Wrap Text
Group preliminary results for the year ended 30 June 2018
City Lodge Hotels Limited
Incorporated in the Republic of South Africa
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE 000117792
Group preliminary results for the year ended 30 June 2018
- Average group occupancies 59%
- Normalised diluted HEPS -9%
- Return on equity 19%
Condensed consolidated statement Of comprehensive income
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000's Note 2018 change 2017
Revenue 1 498 426 (1) 1 520 410
Other income 21 923 -
Administration and marketing costs (99 841) (94 844)
BEE transaction charges 2 (2 267) (587)
Operating costs excluding depreciation (845 483) (825 850)
572 758 (4) 599 129
Depreciation and amortisation (105 217) (102 779)
Results from operating activities 467 541 (6) 496 350
Interest income 4 031 6 603
Total interest expense (63 867) (77 558)
Interest expense (5 857) (19 167)
Notional interest on BEE shareholder loan 2 (6 472) (5 635)
BEE interest expense 2 (4 425) (4 597)
BEE preference dividend 2 (47 113) (48 159)
Profit before taxation 407 705 (4) 425 395
Taxation (128 267) (130 254)
Profit for the period 279 438 (5) 295 141
Other comprehensive income
Items that will never be reclassified to profit or loss
Defined benefit plan remeasurements - (573)
Income tax on other comprehensive income - 160
Items that are or may be reclassified to profit or loss
Foreign currency translation differences 27 825 (35 870)
Total comprehensive income for the period 307 263 19 258 858
Basic earnings per share (cents)
- undiluted 764,7 (6) 809,8
- fully diluted 762,9 (6) 807,5
Condensed consolidated statement Of financial position
(Reviewed) (Audited)
30 June 30 June
R000's 2018 2017
ASSETS
Non current assets 2 352 684 1 978 493
Property, plant and equipment 2 285 396 1 917 022
Intangible assets and goodwill 54 678 50 486
Investments 200 200
Deferred taxation 12 410 10 785
Current assets 333 046 372 367
Inventories 7 298 6 845
Trade receivables 79 167 95 092
Other receivables 159 021 130 549
Taxation 8 282 -
Other investments 26 185 24 217
Cash and cash equivalents 53 093 115 664
Total assets 2 685 730 2 350 860
EQUITY AND LIABILITIES
Capital and reserves 1 057 866 934 311
Share capital and premium 179 503 179 377
BEE investment and incentive scheme shares (524 984) (526 729)
Retained earnings 1 265 174 1 167 252
Other reserves 138 173 114 411
Non-current liabilities 1 446 619 560 688
Interest-bearing borrowings 450 000 320 000
BEE interest-bearing borrowings 44 120 -
BEE preference shares 367 600 -
BEE shareholder's loan 50 000 -
BEE preference share dividend accrual 273 477 -
Other non-current liabilities 86 275 89 517
Deferred taxation 175 147 151 171
Current liabilities 181 245 855 861
BEE interest-bearing borrowings - 44 120
BEE preference shares - 382 200
BEE shareholder's loan - 43 528
BEE preference share dividend accrual - 236 466
Trade and other payables 181 245 142 004
Taxation payable - 7 543
Total liabilities 1 627 864 1 416 549
Total equity and liabilities 2 685 730 2 350 860
Note: The company has authorised capital commitments of R610 million of which approximately
R460 million has been contracted. It is anticipated that approximately R560 million will be
spent by 30 June 2019. In addition, R37 million had been authorised in respect of the construction
of buildings to be leased, of which R36 million (included in other receivables) has been spent
as at 30 June 2018. City Lodge is funding the expenditure during construction and will be refunded
the entire amount by the landlord on completion.
Condensed consolidated statement Of changes in equity
BEE
investment
and incentive
Share capital scheme Other Retained
R000's and premium shares reserves earnings Total
Balance at 1 July 2016 167 958 (524 228) 145 016 1 083 082 871 828
Total comprehensive income for the period - - (35 870) 294 728 258 858
Profit for the period 295 141 295 141
Other comprehensive income
Defined-benefit plan remeasurements, net of tax (413) (413)
Foreign currency translation differences (35 870) (35 870)
Other movements
Deferred tax on settlement and curtailment of
defined benefit fund (1 095) (1 095)
Transactions with owners, recorded directly
in equity 11 419 (2 501) 5 265 (209 463) (195 280)
Issue of new ordinary shares 11 419 11 419
Incentive scheme shares (2 501) (10 205) (16 368) (29 074)
Share compensation reserve 15 470 15 470
Dividends paid (192 955) (192 955)
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 - - 27 825 279 438 307 263
Profit for the period 279 438 279 438
Other comprehensive income
Foreign currency translation differences 27 825 27 825
Transactions with owners, recorded directly in equity 126 1 745 (4 063) (181 516) (183 708)
Issue of new ordinary shares 126 126
Incentive scheme shares 1 745 (14 371) (2 462) (15 088)
Share compensation reserve 10 308 10 308
Dividends paid (178 904) (178 904)
Distribution by BEE structured entity (150) (150)
Balance at 30 June 2018 179 503 (524 984) 138 173 1 265 174 1 057 866
Condensed consolidated statement of cash flows
(Reviewed) (Audited)
30 June 30 June
R000's 2018 2017
Operating cash flows before working capital changes 563 572 626 227
Decrease/(increase) in working capital 57 315 (17 530)
Cash generated by operations 620 887 608 697
Interest received 4 031 6 603
Interest paid (44 347) (35 915)
Taxation paid (128 415) (117 034)
Dividends paid (178 904) (192 955)
Cash inflows from operating activities 273 252 269 396
Cash utilised in investing activities (436 151) (267 630)
- investment to maintain operations (81 936) (38 008)
- investment to expand operations (343 669) (164 353)
- expenditure refundable on operating leases (35 554) (65 268)
- purchase of investment - (200)
- proceeds on disposal of property, plant and equipment 25 008 199
Cash inflows from financing activities 100 288 16 905
- proceeds from issue of ordinary shares 126 11 419
- purchase of incentive scheme shares (15 088) (29 074)
- increase in interest-bearing borrowings 130 000 50 000
- redemption of BEE preference shares (14 600) (15 300)
- distribution by BEE structured entity (150) (140)
Net (decrease)/increase in cash and cash equivalents (62 611) 18 671
Cash and cash equivalents at beginning of period 115 664 104 309
Effect of movements in exchange rates on other investments (1 968) 8 663
Effect of movements in exchange rates on cash held 2 008 (15 979)
Cash and cash equivalents at end of period 53 093 115 664
Note: Cash and cash equivalents held with Chase Bank, Kenya, which was placed into receivership,
have been reclassified as other investments pending the bank resuming full normal operations.
Condensed segment report
Primary segment Courtyard City Lodge Town Lodge
R000's 2018 2017 2018 2017 2018 2017
Revenue 67 410 67 139 783 558 790 685 217 507 228 297
EBITDAR 24 759 25 274 445 407 470 078 97 564 110 094
Land and hotel building rental
EBITDA
Depreciation (4 004) (3 846) (21 728) (22 612) (7 320) (7 316)
Results from operating activities
Central office and
Primary segment Road Lodge rest of Africa Total
R000's 2018 2017 2018 2017 2018 2017
Revenue 312 373 296 104 117 578 138 185 1 498 426 1 520 410
EBITDAR 169 612 166 863 (58 770) (76 656) 678 572 695 653
Land and hotel building rental (105 814) (96 524) (105 814) (96 524)
EBITDA 572 758 599 129
Depreciation (11 345) (11 670) (60 820) (57 335) (105 217) (102 779)
Results from operating activities 467 541 496 350
Geographic information South Africa Rest of Africa Total
R000's 2018 2017 2018 2017 2018 2017
Revenue 1 380 848 1 382 225 117 578 138 185 1 498 426 1 520 410
Non-current assets - Property, plant and equipment 1 329 443 1 299 533 955 953 617 489 2 285 396 1 917 022
EBITDAR represents earnings after BEE transaction charges but before interest, taxation, depreciation, amortisation and rental.
EBITDA represents earnings after BEE transaction charges but before interest, taxation, depreciation and amortisation.
Supplementary information
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000's Note 2018 change 2017
1. Headline earnings reconciliation
Profit for the period 279 438 295 141
(Profit)/loss on sale of property, plant and equipment (21 923) 249
Taxation effect 4 911 (75)
Headline earnings 262 426 (11) 295 315
Number of shares in issue (000's) 43 574 43 572
Weighted average number of shares in issue for EPS calculation (000's) 3 36 543 36 448
Weighted average number of shares in issue for diluted EPS calculation (000's) 3 36 629 36 548
Headline earnings per share (cents) 4
- undiluted 718,1 (11) 810,2
- fully diluted 716,4 (11) 808,0
2. Normalised headline earnings reconciliation
Headline earnings 262 426 295 315
BEE transaction charges 2 267 587
Notional interest charge on BEE shareholder loan 6 472 5 635
BEE interest on interest-bearing borrowings 4 425 4 597
Preference dividends paid by the BEE entities 47 113 48 159
Deferred tax on BEE transactions (1 812) (1 578)
10th anniversary employee share trust transaction charges and DWT (41) 7
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 4 141 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) 6 078 -
Normalised headline earnings 331 069 (9) 362 185
3. Number of shares (000's)
Weighted average number of shares in issue for EPS calculation 36 543 36 448
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 509
Weighted average number of shares in issue for normalised EPS calculation 43 442 43 347
Weighted average number of shares in issue for diluted EPS calculation 36 629 36 548
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated as treasury shares 509 509
Weighted average number of shares in issue for diluted normalised EPS calculation 43 528 43 447
4. Normalised headline earnings per share (cents)
- undiluted 762,1 (9) 835,5
- fully diluted 760,6 (9) 833,6
5. Dividends declared per share (cents) 454,0 (9) 500,0
- interim 253,0 (7) 272,0
- final 201,0 (12) 228,0
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 24,1 18,7
8. Return on equity (%)
- calculated on a normalised basis 18,5 21,8
9. Net asset value per share (cents)
- calculated on a normalised basis 4 289 3 928
COMMENTARY
Average occupancies at the group's operations decreased by four percentage points to 59% in the year to 30 June 2018.
In South Africa, occupancies declined to 61% from 63% as trading conditions continued to be impacted by low business and
consumer confidence. Expectations following new leadership in the ruling party have not yet translated into higher
levels of economic activity. The anxiety caused due to a lack of clarity on the policy for land expropriation
without compensation is further impacting investor confidence.
Occupancies were also impacted by the Day Zero water campaign in the drought-affected greater Cape Town area which
caused some travellers to cancel or shorten their stays. In general, across the country, the length of business travel
stays has been shortened, partly due to budgetary constraints.
Botswana occupancies were in line with the prior year, but Kenya occupancies were markedly weaker over the year due to
the re-run of the country's elections and an overhang of hotel accommodation supply in Nairobi. There were, however,
encouraging signs of recovery in the second half of the year.
The 151-room Town Lodge Windhoek opened towards the end of 2017. The first few months of trading have been slow,
reflecting the economic recession in Namibia.
Group revenue for the year dropped by 1,0% to R1,5 billion. Against the backdrop of lower occupancies and increased
levels of discounting in the industry, room rates reflected below inflation increases.
On a normalised basis, total operating costs, increased by 3,8%, while the headline EBITDA margin decreased
by 2,8% points to 37,8% resulting in headline EBITDA decreasing by 8,2% to R566,0 million. Depreciation and
amortisation rose by 2,4%, interest income was R2,6 million lower and interest expense was R13,3 million lower
as a result of borrowing costs being capitalised during construction activities.
Normalised headline profit before tax decreased by 8,4% to R458,9 million while normalised headline earnings decreased
by 8,6% to R331,1 million. Normalised diluted headline earnings per share were down by 8,8% to 760,6 cents.
The process of obtaining approval from the Kenya Revenue Authority for the Investment Deduction tax allowance on the
development of City Lodge Hotel at Two Rivers Mall in Nairobi, has commenced. This will lead to a zero normal tax charge
for the entire Kenyan operation, including Fairview and Town Lodge, until such time as the allowance is fully utilised.
The application is based on a claim of 150% of the cost incurred; however, only a 100% claim was accounted for until it
is finally approved. There is therefore a cash flow benefit due to the suspension of normal tax payments, until such
time as the allowance is fully utilised.
In line with the group's established policy of paying out 60% of normalised headline earnings, adjusted for unrealised
foreign exchange gains and losses, a final dividend of R2,01 was declared, bringing the total dividend for the year to
R4,54, which is a decrease of 9,2% on the previous year.
On 6 July 2018, the Central Bank of Kenya ("CBK") announced that SBM Bank (Kenya) had commenced with the acquisition
of certain assets and the assumption of certain liabilities of Chase Bank Kenya in receivership, in line with its
announcement of 17 April 2018. It also announced that this process would be completed by 17 August 2018. The announcement
did not, however, give an indication as to when the funds held in the bank would become available to depositors, and as
such no further adjustments were made to the impairment previously recognised.
DEVELOPMENT ACTIVITY
South Africa
The first 39 of 62 additional rooms at City Lodge Hotel at OR Tambo International Airport were opened in the last
week of June. The remaining rooms are expected to become available in the next few weeks, taking the hotel's capacity
to 365 rooms.
Construction is progressing well on the 154-room Town Lodge Umhlanga Ridge, while final approvals are still awaited
for the development of the 90-room Road Lodge Polokwane.
East Africa
The 171-room City Lodge Hotel at Two Rivers Mall in Nairobi opened 104 rooms in early 2018. This hotel has
experienced a slow start. The final 67 rooms are expected to be completed by the end of the month, while the 147-room
City Lodge Hotel Dar es Salaam in Tanzania is expected to open at the end of September.
Southern Africa
The 148-room City Lodge Hotel Maputo in Mozambique has experienced further delays and is now expected to open in
October.
Once all these hotels are fully operational, the group will offer 7 991 rooms at 63 hotels in six countries.
The group continues to assess opportunities in South Africa, Southern Africa and East Africa. This effort will be
stepped up once the current expansion phase has been completed.
OUTLOOK
In South Africa, occupancies in the new financial year have continued the soft trend of the previous year. It is
unlikely that there will be a meaningful change in sentiment until after the country has held its general election,
which is likely to take place in the second quarter of 2019. The outlook for hotels located outside of South Africa,
has shown encouraging signs of improvement and the group will benefit from the opening of the new hotels.
DIRECTORATE
Following the group's announcement in May, long-serving chief executive, Clifford Ross, stepped down at the end of June
due to ill health. The group is thankful to him for his 15 years of leadership and more than 30 years of contributions
to operations and growth. We wish him well in his retirement.
Andrew Widegger succeeded Clifford Ross as chief executive officer from 1 July with Alastair Dooley becoming chief
financial officer. Lindiwe Sangweni-Siddo was appointed to the new role of chief operating officer.
BASIS OF PREPARATION
The 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.
The condensed consolidated financial information has been presented on the historical cost basis, and are presented in
Rand thousands which is City Lodge's functional and presentation currency.
These condensed consolidated financial statements were prepared under the supervision of Mr A W Dooley CA(SA), in his
capacity as chief financial officer.
REVIEW REPORT OF THE INDEPENDENT AUDITOR
These condensed consolidated financial statements for the year ended 30 June 2018 have been reviewed by KPMG Inc., who
expressed an unmodified review conclusion. The auditor's report does not necessarily report on all of the information
contained in this announcement. Shareholders are therefore advised that, in order to obtain a full understanding of the
nature of the auditor's engagement, they should obtain a copy of the auditor's report together with the accompanying
financial information from the issuer's registered office.
PRO FORMA FINANCIAL INFORMATION
The supplementary information presented contains information presented on a normalised basis. This information is the
responsibility of the company's directors and has been prepared for illustrative purposes only. It may not fairly present
the company's financial position, changes in equity, results of operations or cash flows. The reporting accountant has
provided assurance on the pro forma information and the report is available for inspection at the issuer's registered office.
DECLARATION OF DIVIDEND
The board has approved and declared final dividend number 59 of 201 cents per ordinary share (gross) in respect of the
year ended 30 June 2018.
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 201 cents per ordinary share for shareholders exempt from the Dividend Tax;
- The net local dividend amount is 160,8 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 in respect of the final dividend:
Last date to trade cum dividend Tuesday, 4 September 2018
Shares commence trading ex dividend Wednesday, 5 September 2018
Record date Friday, 7 September 2018
Payment of dividend Monday, 10 September 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 5 September 2018 and Friday,
7 September 2018, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka
Chairman
Andrew Widegger
Chief executive officer
15 August 2018
Administration
Registered office
The Lodge
Bryanston Gate Office Park
Corner Homestead Avenue and Main Road
Bryanston, 2191
Telephone: +27 11 557 2600
Facsimile: +27 11 557 2670
Email: info@clhg.com
www.clhg.com
www.bid2stay.co.za
Directors
B T Ngcuka (Chairman) A Widegger (Chief executive officer)*, A W Dooley*, G G Huysamer, F W J Kilbourn,
M S P Marutlulle, N Medupe, S G Morris, V M Rague†, L G Siddo*, Dr K I M Shongwe
*Executive †Kenyan
Transfer secretaries
Computershare Investor Services Proprietary Limited Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
Company secretary
M C van Heerden
Sponsor
Nedbank Corporate and Investment Banking
www.clhg.com
Date: 16/08/2018 01:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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