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Press Release - Half Year Results
Press Release - Half Year Results
28-Feb-2000
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Six months ended 31 December 1999 1998 % Change
Total Revenue $121m $109m 11%
Operating Profit before abnormals $17.0m $16.2m 5%
Profit After Tax and abnormals $25.4m $16.2m 57%
EPS before abnormals 3.2 cents 3.2 cents -
Earnings per Stapled Security 4.8 cents 3.2 cents 50%
Distribution per Stapled Security 2.75 cents 2.6 cents 6%
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The Joint Chairman of Thakral, Mr Ted Harris, today announced an after tax profit of $25.4 million for the six months ended 31 December 1999 compared to $16.2 million in the previous corresponding period. This is an increase of $9.2 million or 57%, including an abnormal gain of $8.4 million, which resulted primarily from the sale of the All Seasons Hotel management business to Accor.
The operating profit before abnormals was $17 million, an increase of 5%. Total revenue increased by 11% from $109 million to $121 million.
An interim dividend of 2.75 cents per stapled security has been declared, which is tax-free.
The Group owns hotels, shopping centres, commercial offices and public car parking. It also has a growing involvement in property development and gaming.
Mr. Harris said: "This result reflects the Group’s diversification in terms of business activity, property type and geographic spread. Thakral's strategy in diversifying income to a broadened range of activities, including property development and gaming, continues to make significant contributions to overall results."
Hotels
The operating profit of the Hotel Division was $18.8 million, which was 9.4% ahead of the same period last year. Across the Group’s properties, average room rate was constant at $127 while occupancy improved from 74% to76.5%.
There were varying trends around the Country. Profit improved strongly at the Novotel Brighton Beach, following the recent refurbishment and the opening of the new "Treasure Cove" gaming lounge. The groups Adelaide and Darwin properties recorded lower returns. These properties are undergoing refurbishment which is expected to lead to increased profitability. On the Gold Coast, the group’s hotels remained flat but were boosted by the new gaming lounge opened at the Grand Mercure in September 1999. Novotel Melbourne on Collins again traded strongly. All Seasons Premier Menzies Hotel, while it exceeded budget, was marginally lower than the previous period.
Retail and Commercial Division
The Retail and Commercial Division achieved a profit of $7.6 million, which was an increase of 7.3% on the previous year, reflecting refinements in tenancy mix and improved retail trading conditions. Thakral manages its own retail and commercial portfolio and vacancies at all the properties remain below 1%.
Development
As foreshadowed at the group’s Annual General Meeting, contributions from property development were lower in the first half than the previous corresponding period due to timing differences. The development activities of the group contributed $2.2 million, down from the previous period’s contribution of $2.9 million. However, as the current developments reach completion, the rate of profit will accelerate and Thakral is forecasting a profit increase from this area for the full year.
Thakral’s current development projects comprise:
Pacific Bay, Coffs Harbour. Currently under development are townhouse developments comprising some 40 homes. This is part of the long-term development of the site, which is being developed over a five to ten year period.
Glenwood. A 164 lots residential subdivision in Sydney’s NorthWest. The project was completed and fully sold out at period end.
Newtown. A 231 unit residential development being undertaken in Joint Venture. The first stage is nearly sold out and strong pre sales of the second stage. Construction of first stage is scheduled to complete mid year.
Newport. Comprises 7 residential units, 6 commercial suites and a 65 berth marina. The development is progressing well with strong pre sales. The marina is complete and construction under way on the units.
Lidcombe Olympic Media Village. Thakral is providing mezzanine funding to assist construction funding of this third party development. Construction is ahead of schedule.
Cairns retail. Part of the re-development of the Lyons Hotel in Cairns which was acquired by Thakral in 1994. Development of a retail strip of tourism focused retail. Construction has been completed and the shops are almost all fully leased. Strata sales expected to commence shortly.
Further sites have recently been acquired at Robina, Southeast Queensland and at Palm Cove near Cairns. The Robina acquisition comprises a fully completed Greg Norman "signature" golf course and will be developed to provide over 600 dwellings. At Palm Cove, Thakral has, as part of the $20 million acquisition of the Courtyard by Marriott 189 room hotel, also acquired a 1.7ha beachfront development site which it is currently seeking development approval for a 115 unit development over four years.
These development activities are all being undertaken in a structured form with emphasis on minimising risks to the Group. Property development continues to be a growing area of our business.
Gaming
Gaming activity has increased during the period with gaming facilities now trading under the new Thakral brand " Treasure Cove" at the All Seasons Premier Menzies, Novotel Brighton Beach, Grand Mercure and Novotel Northbeach hotels in addition to existing facilities at the Hilton on the Park, Melbourne.
The new Treasure Cove lounge at Lone Star Tavern, Mermaid Waters is scheduled to open at the end of March. Additional strong revenue from these facilities is expected to continue to enhance the overall performance of those properties.
Pacific Century Hotels
Pacific Century Hotels (PCH), a 50% joint venture with Thakral Corporation Limited, a Singapore listed company, contributed $1.8 million to operating profits, up from $1.6 million in 1998. Since period end, PCH has announced the sale of both All Seasons on Crown and 161-167 Castlereagh Street. Following the sale of these properties, which are both scheduled to settle in June 2000, PCH’s key asset will be the Hilton on the Park, Melbourne.
All Seasons Hotels
The Group’s hotel management subsidiary, All Seasons Hotels, made an operating profit of $1.2 million compared to $1.1 million in 1998.
As announced just prior to Christmas, All Seasons Hotel Management business has been sold to Accor, with settlement expected in early March 2000. This has resulted in an abnormal gain of $10 million. As part of the sale arrangement, Accor will now operate twelve Thakral owned hotels under revised management agreements. Accor will pay Thakral a total of $29 million for the All Seasons business and new long-term contracts on Thakral properties.
Under the arrangements, Thakral is entitled to dispose of hotels managed by Accor with vacant possession, subject to refund of part of the consideration. The amount liable to refund is capped at $14 million, which diminishes in equal amounts over eight years. If no hotels are sold in this period the full $14 million will be brought to profit at the rate of $1.75 million per annum.
Interest Expense
Interest expense was down 7% during the period reflecting a stable underlying charge and a credit relating to the refund of Stamp Duty on the group’s Queensland assets. Net borrowings to total tangible assets were lower at 32% compared to 34% at year-end.
Group Restructure
As noted in the Annual Accounts, the Group has been subject to an audit by the Australian Tax Office ("ATO"). This audit has now been satisfactorily settled and, in the process, we have restructured the Group to achieve our long-term objective of a more efficient structure.
The benefits of the restructure include:
A simpler and more logical structure, with the Group’s property owning vehicles being transferred to Thakral Holdings Trust and the Group’s other activities remaining under Thakral Holdings Limited. This should provide administration savings and has considered the likely impact of the Business Tax Reform and GST.
Permit, at a later date, more opportunities to effect a more efficient refinancing of the Group
Settle all outstanding issues with the ATO at no tax cost to the Group
It facilitates continued distributions from Thakral Holdings Trust which in the past have been largely tax free with the balance tax deferred. The half year distribution is tax free.
Dividend Reinvestment Plan (DRP)
The DRP will continue to operate. In view of the Group’s future cash projections, Directors have determined to remove the previous discount. The DRP will not be underwritten.
Summary
In summary, Mr. Harris said, "the Group’s underlying profit is continuing to increase. Our diversification strategy and recent acquisitions and divestments have formed a strong platform for ongoing asset and earnings growth. The divestment and acquisition decisions are being taken according to the Board and Management’s judgment as to their place and their value to our overall portfolio of assets."
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Further information:
John Schaap
Managing Director and CEO
Tel: (02) 9272 8888
Mobile: 0417 217 632
