City Lodge Hotels yesterday reported that it doubled its annual profit after the Covid-19 pandemic and now plans to invest back into the group by recommencing its refurbishment programmes.
Andrew Widegger, the CEO of City Lodge Hotels, said, “We are now seeing our recovery playing out. We expect this growth trajectory to continue as we roll out several significant developments aimed at boosting the bottom line by enhancing the guest experience. Our drive is reflected in our new group slogan, ‘Life is hard. Check into easy’.”
Group occupancies were up 18 percentage points to 56% from the prior year’s 38%.
“Occupancies have been on a rising trend, with monthly occupancies since October 2022 exceeding those of 2019 (excluding January 2023). Similarly, average room rates for the year have increased meaningfully by 12% compared to last year, and we have been recovering lost ground against pre-Covid room rates,” it said.
For the year to June 30, 2023 its profit for the year checked in at R164m from R82m, with its revenue rising 55% to R1.7 billion.
Earnings per share (diluted) increased to 28.6 cents per share from 14.3c the prior year, while headline earnings per share (diluted) rose to 30.3c, compared to a loss of 8.6c per share in the prior period.
The board declared a final cash dividend of 8c per share after management withheld a dividend the prior year.
In afternoon trade the share was flat at R4.70. However, the counter has risen 62.07% over three years despite a challenging trading environment.
Martin Rodgers, an assistant portfolio manager at Integrity Asset Management, said on X, “ Staggering numbers from City Lodge for their full year results, recovering nicely!”
City Lodge managed to halve its debt. Debt funding was R300m as at June 30, 2023, from R600m, while cash balances were R328.3m, from an overdraft of R59.3m the prior year.
Food and beverage revenue rose due to new menus at City Lodge Hotels and Courtyard Hotels, as well as the expanded lunch and dinner options at the Town Lodge and Road Lodge brands. It now accounted for 17% (2022: 15%) of total revenue – a 79% increase on the prior year.
However, costs rose.
Salaries and wages increased by 32% to R492.7m as the prior year included a period of up to 30% salary reductions for reduced time worked during Covid as many hotels remained closed or had low occupancies.
Property costs increased by 19% due to the increase in utility prices and the increase in the variable portion of these costs from greater occupancy volumes.
“The cost of running the generators during more frequent power outages increased to R16.6m, from R3.2m in the prior period,” City Lodge said.
Looking ahead, the board said it remained cautious about the economic challenges, particularly in South Africa, with the ongoing electricity and water supply constraints and the high inflation and interest rates over the past 12 months.
Widegger said, “As a consequence of our now robust financial position, our refurbishment programmes have recommenced to ensure our products are always in tip-top condition.”
Dhanisha Nathoo, the chief financial officer, said, “The 2024 financial year will be the year of renewed fervour into modernising and reinvesting in our portfolio of hotels, with refurbishments scheduled at 10 hotels, which will include the further roll-out of our new generation hotel room designs to make the products more appealing to our changing guest profile and delivering an enhanced return for our shareholders.”
City Lodge’s solar programme was being expanded from 25 hotels to a further 15 hotels. Total capital commitments authorised for the 2024 financial year were R367.6m.
BUSINESS REPORT