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CLH
CLH
CLH - City Lodge Hotels Limited - Reviewed group preliminary results for the
year ended 30 June 2011
CITY LODGE HOTELS LIMITED
Registration number 1986/002864/06
Share code: CLH
ISIN: ZAE000117792
REVIEWED GROUP PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2011
COMMENTARY
Although slightly more rooms were sold than in the previous financial year,
occupancies for the year ended 30 June declined to 56% (2010 - 70%). Excluding
the new hotels which opened during the past eighteen months, the average
occupancy rate was 62%.
This fall in occupancy, which was more pronounced in the second half of the
financial year, was the result of the lower demand attributed to the continued
subdued economic activity, the increased supply of rooms created by the
industry in the lead-up to the World Cup, together with the adverse effects of
the public holidays in the second half of the financial year, including an
additional mid week holiday for the Local Government Elections on May 18.
Despite this environment, the group achieved several strategic successes
during the year, including being awarded a Level Two Broad-Based Black
Economic Empowerment rating in terms of the Tourism Sector Charter and
implementing its "I`m Kind" service excellence programme, which helps to
differentiate the group from competitors in terms of service delivery.
In addition, the group successfully completed its biggest ever expansion
drive, with nine new hotels being opened (1 380 rooms) and one being extended
(71 rooms). The group now comprises 52 hotels and 6 440 rooms across its four
brands throughout South Africa.
Revenue for the period grew by 5,5% to R790,2 million, largely due to a higher
achieved average room rate.
The normalised EBITDA margin decreased by 9,6 percentage points to 41,8%
resulting in normalised EBITDA of R330,4 million, a decrease of 14,2% on the
previous year. The decline in the EBITDA margin was materially influenced by
land and building rentals in six of the new hotels, which amounted to R50,8
million (2010 - R10,7 million).
Operating costs reflected a 29,3% increase, which would have been 16,9%
without the additional property rental expenses. The increase in costs was
exacerbated by the significant increase in the number of rooms available and a
50,7% increase in the electricity expense.
Depreciation increased by 54% due to the high levels of capital expenditure on
the new hotels, resulting in normalised operating profit declining by 24%.
Interest income was lower and the interest expense rose to R17,7 million from
R7,6 million as a result of the increased borrowings for the new hotels.
Interest of R2,8 million (2010 - R15,0 million) was capitalised on the new
developments during construction.
The softer demand, as well as the particularly intense competition and
increased supply at the upper end of the market, resulted in the group`s share
of profit from the Courtyard Joint Venture decreasing by R6,3 million to R 642
000.
Profit before tax on a normalised basis decreased by 28,5% while normalised
headline earnings fell by 30,0% to R163,1 million. Normalised diluted headline
earnings per share decreased by 29,9% to 379 cents.
Cash generated by operations before working capital changes, at R357,7
million, was down by 11,4%.
In line with the group`s policy of distributing 60% of normalised earnings, a
final dividend of 104 cents has been declared, bringing the total dividend for
the year to 228 cents, 30% lower than the previous year.
Outlook
The new hotels opened by the group in the 2011 calendar year are steadily
establishing their own market niches and their occupancy rates are improving.
Whilst no hotels are currently under construction, the group continues to seek
suitable sites in South Africa and believes that selected long-term
development opportunities will emerge. Opportunities in other parts of Africa
are being carefully examined and exploratory visits have been made to
neighbouring countries and to East and West Africa.
Trading conditions in July and the early part of August were mixed, but still
remain challenging. If there is no further deterioration in occupancies and
the new hotels continue to improve their performance, the group expects to
show growth in normalised profit in the year ahead.
The industry is suffering from overcapacity in key areas following a period of
many new developments, compounded by soft demand and competitive pricing. Some
hotels are already showing signs of stress as the industry adjusts to a new
balance of supply and demand.
With its range of excellently branded hotels in prime locations, its financial
strength and a highly motivated team in place, the group is well positioned to
consolidate in this cycle and take advantage of market improvements.
Directorate and secretary
The board was pleased to have announced the appointment of Miss Wendy Tlou as
an independent non-executive director and a member of the risk committee with
effect from 1 March 2011.
The board regretted to have announced the resignation of Mrs Melanie van
Heerden as company secretary with effect from 1 September 2011.
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 2010.
Audit review
The group`s auditors KPMG Inc. have reviewed the preliminary results for the
year ended 30 June 2011. 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. 45 of 104 cents per share
(2010 - 177 cents) for the year ended 30 June 2011 has been declared.
Shareholders are advised that the last day to trade cum dividend will be
Friday, 9 September 2011. The shares will trade ex dividend as from Monday, 12
September 2011 and the record date will be Friday, 16 September 2011. The
dividend is payable on Monday, 19 September 2011.
Share certificates may not be dematerialised or rematerialised between Monday,
12 September 2011 and Friday, 16 September 2011, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
12 August 2011
STATEMENT OF COMPREHENSIVE INCOME
(Audited)
Year Year
ended ended
30 June % 30 June
R000`s 2011 change 2010
Revenue 790 198 5 749 099
Administration and (60 110) (56 338)
marketing costs
BEE transaction charges Note 2 (3 805) (15 135)
Operating costs (400 925) (309 964)
excluding depreciation
325 358 (12) 367 662
Depreciation (73 078) (47 334)
Operating profit 252 280 (21) 320 328
Interest income 5 679 6 980
Total interest expense (67 911) (55 283)
Interest expense (17 726) (7 554)
Notional interest on BEE Note 2 (2 452) (2 135)
shareholder loan
BEE preference dividend Note 2 (47 733) (45 594)
Share of profit from 642 6 908
joint venture
Profit before taxation 190 690 (32) 278 933
Taxation (82 162) (111 302)
Profit for the period 108 528 (35) 167 631
Other comprehensive
income
Defined benefit plan (9 214) (771)
actuarial losses
Income tax on other 2 580 216
comprehensive income
Total comprehensive 101 894 167 076
income for the period
STATEMENT OF FINANCIAL POSITION
(Audited)
30 June 30 June
R000`s 2011 2010
ASSETS
Non-current assets 1 173 923 1 123 931
Property, plant and equipment 1 118 902 1 072 962
Investments 34 779 33 161
Loan receivable 17 212 14 778
Deferred taxation 3 030 3 030
Current assets 75 733 105 684
Inventory 2 387 3 012
Trade receivables 42 380 49 149
Other receivables 15 436 11 064
Cash and cash equivalents 15 530 42 459
Total assets 1 249 656 1 229 615
EQUITY AND LIABILITIES
Capital and reserves 252 029 252 603
Share capital and premium 147 601 145 137
BEE investment in City Lodge (486 051) (486 051)
Retained earnings 506 913 514 746
Other reserves 83 566 78 771
Non-current liabilities 821 091 863 406
Interest-bearing borrowings 125 000 230 000
BEE preference shares 425 200 427 200
BEE shareholder`s loan 18 947 16 495
BEE B preference share dividend accrual 64 305 44 563
Fair value of BEE interest rate swap 44 992 41 325
Other non-current liabilities 56 178 22 278
Deferred taxation 86 469 81 545
Current liabilities 176 536 113 606
Interest-bearing borrowings 75 000 -
Trade and other payables 94 930 109 164
Taxation payable 6 606 4 442
Total liabilities 997 627 977 012
Total equity and liabilities 1 249 656 1 229 615
Note: The company has authorised capital commitments of R61 million of which
approximately R17 million has been contracted. It is anticipated that the
entire authorised commitments will be spent by 30 June 2012.
STATEMENT OF CASH FLOWS
(Audited)
Year Year
ended ended
30 June 30 June
R000`s 2011 2010
Cash generated by operations 335 698 436 752
Interest received 3 245 4 891
Interest paid (34 909) (25 673)
Taxation paid (72 494) (107 384)
Dividends paid (109 727) (112 058)
Cash inflow from operating activities 121 813 196 528
Cash utilised in investing activities (119 206) (262 212)
- investment to maintain operations (29 220) (39 490)
- investment to expand operations (90 576) (314 909)
- expenditure refundable on operating leases - 91 098
- investments and loans (1 618) 493
- proceeds on disposal of property, plant 2 208 596
and equipment
Cash flows from financing activities (29 536) 90 785
- proceeds on issue of share capital 11 8
- proceeds on issue of share premium 2 453 1 982
- proceeds from long-term borrowings - 250 000
- repayment of long-term borrowings (30 000) (120 000)
- repayment of short-term borrowings - (40 000)
- redemption of BEE preference shares (2 000) (1 100)
- distribution by BEE SPV - (105)
Net cash (decrease)/increase (26 929) 25 101
Cash and cash equivalents at beginning of 42 459 17 358
period
Cash and cash equivalents at end of period 15 530 42 459
SUPPLEMENTARY INFORMATION
(Audited)
Year Year
ended ended
30 June % 30 June
R000`s 2011 change 2010
1. Headline earnings
reconciliation
Profit for the period 108 528 167 631
Profit on sale of equipment (1 430) (596)
Taxation effect 214 167
Headline earnings 107 312 (36) 167 202
Number of shares in issue 42 929 42 815
(000`s)
Weighted average number of Note 3 36 464 36 389
shares in issue for EPS
calculation (000`s)
Weighted average number of Note 3 36 655 36 709
shares in issue for diluted
EPS calculation (000`s)
Basic earnings per share
(cents)
- fully diluted 296,1 (35) 456,6
- undiluted 297,6 (35) 460,7
Headline earnings per share Note 4
(cents)
- fully diluted 292,8 (36) 455,5
- undiluted 294,3 (36) 459,5
Dividends declared per share 228,0 (30) 327,0
(cents)
- interim 124,0 (17) 150,0
- final 104,0 (41) 177,0
2. Normalised headline earnings
reconciliation
Headline earnings 107 312 167 202
BEE transaction charges 3 805 15 135
- Loss on fair value of 3 667 14 845
interest rate swap
- Sundry expenses 138 290
Notional interest charge on 2 452 2 135
BEE shareholder loan
Preference dividends 47 733 45 594
paid/payable by the BEE
entities
Deferred tax on BEE 553 849
transactions
IFRS 2 share based payment 1 277 2 163
charge for the 10th
anniversary employee share
trust
Normalised headline earnings 163 132 (30) 233 078
3. Number of shares (000`s)
Weighted average number of 36 464 36 389
shares in issue for EPS
calculation
BEE shares treated as 6 390 6 390
treasury shares
Weighted average number of 42 854 42 779
shares in issue for
normalised EPS calculation
Weighted average number of 36 655 36 709
shares in issue for diluted
EPS calculation
BEE shares treated as 6 390 6 390
treasury shares
Weighted average number of 43 045 43 099
shares in issue for diluted
normalised EPS calculation
4. Normalised headline earnings
per share (cents)
- fully diluted 379,0 (30) 540,8
- undiluted 380,7 (30) 544,8
5. Dividend cover (times)
- calculated on normalised 1,7 1,7
headline earnings
6. Effective tax rate (%)
- calculated on normalised 33,2 32,1
profit before taxation
7. Interest bearing debt to
total capital and reserves
(%)
- calculated on a normalised 23,8 28,5
basis
8. Return on equity (%)
- calculated on a normalised 19,8 31,0
basis
9. Net asset value per share
(cents)
- calculated on a normalised 1 958 1 882
basis
Note: Net asset value is calculated using the depreciated historical cost of
buildings and not the director`s current estimated replacement cost of R3,6
billion.
STATEMENT OF CHANGES IN EQUITY
Share
capital
and Treasury Other Retained
R000`s premium shares reserves earnings Total
Balance at 143 147 (486 051) 69 589 459 833 186 518
30 June 2009
Total - - - 167 076 167 076
comprehensive
income for
the period
Profit for - - - 167 631 167 631
the period
Recognised - - - (555) (555)
IAS 19 gains
and losses
Transactions 1 990 - 9 182 (112 163) (100 991)
with owners,
recorded
directly in
equity
Issue of new 1 990 - - - 1 990
ordinary
shares
Share - - 9 182 - 9 182
compensation
reserve
Dividends - - - (112 058) (112 058)
paid
Distribution - - - (105) (105)
by BEE SPV
Balance at 145 137 (486 051) 78 771 514 746 252 603
30 June 2010
Total
comprehensive
income
for the - - - 101 894 101 894
period
Profit for - - - 108 528 108 528
the period
Recognised - - - (6 634) (6 634)
IAS 19 gains
and losses
Transactions 2 464 - 4 795 (109 727) (102 468)
with owners,
recorded
directly in
equity
Issue of new 2 464 - - - 2 464
ordinary
shares
Share - - 4 795 - 4 795
compensation
reserve
Dividends - - - (109 727) (109 727)
paid
Balance at 147 601 (486 051) 83 566 506 913 252 029
30 June 2011
SEGMENT REPORT
City Lodge Town Lodge Road Lodge
R000`s 2011 2010 2011 2010 2011 2010
Revenue 423 206 394 542 153 882 152 262 193 891 181 323
EBITDAR 243 539 246 128 75 587 85 946 109 938 109 690
Land and
hotel
building
rental
Depreciation 22 532 12 130 7 487 6 345 9 682 7 655
Share of
profit from
Courtyard
Joint Venture
SEGMENT REPORT
Central office and Total
other
R000`s 2011 2010 2011 2010
Revenue 19 219 20 972 790 198 749 099
EBITDAR (49 514) (59 001) 379 550 382 763
Land and 54 192 15 101 54 192 15 101
hotel
building rental
Depreciation 33 377 21 204 73 078 47 334
Share of 642 6 908 642 6 908
profit from
Courtyard
Joint
Venture
EBITDAR represents earnings after BEE transaction charges but before interest,
taxation, depreciation and rental.
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, W Tlou, AC Widegger**
Executive
Company Secretary:
MC van Heerden
www.citylodge.co.za
Sponsor:
J.P. Morgan Equities Limited
Date: 12/08/2011 15:35:23 Produced by the JSE SENS Department.
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