| Tue 6 Mar 2012, 12:16 | | 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 2011 and Renewal of Cautionary Announcement
Hospitality Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
Share code for A-linked units: HPA ISIN for A-linked units: ZAE000076790
Share code for B-linked units: HPB ISIN for B-linked units: ZAE000076808
("Hospitality" or "the fund" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 AND RENEWAL
OF CAUTIONARY ANNOUNCEMENT
Statement of comprehensive income
for the six months ended 31 December 2011
Unaudited Unaudited Audited
Dec 2011 Dec 2010 June 2011
R`000 R`000 R`000
Revenue 150 577 137 259 277 358
Rental income
- contractual 160 558 137 039 277 043
- straight-line accrual (9 981) 220 315
Expenditure (17 345) (9 704) (21 051)
Operating expenses (17 345) (9 704) (21 051)
Operating profit 133 232 127 555 256 307
Transaction costs on business
combinations - - (16 958)
Net finance cost (79 971) (57 191) (112 857)
Finance income 208 4 339 13 366
Finance costs (80 179) (61 530) (126 223)
Profit before debenture interest,
goodwill, fair value adjustments
and taxation 53 261 70 364 126 492
Recoupment of debenture interest - 17 534 17 534
Debenture interest (63 242) (87 678) (160 669)
(Loss)/profit before fair value
adjustments, goodwill and taxation (9 981) 220 (16 643)
Gain on bargain purchase - - 141 437
Fair value adjustments (9 123) (27 532) (393 649)
Investment proper ties, before
straight-lining adjustment - - (415 651)
Straight-line rental income accrual 9 981 (220) (315)
Total fair value of investment properties 9 981 (220) (415 966)
Contingent consideration - - 32 842
Interest-rate swaps (19 104) (27 312) (10 525)
Loss before taxation (19 104) (27 312) (268 855)
Equity accounted profit /(loss) from
associate after tax 131 - (60)
Taxation - - 58 195
Total loss and comprehensive loss
for the period (18 973) (27 312) (210 720)
Reconciliation between earnings,
headline earnings and distributable
earnings
Loss for the period (18 973) (27 312) (210 720)
Adjustments: Debenture interest 63 242 70 144 160 669
Earnings/(loss) (linked units) 44 269 42 832 (50 051)
Adjustments:
Fair value - investment proper ties
revaluation, net of tax - - 357 456
Gain on bargain purchase - - (141 437)
Equity accounted (loss)/profit from
associate after tax (131) - 60
Fair value - straight line rental income (9 981) 220 315
Headline earnings (linked units) 34 157 43 052 166 343
Fair value - interest rate swaps 19 104 27 312 10 525
Transaction costs on business combinations - - 16 958
Contingent consideration - - (32 842)
Straight line rental income 9 981 (220) (315)
Distributable earnings 63 242 70 144 160 669
Number of units/shares
A-linked unit 88 761 391 88 761 391 88 761 391
B-linked unit 88 761 391 88 761 391 88 761 391
Weighted average number of
units/shares
A-linked unit 88 761 391 72 299 806 80 462 949
B-linked unit 88 761 391 72 299 806 80 462 949
Distribution per linked unit (cents)
A-linked unit 63,34 60,33 122,12
- Interim 63,34 60,33 60,33
- Final - - 61,79
B-linked unit 7,91 38,45 58,90
- Interim 7,91 38,45 38,45
- Final - - 20,45
71,25 98,78 181,02
(Loss)/earnings per linked units (cents)
A-linked unit 24,94 29,62 (31,10)
B-linked unit 24,94 29,62 (31,10)
49,87 59,24 (62,20)
Headline earnings per linked unit (cents)
A-linked unit 19,24 29,77 103,37
B-linked unit 19,24 29,77 103,37
38,48 59,54 206,73
(Loss)/earnings and diluted earnings
per ordinary share (cents) (10,69) (18,89) (130,94)
Statement of cash flows
for the six months ended 31 December 2011
Unaudited Unaudited Audited
Dec 2011 Dec 2010 June 2011
R`000 R`000 R`000
Cash flows from operating activities
Cash generated from operations 118 772 119 873 253 334
Finance income received 208 4 339 13 366
Finance costs paid (80 179) (61 530) (126 223)
Distribution to unitholders (72 998) (69 752) (162 533)
Net cash outflow from
operating activities (34 197) (7 070) (22 056)
Cash flows from investing activities
Acquisition and development of
investment proper ties (67 932) (174 012) (1 000 524)
Acquisition of proper ties held
for sale (1 008) - (16 940)
Acquisition of furniture and equipment - (553) (397)
Investment in associate - Vexicure 60 - (60)
Net cash outflow from investing
activities (68 880) (174 565) (1 017 921)
Cash flows from financing activities
Proceeds from the issue of linked units - 577 763 600 402
Share issue expenses paid - (11 776) (11 889)
Interest-bearing liabilities raised 99 518 108 099 431 971
Net cash inflow from financing
activities 99 518 674 086 1 020 484
Net increase/(decrease) in cash and
cash equivalents (3 559) 492 451 (19 493)
Cash and cash equivalents at beginning
of year (8 783) 10 710 10 710
Cash and cash equivalents at
end of period (12 342) 503 161 (8 783)
Statement of financial position
as at 31 December 2011
Unaudited Unaudited Audited
Dec 2011 Dec 2010 June 2011
R`000 R`000 R`000
ASSETS
Non-current assets 4 167 187 3 535 327 4 109 300
Investment properties 4 008 491 3 366 405 3 940 558
Straight-line rent income accrual 5 191 15 077 15 172
Investment proper ties and related
accrual 4 013 682 3 381 482 3 955 730
Furniture and equipment 612 1 023 748
Goodwill 152 822 152 822 152 822
Investment in associate 71 - -
Current assets 57 849 528 441 57 903
Trade and other receivables 38 886 25 280 37 413
Proper ties held for trading 17 948 - 16 940
Cash and cash equivalents 1 015 503 161 3 550
Total assets 4 225 036 4 063 768 4 167 203
EQUITY AND LIABILITIES
Equity 518 182 636 744 537 155
Share capital and share premium 342 862 342 975 342 862
Retained earnings 123 849 (701) 123 718
Fair value reserve 51 471 294 470 70 575
Non-current liabilities 2 282 604 3 327 398 2 152 503
Debentures 1 668 714 1 668 714 1 668 714
Interest-bearing liabilities 522 377 1 416 470 411 380
Derivative liability 40 646 38 327 21 542
Contingent consideration - 32 842 -
Deferred taxation 50 867 171 045 50 867
Current liabilities 1 424 250 99 626 1 477 545
Trade and other payables 30 174 11 948 63 257
Bank overdraft 13 357 - 12 333
Interest-bearing liabilities 1 317 483 - 1 328 962
Debenture interest payable 63 236 87 678 72 993
Total equity and liabilities 4 225 036 4 063 768 4 167 203
A. Net asset value per linked unit (Rand)
A-linked unit 12,32 12,99 12,43
B-linked unit 12,32 12,99 12,43
B. Net asset value per linked unit
(excluding deferred taxation) (Rand)
A-linked unit 12,61 13,95 12,71
B-linked unit 12,61 13,95 12,71
Statements of changes in equity
for the period ended 31 December 2011
Share Share Retained
capital premium earnings
R`000 R`000 R`000
Balance at 1 July 2010 13 259 182 (701)
Loss/Total comprehensive loss
for the period - - (210 720)
Transactions with owners, recorded
directly in equity 5 83 662 10 525
Issue of share capital 5 95 551 -
Share issue expenses - (11 889) -
Transfer to fair value reserve
- interestrate swaps - - 10 525
Balance at 31 December 2010 18 342 844 (200 896)
Balance at 1 July 2011 18 342 844 123 718
Loss/Total comprehensive loss
for the period - - (18 973)
Transactions with owners, recorded
directly in equity - - 19 104
Transfer to fair value reserve
- interest rate swaps - - 19 104
Balance at 31 December 2011 18 342 844 123 849
Fair value
reserve Total
R`000 R`000
Balance at 1 July 2010 405 714 664 208
Loss/Total comprehensive loss
for the period - (210 720)
Transactions with owners, recorded
directly in equity (10 525) 83 667
Issue of share capital 95 556
Share issue expenses - (11 889)
Transfer to fair value reserve
- interestrate swaps (10 525) -
Balance at 31 December 2010 395 189 537 155
Balance at 1 July 2011 70 575 537 155
Loss/Total comprehensive loss
for the period - (18 973)
Transactions with owner s, recorded
directly in equity (19 104) -
Transfer to fair value reserve
- interest rate swaps (19 104) -
Balance at 31 December 2011 51 471 518 182
Condensed segmental information
for the six months ended 31 December 2011
Information regarding the results of each reportable segment is included below.
Performance is measured based on operating profit before finance costs, as
included in the internal management reports that are reviewed by the group`s
CEO. Segment profit is used to measure performance as management believes that
such information is the most relevant in evaluating the results of certain
segments relative to other entities that operate within these industries. Inter-
segment pricing is determined on an arm`s length basis.
Fixed lease F & V lease Variable lease
agreements agreements agreements
R`000 R`000 R`000
Statement of comprehensive
income - 31 Dec 2011
Segment revenue 60 925 93 889 5 744
Expenditure (4 829) - -
Segment results 56 096 93 889 5 744
Statement of comprehensive
income - 31 Dec 2010
Segment revenue 65 609 60 134 11 296
Expenditure - - -
Segment results 65 609 60 134 11 296
Statement of
financial position
- 31 December 2011
Non-current assets
Investment proper ties 1 110 349 2 645 625 257 708
Current assets
Trade receivables 13 424 14 985 (88)
Segment assets 1 123 773 2 660 610 257 620
Statement of
financial position
- 31 December 2010
Non-current assets
Investment properties 1 229 119 1 844 520 307 842
Current assets
Trade and other receivables 701 8 194 -
Segment assets 1 229 820 1 852 714 307 842
Total of all
Head operating
office segments
R`000 R`000
Statement of comprehensive
income - 31 Dec 2011
Segment revenue - 160 558
Expenditure (12 516) (17 345)
Segment results (12 516) 143 213
Statement of comprehensive
income - 31 Dec 2010
Segment revenue - 137 039
Expenditure (9 704) (9 704)
Segment results (9 704) 127 335
Statement of financial position
- 31 December 2011
Non-current assets
Investment proper ties - 4 013 682
Current assets
Trade receivables 10 565 38 886
Segment assets 10 565 4 052 56
Statement of financial position
- 31 December 2010
Non-current assets
Investment proper ties - 3 381 481
Current assets
Trade and other receivables 16 385 25 280
Segment assets 16 385 3 406 761
Comments
1 Introduction
While the hotel industry continued to experience extremely challenging trading
conditions during the first quarter of the Fund`s financial year, the second
quarter saw a significant improvement in occupancy levels. According to STR
Global, the industry reported a year-on-year increase in occupancy of 5.4% to
59% and a decrease in average room rates ("ARR") of 5.7% to R855 for the six
months to December 2011. The previous year comparative is distorted by the
effect of the last eleven days of the FIFA World Cup 2010 where trading volumes
and rates were significantly boosted by the event. If the month of July is
excluded from the comparative, occupancy reflects growth of 6.6% and ARR
increases by 2.2%, resulting in a RevPar increase of 9.0%.
The Fund`s trading figures for the portion of its portfolio which is subject to
variable rental income (i.e. dependant on operational earnings) reflected an
increase in occupancy of 9.8% to 57.9% and an increase in ARR of 4.7% to R971
resulting in RevPar growth of 15.0% for the six-month period. The improved
trading conditions during the latter par t of the period are encouraging and
early indications are that this trend appears to be continuing in 2012.
The downside risk to this prognosis being worse than expected growth in the
South African economy in the face of global economic instability. The challenge
facing the Fund is to ensure that optimal growth in ARR`s is achieved on the
back of improving occupancies within what is still a highly competitive
environment.
Hotel owners continue to absorb increases in overhead costs which are currently
significantly ahead of inflation. In particular, escalations in administered
prices such as electricity, water and municipal rates have had a mar ked effect
on earnings. The Fund has implemented various initiatives to proactively reduce
consumption of utilities and actively monitor and manage municipal valuations.
Insofar as the Fund`s fixed lease proper ties are concerned, management
continues to be cognisant of the ongoing financial pressures on tenants and
constantly monitor s and interacts with them in order to under stand their under
lying business performance and evaluate the serviceability of rentals.
2 Results
Rental income for the period grew by 17.2% mainly as a result of the acquisition
of the Arabella portfolio (comprising the Westin - Cape Town and the Arabella
Hotel and Spa - Kleinmond) concluded on 13 May 2011. The standing portfolio
(i.e. excluding the Arabella portfolio) reflected a decrease in rental income of
3.6%. This was partly due to the previous corresponding period having the last
11 days of the FIFA Soccer World Cup 2010 included, where the Fund reaped the
benefits of higher demand.
Additionally, the Western Cape hotels experienced a particularly poor winter
trading season. While these proper ties have since shown strong recovery, it was
not sufficient to make up the initial trading deficit. Furthermore, the
Courtyard proper ties have underperformed expectations and the profits from the
Courtyard Joint Venture with City Lodge Hotels have been significantly lower
than the previous year.
The dispute with the City of Johannesburg highlighted in the year-end financial
statements has not yet been resolved. The amount has increased to R13 million
and relates to disputed municipal valuations at Crowne Plaza Johannesburg - The
Rosebank and Holiday Inn Sandton. The necessary objections and motivations have
been lodged and a valuation appeal board hearing date is awaited. Management and
the consultants engaged to assist on this matter are optimistic of a successful
outcome at the appeal hearing. Fund expenses increased by some R7.6 million
mainly due to a bad debt provision of R4.8 million raised in respect of a
potential tenant default. Net finance costs increased by R22.8 million due to
the additional debt to fund the Arabella acquisition and various capital
expenditures on refurbishment projects.
The net effect is that distributable earnings per combined linked unit declined
by 27.9% compared to the previous financial year. The A-linked unit
distributable amount of 63.35 cents grew by 5%, in line with the Fund`s
distribution structure, resulting in the distribution on the B-linked unit
decreasing by 79.4% to 7.91 cents. This is in line with the trading statement
announced on 5 December 2011.
As previously announced in the cautionary of 23 January 2012 and the Notice of
General Meeting on 27 February 2012, the refinancing of the Absa Bank Limited
("Absa") loan agreement which expired on 10 February 2012 requires the Fund to
undertake a rights issue as part of the refinancing arrangement. Given the
current status of the debt refinancing arrangement with Absa being short term,
(as set out more fully below) any distributions declared by the Fund requires
Absa`s consent. Absa have instructed the Fund that only 50% of the distributable
earnings may be paid out with the balance to be withheld until the Fund provides
ABSA with proof of irrevocable commitments to follow rights and/or subscriptions
for the proposed general issue of linked units for cash and/or underwriting of
the proposed rights offer to a combined value of no less than R500 million.
In addition, given the current short-term status of the Absa loan, the board has
sought legal advice on whether or not the proposed distribution is governed by
section 46 of the Companies Act, 2008 ("the Act"), which provides that a company
may not make any proposed distribution to shareholders unless it reasonably
appears that the company will satisfy the solvency and liquidity test laid down
in the Act immediately after completing the proposed distribution. Having
received conflicting opinions in this regard, the board obtained an urgent
opinion from Senior Counsel which concluded that, on a prima facie basis,
distributions on the debenture component of a linked unit fall within the
definition of a distribution in section 1 of the Act and, accordingly, are
subject to section 46 of the Act.
The solvency and liquidity test laid down in the Act requires that it reasonably
appears that the company will be able to pay its debts as they become due in the
ordinary course of business for a period of 12 months following the date of the
distribution. Given that the Absa facility needs to be refinanced within the
next 6 months and the refinancing is in turn subject to the successful
completion of the capital raising referred to below, the board is of the view
that the fund will only meet this requirement once the conditions set out in
paragraph 11 below have been satisfied.
It is important to note that this comes about purely as a consequence of a
statutory requirement in terms of the current short-term nature of the Absa debt
facility and has nothing to do with the underlying business which is
fundamentally sound.
The following table reflects the operating financial results for the period
ended 31 December 2011 compared to the corresponding previous period.
Six months to 31 December
2011 2010 Variance Variance
(R`000) (R`000) (R`000) (%)
Contractual Rental 160 558 137 039 23 519 17.2
Fund Expenses (17 345) (9 704) (7 641) (78.7)
Net Finance Costs (79 971) (57 191) (22 780) (39.8)
Profit before debenture interest 63 242 70 144 (6 902) (9.8)
Recoupment of debenture interest - 17 534 (17 534) (100.0)
Debenture Interest (63 242) (87 678) (24 436) (27.9)
Distribution - A-linked unit (56 225) (53 548) 2 677 5.0
Distribution - B-linked unit (7 017) (34 130) (27 113) (79.4)
Distribution - A-linked unit
(cents) 63.34 60.33 3.01 5.0
Distribution - B-linked unit
(cents) 7.91 38.45 (30.54) (79.4)
Combined distribution - unit
(cents) 71.25 98.78 (27.53) (27.9)
NOTE: Above distribution subject to certain conditions outlined herein.
Approximately 67% (2010: 84%) of the Fund`s revenue during the year was derived
from fixed rentals with CPI-linked escalations and the remaining 33% (2010: 26%)
comprised variable rentals which are linked to under lying hotel operational
performance. This year-on-year change was a consequence of the new F&V leases
being concluded with hotel operator s which comprise fixed rentals of
approximately 50% of first year budgeted EBITDA and variable rentals of at least
90% of the balance after deducting the fixed rentals.
3 Arabella portfolio
The take-on of the Arabella portfolio on 13 May 2011 went smoothly and the new
hotel operator s of the Westin Cape Town (being Starwood Hotels and Resorts) and
Arabella Hotel & Spa (being Protea Hospitality Group) under their African Pride
brand have performed well despite the challenging trading conditions. The Westin
with its strategic location adjacent to the Cape Town International Convention
Centre, is the largest 5 star hotel in Cape Town and with superb quality of
product and ser vice, is expected to provide a strong underpin to the Fund`s
rental income stream.
The application process for the development rights on the Phase 2 land at
Arabella Hotel & Spa is in progress and the Fund expects a response from the
relevant authorities by May 2012. Once the development rights have been secured,
the Fund will market this development with a view to realising a profit from the
sales of residential stands which will be classified as distributable income.
4 Property Portfolio
The Fund`s portfolio comprises interests in 26 hotel and resort properties in
South Africa. As at 31 December 2011 the book value of the portfolio was R4.0
billion. The portfolio is segmented into three lease types, namely; fixed lease
proper ties, fixed and variable leased proper ties (F&V) and variable lease
proper ties.
Rentals under fixed lease agreements are determined by normal commercial lease
terms, with inflation linked annual escalations. F&V lease agreements comprise
approximately 50% initial fixed lease rental, with the remainder being a
variable rental equivalent to 90% - 98% of the hotel`s EBITDA (earnings before
interest, tax, depreciation and amortisation) after deducting the fixed lease
portion. The F&V lease category now includes the previous C-Corp leases.
Variable lease agreements consist of rentals based on EBITDA from the
property`s under lying operations.
The net asset value per linked unit as at 31 December 2011 was R12.61 (excluding
deferred taxation), a decrease of 9.6% from 2010 primarily as a consequence of a
general write-down in valuations of the standing portfolio. The net asset value
assumes payment in due course of the distribution outlined above. The weighted
average lease expiry period is 7.69 years.
5 Development and capital projects
The Fund invested a total of R54.7 million to complete various refurbishment
projects during the period under review.
Details of the significant refurbishment projects are detailed below:
- Refurbishment of the Protea Hotel Victoria Junction (Cape Town) at a cost of
R41 million and the Inn on the Square (Greenmarket Square - Cape Town) at a cost
of R35 million were both completed within budget and re-opened on 1 September
2011.
- The refurbishment of the Protea Hotel Hazyview was also completed during the
period at a cost of R7.5 million.
With the completion of these projects, all F&V lease properties, with the
exception of Protea Hotel Hluhluwe & Safaris have been refurbished and will
require minimum further capital expenditure in the short term. The high quality
of the Fund`s proper ties will provide a solid platform to benefit from improved
trading in a recovering market.
6 Debt facilities and rights issue
The group`s debt facilities with financial institutions as at 31 December 2011,
amounted to R1.95 billion (Absa R1.35 billion and Nedbank R606 million). Total
funds withdrawn on these facilities were R1.84 billion resulting in a loan to
value (LTV) ratio (total interest bearing liabilities/investment property value)
of 46%. The average cost of borrowings was 8.8% (2011: 8.9%) for the period
under review with 56% of the groups borrowings subject to fixed interest rates
through interest swap structures.
The Nedbank debt facilities have a five year maturity and expire in 2015 and
2016.
The holder s of the company`s securities have been advised in recent
announcements on the Securities Exchange News Services of the JSE Limited
("SENS") and in the press that Absa and Hospitality have been in negotiations
for the past 12 months regarding the refinancing of the Absa facility. Absa
initially indicated that they wished to reduce their exposure to the Group to
around R750 million and to this end, various proposals were discussed between
February and November 2011 with a view to achieving this objective, primarily by
including other financier s in what was to be a "club loan". To achieve this,
proposals were received from other institutions to take-up the balance of the
loan but for various reasons, these were withdrawn in late November 2011.
Prospective financier s, including Absa at that stage advised that refinancing
would be contingent on Hospitality reducing its current gearing levels by under
taking a Rights Issue to a minimum value of R500 million. The Absa facility
expired on 10 February 2012.
The Board of the company has resolved to under take a capital raising during the
first half of 2012 by way of a rights offer and a general issue of shares for
cash, which rights offer and general issue of shares for cash will not in the
aggregate raise more than R600 million. In terms of the company`s memorandum of
incorporation, read with the JSE Listings Requirements, the company`s
shareholders may authorise the directors to allot and issue the authorised but
unissued securities.
The successful outcome of the rights offer and general issue of shares for cash
will:
- reduce Hospitality`s debt levels and strengthen its balance sheet;
- reduce the gearing and interest cover ratios to levels acceptable to the board
and the company`s current and prospective lenders; and
- improve Hospitality`s negotiating capacity in its debt refinancing
negotiations.
The general authority to director s to issue shares for cash will result in the
earlier flow of funds to Hospitality compared to that of the rights offer which
will in par t reduce the Group`s interest exposure.
A notice has been sent to unitholders advising that a General Meeting will be
held at the Fund`s registered office on 28 March 2012 where various resolutions
will be proposed to effectively authorise the director s to allot and issue up
to 36 000 000 (thirty six million) "A" ordinary shares and up to 36 000 000
(thirty six million) "B" ordinary shares in the authorised but unissued capital
of the company, for the specific purposes of implementing the above.
In order to deal with the interim financing pre the conclusion of the rights
offer process, Absa have proposed a bridge loan facility for a six month period.
The interest rate on this bridging facility will however be at prime plus 2%
which is significantly higher than the current average cost of debt. In addition
Absa requires a restructuring fee of 1% p.a. on the current loan balance of
R1,35 billion to be paid in order to activate this facility effectively
amounting to R6,75 million This increase in margin and fee charge will have a
significant effect on the Fund`s distribution for the second six month period to
30 June 2012.
The rights offer process is underway and the necessary circular and notices are
being prepared. As the Fund has a linked unit structure which does not allow for
a disproportionate number of A and B linked units to be issued, a rights offer
cannot be implemented unless an underwrite or irrevocable commitments to follow
rights are secured for both the A and B linked units. In order to assist
unitholders in assessing the rights issue, the Fund will be publishing a
detailed two year financial forecast to provide the market with an assessment of
the Fund`s financial position and future distribution prospects. This forecast
will be included in the rights offer circular and details of the forecast
information published on SENS and in the press prior to the publication of the
circular. This forecast has been reviewed by the Company`s external auditors.
With regards to debt funding post the conclusion of the rights offer which is
expected towards end May 2012, Hospitality is in negotiation with Absa and other
funders to provide term loans totalling R850 million for varying periods. These
loans are however subject to approval of the respective institution`s credit
committees and the successful conclusion of a rights offer in the amount of R500
million.
The successful conclusion of the rights offer will result in the Fund`s LTV
ratio decreasing to around 35% (based on current property valuations) and an
interest cover ratio (ICR) of approximately 2,3 times.
The interest swap agreements that were in place with Absa at yearend for R1.04
billion remain unchanged.
7 Unitholders
During the period some 27.9% of the A-linked units and 27.3% of the B-linked
units were traded on the JSE Limited.
8 Changes to the composition of the Board
Mr F M Berkeley resigned from the Board on 14 February 2012 to prevent any
perceived conflicts of interest in respect of ongoing debt restructure
negotiations between Hospitality and Nedbank where Mr Berkeley is currently
employed. The Board is most grateful to Mr Berkeley for his valuable leader ship
and contribution during his tenure as chairman and director. Mr W C Ross has
been appointed as Acting Chairman of the Board and Mr s L de Beer as Acting
Chairman of the Audit Committee.
9 Prospects
Recent hotel trading conditions have been encouraging and early signs of a
potential recover y across the industry seem evident. Management are focussed on
successfully concluding the rights issue and finalising the term loans with the
various financial institutions.
Distributions for the six month period to June 2012 will remain under pressure
mainly due to higher Absa short term financing costs and debt restructuring fee.
These are however once-off extraneous costs and the Fund is well positioned in
the longer term, with its high quality portfolio of assets to benefit from
improved trading conditions.
Any reference to future financial performance included in this announcement has
not been reviewed and reported on by Hospitality`s external auditors and does
not constitute on earnings forecast.
10 Renewal of Cautionary
Further to the cautionary announcement dated 23 January 2012 and given the
status of the refinancing of the Absa facility shareholders are advised to
continue exercising caution when dealing in the company`s securities until a
further announcement is made in this regard.
11 Payments of Debenture Interest
Unitholders are advised that in applying section 46 as read with section 4 of
the Act, Hospitality does not satisfy the solvency and liquidity test as it
pertains to the liquidity of the company. In the circumstances, and having
regard to the legal advice obtained, the board is unable at this stage to
authorise the distribution payment for the six month period ended 31 December
2011.
With the Absa bridge loan in place, the board is of the view that the
distribution as set out above can be declared, once the following conditions
have been met:
* Irrevocable commitments to follow rights and/or subscriptions for the
proposed general issue of linked units for cash and/or underwriting of the
proposed rights offer to a combined value of no less than R500 million being
obtained;
* loan agreements in excess of 12 months being concluded for the balance of
the refinancing of the Absa debt; and
* unitholders approving the placing of control of the authorised unissued
shares under the control of the directors for purposes of undertaking the rights
issue and/or issue of shares for cash.
Given the rights issue timetable, the earliest date by which these conditions
are likely to be met is the end of March 2012 at which point a further
announcement detailing the salient dates of the distribution will be published.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The preparation of these unaudited interim results was supervised by the
Financial Director, Ridwaan Asmal.
The condensed financial statements have been prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS), including the presentation and disclosure requirements of
IAS34 and the AC500 series issued by the South African Institute of Chartered
Accountants and the requirements of the Companies Act of South Africa, 2008.
KPMG Inc, the independent auditor, has not reviewed the financial statements.
The accounting policies used are consistent with those used in the annual
financial statements for the year ended 30 June 2011.
By order of the Board
W C Ross G A Nelson
(Acting Chairman) (Chief Executive Officer)
6 March 2012
Directors: W C Ross(Acting Chairman)*+, G A Nelson (CEO), K H Abdul-Karrim*+,
Y Aminzadeh (Dutch)*, R Asmal, L de Beer *+, Z N Kubukeli*+, M B Madumise*+,
W J Midgley*, A S Rogers (Deputy CEO) (*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
www.hpf.co.za
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 06/03/2012 12:16:29 Produced by the JSE SENS Department.
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