Holloway Lodging Corporation reports Q2 2015 results, declares quarterly dividend and announces normal course issuer bid

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HALIFAX, Aug. 12, 2015 /CNW/ – Holloway Lodging Corporation (TSX: HLC, HLC.DB, HLC.DB.A) (“Holloway”) today announced financial results for the three months ended June 30, 2015.  All amounts are in Canadian dollars unless otherwise indicated.  Readers should refer to Holloway’s unaudited interim consolidated condensed financial statements as at June 30, 2015 and its management discussion and analysis which are available on Holloway’s website at www.hlcorp.ca and on SEDAR at www.sedar.com.

Second Quarter Overview and Outlook

 

 

Our second quarter was uneventful relative to recent quarters. We did not buy or sell any hotel properties during the quarter. On an operational level, we focused considerable attention on reducing operating costs further in order to preserve margins in our Western Canadian hotels and grow margins in our other hotels. On a development level, we focused on the renovation of the Hilton® hotel in London, ON and prepared for the closure and rebranding of the Chimo hotel in Ottawa, ON which commenced in July 2015.

Hotel Performance

Holloway’s second quarter results include the Royal Host hotels which were acquired on July 1, 2014, whereas Holloway’s 2014 comparative figures do not include these hotels. The base portfolio recorded a 7.0% decrease in revenue, a 6.1% decrease in operating income and a 400 basis point increase in operating income margin to 36.2%, in all cases largely due to lower occupancy in Western Canada, partially offset by growth in Atlantic Canada. Results in Western Canada varied depending on the hotel’s location with several smaller markets experiencing weakness as a result of the decline in oil and gas activity, whereas larger markets such as Grande Prairie and Fort St. John were either not affected or were less affected as they benefit from a more diversified client base. While occupancy declined at most of our Western Canadian hotels, half of our Western Canadian hotels achieved rate increases during the quarter.

The Royal Host hotels contributed $13.6 million in revenue and $3.4 million in operating income in the second quarter and had operating margins of 24.7%. Results in the Royal Host portfolio were negatively impacted by the major renovation at the Hilton® hotel in London, ON which resulted in several floors of rooms being out of order during the quarter to facilitate construction. The impact of rooms being out of order will continue throughout much of 2015.

Balance Sheet

Holloway’s debt level was $261.5 million immediately following the acquisition of Royal Host. This was reduced to $250.8 million at year end and has since been reduced further to $230.0 million at June 30, 2015.

Outlook

There is considerable uncertainty regarding oil and gas activity in Western Canada. While we expect this uncertainty to have an impact on our Western Canadian hotels, we continue to focus on generating increased occupancy through sales initiatives and reducing operating costs where possible. Our Atlantic Canadian hotels are performing well and we anticipate this performance to continue in the second half of the year. Our Ontario hotels are performing in line with our expectations; we intend to devote additional attention to improving our Ontario hotels further, including through labour productivity improvements, the closure of unprofitable or marginally profitable food and beverage operations and targeted property improvements among other things.

The renovation and rebranding of the Hilton® hotel in London, ON is ongoing with completion expected by year-end. The renovation of the Chimo hotel in Ottawa, ON started in July 2015 with completion also expected by year-end. While the Hilton® hotel has remained open during its renovation, the Chimo hotel will be closed throughout the renovation period. As a result, we will experience reduced revenue and NOI at our Ontario hotels in the second half of the year. Our expectation is that each of these hotels, once fully upgraded and reopened, will drive significantly higher results in coming years and a commensurate increase in value.

We continue to seek acquisition opportunities, however, our pricing criteria have not yet been met.

Dividend Declaration

On August 12, 2015, the Board of Directors declared a quarterly dividend of $0.035 per share, representing an annual dividend of $0.14 per share. The dividend is payable on September 15, 2015 to shareholders of record on August 31, 2015.

Holloway Announces Normal Course Issuer Bid

Holloway announced that the Toronto Stock Exchange (the “TSX”) has approved the Company’s notice of intention to make a normal course issuer bid for up to 967,683 of its common shares, representing 5% of the issued and outstanding shares as of August 11, 2015. During the period from August 15, 2014 to August 11, 2015, the Company purchased 23,700 shares under a previous normal course issuer bid.  The weighted average price paid was $5.25 per share.

Pursuant to the notice, the Company may, over the 12 month period commencing on August 17, 2015 and ending on August 16, 2016 (or on such earlier date as the Company completes its purchases pursuant to the bid or provides notice of cancellation), purchase shares through the facilities of the TSX or certain alternative exchanges at prevailing market prices in accordance with the rules and policies of the TSX or such other exchanges.  All shares purchased by the Company under the normal course issuer bid will be cancelled. As of August 11, 2015, the Company had a total of 19,353,666 shares issued and outstanding.  The average daily trading volume of the shares during the six months ended July 31, 2015 was 5,303 shares and the daily repurchase limit for the shares is 1,325 shares other than block purchase exceptions.

The Company believes that, on occasion, its shares become available at prices that do not give full effect to their underlying value, based solely on management’s opinion of the Company’s future prospects. Accordingly, management believes that the purchase of shares pursuant to the normal course issuer bid represents an investment opportunity for Holloway and an appropriate use of its funds.

Results of Annual Meeting

Holloway held its 2014 annual general meeting of shareholders on May 8, 2015. The following five individuals were elected as directors of Holloway to serve until the next annual meeting of shareholders or until their successors are elected or appointed:

 

 

ABOUT HOLLOWAY LODGING CORPORATION

Holloway is a real estate corporation focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway owns 35 hotels with 3,967 rooms. Holloway’s shares and debentures trade on the TSX under the symbols HLC, HLC.DB and HLC.DB.A.

This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway’s future outlook and anticipated events or results and may include statements regarding Holloway’s future financial position, business strategy, financial results, plans and objectives. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts.  Forward-looking information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate. Some of these risks and uncertainties are described under “Risk Factors” in Holloway’s annual information form for the year ended December 31, 2014 which is available on Holloway’s profile on the SEDAR website at www.sedar.com. Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.

 

SOURCE Holloway Lodging Corporation