Royal Host Inc.
TSX : RYL
TSX : RYL.DB.B
TSX : RYL.DB.C
TSX : RYL.DB.D

August 09, 2011 17:50 ET

Royal Host Inc. Announces Second Quarter Results

HALIFAX, NOVA SCOTIA--(Marketwire - Aug. 9, 2011) - Royal Host Inc. ("Royal Host" or the "Company") (TSX:RYL) (TSX:RYL.DB.B) (TSX:RYL.DB.C) (TSX:RYL.DB.D) today announced results for the three and six months ended June 30, 2011 (the "Second Quarter").

John Carnella, Royal Host's President and CEO commented, "Our operating results for the second quarter were mixed. We experienced a slight decline in revenue relative to 2010 as demand moderated across our portfolio. Notwithstanding the revenue decline, we did see improvement in our gross margin and our Funds From Operations. In addition, while we continued to see improvement in occupancy and in RevPAR at our full service hotels, occupancy and RevPAR at our select service hotels declined on a year-over-year basis as they did during the first quarter."

He added, "While our results from operations were mixed, we did make meaningful progress during the quarter with regard to rationalizing our portfolio and better-aligning our capital structure with our asset base. At quarter end, we were under contract to sell four select service hotels for total proceeds of approximately $31 million. These sales have now closed. In addition, shortly after quarter-end, we completed the refinancing of our one-year $25 million credit facility with a three-year $25 million credit facility. These transactions improve our credit profile and add to our capacity to invest in the remaining hotels which comprise our portfolio."

SECOND QUARTER HIGHLIGHTS
In the Second Quarter, Royal Host:
  • Recorded a $351 or 1.5% decrease in Hospitality Revenue for the three months ending June 30, 2011 and an increase of $610 or 1.4% for the six months ended June 30, 2011.
  • Generated overall Occupancy of 58.2% (2010 – 58.0%), an Average Daily Rate of $96.90 (2010 - $98.11) and Revenue per Available Room of $56.44 (2010 - $56.95).
  • Generated $5,352 of hospitality gross margin (2010 - $4,981) from $24,020 of hospitality revenue (2010 - $24,371) for the three months ended June 30, 2011 and $8,236 of hospitality gross margin (2010 - $7,871) from $45,722 of hospitality revenue for the six months ended June 30, 2011. Hospitality gross margin increased to 22.3% and 18.0% for the three and six months ended June 30, 2011 (2010 – 20.4% and 17.4%).
  • Realized a net loss of $1,678 and $6,268 for the three and six months ended June 30, 2011 compared to net income of $2,434 and $277 in the three and six months ended June 30, 2010.
  • Entered into agreements with two purchasers to sell four unencumbered properties; the Super 8 Regina, Country Inn and Suites Winnipeg, Country Inn and Suites Regina and Country Inn and Suites Winnipeg for total proceeds of $31.0 million.
  • Shortly after quarter end, entered into an agreement to refinance its $25 million one year demand credit facility with a $25 million three year committed facility.
SELECTED FINANCIAL INFORMATION
The following table highlights the Company's financial results for the three and six month periods ending June 30, 2011:
Three months Six months ended
ended June 30 June 30
($000's, except as otherwise noted) 2011 2010 2011 2010
Hospitality Revenues 24,020 24,371 45,722 45,112
Hospitality Expenses 18,668 19,390 37,486 37,241
Gross Margin (1) 5,352 4,981 8,236 7,871
Gross Margin %(1) 22.3 % 20.4 % 18.0 % 17.4 %
Investment Income 4 28 5 292
Finance Costs 3,534 5,519 7,092 11,231
Depreciation and Amortization 3,571 4,286 7,230 8,576
Other Expenses (Income) 1,126 (7,354 ) 1,752 (10,843 )
Income Tax Expense (Recovery) (1,197 ) 124 (1,565 ) (1,078 )
Net Income (Loss) (1,678 ) 2,434 (6,268 ) 277
Basic Income (Loss) per Share ($) $ (0.10 ) $ 0.13 $ (0.36 ) $ 0.02
Diluted Income (Loss) per Share ($) $ (0.10 ) $ 0.10 $ (0.36 ) $ 0.02
Funds From Operations 1,040 370 (107 ) (1,270 )
Basic and diluted Funds From Operations per share $ 0.06 $ 0.02 $ (0.01 ) $ (0.07 )
Number of Shares Outstanding (000's) 17,582 18,197 17,582 18,197
Weighted Average Shares Outstanding (000's) 17,479 18,304 17,492 18,206
Closing Share Trading Price ($) $ 1.24 $ 2.45 $ 1.24 $ 2.45
As at August 8, 2011, Royal Host had 17,582,378 common shares outstanding.
(1) Items represent non-GAAP financial measures.
OPERATING STATISTICS
June 30 June 30
($000's) 2011 2010 Variance 2011 2010 Variance
Hotel revenue - full service 15,086 15,032 54 29,084 27,842 1,242
Hotel revenue - select service 8,193 8,518 (324 ) 15,254 15,705 (452 )
Franchise and management revenue 410 484 (74 ) 746 899 (153 )
Tenant revenue 301 306 (5 ) 606 593 13
Other revenue 29 31 (2 ) 32 72 (40 )
24,020 24,371 (351 ) 45,722 45,112 610

Hospitality revenue decreased $351 to $24,020 for the three months ended June 30, 2011 from $24,371 for the same period in 2010. The decline was primarily a result of a $324 decrease in the revenue from our select service hotels. Revenue from the Company's 21 select service hotels declined from $8,518 to $8,193, a decrease of 3.8%. This decrease was partially offset by an increase in revenue from our 10 full service hotels of $54, or 0.4%, from $15,032 in 2010 to $15,086 in 2011.

Franchising and management revenue was down $74, or 15.2%, to $410 for the three months ended June 30, 2011 from $484 during the same period in 2010. The Company was managing two hotels owned by third parties during the first six months of 2010. These management contracts terminated as of June 30, 2010. Additionally, Travelodge franchise revenue was down slightly in 2011 compared to 2010.

Key performance indicators for hotel revenue are summarized below for full and select service hotels in the second quarter:

Three months ended Three months ended
June 30, 2011 June 30, 2010
Occupancy ADR RevPAR Occupancy ADR RevPAR
Full Service 61.7 % $ 104.57 $ 64.51 59.7 % $ 106.87 $ 63.75
Select Service 54.7 % $ 87.95 $ 48.13 56.4 % $ 88.54 $ 49.93

ROYAL HOST INC.

Royal Host is a diversified hospitality company that delivers shareholder value through hotel ownership, investment and franchising. Twenty-five of The Company's hotels operate under recognizable brands and two of the company's hotels are unbranded. The Company's holdings are further enhanced by a stable franchising business and units that it owns in a publicly-traded hospitality trust.

Royal Host's common shares and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D", respectively.

The financial results described above should be read in conjunction with Royal Host's unaudited consolidated financial statements for the three and six months ended June 30, 2011 along with management's discussion and analysis, which are available on Royal Host's website at www.royalhost.com as well as the SEDAR website at www.sedar.com.

This press release contains certain forward-looking statements relating, but not limited to, Royal Host's operations, anticipated financial performance, business prospects, and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Such factors include, but are not limited to economic, competitive, and lodging industry conditions. Royal Host disclaims any responsibility to update any such forward-looking statements except as required by law.

Contact Information