Wrap Text
Reviewed Group Preliminary Results for the Year ended 30 June 2014
City Lodge Hotels Limited
Incorporated in the Republic of South Africa
Registration number 1986/002864/06
ISIN: ZAE 000117792
Share code: CLH
REVIEWED GROUP PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 JUNE 2014
FINANCIAL HIGHLIGHTS
Average occupancy 63%
Normalised diluted HEPS +11%
Return on equity 25%
COMMENTARY
The 2014 financial year was a tale of two halves. The first half occupancies were 64%.The second
half of the year was disrupted by strike action, negative economic growth in the first quarter of
the year, seven public holidays compared to five in the previous second half, one of which included
the general election in May.
Group occupancies at our South African operations for the 12 months to 30 June 2014 increased to
63% from 62% in the previous financial year. Revenue for the period eclipsed the billion Rand mark
for the first time, increasing by 9% to R1,1 billion, mainly due to the slight rise in occupancies
and an increase in achieved room rates.
Reflecting the pressure being experienced by participants in the small and medium business sector,
the Road Lodge brand was the only one of the group’s four brands to show a decrease in occupancy.
The normalised EBITDA margin decreased by 0,6% to 41,2%, resulting in an increase of 7,5% in
normalised EBITDA to R438,2 million. Operating costs excluding depreciation increased by 9,2%.
Excluding the operating costs of the two Kenyan hotels, which were consolidated for the first time
with effect from 21 May following the acquisition of the remaining 50% share, operating costs per
room sold increased by 6,6%.
Depreciation decreased by 0,7% and normalised results from operating activities were 9,5% higher
than in the previous financial year. Interest income was R1,5 million below that of the previous
year while interest expense reduced by R6,5 million as a result of lower average interest-bearing
borrowings during the year.
The Courtyard joint venture showed a profit of R2,9 million compared to R2,4 million in the 2013
financial year. The Kenyan joint venture contributed an equity-accounted profit after tax of
R18,4 million until May 20, after which the two hotels' results have been consolidated with those
of the rest of the group.
Profit before tax on a normalised basis was up by 13%, whilst normalised headline earnings rose
by 12% to R281,6 million. Normalised diluted headline earnings per share increased by 11% to
643,1 cents.
In line with the group’s established policy of paying out 60% of normalised earnings, a final
dividend of 189 cents was declared, bringing the total dividend for the year to 391 cents per
share, which is an increase of 11,4% on the previous year.
To fund the purchase of the remaining 50% of the Kenyan joint venture, an amount of R150
million was drawn down in May from existing long-term borrowing facilities which were extended
by R50 million to R250 million. Total outstanding debt at the end of the 2014 financial year
was R185 million.
DEVELOPMENT ACTIVITY
In addition to completing the acquisition of the remaining 50% of our Kenyan joint venture, we
have made significant progress towards growing our presence in East Africa.
An agreement has been concluded for the purchase of land in Nairobi for the development of a
170-room City Lodge Hotel at a cost of $23 million. It is anticipated that construction will
commence in the first quarter of 2015 and that the hotel will be opened in mid 2016.
In addition, a long term land lease has been concluded to develop a 147-room City Lodge Hotel in
Dar es Salaam, Tanzania. This development, which is subject to regulatory approvals, is
expected to cost $22 million and ground breaking is also expected in the first quarter of 2015.
We continue to explore additional opportunities in Nairobi as well as Kampala, Uganda.
Investigations are also continuing into acquiring suitable sites in Maputo, Mozambique;
Windhoek, Namibia and Lusaka, Zambia.
Within South Africa, excellent progress is being made on the construction of the 149-room
City Lodge Hotel, Waterfall City which is expected to open its first rooms in December 2014
and be fully operational by February 2015.
The construction of the previously announced 90-room Road Lodge Pietermaritzburg has been
delayed, but it is anticipated that the necessary approvals will be received for construction
to begin in the new financial year. Land and building lease agreements have been concluded
for the development of a 148-room City Lodge Hotel at Newtown Junction in the Johannesburg CBD.
Construction is expected to commence shortly with completion scheduled towards the end of 2015.
OUTLOOK
Following on from the various disruptions in the January to mid-May period, the pattern of slow,
but steady growth in occupancies has resumed, similar to the trend experienced over the past two
to three years. We are hopeful that economic growth will accelerate in the medium term, for which
the group is well placed to benefit.
BASIS OF PREPARATION
These condensed consolidated financial statements are prepared in accordance with the requirements
of the JSE Limited Listings Requirements for preliminary reports and the requirements of the
Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared
in accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to also, as a minimum, contain the information required
by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the
condensed consolidated financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements except for the adoption of new
standards which became effective on 1 July 2013.
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 financial statements were prepared under the supervision of Mr AC Widegger
CA (SA), in his capacity as group financial director.
AUDIT REVIEW
The group’s auditors KPMG Inc. have reviewed these preliminary condensed financial statements for
the year ended 30 June 2014. 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 2014 is available for inspection at the company’s
registered office.
DECLARATION OF DIVIDENDS
The board has approved and declared final dividend number 51 of 189 cents per ordinary share
(gross) in respect of the year ended 30 June 2014.
The dividend will be subject to Dividends Withholding Tax (DWT). 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 189 cents per ordinary share for shareholders exempt
from the Dividends Tax;
The net local dividend amount is 160,65 cents per ordinary share for shareholders liable
to pay the Dividends Tax;
The company currently has 43 220 553 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, 5 September 2014
Shares commence trading ex dividend: Monday, 8 September 2014
Record date: Friday, 12 September 2014
Payment of dividend: Monday, 15 September 2014
Share certificates may not be dematerialised or rematerialised between Monday,
8 September 2014 and Friday, 12 September 2014, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
14 August 2014
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2014
R000’s Note (Reviewed) % (Audited)
Year change Year
ended ended
30 June 30 June
2014 2013
Revenue 1 062 749 9 975 893
Administration and marketing costs (83 300) (72 936)
BEE transaction charges 2 (480) 5 658
Operating costs excluding depreciation (542 816) (496 930)
436 153 6 411 685
Depreciation and amortisation (78 421) (79 011)
Results from operating activities 357 732 8 332 674
Interest income 5 210 6 688
Total interest expense (50 349) (51 007)
Interest expense (5 749) (12 203)
Notional interest on BEE shareholder loan 2 (3 717) (3 236)
BEE interest expense 2 (3 638) (848)
BEE preference dividend 2 (37 245) (34 720)
Fair value gain on remeasurement of
investment in joint venture 44 671 -
Share of profit from joint ventures 21 327 16 006
- Courtyard Hotels 2 895 2 371
- East Africa (after tax) 18 432 13 635
Profit before taxation 378 591 24 304 361
Taxation (101 208) (85 934)
Profit for the period 277 383 27 218 427
Other comprehensive income
Items that will never be reclassified to
profit or loss
Defined benefit plan remeasurements 18 337 5 192
Income tax on other comprehensive income (5 134) (1 454)
Items that are or may be reclassified to
profit or loss
Foreign currency translation differences 1 409 (152)
Total comprehensive income for the period 291 995 32 222 013
Consolidated Statement of Financial Position
at 30 June 2014
R000’s (Reviewed) (Audited)
30 June 30 June
2014 2013
ASSETS
Non-current assets 1 512 124 1 295 252
Property, plant and equipment 1 457 426 1 068 641
Intangible assets 15 297 -
Investments in joint ventures 35 762 199 216
Loan receivable - 23 347
Deferred taxation 3 639 4 048
Current assets 191 785 78 651
Inventories 6 551 2 995
Trade receivables 66 330 52 264
Other receivables 32 539 20 276
Taxation 4 065 3 116
Cash and cash equivalents 82 300 -
Total assets 1 703 909 1 373 903
EQUITY AND LIABILITIES
Capital and reserves 565 915 425 953
Share capital and premium 158 255 154 662
BEE investment and incentive
scheme shares (526 822) (503 145)
Retained earnings 820 543 672 200
Other reserves 113 939 102 236
Non-current liabilities 1 016 917 798 522
Interest-bearing borrowings 185 000 -
BEE interest-bearing borrowings 44 120 44 120
BEE preference shares 420 900 424 200
BEE shareholder's loan 28 718 25 001
BEE preference share dividend accrual 141 010 115 867
Fair value of BEE interest rate swap - 513
Other non-current liabilities 105 905 113 060
Deferred taxation 91 264 75 761
Current liabilities 121 077 149 428
Interest-bearing borrowings - 35 000
Fair value of BEE interest rate swap 1 210 3 812
Trade and other payables 105 483 98 827
Bank overdraft 14 384 11 789
Total liabilities 1 137 994 947 950
Total equity and liabilities 1 703 909 1 373 903
Note: The company has authorised capital commitments of R738 million of which approximately
R62 million has been contracted. It is anticipated that approximately R385 milion will be
spent by 30 June 2015.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2014
R000’s Share
capital
and Treasury Other Retained
premium shares reserves earnings Total
Balance at 1 July 2012 148 794 (503 145) 92 793 563 270 301 712
Total comprehensive income for
the period - - (152) 222 165 222 013
Profit for the period 218 427 218 427
Other comprehensive income
Defined-benefit plan remeasurements,
net of tax 3 738 3 738
Foreign currency translation differences (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
Total comprehensive income for the period - - 1 409 290 586 291 995
Profit for the period 277 383 277 383
Other comprehensive income
Defined-benefit plan remeasurements,
net of tax 13 203 13 203
Foreign currency translation differences 1 409 1 409
Transactions with owners, recorded
directly in equity 3 593 (23 677) 10 294 (142 243) (152 033)
Issue of new ordinary shares 3 593 3 593
10th anniversary employee share
trust shares (18 678) (18 678)
Incentive scheme shares (4 999) (4 999)
Share compensation reserve 10 294 10 294
Dividends paid (138 458) (138 458)
Distribution by BEE structured entities (35) (35)
Consolidation of 10th anniversary
employee share trust (1 653) (1 653)
Distribution by 10th anniversary
employee share trust (2 097) (2 097)
Balance at 30 June 2014 158 255 (526 822) 113 939 820 543 565 915
Consolidated Statement of Cash Flows
for the year ended 30 June 2014
R000’s (Reviewed) (Audited)
Year Year
ended ended
30 June 30 June
2014 2013
Operating profit before working
capital changes 454 914 440 835
(Increase)/decrease in working capital (14 303) 24 318
Cash generated by operations 440 611 465 153
Interest received 5 210 3 387
Interest paid (26 133) (74 575)
Taxation paid (98 356) (107 746)
Dividends paid (138 458) (113 235)
Cash inflow from operating activities 182 874 172 984
Cash utilised in investing activities (250 239) (206 274)
- investment to maintain operations (90 355) (40 345)
- investment to expand operations (806) (14 974)
- investments and loans (159 570) (151 296)
- proceeds on disposal of property,
plant and equipment 492 341
Cash inflows/(outflows) from financing activities 146 178 (40 912)
- proceeds from issue of ordinary shares 3 593 5 868
- purchase of incentive scheme shares (4 999) -
- increase in interest-bearing borrowings 150 000 70 000
- repayment of interest-bearing borrowings - (160 000)
- increase in BEE interest-bearing borrowings - 44 120
- redemption of BEE preference shares (3 300) (900)
- distribution by BEE structured entity (35) -
- effect of consolidation of 10th anniversary
employee share trust 919 -
Net increase/(decrease) in cash and cash equivalents 78 813 (74 202)
Cash and cash equivalents at beginning of the period (11 789) 62 413
Effect of movements in exchange rates on cash held 892 -
Cash and cash equivalents at end of the period 67 916 (11 789)
Segment Report
for the year ended 30 June 2014
Primary segment Central office
R000’s City Lodge Town Lodge Road Lodge and other Total
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 597 902 553 036 190 450 178 892 230 495 227 131 43 902 16 834 1 062 749 975 893
EBITDAR 358 434 331 688 89 560 85 903 128 925 127 308 (78 831) (71 804) 498 088 473 095
Land and hotel (61 935) (61 410) (61 935) (61 410)
building rental
EBITDA 436 153 411 685
Depreciation and
amortisation (24 523) (26 314) (5 893) (5 811) (10 589) (10 768) (37 416) (36 118) (78 421) (79 011)
Results from
operating activities 357 732 332 674
Share of profit from
joint ventures 21 327 16 006 21 327 16 006
Geographical Information South Africa Rest of Africa Total
R000’s 2014 2013 2014 2013 2014 2013
Revenue 1 034 451 975 138 28 298 755 1 062 749 975 893
Share of profit from joint ventures 2 895 2 371 18 432 13 635 21 327 16 006
Non-current assets - Property, plant and equipment 1 051 615 1 053 927 405 811 14 714 1 457 426 1 068 641
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
for the year ended 30 June 2014
R000’s (Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
Note 2014 change 2013
1. Headline earnings reconciliation
Profit for the period 277 383 218 427
Fair value gain on remeasurement of
investment in joint venture (44 671) -
Gain on bargain purchase (621) -
Loss/(Profit) on sale of equipment 14 (182)
Taxation effect (4) 51
Headline earnings 232 101 6 218 296
Number of shares in issue (000’s) 43 221 43 123
Weighted average number of shares in issue
for EPS calculation (000’s) 3 35 936 36 428
Weighted average number of shares in issue
for diluted EPS calculation (000’s) 3 36 850 37 214
Basic earnings per share (cents)
- undiluted 771,9 29 599,6
- fully diluted 752,7 28 586,9
Headline earnings per share (cents) 4
- undiluted 645,9 8 599,3
- fully diluted 629,9 7 586,6
2. Normalised headline earnings reconciliation
Headline earnings 232 101 218 296
BEE transaction charges 480 (5 658)
- Loss/(Profit) on fair value of interest rate swap 235 (6 170)
- Sundry expenses 245 512
Notional interest charge on BEE shareholder loan 3 717 3 236
BEE interest on interest-bearing borrowings 3 638 848
Preference dividends paid/payable by the BEE entities 37 245 34 720
Deferred tax on BEE transactions (1 041) (906)
Notional interest income on 10th anniverssary employee
share trust loan 3 845
10th anniversary employee share trust transaction
charges and DWT 44
IFRS 2 share-based payment charge for the 10th
anniversary employee share trust 1 563 1 609
Normalised headline earnings 281 592 12 252 145
3. Number of shares (000’s)
Weighted average number of shares in issue for
EPS calculation 35 936 36 428
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated
as treasury shares 549 -
Weighted average number of shares in issue for
normalised EPS calculation 42 875 42 818
Weighted average number of shares in issue for
diluted EPS calculation 36 850 37 214
BEE shares treated as treasury shares 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 43 789 43 604
4. Normalised headline earnings per share (cents)
- undiluted 656,8 12 588,9
- fully diluted 643,1 11 578,3
5. Dividends declared per share (cents) 391,0 11 351,0
- interim 202,0 15 176,0
- final 189,0 8 175,0
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 14,9 3,3
8. Return on equity (%)
- calculated on a normalised basis 24,6 25,6
9. Net asset value per share (cents)
- calculated on a normalised basis 2 865 2 439
Administration
Directors
BT Ngcuka (Chairman), C Ross (Chief executive)*,
FWJ Kilbourn, IN Matthews, N Medupe, SG Morris,
Dr KIM Shongwe, W Tlou, AC Widegger*
*Executive
Company secretary
MC van Heerden
Registered office
The Lodge
Bryanston Gate Office Park
Corner Homestead Avenue and Main Road
Bryanston, 2191
PO Box 97, Cramerview, 2060
Telephone: +27 11 557 2600
Facsimile +27 11 557 2670
Email: info@citylodge.co.za
Websites: www.clhg.com
www.bid2stay.co.za
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Auditors
KPMG Inc.
Bankers
The Standard Bank of South Africa Limited
Attorneys
Edward Nathan Sonnenbergs
Sponsor
J P Morgan Equities South Africa Proprietary Limited
Date: 15/08/2014 01:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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