Directors’ report
for the year ended 31 March 2020


Nature of business

The Company is a Real Estate Investment Trust (‘REIT’) listed on the JSE Limited (‘JSE’) and domiciled in the Republic of South Africa. The Company is the only specialised REIT in South Africa investing in the hotel and leisure sector, providing investors with exposure to both the property and hospitality industries.


Share capital

There were no changes to the authorised and issued share capital during the year under review.

Shareholder redemption rights

At 31 March 2019, a provision of R24 million was held relating to a dissenting shareholder exercising its rights in terms of section 164(14)(b) of the Companies Act. On 12 June 2019, the High Court of South Africa (‘the Court’) ruled in the matter between Standard Bank Nominees (RF) Proprietary Limited (‘Standard Bank Nominees’), The Standard Bank of South Africa Limited, Nedbank Collective Investments (RF) Proprietary Limited, Nedgroup Investment Advisors Proprietary Limited and Hospitality, that shareholder appraisal rights had not been properly exercised. The Court ordered that Standard Bank Nominees be reinstated as a Hospitality shareholder and that Hospitality make payment to Standard Bank Nominees of all dividends previously declared by the Company from February 2016 to 12 June 2019. Accordingly, on 7 August 2019 Hospitality made payment of R10 663 390 to Standard Bank Nominees, in settlement of the Court order.


Review of financial results

The results of the Group are set out in the financial statements and notes.



The following ordinary dividends were declared during the financial year:

  • A shareholder appraisal rights dividend of R10.7 million was paid on 7 August 2019 in terms of the High Court ruling.
  • An interim dividend of 35.40 cents was declared on 20 November 2019 and paid on 17 December 2019.
  • No final dividend has been declared and the Board may assess the payment of a final dividend once the impact of Covid-19 has been assessed and operations have returned to normality.

Subsequent events

The directors are not aware of any matter or circumstance arising since the end of the financial year, not otherwise dealt with within the financial statements that would affect the operations or results of the Company significantly.


Subsequent events, going concern and Covid-19


The Covid-19 pandemic (‘Covid-19’) and subsequent lockdown of the economy on 27 March 2020, and particularly, the hospitality sector, has had a profound impact on the Group. The Group’s portfolio comprises 54 hotels operating in the hospitality sector, which is one of the industries that has been impacted negatively as a result of Covid-19.

The measures taken by government to limit the spread of Covid-19 and the resultant inability for travellers to travel internationally and inter-provincially will limit the demand for hotel rooms, which will impact the Group’s revenue stream significantly for the 2021 financial year. Hotel trading is therefore expected to remain under pressure until the outlook on the South African economy improves.

Although the impact of Covid-19 is expected to have a longer-term impact on the hospitality industry and the Group, management is not able to quantify the full impact at the date of this report. It is expected that the recovery of the industry will be slow due to the uncertainties around the health of travellers, and the negative economic impact on government, corporates and individuals to spend on hotel accommodation and conferences.

As the Group’s properties are required to be closed, the inability to generate revenue during the lockdown period, together with the expected slow recovery once the hotels can open and operate, the Group will not be able to meet its net debt to EBITDA covenant requirement (and possibly interest cover ratio) in terms of its funding agreements for the measurement period 30 September 2020 and possibly 31 March 2021. The Group’s gearing levels remain manageable, with the loan-to-value ratio at 26% at 31 March 2020.

Subsequent events

The Group’s property valuation methodology incorporates the use of the South African Government bond yield 10Y. As at 31 March 2020, the rate applied was 10.50%. As at 26 May 2020, the yield has reduced to 9.01%, however, this would be offset by an increase in the risk premium due to the sentiment and uncertainty in the market. These are considered non-adjusting subsequent events.

Going concern

In order to partially reduce the impact of Covid-19 on the Group, the following steps have been implemented to preserve cash and to ensure that the Group can continue to operate as a going concern:

  • capital expenditure programme suspended, with only emergency capital expenditures to be considered;
  • waiver from lenders on its net debt to EBITDA covenant requirements for the measurement period 30 September 2020, with the request for waiver of the 31 March 2021 to be considered post 30 September 2020;
  • the capitalisation of bank funding interest to the Group’s revolving credit facilities;
  • review of the dividend retention policy;
  • the decrease of operating costs, such as salaries and wages through furlough;
  • extended payment terms from major creditors; and
  • supporting of tenants to ensure their sustainability in terms of the lease agreements in place.

At the date of the annual financial statements, the lenders are not able to provide waivers on the minimum covenant requirements for the measurement period ending 31 March 2021. This will only be considered post 30 September 2020 and management has no reason to believe that the necessary waivers will not be granted.

At year end, cash and undrawn facilities amounted to R691 million, which will provide sufficient liquidity to the Group over the next 12 months. Through engagements with the Group’s lenders, regular updates on operations and cash flow forecasts, lenders have noted their support to the Group. Management is of the view that the Group will continue to operate as a going concern in a responsible and sustainable manner.


Holding company

The Company is owned by Tsogo Sun Investments Proprietary Limited, which owns 59.2% of the Company’s shares. The Company’s ultimate holding company is Hosken Consolidated Investments Limited.



The Board of Directors comprised the following directors during the year:

  • MN von Aulock^ (Chairman)
  • MH Ahmed# (Lead independent director)
  • MR de Lima (Chief Executive Officer) (previously the Chief Financial Officer)
  • R Erasmus (Financial Director) (appointed 1 June 2019)
  • L McDonald^
  • JR Nicolella^
  • LM Molefi# (appointed 1 June 2019)
  • JG Ngcobo# (appointed 1 June 2019)
  • SC Gina# (appointed 1 June 2019)
  • CC September# (appointed 15 August 2019)
  • JA Copelyn^ (Chairman – resigned 31 May 2019)
  • GA Nelson# (Lead independent director – resigned 31 May 2019)
  • SA Halliday# (resigned 31 May 2019)
  • ZJ Kganyago^ (resigned 31 May 2019)

# Independent non-executive director.
^ Non-executive director.


Subsidiary companies

Information relating to the Company’s interest in its subsidiaries is detailed in note 24.


Associate companies

Information relating to the Company’s interest in its associates is detailed in note 7.


External auditors

PricewaterhouseCoopers Inc. were the Company’s external auditors during the year and will continue in office in accordance with section 90 of the Companies Act, as amended.


Company Secretary

The Company Secretary is HPF Properties Proprietary Limited (registration number: 2005/020743/07). The appointed representative of HPF Properties Proprietary Limited is LR van Onselen. The business and registered office is:
Palazzo Towers West
Montecasino Boulevard