Wrap Text
Financial statements for the year ending 31 August 2016
INTERNATIONAL HOTEL PROPERTIES LTD
(Previously International Hotel Group Ltd)
(Incorporated in the British Virgin Islands, company number: 1862176)
JSE share code: IHL
ISIN: VGG487261064
("IHL" or the "Company" or the "Group")
FINANCIAL STATEMENTS FOR THE YEAR ENDING 31 AUGUST 2016
IHL, the hotel and leisure focused property investment company, is pleased to announce its results for the year ended
31 August 2016.
Financial Highlights Year ended 31 August 2016
Income Statement
- Underlying distributable earnings GBP2.0 million
- Total Dividend paid and payable per share (p) 5.50p
Balance Sheet
- Investment Property GBP29.0 million
- Property, Plant and Equipment GBP57.7 million
- Debt Loan-to-value ratio 40%
Trading Highlights
- Trading hotels have achieved RevPAR growth of 12.6%
- Average RGI (market share of revenue) at 108.5% of competitor sets of trading hotels
Operational Highlights
- A further GBP52.3 million of equity raised
- Successful acquisition and internalisation of external investment and asset management company
- Acquisition of six hotels
- Completion and opening of the Travelodge Belvedere hotel
Helder Pereira, Chairman, commented:
"The Group's achievements in the past year have been encouraging with significant milestones being reached in
establishing a well positioned and focused hotel property investment group that delivers strong value to shareholders.
Recent trading has been particularly encouraging.
With the ongoing support of cornerstone investors, and following the initial primary listing on the Luxembourg Stock
Exchange ("LuxSE") and secondary listing this year on the Johannesburg Stock Exchange's ("JSE") AltX, a further
GBP52.3 million equity was successfully raised and debt facilities accessed with Banco Santander, enabling the purchase
of six hotels and the development of the Travelodge Belvedere hotel in the UK this year.
During the year, the Group's Investment Manager, RBDL Capital Managers Limited, was acquired from Redefine
BDL Hotel Group Limited in order to internalise the investment and asset management functions of the Group and
thereby align the interests of the Group's Shareholders and key management.
Much is being said about Brexit and its potential impact on the UK economy in particular. Like all periods of change
and uncertainty, there are both risks and opportunities. IHL's assets are in good condition and the Group's strong
brands provide a defensive strategy against any downturn in the economy. New acquisitions are being sought in
mainland Europe, which will spread the geographic distribution and associated risk of only operating in one market.
IHL has assembled a very competent Board of Executive and Non-Executive Directors. The appointment of Jon
Colley as Chief Executive Officer (CEO) (previously the Group's Chief Investment Officer) has strengthened the
management team, given Jon's experience in banking, hotel branding and development.
During the year there were six successful acquisitions and the completion of a development in the mid-tier and budget
hotel segment. The portfolio now includes four Travelodge hotels which are leased on long-term leases. Travelodge
has a long track record with a best-in-class offering in the market they operate in. The tenant takes the trading risk in
this group of hotels.
The Group has identified value enhancing opportunities to expand hotels by adding rooms and continues to assess
hotel acquisition opportunities at the right yield, particularly in the UK."
Results presentation, webcast and conference call
There will be a presentation and a live webcast for analysts at 8.00am (UK time), 10.00am (SA time) on 29 November
2016. The live webcast can be accessed via the homepage of the Company's website:
http://www.internationalhotelproperties.com/investors/results-centre/
Conference call dial-in numbers
UK (Toll-Free): 0808 162 4061
South Africa: 0800 200 648 / (Toll-Free) +27 11 535 3600
USA and Canada (Toll-Free): 1 855 481 5362
All other locations: +27 11 535 3600 / +27 10 201 6800
For further information, please contact:
M Partners
Luxembourg listing agent +352 263 868 602
Java Capital
JSE sponsor +27 (0) 11 722 3050
FTI Consulting
South African Public Relations Advisor
Max Gebhardt +27 (0) 11 214 2402
Company Secretary
Osiris Secretarial Services Ltd +1 (284) 494 9820
Notes to editors:
IHL is a hotel and leisure focused property investment company which owns eight hotels in the UK. The Company's
shares are currently listed on the Euro MTF Market of the LuxSE, which constitutes its primary listing, and on the
AltX of the JSE which constitutes its secondary listing.
29 November 2016
GROUP HIGHLIGHTS
- Underlying distributable earnings of GBP2.0 million for the year
- Total dividend declared of 5.50 pence
- A further GBP52.3 million of equity raised taking total equity raised to GBP55.0 million
- Successful acquisition and internalisation of investment and asset management company
- Acquisition of 6 hotels
- Completion and opening of the Travelodge Belvedere Hotel
- RevPAR growth of 12.6% achieved by trading hotels
- Average RGI (market share of revenue) at 108.5% of competitor set of trading hotels
CHAIRMAN'S OVERVIEW
The Group's achievements in the past year have been encouraging with significant milestones being reached in establishing a well positioned and focused hotel
property investment group that delivers strong value to shareholders. Recent trading has been particularly encouraging.
With the ongoing support of cornerstone investors, and following the initial primary listing on the Luxembourg Stock Exchange (LuxSE) and secondary listing
this year on the Johannesburg Stock Exchange's (JSE) AltX, a further GBP52.3 million equity was successfully raised and debt facilities accessed with Banco Santander,
enabling the purchase and development of seven hotels in the UK this year.
During the year the Group's Investment Manager, RBDL Capital Managers Limited, was acquired from Redefine BDL Hotel Group Limited in order to
internalise the investment and asset management functions of the Group and thereby align the interests of the Group's Shareholders and key management.
Much is being said about Brexit and its potential impact on the UK economy in particular. Like all periods of change and uncertainty, there are both risks and
opportunities. IHL's assets are in good condition and the Group's strong brands provide a defensive strategy against any downturn in the economy.
New acquisitions are being sought in mainland Europe, which will spread the geographic distribution and associated risk of only operating in one market.
IHL has assembled a very competent Board of Executive and Non-Executive Directors. The appointment of Jon Colley as Chief Executive Officer (CEO)
(previously the Group's Chief Investment Officer) has strengthened the management team, given Jon's experience in both banking, hotel branding and development.
During the year there were six successful acquisitions and the completion of a development in the mid-tier and budget hotel segment. The portfolio now
includes four Travelodge hotels that are leased on long-term leases. Travelodge has a long track record with a best-in-class offering in the market they operate
in. They take the trading risk in this group of hotels.
The Group has identified value enhancing opportunities to expand hotels by adding rooms and continues to assess hotel acquisition opportunities at the right
yield, particularly in the UK.
CHIEF EXECUTIVE OFFICER'S REVIEW
Over the last year, the Group has turned its hotel portfolio into successful business acquisitions that are generating good returns. Success has been based on key
fundamentals and a disciplined approach when reviewing potential acquisitions. The business has continued to raise equity and bank debt when acquiring good quality,
internationally-branded hotels in mature, stable UK markets.
As with all "start-up" businesses, there were initial set up costs that negatively impacted on early profits. Recent trading was encouraging and reflects the
potential of the portfolio. As a result, the Group paid a maiden dividend of 2.5 pence per share for the six months ending February 2016 and a further 3.0 pence
per share for the six months ending August 2016, bringing the first full year dividend to 5.5 pence per share.
Trading hotels
Three trading hotels were acquired during the financial year which outperformed prior years and their local competitive sets. The UK regional RevPAR
performance has helped and this is set to continue through 2017.
Management's focus on day-to-day asset management of the hotels whilst also working closely with the Group's management partner, Redefine|BDL Hotels,
has been an important contributor to this success.
Exceeding customers' expectations by offering a quality guest experience has been an important part of the plan for new hotels and remains a tracked key
performance indicator. As such, the IHL board has agreed on a capital investment programme to refurbish all rooms to the latest brand standards in both
Holiday Inn Express Southampton and Holiday Inn Express Redditch. Air-conditioning units will be installed to set these hotels apart from their competition,
despite this not being a brand standard.
Investment hotels
Three investment hotels were acquired and one developed during the financial year, all of which are leased to Travelodge, the UK's second largest budget hotel
chain with 534 hotels and nearly 40,000 bedrooms. Travelodge has continued to expand and invest over the last two years, refurbishing rooms to a modern, high
standard and showing strong performance.
FINANCIAL REVIEW
The year to 31 August 2016 has been transformational, with a further GBP52.3 million of equity raised and the acquisition of a further six hotels, along with the
completion of a development.
These acquisitions have been partially funded by bank debt with a target loan-to-value (LTV) in the range of 50% - 55%. The Group has entered into hedging
arrangements on this debt to minimise risk from interest rate movements. This has resulted in a fixed 'all-in' cost of debt of less than 3.4%.
The Group's Investment Property and Property, Plant and Equipment values have grown by 4.1% since acquisition, when compared to headline acquisition prices.
Capital raising
To enable further acquisitions through the year, the Group carried out multiple placements of new ordinary shares, all at GBP1.00 per share, to generate gross
proceeds of GBP52.3 million:
- 12,350,000 - October 2015
- 13,875,000 - October 2015
- 6,125,000 - November 2015
- 13,000,000 - February 2016
- 7,000,000 - March 2016
In addition to these placements, 1,000,000 shares were issued in consideration for the acquisition of RBDL Capital Managers Limited. This has enabled the
asset management of the portfolio to be carried out internally, avoiding any income leakage to third parties.
Hotel valuations
The Group's owned hotels are classified as either Investment Property (where the hotel is leased to a third party), or Property, Plant and Equipment (PP&E) (where the
hotel is managed by a third party operator for a fee but the Group retains the trading risk associated with that hotel). Overall the valuation of the hotels at year
end is 4.1% higher than the headline purchase prices of those hotels, with the average ownership period in this financial year being 7.8 months.
Headline Purchase
At 31 August 2016 Price Gain Gain
GBPm GBPm GBPm %
Investment Property 29.0 28.1 0.9 3.2%
Property, Plant and Equipment 57.7 55.2 2.5 4.5%
86.7 83.3 3.4 4.1%
Once acquisition costs are taken into account, the overall net gain is GBP1.0 million.
Income statement
The income statement is presented under IFRS. The Directors believe it is useful to separately present a table of underlying distributable earnings, after
providing for future maintenance, replacement and refurbishment spend at 3% of trading hotel revenue. The GBP2.0 million in underlying distributable earnings
gives a more appropriate indicator of the performance of the business.
Of the Group's eight hotels at the year end, three were acquired in November 2015, one in March 2016 and two in April 2016 with the Travelodge Belvedere
development being completed in April 2016. As a result, the business has not experienced a full year of revenue from the majority of hotels. The prior year is
non-comparable as the portfolio only comprised one owned hotel for any significant period of time in that year.
The income statement presents Trading Hotel Revenue and related Cost of Sales and Expenses, and Rental Income. Trading Hotel Revenue and Cost of Sales
and Expenses are the revenue and operating cost of hotels where the Group takes the trading risk and pays a management fee to an operator to manage the hotel.
Rental Income is the revenue related to the hotels that are leased to third parties.
The prior year had no Trading Hotel Revenue, as the first such hotel was acquired at the end of the year. The partial year revenues from the four acquired hotels
totalled GBP8.4 million. Rental Income from the leased portfolio increased by GBP1.0 million over the prior year due to the acquisition of three Travelodge hotels and
the completion of the Belvedere development in the year. The prior year rental income related to the Worcester hotel, which was disposed of during the year.
Total operating costs in the business were GBP9.1 million with GBP5.4 million of those arising as operating costs in the trading hotels. The remaining GBP3.7 million
included GBP1.3 million of Goodwill Impairment, GBP0.4 million of Aborted Acquisition Costs, GBP0.4 million of Third Party Rent, GBP0.2 million of Foreign Exchange
Loss relating to an earlier capital raise and GBP0.4 million of Fair Value Losses.
Net Finance Costs have increased by GBP1.6 million to GBP1.6 million, predominantly as a result of the GBP1.1 million Unrealised loss on the interest rate swaps and
cap whilst GBP0.7 million related to additional debt financing. The Group also earned GBP0.2 million on loans it provided.
The calculation of underlying earnings available for distribution is as follows:
GBP
Loss for the year (880,332)
Adjustments:
Revaluation gain on Investment Property (468,541)
Revaluation loss on property, plant and equipment 364,706
Goodwill write-off 1,057,900
Unrealised loss on interest rate swaps/cap 1,082,763
Costs of aborted acquisitions 473,374
Expenses incurred on assumption of net liabilities of Travelodge-owning entities (refer note 10) 238,013
Foreign exchange loss 185,703
Amortisation of debt issue costs 49,486
Depreciation 177,160
Fixtures, Fittings and Equipment replacement reserve provision (250,845)
Underlying distributable earnings 2,029,387
Underlying distributable earnings per share (pence) 5.02
Debt
The Group has targeted an LTV ratio of 50% - 55%. At 31 August 2016 there was an overall LTV position of 40%. This was lower than the targeted position due
to undrawn facilities on the Gatwick, Leatherhead and Belvedere properties. This delay in drawdown was in order to minimise cash drag on equity raised during
the year.
It is anticipated that the Group will drawdown this additional debt at the time of the next acquisition as a substitute for seeking additional equity. This will
increase the Group's LTV to within the target range.
Cash flow
The Group's cash balance has increased by GBP3.8 million since the prior year leaving a closing balance of GBP4.6 million. This balance includes GBP1.0 million raised
as part of the Group's share placements to cover the cost of refurbishing the bedrooms at Holiday Inn Express Southampton and Holiday Inn Express Redditch
to the latest brand standards. The final dividend totalling GBP1.7 million was paid subsequent to the year end.
Dividends
The Directors declared a final dividend for the year of 3.0 pence per share payable on 14th October 2016. The total dividend paid and payable for the year was
5.5 pence per share. The final dividend was paid on the due date. Under S56 of the BVI Business Companies Act 2004 dividends can be paid on the basis that the
Directors are satisfied that the Company passes a solvency test.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 August 2016
Restated *
Audited Audited
Year ended 10 February to
31 August 2016 31 August 2015
GBP GBP
Continuing operations
Trading hotel revenue 8,361,490 -
Rental income 1,111,260 -
Total Revenue 9,472,750 -
Other income and gains - 11,378
Net fair value gain on Investment Property 468,541 -
Trading hotel cost of sales / expenses (5,365,772) -
Administrative expenses (3,744,144) (296,184)
Operating profit / (loss) 831,375 (284,806)
Net finance costs (1,554,956) -
Finance income 258,289 61,202
Finance expense (1,813,245) (61,202)
Loss before tax from continuing operations (723,581) (284,806)
Taxation charge (83,329) -
Loss after taxation from continuing operations (806,910) (284,806)
Discontinued operation
(Loss) / profit after tax for the year from discontinued operation (73,422) 96,414
Loss for the year (880,332) (188,392)
Other Comprehensive Income
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
Revaluation of land and buildings, net of tax 1,150,185 -
Related deferred tax (229,117) -
Other comprehensive income for the period, net of tax 921,068 -
Total comprehensive profit / (loss) for the year 40,736 (188,392)
Earnings per share
Basic loss per share (pence) 1 (2.18) (7.67)
Diluted loss per share (pence) 1 (2.18) (7.67)
Basic headline earnings / (loss) per share (pence) 1 0.53 (8.13)
Diluted headline earnings / (loss) per share (pence) 1 0.53 (8.13)
* The 2015 comparative has been restated as a result of classification of a discontinued operation.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 August 2016
Audited Audited
31 Aug 2016 31 Aug 2015
GBP GBP
ASSETS
Non-current assets 87,683,239 15,554,613
Property, plant and equipment 57,713,520 8,800,000
Goodwill 1,015,968 993,411
Investment property 28,950,000 5,700,000
Derivatives 3,751 61,202
Current assets 5,952,927 1,160,916
Inventories 31,337 6,299
Trade and other receivables 1,363,505 421,986
Cash and cash equivalents 4,558,085 732,631
Total assets 93,636,166 16,715,529
EQUITY
Capital and Reserves 52,061,515 2,376,874
Share capital 56,000 2,650
Share premium 55,233,171 2,562,616
Retained Earnings (4,148,724) (188,392)
Revaluation reserve 921,068 -
LIABILITIES
Non-current liabilities 35,963,744 7,433,230
Loans and borrowings 34,150,108 6,608,908
Derivatives 1,025,312 -
Deferred tax liabilities 788,324 824,322
Current liabilities 5,610,907 6,905,425
Trade and other payables 4,891,946 1,064,053
Short term portion of interest-bearing loans and borrowings 549,000 5,761,356
Current tax liabilities 169,961 80,016
Total equity and liabilities 93,636,166 16,715,529
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August 2016
Audited
Audited Audited Accumulated Audited Audited
Share capital Share premium reserves Revaluation reserve Total equity
GBP GBP GBP GBP GBP
Balance as at 10 February 2015 - - - - -
Issue of shares - 19 March 2015 1 - - - 1
Cancellation of shares - 31 March 2015 (1) - - - (1)
Issue of shares - 31 March 2015 2,650 2,562,616 - - 2,565,266
Total comprehensive income
Loss for the year - - (188,392) - (188,392)
Other comprehensive income - - - - -
Total comprehensive loss for the year - - (188,392) - (188,392)
Balance as at 31 August 2015 2,650 2,562,616 (188,392) - 2,376,874
Loss for the year - - (880,332) - (880,332)
Other comprehensive income for the year - - - 921,068 921,068
Total comprehensive profit for the year - - (880,332) 921,068 40,736
Transactions with owners of the Company
Issue of shares - 14 October 2015 12,350 12,127,314 - - 12,139,664
Issue of shares - 20 October 2015 13,875 13,810,102 - - 13,823,977
Issue of shares - 20 November 2015 6,125 6,069,640 - - 6,075,765
Issue of shares - 23 February 2016 13,000 12,655,385 - - 12,668,385
Issue of shares - 30 March 2016 7,000 6,957,455 - - 6,964,455
Issue of shares - 28 May 2016 1,000 1,050,659 - - 1,051,659
Dividends Paid and Proposed - - (3,080,000) - (3,080,000)
Total transactions with owners of the Company 53,350 52,670,555 (3,080,000) - 49,643,905
Balance as at 31 August 2016 56,000 55,233,171 (4,148,724) 921,068 52,061,515
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 August 2016
Audited Audited
Year ended 10 February to
31 August 2016 31 August 2015
GBP GBP
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the year (880,332) (188,392)
Adjustments to reconcile loss after tax to net cash flows:
Net fair value movement for the year in investment properties (468,541) 183,883
Bargain purchase of subsidiaries - (166,124)
Depreciation of property, plant and equipment 177,160 -
Net finance costs 1,554,956 27,457
Impairment of goodwill 1,057,900 -
Tax charge 83,329 5,901
Fair value losses on property, plant and equipment 364,706 -
Loss on sale of discontinued operation 73,422 -
Working capital adjustments:
(Increase) / Decrease in trade and other receivables and prepayments (16,651) 181,739
Increase in trade and other payables 833,785 379,410
(Increase) in inventories (593) -
Cash generated from operating activities 2,779,141 423,874
Interest paid (515,450) (27,457)
Interest Received 258,289 -
Tax paid (48,176) -
Net cash inflow from operating activities 2,473,804 396,417
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment and net cash flows of related assets (41,305,165) -
and liabilities acquired
Additions to Investment Property (24,030,093) -
Development expenditure on investment property (3,780,882) -
Proceeds from the sale of a disposal group (net of cash disposed) 410,392 -
Acquisition of a subsidiary, net of cash acquired - 361,214
Net cash (outflow) / inflow from investing activities (68,705,748) 361,214
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and borrowings 24,217,500 -
Repayment of loans and borrowings (6,501,022) (25,000)
Transaction costs relating to loans and borrowings (490,251) -
Proceeds from issue of share capital 55,000 -
Proceeds from issue of share premium 54,945,000 -
Transaction costs relating to issue of shares (768,829) -
Dividends paid (1,400,000) -
Net cash inflow / (outflow) from financing activities 70,057,398 (25,000)
Net increase in cash and cash equivalents 3,825,454 732,631
Balance at the beginning of the period 732,631 -
BALANCE AT YEAR END 4,558,085 732,631
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 August 2016
1. EARNINGS PER SHARE (EPS), HEADLINE EARNINGS PER SHARE (HEPS) AND DIVIDEND PER SHARE (DPS)
The following reflects the income and share data used in the basic and diluted EPS computations:
Restated *
2016 2015
GBP GBP
Loss attributable to ordinary equity holders of the parent for basic earnings:
Continuing operations (806,910) (284,806)
Discontinued operations (73,422) 96,414
Potential dilution - -
Loss attributable to ordinary equity holders adjusted for basic and diluted EPS (880,332) (188,392)
Number of ordinary shares in issue 56,000,000 2,650,000
Weighted average number of ordinary shares for basic and diluted EPS 40,402,945 2,457,273
Loss per share (pence)
- Basic (2.18) (7.67)
- Diluted (2.18) (7.67)
Headline earnings per share
Basic loss per share (pence) (2.00) (11.59)
Diluted (loss) / earnings per share (pence) (2.00) (11.59)
Loss per share for discontinued operations
Basic earnings per share (pence) (0.18) 3.92
Diluted (loss) / earnings per share (pence) (0.18) 3.92
Headline earnings per share
The following table provides the profit/(loss) amount used to calculate headline earnings per share:
Loss attributable to equity holders of the parent for the basic and diluted EPS calculations (880,332) (188,392)
Adjustments:
Revaluation gain on Investment Property (468,541) -
Revaluation loss on property, plant and equipment 364,706 -
Goodwill write-off 1,057,900 -
Loss on discontinued operations 139,224 -
Bargain gain on purchases of subsidiary - (11,378)
Headline earnings / (loss) 212,957 (199,770)
Headline earnings / (loss) per share (pence):
- Basic 0.53 (8.13)
- Diluted 0.53 (8.13)
Underlying distributable earnings
Adjustments to headline earnings:
Loss on discontinued operations (139,224) -
Unrealised loss on interest rate swaps/cap 1,082,763 -
Costs of aborted acquisitions 473,374 46,119
Expenses incurred on assumption of net liabilities of Travelodge-owning entities 238,013 -
Foreign exchange loss 185,703 -
Amortisation of debt issue costs 49,486 -
Depreciation 177,160 -
Fixtures, Fittings and Equipment replacement reserve provision (1) (250,845) -
Underlying distributable earnings / (loss) 2,029,387 (153,651)
Underlying distributable earnings / (loss) per share (pence) 5.02 (6.25)
Dividends per share paid and payable (pence) 5.50 -
First interim dividend per share (pence) 2.50 -
Second interim dividend per share (pence) 3.00 -
* The 2015 comparative has been restated as a result of classification of a discontinued operation.
(1) The fixtures, fittings and equipment replacement reserve provision is based on 3% of trading hotel revenue.
2. BASIS OF PREPARATION AND FINANCIAL INFORMATION PRESENTED
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB), the listing requirements of the Luxembourg Stock Exchange and the Listings Requirements of the Johannesburg Stock
Exchange, to the extent that they apply to the company.
The financial information presented here does not amount to statutory financial statements. The Annual Report for the year ended 31 August 2016 will be
available on the Company's website (www.internationalhotelproperties.com) in early December 2016. The auditors, KPMG, have reported on the audited
financial statements and their audit report was unmodified. A copy of their report is available on request from the Company's registered office at Coastal Building,
Wickham's Cay II, Road Town, Tortola, British Virgin Islands.
29 November 2016
Date: 29/11/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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