WINNIPEG, Feb. 25, 2016 /CNW/ – Temple Hotels Inc. (“Temple”) (TSX: TPH) today reported its financial results for the year ended December 31, 2015. The following comments in regard to the financial position and operating results of Temple should be read in conjunction with Management’s Discussion & Analysis and the financial statements for the year ended December 31, 2015, which may be obtained from the Temple website at www.templehotels.ca or the SEDAR website at www.sedar.com.
Monetary data in the tables of this press release, unless otherwise indicated, are in thousands of Canadian dollars, except for per share, average daily rate (“ADR”), and revenue per available room (“RevPAR”) amounts.
2015 KEY POINTS/HIGHLIGHTS
- Net operating income decreased by $12.2 million or 21% in 2015, compared to 2014, comprised of a $14 million and $1.9 million decreases, respectively, in the operating income of the same property portfolio and the sold property portfolio, partially offset by $3.7 million increase attributable to new acquisitions.
- Net operating income for non-Alberta same properties increased by $0.4 million or 2% in 2015, compared to 2014, reflecting a $1.89 increase in ADR (1%) and $1.99 increase in RevPAR (2).
- The sale of Hotel Saskatchewan on September 1, 2015 provided approximately $24 million of net cash proceeds, after repayment of the first mortgage loan, that were primarily used to repay debt.
- A rights offering was successfully completed on October 29, 2015 and resulted in the issuance of 36,363,636 common shares, at $1.10 per share, and net proceeds of $39.3 million that were primarily used to repay debt.
- A non-cash accounting adjustment for impairment of $64.8 million was recognized in 2015 to reflect the impact of the economic downturn on the carrying value of twelve Alberta hotel properties as at December 31, 2015.
OPERATING RESULTS
|
Year Ended December 31 |
||
|
2015 |
2014 |
|
|
Total revenue |
$177,753 |
$188,418 |
|
Operating income |
$45,769 |
$57,995 |
|
Provision for impairment |
$(64,750) |
Nil |
|
Net loss |
$(55,456) |
$(7,835) |
|
Cash flow from operating activities |
$16,085 |
$25,225 |
|
Funds from operations |
$10,881 |
$20,534 |
|
Adjusted funds from operations |
$6,349 |
$19,024 |
|
Per share |
||
|
â FFO |
$0.23 |
$0.51 |
|
â AFFO |
$0.13 |
$0.47 |
|
Occupancy |
62% |
67% |
|
ADR |
$142.89 |
$149.05 |
|
RevPar |
$88.40 |
$99.62 |
Operating Activities
- Operating Income: During 2015, operating income decreased by $12 million or 21%, compared to 2014. The decrease mainly reflects a $14 million decrease in same property operating income and a $1.9 million decrease in the sold property segment, partially offset by a $3.7 million increase in operating income from the six hotels acquired in 2014.
- Occupancy: The decrease in same property operating income reflects the reduced ADR and occupancy levels within the Fort McMurray and Other Alberta segments, as a result of the unfavourable market conditions continuing to affect Fort McMurray and other oilâdependent markets in Alberta. In 2015, the occupancy level of the Fort McMurray and Other Alberta segments decreased by 14 and 10 percentage points, respectively, in comparison to the 2014 occupancy results. In addition, the ADR of the Fort McMurray and Other Alberta segments decreased by $21.01 and $6.14, respectively, in comparison to 2014.
- FFO and AFFO: During 2015, FFO decreased by $9.7 million (47%) and AFFO decreased by $12.8 million (67%), compared to 2014. On a basic per share basis, FFO and AFFO decreased by $0.28 per share and $0.34 per share, respectively, compared to 2014. The decrease in FFO and AFFO mainly reflects a decrease in operating income, due to the factors noted above. During 2015, the FFO and AFFO payout ratios were 65% and 112%, respectively, compared 107% and 116% during 2014. The lower payout ratio reflects, among other things, the reduction of dividends in 2015.
- Cash Provided by Operating Activities: Cash provided by operating activities decreased by $9.1 million during 2015, compared to 2014. After excluding working capital adjustments, cash provided by operating activities decreased by $9.5 million, compared to 2014.
- Net Loss: Temple completed 2015 with a net loss of $55.5 million, compared to a net loss of $7.8 million during 2014. The substantial increase in the net loss is mainly due to the non-cash accounting provision for asset impairment of $64.8 million, as well as a decrease in operating income of $12.2 million, partially offset by an increase in income tax recoveries of $19.2 million and a gain on sale of property of $9.1 million. On a per share basis, the net loss was $1.17 for 2015, compared to a net loss per share of $0.19 during 2014.
- Asset Impairment: The economic downturn in Alberta has resulted in decreased occupancy levels and room rates for certain hotel properties. Evidence that the occupancy and room rate declines may be prolonged, current appraisals at reduced appraised values for certain properties in comparison to previous appraisals and the current share trading price mandated the completion of an impairment review and recoverability analysis in accordance with IFRS. As a result of the analysis, a non-cash accounting adjustment for asset impairment in the aggregate amount of $64.8 million for twelve hotels in Alberta was recorded in 2015.
Liquidity and Financing Activities
As of December 31, 2015, the unrestricted cash balance of Temple was $23 million and working capital was approximately $14.7 million, excluding the current portion of longâterm debt.
The main financing activities of Temple during 2015 were as follows:
- During Q4-2015, the rights offering was completed and resulted in the issuance of 36,363,636 common shares for aggregate proceeds of $40 million and net proceeds of $39.3 million. The completion of the rights offering has enabled Temple to further reduce indebtedness and improve the working capital position.
- Temple completed the sale of Hotel Saskatchewan on September 1, 2015 for gross proceeds of $45 million, including $7 million of capital expenditure reimbursements, and net proceeds of $24 million, after the repayment of the first mortgage loan. The net proceeds were used to retire the revolving loan in full, reduce other debt and improve working capital.
- In response to the economic downturn in Alberta, Temple reduced the annualized dividend payments from $0.54 to $0.30 in January 2015 and to $0.10 in May 2015. In January 2016 Temple suspended the payment of dividends in order to preserve liquidity and reduce debt.
- Temple has negotiated a reduction in the hotel management fees for Fort McMurray and Red Deer hotels.
Investing Activities
Temple has continued to invest in major hotel renovation programs with the objective of enhancing the quality and competitive position of its hotel properties. During 2015, capital expenditures on hotel properties amounted to $18.7 million of which $14.7 million related to major renovations and upgrade programs at five properties, including major expenditures of $7 million at the Hotel Saskatchewan which were reimbursed upon closing of the sale.
With the closing of the sale of the Hotel Saskatchewan and other major capital expenditures programs nearing completion, capital expenditures are expected to substantially decrease during 2016.
Board Governance and Management
During 2015, two nominees of Morguard Corporation and one independent director were elected to the Board. The new board of directors strengthened Board governance by separating the role of CEO and Chairman.
Effective April 1, 2016, asset management responsibilities previously provided by Shelter Canadian Properties Limited will be assumed by Morguard Corporation.
Outlook
In view of the economic contraction in Alberta, Temple will continue to focus on debt reduction; improving its balance sheet; as well as the completion of the strategic capital expenditures which commenced last year. Management is confident that the recent capital expenditure programs and improvement in income from our hotels located outside Alberta will mitigate the impact on Temple of the severe economic downturn in Alberta.
|
Analysis of Net Loss |
|||||||||
|
Year Ended |
|||||||||
|
December 31 |
|||||||||
|
Increase / |
|||||||||
|
2015 |
2014 |
in Income |
|||||||
|
Revenue |
|||||||||
|
Room revenue |
$ |
129,963 |
$ |
137,468 |
$ |
(7,505) |
|||
|
Other hotel revenue |
47,790 |
50,950 |
(3,160) |
||||||
|
Total revenue |
177,753 |
188,418 |
(10,665) |
||||||
|
Hotel operating costs |
131,984 |
130,423 |
(1,561) |
||||||
|
Operating income |
45,769 |
57,995 |
(12,226) |
||||||
|
Interest expense, net |
35,181 |
33,828 |
(1,353) |
||||||
|
Share based compensation |
389 |
405 |
16 |
||||||
|
General and administrative expenses |
1,123 |
4,959 |
3,836 |
||||||
|
Depreciation and amortization |
31,978 |
30,478 |
(1,500) |
||||||
|
(22,902) |
(11,675) |
(11,227) |
|||||||
|
Equity income on investment in hotel properties |
1,032 |
946 |
86 |
||||||
|
Gain on sale of property |
9,071 |
– |
9,071 |
||||||
|
Provision for impairment |
(64,750) |
– |
(64,750) |
||||||
|
Change in fair value of financial instruments |
201 |
241 |
(40) |
||||||
|
Income tax recovery |
21,892 |
2,653 |
19,239 |
||||||
|
Net loss |
$ |
(55,456) |
$ |
(7,835) |
$ |
(47,621) |
|||
|
Per Share: Basic and diluted |
$ |
(1.17) |
$ |
(0.19) |
|||||
Hotel Revenue
|
Analysis of Total Hotel Revenues |
|||||||||
|
Year Ended December 31 |
|||||||||
|
Increase/ |
|||||||||
|
2015 |
2014 |
(Decrease) |
|||||||
|
Same Property |
|||||||||
|
Fort McMurray |
|||||||||
|
Room revenue |
$ |
25,442 |
$ |
36,663 |
$ |
(11,221) |
|||
|
Other hotel revenue |
2,022 |
2,230 |
(208) |
||||||
|
$ |
27,464 |
$ |
38,893 |
$ |
(11,429) |
||||
|
Other Alberta |
|||||||||
|
Room revenue |
$ |
23,970 |
$ |
29,042 |
$ |
(5,072) |
|||
|
Other hotel revenue |
19,355 |
22,302 |
(2,947) |
||||||
|
$ |
43,325 |
$ |
51,344 |
$ |
(8,019) |
||||
|
Other Canada |
|||||||||
|
Room revenue |
$ |
57,533 |
$ |
56,148 |
$ |
1,385 |
|||
|
Other hotel revenue |
21,263 |
20,672 |
591 |
||||||
|
$ |
78,796 |
$ |
76,820 |
$ |
1,976 |
||||
|
Total â Same Property |
|||||||||
|
Room revenue |
$ |
106,945 |
$ |
121,853 |
$ |
(14,908) |
|||
|
Other hotel revenue |
42,640 |
45,204 |
(2,564) |
||||||
|
Total hotel revenue |
$ |
149,585 |
$ |
167,057 |
$ |
(17,472) |
|||
|
Total â Acquisition |
|||||||||
|
Room Revenue |
$ |
18,408 |
$ |
8,824 |
$ |
9,584 |
|||
|
Other hotel revenue |
1,795 |
841 |
954 |
||||||
|
Total hotel revenue |
$ |
20,203 |
$ |
9,665 |
$ |
10,538 |
|||
|
Total â Sold Property |
|||||||||
|
Room revenue |
$ |
4,610 |
$ |
6,791 |
$ |
(2,181) |
|||
|
Other hotel revenue |
3,355 |
4,905 |
(1,550) |
||||||
|
Total hotel revenue |
$ |
7,965 |
$ |
11,696 |
$ |
(3,731) |
|||
|
Total |
|||||||||
|
Room revenue |
$ |
129,963 |
$ |
137,468 |
$ |
(7,505) |
|||
|
Other hotel revenue |
47,790 |
50,950 |
(3,160) |
||||||
|
Total hotel revenue |
$ |
177,753 |
$ |
188,418 |
$ |
(10,665) |
|||
Over the past three years, Temple has reduced its exposure to oilâdependent lodging markets by acquiring properties that enhance the geographic diversification of its portfolio. Nevertheless, Temple has retained a significant concentration of properties in the Fort McMurray, Alberta market which is dependent upon demand from companies and tradespeople that serve the oil sands industry. Over the past year, the decline in oil prices has reduced the extent of construction and other economic activity throughout the oil sands, resulting in weaker hotel market conditions in Fort McMurray and, to a lesser degree, other oil dependent markets in which Temple operates, including Lloydminster and Red Deer, Alberta.
During 2015, room revenue decreased by $7.51 million or 6%, compared to 2014. The decrease mainly reflects a decrease of $14.91 million or 12% in same property room revenue, offset by incremental revenue of $9.58 million from new hotel acquisitions. The decrease in same property room revenue is comprised of an $11.22 million (31%) decrease in the Fort McMurray portfolio and a $5.07 million (17%) decrease in the other Alberta portfolio, offset by a $1.39 million (2%) increase in the other Canada portfolio.
The decrease in same property room revenue is largely due to unfavourable market conditions affecting the Fort McMurray segment and oilâdependent markets in the other Alberta segment. The impact of these two segments on the same property portfolio was partially offset by favourable market conditions for the other Canada segment which experienced a 2% increases over 2014.
As disclosed in the following chart, RevPAR for the same property portfolio was $86.96 during 2015, compared to $99.12 during 2014. RevPAR for new hotel acquisitions was $99.32 during 2015 compared to $99.11 during 2014.
The decrease in same property portfolio RevPAR results generally reflect reduced ADR and occupancy levels in the Fort McMurray and other Alberta segments, partially offset by increased ADR and occupancy levels in the other Canada segment.
|
Room Revenue Statistics |
|||||||||||||||
|
Year Ended December 31 |
|||||||||||||||
|
2015 |
2014 |
||||||||||||||
|
Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
||||||||||
|
Same Property |
|||||||||||||||
|
Fort McMurray |
49% |
$ 169.92 |
$ 83.93 |
63% |
$ 190.93 |
$ 120.73 |
|||||||||
|
Other Alberta |
59% |
$ 131.42 |
$ 77.90 |
69% |
$ 137.56 |
$ 94.16 |
|||||||||
|
Other Canada |
66% |
$ 139.44 |
$ 92.96 |
66% |
$ 137.55 |
$ 90.97 |
|||||||||
|
Total â Same Property |
60% |
$ 144.03 |
$ 86.96 |
66% |
$ 150.18 |
$ 99.12 |
|||||||||
|
Acquisitions |
77% |
$ 130.96 |
$ 101.18 |
78% |
$ 127.56 |
$ 99.11 |
|||||||||
|
Sold Property |
53% |
$ 160.55 |
$ 85.03 |
68% |
$ 161.17 |
$ 110.27 |
|||||||||
|
Overall Portfolio |
62% |
$ 142.89 |
$ 88.40 |
67% |
$ 149.05 |
$ 99.62 |
|||||||||
The above charts do not reflect the operating results for the Cortona Residence, which is 100% leased at an annual net rent of $2.12 million.
Other Hotel Revenue
During 2015, other hotel revenue decreased by $3.16 million or 6%, compared to 2014, comprised of a decrease of $2.95 million from the other Alberta properties and a decrease of $1.55 million from the sold property partially offset by incremental revenue of $0.95 million from new hotel acquisitions and a $0.59 million increase in the other Canada portfolio. The decrease in other revenue for the other Alberta property portfolio mainly reflects decreased economic activity in hotel markets that are directly or indirectly related to the oil industry
Notwithstanding the above, the Sheraton Red Deer was the most significant contributor to other hotel revenue in the same property portfolio during 2015, accounting for $14.03 million or 33% of the other hotel revenue from the same property portfolio and 29% of other hotel revenue from all properties.
|
Operating Income and Profit Margin |
||||||||
|
Operating Income |
Operating Profit Margin |
|||||||
|
2015 |
2014 |
2015 |
2014 |
|||||
|
Same Property |
||||||||
|
Fort McMurray |
$ 10,765 |
$ 19,498 |
39% |
50% |
||||
|
Other Alberta |
8,106 |
13,797 |
19% |
27% |
||||
|
Other Canada |
18,716 |
18,314 |
24% |
24% |
||||
|
Total â Same Property |
$ 37,587 |
$ 51,609 |
25% |
31% |
||||
|
Acquisition |
$ 7,843 |
$ 4,158 |
39% |
43% |
||||
|
Sold Property |
339 |
2,228 |
4% |
19% |
||||
|
Total portfolio |
$ 45,769 |
$ 57,995 |
26% |
31% |
||||
Total operating income decreased by $12.23 million or 21% during 2015, compared to 2014, comprised of a decrease of $14.02 million or 27% for the same property portfolio and a decrease of $1.89 million from the sold property, partially offset by an increase of $3.69 million from new hotel acquisitions.
The decrease in same property operating income reflects a $8.73 million or 45% decrease in operating income for the Fort McMurray segment and a $5.69 million or 41% decrease in operating income for the other Alberta segment, partially offset by a $0.40 million or 2% increase in operating income for the other Canada segment.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased from 31% during 2014 to 26% during 2015.
COMPARISON â Q4-2015 TO Q4-2014
|
Increase / |
||||||
|
Q4-2015 |
Q4-2014 |
in Income |
||||
|
Revenue |
||||||
|
Room revenue |
$ 27,371 |
$ 34,392 |
$ (7,021) |
|||
|
Other hotel revenue |
12,574 |
15,785 |
(3,211) |
|||
|
Total revenue |
39,945 |
50,177 |
(10,232) |
|||
|
Hotel operating costs |
32,425 |
36,507 |
4,082 |
|||
|
Operating income |
7,520 |
13,670 |
(6,150) |
|||
|
Interest expense, net |
8,197 |
8,904 |
707 |
|||
|
Share based compensation |
104 |
94 |
(10) |
|||
|
General and administrative expenses |
371 |
2,558 |
2,187 |
|||
|
Depreciation and amortization |
6,890 |
8,561 |
1,671 |
|||
|
(8,042) |
(6,447) |
(1,595) |
||||
|
Equity income on investment in hotel properties |
225 |
80 |
145 |
|||
|
Provision for impairment |
(13,893) |
– |
(13,893) |
|||
|
Change in fair value of financial instruments |
74 |
58 |
16 |
|||
|
Income tax recovery (expense) |
6,177 |
1,501 |
4,676 |
|||
|
Net loss |
$ (15,459) |
$ (4,808) |
$ (10,651) |
|||
The loss before equity income, gain on sale, provision for impairment, change in fair value and income taxes, increased by $1.6 million during Q4-2015, compared to Q4-2014. The increase in the loss mainly reflects a decrease in operating income of $6.15 million, a $1.67 million decrease in depreciation and amortization and a $0.71 million decrease in interest expense.
The decrease in operating income mainly reflects a $3.2 million decrease in operating income at the Fort McMurray portfolio, a $1.8 million decrease in operating income at the other Alberta portfolio and a $0.8 million decrease in operating income at the sold property.
The decrease in general and administrative expenses is mainly due to non-recurring expenses of $2.44 million incurred in Q4-2014 related to the purchase of hotels.
The decrease in depreciation and amortization charges mainly reflects accelerated depreciation in 2014 of original furniture, fixtures and equipment costs at the three properties (Hilton Garden Inn Edmonton, Saskatoon Inn and Hotel Saskatchewan) that underwent major renovation programs during 2014 and 2015.
The decrease in interest expense (net) in Q4-2015 compared to Q4-2014 reflects reduced interest at the sold property and reduced interest expense on the line of credit resulting from reduced advances.
After providing for equity income, gain on sale of property, provision for impairment, change in fair value of financial instruments and income tax recoveries Temple’s net loss amounted to $15.46 million during Q4-2015, compared to a net loss of $4.81 million during Q4-2014.
ABOUT TEMPLE
Temple is a growth oriented hotel investment company with hotel properties located across Canada. Temple is listed on the Toronto Stock Exchange under the symbols TPH (common shares), TPH.DB.C, TPH.DB.D, TPH.DB.E and TPH.DB.F (convertible debentures). The objective of Temple is to provide shareholders with stable dividends from investment in a diversified portfolio of hotel properties and related assets. For further information on Temple, please visit our website at www.templehotels.ca.
This press release contains certain statements that could be considered as forward-looking information. The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.
The Toronto Stock Exchange has not reviewed or approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.
SOURCE Temple Hotels Inc.
