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Reviewed group preliminary results for the year ended 30 June 2013
City Lodge Hotels Limited
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE 000117792
Reviewed group preliminary results for the year ended 30 June 2013
Average occupancies 62%
Normalised diluted HEPS +31%
Return on equity 26%
COMMENTARY
Group occupancies for the twelve months to 30 June 2013 increased to 62% from 59% in the previous financial year.
Revenue for the period increased by 11% to R975.9 million which was mainly due to the higher average occupancies,
together with an increase in achieved room rates.
The normalised EBITDA margin decreased by 0.3% points to 41.8%, resulting in normalised EBITDA of R407.6 million,
an increase of 11%. Although operating costs excluding depreciation increased by 11.7%, the rise in operating costs
per room sold was limited to 5.8%, illustrating the effectiveness of the groups ongoing cost control and energy
efficiency programmes and initiatives. The increase in the electricity cost per room sold was limited to 5.1%.
Depreciation increased by 1% and normalised results from operating activities was 13% higher than in the previous
financial year. Interest income was below that of a year earlier by R1.9 million, while interest expense also reduced
as a result of lower average interest-bearing borrowings.
The Courtyard Joint Venture improved its performance, showing a profit of R2.4 million for the year compared to a loss
of R125 000 in the previous corresponding period. The Kenyan Joint Venture made a good, first time contribution to the
group, with an equity accounted profit after tax of R13.6 million.
Profit before tax on a normalised basis was up by 21%, whilst normalised headline earnings rose by 32% to R252.2 million,
reflecting the lower effective taxation rate following the change from Secondary Tax on Companies to Dividend Tax.
Normalised diluted headline earnings per share increased by 31% to 578.3 cents. Cash generated by operations was 20%
higher than a year earlier.
In line with the groups established policy of paying out 60% of normalised earnings, a final dividend of 175.0 cents has
been declared. The total dividend for the year amounts to 351.0 cents, which is an increase of 31% on the previous year.
DEVELOPMENT ACTIVITY
The 104-room Town Lodge Gaborone opened in mid-May and early trading has been encouraging. The hotel was officially
opened by Botswanas Minister of Environment, Wildlife and Tourism on 1 August, the day of the groups 28th anniversary.
This, together with the Kenyan acquisition, increases the number of rooms in the group to 6 755 (2012 6440).
Non-binding memorandums of understanding in respect of development opportunities have been signed in both Kenya and Ghana
with ongoing negotiations to finalise agreements in both countries. Additional expansion investigations are continuing in
the rest of East Africa and in several SADC countries.
The acquisition of a site for a 90-room Road Lodge in Pietermartizburg (as previously reported) is expected to be completed
during the final quarter of 2013 with construction anticipated to begin shortly thereafter.
Lease and development agreements are currently being finalised for a 150-room City Lodge at Waterfall City near Midrand.
Construction is expected to begin in the fourth quarter of 2013 and the hotel should be opened in the fourth quarter of 2014.
The group has recently completed a review and update of its corporate branding. The resultant changes better reflect the
ongoing enhancements and modernisation initiatives at each of the groups brands over the years. This will now more
effectively differentiate the identity of each of the Courtyard, City Lodge, Town Lodge and Road Lodge brands.
OUTLOOK
The upward trend in occupancies has continued into the first six weeks of the current financial year and the group is well
placed to benefit from any increased level of economic activity.
BASIS OF PREPARATION
These condensed financial statements have been prepared in accordance with the measurement and recognition requirements of
IFRS, the presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting
Standards Council, the Listings Requirements of the JSE Limited and the Companies Act of South Africa.
The accounting policies used to prepare this report are consistent with those used in the previous annual financial
statements except for any new standards and interpretations that became effective.
The adoption of these standards has had no material effect on the results for the period nor has it required the restatement
of any prior year amounts. 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
Lodges 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 groups auditors KPMG Inc. have reviewed these preliminary condensed financial statements for the year ended 30 June 2013.
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 14 August 2013 is available for inspection at the
companys registered office.
DECLARATION OF DIVIDEND
The board has approved and declared final dividend number 49 of 175 cents per ordinary share (gross) in respect of the year
ended 30 June 2013.
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 175 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 148.75 cents per ordinary share for shareholders liable to pay the Dividends Tax;
- The Company currently has 43 122 653 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, 6 September 2013
Shares commence trading ex dividend Monday, 9 September 2013
Record date Friday, 13 September 2013
Payment of dividend Monday, 16 September 2013
Share certificates may not be dematerialised or rematerialised between Monday, 9 September 2013 and Friday, 13 September 2013,
both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
14 August 2013
Consolidated statement of comprehensive income
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000s Note 2013 change 2012
Revenue 975 893 11 875 822
Administration and marketing costs (72 936) (63 967)
BEE transaction charges 2 5 658 8 660
Operating costs excluding depreciation (496 930) (444 785)
411 685 10 375 730
Depreciation (79 011) (78 375)
Results from operating activities 332 674 12 297 355
Interest income 6 688 8 602
Total interest expense (51 007) (71 491)
Interest expense (12 203) (17 639)
Notional interest on BEE shareholder loan 2 (3 236) (2 817)
BEE interest expense 2 (848) -
BEE preference dividend 2 (34 720) (51 035)
Share of profit/(loss) from jointly controlled entities 16 006 (125)
- Courtyard Hotels 2 371 (125)
- Fairview Hotels Limited, Kenya (after tax) 13 635 -
Profit before taxation 304 361 30 234 341
Taxation (85 934) (84 566)
Profit for the period 218 427 46 149 775
Other comprehensive income
Defined benefit plan actuarial gains/(losses) 5 192 (8 395)
Income tax on other comprehensive income (1 454) 2 351
Foreign currency translation reserve (152) -
Total comprehensive income for the period 222 013 54 143 731
Consolidated statement of financial position
(Reviewed) (Audited)
30 June 30 June
R000s 2013 2012
ASSETS
Non-current assets 1 295 252 1 149 887
Property, plant and equipment 1 068 641 1 092 492
Investments in jointly controlled entities 199 216 34 285
Loan receivable 23 347 20 046
Deferred taxation 4 048 3 064
Current assets 78 651 142 633
Inventories 2 995 2 772
Trade receivables 52 264 59 965
Other receivables 20 276 17 483
Taxation 3 116 -
Cash and cash equivalents - 62 413
Total assets 1 373 903 1 292 520
EQUITY AND LIABILITIES
Capital and reserves 425 953 301 712
Share capital and premium 154 662 148 794
BEE investment and incentive scheme shares (503 145) (503 145)
Retained earnings 672 200 563 270
Other reserves 102 236 92 793
Non-current liabilities 798 522 717 731
BEE interest-bearing borrowings 44 120 -
BEE preference shares 424 200 425 100
BEE shareholder's loan 25 001 21 764
BEE preference share dividend accrual 115 867 93 238
Fair value of BEE interest rate swap 513 3 464
Other non-current liabilities 113 060 94 581
Deferred taxation 75 761 79 584
Current liabilities 149 428 273 077
Interest-bearing borrowings 35 000 125 000
Fair value of BEE interest rate swap 3 812 46 258
Trade and other payables 98 827 89 401
Taxation payable - 12 418
Bank overdraft 11 789 -
Total liabilities 947 950 990 808
Total equity and liabilities 1 373 903 1 292 520
Note: The company has authorised capital commitments of R210 million of which approximately R15 million has been contracted.
It is anticipated that approximately R170 milion will be spent by 30 June 2014.
Consolidated statement of cash flows
(Reviewed) (Audited)
Year Year
ended ended
30 June 30 June
R000s 2013 2012
Cash generated by operations 465 153 387 355
Interest received 3 387 5 768
Interest paid (74 575) (32 615)
Taxation paid (107 746) (83 322)
Dividends paid (113 235) (87 354)
Cash inflow from operating activities 172 984 189 832
Cash utilised in investing activities (206 274) (51 350)
- investment to maintain operations (40 345) (49 421)
- investment to expand operations (14 974) (2 888)
- investments and loans (151 296) 494
- proceeds on disposal of property, plant and equipment 341 465
Cash outflow from financing activities (40 912) (91 599)
- proceeds from issue of ordinary shares 5 868 1 193
- purchase of incentive scheme shares - (17 672)
- increase in interest-bearing borrowings 70 000 -
- repayment of interest-bearing borrowings (160 000) (75 000)
- increase in BEE interest-bearing borrowings 44 120 -
- redemption of BEE preference shares (900) (100)
- distribution by BEE SPV - (20)
Net (decrease)/increase in cash and cash equivalents (74 202) 46 883
Cash and cash equivalents at beginning of period 62 413 15 530
Cash and cash equivalents at end of period (11 789) 62 413
Consolidated statement of changes in equity
Share
capital
and Treasury Other Retained
R000s premium shares reserves earnings Total
Balance at 1 July 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
Defined-benefit plan actuarial losses, net of tax (6 044) (6 044)
Transactions with owners, recorded directly in equity 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
Total comprehensive income - - (152) 222 165 222 013
for the period
Profit for the period 218 427 218 427
Defined-benefit plan actuarial gains, net of tax 3 738 3 738
Foreign currency translation reserve (152) (152)
Transactions with owners, recorded directly in equity 5 868 - 9 595 (113 235) (97 772)
Issue of new ordinary shares 5 868 5 868
Share compensation reserve 9 595 9 595
Dividends paid (113 235) (113 235)
Balance at 30 June 2013 154 662 (503 145) 102 236 672 200 425 953
Segment report
Primary segment City Lodge Town Lodge Road Lodge Central office and other Total
R000s
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
Revenue 553 036 481 682 178 892 161 851 227 131 214 720 16 834 17 569 975 893 875 822
EBITDAR 331 688 285 274 85 903 78 106 127 308 124 527 (71 804) (51 624) 473 095 436 283
Land and hotel building rental (61 410) (60 553) (61 410) (60 553)
EBITDA 411 685 375 730
Depreciation (26 314) (25 570) (5 811) (7 046) (10 768) (10 609) (36 118) (35 150) (79 011) (78 375)
Results from operating activities 332 674 297 355
Share of profit/(loss) from jointly
controlled entities 16 006 (125) 16 006 (125)
South Africa Rest of Africa Total
Geographical information 2013 2012 2013 2012 2013 2012
Revenue 975 138 875 822 755 - 975 893 875 822
Non-current assets - property, plant and equipment 1 053 927 1 092 492 14 714 - 1 068 641 1 092 492
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.
Supplementary information
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000s Note 2013 change 2012
1. Headline earnings reconciliation
Profit for the period 218 427 149 775
Profit on sale of equipment (182) (121)
Taxation effect 51 34
Headline earnings 218 296 46 149 688
Number of shares in issue (000s) 43 123 42 989
Weighted average number of shares in issue 3 36 428 36 437
for EPS calculation (000s)
Weighted average number of shares in issue 3 37 214 36 898
for diluted EPS calculation (000s)
Basic earnings per share (cents)
- undiluted 599,6 46 411,1
- fully diluted 586,9 45 405,9
Headline earnings per share (cents) 4
- undiluted 599,3 46 410,8
- fully diluted 586,6 45 405,7
2. Normalised headline earnings reconciliation
Headline earnings 218 296 149 688
BEE transaction charges (5 658) (8 660)
- Profit on fair value of interest rate swap (6 170) (8 964)
- Sundry expenses 512 304
Notional interest charge on BEE shareholder loan 3 236 2 817
BEE Interest on interest-bearing borrowings 848 -
Preference dividends paid/payable by the BEE entities 34 720 51 035
Deferred tax on BEE transactions (906) (5 078)
- Notional interest charge (906) (789)
- STC on preference dividends payable - (4 289)
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 1 609 1 867
Normalised headline earnings 252 145 32 191 669
3. Number of shares (000s)
Weighted average number of shares in issue for EPS calculation 36 428 36 437
BEE shares treated as treasury shares 6 390 6 390
Weighted average number of shares in issue for normalised EPS calculation 42 818 42 827
Weighted average number of shares in issue 37 214 36 898
for diluted EPS calculation
BEE shares treated as treasury shares 6 390 6 390
Weighted average number of shares in issue 43 604 43 288
for diluted normalised EPS calculation
4. Normalised headline earnings per share (cents)
- undiluted 588,9 32 447,5
- fully diluted 578,3 31 442,8
5. Dividend declared per share (cents) 351,0 31 268,0
- interim 176,0 30 135,0
- final 175,0 32 133,0
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 3,3 13,7
8. Return on equity (%)
- calculated on a normalised basis 25,6 21,8
9. Net asset value per share (cents)
- calculated on a normalised basis 2 439 2 129
Note: Net asset value is calculated using the depreciated historical cost of buildings and not the directors current estimated replacement cost of R4 billion.
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, W Tlou, AC Widegger*
Company Secretary: M C van Heerden * executive
www.citylodge.co.za
Date: 14/08/2013 02:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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