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Press Release re Half Year Financial Results
Press Release re Half Year Financial Results
26-Feb-2001
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Six months ended 31 December 2000 1999 % Change
Total Revenue $142m $121m 17%
Operating Profit before abnormals $19.5m $17.0m 14%
Profit After Tax and abnormals $19.5m 25.4m (23%)
EPS before abnormals 3.5 cents 3.2 cents 7%
EPS after abnormals 3.5 cents 4.8 cents (28%)
Distribution per Stapled Security 3.0 cents 2.75 cents 9%
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The Joint Chairman of Thakral, Mr Ted Harris, today announced an operating profit before abnormals of $19.5 million for the six months ended 31 December 2000 which was an increase of 14% on the previous corresponding period. The profit after abnormals was $19.5 millon compared to $25.4 million in the 1999 result which benefited from an abnormal gain of $8.4 million resulting from the sale of the Group’s All Seasons Hotel business.
Total revenue increased by 17% from $121 million to $142 million.
Earnings per share before abnormals increased by 7% from 3.2 cents to 3.5 cents.
An interim dividend of 3.0 cents per stapled security has been declared. This is a 9% increase over the interim distribution last year. The distribution is currently estimated to be 23% tax-free, 67% tax deferred and the balance, 10% taxable.
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 satisfactory contributions to overall results.
The result included a strong contribution by the hotels during the Olympics and for the first time, the benefits of full ownership of the Hilton on the Park Hotel in Melbourne."
Hotels
The operating profit of the Hotel Division was $29.4 million, which was 56% ahead of the same period last year. Across the Group’s properties, average room rate increased by 5% while occupancy fell slightly from 77.7% to 75.8%.
As stated above, this result includes the results of the Hilton on the Park and also the Courtyard by Marriott, Palm Cove. On a like property basis, profits increased by 19%.
Results across the portfolio were generally higher as some markets recovered from recent increases in supply. In Sydney, profits increased reflecting the very strong results over the Olympic period. In particular, the All Seasons Premier Menzies, benefited from its status as one of three official Olympic Family Hotels. The Hilton on the Park, Melbourne, also had a good Olympic period and increased its profit over the corresponding period by 13%. At Cairns, Wollongong and Darwin the properties increased profits following refurbishments at these properties. The Grand Mercure on the Gold Coast showed continuing improvement with increased contributions from its gaming lounge.
In December 2000, the Group exchanged unconditional contracts for the sale of the Novotel at Launceston for $12.25 million. This has resulted in a profit over book value of $750,000. The property was acquired in 1994 for $8.5 million and has been a consistent contributor since that time. Before revaluation increments the property has realised the group an actual profit of $2.6 million.
Retail and Commercial Division
The Retail and Commercial Division achieved a profit of $8.8 million, which was an increase of 16% 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
The contribution from property development was in line with the previous corresponding period. In this six months the profit arose primarily from the sale of the Glades golf course at Robina together with continuing sales at Pacific Bay.
The Glades golf course was officially opened in December 2000 and has already been acknowledged by Golf Australia magazine as among the top ten resort courses in Australia.
Since year-end Thakral has commenced construction of a 32 unit residential development at St Kilda and a retail/commercial development adjacent to Coolangatta airport. In addition Thakral is in a joint venture with East Asia Property Group developing 81 units at Hawthorn, Melbourne and a high tech office development at North Ryde.
Development approvals are now in place for sites at Cairns and Palm Cove with the sales campaigns set to commence shortly. At the Glades, we have recently completed a joint venture agreement with Sunland for the first stages of the residential developments.
Property development is a growing area of our business and it is confidently expected that the results from this division will exceed last year.
Gaming
Thakral introduced gaming as a contributor to the profitability at our hotels commencing in 1999. Since that time, we have introduced our own brand, Treasure Cove Gaming lounges into 7 properties and the profit from gaming, which is included with the results of the properties, has now reached $3.3 million in the period under review.
Pacific Century Hotels (PCH)
In June 2000, shareholders approved the acquisition of the 50% of PCH not already owned by the Group. This had the effect of giving Thakral full control of the Hilton Hotel in Melbourne from 1 July 2000. This acquisition has resulted in a significant increase in the profit from hotels as previously PCH was treated as an associated entity and equity accounted.
Interest Expense
Interest expense at $12 million is $5.7 million (90%) greater than the corresponding period last year. This increase is mainly attributable to the increased debt taken into THG following the acquisition of the remaining 50% of PCH. Additionally, interest rates were higher than in the six months to December 1999.
Furthermore, the group’s provision against "out of the money swaps" has been increased by $1.7 million to $2.8 million. The accounting treatment of these interest management instruments is difficult to determine, as there are no specific accounting standards covering the instruments employed by the Group. Following discussion with the auditors and their specialists in the area, the principles of UIG 27 (which deals with commodities) and International Accounting Standard 39 Financial Instruments have been applied.
In laymen’s terms, Thakral entered into long term arrangements that are currently above market and these have been written down to market.
Net borrowings to total tangible assets increased to 41% compared to 34% at year-end.
Dividend Reinvestment Plan (DRP)
The DRP will continue to operate, however the Board has determined that no discount will be offered and the DRP will not be underwritten. Shareholders wishing to vary their current election should advise the share registry immediately as the books close for elections on 13 March 2001.
The Thakral Family, who currently own approximately 41% of the issued capital, have advised the Group that they intend to take up their full entitlement to the DRP.
Thakral Family Shareholding
On 29 January 2001, the Group’s principal shareholder, the Thakral Family, advised the Australian Stock Exchange that they were in the early stages of discussions concerning the possible sale of their stake in Thakral Holdings Group.
Summary
In summary, Mr. Harris said, "it is once again pleasing to be able to report that 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."
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Further information:
John Hudson Telephone: (02) 9272 8888
Chief Financial Officer Mobile: 0417 266 744
