| Wed 18 Feb 2009, 17:10 | | HPA/ HPB - Hospitality - Unaudited Interim Results For the Six Months Ended 31 |
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HPA HPB
HPA
HPA/ HPB - Hospitality - Unaudited Interim Results For the Six Months Ended 31
December 2008 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")
Unaudited Interim Results for the six months ended 31 December 2008 and
interest payment declaration
Interim distribution per A-linked unit 54,72c per distribution structure
Interim distribution per B-linked unit 92,04c up 13,4%
Property acquisitions total R416 million
Development projects completed total R314 million
Comments
1. Introduction
Hospitality Property Fund Limited is a property loan stock company that invests
exclusively in hotel and leisure properties. 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 A-linked units distribution amounts to 54,72c up 5% year-on-year which is
in accordance with the Fund`s distribution structure. The B-linked unit
distribution is 92,04c, which represents a 13,4% year- on-year increase. This
has been achieved despite a weakening economic climate and a challenging
trading environment over the past few months.
The following table reflects the financial results for the 6-month period to
31 December 2008 compared to the corresponding period in 2007.
Period ended 31 December
2008 2007 Variance
(R`000) (R`000) (%)
Contractual Rental 126 756 94 141 34,6
Fund Expenses (14 758) (12 395) 19.1
Net Finance Costs (21 606) (7 944) 171,9
Profit before debenture interest 90 392 73 802 22,5
Recoupment of debenture interest - 8 278 (100,0)
Debenture Interest (90 392) (82 080) 10,1
Distribution - A-linked unit (33 702) (32 097) 5,0
Distribution - B-linked unit (56 690) (49 983) 13,4
Distribution - A-linked unit
(cents) 54,72 52,11 5,0
Distribution - B-linked unit
(cents) 92,04 81,15 13,4
The Fund derived some 72% of its lease income from fixed rental and 28% from
variable rental.
The fixed lease agreements have CPIX linked escalations while the variable
rentals are influenced by the profitability of the hotel operations. The
underlying hotel performance figures are currently being affected by the
slowdown in the general economy and in particular by reduced corporate spend on
travel and accomodation. Management has critically reviewed the cost structures
of hotels contributing variable rental and implemented measures to
maintain efficiencies.
3. Property Portfolio
The Fund`s portfolio comprises interests in 23 hotel and resort properties in
South Africa. As at 31 December 2008 the value of the investment portfolio was
R3,1 billion. 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 hotel`s EBITDA (earnings before
interest, tax, depreciation and amortisation) after deducting the fixed lease
portion. Variable lease agreements consist of rentals based on EBITDA from the
property`s underlying operations.
Throughout the trading period all of the properties were fully let. The average
lease expiry is 8,1 years.
(Please see Press for Graphs)
4. Acquisitions
The Fund took transfer of the 301-key Holiday Inn Sandton
- Rivonia Road, on 26 September 2008. The total cost of the acquisition was
R410 million. During the reporting period the Fund also acquired an additional
interest in Champagne Sports Resort for a total sum of R6,4 million.
5. Development and Capital Projects
The redevelopment of The Rosebank has been completed at an approximate
cost of R314 million. It is expected that the works at the Mount Grace Country
House and Spa will be completed towards the end of the financial year within
the budgeted cost of R140 million. Refurbishments at the three properties in
Richards Bay and The Winkler hotel are on track and are anticipated to be
completed during the course of the second half of this financial year.
The Fund is considering the refurbishment and 30 room expansion of the Imperial
Hotel in Pietermaritzburg at an anticipated cost of R35 million. To avoid
possible disruption to operations the refurbishments of the Protea Hotel
Victoria Junction in Cape Town and Protea Hotel Marine in Port Elizabeth have
been postponed until after the World Cup in 2010.
6. Borrowings
The Fund`s weighted average cost of debt for the six-month period was 9,89% and
the gearing ratio was 30,2% of total property value.
During the calendar year 2008, the Fund restructured its borrowings by entering
into various interest-rate-swap agreements as detailed below. In compliance
with International Financial Reporting Standards (IFRS), these swap agreements
have been valued on a mark-to-market basis and a fair value adjustment of
R129,6 million has been charged to the income statement resulting in a
derivative liability of R88,8 million compared to an asset of R40,8 million at
June 2008. This fair value adjustment has no effect on the distribution to
linked unitholders but adversely affects both the earnings and headline
earnings and translates into a loss for the period. Also, as a result of this
adjustment the net asset value (NAV) per combined linked unit decreased by
6,7% to R14,61 over the six month period.
All-in Fixed Commencement Maturity
Rate Date Date
R253 million* 10,45% April 2008 April 2012
R150 million 11,45% August 2008 August 2013
R150 million** 11,15% December 2008 December 2011
R249 million*** 11,97% September 2008 August 2015
R170 million 11,33% September 2008 August 2018
R972 million
*extendable at the option of the funder to April 2014
**extendable at the option of the funder to December 2013
***step up swap structure - weighted average rate
7. Directorate
As announced to unitholders on 2 February 2009, Mr Andrew Rogers, the former
Chief Operating Officer of Hospitality and an Executive Director of the Board
has been appointed as Deputy Chief Executive Officer and Mr Youseph Aminzadeh
has resigned as Deputy Chief Executive Officer of the Fund. Mr Aminzadeh will
remain an Executive Director of Hospitality.
8. Unitholders
During the six-month period some 8% of the A-linked units and 26% of the
B-linked units were traded.
The Fund has a BEE ownership component of 22,6%.
9. Prospects
South Africa`s economic outlook has changed considerably during the latter part
of the reporting period. Economic forecasts indicate that inflationary pressures
are likely to slow during the second half of the current financial year setting
the tone for further easing of monetary policy. Nevertheless consumer and
corporate expenditure are expected to remain under pressure in the short term.
However, the medium to long term outlook is set to improve with events in 2010
and the funds enhanced total offerings.
10. Payments of Debenture Interest
Unitholders will receive debenture interest payment number 6 for the six-month
period ended December 2008, of 54,72c per A-linked unit and 92,04c per B-linked
unit.
2009
Last day to trade cum interest Friday, 6 March
Linked units will trade ex-interest Monday, 9 March
Record date Friday, 13 March
Payment date Monday, 16 March
Unitholders may not dematerialise or rematerialise their linked units between
Monday, 9 March 2009 and Friday, 13 March 2009, both days inclusive.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), International Accounting Standard IAS34
"Interim Financial Reporting" and the requirements of the Companies Act
of South Africa (Act 61 of 1973) as amended.
The accounting policies are consistent with those applied in the most recent
audited financial statements.
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% on land value and 28% on buildings.
By order of the Board
T E Sewell G A Nelson
(Chairman) (Chief Executive Officer)
18 February 2009
Directors: T E Sewell (Chairman)*, G A Nelson (CEO), Y Aminzadeh (Dutch),
R Asmal, K H Abdul-Karrim*, Z N Kubukeli*, B M Madumise*,
W J Midgley*, A S Rogers (Deputy CEO),
W C Ross* (*Non-Executive, Independent)
Registered Office: "3 on Glenhove", Cnr Tottenham Avenue and Glenhove Road,
Melrose Estate, 2196
Tel: +27 11 994 6320 Fax: +27 11 994 6321 Email: info@hpf.co.za
Web: www.hpf.co.za
Financial results
Income statement
for the six months ended 31 December 2008
Unaudited Unaudited Audited
31 Dec 2008 31 Dec 2007 30 June 2008
R`000 R`000 R`000
Revenue 128 929 95 803 200 594
Rental income - contractual 126 756 94 141 196 230
- straight-line accrual 2 173 1 662 4 364
Expenditure (14 758) (12 395) (26 851)
Property and other operating
expenses (14 758) (12 395) (26 851)
Operating profit 114 171 83 408 173 743
Net finance cost (21 606) (7 944) (10 345)
Finance income 16 245 10 670 24 022
Finance costs (37 851) (18 614) (34 367)
Profit before debenture
interest, fair value
adjustments and taxation 92 565 75 464 163 398
Recoupment of debenture
interest - 8 278 8 278
Debenture interest (90 392) (82 080) (167 312)
Profit before fair value
adjustments and taxation 2 173 1 662 4 364
Fair value adjustments (131 773) (1 394) 295 096
Revaluation of investment
properties - - 269 149
Straight-line rental income
accrual (2 173) (1 662) (4 364)
Interest-rate swaps (129 600) 268 30 311
(Loss)/profit before taxation (129 600) 268 299 460
Taxation - - (71 017)
(Loss)/profit for the period (129 600) 268 228 443
Reconciliation between
earnings, headline earnings
and distributable earnings
(Loss)/profit for the period (129 600) 268 228 443
Adjustments:
Debenture interest 90 392 82 080 167 312
(Loss)/earnings (linked units) (39 208) 82 348 395 755
Adjustments:
Fair value - investment
properties revaluation
(net of taxation) - - (198 132)
Fair value - straight line
rental income 2 173 1 662 4 364
Headline (loss)/earnings
(linked units) (37 035) 84 010 201 987
Fair value - interest rate
swaps 129 600 (268) (30 311)
Straight line rental income (2 173) (1 662) (4 364)
Distributable earnings 90 392 82 080 167 312
Number of units
A-linked unit 61 591 087 61 591 087 61 591 087
B-linked unit 61 591 087 61 591 087 61 591 087
Weighted average number of
units
A-linked unit 61 591 087 51 737 923 56 637 584
B-linked unit 61 591 087 51 737 923 56 637 584
Distribution per linked unit
(cents)
A-linked unit 54.72 52.11 105.49
- Interim 54.72 52.11 52.11
- Final 53.38
B-linked unit 92.04 81.15 166.16
- Interim 92.04 81.15 81.15
- Final 85.01
146.76 133.26 271.65
(Loss)/earnings per linked
units (cents)
A-linked unit (31.83) 79.58 349.38
B-linked unit (31.83) 79.58 349.38
(63.66) 159.16 698.76
Headline (loss)/earnings per
linked unit and diluted
headline (loss)/earnings per
linked unit (cents)
A-linked unit (30.07) 81.19 178.32
B-linked unit (30.07) 81.19 178.32
(60.14) 162.38 356.64
(Loss)/earnings and diluted
(loss)/earnings per
ordinary share (cents) (105.21) 0.26 201.67
Balance sheet
at 31 December 2008
Unaudited Unaudited Audited
31 Dec 2008 31 Dec 2007 30 June 2008
R`000 R`000 R`000
ASSETS
Non-current assets 3 075 244 1 930 491 2 300 495
Investment properties 3 063 095 1 912 445 2 249 704
Straight-line rent income
accrual 12 149 7 274 9 976
Derivative asset - 10 772 40 815
Current assets 50 927 224 882 207 128
Trade and other receivables 22 873 18 393 17 522
Cash and cash equivalents 28 054 206 489 189 606
Total assets 3 126 171 2 155 373 2 507 623
EQUITY AND LIABILITIES
Equity 641 390 542 815 770 990
Share capital and share premium 247 148 247 148 247 148
Retained earnings 980 6 477 980
Fair value reserve 393 262 289 190 522 862
Non-current liabilities 2 360 716 1 524 552 1 624 462
Debentures 1 157 912 1 157 912 1 157 912
Interest-bearing liabilities 927 195 250 833 279 726
Derivative liability 88 785 - -
Deferred taxation 186 824 115 807 186 824
Current liabilities 124 065 88 006 112 171
Trade and other payables 33 673 5 926 26 935
Debenture interest payable 90 392 82 080 85 236
Total equity and liabilities 3 126 171 2 155 373 2 507 623
Net asset value per linked
unit (Rands)
A-linked unit 14.61 13.81 15.66
B-linked unit 14.61 13.81 15.66
Statements of changes in equity
for the period ended 31 December 2008
Share Share Retained
capital premium earnings
R`000 R`000 R`000
Balance at 1 July 2007 9 64 881 4 815
Issue of ordinary shares 3 182 255
Profit for the year/total income
and expenses for the year 268
Transfer (from)/to fair value reserve
- straight-line rental income 1 662
Transfer to/(from) fair value reserve
Transfer (from)/to fair value reserve
- straight-line rental income 1 662
Transfer to/(from) fair value reserve
- interest rate swaps (268)
Balance at 31 December 2007 12 247 136 6 477
Balance at 1 July 2008 12 247 136 980
(Loss)/profit for the year/total income
and expenses for the period (129 600)
Transfer (from)/to fair value reserve
- interest rate swaps 129 600
Balance at 31 December 2008 12 247 136 980
Fair value
reserve Total
R`000 R`000
Balance at 1 July 2007 290 584 360 289
Issue of ordinary shares 182 258
Profit for the year/total income
and expenses for the year 268
Transfer (from)/to fair value reserve
- straight-line rental income (1 662) -
Transfer to/(from) fair value reserve
Transfer (from)/to fair value reserve
- straight-line rental income (1 662) -
Transfer to/(from) fair value reserve
- interest rate swaps 268 -
Balance at 31 December 2007 289 190 542 815
Balance at 1 July 2008 522 862 770 990
(Loss)/profit for the year/total income
and expenses for the period (129 600)
Transfer (from)/to fair value reserve
- interest rate swaps (129 600) -
Balance at 31 December 2008 393 262 641 390
Condensed cash flow statement
for the period ended 31 December 2008
Unaudited Unaudited Audited
31 Dec 2008 31 Dec 2007 30 June 2008
R`000 R`000 R`000
Net cash inflow/(outflow) from
operating activities 6 543 9 144 (6 146)
Cash generated from operations 113 385 73 060 133 969
Finance income received 16 245 10 670 24 022
Finance costs paid (37 851) (18 614) (34 367)
Distribution to unitholders (85 236) (55 972) (129 770)
Net cash outflow from
investment activities (815 564) (291 685) (322 172)
Net cash inflow from financing
activities 647 469 481 503 510 397
Net (decrease)/increase in
cash and cash equivalents (161 552) 198 962 182 079
Cash and cash equivalents at
beginning of year 189 606 7 527 7 527
Cash and cash equivalents at
end of year 28 054 206 489 189 606
Condensed segmental information
for the six months ended 31 December 2008
Fixed C-Corp Variable
lease lease lease
agreements agreements agreements
R`000 R`000 R`000
Income statement - 31 December 2008
Segment revenue 66 190 55 582 7 157
Expenditure
Segment operating results 66 190 55 582 7 157
Net finance cost
Profit before fair value
adjustments 66 190 55 582 7 157
Fair-value adjustments
Segment result 66 190 55 582 7 157
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
Balance sheet - 31 December 2008
Non-current assets 1 258 600 1 702 544 114 100
Current assets 84 16 540 -
Segment assets 1 258 684 1 719 084 114 100
Non-current liabilities
Current liabilities 2 650 3 230
Segment liabilities 2 650 3 230 -
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 - -
Corporate Total
R`000 R`000
Income statement - 31 December 2008
Segment revenue 128 929
Expenditure (14 758) (14 758)
Segment operating results (14 758) 114 171
Net finance cost (111 998) (111 998)
Profit before fair value
adjustments (126 756) 2 173
Fair-value adjustments (131 773) (131 773)
Segment result (258 529) (129 600)
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
Balance sheet - 31 December 2008
Non-current assets 3 075 244
Current assets 34 303 50 927
Segment assets 34 303 3 126 171
Non-current liabilities 2 360 716 2 360 716
Current liabilities 118 185 124 065
Segment liabilities 2 478 901 2 484 781
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
Segment liabilities 1 608 547 1 612 558
Date: 18/02/2009 17:10:03 Produced by the JSE SENS Department.
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