Redcape Hotel Group has posted a statutory net profit of $28.5m, up 153.6 per cent on last year’s COVID-impacted result, and has also put forward a proposal to delist from the ASX.
Operating EBITDA was up 29.6 per cent to $74.1m, which the group said reflected the strong return to trading and disciplined cost management. Redcape further strengthened its balance sheet through an expanded debt facility on longer tenure, which it said will provide greater flexibility to pursue its growth strategy and optimise acquisition opportunities.
Redcape was able to grow market share and stay connected with communities by creating bespoke community experiences and stronger engagement with its staff and customers. According to its results statement, central to this has been Redcape’s Publinc Communities program which has now been implemented across 34 of the group’s 36 pubs.
Redcape CEO Dan Brady said, “Redcape performed exceptionally well through FY21 driven by our focus on community, investing in our leading-edge digital platform to enhance customer engagement and our ongoing commitment to staff. We believe this positions us well for the long-term once we return to more normal operating conditions.
“We thrived during FY21 because of our agility, the variety of strategic levers we had available and our disciplined approach to returning to strategy. We made some bold decisions and with valuable learnings from the lockdowns in FY20 have responded through a series of initiatives. Along with the flexibility that comes with owning our assets, these will ensure we can not only withstand this new lockdown but use it to re-emerge more quickly on the other side.”
In detailing its proposal for delisting, Redcape said that despite consistent growth in earnings and distributions its securities have continued to trade at a discount to Directors NAV. Following a strategic review the Board is putting forward the proposal “to more closely align the realisable value of Redcape Securities with the fundamental value of the business”.
The Proposal, if implemented, would provide optionality for securityholders to either remain invested in Redcape as an open-ended unlisted fund or realise their investment through an off-market buy-back at $1.15 per security (Buy-Back Price). The Buy-Back would occur prior to delisting and have a maximum size of $247.3 million. This is sufficiently sized to allow liquidity with respect to at least 60% of Redcape securities, excluding those owned by MA Financial Group and its affiliates that have indicated they will not participate in the Buy-Back.
Independent Non-Executive Chairman of Redcape, Nick Collishaw, said, “The Board Committee, as recommended by the Independent Board Committee has conducted a rigorous review of the Proposal over many months including consideration of alternatives and with the support of leading financial and legal advisers. We believe this Proposal is the most attractive path to maximizing value for Redcape Securityholders.”
The Proposal is subject to a number of conditions including Redcape Securityholders passing a special resolution to approve the Proposal and various related resolutions, and regulatory approvals. A meeting of Redcape Securityholders will be held on Friday 10 September 2021 at 11:00am Sydney time to approve the Proposal.
Brady added: “We have high-quality community hotels and are on the right strategic path to grow market share and return to quarterly distributions as quickly as possible. We believe an open-ended unlisted fund is the right environment for Redcape, allowing for continued growth through acquisitions at a valuation closer to parity with our assets, while providing securityholders with an attractive yield. We are supportive of and see the Proposal as a win-win option for our securityholders and remain committed to delivering long-term value.”