Hotelier Millennium & Copthorne (MLC) is to pay a 9.15p per share special dividend after making a £139.3 million profit on selling its Glyndebourne property development in Singapore. This one-off earnings boost explains why fourth quarter numbers look so good in today's full-year results with a 209.4% rise in pre-tax profit to £167.7 million.

If you focus just on the hotels business, revenue was down in the fourth quarter from £196 million to £192.2 million. Gross operating profit declined from £76.8 million to £67.9 million.

The company says that during 2013 there was a greater emphasis on driving revenue through higher occupancy ratios rather than increased room rates. 'This reflected a more competitive trading environment in some regions - especially Singapore - and other factors, notably the absence of the Olympics in London compared to 2012 and the reduced number of Japanese visitors to Seoul mainly as a result of political tensions,' it says.

Stockbroker Panmure Gordon says the underlying group pre-tax profit, excluding the benefit of the Glyndebourne sale, is 10% below expectations.

MLC - Comparison Line Chart (Rebased to first)

One of the biggest criticisms of Millennium & Copthorne over the past few years has been poor value generation for shareholders. It seems to be stepping up a gear to address this situation by selling assets, although it continues to make acquisitions which isn't necessarily a good move. In 2012, Liberum Capital got under the bonnet of the company and found that 90% of EBIT came from just 20 hotels. More than 80 other hotels were failing to make a decent contribution. Over half of group EBIT was generated from a mere six hotels and many sites were generating virtually no return on invested capital.

Today it pledges to improve returns on shareholders' capital as well as grow the business. 'We are looking forward to a year in which we will be fully re-opening all of the guest rooms at our largest hotel in Asia, the Grand Hyatt Taipei, before completing refurbishment of the public areas and restaurants and creating a truly outstanding five-star deluxe property. Elsewhere, we will continue to maximise the value of our real estate portfolio. We continue to be alert to acquisition and disposal opportunities,' it comments.

Millennium & Copthorne is buying the Novotel New York Time Square hotel for $273.6 million. In December, it also announced plans to buy a hotel in London's Chelsea district for £65 million.

It has closed the Millennium Hotel St Louis, saying a refurbishment of the freehold property is unlikely to offer attractive returns in the near future. The company is now weighing up options for the 17,033 square metre site.

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Issue Date: 21 Feb 2014