MISSISSAUGA, ON, Aug. 7, 2018 /CNW/ – Temple Hotels Inc. (“Temple” or the “Company”) (TSX: TPH) today reported its financial results for the three months ended June 30, 2018 (“second quarter”). 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 three and six months ended June 30, 2018, 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 common share, average daily rate (“ADR”), and revenue per available room (“RevPar”) amounts.
Q2 2018 KEY POINTS/HIGHLIGHTS
- On April 2, 2018, the Company fully repaid the 7% Series F convertible debentures in the amount of $34.4 million.
- Revenue decreased $0.3 million or 1% during the three months ended June 30, 2018 compared to 2017, primarily due to a decrease within the Fort McMurray and Sold Property portfolios of $1.2 million and $0.8 million, respectively, partially offset by increases in revenue within the Other Canada and Other Alberta portfolios of $1.3 million and $0.4 million, respectively.
- Hotel operating income decreased by $0.6 million or 5% during the three months ended June 30, 2018 compared to 2017, primarily due to a decrease in hotel operating income within the Fort McMurray and Sold Property portfolios of $1.0 million and $0.3 million, respectively, partly offset by an increase in hotel operating income within the Other Canada and Other Alberta portfolios of $0.6 million and $0.1 million, respectively.
- FFO decreased by $1.7 million during the three months ended June 30, 2018, compared to the three months ended June 30, 2017. On a basic per common share basis, FFO decreased by $0.06 per common share, compared to the second quarter of 2017.
OPERATING RESULTS
|
Three Months Ended June 30 |
Six Months Ended June 30 |
||||||
|
2018 |
2017 |
2018 |
2017 |
||||
|
Total revenue |
$43,094 |
$43,389 |
$80,305 |
$79,628 |
|||
|
Hotel operating income |
$12,142 |
$12,717 |
$19,689 |
$20,116 |
|||
|
Provision for impairment |
($6,785) |
$ – |
($6,785) |
$ – |
|||
|
Net income (loss) |
($3,870) |
$2,708 |
($8,578) |
($2,860) |
|||
|
Cash flow provided by operating activities |
$1,647 |
$6,289 |
$3,274 |
$2,348 |
|||
|
Funds from operations |
$4,989 |
$6,673 |
$4,933 |
$6,458 |
|||
|
Per common share |
|||||||
|
– Net income (loss) – basic and diluted |
($0.15) |
$0.11 |
($0.34) |
($0.11) |
|||
|
– Funds from operations |
$0.20 |
$0.26 |
$0.20 |
$0.25 |
|||
|
Weighted average number of common shares |
25,156,767 |
25,344,413 |
25,250,940 |
25,341,273 |
|||
|
Occupancy |
64% |
65% |
61% |
60% |
|||
|
ADR |
$144.63 |
$139.00 |
$138.88 |
$136.19 |
|||
|
RevPar |
$92.33 |
$90.81 |
$84.18 |
$81.58 |
|||
Operating Activities
- Net Income (Loss) â Temple completed the second quarter of 2018 with a net loss of $3.9 million, compared to net income of $2.7 million during the same period in 2017. The increase in net loss is mainly due to an increase in provision for impairment of $6.8 million, a decrease in other income of $1.6 million, a decrease in hotel operating income of $0.6 million, an increase in depreciation and amortization of $0.5 million, and higher general and administrative expenses of $0.1 million, partly offset by an increase in income tax recovery of $2.4 million and a decrease in interest expense of $0.6 million. On a per common share basis, net loss was $0.15 for the second quarter of 2018, compared to net income of $0.11 during the second quarter of 2017.
- Occupancy and ADR â The increase in Same Property revenue primarily reflects higher ADR and occupancy levels within the Other Canada segment leading to an increase in RevPar. In the second quarter of 2018, the ADR levels at all the Company’s segments increased, leading to an increase in RevPar at Other Canada and Other Alberta segments in comparison to the second quarter of 2017. Reduced occupancy levels within the Fort McMurray segment partially offset the increase in ADR as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta.
- Cash Provided by Operating Activities â Cash provided by operating activities decreased by $4.6 million during the second quarter of 2018, compared to the second quarter of 2017. Excluding working capital adjustments, cash provided by operating activities decreased by $2.2 million, compared to 2017.
- Funds from Operations (“FFO”) â During the second quarter of 2018, FFO decreased by $1.7 million, compared to the second quarter of 2017. The decrease in FFO mainly reflects lower other income of $1.6 million relating to the timing of recognition of insurance proceeds and recoverable expenses. On a basic per common share basis, FFO decreased by $0.06 per common share, compared to the second quarter of 2017.
- Asset Impairment â During the second quarter of 2018, a non-cash provision for impairment of $6.8 million was recorded to reflect the impact of the economic condition on the carrying value at two of Temple’s hotel properties.
Liquidity and Financing Activities
- As of June 30, 2018, the unrestricted cash balance of Temple was $12.2 million and working capital was $6.3 million.
- On April 2, 2018, the Company fully repaid the 7% Series F convertible debentures in the amount of $34.4 million.
- During the second quarter of 2018, the Company borrowed an additional $18.0 million under its existing revolving loan agreement with Morguard (“Credit Facility A”) and the Company used the proceeds to repay a second mortgage, secured by three properties in Nova Scotia, in the amount of $16.0 million which had an interest rate of 5.0%.
- During the three months ended June 30, 2018, 147,900 common shares were purchased for cash consideration of $0.5 million at a weighted average price of $3.05 per common share under the normal course issuer bid.
Investing Activities
As disclosed in the Statement of Cash Flows in the financial statements, the investing activities of Temple resulted in a net cash outflow of $1.8 million during the second quarter of 2018. Investing activities primarily reflect cash outflows related to capital expenditures on hotel properties.
Debt Covenants
At June 30, 2018, the Company was not in compliance with debt service covenants affecting three mortgage loans in the aggregate amount of $35.9 million. The loan covenant breaches are expected to be resolved by debt refinancings, loan modification agreements and/or a waiver of the covenant requirements.
At June 30, 2018, the Company was not in compliance with a corporate debt service coverage ratio and a minimum net asset requirement in regard to one mortgage loan with an aggregate principal balance of $14.5 million, secured against two properties. The lender has been notified of the breach and management is in discussion with the lender to resolve the matter.
At June 30, 2018, the Company was not in compliance with a corporate working capital ratio and a debt service coverage requirement affecting three mortgage loans with an aggregate principal balance of $36.7 million. The Company received a waiver from the lender subsequent to June 30, 2018.
ANALYSIS OF OPERATING RESULTS
|
Analysis of Net Income (Loss) and Comprehensive Net Income (Loss) |
||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||
|
June 30 |
June 30 |
|||||||||||
|
2018 |
2017 |
Increase/ |
2018 |
2017 |
Increase/ |
|||||||
|
Revenue |
||||||||||||
|
Room revenue |
$31,492 |
$32,113 |
($621) |
$57,532 |
$57,495 |
$37 |
||||||
|
Other hotel revenue |
11,602 |
11,276 |
326 |
22,773 |
22,133 |
640 |
||||||
|
Total revenue |
43,094 |
43,389 |
(295) |
80,305 |
79,628 |
677 |
||||||
|
Hotel operating costs |
30,952 |
30,672 |
(280) |
60,616 |
59,512 |
(1,104) |
||||||
|
Hotel operating income |
12,142 |
12,717 |
(575) |
19,689 |
20,116 |
(427) |
||||||
|
Interest expense |
6,831 |
7,393 |
562 |
13,986 |
14,678 |
692 |
||||||
|
Other income |
(64) |
(1,658) |
(1,594) |
(7) |
(1,776) |
(1,769) |
||||||
|
Share based compensation |
39 |
31 |
(8) |
74 |
66 |
(8) |
||||||
|
General and administrative |
||||||||||||
|
expenses |
955 |
879 |
(76) |
1,673 |
1,606 |
(67) |
||||||
|
Depreciation and amortization |
4,247 |
3,764 |
(483) |
8,579 |
8,968 |
389 |
||||||
|
134 |
2,308 |
(2,174) |
(4,616) |
(3,426) |
(1,190) |
|||||||
|
Equity income on investment in |
||||||||||||
|
hotel properties |
350 |
411 |
(61) |
512 |
542 |
(30) |
||||||
|
Provision for impairment |
(6,785) |
– |
(6,785) |
(6,785) |
– |
(6,785) |
||||||
|
Income tax recovery (expense) |
2,431 |
(11) |
2,442 |
2,311 |
24 |
2,287 |
||||||
|
Net income (loss) and |
||||||||||||
|
comprehensive income (loss) |
($3,870) |
$2,708 |
($6,578) |
($8,578) |
($2,860) |
($5,718) |
||||||
|
Per Common Share Results: |
||||||||||||
|
Basic and diluted |
($0.15) |
$0.11 |
($0.34) |
($0.11) |
||||||||
Hotel Revenue
|
Analysis of Total Hotel Revenues |
||||||||||||||||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||||
|
Increase/ |
Increase/ |
|||||||||||||||||
|
2018 |
2017 |
(Decrease) |
2018 |
2017 |
(Decrease) |
|||||||||||||
|
Same Property |
||||||||||||||||||
|
Fort McMurray |
||||||||||||||||||
|
Room revenue |
$ |
5,348 |
$ |
6,532 |
$ |
(1,184) |
$ |
10,329 |
$ |
11,051 |
$ |
(722) |
||||||
|
Other hotel revenue |
320 |
324 |
(4) |
597 |
685 |
(88) |
||||||||||||
|
$ |
5,668 |
$ |
6,856 |
$ |
(1,188) |
$ |
10,926 |
$ |
11,736 |
$ |
(810) |
|||||||
|
Other Alberta |
||||||||||||||||||
|
Room revenue |
$ |
4,638 |
$ |
4,565 |
$ |
73 |
$ |
8,815 |
$ |
8,407 |
$ |
408 |
||||||
|
Other hotel revenue |
4,920 |
4,646 |
274 |
9,804 |
9,309 |
495 |
||||||||||||
|
$ |
9,558 |
$ |
9,211 |
$ |
347 |
$ |
18,619 |
$ |
17,716 |
$ |
903 |
|||||||
|
Other Canada |
||||||||||||||||||
|
Room revenue |
$ |
21,506 |
$ |
20,263 |
$ |
1,243 |
$ |
38,388 |
$ |
36,696 |
$ |
1,692 |
||||||
|
Other hotel revenue |
6,362 |
6,291 |
71 |
12,372 |
12,115 |
257 |
||||||||||||
|
$ |
27,868 |
$ |
26,554 |
$ |
1,314 |
$ |
50,760 |
$ |
48,811 |
$ |
1,949 |
|||||||
|
Total â Same Property |
||||||||||||||||||
|
Room revenue |
$ |
31,492 |
$ |
31,360 |
$ |
132 |
$ |
57,532 |
$ |
56,154 |
$ |
1,378 |
||||||
|
Other hotel revenue |
11,602 |
11, 261 |
41 |
22,773 |
22,109 |
664 |
||||||||||||
|
Total hotel revenue |
$ |
43,094 |
$ |
42,621 |
$ |
473 |
$ |
80,305 |
$ |
78,263 |
$ |
2,042 |
||||||
|
Total â Sold Property |
||||||||||||||||||
|
Room revenue |
$ |
– |
$ |
753 |
$ |
(753) |
$ |
– |
$ |
1,341 |
$ |
(1,341) |
||||||
|
Other hotel revenue |
– |
15 |
(15) |
– |
24 |
(24) |
||||||||||||
|
Total hotel revenue |
$ |
– |
$ |
768 |
$ |
(768) |
$ |
– |
$ |
1,365 |
$ |
(1,365) |
||||||
|
Total |
||||||||||||||||||
|
Room revenue |
$ |
31,492 |
$ |
32,113 |
$ |
(621) |
$ |
57,532 |
$ |
57,495 |
$ |
37 |
||||||
|
Other hotel revenue |
11,602 |
11,276 |
326 |
22,773 |
22,133 |
640 |
||||||||||||
|
Total hotel revenue |
$ |
43,094 |
$ |
43,389 |
$ |
(295) |
$ |
80,305 |
$ |
79,628 |
$ |
677 |
||||||
During the second quarter of 2018, Same Property room revenue increased by $0.1 million compared to the second quarter of 2017. The increase is comprised of a $1.2 million (6%) increase in the Other Canada portfolio and a $0.1 million (2%) increase in the Other Alberta portfolio, partly offset by a $1.2 million (18%) decrease in the Fort McMurray portfolio.
The increase in Same Property room revenue during the second quarter of 2018, compared to the second quarter of 2017, is largely due to an increase in ADR at all the Company’s segments. Reduced occupancy levels within the Other Alberta and Fort McMurray segments partially offset the increase in ADR as a result of the unfavourable market conditions which continue to affect oil-dependent markets in Alberta.
Room Revenue Statistics
As disclosed in the following chart, for the second quarter of 2018, RevPar for the Same Property portfolio was $92.33, compared to $90.79 for the second quarter of 2017. RevPar for Same Property portfolio results generally reflect increased ADR levels at all the Company’s segments, partly offset by reduced occupancy levels within the Fort McMurray segment.
For the six months ended June 30, 2018, RevPar for the Same Property portfolio was $84.18, compared to $81.56 for the six months ended June 30, 2017.
Occupancy at the Fort McMurray properties decreased during the second quarter of 2018 compared to the second quarter of 2017, and remains impacted by the unfavourable market conditions in Alberta.
|
Room Revenue Statistics |
||||||||||||||||
|
Three Months Ended June 30 |
||||||||||||||||
|
2018 |
2017 |
|||||||||||||||
|
Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
|||||||||||
|
Same Property |
||||||||||||||||
|
Fort McMurray |
49% |
$ |
140.38 |
$ |
68.15 |
57% |
$ |
138.91 |
$ |
78.67 |
||||||
|
Other Alberta |
54% |
$ |
124.51 |
$ |
67.60 |
55% |
$ |
121.08 |
$ |
66.54 |
||||||
|
Other Canada |
73% |
$ |
150.99 |
$ |
110.43 |
72% |
$ |
144.09 |
$ |
104.03 |
||||||
|
Total â Same Property |
64% |
$ |
144.63 |
$ |
92.33 |
65% |
$ |
139.17 |
$ |
90.79 |
||||||
|
Sold Property |
– |
$ |
– |
$ |
– |
69% |
$ |
132.49 |
$ |
91.92 |
||||||
|
Overall Portfolio |
64% |
$ |
144.63 |
$ |
92.33 |
65% |
$ |
139.00 |
$ |
90.81 |
||||||
|
Room Revenue Statistics |
||||||||||||||||
|
Six Months Ended June 30 |
||||||||||||||||
|
2018 |
2017 |
|||||||||||||||
|
Occ |
ADR |
RevPar |
Occ |
ADR |
RevPar |
|||||||||||
|
Same Property |
||||||||||||||||
|
Fort McMurray |
46% |
$ |
139.03 |
$ |
63.51 |
47% |
$ |
138.91 |
$ |
65.72 |
||||||
|
Other Alberta |
54% |
$ |
120.65 |
$ |
64.59 |
51% |
$ |
121.39 |
$ |
61.61 |
||||||
|
Other Canada |
69% |
$ |
143.83 |
$ |
99.10 |
68% |
$ |
139.52 |
$ |
94.75 |
||||||
|
Total â Same Property |
61% |
$ |
138.88 |
$ |
84.18 |
60% |
$ |
136.30 |
$ |
81.56 |
||||||
|
Sold Property |
– |
$ |
– |
$ |
– |
63% |
$ |
131.77 |
$ |
82.31 |
||||||
|
Overall Portfolio |
61% |
$ |
138.88 |
$ |
84.18 |
60% |
$ |
136.19 |
$ |
81.58 |
||||||
The above chart does not reflect the operating results for the Cortona Residence, which was 100% leased at an annual net rent of $2.1 million until April 30, 2018 and is currently transitioning to an operating hotel.
Other Hotel Revenue
During the second quarter of 2018, other hotel revenue in the Same Property portfolio increased by $0.3 million or 3%, compared to the second quarter of 2017, mainly due to an increase of $0.3 million from the Other Alberta properties.
Notwithstanding the above, the Sheraton Red Deer was the most significant contributor to other hotel revenue in the overall portfolio during the second quarter of 2018, accounting for $4.0 million or 34% of other hotel revenue.
During the first six months of 2018, other hotel revenue for the Same Property portfolio increased $0.7 million or 3% compared to the first six months of 2017, mainly due to an increase in the Other Alberta and Other Canada properties of $0.5 million and $0.3 million, respectively, partially offset by a decrease of $0.1 million from the Fort McMurray properties.
Operating Income and Profit Margin
|
Operating Income and Profit Margin |
|||||||||||||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
||||||||||||||
|
Operating Income |
Operating Profit Margin |
Operating Income |
Operating Profit Margin |
||||||||||||
|
2018 |
2017 |
2018 |
2017 |
2018 |
2017 |
2018 |
2017 |
||||||||
|
Same Property |
|||||||||||||||
|
Fort McMurray |
$1,954 |
$2,931 |
34% |
43% |
$3,349 |
$4,377 |
31% |
37% |
|||||||
|
Other Alberta |
1,508 |
1,412 |
16% |
15% |
2,867 |
2,577 |
15% |
15% |
|||||||
|
Other Canada |
8,680 |
8,125 |
31% |
31% |
13,473 |
12,763 |
27% |
26% |
|||||||
|
Total â Same Property |
$12,142 |
$12,468 |
28% |
29% |
$19,689 |
$19,717 |
25% |
25% |
|||||||
|
Sold Property |
– |
$249 |
– % |
32% |
– |
$399 |
– % |
29% |
|||||||
|
Total portfolio |
$12,142 |
$12,717 |
28% |
29% |
$19,689 |
$20,116 |
25% |
25% |
|||||||
After accounting for the decrease in total revenues and the increase in hotel operating costs, total operating income decreased by $0.6 million or 5% during the second quarter of 2018, compared to the second quarter of 2017, comprised of a decrease of $0.3 million, or 3% for the Same Property portfolio and a decrease of $0.3 million due to the Sold Property. The decrease in Same Property operating income reflects a decrease of $1.0 million or 33% for the Fort McMurray segment, partially offset by a $0.6 million or 7% increase in operating income for the Other Canada segment and a $0.1 million or 7% increase in operating income for the Other Alberta segment.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased from 29% in the second quarter of 2017 to 28% in the second quarter of 2018.
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) and TPH.DB.E (convertible debentures). The primary longâterm investment objectives of the Company are to yield stable and growing cash flows and to maximize the longâterm share value of the Company through the active management of its assets, accretive acquisitions, and the performance of valueâadded capital improvement programs on selected properties, as deemed appropriate. 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.
SOURCE Temple Hotels Inc.
View original content: http://www.newswire.ca/en/releases/archive/August2018/07/c3792.html