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Unaudited interim report for the six months ended 31 December 2020
City Lodge Hotels Limited
Incorporated in the Republic of South Africa
Registration number: 1986/002864/06
Share code: CLH ISIN: ZAE000117792
("City Lodge" or the "company" or the "group")
Unaudited interim report for the six months ended 31 December 2020
- Revenue R215,6m
2019: R809,3m (-73%)
- Earnings per share (EPS) -132,7c
2019: 126,4c (-205%)
- Headline earnings per share (HEPS) -62,6c
2019: 126,4c (-149%)
- Normalised diluted headline EPS -54,2c
2019: 184,8c (-129%)
- Dividends declared per share Nil
2019: 153,0c
Commentary
The nearly 12 months of the Covid-19 pandemic and the associated lockdown measures by governments across the world
has had a devastating impact on individuals and economies. The industries worst affected by these measures have been
travel and hospitality. These interim results reflect the continued challenges faced by the industry through
prolonged lockdown measures and the impact of reduced travel confidence due to the uncertainty of further infection
waves and subsequent lockdown measures to control the spread of infections.
The group has seen a steady improvement in occupancies since the last quarter of the 2020 financial year, which ended
on 4% for the quarter, when almost all hotels were temporarily suspended of services, except for those hotels providing
quarantine facilities to repatriated citizens, and essential and critical business continuity services. As South Africa
progressed to the lockdown level 1 - Risk Adjusted Strategy (RAS) by September and domestic and eventually international
travel restrictions eased, the group's occupancies gradually improved to 28% and 27% occupancies of the total inventory
at all 62 hotels in November and December, respectively, and 35% and 34% of total available rooms at open hotels in
November and December respectively. The group continues to review demand when assessing whether to reopen hotels and to
date has 42 hotels open in South Africa and four hotels open in the rest of Africa, i.e. 74% of the hotels in its
portfolio.
These challenges resulted in average occupancies of 17% for the group for the six months to 31 December 2020,
a 37 percentage point decline compared to 54% in the previous financial period. In South Africa, where the group
has the majority of its hotels, occupancies decreased from 57% in the previous financial year to 18%, and 29% based on
open hotels only.
Total revenue decreased by 73% to R215,6 million, while operating costs, excluding depreciation and amortisation,
decreased by 34%, and by 48% excluding unrealised foreign exchange losses on intercompany loans. The operating cost
reductions were mainly due to the cost containment measures put in place from April 2020, to mitigate the extent of the
losses arising from minimal revenues.
Depreciation and amortisation on owned assets decreased by 4%, while depreciation on right-of-use assets decreased by
19%, mainly due to the impact of impairments recognised in the prior year. Interest expense rose by R3,0 million mainly
due to interest expense on lease liabilities, offset by lower BEE preference dividends, due to the lower prime interest
rates.
The group incurred a net loss after tax of R550,4 million (2019: profit of R46,3 million) which includes exceptional
losses of R290,9 million (2019: Rnil), net of tax, related to the impairment of property, plant and equipment along with
right-of-use assets of some hotels. This is primarily due to the impact of the Covid-19 pandemic and the prolonged
lockdown measures and travel restrictions enforced by governments to control the spread of the virus. The additional
impairments for the period are based on management's assessment of the extremely slow recovery of business and international
leisure travel and tourism in East Africa. The hospitality industry there is highly dependent on the North American and European
source markets which have been the worst impacted by the Covid-19 pandemic, and the second wave of infections has delayed
any short-term recovery prospects.
Normalised headline earnings decreased by 399% to a loss of R240,6 million. Diluted and undiluted normalised HEPS
decreased by 129% to a loss of 54.2 cents.
Normalised headline earnings and normalised diluted HEPS comprise headline earnings adjusted for the effects of transactions
relating to the BEE SPVs and those of a non-recurring and/or core nature. They are the responsibility of the directors of
City Lodge and have been provided for illustrative purposes only. Due to their nature, normalised headline earnings and
normalised diluted HEPS usually differ from City Lodge's HEPS.
During the year City Lodge successfully raised proceeds of R1,2 billion through a fully subscribed rights offer which
closed on 21 August 2020. The net proceeds of the rights offer has been used to repay a portion of amounts owing under
its secured facilities and settlement of the company's guarantee of the BEE SPV's interest-bearing borrowings, preference
shares and accrued interest and dividends totalling R764,5 million, as at 14 December 2020. The remaining funds have
been utilised to improve liquidity and support the working capital requirements of the group during the Covid-19
pandemic.
The group has also secured access to a R700 million loan facility with the group's funders of which R170 million
remains undrawn as at the end of December 2020, and secured a waiver of the original debt covenants for the June 2021
measurement period.
Development activity
South Africa
The directors and management are excited to open the new Courtyard Hotel Waterfall City, the group's 63rd hotel, on
1 March 2021. The new flagship of the Courtyard brand, which is located in the lively and vibrant Waterfall City in
Midrand, marks a significant milestone in hotel design and development. It features the latest technological innovation,
state-of-the-art conference facilities and a full culinary team preparing delectable cuisine.
The hotel will open initially with all restaurants, 100-seater conference centre, gym, co-meeting areas, 84 bedrooms
and four suites, with the remaining floors and 80 rooms opening in phases during the next few months according to demand.
The property is to receive a four-star Green Building Council SA certification that validates the sustainability
initiatives implemented during the design, construction and procurement phase.
The Courtyard Hotel Rosebank refurbishment was completed in December 2020, ready to welcome guests to its reopening of
the refreshed, eclectic and trendy rooms in January 2021.
All other pipeline developments have been put on hold due to the cash constraints resulting from the pandemic.
Strategic opportunities
East Africa
The board received an unsolicited non-binding approach for the proposed acquisition of City Lodge's East African
operations, comprising of its four hotels situated in Kenya and Tanzania. The board is continuing negotiations on
the proposed disposal.
Outlook
The second wave of infections and the return to lockdown adjusted Level 3 RAS in December 2020 has impacted the steady
occupancy growth observed in the last quarter of 2020. January 2021 occupancy expectations were underwhelming due to
some travel demand impediments in South Africa, as a result of the lockdown adjusted level 3 beach closures, curfews and
alcohol restrictions. However, with the further easing of some of these lockdown measures in late January, and the drop
in new infections, February occupancies have seen a steady improvement.
While we anticipate a slow recovery of the hospitality sector, we are encouraged that vaccination roll-out programmes
across the world are gaining momentum. South Africa has recently begun its vaccination programme. These actions are
expected to lead to improved travel confidence and boost the recovery of the sector.
The group has embraced the need to innovate and create a safer, healthier stay for all guests through its
industry-leading hygiene and safety protocols, and the introduction of technology enhancements that reduce direct contact
and touch, through the development of the web and App-based online check-in, online Covid-19 pre-screening, and QR code
menu and service selection. We remain ready to warmly and safely welcome our guests.
Dividends
Having regard to the continued impact of the Covid-19 pandemic on the group's operations and the minimal revenue earned
since the declaration of a national state of disaster in South Africa on 15 March 2020, the board has determined that no
dividend shall be paid in respect of the period ended 31 December 2020, and does not intend to pay dividends in the short
term. The declaration of future dividends remains subject to satisfying solvency and liquidity requirements.
Additional information
This short-form announcement is the responsibility of the directors and is only a summary of the information in the
full announcement and does not contain full or complete details. The full announcement is available on the company's
website www.clhg.com. The full announcement can also be accessed directly using the following JSE link:
https://senspdf.jse.co.za/documents/2021/jse/isse/CLH/ie2020.pdf. Any investment decision should be based on the full
announcement published on JSE link and on the company's website.
For and on behalf of the board
Bulelani Ngcuka Andrew Widegger
Chairman Chief executive officer
26 February 2021
Registered office
The Lodge, Bryanston Gate Office Park, corner Homestead Avenue and Main Road, Bryanston, 2191
Transfer secretaries
Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Directors
B T Ngcuka (Chairman), A C Widegger (Chief executive officer)*, G G Huysamer, F W J Kilbourn,
M S P Marutlulle, N Medupe, S G Morris, D Nathoo*,
V M Rague?, L G Siddo* *Executive ?Kenyan
Company secretary
MC van Heerden
Sponsor
Nedbank Corporate and Investment Banking
www.clhg.com
Date: 26-02-2021 04:10:00
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