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Reviewed Preliminary Results
City Lodge Hotels Limited
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE 000117792
www.clhg.com
Reviewed group preliminary results for the year ended 30 June 2015
Average occupancies - SA operations 67%
Normalised diluted headline EPS +18%
Return on equity 25%
COMMENTARY
The City Lodge Hotel group celebrated its 30th anniversary on 1 August and we are delighted to report strong
results.
Average occupancies for the year at the group’s South African operations increased by a notable 4 percentage
points to 67% compared to 63% in the previous year, despite the impact of several headwinds.
The second half of the year benefitted from fewer public holidays than the previous corresponding period
which had the additional mid-week public holiday for the 2014 national and provincial elections.
While the group’s Botswana hotel continued to improve occupancies, the Kenyan operations were impacted by
the perceived Ebola risk and ongoing travel advisories issued by various governments in regard to security
concerns in parts of East Africa.
Total revenue for the year grew by 22.6% to R1.3 billion, assisted by a contribution from City Lodge Hotel
Waterfall City, which became fully operational in February, and from the acquisition of Hospitality Property
Fund’s 50% stake in the Courtyard Joint Venture with effect from 1 May for R77.5 million.
South African operating costs, on a normalised basis, increased by 6.2% on a per room sold basis, resulting
in a 0.2% point decrease in the normalised EBITDA margin for the South African operations to 41.2%. Total
normalised EBITDA increased by 24.9% to R547.1 million. Depreciation rose by 10.2%, interest income was
slightly lower and interest expense was R9.7 million higher due to increased average borrowings.
Profit for the Courtyard Joint Venture of R1.6 million was only for the 10-month period to 1 May, after
which Courtyard earnings were consolidated. At this date, the fair value of the assets acquired and
liabilities assumed were equal to their carrying amounts, except for Property, Plant and Equipment with a
carrying amount of R26.9 million and a fair value of R87.0 million. Goodwill of R3.4 million arose on this
business combination.
Normalised headline profit before tax for the group increased by 18.7% to R455.7 million, while normalised
headline earnings increased by 17.9% to R332.1 million. Normalised diluted headline earnings per share
increased by 18.2% to 759.9 cents.
In line with the group’s established policy of paying out 60% of normalised earnings, the final dividend
increased by 21.7% to 230 cents, bringing the total dividend for the year to 460 cents per share, which
is an increase of 17.7% on the previous year.
An additional amount of R65 million was drawn down from existing long term borrowing facilities to partly
fund the purchase of the outstanding 50% of the Courtyard Joint Venture.
DEVELOPMENT ACTIVITY
South Africa: City Lodge Hotel Newtown (148 rooms) and Road Lodge Pietermaritzburg (90 rooms) are
progressing well and on schedule for a phased opening towards the end of the fourth quarter, with both
hotels fully operational early in 2016.
East Africa: Construction on the 169-room City Lodge Hotel Two Rivers in Nairobi is due to commence in
September with completion expected in the first quarter of 2017. Construction on the 147-room City Lodge
Hotel Dar es Salaam is expected to begin during September, with completion also targeted for the first quarter
of 2017. Formal agreements are due to be signed shortly relating to a 150-room City Lodge Hotel in Kampala,
but these remain subject to the completion of a detailed feasibility study. It is anticipated that the study
will be favourable and that construction will commence in the fourth quarter of 2015 or the first quarter
of 2016.
Southern Africa: Formal agreements have been signed for the lease of land in Maputo for the development of
a 148-room City Lodge Hotel. Construction will begin on receipt of the final development approvals which is
anticipated to be in the final quarter of 2015 or early 2016 for completion in the first quarter of 2017. In
Windhoek, formal agreements have now been signed for the development of a 151-room Town Lodge. Construction
is expected to commence in the first quarter of 2016 with completion scheduled for the first quarter of 2017.
Once the group has completed the development projects above, its total rooms will increase by 15% to 7837
rooms.
In addition to these developments, the group has been successful in rolling out a fast and reliable wireless
fibre internet offering for guests.
OUTLOOK
In the year ahead, the group will continue to grow in South Africa and also look to substantially increase
its footprint in selected African countries. Our development pipeline will be funded out of a combination of
operating cash flows and additional bank loan facilities of R890 million.
The trend of better than prior year occupancies has continued into July and August, auguring well for this
momentum to be maintained in the year ahead.
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE
Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South
Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum,
contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in
the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent
with those applied in the previous consolidated annual financial statements.
The condensed group financial information has been presented on the historical cost basis, except for
financial instruments and share based payments carried at fair value, and are presented in Rand thousands
which is City Lodge’s functional and presentation currency.
These condensed financial statements were prepared under the supervision of Mr AC Widegger CA (SA), in his
capacity as group financial director.
AUDIT REVIEW
The group’s auditors KPMG Inc. have reviewed these preliminary condensed financial statements for the
year ended 30 June 2015. The review was conducted in accordance with ISRE 2410: Review of interim financial
information performed by the independent auditor of the entity. A copy of their unmodified review report
dated 13 August 2015 is available for inspection at the company’s registered office.
DECLARATION OF DIVIDEND
The board has approved and declared final dividend number 53 of 230 cents per ordinary share (gross)
in respect of the year ended 30 June 2015.
The dividend will be subject to Dividends Withholding Tax (DWT). In accordance with paragraphs
11.17 (a) (i) to (x) and 11.17(c) of the JSE Listings Requirements the following additional
information is disclosed:
- The dividend has been declared out of income reserves;
- The local Dividends Tax rate is 15% (fifteen per centum);
- The gross local dividend amount is 230 cents per ordinary share for shareholders exempt from the
Dividends Tax;
- The net local dividend amount is 195.5 cents per ordinary share for shareholders liable to pay
the Dividends Tax;
- The Company currently has 43 346 593 ordinary shares in issue; and
- The Company’s income tax reference number is 9041001711.
Shareholders are advised of the following dates in respect of the final dividend:
Last date to trade cum dividend Friday, 4 September 2015
Shares commence trading ex dividend Monday, 7 September 2015
Record date Friday, 11 September 2015
Payment of dividend Monday, 14 September 2015
Share certificates may not be dematerialised or rematerialised between Monday, 7 September 2015
and Friday, 11 September 2015, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
13 August 2015
Condensed Consolidated statement of comprehensive income
(Reviewed) % (Audited)
Year change Year
ended ended
30 June 30 June
2015 2014
R000’s Note
Revenue 1 303 112 23 1 062 749
Administration and marketing costs (99 191) (83 300)
BEE transaction charges 2 (301) (480)
Operating costs excluding depreciation (664 075) (542 816)
539 545 24 436 153
Depreciation (86 380) (78 421)
Results from operating activities 453 165 27 357 732
Interest income 4 751 5 210
Total interest expense (63 251) (50 349)
Interest expense (15 398) (5 749)
Notional interest on BEE shareholder loan 2 (4 270) (3 717)
BEE interest expense 2 (4 041) (3 638)
BEE preference dividend 2 (39 542) (37 245)
Fair value gain on remeasurement of
investment in joint venture 59 977 44 671
Share of profit from joint ventures 1 618 21 327
- Courtyard Hotels 1 618 2 895
- East Africa (after tax) - 18 432
Profit before taxation 456 260 21 378 591
Taxation (137 998) (101 208)
Profit for the period 318 262 15 277 383
Other comprehensive income
Items that will never be reclassified to profit or loss
Defined benefit plan remeasurements (3 347) 18 337
Income tax on other comprehensive income 937 (5 134)
Items that are or may be reclassified to profit or loss
Foreign currency translation differences 213 1 409
Total comprehensive income for the period 316 065 8 291 995
Condensed Consolidated statement of financial position
(Reviewed) (Audited)
30 June 30 June
R000’s 2015 2014
ASSETS
Non-current assets 1 777 574 1 512 124
Property, plant and equipment 1 740 251 1 457 426
Intangible assets and goodwill 32 578 15 297
Investments in joint ventures - 35 762
Deferred taxation 4 745 3 639
Current assets 221 119 191 785
Inventories 7 122 6 551
Trade receivables 95 934 66 330
Other receivables 32 701 32 539
Taxation - 4 065
Cash and cash equivalents 85 362 82 300
Total assets 1 998 693 1 703 909
EQUITY AND LIABILITIES
Capital and reserves 727 442 565 915
Share capital and premium 164 002 158 255
BEE investment and incentive scheme shares (515 728) (526 822)
Retained earnings 971 117 820 543
Other reserves 108 051 113 939
Non-current liabilities 1 148 410 1 016 917
Interest-bearing borrowings 250 000 185 000
BEE interest-bearing borrowings 44 120 44 120
BEE preference shares 412 100 420 900
BEE shareholder’s loan 32 988 28 718
BEE preference share dividend accrual 168 191 141 010
Other non-current liabilities 113 376 105 905
Deferred taxation 127 635 91 264
Current liabilities 122 841 121 077
Fair value of BEE interest rate swap - 1 210
Trade and other payables 109 474 105 483
Taxation payable 1 351 -
Bank overdraft 12 016 14 384
Total liabilities 1 271 251 1 137 994
Total equity and liabilities 1 998 693 1 703 909
Note: The company has authorised capital commitments of R1 015 million of which approximately
R109 million has been contracted. It is anticipated that approximately R499 million will be
spent by 30 June 2016.
Condensed Consolidated statement of cash flows
(Reviewed) (Audited)
Year ended Year ended
30 June 30 June
2015 2014
R000’s
Operating cash flows before working capital changes 564 297 454 914
Increase in working capital (34 523) (14 303)
Cash generated by operations 529 774 440 611
Interest received 4 751 5 210
Interest paid (33 119) (26 133)
Taxation paid (115 520) (98 356)
Dividends paid (154 196) (138 458)
Cash inflows from operating activities 231 690 182 874
Cash utilised in investing activities (267 047) (250 239)
- investment to maintain operations (119 430) (90 355)
- investment to expand operations (90 008) (806)
- investments in joint ventures (58 527) (159 570)
- proceeds on disposal of property, plant and equipment 918 492
Cash inflows from financing activities 40 145 146 178
- proceeds from issue of ordinary shares 5 747 3 593
- purchase of incentive scheme shares (21 657) (4 999)
- increase in interest-bearing borrowings 65 000 150 000
- redemption of BEE preference shares (8 800) (3 300)
- distribution by BEE structured entity (145) (35)
- effect of consolidation of 10th anniversary employee share trust - 919
Net increase in cash and cash equivalents 4 788 78 813
Cash and cash equivalents at beginning of period 67 916 (11 789)
Effect of movements in exchange rates on cash held 642 892
Cash and cash equivalents at end of period 73 346 67 916
Condensed Consolidated statement of changes in equity
BEE
invest-
ment
Share and
capital incentive
and scheme Other Retained
R000’s premium shares reserves earnings Total
Balance at 1 July 2013 154 662 (503 145) 102 236 672 200 425 953
Total comprehensive income for the period - - 1 409 290 586 291 995
Profit for the period 277 383 277 383
Other comprehensive income
Defined-benefit plan remeasurements, net of tax 13 203 13 203
Foreign currency translation differences 1 409 1 409
Transactions with owners, recorded directly in equity 3 593 (23 677) 10 294 (142 243) (152 033)
Issue of new ordinary shares 3 593 3 593
10th anniversary employee share trust shares (18 678) (18 678)
Incentive scheme shares (4 999) (4 999)
Share compensation reserve 10 294 10 294
Dividends paid (138 458) (138 458)
Distribution by BEE structured entity (35) (35)
Consolidation of 10th anniversary employee share trust (1 653) (1 653)
Distribution by 10th anniversary employee share trust (2 097) (2 097)
Balance at 30 June 2014 158 255 (526 822) 113 939 820 543 565 915
Total comprehensive income for the period - - 213 315 852 316 065
Profit for the period 318 262 318 262
Other comprehensive income
Defined-benefit plan remeasurements, net of tax (2 410) (2 410)
Foreign currency translation differences 213 213
Transactions with owners, recorded directly in equity 5 747 11 094 (6 101) (165 278) (154 538)
Issue of new ordinary shares 5 747 5 747
Incentive scheme shares 11 094 (21 814) (10 937) (21 657)
Share compensation reserve 15 713 15 713
Dividends paid (154 196) (154 196)
Distribution by BEE structured entity (145) (145)
Balance at 30 June 2015 164 002 (515 728) 108 051 971 117 727 442
SUPPLEMENTARY INFORMATION
(Reviewed) (Audited)
Year ended Year ended
30 June % 30 June
R000’s Note 2015 change 2014
1. Headline earnings reconciliation
Profit for the period 318 262 277 383
Fair value gain on remeasurement of investment
in joint venture (59 977) (44 671)
Gain on bargain purchase - (621)
Write off of net investment in joint venture 4 111 -
(Profit)/loss on sale of equipment (762) 14
Taxation effect 213 (4)
Headline earnings 261 847 13 232 101
Number of shares in issue (000’s) 43 347 43 221
Weighted average number of shares in
issue for EPS calculation (000’s) 3 36 229 35 936
Weighted average number of shares in
issue for diluted EPS calculation (000’s) 3 36 755 36 850
Basic earnings per share (cents)
- undiluted 878,5 14 771,9
- fully diluted 865,9 15 752,7
Headline earnings per share (cents) 4
- undiluted 722,8 12 645,9
- fully diluted 712,4 13 629,9
2. Normalised headline earnings reconciliation
Headline earnings 261 847 232 101
BEE transaction charges 301 480
- Loss on fair value of interest rate swap 67 235
- Sundry expenses 234 245
Notional interest charge on BEE shareholder loan 4 270 3 717
BEE interest on interest-bearing borrowings 4 041 3 638
Preference dividends paid/payable by
the BEE entities 39 542 37 245
Deferred tax on BEE transactions (1 196) (1 041)
Notional interest income on 10th anniversary employee share trust loan 4 478 3 845
10th anniversary employee share trust transaction charges and DWT 69 44
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 3 137 1 563
Once-off deferred tax raised due to introduction of Capital Gains Tax in Kenya 15 562 -
Normalised headline earnings 332 051 18 281 592
3. Number of shares (000’s)
Weighted average number of shares in issue for EPS calculation 36 229 35 936
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated as treasury shares 549 549
Weighted average number of shares in issue for normalised EPS calculation 43 168 42 875
Weighted average number of shares in issue for diluted EPS calculation 36 755 36 850
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated as treasury shares 549 549
Weighted average number of shares in issue for diluted normalised EPS calculation 43 694 43 789
4. Normalised headline earnings per share (cents)
- undiluted 769,2 17 656,8
- fully diluted 759,9 18 643,1
5. Dividends declared per share (cents) 460,0 18 391,0
- interim 230,0 14 202,0
- final 230,0 22 189,0
6. Dividend cover (times)
- calculated on normalised headline earnings 1,7 1,7
7. Interest-bearing debt to total capital and reserves (%)
- calculated on a normalised basis 17,4 14,9
8. Return on equity (%)
- calculated on a normalised basis 24,8 24,6
9. Net asset value per share (cents)
- calculated on a normalised basis 3 322 2 865
Condensed Segment report
Central office
Primary segment Courtyard City Lodge Town Lodge Road Lodge and other Total
R000’s
2015* 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Revenue 30 491 673 846 597 902 213 594 190 450 259 356 230 495 125 825 43 902 1 303 112 1 062 749
EBITDAR 13 982 402 790 358 434 99 088 89 560 147 215 128 925 (48 749) (78 831) 614 326 498 088
Land and hotel
building rental (74 781) (61 935) (74 781) (61 935)
EBITDA 539 545 436 153
Depreciation (1 148) (23 165) (24 523) (7 494) (5 893) (11 930) (10 589) (42 643) (37 416) (86 380) (78 421)
Results from
operating activities 453 165 357 732
Share of profit from
joint ventures 1 618 21 327 1 618 21 327
Geographic information
R000’s South Africa Rest of Africa Total
2015 2014 2015 2014 2015 2014
Revenue 1 177 287 1 034 451 125 825 28 298 1 303 112 1 062 749
Share of profit from
joint ventures 1 618 2 895 - 18 432 1 618 21 327
Non-current assets - Property, plant and equipment 1 301 952 1 051 615 438 299 405 811 1 740 251 1 457 426
EBITDAR represents earnings after BEE transaction charges but before interest, taxation, depreciation and rental.
EBITDA represents earnings after BEE transaction charges but before interest, taxation and depreciation.
* Now disclosed separately following the acquisition of the remaining shares of the Courtyard joint venture.
Registered office:
“The Lodge”, Bryanston Gate Office Park, cnr Homestead Avenue and Main Road, Bryanston,2191
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
Sponsor:
JP Morgan Equities South Africa Proprietary Limited
Directors:
BT Ngcuka (Chairman), C Ross (Chief executive)*, GG Huysamer, FWJ Kilbourn, N Medupe, SG Morris, Dr KIM Shongwe, W Tlou, AC Widegger*
*Executive
Company Secretary:
MC van Heerden
Website:
www.clhg.com
Date of issue:
14 August 2015
Date: 14/08/2015 10:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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