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Quarterly report and Financial Statements for the nine months ended 31 May 2017
INTERNATIONAL HOTEL PROPERTIES LIMITED
(Previously International Hotel Group Limited)
(Incorporated in the British Virgin Islands, company number: 1862176)
JSE share code: IHL
("IHL" or the "Company" or the "Group")
ISIN: VGG487261064
LEI Code: 213800VGTQA4SMCAWP71
Quarterly report and Financial Statements for the nine months ended 31 May 2017
HIGHLIGHTS AND CHAIRMAN'S SUMMARY
GROUP HIGHLIGHTS
- Nine months to May 2017 underlying distributable earnings of GBP2.19 million (2016: GBP0.83 million)
- Underlying distributable earnings per share of 3.90 pence (2016: 2.37 pence)
- Portfolio now consists of 9 hotels with 1,143 bedrooms
- Gearing at 51% loan to value (‘LTV')
- Key stats for Owner-operated hotels:
- 7.4% RevPAR growth on prior year
- RGI (market share of revenue) at 110.1% of the competitor set - all hotels above fair market share
- Trading remains positive and in line with expectations
CHAIRMAN'S REVIEW
Trading for the 9 months to May 2017 remains positive and in line with expectations. Total revenues were £13.35 million, delivering underlying distributable
earnings of £2.19 million and underlying distributable earnings per share of 3.90 pence.
All trading hotels are performing in line with expectations, with the most recent IHL acquisition, the Holiday Inn Express Edinburgh City Centre, comfortably
exceeding monthly revenue and EBITDA expectations since the acquisition was completed in January 2017. There are no issues to report with IHL’s four
Investment properties that are let to Travelodge – all rent has been received on time and no rent reviews are currently due.
There were no new acquisitions during the third quarter, although management continues to monitor both on-market and off-market opportunities.
All major capital expenditure projects have now been completed for the current financial year.
IHL’s banking facilities, currently all with Santander, continue to be fully covenant compliant and the Group’s LTV is circa 51%.
Shareholders are referred to the announcement released on 19 July 2017 (the “announcement”) wherein shareholders were advised that the Board has concluded
that the listing of the Company’s shares on the JSE and the LuxSE has not provided, and is not anticipated in the medium term to provide, the liquidity or
access to equity capital markets required to facilitate the growth of the Company and that the costs and administrative burden of maintaining the listings
are no longer justified. Accordingly, it has been proposed that a delisting be effected by way of a scheme of arrangement to be proposed by Redefine
International P.L.C. (“Redefine International”), between IHL and its shareholders other than (i) Redefine Share Investments Limited (a subsidiary of
Redefine International), (ii) Redefine Properties Limited and (iii) Southern Sun Africa Limited (the “scheme members”), pursuant to which Redefine International
will acquire all IHL shares held by scheme members in consideration for 2.5 Redefine International shares for every 1 IHL share held and on implementation of
the scheme the listing of the Company’s shares on both the JSE and LuxSE will be terminated. Shareholders are referred to the announcement for further details
in this regard.
FINANCIAL REVIEW
Revenue from the owner-operated hotels totalled GBP12.1 million with a further GBP1.2 million of rental income derived from the leased hotels. EBITDAR
was GBP4.8 million which was GBP3.5 million up on the prior year, predominantly driven by the increased number of hotels in the portfolio. The EBITDAR
margin at 36% was two percentage points higher than for the 12 months to August 2016. Underlying this is the EBITDAR margin of the trading hotels at 35%
compared to 12 months to August 2016 of 36% - the last three months of the year are traditionally the strongest period for these hotels and when the
EBITDAR margin improves.
Nine months ended Nine months ended Year ended
Notes 31 May 2017 31 May 2016 31 August 2016
GBP'000 GBP'000 GBP'000
Trading Hotel Statistics
Occupancy 81% 80% 84%
Average Rate GBP70.47 GBP66.22 GBP71.11
RevPAR ("Revenue Per Available Room") GBP56.87 GBP52.95 GBP59.75
Rooms Available 183,287 66,636 120,732
Rooms Sold 147,921 53,284 101,452
Revenue 13,349 4,769 9,472
Trading Hotels 12,123 4,072 8,361
Rental Income 1,226 697 1,111
EBITDAR 2 4,791 1,321 3,245
Trading Hotels 4,268 1,238 3,005
Leased Hotels 1,152 666 1,055
Corporate (629) (583) (815)
EBITDAR Margin 36% 28% 34%
- EBITDAR Margin - Trading 35% 30% 36%
- EBITDAR Margin - Leased 94% 96% 95%
Rent (654) (133) (386)
Depreciation (697) (401) (177)
Net Finance Expense (1,103) (218) (1,555)
Exceptional Items - (843) (1,851)
Taxation (432) (97) (83)
Profit / (loss) after tax from discontinued operations - 81 (73)
Profit Attributable to Equity Holders 1,905 (289) (880)
Adjustments 1 281 1,122 2,909
Underlying Distributable Earnings 1 2,186 832 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 the Net Finance Expenses of GBP1.1 million, an unrealised gain on the interest rate swaps of GBP0.2 million
in the period. The Company has implemented hedge accounting which results 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 GBP1.4 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:
- GBP3.0 million of additional EBITDAR from owner-operated hotels due to acquisitions
- GBP0.5 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
- GBP0.5 million of additional rent payable to head landlords due to the acquisition of Holiday Inn Express Edinburgh and a full period of Hampton
by Hilton Gatwick trading
- GBP0.9 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 most significant changes in the Statement of Financial Position since August 2016 have been in the Property, plant and equipment balance and in the
Loans and borrowings balance. Property, plant and equipment has increased by GBP19.6 million from August 2016 to GBP77.3 million at May 2017 and this
is predominantly due to the acquisition of the Holiday Inn Express Edinburgh City Centre earlier in the year. Loans and borrowings have increased by
GBP18.5 million from August 2016 to GBP53.7 million at May 2017. This includes the additional debt taken for the acquisition of the Edinburgh hotel
(GBP9.6 million) and the draw down of debt that had been unutilised in the prior year as discussed in the Annual Report.
The Company's cash balance of GBP4.1 million at May 2017 is GBP0.5 million below the balance at August 2016. This is largely due to the capital spend
that has taken place in the nine months to May 2017. The Company is fully drawn on its banking facilities with a loan-to-value of 51%.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the nine months ended 31 May 2017
Nine months ended Nine months ended Year ended
Notes 31 May 2017 31 May 2016 31 August 2016
GBP GBP GBP
Continuing operations
Trading hotel revenue 12,123,152 4,071,998 8,361,490
Rental income 1,226,056 696,587 1,111,260
Total revenue 13,349,208 4,768,585 9,472,750
Net fair value gain on investment property - - 468,541
Trading hotel cost of sales / expenses (7,902,715) (3,129,634) (5,365,772)
Administrative expenses (2,007,636) (1,695,059) (3,744,144)
Operating profit / (loss) 3,438,857 (56,108) 831,375
Net finance costs (1,102,763) (217,912) (1,554,956)
Finance income 1,396 220,377 258,289
Finance expense (1,104,159) (438,288) (1,813,245)
Profit / (loss) before tax from continuing operations 2,336,094 (274,020) (723,581)
Taxation charge (431,536) (96,733) (83,329)
Profit / (loss) after taxation from continuing operations 1,904,558 (370,753) (806,910)
Discontinued operation
Profit / (loss) after tax for the year from discontinued operation - 81,324 (73,422)
Profit / (loss) for the period 1,904,558 (289,429) (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 - 301,993 1,150,185
Related deferred tax - - (229,117)
- 301,993 921,068
Other comprehensive income items that are or may be reclassified
to profit or loss in subsequent periods:
Revaluation of derivatives (226,850) - -
(226,850) - -
Other comprehensive income for the period, net of tax (226,850) 301,993 921,068
Total comprehensive profit for the period 1,677,708 12,564 40,736
Earnings per share
Basic earnings / (loss) per share (pence) 1 3.40 (0.82) (2.18)
Diluted earnings / (loss) per share (pence) 1 3.40 (0.82) (2.18)
Basic headline earnings / (loss) per share (pence) 1 3.40 (0.82) 0.53
Diluted headline earnings / (loss) per share (pence) 1 3.40 (0.82) 0.53
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the nine months ended 31 May 2017
As at As at As at
31 May 2017 31 May 2016 31 August 2016
GBP GBP GBP
ASSETS
Non-current assets 107,329,836 88,327,960 87,683,239
Property, plant and equipment 77,361,010 55,930,470 57,713,520
Goodwill 1,015,968 3,670,146 1,015,968
Investment property 28,950,000 28,705,433 28,950,000
Derivatives 2,858 21,911 3,751
Current assets 6,037,100 5,932,050 5,952,927
Inventories 25,737 25,636 31,337
Trade and other receivables 1,950,348 2,859,922 1,363,505
Cash and cash equivalents 4,061,015 3,046,492 4,558,085
Total assets 113,366,936 94,260,010 93,636,166
EQUITY
Capital and Reserves 52,507,223 53,940,643 52,061,515
Share capital 56,000 56,000 56,000
Share premium 55,233,171 55,529,474 55,233,171
Retained earnings (3,476,166) (1,946,824) (4,148,724)
Revaluation reserve 921,068 301,993 921,068
Cashflow hedge reserve (226,850) - -
LIABILITIES
Non-current liabilities 55,011,408 35,446,826 35,963,744
Loans and borrowings 53,184,768 34,729,509 34,150,108
Derivatives 1,038,316 - 1,025,312
Deferred tax liabilities 788,324 717,317 788,324
Current liabilities 5,848,305 4,872,541 5,610,907
Trade and other payables 5,100,527 4,328,656 4,891,946
Short term portion of interest-bearing loans and borrowings 473,000 454,000 549,000
Current tax liabilities 274,778 89,885 169,961
Total equity and liabilities 113,366,936 94,260,010 93,636,166
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the nine months ended 31 May 2017
Revaluation Cashflow
Share capital Share premium Retained earnings reserve 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
Dividends paid and proposed - - (1,232,000) - - (1,232,000)
Profit for the period - - 1,904,558 - - 1,904,558
Other comprehensive income for the period - - - - (226,850) (226,850)
Total comprehensive profit for the period - - 672,558 - (226,850) 445,708
Balance as at 31 May 2017 56,000 55,233,171 (3,476,166) 921,068 (226,850) 52,507,223
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended 31 May 2017
Nine months ended Nine months ended Year ended
31 May 2017 31 May 2016 31 August 2016
GBP GBP GBP
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit / (loss) for the period 1,904,558 (289,429) (880,332)
Adjustments to reconcile profit / (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 697,275 401,228 177,160
Net finance costs 1,102,763 217,911 1,554,956
Impairment of goodwill - - 1,057,900
Tax charge 431,536 96,733 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 (266,393) (2,437,836) (16,651)
(Decrease) / increase in trade and other payables (194,982) 3,311,578 833,785
Decrease / (increase) in inventories 5,600 (19,337) (593)
Cash generated from operating activities 3,680,357 1,199,524 2,779,141
Interest paid (929,665) (505,369) (515,450)
Interest received 1,396 220,377 258,289
Tax paid (210,310) - (48,176)
Net cash inflow from operating activities 2,541,778 914,532 2,473,804
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment and net cash flows of related assets (20,188,748) (42,411,045) (41,305,165)
and liabilities acquired
Additions to investment property - (23,792,133) (24,030,093)
Development expenditure on investment property - (3,780,882) (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 (20,188,748) (69,573,668) (68,705,748)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and borrowings 19,780,866 23,706,078 24,217,500
Repayment of loans and borrowings (423,150) (6,474,001) (6,501,022)
Transaction costs relating to loans and borrowings (527,816) (490,251) (490,251)
Proceeds from issue of share capital - 55,000 55,000
Proceeds from issue of share premium - 54,945,000 54,945,000
Transaction costs relating to issue of shares - (768,829) (768,829)
Dividends paid (1,680,000) - (1,400,000)
Net cash inflow from financing activities 17,149,900 70,972,997 70,057,398
Net (decrease) / increase in cash and cash equivalents (497,070) 2,313,861 3,825,454
Balance at the beginning of the period 4,558,085 732,631 732,631
Balance at the end of the period 4,061,015 3,046,492 4,558,085
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 ("HEPS")
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:
Nine months ended Nine months ended Year ended
31 May 2017 31 May 2016 31 August 2016
GBP GBP GBP
Profit / (loss) attributable to ordinary equity holders of the parent for basic earnings:
Continuing operations 1,904,558 (370,753) (806,910)
Discontinued operations - 81,324 (73,422)
Potential dilution - - -
Profit / (loss) attributable to ordinary equity holders adjusted for basic and diluted EPS 1,904,558 (289,429) (880,332)
Number of ordinary shares in issue 56,000,000 56,000,000 56,000,000
Weighted average number of ordinary shares for basic and diluted EPS 56,000,000 35,146,795 40,402,945
Earnings / (loss) per share (pence)
- Basic 3.40 (0.82) (2.18)
- Diluted 3.40 (0.82) (2.18)
Earnings / (loss) per share for continuing operations (pence)
Basic earnings / (loss) per share 3.40 (1.05) (2.00)
Diluted earnings / (loss) per share 3.40 (1.05) (2.00)
Earnings / (loss) per share for discontinued operations (pence)
Basic earnings / (loss) per share - 0.23 (0.18)
Diluted earnings / (loss) per share - 0.23 (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 1,904,558 (289,429) (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 / (loss) 1,904,558 (289,429) 212,957
Headline earnings / (loss) per share (pence):
- Basic 3.40 (0.82) 0.53
- Diluted 3.40 (0.82) 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 (181,007) - 1,082,763
Costs of aborted acquisitions - 396,933 473,374
Expenses incurred on assumption of net liabilities of Travelodge-owning entities - - 238,013
Foreign exchange loss - 445,738 185,703
Amortisation of debt issue costs 128,759 - 49,486
Depreciation 697,275 401,228 177,160
Fixtures, fittings and equipment replacement reserve provision [1] (363,695) (122,160) (250,845)
Underlying distributable earnings 2,185,890 832,310 2,029,387
Underlying distributable earnings per share (pence) 3.90 2.37 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
Nine months ended Nine months ended Year ended
31 May 2017 31 May 2016 31 August 2016
GBP GBP GBP
Operating Profit / (Loss) 3,438,857 (56,108) 831,375
Add back:
Rent payable 655,233 133,337 386,165
Depreciation 697,275 401,228 177,160
EBITDAR before Exceptional Items 4,791,365 478,457 1,394,700
Adjust for Exceptional Items:
Revaluation gain on Investment Property - - (468,541)
Revaluation loss on Property, Plant & Equipment - - 364,706
Goodwill write-off - - 1,057,900
Costs of aborted acquisitions - 396,933 473,374
Expenses incurred on assumption of net liabilities of Travelodge-owning entities - - 238,013
Foreign exchange loss - 445,738 185,703
EBITDAR 4,791,365 1,321,128 3,245,855
SPONSOR'S DETAILS
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
25 July 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: 25/07/2017 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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