City Lodge performance affected by low consumer confidence

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“Given the muted prevailing business and consumer confidence, trading during the period was predictably mixed. As a direct result of the sustained pressure on consumers and small businesses, the Road Lodge brand was particularly affected,” said the South African hotel chain, [DATA CLH:CITY LODGE HOTELS LTD.], in a statement.

While the Road Lodge continues to have the highest overall occupancies across the group, it was the worst performer during the period.

Nonetheless, the company managed to see revenue growth of 9 percent to 533.9 million rand due to an improvement in occupancies and higher room rates. Occupancy levels grew from 63 percent to 64 percent.

Operating costs were also contained to a 5.7 per cent increase per room sold, resulting in the normalised earnings before interest, taxes, depreciation, and amortization (EBITDA)  margin to improve slightly to 42.1 percent and normalised EBITDA rose nine percent to 225.3 million rand.

Normalised operating profit was 11 percent higher while interest income rose slightly and interest expense fell by 5 million rand.

“Particularly pleasing was the continued success of our energy saving initiatives, with electricity costs per room sold, decreasing by 10.2 percent,” said the company.

Their Courtyard Joint Venture doubled its profits to 1.8 million rand from 909,000 rand the previous period.

Equity accounted after tax from their Kenyan Joint Venture increased 37 percent to 10 million rand aided by the strength of the Kenyan Shilling against the Rand together with the fact that the previous interim contribution only reflected five months of trading.

“The performance in local currency terms showed a marginal improvement which was satisfactory considering the negative effects of the Nairobi airport fire and the terror attack on the Westgate Shopping Centre,” added the group.

Normalised diluted headline earnings per share rose 14 percent to 330.5 cents and an interim dividend of 202 cents per share has been declared, 15 percent higher than the previous period.

Construction of their 150 room City Lodge Hotel Waterfall City is well on track for completion in the final quarter of 2014 while final approvals of their 90 room Road Lodge in Pietermaritzburg will be obtained so that it can also be completed in 2014.

The group are looking to expand further into Ghana, Kenya and Tanzania where final agreements are currently underway. They stated that further opportunities also exist in several Southern African Development Community (SADC) countries.

The group is also set to acquire full ownership of the Fairview Hotel and the Country Lodge in Nairobi, Kenya.

“This illustrates the group’s confidence in Kenya and the region and provides a strong platform for further growth in East Africa,” said the company.

While trading will remain mixed in the second half of 2014 due to subdued business confidence leading up to the South African general elections, City Lodge’s executives believe that occupancy levels will continue to improve due to an increasing demand and a lack of new accommodation capacity coming on stream.