The demonstrable turn-around of listed pub group Lantern has been seen in the company’s end of financial year report.
Having announced plans to execute a formal ‘Transformation Plan’ (see below) at the end of 2015, the resulting changes to revenue and debt have brought significant upswings on the bottom line and a healthy dividend return to stakeholders.
The Plan has worked to first ‘stabilise’ and then ‘transform’ the company’s haemorrhaging financials, by reducing debt and by shedding its less lucrative assets in what has become one of the most rigorous divestment programs seen from a group in continued operation.
While there are future plans to begin growth again, the portfolio has shrunk to just six freehold going concern venues and one passive freehold in Perth. The remaining ‘core’ venues have greatly sharpened their focus on gaming in favour of dining and even beverage.
The stronger gaming focus sparked the ‘EGM replacement programme’ that has seen half of machines in the core venues replaced. This programme is slated to be complete by the end of this month, when 64 per cent of all machines will be new.
The new machines have driven increases in gaming revenue of 18.7 per cent across the core portfolio.
This has been the backbone of a 10.9 per cent growth in revenue in the core venues to $18.2 million, and a 38.8 per cent increase in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) to $4.9 million.
The recent sale of the Lawson Park Hotel, following the sale of the Courthouse Hotel to Pelathon, and news the sale of the Central Hotel is “underway” leaves the divestment program almost complete.
Lantern (ASX: LTN) reports these sales drew a premium of 14 per cent to book value at the end of 2015, and realised around $43 million in capital.
This has helped facilitate the completion of refinancing on the primary debt facility, and gross bank debt has reportedly been halved to approximately $40 million at the end of FY16.
In July LTN traded at a six-year high of 0.124 cents per security, which is a 103 per cent increase on its lowest 2015 price in October, and 265 per cent increase on its low of 0.03 cents in mid-2012.
Investors saw a return of 2c per security earlier this month, reflecting the new Board’s formalised “Distribution Policy” for Lantern, aiming for a payout ratio of 50-80 per cent of net profit, intended to “provide a return to security holders relative to profit”.
