Elanor Investors Group discusses H1 2016 results


Transcription of Discussion by Elanor Investors Group (ASX:ENN) CEO, Glenn Willis
Elanor Investors Group (ASX:ENN) is a listed funds management business, we listed the business in July 2014. We listed the business, because we believed the listed structure would enable us to achieve our growth ambitions, for the business more effectively. We have a strong focus on real estate; we have a strong focus on hotels, tourism and leisure. And we have a strong focus on operating businesses as well, that have substantial real estate backing.
So really is an investment philosophy. We’re focused on investing in assets that deliver strong cash flows, that deliver the ability to value add to the investments. And really the areas of focus for the business are a function of being able to find investment opportunities, in those sectors. The key highlight was the growth in core earnings. Core earnings were $5.7 million for the period and that’s an increase of over 20 per cent, against the prior corresponding period.
We’re pleased with that growth and earnings. We think it is one that reflects the strength of our operating platform and more importantly, the strength of our people to deliver strong results for our unit holders. The distribution for the half was 7.3 cents per security, that’s an increase of 40 per cent over the prior corresponding period. And our payout ratio was 90 per cent, which has been the consistent payout ratio since we’ve been listed.
All our operating divisions performed well. The hotels, tourism and leisure division achieved an EBITDA of $5.1 million, which was an increase of over 30 per cent on the prior corresponding period. It is a key area of focus for us and was a pleasing result. The funds and management division also performed well, delivering an EBITDA of $4.1 million for the period. That’s a very substantial, over 200 per cent increase in the prior corresponding period, the prior corresponding period being coming off a low base. The funds management area is a key focus for the business to grow funds under management, and the fee streams from that division.
The special situations investment division comprises the John Cootes Furniture business. That achieved an EBITDA of $700,000 for the period, which is comparable to the prior corresponding period. That result was adversely affected by a fire, which we’ve tabled to the market and we expect that division to come back well, post the fire at the warehouse. This has been a key strategic objective for the Group, pretty much since listing back in July 2014. As I said, it’s a key area of focus for the Group, the hotels and accommodation sector. Two of the assets that we’ve held on balance sheet, being the Cradle Mountain Lodge asset and the Mantra Wollongong asset, will seed the new Fund. And there will be a further four assets that are being acquired into the new Fund.
We’re very excited about this Fund, it’s starting with a gross asset value of about $95 million. We think there’s a very good opportunity to grow the Fund. And the Fund has a forecast three-year distribution yield of 13 per cent, which is a very strong distribution yield. We’re confident about achieving a very strong total return for that Fund, as well. So it’s pleasing to see that it’s the first of our Funds that have been seeded with assets that we’ve held on balance sheet.
When we acquired the John Cootes Furniture business in July 2014, it really was a function of buying a strong cash flow generating business. But more importantly, the acquisition was substantially real estate, and there’re four real estate sites in that acquisition. The key site being the John Cootes Merrylands site, it’s 26,000 square metres of land. Over the past 18 months, we’ve set about having that land rezoned.

That got approval at Council in December, it’s currently going through the gateway process. We’re very positive about the ability to increase the value of that asset. In terms of plans for the site, once it’s gone through the gateway process, we’ll then look at the various alternatives we have and we’ll make a decision from there.
We’ve stated that we believe we can achieve continued growth and core earnings, throughout 2016. We have a very solid pipeline of investment opportunities at present. We’re very encouraged by those opportunities. And with our listed platform, with the strength of our team, we’re positive about continued growth over 2016, but more importantly, over the medium to longer term.