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
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