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CITY LODGE HOTELS LIMITED - Reviewed Group preliminary results for the year ended 30 June 2012

Release Date: 15/08/2012 15:37
Code(s): CLH     PDF:  
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Reviewed Group preliminary results for the year ended 30 June 2012

CITY LODGE HOTELS LIMITED

Registration number 1986/002864/06

Share code : CLH        
ISIN : ZAE 000117792
www.citylodge.co.za 


Reviewed Group preliminary results for the year ended 30 June 2012


COMMENTARY



Occupancies for the current year increased by three percentage points to 59%, whilst occupancies in the second half were five percentage points better than the prior year. Encouragingly, there have been higher occupancies in each of the months since September 2011, than the corresponding month of the prior year.



Revenue for the year rose by 11% to R875.8 million, mainly as a result of the higher occupancies and the resultant increase in the number of rooms sold. Average room rates achieved were marginally higher notwithstanding the group's decision not to raise rates in August 2011.



The normalised EBITDA margin increased by 0.3% points to 42.1% resulting in normalised EBITDA of R368.9 million, an increase of 12% on the previous year. In spite of operating cost pressures, especially from rising electricity tariffs and property rates, operating costs per room sold were contained to a rise of just 3.2%, benefitting from group-wide energy efficiency initiatives introduced over the past year. Electricity costs per room sold were up by just 8.2%.



Depreciation rose by 7.2% and normalised operating profit rose by 13%. Interest income was R2.9 million higher than in the previous year while the interest expense was roughly in line with the prior year. The Courtyard joint venture generated a profit of  R948 000 in the second six months, which reduced the loss of R1.1 million at the half year, to a loss of just R125 000 for the full year.



Profit before tax on a normalised basis increased by 14% whilst normalised headline earnings rose by 17% to R191.7 million. Normalised diluted headline earnings per share increased by 17% to 442.8 cents.



Cash generated by operations rose by 15% to R387.4 million.



In line with the group's policy of distributing 60% of normalised earnings, a final dividend of 133 cents has been declared. The total dividend for the year amounts to 268 cents, which is 18% higher than the previous year.



OUTLOOK



The improving occupancy trend has continued into the first two months of the new financial year.



Construction of the 106-room Town Lodge Gaborone in Botswana is progressing well and the hotel is on track for all rooms to be opened by early February 2013.



The joint venture transaction in Kenya, which includes the acquisition of a 50% stake in the Fairview Hotel and the Country Lodge in Nairobi, is now unconditional and a positive contribution to earnings is anticipated in the 2013 financial year.



There is continuing emphasis on investigating expansion opportunities in East and West Africa, as well as in the SADC region and the group is confident that these efforts will be rewarded in the years ahead.



Within South Africa, the hospitality industry continues to experience inconsistent demand along with oversupply in certain areas. Despite this, the group is well positioned for any improvement in market conditions.





BASIS OF PREPARATION



These condensed consolidated financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards ("IFRS") and with the presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the Listings requirements of the JSE Limited, the AC500 standards issued by the Accounting Practices Board and the Companies Act of South Africa 2008, as amended. These condensed results were prepared under the supervision of Mr AC Widegger CA (SA), in his capacity as group financial director.



The accounting policies used are consistent with those used in the annual financial statements for the year ended 30 June 2011.



AUDIT REVIEW

The group's auditors KPMG Inc. have reviewed these condensed financial statements for the year ended 30 June 2012. 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 15 August 2012 is available for inspection at the company's registered office.



DECLARATION OF DIVIDEND



The board has approved and declared a final dividend of 133 cents per ordinary share (gross) in respect of the year ended 30 June 2012.

                                   

The dividend will be subject to the new Dividends Tax that was introduced with effect from 1 April 2012. 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); 

-	There are no Secondary Tax on Companies (STC) credits utilised;

-	The gross local dividend amount is 133 cents per ordinary share for shareholders exempt from the Dividends Tax;

-	The net local dividend amount is 113.05 cents per ordinary share for shareholders liable to pay the Dividends Tax;

-	The Company currently has 42 988 803 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, 7 September 2012

Shares commence trading ex dividend			Monday, 10 September 2012

Record date						Friday, 14 September 2012

Payment of dividend					Monday, 17 September 2012



Share certificates may not be dematerialised or rematerialised between Monday, 10 September 2012 and Friday, 14 September 2012, both days inclusive.


For and on behalf of the board

Bulelani Ngcuka                                              Clifford Ross

Chairman                                                     Chief executive

15 August 2012






Consolidated statement of comprehensive income

                                                          (Reviewed)               (Audited)

                                                                Year                    Year

R 000's                                                        ended                   ended

                                                             30 June           %     30 June

                                                                2012      change        2011



Revenue                                                      875 822          11     790 198

Administration and marketing costs                          (63 967)                (60 110)

BEE transaction charges                          Note 2        8 660                 (3 805)

Operating costs excluding depreciation                     (444 785)               (400 925)

                                                             375 730          15     325 358

Depreciation                                                (78 375)                (73 078)

Operating profit                                             297 355          18     252 280

Interest income                                                8 602                   5 679

Total interest expense                                      (71 491)                (67 911)

Interest expense                                            (17 639)                (17 726)

Notional interest on BEE shareholder loan        Note 2      (2 817)                 (2 452)

BEE preference dividend                          Note 2     (51 035)                (47 733)

Share of (loss)/profit from joint venture                      (125)                     642

Profit before taxation                                       234 341          23     190 690

Taxation                                                    (84 566)                (82 162)

Profit for the period                                        149 775          38     108 528



Other comprehensive income

Defined benefit plan actuarial losses                        (8 395)                 (9 214)

Income tax on other comprehensive income                       2 351                   2 580

Total comprehensive income for the period                    143 731                 101 894



SUPPLEMENTARY INFORMATION:

1. Headline earnings reconciliation



Profit for the period                                        149 775                 108 528

Profit on sale of equipment                                    (121)                 (1 430)

Taxation effect                                                   34                     214

Headline earnings                                            149 688          39     107 312



Number of shares in issue (000's)                             42 989                  42 929



Weighted average number of shares in

issue for EPS calculation (000's)                Note 3       36 437                  36 464



Weighted average number of shares in

issue for diluted EPS calculation (000's)        Note 3       36 898                  36 655



Basic earnings per share (cents)

    - undiluted                                                411,1          38       297,6

    - fully diluted                                            405,9          37       296,1



Headline earnings per share (cents)              Note 4

    - undiluted                                                410,8          40       294,3

    - fully diluted                                            405,7          39       292,8





2. Normalised headline earnings reconciliation



Headline earnings                                            149 688                 107 312

BEE transaction charges                                      (8 660)                   3 805

 - (Profit)/Loss on fair value of interest rate swap         (8 964)                   3 667

 - Sundry expenses                                               304                     138





Notional interest charge on BEE shareholder loan               2 817                   2 452

Preference dividends paid/payable by

the BEE entities                                              51 035                  47 733

Deferred tax on BEE transactions                             (5 078)                     553

 - Notional interest charge                                    (789)                   (687)

 - STC on preference dividends payable                       (4 289)                   1 240

IFRS 2 share based payment charge for

the 10th anniversary employee share trust                      1 867                   1 277



Normalised headline earnings                                 191 669          17     163 132



3. Number of shares (000's)



Weighted average number of shares in

issue for EPS calculation                                     36 437                  36 464



BEE shares treated as treasury shares                          6 390                   6 390



Weighted average number of shares in

issue for normalised EPS calculation                          42 827                  42 854



Weighted average number of shares in

issue for diluted EPS calculation                             36 898                  36 655



BEE shares treated as treasury shares                          6 390                   6 390



Weighted average number of shares in

issue for diluted normalised EPS calculation                  43 288                  43 045



4. Normalised headline earnings per share (cents)



   - undiluted                                                 447,5          18       380,7

   - fully diluted                                             442,8          17       379,0



5. Dividends declared per share (cents)                        268,0          18       228,0

  - interim                                                    135,0           9       124,0

  - final                                                      133,0          28       104,0



6. Dividend cover (times)



   - calculated on normalised headline earnings                  1,7                     1,7



7. Effective tax rate (%)



   - calculated on normalised profit before taxation            31,9                    33,2



8. Interest bearing debt to total capital and

    reserves (%)



   - calculated on a normalised basis                           13,7                    23,8



9. Return on equity (%)



   -calculated on a normalised basis                            21,8                    19,8



10. Net asset value per share (cents)



   - calculated on a normalised basis                          2 129                   1 958



Note: Net asset value is calculated using the depreciated historical cost of buildings and not the directors current estimated replacement cost of R3.8 billion.






Consolidated statement of financial position

                                               (Reviewed)     (Audited)

R000's                                            30 June       30 June

                                                     2012          2011

ASSETS

Non current assets                              1 149 887     1 173 923

Property, plant and equipment                   1 092 492     1 118 902

Investments in jointly controlled entities         34 285        34 779

Loan receivable                                    20 046        17 212

Deferred taxation                                   3 064         3 030

Current assets                                    142 633        75 733

Inventories                                         2 772         2 387

Trade receivables                                  59 965        42 380

Other receivables                                  17 483        15 436

Cash and cash equivalents                          62 413        15 530



Total assets                                    1 292 520     1 249 656



EQUITY AND LIABILITIES

Capital and reserves                              301 712       252 029

Share capital and premium                         148 794       147 601

BEE investment and incentive scheme shares      (503 145)     (486 051)

Retained earnings                                 563 270       506 913

Other reserves                                     92 793        83 566

Non-current liabilities                           717 731       821 091

Interest-bearing borrowings                             -       125 000

BEE preference shares                             425 100       425 200

BEE shareholder's loan                             21 764        18 947

BEE preference share dividend accrual              93 238        64 305

Fair value of BEE interest rate swap                3 464        44 992

Other non-current liabilities                      94 581        56 178

Deferred taxation                                  79 584        86 469

Current liabilities                               273 077       176 536

Interest-bearing borrowings                       125 000        75 000

Fair value of BEE interest rate swap               46 258             -

Trade and other payables                           89 401        94 930

Taxation payable                                   12 418         6 606



Total liabilities                                 990 808       997 627

Total equity and liabilities                    1 292 520     1 249 656



Note: The company has authorised capital commitments of R129 million of which approximately R20 million has been contracted. It is anticipated that the entire authorised commitments will be spent by 30 June 2013.







Consolidated statement of cash flows          		      (Reviewed)     (Audited)

                                              		      Year ended    Year ended

                                                 		 30 June       30 June

R000's                                           		    2012          2011



Cash generated by operations                     		 387 355       335 698

Interest received                                		   5 768         3 245

Interest paid                                  		  	(32 615)      (34 909)

Taxation paid                                   		(83 322)      (72 494)

Dividends paid                                   		(87 354)     (109 727)

Cash inflow from operating activities            		 189 832       121 813

Cash utilised in investing activities            		(51 350)     (119 206)

  -investment to maintain operations            	        (49 421)      (29 220)

  -investment to expand operations                		 (2 888)      (90 576)

  -investments and loans                           		     494       (1 618)

  -proceeds on disposal of property, plant and equipment   	     465         2 208

Cash outflow from financing activities          		(91 599)      (29 536)

  -proceeds on issue of shares                    		   1 193         2 464

  -purchase of incentive scheme shares          	        (17 672)             -

  -repayment of interest-bearing borrowings     		(75 000)      (30 000)

  -redemption of BEE preference shares            		   (100)       (2 000)

  -distribution by BEE SPV                         		    (20)             -



Net increase/ (decrease) in cash and cash equivalents		  46 883      (26 929)

Cash and cash equivalents at beginning of period      		  15 530        42 459

Cash and cash equivalents at end of period         		  62 413        15 530





Consolidated statement of changes in equity

                                             		Share capital      Treasury       Other     Retained

R000's                                       		  and premium        shares    reserves     earnings        Total



Balance at 1 July 2010                       		      145 137     (486 051)      78 771      514 746      252 603



Total comprehensive income for the period    		            -             -           -      101 894      101 894

Profit for the period                         		                                             108 528      108 528

Recognised IAS 19 gains and losses                                                                   (6 634)      (6 634)

Transactions with owners, recorded directly in equity 	        2 464             -       4 795    (109 727)    (102 468)

Issue of new ordinary shares                       	        2 464                                               2 464

Share compensation reserve                                  		                  4 795                     4 795

Dividends paid                                                        		                   (109 727)    (109 727)



Balance at 30 June 2011                          	      147 601     (486 051)      83 566      506 913      252 029



Total comprehensive income for the period         	            -             -           -       143 731     143 731

Profit for the period                                    	                                      149 775     149 775

Recognised IAS 19 gains and losses                                 		                      (6 044)     (6 044)

Transactions with owners, recorded directly        		1 193      (17 094)       9 227      (87 374)    (94 048)

Issue of new ordinary shares                       		1 193                                               1 193

Share compensation reserve                                     		                  9 805                     9 805

Incentive scheme shares                                        		   (17 094)       (578)                  (17 672)

Dividends paid                                             		                             (87 354)    (87 354)

Distribution by BEE SPV                                     		                                 (20)        (20)



Balance at 30 June 2012                          	      148 794     (503 145)      92 793       563 270     301 712







Segment report

                                                                                                                Central office

R000's                                           City Lodge            Town Lodge            Road Lodge            and other               Total

                                               2012       2011       2012       2011       2012       2011       2012        2011      2012      2011



Revenue                                     481 682    423 206    161 851    153 882    214 720    193 891     17 569      19 219   875 822   790 198



EBITDAR                                     285 274    243 539     78 106     75 587    124 527    109 938   (51 624)    (49 514)   436 283   379 550



Land and hotel building rental                                                                                 60 553      54 192    60 553    54 192

EBITDA                                                                                                                              375 730   325 358



Depreciation                                 25 570     22 532      7 046      7 487     10 609      9 682     35 150      33 377    78 375    73 078



Share of (loss)/profit from Courtyard joint venture                                                             (125)         642     (125)       642



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.







Registered office                                            Transfer secretaries

"The Lodge", Bryanston Gate Office Park,      		     Computershare Investor Services 

cnr. Homestead Avenue and Main Road           		     (Proprietary )Limited

Bryanston, 2191                                              70 Marshall Street, Johannesburg, 2001






Directors: BT Ngcuka (Chairman), C Ross (Chief executive)*, FWJ Kilbourn, IN Matthews,                                           

           N Medupe, SG Morris, Dr KIM Shongwe, W Tlou, AC Widegger*

           Company Secretary: MC van Heerden                             * executive




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