONE UN New York
Pine Lake Trout Club
The Premier Hotel New York
CORPORATE OFFICES
Asia
Millennium & Copthorne International Limited
390 Havelock Road
#02-01 King’s Centre
Singapore 169662
Tel: + [65] 6664 8888
Fax: + [65] 6732 5435
Email: sales@millenniumhotels.com
Australasia
Millennium & Copthorne Hotels
New Zealand Limited Level 13,
280 Queen Street
Auckland 1010 New Zealand
Tel: + [64] (9) 353 5010
Fax: + [64] (9) 309 3244
Email: sales.marketing@millenniumhotels.co.nz
Middle East
Millennium & Copthorne Middle East & Africa
H Hotel Office Tower (3rd floor)
Sheikh Zayed Road
PO Box 119666
Dubai
United Arab Emirates
Tel: + [971] (4) 309 9000
Fax: + [971] (4) 351 0508
cherry.tangpos@millenniumhotels.com
Europe
Millennium & Copthorne Hotels plc
Corporate Headquarters
Scarsdale Place, Kensington
London, W8 5SR, UK
Tel: + [44] (0) 20 7872 2444
Fax: + [44] (0) 20 7872 2460
Email: marketing.eu@millenniumhotels.com
North America
Millennium Hotels and Resorts
7600E
Orchard Road, Ste #230S
Greenwood Village
Colorado, 80111, USA
Tel: + [1] 303 779 2000
Fax: + [1] 303 779 2001
Email: guestcomment@millenniumhotels.com
155
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Millennium & Copthorne hotels worldwide
continued
GLOBAL SALES
Asia
China, Beijing: + [86] 10 6533 0749
China, Chengdu: + [86] 28 8517 2000
China, Guangzhou: + [852] 29218328
China, Shanghai: + [86] 21 6468 8099
Hong Kong: + [852] 2921 8328
Singapore: + [65] 6664 8888
Taipei: + [886] (2) 2729 3299
Australasia
Sydney: + [61] (2) 9358 5080
Auckland: + [64] (9) 353 5010
Wellington: + [64] (4) 382 0770
Europe
France: + [33] (0) 1 4949 1617
Italy: + [39] (0) 6 4201 2198
UK: + [44] (0) 20 7872 2444
North America
New York: +1 212 789 7860
International reservations
Asia
China North: +108 0065 00558 (toll free)
China South: +108 0026 52531 (toll free)
Hong Kong: +800 96 2541
Indonesia: +001 803 65 6541
Malaysia: +1 800 80 1063
Singapore: +65 6735 7575
Taiwan: +008 01 65 15 05 (toll free)
Thailand: +001 800 65 6544 (toll free)
Australasia
Australia: +1 800 124 420
New Zealand: +0 800 808 228
Middle East
UAE: + [971] (4) 309 9096
(Sunday – Thursday)
8:00am – 5:00pm
Europe
When in the following countries, please use this toll free number:
00 800 86 86 8086
Austria, Belgium, Denmark, Finland (prefix 990 instead 00) ,
Germany, Ireland, Italy, The Netherlands, Norway, Portugal, Spain,
Sweden & Switzerland
France: 0800 909 586
UK: 0800 41 47 41 Main reservations
0845 30 20 001 Leisure bookings
0845 30 20 002 Meetings and Events bookings
North America
When in the following countries, please use this toll free number:
+1 866 866 8086
Canada, Puerto Rico, USA & US Virgin Islands
156
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Shareholder information
Analysis of shareholders as at 31 December 2016
Number of shares
1 – 10,000
10,001 – 25,000
25,001 – 50,000
50,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 – Highest
Total
Number
of holders
Percentage
of holders
Total number
of shares
held
831,641
690,510
1,031,471
2,047,879
9,185,342
2,891,990
308,056,732
Percentage
of issued
share capital
0.26%
0.21%
0.32%
0.63%
2.83%
0.89%
94.86%
78.26%
5.56%
3.54%
3.79%
5.06%
0.63%
3.16%
100.00% 324,735,565
100.00%
619
44
28
30
40
5
25
791
Shareholders can find a wealth of information on the Company at www.
millenniumhotels.com including:
• regular updates about our business;
• hotel and other property information;
• the ability to book a room at one of our hotels around the world;
• share price information;
• financial results and investor information; and
• our financial calendar which includes dividend payment dates and
amounts.
You can also manage your shareholding online by registering for
Shareview at www.shareview.co.uk. When contacting Equiniti or
registering online, you should have your shareholder reference number at
hand. This can be found on your share certificate or latest dividend tax
voucher.
Contact details for our registrar:
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99
6DA, United Kingdom
Electronic shareholder communications
Registering for online communication gives shareholders more control of
their shareholding. The registration process is via our registrar’s secure
website www.shareview.co.uk.
Telephone: 0371 384 2343*
and outside the UK +44 121 415 7047
Textphone: 0371 384 2255*
and outside the UK +44 121 415 7028
Once registered shareholders are able to:
* Lines are open from 8.30 am to 5.30 pm, Monday to Friday, UK time.
ShareGift
It may be that you have a small number of shares which would cost you
more to sell than they are worth. It is possible to donate these to
ShareGift, a registered charity, who provide a free service to enable you
to dispose charitably of such shares. More information on this service
can be obtained from www.sharegift.org or by calling +44 (0) 207 930
3737.
• elect how we communicate with them;
• amend their details;
• amend the way dividends are received; and
• buy or sell shares online.
This does not mean shareholders can no longer receive paper copies of
documents. We are able to offer a range of services and tailor
communication to meet their needs.
Managing your shares
Please contact our registrar, Equiniti, to manage your shareholding if you
wish to:
• register for electronic communications;
• transfer your shares;
• change your registered name or address;
• register a lost share certificate and obtain a replacement;
• consolidate your share holdings;
• manage your dividend payments; and
• notify the death of a shareholder.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Shareholder information
continued
Be aware of share fraudsters
Shareholders are cautioned to be very wary of any unsolicited advice,
offers to buy shares at a discount, sell your shares at a premium or offers
of free reports on the Company.
If you do receive such an approach, you are encouraged to take the
following steps:
• obtain the full name of the person and organisation and make a record
of any other information they give you, for example telephone number,
address or web address;
• if the caller persists, simply hang up; and
• report the matter to the Financial Conduct Authority (“FCA”) so that they
can investigate.
If you suspect that you have been approached by fraudsters please tell
the FCA using the share fraud reporting form at www.fca.org.uk/ scams,
where you can find out more about investment scams. You can also call
the FCA Consumer Helpline on 0800 111 6768.
You are advised to deal only with financial services firms that are
authorised by the FCA. Check the firm is properly authorised by the FCA
before getting involved by visiting www.fca.org.uk/register. If you do deal
with an unauthorised firm you will not be eligible to receive payment
under the Financial Services Compensation Scheme if anything goes
wrong.
If you have lost money to investment fraud, you should report it to Action
Fraud on 0300 123 2040 or online at www.actionfraud. police.uk.
Find out more at www.fca.org.uk/scamsmart.
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Contacts and advisers
Registered office
Victoria House, Victoria Road, Horley, Surrey RH6 7AF,
United Kingdom
Registered in England and Wales No: 3004377
Corporate headquarters
Scarsdale Place, Kensington, London W8 5SR,
United Kingdom
Stockbroker
Credit Suisse Securities Limited
Auditor
KPMG LLP
Solicitor
Hogan Lovells International LLP
Principal bankers
Bank of America Merrill Lynch
DBS Bank Ltd.
Mizuho Bank, Ltd.
Oversea-Chinese Banking Corporation Limited
Royal Bank of Scotland plc
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Hongkong and Shanghai Banking Corporation Limited
Registrar
Equiniti Limited
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Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Strategic ReportGovernanceFinancial statementsFurther information Financial calendar
2016 final dividend record date
First quarter’s results announcement
Annual general meeting
2016 final dividend payment
Interim results announcement
2017 interim dividend record date
17 March 2017
5 May 2017
5 May 2017
12 May 2017
4 August 2017
18 August 2017
2017 interim dividend payment
29 September 2017
Third quarter’s results announcement
1 November 2017
160
Millennium & Copthorne Hotels plc | Annual Report & Accounts 2016Further information Further Information
We value feedback and welcome
comments and questions you may
have regarding this publication.
Please email us at:
companysecretary@millenniumhotels.co.uk
or write to:
The Company Secretary
Millennium & Copthorne Hotels plc
Scarsdale Place
Kensington
London W8 5SR
United Kingdom
This document is printed on Galerie Satin, a paper
containing 15% recycled fibre and 85% virgin fibre
sourced from well managed, responsible, FSC® certified
forests. The pulp used in this product is bleached using
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Millennium & Copthorne Hotels plc
Scarsdale Place
Kensington
London W8 5SR
United Kingdom
www.millenniumhotels.co.uk