Wrap Text
Unaudited interim report for the six months ended 31 December 2014
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 2014
- Average occupancies - SA operations 68%
- Normalised diluted headline EPS +15%
- Return on equity 25%
Statement of financial position
(Audited)
31 Dec 31 Dec 30 Jun
R000’s 2014 2013 2014
ASSETS
Non-current assets 1 533 778 1 271 752 1 512 124
Property, plant and equipment 1 478 566 1 058 216 1 457 426
Intangible assets 21 581 - 15 297
Investments in joint ventures 29 484 209 138 35 762
Deferred taxation 4 147 4 398 3 639
Current assets 223 611 132 176 191 785
Inventories 6 828 3 261 6 551
Trade receivables 74 504 63 091 66 330
Other receivables 42 939 25 660 32 539
Taxation 1 869 2 231 4 065
Cash and cash equivalents 97 471 37 933 82 300
Total assets 1 757 389 1 403 928 1 703 909
EQUITY
Capital and reserves 628 004 461 100 565 915
Share capital and premium 159 713 155 916 158 255
BEE investment and incentive scheme shares (515 728) (526 825) (526 822)
Retained earnings 876 091 724 907 820 543
Other reserves 107 928 107 102 113 939
LIABILITIES
Non-current liabilities 1 035 212 820 050 1 016 917
Interest-bearing borrowings 185 000 - 185 000
BEE interest-bearing borrowings 44 120 44 120 44 120
BEE preference shares 418 100 423 900 420 900
BEE shareholder’s loan 30 779 26 795 28 718
BEE preference share dividend accrual 154 179 127 765 141 010
Fair value of BEE interest rate swap - 151 -
Other non-current liabilities 108 509 116 454 105 905
Deferred taxation 94 525 80 865 91 264
Current liabilities 94 173 122 778 121 077
Interest-bearing borrowings - 35 000 -
BEE preference share dividend accrual 3 146 4 869 3 144
Fair value of BEE interest rate swap 365 2 508 1 210
Trade and other payables 85 714 80 401 102 339
Bank overdraft 4 948 - 14 384
Total liabilities 1 129 385 942 828 1 137 994
Total equity and liabilities 1 757 389 1 403 928 1 703 909
Note: The company has authorised capital commitments of R704 million of which approximately R71 million has been contracted.
It is anticipated that approximately R178 million of the authorised commitments will be spent by 30 June 2015.
Statement of changes in equity
Share
capital
and Treasury Other Retained
R000’s premium shares reserves earnings Total
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 remeasurements, net of tax 432 432
Foreign currency translation differences (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
Total comprehensive income for the period - - 1 574 168 973 170 547
Profit for the period 156 202 156 202
Other comprehensive income
Defined-benefit plan remeasurements, net of tax 12 771 12 771
Foreign currency translation differences 1 574 1 574
Transactions with owners, recorded directly in equity 2 339 3 5 263 (73 337) (65 732)
Issue of new ordinary shares 2 339 2 339
10th anniversary employee share trust shares 2 2
Incentive scheme shares 1 1
Share compensation reserve 5 263 5 263
Dividends paid (73 300) (73 300)
Distribution by BEE structured entity (35) (35)
Distribution by 10th anniversary employee share trust (2) (2)
Balance at 30 June 2014 158 255 (526 822) 113 939 820 543 565 915
Total comprehensive income for the period - - 6 212 134 337 140 549
Profit for the period 134 337 134 337
Other comprehensive income
Foreign currency translation differences 6 212 6 212
Transactions with owners, recorded directly in equity 1 458 11 094 (12 223) (78 789) (78 460)
Issue of new ordinary shares 1 458 1 458
Incentive scheme shares 11 094 (21 048) (8 127) (18 081)
Share compensation reserve 8 825 8 825
Dividends paid (70 662) (70 662)
Balance at 31 December 2014 159 713 (515 728) 107 928 876 091 628 004
Summarised statement of cash flows
Six Six (Audited)
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
R000’s 2014 2013 2014
Operating profit before working capital changes 285 451 235 023 454 914
Increase in working capital (35 532) (29 478) (14 303)
Cash generated by operations 249 919 205 545 440 611
Interest received 1 475 1 988 5 210
Interest paid (16 499) (12 655) (26 133)
Taxation paid (55 622) (46 829) (98 356)
Dividends paid (70 662) (65 158) (138 458)
Cash inflow from operating activities 108 611 82 891 182 874
Cash utilised in investing activities (67 643) (30 042) (250 239)
- investment to maintain operations (51 405) (29 477) (90 355)
- investment to expand operations (18 405) (672) (806)
- investments in joint ventures 2 167 107 (159 570)
- proceeds on disposal of property, plant and equipment - - 492
Cash (outflow)/inflow from financing activities (19 423) (3 127) 146 178
- proceeds from issue of ordinary shares 1 458 1 254 3 593
- purchase of incentive scheme shares (18 081) (5 000) (4 999)
- increase in interest-bearing borrowings - - 150 000
- redemption of BEE preference shares (2 800) (300) (3 300)
- distribution by BEE structured entity - - (35)
- effect of consolidation of 10th anniversary employee share trust - 919 919
Net increase in cash and cash equivalents 21 545 49 722 78 813
Cash and cash equivalents at beginning of the period 67 916 (11 789) (11 789)
Effect of movements in exchange rates on cash held 3 062 - 892
Cash and cash equivalents at end of the period 92 523 37 933 67 916
Statement of comprehensive income
Six Six (Audited)
months months Year
ended ended ended
31 Dec % 31 Dec 30 Jun
R000’s Note 2014 change 2013 2014
Revenue 642 394 20 533 949 1 062 749
Administration and marketing costs (48 025) (42 220) (83 300)
BEE transaction charges 2 (159) (388) (480)
Operating costs excluding depreciation (328 721) (267 220) (542 816)
265 489 18 224 121 436 153
Depreciation and amortisation (42 386) (40 574) (78 421)
Results from operating activities 223 103 22 183 547 357 732
Interest income 1 475 1 988 5 210
Total interest expense (30 891) (23 856) (50 349)
Interest expense (7 334) (2 383) (5 749)
Notional interest on BEE shareholder’s loan 2 (2 061) (1 794) (3 717)
BEE interest expense 2 (2 019) (1 786) (3 638)
BEE preference dividend 2 (19 477) (17 893) (37 245)
Fair value gain on remeasurement of investment in joint venture - - 44 671
Share of profit from joint ventures 1 029 11 847 21 327
- Courtyard Hotels 1 029 1 818 2 895
- East Africa (after tax) - 10 029 18 432
Profit before taxation 194 716 12 173 526 378 591
Taxation (60 379) (52 345) (101 208)
Profit for the period 134 337 11 121 181 277 383
Other comprehensive income
Items that will never be reclassified to profit and loss
Defined benefit plan remeasurements - 600 18 337
Income tax on other comprehensive income - (168) (5 134)
Items that are or may be reclassified to profit and loss
Foreign currency translation differences 6 212 (165) 1 409
Total comprehensive income for the period 140 549 16 121 448 291 995
Supplementary Information
1. Headline earnings reconciliation
Profit for the period 134 337 121 181 277 383
Fair value gain on remeasurement of investment in joint
venture - - (44 671)
Gain on bargain purchase - - (621)
Write-off of net investment in joint venture 4 111 - -
Loss on sale of equipment - - 14
Taxation effect - - (4)
Headline earnings 138 448 14 121 181 232 101
Number of shares in issue (000’s) 43 248 43 149 43 221
Weighted average number of shares in 3 36 203 35 923 35 936
issue for EPS calculation (000’s)
Weighted average number of shares in issue for diluted
EPS calculation (000’s) 3 36 509 37 002 36 850
Basic earnings per share (cents)
- undiluted 371,1 10 337,3 771,9
- fully diluted 368,0 12 327,5 752,7
Headline earnings per share (cents) 4
- undiluted 382,4 13 337,3 645,9
- fully diluted 379,2 16 327,5 629,9
2. Normalised headline earnings reconciliation
Headline earnings 138 448 121 181 232 101
BEE transaction charges 159 388 480
- Loss on fair value of interest rate swap 51 269 235
- Sundry expenses 108 119 245
Notional interest charge on BEE shareholder’s loan 2 061 1 794 3 717
BEE interest on interest-bearing borrowings 2 019 1 786 3 638
Preference dividends paid/payable by the BEE entities 19 477 17 893 37 245
Deferred tax on BEE transactions (577) (503) (1 041)
Notional interest income on 10th anniversary employee
share trust loan 2 154 1 849 3 845
10th anniversary employee share trust transaction
charges and DWT (111) 48 44
IFRS 2 share based payment charge for the 10th
anniversary employee share trust 1 581 788 1 563
Normalised headline earnings 165 211 14 145 224 281 592
3. Number of shares (000’s)
Weighted average number of shares in issue for EPS
calculation 36 203 35 923 35 936
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as
treated as treasury shares 549 549 549
Weighted average number of shares in issue for
normalised EPS calculation 43 142 42 862 42 875
Weighted average number of shares in issue for
diluted EPS calculation 36 509 37 002 36 850
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as
treasury shares 549 549 549
Weighted average number of shares in issue for
diluted normalised EPS calculation 43 448 43 941 43 789
4. Normalised headline earnings per share (cents)
- undiluted 382,9 13 338,8 656,8
- fully diluted 380,2 15 330,5 643,1
5. Dividend declared per share (cents) 230,0 14 202,0 391,0
6. Dividend cover (times)
- calculated on normalised headline earnings 1,7 1,6 1,7
7. Interest-bearing debt to total capital and
reserves (%)
- calculated on a normalised basis 14,1 3,1 14,9
8. Return on equity (%)
- calculated on a normalised basis 24,8 25,6 24,6
9. Net asset value per share (cents)
- calculated on a normalised basis 3 039 2 601 2 865
Segment report
Primary segment City Lodge Town Lodge Road Lodge Central office and other Total
R000’s 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 334 186 302 915 108 444 97 601 129 839 117 489 69 925 15 944 642 394 533 949
EBITDAR 201 849 184 801 52 427 46 510 71 705 65 913 (25 312) (42 721) 300 669 254 503
Land and hotel building rental (35 180) (30 382) (35 180) (30 382)
EBITDA 265 489 224 121
Depreciation and amortisation (11 330) (12 427) (3 744) (3 348) (6 460) (5 750) (20 852) (19 049) (42 386) (40 574)
Results from operating activities 223 103 183 547
Share of profit from joint ventures 1 029 11 847 1 029 11 847
South Africa Rest of Africa Total
Geographic information 2014 2013 2014 2013 2014 2013
Revenue 583 155 527 119 59 239 6 830 642 394 533 949
Share of profit from joint ventures 1 029 1 818 - 10 029 1 029 11 847
Non-current assets - property, plant and equipment 1 074 520 1 043 808 404 046 14 408 1 478 566 1 058 216
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.
Commentary
Average occupancies at the group’s South African hotels rose to 68% in the six months to 31 December 2014, an increase
of 4 percentage points from the 64% achieved in the previous interim reporting period.
Revenue at the South African operations increased by 10,6% to R583,2 million due to the higher occupancies and a below
inflation increase in achieved room rates. Total revenue, including the Kenyan operations, which weren’t consolidated in
the prior year, rose by 20,3% to R642,4 million. Kenyan occupancies were lower than in the previous year as a result of
the perceived Ebola threat and numerous foreign travel advisories in relation to the terror threat in the region.
Unlike the previous year, the Road Lodge brand also achieved higher occupancies, whilst occupancies at the Courtyard
Hotel brand were lower, reflecting the ongoing over-supply in the four star market.
South African operating costs, on a normalised basis, increased by 6,7% on a per room sold basis, resulting in a 0,8
percentage point decrease in the normalised EBITDA margin for the South African operations to 42,0%. Total normalised
EBITDA increased by 20,4% to R271,4 million. Depreciation was slightly higher, interest income was lower and interest
expense was higher as a result of additional borrowings for the Kenyan operations acquired in May 2014.
As a consequence of lower occupancies, the contribution from the Courtyard joint venture fell to R1,0 million from
R1,8 million. This performance was also affected by the closure of Courtyard Hotel Cape Town.
Profit before tax on a normalised basis rose by 14% to R226,3 million, while normalised headline earnings also
increased by 14% to R165,2 million. Fully diluted normalised headline earnings per share increased by 15% to 380,2 cents.
In line with the group’s policy of paying out 60% of normalised earnings, an interim dividend of 230 cents has
been declared, 14% higher than the previous year’s interim dividend.
Development activity
Several major refurbishments have been completed or are underway, which is in keeping with the group’s ongoing
commitment to maintaining and upgrading its portfolio across all locations and brands.
The first 35 rooms of the 149-room City Lodge Hotel Waterfall City were opened in mid-December, with the rest of the
hotel becoming operational at the beginning of February 2015.
City Lodge Hotel Newtown is progressing well and is on track to open its 148 rooms towards the end of calendar 2015.
Construction of the 90-room Road Lodge Pietermaritzburg will commence next week, with completion scheduled for early
November.
Detailed design work is at an advanced stage for the development of the 169-room City Lodge Hotel Two Rivers, Nairobi
and the 147-room City Lodge Hotel Dar es Salaam, and it is expected that earthworks will commence at each of the
locations during the second quarter of 2015. Both hotels are expected to open during the fourth quarter of 2016.
A memorandum of understanding (MOU), which is subject to finalisation of a financial feasibility study, has been
signed regarding a land and building lease in Kampala, Uganda, for the development of a 150-room City Lodge Hotel.
Similarly, an MOU, which is subject to certain conditions, has been signed in respect of a land and building lease for
a 140 to 150-room Town Lodge in Windhoek, Namibia. Negotiations are at an advanced stage for the acquisition of land in
Maputo, Mozambique, with a view to constructing a 150 to 160-room City Lodge Hotel.
Outlook
The trend of higher than previous year occupancies extended into January and the first half of February. It is
expected that this trend will continue given the combined effect of gradual GDP growth and limited supply of new hotel
capacity.
Directorate
Mr Nigel Matthews retired from the board effective 31 December 2014 after 25 years of distinguished service. The board
thanks Nigel for his leadership and valued contribution and wishes him well in his retirement.
The board was pleased to announce the appointment of Mr Deon Huysamer as an independent non-executive director with effect
from 1 January 2015 and welcomes him to the team.
In addition, a number of changes to the various committees were announced on SENS on 17 December 2014.
Basis of preparation
The 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 Pronouncements as issued by the 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 financial statements.
The condensed group financial information has been presented on the historical cost basis, except for financial
instruments 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 52 of 230 cents per ordinary share (gross) in respect of
the six months ended 31 December 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 230 cents per ordinary share for shareholders exempt from the Dividends Tax.
The net local dividend amount is 195,5 cents per ordinary share for shareholders liable to pay the Dividends Tax.
The Company currently has 43 247 993 ordinary shares in issue.
The Company’s income tax reference number is 9041001711.
Shareholders are advised of the following dates:
Last date to trade cum dividend Friday, 6 March 2015
Shares commence trading ex dividend Monday, 9 March 2015
Record date Friday, 13 March 2015
Payment of dividend Monday, 16 March 2015
Share certificates may not be dematerialised or rematerialised between Monday, 9 March 2015 and Friday,
13 March 2015, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
17 February 2015
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)*, GG Huysamer, FWJ Kilbourn, 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.clhg.com
Date of release 18 February 2015
Date: 18/02/2015 11:41:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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