Financial Update & Presentation to Brokers. April 2004

Transcription

1 Financial Update & Presentation to Brokers April 2004

2 Introduction The purpose of this presentation is to provide initially to selected share brokers and investment advisors the following information: Who is Eumundi Brewing Group Limited; The impact of recent hotel / shopping centre acquisitions by the company; Flag the release next month (May) of Eumundi s Share Purchase Plan (SPP) which will provide existing shareholders 31 March 04) with an opportunity to each purchase up to $5,000 worth of new ordinary shares in Eumundi at a discount to the market price just prior the date of the SSP being opened; and Appropriate information to ascertain broker interest in participating and under what terms on the placement to their informed clients of any shortfall between number of shares ultimately made available under the SPP and the number actually placed with existing shareholders. The total number of ordinary shares proposed to be issued by Eumundi under this SPP and the other details attached to the SPP are yet to be finalised. Once those are finalised pursuant to Corporations Act 2001 and Listing Rules of the ASX they will be the subject of a notice of general meeting containing resolutions to be put to a meeting of Eumundi s shareholders. Approval will be sought to issue up to $6,000,000 worth of shares. Subject to obtaining appropriate approvals at that meeting, if insufficient funds are raised under the SPP or otherwise available to enable Eumundi to meet its short term financing obligations, the Directors (and their related entities) intend to subscribe for shares in the Company on the same terms as the SPP to provide funding to Eumundi to meet those obligations. The Directors are committed to contributing equity to maintain Eumundi s position since the acquisition of the Aspley and Sunnybank Hotels and Shopping Centres. Copies of this presentation are available at: 22

3 Presentation outline 1. History of Eumundi Brewing Board of Directors & Management 7 3. Business Strategy - integrated & diversified business model Overview of the business - Operations Financials Equity Raising Summary 26 Appendices 3

4 1. History of Eumundi Brewing An inauspicious beginning from 1990 to 1997 EBG listed on ASX in mid 1990 FY with a core business of brewing and marketing a premium line of beers. From the outset there were problems with both aspects. Between listing and 1997 core operations suffered very substantial losses leading to brewing operations being contracted out to Power Brewing (now Carlton) in 1992 & Eumundi s brewing plant being sold in Marketing by Eumundi continued to Net profit Dec 03 Equity per share Dec 03 NPAT $0 -$5,000, $10,000,000 -$15,000,000 Net Profit / Loss after tax Dec-03 cents per share Net Profit / Loss after tax before abnormals Dec-03 24

5 History of Eumundi Brewing The turnaround from 1997 to 2003 In 1997 Eumundi purchased the Ashmore Tavern using largely debt funding. In 1998 a brewing contract termination agreement with Carlton & United was struck and Eumundi brands were then licensed to Castlemaine Perkins. Since 1997 Eumundi has consistently increased equity & produced profits despite write downs of $385K in & cessation of a $200K pa distribution in 2001 associated with purchase of the Ashmore Tavern in $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 Net profit Dec Net Profit after tax Dec-03 Net Profit after tax before abnormals cents per share Equity per share Dec Dec-03 25

6 History of Eumundi Brewing Eumundi s 2003 Review A review of performance & operations was carried out in 2003 that found earnings from hotel operations were not keeping pace with industry levels. For Eumundi to enjoy significant growth, existing operations had to improve & be supplemented with a diversified but integrated expansionary approach. This review coincided with a significant increase in Eumundi s share price starting in August 2003 through to the present. This review has led to a 35% increase in forecast earnings for 2004 FY from Ashmore Tavern operations and in March 04 the $30 Million acquisition of Aspley & Sunnybank Hotels / Shopping Centres was completed. cents per share Jun-01 Sep-01 ASX Market Price June 01 - April 04 with 4 month moving average Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 6

7 2. Board of Directors & Management Position Name Comment Chairman Director Director Joseph Ganim Gilbert De Luca Brian Weller Joined the Board in Is a founding partner of Hopgood Ganim, Solicitors and Notary. Has extensive experience in many facets of the law and complex commercial negotiations. Has represented large publicly listed entities in their dealings with overseas corporations. Has served on a number of publicly listed company boards and is a director of a large number of private companies. Joined the Board in Is the principal of the De Luca Group of Companies and has a very wide business experience overseeing the acquisition of significant investment and development properties by that group. Joined the Board in September Representing the Weller Family Group of Companies has a wealth of experience in the hotel industry. Has built business into a position of market prominence controlling a large number of liquor outlets. Board of Directors Board of Directors CEO Simon Coxon CEO Simon Coxon Hotel Operations Hotel Operations Developments Investments 7

8 3. Integrated & diversified business Investment properties model Hotel & commercial development Hold land Hotels Hotels & Commercial Hotels & Retail Widen geographical base Owner - operated hotels Hold the underlying land utilised by the company s operations. Facilitates growth by leveraging property value increases. Derivation of recurrent earnings from diversification into one or more stages in the development, operational & investment cycle. Spreads risk with involvement over one or more stages in liquor / gaming & commercial / retail. 8

9 Integrated & diversified business model Actual 03 FY profit composition 20% 6% 74% Investment properties (Imperial rental income) Hotels owner-operated Licenses / Royalties (ex Carlton fee) Forecast 04 profit composition (B4 write-down of ancilliary property acquisition costs) 13% 14% 73% Investment properties (inc leased hotels) Hotels owner-operated Licenses / Royalties (ex Carlton fee) 43% Utilise tax credits ($1.85 M June 03) to maximise earnings & accelerate the increase in shareholder equity & ultimately leading to the distribution of dividends to shareholders. Eumundi directors and management are well credentialed in successfully continuing with this business model. Forecast 05 profit composition (excludes Airlie Beach or any abnormal earnings) 6% 51% Investment properties (inc leased hotels) Hotels owner-operated Licenses / Royalties (ex Carlton fee) 9

10 4. Overview of the business Ashmore Tavern - Gold Coast Owned & operated hotel with 3 x bottle shops Modern - 8,944 m2 land in strategic location Major facility changes in first half of 2004 FY One of Gold Coast s highest gaming revenues 2004 forecast V 2003 FY net earnings up 35% Imperial Hotel - Eumundi (Noosa hinterland) Owned & operated hotel with 2 X bottle shops Historical - 5,276 m2 land area in town centre Major point of sale improvements in 04 FY Retail rental supplements hotel earnings Substantial revenue increase in 04 Half-Year Problematic management & net profit history Not a strategic asset - Earmarked for disposal 10

11 Overview of the business Aspley Shopping Centre & Hotel (Brisbane) 7,211 m2 land in strategic main highway location 2,527 m2 of internal lettable area Hotel leased to Murphy Group (10X5X5 years), lessee responsible for hotel improvements & maintenance Strong occupancy history - 100% leased - 7X24 trade Approx 70% area retail but contributing <60% income Most leases (14) on fixed annual % increases >CPI Weighted remaining lease duration 5.7 years 211

12 Overview of the business Sunnybank Shopping Centre & Hotel 9,706 m2 land in growth corridor close to the city 2,059 m2 of internal lettable area Hotel leased to Murphy Group-same terms as Aspley Approx 70% area retail but contributing <40% income Good rental growth prospects as catchment expands Most leases (14) on fixed annual % increases >CPI Weighted remaining lease duration 4.8 years Most leases have lessee guarantees Note: Aspley & Sunnybank were able to be acquired by Eumundi (with vacant possession of hotels) by pre-leasing hotels contemporaneously with acquisition. 12

13 Overview of the business Brewing termination agreement with Carlton & United The 1998 agreement with Carlton & United Breweries terminating contract brewing arrangements was in consideration for Eumundi receiving a termination fee payable in annual installments of $150K pa until The present value in 1998 ($1.55 M) of Carlton contract was taken up as abnormal profit in 1999 FY i.e. now only recognised in terms of cash flow. Eumundi brand licensing to Castlemaine Perkins Eumundi s 1998 license agreement with Castlemaine Perkins (expires in 2008) involves annual payments based upon a fixed fee of $75K pa plus a volume fee. In the year to June 2003, license and royalty totaled $116K. Other Investments FY equity in Telecorp & FSA Group written down $324K to $91K 13

14 Overview of the business Airlie Beach Lagoon Hotel (North Qld) Current status has joint venture consortium of Eumundi and FKP Ltd awaiting documentation to be executed by the State Govt and the Whitsunday Council. That is expected shortly. This $35 Million beachfront development comprises a 125 room hotel, retail outlets and licensed premises for Eumundi (abt 1,200 m2). JV arrangements have Eumundi sharing no development costs or risk i.e free-carry Anticipated completion 2005, therefore all financials in this presentation exclude any earnings / increase in assets being generated, albeit they are anticipated to be significant. 14

15 Overview of the business New & expanded opportunities Implement 2 nd stage of hotel operational review & enhance earnings and carrying position of Aspley & Sunnybank assets. Advance Airlie position. Until debt levels are reduced new opportunities for Eumundi will come about through either off-balance sheet funding arrangements or converting operational or intellectual interests into equity i.e. like Airlie Beach venture. The pre-leasing of Aspley & Sunnybank hotels simultaneously with purchase demonstrates Eumundi is well credentialed for leveraging it s expertise. Airlie Beach Airlie Beach 15

16 Overview of the business Equity & Net Asset Position - Change of Accounting Policy Pro forma Consolidated Statement of Financial Position as at 31 December 2003 prepared as if Aspley & Sunnybank transactions took place then. Total purchase costs for Aspley & Sunnybank properties (inc ancillary acquisition costs of $1.26 million) is approx $31.0 million. This is initially recognised at cost & then written down to recoverable amount of $29.77 million (purchase price) with $1.26 Million expensed as accumulated loss. Components of independent valuations for Ashmore Tavern & Imperial Hotel totalling $3.0 Million have not been recognised at all in pro forma balance sheet. 216

17 Overview of the business cents per share Equity per share (refer to attached pro forma balance sheet and notes) cents Actual 31/12/ cents 24.5 cents Pro forma Pure Value Value with valuation components exc from pro forma balance sheet taken up 217

18 Consolidated Statement of Financial Position (1) $ 000 s Actual Pro 31 December 03 Forma Cash Receivables Inventories Property plant & equipment Investment property Intangibles Other assets Total assets Payables Interest bearing debt Provisions Total liabilities Net Assets / Equity Net Assets per share (cents) Debt to total assets 685 1,001 1,276 6, ,035 1,386 3, ,516 5, c 31% 956 1,001 1,276 12,768 29, ,446 1,386 34, ,516 10, c 73% Note (1): Refer to Appendix A for detailed pro forma balance sheet details and notes on adjustments. Excludes any interest in Airlie Beach venture save for capitilised expenditure <$100,000 18

19 Change of Accounting Policy & Valuations Independent valuations have been received for the Imperial and Ashmore hotels. These hotels have been revalued upwards by $6,668,000. Eumundi has changed their accounting policy and the land and building components are to be recorded on a "fair value" basis. The other components of the valuations (above $6,668,00), being the goodwill ($2,500,000) and the increment above cost in plant & equipment ($505,000) has not been recognised. The effect if these other valuation components were to be taken up is as follows: Total $'000 Total of independent valuations 15,750 Carrying value included in pro forma 12,745 Additional equity 3,005 Additional equity per share (cents) 5.3c 19

20 Overview of the business Earnings forecasts The resulting decrement of $1.26 million by writing down new investment properties to recoverable amount of $29.77 million (actual purchase price) has been expensed as an abnormal loss in forecast 2004 FY earnings. Assumes the Imperial Hotel is sold in in the 2005 Half-Year for a price not exceeding independent valuation. Recognition of the profit on sale is approx $475K. This abnormal profit is calculated post-valuation and therefore profit is substantially less than that which would be shown if a cost-based accounting policy was still being used from 2004 FY. Assumes the following debt reduction program to reduce interest expense: -In 2004 FY $3.55 million from proceeds of equity raising (refer to Introduction for details & where Director s are committed to providing equity if insufficient funds are raised to meet short-term liabilities); and - in 2005 FY $4.00 million from sale proceeds for the Imperial Hotel. 20

21 Overview of the business Earnings forecasts exclude any interest in Airlie Beach venture. Earnings before interest, tax, depreciation & amortisation (EBITDA) is shown for convenience only to assist measuring Eumundi s ability to service debt and fund capital expenditure. EBITDA $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Actual 03 FY $636,461 Actual Half-Yr Dec 03 $556,377 Forecast 04 FY Forecast Half-Yr Dec 04 Forecast 05 FY 21

22 Overview of the business Net profit after tax $2,200,000 $1,700,000 $1,200,000 $700,000 $200,000 $327,167 $185,045 -$300,000 -$800, Forecast 05 FY Actual 03 FY Actual Half-Yr Dec 03 Forecast 04 FY Forecast Half-Yr Dec 04

23 Overview of the business Earnings per share (1) cents 0.32 cents (1) Assumes issue of approx 19,750,000 new ordinary shares as at 30 June cents per share Actual 03 FY Actual Half-Yr Dec 03 Forecast 04 FY Forecast Half-Yr Dec 04 Forecast 05 FY

24 Overview of the business Financial liabilities & managing interest rate risk Eumundi responsibly manages it exposure to debt repayment terms and interest rate fluctuations as follows. $16,000,000, 46% Financial liabilities (Pro forma 31 Dec 03) $408,000, 1% $1,386,000, 4% $5,500,000, 15% $12,222,000, 34% Trade accounts Commercial Bills 1 Year or less (floating interest) Commercial Bills 1-5 Years (floating & fixed interest) Commercial Bills 5 Years or more (fixed interest) Bank Overdraft, Finance Leases & Provisions 24

25 5. Equity Raising Eumundi s Share Placement Plan (SPP) will entail shareholder approval being sought for issuing up to $6.0 Million worth of shares; and Share placement to informed clients of selected brokers for any shortfall between $6.0 Million & actual placement under the SPP. The SPP program is generally as follows: - Notice of Extraordinary General Meeting - SPP Opens - Extraordinary General Meeting - SPP closes & settlement due - Brokers advised of any shortfall - Shortfall acceptances & settlement due - Allotment 11 May May June June June June June

26 6. Summary Eumundi has made a significant turnaround from inauspicious beginnings, and since 1997 has consistently increased shareholder equity and produced profits. Since Eumundi s 2003 Strategic Review and adoption of business model the size of the company has increased four fold. Strong performance and solid returns to shareholders are forecast. Strategic intent to dispose of non-performing assets, diversify and integrate business operations within a expansionary orientated business model. Directors and management are well credentialed to continue prosecuting this business plan. 26

27 Appendices 27

28 Appendix A - Statement of Financial Position 31 December 2003 Actual Pro Forma $ 000 $ 000 CURRENT ASSETS Cash assets Receivables Inventories 1,276 1,276 Other financial assets Other assets Total Current Assets 2,843 2,614 NON-CURRENT ASSETS Receivables Other financial assets Property, plant and equipment 6,100 12,768 Investment properties - 29,770 Intangibles Other assets Total Non-Current Assets 7,192 43,832 Total Assets 10,035 46,446 CURRENT LIABILITIES Payables 1,386 1,386 Interest-bearing liabilities 298 5,798 Provisions Total Current Liabilities 1,776 7,276 NON-CURRENT LIABILITIES Interest-bearing liabilities 2,722 28,222 Provisions Total Non-Current Liabilities 2,740 28,240 Total Liabilities 4,516 35,516 Net Assets 5,519 10,930 EQUITY Contributed equity 9,293 9,293 Asset revaluation reserves - 6,668 Accumulated losses (3,774) (5,031) Total 5,519 10,930 Total Equity per Share (cents per share) 9.7c 19.2c 28

29 Appendix A - Notes to Statement of Financial Position PRO FORMA ADJUSTMENTS The pro forma Consolidated Statement of Financial Position as at 31 December 2003 has been prepared as if the following transactions had taken place at that date: (a) The purchase of the two investment properties, Aspley and Sunnybank Hills, which settled at the end of March The total purchase price for the two new properties (including estimated acquisition costs of $1,257,000) is approximately $31 million. The investment properties have been initially recognised at cost and written down to their recoverable amount of $29,770,000. The resulting decrement of $1,257,000 has been expensed in the pro forma balance sheet by increasing accumulated losses. (b) Drawdown of the bank loan of $31 million less the deposit of $500,000 paid prior to 31 December (c) Payment of $202,000 as loan establishment costs. (d) The revaluation of the land and buildings of the existing properties, Ashmore and Imperial, in accordance with independent valuations prepared for mortgage lending purposes and the recognition of an increment of $6,668,000. CHANGE OF ACCOUNTING POLICY & VALUATIONS Independent valuations have been received for the Imperial and Ashmore hotel business. In prior years the Eumundi Brewing Group has recognised their property, plant and equipment at cost and applied the recoverable amount test. The group has changed their accounting policy and the land and buildings components are to be recorded on a "fair value" basis. Based upon the valuations, the land and buildings of the Imperial and Ashmore hotels have been revalued upwards by $6,668,000. This has been reflected in the pro forma consolidated Statements of Financial Position. The other components of the valuations, being the goodwill ($2,500,000) and the increment above cost in plant & equipment ($505,000) has not been recognised. This is due to the policy relating to plant & equipment not changing from previous years and the goodwill value being internally generated and, as such, not able to be recognised under the applicable accounting standard. The effect if these other components were to be taken up is as follows - Total of independent valuation $15,750,000 Carrying value included in pro forma $12,745,000 Additional equity $3,005,000 Additional equity per share (cents) 5.3c 29

30 Disclaimer This presentation is not and does not constitute an offer, invitation or recommendation to subscribe for, or purchase any security and neither this presentation nor anything contained in it shall form the basis of or be relied upon in any contract or commitment. This presentation does not constitute an offer or invitation in any jurisdiction where, or any person to whom, such an offer would be unlawful. Reliance should not be placed on the information or opinions contained in this presentation. This presentation does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Any decision to purchase or subscribe for securities in Eumundi Brewing Group Limited must be made solely on the basis of public information about Eumundi Brewing Group Limited, if necessary after seeking appropriate financial advice. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, Eumundi Brewing Group Limited, any participating broker and investment advisor, and their affiliates and related bodies corporate, and their respective officers, directors, employees and agents disclaim any liability (including without limitation any liability arising from fault or negligence) for any loss arising from any use of this presentation or its contents or otherwise arising in connection with it. The Directors forecasts and other forward-looking statements set out in this presentation are based upon on a number of estimates, assumptions and pro forma adjustments that subject to business, economic and competitive uncertainties and contingencies, with respect to future business decisions, which are subject to change and in many cases outside the control of Eumundi Brewing Group Limited and its Directors. The Directors believe that they have prepared the Directors forecasts with due care and attention and consider all best estimate assumptions when taken as a whole to be reasonable at the time of preparing this presentation. However the Directors forecasts presented in this presentation may vary from actual financial results, and these variations may be material and, accordingly neither the Company nor its Directors can give any assurance that the forecast performance in the Directors forecasts or any forward-looking statement in this presentation will be achieved. 30