Total income for the year of R4.5 billion (2019: R4.4 billion) ended 2% above the prior year, with a 2% growth in hotel rooms’ revenue and a 7% growth in food and beverage revenue. This growth was offset by a 7% reduction in property rental income and a 7% reduction in other income. Revenues were favourably impacted in the third quarter following the successful conclusion of the fixed and variable leases over the three Sandton hotels with effect from 1 November 2019, which together total 1 001 rooms and make up 5% of the group’s total rooms’ portfolio. In terms of the leases, after the deduction of management fees, 98% of hotel earnings accrues to the hotel owners as rent. It is worth noting that these leases are similar to those between Tsogo Sun Hotels and Hospitality. As a result, while the group consolidated the trading of these hotels on the income statement, the net impact on Ebitda is minimal. Excluding the impact of the Sandton hotels, revenue for the group’s base portfolio declined by 3% for the year ended 31 March 2020.

Despite strict cost controls during the year to counteract the above-inflationary increases in administered costs, including property rates and utilities, Ebitdar of R1.4 billion (2019: R1.5 billion) ended 9% down on the prior year. The decrease is primarily due to the shortfall in revenue as a result of the decline in demand which was further exacerbated by COVID-19. Excluding the impact of the Sandton hotels, Ebitdar for the group’s base portfolio declined by 12% for the year ended 31 March 2020. The overall group Ebitdar margin of 30% has declined by 4pp from the prior year.

The long-term incentive expense in the income statement on the equity-settled incentive scheme of R17 million is R4 million up on the prior year pro forma charge of R13 million. The variance on the prior year is as a result of aligning the expense to the new equity-settled scheme that values the share-based payment (including dividend adjustments) by reference to the company’s share price adjusted for management’s best estimate of the appreciation units expected to vest and future performance of the group. The long-term incentive expense will increase by new grants made to employees and decrease by employee forfeitures.

Property rentals, excluding IFRS 16 adjustments, at R210 million (2019: R208 million) are 1% up on the prior year. Amortisation and depreciation, excluding IFRS 16 adjustments, was R289 million (2019: R306 million), which is 6% down on the prior year. This is mainly due to year end residual value adjustments on the Hospitality property portfolio that is recognised as property, plant and equipment on a group level. The net pre-tax impact of IFRS 16 on the group’s income statement is a R34 million expense, with the majority of the adjustment relating to the leases over the SunSquare and StayEasy City Bowl, Garden Court Marine Parade and the Sandton hotels.

Exceptional losses for the year of R1.7 billion (2019: R581 million) mainly relate to:

• Fair value losses on the revaluation of externally managed investment properties in Hospitality of R888 million (2019: R445 million)
• Property, plant and equipment impairments of hotels in South Africa and offshore totalling R716 million (2019: R94 million)
• Restructuring costs of R40 million (2019: R8 million) that includes retrenchment costs relating to the unbundling
• The impairment of the group’s investment in RBH of R17 million (2019: Rnil)

The majority of these impairments are due to management’s assessment of the negative impact of COVID-19 on forecast cash flows for the financial years ending March 2021 and March 2022, as well as volatility in the bond market and increased in-country risk assessments that have had a material impact on discount rates across the portfolio. In South Africa in particular, the risk posed by COVID-19 compounded by the ratings downgrade, saw the 10Y bond yield increasing by 1.9% from 31 March 2019 (8.61%) to 31 March 2020 (10.51%).

Refer to Note 16 of the consolidated financial statements for the sensitivity analyses relating to impairments and fair value adjustments.

Finance costs, excluding IFRS 16 adjustments, of R299 million are R30 million above the prior year pro forma finance costs of R269 million due to the increase in debt to fund expansion and replacement capex including major hotel refurbishments during the year.

The share of loss of associates and joint ventures of R3 million (2019: R15 million profit) declined by R18 million on the prior year primarily due to fair value losses on investment properties owned by IHPL.

The effective tax rate for the year of 8.5% excludes the group’s share of losses of associates and joint ventures and is impacted by:

• Fair value losses that are not deductible for tax purposes on investment property in Hospitality
• The pre-tax profits attributable to the Hospitality non-controlling interests due to its REIT tax status
• The offshore tax rate differentials

Losses attributable to non-controlling interests of R329 million (2019: R18 million profit) increased by R347 million from the prior pro forma year, mainly due to the share of the R888 million fair value loss on investment property in Hospitality.

Group adjusted headline earnings for the year at R278 million (2019: R403 million) ended 31% down on the prior pro forma year. The adjustments to the current year include the reversal of the post-tax and non-controlling interest impacts of the exceptional losses noted above. The number of shares in issue remained flat on the prior comparative pro forma year and the resultant adjusted headline earnings per share is 31% down on the prior pro forma year at 26.2 cents (2019: 37.9 cents).