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Half year report and financial statements for the six months ended 28 February 2017
INTERNATIONAL HOTEL PROPERTIES LIMITED
("IHL" or the "Company" or the "Group")
(Previously International Hotel Group Limited)
(Incorporated in the British Virgin Islands, company number: 1862176)
JSE share code: IHL
ISIN: VGG487261064
Half year report and financial statements for the six months ended 28 February 2017
GROUP HIGHLIGHTS
- Half year underlying distributable earnings of GBP1.27 million (Prior Year: GBP0.1 million)
- Underlying distributable earnings per share of 2.28 pence (Prior Year: 0.39 pence)
- Half year dividend declared of 2.20 pence per share (Prior Year: 2.50 pence per share)
- Acquisition of the Holiday Inn Express Edinburgh City Centre (161 rooms)
- Portfolio expanded to nine hotels with 1,135 bedrooms (Prior Year: four hotels with 454 bedrooms)
- Gearing at 52% loan to value
- Key stats of owner-operated hotels:
- 12.1% RevPAR growth on prior year
- RGI (market share of revenue) at 104.8% of the competitor set
- Trading remains strong
CHAIRMAN'S REVIEW
Trading during the second quarter remained positive and in-line with expectations, with total half year revenue of GBP8.1 million. This delivered underlying distributable earnings of
GBP1.27 million, and underlying distributable earnings per share of 2.28 pence. A dividend of 2.20 pence per share was declared.
During the second quarter, the Company acquired the Holiday Inn Express Edinburgh City Centre for GBP17.7 million plus costs. Santander, the Company's primary bankers, provided
an additional five-year loan facility of GBP9.6 million for this acquisition, taking IHL's total loan-to-value to 52%. This hotel is located in the heart of Edinburgh City Centre, in close
proximity to the city's main attractions. The hotel had previously obtained planning permission for 24 extra hotel bedrooms, which the Company is currently assessing. In line with
the company's strategy of maintaining and improving assets to remain competitive, the Edinburgh property will be upgrading all bedrooms to the latest generation Holiday Inn
Express standard (generation 4) and also installing air conditioning to all bedrooms. This is similar to the investment at the Holiday Inn Express Southampton. The hotel will remain
branded as a Holiday Inn Express, under a new 20 year franchise agreement with IHG (InterContinental Hotels Group PLC), and will be managed by Redefine BDL Hotel Group
Limited. The acquisition continues IHL's growth and investment into the UK hotel sector and is the Company's ninth hotel acquisition since August 2015.
Subsequent to the period end, an additional six rooms were added at the Holiday Inn Express Southampton and an additional two rooms were added at the Hampton by Hilton London
Gatwick Airport. These two hotels operate at high occupancies and the additional rooms will improve the hotels' operating profit, whilst the construction cost per room was lower than
the build cost per room of a new hotel.
FINANCIAL REVIEW
Revenue from the owner-operated hotels totalled GBP7.3 million with a further GBP0.8 million of rental income derived from the leased hotels. EBITDAR was GBP2.9 million which was GBP2.8
million up on the prior year, predominantly driven by the increased number of hotels in the portfolio. The EBITDAR margin at 35% was one percentage point higher than for
12 months to August 2016. Underlying this is the EBITDAR margin of the trading hotels at 34% compared to 12 months to August 2016 of 36% - the first six months of the year
include the lower seasonal trading periods which result in a reduced EBITDAR margin that should be recovered in the remainder of the year.
Six months ended Six months ended Year ended
Notes 28 February 2017 28 February 2016 31 August 2016
GBP'000 GBP'000 GBP'000
Trading Hotel Statistics
Occupancy 78% 74% 84%
Average Rate GBP68.91 GBP65.76 GBP71.11
RevPAR ("Revenue Per Available Room") GBP53.95 GBP48.61 GBP59.75
Rooms Available 113,995 22,200 120,732
Rooms Sold 89,248 16,409 101,452
Revenue 8,078 1,499 9,472
Trading Hotels 7,259 1,165 8,361
Rental Income 819 334 1,111
EBITDAR 2 2,863 29 3,245
Trading Hotels 2,476 300 3,005
Leased Hotels 753 279 1,055
Corporate (366) (550) (815)
EBITDAR Margin 35% 2% 34%
- EBITDAR Margin - Trading 34% 26% 36%
- EBITDAR Margin - Leased 92% 84% 95%
Rent (404) - (386)
Depreciation (465) (278) (177)
Net Finance Expense (645) (44) (1,555)
Exceptional Items - (796) (1,851)
Taxation (257) 29 (83)
Profit/(loss) after tax from discontinued operations - 81 (73)
Profit Attributable to Equity Holders 1,092 (979) (880)
Adjustments 1 183 1,080 2,909
Underlying Distributable Earnings 1 1,275 101 2,029
Rent includes the amounts payable to head landlords on Hampton by Hilton Gatwick and Holiday Inn Express Edinburgh City Centre. The Gatwick rent is turnover related and so
will rise in line with increased revenues as the hotel continues to perform strongly.
The income statement also includes, within Net Finance costs of GBP0.6 million, an unrealised gain on the interest rate swaps of GBP0.2 million in the period. The company has now
implemented hedge accounting which will result in gains and losses on new derivative instruments being taken to Other Comprehensive Income. The charge through the income
statement in the prior year, on existing hedges, will continue to reverse until fully unwound through the income statement.
The GBP1.1 million increase in underlying distributable earnings compared to the prior period is the result of the acquisitions that have taken place and can be further broken down as
follows:
- GBP2.2 million of additional EBITDAR from owner-operated hotels due to acquisitions
- GBP0.3 million of additional EBITDAR from leased hotels due to the full period of trading for the completed Belvedere development and the hotels acquired last year
- GBP0.4 million of additional rent payable to landlords on hotels acquired since February 2016
- GBP0.5 million increase in net finance costs due to the increased bank funding in place to fund the acquisitions
- GBP0.3 million of additional taxation charge on incremental profits earned
- GBP0.2 million increase in the provision for replacement of fixtures, fittings and equipment
The company's cash balance of GBP3.8 million at February 2017 is GBP0.8 million below the balance at August 2016. This is largely due to the final dividend for the year to August 2016
exceeding cash generated from trading in the first half of the current year by GBP0.3 million and GBP0.3 million of loan repayments in the six months to February 2017. The company is
fully drawn on its banking facilities with a loan-to-value of 52%.
DIVIDEND TIMETABLE
The Directors have declared a dividend of 2.20 pence per share for the six months ended 28 February 2017. The salient dates and times for the dividend payment are set out below:
Announcement of GBP to ZAR conversion rate and rand-equivalent dividend Tuesday, 16 May 2017
Last day to trade on the LuxSE and the JSE in order to be eligible for receipt of the dividend Tuesday, 23 May 2017
Trading commences ex-dividend on the LuxSE and the JSE Wednesday, 24 May 2017
Record date Friday, 26 May 2017
Dividend cheques posted, CSDP/broker accounts credited/updated Friday, 9 June 2017
- Shareholders on the South African register will receive a cash dividend in South African Rand, based on the conversion rate.
- Share certificates (in respect of shares held on the South African register) may not be dematerialised or rematerialised between Wednesday, 24 May 2017 and Friday, 26 May
2017, both days inclusive.
- Transfers of shares between sub-registers in Luxembourg and South Africa may not take place between Tuesday, 16 May 2017, and Friday, 26 May 2017, both days inclusive.
- South African shareholders are advised that this dividend will be regarded as a foreign dividend and further details relating to South African dividends withholding tax will be
included in the announcement detailing the currency conversion rate.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the six months ended 28 February 2017
Six months ended Six months ended Year ended
Notes 28 February 2017 29 February 2016 31 August 2016
GBP GBP GBP
Continuing operations
Trading hotel revenue 7,258,501 1,164,868 8,361,490
Rental income 819,493 333,713 1,111,260
Total revenue 8,077,994 1,498,581 9,472,750
Net fair value gain on investment property - - 468,541
Trading hotel cost of sales/expenses (4,810,187) (1,081,157) (5,365,772)
Administrative expenses (1,273,678) (1,462,887) (3,744,144)
Operating profit/(loss) 1,994,129 (1,045,463) 831,375
Net finance costs (645,291) (44,150) (1,554,956)
Finance income 1,111 170,349 258,289
Finance expense (646,402) (214,499) (1,813,245)
Profit/(loss) before tax from continuing operations 1,348,838 (1,089,613) (723,581)
Taxation (charge)/credit (256,917) 29,108 (83,329)
Profit/(loss) after taxation from continuing operations 1,091,921 (1,060,505) (806,910)
Discontinued operation
Profit/(loss) after tax for the year from discontinued operation - 81,324 (73,422)
Profit/(loss) for the period 1,091,921 (979,181) (880,332)
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 - 243,337 1,150,185
Related deferred tax - (22,026) (229,117)
Revaluation of derivatives (157,551) - -
Other comprehensive income for the period, net of tax (157,551) 221,311 921,068
Total comprehensive profit/(loss) for the period 934,370 (757,870) 40,736
Earnings per share
Basic earnings/(loss) per share (pence) 1 1.95 (3.78) (2.18)
Diluted earnings/(loss) per share (pence) 1 1.95 (3.78) (2.18)
Basic headline earnings/(loss) per share (pence) 1 1.95 (3.78) 0.53
Diluted headline earnings/(loss) per share (pence) 1 1.95 (3.78) 0.53
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the six months ended 28 February 2017
As at As at As at
28 February 2017 29 February 2016 31 August 2016
GBP GBP GBP
ASSETS
Non-current assets 106,827,566 38,619,921 87,683,239
Property, plant and equipment 76,855,326 8,800,814 57,713,520
Goodwill 1,015,968 975,018 1,015,968
Investment property 28,950,000 26,176,287 28,950,000
Derivatives 6,272 20,014 3,751
Non-current financial assets - 2,647,788 -
Current assets 5,260,491 18,042,426 5,952,927
Inventories 26,543 4,416 31,337
Trade and other receivables 1,483,328 16,721,755 1,363,505
Cash and cash equivalents 3,750,620 1,316,255 4,558,085
Total assets 112,088,057 56,662,347 93,636,166
EQUITY
Capital and Reserves 52,995,885 46,554,095 52,061,515
Share capital 56,000 48,000 56,000
Share premium 55,233,171 47,521,360 55,233,171
Retained earnings (3,056,803) (1,236,576) (4,148,724)
Revaluation reserve 921,068 221,311 921,068
Cash flow hedge reserve (157,551) - -
LIABILITIES
Non-current liabilities 55,061,634 5,049,036 35,963,744
Loans and borrowings 53,251,110 4,340,392 34,150,108
Derivatives 1,022,200 - 1,025,312
Deferred tax liabilities 788,324 708,644 788,324
Current liabilities 4,030,538 5,059,216 5,610,907
Trade and other payables 3,515,041 1,133,467 4,891,946
Short-term portion of interest-bearing loans and borrowings 473,000 3,925,027 549,000
Current tax liabilities 42,497 722 169,961
Total equity and liabilities 112,088,057 56,662,347 93,636,166
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 28 February 2017
Share capital Share premium Retained earnings Revaluation reserve Cash flow hedge reserve Total equity
GBP GBP GBP GBP GBP GBP
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
Profit for the period - - 1,091,921 - - 1,091,921
Other comprehensive income for the period - - - - (157,551) (157,551)
Total comprehensive profit for the period - - 1,091,921 - - 934,370
Balance as at 28 February 2017 56,000 55,233,171 (3,056,803) 921,068 (157,551) 52,995,885
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 28 February 2017
Six months ended Six months ended Year ended
28 February 2017 29 February 2016 31 August 2016
GBP GBP GBP
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit/(loss) for the period 1,091,921 (1,060,505) (880,332)
Adjustments to reconcile loss after tax to net cash flows:
Net fair value movement for the period in investment properties - - (468,541)
Depreciation of property, plant and equipment 464,850 277,956 177,160
Net finance costs 645,293 44,150 1,554,956
Impairment of goodwill - - 1,057,900
Tax charge 256,917 (29,108) 83,329
Fair value loss on property, plant and equipment - - 364,706
(Profit)/loss on sale of discontinued operation - (81,324) 73,422
Working capital adjustments:
Increase in trade and other receivables and prepayments (114,499) (16,299,769) (16,651)
(Decrease)/increase in trade and other payables (358,497) 69,414 833,785
Decrease/(increase) in inventories 13,458 1,883 (593)
Cash generated from operating activities 1,999,443 (17,077,303) 2,779,141
Interest paid (491,801) (152,733) (515,450)
Interest received 1,111 69,710 258,289
Tax paid (127,464) - (48,176)
Net cash inflow/(outflow) from operating activities 1,381,289 (17,160,326) 2,473,804
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment and net cash flows of related assets (19,459,304) (814) (41,305,165)
and liabilities acquired
Additions to investment property - (25,376,287) (24,030,093)
Development expenditure on investment property - - (3,780,882)
Proceeds from the sale of a disposal group (net of cash disposed) - 410,392 410,392
Net cash outflow from investing activities (19,459,304) (24,966,709) (68,705,748)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and borrowings 19,780,866 - 24,217,500
Repayment of loans and borrowings (302,500) (4,581,556) (6,501,022)
Transaction costs relating to loans and borrowings (527,816) - (490,251)
Proceeds from issue of share capital - 48,000 55,000
Proceeds from issue of share premium - 47,952,000 54,945,000
Transaction costs relating to issue of shares - (707,785) (768,829)
Dividends paid (1,680,000) - (1,400,000)
Net cash inflow from financing activities 17,270,550 42,710,659 70,057,398
Net increase in cash and cash equivalents (807,465) 583,624 3,825,454
Balance at the beginning of the period 4,558,085 732,631 732,631
Balance at the end of the period 3,750,620 1,316,255 4,558,085
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Half year report and financial statements for the six months ended 28 February 2017
1. EARNINGS PER SHARE (EPS), HEADLINE EARNINGS PER SHARE (HEPS) AND UNDERLYING DISTRIBUTABLE EARNINGS PER SHARE
Basic EPS amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Headline earnings and Headline earnings per share are required to be disclosed as a result of the secondary listing on the AltX of the Johannesburg Stock Exchange ("JSE").
The following reflects the income and share data used in the basic and diluted EPS computations:
Six months ended Six months ended Year ended
28 February 2017 28 February 2016 31 August 2016
GBP GBP GBP
Profit/(loss) attributable to ordinary equity holders of the parent for basic earnings:
Continuing operations 1,091,921 (1,060,505) (806,910)
Discontinued operations - 81,324 (73,422)
Potential dilution - - -
Profit/(loss) attributable to ordinary equity holders adjusted for basic and diluted EPS 1,091,921 (979,181) (880,332)
Number of ordinary shares in issue 56,000,000 48,000,000 56,000,000
Weighted average number of ordinary shares for basic and diluted EPS 56,000,000 25,890,522 40,402,945
Earnings/(loss) per share (pence)
- Basic 1.95 (3.78) (2.18)
- Diluted 1.95 (3.78) (2.18)
Earnings/(loss) per share for continuing operations
Basic earnings/(loss) per share (pence) 1.95 (4.10) (2.00)
Diluted earnings/(loss) per share (pence) 1.95 (4.10) (2.00)
Earnings/(loss) per share for discontinued operations
Basic earnings/(loss) per share (pence) - 0.31 (0.18)
Diluted earnings/(loss) per share (pence) - 0.31 (0.18)
Headline earnings per share
The following table provides the profit/(loss) amount used to calculate headline earnings per share:
Profit/(loss) attributable to equity holders of the parent for the basic and diluted EPS calculations 1,091,921 (979,181) (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
Loss on discontinued operation - - 139,224
Headline earnings 1,091,921 (979,181) 212,957
Headline earnings/(loss) per share (pence):
- Basic 1.95 (3.78) 0.53
- Diluted 1.95 (3.78) 0.53
Underlying distributable earnings
Adjustments to headline earnings:
Loss on discontinued operation - - (139,224)
Unrealised (gain)/loss on interest rate swaps/cap, net of tax impact (138,703) 41,188 1,082,763
Costs of aborted acquisitions - 350,814 473,374
Expenses incurred on assumption of net liabilities of Travelodge-owning entities - - 238,013
Foreign exchange loss - 445,737 185,703
Amortisation of debt issue costs 74,451 - 49,486
Depreciation 464,850 277,956 177,160
Fixtures, fittings and equipment replacement reserve provision [1] (217,755) (34,946) (250,845)
Underlying distributable earnings 1,274,764 101,568 2,029,387
Underlying distributable earnings per share (pence) 2.28 0.39 5.02
[1] The fixtures, fittings and equipment replacement reserve provision is based on 3% of trading hotel revenue and is adjusted to ensure sufficient earnings
are retained in the business for future expenditure on fixtures, fittings and equipment and refurbishment.
2. RECONCILIATION OF OPERATING PROFIT TO EBITDAR
Six months ended Six months ended Year ended
28 February 2017 28 February 2016 31 August 2016
GBP GBP GBP
Operating Profit 1,994,129 (1,045,463) 831,375
Add back:
Rent payable 403,868 - 386,165
Depreciation 464,850 277,956 177,160
EBITDAR before Exceptional Items 2,862,847 (767,507) 1,394,700
Adjust for Exceptional Items:
Revaluation (gain)/loss on Investment Property - - (468,541)
Revaluation (gain)/loss on Property, Plant and Equipment - - 364,706
Goodwill write-off - - 1,057,900
Costs of aborted acquisitions - 350,814 473,374
Expenses incurred on assumption of net liabilities of Travelodge-owning entities - - 238,013
Foreign exchange loss - 445,737 185,703
EBITDAR 2,862,847 29,044 3,245,855
SPONSOR'S DETAILS
Half year report and financial statements for the six months ended 28 February 2017
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 Limited +1 (284) 494 9820
3 May 2017
IHL has a primary listing on the Euro MTF market of the Luxembourg Stock Exchange and a secondary listing on the AltX of the JSE.
Date: 03/05/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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