Pubs owner ALE lifts profit

The positive result was largely pinned on a rise in the rents paid by Bruce Mathieson-backed ALH Group.

ALE is tied to the Woolworths and Bruce Mathieson-backed ALH Group.

Pubs owner ALE Property Group has reported a 1.7 per cent rise in profit for the 2016 financial year, with its yearly distribution to shareholders matching its guidance.

The Woolworths and Bruce Mathieson-linked property trust said its distributable profit had edged up to $29.6 million, from $29.1m last year, with its payout jumping 18.7 per cent to 20 cents per share.

The distribution was in line with the forecasts outlined by the company at its AGM last year.

ALE is tied to the Woolworths and Bruce Mathieson-backed ALH Group, with the latter leasing all of ALE’s properties.

ALH, the nation’s largest pubs operator, has recently come under the spotlight amid talk Woolworths may consider a divestment of its 75 per cent stake in order to maintain its credit rating amid a trying period that has seen the retailer hit by writedowns worth over $4 billion this year.

However, ALE would be a potential blocker of any deal, reiterating today that any significant change in control at ALH would need its support.

“A change in more than 20 per cent of the ownership of ALH requires ALE’s consent based on its reasonable opinion that ALH will continue to have the financial capacity, business skills, other resources and authorisations to enable it to conduct the permitted operating uses profitably and perform all of its the lease obligations,” the group noted.

The exception to this requirement would be if ALH becomes a publically listed company through a possible Woolworths demerger, with a spin-off consequently seen as the most likely avenue for a potential Woolworths exit.

In the meantime, ALE’s profit rise was largely pinned on a rise in the rents paid by ALH that raised revenues by $1m to $56.2m.

“Property income increased given the annual CPI based rental escalations,” the group said.

“Borrowing expenses were lower due to the reduced credit margins from 2014 refinancing having their full impact, [while] management expenses were higher than the prior year due to a number of items including the response to Caledonia’s indicative proposal.”

The “Caledonia proposal” relates to a $3.95 a share takeover offer from Caledonia Investments last year that was rebuffed by the board.

The company said it had not held talks with Caledonia since the offer was retracted in November.

ALE’s shares have traded above the offer price for much of 2016 and rose 0.46 per cent to $4.34 on the profit result today.

The company also announced a 10 per cent lift in its property valuations, with its real estate now valued at $990.5m.

ALE said it expects to deliver a rise in distributions to shareholders for the coming year that matches or betters the nation’s inflation rate.