Mantra Group Limited and its controlled entities Appendix 4D Financial statements for the half year ended 31 December 2017 Company details Name of entity Mantra Group Limited ABN 69 137 639 395 Reporting period For the half year ended 31 December 2017 Comparative reporting period For the half year ended 31 December 2016 Results for announcement to the market $'000 Up/(Down) Movement $ 000 Revenue from ordinary activities 366,223 Up 10,059 Profit from ordinary activities after tax attributable to members 25,138 Down (5,394) Net profit for the period attributable to members 25,138 Down (5,394) Dividend information If the Scheme of Arrangement ( Scheme ) with AccorHotels is approved, under the terms of the Scheme, Mantra Group shareholders will be entitled to receive $3.96 cash per share. Mantra Group has the discretion to pay shareholders a special dividend of up to a maximum of 23.5 cents per share which will be deducted from the $3.96 headline value. In this context, Mantra Group will not be declaring a dividend in respect of the half year. Net Tangible Assets per security Net tangible assets /(liabilities) per ordinary security 31 Dec 2017 31 Dec 2016 $ $ (0.29) (0.14) This information should be read in conjunction with the 2017 Annual Financial Report of Mantra Group Limited and its controlled entities and any public announcements made in the period by Mantra Group Limited in accordance with the continuous disclosure requirements of the Corporations Act 2001 and Listing Rules. Additional Appendix 4D disclosure requirements can be found in the Directors Report and the consolidated financial statements for the half-year ended 31 December 2017. This report is based on the consolidated financial statements for the half-year ended 31 December 2017 of Mantra Group Limited and its controlled entities, which have been reviewed by PricewaterhouseCoopers. The Independent Auditor s Review Report provided by PricewaterhouseCoopers is included in the consolidated financial statements for the half-year ended 31 December 2017. Signed Date: 14 February 2018 Kerry Robert East Chief Executive Officer Gold Coast
INTERIM REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 ABN: 69 137 639 395 ASX CODE: MTR
Interim report - 31 DECEMBER 2017 MANTRA GROUP LIMITED ABN: 69 137 639 395 CONTENTS Directors report 3 Auditor s independence declaration 8 Interim financial report Consolidated statement of comprehensive income 9 Consolidated statement of financial position 10 Consolidated statement of changes in equity 11 Consolidated statement of cash flows 12 Notes to the consolidated financial statements 13 Directors declaration 27 Independent auditor s review report to the members 28 NOTE REGARDING NON-IFRS FINANCIAL INFORMATION Within this report, Mantra Group Limited (Mantra Group) has included certain non-ifrs financial information. This information is presented to assist in making appropriate comparisons with prior periods and to assess the operating performance of the business. Mantra Group uses these measures to assess the performance of the business and believes that the information is useful to investors. The following non-ifrs measures have not been reviewed but have been extracted from Mantra Group s reviewed financial statements: EBITDAI - Group profit before interest, taxation, depreciation, amortisation and impairment, or reversals of impairment; Underlying EBITDAI - EBITDAI before transaction costs; and Underlying NPAT - Net profit after tax before transaction costs, impairment or reversals of impairment and related tax impacts. The Directors believe that these measures provide useful information about the financial performance of Mantra Group as they remove the impact of key accounting adjustments, financing charges and taxation. These measures, however, should be considered as supplements to the income statement and cash flow measures that have been presented in accordance with the Australian Accounting Standards and not as a replacement for them. Because these non-ifrs financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Mantra Group calculates these measures may differ from similarly titled measures used by other companies. Readers should therefore not place undue reliance on these non-ifrs financial measures. A reconciliation of underlying EBITDAI and underlying NPAT to the nearest measure prepared in accordance with IFRS is included in note A1, segment information and note D1, earnings per share, respectively. 2 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Directors report Your Directors present their report on the consolidated entity, referred to hereafter as Mantra Group or the Group, consisting of Mantra Group Limited (the Company) and the entities it controlled at the end of, or during, the half-year ended 31 December 2017. DIRECTORS The following persons were directors of Mantra Group during the whole of the half-year and up to the date of this report: Peter Bush Andrew Cummins Kerry Robert East (Bob East) David Gibson Elizabeth (Liz) Savage Melanie Willis PRINCIPAL ACTIVITIES REVIEW OF OPERATIONS Mantra Group is the leading Australian-based hotel and resort operator. Mantra Group s portfolio consists of 136 properties and over 18,000 rooms across Australia, New Zealand, Indonesia and Hawaii. Through its portfolio, Mantra Group operates the second largest network of accommodation properties in Australia (by total room number). Approximately 2.5 million guests per year stay in Mantra Group branded accommodation. In addition to providing accommodation, Mantra Group s core services include management of guest relations and reception areas, restaurants and bars, conference and function centres, pool and entertainment facilities and offices. Properties in Mantra Group s portfolio range from luxury retreats and coastal resorts to serviced apartments and hotels in CBD and key leisure destinations. The Group, through its diverse portfolio range and brand names, targets a cross section of consumers in both the domestic and international visitor segments of the accommodation industry. Mantra Group operates the properties in its portfolio under four brands: Peppers, Art Series, Mantra and BreakFree. The Art Series brand was added to the portfolio in November 2017 following the acquisition of seven properties trading under this brand. As at 31 December 2017, the Group had paid $49.1 million in respect of this acquisition. The balance of the purchase price of $2.6 million was paid in February 2018 following settlement of The Chen management letting rights contract in accordance with the conditions of the sale agreement. Mantra Group operates its properties under a range of operating structures. The operating structures used by Mantra Group provide it with long-term property management contracts across its portfolio and strong contractual rights to operate the properties. In particular, Lease Rights, Management Letting Rights and Hotel Management Rights also provide Mantra Group with flexible and targeted development and operating options. Other models include Management Agreements and Marketing Services Agreements. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 3
The split of keys in building by operating model and keys under management by geographic location as at 31 December 2017 was as follows: KEYS IN BUILDINGS BY OPERATING MODEL: HMR 2.8% MSA 1.6% MLR 61.7% LR 22.7% MA 11.2% Management Letting Rights (MLR) Marketing Service Agreements (MSA) Hotel Management Rights (HMR) Lease Rights (LR) Management Agreements (MA) TOTAL KEYS IN BUILDINGS: 24,000+ KEYS UNDER MANAGEMENT BY GEOGRAPHIC LOCATION IND 0.3% TAS 2.2% ACT 2.7% BRISBANE 8.8% HAWAII 5.8% GOLD COAST 20.9% GOLD COAST TROPICAL NORTH QUEENSLAND (TNQ) MELBOURNE SUNSHINE COAST SYDNEY SA 4.2% WA 4.2% TNQ 7.6% OTHER VICTORIA (VIC) NEW ZEALAND (NZ) NORTHERN NEW SOUTH WALES (Nrth NSW) NORTHERN TERRITORY (NT) NSW 3.1% NT 2.9% MELBOURNE 15.9% OTHER NSW (NSW) WESTERN AUSTRALIA (WA) SOUTH AUSTRALIA (SA) Nrth NSW 2.7% NZ 3.6% VIC 4.4% SYDNEY SUNSHINE 5.7% COAST 5.2% BRISBANE TASMANIA (TAS) AUSTRALIAN CAPITAL TERRITORY (ACT) INDONESIA (IND) HAWAII TOTAL KEYS UNDER MANAGEMENT: 18,000+ Mantra Group has more than 5,900 team members to carry out its core functions, which include operations, sales, revenue and distribution, marketing and digital, portfolio and asset management, information technology and corporate activities. 1.2 BUSINESS SEGMENTS Mantra Group generates its revenue under the following three core business segments: Resorts; CBD; and Central Revenue and Distribution (CR&D). Mantra Group s Resorts and CBD segments operate properties varied by location and targeted customer and utilise all of the Mantra Group s brands and operating structures. The Central Revenue and Distribution segment ( CR&D ) manages Mantra Group s in-house customer management, online booking service, distribution and digital marketing platforms. For financial reporting purposes, CR&D also includes fees earned by Mantra Group under Management Agreements. 4 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
1.3 GROUP FINANCIAL PERFORMANCE Operating revenue for the six months ended 31 December 2017 ( the period ) was $366.2m, an increase of $10.1m or 2.8% on the same period last year. Revenue for the period benefited from continued growth in domestic and international travel, particularly to Queensland and New Zealand regions, and strong demand in Sydney, Canberra and Adelaide. The Group attained occupancy of 81.9% at an average rate of $177.08 compared to last year s occupancy and rate of 82.2% and $176.33 respectively for the same period. This resulted in RevPAR of $145.07 for the current period compared to $144.91 for the prior corresponding period, an increase of $0.16 or 0.1%. During the six months ended 31 December 2017, Mantra Group acquired ten new properties - Mantra Sydney Airport Hotel (Sydney), Mantra Macarthur Hotel (Canberra), Peppers FV (Brisbane) and the seven Art Series Hotel Group properties: The Watson (Adelaide); The Olsen, The Blackman, The Cullen, The Larwill, and The Chen (all Melbourne); and The Johnson (Brisbane). All new properties joined the CBD segment, with the exception of Mantra Sydney Airport Hotel, a Management Agreement property, which joined the CR&D segment. New properties increased available rooms by 2.6% in the six month period. Underlying* earnings before interest, taxation, depreciation, amortisation and impairment ( underlying EBITDAI ) for the period was $56.6m, a decrease of $2.1m or 3.6% on the prior corresponding period. The underlying EBITDAI margin of 15.5% decreased by one percentage point compared to the 16.5% achieved in the previous comparable period. Refer below for further details. Transaction costs of $0.7m were incurred during the period in respect of the acquisition of the Art Series Hotel Group on 22 November 2017. This acquisition has been treated as a business combination under AASB 3 Business Combinations. As a result, all transaction costs associated with the transaction have been expensed in the consolidated statement of comprehensive income. The Group also incurred costs of $2.0m in respect of the proposed acquisition by AccorHotels. These costs include professional services fees and expenses arising from the long term incentive plan which was modified by the Scheme Implementation Agreement. Underlying* net profit after tax for the period of $27.6m was $1.9m (6.3%) lower than underlying net profit after tax in the prior corresponding period. After taking account of transaction costs incurred in respect of the business combination and the costs of the proposed acquisition by AccorHotels, net profit after tax of $25.1m was $5.4m (17.7%) lower than the same period in the prior year. While finance costs have remained similar to the previous corresponding period, tax expense for the period of $11.6m was $2.1m or 15.2% lower than the same period in the prior year which is in line with decreased earnings in the period. The effective tax rate was 31.6%. Mantra Group s revenue and underlying EBITDAI by business segment is summarised below with a comparison of revenue and underlying EBITDAI to the previous corresponding period. REVENUE BY BUSINESS SEGMENT DEC 2017 DEC 2016 $ 000 $ 000 Resorts 165,583 163,036 CBD 172,156 162,796 Central Revenue and Distribution 26,561 28,250 Corporate 1,923 2,082 TOTAL SEGMENT REVENUE 366,223 356,164 UNDERLYING* EBITDAI BY BUSINESS SEGMENT DEC 2017 DEC 2016 $ 000 $ 000 Resorts 26,349 28,075 CBD 26,644 26,299 Central Revenue and Distribution 18,492 18,834 Corporate (14,873) (14,502) TOTAL UNDERLYING* EBITDAI 56,612 58,706 *Underlying EBITDAI is EBITDAI excluding transaction costs associated with business combinations of $0.7m (H1FY2017: $1.7m) and costs of $2.0m associated with the proposed acquisition by AccorHotels (H1FY2017: nil). Underlying NPAT also excludes a net reversal of impairment (H1FY2018: nil (H1FY2017: $3.2m)) and related tax impacts. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 5
The key factors affecting Mantra Group s performance in the current period compared to the prior corresponding period by segment are as follows: RESORTS Resorts revenue increased by $2.6m, from $163.0m to $165.6m, an increase of 1.6%. RevPAR increased by 0.5%. Underlying this growth in particular was increased average room rate of $3.85 in the Queensland regions, an increase of 2.2%. The growth in the average room rate was restricted by a reduction in Group business, as some Gold Coast venues are unavailable in advance of the Commonwealth Games. New Zealand also enjoyed an increase in average room rate of $12.73 or 7.3%. The Australian and New Zealand operations continue to benefit from strong short term domestic travel demand, particularly to Queensland, as well as an increase in international travellers taking advantage of low cost carriers. By contrast, results from the US operations have been impacted by a number of new and renovated hotel openings in Waikiki in the period. This resulted in a loss of some contracted business early in the period which was not replaced until later in the period. Also the increased supply has impacted average room rate. Finally there has also been a general reduction in demand for hotel rooms and conference facilities in the region which has had a negative impact on occupancy levels during the period. Resorts underlying EBITDAI decreased from $28.1m to $26.3m, a decrease of $1.8m or 6.1%. EBITDAI margin also decreased by 1.3 percentage points to 15.9%. With the exception of annual award payroll increases, costs have been maintained within CPI parameters. CBD CBD revenue increased by $9.4m or 5.7% to $172.2m for the period compared with $162.8m in the previous corresponding period. RevPAR decreased by 0.5%. There were nine properties added to the CBD segment during the period which increased available rooms by 6.4% on the same period last year and contributed $9.1m to revenue. Organic revenue remained in line with prior corresponding period and organic EBITDAI fell by 1.0%. Revenue in this segment has been positively impacted by the following: Strong average room rate increases in ACT, Sydney and Adelaide of 4.0% on average. The increase in average room rate has been strongest in the corporate and entertainment sectors; and Large increases in occupancy in Brisbane, South Australia and Darwin of 6.3%. Brisbane has benefited from certain one -off events such as the world title boxing match in July and the Ashes in November. Brisbane, Adelaide and Darwin have all benefited from increased corporate travel. By contrast, revenue in this segment has been negatively impacted by the following: RevPAR in Melbourne and Perth has decreased by 3.2% and 9.5% respectively. In Melbourne the reduction has been brought about by a reduction in constrained demand brought about by new supply. In Perth, the increased supply of hotel rooms and subsequent rate discounting in line with the broader market has negatively impacted the results in this region. CBD underlying* EBITDAI increased marginally from $26.3m to $26.6m for the period, an increase of $0.3m or 1.3%. CENTRAL REVENUE AND DISTRIBUTION Operating revenue in the CR&D segment decreased from $28.3m to $26.6m, a decrease of $1.7m or 6.0%. Underlying* EBITDAI in the CR&D segment also decreased from $18.8m to $18.5m, a decrease of $0.3m or 1.8%. The results of this segment were principally driven by one off termination fees received in the prior corresponding period which were not received in the current year. CORPORATE The Corporate segment includes the costs for the centralised shared services providing the management team, sales and marketing, digital, finance, legal, acquisitions and asset management support. Net costs of $14.9m have increased by $0.4m compared to the prior corresponding period. Costs increases have resulted from the integration of the Art Series central services. Excluding these costs, net costs from the corporate segment would have decreased. 6 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
CASH AND CASH FLOW The Group continues to generate strong operating cash inflows from operations, with net cash inflow from operating activities increasing by $11.3m or 44.8% from $25.1m to $36.4m in the current period. During the period, the Group increased the facility limit of Tranche B of the Syndicated Facility Agreement by $30m. DIVIDENDS If the Scheme of Arrangement ( Scheme ) with AccorHotels is approved, under the terms of the Scheme, Mantra Group shareholders will be entitled to receive $3.96 cash per share. Mantra Group has the discretion to pay shareholders a special dividend of up to a maximum of 23.5 cents per share which will be deducted from the $3.96 headline value. In this context, Mantra Group will not be declaring a dividend in respect of the half year. PROPOSED ACQUISITION BY ACCORHOTELS The proposed acquisition of the Group by AccorHotels was a key Board and management focus in the period and will continue to be so for the remainder of FY2018. On current timelines, and assuming regulatory, shareholder and other approvals are secured, it is anticipated that the transaction will close in the last quarter of FY2018. Costs to date in respect of this proposed acquisition are $2.0 million. If the acquisition were to complete in the second-half of the financial year total costs will be approximately $14.7 million. Costs to date include professional services fees and the increase Long Term Incentive Plan charge as a result of the modification of the Plan following the signing of the Scheme Implementation Agreement. AUDITOR S INDEPENDENCE DECLARATION A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 8. ROUNDING OF AMOUNTS The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the rounding off of amounts in the directors report and financial report. Amounts in the directors report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of Directors. Peter Bush Director Kerry Robert East Director Gold Coast 14 February 2018 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 7
Auditor s Independence Declaration As lead auditor for the review of Mantra Group Limited for the half-year ended 31 December 2017, I declare that to the best of my knowledge and belief, there have been: (a) (b) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and no contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Mantra Group Limited and the entities it controlled during the period. Kristin Stubbins Partner PricewaterhouseCoopers Sydney 14 February 2018 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 8 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2017 HALF YEAR NOTES 2017 2016 $ 000 $ 000 REVENUE FROM CONTINUING OPERATIONS 366,223 356,164 Other income 23 9 Employee benefits expense (125,335) (117,266) Operating expenses (111,279) (110,171) Occupancy and utilities expenses (64,917) (60,169) Depreciation and amortisation expense C1, C2 (14,607) (13,523) Transaction costs associated with business combinations A2 (699) (1,692) Costs associated with proposed acquisition by AccorHotels D5 (1,962) - Administration expenses (8,103) (9,861) Impairment reversal C3-3,217 Finance costs (net) (2,600) (2,485) PROFIT BEFORE INCOME TAX 36,744 44,223 Income tax expense D2 (11,606) (13,691) PROFIT FOR THE PERIOD 25,138 30,532 OTHER COMPREHENSIVE INCOME Item that may be reclassified to profit or loss Exchange differences on translation of foreign operations (1,769) 2,791 OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD, NET OF TAX (1,769) 2,791 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 23,369 33,323 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS OF MANTRA GROUP LIMITED 23,369 33,323 NOTES CENTS CENTS EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY: Earnings per share D1 8.5 10.3 Diluted earnings per share D1 8.4 10.3 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 NOTES 31 DECEMBER 2017 30 JUNE 2017 $ 000 $ 000 ASSETS CURRENT ASSETS Cash and cash equivalents B1 64,316 62,923 Trade and other receivables 87,321 54,152 Inventories 3,527 3,099 Current tax receivables 1,606 1,686 Other current assets 3,361 8,321 TOTAL CURRENT ASSETS 160,131 130,181 NON-CURRENT ASSETS Receivables 635 613 Other non-current assets 4,100 4,100 Property, plant and equipment C1 168,184 157,658 Intangible assets C2 571,833 513,352 Deferred tax assets 356 356 TOTAL NON-CURRENT ASSETS 745,108 676,079 TOTAL ASSETS 905,239 806,259 LIABILITIES CURRENT LIABILITIES Trade and other payables 64,953 52,595 Current tax liabilities - 2,348 Employee benefit obligations 16,370 16,554 Derivative financial instruments - 13 Advance deposits 43,689 26,103 TOTAL CURRENT LIABILITIES 125,011 97,613 NON-CURRENT LIABILITIES Borrowings B1 186,355 135,252 Deferred tax liabilities 104,789 91,930 Provisions 3,853 3,516 TOTAL NON-CURRENT LIABILITIES 294,997 230,698 TOTAL LIABILITIES 420,008 328,311 NET ASSETS 485,231 477,948 EQUITY Share capital B2 414,252 414,252 Other reserves 228,611 228,620 Accumulated losses (157,632) (164,924) TOTAL EQUITY 485,231 477,948 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 10 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2017 SHARE CAPITAL ATTRIBUTABLE TO OWNERS OF MANTRA GROUP LIMITED OTHER RESERVES ACCUMULATED LOSSES TOTAL EQUITY $ 000 $ 000 $ 000 $ 000 BALANCE AT 1 JULY 2016 412,321 230,085 (179,339) 463,067 Profit for the half-year - - 30,532 30,532 Other comprehensive income - 2,791-2,791 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD - 2,791 30,532 33,323 TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS: Issue of shares on Dividend Reinvestment Plan 1,132 - - 1,132 Issue of shares on share purchase plan 254 - - 254 Dividends paid - - (16,321) (16,321) Employee share schemes value of employee services - 282-282 Transaction costs arising on issue of shares (net of tax) (63) - - (63) 1,323 282 (16,321) (14,716) BALANCE AT 31 DECEMBER 2016 413,644 233,158 (165,128) 481,674 BALANCE AT 1 JULY 2017 414,252 228,620 (164,924) 477,948 Profit for the half-year - - 25,138 25,138 Other comprehensive income - (1,769) - (1,769) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD - (1,769) 25,138 23,369 TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS: Dividends paid - - (17,846) (17,846) Employee share schemes value of employee services - 1,760-1,760-1,760 (17,846) (16,086) BALANCE AT 31 DECEMBER 2017 414,252 228,611 (157,632) 485,231 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 11
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2017 HALF YEAR NOTES 2017 2016 $ 000 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) 383,305 371,784 Payments to suppliers and employees (inclusive of goods and services tax) (330,082) (331,262) 53,823 40,522 Transaction costs relating to business combinations A2 (699) (922) Interest received 432 352 Interest paid (2,740) (2,555) Income taxes paid (14,404) (12,255) NET CASH INFLOW FROM OPERATING ACTIVITIES 36,412 25,142 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment C1 (10,812) (7,833) Payments of deposits for other acquisitions A3 (220) (5,683) Payments for intangible assets C2 (8,272) (3,804) Proceeds from sale of property, plant and equipment 350 152 Proceeds from sale of intangible assets - 76 Payments for business acquisitions, net of cash acquired A2 (49,119) (67,624) NET CASH (OUTFLOW) FROM INVESTING ACTIVITIES (68,073) (84,716) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of shares and other equity securities - 191 Proceeds from borrowings 51,000 15,000 Borrowing costs (100) (63) Dividends paid to Company s shareholders (17,846) (15,190) NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 33,054 (62) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,393 (59,636) Cash and cash equivalents at the beginning of the financial year 62,923 117,091 Effects of exchange rate changes on cash and cash equivalents - (770) CASH AND CASH EQUIVALENTS AT END OF PERIOD 64,316 56,685 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 12 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Notes to the consolidated financial statements About this report Mantra Group Limited is a company limited by shares, incorporated and domiciled in Australia and is a for profit entity for the purpose of preparing financial statements. Its registered office and principal place of business is at Level 15, 50 Cavill Avenue, Surfers Paradise, QLD 4217. Its shares are listed on the Australian Securities Exchange ( ASX ). SIGNIFICANT JUDGEMENTS AND ESTIMATES In the process of applying the Group s accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial statements include: - Assessment of accounting treatment of property acquisitions (Note A2) - Assessment of the useful economic life of an asset or that an asset has indefinite life (Note C2) - Carrying value assessment of property, plant and equipment and intangible assets (Note C3) - Assessment of the probability and timing of the completion of the proposed acquisition by AccorHotels (Note D3) KEEPING IT SIMPLE The keeping it simple explanations provide a high level overview of the accounting treatment of the more complex sections of the financial statements. The notes provide explanations and additional disclosure to assist readers understanding and interpretation of the financial statements and include information required by accounting standards or ASX Listing Rules. CORPORATE INFORMATION The financial statements of Mantra Group Limited ( the Company ) for the six months ended 31 December 2017 are for the consolidated entity consisting of the Company and its subsidiaries (together referred to as the Group or Mantra Group ). MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 13
BASIS OF PREPARATION This interim financial report for the six months reporting period ended 31 December 2017 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this financial report is to be read in conjunction with the annual report of the Company for the year ended 30 June 2017 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The financial report for the year ended 30 June 2017 is accessible at www.mantragroup.com.au. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. The following standards will be applicable in future reporting periods and the Group will adopt the standards upon the operative date. AASB 9 Financial Instruments (effective 1 January 2018) AASB15 Revenue from contracts with customers (effective 1 January 2018) AASB 16 Leases (effective 1 January 2019) The Group set out the status of the assessment of the impact of these new standards on the results of the Group in the June 2017 financial statements. Since that date, the Group s Financial Reporting team continues to finalise its works in respect of AASB 9 and continues to assess the impact of AASB16. The Group s view on the impact of these standards on the financial statements remains unchanged to that reported in the June 2017 financial statements. 14 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Notes to the consolidated financial statements A: Results for the period This section provides additional information about those individual line items in the financial statements that the directors consider most relevant in the context of the operations of the entity. A1 Segment information page 15 A2 Business combinations page 17 A3 Pre-acquisition deposits page 18 A1 SEGMENT INFORMATION KEEPING IT SIMPLE Segment reporting requires presentation of financial information based on the information that is internally provided to the Chief Executive Officer (CEO). The chief measure used by the CEO to monitor performance is EBITDAI. The four reportable segments of the business are as follows: Resorts - operates retreats and resorts in key leisure destinations, principally under Management Letting Right (MLR) agreements; CBD - operates properties in major cities throughout Australia, principally under Lease Rights (LR) agreements; Central Revenue and Distribution - operates the Group s in-house customer management and booking services, through which it earns fees from bookings made through its central reservation system. Management fees earned on properties under Management Agreements are also included in this segment; and Corporate - Revenue includes revenue received under Marketing Services Agreements. Costs include sales and marketing and head office costs. None of the segments included are aggregated segments and the operating segments are consistent with the June 2017 financial report. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 15
The segment information provided to the Chief Executive Officer for the reportable segments is as follows: HALF-YEAR DECEMBER 2017 RESORTS CBD CENTRAL REVENUE AND DISTRIBUTION CORPORATE TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 Total segment revenue 165,617 172,168 26,561 11,722 376,068 Inter-segment revenue (34) (12) - (9,799) (9,845) REVENUE FROM EXTERNAL CUSTOMERS 165,583 172,156 26,561 1,923 366,223 UNDERLYING EBITDAI* 26,349 26,644 18,492 (14,873) 56,612 Transaction costs - - - (2,661) (2,661) EBITDAI 26,349 26,644 18,492 (17,534) 53,951 HALF-YEAR DECEMBER 2016 Total segment revenue 163,070 162,808 28,250 11,171 365,299 Inter-segment revenue (34) (12) - (9,089) (9,135) REVENUE FROM EXTERNAL CUSTOMERS 163,036 162,796 28,250 2,082 356,164 UNDERLYING EBITDAI* 28,075 26,299 18,834 (14,502) 58,706 Transaction costs - - - (1,692) (1,692) EBITDAI 28,075 26,299 18,834 (16,194) 57,014 *Underlying EBITDAI is EBITDAI excluding transaction costs of $0.7m associated with business combinations (H1FY2017: $1.7m) (refer note A2) and costs of $2.0m associated with the proposed acquisition by AccorHotels (H1FY2017: nil) (refer note D5). REVENUE FROM EXTERNAL CUSTOMERS 7.3% 0.5% 7.9% 0.6% CBD CBD 47.0% 45.2% Resorts CR&D Corporate 45.8% 45.7% Resorts CR&D Corporate 2017 2016 UNDERLYING EBITDAI* EXCLUDING CORPORATE SEGMENT 25.9% 36.9% CBD Resorts CR&D 25.7% 35.9% CBD Resorts CR&D 37.3% 38.3% 2017 2016 16 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
OTHER SEGMENT INFORMATION SEGMENT REVENUE Sales between segments are carried out at arm s length and are eliminated on consolidation. The revenue from external parties reported to the Chief Executive Officer is measured in a manner consistent with that in the consolidated statement of comprehensive income. EARNINGS BEFORE INTEREST, TAX, DEPRECIATION, AMORTISATION AND IMPAIRMENT (EBITDAI) The Chief Executive Officer assesses the performance of the operating segments using EBITDAI. A reconciliation of underlying EBITDAI* to statutory operating profit before income tax is provided as follows: HALF YEAR 31 DECEMBER 2017 31 DECEMBER 2016 $ 000 $ 000 UNDERLYING EBITDAI* 56,612 58,706 Transaction costs associated with business combinations (699) (1,692) Costs associated with proposed acquisition by AccorHotels (1,962) - Finance costs (net) (2,600) (2,485) Depreciation (7,680) (6,843) Amortisation (6,927) (6,680) Reversal of impairment - 3,217 PROFIT BEFORE INCOME TAX 36,744 44,223 *Underlying EBITDAI is EBITDAI excluding transaction costs of 0.7m associated with business combinations (H1FY2017: $1.7m) (refer note A2) and costs of $2.0m associated with the proposed acquisition by AccorHotels (H1FY2017: nil) (refer note D5). A2 BUSINESS COMBINATIONS SIGNIFICANT JUDGEMENTS AND ESTIMATES Assessment of the acquisition of properties as asset acquisitions or business combinations requires management judgement regarding the terms of the individual contract. The main impacts of the different accounting treatments are that if the transaction is accounted for as a business combination, the assets and liabilities acquired, as well as the consideration paid, have to be fair valued. Also the transaction costs incurred in respect of the business combination are expensed to the statement of comprehensive income. SUMMARY OF ACQUISITIONS CURRENT PERIOD During the interim reporting period, the Group completed one acquisition which has been accounted for as a business combination. Details of this acquisition are included below. ART SERIES HOTEL GROUP On 22 November 2017 Mantra Group acquired the Art Series Hotel Group, a portfolio of seven luxury 4-5 star unique hotels in popular cultural hubs in key Australian capital cities. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 17
Details of the purchase consideration and the net assets acquired are as follows: $ 000 PURCHASE CONSIDERATION Cash paid 49,119 The provisionally determined fair values of the assets and liabilities recognised as a result of the acquisition are as follows: FAIR VALUE $ 000 Current assets 967 Property, plant and equipment 8,276 Intangible assets 41,487 Deferred tax asset 189 Provision for employee benefits (1,800) Deferred tax liability (13,571) NET IDENTIFIABLE ASSETS ACQUIRED 35,548 Add: Goodwill 13,571 NET ASSETS ACQUIRED 49,119 Acquisition related costs of $0.7m in respect of this business combination are included in the consolidated statement of comprehensive income. As noted above, as at 31 December 2017 the Group had paid $49.1m in respect of this acquisition. The balance of the purchase price of $2.6m was paid in February 2018 following settlement of The Chen management letting rights contract in accordance with the conditions of the sale agreement. REVENUE AND PROFIT CONTRIBUTION The acquired business contributed revenue of $6.7m, EBITDAI of $0.7m and net profit after tax of $0.3m to the Group for the period from the date of acquisition to 31 December 2017. If the acquisition had occurred on 1 July 2017, consolidated revenue and consolidated profit for the half year ended 31 December 2017 would have been $390.1m and $25.8m respectively. These amounts have been calculated using the Group accounting policies and by adjusting the results of the operations to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to land and buildings and intangible assets had applied from 1 July 2017, together with the consequential tax effects. PRIOR PERIOD During the prior interim reporting period, the Group acquired three properties. Details of these business combinations were disclosed in note A4 of the Group s annual financial statements for the year ended 30 June 2017. PURCHASE CONSIDERATION - CASH OUTFLOW HALF YEAR 31 DECEMBER 2017 31 DECEMBER 2016 $ 000 $ 000 OUTFLOW OF CASH TO ACQUIRE BUSINESSES, NET OF CASH ACQUIRED Cash consideration for the period ended 31 December 49,119 67,624 Movement in pre-acquisition deposits - 8,342 49,119 75,966 A3 PRE-ACQUISITION DEPOSITS During the current and prior periods Mantra Group signed a number of agreements to acquire management rights and management agreements, all subject to customary conditions. At balance date, deposits of $5.4m were held in respect of these agreements (H1FY2017: $5.7m). 18 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Notes to the consolidated financial statements B: Funding the business Mantra Group focuses on maintaining a strong balance sheet through managing cash and debt levels. The funding strategy also considers the Group s expenditure, growth, and acquisition requirements, and the desire to return dividends to shareholders. This section provides more information on how the business is funded. B1 Net debt page 19 B2 Equity page 19 B1 NET DEBT 31 DECEMBER 2017 30 JUNE 2017 $ 000 $ 000 Cash and cash equivalents 64,316 62,923 Secured non-current borrowings (186,355) (135,252) NET DEBT (122,039) (72,329) On 14 December 2017, the Group increased the facility limit of Tranche B of the Syndicated Facility Agreement by $30m. The expiry date of Tranche B was also extended to 13 January 2019. On 27 December 2017 the Group did not renew its interest rate swap of $70m. The Group s borrowings were therefore not hedged as at 31 December 2017. B2 EQUITY KEEPING IT SIMPLE Issued capital represents the amount of consideration received for securities issued by Mantra Group. When the Company issues its shares, the consideration for these shares, including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 19
SHARE CAPITAL 31 DECEMBER 2017 30 JUNE 2017 31 DECEMBER 2017 30 JUNE 2017 SHARES SHARES $ 000 $ 000 Ordinary shares - fully paid 297,428,917 297,428,917 414,252 414,252 ORDINARY SHARES Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. 20 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Notes to the consolidated financial statements C: Operating assets This section highlights the primary operating assets used to support the Group s operating activities. C1 Property, plant and equipment page 21 C2 Intangible assets page 22 C3 Carrying value assessment of intangible assets page 23 C1 PROPERTY, PLANT AND EQUIPMENT LAND AND BUILDINGS PLANT AND EQUIPMENT LEASEHOLD IMPROVEMENTS TOTAL $ 000 $ 000 $ 000 $ 000 AT 30 JUNE 2017 Cost or fair value 152,327 94,470 14,343 261,140 Accumulated depreciation (41,032) (56,334) (6,116) (103,482) Net book amount 111,295 38,136 8,227 157,658 HALF-YEAR ENDED 31 DECEMBER 2017 Opening net book amount 111,294 38,136 8,227 157,658 Exchange differences (494) (32) (6) (532) Additions 380 7,676 2,756 10,812 Disposals (335) (15) - (350) Depreciation charge (1,500) (5,428) (752) (7,680) Acquisition of business 3,750 4,526-8,276 Closing net book amount 113,096 44,863 10,225 168,184 AT 31 DECEMBER 2017 Cost 155,463 106,216 17,092 278,771 Accumulated depreciation (42,367) (61,353) (6,867) (110,587) Net book amount 113,096 44,863 10,225 168,184 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 21
C2 INTANGIBLE ASSETS SIGNIFICANT JUDGEMENTS AND ESTIMATES Assessment of the useful economic life of an asset or that an asset has an indefinite life requires management judgement and is reassessed at each reporting date. If an asset s useful life was assessed to be shorter or longer than that disclosed, the amortisation expense for the period would be higher or lower, respectively. GOODWILL INTELLECT- UAL PROPERTY AND OTHER INTANGIBLES BRAND NAMES AND TRADEMARKS MANAGEMENT LETTING RIGHTS LEASE RIGHTS HOTEL MANAGEMENT RIGHTS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 AT 30 JUNE 2017 Cost 242,312 22,609 11,460 357,004 153,102 26,605 813,092 Accumulated amortisation and impairment (119,670) (19,401) (1,004) (109,333) (48,939) (1,393) (299,740) Net book amount 122,642 3,208 10,456 247,671 104,163 25,212 513,352 HALF-YEAR ENDED 31 DECEMBER 2017 Opening net book amount 122,642 3,208 10,456 247,671 104,163 25,212 513,352 Exchange differences - 2 - (504) - (262) (764) Additions - 868-6,210-4,036 11,114 Amortisation charge - (911) (2) (3,697) (1,883) (434) (6,927) Acquisition of business 13,571-5,500-32,341 3,646 55,058 Closing net book amount 136,213 3,167 15,954 249,680 134,621 32,198 571,833 AT 31 DECEMBER 2017 Cost 255,883 23,479 16,959 362,578 185,443 34,002 878,344 Accumulated amortisation (119,670) (20,312) (1,005) (112,898) (50,822) (1,804) (306,511) Net book amount 136,213 3,167 15,954 249,680 134,621 32,198 571,833 22 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
C3 CARRYING VALUE ASSESSMENT OF INTANGIBLE ASSETS KEEPING IT SIMPLE The Group tests property, plant and equipment and intangible assets for impairment to ensure they are not carried at above either the amount for which they could be sold (fair value less costs of disposal FVLCD ), or the amount they would generate by being used in the business (value in use). These tests are carried out: - At least annually for goodwill and brand names; and - Where there is an indication that the assets may be impaired (which is assessed at least each reporting date). SIGNIFICANT JUDGEMENTS AND ESTIMATES These calculations require the use of estimates and judgements regarding a number of items including forecast results, growth rates, discount rates and multiples applicable to each Cash Generating Unit ( CGU ). Such estimates are subject to change as a result of changing economic and operational conditions. Actual cash flows may therefore differ from forecasts and could result in changes in the recognition of impairment charges or credits in future periods. REVERSAL OF IMPAIRMENT Impairment losses recognised in prior periods for intangible assets and property, plant and equipment are assessed at each reporting date for indications that the impairment loss has decreased or may no longer exist. The impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount of the asset and is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of amortisation or depreciation, had not impairment losses been recognised. IMPAIRMENT TEST FOR MANAGEMENT LETTING RIGHTS, LEASE RIGHTS AND HOTEL MANAGEMENT RIGHTS As at the reporting date, to the extent that there are indicators of impairment or reversal of impairment, Management Letting Rights, Lease Rights and Hotel Management Rights are tested for impairment or reversal of impairment at the individual property level which is the smallest identifiable group of assets which generates cash flows which are largely independent of each other. During the period, no impairment or reversal of impairment (H1FY2017: reversal of impairment of $3.2m) was recognised in relation to management letting rights, lease rights and hotel management rights. Details of the H1FY2017 reversal of impairment is included in the interim report for that period. MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 23
Notes to the consolidated financial statements D: Other information This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements or because it provides further information which may be useful for the users of the interim report. D1 Earnings per share page 24 D2 Income tax expense page 25 D3 Share based payments page 25 D4 Events occurring after the reporting period page 26 D5 Contingent liabilities page 26 D1 EARNINGS PER SHARE KEEPING IT SIMPLE Earnings per Share (EPS) is the amount of post-tax profit attributable to each share. UNDERLYING EARNINGS PER SHARE HALF YEAR 31 DECEMBER 2017 31 DECEMBER 2016 $ 000 $ 000 Total underlying earnings per share attributable to the ordinary equity holders of the Group 9.3 9.9 RECONCILIATION OF UNDERLYING NET PROFIT AFTER TAX, USED TO CALCULATE UNDERLYING EARNINGS PER SHARE, TO STATUTORY NET PROFIT AFTER TAX IS PROVIDED AS FOLLOWS: HALF YEAR 31 DECEMBER 2017 31 DECEMBER 2016 $ 000 $ 000 Underlying net profit after tax 27,603 29,465 Transaction costs associated with business combinations (699) (1,692) Costs associated with proposed acquisition by AccorHotels (1,962) - Reversal of impairment - 3,217 Tax effect 196 (458) Net profit after tax 25,138 30,532 24 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
D2 INCOME TAX EXPENSE Income tax expense is recognised based on management s estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the six-month period to 31 December 2017 is 31.6% (H1FY2017:31.0%). D3 SHARE BASED PAYMENTS This note provides an update on the Long Term Incentive Plan that was introduced in H1FY2016. KEEPING IT SIMPLE The share-based payments scheme described in this section was established by the Board to provide long-term incentives to the Group s senior executives based on shareholder returns taking into account the Group s financial and operational performance. Eligible executives may be granted performance rights on terms and conditions determined by the Board from time to time. The fair value of rights granted under the scheme is recognised as an employee benefit expense with a corresponding increase in equity. The Company provides benefits to certain employees under a Long Term Incentive Plan (LTIP) whereby employees render services in exchange for rights over shares which are accounted for as share-based payments. The LTIP was implemented in November 2015 and continues in the current period. A description of the LTIP is included in the June 2017 annual report. YEAR GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT START OF THE YEAR GRANTED DURING THE YEAR EXERCISED DURING THE YEAR OTHER CHANGES DURING THE YEAR BALANCE AT END OF THE YEAR NUMBER NUMBER NUMBER NUMBER NUMBER Long Term Incentive Plan (2016) 26/11/15 25/11/19-279,341 - - - 279,341 Long Term Incentive Plan (2017) 17/11/16 16/11/20-345,363 - - - 345,363 Long Term Incentive Plan (2018) 22/11/17 21/11/21 - - 481,356 - - 481,356 Total 624,704 481,356 - - 1,106,060 MODIFICATION OF SHARE BASED PAYMENTS ARRANGEMENTS In October 2017, Mantra Group signed the Scheme Implementation Agreement ( SIA ) setting out how the proposed acquisition of Mantra Group by AccorHotels would be effected. Under the SIA any performance rights issued under the Long Term Incentive Plan which had not vested by the date shareholder approval is obtained will vest and convert to Mantra shares at that time. This clause has the impact of shortening the vesting period and also removing the EPS and TSR hurdles and is considered to be a modification of the LTIP. The change in fair value of the options at the date of the modification was determined to be as follows: For performance rights issued in FY2016, performance rights previously subject to TSR hurdles, an increase of $2.00. For performance rights issued in FY2017, performance rights previously subject to TSR hurdles, an increase of $2.61 There was no change to the fair value of performance rights previously subject to EPS hurdles. The incremental fair values are recognised as an expense over the period from October 2017 to the end of the estimated vesting period, currently estimated to be April 2018. The expense for the original option grant will continue to be recognised as if the terms had not been modified, but over the shortened vesting period. FAIR VALUE OF OPTIONS GRANTED In order to ascertain the fair value of transaction options granted, a probability weighted average value was calculated using the fair value assuming no AccorHotels transaction and a fair value assuming the AccorHotels transaction completes. The assessed fair value at grant date of performance rights granted during the half year ended 31 December 2017 linked to the Company s TSR performance assuming no AccorHotels transaction was $1.099 per performance right (2017: $1.12). The assessed fair value of performance MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 25
rights linked to the Company s EPS performance assuming no AccorHotels transaction was $3.22 (2017: $3.22). The fair value is independently determined using a Binomial Call Option Pricing Model which takes into account the exercise price, the term of the option, the impact of dilution (where material), the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the performance right and the correlations and volatilities of the peer group companies. The model inputs for performance rights granted during the half year ended 31 December 2017 included: performance rights are granted for no consideration and vest based on Mantra Group Limited s TSR ranking with a peer group of the members of the S&P/ASX 200 Industrials Index during the performance period. Mantra Group Limited s EPS performance over three years and the continued employment of participants at specific dates Exercise price: Nil Grant date: 22 November 2017 Expiry date: 21 November 2021 Share price at grant date: $3.22 Expected price volatility of the company s shares: 25% to 35% Expected dividend yield: 3.6% Risk-free rate: 2.02% The expected price volatility is based on an analysis of the historical volatility of comparable companies and Industry Constituents adjusted for any expected changes to future volatility due to publicly available information. The alternative valuation is that the proposed transaction completes and the fair value of the performance rights is $3.96. The change in the fair value of the performance rights is detailed above. EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS Total expenses arising from share-based payment transactions recognised during the period were as follows: HALF YEAR 31 DECEMBER 2017 31 DECEMBER 2016 $ 000 $ 000 Long term incentive plan 1,768 282 D4 EVENTS OCCURRING AFTER THE REPORTING PERIOD On 22 November 2017, Mantra Group acquired the Art Series Hotel Group. As at 31 December 2017, the Group had paid $49.1m in respect of this acquisition. The balance of the purchase price of $2.6m was paid in February 2018 following settlement of The Chen management letting rights contract in accordance with the conditions of the sale agreement. No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. D5 CONTINGENT LIABILITIES Costs to date in respect of the proposed acquisition by AccorHotels total $2.0m. If the acquisition was to complete in the second-half of the financial year total costs will be approximately $14.7m. These costs include professional services fees and the increased Long Term Incentive Plan charge as a result of the modification of the plan following the signing of the SIA. 26 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Directors declaration In the Directors opinion: (a) the interim report and notes set out on pages 9 to 26 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and giving a true and fair view of the consolidated entity s financial position as at 31 December 2017 and of its performance for the half-year ended on that date, and (b) there are reasonable grounds to believe that Mantra Group Limited will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of Directors. Peter Bush Director Kerry Robert East Director Gold Coast 14 February 2018 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017 27