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CLH
CLH
CLH - City Lodge Hotels Limited - Reviewed Group Preliminary Results for the
Year Ended 30 June 2010
CITY LODGE HOTELS LIMITED
Registration number 1986/002864/06
Share code: CLH
ISIN: ZAE000117792
REVIEWED GROUP PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2010
- Average occupancies 70%
- Normalised diluted HEPS -2%
- ROE 31%
STATEMENT OF COMPREHENSIVE INCOME
(Audited)
Year Year
ended ended
30 June % 30 June
R000`s 2010 change 2009
Revenue 749 099 13 665 029
Administration and marketing (56 338) (46 977)
costs
BEE transaction charges Note 2 (15 135) (56 962)
Operating costs excluding (309 964) (251 320)
depreciation
367 662 19 309 770
Depreciation (47 334) (34 858)
Operating profit 320 328 17 274 912
Interest income 6 980 11 486
Total interest expense (55 283) (45 465)
Interest expense (7 554) (2 320)
Notional interest on BEE Note 2 (2 135) (1 778)
shareholder loan
BEE preference dividend Note 2 (45 594) (41 367)
Share of profit from joint 6 908 8 952
venture
Profit before taxation 278 933 12 249 885
Taxation (111 302) (117 919)
Profit for the period 167 631 27 131 966
Other comprehensive income
Defined benefit plan actuarial (771) (8 781)
losses
Income tax on other 216 2 459
comprehensive income
Total comprehensive income for 167 076 125 644
the period
SUPPLEMENTARY INFORMATION
(Audited)
Year Year
ended ended
30 June % 30 June
R000`s 2010 change 2009
1. Headline earnings
reconciliation
Profit for the period 167 631 131 966
Profit on sale of equipment (596) (215)
Taxation effect 167 60
Headline earnings 167 202 27 131 811
Number of shares in issue 42 815 42 744
(000`s)
Weighted average number of Note 3 36 389 36 257
shares in issue for EPS
calculation (000`s)
Weighted average number of Note 3 36 709 36 592
shares in issue for diluted
EPS calculation (000`s)
Basic earnings per share
(cents)
- fully diluted 456,6 27 360,6
- undiluted 460,7 27 364,0
Headline earnings per share Note 4
(cents)
- fully diluted 455,5 26 360,2
- undiluted 459,5 26 363,5
Dividends declared per share 327,0 (9) 361,0
(cents)
- interim 150,0 (26) 203,0
- final 177,0 12 158,0
2. Normalised headline earnings
reconciliation
Headline earnings 167 202 131 811
BEE transaction charges 15 135 56 962
- IFRS 2 share based payment - 25 840
charge
- Loss on fair value of 14 845 26 480
interest rate swap
- Sundry expenses 290 4 642
Notional interest charge on 2 135 1 778
BEE shareholder loan
Preference dividends 45 594 41 367
paid/payable by the BEE
entities
Deferred tax on BEE 849 1 105
transactions
IFRS 2 share based payment 2 163 2 978
charge for the 10th
anniversary employee share
trust
Normalised headline earnings 233 078 (1) 236 001
3. Number of shares (000`s)
Weighted average number of 36 389 36 257
shares in issue for EPS
calculation
BEE shares treated as 6 390 6 390
treasury shares
Weighted average number of 42 779 42 647
shares in issue for
normalised EPS calculation
Weighted average number of 36 709 36 592
shares in issue for diluted
EPS calculation
BEE shares treated as 6 390 6 390
treasury shares
Weighted average number of 43 099 42 982
shares in issue for diluted
normalised EPS calculation
4. Normalised headline earnings
per share (cents)
- fully diluted 540,8 (2) 549,1
- undiluted 544,8 (2) 553,4
5. Dividend cover (times)
- calculated on normalised 1,7 1,5
headline earnings
6. Effective tax rate (%)
- calculated on normalised 32,1 33,1
profit before taxation
7. Interest bearing debt to
total capital and reserves
(%)
- calculated on a normalised 28,5 20,1
basis
8. Return on equity (%)
- calculated on a normalised 31,0 34,7
basis
9. Net asset value per share
(cents)
- calculated on a normalised 1 882 1 628
basis
Note: Net asset value is calculated using the depreciated historical cost of
buildings and not the directors` current estimated replacement cost of R3,5
billion.
STATEMENT OF CHANGES IN EQUITY
Share
capital
and Treasury Other Retained
R000`s premium shares reserves earnings Total
Balance at 140 434 - 5 694 480 399 626 527
30 June 2008
Total - - 2 294 123 350 125 644
comprehensive
income for the
period
Profit for the - - - 131 966 131 966
period
Recognised IAS 19 - - 2 294 (2 294) -
gains and losses
transferred
Recognised IAS 19 - - - (6 322) (6 322)
gains and losses
Transactions with 2 713 (486 051) 61 601 (143 916) (565 653)
owners, recorded
directly in
equity
Issue of new 2 713 - - - 2 713
ordinary shares
Share - - 8 820 - 8 820
compensation
reserve
BEE share-based - - 25 840 - 25 840
payment reserve
BEE investment in - (486 051) - - (486 051)
City Lodge
Equity component - - 26 941 - 26 941
of BEE
shareholder`s
loan
Dividends paid - - - (143 884) (143 884)
Distribution by - - - (32) (32)
BEE SPV
Balance at 143 147 (486 051) 69 589 459 833 186 518
30 June 2009
Total
comprehensive
income
for the period - - - 167 076 167 076
Profit for the - - - 167 631 167 631
period
Recognised IAS 19 - - - (555) (555)
gains and losses
Transactions with 1 990 - 9 182 (112 163) (100 991)
owners, recorded
directly in
equity
Issue of new 1 990 - - - 1 990
ordinary shares
Share - - 9 182 - 9 182
compensation
reserve
Dividends paid - - - (112 058) (112 058)
Distribution by - - - (105) (105)
BEE SPV
Balance at 145 137 (486 051) 78 771 514 746 252 603
30 June 2010
STATEMENT OF FINANCIAL POSITION
(Audited)
30 June 30 June
R000`s 2010 2009
ASSETS
Non-current assets 1 123 931 815 238
Property, plant and equipment 1 072 962 765 897
Investments 33 161 33 654
Loan receivable 14 778 12 689
Deferred taxation 3 030 2 998
Current assets 105 684 155 539
Inventory 3 012 1 773
Trade receivables 49 149 32 654
Other receivables 11 064 103 754
Cash and cash equivalents 42 459 17 358
Total assets 1 229 615 970 777
EQUITY AND LIABILITIES
Capital and reserves 252 603 186 518
Share capital and premium 145 137 143 147
BEE investment in City Lodge (486 051) (486 051)
Retained earnings 514 746 459 833
Other reserves 78 771 69 589
Non-current liabilities 863 406 681 095
Interest-bearing borrowings 230 000 100 000
BEE preference shares 427 200 428 300
BEE shareholder`s loan 16 495 14 360
BEE B preference share dividend accrual 44 563 23 906
Fair value of BEE interest rate swap 41 325 26 480
Other non-current liabilities 22 278 15 621
Deferred taxation 81 545 72 428
Current liabilities 113 606 103 164
Interest-bearing borrowings - 40 000
Trade and other payables 109 164 53 339
Taxation payable 4 442 9 825
Total equity and liabilities 1 229 615 970 777
Note: The company has authorised capital commitments of R155 million of which
approximately R71 million has been contracted. It is anticipated that the
entire authorised commitments will be spent by 30 June 2011.
STATEMENT OF CASH FLOWS
(Audited)
Year Year
ended ended
30 June 30 June
R000`s 2010 2009
Cash generated by operations 436 752 368 231
Interest received 4 891 9 691
Interest paid (25 673) (15 208)
Taxation paid (107 384) (103 274)
Dividends paid (112 058) (143 884)
Cash inflow from operating activities 196 528 115 556
Cash utilised in investing activities (262 212) (243 985)
- investment to maintain operations (39 490) (80 867)
- investment to expand operations (314 909) (73 181)
- expenditure refundable on operating leases 91 098 (91 098)
- investments and loans 493 494
- proceeds on disposal of property, plant 596 667
and equipment
Cash flows from financing activities 90 785 94 930
- proceeds on issue of share capital 8 14
- proceeds on issue of share premium 1 982 2 699
- proceeds from long-term borrowings 250 000 100 000
- repayment of long-term borrowings (120 000) -
- repayment of short-term borrowings (40 000) -
- issue of BEE preference shares - 440 700
- redemption of BEE preference shares (1 100) (12 400)
- BEE shareholder`s loan - 12 582
- equity component of BEE shareholder`s loan - 37 418
- distribution by BEE SPV (105) (32)
- BEE investment in City Lodge - (486 051)
Net cash increase/(decrease) 25 101 (33 499)
Cash and cash equivalents at beginning of 17 358 50 857
period
Cash and cash equivalents at end of period 42 459 17 358
SEGMENT REPORT
City Lodge Town Lodge Road Lodge
R000`s 2010 2009 2010 2009 2010 2009
Revenue 394 542 339 059 152 262 144 079 181 323 161 138
EBITDAR 246 128 219 335 85 946 83 106 109 690 102 240
Depreciation 12 130 8 666 6 345 5 966 7 655 5 735
Share of profit
from Courtyard
Joint Venture
EBITDAR represents earnings after BEE transaction changes but before interest,
taxation, depreciation and rental
SEGMENT REPORT
Central office and other Total
R000`s 2010 2009 2010 2009
Revenue 20 972 20 753 749 099 665 029
EBITDAR (59 001) (90 533) 382 763 314 148
Depreciation 21 204 14 491 47 334 34 858
Share of profit 6 908 8 952 6 908 8 952
from Courtyard
Joint Venture
EBITDAR represents earnings after BEE transaction charges but before interest,
taxation, depreciation and rental
Segment information
IFRS 8 Operating Segments requires a `management approach` whereby segment
information is presented on the same basis as that used for internal reporting
purposes to the chief operating decision-maker/s who have been identified as
the Group`s executive directors. These individuals review the Group`s internal
reporting by hotel brand in order to assess performance and allocate
resources. Depreciation for reportable segments is an asymmetrical expense as
assets are not classified by segment. The depreciation charge for each
reportable segment relates to furniture, fittings and equipment, whilst the
majority of the charge for central office and other relates to hotel
buildings.
COMMENTARY
The average occupancy level of 70% for the year to 30 June 2010 was seven
percentage points lower than the 77% of a year earlier, matching the level
reported at the interim stage.
Turnover for the year grew by 13% to R749,1 million boosted by an 8% increase
in available room numbers and higher achieved average room rates.
Occupancy levels during the FIFA World Cup period in June were satisfactory
considering the late cancellation of a large number of bookings by FIFA`s
associate MATCH. Occupancies were however, not as favourable as originally
expected, particularly in areas outside the Gauteng region. Significantly
higher room rates than those of a year earlier were achieved throughout the
event.
Primarily as a result of the lower occupancies, the EBITDA margin for the year
decreased by 4 percentage points to 51,1%, resulting in normalised EBITDA
increasing by only 4% to R382,8 million. Depreciation increased by 36% as a
result of the high capital expenditure, resulting in an increase in the
normalised operating profit of 1%.
Interest income declined by R4,5 million due to lower cash balances while the
interest expense rose by 226% to R7,6 million as a result of increased
borrowings. Interest of R15 million (2009 - R3,3 million) was capitalised on
the new developments during construction.
With the upper end of the market having been hardest hit by the drop in
occupancies, the group`s share of the profit from the Courtyard Joint Venture
fell by 23% to R6,9 million.
Profit before tax on a normalised basis decreased by 4% while normalised
headline earnings fell by 1% to R233,1 million. Normalised headline earnings
per share, on a fully diluted basis, decreased by 2% to 540,8 cents.
In line with the group`s policy of paying out 60% of normalised earnings, a
final dividend of 177 cents has been declared, 12% higher than the previous
year`s final dividend.
DEVELOPMENT PROGRAMME UPDATE
During the year, the group successfully opened a number of hotels as part of
its biggest ever development programme, on time and within budget. This
resulted in the number of hotels rising to 50 (2009 - 43) and room numbers
increasing by 24% to 6 053 during the year. This programme included:
Road Lodge Umhlanga Ridge - 125 rooms; City Lodge Fourways - 211 rooms; City
Lodge OR Tambo Airport - 303 rooms; Road Lodge Port Elizabeth Airport - 90
rooms; Road Lodge Bloemfontein Airport - 66 rooms; City Lodge Lynnwood - 205
rooms; Road Lodge Southgate - 118 rooms; Town Lodge Sandton Grayston Drive -
extended by 70 rooms.
The two hotels still to be completed as part of this development programme -
City Lodge Hatfield (184 rooms) and Town Lodge Port Elizabeth (203 rooms) are
on track to open towards the end of calendar 2010, taking the number of hotels
in the group to 52 and room numbers to 6 440.
OUTLOOK
Trading after the final of the FIFA World Cup on 11 July has been
disappointing amid clear evidence that normal business travel patterns have
not yet resumed.
While it is difficult to predict, trading conditions are not expected to
normalise until the second half of 2011. The significantly enlarged group is
well positioned to benefit from any upturn in the economy.
Opportunities to continue growing the group`s footprint in South and southern
Africa are being closely examined and ongoing research continues into other
potential expansion markets such as India.
DIRECTORATE
Coinciding with the 25th anniversary of the founding of the group, Hans
Enderle retired from the board on 1 August. Hans` leadership, vision and
creativity, both as chief executive and chairman, were a hugely significant
factor in the successful development and positioning of the group. His
contribution has ensured the achievement of consistently superior results. The
board thanks him and wishes him well in his retirement.
Bulelani Ngcuka, who has been a non-executive director since 2008, was
appointed as non-executive chairman on 1 August. The group looks forward to
continuing to grow and prosper under his leadership.
BASIS OF PREPARATION
These condensed annual financial statements have been prepared in accordance
with the recognition and measurement requirements of International Financial
Reporting Standards ("IFRS") and with the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting, the Listings Requirements
of the JSE Limited, the AC500 series issued by the Accounting Practices Board
and the Companies Act of South Africa, as amended.
The accounting policies used are consistent with those used in the annual
financial statements for the year ended 30 June 2009, except for the adoption
of IFRS 8 Operating Segments which has no impact on the results but requires
additional information. The amendment to IFRS 8 relating to the non-disclosure
of segment assets has been early adopted.
AUDIT REVIEW
The group`s auditors KPMG Inc. have reviewed the preliminary results for the
year ended 30 June 2010. A copy of the unmodified review report is available
for inspection at the company`s registered office.
DECLARATION OF DIVIDEND
Notice is hereby given that ordinary dividend no. 43 of 177 cents per share
(2009 - 158 cents) for the year ended 30 June 2010 has been declared.
Shareholders are advised that the last day to trade cum dividend will be
Friday, 10 September 2010. The shares will trade ex dividend as from Monday,
13 September 2010 and the record date will be Friday, 17 September 2010. The
dividend is payable on Monday, 20 September 2010.
Share certificates may not be dematerialised or rematerialised between Monday,
13 September 2010 and Friday, 17 September 2010, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
12 August 2010
Registered office:
"The Lodge", Bryanston Gate Office Park, corner Homestead Avenue and Main
Road, Bryanston
Transfer secretaries:
Computershare Investor Services (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
Directors:
BT Ngcuka (Chairman), C Ross (Chief executive)*, FWJ Kilbourn,
IN Matthews, N Medupe, SG Morris, Dr KIM Shongwe, AC Widegger*
*Executive
Company Secretary: MC van Heerden
www.citylodge.co.za
Sponsor:
J.P. Morgan Equities Limited
Date: 12/08/2010 15:52:01 Produced by the JSE SENS Department.
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