City Lodge banks on vaccine rollout in the face of R804.6m loss

Courtyard Hotel Waterfall City.
Courtyard Hotel Waterfall City.

City Lodge Hotels released its provisional results for the year ended 30June 2021, reporting a net loss of R804.6 million (FY2020: R486.6 million).

The group decided against declaring a dividend with its loss in earnings per share of 161c (FY2020: 440C) and the loss in headline earnings per share of 91c (2020: 128c) improving slightly compared to 2020.

Occupancies for the reporting period were 19% compared to 38% in 2020 and 55% in 2019 with revenue decreasing by 56% to R0.5 billion.

Operating costs, excluding depreciation and amortisation, decreased by 22% and by 30% excluding unrealised foreign exchange losses.

Depreciation and amortisation on owned assets decreased by 9% while a depreciation charge for right-of-use assets decreased by 7%, mainly due to the impact of impairments recognised during the previous year.

Interest expense decreased by R26.8 million mainly due to the redemption and repayment of BEE preference shares and BEE interest-bearing loans during December 2020.

With the prolonged recovery of the hospitality sector and the dependency on the vaccine rollout, the group recognised additional impairments to property plant and equipment of R390.4 million (FY2020: R245.5 million) mainly on impairment to fair value less cost to sell of its East African assets held for sale, the reversal of impairment on right-of-use assets of R48.9 million (FY2020: an impairment loss of R242.9 million), impairment of goodwill of R10.6 million (FY2020: nil) and impairment of VAT receivable of R25.9 million (FY2020: nil).

The completion of the rights offer in August 2020 raised gross proceeds of R1.2 billion which gave the group a much-needed injection of liquidity and to the settling of its BBBEE debt through the redemption of the BEE preference shares and settlement of accrued preference dividends, term loans and interest accrued totalling R764.5 million in December 2020.

The group drew R650 million of the total available loan facilities of R800 million with access to an overdraft facility of R115 million. Its funders recently approved an extension of the repayment date of Loan F, R100 million, from September 2021 to September 2022, and access to an additional R100 million, Loan G facility (included in the total R800 million available facilities), in addition to waiving the original debt covenants to the September 2022 measurement period.

The sale of its four hotels in East Africa is expected to be complete within 22 weeks of the signing date (July 2021) and the proceeds from the disposals will be used to reduce debt levels, increase liquidity and to support the group’s working capital requirements.

Occupancies for July 2021 were at 16% for the group’s total inventory in its South African portfolios while August 2021 saw an improvement of 24%. As at the 9th of September 2021, the group has 51 out of 56 of its hotels trading with 5 out of 7 hotels open in the ‘rest of Africa’.

The group is banking its recovery – and that of the hospitality industry – on the successful rollout of the vaccination program across South Africa.