Wrap Text
Reviewed Results for the year ended 30 June 2014
and distribution payment declaration
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
Income tax reference number: 9770/799/1/47
("Hospitality" or "the Fund" or "the company")
Reviewed Results for the year ended 30 June 2014
and distribution payment declaration
Comments
1. Introduction
Hospitality is the only Specialised Real Estate Investment Trust ("REIT") listed on the JSE that
offers investors an investment vehicle in the hospitality sector through the ownership of a
portfolio of hotel and leisure properties.
The Fund benefited from a buoyant hospitality sector, once again returning strong distribution
growth of 14,5% per combined linked unit on the prior year and exceeded the forecast set out in
the December 2013 results announcement by 0,5% ("forecast"). The A-linked unit distribution
grew by 5,0% to 141,35 cents, in line with the Fund's distribution structure and the forecast.
Distribution on the B-linked unit showed an increase of 85,0% to 33,45 cents compared to the
previous year and exceeding the forecast by 2,6%. The Fund's focus on increasing its exposure
to large hotel properties in major metropolitan areas is paying off, with growing business travel
demand in these nodes. Its properties in Cape Town and Sandton continue to perform well, in
particular The Westin Cape Town, the Radisson Blu Waterfront and the Radisson Blu Gautrain
Hotel. In line with the Fund's strategy to constantly enhance the quality of core properties to
sustain their performance, it continually invests to improve the facilities at these hotels. Selective
refurbishments were also carried out at certain properties in the Fund's portfolio in order to
maintain their appeal and ensure sustainable rental income streams.
Reflecting Hospitality's proactive asset management strategy, the Fund also introduced new hotel
operators at the Mount Grace Country House and Spa ("Mount Grace") and the Kopanong
Hotel & Conference Centre ("Kopanong"), and is working with these new managers to reposition
the hotels to achieve Hospitality's required returns.
2. Trading environment
According to the STR Global South Africa Hotel Review, the hotel industry reported a year-on-
year increase in occupancy of 1,4% to 62,3% and average room rates ("ARR") were up 9,6%
to R1,001, resulting in revenue per available room ("RevPAR") growth of 11,1% for the year
ended 30 June 2014. The Fund's trading figures for that portion of its portfolio which is subject
to variable rental income and excluding conference hotels (hotels where the revenue generated
from conferencing exceeds rooms revenue) outperformed the broader industry, with an overall
occupancy of 61.4% (2013: 60,1%). Its overall ARR growth of 14,0% to R1,162 and RevPar growth
of 16,5% was well ahead of the industry.
The consistent RevPAR growth confirmed the recovery trend that has benefited the industry
since October 2011. With demand for hotel accommodation continuing to increase and limited
creation of additional room stock, demand pull is driving room rate growth.
Insofar as the Fund's fixed lease properties are concerned, management constantly monitors
and interacts with its tenants in order to maintain a full understanding of their underlying
business performance and evaluate the serviceability of rentals. During the year, the Fund's asset
management team was bolstered to ensure it has the capacity to effectively support the hotel
operators in optimising the performance of their properties.
3. Results
The Fund reported solid rental income growth of 19,6% to R426,2 million (2013: R356,3 million).
Like-for-like rental income growth for the portfolio's properties subject to variable rental income
(excluding Radisson Blu Gautrain Hotel which was acquired in May 2013 and Kopanong which
was previously on a fixed lease) was 13,3%, driven mainly by the higher ARR achieved by the
Fund. RevPAR was boosted in December 2013 as many foreign dignitaries travelled to South
Africa to pay tribute to late President Nelson Mandela. The average rental increase of only 4,2%
on the fixed lease portion of the portfolio, including a 3% escalation in the rental at Birchwood
Hotel and OR Tambo Conference Centre ("Birchwood"), (contributing 19,7% of total current
rental income) dampened overall rental income growth. Strong demand in Sandton and Cape
Town, where the Fund has several well-located properties, underpinned the Fund's growth.
While trading conditions in the first nine months of the year were buoyant and demand trended
consistently higher, the timing of public holidays and National Elections in April and May 2014
dampened Hospitality's business and conferencing income streams in the last three months
of the financial year. After changing hotel operators from 1 December 2013 at Mount Grace
(due to lost market share) and at Kopanong (tenant placed in business rescue and defaulted on
lease payments) the performance of these properties is yet to recover to the level required by
the Fund. Accordingly, Hospitality is restructuring and repositioning these properties with the
operators to improve returns.
Fund expenses increased by R10,6 million (35,6%) to R40,5 million (2013: R29,9 million) with the
major contributors being:
- An early repayment penalty of R4,9 million that was paid to Absa Bank ("Absa") in the
second half of the year after the Fund's R550 million facility with Absa was repaid with
proceeds from the domestic medium–term note ("DMTN") programme and an additional
facility from Nedbank.
- Debt raising fees of R1,9 million in respect of the Absa term loans which were being
amortised over the original loan period that were expensed in the second half of the year;
- Higher employee costs following the recruitment of additional specialist skills to enhance the
Fund's capacity to effectively manage its growing portfolio and the increasing proportion of
fixed and variable leases.
- Expenses benefitted from a net bad debt recovery of R1.5 million. R5,7 million was recovered
n the second half of the year from the previous tenant at Kopanong after raising a provision
f R4.2 million in the first six months of the year.
Net finance costs increased 10,6% to R146,3 million (2013: R132,3 million), in line with higher
debt levels after funding the acquisition of the Radisson Blu Gautrain Hotel with the DMTN
programme. The 50 basis point interest rate hike late in the period had a marginal impact.
Distributable earnings per combined linked unit grew by 14,5% to 174,80 cents (2013:
152,71 cents), and exceeded the forecast of 173,96 cents by 0,5%. The A-linked unit distribution
of 141,35 cents (2013: 134,63 cents) showed a 5,0% increase, and was in line with forecast.
The reported distribution of the B-linked unit grew 85,0% to 33,45 cents (2013: 18,08 cents),
exceeding the forecast by 2,6%.
The following table reflects the operating financial results for the year ended 30 June 2014
compared to the previous financial year:
2014 2013 Variance Variance
(R'000) (R'000) (R'000) (%)
Contractual rental 426 276 356 337 69 939 19,6
Profit on sale of properties – 948 (948) (100,0)
Fund expenses (40 524) (29 878) (10 646) (35,6)
Net finance costs (146 326) (132 320) (14 006) (10,6)
Taxation (181) (1 158) 977 84,4
Income from associates 238 125 113 90,4
(239 483) (194 054) (45 429) (23,4)
Debenture interest (240 014) (200 184) (39 830) (19,9)
Recoupment of debenture interest 531 6 130 (5 599) (91,3)
Number of linked units 138 150 137 238 912 0,7
Distribution – A-linked unit (cents) 141,35 134,63 6,72 5,0
– Interim 69,83 66,51 3,32 5,0
– Final 71,52 68,12 3,40 5,0
Distribution – B-linked unit (cents) 33,45 18,08 15,37 85,0
– Interim 19,25 9,19 10,06 109,5
– Final 14,20 8,89 5,31 59,7
Combined distribution (cents) 174,80 152,71 22,09 14,5
– Interim 89,08 75,70 13,38 17,7
– Final 85,72 77,01 8,71 11,3
4. Funding and capital structure
The group's debt facilities with financial institutions as at 30 June 2014 amounted to
R1,89 billion. Total funds drawn on these facilities were R1,77 billion resulting in a loan to
value (LTV) ratio (total interest–bearing liabilities/investment properties plus properties
held for sale) of 36,72% (2013: 34,4%). The interest cover ratio was 2,64 which is well
within the minimum covenant level of 2,00 required by the debt providers.
The weighted average cost of borrowings was 9,14% (2013: 8,56%) for the period under
review with 58% of the group's borrowings at year-end subject to fixed interest rates.
Repayment
Facility Interest rate date
Loan 1 176 300 000 3-month JIBAR plus 2,9% July 2015
Loan 2 400 000 000 3-month JIBAR plus 2,8% Oct 2019
Loan 3 30 250 000 3-month JIBAR plus 2,85% Oct 2018
Loan 4 150 000 000 3-month JIBAR plus 2,38% Feb 2018
Loan 5 150 000 000 3-month JIBAR plus 2,84% June 2016
Loan 6 50 000 000 3-month JIBAR plus 2,38% Feb 2018
Loan 7 67 000 000 3-month JIBAR plus 2,38% July 2018
1 023 550 000
Corporate bonds
Secured – HPF 01 150 000 000 3-month JIBAR plus 1,82% April 2016
Unsecured – HPF 02 40 000 000 3-month JIBAR plus 2,4% April 2015
Unsecured – HPF 03 80 000 000 3-month JIBAR plus 2,7% April 2016
Secured – HPF 04.1 300 000 000 3-month JIBAR plus 2,0% Feb 2017
Secured – HPF 04.2 100 000 000 3-month JIBAR plus 2,0% Feb 2017
Secured – HPF 05 200 000 000 Fixed at 9,89% Feb 2017
870 000 000
1 893 550 000
SWAPS/FIXED
Expiry
Collar swap – Floor 6.0%/Ceiling
Nedbank swap 1 150 000 000 9,09% Sep 2016
Nedbank swap 2 150 000 000 Vanilla swap – 6,4% Oct 2016
RMB swap 2 346 667 000 Vanilla swap – 7,96% July 2016
Collar swap-Floor 6,65%/Ceiling
RMB swap 3 250 000 000 9,20% Feb 2016
Secured – HPF 05 200 000 000 Fixed at 9,89% Feb 2017
1 096 667 000
The Fund continually evaluates and plans the optimal method of funding new acquisitions
and replacing debt with consideration given to the options of new unit issues, replacement
of bank funding and the group's DMTN programme. When issuing new debt the group
endeavours to optimally spread the maturity to minimise its exposure to large debt
maturities in any single year.
In this regard the expiry profile was restructured in the first half of the period to provide
an even expiry profile with limited concentration exposure.
Rand Merchant Bank ("RMB"), acting as arranger, successfully facilitated a R500 million
secured note issue on 17 February 2014. The issue comprised R300 million floating rate
notes at 3-month JIBAR plus 200bps and R200 million fixed rate notes at an interest rate
of 9,89% for a three-year period. Nedbank also provided a new term loan of R50 million at
3-month JIBAR plus 238bps. The proceeds were utilised to repay all the facilities previously
provided by Absa amounting to R550 million. This decision was taken due to the onerous
conditions contained in the Absa loan agreement which was hampering business decisions.
The Fund paid an early repayment penalty of R4,9 million to Absa and debt raising fees of
R1,9 million which were being amortised over the loan period were expensed in the second
half of the year. The two Absa swaps were also novated to RMB on 10 February 2014. The
Fund thanks Nedbank, RMB, Bowman Gilfillan and investors in the note programme for their
continued support and assistance in restructuring and enhancing the Fund's debt facilities.
The Fund's application to the JSE for REIT status was granted with effect from 1 July 2013
and it has until 1 July 2015 to convert the debentures to shares. The conversion is in
progress and is expected to be completed by December 2014. In conjunction with this
process, Deloitte & Touche Corporate Finance was appointed to conduct a review of
the Fund's capital structure and a number of options are currently being explored.
5. Property portfolio
The Fund's portfolio comprises interests in 26 hotel and resort properties in South Africa.
As at 30 June 2014, the carrying amount of the portfolio was R4,8 billion.
The net asset value (NAV) per linked unit as at 30 June 2014 was R11,40, an increase
of 4,1% from 2013 primarily as a result of an increase in the valuation of the standing
portfolio.The combined NAV of R22,80 is in line with the combined market value of the units
at year end. The weighted average lease expiry period is 8,47 years.
African Pride Hotels (owned by Protea Hotels) took over as hotel manager at Mount
Grace on 1 December 2013, positioning the property to regain lost market share by
leveraging off Protea Hotels' global sales and marketing infrastructure, enabled with
its recent acquisition by Marriott International. The Fund also concluded a new lease
agreement with a subsidiary of African Hotels and Adventures ("AHA") (a division of
Tourvest) for Kopanong on 1 December 2013. Through the extensive sales and marketing
network that is available to AHA the performance of this property should improve.
In April 2014, the ownership of the Courtyard Cape Town property, 50:50 owned
by the Fund and City Lodge, reverted to the University of Cape Town. The valuation of
this property was fully written down to zero in June 2013 and no further impairment was
raised in 2014.
6. Acquisitions and disposals
Increasing awareness of Hospitality's specialist hotel property investment focus is generating
a constant flow of investment opportunities to the Fund, including new developments in
major metropolitan nodes which have proven to be more robust than those located in
outlying areas. Although no major acquisitions of new properties were finalised during the
year, Hospitality has invested significant time and effort in evaluating a number of potential
investments to deliver on its strategy of acquiring hotels that meet its investment criteria.
The most recent acquisitions, being the Westin Cape Town (2011) and the Radisson Blu
Gautrain Hotel (Gautrain Hotel) in Sandton (2013) have performed well and have become
key assets that form part of the benchmark against which new acquisitions are evaluated.
The renegotiation agreement of the new fixed and variable lease at Birchwood will
result in a reversion in net income of approximately R14 million in the 2015 financial
year. The renegotiation included the investment by the Fund of a further R60 million
in the property for the Terminal Convention Centre development, which is uniquely
positioned to accommodate large conferences of approximately 2 000
delegates. Its scale and proximity to the OR Tambo International Airport and
scale coupled with the 665 available rooms continue to differentiate this hotel
from its competitors. In the year ahead, 167 rooms will also be renovated and
repositioned to meet the growing demands of the corporate market.
The Fund has identified certain non-core properties, which do not meet
its long-term investment criteria valued at R311,9 million, for disposal and
continues to market these properties. These properties remain profitable and
Hospitality is not under pressure to compromise on pricing.
7. Developments and capital projects
The Fund completed various refurbishment projects during the period, as
follows:
- An upgrade at the Protea Hotel The Richards, located in Richards Bay, was
completed with positive feedback from hotel customers.
- Completion of the Protea Hotel Hluhluwe and Safaris refurbishment,
enabled the property to be effectively marketed to the improving foreign
tourist market.
- The irrigation system of the world class Arabella Golf Course was
upgraded during the year.
In 2015, capital projects amounting to R160 million are planned. These include:
- The upgrade of 167 rooms at the Birchwood Hotel and
OR Tambo Conference Centre as well as the addition of The Terminal
Convention Centre.
- The construction of four new bedrooms and upgrades to the public areas
at the Radisson Blu Gautrain Hotel.
- A refurbishment of the conferencing facilities and public areas at the
Radisson Blu Waterfront which is currently underway.
- Construction of an outdoor swimming pool at The Westin Cape Town
which will enhance the appeal of the hotel to the leisure market.
- Repositioning of Mount Grace with additional facilities to
enhance its appeal to the family market.
- Refurbishment of the Courtyard Eastgate property (in conjunction with
City Lodge) to maintain market share.
The quality of the Fund's properties continue to provide a solid platform for
future income growth. The Fund is cognisant of future refurbishment projects
that will attract additional capital investment.
The Overstrand Municipality approved the rezoning application on the
Phase 2 at Arabella Hotel and Spa in the first quarter of 2014. However, two
environmental associations subsequently appealed this decision, and these will
be processed by the Department of Environmental Affairs with the Minister
of Environmental Affairs & Development Planning making the final decision.
The Fund continues to monitor the situation closely and is engaging with
all the relevant parties to reach a timeous resolution to this process. If the
development rights are finally secured after the appeals process, the Fund
will market this scheme with a view to realising a profit from the sales of
352 residential stands, to be classified as distributable income.
8. Liquidity
During the year, 26,6% of the A-linked units and 45,0% of the B-linked units
were traded on the JSE Limited.
9. Board of directors
Changes to the board during the financial year were as follows:
- Ms Zola Ntwasa was appointed as Independent Non-Executive Director
on 8 July 2013, she has an investment banking and property finance
background.
- In line with the Fund's succession program, Mr Willy Ross stepped down
as a member of the Audit and Risk Committee with effect from 1 April
2014, remaining on the Board as an independent non-executive director
and retaining his position on the other Board committees.
- The Audit and Risk Committee remains fully constituted as required by
the Companies Act No. 71 of 2008 with four independent non-executive
members, being Mrs Linda de Beer (Chairman), Ms Zola Ntwasa, Messrs
Kamil Abdul-Karrim and Syd Halliday.
10. Prospects
The long-term fundamentals for the hospitality industry remain positive, despite a
slowdown in the recovery trend during the last three months of the financial year.
Looking forward, an improving global economy and a weaker Rand could provide
support for foreign visitors to the country, however, Hospitality is concerned
that the more stringent travel regulations that the South African Department of
Home Affairs is implementing could dampen growth within the tourist and the
foreign conferencing markets. The Fund will also monitor the possible impact of
the new Employment Equity Act on its hotel managers and tenants.
Recent reductions in GDP growth rates, increased labour demands and
potential interest rate hikes are of concern but the Fund remains cautiously
optimistic and expects its overall occupancies to remain stable and room rates
in major centres to continue to show real growth.
The Fund continues to evaluate acquisition opportunities that meet its
investment criteria and that are able to support and improve distribution
growth.
For the year ending 30 June 2015, combined distributions are expected to
increase by 4,0% on the prior year to 181,87 cents. A 5,0% growth on the prior
year is forecast for the A-linked unit to 148,42 cents while the distribution
per B-linked unit is expected to remain the same at 33,45 cents, relatively evenly
split between the distribution periods. This forecast is based on achieving an
occupancy of 64,8% and ARR of R1,248 for the Fund's portfolio excluding
conference hotels. The forecast includes the expected impact of the
Birchwood net income reversion of R14 million, which if excluded, will have
resulted in an increase in the combined and B-linked unit distributions of 10,1% and
31,8% respectively. Finance costs are expected to increase, having forecast
interest rate hikes of 100 bps over the year and additional debt-funded capital
expenditure of R100 million. These forecasts have not been audited or reviewed by
the Fund's auditor.
Hospitality's underlying performance for the 2016 financial year
will be impacted by a renewal of the lease at Champagne Sports Resort ("Champagne").
Preliminary negotiations indicate a reversion in rental income of approximately 20% and
also a requirement to refurbish the hotel in order to maintain market share.
No further rental income reversions are expected following the restructure of the
Champagne lease.
11. Payments of distribution
Unitholders will receive distribution payment number 17 for the six-month
period ended 30 June 2014 of 71,52 cents per A-linked unit and 14,20 cents
per B-linked unit.
In accordance with Hospitality's status as a REIT, linked unitholders are advised
that the distribution meets the requirements of a "qualifying distribution"
for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962
("Income Tax Act").
The number of units in issue at the date of declaration is 140 197 778.
Local tax residents
Qualifying distributions received by local tax residents must be included in
the gross income of such linked unitholders (as a non-exempt dividend in
terms of section 10(1)(k)(aa) of the Income Tax Act), with the effect that
the qualifying distribution is taxable as income in the hands of the linked
unitholder. These qualifying distributions are, however, exempt from dividend
withholding tax in the hands of South African tax resident linked unitholders,
provided that the South African resident linked unitholders provided the
following forms to their Central Securities Depository Participant ("CSDP")
or broker, as the case may be, in respect of uncertificated linked units, or the
company, in respect of certificated linked units:
(a) a declaration that the distribution is exempt from dividends tax; and
(b) a written undertaking to inform the CSDP, broker or the company, as
the case may be, should the circumstances affecting the exemption
change or the beneficial owner cease to be the beneficial owner, both
in the form prescribed by the Commissioner for the South African
Revenue Service. Linked unitholders are advised to contact their
CSDP, broker or the company, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the
distribution, if such documents have not already been submitted.
Non-residents
Qualifying distributions received by non-resident linked unitholders will not be
taxable as income and instead will be treated as ordinary dividends but which
are exempt in terms of the usual dividend exemptions per section 10(1)
(k) of the Income Tax Act. It should be noted that until 31 December 2013
qualifying distributions received by non-residents were not subject to dividend
withholding tax. From 1 January 2014, any qualifying distribution received by
a non-resident from a REIT will be subject to dividend withholding tax at
15%, unless the rate is reduced in terms of any applicable agreement for the
avoidance of double taxation ("DTA") between South Africa and the country
of residence of the linked unitholder. Assuming dividend withholding tax will
be withheld at a rate of 15%, the net amount due to non-resident unitholders
will be 60,7920 cents per A-linked unit and 12,0700 cents per B-linked unit. A reduced
dividend withholding tax rate in terms of the applicable DTA, may only be
relied on if the non-resident linked unitholder has provided the following
forms to their CSDP or broker, as the case may be, in respect of uncertificated
linked units, or the company, in respect of certificated linked units:
(a) a declaration that the distribution is subject to a reduced rate as a
result of the application of a DTA; and
(b) a written undertaking to inform their CSDP, broker or the company, as
the case may be, should the circumstances affecting the reduced rate
change or the beneficial owner cease to be the beneficial owner, both
in the form prescribed by the Commissioner for the South African
Revenue Service. Non-resident linked unitholders are advised to
contact their CSDP, broker or the company, as the case may be, to
arrange for the abovementioned documents to be submitted prior to
payment of the distribution if such documents have not already been
submitted, if applicable.
Unitholders are requested to seek professional advice on the appropriate
action to take.
Last day to trade cum distribution Friday, 5 September 2014
Linked units will trade ex-distributin Monday, 8 September 2014
Record date Friday, 12 September 2014
Payment date Monday, 15 September 2014
Unitholders may not dematerialise or rematerialise their linked units between
Monday,8 September and Friday, 12 September 2014 both days inclusive.
By order of the Board
D G Bowden A S Rogers
(Chairman) (Chief Executive Officer)
20 August 2014
Directors: D G Bowden (Chairman)*+, A S Rogers (CEO),
K H Abdul-Karrim*+, R Asmal, L de Beer *+,
SA Halliday *+, Z N Kubukeli*+, GA Nelson*,
Z Ntwasa *+, WC Ross*+, A Soni*+
(*Non-Executive, +Independent)
Registered Office: The Zone 2, Loft Offices East Wing, 2nd Floor,
Cnr Oxford Road and Tyrwhitt Avenue, Rosebank, 2196
Tel: +27 11 994 6300
Fax: +27 11 994 6301
Email:info@hpf.co.zaWeb:www.hpf.co.za
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These results were prepared by the Group Financial Manager, Mr R Erasmus CA(SA)
under the supervision of the Financial Director; Mr R Asmal.
The condensed consolidated financial statements have been prepared in accordance
with the requirements of the JSE Limited Listings Requirements for preliminary
reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require preliminary reports to be prepared in accordance with
the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards (IFRS) and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and the Financial
Pronouncements as issued by the Financial Reporting Standards Council and to
also, as a minimum, contain the information required by IAS34 Interim Financial
Reporting. KPMG Inc, the independent auditor, has reviewed the financial statements
and expressed an unqualified review opinion, which is available for inspection at
Hospitality's registered office. The accounting policies applied are consistent with
those applied in the previous years consolidated annual financial statements, with
the exception of the adoption of new and revised standards which became effective
during the year.
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 30 June 2014
Reviewed Audited
2014 2013
R'000 R'000
Revenue 423 174 356 042
Rental income – contractual 426 276 356 337
– straight-line accrual (3 102) (295)
Expenditure (40 524) (29 878)
Operating expenses (40 524) (29 878)
Operating profit 382 650 326 164
Transaction costs on business combinations – (1 975)
Profit on properties held for trading – 948
Net finance cost (146 041) (132 320)
Finance income 4 371 1 819
Finance costs (150 412) (134 139)
Profit before debenture interest, goodwill, fair value
adjustments and taxation 236 609 192 817
(239 483) (194 054)
Debenture interest (240 014) (200 184)
Recoupment of debenture interest 531 6 130
Loss before fair value adjustments, goodwill and taxation (2 874) (1 237)
Gain on bargain purchase – 7 615
Fair value adjustments 116 275 199 356
Investment properties, before straight-lining adjustment 153 772 218 441
Straight-line rental income accrual 3 102 295
Total fair value of investment properties 156 874 218 736
Goodwill (53 400) (41 400)
Interest-rate swaps 12 801 22 020
Profit before taxation 113 401 205 734
Debenture discount amortisation (7 480) (5 635)
Equity accounted profit from associate after tax 238 126
Taxation (181) 35 572
Total profit and comprehensive income for the year 105 978 235 797
Reconciliation between earnings, headline earnings and
distributable earnings
Total profit and comprehensive income for the year 105 978 235 797
Adjustments : Debenture interest 240 014 200 184
Profit (linked units) 345 992 435 981
Adjustments:
Gain on bargain purchase – (7 615)
Goodwill impairment 53 400 41 400
Fair value – investment properties revaluation, net of tax (153 772) (255 172)
Fair value – straight-line rental income (3 102) (295)
Headline earnings (linked units) 242 518 214 299
Fair value – interest rate swaps (12 801) (22 020)
Transaction costs on business combinations – 1 975
Debenture discount amortisation 7 480 5 635
HPF Employee Incentive Trust effects (285) –
Straight-line rental income 3 102 295
Distributable earnings 240 014 200 184
Number of units/shares
A-linked unit 138 149 717 1 137 237 530
B-linked unit 136 180 007 1 137 237 530
– Units in issue 138 149 717 1 137 237 530
– HPF Employee Incentive Trust units (1 969 710) –
Weighted average number of units/shares
A-linked unit 137 369 080 1 129 273 310
B-linked unit 136 225 029 1 129 273 310
– Units in issue 137 369 080 1 129 273 310
– HPF Employee Incentive Trust units (1 144 051) –
Distribution per linked unit (cents)
A-linked unit 141,35 134,63
– Interim 69,83 66,51
– Final 71,52 68,12
B-linked unit 33,45 18,08
– Interim 19,25 9,19
– Final 14,20 8,89
174,80 152,71
Profit/(loss) per linked units (cents)
A-linked unit 126,46 168,63
B-linked unit 126,46 168,63
252,92 337,26
Headline earnings per linked unit (cents)
A-linked unit 88,64 82,89
B-linked unit 88,64 82,89
177,28 165,78
Earnings per ordinary share (cents) 38,74 91,20
STATEMENT OF CASH FLOWS
for the year ended 30 June 2014
Reviewed Audited
2014 2013
R'000 R'000
Cash flows from operating activities
Cash generated from operations 391 132 336 430
Finance income received 4 371 1 819
Finance costs paid (150 412) (134 139)
Taxation (1 200) (89)
Distribution to unitholders (227 607) (156 500)
Net cash inflow from operating activities 16 284 47 521
Cash flows from investing activities
Acquisition and development of investment properties (104 228) (481 989)
Acquisition of properties held for trading (827) (728)
Acquisition of fixtures, furniture and equipment (484) (799)
Dividends received from associates 150 125
Net cash outflow from investing activities (105 389) (483 391)
Cash flows from financing activities
Proceeds from the issue of linked units 18 985 274 974
Share issue expenses paid (77) (251)
Units acquired by HPF Incentive Trust (9 995) –
Interest-bearing liabilities raised 200 000 213 100
Net cash inflow from financing activities 208 913 487 823
Net increase in cash and cash equivalents 119 808 51 953
Cash and cash equivalents at beginning of year 67 395 15 442
Cash and cash equivalents at end of year 187 203 67 395
STATEMENTS OF FINANCIAL POSITION
as at 30 June 2014
Reviewed Audited
2014 2013
R ‘000 R ‘000
ASSETS
Non-current assets 4 536 393 4 324 662
Investment properties 4 514 950 4 246 848
Straight-line rent income accrual 1 050 4 152
Investment properties and related accrual 4 516 000 4 251 000
Furniture, fittings and equipment 942 899
Goodwill 19 200 72 600
Investment in associates 251 163
Current assets 577 725 448 263
Non-current assets held for sale 311 900 318 900
Properties held for trading 20 535 19 708
Trade and other receivables 58 087 42 260
Cash and cash equivalents 187 203 67 395
Total assets 5 114 118 4 772 925
EQUITY AND LIABILITIES
Equity 801 847 690 752
Share capital and share premium 481 316 476 199
Retained earnings 13 289 73 884
Fair value reserve 307 242 140 669
Non-current liabilities 4 066 078 3 708 134
Debentures 2 325 186 2 314 441
Interest-bearing liabilities 1 732 627 1 372 627
Derivative liability 8 265 21 066
Current liabilities 246 193 374 039
Trade and other payables 87 917 67 151
Interest-bearing liabilities 40 000 200 000
Taxation 134 1 153
Debenture interest payable 118 142 105 735
Total equity and liabilities 5 114 118 4 772 925
Net asset value per linked unit (Rand)
A-linked 11,40 10,95
B-linked 11,40 10,95
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2014
Share Share Retained Fair value
capital premium earnings reserve Total
R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2012 25 392 102 115 278 (136 522) 370 883
Profit/Total comprehensive profit
for the year – – 235 797 235 797
Transactions with owners,
recorded directly in equity 2 84 070 (277 191) 277 191 84 072
Issue of shares 2 84 321 84 323
Share issue expenses, net of tax (251) (251)
Transfer to fair value reserve –
investment properties (net of
deferred tax) (255 171) 255 171 –
Transfer to fair value reserve –
interest rate swaps (22 020) 22 020 –
Balance at 30 June 2013 27 476 172 73 884 140 669 690 752
Profit/Total comprehensive
income for the year – – 105 978 105 978
Transactions with owners,
recorded directly in equity – 5 117 (166 573) 166 573 5 117
Issue of shares – 5 194 – – 5 194
Share issue expenses, net of tax – (77) – – (77)
Transfer to fair value reserve –
investment properties – – (153 772) 153 772 –
Transfer to fair value reserve –
interest rate swaps – – (12 801) 12 801 –
Balance at 30 June 2014 27 481 289 13 289 307 242 801 847
CONDENSED SEGMENTAL INFORMATION
for the year ended 30 June 2014
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.
Variable Total of all
Fixed lease F & V lease lease Head operating
R'000 agreements agreements agreements Office segments
Statement of
Comprehensive Income –
30 Jun 2014
Segment revenue 121 091 281 028 24 144 13 426 276
Expenditure – – – (40 524) (40 524)
Segment results 121 091 281 028 24 144 (40 511) 385 752
Statement of
Comprehensive Income –
30 Jun 2013
Segment revenue 124 756 214 107 17 474 – 356 337
Expenditure – – – (29 878) (29 878)
Segment results 124 756 214 107 17 474 (29 878) 326 459
Statement of Financial
Position – 30 June 2014
Non-current assets
Investment properties 969 000 3 235 000 312 000 – 4 516 000
Current assets
Non-current assets held
for sale – 311 900 – – 311 900
Trade and other
receivables – 4 220 76 53 791 58 087
Segment assets 969 000 3 551 120 312 076 53 791 4 885 987
Statement of Financial
Position – 30 June 2013
Non-current assets
Investment properties 927 000 3 064 000 260 000 – 4 251 000
Current assets
Non-current assets held
for sale 79 000 239 900 – – 318 900
Trade and other
receivables 7 743 1 660 223 32 634 42 260
Segment assets 1 013 743 3 305 560 260 223 32 634 4 612 160
Web : www.hpf.co.za
Date: 20/08/2014 02:27:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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