2010 AnnuA l RepoRt Invercargill Licensing Trust | ILT Foundation Annual General Meeting Elmwood Garden | 7 September 2010, 7.30pm 2010 Highlights Invercargill Licensing Trust | ILT Foundation at a glance Photo courtesy of The Southland Times • $10.428 million in grants returned to our community - $52 million in the last five years. • Managing the business through a full year of economic recession – consolidated (group) after-tax profit, before grants, was $11.223 million – down 3.8% on last year, but a very satisfactory result. • Invercargill Licensing Trust (Parent) after-tax profit, before grants, was 3.4% down on last year’s performance. • The ILT Foundation, for the 2008/09 year, returned the highest proportion of gaming income in grants to its community than any Photo courtesy of The Southland Times other gaming society in NZ. With the ratio from this past year exceeding the previous year’s level, it is very likely that we will have again achieved this notable position. The ILT Foundation profit, before grants, was down 16% on last year. • Our longstanding policy of re-investing in the Trust’s businesses continued in earnest throughout the year. Over $7 million was invested into several upgrades and new developments. • Planning for a rebuild of the Northern Tavern was completed by year end. Concept planning for a new inner city hotel as well as a new development at our Waikiwi Tavern site commenced. Greg Mulvey, General Manager Our vision For Invercargill to grow and develop into the best place to live, work and play. 2 Invercargill Licensing Trust | ILT Foundation Review Of Your Trusts for the year ended 31 March 2010 Overview Consolidated Financial Performance As we review the 2009/2010 financial year, The consolidated net after-tax profit, before grants, is $11.223 million. This represents a a host of achievements feature despite decrease of 3.8% on last year’s result of $11.663 million. challenges arising from a tough economic climate – an accomplishment we are The consolidated group consists of the Invercargill Licensing Trust, the ILT Foundation and justifiably proud of. the equity accounted value of the Invercargill Licensing Trust’s investment in DB South Island Brewery Ltd. The net after-tax profit, before grants, of the group is: Managing the full impact of the economic recession has proved testing but the solid profit performance produced met our 2010 2009 expectations and left the Trusts in a very sound financial position. Invercargill Licensing Trust (Parent) $5,504,000 $5,695,000 For the fifth consecutive year, total grants Change in value of associated company $486,000 ($297,000) have exceeded $10 million and we have ILT Foundation $5,233,000 $6,265,000 been at the forefront of initiating valuable community projects which advance our Consolidated (Group) $11,223,000 $11,663,000 vision of helping Invercargill develop into the best place in New Zealand to live, work and play. Total grants for the year were $10.428 million and compare to last year’s record level The Invercargill Licensing Trust’s of $10.767 million. Total grants allocated in the last five years now stand at $52 million, commitment to continually re-invest in undoubtedly making a real difference in our community. it’s businesses by undertaking major developments also proved successful. To ensure we meet the expectations of our customers, existing establishments were revamped and a new inner city venture, Barluca Pizza Kitchen and Club, was opened in April 2010. ‘We’re driven by a determination to not Looking to the future, we took an active only meet, but exceed the expectations interest and played our part in making of our community’ submissions to the Law Commission tasked with reviewing the sale of liquor in New Zealand and making recommendations for - Alan Dennis, President change. 3 Invercargill Licensing Trust The after-tax net profit for the year, before grants, is $5,504,000, down 3.4% on last year’s result of $5,695,000. The pre-tax operating profit is $7,086,000, up fractionally on last year but it had the advantage of a reduced level of impairment losses to property as well as gains from unrealised revaluation of investments compared to the 2009 financial year. The Trust’s underlying pre-tax operating profit prior to the inclusion of those items was down 9.6% on last year’s result and reflected the full impact of the economic recession which existed throughout the year. Up slightly on budget, this financial performance Executive Management Team. Back: Greg McElhinney, Neil Affleck, Terry Laidlaw and Gary Muir. is considered a very satisfactory one given the Front: Greg Mulvey. demanding economic climate the Trust had to into 2011 with $5.3 million budgeted. Most of the was well advanced with the new premises operate in. The recession is expected to continue expenditure relates to the completion of the new expected to open in September 2010. Designed throughout the 2010/11 financial year. Southland Tavern and commencement of the to meet the expectations of our patrons, the Major factors influencing this result were: planned Northern Tavern redevelopment. new tavern features a dedicated restaurant facility and highlights our commitment to the • Total sales decreased by $660,000 or 0.8%. Despite this high level of capital work, we are future of South City. Lower sales were recorded in our on-premise budgeting to retain our substantial cash reserves businesses but these were partially offset by at similar levels to those on hand at the balance • Kelvin Hotel: Following a major an increase in off-premise sales. date. redevelopment, the stylish Level One Restaurant was officially opened in November • Income from our investments decreased 2009. Extensive work continued to extend due to lower interest rates received on our the theme through to the bar area, resulting short-term investments and a lower dividend Investing in the in a high quality restaurant/bar facility which received from our associate company. we are confident will prove popular with both future hotel guests and locals alike. • Operating expenses decreased by $411,000 or The continually evolving nature of the hospitality 1.5%. The reduction in cost was a very good • Avenal Homestead Tavern – Brewer’s industry – and the expectations of its patrons – result, necessary to offset the lower sales and Elbow: A complete refurbishment and reinforces the importance of our long-standing therefore gross profit contribution from our extension of this popular bar was finished policy of reinvesting in our individual businesses. various businesses. during the year and has been met favourably We’re unashamedly proud of all our ventures by its many patrons. • While the operating profit is very similar to last and dedicated to ensuring they remain relevant year’s, an increase in provision for taxation • Waxy O’Shea’s Irish Pub: Relocating the by injecting significant capital expenditure into gaming room at this inner city establishment by $209,000 is the main reason our after- their development and refurbishment – to a level will enable the creation of a function room tax profit decreased to $5,504,000 (last year unlikely to be matched anywhere in New Zealand. $5,695,000). and, by balance date, the majority of work was During the past year we invested over $7 million already completed. The popular pub will now • Trust businesses were affected to some into upgrades and developments, the highlights have an additional feature to offer its many degree by the high level of development and of which included: patrons. refurbishment work completed during the year, including three major projects – the Ascot • Ascot Park Hotel: A fourth wing of • Balmoral Lodge Motel: A complete revamp Park Hotel accommodation extension, the accommodation was completed in April 2010. of several more rooms at this successful motel development of Barluca Pizza Kitchen and Club The 20-room expansion comprises a mix of was completed during the year – the result of and partial construction of the new Southland apartment-style and studio rooms and adds to an on-going programme to upgrade all motel Tavern. In addition, we refurbished six other the flexibility of the hotel, which can now offer rooms to ensure their status as a `top-of-the- businesses which created minor disruption to a wider range of facilities for guests. range’ accommodation destination is retained. trading during the year but also provided some • Barluca Pizza Kitchen and Club: Since Extensive planning for the demolition and benefit when work was completed. opening in April 2010, our new inner city pizza subsequent rebuild of our Trust’s iconic Northern The Trust’s balance sheet remains very strong and entertainment bar has been extremely Tavern was completed. A time consuming with a minimal level of term debt. Our total well received by its many patrons. With its process, we consulted widely with patrons to assets are now $77.8 million. contemporary design, this high quality café ensure we `get it right’. We anticipate letting a and bar is a welcome addition to the city’s contract to rebuild the Northern Tavern on the From our after-tax profit of $5,504,000 we have hospitality industry. existing site in the new year. The main objective allocated grants of $3,377,000, resulting in a net of this major reinvestment project is to give the increase in our equity of $2,127,000. Our total • Southland Tavern: Demolition of the former business optimal chance of success for the next equity now equals $66.5 million. Southland Tavern during the year signalled 20 years and beyond. the start of construction on our latest venture. Over $7 million was invested into our development Temporary premises were established in the We have also commenced concept planning and refurbishment programme during the year – former tavern bottle store to cater for our loyal work for a new inner city hotel, along with a new a significant commitment which is set to continue customers.