Holloway Lodging Corporation reports 2016 year end results and declares quarterly dividend

Not for distribution on U.S. wire services or for dissemination in the United States

HALIFAX, March 9, 2017 /CNW/ - Holloway Lodging Corporation (TSX: HLC, HLC.DB, HLC.DB.A) ("Holloway") today announced financial results for the year ended December 31, 2016.  All amounts are presented in thousands of Canadian dollars, except earnings per share amounts, unless otherwise indicated.  Readers should refer to Holloway's audited consolidated financial statements as at December 31, 2016 and its management discussion and analysis which are available on Holloway's website at www.hlcorp.ca and on SEDAR at www.sedar.com.

Fourth Quarter Overview and Outlook

Hotel Performance

In the fourth quarter of 2016, Holloway realized a 5.4% increase in revenue, a 20.6% increase in operating income and a 2.9 percentage point increase in operating income margin compared to the fourth quarter of 2015. The changes are shown in the tables below for the three months and year ended December 31, 2016.

		Three Months Ended December 31						Years Ended December 31
		2016		2015		Variance		2016		2015		Variance
Revenue		$	24,595	$	23,332	5.4%		$	106,412	$	110,683	(3.9%)
Operating income^(1)		5,598		4,641		20.6%		29,338		31,288		(6.2%)
Operating income margin		22.8%		19.9%		2.9 ppt		27.6%		28.3%		(0.7 ppt)
Net income attributable to shareholders		(2,302)		(12,083)				(1,045)		(3,811)
	per basic and diluted share	(0.12)		(0.63)				(0.06)		(0.20)
Funds from operations		1,374		(252)				10,726		11,968
	per basic share	0.07		(0.01)				0.57		0.62
Adjusted funds from operations		1,153		(474)				9,256		10,244
	per basic share	0.06		(0.02)				0.49		0.53
Dividends declared per share		0.035		0.035				0.14		0.14
(1) Before depreciation and amortization.

 

	Three Months Ended  December 31							Years Ended December 31
	Revenue			Operating Income^(1)				Revenue			Operating Income^(1)
2015	$	23,332	100%	$	4,641	100%		$	110,683	100%	$	31,288	100%
Hotels acquired	1,218			166				7,174			2,290
Hotels sold	(908)			(108)				(4,478)			(872)
Franchise business sold	-			-				(412)			(326)
London DoubleTree®/ Ottawa Holiday Inn®	2,655			1,494				6,860			4,454
Other Ontario hotels	(185)			114				(1,215)			67
Atlantic Canada hotels	299			359				(583)			(15)
Western Canada hotels	(1,874)			(1,111)				(11,791)			(7,599)
Northern Canada hotels	58			43				174			51
2016	$	24,595	105%	$	5,598	121%		$	106,412	96%	$	29,338	94%
(1) Before depreciation and amortization.

 

For the three months ended December 31, 2016, the Company's revenue and operating income were higher than in the fourth quarter of 2015. The results from our newly acquired Westmark Hotel and Conference Center® in Whitehorse, YT and our renovated and reopened hotels in Sydney, NS, London and Ottawa, ON more than offset the decline in revenue and operating income from our hotels in Western Canada.

Our Western Canada hotels were the largest detractors from our performance in 2016. The lack of oil and gas activity in many of our markets was the primary reason for this decline. This performance was driven more by lower occupancy (which declined by 15.7ppt from 57.8% to 42.1%) than lower rate (which only declined 5% from $137 to $130). Maintaining our rates and managing our hotels to the utmost efficiency during this market downturn has helped reduce the effects of this downturn and will serve us well when the market improves.

Our renovated Ontario hotels, the DoubleTree in London, ON and the Holiday Inn® in Ottawa, ON, contributed an additional $6.9 million in revenue and $4.5 million in operating income in 2016 compared to 2015.  This year was a year of ramp up for these hotels and we expect increased revenue and operating income in 2017. We are particularly pleased with the higher average daily rates we are seeing at these two hotels following their renovations.

Our other Ontario hotels increased operating income by $67 thousand despite revenue that was $1.2 million lower than the prior year. Our focus on managing our costs and flow through and the closure of unprofitable food and beverage operations show in these results. The Travelodge® hotel in Ottawa and our two hotels in Thunder Bay had higher revenues and operating income in 2016; these increases were offset by weaker performance from our hotel in Belleville and our two hotels in Timmins which were impacted by increased competition and lower demand from mining companies, respectively.

Our two hotels in Whitehorse, YT and the Travelodge in Sydney, NS are considered "hotels acquired" for 2016.  These hotels are performing well. The performance of the Westmark Hotel and Conference Center has exceeded our expectations and we believe there is opportunity for higher revenues and additional cost improvements in 2017. Our remaining hotels in Northern Canada and Atlantic Canada continued to record stable results.

Balance Sheet and Capital Allocation

Holloway's financial position remains strong. At year-end, we had $234.7 million of debt of which $89.8 million or 38% is in the form of convertible debentures with no financial covenants. In 2016, we took advantage of the lower interest rate environment by obtaining four new mortgages at 4.25%.

During the year, we sold the Travelodge hotel in Barrie, ON for gross proceeds of $8.7 million, resulting in a gain on sale of $2.9 million and representing a cap rate of 7.3%. We also acquired the Westmark Hotel and Conference Center in Whitehorse for $9.8 million, which implies a cap rate of 15% (based on our nine months of operations in 2016 only).

During the year, we repurchased $651 thousand of our common shares (142,000 shares at an average price of $4.58 per share). We also repurchased $101 thousand face value of our 6.25% Series B convertible debentures at a cost of $90 thousand (average cost of $89.30 per $100 face value) and $3 thousand face value of our 7.50% Series C convertible debentures at a cost of $3 thousand (average cost of $92.83 per $100 face value).

In 2016, we paid a quarterly dividend of $0.035 for a total annual dividend of $0.14 per share. The Company believes our capital is better spent investing in our hotels or repurchasing our shares and debentures than increasing our dividend.

Outlook

We noted in our third quarter report that we suspected the second half of 2016 would represent the bottom in the performance of our Western Canada hotels. Results at the end of the fourth quarter of 2016 and the beginning of 2017 have provided more support for this. Through the first two months of 2017, seven of our 11 Western Canada hotels have recorded revenue increases over the prior year with four of these properties experiencing revenue increases of more than 30%. Accordingly, assuming oil and gas prices remain stable or increase from current levels, we believe we will experience gradual improvement in our results in Western Canada as the year progresses.

Results in our other regions should remain stable or improve in 2017. We continue to expect positive performance from our renovated Ontario hotels and our newly acquired hotels in Whitehorse, YT and Sydney, NS. We are hopeful that the recent strength in metals pricing will result in improved business performance in Timmins, ON.

Our business plan for 2017 includes an active capital program that will focus on several growth initiatives as well as property improvements. We are nearing completion of an 11-room expansion of the Super 8® hotel in Fort St. John, BC in an area previously occupied by a restaurant. We expect to commence in the second quarter of 2017 renovations of our Holiday Inn and Super 8 hotels in Grande Prairie, AB. We have also commenced demolition of the non-operated structures located on the Travelodge hotel site in Ottawa, ON in anticipation of redevelopment activities; these demolition activities will not impact the existing hotel structure.

Subsequent to year-end, we sold the Holiday Inn in Oakville, ON for $19.4 million, representing a cap rate of approximately 7.4% and a price per room of $132 thousand. We recorded a gain on the sale of $7.8 million. We used the proceeds from this sale to fully repay our revolving credit facility. We anticipate at least one and possibly additional hotel sales during the year.

Finally, we continue to advance the process of refinancing those mortgages that mature in 2017.

Dividend Declaration

On March 9, 2017, 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 April 13, 2017 to shareholders of record on March 31, 2017.

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 34 hotels with 3,878 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, 2016 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

please contact Michael Rapps, Chairman, at [phone] or Jane Rafuse, Chief Financial Officer, at [phone].

Related Links

http://www.hlreit.com/