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HOSPITALITY PROPERTY FUND LIMITED - Unaudited interim results for the six months ended 31 December 2014 and interest payment declaration

Release Date: 25/02/2015 10:00
Code(s): HPB HPA     PDF:  
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Unaudited interim results for the six months ended 31 December 2014 and interest 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")

Unaudited Interim Results for the six months ended 31 December 2014 and interest 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 properties.
 
    Hospitality's strategy is to focus on growing its exposure to large hotels in major
    metropolitan centres ("core portfolio"). The performance of the Fund during the first
    six months of the year reflected the impact of a weaker hospitality trading environment,
    however, its core portfolio occupancy and room rates continue to track industry trends.
    The Western Cape and Sandton portfolios continue to show strong growth. Strategic
    properties in the portfolio have also undergone selective refurbishments, sustaining their
    appeal within their target markets, with total capital expenditure of R50 million in the
    six months.
 
    Distributable earnings per combined linked unit decreased by 7,4% to 82,45 cents  
    (2014: 89,08 cents), and remains in line with the trading statement released on
    25 November 2014 ("the forecast") of 82,33 cents. The A-linked unit distribution of
    73,33 cents (2014: 69,83 cents) showed a 5,0% increase, consistent with the forecast and
    the distribution policy. The distribution of the B-linked unit declined 52,6% to 9,12 cents
    (2014: 19,25 cents), in-line with the forecast of 9,0 cents.
 
2.  Trading environment
 
    According to the STR Global South Africa Hotel Review, the hotel industry reported a
    year-on-year increase in occupancy of 1.0% to 64,3% for the reporting period. This is due
    to the subdued pace of domestic economic growth. Average daily rates ("ADR") for the
    industry were up 5,9% to R1,022, resulting in revenue per available room ("RevPAR")
    growth of 7,0%. In addition to the muted economy, other factors impacting the South
    African hospitality industry during the six months under review included reduced
    international travel as a result of the Ebola epidemic in Africa and its perceived impact on
    South Africa, while arrivals from Asian countries have also been negatively impacted by
    the recently implemented visa requirements. In addition, restricted public sector spending
    in line with cost saving measures imposed by the Finance Ministry also contributed to
    the lower demand from government segments. Hospitality's trading performance for the
    core portfolio which is subject to variable rental income and excluding conference hotels
    (hotels where the revenue generated from conferencing exceeds rooms revenue), was
    in line with the overall hotel and leisure market. Occupancy increased by 1.1% to 66.3%,
    ADR increasing 4.4% to R1,290 resulting in RevPar growth of 5.6% to R855 for the six
    months to 31 December 2014.
    
                          OCCUPANCY                         ADR                        RevPAR 
                    FY2015   FY2014  Variance     FY2015   FY2014   Variance   FY2015   FY2014   Variance
    Core              66.3%    65.5%      1.1%     R1 290   R1 236       4.4%     R855     R810       5.6%
    Secondary         50.9%    54.2%    (6.1%)       R725     R685       5.8%     R369     R371     (0.7%)
    Total             62.6%    62.9%    (0.4%)     R1 182   R1 124       5.2%     R740     R706       4.8%
    
                                                      Gross rental income             Property valuation
                                                      R 000              %            R 000             %
    Fixed leases                                     19 713            9,1          287 720           5,7
    F&V leases                                      197 680           90,9        4 748 835          94,3
    Core portfolio                                  145 132           66,8        3 604 881          71,6
    Secondary portfolio                              12 830            5,9          302 891           6,0
    Conference portfolio                             39 717           18,3          841 063          16,7
                                                    217 392          100,0        5 036 555         100,0
 
    Management continually monitors and interacts with tenants to maintain a full
    understanding of their underlying business performance and to evaluate the serviceability
    of rentals. This has become an increasingly important driver of distribution growth as the
    proportion of the Fund's rental income from F&V leases has grown.
 
3.  Results
 
    The Fund reported rental income growth of 2,3% to R217,4 million (2014: R212,6 million),
    reflecting the weaker hospitality trading environment. In addition, the prior year result
    was boosted by higher rates in December 2013 with the arrival of a number of foreign
    dignitaries to South Africa, to pay tribute to the late President Nelson Mandela. The
    resultant year-on-year impact was a decline of some R10 million, experienced mainly at
    the Fund's Sandton properties. In addition, the negative impact of the lease conversion
    at Birchwood Hotel and OR Tambo Conference Centre ("Birchwood") from a fixed
    to a F&V lease was R6,7 million compared to the previous year. The Fund's properties
    in outlying areas, predominantly those on the disposal list ("secondary portfolio"),
    experienced a sharper decline in demand than in the core portfolio. However, strong
    trading results from its properties in the Western Cape, which are all well-located,
    somewhat ameliorated these factors. The Fund's Courtyard Hotels continued to
    underperform during the period and this portfolio is now also being marketed for sale.
    The change in hotel operator at Kopanong led to an improved performance.
    
    Fund expenses decreased by R1,5 million (7,7%) to R18,3 million.
    
    Net finance costs were up 13,7% to R80,3 million (2014: R70,6 million), due to additional
    debt of R196 million raised to fund acquisitions and capital projects, the impact of
    additional swaps contracted for and the 25 basis points rise in the South African prime
    overdraft rate in July 2014.
 
    The following table reflects the operating financial results for the six months ended
    31 December 2014 compared to the previous financial year:
    
                                          Actual 2014   Actual 2013   Variance      Variance   
                                                R'000         R'000      R'000             %   
    Contractual rental                         217 392       212 579      4 813           2.3   
    Fund expenses                             (18 264)      (19 790)      1 526           7.7   
    Net finance costs                         (80 266)      (70 565)    (9 701)        (13.7)   
    Taxation                                         –         (46)         46         100.0   
    Income from associates                         101           83         18         21.7   
    Debenture interest                       (118 963)     (122 261)      3 298           2.7   
    A-linked unit                            (105 805)      (95 843)    (9 962)        (10.4)   
    B-linked unit                             (13 158)      (26 418)     13 260        (50.2)  

    Distribution comparative to prior year and revised forecast:

                                          Actual 2014   Actual 2013   Variance %    Rev Fcst 2014    Variance %    
    Distribution – A-linked unit (cents)         73.33         69.83          5.0            73.33           0.0 
    Distribution – B-linked unit (cents)          9.12         19.25       (52.6)              9.0           1.3
    Combined distribution (cents)                82.45         89.08        (7.4)            82.33           0.1 
    Number of units in issue               144 285 503   137 237 530          5.1      144 285 503           0.0
 
4.  Funding
 
    The group's debt facilities with financial institutions as at 31 December 2014 amounted
    to R1,89 billion. Total funds drawn on these facilities were R1,79 billion resulting in a
    loan to value ("LTV") ratio (total interest-bearing liabilities/investment properties plus
    properties held for sale) of 35,5% (2014: 34,6%).The interest cover ratio was 2,48 which
    is well within the minimum covenant level of 2,00 required by the debt providers.
    
    The average cost of borrowings was 9,23% (2014: 9,02%) for the period under review,
    with 68% of the group's borrowings subject to fixed interest rates.
    
                             Facility   Interest rate                Repmt date   
    Nedbank                                                                    
    Loan 1                 176 300 000   3-month JIBAR plus 2,67%      June 2020   
    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                                           
                                  54%                                           
    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                                           
                                  46%                                           
                        1 893 550 000                                           
    SWAPS/FIXED                                                                 
                                       Nominal rate                     Expiry   
                                         Collar swap – Floor 6.0%/                 
    Nedbank swap 1         150 000 000   Ceiling 9.09%                  Sep 2016   
    Nedbank swap 2         150 000 000   Vanilla swap – 6.4%            Oct 2016   
    Nedbank swap 3         100 000 000   Vanilla swap – 7.05%           Sep 2017   
    RMB swap 2             346 667 000   Vanilla swap – 7.96%          July 2016   
                                         Collar swap – Floor 6.65%/               
    RMB  swap 3            250 000 000   Ceiling 9.20%                  Feb 2016   
    RMB  swap 4            100 000 000   Vanilla swap – 7.05%           Sep 2017   
    Secured – HPF 05       200 000 000   Fixed at 9.89%                 Feb 2017   
                        1 296 667 000                                           
 
    Additional five-year secured notes for R60 million and 2.5-year secured notes for
    R80 million were issued in February 2015. The proceeds will be utilised to repay
    the R40 million unsecured note that matures in April 2015 and to fund the capital
    expenditure programme for FY2016.
 
    The Fund continually reviews the optimal method of funding new acquisitions and capital
    projects with consideration given to the options of new unit issues, replacement of bank
    funding and the group's DMTN programme. When contracting for new debt, the group
    endeavours to optimally spread the maturity to minimise its exposure to large debt
    maturities in any single year.
 
5.  Capital structure
 
    Hospitality was awarded REIT status by the JSE Limited ("JSE") with effect from
    1 July 2013. In order to maintain its REIT status and ensure that it may continue to
    benefit from the tax efficiencies granted to REITs as set out in section 25BB of the
    Income Tax Act, the company is required to comply with section 13 of the JSE Listings
    Requirements.
 
    The JSE has granted REIT companies dispensation until 1 July 2015 to comply with
    the gearing requirement of section 13 of the Listings Requirements that the total
    consolidated IFRS liabilities of a REIT may not exceed 60% of its consolidated IFRS
    assets. In this regard, the JSE agreed to the exclusion of the existing debentures issued
    as part of Hospitality's linked units and the related premium from its liabilities for the
    purposes of the gearing test until such date. 
 
    In this regard, Hospitality will propose a restructuring of the Company's linked unit capital
    structure to A and B shares by way of a scheme of arrangement in terms of sections
    114 and 115 of the Companies Act, 71 of 2008 at a Special General Meeting to be held
    during the month of April 2015. A circular and meeting notice relating to the restructure
    will be circulated to linked unitholders in due course.
 
6.  Property portfolio
 
    The Fund's portfolio comprises interests in 26 hotel and resort properties in South
    Africa. As at 31 December 2014, the carrying amount of the portfolio was R5,0 billion.
    
    The net asset value (NAV) per linked unit as at 31 December 2014 was R11,24, an
    increase of 2,5% from 2013. The combined linked unit market value of the Fund's
    securities at the end of the period traded at a 30% discount to the NAV.
 
    The weighted average lease expiry period is 11.36 years.
 
7.  Acquisitions and disposals
 
    The Fund continues to evaluate opportunities to deliver on its strategy
    and is accelerating the disposal of properties from its secondary
    portfolio. This will unlock additional capital resources while releasing
    management time to focus on the core portfolio.
 
    The renegotiation of the new fixed and variable lease at Birchwood
    from 1 July 2014 included the investment by the Fund of a further
    R60 million in the property for the Terminal Convention Centre
    development, funded through the issue of linked units to the sellers.
    This facility is uniquely positioned to accommodate large conferences of
    approximately 2 000 delegates. Its scale and proximity to the OR Tambo
    International Airport, coupled with the 665 available rooms continue to
    differentiate this hotel from its competitors.
 
    The Fund invested R76,6 million to acquire additional units at the
    Radisson Blu Waterfront, increasing its share of the rental pool by 19%
    to 54%.The acquisition was funded by a combination of debt and equity.
    Due to its prime location at the Waterfront development in Cape
    Town, coupled with recent refurbishments, this property enjoys strong
    demand from both leisure travellers and corporate conferences. 
 
8.  Developments and capital projects
 
    The Fund continued to upgrade several of its properties during the
    period, as follows:
 
    -  R11,0 million was invested to reposition the Mount Grace Country
       House and Spa with the construction of a mountain cycling club
       and children's entertainment facilities leading to improved demand
       in the peak summer holiday period.
    -  Refurbishment of 167 rooms at Birchwood for R12,3 million to
       support the hotel's initiatives to attract additional corporate clients,
       including the relaunch of a section of the hotel as "The Silverbirch Hotel".
    -  Four new rooms were added at the Radisson Blu Gautrain and the
       public areas were upgraded, with a total investment of R10,3 million.
    -  The Radisson Blu Waterfront conference facilities and public areas
       were refurbished, at a cost of R9,4 million.
    -  An outdoor swimming pool, with an investment of R8,4 million, was
       completed at The Westin Cape Town to enhance the appeal of the
       hotel to the leisure market.
 
    The Fund is awaiting a final decision on the approval of Phase 2 at
    Arabella Hotel & Spa by the Minister of Environmental Affairs and
    Development Planning.

9.  Liquidity

    During the six months, 11.3% of the A-linked units and 35.4% of the
    B-linked units were traded on the JSE Limited.

10. Board of directors

    Mr Kamil Abdul Karrim resigned as an independent non-executive
    director with effect from 31 December 2014. He served on the Board
    since listing of the Fund in 2006 and was a valued member of the Audit
    and Risk, and Investment Committees. The Board would like to express
    its gratitude to Mr Abdul Karrim for the significant contribution during
    this period. The Board and its committees remain properly constituted
    following Mr Abdul Karrim's resignation.

11. Prospects

    The short-term outlook for the economy and the hospitality sector
    remains uncertain.

    Hospitality's underlying performance will be impacted by a renewal
    of the lease at Champagne Sports Resort ("Champagne") from 1 July
    2015. Due to escalations in the fixed rental since 2006 the rental at
    expiry is significantly higher than market which will result in a reversion
    of approximately R7 million per annum. Furthermore, a refurbishment will be 
    required at the hotel in order to maintain market share.

    No further fixed lease rental income reversions are due following the
    restructure of the Champagne lease.

12. Payment of distribution

    Unitholders will receive distribution payment number 18 for the six-
    month period ended 31 December 2014 of 73,33 cents per A-linked
    unit and 9,12 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 the declaration is 144 285 503.

    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 ceases 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 CSDPs, brokers 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-resident

    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 is withheld at a
    rate of 15%, the net amount due to non-resident unitholders will be
    62,3305 cents per A-linked unitholder and 7,752 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 dividend 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 ceases 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 CSDPs, brokers 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 advise on the appropriate action
        to take.

Last day to trade cum interest                            Friday, 13 March 2015
Linked units will trade ex-interest                       Monday, 16 March 2015
Record date                                               Friday, 20 March 2015
Payment date                                              Monday, 23 March 2015

Unitholders may not dematerialise or rematerialise their linked units between
Monday,16 March and Friday, 20 March 2015 both days inclusive.

By order of the Board

D G Bowden                                A S Rogers
(Chairman)                                (Chief Executive Officer)

24 February 2015

Directors:         D G Bowden (Chairman)*+, A S Rogers (CEO),
                   R Asmal, L de Beer *+, S A Halliday *+, Z N Kubukeli*+,
                   G A Nelson*, Z Ntwasa *+, W C 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 6320     Fax: +27 11 994 6321         Email: info@hpf.co.za 
Web: www.hpf.co.za                                     

Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)

25 February 2015

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 IAS 34 Interim Financial Reporting. KPMG Inc.,
the independent auditor, has not reviewed the financial statements. The
accounting policies applied are consistent with those applied in the previous
year's 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 six months ended 31 December 2014

                                                      Unaudited       Unaudited         Audited   
                                                       Dec 2014        Dec 2013       June 2014   
                                                          R'000           R'000           R'000   
Revenue                                                 217 027         211 156        423 174   
Rental income – contractual                              217 392         212 579         426 276   
– straight-line accrual                                    (365)         (1 423)         (3 102)   
Expenditure                                             (18 264)        (19 790)        (40 524)   
Operating expenses                                      (18 264)        (19 790)        (40 524)   
Operating profit                                         198 763         191 366         382 650   
Transaction costs on business combination                      –              –              –   
Profit on properties held for sale                             –              –              –   
Net finance cost                                        (80 266)        (70 565)       (146 041)   
Finance income                                             4 511           1 349           4 371   
Finance costs                                           (84 777)        (71 914)       (150 412)   
Profit before distribution, goodwill, fair value                                                 
adjustments and taxation                                 118 497         120 801         236 609   
Recoupment of distribution                                     –              –            531   
Distribution                                           (118 963)       (122 261)       (240 014)   
Loss before fair value adjustments, goodwill                                                       
and taxation                                               (466)         (1 460)         (2 874)   
Fair value adjustments                                       922           7 592         116 275   
Investment properties, before straight-lining                                                      
adjustment                                                     –              –        153 772   
Straight-line rental income accrual                          365           1 423           3 102   
Total fair value of investment properties                    365           1 423         156 874   
Goodwill impairment                                            –              –       (53 400)   
Interest-rate swaps                                          557           6 169          12 801   
Profit before taxation                                       456           6 132         113 401   
Debenture discount amortisation                          (4 082)         (3 757)         (7 480)   
Equity accounted profit from associate                                                            
after tax                                                     93              83             238   
Taxation                                                       –           (46)           (181)   
Total profit/(loss) and comprehensive                                                              
income for the period                                    (3 533)           2 412         105 978   
Reconciliation between earnings, headline                                                          
earnings and distributable earnings                                                             
Total profit/(loss) and comprehensive                                                             
income for the period                                    (3 533)           2 412         105 978   
Adjustments: Distribution                                118 963         122 261         240 014   
Profit/(loss) (linked units)                             115 430         124 673         345 992   
Adjustments:                                                                                   
Equity accounted profit from associate after                                                      
tax                                                            –              –              –   
Gain on bargain purchase                                       –              –              –   
Goodwill impairment                                            –              –         53 400   
Fair value – investment properties revaluation,                                   
net of tax                                                     –              –      (153 772)   
Fair value – straight-line rental income                   (365)         (1 423)         (3 102)   
Headline earnings (linked units)                         115 065         123 250         242 518   
Fair value – interest rate swaps                           (557)         (6 169)        (12 801)   
HPF Employee Incentive Trust effects                           8              –           (285)   
Debenture discount amortisation                            4 082           3 757           7 480   
Straight-line rental income                                  365           1 423           3 102   
Distributable earnings                                   118 963         122 261         240 014   
Number of units/shares                                        –              –              –   
A-linked unit                                        144 285 503     137 237 530     138 149 717   
B-linked unit                                        144 285 503     137 237 530     138 149 717   
Weighted average number of units/shares                                                         
A-linked unit                                        140 506 693     137 237 530     137 639 080   
B-linked unit                                        140 506 693     137 237 530     137 639 080   
Distribution per linked unit (cents)                                                            
A-linked unit                                              73.33           69.84          141.03   
 – Interim                                                73.33           69.84           69.83   
 – Final                                                      –              –          71.20   
B-linked unit                                               9.12           19.25           33.45   
 – Interim                                                 9.12           19.25           19.25   
 – Final                                                      –              –          14.20   
                                                          82.45           89.09          174.48   
Profit per linked units (cents)                                                                
A-linked unit                                              41.08           45.42          126.46   
B-linked unit                                              41.08           45.42          126.46   
                                                          82.15           90.84          252.92   
Headline earnings per linked unit (cents)                                                       
A-linked unit                                              40.95           44.90           88.64   
B-linked unit                                              40.95           44.90           88.64   
                                                          81.89           89.81          177.28   
Earnings and diluted earnings per ordinary                                                         
share (cents)                                              41.08           45.42          126.46   

STATEMENT OF CASH FLOWS
for the six months ended 31 December 2014

                                                      Unaudited       Unaudited         Audited   
                                                       Dec 2014        Dec 2013       June 2014   
                                                          R'000           R'000           R'000   
Cash flows from operating activities                                                            
Cash generated from operations                           192 059         159 931         391 132   
Finance income received                                    4 511           1 349           4 371   
Finance costs paid                                      (84 777)        (71 914)       (150 412)   
Taxation                                                   (134)           (383)         (1 200)   
Distribution to unitholders                            (118 142)       (106 504)       (227 607)   
Net cash (outflow)/inflow from operating                                                         
activities                                               (6 483)        (17 521)          16 284   
Cash flows from investing activities                                                            
Acquisition and development of investment                                                          
properties                                             (208 655)        (37 991)       (104 228)   
Properties held for trading                                (362)           (209)           (827)   
Acquisition of furniture and equipment                     (173)           (344)           (484)   
Dividends received from associate                            200             150             150   
Loan from associate                                            –              –              –   
Net cash outflow from investing activities             (208 990)        (38 394)       (105 389)   
Cash flows from financing activities                                                            
Proceeds from the issue of linked units                  119 694               –         18 985   
Share issue expenses paid                                (3 004)               –           (77)   
HPF shares and debentures held by trust                                       –        (9 995)   
Interest-bearing liabilities (repaid)/raised              16 536          20 512         200 000   
Net cash inflow/(outfl ow) from financing                                                        
activities                                               133 226          20 512         208 913   
Net (decrease)/increase in cash and                                                                
cash equivalents                                        (82 247)        (35 403)         119 808   
Cash and cash equivalents at beginning                                                             
of year                                                  187 203          67 395          67 395   
Cash and cash equivalents at end of period               104 956          31 992         187 203   

STATEMENTS OF FINANCIAL POSITION
as at 31 December 2014

                                                     Unaudited       Unaudited         Audited   
                                                      Dec 2014        Dec 2013        Jun 2014   
                                                         R'000           R'000           R'000   
Non-current assets                                     4 745 015       4 354 882       4 536 393   
Investment properties                                  4 724 131       4 278 426       4 514 950   
Straight-line rent income accrual                            685           2 729           1 050   
Investment properties and related                                                                  
accrual                                                4 724 816       4 281 155       4 516 000   
Furniture, fittings and equipment                           855           1 031             942   
Goodwill                                                  19 200          72 600          19 200   
Investment in associate                                      144              96             251   
Current assets                                           475 989         434 917         577 725   
Non-current assets held for sale                         311 739         326 736         311 900   
Properties held for trading                               20 897          19 917          20 535   
Trade and other receivables                               38 397          56 272          58 087   
Cash and cash equivalents                                104 956          31 992         187 203   
Total assets                                           5 221 004       4 789 799       5 114 118   

EQUITY AND LIABILITIES                                                                      
Equity                                                   832 617         693 164         801 847   
Share capital and share premium                          515 619         476 199         481 316   
Retained earnings                                          9 199          70 127          13 289   
Fair value reserve                                       307 799         146 838         307 242   
Non-current liabilities                                4 168 528       3 692 072       4 066 078   
Debentures                                             2 411 657       2 318 197       2 325 186   
Interest-bearing liabilities                           1 749 163       1 363 139       1 732 627   
Derivative liability                                       7 708          10 736           8 265   
Current liabilities                                      219 859         404 563         246 193   
Trade and other payables                                  60 896          48 091          87 917   
Short-term portion of interest-bearing                                                             
liabilities                                               40 000         230 000          40 000   
Derivative liability                                           –          4 162               –   
Taxation                                                       –              –            134   
Distribution payable                                     118 963         122 310         118 142   
Total equity and liabilities                           5 221 004       4 789 799       5 114 118   
A. Net asset value per linked unit (Rand)                                                       
A-linked unit                                              11.24           10.97           11.40   
B-linked unit                                             11.24           10.97           11.40   

STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2014

                                              Share     Share   Retained   Fair value            
                                            capital   premium   earnings      reserve     Total   
                                              R'000     R'000      R'000        R'000     R'000   
Balance at 1 July 2013                            27   476 172     73 884      140 669   690 752   
Profit/total comprehensive                                                                         
income for the period                              –        –     2 412            –    2 412   
Transfer to fair value reserve –                                                                   
interest rate swaps                                –        –   (6 169)        6 169         –   
Balance at 31 December 2013                       27   476 172     70 127      146 838   693 164   
Balance at 1 July 2014                            27   481 289     13 289      307 242   801 847   
Issue of shares                                    2    37 305          –           –   37 307   
Share issue expense, net of tax                    –  (3 004)          –           –  (3 004)   
Loss/total comprehensive loss for                                                                  
the year                                           –        –   (3 533)            –  (3 533)   
Transfer to fair value reserve –                                                                   
interest rate swaps                                –        –     (557)          557         –   
Balance at 31 December 2014                       29   515 590      9 199      307 799   832 617   

CONDENSED SEGMENTAL INFORMATION
for the six months ended 31 December 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   
                              Fixed lease   F & V lease        lease       Head   all operating   
R'000                           agreements    agreements   agreements     Office        segments   
Statement of                                                                                       
Comprehensive Income                                                                               
– 31 December 2014                                                                            
Segment revenue                     19 713       183 393       14 286          –        217 392   
Expenditure                              –            –           –  (18 264)        (18 264)   
Segment results                     19 713       183 393       14 286   (18 264)         199 128   
Statement of                                                                                       
Comprehensive Income                                                                               
– 31 December 2013                                                                            
Segment revenue                     63 404       138 046       11 129          –        212 579   
Expenditure                              –            –           –  (19 790)        (19 790)   
Segment results                     63 404       138 046       11 129   (19 790)         192 789   
Statement of Financial                                                                             
Position – 31 December                                                                             
2014                                                                                          
Non-current assets                                                                            
Investment properties              287 720     3 730 323      395 034          –      4 724 816   
Current assets                                                                                
Non-current assets                                                                                 
held for sale                            –      311 739            –         –        311 739   
Trade and other                                                                                    
receivables                              8         1 589          258     36 542          38 397   
Segment assets                     287 728     4 043 651      395 292     36 542       5 074 952   
Statement of Financial                                                                             
Position – 31 December                                                                             
2013                                                                                          
Non-current assets                                                                            
Investment properties              926 403     3 092 207      262 545          –      4 281 155   
Current assets                                                                                
Non-current assets held                                                                            
for sale                            81 000       245 736            –         –        326 736   
Trade and other                                                                                    
receivables                          6 207           367       29 243     20 455          56 272   
Segment assets                   1 013 610     3 338 310      291 788     20 455       4 664 163   

Web:www.hpf.co.za

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