Wrap Text
Group preliminary results for the year ended 30 June 2019
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 2019
Condensed consolidated statement of comprehensive income
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000's Note 2019 change 2018
Revenue 1 547 984 3 1 498 426
Other income 4 475 21 923
Administration and marketing costs (106 432) (99 841)
BEE transaction charges 2 (352) (2 267)
Impairment loss on trade and other receivables (2 198) -
Operating costs excluding depreciation (961 422) (845 483)
482 055 (16) 572 758
Depreciation and amortisation (117 471) (105 217)
Results from operating activities 364 584 (22) 467 541
Interest income 2 233 4 031
Total interest expense (59 842) (63 867)
Interest expense (4 650) (5 857)
Notional interest on BEE shareholder loan 2 - (6 472)
BEE interest expense 2 (4 187) (4 425)
BEE preference dividend 2 (51 005) (47 113)
Profit before taxation 306 975 (25) 407 705
Taxation (101 519) (128 267)
Profit for the period 205 456 (26) 279 438
Other comprehensive income
Items that are or may be reclassified to profit or loss
Foreign currency translation differences (2 397) 27 825
Total comprehensive income for the period 203 059 (34) 307 263
Basic earnings per share (cents)
- undiluted 562,0 (27) 764,7
- diluted 560,7 (27) 762,9
Condensed consolidated statement
of financial position
(Reviewed) (Audited)
30 June 30 June
R000's 2019 2018
ASSETS
Non current assets 2 722 355 2 352 684
Property, plant and equipment 2 630 411 2 285 396
Intangible assets and goodwill 55 358 54 678
Investments 800 200
Other investments 13 073 -
Deferred taxation 22 713 12 410
Current assets 303 373 333 046
Inventories 7 978 7 298
Trade receivables 77 369 79 167
Other receivables 128 468 159 021
Taxation 11 935 8 282
Other investments 6 577 26 185
Cash and cash equivalents 71 046 53 093
Total assets 3 025 728 2 685 730
EQUITY AND LIABILITIES
Capital and reserves 1 106 701 1 057 866
Share capital and premium 179 503 179 503
BEE investment and incentive scheme shares (518 014) (524 984)
Retained earnings 1 307 529 1 265 174
Other reserves 137 683 138 173
Non-current liabilities 1 701 435 1 446 619
Interest-bearing borrowings 660 000 450 000
BEE interest-bearing borrowings 44 120 44 120
BEE preference shares 355 000 367 600
BEE shareholder's loan 50 000 50 000
BEE preference share dividend accrual 315 604 273 477
Other non-current liabilities 78 899 86 275
Deferred taxation 197 812 175 147
Current liabilities
Trade and other payables 217 592 181 245
Total liabilities 1 919 027 1 627 864
Total equity and liabilities 3 025 728 2 685 730
Note: The company has authorised capital commitments of R392 million of which approximately R175 million
has been contracted. It is anticipated that approximately R333 million will be spent by 30 June 2020.
Condensed consolidated statement
of changes in equity
BEE
investment
and incentive
Share capital scheme Other Retained
and premium shares reserves earnings Total
R000's
Balance at 1 July 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
Total comprehensive income for the period - - (2 397) 205 456 203 059
Profit for the period 205 456 205 456
Other comprehensive income
Foreign currency translation differences (2 397) (2 397)
Transactions with owners, recorded directly in equity - 6 970 1 907 (163 101) (154 224)
Incentive scheme shares 6 970 (6 350) (3 001) (2 381)
Share compensation reserve 8 257 8 257
Dividends paid (160 100) (160 100)
Balance at 30 June 2019 179 503 (518 014) 137 683 1 307 529 1 106 701
Condensed consolidated statement of cash flows
(Reviewed) (Audited)
30 June 30 June
R000's 2019 2018
Operating cash flows before working capital changes 461 479 563 572
Decrease in working capital 31 288 57 315
Cash generated by operations 492 767 620 887
Interest received 2 233 4 031
Interest paid (64 774) (44 347)
Taxation paid (95 101) (128 415)
Dividends paid (160 100) (178 904)
Cash inflows from operating activities 175 025 273 252
Cash utilised in investing activities (371 965) (436 151)
- investment to maintain operations (71 785) (81 936)
- investment to expand operations (335 346) (343 669)
- expenditure refundable on operating leases 35 554 (35 554)
- purchase of investment (600) -
- proceeds on disposal of property, plant and equipment 212 25 008
Cash inflows from financing activities 195 019 100 288
- proceeds from issue of ordinary shares - 126
- purchase of incentive scheme shares (2 381) (15 088)
- increase in interest-bearing borrowings 210 000 130 000
- redemption of BEE preference shares (12 600) (14 600)
- distribution by BEE structured entity - (150)
Net decrease in cash and cash equivalents (1 921) (62 611)
Cash and cash equivalents at beginning of period 53 093 115 664
Reclassification of other investments to cash and cash equivalents 20 398 -
Effect of movements in exchange rates on other investments (430) (1 968)
Effect of movements in exchange rates on cash held (94) 2 008
Cash and cash equivalents at end of period 71 046 53 093
Note: The reclassification of other investments to cash and cash equivalents relates to the
portion of deposits previously held with Chase Bank, Kenya, which was placed into receivership,
and which have now been repaid back to depositors.
Condensed segment report
Primary segment
Courtyard City Lodge Town Lodge Road Lodge
R000's 2019 2018 2019 2018 2019 2018 2019 2018
Revenue 66 139 67 410 805 992 783 558 219 638 217 507 312 385 312 373
EBITDAR 17 345 24 759 425 024 445 407 88 672 97 564 156 310 169 612
Land and hotel
building rental
EBITDA
Depreciation (4 072) (4 004) (24 999) (21 728) (7 538) (7 320) (10 438) (11 345)
Results from operating activities
Primary segment (continued)
Central office and
rest of Africa Total
R000's 2019 2018 2019 2018
Revenue 143 830 117 578 1 547 984 1 498 426
EBITDAR (89 161) (58 770) 598 190 678 572
Land and hotel
building rental (116 135) (105 814) (116 135) (105 814)
EBITDA 482 055 572 758
Depreciation (70 424) (60 820) (117 471) (105 217)
Results from operating activities 364 584 467 541
Geographic information
South Africa Rest of Africa Total
R000's 2019 2018 2019 2018 2019 2018
Revenue 1 404 154 1 380 848 143 830 117 578 1 547 984 1 498 426
Non-current assets -
Property, plant
and equipment 1 436 111 1 329 443 1 194 300 955 953 2 630 411 2 285 396
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
% 2018
R000's Note 2019 change
1. Headline earnings reconciliation
Profit for the period 205 456 279 438
Profit on sale of property, plant and equipment (170) (21 923)
Taxation effect 48 4 911
Headline earnings 205 334 (22) 262 426
Number of shares in issue (000's) 43 574 43 574
Weighted average number of shares in issue for
EPS calculation (000's) 3 36 556 36 543
Weighted average number of shares in issue for
diluted EPS calculation (000's) 3 36 642 36 629
Headline earnings per share (cents) 4
- undiluted 561,7 (22) 718,1
- diluted 560,4 (22) 716,4
2. Normalised headline earnings reconciliation*
Headline earnings 205 334 262 426
BEE transaction charges 352 2 267
Notional interest charge on BEE shareholder loan - 6 472
BEE interest on interest-bearing borrowings 4 187 4 425
Preference dividends paid by the BEE entities 51 005 47 113
Deferred tax on BEE transactions - (1 812)
10th anniversary employee share trust
transaction charges and Dividend Tax (43) (41)
IFRS 2 share-based payment charge for the
10th anniversary employee share trust 4 148 4 141
Reversal of impairment of other investment in
Chase Bank Kenya (net of tax) (9 403) -
Pre-opening expenses write-off (net of tax) 11 487 6 078
Normalised headline earnings 267 067 (19) 331 069
* Normalised headline earnings is headline earnings adjusted for the effects of transactions relating to BEE
or those of a non-recurring/core nature.
(Reviewed) (Audited)
Year Year
ended ended
30 June 30 June
% 2018
R000's 2019 change
3. Number of shares (000's)
Weighted average number of shares in issue
for EPS calculation 36 556 36 543
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust
treated as treasury shares 506 509
Weighted average number of shares in issue
for normalised EPS calculation 43 452 43 442
Weighted average number of shares in issue
for diluted EPS calculation 36 642 36 629
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employees share trust treated
as treasury shares 506 509
Weighted average number of shares in issue
for diluted normalised EPS calculation 43 538 43 528
4. Normalised headline earnings per share (cents)
- undiluted 614,6 (19) 762,1
- diluted 613,4 (19) 760,6
5. Dividends declared per share (cents) 366,0 (19) 454,0
- interim 229,0 (9) 253,0
- final 137,0 (32) 201,0
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 33,9 24,1
8. Return on equity (%)
- calculated on a normalised basis 14,0 18,5
9. Net asset value per share (cents)
- calculated on a normalised basis 4 471 4 289
Commentary
Average occupancies for the group in the 12 months to 30 June, 2019 declined from 59% in the previous financial year
to 55%.
In South Africa, occupancies decreased from 61% to 58%, in line with the three percentage points decline in the six
months to 31 December 2018. Low levels of business and consumer confidence, high unemployment, uncertainty around Eskom's
sustainability and land expropriation, as well as negative growth in the first quarter of 2019, resulted in difficult
trading conditions.
Down by three percentage points at the half year, Botswana occupancies improved slightly in the second half, with the
improvement continuing into the current year. Town Lodge Windhoek performed below expectations on weak economic growth
in Namibia, but the hotel is improving on a month-by- month basis. After a welcome improvement in the first half with
occupancies up by four percentage points, Kenyan operations experienced a weaker second half due to increased hotel supply
and economic growth not translating into commercial activity. Occupancies were two percentage points lower for the full
year. City Lodge Hotel at Two Rivers Mall continues to improve, but at a slower pace than expected.
In Tanzania, City Lodge Hotel Dar es Salaam had a disappointing first few months of trading due to increased hotel
supply, a challenging business environment and a shift in some commercial activity as a result of government administration
offices relocating to the capital of Dodoma.
Total revenue increased by 3% to R1,5 billion. In South Africa, achieved room rates rose by less than inflation due to
increased competitor discounting.
On a normalised basis, total operating costs increased by 11,4%, but by 7,2% in South Africa where the majority of the
group's operations are located. The total normalised headline EBITDA margin decreased by six percentage points to 32%,
resulting in normalised headline EBITDA for the group decreasing to R489,5 million. Depreciation and amortisation
increased by 12%, while interest income was R1,8 million lower and interest expense was R1,2 million lower as a result of
borrowing costs being capitalised during construction activities.
Normalised headline profit before tax for the group decreased by 19,5% to R369,6 million, while normalised headline
earnings decreased by 19,3% to R267,1 million. Diluted normalised headline earnings per share decreased by 19,4% to
613,4 cents.
In line with the group's established policy of paying out 60% of normalised earnings adjusted for unrealised foreign
exchange gains and losses, a gross final dividend of 137,0 cents per share has been declared, bringing the total dividend
for the year to 366,0 cents, which is a decrease of 19,4% on the previous year.
The group's application for an investment deduction allowance on the development of the City Lodge Hotel at Two Rivers
Mall in Nairobi awaits finalisation by the Kenya Revenue Authority.
On 18 August 2018, and in line with the Kenyan Central Bank's announcement, 38% of the cash deposits previously held
with Chase Bank Kenya (in receivership) were repaid to the company. As a result of the partial receipt of these deposits,
half of the impairment charge previously recognised in other investments amounting to R9,4 million (net of tax) was
reversed. The cash received was reclassified to cash and cash equivalents. The remaining 38% of deposits remain as other
investments, and will be repaid in three equal instalments between August 2019 and August 2021 , with a portion being
classified as current.
Development activity
South Africa
The first 76 rooms have opened at the 154-room Town Lodge Umhlanga, with the balance expected to be opened in early
September.
Construction of the 168-room Courtyard Hotel Waterfall City is progressing well with the first rooms on track for
opening in November 2020 and the balance becoming available at the beginning of 2021.
Southern Africa
The completion of the 148-room City Lodge Hotel Maputo has been delayed due to contractor-related delays and disputes.
Final timelines are uncertain at this stage.
With the opening of this hotel in due course, the group will have completed its initial targeted expansion into
Southern Africa and East Africa. It will then comprise 63 hotels with 8 070 rooms in six countries (South Africa, Botswana,
Namibia, Mozambique, Kenya and Tanzania). The focus now is on ensuring the success of the recently opened hotels through
effective sales and marketing campaigns and building brand preference in the markets where we operate.
Outlook
Given the current economic situation in South Africa, the weaker trend of the past year has extended into the new
financial year. New catalysts are needed to boost investment confidence and spur economic growth.
Against this backdrop, there are some encouraging signs, such as the notable efforts by the National Department of
Tourism to develop and grow this industry that is so important to the future of South Africa.
Our portfolio of hotels in South Africa, Southern Africa and East Africa is in excellent shape after ongoing
refurbishments and the addition of exciting new properties. Our entire operational team is highly motivated to deliver
on our brand promise and grow market share in a depressed environment, ideally positioning the group to benefit from better
trading conditions as they arise.
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 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, except for the adoption of IFRS 9
Financial instruments and IFRS 15 Revenue from contracts with customers which have not had a significant impact on the
group.
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.
Impact of IFRS 16 Leases
The group anticipates a material change as a result of the adoption of IFRS 16 Leases in 2019 using the modified
retrospective approach. The material change relates to the capitalising of leased hotels onto the statement of financial
position in the form of a right of use asset, together with the corresponding lease liability. Changes to the statement of
comprehensive income will result in the current operating lease costs being replaced by an amortisation of the
right-of-use asset and calculated lease finance costs on the interest line. Other areas of the statutory metrics that will be
impacted by the adoption of the standard include EBITDA, earnings per share and normalised headline earnings. The majority
of the leases are long leases with additional renewal periods available. Additional disclosure will be provided in the
publication of our 2019 annual financial statements.
Review report of the independent auditor
These condensed consolidated financial statements for the year ended 30 June 2019 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's
report on the supplementary information is available for inspection at the issuer's registered office.
Declaration of dividend
The board has approved and declared final dividend number 61 of 137 cents per ordinary share (gross) in respect of the
year ended 30 June 2019.
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 137 cents per ordinary share for shareholders exempt from the Dividend Tax;
- The net local dividend amount is 109,6 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, 3 September 2019
Shares commence trading ex dividend Wednesday, 4 September 2019
Record date Friday, 6 September 2019
Payment of dividend Monday, 9 September 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 4 September 2019 and Friday,
6 September 2019, both days inclusive.
The JSE link to the announcement is https://senspdf.jse.co.za/documents/2019/jse/isse/CLH/ye2019.pdf.
For and on behalf of the board
Bulelani Ngcuka
Chairman
Andrew Widegger
Chief executive officer
14 August 2019
Administration
Registered office
The Lodge
Bryanston Gate Office Park
Corner Homestead Avenue and Main Road Bryanston, 2191
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
Date: 16/08/2019 07:10:00
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