annual results presentation 2016€¦ · salient features. 4 4 salient features occupancy adr...

ANNUAL RESULTS PRESENTATION

2016

2

2

SALIENT FEATURES AND FINANCIAL HIGHLIGHTS

MARKET ENVIRONMENT

PORTFOLIO REVIEW

FINANCIAL REVIEW

CAPITAL RESTRUCTURE

TSOGO TRANSACTION

STRATEGY AND FUND OUTLOOK

AGENDA

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• Like-for-like rental income growth of 13.7% (adjusted for disposals)

• Strong results in Cape Town node and improved performance at Mount Grace

Rental income growth of 9.3%

• A-shares 155.62cps: up 5.0%

• B-shares 34.81cps: up 164.7%

Combined distribution per share increased 18.0%

• Disposal of seven non-core properties for net proceeds of R189.9 million

• Restructure of asset management team

• Shareholder approval: Conversion to shares and simplication to single share class

• Competition tribunal approval for Tsogo transaction (post balance sheet)

Strategic highlights

SALIENT FEATURES

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SALIENT FEATURES

Occupancy ADR RevPAR

Traditional hotel portfolio* Up 5.2% Up 8.1% Up 13.7%

Conference portfolio* Up 13.3% Up 13.8% Up 29.0%

* Portfolio excluding fixed properties

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June 2015 June 2016

Gross Rental Income

R434 million 9.3% R475 million

Portfolio Value

R5.1 billion 3.9% R5.3 billion

Weighted Average Cost of Debt

9.12% 46 bps 9.58%

Total Debt

R1,86 billion 7.0% R1,73 billion

June 2015 June 2016

Net Asset Value per Share

1 174 cents 10.2% 1 293 cents

Distribution

R233 million 16.8% R272 million

Gearing (% of asset value)

36.6%4%

points32.6%

Interest Cover Ratio

2.45x 11.0% 2. 72x

YEAR ENDED 30 JUNE 2016

FINANCIAL HIGHLIGHTS

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UNCERTAINTY IN LAST SIX MONTHS: POTENTIAL UPSIDE GOING FORWARD

MARKET ENVIRONMENT

Period in review Year ahead

Global GDP in low single digits, supported by

growth in China and IndiaGlobal economic uncertainties: US elections and Brexit

Minimal economic growth in South Africa: Weak

commodity prices, currency volatility and policy

uncertainties

0% growth forecast in 2016 and 1.0% forecast in 2017

Impact of municipal election results still to be felt

Possible sovereign downgrade

Domestic inflation edged up: Impact of weakening

currency and drought

Continued currency volatility expected

Interest rate cycle peaking

Weakening Rand: Enhances affordability for foreign

travellers and encourages domestic leisure travel by

South Africans

Sustainability of Rand’s recent recovery?

New visa regulation in process of being reviewed:

Foreign arrivals in SA down 7% in 2015 vs 4% global

growth in tourist numbers

Reversal of recent trend (first 5 months of 2016)

Relaxation of certain visa regulations, increased

affordability for foreigners, SA seen as safer destination

in context of global terrorism

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Persistent poor growth in SA economy limiting hospitality sector

Public sector spending constraints slowdown in conferencing demand prior to elections

• Enhancing affordability for foreign travellers

• Driving local tourism by South Africans

• Higher cost of foreign currency-based management, marketing and incentive fees to international hotel operators

Recent currency weakness

• Support improvement in ADR

• Limited availability of new attractive developments

Supply of new rooms up by cumulative 1% in last 4 years (PWC Hospitality Outlook)

• Salaries and wages

• Administered costs

• Food and beverage costs

Inflationary pressure

SA HOSPITALITY OUTLOOK

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63.34c 66.51c 69.83c 73.33c 77.00c

49.74c68.12c 71.53c 74.88c

78.62c

-

50

100

150

200

2012 2013 2014 2015 2016

A Share Distribution

7.91c 9.19c 19.25c 9.12c 16.87c

8.89c

14.20c

4.03c

17.94c

-

10

20

30

40

50

2012 2013 2014 2015 2016

B Share Distribution

DISTRIBUTION HISTORY

+165%

+5%

First half Second half

Combined share distribution increased 18,0%

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STRATEGIC DIRECTION

1.2

1.7

2.3

3.4 3.3

4.0 3.9

4.64.8

5.15.3*

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property value (Rbn)

The Fund’s assets have grown since listing:

• R1.2 billion in June 2006

• R5.3 billion in June 2016

16.4%

CAGR

* As at 30 June 2016: Excludes disposals valued at R203 million during F2016

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PORTFOLIO STRATEGY: PROGRESS DURING 2016

Progress during period under review

Acquisitions:

Hotel properties in major urban

areas with diverse source markets

and strong brands

Radisson Blu Waterfront: 3 additional units acquired

(ownership increased to 55.8% of rental pool)

Acquisition of 10 properties from Tsogo valued at R1.78bn

(expected effective date 1st September 2016)

Disposals:

Non-core properties in tertiary

zones

PH The Richards: R44.8m PH Hluhluwe & Safaris: R13.9m

Premier King David: R27.9m PH Imperial: R23.8m

PH Richards Bay: R28.9m PH The Winkler: R25.1m

The Bayshore Inn: R25.6m

Investments:

Continually investing in existing

properties to enhance value

proposition of portfolio

PH Edward: 30 new rooms at a cost of R19.8m

Birchwood Hotel: R14.0m invested to refurbish 82 rooms to form part of

Silverbirch hotel section

Champagne Sports Resort: Movables acquired for R14m

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CAPEX INVESTMENTS

SILVERBIRCH AT BIRCHWOOD

PROTEA HOTEL EDWARD

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DIVIDER SLIDE LAYOUT

PORTFOLIO REVIEW

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STR GLOBAL – SOUTH AFRICA HOTEL REVIEW

64%65%

63%

68% 67% 66%

69%71%

72%70%

59%

56% 56%

60%62% 63%

64%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Occupancy Growth

OCCUPANCY (CY)

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AVERAGE DAILY RATE (CY)


R368

R389R418 R486

R522

R511R537

R583

R671

R791R843

R937

R855R888

R968R1 020

R1 086

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ADR Growth

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R 235

R 253 R 264

R 328R 349 R 336

R 370 R 414

R 484

R 554

R 497 R 527

R 479

R 531

R 602

R 638

R 691

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

RevPAR Growth

Growth

REVENUE PER AVAILABLE ROOM (CY)

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HPF TRADITIONAL HOTELS - JULY 2015 TO JUNE 2016*

OCCUPANCY INCREASE AHEAD OF INDUSTRY

65.7%69.1%

62.6%64.6%

HPF'15 HPF'16 STR'15 STR'16

Occupancy HPF vs STR

*this excludes fixed and conference hotel properties. Disposals before 30 June 2016 have also been excluded.

+5.2%+3.2%

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INCREASED ROOM RATES: BIG BOX STRATEGY PAYING OFF

R 1 348

R 1 457

R 1 049

R 1 133


ADR HPF vs STR


+8.1%

+8.0%


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INCREASED REVPAR: UNDERPINNED BY ADR

R 886

R 1 007

R 658

R 733


RevPAR HPF vs STR


+13.7%+11.4%


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66.3% 66.0%68.3%

55.6%53.4% 51.4%

57.5%60.1% 61.4%

65.7%69.1%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

HPF’S OCCUPANCY*

POSITIVE TREND CONFIRMED SINCE 2011

From YE June 2014 onwards data for traditional F&V and Variable hotels excluding conference hotels and Fixed hotels

2016 also excludes properties disposed of prior to 30 June 2016

CAGR:

6.1%

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THE WESTIN CAPE TOWN

• Scale and location (483 keys)

• Foreign business and leisure travellers to Western Cape

• Global brand

Positioned in the sweet spot

• Revenue continues to grow

Strong rental income growth

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RADISSON BLU WATERFRONT

• Majority foreign business and leisure travellers

• Global brand

Iconic location on Western Seaboard

Refurb of spa and kitchen in progress

• Ownership increased to 55.8% of rental pool

Acquired three additional units

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RADISSON BLU GAUTRAIN

Prime location in competitive Sandton market supports occupancy

Potential upside to rental with modified strategy

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BIRCHWOOD HOTEL & OR TAMBO CONFERENCE CENTRE

Achieved budget

Diversification of client base

Lower public sector conferencing demand

Silverbirch refurb attracting corporate traveller

Restructured to enhance ongoing sustainability

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MOUNT GRACE COUNTRY HOUSE & SPA

• Sales and marketing strategies bedded down

Strong rental income growth

Restaurant undergoing refurbishment

Upgraded WIFI infrastructure

Kids club is popular

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CROWNE PLAZA JOHANNESBURG - THE ROSEBANK

Tsogo acquired existing tenant and operates hotel

Strategy to diversify client base with wider base of second tier corporates

Competitively positioned in the marketplace

Rosebank node undergoing significant redevelopment

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HOLIDAY INN SANDTON – RIVONIA ROAD

Tsogo acquired existing tenant and operates hotel

Performance impacted by adjacent construction

New development should boost occupancy after completion of Phase I in 2017

Confirmed tenant – ENS and Momentum

Location in Sandton central secures long term value proposition

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PROTEA HOTEL EDWARD

Strong growth in 2016

30 new rooms added (total 131 keys) in time for peak December 2015 trading period

Two new conference rooms completed

Immediate positive impact with improved occupancy and ADR

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DIVIDER SLIDE LAYOUT

FINANCIAL REVIEW

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434.140.4 (44.8)

(158.1)

(47.3)

(224.5)

Renta

l in

com

e

(F2015)

Renta

l in

com

e

grow

th

Fund e

xpense

s

Net

finan

ce

cost

s

Tota

l A

shar

e

dis

trib

ution

Tota

l B

shar

e

dis

trib

ution

INCOME STATEMENT (MAJOR COMPONENTS)

+5.0%

+149.5%

+1.7%

+9.3% +10.3%

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ALL PROPERTIES EXCLUDING FIXED RENTAL PROPERTIES – R1.6 BILLION GROSS REVENUE AT HOTEL

LEVEL

MARGIN ANALYSIS

34% 34% 35% 36% 37%39%

24% 24% 25%27% 26%

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2012 2013 2014 2015 2016

Rooms Revenue F&B Revenue Other Revenue MCP EBITDA

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GROSS RENTAL INCOME PER PORTFOLIO SEGMENTATION

RENTAL INCOME CONTRIBUTION

Gross rental income (R’000)

Total Portfolio 474 552 100.0%

Traditional hotel portfolio 410 260 86.5%

Conference portfolio 64 292 13.5%

Portfolio excl.

conferencing

properties (85.6%)

Conferencing

(14.4%)

PORTFOLIO VALUATION

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DEBT PROFILE AS AT 30 JUNE 2016 (R’MILLION)

DEBT PROFILE

63%

37%

Hedged Unhedged

• Successful issue of secured and unsecured notes to replace R230 million expired notes (April 2016)

• Increased Nedbank facility by R100 million

• R600 million secured notes expire February 2017: Have commenced noteholder engagement

0

100

200

300

400

500

600

700

Q3:2

016

Q4:2

016

Q1:2

017

Q2:2

017

Q3:2

017

Q4:2

017

Q1:2

018

Q2:2

018

Q3:2

018

Q4:2

018

Q1:2

019

Q2:2

019

Q3:2

019

Q4:2

019

Q1:2

020

Nedbank Secured Note Unsecured Note

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14 16 18 20 22 24 26 28 30 32 34 36 38 40 42

Champagne SportsResort

Kopanong Hotel &Conference Centre

Radisson BluWaterfront

Inn on the Square

Protea HotelEdward

Protea HotelMarine

Crowne PlazaJohannesburg -…

Holiday InnSandton -…

Arabella Hotel andSpa

Protea HotelHazyview

BirchwoodExecutive Hotel…

Mount GraceCountry House &…

Protea HotelVictoria Junction

Radisson BluGautrain Hotel

Westin Cape Town

Financial Year

Initial Option period 1 Option period 2

THE PERIOD IN REVIEW

LEASE EXPIRY PROFILE (CY) – WEIGHTED AVERAGE EXPIRY 10.72 YEARS*

*Portfolio as at 30 June 2016

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CAPITAL EXPENDITURE

• Protea Hotel Edward: 30 new rooms increasing number of keys to 131 keys: R19.8 million

• Birchwood Hotel: 82 additional rooms comprising part of Silverbirch hotel section (now 235 keys) : R14.0 million

• Movable assets acquired at Champagne Sports Resort: R14.0 million

• Other small projects

R102.9 million capex in 2016

• Refurbishment of spa and kitchen facilities at Radisson Waterfront

• Restaurant at Mount Grace

• Room refurbishments and kids club at Champagne Sports

• Other smaller projects

F2017 capex budget: R100 million (excl. Tsogo transaction)

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STRATEGY AND WAY FORWARD

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• In excess of 85% support on all resolutions (August 2015)

Conversion from debenture to shares

Shareholders’ interests misaligned due to dual share structure

• Shareholder approval obtained on 11 April 2016

• In excess of 75% support on all resolutions

A and B share structure to collapse into single class of shares

Resolves conflicts of interests between shareholders

CAPITAL STRUCTURE

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A SHAREHOLDERS

B SHAREHOLDERS

June 2016

Actual

After 3.5:1 conversion

(Ordinary Share)

Variance

NAV per share R12.93* R20.12* +55.6%

Voting rights 50.0% 77.8% +55.6%

Distribution growth Capped at 5% Uncapped

Distribution YE 2016 155.62c 148.46c -4.6%

* As at June 2016

June 2016

Actual

After 3.5:1 conversion

(Ordinary Share)

B share equivalent Variance

NAV per share R12.93* R20.12* R5.75* -55.6%

Voting rights 50.0% 22.2% - -55.6%

Distribution growth Uncapped

(only residual)

Uncapped -

Distribution YE 2016 34.81c 148.46c 42.42c +21.8%

SIMULATION

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TSOGO TRANSACTION

• Initial acquisition of 55% of B shares from existing shareholders in 2015

• Injection of ten hotel properties valued at R1.78 billion into Hospitality

• Will result in Tsogo owning 51% of Hospitality on completion

Tsogo acquisition of a controlling stake in HPF

• 10 successful and established mid scale hotel properties

• Expanded diversification: Brand / Operator / Geography / Market Segmentation

• Strong domestic brands as well as sales and marketing networks

Enhances Hospitality’s property portfolio

Debt free acquisition and potential cost of funding benefits

Broader earnings base ensuring greater stability of cash flows

Strategy to acquire additional properties from Tsogo Sun

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OVERVIEW OF TSOGO PORTFOLIO

PROPERTY ROOMS VALUATION

(Rm)

Garden Court Kimberley 135 129.1

Garden Court Milpark 252 240.0

Garden Court OR Tambo 253 287.4

Garden Court Polokwane 180 159.2

Garden Court South Beach 414 453.6

StayEasy Century City 175 178.4

StayEasy Rustenburg 125 85.1

SunSquare Cape Town 136 39.3

Southern Sun Bloemfontein 147 89.9

Southern Sun Newlands 162 117.9

All properties have F&V leases and mid scale grading

Gauteng

34%

KwaZulu-

Natal

26%

Western

Cape

19%

Limpopo

9%

Northern

Cape

7%

Free State

5%

Value by locality

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TSOGO PORTFOLIO: GARDEN COURT

POLOKWANE

KIMBERLEY SOUTH BEACH

OR TAMBOMILPARK

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TSOGO PORTFOLIO: STAYEASY

RUSTENBURGCENTURY CITY

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TSOGO PORTFOLIO: SUN SQUARE / SOUTHERN SUN

SOUTHERN SUN NEWLANDS

SUNSQUARE CAPE TOWN

SOUTHERN SUN BLOEMFONTEIN

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SA hospitality sector buoyed by increased demand from international travellers

• Partially offset lower travel frequency

Increased rate allowance on public sector travel budgets

• Pressure on hotel operating costs

Inflation expected to remain high

• Upside potential for rates at hotels in high tourist areas

• Stable domestic business and leisure demand

• Normalisation of public sector conferencing post municipal elections

Hospitality property fund well-positioned

• Political, economic and social

Continued uncertainty in South Africa

Focus on implementing Tsogo transaction

• Broader earnings based and increased critical mass

F2017 outlook

FUND OUTLOOK

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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

DIVIDEND DISTRIBUTION DATES

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FINANCIAL YEAR END 30 JUNE 2016

INTEGRATED REPORT POSTED TO SHAREHOLDERS 29 SEPTEMBER 2016

ANNUAL GENERAL MEETING 22 NOVEMBER 2016

ANNOUNCEMENT OF INTERIM RESULTS FEBRUARY 2017

ANNOUNCEMENT OF ANNUAL RESULTS AUGUST 2017

SHAREHOLDER DIARY

ANNUAL RESULTS PRESENTATION

2016

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The announcements and information in this presentation do not constitute an offer to sell or issue or the

solicitation of an offer to buy or acquire securities of hospitality property fund (pty) ltd ('hospitality') or any of

its affiliates in any jurisdiction or an inducement to enter into investment activity. This presentation may include

"forward-looking statements". These statements may contain the words "anticipate", "believe", "intend",

"estimate", "expect" and words of similar meaning. All statements other than statements of historical facts

included in these announcements, including, without limitation, those regarding hospitality's financial position,

business strategy, plans and objectives of management for future operations (including development plans and

objectives relating to hospitality's products and services) are forward-looking statements. These forward-

looking statements involve known and unknown risks, uncertainties and other important factors that could

cause the actual results, performance or achievements of hospitality to be materially different from future

results, performance or achievements expressed or implied by such forward-looking statements. These forward-

looking statements are based on numerous assumptions regarding hospitality's present and future business

strategies and the environment in which hospitality will operate in the future. These forward-looking statements

speak only as at the date of these announcements. Neither hospitality nor any affiliate, nor any of their

respective officers, directors, partners, or employees claim any obligation or undertaking to disseminate any

updates or revisions to any forward-looking statements contained in these announcements to reflect any

change in hospitality's expectations with regard thereto or any change in events, conditions or circumstances on

which any such statement is based. Any information contained in these announcements on the price at which

hospitality's securities have been bought or sold in the past, or on the yield on such securities, should not be

relied upon as a guide to future performance.

DISCLAIMER

annual results presentation 2016€¦ · salient features. 4 4 salient features occupancy adr...

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