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Reviewed group provisional results for the year ended 30 June 2021
CITY LODGE HOTELS LIMITED
Registration number: 1986/002864/06
Incorporated in the Republic of South Africa
Share code: CLH ISIN: ZAE000117792
("City Lodge" or the "company" or the "group")
REVIEWED GROUP PROVISIONAL RESULTS for the year ended 30 June 2021
- Revenue R0.51bn
2020: R1.16bn (-56%)
- Earnings per share -161c
2020: -440c* (-63%)
- Headline earnings per share -91c
2020: -128c* (-29%)
- Dividends declared per share Nil
2020: 153.0c
- Average group occupancy 19%
2020: 38%
* EPS and HEPS for FY2020 has been restated for IAS 33 following the rights offer in August 2020.
Commentary
The 2020/2021 financial year has been dominated by the Covid-19 pandemic and the various degrees of lockdown
mandated by President Cyril Ramaphosa. The City Lodge Hotel Group has demonstrated agility and innovation in running
a solutions-based operating environment in which its management team responds quickly and creatively to challenges,
including its ability to temporarily suspend and reactivate hotels as demand determines.
The government's vaccination programme, after getting off to a slow start, commenced in mid-February 2021. During
the last two months, since vaccinations opened to 35 to 60-year-olds, we have seen the most momentum in people getting
vaccinated. Vaccinations opened to 18 to 34-year-olds on 20 August 2021, earlier than initially planned, and the
take-up has been very encouraging with almost 300 000 vaccinations being administered per day. As of 31 August 2021,
in excess of 12 million vaccinations had been administered (source: www.sacoronavirus.co.za). The success of the
vaccination programme is integral to the recovery of the hospitality industry.
Review of operations
Occupancies based on total inventory have steadily improved from the last quarter of the 2020 financial year, which
ended on 4% occupancies, to slow improvements in occupancy in July 2020 of 7% when the group re-opened a total of 36
hotels as the level 5 hard-lockdown regulations were slightly relaxed and ending the financial year in June 2021 with
monthly occupancy of 25% in the midst of the third wave of infections and adjusted level 4 restrictions. Occupancies
for the year were 19%, compared to 38% in 2020 and 55% in 2019. Revenue for the period decreased by 56% to R0.5
billion, while operating costs, excluding depreciation and amortisation, decreased by 22%, and by 30% excluding
unrealised foreign exchange losses. The operating cost reductions were mainly due to the cost-containment measures
put in place from April 2020 to mitigate the extent of the losses arising from minimal revenues.
Depreciation and amortisation on owned assets decreased by 9.0%, while a depreciation charge for right-of-use assets
decreased by 7%, mainly due to the impact of impairments recognised in the prior year. Interest expense decreased by
R26.8 million, mainly due to the redemption and repayment of BEE preference shares and BEE interest-bearing loans,
in December 2020.
The group incurred a net loss of R804.6 million (2020: R486.6 million) for the year. The prolonged recovery of the
sector and the dependency on the successful vaccine roll-out has also led to the recognition of additional impairments
to property plant and equipment of R390.4 million (2020: R245.5 million) mainly on impairment to fair value less cost
to sell of the East African assets held for sale, reversal of impairment on right-of-use assets of R48.9m (2020:
impairment loss R242.9 million), impairment of goodwill of R10.6 million (2020: Rnil) and impairment of VAT receivable
of R25.9 million (2020: Rnil).
The loss in earnings per share of 161c (2020: 440c) and the loss in headline earnings per share of 91c (2020: 128c)
has improved compared to prior year, mainly due to the dilutive impact of the additional shares in issue following
the rights offer.
The completion of the rights offer in August 2020 raised gross proceeds of R1.2 billion, gave a much-needed injection
of liquidity and has led to the group settling its broad-based black economic empowerment (BBBEE) debt through the
redemption of the BEE preference shares and settlement of accrued preference dividends, term loans and interest accrued
totalling R764.5 million in December 2020.
While we have maintained a Level 4 BBBEE rating, the rights offer resulted in the unwinding of our BBBEE structure
and the loss of some equity ownership. BBBEE ownership remains important to the group, and we are committed to continually
improving our BBBEE credentials and maintaining our overall rating.
The group's lenders have been very supportive during the ongoing operational challenges, the prolonged pandemic and
the resurgent waves of infections, which have extended the economic recovery of the hospitality sector. The group has
drawn R650 million of the total available loan facilities of R800 million and also has access to an overdraft facility
of R115 million. The funders recently approved an extension of the repayment date of Loan F, R100 million, from September
2021 to September 2022, and access to an additional R100 million Loan G facility (included in the total R800 million
available facilities), in addition to waiving the original debt covenants to the September 2022 measurement period.
Development and disposal activity
South Africa
The 168-room Courtyard Hotel Waterfall City opened on 1 March 2021 and is the group's 63rd hotel. The new flagship
of the Courtyard brand, which is located in the lively and vibrant Waterfall City in Midrand, marks a significant
milestone in hotel design and development. It features the latest technological innovation, state-of-the-art conference
facilities and a full culinary team preparing delectable cuisine. Initial trading has been encouraging.
East Africa
The big news for the group is the sale of its four hotels in East Africa. The sale is expected to complete within
22 weeks of signing date, which was in July 2021. The proceeds from disposal will be used to reduce debt levels,
increase liquidity and support the working capital requirements of the group.
Dividend
Given the prolonged impact of the Covid-19 pandemic and the resurgence of new waves of infections on the group's
operations and revenue, the board has determined that no final dividend shall be paid in the respect of the year
ended 30 June 2021. The declaration of future dividends remains subject to satisfying solvency and liquidity requirements.
Outlook
Occupancies for July 2021, were 16% for the total inventory in the South African hotels following a turbulent month
of civil unrest and lockdown restrictions to travel, while August saw an improvement to 24%. As at 9 September 2021,
the group has 51 out of the 56 hotels open in South Africa and five out of seven hotels open in Rest of Africa.
With the third wave of infections beginning to wane and the arrival of warmer weather, the forecast for occupancies
is positive, as travel within and between South Africa and the world begins to recover. This is in no small part due
to the success of the rollout of the vaccination programme, being the catalyst to growing confidence to travel by
local and international travellers. Also, local industry associations like Tourism Business Council of South Africa
and South Africa Tourism are lobbying hard to get South Africa moved off the 'Red List' of all European and North American
countries. Good progress has been made in Germany, Switzerland, Netherlands and Canada who have removed South Africa
from the 'red list'.
We remain cautiously optimistic that the worst of the Covid-19 pandemic is behind us, as an encouraging portion
of the South African population has been vaccinated, and very soon we can all once again embrace the freedom of travel
and hospitality, and start #GettingBackToLife. There is pent-up demand as we emerge from the 18-month confinement within
our homes, to begin to explore, socialise and experience life. We have all made the many sacrifices necessary to try
and limit the spread of this deadly virus. Now let us reward ourselves with a return to travel and City Lodge Hotel
Group's promise of TLC - tip-top, loving and clean hospitality coupled with service excellence.
The information contained in this 'Outlook' section has not been reviewed or reported on by the company's auditors.
Additional information
This short-form announcement is the responsibility of the directors and is only a summary of the information in the
full announcement and does not contain full or complete details. The full announcement and the auditor's unqualified
review conclusion are available on the company's website www.clhg.com. The full announcement can also be accessed
directly using the following JSE link: https://senspdf.jse.co.za/documents/2021/jse/isse/CLH/ye2021.pdf. Any investment
decision should be based on the full announcement published on the JSE link above and on the company's website.
For and on behalf of the board
Bulelani Ngcuka Andrew Widegger
Chairman Chief executive officer
10 September 2021
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
B T Ngcuka (Chairman), A C Widegger (Chief executive officer)*, G G Huysamer, F W J Kilbourn, M S P Marutlulle,
N Medupe, S G Morris, D Nathoo*, V M Rague?, L G Siddo*, S Enderle# *Executive ?Kenyan #South African and Swiss
Company secretary
MC van Heerden
Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Date: 10-09-2021 04:46:00
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