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I am pleased to present to you an overview of the operations of
Amalgamated Holdings Limited and its controlled entities (the “Group”) for the
year ended 30 June 2004. For a detailed account of the activities of the Group
and a review of the Group’s performance for the year, I commend to you the
Managing Director's Review of Operations by Division contained within this Annual Report. |
This report is divided into:
Results
The Group operating profit before unusual and extraordinary items and
income tax was $59.3 million compared to $42.4 million in the previous year,
an increase of 40%. From this profit perspective, the 2004 financial year
has been an exceptional one. The outstanding result was driven by the recovery in the hotel and tourism
sectors, another strong ski season, continued growth in domestic cinema operations and a significant lift in the contribution from our 50% share in Roadshow Distributors Pty Ltd. The impact of unusual items was
significant and resulted in the Group reporting a net loss of $31.2 million compared to the prior year profit of $30.3 million. The total of unusual items was a net loss before income tax of $74.3 million and predominately related to two events on which I will comment briefly.
Major Events
The year saw two particular events, which have had and will have varying impacts on the earnings of the Group in the year under review and into the future. The most significant of the events was the acquisition, in December 2003, of the remaining 50% interest in Kieft & Kieft Filmtheater GmbH (“Kieft & Kieft”)
and the subsequent reassessment of our investment in Kieft & Kieft.
The decision to acquire the additional 50% in Kieft & Kieft was taken in order to better protect our existing investment. Most shareholders will be aware that the Group acquired 50% of Kieft & Kieft in January 1998. At that time, Kieft & Kieft operated 137 screens and the acquisition was anticipated to provide access to
extensive growth opportunities within the German market. Whilst Kieft & Kieft has expanded considerably since 1998 and now operates 394 screens, the deteriorating economic conditions within Germany, and the resulting impact on cinema visitations, necessitated a write-down of our interests in that group. The write-down, as announced to the market in May 2004, included an amount for goodwill and other intangibles of $65 million and $5.4 million for underperforming cinema sites and other provisions. This write-down was in addition to the $10.9 million in respect of underperforming sites that was booked in the half year to 31 December 2003.
Since moving to 100% ownership of Kieft & Kieft, there has been a restructure of the organisation and an enhanced focus on cost control. Management is confident that an improvement in the German economy, the availability of good film product and continued focus on cost control should contribute to improved results for Kieft & Kieft.
In March 2004, the Group disposed of its one-third shareholding in Val Morgan Holdings Pty Limited (“Val Morgan”). The Group first acquired its interest in Val Morgan in December 2002, the acquisition was approved by the Australian Competition and Consumer Commission (“ACCC”) subject to the undertaking that at least two of the acquiring exhibitors divest of their interest within 18 months. In March
2004, and in accordance with the ACCC undertaking, the Group announced the sale of its interest in Val Morgan. The profit on the sale was $8.9 million.
Corporate Governance and Board of Directors
The year 2004/05 marks the beginning of reporting under the corporate governance
guidelines as developed by the ASX Corporate Governance Council. The Group elected to early adopt these
guidelines and the Corporate Governance Statement was published in the 2003 Annual Report. The Corporate
Governance Statement has been reviewed during the year and the 2004 statement addresses the Group’s current position in relation to the guidelines developed by the Council. The Board will, as has always
been the case, endeavour to achieve the highest levels of accountability and transparency in all aspects of its reporting.
There were two retirements from the Board during the year. Messrs Adrian Lane and Graeme Herring resigned on
31 August 2003 and 17 June 2004 respectively. Both Directors made substantial contributions to the Company
during their tenure on the Board. In particular Mr Herring, as Chairman of the Audit Committee, bought great diligence to the Board’s deliberations and was a strong and willing advocate of good corporate governance. I extend, on behalf of the Board, appreciation for both Directors’ contributions and the best wishes to them in their retirement.
Ms Meredith Hellicar was welcomed to the Board on 18 September 2003. Given Ms Hellicar’s breadth of experience and skills as outlined in this Annual Report, we are already benefiting from her contribution to the Board’s deliberations.
During the year Mr Richard Parton, the Chief General Manager of Greater Union Film Division, retired. Mr Parton had been a long-serving contributor to the Company, having been General Manager of Birch Carroll & Coyle prior to his appointment in Sydney. The Group has appointed on 1 September, Mr Jim Collier as Managing Director, Entertainment. Prior to his appointment, Mr Collier was Chief Executive Officer of Restaurant Brands New Zealand Ltd and brings with him a vast experience in multi-unit retailing.
Dividends
Directors have declared a final dividend for the year of 7 cents per share on top of the 6 cents per share interim dividend that was paid on 18 March 2004. This makes a total dividend paid for the year
of 13 cents, compared to 11.5 cents paid in 2003 being an increase of 13%. In declaring the dividend, the Directors continue to be mindful of the current trading environment in which the Group
is operating, together with its ongoing cash requirements.
The Directors are continuing to abide by a dividend policy that will not only look after the short-term needs of shareholders and the Group, but also provide longer-term security of earnings.
The Future
The Board believes the Company is in a strong position at the commencement of the new financial year. Whilst the market segments in which the various businesses operate will, from time to time undergo
changes, the businesses comprising Amalgamated Holdings Limited are robust and, notwithstanding variable operating conditions and external factors, we believe shareholders can look forward to continued long-term earnings growth for the Group.
Alan G. Rydge
Chairman
Amalgamated Holding Limited
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