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Short-form unaudited condensed consolidated financial results for the six months ended 30 September 2019
Hospitality Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
JSE share code: HPB ISIN: ZAE000214656
Bond company code: HPAI
(Approved as a REIT by the JSE)
("Hospitality" or "the company")
Short-form unaudited condensed consolidated financial results
for the six months ended 30 September 2019
- Rental income for the six months ended September 2019 at R335 million
- Investment property value increased to R12.3 billion
- Distribution per share of 35.40 cents for the six months ended 30 September 2019
FINANCIAL RESULTS
Hospitality's board of directors declared a dividend of 35.40 cents per share for the six months ended
30 September 2019. The Fund's distributable earnings decreased by 9% for the six months to R215 million when
compared to the prior six months to 30 September 2018, excluding the settlement of R11 million for the
shareholder appraisal rights matter (see detail below).
Rental income for the six months decreased by 3% to R335 million (2018: R345 million) mainly due to the
impact of the weaker trading performance at the Birchwood Hotel and OR Tambo Conference Centre and utility costs
in the hotels increasing above CPI. Hospitality's rental income is subject to seasonal variability and the
trading has been impacted by the elections and the misaligned school holidays. Hospitality's expenses for the
six months increased by 7% or R1.9 million on the prior six months to R30 million, mainly due to property rates
and taxes. Net finance costs of R92 million (2018: R80 million) are higher than the prior six months due to
increased borrowings arising from capital expenditure.
The following table reflects the operating financial results for the six months ended 30 September 2019
compared to the prior six months period ended 30 September 2018:
SUMMARY OF OPERATING RESULTS AS AT 30 SEPTEMBER 2019
Actual Actual Variance on Variance on
September September September September
2019 2018 2018 2018
R'000 R'000 R'000 %
Contractual revenue 335 352 344 553 (9 201) (3)
Other income/sundry income 1 689 282 1 407 499
Fund expenses (30 131) (28 229) (1 902) (7)
Net finance cost (91 789) (79 567) (12 222) (15)
Income from associates - 84 (84) (100)
Distributable earnings 215 121 237 123 (22 002) (9)
Dividends paid in respect of shareholder
appraisal rights matter (10 663) - (10 663) *
Distribution 204 458 237 123 (32 665) (14)
No par value ordinary shares 577 591 575 214 2 377 -
Distribution comparative to prior years
Interim dividend (cents) 35.40 41.22 (5.82) (14)
PROPERTY PORTFOLIO
The Fund's portfolio includes 54 hotel and resort properties in South Africa, including the Southern Sun
Pretoria. The weighted average lease expiry period is 13.52 years. As at 30 September 2019, the carrying
amount of the portfolio was R12.3 billion and the net asset value ("NAV") per ordinary share amounted to
R17.41 (2018: R18.13).
FUNDING
The group's debt facilities with financial institutions as at 30 September 2019 amounted to
R2.5 billion and the total drawn down facilities amounted to R2.3 billion, resulting in a loan-to-value
("LTV") ratio (total interest-bearing liabilities/investment properties plus properties held for sale) of
19% (2018: 16%). The interest cover ratio of 4.4 times (2018: 4.6 times) for the 12 months rolling to
30 September 2019 is well above the required debt covenant limit of 2.0 times. The weighted average cost
of net debt to 30 September 2019 is 9.2%. A corporate bond (HPF12) of R300 million was issued in April 2019
to refinance the maturing corporate bonds (HPF08 and HPF09) and to fund capital expenditure. Global credit
ratings maintained the Fund's long-term credit rating at A- (ZA) and revised its short-term credit rating
to A2(ZA).
SHAREHOLDER APPRAISAL RIGHTS MATTER
On 12 June 2019, the High Court of South Africa ("the Court") ruled in the matter between Standard Bank
Nominees (RF) Proprietary Limited ("Standard Bank Nominees"), The Standard Bank of South Africa Limited,
Nedbank Collective Investments (RF) Proprietary Limited, Nedgroup Investment Advisors Proprietary Limited and
Hospitality, that the shareholder appraisal rights had not been properly exercised. The Court ordered that
Standard Bank Nominees be reinstated as a Hospitality shareholder and that Hospitality make payment to
Standard Bank Nominees of all dividends previously declared by the company from February 2016 to
12 June 2019. Accordingly, on 7 August 2019 Hospitality made payment of R10 663 390 to Standard Bank
Nominees in settlement of the Court order.
PROSPECTS
Hotel trading is expected to remain under pressure until the outlook on the South African economy improves.
The Fund's gearing is currently low at 19%. The Fund is committed to and able to fund its ongoing capital
expenditure programme over a five-year planning horizon. The directors have decided to maintain the
distribution at 100% of distributable earnings to Hospitality's shareholders.
DIVIDEND PAYMENT
The board has approved and notice is hereby given of gross dividend payment number 29 of 35.39846 cents per
share for the six months ended 30 September 2019. The number of shares in issue at the date of the dividend
declaration is 578 154 207 ordinary shares (for the purposes of the dividend declaration, 562 774 ordinary
shares held as treasury shares, have been excluded). In accordance with Hospitality's REIT status,
shareholders are advised that the dividend meets the requirements of a "qualifying distribution" for the
purposes of section 25BB of the Income Tax Act.
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 Hospitality, in respect of certificated shares:
(a) a declaration that the dividend is exempt from dividends tax; and
(b) a written undertaking to inform the CSDP, broker or Hospitality, as the case may be, should the
circumstances affecting the exemption change or the beneficial owner cease to be the beneficial owners;
both in the form prescribed by the Commissioner for the South African Revenue Service.
Shareholders are advised to contact their CSDP, broker or Hospitality, as the case may be, to arrange for
the abovementioned documents to be submitted prior to payment of the dividend,
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. 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, the
net amount due to non-resident shareholders will be 28.31877 cents per 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 Hospitality, as the case may be, should the
circumstances affecting the reduced rate change or the beneficial owner cease 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 Hospitality, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the dividend if such documents have not already
been submitted, if applicable. Shareholders are requested to seek professional advice on the appropriate
action to take.
The dividend is payable in accordance with the timetable below:
Last day to trade cum dividend: Tuesday, 10 December 2019
Shares will trade ex dividend: Wednesday, 11 December 2019
Record date: Friday, 13 December 2019
Payment date: Tuesday, 17 December 2019
Shareholders may not dematerialise or rematerialise their shares between Wednesday, 11 December 2019 and
Friday, 13 December 2019, both days inclusive.
Payments of the dividend will be made to shareholders on Tuesday, 17 December 2019. In respect of
dematerialised shares, the dividend will be transferred to the CSDP accounts/broker accounts on
Tuesday, 17 December 2019. Certificated shareholders' dividend will be deposited on or about
Tuesday, 17 December 2019.
20 November 2019
The contents of this short-form announcement are the responsibility of the board of directors of
Hospitality. The information in this short-form announcement is a summary of the full announcement, which can
be accessed on https://senspdf.jse.co.za/documents/2019/jse/isse/HPBE/HPF2020Int.pdf or on the Company's
website on 21 November 2019 and accordingly does not contain full or complete details. The short-form announcement
has been extracted from the summary consolidated financial results, but the short-form announcement itself is not
audited. Any investment decisions by shareholders should be based on a consideration of the full announcement,
which shareholders are encouraged to view on SENS and on the company's website set out above.
The full announcement is available for inspection at the offices of Hospitality (Palazzo Towers West,
Montecasino Boulevard, Fourways, Gauteng, 2055) and the offices of the sponsor, Java Capital (6A Sandown
Valley Crescent, Sandton, Johannesburg, 2196) at no charge during normal business hours on business days
from Wednesday, 20 November 2019 to Wednesday, 27 November 2019.
Sponsor:
Java Capital
Debt sponsor:
Rand Merchant Bank,
a division of FirstRand Bank Limited
Income tax reference number:
9770/799/1/47
http://www.hpf.co.za
Date: 21/11/2019 08:00:00
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