It’s business as usual and business is good at Australia’s largest pub landlord, which has just posted a rosy outlook and profit lift as it continues to “focus on quality”.
ALE owns the freeholds to 86 properties, exclusively leased to the country’s largest publican, Australian Leisure & Hospitality (ALH). The pair have largely pioneered the freehold/leasehold partnership model in this country, sometimes copied but with mixed results.
Speaking with PubTIC, CEO of the ASX-listed ALE, Andrew Wilkinson, says it’s an simple and aligned business model that they will continue to pursue.
“The market has watched it worked well for us, and increasingly it has worked for others too,” replied Wilkinson.
“ALE has progressed in a positive way by sticking with the high-quality end of industry, and to be frank ALH’s operating commitment and professionalism has seen both ALH and ALE succeed. Accordingly we have and continue to support ALH’s initiatives to improve the properties to optimise their operating profit and in turn ALE’s medium and longer term rental profile.”
“We keep to a simple recipe for returns, and keep risks well away from the front door.”
The company was last year named top A-REIT (Real Estate Investment Trust) by corporate finance advisor BDO. A dollar invested with ALE in 2003 would now be worth $11.33 – representing an average compounding annual return of around 22% over each of the past 12 years.”
Agreeing with suggestions by agents that ALH properties are in fact an “asset class of their own” Wilkinson says while they continue to actively pursue opportunities, their methodology will not change.
“Our sole focus continues to be on ALH as we regard them as the best in class.”
“We believe that a focus on good quality properties, triple net leases, investment grade tenants and a sound Board and management team has and we believe will continue to be the recipe to generate the right risk and return profile. ”
“Our hope is that the rest of the industry will also focus on quality, and if so we should all see the benefits.”
ALE reported key results for the second-half of:
- Property valuation increase of 5.93% to $953.9 million
- Continued benefit of falling interest rates
- An average cash rate locked in at 4.35%
- Gearing reduced from 48.0 to 45.7%
- Distributable profit of $14.8 million
- Distribution of 9.90 cps – up 17.86% on same corresponding period
- Full year guidance of 20.00+ cps on track
- Gearing restored to target range through distribution guidance, with subsequent distributions expected to be line with CPI