Temple Hotels Inc. reports 2014 first quarter results
WINNIPEG, May 14, 2014 /CNW/ - Temple Hotels Inc. ("Temple") (TSX: TPH) today reported its financial results for the quarter ended March 31, 2014. 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 quarter ended March 31, 2014, 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.
OPERATING RESULTS AND STATISTICS
| Three Months Ended March 31 | ||
| 2014 | 2013 | |
| Total revenue | $39,913 | $32,179 |
| Operating income | $11,719 | $11,339 |
| Net income (loss) | $(2,297) | $136 |
| Cash flow from operating activities | $2,568 | $476 |
| Funds from operations (FFO) | $4,259 | $3,465 |
| FFO per share | $0.11 | $0.13 |
| Adjusted funds from operations (AFFO) | $3,216 | $3,740 |
| AFFO per share | $0.08 | $0.14 |
| Dividends | $5,467 | $3,657 |
| Dividends per share | $0.13 | $0.13 |
| FFO payout ratio | 128% | 106% |
| AFFO payout ratio | 170% | 96% |
| Occupancy | 65% | 67% |
| ADR | $149.09 | $156.35 |
| RevPAR | $96.54 | $105.18 |
KEY POINTS
- In comparison to Q1-2013, operating income in Q1-2014 increased by $0.38 million or 3%, comprised of a $1.39 million increase in operating from "new hotel properties" (the eight hotels acquired during 2013) and a $1.01 million decrease in operating income from the "same property" portfolio (the 16 properties acquired prior to January 1, 2013)
- The decrease in operating income for the same property portfolio reflects a comparatively high level of operating expenses in Q1-2014, primarily due to a significant increase in utility costs reflecting the effect of severe winter conditions. Although room rates and revenue levels were lower than anticipated, the same property portfolio still managed to achieve a modest increase in room revenue during Q1-2014, with RevPAR increasing by $1.03 or 0.1% compared to Q1-2013. Overall, total hotel revenue for the same property portfolio increased by $0.09 million or 0.3% during Q1-2014. The delays in major oilsands projects and increased competition from new work camps served to limit occupancy and rate increases for the Fort McMurray Portfolio.
- Temple completed Q1-2014 with a net loss of $2.30 million, compared to net income of $0.14 million during Q1-2013. The net loss includes a $4.04 million increase in depreciation and amortization charges and a $0.87 million increase in interest expense (net), partially offset by a $1.21 million decrease in general and administration expenses. On a per share basis, the net loss was $0.06 per share during Q1-2014 compared to net income of $0.01 per share during Q1-2013.
- FFO increased by $0.8 million and AFFO decreased by $0.5 million in Q1-2014. On a basic per share basis, FFO decreased by $0.02 per share and AFFO decreased by $0.06 per share.
- Cash flow from operating activities increased by $2.1 million during Q1-2014.
Capital Expenditures
In addition to the capital expenditures which are completed on an ongoing basis to enhance the appeal of its hotel properties, Temple is continuing to make a substantial investment in major renovation and upgrade programs at a number of hotels in order to modernize and enhance the image of the hotels and improve the quality or extent of hotel amenities. The overall objective of the renovation/upgrade programs is to increase the occupancy level and average room rates of the individual hotels and the overall value of the hotel portfolio.
During Q1-2014, Temple's investment in capital expenditures amounted to $5.3 million, including $3.8 million of renovations at the Saskatoon Inn & Conference Centre and $0.4 million of renovations at the Prince George Hotel in Halifax, Nova Scotia.
Financing and Liquidity
As of March 31, 2014, the total long‑term debt, including convertible debentures, is equal to 66% of the appraised value of the total property portfolio. The weighted average interest rate of the total long‑term debt is 5.70% as of March 31, 2014, compared to 5.64% as of December 31, 2013 and 5.87% as of March 31, 2013.
The total cash balance as at March 31, 2014 is $27.7 million and the working capital is $26.8 million.
Equity Capital and New Property Acquisitions
In December 2013, Temple raised $57.5 million from the issue of 9.9 million shares. Although a portion of the proceeds were used to temporarily repay first mortgage loan debt in the amount of $23.2 million, the remaining proceeds of the equity offering remained un-invested throughout Q1-2014.
The time lag between raising and investing the equity capital served to increase the payout ratio and decrease the per share results in Q1-2014.
Effective April 1, 2014, Temple completed the acquisitions of the Hotel Saskatchewan in Regina (224 guestrooms) and the Cortona Residence in Fort McMurray (57 "extended stay" suites). The total combined acquisition cost of $58.8 million was financed with $40.3 million of first mortgage loan financing with the balance in cash.
Subsequent to March 31, 2014, Temple obtained a new first mortgage loan of $25 million for the Merit Hotel and Suites and arranged a line of credit of $25 million, secured by a first mortgage charge against the Nomad Hotel. The proceeds of the mortgage financing together the remaining proceeds from the December 2013 share issue will permit Temple to complete additional acquisitions in the second and third quarter.
Outlook
Temple expects to close additional hotel acquisitions and further expand its asset base and earnings capacity during the remainder of 2014. The two new hotel acquisitions in April 2014 are contributing to earnings and the existing portfolio is also budgeted to experience progressively higher occupancies and earnings during the balance of the year.
Q1-2014 COMPARED TO Q1-2013
| Analysis of Net income (loss) | |||||||||
| Three Months Ended | |||||||||
| March 31 | |||||||||
| Increase / (Decrease) |
|||||||||
| 2014 | 2013 | in Income | |||||||
| Revenue | |||||||||
| Room revenue | $ | 29,245 | $ | 22,647 | $ | 6,598 | |||
| Other hotel revenue | 10,668 | 9,532 | 1,136 | ||||||
| Total revenue | 39,913 | 32,179 | 7,734 | ||||||
| Hotel operating costs | 28,194 | 20,840 | (7,354) | ||||||
| Operating income | 11,719 | 11,339 | 380 | ||||||
| Interest expense, net | 7,320 | 6,448 | (872) | ||||||
| Share based compensation | 148 | 26 | (122) | ||||||
| General and administrative expenses | 208 | 1,421 | 1,213 | ||||||
| Depreciation and amortization | 7,564 | 3,525 | (4,039) | ||||||
| (3,521) | (81) | (3,440) | |||||||
| Equity income on investment in hotel properties | 216 | 124 | 92 | ||||||
| Change in fair value of financial instruments: gain (loss) | 39 | (179) | 218 | ||||||
| Income tax recovery | 969 | 272 | 697 | ||||||
| Net income (loss) | $ | (2,297) | $ | 136 | $ | (2,433) | |||
| Per Share Results: | |||||||||
| Basic | $ | (0.06) | $ | 0.01 | |||||
| Diluted | $ | (0.06) | $ | 0.01 | |||||
Revenue
| Analysis of Total Hotel Revenues | ||||||||
| Three Months Ended March 31 | ||||||||
| Increase/ | ||||||||
| 2014 | 2013 | (Decrease) | ||||||
| Total - Same Properties | ||||||||
| Room revenue | $ | 20,920 | $ | 20,723 | $ | 197 | ||
| Other hotel revenue | 8,666 | 8,777 | (111) | |||||
| Total Hotel Revenue | 29,586 | 29,500 | 86 | |||||
| Total - Acquisitions | ||||||||
| Room revenue | $ | 8,325 | $ | 1,924 | $ | 6,401 | ||
| Other hotel revenue | 2,002 | 755 | 1,247 | |||||
| Total Hotel Revenue | $ | 10,327 | $ | 2,679 | $ | 7,648 | ||
| Total | ||||||||
| Room revenue | $ | 29,245 | $ | 22,647 | $ | 6,598 | ||
| Other hotel revenue | 10,668 | 9,532 | 1,136 | |||||
| Total hotel revenue | $ | 39,913 | $ | 32,179 | $ | 7,734 | ||
As of March 31, 2014, the "Acquisitions" portfolio comprises 37% of the total rooms. With the exception of the Acclaim Hotel, Calgary Airport North and the Holiday Inn Express, Sherwood Park, all of the hotels in the portfolio of "newly acquired properties" are located outside of Alberta.
During Q1-2014, total room revenue increased by $6.6 million or 29%, compared to Q1-2013, comprised of an increase of $0.2 million or 1% in "same property" revenue and incremental revenue of $6.4 million from new hotel acquisitions. The increase in room revenue for the "same property" portfolio is comprised of an increase in room revenue of $0.04 million or 0.4% for the Fort McMurray same property portfolio, and an increase in room revenue of $0.16 million or 1.5% million for the "Other" hotels in the same property portfolio.
As disclosed in the following chart, RevPAR for the same property portfolio was $109.90 during Q1-2014, compared to $108.87 during Q1-2013. RevPAR for the portfolio of newly acquired properties was $73.94 in Q1-2014, compared to $71.44 in Q1-2013. The increase in same property RevPAR in Q1-2014 reflects that the Radisson Hotel in Fort McMurray was undergoing renovations in Q1-2013.
| Room Revenue Statistics | ||||||||||||
| Three Months Ended March 31 | ||||||||||||
| 2014 | 2013 | |||||||||||
| Occ | ADR | RevPar | Occ | ADR | RevPar | |||||||
| Same Properties | ||||||||||||
| Fort McMurray | 70% | $ 190.60 | $ 133.35 | 71% | $ 187.84 | $ 132.86 | ||||||
| Other | 66% | $ 144.49 | $ 94.70 | 65% | $ 142.66 | $ 93.31 | ||||||
| Total - Same Properties | 67% | $ 163.35 | $ 109.90 | 68% | $ 161.28 | $ 108.87 | ||||||
| Acquisitions | 61% | $ 122.27 | $ 73.94 | 60% | 119.83 | 71.44 | ||||||
| Overall Portfolio | 65% | $ 149.09 | $ 96.54 | 67% | $ 156.35 | $ 105.18 | ||||||
Other Hotel Revenue
During Q1-2014, other hotel revenue increased by $1.14 million or 12%, compared to Q1-2013, comprised primarily of incremental revenue of $1.25 million from new hotel acquisitions and a decrease of $0.11 million from the same property portfolio.
| Operating Income and Profit Margin | ||||||||||||
| Three Months Ended March 31 | ||||||||||||
| Operating Income | Operating Margin | |||||||||||
| Amount | ||||||||||||
| Increase/ | ||||||||||||
| 2014 | 2013 | (Decrease) | 2014 | 2013 | ||||||||
| Same Properties | ||||||||||||
| Fort McMurray | $ | 5,330 | $ | 5,862 | $ | (532) | 50% | 56% | ||||
| Other Canada | 4,603 | 5,078 | (475) | 24% | 27% | |||||||
| Total - Same Properties | $ | 9,933 | $ | 10,940 | $ | (1,007) | 34% | 37% | ||||
| Acquisitions | $ | 1,786 | $ | 399 | $ | 1,387 | 17% | 15% | ||||
| Total portfolio | $ | 11,719 | $ | 11,339 | $ | 380 | 29% | 35% | ||||
Total operating income increased by $0.38 million or 3% during Q1-2014, compared to Q1-2013, comprised of a decrease of $1.01 million or 9% for the "same property" portfolio and an increase of $1.39 million which is attributable to new hotel acquisitions. The decrease in "same property" operating income reflects a $0.53 million or 9% decrease in operating income for the Fort McMurray "same property" portfolio and a $0.48 million or 9% decrease in operating income for the Other Canada "same property" portfolio. In summary, the decrease in same property operating income reflects a $1.1 million increase in same property operating costs compared to an increase in same property revenue of $0.09.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased from 35% during Q1-2013 to 29% during Q1-2014.
COMPARISON TO PRIOR QUARTER
| Analysis of Net Income (loss) | ||||||||
| Increase / (Decrease) |
||||||||
| Q1-2014 | Q4-2013 | in Income | ||||||
| Revenue | ||||||||
| Room | $ | 29,245 | $ | 29,034 | $ | 211 | ||
| Other | 10,668 | 13,178 | (2,510) | |||||
| Total revenue | 39,913 | 42,212 | (2,299) | |||||
| Hotel operating costs | 28,194 | 29,620 | 1,426 | |||||
| Operating income | 11,719 | 12,592 | (873) | |||||
| Interest expense, net | 7,320 | 8,181 | 861 | |||||
| Share based based compensation | 148 | 52 | (96) | |||||
| General and administrative expenses | 208 | 1,332 | 1,124 | |||||
| Depreciation and amortization | 7,564 | 7,939 | 375 | |||||
| (3,521) | (4,912) | 1,391 | ||||||
| Equity income on investment in hotel properties | 216 | (13) | 229 | |||||
| Gain on expropriation of property | - | 1,630 | (1,630) | |||||
| Change in fair value of financial instruments: gain (loss) | 39 | 266 | (227) | |||||
| Income taxes recovery (expense) | 969 | 1,050 | (81) | |||||
| Net loss | $ | (2,297) | $ | (1,979) | $ | (318) | ||
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.
Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Executive Vice President
Tel: (204) 475-9090, Fax: (204) 452-5505, Email: [email protected]
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