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DIRECTORS’ REPORT CONTINUED

Net profit after individually significant items and income tax was $82,195,000 and compares to a profit of $59,441,000 in the
previous year, an increase of 38.3%. An analysis of the last five years is outlined below:

AIFRS Previous AGAAP
2007 2006 2005 2004 2003
Total operating revenue and other income ($’000)
Net profit/(loss)* ($’000)
Normalised operating profit^ ($’000)
Basic earnings per share (cents)
Dividends declared ($’000)
Dividends per share (cents)
628,905
82,195
81,914
64.6
35,848
28.0
614,612
59,441
73,693
47.3
30,261
24.0
598,976
45,651
64,949
36.4
23,268
18.5
481,497 369,048
(31,168) 30,286
59,349 42,357
(25.0) 24.0
16,226 14,354
13.0 11.5

* Net profit/(loss) after individually significant and extraordinary items, net finance costs, minority interests and income tax.
^ Net profit before individually significant and extraordinary items, minority interests and income tax.
Investments

The Group acquired property, plant
and equipment totalling $63,026,000
during the year. This figure excludes
capital expenditure incurred through
partnerships and joint venture activities.
The acquisitions were primarily
attributable to the purchase of hotel
properties at Cronulla and Bankstown,
the expansion of the existing cinema
circuits, refurbishment requirements
for the cinemas, hotels and resorts,
the infrastructure and operational
requirements for the Thredbo Alpine
Resort and ongoing reporting system
upgrades to ensure that the Group’s
IT facilities are keeping pace with
technological advances.

Capital structure

During the year, 1,592,200 ordinary
shares were issued as a result of
employees exercising options granted
under the Management Share Option
Plan. Funds raised from the exercise of
these ordinary share options amounted
to $4,827,000. In addition, 345,422
performance shares were issued to
employees under the Executive
Performance Share Plan.

Borrowings decreased by $11,818,000
during the year. The net debt to book
equity ratio has decreased to 34% as
at 30 June 2007 (2006: 40%).

Treasury policy

The Group’s treasury function is
responsible for managing interest rate
and currency risks and finance facilities.
The treasury department operates within
policies established by the Board. The
Group manages interest rate risk in
accordance with a Board approved
policy covering the types of instruments
that can be used, and the range of
protection and duration that instruments
can be taken out for. Maturities of

instruments to hedge interest rate risk
are up to a maximum of five years.
Interest rate swap contracts are generally
used to swap a portion of long term
borrowings at floating rates into fixed
rates. The Group currently hedges
interest bearing debt in A$, €
and
NZ$ with cover at 30 June 2007
extending to December 2010 in A$,
June 2010 in €
and March 2011 in
NZ$. At 30 June 2007, the Group had
56% (2006: 66%) of debt hedged at
an average effective rate of 5.5% per
annum (2006: 5.3% per annum).

The Group enters into a small number of
forward contracts to hedge a proportion
of anticipated purchase and sales
commitments denominated in foreign
currencies, principally US dollars.

Liquidity and funding

On 22 June 2007, the Group entered
into new bank debt facilities, concurrent
with the cancellation of its old
syndicated multi-currency loan
facility and NZ$ facility.

The new facilities comprise of:

•
A$160,000,000 of revolving multi-
currency loan facilities, maturing
on 10 July 2012;
•
A$70,000,000 of cash advance
facilities which are rolling 364-day
facilities with a capacity to term out
amounts drawn to a maturity date
of 10 July 2012; and
•
A$38,750,000 of credit support
facilities (for the issue of letters
of credit and bank guarantees),
maturing on 10 July 2012.
Under the revolving multi-currency
facilities amounts can be borrowed in
Australian dollars, New Zealand dollars,
euro or United States dollars.

In addition to the above facilities, the
Group has a total of A$5,050,000
in overdraft limits to support its
transactional banking facilities.
All facilities are secured by specific
property mortgages over a number
of the Group’s properties and are
supported by interlocking guarantees
by defined Group entities.

Additionally, a wholly-owned subsidiary
of the Group has a working capital
and bank guarantee facility totalling
€9,920,000 (supported by a letter
of credit and bank guarantees drawn
under the credit support facility in
Australia), and a further €5,000,000
working capital and bank guarantee
facility which is supported by
the Company.

Use of funds under the Group’s main
bank facilities is limited by certain
undertakings; however, it is considered
that the Group has sufficient bank
facilities available to meet any
unforeseen investment requirements
and seasonal fluctuations in working
capital requirements.

Cash flows from operations

Operating net cash inflows decreased
from $70,922,000 in the year to
30 June 2006 to $63,051,000 in the
year to 30 June 2007. This decrease
was mostly attributable to working
capital movements.

Impact of legislation and
other external requirements

There were no changes in environmental
or other legislative requirements during
the year that have significantly impacted
the results of operations of the Group.

REVIEW OF OPERATIONS
BY DIVISION

The Managing Director’s review of
operations by division is set out
on pages 15 to 19.

STRATEGIC PLANS BY
DIVISION

The Group’s strategic plan, which
includes future expansion, will depend
on industry, economic and political
conditions, the potential impact of global
events, the future financial performance
and available capital, the competitive
environment, evolving customer needs
and trends, and the availability of
attractive opportunities. It is likely that
the Group’s strategies will continue to
evolve and change in response to these
and other factors, and there can be no
absolute assurance that these current
strategies, as detailed below, will
be achieved.

ENTERTAINMENT

The strategic plans for Entertainment
are applicable to both the domestic
and international cinema businesses.

Cinema Exhibition —
Domestic and International

Enhancing the customer experience

Whilst the Group has no control over
the general audience appeal of available
films, providing consumers with a
demonstrably superior experience
to that which can be achieved in the
home, is a central strategic platform.
To provide this enhanced cinema
experience, the Group will pursue
the following strategies:

•
expansion of the Gold Class cinema
concept to certain cinema locations
within the Australian domestic circuit;
•
expansion of the G-Max cinema
concept which provides the ultimate
big screen cinema experience
through larger screens and seats
than a traditional auditorium;
•
the refurbishment of existing
cinemas to improve the customer
experience and maximise food,
beverage and other revenue
opportunities; and
•
enhanced customer communication
and ticketing through online assets.
Maximising returns from
existing locations

The cinema exhibition markets in
Australia, and those international
locations in which the Group currently
operates, are considered to be mature
markets with limited growth and
expansion capacity. The Group
anticipates achieving growth primarily
through both higher yield per customer
and cost improvements and by adding
locations as opportunities (population
growth and/or urban development)
are identified.

Rationalising underperforming
cinema sites

The Group will continue to pursue the
policy of rationalising underperforming
cinema sites. All sites, in all territories,
are reviewed periodically and, where it
is assessed that there is limited profit
or potential for performance turnaround,
an exit strategy is formulated. Where
the site (or group of sites) is subject to
long term leases, the exit strategy may
be over a protracted period of time.

Industry developments

The Group believes that there are certain
current issues pertaining to the industry
that have the capacity to impact the
strategic plans and future direction of
the cinema operations. The Group will
continue to monitor developments
in relation to the following issues:

•
alternative film delivery methods and
the rise in popularity of other forms
of entertainment (including DVD
ownership and the increase of
home entertainment systems);
•
shortening of the release window
of film to DVD;
•
increase in capital expenditure
resulting from the development
of digital technologies for film
exhibition; and
•
increase in unauthorised recording
(piracy) of audio and visual
recordings for commercial sale.
HOSPITALITY AND LEISURE

Rydges Hotels and Resorts

Enhancing the guest experience

The Group will continue to provide hotel
guests with quality three to four star
accommodation that consistently delivers
a product and service that meets or
exceeds guest expectations. To provide
this the Group will continue to pursue
the following strategies including:

•
the revitalisation of the hotel
guest room product and
breakfast concepts;
•
the continued expansion of, and
improvement in, the online booking
capabilities for guests including the
launch of the Rydges Priority Guest
Loyalty Program; and
•
the continued improvement of
the guest experience by ensuring
Group policies encourage, train and
support staff to ensure appropriate
service delivery.
Increasing the number of hotel rooms

The Group will continue to seek
opportunities for future growth
through the gaining of new hotel
management agreements.

Maximising returns from
existing locations

The Group anticipates achieving
continuing improvements in results
through growth in average room rate
and revpar.

Thredbo Alpine Resort

Premier holiday destination

The key strategy for the Thredbo Alpine
Resort is to maintain the facility as
one of the premier Australian holiday
destinations. This strategy includes:

•
continuing to ensure the popularity,
high-quality and ambience of the
winter-time resort facility;
•
expanding snow making automation
to minimise risks in poor seasons;
•
increasing the summer and shoulder
visitations by both leisure and
conference guests; and
•
ensuring that the environmental
integrity of the resort is maintained
and, where possible, improved.
Maximising returns from existing facility

The Group anticipates that the resort
will achieve growth through shoulder
periods, summer revenue and cost
improvements, increased visitation
and increased occupancy rates.