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Trading statement
City Lodge Hotels Limited
(Reg. No. 1986/002864/06)
(Incorporated in the Republic of South Africa)
Share Code: CLH ISIN Code: ZAE000117792
“City Lodge” or the “Company” or the “Group”
Trading statement
In terms of the JSE Limited Listing’s Requirements, companies are
required to publish a trading statement as soon as they are
reasonably certain that the financial results for the current
reporting period will be more than 20% different to those of the
prior comparative period.
Shareholders are advised that for the year ended 30 June 2020,
the Company expects to report:
• normalised headline earnings - loss of between R(70.1) million
and R(86.1) million, being a decrease of between 126% and 132%
compared to normalised headline earnings of R267.1 million for
the year ended 30 June 2019 (“YE2019“);
• normalised diluted headline earnings per share (“HEPS”) - loss
of between (161.5) cents and (198.4) cents, being a decrease
of between 126% and 132% compared to normalised diluted HEPS
of 613.4 cents for YE2019;
• basic earnings per share (“EPS”) - loss of between (1,310.8)
cents and (1,344.5) cents, being a decrease of between 333%
and 339% compared to basic EPS of 562.0 cents reported for
YE2019; and
• basic HEPS - loss of between (369.6) cents and (403.3) cents,
being a decrease of between 166% and 172% compared to basic
HEPS of 561.7 cents reported for YE2019;
On a comparable basis, excluding the effects of implementing IFRS
16 Leases, normalised headline earnings would be a loss of between
(R2.7) million and (R18.8) million, being a decrease of between
101% and 107% compared to the normalised headline earnings of
R267.1 million for YE2019.
The normalised headline earnings, normalised diluted HEPS, basic
EPS and basic HEPS are collectively referred to as “Estimated
Financial Information”.
Normalised headline earnings and normalised diluted HEPS comprise
headline earnings adjusted for the effects of transactions
relating to the BEE SPVs and those of a non-recurring and/or core
nature. They are the responsibility of the directors of City Lodge
and have been provided for illustrative purposes only. Because of
their nature, normalised headline earnings and normalised diluted
HEPS usually differ from City Lodge’s HEPS and diluted HEPS.
The basic EPS results are adversely impacted by exceptional losses
of R344.6 million (YE2019: R nil) net of tax related to the
impairment of property, plant and equipment and right-of-use
assets of some hotels. In addition, we have recognised an
impairment of deferred tax assets of R47.0 million (YE2019: R nil).
The impairments are due to management’s assessment of the negative
impact of COVID-19 on forecast cash flows to be generated by the
underlying hotels and increased risk assessments that have had a
material impact on the valuation discount rates applied across the
portfolio. Further details of the impairments will be disclosed in
the Reviewed preliminary results (refer below).
Reviewed preliminary results in relation to the pending Rights
Offer
For purposes of enhancing financial disclosure in the context of
the planned rights offer (“the Rights Offer”), the Group intends
to publish reviewed preliminary results for the nine months
ended 31 March 2020 (“Reviewed preliminary results”) prior to
the issuance of the Rights Offer Circular, planned for on or
about 3 August 2020.
Financial overview
The global economy, and specifically the hospitality industry, has
been heavily impacted by the COVID-19 pandemic and, in particular,
President Cyril Ramaphosa’s declaration of a national state of
disaster on 15 March 2020, shortly followed by the announcement of
strict lockdown protocols and travel restrictions commencing on
the 27 March 2020. Similar lockdown protocols were announced in
all other countries in which the Company operates.
These measures resulted in the initial temporary closure of all
hotels to the public. Four hotels remained open to provide support
to government authorities and essential and critical business
continuity services, and to provide other enabling services in the
form of quarantine facilities or to provide accommodation to
international tourists unable to return to their home countries.
As South Africa progresses through the COVID-19 Risk Adjusted
Strategy, more hotels have undergone a phased re-opening to provide
accommodation to authorised business and essential services
guests. Re-opened hotels continue to operate on a reduced basis,
with limited occupancy. For additional information please refer to
the COVID-19 operational updates published on 24 March 2020 and 12
June 2020.
The pandemic has had an adverse impact on the Group’s results for
the year ended 30 June 2020, but more specifically in the last
three months.
Selected consolidated financial statement captions for the ten
months ended 30 April 2020 and the year ended 30 June 2020
The consolidated revenue, total salaries, interest expense
(including BEE interest and BEE preference dividend), interest
expenses – leases, depreciation, depreciation – leases and
impairments of property, plant and equipment and right-of-use
assets of the Group for the ten months ended 30 April 2020 and the
year ended 30 June 2020 (collectively “Financial Statement
Captions”) have been provided to afford shareholders with
additional information in relation to the financial performance of
the Group during the recent COVID-19 lockdown period.
The Financial Statement Captions have been extracted from reviewed
special purpose consolidated financial statements of City Lodge
for the ten months ended 30 April 2020 and the twelve months ended
30 June 2020 (“Special Purpose Consolidated Financial
Statements”). The accounting policies used in the preparation of
the Special Purpose Consolidated Financial Statements are the same
as those used for the preparation of the audited consolidated
financial statements of the Group for the year ended 30 June 2019
and are consistent with the recognition and measurement criteria
of International Financial Reporting Standards, except for the
adoption of IFRS 16 Leases.
The directors are responsible for the Special Purpose Consolidated
Financial Statements and for the correct extraction of the
Financial Statement Captions presented below.
Ten months ended 30 April 2020
• revenue R1.14 billion;
• total salaries R347.7 million;
• interest expenses R72.8 million;
• interest expenses - leases R96.1 million;
• depreciation R110.8 million;
• depreciation - leases R79.5 million;
• impairments of property, plant and equipment and right-of-
use assets R488.4 million
Year ended 30 June 2020
• revenue R1.16 billion being a decrease of 25% compared to
R1.55 billion for YE2019;
• total salaries R385.3 million being a decrease of 5% compared
to R404.1 million for YE2019;
• interest expenses R87.0 million being an increase of 45%
compared to R59.8 million for YE2019;
• interest expense – leases R117.2 million compared to R nil
for YE2019;
• depreciation R131.2 million being an increase of 12% compared
to R117.5 million for YE2019;
• depreciation – leases R92.3 million compared to R nil for
YE2019;
• impairments of property, plant and equipment and right-of-
use assets R488.4 million compared to R nil for YE2019;
The Financial Statement Captions are prior to the application of
any proceeds from the Rights Offer as announced on 22 June 2020.
The financial information presented above relating to YE2019 has
been extracted from the audited annual financial statements for
that period which are available, together with the related
unmodified audit opinion at: www.clhg.com.
The Special Purpose Consolidated Financial Statements, from which
the Financial Statement Captions have been extracted, and KPMG
Inc.’s related unmodified special purpose review opinion, may
further be obtained from the Company Secretary at
mvanheerden@clhg.com.
Results announcement
Shareholders are advised that the Estimated Financial Information
on which this trading statement is based has not been reviewed or
reported on by the Company’s auditors. City Lodge’s results for
the year ended 30 June 2020 will be released on SENS on or about
27 August 2020.
24 July 2020
Bryanston
Sponsor
Nedbank Corporate and Investment Banking
Date: 24-07-2020 03:56:00
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