HOLLOWAY LODGING CORPORATION
FOR IMMEDIATE RELEASE March 11, 2015
Not for distribution on U.S. wire services or for dissemination in the United States
HOLLOWAY LODGING CORPORATION REPORTS STRONG 2014 YEAR END RESULTS AND DECLARES QUARTERLY DIVIDEND
Halifax, NS - Holloway Lodging Corporation ("Holloway") (TSX: HLC, HLC.DB, HLC.DB.A) today announced financial results for the year ended December 31, 2014. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's consolidated financial statements as at December 31, 2014 and its management discussion and analysis which are available on Holloway's website at www.hlcorp.caand on SEDAR at www.sedar.com.
Fourth Quarter Overview and Outlook
Holloway had an excellent fourth quarter and a record 2014. Holloway's base hotel portfolio performed above our expectations. We successfully acquired Royal Host Inc. ("Royal Host") during the third quarter and made material progress integrating its hotels into our operation during the fourth quarter.
The large increases in revenue and operating income during the fourth quarter were driven by the addition of the Royal Host hotels. While operating margins for the Company as a whole declined by 480 basis points in the fourth quarter, this represents an improvement over third quarter operating margins as we continue to apply our operating program to our newly acquired hotels. We expect many of the Royal Host properties will have moderately lower margins than our base portfolio as many of such hotels have large food and beverage operations, which generally carry lower margins. Nonetheless, we expect the Royal Host properties will provide Holloway with attractive returns.
The base portfolio realized an 8.4% increase in revenue, a 20.3% increase in operating income and a 380 basis point increase in operating income margin, in all cases largely due to higher room rates in Western Canada. The newly acquired Royal Host hotels contributed $31.9 million in revenue, $7.4 million in operating income and had operating margins of 23%.
Three Months Ended December 31 Yea rs Ended December 31
2014 | 2013 Va ri a nce | 2014 | 2013 Va ri a nce | |
Revenue Opera ti ng i ncome(1 ) Opera ti ng i ncome ma rgi n Net i ncome per ba s i c a nd di l uted s ha re Funds from opera ti ons per ba s i c a nd di l uted s ha re Adj us ted funds from opera ti ons per ba s i c a nd di l uted s ha re Di vi dends decl a red per s ha re | $ 31,715 9,269 29.2% 11,487 0.59 3,171 0.16 2,406 0.12 0.035 | $ 14,338 121.2% 4,880 89.9% 34.0% (4.8 ppt) 2,862 301.4% 0.16 268.8% 2,729 16.2% 0.15 6.7% 2,445 (1.6%) 0.14 (14.3%) 0.035 - | $ 97,537 33,219 34.1% 27,333 1.46 16,462 0.88 14,316 0.77 0.14 | $ 59,957 62.7% 21,510 54.4% 35.9% (1.8 ppt) 4,470 511.5% 0.25 484.0% 11,606 41.8% 0.64 37.5% 10,483 36.6% 0.58 32.8% 0.14 - |
(1) Before depreci a ti on and amorti za ti on.
During the fourth quarter, substantial progress was achieved integrating Royal Host and Holloway and the financial and administrative integration was largely completed by year-end. We have adjusted our middle management and sales team staffing levels and streamlined our purchasing, capital expenditure and reporting processes. We are beginning to see economies of scale as a result of consolidating several larger suppliers, insurance policies and benefit plans. Subsequent to year end, Holloway internalized the management of the hotels previously managed by a third party, which is expected to result in further annual savings. Management expects the performance of the Royal Host properties to continue to improve in 2015 due to, among other things, labour productivity improvements, energy efficiency upgrades, the implementation of rate management programs and targeted capital investments.
We completed the upgrade of our Super 8® in Timmins, ON in December 2014 and the results have been positive to date with ADR increasing approximately 30% on stable occupancy. We opened a new Starbucks® location in our Hilton® in London, ON in January 2015 and our upgrade of the hotel itself is ongoing. We are presently planning a major upgrade and rebranding of our Chimo® hotel in Ottawa, ON, which we anticipate starting in the second half of 2015.
Holloway's balance sheet continues to get stronger. Holloway had a total of $261.5 million of debt immediately following its acquisition of Royal Host; at year end the Company's debt stood at $250.8 million and today, the Company's debt stands at $243.1 million. That represents a 7% reduction in debt while the Company's cash flow continues to increase. We expect debt levels to come down further throughout 2015.
Looking forward to 2015, there is considerable uncertainty regarding energy prices and the implications on the Alberta economy. So far in 2015, our Western Canadian hotels have continued to perform well. Several markets have seen revenue declines, such as Whitecourt, AB which has been impacted by unseasonably warm weather that has led to road bans in the area. Other markets, including Grande Prairie, AB and High Level, AB, have performed very strongly. We will not speculate as to how energy markets will perform later in 2015 or which specific markets will be affected. Instead, we will continue to manage our hotels as efficiently as possible.
Outside of Alberta and British Columbia, we expect continued positive performance from our hotels. The weaker Canadian dollar is expected to have a positive impact on the business environment in Southwestern Ontario where we have several hotels and also on leisure markets, including our Maritime hotels and our hotels in Whitehorse, YT and Yellowknife, NT.
We are pleased to have completed the acquisition of Royal Host when we did, as it further diversified our revenue and NOI base outside of oil and gas markets. We will continue to seek hotel acquisitions that are accretive to Holloway on a cash flow and NAV basis.
Dividend Declaration
On March 11, 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 April 15, 2015 to shareholders of record on March
31, 2015.
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.
For further information please contact Michael Rapps, Chairman, at (416) 855-1925 or Jane Rafuse, Chief Financial
Officer, at (902) 443-5101.
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.
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