Wrap Text
Condensed consolidated reviewed results & cash dividend distribution("distribution") for the year ended 30 June 2016
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")
Condensed consolidated reviewed results and cash dividend distribution
("distribution") for the year ended 30 June 2016
Salient features
- Rental income up 9,3% to R474,6 million
- Profit before distribution up 16,8% to R272,0 million
- Exceptional performance from Western Cape properties
- Tsogo Sun transaction receives Competition Tribunal approval
- Disposal of seven non-core properties (for a total net consideration of R189,9 million)
- Capital restructure in process
Trading environment
Despite the uncertain global and domestic economy, Hospitality delivered a pleasing
performance for the year, with the combined distribution per A and B share improving 18,0%
(2015: down 14,44%) to 190,43 cents (2015: 161,36 cents) compared to the prior year. This
comprises the A share distribution, which is up 5,0% to 155,62 cents (2015: 148,21 cents)
in line with the A share distribution policy and the B share distribution of 34,81 cents
(2015: 13,15 cents), reflecting an increase of 164,7%.
Trading conditions remain challenging, however, the tourism sector has seen some increased
growth, particularly in the Cape Town node. This was driven mainly by an increase in
international and local leisure travellers as a result of the weak Rand.
The STR Global South Africa Hotel Review reflected improved occupancies and room rates
for the hotel industry during the year under review. Occupancy levels increased year-on-year
for the same period by 3,2% to 64,6% and average daily rates ("ADR") improved by 8,0% to
R1 133. Revenue per available room ("RevPAR") grew 11,4% for the year ended 30 June 2016
to R733.
The Fund's portfolio delivered (excluding the properties sold) the following performance
statistics for the year ended 30 June 2016:
ADR Variance Occupancy Variance RevPar Variance
F2016 F2015 F2016 F2015 F2016 F2015
Traditional R1 457 R1 348 8,1% 69,1% 65,7% 5,2% R1 007 R886 13,7%
Portfolio*
Conference R852 R751 13,3% 50,4% 44,3% 13,8% R429 R333 29,0%
Portfolio#
Total R1 336 R1 233 8,4% 64,3% 60,1% 7,1% R859 R740 16,0%
* Traditional portfolio: Properties which generate revenue from room nights sold
# Conference portfolio: Properties which generate revenue predominantly from
conference facilities and food and beverage
Results
Rental income for the Fund increased 9,3% to R474,6 million (2015: R434,1 million), including
the impact of the seven non-core properties disposed of during the year and the disposal of
the Fund's 50% interest in the Courtyard portfolio in the prior year. Like-for-like rental income
(adjusted for the impact of disposals) grew 13,7% to R462,8 million.
The Fund's rental income growth was bolstered by its well-located hotel properties in the
Western Cape that continue to appeal to domestic and international travellers alike, with
overall rental income growth of 31,4% compared to the prior year. Furthermore, Mount Grace
Country House and Spa showed a significant improvement as the management company
bedded down its sales and marketing strategies with positive results, delivering a rental income
growth of 68,1% to R15,3 million. The new fixed lease at Champagne Sports Resort, which
commenced on 1 July 2015, dampened the overall growth in rental income by R6,2 million.
Hospitality's overall expenses increased 10,3% to R44,9 million (2015: R40,7 million). The
major impact was the staff incentive bonus provision of R5,8 million, reflecting the improved
performance of the Fund. Increases in other expenses were largely in line with inflation.
Net finance costs decreased marginally to R158,1 million (2015: R160,9 million) due to the
application of excess proceeds from the sale of properties to reduce debt.
The following table reflects the operating financial results for the year ended 30 June 2016
compared to the corresponding previous financial year:
Actual Actual
Summary of operating results 2016 2015 Variance Variance
for the year ended 30 June 2016 (R'000) (R'000) (R'000) (%)
Contractual rental income 474 553 434 112 40 441 9,3
Fund expenses (44 852) (40 674) (4 178) 10,3
Net finance cost (158 085) (160 888) 2 803 1,7
HPF Employee Incentive Trust
net effects – 178 (178) (100,0)
Taxation (9) (116) 107 92,2
Income from associates 264 203 60 29,6
Profit before distribution/
debenture interest 271 871 232 815 39 056 16,8
Distribution to shareholders/
linked-unit holders (271 871) (232 815) (39 056) 16,8
A – share distribution (224 539) (213 845) (10 694) 5,0
B – share distribution (47 332) (18 970) (28 362) 149,5
Funding
The group's debt facilities with financial institutions as at 30 June 2016 amounted to
R2.04 billion. Total drawn facilities were R1.73 billion resulting in a loan to value (LTV) ratio
(total interest-bearing liabilities/investment properties plus properties held for sale) of 32.6%
(2015: 36.2%). The interest cover ratio improved to 2.72 times (2015: 2.45 times), well above
the required debt covenant limit of 2.00 times.
The weighted average cost of borrowings (WACC) was 9.58% (2015: 9.12%) for the period
under review, with 63.5% of the group's borrowings being hedged.
Summary of funding (R'000) Facility Drawn-down
Nedbank Limited 1 073 550 755 063
Corporate bonds 370 000 370 000
Total non-current 1 443 550 1 125 063
Corporate bonds 600 000 600 000
Total current 600 000 600 000
Total interest-bearing borrowings 2 043 550 1 725 063
% of debt hedged 63%
A new interest rate swap was entered into for R250 million at a rate of 7,88%, commencing
February 2016, which replaced an existing swap of the same amount.
The Fund is currently engaging with financial institutions and potential investors to refinance
or issue new notes to the total value of R600 million, to replace the current notes of the same
value, expiring in February 2017.
When issuing new debt the group endeavours to optimally spread the maturity to minimise its
exposure to large debt maturities in any single year.
REIT capital structure
As previously announced, in order to comply with 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, by way of a scheme of arrangement in terms of
sections 114 and 115 of the Companies Act, 71 of 2008 ("the Act") and the adoption of a
new Memorandum of Incorporation to take account of the change in the Company's capital
structure, received the requisite approval from both A and B linked unitholders at Special
General Meetings ("SGMs") held on 21 August 2015.
Dissenting shareholder appraisal rights
Subsequent to the SGMs, shareholders representing 2,8% of total shares in issue or 8 320 397
B shares ("the appraisal shares") exercised their appraisal rights and demanded fair value for
their shares in terms of section 164(5) of the Act.
The Board determined a fair value of R2,90 per appraisal share, which amounts to a total fair
value of R24,1 million. In terms of section 164(14)(b), the dissenting shareholders have applied
to the court to determine a fair value. In-line with section 164(9), the appraisal shares have no
further rights, other than to be paid their fair value and as a result, the appraisal shares are now
considered treasury shares by the Company for accounting treatment purposes.
Had appraisal rights not been exercised, the B share distribution, for the period under review,
would have amounted to 15,93 cents, as opposed to declared distribution number 21 of
17,94 cents and would have amounted to an increase of 293,7%, instead of the current increase
of 345,2%.
Tsogo Transaction ("the Transaction") and
Capital Restructure ("the Restructure")
Salient terms
The acquisition by Hospitality from Southern Sun Hotels Proprietary Limited ("SSH"), (a
wholly-owned subsidiary of Tsogo Sun Holdings Limited ("Tsogo")) of a portfolio of 10 hotel
properties valued at R1,78 billion ("the Transaction") through the acquisition of 100% of the
issued shares of a newly incorporated company ("Newco"), and the restructure of Hospitality's
dual-class share capital structure to a single-class share capital structure ("the Restructure"),
was approved in general meeting by the requisite majority of shareholders. The applied ratio
of shares being issued in the Restructure is one ordinary share for every one A share held and
one ordinary share for every 3,5 B shares held.
The purchase consideration will be settled through the issue of 145 million Hospitality shares
("consideration shares"). On completion of the transaction, Tsogo's holding will increase to
more than 50% of Hospitality's ordinary shares. Rationale
The Transaction presents a highly attractive acquisition of 10 successful and established
hotel properties for Hospitality, all of which are well located within their respective nodes.
The Transaction will contribute to a diversification 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 32,6% as at 30 June 2016 to 24,4%, which together with Hospitality's greater
scale and inclusion as part of the Tsogo group, is expected to both enhance Hospitality's BEE
ownership and credit rating. This should in turn reduce the Fund's future cost of funding.
The simplified capital structure will enable Hospitality to more fully deliver on its strategic
objectives in the longer term. It is also anticipated that the Transaction will see Hospitality
forming the platform for Tsogo's stated 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.
Competition Tribunal and effective date
The Transaction was approved by the Competition Tribunal, subject to conditions accepted
by both parties, and a merger clearance certificate has been issued.
Accordingly, save for certain administrative conditions precedent that remain to be fulfilled,
including, inter alia, receipt of confirmation by the Companies and Intellectual Properties
Commission that it has accepted and placed on file all relevant documents required to effect
the Transaction.
Hospitality anticipate that the remaining conditions precedent to the
Transaction will be fulfilled by 31 August 2016, such that the effective date of the Transaction
will be 1 September 2016.
A further announcement will be released regarding fulfilment of the outstanding conditions
precedent to the Transaction at the appropriate time, which announcement will include a
detailed timetable for its implementation.
Property portfolio
The Fund's portfolio comprises interests in 15 hotel and resort properties in South Africa. The
weighted average lease expiry period is 10,72 years. As at 30 June 2016, the carrying value
of the portfolio was R5,3 billion and the net asset value (NAV) per combined A and B share
amounted to R12,93, an increase of 10,2% from 2015. The market value per combined A and
B share at the end of the financial year traded at a 41,3% discount to the NAV.
Acquisitions and disposals
To date, the Fund's investment strategy has been 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 Tsogo transaction 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. In the last
12 months, seven properties were disposed of amounting to a total net consideration of
R189,9 million. These included the Protea Hotel The Richards; Protea Hotel Hluhluwe and
Safaris; Premier Hotel King David and Protea Hotel Imperial: Protea Hotel The Winkler,
Bayshore Inn and the Protea Hotel Richards Bay properties. The Protea Hotel Hazyview and
Kopanong Hotel and Conference Centre remain on the disposal list.
During the year, 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
In order to maintain the appeal of its properties, the Fund continually upgrades and invests
in its properties. During the year, the total capital expenditure amounted to R102,9 million,
which included:
- during the year, 30 additional rooms were developed at the Protea Hotel Edward, at a total
cost of R19,8 million increasing the number of rooms to 131;
- at Birchwood Hotel R14,0 million was spent on the refurbishment of 82 rooms that now
forms part of the Silverbirch hotel section; and
- at Champagne Sports Resorts, R14,0 million was spent on acquiring all movable assets from
the tenant.
The Fund is cognisant of future refurbishment projects that will require additional capital investment
and continues to investigate options to deal with this on a sustainable basis going forward.
Prospects
Although the local currency stabilised after the end of the financial year, the overall weakening
of the Rand buoyed the South African hospitality sector, despite the weak domestic economy.
South Africa has become a more affordable destination for international tourists and there
has been an increase in domestic travellers opting to travel locally. Although public sector
spending remains under pressure, the approval of increased rates on travel budgets is positive
for the Fund.
Inflation is expected to rise as a consequence of the weaker Rand and the drought impact,
thereby putting upward pressure on hotel operating costs.
Looking forward, the Fund is well positioned, with upside potential for rates in hotels located in
high tourist areas particularly the Western Cape. The domestic business and leisure sector is
expected to be stable. Public sector conferencing, which slowed in the run up to the municipal
elections, is expected to normalise.
Share trading liquidity
During the period under review, 20.8% of the A shares/linked units and 78,0% 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 payment
Shareholders will receive a gross distribution payment number 21 for the six-month period
ended 30 June 2016 of 78,62 cents per A-share and 17,94 cents per B-share respectively.
In accordance with Hospitality's REIT status, 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 A shares and
135 965 106 B shares.
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 ceases
to be the beneficial owner, both in the form prescribed by the Commissioner for the South
African Revenue Service. Linked 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 shareholder. Assuming dividend
withholding tax is withheld at a rate of 15%, the net amount due to non-resident shareholders
will be 66,827 cents per A-share and 15,249 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 ceases
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 Tuesday, 13 September 2016
Shares will trade ex-distribution Wednesday, 14 September 2016
Record date Friday, 16 September 2016
Payment date Tuesday, 19 September 2016
Shareholders may not dematerialise or rematerialise their shares between Wednesday,
14 September 2016 and Friday, 16 September 2016 both days inclusive.
By order of the Board
D G Bowden V M Joyner
(Chairman) (Chief Executive Officer)
Approved by the Board: 23 August 2016
Released on SENS: 24 August 2016
Directors: D G Bowden (Chairman)*+, V M Joyner (CEO), L de Beer *+, S A Halliday *+,
Z N Kubukeli*+, G A Nelson*, Z Malinga*+, 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
Web: www.hpf.co.za
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These results were prepared under the supervision of the Acting CFO, Riaan Erasmus CA(SA).
The condensed consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for preliminary reports and the
requirements of the Companies Act of South Africa. The Listings Requirements require
preliminary reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting Standards Council
and to also, as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The accounting policies applied in the preparation of the condensed consolidated
financial statements are in terms of IFRS and are consistent with those applied in the previous
consolidated annual financial statements.
The directors take full responsibility for the preparation of the preliminary report.
AUDITOR'S REPORT
These condensed consolidated financial statements for the year ended 30 June 2016 have
been reviewed by KPMG Inc, who expressed an unmodified review conclusion. A copy of the
auditor's review report is available for inspection at the company's registered office together
with the financial statements identified in the auditor's report.
The auditor's report does not necessarily report on all of the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain
a full understanding of the nature of the auditor's engagement they should obtain a copy of
the auditor's report together with the accompanying financial information from the issuer's
registered office.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2016
Reviewed Audited
June June
2016 2015
R'000 R'000
Revenue 474 328 433 287
Rental income – contractual 474 553 434 112
– straight-line accrual (225) (825)
Operating income – –
Expenditure (44 852) (40 674)
Operating expenses (44 852) (40 674)
Operating profit 429 476 392 613
Net finance cost (158 085) (160 888)
Finance income 12 737 9 696
Finance costs (170 822) (170 584)
Profit before debenture interest, goodwill, fair value
adjustments and taxation 271 391 231 725
Debenture interest – (232 815)
Profit/(loss) before fair value adjustments, goodwill and
taxation 271 391 (1 090)
(Loss)/profit on sale of investment properties (13 556) 390
Fair value adjustments 245 412 143 531
Investment properties, before straight-lining adjustment 251 024 143 734
Straight-line rental income accrual 225 825
Total fair value of investment properties 251 249 144 559
Goodwill impairment (12 000) (7 200)
Interest-rate swaps 6 163 6 172
Profit before taxation 503 247 142 831
Debenture discount amortisation (2 313) (8 633)
Equity accounted profit from associate after tax 264 203
Taxation (9) (116)
Total profit and comprehensive income
for the year 501 189 134 285
Reconciliation between earnings, headline earnings and
distributable earnings
Total profit and comprehensive income for the year 501 189 134 285
Adjustment : Debenture interest – 232 815
Profit (shares/linked units) 501 189 367 100
Adjustments :
Loss/(profit) on sale of investment properties 13 556 (390)
Goodwill impairment 12 000 7 200
Impairment to furniture, fittings and equipment 265 –
Loss on disposal of furniture, fitting and equipment 7 –
Fair value – investment properties revaluation (251 024) (143 734)
Fair value – straight-line rental income (225) (825)
Headline earnings (shares/linked units) 275 768 229 351
Fair value – interest rate swaps (6 163) (6 172)
Debenture discount amortisation 2 313 8 633
HPF Employee Incentive Trust effects – 78
Taxation – 100
Impairment to furniture, fittings and equipment (265) –
Loss on disposal of furniture, fitting and equipment (7) –
Straight-line rental income 225 825
Distributable earnings 271 871 232 815
Number of shares/units
A shares/linked unit 144 285 503 144 285 503
B shares/linked unit 133 995 396 142 315 793
– Shares/units in issue 144 285 503 144 285 503
– HPF Employee Incentive Trust shares/units (1 969 710) (1 969 710)
– Shareholder redemption (8 320 397) –
Weighted average number of shares/units
A shares/linked unit 144 285 503 142 380 569
Reviewed Audited
June June
2016 2015
R'000 R'000
B shares/linked unit 135 154 796 140 410 859
– Shares/units in issue 144 285 503 142 380 569
– HPF Employee Incentive Trust shares/units (1 969 710) (1 969 710)
– Shareholder redemption (7 160 997) –
Dividend per share/distribution per linked unit (cents)
A shares/linked unit 155,62 148,21
– Interim 77,00 73,33
– Final 78,62 74,88
B shares/linked unit 34,81 13,15
– Interim 16,87 9,12
– Final 17,94 4,03
190,43 161,36
Earnings and diluted earnings per share/linked unit (cents)
A shares/linked unit 179,35 129,81
B shares/linked unit 179,35 129,81
358,70 259,62
Headline earnings and diluted headline earnings per share/
linked unit (cents)
A-linked share/unit 98,69 81,10
B-linked share/unit 98,69 81,10
197,38 162,20
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2016
Reviewed Audited
June June
2016 2015
R'000 R'000
ASSETS
Non-current assets 5 174 459 4 823 982
Investment properties 5 169 000 4 806 775
Straight-line rent income accrual – 225
Investment properties and related accrual 5 169 000 4 807 000
Furniture, fittings and equipment 180 573
Goodwill – 12 000
Derivative asset 4 961 4 155
Investment in associates 318 254
Current assets 404 128 626 033
Non-current assets held for sale 129 491 329 228
Properties held for trading 22 643 21 620
Derivative asset 699 –
Trade and other receivables 57 035 71 035
Cash and cash equivalents 194 260 204 150
Total assets 5 578 587 5 450 015
EQUITY AND LIABILITIES
Equity 3 732 253 970 747
Stated capital 2 909 957 –
Share capital and share premium – 515 931
Retained earnings 107 961 (2 332)
Fair value reserve 714 335 457 148
Non-current liabilities 1 126 540 4 049 964
Debentures – 2 415 842
Interest-bearing liabilities 1 125 063 1 627 874
Derivative liability 1 477 6 248
Current liabilities 719 794 429 304
Trade and other payables 95 552 85 352
Short-term portion of interest-bearing liabilities 600 000 230 000
Taxation – 100
Provision for shareholder redemption 24 129 –
Derivative liability 113 –
Debenture interest payable – 113 852
Total equity and liabilities 5 578 587 5 450 015
Net asset value per share/linked unit (Rand)
A share/linked unit 12,93 11,74
B share/linked unit 12,93 11,74
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2016
Share Share Stated Retained Fair value Treasury
capital premium capital earnings reserve share reserve Total
R'000 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 profit and
comprehensive income
for the year – – – 134 285 – - 134 285
Transactions with
owners, recorded
directly in equity 1 34 614 – (149 906) 149 906 - 34 615
Issue of shares 1 34 614 – – – - 34 615
Transfer to fair value
reserve – investment
properties – – – (143 734) 143 734 - –
Transfer to fair value
reserve – interest rate
swaps – – – (6 172) 6 157 - –
Balance at 1 July 2015 28 515 903 – (2 332) 457 148 - 970 747
Total profit and
comprehensive income
for the year – – – 501 189 – - 501 189
Transactions with
owners, recorded
directly in equity (28) (515 903) 2 919 952 (390 896) 257 187 (9 995) 2 260 317
Conversion of par
value shares into
no par value shares (28) (515 903) 515 931 – – - –
Conversion of
debentures into no-par
value shares – – 2 428 150 – – - 2 428 150
Conversion of treasury
shares into no-par
value shares – – – – – (9 995) (9 995)
Provision for
shareholder
redemption – – (24 129) – – - (24 129)
Dividend paid (interim) – – – (133 709) – - (133 709)
Transfer to fair value
reserve – investment
properties – – – (251 024) 251 024 - –
Transfer to fair value
reserve – interest rate
swaps – – – (6 163) 6 163 - –
Balance at
30 June 2016 – – 2 919 952 107 961 714 335 (9 995) 3 732 253
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2016
Reviewed Audited
June June
2016 2015
R'000 R'000
Cash flows from operating activities
Cash generated from operations 453 473 377 433
Finance income received 12 737 9 696
Finance costs paid (170 822) (170 584)
Taxation (109) (150)
Dividends paid/distribution to unitholders (247 561) (237 105)
Net cash inflow/(outflow) from operating activities 47 718 (20 710)
Cash flows from investing activities
Acquisition and development of investment properties (131 157) (244 204)
Disposal of investment properties 206 362 80 000
Acquisition of furniture and equipment (202) (224)
Dividends received from associates 200 200
Net cash inflow/(outflow) from investing activities 75 203 (164 228)
Cash flows from financing activities
Proceeds from the issue of linked units – 116 638
Interest-bearing liabilities repaid (365 011) (240 000)
Interest-bearing liabilities raised 232 200 325 247
Net cash (outflow)/inflow from financing activities (132 811) 201 885
Net (decrease)/increase in cash and cash equivalents (9 890) 16 947
Cash and cash equivalents at beginning of year 204 150 187 203
Cash and cash equivalents at end of year 194 260 204 150
CONDENSED CONSOLIDATED SEGMENTAL INFORMATION
for the year ended 30 June 2016
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# Head operating
R'000 portfolio* portfolio# office^ segments
Statement of Comprehensive Income
– 30 June 2016
Segment revenue 412 261 62 292 – 474 553
Expenditure – – (44 852) (44 852)
Segment results 412 261 62 292 (44 852) 429 701
Statement of Comprehensive
Income – 30 June 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
– 30 June 2016
Non-current assets
Investment properties 4 407 509 761 491 – 5 169 000
Current assets
Non-current assets held for sale 41 000 88 491 – 129 491
Trade and other receivables 56 116 – 1 919 57 035
Segment assets 4 504 625 849 982 1 919 5 355 526
Statement of Financial Position
– 30 June 2015
Non-current assets
Investment properties 4 045 272 761 728 – 4 807 000
Current assets
Non-current assets held for sale 249 500 79 728 – 329 228
Trade and other receivables 3 584 1 236 66 215 71 035
Segment assets 4 298 356 842 692 66 215 5 207 263
* Traditional portfolio: Properties to which revenue is generated predominately from
occupation
# Conference portfolio: Properties to which revenue is generated predominantly from
conference facilities and food and beverage
^ Head office: Head office represents all the costs at Fund level and is reviewed separately
from the property portfolio
Reconciliations of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Revenues 2016 2015
Total revenue for reportable segments
Other revenue 474 553 434 112
Straight–line of leases (225) (825)
Elimination of discontinued operations - -
Consolidated revenue 474 328 433 287
Profit or loss
Total profit or loss for reportable segments 429 701 393 438
Other profit or loss
Elimination of inter–segment profits -
Operating income - -
Net finance costs (158 085) (160 888)
Debenture interest - (232 815)
Recoupment of debenture interest - -
(Loss)/profit on disposal of investment properties (13 556) 390
Fair value adjustments 245 187 142 706
Profit before taxation 503 247 142 831
SUBSEQUENT EVENTS
The board is not aware of any matter or circumstances arising since the end of the financial
year to the date of this report, not otherwise dealt with in this report that would
significantly affect the operations, the results and the financial position of the Group.
As announced on SENS on 11 August 2016, the Competition Tribunal has given their approval
regarding the Tsogo Transaction, subject to conditions which have been accepted by the Fund
and Tsogo Sun Holdings Limited (Tsogo). A merger clearance certificate has been issued.
The Fund anticipates that the remaining conditions precedent to the Tsogo Transaction will
be fulfilled by 31 August 2016, such that the effective date of the Tsogo Transaction will
be 1 September 2016.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2016
Reviewed Audited
June June
2016 2015
R '000 R '000
1 Interest bearing borrowings
Non-current 1 125 063 1 627 874
Current 600 000 230 000
Total interest bearing borrowings 1 725 063 1 857 874
Measurement of fair value
The group recognises and measures its long-term
loans at amortised cost. The fair value of the loans was
determined using both external and internal inputs and
is presented for disclosure purposes only.
The external inputs applied, related to the interest rates
contracted with the various sources of funding linked
to jibar, whereas the internal inputs applied, related to
the weighted average cost of funding (WACC) 9.58%
(2015: 9.12%) determined for the group.
Fair value is calculated based on the present value of
future principal and interest cash flows, discounted at
the market rate of interest at the reporting date.
As both external and internal data was used to
determine the fair value, the fair value measurement has
been classified under Level 2.
Non-current 1 234 749 1 743 757
Current 1 017 230 237 661
Total interest bearing borrowings at fair value 2 251 979 1 981 418
2 Derivative assets/(liabilities)
Non-current asset 4 961 4 155
Current asset 699 –
Non-current liability (1 477) (6 248)
Current liability (113) –
Net derivative asset/(liability) 4 070 (2 093)
Measurement of fair value
Derivative financial instruments are recognised and
measured at fair value through profit or loss, using both
internal and external inputs.
The external inputs applied, related to the interest rates
contracted with the various sources of funding linked
to jibar, whereas the internal inputs applied, related to
the weighted average cost of capital (WACC) 9.58%
(2015: 9.12%) determined for the group.
The fair value of interest rate swaps is based on broker
quotes. Those quotes are tested for reasonableness by
discounting estimated future cash flows based on the
terms and maturity of each contract and using market
interest rates for a similar instrument at the reporting
date.
As both external and internal data was used to
determine the fair value, the fair value measurement has
been classified under Level 2.
3 Other financial instruments
Trade and other receivables 57 035 71 035
Cash and cash equivalents 194 260 204 150
251 295 275 185
Trade and other payables 95 552 85 352
The above financial assets and liabilities are carried at amortised cost, which approximates
their fair value.
Web : www.hpf.co.za
Date: 24/08/2016 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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