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CLH
CLH
CLH - City Lodge Hotels Limited - Unaudited interim report for the six months
ended 31 December 2011
CITY LODGE HOTELS LIMITED
Registration number: 1986/002864/06
Share code: CLH
ISIN: ZAE 000117792
UNAUDITED INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
Average occupancies 60%
Normalised diluted HEPS +10%
Return on equity 20%
Commentary
Against a backdrop of continued tough trading conditions, the group achieved
a pleasing performance for the six months to 31 December 2011. The average
occupancy rate increased to 60% from 59% in the previous corresponding
period, which included two weeks of the 2010 FIFA World Cup. The new hotels
which opened in 2010 continue to gain market share with growth in occupancies
being achieved in all instances.
Encouragingly, the last quarter of calendar 2011 produced stronger
occupancies than in the same months a year earlier, the first time that this
has happened since early 2008.
Revenue for the period increased by 9% to R443,3 million as a result of the
slightly higher occupancy levels and more rooms being available through the
opening of two new hotels, City Lodge Hatfield and Town Lodge Port Elizabeth.
Average room rates achieved were marginally higher despite the group`s
decision not to increase rates on 1 August and given the high base of July
2010.
The normalised EBITDA margin decreased by 0,6 percentage points to 42,0%
resulting in normalised EBITDA of R186,2 million, an increase of 7,8% on the
previous interim period.
Despite operating cost pressures, especially from rising electricity tariffs
and higher property rates and taxes, the group contained the increase in
operating costs per room sold to just 5,4%. Electricity costs per room sold
rose by 17,3%, which is well below the official tariff increase and reflects
the success of the various energy saving initiatives introduced by the
company over the past year.
Depreciation rose by 10,4% as a result of the addition of the two new hotels.
Interest received was R1,1 million above the previous year due to higher
average cash balances, whilst the interest expense was R1,6 million higher
than last year. The Courtyard joint venture sustained a loss of R1,1 million
compared to a profit of R575,000 a year earlier.
Normalised headline earnings of R96,6 million and diluted headline earnings
per share of 223,8 cents both increased by 10%. At R190,6 million, cash
generated by operations was 17,8% higher than in the previous corresponding
period.
In line with the group`s policy of paying out 60% of normalised earnings, an
interim dividend of 135 cents has been declared, 9% higher than the previous
year`s interim dividend.
Outlook
Although no group hotels are currently under construction within South
Africa, the group believes that selected opportunities will emerge to
increase our domestic footprint which currently comprises 52 hotels offering
6 440 rooms across the four brands.
Significantly, the group has made its first foray into Africa through
entering into a lease and development agreement in Gaborone, the capital city
of neighbouring Botswana. Earthworks have commenced and the 106-room Town
Lodge is expected to open in December this year at an estimated total
development cost of R61 million. Expansion opportunities continue to be
evaluated elsewhere in Africa and it is anticipated that further
announcements will be made during the course of the year.
The trend of slightly higher occupancies in the final quarter of 2011 appears
to have continued into the beginning of 2012. Should this trend continue and
should there be no deterioration in the economic conditions in the remaining
months of the financial year, the group is well positioned to achieve
satisfactory growth.
Declaration of interim dividend
Notice is hereby given that ordinary dividend no. 46 of 135,0 cents per share
for the six months ended 31 December 2011 (2010: 124,0 cents) has been
declared.
Shareholders are advised that the last day to trade cum dividend will be
Friday, 9 March 2012. The shares will trade ex dividend as from Monday, 12
March 2012 and the record date will be Friday, 16 March 2012. The dividend is
payable on Monday 19 March 2012.
Share certificates may not be dematerialised or rematerialised between
Monday, 12 March 2012 and Friday, 16 March 2012, both days inclusive.
Basis of preparation
These condensed, unaudited interim financial statements have been prepared in
accordance with the recognition and measurement requirements of International
Financial Reporting Standards ("IFRS") and 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, 2008 (as amended) and Companies
Regulations, 2011.
The accounting policies used are consistent with those used in the annual
financial statements for the year ended 30 June 2011.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
15 February 2012
Statement of comprehensive income
Six months
ended
31 December %
R000`s Note 2011 change
Revenue 443 257 9
Administration and marketing costs (34 733)
BEE transaction charges 2 (4 851)
Operating costs excluding depreciation (222 328)
181 345 10
Depreciation (39 569)
Operating profit 141 776 10
Interest income 4 176
Total interest expense (37 201)
Interest expense (9 632)
Notional interest on BEE shareholder loan 2 (1 360)
BEE preference dividend 2 (26 209)
Share of (loss)/profit from joint venture (1 073)
Profit before taxation 107 678 8
Taxation (45 015)
Profit for the period 62 663 15
Other comprehensive income
Defined benefit plan actuarial losses (2 304)
Income tax on other comprehensive income 645
Total comprehensive income for the period 61 004
Statement of comprehensive income (continued)
(Audited)
Six months Year
ended ended
31 December 30 June
R000`s 2010 2011
Revenue 405 397 790 198
Administration and marketing costs (30 263) (60 110)
BEE transaction charges (8 091) (3 805)
Operating costs excluding depreciation (202 483) (400 925)
164 560 325 358
Depreciation (35 836) (73 078)
Operating profit 128 724 252 280
Interest income 3 047 5 679
Total interest expense (32 628) (67 911)
Interest expense (8 076) (17 726)
Notional interest on BEE shareholder loan (1 184) (2 452)
BEE preference dividend (23 368) (47 733)
Share of (loss)/profit from joint venture 575 642
Profit before taxation 99 718 190 690
Taxation (45 045) (82 162)
Profit for the period 54 673 108 528
Other comprehensive income
Defined benefit plan actuarial losses (70) (9 214)
Income tax on other comprehensive income 20 2 580
Total comprehensive income for the period 54 623 101 894
Statement of financial position
(Audited)
31 December 31 December 30 June
R000`s 2011 2010 2011
ASSETS
Non-current assets 1 163 204 1 181 088 1 173 923
Property, plant and equipment 1 107 067 1 129 195 1 118 902
Investments 34 532 32 914 34 779
Loan receivable 18 575 15 949 17 212
Deferred taxation 3 030 3 030 3 030
Current assets 108 987 61 198 75 733
Inventory 2 698 2 669 2 387
Trade receivables 45 891 38 081 42 380
Other receivables 19 812 15 469 15 436
Taxation receivable - 4 979 -
Cash and cash equivalents 40 586 - 15 530
Total assets 1 272 191 1 242 286 1 249 656
EQUITY
Capital and reserves 261 116 249 068 252 029
Share capital and premium 148 031 146 502 147 601
BEE investment and incentive (503 145) (486 051) (486 051)
scheme shares
Retained earnings 529 897 504 868 506 913
Other reserves 86 333 83 749 83 566
LIABILITIES
Non-current liabilities 802 898 869 623 821 091
Interest-bearing borrowings 75 000 200 000 125 000
BEE preference shares 425 200 425 300 425 200
BEE shareholder`s loan 20 307 17 679 18 947
BEE preference share dividend 74 426 54 661 64 305
accrual
Fair value of BEE interest rate 49 617 49 342 44 992
swap
Other non-current liabilities 70 332 34 841 56 178
Deferred taxation 88 016 87 800 86 469
Current liabilities 208 177 123 595 176 536
Interest-bearing borrowings 100 000 46 156 75 000
BEE preference share dividend 5 716 3 021 3 642
accrual
BEE interest rate swap accrual 25 944 12 442 18 558
Trade and other payables 71 426 61 976 72 730
Taxation payable 5 091 - 6 606
Total liabilities 1 011 075 993 218 997 627
Total equity and liabilities 1 272 191 1 242 286 1 249 656
Note: The company has authorised capital commitments of R34 million of which
approximately R21 million has been contracted. It is anticipated that the
entire authorised commitments will be spent by 30 June 2012.
Segment report
City Lodge Town Lodge
R000`s 2011 2010 2011 2010
Revenue 240 528 218 581 83 535 78 335
EBITDAR 140 537 127 500 41 326 40 227
Land and hotel building rental
Depreciation 13 067 10 955 3 590 3 337
Share of (loss)/profit from joint venture
Segment report (continued)
Central office
Road Lodge and other Total
R000`s 2011 2010 2011 2010 2011 2010
Revenue 109 833 98 826 9 361 9 655 443 257 405 397
EBITDAR 63 436 56 565 (35 277) (32 873) 210 022 191 419
Land and hotel 28 677 25 950 28 677 25 950
building rental
Depreciation 5 273 4 981 17 639 16 563 39 569 35 836
Share of (1 073) 575 (1 073) 575
(loss)/profit
from joint
venture
EBITDAR represents earnings after BEE transaction charges but before
interest, taxation, depreciation and rental.
Supplementary information
Six months
ended
31 December %
R000`s Note 2011 change
1. Headline earnings reconciliation
Profit for the period 62 663
Profit on sale of equipment -
Taxation effect -
Headline earnings 62 663
Number of shares in issue (000`s) 42 947
Weighted average number of shares in 3 36 533
issue for EPS calculation (000s)
Weighted average number of shares in 3 36 768
issue for diluted EPS calculation (000s)
Basic earnings per share (cents)
- undiluted 171,5 14
- fully diluted 170,4 15
Headline earnings per share (cents) 4
- undiluted 171,5 14
- fully diluted 170,4 15
Dividend declared per share (cents) 135,0 9
2. Normalised headline earnings
reconciliation
Headline earnings 62 663
BEE transaction charges 4 851
- Loss on fair value of interest rate 4 625
swap
- Sundry expenses 226
Notional interest charge on BEE 1 360
shareholder loan
Preference dividends paid/payable by the 26 209
BEE entities
Deferred tax on BEE transactions 550
IFRS 2 share-based payment charge for the 939
10th anniversary employee share trust
Normalised headline earnings 96 572 10
3. Number of shares (000`s)
Weighted average number of shares in 36 533
issue for EPS calculation
BEE shares treated as treasury shares 6 390
Weighted average number of shares in 42 923
issue for normalised EPS calculation
Weighted average number of shares in 36 768
issue for diluted EPS calculation
BEE shares treated as treasury shares 6 390
Weighted average number of shares in 43 158
issue for diluted normalised EPS
calculation
4. Normalised headline earnings per share
(cents)
- undiluted 225,0 9
- fully diluted 223,8 10
5. Dividend cover (times)
- calculated on normalised headline 1,7
earnings
6. Effective tax rate (%)
- calculated on normalised profit before 31,5
taxation
7. Interest-bearing debt to total capital
and reserves (%)
- calculated on a normalised basis 20,0
8. Return on equity (%)
- calculated on a normalised basis 20,2
9. Net asset value per share (cents)
- calculated on a normalised basis 2 040
Supplementary information (continued)
(Audited)
Six months Year
ended ended
31 December 30 June
R000`s 2010 2011
1. Headline earnings reconciliation
Profit for the period 54 673 108 528
Profit on sale of equipment - (1 430)
Taxation effect - 214
Headline earnings 54 673 107 312
Number of shares in issue (000`s) 42 862 42 929
Weighted average number of shares in issue for 36 446 36 464
EPS calculation (000s)
Weighted average number of shares in issue for 36 754 36 655
diluted EPS calculation (000s)
Basic earnings per share (cents)
- undiluted 150,0 297,6
- fully diluted 148,8 296,1
Headline earnings per share (cents)
- undiluted 150,0 294,3
- fully diluted 148,8 292,8
Dividend declared per share (cents) 124,0 228,0
2. Normalised headline earnings reconciliation
Headline earnings 54 673 107 312
BEE transaction charges 8 091 3 805
- Loss on fair value of interest rate swap 8 017 3 667
- Sundry expenses 74 138
Notional interest charge on BEE shareholder 1 184 2 452
loan
Preference dividends paid/payable by the BEE 23 368 47 733
entities
Deferred tax on BEE transactions 167 553
IFRS 2 share-based payment charge for the 10th 644 1 277
anniversary employee share trust
Normalised headline earnings 88 127 163 132
3. Number of shares (000`s)
Weighted average number of shares in issue for 36 446 36 464
EPS calculation
BEE shares treated as treasury shares 6 390 6 390
Weighted average number of shares in issue for 42 836 42 854
normalised EPS calculation
Weighted average number of shares in issue for 36 754 36 655
diluted EPS calculation
BEE shares treated as treasury shares 6 390 6 390
Weighted average number of shares in issue for 43 144 43 045
diluted normalised EPS calculation
4. Normalised headline earnings per share (cents)
- undiluted 205,7 380,7
- fully diluted 204,3 379,0
5. Dividend cover (times)
- calculated on normalised headline earnings 1,6 1,7
6. Effective tax rate (%)
- calculated on normalised profit before 33,7 33,2
taxation
7. Interest-bearing debt to total capital and
reserves (%)
- calculated on a normalised basis 29,9 23,8
8. Return on equity (%)
- calculated on a normalised basis 27,5 19,8
9. Net asset value per share (cents)
- calculated on a normalised basis 1 922 1 958
Summarised statement of cash flows
Six months Six months (Audited)
Year
ended ended ended
31 December 31 December 30 June
R000`s 2011 2010 2011
Cash generated by operations 190 590 161 833 335 698
Interest income 2 813 1 877 3 245
Interest expense (16 260) (17 276) (34 909)
Taxation paid (44 338) (48 191) (72 494)
Dividends paid (38 000) (64 501) (109 727)
Cash inflow from operating 94 805 33 742 121 813
activities
Cash utilised in investing (27 487) (91 822) (119 206)
activities
- investment to maintain operations (25 168) (6 745) (29 220)
- investment to expand operations (2 566) (85 324) (90 576)
- investments and loans 247 247 (1 618)
- proceeds on disposal of property, - - 2 208
plant and equipment
Cash flows from financing activities (42 262) (30 535) (29 536)
- proceeds from issue of ordinary 430 1 365 2 464
shares
- repayment of interest-bearing (25 000) (30 000) (30 000)
borrowings
- purchase of incentive scheme (17 672) - -
shares
- redemption of BEE preference - (1 900) (2 000)
shares
- distribution by BEE SPV (20) - -
Net cash increase/(decrease) 25 056 (88 615) (26 929)
Statement of changes in equity
Share
capital
and Treasury Other
R000`s premium shares reserves
Balance at 30 June 2010 145 137 (486 051) 78 771
Total comprehensive income for the - - -
period
Profit for the period
Recognised income and expenses
Transactions with owners, recorded
directly
in equity 1 365 - 4 978
Issue of new ordinary shares 1 365
Share compensation reserve 4 978
Dividends paid
Balance at 31 December 2010 146 502 (486 051) 83 749
Total comprehensive income for the - - -
period
Profit for the period
Recognised income and expenses
Transactions with owners, recorded
directly
in equity 1 099 - (183)
Issue of new ordinary shares 1 099
Share compensation reserve (183)
Dividends paid
Balance at 30 June 2011 147 601 (486 051) 83 566
Total comprehensive income for the - - -
period
Profit for the period
Recognised income and expenses
Transactions with owners, recorded
directly
in equity 430 (17 094) 2 767
Issue of new ordinary shares 430
Shares acquired for restricted share (17 094)
plan
Share compensation reserve 2 767
Dividends paid
Distribution by BEE SPV
Balance at 31 December 2011 148 031 (503 145) 86 333
Statement of changes in equity (continued)
Retained
R000`s earnings Total
Balance at 30 June 2010 514 746 252 603
Total comprehensive income for the period 54 623 54 623
Profit for the period 54 673 54 673
Recognised income and expenses (50) (50)
Transactions with owners, recorded directly
in equity (64 501) (58 158)
Issue of new ordinary shares 1 365
Share compensation reserve 4 978
Dividends paid (64 501) (64 501)
Balance at 31 December 2010 504 868 249 068
Total comprehensive income for the period 47 271 47 271
Profit for the period 53 855 53 855
Recognised income and expenses (6 584) (6 584)
Transactions with owners, recorded directly
in equity (45 226) (44 310)
Issue of new ordinary shares 1 099
Share compensation reserve (183)
Dividends paid (45 226) (45 226)
Balance at 30 June 2011 506 913 252 029
Total comprehensive income for the period 61 004 61 004
Profit for the period 62 663 62 663
Recognised income and expenses (1 659) (1 659)
Transactions with owners, recorded directly
in equity (38 020) (51 917)
Issue of new ordinary shares 430
Shares acquired for restricted share plan (17 094)
Share compensation reserve 2 767
Dividends paid (38 000) (38 000)
Distribution by BEE SPV (20) (20)
Balance at 31 December 2011 529 897 261 116
Registered office:
"The Lodge", Bryanston Gate Office Park,
cnr. Homestead Avenue and Main Road, Bryanston, 2001
Transfer secretaries:
Computershare Investor Services (Proprietary) 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, WM Tlou, AC Widegger*
*Executive
Company Secretary:
MC van Heerden
www.citylodge.co.za
Sponsor:
J.P. Morgan Equities Limited
Date: 15/02/2012 15:42:11 Produced by the JSE SENS Department.
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