Check this one out. Touching its lows lately but no reason for it. Should benefit well from the Commomwealth games. Profits improving, nice balance sheet.
http://stocknessmonster.com/news-item?S=GHG&E=ASX&N=243023
3
DIRECTORS’ REPORT (CONTINUED)
PRINCIPAL ACTIVITIES
The principal activity of the Group during the year was the investment and operation of hotels in the three, four and five
star hotel category. These properties include ancillary businesses such as commercial office, rental offices and car
parks.
DISTRIBUTIONS
A final distribution of 2 cents has been declared and provided for the financial year ended 30 June 2005. Payment was
made on 29 August 2005. The distribution which amounts to $4,444,059 (2004: $5,555,083) was paid out of the Trust
and as such there are no imputation credits applicable to these. The interim and final distributions amounting to 4 cents
(2004: 2.5 cents) are 100% tax deferred (2004: 100%). There is not expected to be any imputation credits available for
the subsequent financial year as future distributions are expected to be from the Trust.
REVIEW AND RESULTS OF OPERATIONS
2005
$’000
2004
$’000
Revenue from Ordinary Activities 165,243 235,180
Profit from Ordinary Activities before Revaluations 13,046 17,120
Net Profit from Ordinary Activities after Income Tax Expense 31,230 22,293
Cents Cents
Basic earnings per security 14.05 10.03
For the financial year ended 30 June 2005, the Group continued its performance improvements, achieving a net profit
after tax of $31.2 million, an increase of $8.9 million (40%) from the prior year. The net profit was achieved in the
context of reduced asset sales, reduced asset base and the closure of the Grand Hyatt Melbourne banquet facilities for a
planned six month refurbishment.
The decrease in revenue and profit from ordinary activities before revaluations was directly attributable to the
following:
• In the 2004 financial year, $72.1 million of revenue and $4.7 million of profit was generated through the sale of
ten properties, in comparison to $8.2 million of revenue and $0.7 million of profit being generated through the
sale of one property and strata title units in 2005.
• The reduction in asset base along with changes in trading activity resulted in rental from the Chifley and Country
Comfort portfolio to decease by $4.1 million.
• The closure of the Grand Hyatt Melbourne banquet facilities for six months reduced hotel revenue and hotel
contribution by an estimated $4 million and $1.7 million respectively. This reduction was partially offset by the
improved room revenue from the Hyatt properties.
Of the 14 properties held at year end, five were independently valued in 2005. The improved performance of these
properties along with in progress refurbishments led to a valuation uplift of $18.2 million, an increase of $12.8 million
from prior year.
Other Key Financial Highlights
• Bank borrowings costs down $2.7 million (excluding premium paid on buy back of converting preference
securities), reflecting a decrease in average borrowings and reduced margins for the year;
• Net tangible asset backing up 10.6% to $1.04 per security;
• Security price up 23.2% to 85 cents
• Distributions per security up 1.5 cents from prior year;
GRAND HOTEL GROUP
YEAR ENDED 30 JUNE 2005
4
DIRECTORS’ REPORT (CONTINUED)
REVIEW AND RESULTS OF OPERATIONS (CONTINUED)
Operational Highlights (On a like for like basis)
Hyatt Portfolio:
• Revenue per available room increased by 5% to $130.36;
• Average room rate increased by 2.9% to $162.34;
• Successful refurbishment of the Grand Hyatt Melbourne banquet facilities.
Chifley Portfolio:
• Occupancy rate up from 70.5% to 72.1%;
• Revenue per available room up 4.8% to $80.02;
Country Comfort Portfolio:
• Occupancy rate down from 75.7% to 74.8%;
• Revenue per available room down 1.1% to $77.38;
For additional details on the review of operations refer to the Chairman and Managing Director’s Review in the Annual
Report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Subsequent to year end the Group has entered into an arrangement to obtain vacant possession on all properties
currently operated by Touraust Hotels Pty Limited (“TH”) by 30 November 2005. This arrangement provides the
Group flexibility to sell or retain properties for any and alternate use without encumbrance from the previous lease
arrangements. In addition, the Group has finalised compensation arrangements for all properties sold which were
previously operated by TH.
At the same time, the Group has reached a commercial settlement with TH and its related entities (collectively
“Touraust”) regarding their statement of claim and the Group’s counter claim.
The Group has agreed to pay Touraust $14 million to obtain vacant possession on the 10 properties currently operated
by Touraust, compensation on properties sold to date (which is fully provided for at reporting date, amounting to $4.7
million) and settlement of claims and counter claims. As part of this entire arrangement, the Group will receive early
payment of $2.8 million owing by Touraust for brand name rights, the predominate balance of which would have
otherwise been received in 2008. The Board believes that this will provide greater opportunities and better financial
returns for the Group in the future.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The directors believe that to include in this report particular information regarding the likely developments in the
operations of the Group and the expected results of those operations in subsequent financial years would likely to result
in unreasonable prejudice to the Group. Accordingly, this information has not been included in this report.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Group has agreed to indemnify the directors, company secretaries and the financial controller of Grand Hotel
Company Limited and Grand Hotel Management Limited. The indemnification of the above classes of officers is for
each and every liability for costs and expenses incurred by an officer, in their role as an officer to the full extent
permitted by the law, excluding any liability arising out of conduct involving a lack of good faith, willful misconduct or
reckless behaviour on the part of the officer.
During or since the end of the financial year, the Group has paid premiums to insure each of the directors named in this
report along with officers of the Group against all liabilities for costs and expenses incurred by them in defending any
legal proceedings arising out of their conduct while acting in the capacity of director or officer of the Group, other than
conduct involving a willful breach of duty in relation to the Group. The amount of the premium was $36,034 (2004:
$35,234).
GRAND HOTEL GROUP
YEAR ENDED 30 JUNE 2005
5
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT
This report outlines the remuneration arrangements in place for directors and executives of the Group. The
remuneration details for directors and the five highest remunerated executives are set out on page 8.
Remuneration and Nomination Committees
The Group has a Remuneration and Nomination Committee. The composition and function of these committees are set
out within the Corporate Governance Statement in the Annual Report.
The Remuneration Committee is responsible for reviewing the remuneration of directors and executives, and the
evaluation of executives and make recommendations to the Board on these matters. The Remuneration Committee
obtains independent advice on remuneration where appropriate.
The Nomination Committee is responsible for reviewing the composition of the Board and recommending new
nominees for membership to the Board.
Detailed committee charters are available on the Group’s website at www.ghg.net.au.
Remuneration Policy
The key principles of the Group’s remuneration policy are:
• Remuneration is competitively set at levels that will attract, motivate and retain high quality local and
international executive staff.
• Remuneration will incorporate a variable pay element for performance.
• Remuneration is structured to reward employees for increasing shareholder value.
Rewards are linked to the achievement of business strategies and goals.
In accordance with best practice corporate governance, the remuneration structure for non-executive directors, the
executive director and executives are separate and distinct.
Remuneration of Non-Executive Directors
The remuneration policy for Non-Executive Directors is designed to remunerate directors based on the scope of their
responsibilities and on the size and complexity of the Group.
The Remuneration Committee considers the level of remuneration required to attract and retain directors with the
necessary skills and experience for the Group’s board. This takes into account survey data on the level of directors’
fees being paid to directors of companies of comparable size and complexity.
No equity incentives are offered to non-executive directors.
No retirement allowances are payable to non-executive directors appointed after 1 July 2003. As Mr Conn and Mr
Haddad joined the board before then and have served on the Board for longer than seven years they are entitled to a
retirement allowance. These directors are contractually entitled to a lump sum amount equal to the sum of their fees
paid for three years prior to their retirement. This amount will be adjusted for any net superannuation paid by the
Group. The two non-executive director’s retirement allowance, including adjustments for estimated superannuation
earnings, totals $353,000 at June 2005.
The maximum aggregate cap for the remuneration of non-executive directors was set at $400,000 per annum, as
approved by shareholders in 1997. This cap covered directors’ fees but not retirement benefits.
Non-executive directors’ fees are fixed between $40,000-$55,000 per director per annum inclusive of committee fees
and the Chairman’s fees are $100,000 per annum inclusive of committee fees. From 1 July 2003, the Board volunteered
to take a reduction in their fees and remuneration until the Group returned to profitability. This arrangement will be
reviewed after 1 July 2005 following two consecutive years of profit.
Other than the reduction referred to above, the current directors’ fees have been unchanged since 2001.
GRAND HOTEL GROUP
YEAR ENDED 30 JUNE 2005
6
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (CONTINUED)
Remuneration of Executive Director
Managing Director, Mr Garry Cameron is currently the only executive director. He was appointed managing director
and chief executive officer in August 1996.
The executive director has an employment contract to 1 July 2006. On or before 31 December 2005 Mr Cameron and
the Board have to undertake renewal negotiations or allowing the contract to lapse. The remuneration of the executive
director comprises fixed remuneration and an annual short-term incentive.
The remuneration of the executive director is fixed by the Board as part of the terms and conditions of his appointment.
Those terms and conditions are established in a contract of employment with Mr Cameron which was effective from 1
July 2002 and they are subject to review from time to time, by the Board. The performance of the Managing Director is
reviewed annually. The performance objectives include both annual and multi-year performance periods.
Executive Remuneration Structure
The remuneration structure outlined below is applicable to the executives in the four Hyatt operated hotels and Grand
Hotel Management Limited (“GHML”) as Responsible Entity. The remuneration structure consists of two parts;
• FIXED REMUNERATION generally comprises salary, superannuation and other benefits provided by the Group.
• VARIABLE REMUNERATION comprises a short-term incentive of an annual cash payment with no cumulative
carryover.
The Group aims to set fixed annual remuneration at levels of positions for comparable size, based on position
evaluations using local and internationally recognised position evaluation methods.
The fixed remuneration component at the operational level relates only to salary and some allowances. Other elements
of the remuneration are contracted entitlements that are subject to cost variations. These cost variations may be caused
by the seniority of the position, changes to the market rate for the benefit, such as home leave airfares, the utilisation of
the benefit and exchange rates where overseas superannuation and insurance components are included.
The fixed remuneration for GHML executives, including the Company Secretary, is subject to a total employment cost
arrangement.
Short-term incentives are applied at two levels. The first level is at operational level where a structured formula is used
to ascertain the short-term incentive recommended to be paid. The second level is within GHML where short-term
incentives are based on the overall performance of the Group. The aim of the short-term incentive arrangement is to
drive performance to increase shareholder value.
The short-term incentives at the operational level are based on an annual scoring mechanism containing three
performance condition parts namely, financial performance, mystery guest survey and an employee opinion survey,
with a minimum standard established in each part. This formula is based on a worldwide approach used by Hyatt. All
parts of the formula must meet a minimum standard for the executives of a hotel to be eligible for an incentive
allocation. The Group has management discretion to override the formula outcome. During the period bonuses were
paid to executives of three of the four operating companies.
The annual incentives within GHML are up to a maximum of 40% of base salary for a number of executives’ fixed
remuneration and are based on the contribution to the performance of the Group. No bonuses were paid to executives of
GHML during the period.
Remuneration Review
The remuneration for all executives and staff is formally reviewed and reported to the Remuneration Committee
annually.
Retirement Benefits for Employees
The Group’s employees participate in a choice of superannuation funds. Most employees participate in cash
accumulation funds, their retirement benefit being the company’s and their own contributions plus investment earnings.
A small number of current employees are members of an international fund established by Hyatt Corporation that
provides a defined benefit pension or lump sum on retirement.
GRAND HOTEL GROUP
YEAR ENDED 30 JUNE 2005
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (CONTINUED)
Service Agreements
The terms and conditions of employment of both the Managing Director and General Manager of the Group contain
provisions for termination payments of up to a maximum of one year’s remuneration. Termination payments are not
payable, however, where termination is as a consequence of misconduct or any serious breach of the terms of
employment.
If the Group terminates the Managing Director’s appointment without cause or does not renew his appointment beyond
1 July 2006, in addition to his statutory entitlements, he will be paid an amount equal to his fixed annual remuneration.
The General Manager also has a fixed term of employment to 31 March 2006. If the Group terminates the General
Manager’s appointment without cause or does not renew his appointment beyond 31 March 2006, in addition to his
statutory entitlements, he will be paid an amount equal to nine months of annual remuneration.
A notice period of six months applies to both the Managing Director and the General Manager.
Other senior executives have no fixed term of employment. In the event of retrenchment, senior executives are entitled
to payments in accordance with the terms of their engagement, which provides for a period of notice or pay in lieu of
notice between one and three months, plus statutory entitlements.
Group Performance
The Group’s performance over the last five years (including the current financial year) is best reflected in the
movements of basic earnings per security, net tangible asset backing (“NTA”) and share price per security as shown
below. Over the past 2 years, the Group has generated positive returns and narrowed the margin between share price
and NTA.
GHG
grand hotel group
