Redcape Hotel Group (ASX:RDC) - owner & operator


by Anna Napoli

Redcape Hotel Group Limited (ASX:RDC) CEO, Dan Brady discusses FY19 results, company strategy and creating pub venues that become the hub of local communities.

Anna Napoli: Welcome to the Finance News Network. I'm Anna Napoli, and joining me now from Redcape Hotel Group (ASX:RDC) is CEO, Dan Brady. Dan, welcome to FNN.

Daniel Brady: Thank you very much. It's great to be here.

Anna Napoli: First up, could you start with an introduction to the company?

Daniel Brady: Sure. Well, Redcape Hotel Group (ASX:RDC) is 32 hotels across Queensland and New South Wales. These are localised pubs, the local down the road. We're located in suburban areas, predominantly, predominantly Western Suburbs, Sydney, and to that end we have these offerings that sit in around food and beverage, retail, liquor and gaming, really tying in what we do as part of a hotel, local pub operation, to its local community.

Anna Napoli: Now to your FY19 results. What were some of the highlights?

Daniel Brady: So in the F19 year, Redcape was highly cash generative business, generating $36 million worth of operating cashflow. It was able to achieve like-for-like revenue growth north of CPI, which really highlighted the fact that it's a robust business in what was a pretty wavering consumer market at the time. We were able to hit 08.8 cents per security distributable income result, which is what we highlighted in the PDS in November last year, as well as the distributions of 8.75 cents per security. It was a very solid year for our first year of listing.

Anna Napoli: Very good. Now, turning to your portfolio, can you tell us more, starting with the property portfolio?

Daniel Brady: Important to understand with Redcape is that we do own our property, so we own the business and the property, which is unique for an operating business. We have, out of our 32 hotels, we have a five-year pipeline of planned refurbishments.

When we're thinking about refurbishments, we're thinking about the fact that we will do a 20 per cent return on any capital growth capital deployed. Last year, we had around 25-odd million dollars pushed out as growth capital, and that's a pipeline that we can look forward to deploying out each particular year.

Also, with the fact that we do own the land and the business, gives us great ability to be able to view our pubs as to whether or not they're reached their potential for what we see as being growth out of them, and if we do see the fact that venues have reached their potential, we're able to make the decision to divest those hotels, and likewise, utilise that capital to acquire further hotels.

Anna Napoli: Thanks, Dan. And can you tell us a bit more about your strategy and how you create value for shareholders?

Daniel Brady: The investment in the platform or the enhancement of the businesses is a great feature of how we grow our earnings profile. So we have a sophisticated platform in regards to how we think about not only just our management of these hotels, but how we interact with customers. So our technology and how we manage our customers, and create offers, and create bespoke offers for them, is something that continues to evolve and we're seeing a lot of success with that.

We also deploy capital to those refurbishments that I spoke to earlier. That can really feed to the growth curve going forward, as well as, also, the latent value in land that we have in and around our venues, where we have surplus land that we can look to do joint ventures in with developers, or, indeed, just sell that surplus land off. So they're the buckets we think about in relation to how we grow and go forward in the venues.

Anna Napoli: Sounds like there's lots of opportunity there. Last question now, Dan, where would you like to see the company 12 months from now?

Daniel Brady: I think, over the course of this year, we're seeing strong trading, and that's in line with our forecast that we provided at the full-year, to say that we would have a nine cents per security or greater result, and that's well and truly on track. We'd also be saying that our acquisitions and divestments program would also look to, again, maybe divest some hotels and acquire some within the period to help grow the overall size of the portfolio and the earnings profile.

Anna Napoli: Dan Brady, thank you for the update.

Daniel Brady: Thank you.