Wrap Text
Unaudited interim report for the six months ended 31 December 2015
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 2015
- Average occupancies - SA operations 69%
- Normalised diluted headline EPS +18%
- Return on equity 25%
Statements of comprehensive income
(Audited)
Six months Six months Year
ended ended ended
31 December % 31 December 30 June
R000 Note 2015 change 2014 2015
Revenue 753 442 17 642 394 1 303 112
Administration and marketing costs (54 893) (48 025) (99 191)
BEE transaction charges 2 (521) (159) (301)
Operating costs excluding depreciation (381 248) (328 721) (664 075)
316 780 19 265 489 539 545
Depreciation and amortisation (46 748) (42 386) (86 380)
Results from operating activities 270 032 21 223 103 453 165
Interest income 624 1 475 4 751
Total interest expense (35 560) (30 891) (63 251)
Interest expense (9 825) (7 334) (15 398)
Notional interest on BEE shareholder loan 2 (2 368) (2 061) (4 270)
BEE interest expense 2 (2 087) (2 019) (4 041)
BEE preference dividend 2 (21 280) (19 477) (39 542)
Fair value gain on remeasurement of investment in joint venture - - 59 977
Share of profit from joint venture - Courtyard Hotels - 1 029 1 618
Profit before taxation 235 096 21 194 716 456 260
Taxation (70 323) (60 379) (137 998)
Profit for the period 164 773 23 134 337 318 262
Other comprehensive income
Items that will never be reclassified to profit and loss
Defined benefit plan remeasurements - - (3 347)
Income tax on other comprehensive income - - 937
Items that are or may be reclassified to profit and loss
Foreign currency translation differences 44 004 6 212 213
Total comprehensive income for the period 208 777 49 140 549 316 065
Statements of financial position
(Audited)
31 December 31 December 30 June
R000 2015 2014 2015
ASSETS
Non-current assets 1 851 573 1 533 778 1 777 574
Property, plant and equipment 1 808 435 1 478 566 1 740 251
Intangible assets 38 077 21 581 32 578
Investments in joint ventures - 29 484 -
Deferred taxation 5 061 4 147 4 745
Current assets 302 753 223 611 221 119
Inventories 8 719 6 828 7 122
Trade receivables 114 295 74 504 95 934
Other receivables 45 050 42 939 32 701
Taxation 5 847 1 869 -
Cash and cash equivalents 128 842 97 471 85 362
Total assets 2 154 326 1 757 389 1 998 693
EQUITY
Capital and reserves 819 369 628 004 727 442
Share capital and premium 165 759 159 713 164 002
BEE investment and incentive scheme shares (524 228) (515 728) (515 728)
Retained earnings 1 029 337 876 091 971 117
Other reserves 148 501 107 928 108 051
LIABILITIES
Non-current liabilities 1 172 621 1 035 212 1 148 410
Interest-bearing borrowings 250 000 185 000 250 000
BEE interest-bearing borrowings 44 120 44 120 44 120
BEE preference shares 406 100 418 100 412 100
BEE shareholder's loan 35 356 30 779 32 988
BEE preference share dividend accrual 183 350 154 179 168 191
Other non-current liabilities 115 694 108 509 113 376
Deferred taxation 138 001 94 525 127 635
Current liabilities 162 336 94 173 122 841
BEE preference share dividend accrual 3 074 3 146 3 102
Fair value of BEE interest rate swap - 365 -
Trade and other payables 116 602 85 714 106 372
Taxation payable - - 1 351
Bank overdraft 42 660 4 948 12 016
Total liabilities 1 334 957 1 129 385 1 271 251
Total equity and liabilities 2 154 326 1 757 389 1 998 693
Note: The company has authorised capital commitments of R1 040 million, of which approximately
R297 million has been contracted. It is anticipated that approximately R293 million of
the authorised commitments will be spent by 30 June 2016. These capital commitments will
be funded out of operating cash flows and by utilising committed banking facilities.
Summarised statements of cash flows
(Audited)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
R000 2015 2014 2015
Operating profit before working capital changes 327 033 285 451 564 297
Increase in working capital (22 077) (35 532) (34 523)
Cash generated by operations 304 956 249 919 529 774
Interest received 624 1 475 4 751
Interest paid (18 061) (16 499) (33 119)
Taxation paid (68 486) (55 622) (115 520)
Dividends paid (86 241) (70 662) (154 196)
Cash inflow from operating activities 132 792 108 611 231 690
Cash utilised in investing activities (95 372) (67 643) (267 047)
- investment to maintain operations (43 429) (51 405) (119 430)
- investment to expand operations (51 943) (18 405) (90 008)
- investments and loans - 2 167 (58 527)
- proceeds on disposal of property, plant and equipment - - 918
Cash (outflow)/inflow from financing activities (43 468) (19 423) 40 145
- proceeds from issue of ordinary shares 1 757 1 458 5 747
- purchase of incentive scheme shares (39 225) (18 081) (21 657)
- increase in interest-bearing borrowings - - 65 000
- redemption of BEE preference shares (6 000) (2 800) (8 800)
- distribution by BEE structured entity - - (145)
Net (decrease)/increase in cash and cash equivalents (6 048) 21 545 4 788
Cash and cash equivalents at beginning of the period 73 346 67 916 67 916
Effect of movements in exchange rates on cash held 18 884 3 062 642
Cash and cash equivalents at end of the period 86 182 92 523 73 346
Statements of changes in equity
Share
capital
and Treasury Other Retained
R000 premium shares reserves earnings Total
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
Total comprehensive income for the period (5 999) 181 515 175 516
Profit for the period 183 925 183 925
Other comprehensive income
Defined benefit plan remeasurements, net of tax (2 410) (2 410)
Foreign currency translation differences (5 999) (5 999)
Transactions with owners, recorded directly in equity 4 289 6 122 (86 489) (76 078)
Issue of new ordinary shares 4 289 4 289
Incentive scheme shares (766) (2 810) (3 576)
Share compensation reserve 6 888 6 888
Dividends paid (83 534) (83 534)
Distribution by BEE structured entity (145) (145)
Balance at 30 June 2015 164 002 (515 728) 108 051 971 117 727 442
Total comprehensive income for the period 44 004 164 773 208 777
Profit for the period 164 773 164 773
Other comprehensive income
Foreign currency translation differences 44 004 44 004
Transactions with owners, recorded directly in equity 1 757 (8 500) (3 554) (106 553) (116 850)
Issue of new ordinary shares 1 757 1 757
Incentive scheme shares (8 500) (10 413) (20 312) (39 225)
Share compensation reserve 6 859 6 859
Dividends paid (86 241) (86 241)
Balance at 31 December 2015 165 759 (524 228) 148 501 1 029 337 819 369
Supplementary information
(Audited)
Six months Six months Year
ended ended ended
31 December % 31 December 30 June
R000 Note 2015 change 2014 2015
1. Headline earnings reconciliation
Profit for the period 164 773 134 337 318 262
Fair value gain on remeasurement of investment in joint venture - - (59 977)
Write-off of net investment in joint venture - 4 111 4 111
Profit on sale of equipment - - (762)
Taxation effect - - 213
Headline earnings 164 773 19 138 448 261 847
Number of shares in issue (000's) 43 373 43 248 43 347
Weighted average number of shares in issue for EPS calculation (000's) 3 36 284 36 203 36 229
Weighted average number of shares in issue for diluted EPS calculation (000's) 3 36 500 36 509 36 755
Basic earnings per share (cents)
- undiluted 454,1 22 371,1 878,5
- fully diluted 451,4 23 368,0 865,9
Headline earnings per share (cents) 4
- undiluted 454,1 19 382,4 722,8
- fully diluted 451,4 19 379,2 712,4
2. Normalised headline earnings reconciliation
Headline earnings 164 773 138 448 261 847
BEE transaction charges 521 159 301
- Loss on fair value of interest rate swap - 51 67
- Sundry expenses 521 108 234
Notional interest charge on BEE shareholder loan 2 368 2 061 4 270
BEE interest on interest-bearing borrowings 2 087 2 019 4 041
Preference dividends paid/payable by the BEE entities 21 280 19 477 39 542
Deferred tax on BEE transactions (663) (577) (1 196)
Notional interest income on tenth anniversary employee share trust loan 2 330 2 154 4 478
Tenth anniversary employee share trust transaction charges and DWT (152) (111) 69
IFRS 2 share-based payment charge for the tenth anniversary employee share trust 1 588 1 581 3 137
Once-off deferred tax raised due to introduction of capital gains tax in Kenya - - 15 562
Normalised headline earnings 194 132 18 165 211 332 051
3. Number of shares (000's)
Weighted average number of shares in issue for EPS calculation 36 284 36 203 36 229
BEE shares treated as treasury shares 6 390 6 390 6 390
Tenth anniversary employees share trust treated as treasury shares 538 549 549
Weighted average number of shares in issue for normalised EPS calculation 43 212 43 142 43 168
Weighted average number of shares in issue for diluted EPS calculation 36 500 36 509 36 755
BEE shares treated as treasury shares 6 390 6 390 6 390
Tenth anniversary employees share trust treated as treasury shares 538 549 549
Weighted average number of shares in issue for diluted normalised EPS calculation 43 428 43 448 43 694
4. Normalised headline earnings per share (cents)
- undiluted 449,3 17 382,9 769,2
- fully diluted 447,0 18 380,2 759,9
5. Dividend declared per share (cents) 269,0 17 230,0 460,0
6. Dividend cover (times)
- calculated on normalised headline earnings 1,7 1,7 1,7
7. Interest-bearing debt to total capital and reserves (%)
- calculated on a normalised basis 16,3 14,1 17,4
8. Return on equity (%)
- calculated on a normalised basis 25,4 24,8 24,8
9. Net asset value per share (cents)
- calculated on a normalised basis 3 529 3 039 3 322
Segment report
Primary segment Central office
Courtyard City Lodge Town Lodge Road Lodge and other Total
R000 2015* 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Revenue 39 908 379 582 334 186 119 572 108 444 145 187 129 839 69 193 69 925 753 442 642 394
EBITDAR 18 152 227 208 201 849 59 785 52 427 83 733 71 705 (31 092) (25 312) 357 786 300 669
Land and hotel building rental (41 006) (35 180) (41 006) (35 180)
EDITDA 316 780 265 489
Depreciation and amortisation (2 168) (9 811) (11 330) (3 438) (3 744) (5 805) (6 460) (25 526) (20 852) (46 748) (42 386)
Results from operating activities 270 032 223 103
Share of profit from joint venture - 1 029 - 1 029
Geographic information South Africa Rest of Africa Total
2015 2014 2015 2014 2015 2014
Revenue 684 249 583 155 69 193 59 239 753 442 642 394
Share of profit from joint venture - 1 029 - - - 1 029
Non-current assets - property, plant and equipment 1 345 994 1 074 520 462 441 404 046 1 808 435 1 478 566
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
* Now disclosed separately following the acquisition of the remaining share of the Courtyard joint venture
COMMENTARY
Average occupancies at the group’s South African hotels rose to 69% in the six months to 31 December 2015, up from 68%
in the previous interim reporting period. All brands within the group increased their average occupancies during the
period, with the Courtyard Hotel and Road Lodge brands showing the highest relative increases.
Total revenue rose by 17,3% to R753,4 million. Revenue at the South African operations also increased by 17,3% to R684,3 million,
supported by a full period contribution from City Lodge Hotel Waterfall City, the first time inclusion of four Courtyard
Hotels in the revenue line, and an inflationary increase in the achieved room rate. Botswana occupancies were marginally
higher, while the Kenyan occupancies showed an increase after approximately two years of declining occupancies.
South African operating costs, on a normalised basis, were again well contained, increasing by only 4,5% on a room
sold basis and by only 3,7% if the four Courtyards, which were not in the prior period, are excluded. The normalised EBITDA
margin for South African operations was 42,1% compared to 42,0% in the previous corresponding period. Total normalised EBITDA
for the group increased by 17,5% to R318,9 million. Depreciation rose by 10,3%, interest income was slightly lower and
interest expense was 34,0% (R2,5 million) higher due to increased average borrowings.
Normalised profit before tax for the group rose by 17,2% to R265,3 million, while normalised headline earnings
increased by 17,5% to R194,1 million. Fully diluted normalised headline earnings per share increased by 17,6% to 447,0 cents.
In line with the group’s policy of paying out 60% of normalised earnings, a gross interim dividend of 269,0
cents per share has been declared, 17,0% higher than the previous year’s interim dividend.
DEVELOPMENT ACTIVITY
South Africa
The 90-room Road Lodge Pietermaritzburg opened its first phase of rooms in late November and the hotel was fully
opened by mid-December. The 148-room City Lodge Hotel Newtown opened its first 25 rooms in late December and the hotel will
be fully opened by the end of the month.
East Africa
The site for the 169-room City Lodge Hotel Two Rivers in Nairobi was handed over to the contractor towards the end of
November and earthworks and work on the foundations have commenced. It is expected that the hotel will be opened in the
second quarter of 2017.
Construction of the 147-room City Lodge Hotel Dar es Salaam has been delayed due to outstanding regulatory approvals
impacted by Tanzania’s general election and the appointment of a new cabinet. It is nevertheless expected that
construction will commence within the next couple of months for completion towards the end of the second quarter/beginning of the
third quarter 2017.
In Kampala, liaison is ongoing with the prospective landlord to reach a feasible outcome for the development of a
150-room City Lodge Hotel.
Southern Africa
Final approvals are still being sought in Maputo towards the development of a 148-room City Lodge Hotel. It is
anticipated that construction will begin in the second quarter of 2016 and that the hotel will open during the third quarter of
2017.
In Namibia, handover of the basement by the landlord, on top of which the 151-room Town Lodge Windhoek will be built,
is on schedule for the end of April, with construction of the hotel commencing shortly thereafter. The hotel is expected
to open during the second quarter of 2017.
It is pleasing to report that the roll-out of the group’s bespoke property management system, Lodgix, has been
completed across all hotels. This state-of-the-art system will improve management efficiencies at all of our hotels and further
enhance the guest experience.
DIRECTORATE
It was a great pleasure to welcome Nairobi-based Vincent Rague to the board as an independent non-executive director
with effect 1 January 2016. His considerable advisory, banking, investment and corporate finance experience will be of
benefit to the group’s ongoing expansion into selected parts of east and southern Africa.
OUTLOOK
The trend of higher occupancies has continued in the second half of the financial year, albeit at a slower pace.
While a positive momentum is expected to be maintained in the medium term, it is likely that business and government travel
will be negatively affected in the lead-up to and holding of local government elections which are required to take place
between 18 May and 16 August 2016.
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 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 derivative
financial instruments carried at fair value and the defined benefit plan measured at the fair value of plan assets, less the
present value of the defined benefit obligation, 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 54 of 269 cents per ordinary share (gross) in respect of
the six months ended 31 December 2015.
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);
- The gross local dividend amount is 269 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 228,65 cents per ordinary share for shareholders liable to pay the Dividends Tax;
- The company currently has 43 372 593 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, 4 March 2016
Shares commence trading ex dividend Monday, 7 March 2016
Record date Friday, 11 March 2016
Payment of dividend Monday, 14 March 2016
Share certificates may not be dematerialised or rematerialised between Monday, 7 March 2016 and Friday, 11 March 2016,
both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive 18 February 2016
Registered office: The Lodge, Bryanston Gate Office Park, Corner 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, VM Rague+,
Dr KIM Shongwe, W Tlou, AC Widegger* *Executive +Kenyan
Company secretary: MC van Heerden
Sponsor: JP Morgan Equities South Africa Proprietary Limited
www.clhg.com
Date: 18/02/2016 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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