Vacation hotels loss $936,888

Press, 13 November 1982, Page 21

Vacation hotels loss $936,888

Vacation Hotels. Ltd. incurred a loss of $936,888 for the six months ended September 30. compared with a loss of $219,833 for the last published 17-months financial statement, the directors reported yesterday. An absence of structural change within Vacation Hotels w'ould make it unrealistic to expect it to pav an ordinary dividend in the foreseeable future, they reported to the Stock Exchange. They told the exchange that the company had been severely hit by the continuing decline in hotel-staying tourists.

In their report the directors said: “After the change in the company's financial year-end. from October 31 to March 31. the statement of group revenue for the six months to September 30. 1982. reflects the low season results, and consequently these results are not comparable with the last published seventeen months financial statement which included two peak seasons. "The company, over the reported period, has been severely hit by the continuing decline in hotel staying tourists, coupled with the

world-wide . recessionaryeconomic climate, a past lack of planning for overseas marketing, and the current excess of accommodation available at many of our major tourist resorts and cities.

“It is expected that these conditions will continue, and in the absence of structural change within the company, will adversely affect its trading results to a degree where it would be unrealistic to expect an ordinary dividend for the current financial year, or indeed in the foreseeable future.

“The necessity to complete the current Rotorua rebuilding programme has put a severe strain on the company’s liquidity. The delay in opening by some twelve months, consequent on the essential need to upgrade the original design concept to attract the appropriate clientele, has resulted in a substantial increase in the cost of the project. Discussions are taking place with the Development Finance Corporation and other parties relating to these cost increases.

“However, it is clear that the likely high servicing cost

of the additional borrowed funds cannot be met from the company's current anticipated cash flow after allowing for other loan repayments.

"The refurbishing of the Intercontinental Hotel. Auckland and the Vacation Hotel. Christchurch, is • imperative in order to bring both of these hotels up to an acceptable international standard and to maintain continuing representation for the chain in those critical points of entry and departure. “Estimated refurbishing costs are $11.5 million and your directors are of the opinion that such funds should be raised from an equity source, rather than from borrowed funds, because of the company's present inability to service interest on such funds. "If the company is to survive as a viable international hotel group, a major restructuring will be required. together with a substantial injection of further equity capital.

“These matters are now under urgent discussion, and your directors will be reporting further to shareholders very soon."