City Lodge Hotels has released its unauthorized consolidated consolidated financial statements and cash dividend declarations for the six months ended December 31, 2024.
Highlights
Revenue: R1.02bn (2% increase) HY2024: R1.00bn Stock Earnings: 10% (0.6% points increase) HY2024: 9.4% Group Occupancy: 57% (4% points) HY2024: 61% Average Room Rate: 10% HY2024: R120M (12% (no dilution): 21.6C (15% increase) HY2024: 18.8C Headline Earnings per share (no dilution): 21.6C (15% increase) HY2024: 18.8C Adjusted Headline Earnings (dilution): 19.6C (2% decrease) HY2024: 19.9C Adjusted ebitdar: Declared dividend per share: Provisional: 6c (no change) HY2024: 6c
Explanation
City Lodge Hotels continues to provide strategic initiatives to improve yield management, focus on cost containment and create value by investing and modernizing key properties in its portfolio of 58 hotels. The group has achieved a 10% room rate growth and nine renovation projects are currently underway in six months at various stages of progress.
The group has invested R408 million in revitalizing its hotel portfolio over the past 30 months, and plans to invest an additional R20 million over the next six months.
“City Lodge Hotels provided stable trading performance in the first half of the year against strong demand headwinds as consumer and business spending remains curtailed. Economic sentiment has improved following the outcome of South Africa's central government elections and the formation of a national unified government (GNU), but consumers and businesses remain cautious until meaningful changes come into effect.
Regionally, Garten, Western Cape and Free State have seen the most improvement in revenue growth as more employees return to work with normalisation of office and business-related travel. The increase in the volume of international travellers has benefited the Western Cape Hotel. In contrast, Kwazulu-Natal's leisure and business demand remains curtailed due to water and sanitation challenges, safety and security concerns from riots, and new disruptions leading up to national elections.
General elections held in other SADC countries in the second quarter have contributed to the disruption of management and occupancy to varying degrees. The unrest in Mozambique continues to destroy both our operations and our group's schedule to complete the remaining three floors of the hotel. However, the hotel is open and serves as a safe haven for guests.
Financial Review
“These challenges attenuated occupancy in the first half of the fiscal year, a 4% percentage point reduction compared to the past six months. The decline in occupancy is somewhat mitigated by group strategy delivery for more effective yield management, which results in a 10% increase in average room rates. This has led to an overall increase of 2% for the six months ended December 31, 2024 to R10.2 billion (6 months ended December 31, 2023 (HY2024): R10 billion).
Our fortified food and drink (F&B) offerings are now well established across all brands and still offer promising prospects for further growth despite being negatively affected by ongoing occupancy and renovations over the period. F&B revenues increased by 6% to R200.2 million (HY2024: R188.5 million), and now accounts for 20% of total revenues (HY2024: 19%).
“Along with nights of 35,500 (HY2024:17,000) rooms that were removed from stock during renovations due to constrained occupancy, the group focused on cost containment, which increased total operating costs by just 3%,” says Andrew Widegger.
Salary and wages increased to R288.8 million (HY2024: R2718 million), roughly in line with the increase in annual inflation provided to 6.25% staff in August 2024.
“The group eased an average 13% rise in utility prices last year, thanks to increased solar power usage and reduced generator fuel consumption.
Room-related costs R104.5 million (HY2024: R110.5 million) were primarily varied, falling 5% over the period. The F&B cost remains the same for R77.6 million (HY2024: R77.8 million), bringing even more efficiency against F&B's 6% revenue growth. F&B's total profit margin improved from 59% in the previous period to 61%.
This group generated an EBITDAR margin of R330.1 million (HY2024:312.3 million) and 32.3% (HY2024:31.2%) during the period. The adjusted EBITDAR margin excluding unrealized foreign currency profits/(loss) was withdrawn to just 31.2% (HY2024: 31.8%).
Depreciation for the year of R89.5 million (HY2024: R83.1 million) includes depreciation for capitalized leases. The 8% increase is related to higher renovation capital expenditures that the group suffered compared to the previous period.
Lease-related expenses (i.e., depreciation on right-of-use assets of R45.8 million and interest expense on leases of R62.9 million) exceed R22.4 million cash lease payments.
Taxation equivalent to R47.2 million (HY2024: R45.6 million) has increased by 3%, with an effective tax rate of 28% (HY2024: 29%)
Post-tax profits rose 12% to R120 million (HY2024: R10007.3 million), while earnings per share dilution increased 16% to 21.6 cents (HY2024: 18.7 cents).
Diluted headline revenue increased 16% per share to 21.6 cents (HY2024: 18.7 cents), while adjusted headline earnings per share to 19.6 cents (HY2024: 19.9 cents), excluding unrealized foreign currency earnings/(loss) and exceptional items, dipping down 2% to 19.6 cents (HY2024: 19.9 cents).
Strategic Updates
“The board has approved the six months ended December 31, 2024 (4.80 cents after withholding tax (4.80 cents after withholding tax) (4.80 cents after withholding tax) (4.80 cents after withholding tax deduction) (4.80 cents and 4.80 cents after withholding tax deduction),” Dhanisha announced.
She adds: “The Group has actively managed the debt and cash generated by the operation of R250 million (HY2024: R265.9 million) to fund large renovation investments in major hotels and large renovation investments in water and electricity resilience initiatives. These investments allow the Group to continue to provide value from a portfolio of hotels that are well positioned to respond to guest demand, more sustainable, and well-equipped hotels. During the period, the Group has used R60.0 million of its loan facility to fund capital expenditures incurred during the period and expenses incurred as of June 30, 2024.”
The group completed five renovation projects during the period during review. This includes City Lodge Hotel Lynwood, Town Lodge Bellville, Road Lodge Durban, Road Lodge N1 City, and Courtyard Hotel Sandton (commercial area).
Four additional projects are currently underway and will be completed in the current fiscal year. These include expansions at Town Lodge George, City Lodge Hotel Umlanga Ridge, City Lodge Hotel V&A Waterfront – Commercial Area and City Lodge Hotel Maputo.
“After 35 years of operation, the door to the door to the City Lodge Hotel Sandton on Catherine Street was closed in December 2024. The loyal guests will be redirected to three other hotels in the Sandton area to cover a variety of budget options. The hotel is in the process of selling with a total revenue of R68 million, with the sale expected to be completed in the fiscal year. The group intends to use some of the sale for share buybacks,” notes Andrew.
Outlook
“The economic outlook for the next 12 months is positive due to stabilizing the power supply, three consecutive interest rate cuts, revised revised forecasts for GDP growth, and soft inflation supplemented by the introduction of a two-pot retirement system and continued progress from the GNU. All of the events and activities associated with this year are expected to have a positive impact on consumer and business trust, spending and increasing interest in investors in South Africa,” commented Andrew.
Dhanisha reports: “This group benefited from these green buds that had grown occupancy in January 2025. This is usually the quietest month, rising 2% points to 44% (January 2024: 42%), while SA occupancy has increased by 3% points. The positive momentum was in February 2025, with the month to date increasing by 3.8% to date to 60.3% (February 2024: 56.5%) compared to last year's simultaneous.”
The group's extensive hotel portfolio and its modernization programme's strategy to deliver value has progressed at a pace, and at the end of this current phase it had completed renovations to 21% of the portfolio.
“The group continues to pursue selected opportunities for new hotels in South Africa's high-growth regions,” adds Andrew.
We are actively partnering with local and city governments, and travel and tourism industry organizations are energizing positive public relations and identifying and pursuing uplifting and safety solutions within the tourism hubs of KwaZulu-Natal and Gqeberha.
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