| Tue 20 Feb 2007, 17:38 | | HPA/HPB - Hospitality - Unaudited Interim Results |
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HPA HPB
HPA
HPA/HPB - Hospitality - Unaudited Interim Results For The Six Months
Ended 31 December 2006 and Payment Of Debenture Interest
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")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
- Distribution per A-linked unit 49.63c per forecast
- Distribution per B-linked unit 68.72c up 15.9%
- Black Economic Empowerment (BEE) shareholding doubles to 30.4%
- Acquisitions total Rm204
COMMENTS
1. RESULTS
Distributable earnings per A-linked unit amounted to 49.63c, as set out in
the listing prospectus forecast. The distributable earnings per B-linked
unit was 68.72c, a 15.9% increase over the prospectus forecast.
The predominant factor contributing to the positive variance in
distributable earnings was an increase in rental income received from the
variable rental structures. The current trading climate in the hospitality
industry is buoyant and is characterised by substantial growth in demand
for hotel rooms. This, coupled with the continued focus on improving
operating efficiencies within the hotel portfolio contributed to the strong
performance.
2. PROPERTY PORTFOLIO
The Fund`s portfolio comprises interests in 16 hotel and resort properties,
which were independently valued at 30 June 2006 at R1.2 billion.
The portfolio is 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% initial fixed lease rental, with the
remaining being a variable rental equivalent to 90% of the hotel`s earnings
before interest, tax, depreciation and amortisation (EBITDA) after
deducting the fixed lease portion. Variable lease agreements comprise
rentals based on EBITDA, from the properties` underlying operations.
% of
R`000 income
Fixed Lease Properties 39 521 63.7
C-Corp Lease Properties 17 159 27.7
Variable Lease Properties 5 342 8.6
Rental income 62 022 100.0
Throughout the trading period all properties in the portfolio were fully
let.The average lease period is eight and a half years with the first lease
expiring within two years.
3. ACQUISITONS
As announced on 18 December 2006, the acquisitions of four properties
(Protea Victoria Junction Hotel, Richards Hotel, Bayshore Inn and Imperial
Hotel) were concluded, amounting to a total purchase consideration of R204
million at an estimated combined forward yield of 12.2%. The Protea
Victoria Junction Hotel, Richards Hotel and the Bayshore Inn were
transferred during February 2007, whilst the transfer of the Imperial Hotel
is expected during March 2007.
Current Post Acquistion % Change
Number of hotels 16 20 25.0
Number of rooms 2 131 2 583 21.2
Investment Properties (Rm`s) 1 169 1 373 17.5
Market Capitalisation (Rm`s) 973 1 178 21.1
4. BEE INITIATIVES
Hospitality subscribes to the provisions of the Property Sector
Transformation Charter. In our announcement dated 18 December 2006,
unitholders were advised that the aforementioned acquisitions formed part
of the implementation of Hospitality`s overall BEE Initiative and its
objective of introducing meaningful participation of Historically
Disadvantaged South Africans (HDSAs) to the listed property sector. The
units issued in respect of the acquisitions were renounced in favour of
Nobuntu Investments II (Pty) Ltd, a majority black-owned company.
Following the conclusion of the transaction, Hospitality`s BEE ownership
will double to 30.4% of units in issue.
5. BORROWINGS
The Fund`s weighted average cost of debt for the reporting period was 9.2%
and the effective gearing ratio was 25.2%. An interest rate swap has been
entered into on interest bearing liabilities of R253 million, expiring on
10 February 2009. Towards the end of the reporting period the Fund
consolidated its debt facility with Absa Bank as sole lender, resulting in
a reduction of the margin. This benefit will be realised in the current
period. The all-in-rate of the swap at the end of the reporting period is
8.83%. At 31 December 2006 the Fund had a facility of R192 million
available for future investment opportunities.
6. DIRECTORATE
As announced to unitholders on 12 October 2006, Mr B Hutchison resigned as
Chief Executive Officer (CEO) effective 31 October 2006 and was replaced by
Mr G A Nelson as CEO and Mr Y Aminzadeh as Deputy CEO. Mr A S Rogers was
appointed to the Board effective 1 February 2007 in the position of Chief
Operating Officer.
7. PROSPECTS
The Fund continues to assess potential acquisitions and is seeking to
implement several development and refurbishment opportunities within the
existing portfolio. Given the continued favourable trading climate in the
hospitality and property industries and the resulting growth in rental
income, the Board is confident that the following forecast as set out in
the trading update of 13 February 2007 will be achieved:
"An increase in distributable earnings of between 15% and 20% per B-linked
units can be expected for the year ending 30 June 2007 compared to that set
out in the prospectus forecast.
The above information has not been reviewed or reported on by the company`s
auditors."
8. PAYMENT OF DEBENTURE INTEREST
Unitholders will receive debenture interest payment number 2, for the six
month period ended 31 December 2006, of 49.63c per A-linked unit and 68.72c
per B-linked unit.
Last day to trade cum interest Friday, 9 March 2007
Linked units will trade ex-interest Monday, 12 March 2007
Record date Friday, 16 March 2007
Payment date Monday, 19 March 2007
Unitholders may not dematerialise or rematerialise their linked units
between Monday, 12 March 2007 and Friday, 16 March 2007, both dates
inclusive.
By order of the Board
T E Sewell G A Nelson
Chairman Chief Executive Officer
20 February 2007
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2006
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 16 026
Transfer to/(from) fair
value reserve - straight-line
rental income 2 133
Transfer to/(from) fair value
reserve-
interest rate swaps (16 026)
Balance at 30 June 2006 7 39 457 3 113
Fair value
reserve Total
R`000 R`000
Balance at 1 July 2006 105 859 146 303
Profit for the period 16 026
Transfer to/(from) fair
value reserve - straight-line
rental income (2 133)
Transfer to/(from) fair value
reserve-
interest rate swaps 16 026
Balance at 30 June 2006 119 752 162 329
INCOME STATEMENT
for the six months ended 31 December 2006
Prospectus
Actual Forecast
2006 2006
R`000 R`000
Revenue 64 155 57 973
Rental income - contractual 62 022 57 973
- straight-line accrual 2 133 -
Expenditure (7 017) (6 729)
Property and other operating expenses (7 017) (6 729)
Operating profit 57 138 51 244
Net finance costs (55 005) (51 244)
Received 566 -
Paid (12 759) (11 839)
Debenture interest (42 812) (39 405)
Profit before fair value adjustments 2 133 -
Fair value adjustments 13 893 -
Straight-line rental income accrual (2 133) -
Interest rate swaps 16 026 -
Profit for the period 16 026 -
Reconciliation between earnings,
headline earnings and distributable
earnings:
Profit for the period 16 026 -
Adjustments:
Debenture interest 42 812 39 405
Earnings 58 838 39 405
Adjustments:
Fair value - straight-line rental income 2 133 -
Headline earnings 60 971 39 405
Fair value - interest rate swaps (16 026) -
Straight-line rental income (2 133) -
Distributable earnings 42 812 39 405
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) 49.63 49.63
Distribution per B-linked unit (cents) 68.72 59.30
Total distribution per combined unit 118.35 108.93
Earnings per A-linked unit (cents) 81.32 54.46
Earnings per B-linked unit (cents) 81.32 54.46
Total earnings per combined unit 162.62 108.92
Headline earnings per A-linked unit
(cents) 84.27 54.46
Headline earnings per B-linked unit
(cents) 84.27 54.46
Total headline earnings per combined
unit 168.54 108.92
Earnings per share (cents) 44.30 -
BALANCE SHEET
Audited
31 December 2006 30 June 2006
R`000 R`000
ASSETS
Non-current assets 1 172 632 1 161 144
Investment properties 1 168 722 1 159 367
Straight-line rental income accrual 3 910 1 777
Current assets 24 298 21 614
Trade and other receivables 11 175 17 260
Derivative asset 7 476 -
Cash and cash equivalents 5 647 4 354
Total assets 1 196 930 1 182 758
EQUITY AND LIABILITIES
Equity 162 329 146 303
Share capital and share premium 39 464 39 464
Retained income 3 113 980
Fair value reserve 119 752 105 859
Non-current liabilities 977 848 987 363
Debentures 680 085 680 085
Derivative liability - 8 550
Interest-bearing liabilities 250 307 251 272
Deferred taxation 47 456 47 456
Current liabilities 56 753 49 092
Trade and other payables 13 941 19 241
Debenture interest payable 42 812 29 851
Total equity and liabilities 1 196 930 1 182 758
Net asset value per A linked unit (R) 11.64 11.42
Net asset value per B linked unit (R) 11.64 11.42
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) and comply with IAS 34, Interim
Financial Reporting, and the requirements of the Companies Act of South
Africa. The accounting policies applied are consistent with those in the
annual financial statements for the period ended 30 June 2006.
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 fair value reserves 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 29%.
CONDENSED CASH FLOW STATEMENT
Audited
31 December 2006 30 June 2006
R`000 R`000
Net cash inflow from operating activities 13 746 31 035
Cash generated from operations 55 790 41 215
Interest received 566 1 586
Interest paid (12 759) (11 766)
Debenture interest (29 851) -
Net cash outflow from investing activities (11 488) (997 502)
Acquisition of investment properties (11 488) (997 502)
Net cash inflow/(outflow) from financing
activities (965) 970 821
Interest bearing liabilities raised (965) 251 272
Proceeds from the issue of linked units - 723 494
Share issue expenses - (3 945)
Net increase in cash and cash equivalents 1 293 4 354
Cash and cash equivalents at beginning of
period 4 354 -
Cash and cash equivalents at end of the
period 5 647 4 354
CONDENSED SEGMENTAL INFORMATION
Fixed lease C-Corp lease Variable lease
agreements agreements agreements
R`000 R`000 R`000
Income statement
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
Non-current assets
Investment properties* 741 845 360 718 70 069
Current assets 1 135 5 928 775
Segment assets 742 980 366 646 70 844
LIABILITIES
Non-current liabilities
Current liabilities 10 794
Segment liabilities 10 794 - -
Corporate Total
R`000 R`000
Income statement
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
Non-current assets
Investment properties* 1 172 632
Current assets 16 460 24 298
Segment assets 16 460 1 196 930
LIABILITIES
Non-current liabilities 977 848 977 848
Current liabilities 45 959 56 753
Segment liabilities 1 023 807 1 034 601
*Acquisition of segment assets/capital expenditure for the period.
Directors: T E Sewell (Chairman)*+, G A Nelson (CEO), Y Aminzadeh (Deputy
CEO)
(Dutch)
R Asmal, K H Abdul-Karrim*+, J J P G Bass (British), M S Hoosen*+, B M
Madumise*+, A S Rogers
(*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: 20/02/2007 17:38:14 Produced by the JSE SENS Department.
