Wrap Text
Unaudited interim report for the six months ended 31 December 2016
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 2016
- Average occupancies
66%
- Normalised diluted headline EPS
+2%
- Return on equity
24%
Statements of comprehensive income
(Audited)
Six months Six months Year
ended ended ended
31 December % 31 December 30 June
R000 Note 2016 change 2015 2016
Revenue 791 273 5 753 442 1 493 163
Administration and marketing costs (50 200) (54 893) (98 019)
BEE transaction charges 2 (351) (521) (858)
Operating costs excluding depreciation (408 400) (381 248) (773 490)
332 322 5 316 780 620 796
Depreciation and amortisation (51 640) (46 748) (96 399)
Results from operating activities 280 682 4 270 032 524 397
Interest income 3 216 624 2 268
Total interest expense (40 348) (35 560) (74 523)
Interest expense (11 195) (9 825) (21 002)
Notional interest on BEE shareholder loan 2 (2 720) (2 368) (4 905)
BEE interest expense 2 (2 333) (2 087) (4 248)
BEE preference dividend 2 (24 100) (21 280) (44 368)
Profit before taxation 243 550 4 235 096 452 142
Taxation (77 110) (70 323) (136 854)
Profit for the period 166 440 1 164 773 315 288
Other comprehensive income
Items that will never be reclassified to profit and loss
Defined benefit plan remeasurements - - 6 827
Income tax on other comprehensive income - - (1 912)
Items that are or may be reclassified to profit and loss
Foreign currency translation differences (22 933) 44 004 34 093
Total comprehensive income for the period 143 507 (31) 208 777 354 296
Statements of financial position
(Audited)
31 December 31 December 30 June
R000 2016 2015 2016
ASSETS
Non-current assets 1 910 442 1 851 573 1 895 445
Property, plant and equipment 1 856 505 1 808 435 1 844 140
Intangible assets 47 713 38 077 45 558
Deferred taxation 6 224 5 061 5 747
Current assets 391 335 302 753 306 648
Inventories 7 763 8 719 7 734
Trade receivables 91 688 114 295 97 408
Other receivables 78 702 45 050 35 948
Taxation - 5 847 4 389
Other investments 51 945 - 56 860
Cash and cash equivalents 161 237 128 842 104 309
Total assets 2 301 777 2 154 326 2 202 093
EQUITY
Capital and reserves 925 959 819 369 871 828
Share capital and premium 173 994 165 759 167 958
BEE investment and incentive scheme shares (526 729) (524 228) (524 228)
Retained earnings 1 154 421 1 029 337 1 083 082
Other reserves 124 273 148 501 145 016
LIABILITIES
Non-current liabilities 554 829 1 172 621 1 196 572
Interest-bearing borrowings 300 000 250 000 270 000
BEE interest-bearing borrowings - 44 120 44 120
BEE preference shares - 406 100 397 500
BEE shareholder’s loan - 35 356 37 893
BEE preference share dividend accrual - 183 350 200 171
Other non-current liabilities 100 692 115 694 102 203
Deferred taxation 154 137 138 001 144 685
Current liabilities 820 989 162 336 133 693
BEE interest-bearing borrowings 44 120 - -
BEE preference shares 390 700 - -
BEE shareholder’s loan 40 613 - -
BEE preference share dividend accrual 221 169 3 074 3 147
Trade and other payables 122 736 116 602 130 546
Taxation payable 1 651 - -
Bank overdraft - 42 660 -
Total liabilities 1 375 818 1 334 957 1 330 265
Total equity and liabilities 2 301 777 2 154 326 2 202 093
Note: The company has authorised capital commitments of R662 million of which approximately
R447 million has been contracted. It is anticipated that approximately R328 million of the
authorised commitments will be spent by 30 June 2017. In addition, R96 million has been
authorised in respect of the construction of buildings to be leased, of which, R25 million
(included in other receivables) has been spent as at 31 December 2016. City Lodge is funding
the expenditure during construction and will be refunded the entire amount, by the landlord,
on completion.
Statements of changes in equity
Share
capital and Treasury Other Retained
R000 premium shares reserves earnings Total
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
Total comprehensive income for the period - - (9 911) 155 430 145 519
Profit for the period 150 515 150 515
Other comprehensive income
Defined-benefit plan remeasurements, net of tax 4 915 4 915
Foreign currency translation differences (9 911) (9 911)
Transactions with owners, recorded directly in equity 2 199 - 6 426 (101 685) (93 060)
Issue of new ordinary shares 2 199 2 199
Incentive scheme shares (830) (3 470) (4 300)
Share compensation reserve 7 256 7 256
Dividends paid (98 075) (98 075)
Distribution by BEE structured entity (140) (140)
Balance at 30 June 2016 167 958 (524 228) 145 016 1 083 082 871 828
Total comprehensive income for the period - - (22 933) 166 440 143 507
Profit for the period 166 440 166 440
Other comprehensive income
Foreign currency translation differences (22 933) (22 933)
Transactions with owners, recorded directly in equity 6 036 (2 501) 2 190 (95 101) (89 376)
Issue of new ordinary shares 6 036 6 036
Incentive scheme shares (2 501) (5 722) (1 889) (10 112)
Share compensation reserve 7 912 7 912
Dividends paid (93 212) (93 212)
Balance at 31 December 2016 173 994 (526 729) 124 273 1 154 421 925 959
Summarised statements of cash flows
Six months Six months (Audited)
ended ended Year ended
31 December 31 December 30 June
R000 2016 2015 2016
Operating profit before working capital changes 338 548 327 033 635 780
(Increase)/decrease in working capital (19 818) (22 077) 18 841
Cash generated by operations 318 730 304 956 654 621
Interest received 3 215 624 2 268
Interest paid (19 777) (18 061) (37 593)
Taxation paid (61 652) (68 486) (129 657)
Dividends paid (93 212) (86 241) (184 316)
Cash inflow from operating activities 147 304 132 792 305 323
Cash utilised in investing activities (104 575) (95 372) (191 893)
- investment to maintain operations (13 833) (43 429) (81 963)
- investment to expand operations (65 487) (51 943) (110 345)
- expenditure refundable on operating lease (25 055) - -
- investments and loans (200) - -
- proceeds on disposal of property, plant and equipment - - 415
Cash inflows/(outflows) from financing activities 19 124 (43 468) (40 659)
- proceeds from issue of ordinary shares 6 036 1 757 3 956
- purchase of incentive scheme shares (10 112) (39 225) (43 525)
- increase in interest-bearing borrowings 30 000 - 20 000
- redemption of BEE preference shares (6 800) (6 000) (14 600)
- settlement of retirement benefit obligation - - (6 350)
- distribution by BEE structured entity - - (140)
Net increase/(decrease) in cash and cash equivalents 61 853 (6 048) 72 771
Cash and cash equivalents at beginning of the period 104 309 73 346 73 346
Reclassification of cash and cash equivalents to other investments - - (56 860)
Effect of movements in exchange rates on cash held (4 925) 18 884 15 052
Cash and cash equivalents at end of the period 161 237 86 182 104 309
Segment report
Primary segment Courtyard City Lodge Town Lodge Road Lodge
R000 2016 2015 2016 2015 2016 2015 2016 2015
Revenue 35 855 39 908 405 723 379 582 121 881 119 572 154 297 145 187
EBITDAR 14 269 18 152 245 445 227 208 62 323 59 785 88 259 83 733
Land and hotel building rental
EDITDA
Depreciation and amortisation (2 056) (2 168) (11 435) (9 811) (3 716) (3 438) (5 906) (5 805)
Results from operating activities
Segment report
Primary segment Central office and other Total
R000 2016 2015 2016 2015
Revenue 73 517 69 193 791 273 753 442
EBITDAR (34 330) (31 092) 375 966 357 786
Land and hotel building rental (43 644) (41 006) (43 644) (41 006)
EDITDA 332 322 316 780
Depreciation and amortisation (28 527) (25 526) (51 640) (46 748)
Results from operating activities 280 682 270 032
Geographic information South Africa Rest of Africa Total
2016 2015 2016 2015 2016 2015
Revenue 717 756 684 249 73 517 69 193 791 273 753 442
Non-current assets - property, plant and equipment 1 303 177 1 345 994 553 328 462 441 1 856 505 1 808 435
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
(Audited)
Six months Six months Year
ended ended ended
31 December % 31 December 30 June
R000 Note 2016 change 2015 2016
1. Headline earnings reconciliation
Profit for the period 166 440 164 773 315 288
Profit on sale of equipment - - (229)
Taxation effect - - 67
Headline earnings 166 440 1 164 773 315 126
Number of shares in issue (000’s) 43 505 43 373 43 407
Weighted average number of shares in issue for EPS calculation (000’s) 3 36 403 36 284 36 309
Weighted average number of shares in issue for diluted EPS calculation (000’s) 3 36 517 36 500 36 537
Basic earnings per share (cents)
- undiluted 457,2 1 454,1 868,3
- fully diluted 455,8 1 451,4 862,9
Headline earnings per share (cents) 4
- undiluted 457,2 1 454,1 867,9
- fully diluted 455,8 1 451,4 862,5
2. Normalised headline earnings reconciliation
Headline earnings 166 440 164 773 315 126
BEE transaction charges 351 521 858
Notional interest charge on BEE shareholder loan 2 720 2 368 4 905
BEE interest on interest-bearing borrowings 2 333 2 087 4 248
Preference dividends paid/payable by the BEE entities 24 100 21 280 44 368
Deferred tax on BEE transactions (761) (663) (1 373)
Notional interest income on 10th anniversary employee share trust loan - 2 330 2 330
10th anniversary employee share trust transaction charges and DWT (228) (152) 49
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 2 171 1 588 3 158
Normalised headline earnings 197 126 2 194 132 373 669
3. Number of shares (000’s)
Weighted average number of shares in issue for EPS calculation 36 403 36 284 36 309
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 538 527
Weighted average number of shares in issue for normalised EPS calculation 43 302 43 212 43 226
Weighted average number of shares in issue for diluted EPS calculation 36 517 36 500 36 537
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 538 527
Weighted average number of shares in issue for diluted normalised EPS calculation 43 416 43 428 43 454
4. Normalised headline earnings per share (cents)
- undiluted 455,2 1 449,3 864,5
- fully diluted 454,0 2 447,0 859,9
5. Dividend declared per share (cents) 272,0 1 269,0 517,0
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 17,9 16,3 16,8
8. Return on equity (%)
- calculated on a normalised basis 23,5 25,4 24,5
9. Net asset value per share (cents)
- calculated on a normalised basis 3 852 3 529 3 704
COMMENTARY
Average occupancies for the group in the six months to 31 December 2016 declined by three percentage points to 66%.
This was due mainly to a weaker performance in South Africa where occupancies also fell by three percentage points.
Occupancies in Botswana were on a par with the previous year while the Kenyan operations achieved slightly higher
occupancies.
As anticipated in the 2016 financial year end results commentary, the group’s South African hotels were negatively
affected by the prevailing low business and consumer confidence. This was exacerbated by the lead up to and the
holding of the local government elections in August. Coastal hotels were shielded to some extent by favourable
inbound tourism volumes.
Total revenue grew by 5,0% to R791,3 million, benefiting from an inflationary increase in room rates and first time
contributions from the 90-room Road Lodge Pietermaritzburg and the 148-room City Lodge Hotel Newtown. This hotel has,
however, had a relatively disappointing start.
Operating costs were again well contained, with total normalised operating costs increasing by 7,0%. The total
normalised EBITDA margin for the group was in line with the previous year, while the South African normalised EBITDA
margin increased by 0,3 percentage points to 42,4%. The Botswana and Kenya margins were slightly lower due to a weakening
of their respective exchange rates. Total normalised EBITDA for the group increased by 5,0% to R334,9 million. Depreciation
and amortisation rose by 10,5%, interest income rose slightly due to higher average cash balances, and interest paid
increased due to higher interest rates and R30 million of additional borrowings.
Normalised profit before tax for the group increased by 3,7% to R275,2 million, while normalised headline earnings
grew by only 1,5% to R197,1 million as a result of a slightly higher effective tax rate. Fully diluted normalised headline
earnings per share increased by 1,6% to 454,0 cents.
The funding associated with the group's BEE transaction, which was concluded in 2008, is due for redemption and/or repayment
on 31 December 2017. As a result, the associated liabilities on the balance sheet, which are well covered by the value of the
underlying shares, have been reclassified from non-current to current.
In line with the group's policy of paying out 60% of normalised earnings, a gross interim dividend of 272,0 cents per share
has been declared, 1,1% higher than the previous year’s interim dividend.
DEVELOPMENT ACTIVITY
East Africa
Significant progress has been achieved in the development of our new East African hotels - the 172-room City Lodge Hotel
Two Rivers in Nairobi, Kenya, and the 147-room City Lodge Hotel Dar es Salaam in Tanzania's capital city. City Lodge Hotel
Two Rivers is expected to be completed in the beginning of the third quarter of 2017 and City Lodge Hotel Dar es Salaam is
likely to open its first rooms towards the end of the fourth quarter of 2017.
Southern Africa
In Namibia, development of the 147-room Town Lodge Windhoek is progressing well and the hotel is expected to open in
the third quarter of 2017.
Final approvals were received in early January for the development of a 148-room City Lodge Hotel in Maputo, Mozambique.
Contractors began work on the site in late January and it is expected that the hotel will open in the second quarter
of 2018.
DIRECTORATE
It was a great pleasure to welcome Sizakele Marutlulle to the board as an independent non-executive director with
effect from 1 October 2016. Her considerable experience in brand communication and business leadership across various
industries will be of benefit to the group.
OUTLOOK
Trading in the first six weeks of 2017 has been mixed, making it difficult to ascertain an outlook trend for the second half
of the financial year. Stronger economic growth and improved business and consumer confidence would be catalysts for a stronger
performance by the group.
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 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 56 of 272 cents per ordinary share (gross) in respect of the six months
ended 31 December 2016.
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 272 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 231.2 cents per ordinary share for shareholders liable to pay the Dividends Tax;
- The company currently has 43 504 813 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 Tuesday, 7 March 2017
Shares commence trading ex dividend Wednesday, 8 March 2017
Record date Friday, 10 March 2017
Payment of dividend Monday, 13 March 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 8 March 2017 and Friday, 10 March 2017,
both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
16 February 2017
Registered office: The Lodge, Bryanston Gate Office Park, Corner Homestead Avenue and Main Road, Bryanston, 2191
Transfer secretaries: Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196
Directors: BT Ngcuka (chairman), C Ross (chief executive)*, GG Huysamer, FWJ Kilbourn, MSP Marutlulle, N Medupe, SG
Morris, VM Rague+, Dr KIM Shongwe, AC Widegger*
*Executive +Kenyan
Company secretary: MC van Heerden
Sponsor: JP Morgan Equities South Africa Proprietary Limited
www.clhg.com
Date: 16/02/2017 10:15:00 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.
Sharenet Sites 
