This article is from the Australian Property Journal archive
THE Hedley Leisure & Gaming Property Fund has confirmed its IPO distribution guidance of $33.8 million for FY08 and is on course to sell another $30 million of assets.
HLG announced an unaudited operating profit of $10.8 million for the nine months ended March 31 2008 – exceeding IPO forecasts of $10.3 million.
The fund’s unaudited profit before tax of $8.6 million which includes extraordinary items of $19.3 million, exceeding the prospectus forecast of $21.4 million.
The fund’s total revenue was $56.7 million compared to $51.6 million forecast in the IPO.
During the period, the fund has rescinded the contract to buy one pub at a cost of $240,000. Negotiations continue for the purchase of the remaining six pubs.
HLG’s chief financial officer Stephen Donnelly said the fund has maintained its distribution guidance of $33.8 million for FY08.
Donnelly said the first stage of the strategic review is now complete and has resulted in the sale of 17.07 million ALE Property Group securities for $3.34 per security.
Proceed from the sale were used to reduce net debt by $56 million to $749 million, as a result the loan to valuation ration was reduced to 64.7%.
And to further reduce the fund’s gearing, negotiations to sell approximately $30 million worth of pubs assets are at an advanced stage.
HLG has agreed with its bank syndicate to permanently reduce its borrowing limit by $100 million to $810 million.
Looking ahead, Donnelly said the board is considering the establishment of internal management rather than the current external management structure.
He added that fund’s securities have traded on the market at a substantial discount to net assets.
“The HLG board believes that the current market price of the fund’s securities understates the true value of the funds,” he added.
Donnelly said although the smoking ban recently introduced in New South Wales may have had a negative impact of the performance of some pubs, the rental income continues to be paid of the fund.
“The smoking ban in those pubs has had no effect on the performance of the fund. It is expected that trading in the pubs affected will steadily improve as was the case in Victoria and Queensland which introduced smoking bans in clubs and pubs some time ago.
“It is the view of the HLG board that with reasonable prevailing economic conditions, the value of those assets will continue to increase over time. Recent amendments to gaming legislation in QLD have enhanced the value of existing gaming licenses and HLG is the second largest holder of licenses in the state,” he concluded.
Australian Property Journal
