| Thu 21 Feb 2008, 16:51 | | HPA / HPB - Hospitality Property Fund - Unaudited Interim Resultsfor The Six |
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HPA HPB
HPA
HPA / HPB - Hospitality Property Fund - Unaudited Interim Resultsfor The Six
Months Ended 31 December 2007 and Interest Payment Declaration
Hospitality Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
JSE code for A-linked units: HPA ISIN: ZAE000076790
JSE code for B-linked units: HPB ISIN: ZAE000076808
("Hospitality" or "the Fund" or "the company")
- Distribution per B-linked unit 81.15c up 18,1%
- Property acquisitions R240 million
- Committed capital investments R470 million
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 AND INTEREST
PAYMENT DECLARATION
Comments
1. Introduction
Hospitality Property Fund is a property loan stock company, which
invests in properties in the hotel and leisure industries. The Fund`s units in
issue comprise A- and B-linked units, with A-linked units having a
preferential claim to earnings with capped growth, whilst the B-linked units
receive the balance of earnings.
2.Results
The favourable hospitality and property trading conditions resulted in
significant growth in earnings. Distributions for the period amount to 52,11c
per A-linked unit, which is in line with the company`s distribution policy.
The distribution per B-linked unit of 81,15c per B-linked unit, equates to an
increase of 18,1% over the corresponding period in 2006.
The following table shows the actual performance for the period of July
to December 2007 compared to the same period in 2006:
Period ended 31 December
2007 2006 Variance
(R`000) (R`000) (%)
Contractual rental income 94 141 62 022 51
Fund expenses (12 395) (7 017) 77
Net finance costs (7 944) (12 193) (35)
Profit before debenture interest 73 802 42 812 72
Recoupment of debenture interest 8 278 -
Debenture interest (82 080) (42 812) 92
Distribution - `A linked unit` (32 097) (17 954) 79
Distribution - `B linked unit` (49 983) (24 858) 101
Distribution - `A linked unit` (cents) 52,11 49,63 5,0
Distribution - `B linked unit` (cents) 81,15 68,72 18,1
The growth in rental income was predominantly as a result of increased
rental income from properties under C-Corp and variable rental structures due
to the favourable hospitality trading climate and continued improvements in
operating efficiencies and performance. The acquisitions concluded during the
period were overall yield enhancing. Net finance costs reduced substantially
due to the cash raised in the rights issue not being fully utilised during the
period.
3. Rights issue
The Fund successfully concluded a R500 million rights issue in October
2007 to fund various capital projects and acquisitions. 15 903 352 A-linked
units and 15 903 352 B- linked units were placed in respect of the rights
issue. The rights issue included a recoupment of debenture interest amounting
to R8,3 million.
4. Property portfolio
The Fund`s portfolio comprises interests in 22 hotel and resort
properties in South Africa amounting to R1,9 billion. The net asset value
(NAV) totalled R13,81 per linked unit. The combined units were trading at a
premium of 21,70% to NAV at the end of the reporting period.
The portfolio is segmented into three lease types, namely: fixed lease
properties, C-Corp lease properties and variable lease properties.
Rentals under fixed lease agreements are determined by normal
contractual lease terms, with inflation-linked annual escalations. C-Corp
lease agreements comprise approximately 50% initial fixed lease rental, with
the remaining being a variable rental equivalent to 90% of the hotels`
earnings before interest, tax, depreciation and amortisation (EBITDA) after
deducting the fixed lease portion. Variable lease agreements comprise rentals
based on EBITDA from the property`s underlying operations.
Throughout the trading period all the properties were fully let. The
average lease period is 8,4 years.
SEE PRESS ANNOUNCEMENT FOR GRAPH
5. Acquisitions
During the reporting period the Fund acquired four property interests
for a total consideration of R240 million, which properties were independently
valued at R298 million, representing a valuation surplus of 24% on
acquisition. These acquisitions included: the expansion to the Birchwood Hotel
& Conference Centre, Hluhluwe Hotel & Safaris, the remaining 32% share in the
Park Inn Greenmarket Square and the remaining 35% shareholding in the 90 units
at the Radisson Hotel Waterfront. The acquisitions are forecast to be growth-
enhancing to the Fund. In January 2008 the Fund acquired the ONEwellness
branded spa at the Radisson Hotel Waterfront for a consideration of
R14,5 million.
6. Cautionary announcement
Unitholders are reminded of the cautionary issued on 22 January 2008
relating to ongoing negotiations pertaining to a major acquisition.
7. Developments and capital projects
Hospitality has committed significant funds to the development and
repositioning of a number of properties in the portfolio to strategically
position these to maximise long - term growth. The combined capital value of the
refurbishment, repositioning and expansion projects is estimated at
R470 million.
The main development and capital projects which will be completed in the coming
18 months are as follows:
The Rosebank Hotel
This property is undergoing a major redevelopment and repositioning,
with a total capital value of R254 million. Once completed, the full service
hotel will comprise 316 rooms, several food and beverage outlets, substantial
conference facilities and a spa. This development will be completed by the
beginning of the next financial year.
Mount Grace Country House & Spa
This resort is in the process of being refurbished and expanded and will
be repositioned as one of the top conference and leisure destinations in the
country. The expansion will include an additional 40 rooms and villas,
additional conference and food and beverage facilities and the expansion of
the spa. The total investment is estimated at R134 million and the development
will be completed towards the end of 2008.
Other capital projects
Refurbishment projects will commence shortly at The Winkler Hotel, The
Richards Hotel, Protea Hotel Richards Bay and The Bayshore Inn. The combined
investment in these properties is estimated at R83 million. Other projects
currently under review are: the expansions of The Imperial Pietermaritzburg
and Champagne Sports Resort, and refurbishments of Protea Hotel Victoria
Junction, Protea Hotel Marine and the The Hazyview Hotel.
It is forecast that the operating earnings of the hotels will not be
impacted during development. On aggregate, the developments are forecast to be
initially yield neutral, yet growth-enhancing.
The Fund is implementing a business continuity programme across the
portfolio to minimise the effect of power interruptions on the operating
performance of the hotels.
8. Directorate
As announced to unitholders on 13 December 2007, Mr William Midgley was
appointed as a non-executive director to the Board effective from 2 January
2008. The Board comprises a majority of non-executive directors, the majority of
which are independent.
9. Borrowings
The Fund`s weighted average cost of debt for the reporting period
was 9,26% and the effective gearing level was 13,2% at 31 December 2007.
During the reporting period, net finance costs reduced substantially due to
the cash raised in the rights issue not being fully utilised during the
period.
10. Units in issue/liquidity
As at the end of the reporting period, 61 591 087 A-linked units and
61 591 087 B-linked units were in issue. During the course of this reporting
period, an additional 15 903 352 both A - and B- linked units were issued in
respect of the aforementioned rights issue. In terms of liquidity, an
annualised 27% of the Fund`s units in issue were traded during the six months
ended 31 December 2007.
11. Prospects
The operating climate in the hospitality industry is buoyant and the
Fund is well-placed to benefit from this. According to the Deloitte
HotelBenchmark study, occupancies in South Africa remained relatively high,
whilst average achieved room rates increased by 15% during the reporting
period. The Fund is able to benefit from the growth in earnings through its
variable rental structures, whilst effective hotel and asset management
structures have contributed to increases in operating margins.
The investments in the Fund`s existing properties will position the
portfolio to take advantage of the favourable trading conditions in the hotel
industry anticipated to continue over the next few years, particularly in the
lead up to 2010. This should lead to sustained growth in the foreseeable
future.
The Board expects distribution growth for the full financial year to remain
robust.
12. Payments of debenture interest
Unitholders will receive debenture interest payment number 4 for the
six - month period ended 31 December 2007, of 52,11c per A-linked unit and
81,15c per B-linked unit.
2008
Last day to trade cum interest Friday, 7 March
Linked units will trade ex-interest Monday, 10 March
Record date Friday, 14 March
Payment date Monday, 17 March
Unitholders may not dematerialise or rematerialise their linked units
between Monday, 10 March 2008 and Friday, 14 March 2008, both days inclusive.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), including IAS 34 and the requirements of
the Companies Act of South Africa (Act 61 of 1973) as amended. The accounting
policies applied are consistent with those in the annual financial statements
for the year ended 30 June 2007.
The financial statements are prepared on the historic cost basis, except for
investment properties and derivatives which are measured at fair value. The
significant accounting policies are as follows:
- Investment property is initially recognised at cost including
transaction costs. Subsequent to initial measurement, investment property is
measured at fair value. Gains or losses arising from changes in fair value are
included in net profit or loss for the period in which they arise. These gains
or losses are transferred to a fair value reserve as they are not available
for distribution.
- Interest bearing liabilities and debenture capital are measured at
amortised cost.
- Revenue comprises rental income from the letting of investment property
and is accounted for on a straight-line basis over the period of the lease in
terms of IAS 17.
- Deferred taxation on the fair value adjustment of investment properties
has been calculated at 14,5% on land value and 29,0% on buildings.
By order of the Board
T E Sewell G A Nelson
(Chairman) (Chief Executive Officer) 21 February 2008
Directors: T E Sewell (Chairman)*+, G A Nelson (CEO), Y Aminzadeh (Deputy CEO)
(Dutch), R Asmal, K H Abdul-Karrim*+, B M Madumise*+, W J Midgley*,
A S Rogers, W C Ross*+
(*Non-executive, +Independent)
Registered Office: "3 on Glenhove", corner Glenhove Road and Tottenham Avenue,
Melrose Estate, 2196, Johannesburg, South Africa
Tel: +27 11 994 6320 Fax: +27 11 994 6321 E -Mail: info@hpf.co.za
Website: www.hpf.co.za
Income statement
for the six months ended 31 December 2007
Unaudited Unaudited Audited
31 Dec 2007 31 Dec 2006 30 June 2007
R`000 R`000 R`000
Revenue 95 803 64 155 142 391
Rental income - contractual 94 141 62 022 138 556
- straight-line accrual 1 662 2 133 3 835
Expenditure (12 395) (7 017) (18 921)
Property and other operating
expenses (12 395) (7 017) (18 921)
Operating profit 83 408 57 138 123 470
Net finance cost (7 944) (12 193) (24 206)
Finance income 10 670 566 4 240
Finance costs (18 614) (12 759) (28 446)
Profit before debenture
interest, fair value
adjustments and taxation 75 464 44 945 99 264
Recoupment of debenture
interest 8 278 - 3 356
Debenture interest (82 080) (42 812) (98 785)
Profit before fair value
adjustments 1 662 2 133 3 835
Fair value adjustments (1 394) 13 893 253 076
Revaluation of investment
properties - - 237 857
Straight-line rental income
accrual (1 662) (2 133) (3 835)
Interest rate swaps 268 16 026 19 054
Profit before taxation 268 16 026 256 911
Taxation - - (68 351)
Profit for the period 268 16 026 188 560
Reconciliation between
earnings,
headline earnings
and distributable earnings
Profit for the period 268 16 026 188 560
Adjustments:
Debenture interest 82 080 42 812 98 785
Earnings (linked units) 82 348 58 838 287 345
Adjustments:
Fair value-investment
properties
revaluation (net of taxation) - - (169 506)
Fair value - straight-line
rental income 1 662 2 133 3 835
Headline earnings (linked units) 84 010 60 971 121 674
Fair value - interest rate swaps (268) (16 026) (19 054)
Straightline rental income (1 662) (2 133) (3 835)
Distributable earnings 82 080 42 812 98 785
Number of units
A-linked unit 61 591 087 36 174 723 45 687 735
B-linked unit 61 591 087 36 174 723 45 687 735
Weighted average number of
units
A-linked unit 51 737 923 36 174 723 39 530 070
B-linked unit 51 737 923 36 174 723 39 530 070
Distribution per linked unit
(cents)
A-linked unit 52,11 49,63 100,46
- Interim 52,11 49,63 49,63
- Final 50,83
B-linked unit 81,15 68,72 140,40
- Interim 81,15 68,72 68,72
- Final 71,68
133,26 118,35 240,86
Earnings per linked unit
(cents)
A-linked unit 79,58 81,32 363,45
B-linked unit 79,58 81,32 363,45
159,16 162,64 726,90
Headline earnings per linked
unit (cents)
A-linked unit 81,19 84,27 153,90
B-linked unit 81,19 84,27 153,90
162,38 168,54 307,80
Earnings per share (cents) 0,26 44,30 238,50
Balance sheet
At 31 December 2007
Unaudited Unaudited Audited
31 Dec 2007 31 Dec 2006 30 June 2007
R`000 R`000 R`000
ASSETS
Non-current assets 1 930 491 1 180 108 1 678 863
Investment properties 1 912 445 1 168 722 1 662 747
Straight-line rent income
accrual 7 274 3 910 5 612
Derivative asset 10 772 7 476 10 504
Current assets 224 882 16 822 20 970
Trade and other receivables 18 393 11 175 13 443
Cash and cash equivalents 206 489 5 647 7 527
Total assets 2 155 373 1 196 930 1 699 833
EQUITY AND LIABILITIES
Equity 542 815 162 329 360 289
Share capital and share premium 247 148 39 464 64 890
Retained income 6 477 3 113 4 815
Fair value reserve 289 190 119 752 290 584
Non-current liabilities 1 524 552 977 848 1 225 306
Debentures 1 157 912 680 085 858 929
Interest bearing liabilities 250 833 250 307 250 570
Deferred taxation 115 807 47 456 115 807
Current liabilities 88 006 56 753 114 238
Trade and other payables 5 926 13 941 58 266
Debenture interest payable 82 080 42 812 55 972
Total equity and liabilities 2 155 373 1 196 930 1 699 833
Net asset value per linked
unit (Rand)
A-linked unit 13,81 11,64 13,34
B-linked unit 13,81 11,64 13,34
Statement of changes in equity
for the six months ended 31 December 2007
Share Share Retained
capital premium income
R`000 R`000 R`000
Balance at 1 July 2006 7 39 457 980
Profit for the period/total income and
expenses for the period 16 026
Transfer from fair value reserve -
straight-line rental income 2 133
Transfer to fair value reserve -
interest rate swaps (16 026)
Balance at 31 December 2006 7 39 457 3 113
Balance at 1 July 2007 9 64 881 4 815
Issue of ordinary shares 3 182 255
Profit for the period/total income and
expenses for the period 268
Transfer from fair value reserve -
Straight-line rental income 1 662
Transfer to fair value reserve -
interest rate swaps (268)
Balance at 31 December 2007 12 247 136 6 477
Fair value
reserve Total
R`000 R`000
Balance at 1 July 2006 105 859 146 303
Profit for the period/total income and
expenses for the period 16 026
Transfer from fair value reserve -
straight-line rental income (2 133) -
Transfer to fair value reserve -
interest rate swaps 16 026 -
Balance at 31 December 2006 119 752 162 329
Balance at 1 July 2007 290 584 360 289
Issue of ordinary shares 182 258
Profit for the period/total income and
expenses for the period 268
Transfer from fair value reserve -
straight line rental income (1 662) -
Transfer to fair value reserve -
interest rate swaps 268 -
Balance at 31 December 2007 289 190 542 815
Condensed cash flow statement
for the six months ended 31 December 2007
Unaudited Unaudited Audited
31 Dec 2007 31 Dec 2006 30 June 2007
R`000 R`000 R`000
Net cash inflow from operating
activities 9 144 13 746 68 963
Cash generated from operations 73 060 55 790 162 477
Finance income received 10 670 566 4 240
Finance costs paid (18 614) (12 759) (28 446)
Distribution to unitholders (55 972) (29 851) (69 308)
Net cash outflow from
investment activities (291 685) (11 488) (269 358)
Net cash inflow from financing
activities 481 503 (965) 203 568
Net increase in cash and cash
equivalents 198 962 1 293 3 173
Cash and cash equivalents at
beginning of year 7 527 4 354 4 354
Cash and cash equivalents at
end of period 206 489 5 647 7 527
Condensed segmental information
for the six months ended 31 December 2007
C-Corp Variable
Fixed lease lease lease
agreements agreements agreements
R`000 R`000 R`000
Income statement - 31 December 2007
Segment revenue 47 010 42 002 6 791
Expenditure
Segment operating results 47 010 42 002 6 791
Net finance cost
Profit before fair value adjustments 47 010 42 002 6 791
Fair-value adjustments (1 662)
Segment result 45 348 42 002 6 791
Income statement - 31 December 2006
Segment revenue 41 654 17 159 5 342
Expenditure
Segment operating results 41 654 17 159 5 342
Net finance cost
Profit before fair value adjustments 41 654 17 159 5 342
Fair-value adjustments (2 133)
Segment result 39 521 17 159 5 342
Balance sheet - 31 December 2007
Non-current assets 1 071 899 744 620 103 200
Current assets 1 586 13 056 774
Segment assets 1 073 485 757 676 103 974
Non-current liabilities - - -
Current liabilities 4 011 - -
Segment liabilities 4 011 - -
Balance sheet - 30 June 2006
Non-current assets 741 845 360 718 70 069
Current assets 1 135 5 928 775
Segment assets 742 980 366 646 70 844
Non-current liabilities
Current liabilities 10 794
Segment liabilities 10 794 - -
Corporate Total
R`000 R`000
Income statement - 31 December 2007
Segment revenue 95 803
Expenditure (12 395) (12 395)
Segment operating results (12 395) 83 408
Net finance cost (81 746) (81 746)
Profit before fair value adjustments (94 141) 1 662
Fair-value adjustments 268 (1 394)
Segment result (93 873) 268
Income statement - 31 December 2006
Segment revenue 64 155
Expenditure (7 017) (7 017)
Segment operating results (7 017) 57 138
Net finance cost (55 005) (55 005)
Profit before fair value adjustments (62 022) 2 133
Fair-value adjustments 16 026 13 893
Segment result (45 996) 16 026
Balance sheet - 31 December 2007
Non-current assets 10 772 1 930 491
Current assets 209 466 224 882
Segment assets 220 238 2 155 373
Non- current liabilities 1 524 552 1 524 552
Current liabilities 83 995 88 006
Segtment liabilities 1 608 547 1 612 558
Balance sheet - 30 June 2006
Non-current assets 1 172 632
Current assets 16 460 24 298
Segment assets 16 460 1 196 930
Non-current liabilities 977 848 977 848
Current liabilities 45 959 56 753
Segment liabilities 1 023 807 1 034 601
Date: 21/02/2008 16:51:15 Produced by the JSE SENS Department.
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