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
31 Dec 2017 31 Dec 2016 $ $ Net tangible assets /(liabilities) per ordinary security
(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 2017ABN: 69 137 639 395 ASX CODE: MTR
2 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Interim report - 31 DECEMBER 2017
MANTRA GROUP LIMITEDABN: 69 137 639 395
CONTENTSDirectors’ 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 INFORMATIONWithin 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.
3MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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.
DIRECTORSThe 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 ACTIVITIESREVIEW OF OPERATIONSMantra 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.
Directors’ report
4 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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:
Management Letting Rights (MLR)
Marketing Service Agreements (MSA)
Hotel Management Rights (HMR)
Lease Rights (LR)
Management Agreements (MA)
TOTAL KEYS IN BUILDINGS: 24,000+
LR22.7%
MSA1.6%
MA11.2%
HMR2.8%
MLR61.7%
KEYS UNDER MANAGEMENT BY GEOGRAPHIC LOCATION
GOLD COAST
TROPICAL NORTH QUEENSLAND (TNQ)
MELBOURNE
SUNSHINE COAST
SYDNEY
OTHER VICTORIA (VIC)
NEW ZEALAND (NZ)
NORTHERN NEW SOUTH WALES (Nrth NSW)
NORTHERN TERRITORY (NT)
OTHER NSW (NSW)
WESTERN AUSTRALIA (WA)
SOUTH AUSTRALIA (SA)
BRISBANE
TASMANIA (TAS)
AUSTRALIAN CAPITAL TERRITORY (ACT)
INDONESIA (IND)
HAWAII
TOTAL KEYS UNDER MANAGEMENT: 18,000+
GOLD COAST20.9%
TNQ7.6%
MELBOURNE15.9%
SUNSHINECOAST5.2%
SYDNEY5.7%
VIC4.4%
NZ3.6%
Nrth NSW2.7%
NSW3.1%
NT2.9%
WA4.2%
SA4.2%
BRISBANE8.8%
TAS2.2% ACT
2.7%
IND0.3%
HAWAII5.8%
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.
5MANTRA 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.
6 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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.
7MANTRA 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 ACCORHOTELSThe 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 DECLARATIONA 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 Kerry Robert East Director Director
Gold Coast 14 February 2018
8 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
(b) 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 StubbinsPartnerPricewaterhouseCoopers
Sydney14 February 2018
PricewaterhouseCoopers, ABN 52 780 433 757One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.auLevel 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
9MANTRA 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.
10 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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.
11MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2017
ATTRIBUTABLE TO OWNERS OF MANTRA GROUP LIMITED
SHARE CAPITAL
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.
12 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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.
13MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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 ESTIMATESIn 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 SIMPLEThe ‘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.
Notes to the consolidated financial statements About this report
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’).
14 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
BASIS OF PREPARATIONThis 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.
15MANTRA 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 SIMPLESegment 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.
16 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
The segment information provided to the Chief Executive Officer for the reportable segments is as follows:
RESORTS CBDCENTRAL
REVENUE AND DISTRIBUTION
CORPORATE TOTAL
$’000 $’000 $’000 $’000 $’000
HALF-YEAR DECEMBER 2017
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
CBD
Resorts
CR&D
Corporate
0.5%
45.2%
47.0%
7.3%
CBD
Resorts
CR&D
Corporate
0.6%
45.7%
45.8%
7.9%
2017 2016
UNDERLYING EBITDAI* EXCLUDING CORPORATE SEGMENT
36.9%
CBD
Resorts
CR&D
37.3%
25.9%CBD
Resorts
CR&D
25.7%35.9%
38.3%
2017 2016
17MANTRA 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 ESTIMATESAssessment 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.
18 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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 DEPOSITSDuring 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).
19MANTRA 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 SIMPLEIssued 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.
20 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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.
21MANTRA 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 EQUIPMENTLAND 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
22 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
C2 INTANGIBLE ASSETS
SIGNIFICANT JUDGEMENTS AND ESTIMATESAssessment 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 RIGHTSHOTEL
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
23MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
C3 CARRYING VALUE ASSESSMENT OF INTANGIBLE ASSETS
KEEPING IT SIMPLEThe 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 ESTIMATESThese 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.
24 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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 SIMPLEEarnings per Share (EPS) is the amount of post-tax profit attributable to each share.
UNDERLYING EARNINGS PER SHARE
HALF YEAR31 DECEMBER 2017 31 DECEMBER 2016
$’000 $’000Total 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 YEAR31 DECEMBER 2017 31 DECEMBER 2016
$’000 $’000Underlying 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
25MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
D2 INCOME TAX EXPENSEIncome 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 PAYMENTSThis note provides an update on the Long Term Incentive Plan that was introduced in H1FY2016.
KEEPING IT SIMPLEThe 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
26 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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 PERIODOn 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 LIABILITIESCosts 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.
27MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
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) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
(ii) 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 Kerry Robert East Director Director
Gold Coast 14 February 2018
Directors’ declaration
28 MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
Independent auditor's review report to the members of Mantra Group Limited
Report on the Half-Year Financial ReportWe have reviewed the accompanying half-year financial report of Mantra Group Limited (the Company), which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, selected explanatory notes and the directors' declaration for Mantra Group Limited. The consolidated entity comprises the Company and the entities it controlled from time to time during the half-year.
Directors' responsibility for the half-year financial reportThe directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error.
Auditor's responsibilityOur responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Australian Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Mantra Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
IndependenceIn conducting our review, we have complied with the independence requirements of the Corporations Act2001.
PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650 Sydney NSW 2001T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.auLevel 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
29MANTRA GROUP INTERIM REPORT 31 DECEMBER 2017
ConclusionBased on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Mantra Group Limited is not in accordance with the Corporations Act 2001 including:
1. giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 andof its performance for the half-year ended on that date;
2. complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.
Matters relating to the electronic presentation of the reviewed half-year financial reportThis review report relates to the half-year financial report of the Company for the half-year ended 31 December 2017 included on Mantra Group Limited’s web site. The Company’s directors are responsible for the integrity of the Mantra Group Limited web site. We have not been engaged to report on the integrity of this web site. The review report refers only to the statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the reviewed half-year financial report to confirm the information included in the reviewed half-year financial report presented on this web site.
PricewaterhouseCoopers
Kristin StubbinsPartner
Sydney14 February 2018