Shangri-La Asia to cancel final dividend

PUBLISHED : Thursday, 22 May, 2003, 12:00am
UPDATED : Thursday, 22 May, 2003, 12:00am

Shangri-La Asia will scrap its proposed final dividend of five HK cents a share for the past financial year.

The luxury hotel operator's move follows decisions by Cathay Pacific Airways and China Eastern Airlines to also cut or scrap dividends to conserve cash.

Shangri-La had said the Sars outbreak had led to a significant decline in occupancies, and in food and beverage spending at the group's luxury hotels, which would adversely affect its upcoming interim result.

It said the group had a healthy balance sheet, adequate liquid funds and available lines of credit to meet long-term and short-term financial requirements. The final dividend payment would have cost the group US$13.97 million.

An analyst from a European brokerage said Shangri-La had an undrawn credit line of about US$200 million.

'Cash flow should not be a big problem,' he said.

The group had been the worst hit by the Sars outbreak among the luxury hotel operators because its major markets - Hong Kong and the mainland, particularly Beijing - had seen more visitors cancel their travel plans.

However, the analyst expected the luxury hotel group to still make a profit for this financial year, if Sars could be contained in three months.

'But the longer it takes to contain Sars, the worse the problem for the hotel industry,' he said.

KGI Asia head of research Ben Kwong Man-bun thought Shangri-La would not recommend an interim dividend this year.

'I believe investors will understand the need for conserving cash amid the current situation,' Mr Kwong said.

He said it was a sensible move because it was difficult to predict the duration of the Sars impact and quantify the potential effect on the group's performance.

Tung Tai Securities associate director Kenny Tang Sing-hing said Sars should be under control in the short term and was unlikely to jeopardise Shangri-La's operations.

On May 10, Hongkong and Shanghai Hotels said it would maintain its proposed final dividend of eight HK cents a share, while no final dividend was recommended by Mandarin Oriental International.

Shangri-La is part of Robert Kuok's Kerry Group, which is the largest shareholder in the SCMP Group, which publishes the South China Morning Post.