City Lodge declares first dividend since 2019

The financial and operational recovery of JSE-listed City Lodge Hotels from the devastating impact of the Covid-19 pandemic is gathering pace, resulting in the resumption of dividend payments for the six months to December 2022.

According to the interim results statement, the new financial year (2023) saw the tapering off of direct pandemic-related impacts to the group’s operations and the continued recovery of revenue lost during the previous two years through wide-ranging innovation.

The continued recovery from the pandemic has seen improved numbers of foreign tourists visiting South Africa, in addition to an increase in domestic business and leisure travel, says City Lodge.

Statistics SA reported earlier this month that the number of foreign tourist arrivals in South Africa increased by 158% year on year in December 2022 to 677 838 tourists from 263 108 in December 2021.

Although the trend is promising, City Lodge says the December 2022 figure is still well below the 981 038 foreign tourist arrivals in South Africa in December 2019.

The group’s average occupancies for the six months to end-December 2022 improved to 57% from 30% in the prior period and for South African hotels to 58% from 32% in 2021 and 57% in 2019.

Read:

The group’s average room rates in South Africa increased by 10% in the reporting period compared with 2021, but remain only 1% above 2019.

It said the business in South Africa has been hampered by crippling load shedding and the knock-on effects of interruptions to water supply and the higher cost of operations in general.

The cost of running generators during power outages increased to R7.4 million from R0.9 million in the prior period.

“These interruptions, including the war in Ukraine, have steadily impacted the supply chain, resulting in longer lead times and higher prices, which contributed to the increase in operational costs, and the delays to planned capital investment projects,” City Lodge said.

The numbers

City Lodge reported a 94% increase in revenue to R838 million in the six months to end-December 2022, from R436 million in the previous period.

The growth in revenue was driven by the steady return of guests, with a renewed fervour for travel and hospitality in both the leisure and business markets.

The roll out of the new food and beverage offering at Town Lodge and Road Lodge, as well as service and menu enhancements at City Lodge-branded hotels, has delivered a 132% increase in food and beverage revenue to R139 million from R60 million in the prior year.

Food and beverage revenue now comprises 16% of total group revenue.

Earnings before interest, taxes, depreciation, amortisation and restructuring or rent costs (Ebitdar) improved by 143% to R304 million from R125 million.

However, the group said improved occupancies and the return to normal trading conditions also contributed to the increase in operating costs, with salaries and wages rising by 43% to R230.3 million because the prior year included 30% salary deductions.

City Lodge reported a 390% improvement in profit after tax to R97.9 million from the R33.8 million loss in the prior period.

Headline earnings per share grew by 383% to 17 cents per share, from the six cents per share loss in the prior period.

The group in the reporting period received R27 million from the settlement of its Covid-19 business interruption claim and the R467.2 million proceeds from the sale of its East African operations.

The cash generated by operations of R260.4 million compared with R13.1 million in the prior period, enabled the group to repay R300 million of its total R600 million interest-bearing borrowings facilities.

The group now has R248 million of available cash, R115 million in overdraft facilities, and R300 million undrawn debt facilities.

It said the group’s much-improved liquidity position and the promising outlook allowed the board to declare an interim cash dividend of five cents per share.

City Lodge last declared a dividend – of 153 cents per share – for the six months to end-December 2019.

Outlook

As to the group’s outlook, City Lodge stated that consumers’ budgets are stretched by the higher prices of groceries, petrol price fluctuations and increased interest rates – which come on top of high unemployment, poverty, crime and corruption.

“This is pointing to cost-of-living challenges to come, leading to a risk of stagflation and a period of economic hardship and lower household disposable income.

“Despite these dismal macroeconomic factors, occupancy growth remains encouraging with group occupancy of 43% for January 2023 compared to 31% in January 2022 and 59% up to 23 February 2023 from 45% in February 2022,” the Sens reads.

Capex

City Lodge says it has resumed refurbishment programmes to ensure its products are in tip-top condition.

It has planned capital expenditure of R99.4 million for the remainder of the financial year, of which R62.2 million is committed, compared with the R19.7 million spent on expansionary and maintenance capital expenditure in the six months to end-December.

The majority of this capital expenditure relates to the City Lodge Hotel V&A Waterfront and Road Lodge Richards Bay refurbishment projects, and sustainability investment projects for solar and borehole installations.

Shares in City Lodge rose by 0.93% on Friday to close at R4.35 per share.