Conference Call with Mahindra Holidays Management and Analysts on Q4FY20 and Full Year Earnings and Outlook. Listen in to the full earnings transcript.
Call Participants: Mr. Kavinder Singh - Managing Director & CEO, Mrs. Akhila Balachandar - Chief Financial Officer, Mr Dhanraj Mulki - Company Secretary, Mr. Arun Nanda - Chairman
Introductory remarks from Kavinder Singh
A very warm welcome to our Q4FY20 and full year earnings call. Hope you and your family are healthy and staying safe during these uncertain and unprecedented times. I had requested Mr. Arun Nanda to join this investor's call and share his thoughts.
Highlights from Arun Nanda
Welcome to all my dear friends! I join Kavinder in his prayers that you, your families and all your near and dear ones remain safe and healthy during these difficult times. As I have been saying in my 70 years, I have not seen such a difficult time, but we hope and pray that this too shall pass. I just want to go back to June 11, 2019 when after a long time, I came and spoke to you at an investor conference at the Four Seasons Hotel and the reason for doing that was a big change in our accounting policy which had upset us all because we were allowed to account for only 4% of our profits of our turnover where majority of the sales of the cost had to be booked. That had affected our profits significantly but I had also projected that this is good news for the investor because it brings predictability of future earnings.
I am very happy to tell you that we had projected an income of Rs 344 crores and we are at Rs 346.7 crores. We had projected an ASF income of Rs 289.6 crores and we are Rs 291 crores. We had predicted at a deferred revenue cumulative carry forward of Rs 5,476 crore and we are at Rs 5,371 crore. This number would have been very close to Rs 5,476 crore if our sales were totally not lost in significant part of March. March is our peak months and we did not get any of our sales. The good news as again I had told you is that while we carry forward our revenue unbooked of Rs 5,476 crores, the deferred cost which we carry forward against that is Rs 713 crore which means Rs 4,763 crores is clean profit earned, majority of which realised in cash. This is earned and except for small portions which realization of receivables may not happen and our receivables are much less than that. So this, Rs 4,763 crore is an earned profit which is not booked and 75-85% of that is also realized in cash.
I am very proud to say that my team, led by Akhila predicted these figures and I passed my Chartered Accountant more than 50 years ago in 1969. I have never seen projections made a year ago being so close to what they have achieved. So, it not only shows the quality of the management, the quality of the team but it also shows a very high level of predictability because of this accounting standard.
The written down value of our resorts is Rs 700 crores. Today it costs more than a crore to build a room in the resort and we have 2,157 rooms in our books. There is a depreciation and acceleration into that of Rs 1,400 crores. If you add all of that, forget future earnings, on what we have in our balance sheet, the value is close to Rs 11.500 crores - 12,000 crores.
I am now going to talk in detail about operations but I treat this pandemic as ‘Samundra Manthan’ which you might have read in our Hindu mythology. There will be ‘vish’ (poison) and ‘amrit’ and I am reasonably sure that Mahindra Holidays is going to benefit from that. I just want to make two points - Point number one - Domestic tourism is going to increase and the second is - we have a very strong base of committed members.
Highlights from Kavinder Singh
Most of you had very strong apprehensions when we took over HCRO. I want to give you some data to tell you when we bought this company in the previous year, the lot in September 2014 was 9.68 million. In our first year of operation, the loss was 7.21 million because we were there for the part of the year. In FY18 4.72, we had made a profit of a million. In FY19 results, as I told you were affected because of the contractor who went bankrupt, we had a problem and we had to write a significant amount of this year.
March has been totally wide-top and March is the highest keen season. We lost our resort income in the month of March. In spite of that from a lot of nearly 10 million, we should have made a profit of 4-5 million but even in spite of the whole month of March being written off, we have still made a small profit and we have not made any loss. I want to give you another good news, because anybody who values HCRO will take EBITDA multiple and deduct the bit. When we took over the company, the debt was 51.7 million and today the debt is 19.6 million which means that we have paid over 32 million of debt. We have developed low cost respirators to support.
I would now take you through the views we have at Mahindra Holidays and will talk a little bit about Holiday club also. Let me begin by saying that today as the world comes together to fight the pandemic, we at Mahindra Group have undertaken multiple initiatives under both preventive as well the critical people affected in line with our Mahindra rights philosophy. As you know, we have developed no cost respirators to supply to hospitals. We have offered our resort system care facilities to fight against the pandemic. We have manufactured hand sanitizers as well face shields for health workers and launched free emergency cap services under the brand name Elite for people in need. These are the initiatives that our group has taken.
Across the business, we are using this time to get prepared for the new normal. As you know that the hospitality and aviation business have been significantly impacted and since travel & tourism contributes to almost 10% of GDP, the impact is rather widespread. You must have heard about industry associations speaking of the issues with the government on various measures whether it is debt restructuring or direct benefit transfer for the people engaged in the hospitality sector.
Once the travel restrictions are eased off, domestic travel will recover faster. Drivable destinations will become more popular. Hygiene and safety will be the key concern and consumers will make choices accordingly.