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Interim Results
City Lodge Hotels Limited
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE 000117792
Unaudited interim report for the six months ended 31 December 2013
-Average occupancies:
64%
-Normalised diluted HEPS:
+14%
-Return on equity:
26%
Statement of comprehensive income
Six Six (Audited)
months months Year
ended ended ended
31 Dec % 31 Dec 30 Jun
R000’s Note 2013 change 2012 2013
Revenue 533 949 9 492 093 975 893
Administration and marketing costs (42 220) (37 816) (72 936)
BEE transaction charges 2 (388) 6 291 5 658
Operating costs excluding depreciation (267 220) (248 000) (496 930)
224 121 5 212 568 411 685
Depreciation (40 574) (40 570) (79 011)
Results from operating activities 183 547 7 171 998 332 674
Interest income 1 988 3 415 6 688
Total interest expense (23 856) (36 151) (51 007)
Interest expense (2 383) (7 393) (12 203)
Notional interest on BEE shareholder loan 2 (1 794) (1 562) (3 236)
BEE interest expense 2 (1 786) - (848)
BEE preference dividend 2 (17 893) (27 196) (34 720)
Share of profit from jointly controlled entities 11 847 8 242 16 006
- Courtyard Hotels 1 818 909 2 371
- East Africa (after tax) 10 029 7 333 13 635
Profit before taxation 173 526 18 147 504 304 361
Taxation (52 345) (44 301) (85 934)
Profit for the period 121 181 17 103 203 218 427
Other comprehensive income
Defined benefit plan actuarial gains 600 481 5 192
Income tax on other comprehensive income (168) (135) (1 454)
Foreign currency translation reserve (165) (49) (152)
Total comprehensive income for the period 121 448 17 103 500 222 013
Statement of financial position
(Audited)
31 Dec 31 Dec 30 Jun
R000’s 2013 2012 2013
ASSETS
Non-current assets 1 271 752 1 302 765 1 295 252
Property, plant and equipment 1 058 216 1 086 983 1 068 641
Investments in jointly controlled entities 209 138 191 084 199 216
Loan receivable - 21 634 23 347
Deferred taxation 4 398 3 064 4 048
Current assets 132 176 83 917 78 651
Inventories 3 261 2 840 2 995
Trade receivables 63 091 64 966 52 264
Other receivables 25 660 16 111 20 276
Taxation 2 231 - 3 116
Cash and cash equivalents 37 933 - -
Total assets 1 403 928 1 386 682 1 373 903
EQUITY
Capital and reserves 461 100 366 695 425 953
Share capital and premium 155 916 151 150 154 662
BEE investment and incentive scheme shares (526 825) (503 145) (503 145)
Retained earnings 724 907 618 122 672 200
Other reserves 107 102 100 568 102 236
LIABILITIES
Non-current liabilities 820 050 776 989 798 522
Interest-bearing borrowings - 35 000 -
BEE interest-bearing borrowings 44 120 - 44 120
BEE preference shares 423 900 425 000 424 200
BEE shareholder’s loan 26 795 23 326 25 001
BEE preference share dividend accrual 127 765 104 511 115 867
Fair value of BEE interest rate swap 151 4 165 513
Other non-current liabilities 116 454 107 258 113 060
Deferred taxation 80 865 77 729 75 761
Current liabilities 122 778 242 998 149 428
Interest-bearing borrowings 35 000 75 000 35 000
BEE preference share dividend accrual 4 869 11 381 4 576
Fair value of BEE interest rate swap 2 508 51 168 3 812
Trade and other payables 80 401 71 465 94 251
Taxation payable - 318 -
Bank overdraft - 33 666 11 789
Total liabilities 942 828 1 019 987 947 950
Total equity and liabilities 1 403 928 1 386 682 1 373 903
Note: The company has authorised capital commitments of R410 million of which approximately R262 million has been contracted.
It is anticipated that approximately R340 million of the authorised commitments will be spent by 30 June 2014.
Statement of changes in equity
Share
capital
and Treasury Other Retained
R000’s premium shares reserves earnings Total
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 in equity 2 356 - 7 824 (48 697) (38 517)
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
Total comprehensive income for the period - - (103) 118 616 118 513
Profit for the period 115 224 115 224
Other comprehensive income
Defined-benefit plan actuarial gains, net of tax 3 392 3 392
Foreign currency translation reserve (103) (103)
Transactions with owners, recorded directly in equity 3 512 - 1 771 (64 538) (59 255)
Issue of new ordinary shares 3 512 3 512
Share compensation reserve 1 771 1 771
Dividends paid (64 538) (64 538)
Balance at 30 June 2013 154 662 (503 145) 102 236 672 200 425 953
Total comprehensive income for the period - - (165) 121 613 121 448
Profit for the period 121 181 121 181
Other comprehensive income
Defined-benefit plan actuarial gains, net of tax 432 432
Foreign currency translation reserve (165) (165)
Transactions with owners, recorded directly in equity 1 254 (23 680) 5 031 (68 906) (86 301)
Issue of new ordinary shares 1 254 1 254
10th anniversary employee share trust shares (18 680) (18 680)
Incentive scheme shares (5 000) (5 000)
Share compensation reserve 5 031 5 031
Dividends paid (65 158) (65 158)
Consolidation of 10th anniversary employee share trust (1 653) (1 653)
Distribution by 10th anniversary employee share trust (2 095) (2 095)
Balance at 31 December 2013 155 916 (526 825) 107 102 724 907 461 100
Summarised statement of cash flows
Six Six (Audited)
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
R000’s 2013 2012 2013
Operating profit before working capital changes 235 023 228 042 440 835
(Increase)/decrease in working capital (29 478) (6 001) 24 318
Cash generated by operations 205 545 222 041 465 153
Interest received 1 988 1 827 3 387
Interest paid (12 655) (15 588) (74 575)
Taxation paid (46 829) (58 391) (107 746)
Dividends paid (65 158) (48 697) (113 235)
Cash inflow from operating activities 82 891 101 192 172 984
Cash utilised in investing activities (30 042) (184 527) (206 274)
- investment to maintain operations (29 477) (28 260) (40 345)
- investment to expand operations (672) (6 801) (14 974)
- investments and loans 107 (149 466) (151 296)
- proceeds on disposal of property, plant and equipment - - 341
Cash outflow from financing activities (3 127) (12 744) (40 912)
- proceeds from issue of ordinary shares 1 254 2 356 5 868
- purchase of incentive scheme shares (5 000) - -
- increase in interest-bearing borrowings - 70 000 70 000
- repayment of interest-bearing borrowings - (85 000) (160 000)
- Increase in BEE interest-bearing borrowings - - 44 120
- redemption of BEE preference shares (300) (100) (900)
- effect of consolidation of 10th anniversary employee share trust 919 - -
Net cash increase/(decrease) 49 722 (96 079) (74 202)
Segment report
Primary segment City Lodge Town Lodge Road Lodge
R000’s 2013 2012 2013 2012 2013 2012
Revenue 302 915 277 860 97 601 89 404 117 489 116 893
EBITDAR 184 801 168 252 46 510 43 079 65 913 66 515
Land and hotel building rental
EBITDA
Depreciation (12 427) (13 968) (3 348) (3 147) (5 750) (5 494)
Results from operating activities
Share of profit from jointly controlled entities
Geographic information South Africa
2013 2012
Revenue 527 119 492 093
Share of profit from jointly controlled entities 1 818 909
Non-current assets - property, plant and equipment 1 043 808 1 086 983
Segment report (continued)
Primary segment Central office and other Total
R000’s 2013 2012 2013 2012
Revenue 15 944 7 936 533 949 492 093
EBITDAR (42 721) (34 567) 254 503 243 279
Land and hotel building rental (30 382) (30 711) (30 382) (30 711)
EBITDA 224 121 212 568
Depreciation (19 049) (17 961) (40 574) (40 570)
Results from operating activities 183 547 171 998
Share of profit from jointly controlled entities 11 847 8 242 11 847 8 242
Geographic information Rest of Africa Total
2013 2012 2013 2012
Revenue 6 830 - 533 949 492 093
Share of profit from jointly controlled entities 10 029 7 333 11 847 8 242
Non-current assets - property, plant and equipment 14 408 - 1 058 216 1 086 983
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:
1. Headline earnings reconciliation
Profit for the period 121 181 103 203 218 427
Profit on sale of equipment - - (182)
Taxation effect - - 51
Headline earnings 121 181 17 103 203 218 296
Number of shares in issue (000’s) 43 149 43 047 43 123
Weighted average number of shares in 3 35 923 36 394 36 428
issue for EPS calculation (000’s)
Weighted average number of shares in issue for
diluted EPS calculation (000’s) 3 37 002 37 069 37 214
Basic earnings per share (cents)
- undiluted 337,3 19 283,6 599,6
- fully diluted 327,5 18 278,4 586,9
Headline earnings per share (cents) 4
- undiluted 337,3 19 283,6 599,3
- fully diluted 327,5 18 278,4 586,6
2. Normalised headline earnings reconciliation
Headline earnings 121 181 103 203 218 296
BEE transaction charges 388 (6 291) (5 658)
- Loss/(profit) on fair value of interest rate swap 269 (6 368) (6 170)
- Sundry expenses 119 77 512
Notional interest charge on BEE shareholder loan 1 794 1 562 3 236
Interest on BEE interest-bearing borrowings 1 786 - 848
Preference dividends paid/payable by the BEE entities 17 893 27 196 34 720
Deferred tax on BEE transactions (503) (437) (906)
Notional interest income on 10th anniversary employee
share trust loan 1 849 - -
10th anniversary employee share trust transaction charges
and DWT 48 - -
IFRS 2 share based payment charge for the 10th anniversary
employee share trust 788 961 1 609
Normalised headline earnings 145 224 15 126 194 252 145
3. Number of shares (000’s)
Weighted average number of shares in issue for EPS calculation 35 923 36 394 36 428
BEE shares treated as treasury shares 6 390 6 390 6 390
10th Anniversary employees share trust treated as treated as
treasury shares 549 - -
Weighted average number of shares in issue for normalised EPS
calculation 42 862 42 784 42 818
Weighted average number of shares in issue for diluted EPS
calculation 37 002 37 069 37 214
BEE shares treated as treasury shares 6 390 6 390 6 390
10th Anniversary employees share trust treated as treasury
shares 549 - -
Weighted average number of shares in issue for diluted
normalised EPS calculation 43 941 43 459 43 604
4. Normalised headline earnings per share (cents)
- undiluted 338,8 15 295,0 588,9
- fully diluted 330,5 14 290,4 578,3
5. Dividend declared per share (cents) 202,0 15 176,0 351,0
6. Dividend cover (times)
- calculated on normalised headline earnings 1,6 1,7 1,7
7. Interest bearing debt to total capital and reserves (%)
- calculated on a normalised basis 3,1 14,5 3,3
8. Return on equity (%)
- calculated on a normalised basis 25,6 23,7 25,6
9. Net asset value per share (cents)
- calculated on a normalised basis 2 601 2 308 2 439
COMMENTARY
Group occupancies for the six months to 31 December 2013 increased to 64% from 63% in the previous interim reporting
period. Revenue for the period rose by 9% to R533,9 million, mainly as a result of the improvement in occupancies and
higher room rates achieved.
Given the muted prevailing business and consumer confidence, trading during the period was predictably mixed. As a direct
result of the sustained pressure on consumers and small businesses, the Road Lodge brand was particularly affected. While
it continues to run the highest overall occupancies across the group’s four brands, it was the worst relative performer
during the period.
Operating costs were well contained to a 5,7% increase per room sold, resulting in the normalised EBITDA margin
improving slightly to 42,1% and normalised EBITDA increasing by 9% to R225,3 million. Particularly pleasing was the continued
success of our energy saving initiatives, with electricity costs per room sold, decreasing by 10,2%.
Depreciation was in line with the prior year. Normalised operating profit was 11% higher while interest income rose
slightly and interest expense fell by R5 million, reflecting lower average interest bearing borrowings.
The Courtyard Joint Venture continued with its performance improvement, doubling its profit to R1,8 million
from R909 000 in the previous interim period. Equity accounted after tax profit from the Kenyan Joint venture increased
by 37% to R10,0 million, aided by the strength of the Kenyan Shilling against the Rand together with the fact that the
previous interim contribution only reflected 5 months of trading. The performance in local currency terms showed a
marginal improvement which was satisfactory considering the negative effects of the Nairobi airport fire and the terror attack on
the Westgate Shopping Centre.
Profit before tax on a normalised basis rose by 16% to R198,1 million, whilst normalised headline earnings rose by 15%
to R145,2 million. Normalised, diluted headline earnings per share increased by 14% to 330,5 cents.
In line with the group’s ongoing policy of paying out 60% of normalised earnings, an interim dividend of 202 cents per
share has been declared, 15% higher than the previous year’s interim dividend.
DEVELOPMENT ACTIVITY
Construction of the 150-room City Lodge Hotel Waterfall City is progressing well and is on track for completion in the
final quarter of 2014. It is anticipated that final approvals for the 90-room Road Lodge Pietermaritzburg will be
obtained so as to allow construction to begin in the second quarter and be completed by the end of the year.
Negotiations are continuing to finalise agreements in Kenya, Ghana and Tanzania and investigations are ongoing into
further opportunities in East Africa and several Southern African Development Community countries.
CORPORATE ACTIVITY
It was announced on SENS on 4 February that with effect from 31 January 2014, the group agreed to acquire
the remaining 50% of Fairview Hotel Limited, giving it full ownership of the Fairview Hotel and the Country Lodge in
Nairobi, Kenya. This illustrates the group’s confidence in Kenya and the region and provides a strong platform for further
growth in East Africa. This transaction is still subject to regulatory approvals in South Africa and Kenya with profits
being accounted from the fulfilment date of these conditions.
OUTLOOK
Trading is expected to remain mixed in the second half of the financial year with business confidence likely to be
subdued in the lead-up to the general election. Beyond that, it is believed that occupancies will continue to improve due
to the lack of new accommodation capacity coming on stream and improved demand.
BASIS OF PREPARATION
These condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standard 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 and the
requirements of the Companies Act of South Africa.
The accounting policies applied in the preparation of these interim financial statements are in terms of International
Financial Reporting Standards and are consistent with those applied in the previous annual finanical statements.
The adoption of new standards and interpretations has had no material effect on the results for the period nor has it
required the restatement of any prior year. In line with the requirements of IFRS 10, the 10th Anniversary Employees
Share Trust has been consolidated in the current year. 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 Lodge’s functional and presentation currency.
These condensed interim financial statements were prepared under the supervision of Mr AC Widegger CA (SA), in his
capacity as group financial director.
DECLARATION OF DIVIDEND
The board has approved and declared interim dividend number 50 of 202 cents per ordinary share (gross) in respect of
the six months ended 31 December 2013.
The dividend will be subject to Dividends Withholding Tax (DWT) 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 202 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 171,7 cents per ordinary share for shareholders liable to pay the Dividends Tax;
- The Company currently has 43 149 453 ordinary shares in issue; and
- The Company’s income tax reference number is 9041001711.
Shareholders are advised of the following dates:
Last date to trade cum dividend Friday, 7 March 2014
Shares commence trading ex dividend Monday, 10 March 2014
Record date Friday, 14 March 2014
Payment of dividend Monday, 17 March 2014
Share certificates may not be dematerialised or rematerialised between Monday, 10 March 2014 and Friday,
14 March 2014, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
13 February 2014
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: MC van Heerden
Sponsor: JP Morgan Equities South Africa (Proprietary) Limited
*Executive
www.citylodge.co.za
Date: 13/02/2014 01:14:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
