Wrap Text
Unaudited interim report for the six months ended 31 December 2017
City Lodge Hotels Limited
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE000117792
Unaudited interim report for the six months ended 31 December 2017
- Average group occupancies
63%
- Normalised diluted headline EPS
-12%
- Return on equity
20%
Statements of comprehensive income
Six months Six months (Audited)
ended ended Year ended
31 December % 31 December 30 June
R000 Note 2017 change 2016 2017
Revenue 787 084 (1) 791 273 1 520 410
Administration and marketing costs (52 562) (50 200) (94 844)
BEE transaction charges 2 (397) (351) (587)
Operating costs excluding depreciation (424 008) (408 400) (825 850)
310 117 (7) 332 322 599 129
Depreciation and amortisation (51 879) (51 640) (102 779)
Results from operating activities 258 238 (8) 280 682 496 350
Interest income 2 107 3 216 6 603
Total interest expense (33 146) (40 348) (77 558)
Interest expense (3 599) (11 195) (19 167)
Notional interest on BEE shareholder loan 2 (3 124) (2 720) (5 635)
BEE interest expense 2 (2 253) (2 333) (4 597)
BEE preference dividend 2 (24 170) (24 100) (48 159)
Profit before taxation 227 199 (7) 243 550 425 395
Taxation (69 909) (77 110) (130 254)
Profit for the period 157 290 (5) 166 440 295 141
Other comprehensive income
Items that will never be reclassified to profit and loss
Defined benefit plan remeasurements - - (573)
Income tax on other comprehensive income - - 160
Items that are or may be reclassified to profit and loss
Foreign currency translation differences (16 462) (22 933) (35 870)
Total comprehensive income for the period 140 828 (2) 143 507 258 858
Statements of financial position
R000 31 December 31 December (Audited)
2017 2016 30 June 2017
ASSETS
Non-current assets 2 138 624 1 910 442 1 978 493
Property, plant and equipment 2 070 708 1 856 505 1 917 022
Intangible assets and goodwill 51 418 47 713 50 486
Investments 200 - 200
Deferred taxation 16 298 6 224 10 785
Current assets 376 825 391 335 372 367
Inventories 11 969 7 763 6 845
Trade receivables 87 212 91 688 95 092
Other receivables 108 622 78 702 130 549
Other investments 23 149 51 945 24 217
Cash and cash equivalents 145 873 161 237 115 664
Total assets 2 515 449 2 301 777 2 350 860
EQUITY
Capital and reserves 991 317 925 959 934 311
Share capital and premium 179 503 173 994 179 377
BEE investment and incentive scheme shares (524 984) (526 729) (526 729)
Retained earnings 1 236 988 1 154 421 1 167 252
Other reserves 99 810 124 273 114 411
LIABILITIES
Non-current liabilities 1 317 550 554 829 560 688
Interest-bearing borrowings 350 000 300 000 320 000
BEE interest-bearing borrowings 44 120 - -
BEE preference shares 375 800 - -
BEE shareholder's loan 46 652 - -
BEE B preference share dividend accrual 255 280 - -
Other non-current liabilities 87 330 100 692 89 517
Deferred taxation 158 368 154 137 151 171
Current liabilities 206 582 820 989 855 861
BEE interest-bearing borrowings - 44 120 44 120
BEE preference shares - 390 700 382 200
BEE shareholder's loan - 40 613 43 528
BEE B preference share dividend accrual - 221 169 236 466
Trade and other payables 160 663 122 736 142 004
Taxation payable 4 693 1 651 7 543
Bank overdraft 41 226 - -
Total liabilities 1 524 132 1 375 818 1 416 549
Total equity and liabilities 2 515 449 2 301 777 2 350 860
Note: The company has authorised capital commitments of R561 million of which approximately R345 million has been
contracted. It is anticipated that approximately R362 million of the authorised commitments will be spent by
30 June 2018. In addition, R37 million has been authorised in respect of the construction of buildings to be
leased, of which, R13 million (included in other receivables) has been spent as at 31 December 2017. 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 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
Total comprehensive income for the period - - (12 937) 128 288 115 351
Profit for the period 128 701 128 701
Other comprehensive income
Defined-benefit plan remeasurements, net of tax (413) (413)
Foreign currency translation differences (12 937) (12 937)
Other movements
Deferred tax on settlement and curtailment of defined-benefit fund (1 095) (1 095)
Transactions with owners, recorded directly in equity 5 383 - 3 075 (114 362) (105 904)
Issue of new ordinary shares 5 383 5 383
Incentive scheme shares (4 483) (14 479) (18 962)
Share compensation reserve 7 558 7 558
Dividends paid (99 743) (99 743)
Distribution by BEE structured entity (140) (140)
Balance at 30 June 2017 179 377 (526 729) 114 411 1 167 252 934 311
Total comprehensive income for the period - - (16 462) 157 290 140 828
Profit for the period 157 290 157 290
Other comprehensive income
Foreign currency translation differences (16 462) (16 462)
Transactions with owners, recorded directly in equity 126 1 745 1 861 (87 554) (83 822)
Issue of new ordinary shares 126 126
Incentive scheme shares (4 255) (500) (1 437) (6 192)
Share compensation reserve 6 000 2 361 8 361
Dividends paid (86 117) (86 117)
Balance at 31 December 2017 179 503 (524 984) 99 810 1 236 988 991 317
Summarised statements of cash flows
Six months Six months (Audited)
ended ended Year ended
31 December 31 December 30 June
R000 2017 2016 2017
Operating profit before working capital changes 294 078 338 548 626 227
Decrease/(increase) in working capital 56 277 (19 818) (17 530)
Cash generated by operations 350 355 318 730 608 697
Interest received 2 107 3 215 6 603
Interest paid (11 450) (19 777) (35 915)
Taxation paid (71 476) (61 652) (117 034)
Dividends paid (86 117) (93 212) (192 955)
Cash inflow from operating activities 183 419 147 304 269 396
Cash utilised in investing activities (211 206) (104 575) (267 630)
- investment to maintain operations (26 342) (13 833) (38 008)
- investment to expand operations (197 171) (65 487) (164 353)
- expenditure refundable on operating lease (12 693) (25 055) (65 268)
- investments and loans - (200) (200)
- proceeds on disposal of property, plant and equipment 25 000 - 199
Cash inflows from financing activities 17 534 19 124 16 905
- proceeds from issue of ordinary shares 126 6 036 11 419
- purchase of incentive scheme shares (6 192) (10 112) (29 074)
- increase in interest-bearing borrowings 30 000 30 000 50 000
- redemption of BEE preference shares (6 400) (6 800) (15 300)
- distribution by BEE structured entity - - (140)
Net (decrease)/increase in cash and cash equivalents (10 253) 61 853 18 671
Cash and cash equivalents at beginning of the period 115 664 104 309 104 309
Effect of movements in exchange rates on other investments 1 068 - 8 663
Effect of movements in exchange rates on cash held (1 832) (4 925) (15 979)
Cash and cash equivalents at end of the period 104 647 161 237 115 664
Note: Cash and cash equivalents held with Chase Bank, Kenya, which was placed into receivership, have been
reclassified as other investments pending resolution thereof.
Segment report
Primary segment Courtyard City Lodge Town Lodge Road Lodge
R000 2017 2016 2017 2016 2017 2016 2017 2016
Revenue 36 663 35 855 414 690 405 723 117 503 121 881 162 422 154 297
EBITDAR 14 734 14 269 241 873 245 445 55 343 62 323 90 331 88 259
Land and hotel building rental
EBITDA
Depreciation and amortisation (2 073) (2 056) (11 172) (11 435) (3 662) (3 716) (5 601) (5 906)
Results from operating activities
Segment report
Primary segment Central office and other Total
R000 2017 2016 2017 2016
Revenue 55 806 73 517 787 084 791 273
EBITDAR (46 596) (34 330) 355 685 375 966
Land and hotel building rental (45 568) (43 644) (45 568) (43 644)
EBITDA 310 117 332 322
Depreciation and amortisation (29 371) (28 527) (51 879) (51 640)
Results from operating activities 258 238 280 682
Geographic information South Africa Rest of Africa Total
2017 2016 2017 2016 2017 2016
Revenue 731 278 717 756 55 806 73 517 787 084 791 273
Non-current assets - property, plant and equipment 1 276 386 1 303 177 794 322 553 328 2 070 708 1 856 505
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
Six months Six months (Audited)
ended ended Year ended
31 December % 31 December 30 June
R000 Note 2017 change 2016 2017
1. Headline earnings reconciliation
Profit for the period 157 290 166 440 295 141
(Profit)/loss on sale of property, plant and equipment (21 923) - 249
Taxation effect 4 911 - (75)
Headline earnings 140 278 (16) 166 440 295 315
Number of shares in issue (000's) 43 574 43 505 43 572
Weighted average number of shares in issue for EPS calculation (000's) 3 36 546 36 403 36 448
Weighted average number of shares in issue for diluted EPS calculation (000's) 3 36 604 36 517 36 548
Basic earnings per share (cents)
- undiluted 430,4 (6) 457,2 809,8
- fully diluted 429,7 (6) 455,8 807,5
Headline earnings per share (cents) 4
- undiluted 383,8 (16) 457,2 810,2
- fully diluted 383,2 (16) 455,8 808,0
2. Normalised headline earnings reconciliation
Headline earnings 140 278 166 440 295 315
BEE transaction charges 397 351 587
Notional interest charge on BEE shareholder loan 3 124 2 720 5 635
BEE interest on interest-bearing borrowings 2 253 2 333 4 597
Preference dividends paid/payable by the BEE entities 24 170 24 100 48 159
Deferred tax on BEE transactions (875) (761) (1 578)
10th anniversary employee share trust transaction charges and DWT (289) (228) 7
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 2 087 2 171 4 306
Impairment of other investment in Chase Bank Kenya (net of tax) - - 16 786
Gain on settlement and curtailment of defined benefit fund - - (11 629)
Pre-opening expenses write-off (net of tax) 3 127 - -
Normalised headline earnings 174 272 (12) 197 126 362 185
3. Number of shares (000's)
Weighted average number of shares in issue for EPS calculation 36 546 36 403 36 448
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 509 509
Weighted average number of shares in issue for normalised EPS calculation 43 445 43 302 43 347
Weighted average number of shares in issue for diluted EPS calculation 36 604 36 517 36 548
BEE shares treated as treasury shares 6 390 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 509 509
Weighted average number of shares in issue for diluted normalised EPS calculation 43 503 43 416 43 447
4. Normalised headline earnings per share (cents)
- undiluted 401,1 (12) 455,2 835,5
- fully diluted 400,6 (12) 454,0 833,6
5. Dividend declared per share (cents) 253,0 (7) 272,0 500,0
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 19,8 17,9 18,7
8. Return on equity (%)
- calculated on a normalised basis 19,7 23,5 21,8
9. Net asset value per share (cents)
- calculated on a normalised basis 4 063 3 852 3 928
Commentary
Average occupancies for the group in the six months to 31 December 2017 declined to 63% from 66% in the previous
interim period.
While occupancies in Botswana were on a par with the previous year, Kenyan occupancies, throughout the period, were
severely affected by the disruption caused by the country's election and subsequent re-run of the election. In South
Africa, occupancies were down two percentage points to 64%, as a result of the depressed business and consumer confidence
levels. In the Cape Town area, occupancies remain good albeit that occupancy in the October to December quarter was
slightly weaker, partly due to the severe drought in the Western Cape. This trend has continued into 2018.
Total revenue decreased by 0,5% to R787,1 million, benefiting from a slightly below inflationary increase in room rates
and a small first time contribution from the 147-room Town Lodge Windhoek, which opened its first 45 rooms in early
October and was fully operational by mid-November.
Total operating costs, which include an unrealised foreign exchange loss of R13,4 million due to the sharp strengthening
in the Rand in December, were again well contained, increasing by 8,1% and by 5,6% excluding the foreign exchange loss.
The South African operating costs increased by 5,4%.
The total normalised EBITDA margin, excluding a R21,9 million profit on the sale of vacant land, was down by 4,8 percentage
points to 37,5%, whilst the South African EBITDA margin was down by 1,9 percentage points. Total normalised EBITDA for the
group decreased by 11,8% to R295,2 million.
Normalised profit before tax for the group decreased by 12,1% to R241,8 million, while normalised headline earnings
decreased by 11,6% to R174,3 million and by 7,8% pre the unrealised foreign exchange loss. Fully diluted normalised
headline earnings per share decreased by 11,8% to 400,6 cents.
Due to the group's development of City Lodge Hotel at Two Rivers Mall in Nairobi, an Investment Deduction tax allowance
of 150% of the cost of the building can be claimed on completion and sign-off by the Kenya Revenue Authority. This will
lead to a zero tax charge for the entire Kenya operation until such time as the allowance has been fully utilised. This
will be available for the current financial year if sign-off is achieved by the end of June.
After taking the unrealised foreign exchange movements into account and in line with the group's policy of paying out 60%
of normalised headline earnings, a gross interim dividend of 253,0 cents per share has been declared, 7,0% lower than the
previous year.
The group had deposits of R46,3 million with Chase Bank, Kenya, when it was placed into receivership in April 2016.
The carrying value was impaired by 50% in the 2017 financial year and the balance reclassified as other investments.
The Central Bank of Kenya announced that a sale agreement had been concluded with State Bank of Mauritius on 4 January 2018.
It was further announced that depositors would have access to 75% of their deposits, with 37,5% being available from the
effective date and the balance of 37,5% in three equal annual instalments. There has to date not been an announcement of
the effective date and as such no adjustment has been made to the impairment charge.
Development activity
South Africa
The 62-room extension of City Lodge Hotel at OR Tambo Airport is on track for completion towards the end of May. This
will take the hotel's capacity to 365 rooms. Earthworks have begun for the development of a 158-room Town Lodge in Umhlanga
Ridge and planning is at an advanced stage for the development of the 90-room Road Lodge in Polokwane, both of which were
previously announced.
East Africa
After experiencing further delays, the 171-room City Lodge Hotel at Two Rivers Mall in Nairobi, Kenya, opened its first
40 rooms in January and is expected to be fully operational during the course of April. The 147-room City Lodge Hotel
Dar es Salaam in Tanzania is expected to be fully operational during May/June.
Southern Africa
The development of the 148-room City Lodge Hotel Maputo in Mozambique is expected to open in July.
Following the opening of all the above developments, the group will have 63 hotels in six countries in East and Southern
Africa, offering a total of 7 995 rooms.
OUTLOOK
Occupancies at the Kenyan operations have shown good signs of recovery in the first six weeks of 2018. In South Africa
there have been encouraging signs of improving sentiment and meaningful political change that could boost the economy,
these have however yet to translate into noticeably stronger trading. It is expected that the group will be an early
beneficiary of higher levels of confidence.
The group has taken a number of proactive steps to reduce water consumption at its six hotels in the greater Cape Town
area and alternative sources of supply are being investigated.
Basis of preparation
These condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standards, 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 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 58 of 253,0 cents per ordinary share (gross) in respect of
the six months ended 31 December 2017.
The dividend will be subject to Dividend Tax. In accordance with paragraphs 11.17 (a) (i) to (ix) 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 Dividend Tax rate is 20% (twenty per centum);
- The gross local dividend amount is 253,0 cents per ordinary share for shareholders exempt from the Dividend Tax;
- The net local dividend amount is 202,4 cents per ordinary share for shareholders liable to pay the Dividend Tax;
- The company currently has 43 573 893 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, 6 March 2018
Shares commence trading ex dividend Wednesday, 7 March 2018
Record date Friday, 9 March 2018
Payment of dividend Monday, 12 March 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 7 March 2018 and Friday, 9 March 2018,
both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
15 February 2018
Registered office:
The Lodge, Bryanston Gate Office Park, cnr. 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*
†Kenyan *Executive
Company secretary:
MC van Heerden
Sponsor:
Nedbank Corporate and Investment Banking
www.clhg.com
Date: 15/02/2018 10:48:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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