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HOSPITALITY PROPERTY FUND LIMITED - Unaudited consolidated interim results and cash dividend distribution for the six months ended 31 December 2015

Release Date: 23/02/2016 08:49
Code(s): HPB HPA     PDF:  
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Unaudited consolidated interim results and cash dividend distribution for the six months ended 31 December 2015

Hospitality Property Fund Limited 
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
Share code for A shares: HPA ISIN for A shares: ZAE000203022 
Share code for B shares: HPB ISIN for B shares: ZAE000203030
Income tax reference number: 9770/799/1/47
("Hospitality" or "the company" or "the Fund")

Unaudited consolidated interim results and cash dividend distribution
("distribution") for the six months ended 31 December 2015 

Salient features

-  Rental income up 8,6% (10,8% like for like) to R236,1 million
-  Profit before distribution up 13,8% to R135,4 million
-  Continued strong performance from core properties in Western Cape and Sandton
-  Disposal of four non-core properties for total proceeds of R119,4 million
-  Tsogo Sun Transaction in progress

Trading environment

Against a challenging trading environment, Hospitality, showed relatively strong growth with a
13,8% increase in distribution per combined share to 93,87 (2014: 82,45) cents compared to
the previous comparable period in the prior year. The A share distribution increased by 5,0% to 77,0 cents 
(2014: 73,33 cents) whereas the B share distribution increased by 85,0% to 16,87 (2014: 9,12 cents). 
The subdued domestic economy continued to impact trading conditions in the hotel industry, exacerbated
by the decline in public sector travel and conferencing. Furthermore, the new South African visa
requirements filtered into the leisure and conferencing markets and although government is in
the process of retracting these new regulations, long lead times on international travel has meant
that the negative impacts are still being felt on industry growth.

The STR Global South Africa Hotel Review reflected improved occupancies and room rates
for the hotel industry during the six months under review. Occupancy levels increased year-on-year
for the same period by 2,7% to 66,0% and average daily rates ("ADR") rose by 6,8% to R1 091. 
The revenue per available room ("RevPAR") grew 9,6% for the six months ended 31 December 2015 to R720.

The Fund's portfolio reveals the following performance statistics:

excluding fixed                 ADR       Variance      OCCUPANCY       Variance           RevPar         Variance
                       H1 F2016  H1 F2015            H1 F2016 H1 F2015              H1 F2016  H1 F2015    
Traditional Portfolio    R1 323    R1 232     7.4%     68.9%     65.6%      5.0%        R912      R808       12.8%
Conference                 R858      R709    21.0%     51.9%     47.8%      8.6%        R445      R339       31.4%
Total Portfolio          R1 234    R1 132     9.1%     64.8%     61.2%      5.9%        R800      R693       15.5%

The above statistics excludes the properties sold during the six months under review.

* Traditional portfolio: Properties to which revenue is generated from room nights sold.

# Conference portfolio: Properties to which revenue is generated predominantly from conference facilities and 
  food and beverage. 

Results

The Fund reported rental income growth of 8,6% to R236,1 million (2014: R217,4 million),
notwithstanding the disposal of four non-core properties during the period and the absence of
the Fund's 50,0% interest in the Courtyard portfolio (sold in the prior year). Like-for-like rental
income (adjusted for the impact of these disposals) increased by 10,8%.

Strong ongoing demand for Hospitality's core properties in the Western Cape and Sandton
areas supported rental income growth. The results of the Mount Grace Country House and
Spa improved significantly for the six months in comparison to the prior year as strategies
implemented by the operator to attract both weekend leisure and weekday conferencing
business gained momentum. The refurbishment and addition of 30 new rooms at the Protea
Hotel Edward, in time for the peak December trading period underpinned this property's strong
performance. The Fund also benefited from the acquisition of three additional units at Radisson
Blu Waterfront, increasing its share of the rental pool in this property from 54,0% to 55,8%.

The decline in public sector travel and conferencing, the impact of the Visa regulations and the 
R2,7 million rental reversion for the six months to 31 December 2015 on the new fixed lease at 
Champagne Sports Resort which commenced in July 2015, All impacted negatively on the growth 
in rental income.

As a result of the decline in public sector travel, poor performance from the Fund's conferencing
hotel properties has limited growth in rental income.

Fund expenses for the period increased 14,7% year-on-year for the six months ended
31 December 2015 to R20,9 million (2014:R18,3 million), mainly as a result of higher
staff incentive bonus provisions of R3,1 million (2014: R1,3 million), linked to the improved
performance of the Fund in the current period.

Net finance costs decreased to R79,8 million (2014: R80,3 million). Proceeds from the sale of
properties amounting to R119,4 million, were applied to reduce debt.

The following table reflects the operating financial results for the six months ended 31 December 2015 
compared to the corresponding previous financial period:

                                            Six months to 31 December
                                   2015            2014     Variance    Variance
                                (R'000)         (R'000)      (R'000)         (%)
Contractual rental               236 067         217 392       18 675         8,6
Fund expenses                   (20 953)        (18 264)      (2 689)      (14,7)
Net finance costs               (79 817)        (80 266)          449         0,6
Income from associates               144             101           43        42,6
Profit before distribution       135 411         118 963       16 478        13,8
Distribution                   (135 441)       (118 963)     (16 478)      (13,8)
A-linked unit/share            (111 093)       (105 805)      (5 288)       (5,0)
B-linked unit/share             (24 348)        (13 158)     (11 190)      (85,0)

Distribution comparative to prior year:
                                            Six months to 31 December
                                    2015           2014      Variance    Variance
                                 (R'000)        (R'000)       (R'000)         (%)
Distribution – A share (cents)     77,00          73,33          3,67         5,0
Distribution – B share (cents)     16,87           9,12          7,75        85,0
Combined distribution (cents)      93,87          82,45         11,42        13,8
Number of linked units/shares    144 286        144 286           (0)         0,0

Funding

The group's debt facilities with financial institutions as at 31 December 2015 amounted to
R1,94 billion. Total funds drawn on these facilities were R1,78 billion resulting in a loan to value
(LTV) ratio (total interest-bearing liabilities/investment properties plus properties held for sale)
of 34,9% (2014: 35,5%). The interest cover ratio improved to 2,70 times (2014: 2,49 times), well
ahead of the required debt covenant level of 2,00 times.

The weighted average cost of borrowings was 9,45% (2014: 9,23%) for the period under review
with 67% of the group's borrowings being subject to fixed interest rates.

R'000                                              Facility   Drawn-down facility
Nedbank property facilities                        R973 550              R807 864
Corporate bonds                                    R740 000              R740 000
Total non-current interest-bearing borrowing     R1 713 550            R1 547 864
Corporate bonds                                    R230 000              R230 000
Total current interest-bearing borrowing           R230 000              R230 000
Total interest-bearing borrowings                R1 943 550            R1 777 874
Hedged debt                                                            R1 296 667
% of debt hedged                                                              67%

The carrying amount of the financial instruments reasonably approximates their fair values.

A new forward rate swap was entered into for R250 million at a rate of 7,88%, starting February
2016. The forward rate swap will replace a current R250 million swap. 

The Fund is currently engaging with financial institutions and potential investors to refinance or
reissue the combined notes of R230 million (R80 million unsecured and R150 million secured
notes) expiring in April 2016.

When issuing new debt the group endeavours to optimally spread the maturity to minimise its
exposure to large debt maturities in any single year.

Capital structure

As previously announced on SENS, in order to comply with the REITs, gearing requirement in terms 
of the JSE Limited Listings Requirements, Restructuring of the Company's linked unit capital structure to
a simple "all share" structure, was preposed. This structure, by way of a scheme of arrangement in terms of 
sections 114 and 115 of the Companies Act, 71 of 2008, received the requisite approval from both A and B 
linked unitholders at a Special General Meeting held on 21 August 2015.

Property portfolio

The Fund's portfolio comprises interests in 18 hotel and resort properties in South Africa. As at
31 December 2015, the carrying amount of the portfolio was R5,1 billion and the net asset value
(NAV) per share/linked unit amounted to R12,26, an increase of 9,1% from 2014. The market value
per combined A and B share at the end of the year traded at a 45,2% discount to the NAV.  
The weighted average lease expiry period is 10,82 years.

Acquisitions and disposals

The Fund's investment strategy is to invest in well-located, large hotels in major urban centres
with strong brands and diverse source markets and to dispose of certain properties which do
not meet these criteria.The Fund also continues to investigate long-term growth and investment
opportunities.

The proposed acquisition of 10 established and well located hotel properties from Southern Sun Hotels
Proprietary Limited ("SSH") (an indirect wholly-owned subsidiary of Tsogo Sun Holdings Limited ("Tsogo")), 
through the acquisition of 100% of the issued shares of a company which will own the Tsogo Portfolio, 
will provide additional scale to the current portfolio and present opportunities for further growth 
in line with the Funds' property investment strategy.

The Fund had previously identified several non-core properties for disposal. During the
period, four properties were disposed of namely Protea Hotel The Richards (R47,7 million);
Protea Hotel Hluhluwe and Safaris (R15,7 million); Premier Hotel King David (R30,6 millon) and
Protea Hotel Imperial (R25,4 million) for total value of R119,4 million. The Protea Hotel The
Winkler and Bayshore Inn properties were sold in January 2016 for a combined consideration
of R52,0 million.The Protea Hotel Richards Bay, Protea Hotel Hazyview and Kopanong Hotel and
Conference Centre remain on the disposal list.

During the period, the Fund acquired three additional units at the Radisson Blu Waterfront for
R14,3 million, bringing its total interest in the property rental pool to 55,8%.

Developments and capital projects

The Fund continued to upgrade and invest in its properties and during the period increased
the number of rooms by 30 to 131 rooms at Protea Hotel Edward at a cost of R20,6 million.

The Fund is cognisant of future refurbishment projects that will require additional capital
investment and is investigating options to deal with this on a sustainable basis going forward.

Proposed Tsogo Transaction ("the Transaction") and Capital Restructure ("the Restructure")

Hospitality currently has a dual-class share capital structure consisting of A shares and B shares.
The A shares have a preferential right to net income distributions made by Hospitality, with
the B shares having the right to participate only in that portion of Hospitality's net income
distributions that remains following payment of the fixed amount due in respect of the A shares.

As previously reported to Hospitality shareholders, the Board of directors of Hospitality is,
and has for some time been, of the view that the dual-class share capital structure is not in the
best interests of the company and that it has been a major impediment to the development of
Hospitality's business.The Board believes that a simplified capital structure will enable Hospitality
to more fully deliver on its strategic objectives in the longer term, and the possibility of converting
to a single-class share capital structure has therefore been a key focus area for Hospitality in
recent years.

On 15 December 2015, Hospitality announced that it had signed an agreement to acquire
10 hotel properties, valued at R1,78 billion, from SSH. The purchase consideration will 
be settled through the issue of 145 million Hospitality shares. On completion of the transaction, 
Tsogo will hold more than 50% of Hospitality's ordinary shares. The transaction is conditional 
on the restructure of Hospitality's dual-class capital structure into a single share capital 
structure on a swap ratio of 3,5 B ordinary shares for every 1 A ordinary share ("the Restructure").

Following engagement with shareholders, indications are now that there is a high level of
shareholder support for such a conversion insofar as it is implemented in the broader context
of the Transaction. The Transaction therefore presents a mechanism by which Hospitality can
achieve the desired restructure of its share capital.

The Transaction presents a highly attractive acquisition for Hospitality, with the Tsogo
Portfolio comprising 10 successful and established hotel properties which are well located within
their respective nodes. The Transaction will contribute to a broadening of Hospitality's earnings
base and should introduce an additional element of stability to earnings, through exposure to
the relatively predictable cash flows generated by the Tsogo Portfolio. As the Tsogo Portfolio will
be acquired free of any debt, the Transaction will also bring about the reduction of Hospitality's
gearing ratio from 36,2% as at 30 June 2015 to 26.9% which, together with Hospitality's greater
scale and inclusion as part of the Tsogo group, is expected to enhance Hospitality's BEE ownership 
and credit rating, which will reduce the cost of funding.

It is also anticipated that the Transaction will see Hospitality forming the platform for Tsogo's
strategy of growing a hospitality-focused REIT. It therefore provides Hospitality with exciting
future growth prospects and an attractive pipeline of acquisitions in the medium term, both in
terms of Tsogo properties and properties owned by third parties.

Ultimately, while the Restructure will in the short-term dilute the net income distributions to
holders of A shares, it will (together with the Transaction) result in the long-term sustainability
of Hospitality's business in the best interests of Hospitality shareholders. This, in the Hospitality
Board's view, provides sound and compelling justification for the implementation of both the
Transaction and the Restructure.

Circulars in respect of both the Transaction and the Restructure are expected to be posted on
or about 26 February 2016.

Prospects

The outlook for the domestic economy remains fragile for the second half of the financial year,
potentially dampening domestic demand in the hospitality sector. Traditionally, this has also been
the weaker half of the financial year, due to seasonality. Furthermore, public sector
spending is expected to remain under pressure with the fiscus focusing on reining in expenditure.
However, recent currency weakness is making leisure tourism in South Africa more affordable to
foreign tourists and the government's revision of the new visa requirements, once implemented,
should also contribute to higher foreign arrivals in the country, although not immediately.The
expected gradual increase in foreign arrivals together with the anticipated increase in domestic
leisure tourism in South Africa due to a weaker Rand, should go some way to countering the economic 
drag on the hospitality industry.

The weaker Rand is, however, also expected to further drive inflation, with consequent upward
pressure on hotel operating costs.

Having divested of most of its non-core properties, the Fund's portfolio is more biased
towards major urban centres, including its well-located properties in the Western Cape
and Sandton areas, where demand has been less cyclical. These should continue to support the
Fund's earnings for the remainder of the financial year. In addition, the approval and conclusion 
of the Proposed Tsogo transaction in due course should provide a strong underpin to the Fund's 
future earnings.

Board of directors

Mr Vincent Joyner was appointed as Chief Executive Officer ("CEO") and a member of the
Board of Hospitality with effect from 15 September 2015. Mr Joyner has a 28-year career
in the hospitality industry including 20 years at the Accor hospitality group, culminating in his
appointment as Accor Group CEO, Southern Africa. In 2009, he formed an African hospitality
consulting and investment firm, Hospitality Investment Partners Africa. Mr Joyner holds
a BA (Honours) from Galway-Mayo Institute of Technology (Ireland) and a joint Masters in
International Hospitality Management from Cornell University (USA) and ESSEC (France).

Mr Ridwaan Asmal, Hospitality's Financial Director, who also fulfilled the role of Acting CEO,
resigned from the company effective 12 August 2015. Mr Riaan Erasmus who served as Group
Financial Manager of the Fund since 2010 was appointed as Acting Chief Financial Officer with
effect from 13 August 2015, up until this position has been filled permanently.

Share trading liquidity

During the period under review, 13,9% of the A shares/linked units and 73,0% of the B shares/
linked units were traded on the JSE Limited. Of the total number B shares/linked unit traded,
55,0% related to open market acquisitions by Tsogo, as disclosed on SENS on 26 August 2015.

Dividend distribution payment

Shareholders will receive distribution payment number 20 for the six-month period ended
31 December 2015 of 76,99552 cents per A share and 16,87478 cents per B share.

In accordance with Hospitality's status as a REIT, shareholders 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 shares 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 shareholders (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
shareholder.  These qualifying distributions are, however, exempt from dividend withholding tax
in the hands of South African tax resident shareholders, provided that the South African resident
shareholders provided the following forms to their Central Securities Depository Participant
("CSDP") or broker, as the case may be, in respect of uncertificated shares, or the company, in
respect of certificated shares:

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. Shareholders 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-resident

Qualifying distributions received by non-resident shareholders 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 shareholder. Assuming dividend
withholding tax is withheld at a rate of 15%, the net amount due to non-resident shareholders
will be 65,44619 cents per A share and 14,34356 cents per B share. A reduced dividend withholding
tax rate in terms of the applicable DTA, may only be relied on if the non-resident shareholder
has provided the following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated shares:

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 cease
     to be the beneficial owner, both in the form prescribed by the Commissioner for the South
     African Revenue Service. Non-resident shareholders 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. Shareholders are requested to seek professional advice on the
     appropriate action to take.

Last day to trade cum distribution                                       Friday, 11 March 2016
Shares will trade ex-distribution                                        Monday, 14 March 2016
Record date                                                              Friday, 18 March 2016
Payment date                                                            Tuesday, 22 March 2016

Shareholders may not dematerialise or rematerialise their shares between Monday, 14 March
and Friday, 18 March 2016 both days inclusive.

By order of the Board

D G Bowden                                  V Joyner
(Chairman)                                  (Chief Executive Officer)

Approved by the board: 18 February 2016
Released on SENS: 23 February 2016

Directors:          D G Bowden (Chairman)*+,V M Joyner (CEO), L de Beer *+, S A Halliday *+,
                    Z N Kubukeli*+, G A Nelson*, Z Ntwasa*+, W C Ross *+
                    (*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

BASIS OF PREPARATION AND ACCOUNTING POLICIES

These results were prepared under the supervision of the Acting Chief Financial Officer,
Mr R Erasmus CA(SA).

The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, IAS 34 Interim Financial Reporting, 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 the requirements
of the Companies Act of South Africa. The accounting policies applied in the preparation of
these interim financial statements are in terms of International Financial Reporting Standards
and are consistent with those applied in the previous annual financial statements. KPMG Inc., the
independent auditor, has not reviewed or audited these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December
                                               Unaudited      Unaudited       Audited
                                                     Dec            Dec           Jun
                                                    2015           2014          2015
                                                   R'000          R'000         R'000
Revenue                                          235 587        217 027       433 287
Rental income   – contractual                    236 067        217 392       434 112
                – straight-line accrual            (480)          (365)         (825)
Expenditure                                     (20 953)       (18 264)      (40 674)
Operating expenses                              (20 953)       (18 264)      (40 674)
Operating profit                                 214 634        198 763       392 613
Net finance cost                                (79 817)       (80 266)     (160 888)
Finance income                                     4 499          4 511         9 696
Finance costs                                   (84 316)       (84 777)     (170 584)
Profit before debenture interest, goodwill,
fair value adjustments and taxation              134 817        118 497       231 725
Debenture interest                                     –      (118 963)     (232 815)
Profit/(loss) before fair value adjustments,
goodwill and taxation                            134 817          (466)       (1 090)
(Loss)/profit on sale of investment
properties                                       (3 121)              –           390
Fair value adjustments                            18 619            922       143 531
Investment properties, before  
straight-lining adjustment                             –              –       143 734
Straight-line rental income accrual                  480            365           825
Total fair value of investment properties            480            365       144 559
Goodwill impairment                                    –              –       (7 200)
Interest-rate swaps                               18 139            557         6 172
Profit before taxation                           150 315            456       142 831
Debenture discount amortisation                  (2 313)        (4 082)       (8 633)
Equity accounted profit from associate
after tax                                            144             93           203
Taxation                                               –              –         (116)
Total profit/(loss) and comprehensive
income for the year                              148 146        (3 533)       134 285

Reconciliation between earnings, headline
earnings and distributable earnings
Total profit/(loss) and comprehensive
income for the year                              148 146        (3 533)       134 285
Adjustment: Debenture interest                         –        118 963       232 815
Profit (shares/linked units)                     148 146        115 430       367 100
Adjustments:
Loss/(profit) on sale of investment
properties                                         3 121              –         (390)
Goodwill impairment                                    –              –         7 200
Fair value – investment properties
revaluation                                            –              –     (143 734)
Fair value – straight-line rental income           (480)          (365)         (825)
Headline earnings (shares/linked units)          150 787        115 065       229 351
Fair value – interest rate swaps                (18 139)          (557)       (6 172)
Debenture discount amortisation                    2 313          4 082         8 633
HPF Employee Incentive Trust effects                   –              8            78
Taxation                                               –              –           100
Straight-line rental income                          480          (365)           825
Distributable earnings                           135 441        118 963       232 815
Number of shares/units
A shares/linked unit                         144 285 503    144 285 503   144 285 503
B shares/linked unit                         142 315 793    144 285 503   142 315 793
– Shares/Units in issue                      144 285 503    144 285 503   144 285 503
– HPF Employee Incentive Trust shares/
  units                                      (1 969 710)              –   (1 969 710)

                                               Unaudited      Unaudited       Audited
                                                     Dec            Dec           Jun
                                                    2015           2014          2015
                                                   R'000          R'000         R'000
Weighted average number of shares/units
A shares/linked unit                         142 380 569    140 506 693   142 380 569
B shares/linked unit                         140 410 859    140 506 693   140 410 859
– Shares/Units in issue                      142 380 569    140 506 693   142 380 569
- HPF Employee Incentive Trust  
  shares/units                               (1 969 710)              –   (1 969 710)
Distribution per share/linked unit (cents)
A shares/linked unit                               77,00          73,33        148,21
– Interim                                          77,00          73,33         73,33
– Final                                                –              –         74,88
B shares/linked unit                               16,87           9,12         13,15
– Interim                                          16,87           9,12          9,12
– Final                                                –              –          4,03
                                                   93,87          82,45        161,36
Earnings and diluted earnings per share/
linked unit (cents)
A shares/linked unit                               52,39          41,08        129,81
B shares/linked unit                               52,39          41,08        129,81
                                                  104,78          82,15        259,62
Headline earnings and diluted headline
earnings per share/linked unit (cents)
A linked share/unit                                53,32          40,95         81,10
B linked share/unit                                53,32          40,95         81,10
                                                  106,64          81,89        162,20

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December
                                               Unaudited      Unaudited       Audited
                                                     Dec            Dec           Jun
                                                    2015           2014          2015
                                                   R'000          R'000         R'000
ASSETS
Non-current assets                             4 901 812      4 745 015     4 819 827
Investment properties                          4 873 266      4 724 131     4 806 775
Straight-line rent income accrual                  (255)            685           225
Investment properties and related accrual      4 873 011      4 724 816     4 807 000
Goodwill                                          12 000         19 200        12 000
Furniture, fittings and equipment                    558            855           573
Derivative asset                                  16 046              –             –
Investment in associates                             197            144           254
Current assets                                   484 753        475 989       626 033
Non-current assets held for sale                 216 721        311 739       329 228
Properties held for trading                       22 309         20 897        21 620
Trade and other receivables                       50 839         38 397        71 035
Cash and cash equivalents                        194 884        104 956       204 150
Total assets                                   5 386 565      5 221 004     5 445 860
EQUITY AND LIABILITIES
Equity                                         3 537 049        832 617       970 747
Stated capital                                 2 934 087        515 619       515 931
Retained earnings                                127 675          9 199       (2 332)
Fair value reserve                               475 287        307 799       457 148
Non-current liabilities                        1 547 863      4 168 528     4 045 809
Debentures                                             –      2 411 657     2 415 842
Interest-bearing liabilities                   1 547 863      1 749 163     1 627 874
Derivative liability                                   –          7 708         2 093
Current liabilities                              301 653        219 859       429 304
Trade and other payables                          71 653         60 896        85 352
Short-term portion of interest-bearing
liabilities                                      230 000         40 000       230 000
Taxation                                               –              –           100
Debenture interest payable                             –        118 963       113 852
Total equity and liabilities                   5 386 565      5 221 004     5 445 860
Net asset value per share/linked unit
(Rand)
A-share/linked unit                                12,26          11,24         11,74
B-share/linked unit                                12,26          11,24         11,74

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

                           Share       Share      Stated    Retained   Fair value
                         capital     premium     capital    earnings      reserve        Total
                           R'000       R'000       R'000       R'000        R'000        R'000
Balance at 1 July 2014        27     481 289           –      13 289      307 242      801 847
Total loss and
comprehensive
income for the year            –           –           –     (3 533)            –      (3 533)
Transactions with
owners, recorded
directly in equity             2      34 301           –       (557)          557       34 301
Issue of shares                2      37 305           –           –            –       37 307
Share issue expense,
net of tax                     –     (3 004)           –           –            –      (3 004)
Transfer to fair value
reserve – interest rate
swaps                          –           –           –       (557)          557            –
Balance at
31 December 2014              29     515 590           –       9 199      307 799      832 617

                           Share       Share      Stated    Retained   Fair value
                         capital     premium     capital    earnings      reserve        Total
                           R'000       R'000       R'000       R'000        R'000        R'000
Balance at 1 July 2015        28     515 903           –     (2 332)      457 148      970 747
Total profit and
comprehensive
income for the year            –           –           –     148 146            –      148 146
Transactions with
owners, recorded
directly in equity          (28)   (515 903)   2 934 087    (18 139)       18 139    2 418 156
Conversion of par
value shares into no-
par value shares            (28)   (515 903)     515 931           –            –           –
Conversion of
debentures into
stated capital                 –           –   2 418 156           –            –   2 418 156
Transfer to fair value
reserve – investment
properties                     –           –           –           –            –           –
Transfer to fair value
reserve – interest rate
swaps                          –           –           –    (18 139)       18 139           –
Balance at
31 December 2015               –           –   2 934 087     127 675      475 287   3 537 049

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 December
                                                          Unaudited    Unaudited      Audited
                                                                Dec          Dec          Jun
                                                               2015         2014         2015
                                                              R'000        R'000        R'000
Cash flows from operating activities
Cash generated from operations                              221 806      192 059      378 518
Finance income received                                       4 499        4 511        9 696
Finance costs paid                                         (84 316)     (84 777)    (170 584)
Taxation                                                      (100)        (134)        (150)
Distribution to share/unitholders                         (113 852)    (118 142)    (237 105)
Net cash inflow/(outflow) from operating
activities                                                   28 037      (6 483)     (19 625)
Cash flows from investing activities
Acquisition and development of investment
properties                                                 (78 773)    (208 655)    (244 204)
Disposal of investment properties                           122 148            –       80 000
Acquisition of properties held for trading                    (689)        (326)      (1 085)
Acquisition of furniture and equipment                        (178)        (173)        (224)
Dividends received from associates                              200          200          200
Net cash inflow/(outflow) from investing
activities                                                   42 708    (208 990)    (165 313)
Cash flows from financing activities
Proceeds from the issue of linked units                           –      119 694      116 638
Share issue expenses paid                                         –      (3 004)            –
Interest-bearing liabilities (paid)/raised                 (80 011)       16 536       85 247
Net cash (outflow)/inflow from financing
activities                                                 (80 011)      133 226      201 885
Net (decrease)/increase in cash and cash
equivalents                                                 (9 266)     (82 247)       16 947
Cash and cash equivalents at beginning of
year                                                        204 150      187 956      187 203
Cash and cash equivalents at end of year                    194 884      104 956      204 150

CONDENSED CONSOLIDATED SEGMENTAL INFORMATION
for the six months ended 31 December

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 arms' length basis. 

                                                                                     Total of all 
                                         Traditional       Conference                   operating
R 000's                                   portfolio*       portfolio#   Head office      segments
Statement of Comprehensive Income  -
31 Dec 2015
Segment revenue                              201 951           34 116             -       236 067
Expenditure                                        -                -      (20 953)      (20 953)
Segment results                              201 951           34 116      (20 953)       215 114
Statement of Comprehensive Income  -
31 Dec 2014
Segment revenue                              177 675           39 717             -       217 392
Expenditure                                        -                -      (18 264)      (18 264)
Segment results                              177 675           39 717      (18 264)       199 128
Statement of Comprehensive Income  -
30 Jun 2015
Segment revenue                              370 416           63 585           111       434 112
Expenditure                                        -                -      (40 674)      (40 674)
Segment results                              370 416           63 585      (40 563)       393 438
Statement of Financial Position - 
31 Dec 2015
Non-current assets
Investment properties                      4 104 911          768 100             -     4 873 011
Current assets
Non-current assets held for sale             216 721                -             -       216 721
Trade and other receivables                    2 382            3 432        45 025        50 839
Segment assets                             4 324 014          771 532        45 025     5 140 571
Statement of Financial Position -
31 Dec 2014
Non-current assets
Investment properties                      3 873 839          850 977             -     4 724 816
Current assets
Non-current assets held for sale             311 739           81 121             -       311 739
Trade and other receivables                    2 656            4 345        31 396        38 397
Segment assets                             4 188 234          855 322        31 396     5 074 952
Statement of Financial Position –
30 Jun 2015
Non-current assets
Investment properties                      4 045 272          761 728             -     4 807 000
Current assets
Non-current assets held for sale             329 228                -             -       329 228
Trade and other receivables                    3 584            1 236        66 215        71 035
Segment assets                             4 378 084          762 964        66 215     5 207 263

* Traditional portfolio: Properties to which revenue is generated predominantly from room nights sold.

# Conference portfolio: Properties to which revenue is generated predominantly from conference facilities and 
  food and beverage. 

Web:www.hpf.co.za

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