MCK owns, leases, manages and franchises a portfolio of 30 hotels in New Zealand under the Millennium, Copthorne and Kingsgate brands. The Company, that has hotel assets with a net book value of $326 million recorded a modest profit of $12.4 million for the year to December 2009.
MCK's trading performance for the six months ending June 2010 has improved with revenues of $61 million compared with $54.5 million in the same period last year. Occupancy has increased to 68.1% compared with 63% for the same period last year. Not surprisingly the hotel group has found overseas tourist markets remaining soft, however we were surprised that they have reported a lift in the domestic tourism market.
In spite of improved trading, we see that MCK have reported a $20.2 million loss in the six months to June 30 2010.
Ignoring the losses incurred with the shenanigans of exposing themselves in China, MCK has taken a one-off non-cash hit of $26.8 million by the recent tax changes relating to the way depreciation of commercial buildings will be treated for tax. Interestingly tax woes may continue with fears that depreciation changes will cost MCK up to $2 million a year in additional taxation that will cancel out any gains from the 2% reduction in corporate tax.
It will be interesting to see how the new depreciation tax rules will influence the bottom line of accommodation businesses, in particular those that wish to continue to add value by investing in refurbishment and future development.
