| Thu 24 Aug 2006, 16:17 | | Hospitality - Reviewed Results For The Period Ende |
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HPA HPB
HPA
Hospitality - Reviewed Results For The Period Ended 30 June 2006
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")
REVIEWED RESULTS FOR THE PERIOD ENDED 30 JUNE 2006
- 4 1/2 Month Trading Period
- Distribution per A-linked unit 37.40c per forecast
- Distribution per B-linked unit 45.12c up 17.6%
- NAV increased by 15.7%
- 24.2% Effective Gearing Ratio
1. INTRODUCTION
Hospitality Property Fund listed on the JSE Limited on the 16th of February
2006. The Fund is the first specialised property loan stock company (PLS)
investing in the hotels and leisure sector, providing investors with
exposure to both the property and hospitality industries.
The Fund"s units in issue comprise A- and B-linked units, with A-linked
unit having a preferential claim to earnings, whilst the B-linked units
receive the balance of the earnings.
2. RESULTS
The prospectus forecast assumed an effective date of 1 February 2006 for
transfer of all properties and listing of the Fund. Delays in the transfer
of certain properties resulted in an actual listing date of 16 February
2006. As a result an adjusted prospectus forecast (APF) reflecting actual
property transfer and listing dates was prepared as a basis for comparison.
Adjusted
Actual Prospectus
Variance
4 1/2-Month Trading Period forecast %
(R"000) (R"000)
Contractual rental income 47 193 43 607 8.2
Fund expenses (6 356) (5 003) (27.0)
Interest paid (10 180) (11 200) 9.1
Listing expenses (1 604) (4 990) 67.9
Profit before debenture interest 29 053 22 414 29.6
Debenture interest (29 851) (27 403) 8.9
Distribution - "A linked unit" (13 530) (13 530) 0.0
Distribution - "B linked unit" (16 321) (13 873) 17.6
Distribution per "A linked unit" (cents) 37.40 37.40 0.0
Distribution per "B linked unit" (cents) 45.12 38.35 17.6
For the 4 1/2-month period the distribution per A-linked unit amounted to
37.40 cents in line with the APF translating to an annualised yield of
9.68% on issue price. The distribution per B-linked unit was 45.12 cents, a
17.6% increase over the APF distribution forecast, equating to an
annualised yield of 11.68% on issue price.
The growth in distribution is mainly as a result of increased rental income
received from the properties under variable rental structures. During the
period, operational profitability increased due to favourable trading
conditions, implementation of effective hotel and asset management
structures critical review of expenditure and a focus on operating
efficiencies.
3. REGULATORY REPORTING
Notwithstanding the above like-for-like comparison, in terms of regulatory
reporting requirements, the Income Statement below reports on an actual
4 1/2-month period compared to a prospectus forecast of a five-month
period.
4. PROPERTY PORTFOLIO
The Fund"s portfolio comprises interests in 16 hotel and resort properties
and can be segmented into three lease types, namely: fixed leases, C-Corp
leases and variable leases.
Rentals under fixed lease agreements are determined by normal contractual
lease terms with inflation-linked annual escalations. C-Corp lease
agreements comprise approximately 50% fixed lease rental, with the
remaining being a variable rental equivalent to 90% of the hotel"s earnings
before income tax,depreciation and amortisation (EBITDA) after deducting
the fixed lease portion. Variable lease agreements comprise rentals based
on EBITDA, from the properties" underlying operations. The Birchwood
Executive Hotel & Conference Centre, initially under a C-Corp lease, was
converted to a fixed lease agreement effective from transfer.
Contractual rental income contribution to the Fund per lease type:
%
R"000 of income
Fixed Lease Properties 29 447 62.4
C-Corp Lease Properties 13 693 29.0
Variable Lease Properties 4 053 8.6
Rental income 47 193 100.0
Throughout the trading period all properties in the portfolio were fully
let.The average lease period is nine years with the first lease expiring in
two and a half years.
5. VALUATION OF PROPERTIES
Independent valuers valued the Fund"s portfolio at year-end at R1.161
billion Given the historic property cost at listing of R997 million, this
amounted to a R164 million revaluation gain. The resulting net asset value
(NAV) totalled
1 142 cents per unit, which represents an increase of 15.7% from the
listing NAV of 987 cents per unit.
At 30 June 2006 the combined units were trading at a 7.2% discount to NAV.
Thiscompares to an aggregate 27% premium to NAV for the listed property
sector at the same date.
The Funds NAV increase is as a result of the favourable historic purchase
price and the current buoyant conditions in both the property and
hospitality industries.
6. BORROWINGS
The Fund"s weighted average cost of debt is currently 9.19% and the
effective gearing ratio is 24.2%. An interest rate swap has been entered on
interest bearing liabilities of R253 million at an all-in-rate of 9.08%
per annum, expiring on 10 February 2009. The Fund currently has facilities
of R175 million available for future investment opportunities.
7. BEE CREDENTIALS
The Fund has a BEE ownership component of 12.5% of market capitalisation
and is considering initiatives to further enhance this.
8. CITY LODGE TRANSACTION
During this reporting period the Fund evaluated the possibility of
acquiring the City Lodge Group"s property portfolio and as a result a
cautionary announcement was made to unitholders. Based on feedback from the
shareholders of City Lodge and further discussions with the management of
City Lodge, the Fund"s Board resolved not to proceed with the proposed
acquisition at that stage.
9. POST-BALANCE SHEET EVENTS
The Fund is currently in negotiations in respect of several potential
property acquisitions, details of which will be announced in due course.
10. PROSPECTS
The Fund is seeking to implement a number of development and refurbishment
opportunities within the existing portfolio. Operating performance of the
C-Corp and variable lease properties is continuously being improved as a
result of effective asset management. To this end the Board is confident
that the forecast as set out in the listing prospectus will be achieved.
11. PAYMENT OF DEBENTURE INTEREST
Unitholders will receive debenture interest payment number 1, for the
4 1/2 month period ended 30 June 2006, of 37.40 cents per A-linked unit and
45.12 cents per B-linked unit.
2006
Last day to trade cum interest Friday, 8 September
Linked units will trade ex-interest Monday, 11 September
Record date Friday, 15 September
Payment date Monday, 18 September
Unitholders may not dematerialise or rematerialise their linked units
between Monday, 11 September 2006 and Friday, 15 September 2006, both dates
inclusive By order of the Board
T E Sewell B Hutchison
Chairman Chief Executive Officer 24 August 2006
INCOME STATEMENTS
for the period ended 30 June 2006
4 1/2-months 5 months
Unaudited
Reviewed Prospectus
Actual forecast
2006 2006
R"000 R"000
Revenue 48 970 47 709
Rental income - contractual 47 193 47 709
- straight-line accrual 1 777
Expenditure (6 355) (5 498)
Property and other operating expenses (6 355) (5 498)
Operating profit 42 615 42 211
Listing expenses (1 604) (4 990
Net finance costs (40 031) (42 211)
Received 1 586
Paid (11 766) (12 168)
Debenture interest (29 851) (30 043)
Profit/(loss) before fair value
adjustments and taxation 980 (4 990)
Fair value adjustments 153 315
Revaluation of
investment properties 163 642
Straight-line rental income accrual (1 777)
Interest rate swaps (8 550)
Profit/(loss) before taxation 154 295 (4 990)
Taxation (47 456)
Profit/(loss) for the period 106 839 (4 990)
Reconciliation between earnings,
headline earnings and
distributable earnings:
Profit/(loss) for period 106 839 (4 990)
Adjustments:
Debenture interest 29 851 30 043
Earnings 136 690 25 053
Adjustments:
Fair value - investment
properties revaluation
(net of deferred tax) (116 186)
Fair value - straight-line rental income 1 777
Headline earnings 22 281 25 053
Listing expenses not
included in distribution 797 4 990
Fair value - interest rate swaps 8 550
Straight-line rental income (1 777)
Distributable earnings 29 851 30 043
Number of A-linked units 36 174 723 36 174 723
Number of B-linked units 36 174 723 36 174 723
Distribution per A-linked unit (cents) 37.40 40.00
Distribution per B-linked unit (cents) 45.12 43.00
Total distribution per unit (cents) 82.52 83.00
Earnings per A-linked unit (cents) 188.93 35.00
Earnings per B-linked unit (cents) 188.93 35.00
Total earnings per unit (cents) 377.86 70.00
Headline earnings per A-linked unit (cents) 30.80 35.00
Headline earnings per B-linked unit (cents) 30.80 35.00
Total headline earnings per unit (cents) 61.60 70.00
Earnings/(loss) per share (cents) 147.67 (13.79)
BALANCE SHEET
At 30 June 2006
Reviewed
Actual
2006
R"000
ASSETS
Non-current assets 1 161 144
Investment properties 1 159 367
Straight-line rental income accrual 1 777
Current assets 21 614
Trade and other receivables 17 260
Cash and cash equivalents 4 354
Total assets 1 182 758
EQUITY AND LIABILITIES
146 303
Equity
Share capital and share premium 39 464
Retained income 980
Fair value reserve 105 859
Non-current liabilities 987 363
Debentures 680 085
Interest bearing liabilities 251 272
Derivative liability 8 550
Deferred taxation 47 456
Current liabilities 49 092
Trade and other payables 19 241
Debenture interest payable 29 851
Total equity and liabilities 1 182 758
A units B Units
Net asset value per linked unit R11.42 R11.42
STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2006
Share Share Retained Fair value
capital premium income reserve Total
R"000 R"000 R"000 R"000 R"000
Issue of ordinary shares 7 43 402 43 40
Share issue expenses (3 945) (3 945)
Profit for the period 106 839 106 839
Transfer to/(from) fair
value reserve -
revaluation of
investment properties
(net of deferred tax) (116 186) 116 186
Transfer to/(from) fair
value reserve -
straight-line
rental income 1 777 (1 777)
Transfer to/(from) fair
value reserve -
interest rate swaps 8 550 (8 550)
Balance at 30 June 2006 7 39 457 980 105 859 146 303
CONDENSED CASH FLOW STATEMENT
for the period ended 30 June 2006
Reviewed
Actual
2006
R000
Net cash inflow from operating activities 31 035
Cash generated from operations 41 215
Interest received 1 586
Interest paid (11 766)
Net cash outflow from investing activities (997 502)
Acquisition of investment properties (997 502)
Net cash inflow from financing activities 970 821
Proceeds from the issue of linked units 723 494
Share issue expenses (3 945)
Interest bearing liabilities raised 251 272
Cash and cash equivalents at end of period 4 354
CONDENSED SEGMENTAL INFORMATION
Fixed lease C-Corp lease Variable lease
agreements agreements agreements Corporate Total
R"000 R"000 R"000 R"000 R"000
Income statement
Segment revenue 31 224 13 693 4 053 48 970
Expenditure (6 355) (6 355)
Segment operating
results 31 224 13 693 4 053 (6 355) 42 615
Listing expenses (1 604) (1 604)
Net finance costs (40 031) (40 031)
Profit before
fair value
adjustments
and taxation 31 224 13 693 4 053 (47 990) 980
Fair value
adjustments 114 853 61 028 13 402 (35 968) 153 315
Profit before
taxation 146 077 74 721 17 455 (83 958) 154 295
Taxation (47 456) (47 456)
Segment result 146 077 74 721 17 455 (131 414) 106 839
Balance sheet
Non-current
assets
Investment
properties* 732 725 358 350 70 069 1 161 144
Current assets 1 761 4 893 1 175 13 785 21 614
Segment assets 734 486 363 243 71 244 13 785 1 182 758
LIABILITIES
Non-current
liabilities 987 363 987 363
Current
liabilities 14 142 34 950 49 092
Segment
liabilities 14 142 - - 1 022 313 1 036 455
* Acquisition of segment assets/capital expenditure for the period.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the Companies
Act of South Africa. KPMG Inc. has reviewed the financial statements and
their unqualified review opinion is available for inspection at the Fund"s
registered office.
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.รบ Deferred taxation on the fair value adjustment of
investment properties has been calculated at 29%.
Directors: T E Sewell (Chairman)*#, B Hutchison (CEO), R Asmal,
K H Abdul-Karrim*#, Y Aminzadeh (Dutch)*, M S Hoosen*+, B M Madumise*#,
G A Nelson*, J J P G Bass (British)*
(*Non-Executive, #Independent)
Registered Office: 1st Floor, Building 2, 135 Patricia Road, Sandown,
Sandton 2196
Tel: +27 11 775 6535 Fax: +27 11 775 6425 E-Mail: info@hpf.co.za
Website: www.hpf.co.za
Date: 24/08/2006 04:17:37 PM Produced by the JSE SENS Department
