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Press Release Year End Financial Results
Press Release Year End Financial Results
31-Aug-2001
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Year Ended 30 June 2001 2000 % Change
Total Revenue $292.1m $258.2m +13%
Profit after tax and unusual items $35.3m $42.0m -16%
Profit after tax before unusual items $37.3m $34.3m +9%
Basic EPS before unusual items 6.5 cents 6.4 cents +1.5%
Basic EPS after unusual 6.2 cents 7.9 cents -21.5%
items after abnormals
Final Distribution per Stapled Security 3.25 cents 3.5 cents -7%
Distribution per Stapled Security 6.25 cents 6.25 cents -
for the year
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The Joint Chairman of Thakral, Mr. Ted Harris, today announced an after tax profit before unusual items of $37.3 million, an increase of 9% over the previous corresponding period. The profit after tax and unusual items was $35.3 million compared to $42 million in the previous period, a reduction of $6.7 million.
The unusual items included a provision for claims of $2 million that might result following the Group’s public liability insurers HIH and The Independent Insurance Group Plc., UK who have both been placed in liquidation. The 2000-year profit was boosted by an abnormal gain of $7.6 million primarily arising from the sale of the All Seasons business for $15 million.
Earnings per share before these unusual items increased from 6.4 cents to 6.5 cents.
Total revenue was $292.1 million compared to $258.2 million for the previous year, an increase of 13%.
A final distribution of 3.25 cents per stapled security has been declared bringing the total distribution for the year to 6.25 cents, the same level as 2000. The distribution is 23.1% tax-free, 72.2% tax deferred, 3.4% taxable and 1.3% CGT concessionally taxed. The Group’s Distribution Reinvestment Plan will operate. The Board has determined that there will be no discount and the DRP will not be underwritten.
Mr. Harris said:
"The underlying profit of $37.3 million was achieved in the face of a difficult economic environment in the second half of the financial year. The solid result again reflects the importance of 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.
The result was boosted in the first half by a strong contribution during the Olympics and also includes, for the first time, the benefits of full ownership of the Hilton on the Park Hotel in Melbourne".
Segment contributions to profit 2001 $m 2000 $m % Increase
Hotels 50.0 37.0 35%
Retail & Commercial 17.2 15.7 10%
All Seasons* - 1.7 -
Development 9.3 6.3 49%
Pacific Century Hotels # - 3.6 -
76.5 64.3 19%
* to 28 February 2000
# 50% owned to 30 June 2000
Hotels
The operating profit of the Hotel Division was $50 million - an increase of 35% compared with the previous year. Across the Group’s properties, average room rates increased from $130 to $133. However, occupancy declined from 76.8% to 74.0%.
This result includes, for the first time, the full results of the Hilton on the Park, Melbourne and the Courtyard by Marriott, Palm Cove. Further, effective 1 February 2001, the Group sold the Novotel Launceston. On a like property basis, profits increased by 5%.
The year for hotels was a challenging one with the introduction of GST, the Sydney Olympics and, in the latter part of the year, over-supply and falling business confidence adversely affecting a number of key markets.
In Sydney, profits increased in the first half 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. Novotel Brighton Beach and Novotel Northbeach Wollongong both accommodated Olympic guests. More recently, we have seen a marked reduction in performance as the Sydney market adjusts for the effects of the significant increase in supply that preceded the Olympics. This will continue to affect adversely the trading of our Sydney properties for at least the next 12 months while this supply is absorbed by the continuing growth in demand, especially from overseas markets.
Melbourne has also experienced major additions to supply over the past 2 years, especially in the four star and five star markets. However, this market has to date, remained fairly resilient. The Hilton on the Park and Novotel Melbourne on Collins hotels both recorded results in line with 2000. Hilton on the Park’s result was favourably influenced by strong demand over the Olympic period due to the hosting of the soccer at the MCG. Novotel Melbourne on Collins commenced, in April, a refurbishment and upgrading of all of its guestrooms at a cost of $5 million. The refurbishment will be completed in September 2001.
Regional hotel profits were varied. However, the effect of GST on the domestic leisure sector and the distorting effect of the Olympics have hampered performance. The advent of cheaper airfares, primarily on the eastern seaboard, has also had a diversionary effect on demand to more distant destinations. At Cairns, Wollongong and Darwin the hotels increased profits following refurbishment at these properties while the Grand Mercure on the Gold Coast improved as a result of the contribution from its gaming lounge. Pacific Bay, which is now the "Home of the Wallabies" rugby team also increased its bottom line.
Novotel at Launceston was sold for $12.25 million, which resulted in a profit over book value of $750,000.
Retail and Commercial Division
The Retail and Commercial Division, which controls over 50,000 sq.m of office and retail space, achieved a profit of $17.2 million, which was an increase of 10% on the previous year. Vacancies at all Thakral properties are below 1%. The improved profit reflects increased commercial rentals in the Sydney market and a growing contribution from the Oasis Shopping Centre on the Gold Coast.
Development Property
Profit from property development was $9.3 million, an increase of 49% over 2000. This reflects the Board’s strategy of seeking to expand, in a controlled manner, this area of the Group’s activities. The profit arose primarily from the sales at the Glades, Residential Golf Resort at Robina together with continuing sales at Pacific Bay.
The Glades golf course, which was designed by Greg Norman, opened in December 2000 and has already been acknowledged by numerous golfing commentators as among the best resort courses in Australia. Thakral has sold the golf course to a consortium headed by former British Open Champion winner, Ian Baker-Finch, and is currently completing the clubhouse and golf lodge. Greg Norman will officially open the course in November. In addition, Thakral is in a joint venture with The Sunland Group, developing some 260 house and land packages over-looking the course. Thakral is also developing, with retirement development specialists, Kilcor Investments Pty Limited a 185-unit retirement village on the northern extremities of the site. In addition to the sites being developed in joint venture, Thakral has approximately 210 sites available to develop over the next 3 years.
At Pacific Bay, Coffs Harbour, profits continued from the progressive development of the surplus land that surrounds the resort. In addition, approval has now been achieved for the strata sale of the balance of the Hotel Apartments. During the latter part of the year, the sale of dual-key apartments at the resort commenced.
Thakral has commenced construction of a 32 unit residential development at St Kilda and a recently completed construction of a retail/commercial development adjacent to Coolangatta airport. This is currently being leased. In addition, the Group is in 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 the sites at Cairns and Palm Cove with the sales campaigns set to commence shortly.
Property development is a growing area of our business and we are budgeting for improved results from this area.
Interest Expense
Interest expense at $19.9 million is $6.7 million greater than last year. This increase is mainly attributable to the increased debt taken into THG following the acquisition of the remaining 50% of Pacific Century Hotels (principal asset Hilton on the Park, Melbourne).
Net borrowings to total tangible assets increased to 41.5% at year-end compared to 34% last year, principally due to the acquisition of the Hilton Hotel .
Property Values
Thakral’s property portfolio is revalued annually. Valuations fell less than 1% on a like property portfolio. After taking into account capital improvements, offset by depreciation, the asset revaluation reserve was reduced by $9 million.
Unusual Item
The Group’s public liability insurer from 1994 to 1998 was HIH and from 1998 to June 2001 was Independent Insurance Group Plc., London. Both insurance companies have been placed into liquidation. The failure of these two insurance companies has meant that Thakral is now primarily liable to settle claims still outstanding, and those that may still arise during the period of coverage by these companies.
Thakral employed consulting actuaries, Trowbridge Consulting Actuaries, to provide estimates of the likely amount payable for both claims made and claims incurred but not reported (IBNR). The Group has provided an amount of $2 million for claims already made and has assessed a further $1 million as an IBNR contingent liability.
Thakral has placed its public liability insurance with Allianz, and will be seeking to insure against "claims incurred but not reported".
Summary
In summary, Mr. Harris said:
"2001 has continued the group’s record of increasing underlying profit in every year since listing in 1994. The strategy adopted several years ago by the Board to diversify into areas of property development together with increasing contributions from gaming facilities and continuing satisfactory increases from hotels and commercial property has enabled Thakral to produce another satisfactory result".
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Further information:
John Hudson (Chief Operating Officer)
Tel: (02) 9272 8888
0417 266 744
A E (Ted) Harris (Joint Chairman)
Tel: (02) 9358 3200
