Vacation offers warning

Press, 27 February 1981, Page 8

Vacation offers warning

The shareholders of Vacation Hotels, Ltd, have been warned by the chairman (Mr J. T. Sheffield) that the 51 per cent interest in the company hgld by Fletcher group and its superannuate fund may be sold. May, 1979, the Fletchefygroup together with its superannuation fund had held a substantial interest in Vacation which was increased to 51 per cent, in 1980, with the consent of the Examiner of Commercial Practices, said Mr Sheffield in the annual report. “As has been- reported, in the press, Fletcher is considering the sale of certain of its non-profit mainstream investments, including its share holding in Vacation. “It is possible that if these shares are purchased by one party , only, the control of Vacation would change hands. “While it is most unlikely that any sale would detrimentally affect- the interests of public shareholders they should be aware of the.situation,” he said.

Mr Sheffield also revealed that merger talks had been held between Vacation and

Travelodge N.Z., Ltd, but were abandoned when it was decided a joint operation would not benefit Vacation. It was announced lasi week — possibly because of the failed talks with Vacation — that Rothmans Industries Ltd, was buying into Travelodge and an existing shareholder. The Mount Cook Group Ltd, was increasing its investment in the hotel company. “During . the year there were discussions with Travelodge on some rationalisation of the two companies activities bv way of a full or partial merger or management.

“However, after careful examination by your board no action was taken as it was felt that the proposals were not in the interest of your company.” It was reported last week that the shareholding of Travelodge had changed after the sale of stakes bj two shareholders, Lion Breweries and Fletcher Trust.

There were originally four equal shareholders in the company: The Mount Cook Group, Southern Pacific

Hotels (the Travelodge parent), Lion and Fletcher. The reorganisation has given Mount Cook, Rothmans and Southern Pacific equal 33 per cent shareholdings.

Vacation benefited from severe! windfall during the year under review, Mr Sheffield said. The increase in hotel trading profits was mainly from increased tariffs and improved efficiencies rather than from increased occupancies and the completion of a new wing at the Logan Park Motel in Auckland resulted in “substantial tax concessions from first year depreciation allowances.” ’ The company also increased its net profit from tax concessions arising from increased tourist promotion expenditure and these factors “resulted in a sharply reduced tax provision.”

Results also included a loss of profits insurance payment after the 1978 Queenstown hotel fire.

Costs were continuing to rise at rates which would have been considered “alarming” a few years ago “but which we have now

learned to live with,” he said. Vacation had noted “heartening signs” of an upturn in the number of tourists coining to New Zealand, with a re-awakening of Australian interest and a livening of the Japanese market.

Although the'limiting factor of tourist development was still the ability of the airlines to bring the passengers in, at reasonable prices, the position was improving and Vacation “continues to view the future of the tourist industry as a growth industry though it will continue to have its peaks and troughs.” As reported, the group ne< profit rose 44.1 per cent to $1,007,473 in the year to October 31 on. revenue 7 per cent higher at $16.5 million. The pre-tax net proift was up 27 per cent tc $1,053,373. Depreciation rose $37,484 to $650,881 but taxation fell $84,363 to $130,263.

The annual dividend rate has been raised from 7.5 c t< 8.5 c a share (13 per cent), 40 per cent of which will be tax-free. The dividend requires $477,750 and is covered 1.7 times after allowing for the preference dividend. The net current deficit fell $243,611 to $1,379,202. I