UPDATE 1-M&C Hotels cuts profit target as Asia slowdown bites

Thu May 2, 2013 5:18am EDT

* Q1 pretax profit down 34.7 pct to 16.9 mln stg

* Q1 Revpar up 1.6 pct

* FY profit to be 140-150 mln stg vs 160 mln stg consensus

* Shares down 4 pct

By Neil Maidment

LONDON, May 2 (Reuters) - Hotelier Millennium & Copthorne said full-year profit would fall below expectations in 2013 after warning the worst of a slowdown in its core Asian market was not yet over.

M&C, with 100 hotels globally, on Thursday said trading in Asia, where it makes 40 percent of its revenue, had suffered from slower growth in China, falling tourist numbers in South Korea and a host of problems in its biggest market, Singapore.

"Singapore will see another increase in the number of hotel rooms this year, which is putting pressure on revenues, whilst government's tighter foreign labour quotas are putting pressure on costs," Chairman Kwek Leng Beng told reporters.

"We also have the spectre of Avian flu returning in Asia, so all in all the continent looks like it will remain a more challenging hospitality market for the time being ... The worst in Asia, I think, is not over."

Shares in the firm, whose profit has also been hit by a 240 million pound hotel refurbishment roll-out, fell 4 percent to 533 pence after the group said the slowdown in Asia - a region that has led growth in recent years - would hit annual profit.

"I would recommend that the 160 million pounds (full-year) profit before tax figure to be adjusted downwards to in the region of 140 million pounds to 150 million pounds," Chief Financial Officer John Chang told reporters.

According to a Reuters poll of nine analysts, M&C had on average been expected to post a full-year pretax profit of 161.25 million pounds.

M&C's warning contrasts with more upbeat recent statements from larger rivals including Intercontinental Hotels, Starwood Hotels and Marriott.

M&C's pretax profit for the first quarter to March 31, posted on Thursday, fell by 34.7 percent to 16.9 million pounds after revenues were hit by the impact of a slowing economy and less corporate spending in Singapore, poor weather and austerity measures in Europe, as well as the closure of hotels for refurbishment.

The firm added its Seoul hotel in South Korea had also been effected by geo-political tensions, and was gloomy on prospects in South East Asia, where markets like Malaysia, Thailand and Jakarta in Indonesia had improved year-on-year but could soon see a slowdown due to changing macroeconomic environments.

"The outlook is more cautious than normal ... In terms of trading it looks pretty soft and I wasn't expecting it (the profit downgrade) to be as severe a drop as it was," Liberum analyst Patrick Coffey said.

M&C, whose brands include Millennium, Grand Millennium, Copthorne and Kingsgate, said global revenue per available room (RevPAR) - a key hotel measure - grew by 1.6 percent in the first quarter, however, on improved trading in the United States and Australasia.

It was also up 1.9 percent in the first four weeks of its second quarter, it said, with its important London and New York markets both up, but Singapore and the rest of Asia down.

"The group's financial strength will get us through any economic storms ahead, we remain focused on repositioning and upgrading a number of our properties," said Beng, whose firm ended the first-quarter with net cash of 56.4 million pounds.

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