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CITY LODGE HOTELS LIMITED - Unaudited interim report for the six months ended 31 December 2012

Release Date: 13/02/2013 15:18
Code(s): CLH     PDF:  
Wrap Text
Unaudited interim report for the six months ended 31 December 2012

CITY LODGE HOTELS LIMITED
Registration number: 1986/002864/06    
Share code: CLH   ISIN: ZAE 000117792
www.citylodge.co.za
Expanding our African footprint

Unaudited interim report for the six months ended 31 December 2012

Average occupancies 63% 
Normalised diluted HEPS +30% 
Return on equity 24% 

Commentary
Group occupancies for the six months to 31 December 2012 increased to 63% from 60% in the previous interim reporting 
period. Revenue for the period increased by 11% to R492,1 million, mainly as a result of improved occupancies and 
the resultant increase in the number of rooms sold. Achieved room rates increased in line with inflation.
The normalised EBITDA margin was in line with the previous corresponding period, resulting in normalised EBITDA of 
R207,2 million, an increase of 11%. While operating costs rose by 11,6%, the increase in operating costs per room 
sold was restricted to 6,5%, again demonstrating the effectiveness of the groups cost control and energy saving 
initiatives. 

Depreciation increased by 2,5% and normalised operating profit was 13% higher. Interest income was slightly below 
that of a year earlier while interest expense also reduced due to lower average interest-bearing borrowings. The 
Courtyard Joint Venture showed an encouraging improvement in performance and reported a profit of R909 000 compared 
to a loss of R1,1 million in the previous interim period.   

The Kenyan Joint Venture, which currently comprises 50% stakes in the Fairview Hotel and the Country Lodge in Nairobi, 
made its first contribution to the group, achieving an equity accounted profit after tax of R7,3 million. This was 
ahead of our expectations.

Profit before tax on a normalised basis rose by 21%, whilst normalised headline earnings rose by 31% to R126,2 million, 
reflecting the lower effective taxation rate following the change from Secondary Tax on Companies to a dividend 
withholding tax. Normalised diluted headline earnings per share increased by 30% to 290,4 cents. At R222,0 million, cash 
generated by operations was 17% higher than a year earlier.

In line with the groups ongoing policy of paying out 60% of normalised earnings, an interim dividend of 176 cents has 
been declared, 30% higher than the previous years interim dividend.

Development activity  
The construction of the 104-room Town Lodge in Gaborone, Botswana has been completed and regulatory approvals are now 
awaited. It is anticipated that the hotel will open for trading by the end of February. 
 
Investigations are continuing into expansion opportunities in East Africa, West Africa and certain SADC countries.
In South Africa, a site is in the process of being acquired for the development of a 90-room Road Lodge in 
Pietermaritzburg. Total development cost of this hotel will be approximately R40 million with construction scheduled to 
begin in the second quarter of 2013 for completion by the end of 2013 or early 2014.

A process has been initiated to refresh the four brands logos to reflect the ongoing changes and enhancements that 
have been introduced over the years. This is expected to be completed during the third quarter of 2013.   

Outlook  
The improving occupancy trend has continued into 2013 and the group has enjoyed some benefit from the African Cup of 
Nations soccer tournament.   

Basis of preparation
These condensed, unaudited interim 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 2012.

Declaration of dividend
The board has approved and declared interim dividend number 48 of 176 cents per ordinary share (gross) in respect of the 
six months ended 31 December 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 176 cents per ordinary share for shareholders exempt from the Dividends Tax;
  The net local dividend amount is 149,6 cents per ordinary share for shareholders liable to pay the Dividends Tax;
  The Company currently has 43 046 953 ordinary shares in issue; and
  The Companys 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, 8 March 2013
Shares commence trading ex dividend                        Monday, 11 March 2013
Record date                                                Friday, 15 March 2013
Payment of dividend                                        Monday, 18 March 2013
Share certificates may not be dematerialised or rematerialised between Monday, 11 March 2013 and Friday, 15 March 2013, 
both days inclusive.

For and on behalf of the board
Bulelani Ngcuka                               Clifford Ross
Chairman                                      Chief executive
13 February 2013



  Statement of comprehensive income                                                                                                     
  R000s                                                     Note           Six months                 %            Six months              (Audited)  
                                                                                 ended            change                 ended                  Year   
                                                                                31 Dec                                  31 Dec                 ended   
                                                                                  2012                                    2011                30 Jun   
                                                                                                                                                2012   
  Revenue                                                                      492 093                11               443 257               875 822   
  Administration and marketing costs                                          (37 816)                                (34 733)              (63 967)   
  BEE transaction charges                                       2                6 291                                 (4 851)                 8 660   
  Operating costs excluding depreciation                                     (248 000)                               (222 328)             (444 785)   
                                                                               212 568                17               181 345               375 730   
  Depreciation                                                                (40 570)                                (39 569)              (78 375)   
  Operating profit                                                             171 998                21               141 776               297 355   
  Interest income                                                                3 415                                   4 176                 8 602   
  Total interest expense                                                      (36 151)                                (37 201)               (71 491)  
  Interest expense                                                             (7 393)                                 (9 632)              (17 639)   
  Notional interest on BEE shareholder loan                     2              (1 562)                                 (1 360)               (2 817)   
  BEE preference dividend                                       2             (27 196)                                (26 209)              (51 035)   
  Share of profit/(loss) from jointly controlled                                                                                       
  entities                                                                       8 242                                 (1 073)                 (125)   
   Courtyard Hotels                                                               909                                 (1 073)                 (125)   
   Fairview Hotels Limited, Kenya (after tax)                                  7 333                                                               
                                                                                                                                                       
  Profit before taxation                                                       147 504                37               107 678               234 341   
  Taxation                                                                    (44 301)                                (45 015)              (84 566)   
  Profit for the period                                                        103 203                65                62 663               149 775   
  Other comprehensive income                                                                                                                           
  Defined benefit plan actuarial gains/(losses)                                    481                                 (2 304)               (8 395)   
  Income tax on other comprehensive income                                       (135)                                     645                 2 351   
  Foreign currency translation reserve                                            (49)                                                               
  Total comprehensive income for the period                                    103 500                70                61 004               143 731   




  Supplementary information                                                                                                                                                          
  R000s                                                           Note        Six months             %            Six months             (Audited)  
                                                                                 ended           change                 ended                 Year   
                                                                                31 Dec                                 31 Dec                ended   
                                                                                  2012                                   2011               30 Jun   
                                                                                                                                              2012   
  1.     Headline earnings reconciliation                                                                                                            
         Profit for the period                                                 103 203                                 62 663              149 775   
         Profit on sale of equipment                                                                                                        (121)  
         Taxation effect                                                             -                                                         34   
         Headline earnings                                                     103 203               65                62 663              149 688   
         Number of shares in issue (000s)                                      43 047                                 42 947               42 989   
         Weighted average number of shares in issue for                                                                             
		 EPS calculation (000s)                                   3    36 394                                 36 533               36 437   
         Weighted average number of shares in issue for                                                                             
		 diluted EPS calculation (000s)                           3    37 069                                 36 768               36 898   
         Basic earnings per share (cents)                                                                                                            
          undiluted                                                             283,6               65                 171,5                411,1   
          fully diluted                                                         278,4               63                 170,4                405,9   
         Headline earnings per share (cents)                               4                                                                                 
          undiluted                                                             283,6               65                 171,5                410,8   
          fully diluted                                                         278,4               63                 170,4                405,7   
  2.     Normalised headline earnings reconciliation                                                                                                 
         Headline earnings                                                     103 203                                 62 663              149 688   
         BEE transaction charges                                               (6 291)                                  4 851              (8 660)   
           (Profit)/Loss on fair value of interest rate swap                  (6 368)                                  4 625              (8 964)   
          Sundry expenses                                                          77                                    226                  304   
         Notional interest charge on BEE shareholder loan                        1 562                                  1 360                2 817   
         Preference dividends paid/payable by the BEE entities                  27 196                                 26 209               51 035   
         Deferred tax on BEE transactions                                        (437)                                    550              (5 078)      
         IFRS 2 share-based payment charge for the 10th                                                                             
		 anniversary employee share trust                                  961                                    939                1 867   
         Normalised headline earnings                                          126 194               31                96 572              191 669   
  3.     Number of shares (000s)                                                                                                                    
         Weighted average number of                                             36 394                                 36 533               36 437   
         shares in issue for EPS calculation                                                                                                         
         BEE shares treated as treasury shares                                   6 390                                  6 390                6 390   
         Weighted average number of shares in issue for                                                                             
		 normalised                                                                                                                 
		 EPS calculation                                                42 784                                 42 923               42 827   
         Weighted average number of shares in issue for                                                                             
		 diluted EPS calculation                                        37 069                                 36 768               36 898   
         BEE shares treated as treasury shares                                   6 390                                  6 390                6 390   
         Weighted average number of shares in issue for                                                                             
		 diluted normalised EPS calculation                             43 459                                 43 158               43 288   
  4.     Normalised headline earnings per share (cents)                                                                                              
                                                                                                                                                     
          undiluted                                                             295,0               31                 225,0                447,5   
          fully diluted                                                         290,4               30                 223,8                442,8   
  5.     Dividend declared per share (cents)                                     176,0               30                 135,0                268,0   
  6.     Dividend cover (times)                                                                                                                      
           calculated on normalised headline earnings                             1,7                                    1,7                  1,7   
  7.     Effective tax rate (%)                                                                                                                      
           calculated on normalised profit before taxation                       26,2                                   31,5                 31,9   
  8.     Interest-bearing debt to total capital and reserves (%)                                                                                     
                                                                                                                                                     
           calculated on a normalised basis                                      14,5                                   20,0                 13,7   
  9.     Return on equity (%)                                                                                                                        
           calculated on a normalised basis                                      23,7                                   20,2                 21,8   
  10.    Net asset value per share (cents)                                                                                                           
           calculated on a normalised basis                                     2 308                                  2 040                2 129




  Statement of financial position                                                                       
  R000s                                                   31 Dec               31 Dec             (Audited)  
                                                             2012                 2011               30 Jun   
                                                                                                       2012   
  ASSETS                                                                                                      
  Non-current assets                                    1 302 765            1 163 204            1 149 887   
  Property, plant and equipment                         1 086 983            1 107 067            1 092 492   
  Investments                                             191 084               34 532               34 285   
  Loan receivable                                          21 634               18 575               20 046   
  Deferred taxation                                         3 064                3 030                3 064   
  Current assets                                           83 917              108 987              142 633   
  Inventory                                                 2 840                2 698                2 772   
  Trade receivables                                        64 966               45 891               59 965   
  Other receivables                                        16 111               19 812               17 483   
  Cash and cash equivalents                                     -               40 586               62 413   
                                                                                                              
  Total assets                                          1 386 682            1 272 191            1 292 520   
  EQUITY                                                                                                      
  Capital and reserves                                    366 695              261 116              301 712   
  Share capital and premium                               151 150              148 031              148 794   
  BEE investment and incentive scheme shares             (503 145)            (503 145)           (503 145)   
  Retained earnings                                       618 122              529 897              563 270   
  Other reserves                                          100 568               86 333               92 793   
  LIABILITIES                                                                                                 
  Non-current liabilities                                 776 989              802 898              717 731   
  Interest-bearing borrowings                              35 000               75 000                    -   
  BEE preference shares                                   425 000              425 200              425 100   
  BEE shareholders loan                                   23 326               20 307               21 764   
  BEE "B" preference share dividend accrual               104 511               74 426               93 238   
  Fair value of BEE interest rate swap                      4 165               49 617                3 464   
  Other non-current liabilities                           107 258               70 332               94 581   
  Deferred taxation                                        77 729               88 016               79 584   
  Current liabilities                                     242 998              208 177              273 077   
  Bank overdraft                                           33 666                    -                    -   
  Interest-bearing borrowings                              75 000              100 000              125 000   
  BEE preference share dividend accrual                    11 381                5 716               15 632   
  BEE interest rate swap accrual                           51 168               25 944               46 258   
  Trade and other payables                                 71 465               71 426               73 769   
  Taxation payable                                            318                5 091               12 418   
                                                                                                              
  Total liabilities                                     1 019 987            1 011 075              990 808   
  Total equity and liabilities                          1 386 682            1 272 191            1 292 520   
  Note: The company has authorised capital commitments of R92 million of which approximately 
        R17 million has been contracted. It is anticipated that R57 million of the authorised 
        commitments will be spent by 30 June 2013.                                                            


   
                                                                                                                                                                       
  Summarised statement of cash flows                                                                               
  R000s                                                         Six months           Six months            (Audited)  
                                                                       ended                ended               Year   
                                                                      31 Dec               31 Dec              ended   
                                                                        2012                 2011             30 Jun   
                                                                                                                2012   
  Cash generated by operations                                       222 041              190 590            387 355   
  Interest received                                                    1 827                2 813              5 768   
  Interest paid                                                      (15 588)             (16 260)           (32 615)  
  Taxation paid                                                      (58 391)             (44 338)           (83 322)  
  Dividends paid                                                     (48 697)             (38 000)           (87 354)  
  Cash inflow from operating activities                              101 192               94 805            189 832   
  Cash utilised in investing activities                             (184 527)             (27 487)           (51 350)  
   investment to maintain operations                                (28 260)             (25 168)          (49 421)   
   investment to expand operations                                   (6 801)              (2 566)           (2 888)   
   investments and loans                                           (149 466)                 247                494   
   proceeds on disposal of property, plant and equipment                  -                    -                465   
  Cash outflow from financing activities                             (12 744)             (42 262)           (91 599)  
   proceeds from issue of ordinary shares                             2 356                  430              1 193   
   increase in interest-bearing borrowings                           70 000                    -                  -   
   repayment of interest-bearing borrowings                         (85 000)             (25 000)           (75 000)  
   purchase of incentive scheme shares                                    -              (17 672)           (17 672)  
   redemption of BEE preference shares                                 (100)                   -               (100)  
   distribution by BEE SPV                                                -                  (20)               (20)  
                                                                                                                       
  Net cash (decrease)/increase                                       (96 079)              25 056             46 883   




  Statement of changes in equity                                                                                            
  R000s                                                   Share             Treasury               Other            Retained                Total   
                                                         capital               shares            reserves            earnings                        
                                                             and                                                                                     
                                                         premium                                                                                     
  Balance at 30 June 2011                                147 601            (486 051)              83 566             506 913              252 029   
  Total comprehensive income for the period                    -                    -                   -              61 004               61 004   
  Profit for the period                                                                                                62 663               62 663   
  Other comprehensive income                                                                                                                         
  Defined-benefit plan actuarial losses, net of tax                                                                   (1 659)              (1 659)   
  Transactions with owners, recorded directly                430             (17 094)               2 767            (38 020)             (51 917)   
  in equity                                                                                                                                          
  Issue of new ordinary shares                               430                                                                               430   
  Incentive scheme shares                                                    (17 094)                                                     (17 094)   
  Share compensation reserve                                                                        2 767                                    2 767   
  Dividends paid                                                                                                     (38 000)             (38 000)   
  Distribution by BEE SPV                                                                                                (20)                 (20)   
                                                                                                                                                     
  Balance at 31 December 2011                            148 031            (503 145)              86 333             529 897              261 116   
  Total comprehensive income for the period                    -                    -                   -              82 727               82 727   
  Profit for the period                                                                                                87 112               87 112   
  Other comprehensive income                                                                                                                         
  Defined-benefit plan actuarial losses, net of tax                                                                   (4 385)              (4 385)   
  Transactions with owners, recorded directly                763                    -               6 460            (49 354)             (42 131)   
  in equity                                                                                                                                          
  Issue of new ordinary shares                               763                                                                               763   
  Share compensation reserve                                                                        7 038                                    7 038   
  Incentive scheme shares                                                                           (578)                                    (578)   
  Dividends paid                                                                                                     (49 354)             (49 354)   
                                                                                                                                                     
  Balance at 30 June 2012                                148 794            (503 145)              92 793             563 270              301 712   
  Total comprehensive income for the period                    -                    -                (49)             103 549              103 500   
  Profit for the period                                                                                               103 203              103 203   
  Other comprehensive income                                                                                                                         
  Defined-benefit plan actuarial gains, net of tax                                                                        346                  346
  Foreign currency translation reserve                                                               (49)                                     (49)    
  Transactions with owners, recorded directly              2 356                    -               7 824            (48 697)             (38 517)   
  in equity                                                                                                                                          
  Issue of new ordinary shares                             2 356                                                                             2 356   
  Share compensation reserve                                                                        7 824                                    7 824    
  Dividends paid                                                                                                     (48 697)             (48 697)   
                                                                                                                                                     
  Balance at 31 December 2012                            151 150            (503 145)             100 568             618 122              366 695   
                                                                                              
  

  Segment report                                                                                                                                                                                                            
  R000s                                       City Lodge                   Town Lodge                  Road Lodge               Central office and other                 Total                     
                                            2012         2011          2012           2011           2012           2011            2012            2011            2012            2011   
  Revenue                                277 860      240 528        89 404         83 535        116 893        109 833           7 936           9 361         492 093         443 257   
                                                                                                                                                                                           
  EBITDAR                                168 252      140 537        43 079         41 326         66 515         63 436         (34 567)        (35 277)        243 279         210 022   
  Land and hotel building rental                                                                                                 (30 711)        (28 677)        (30 711)        (28 677)  
                                                                                                                                                                                           
  EBITDA                                                                                                                                                         212 568         181 345   
  Depreciation                           (13 968)     (13 067)       (3 147)        (3 590)        (5 494)        (5 273)        (17 961)        (17 639)        (40 570)        (39 569)  
  Results from operating activities                                                                                                                              171 998         141 776   
  Share of profit/(loss) from jointly controlled entities                                                                          8 242          (1 073)          8 242          (1 073)  
  
  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:  
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   

Directors:  
BT Ngcuka (Chairman), C Ross (Chief executive)*, FWJ Kilbourn, IN Matthews, 
N Medupe, SG Morris, Dr KIM Shongwe, WM Tlou, AC Widegger*      
*Executive   

Company Secretary:  
MC van Heerden

www.citylodge.co.za
Date: 13/02/2013 03:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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