City Lodge to slump into a loss


City Lodge to slump into a loss

Published Date: 2020-07-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

City Lodge to slump into a loss

The hotel group has reopened some of its hotels as lockdown restrictions ease but occupancies remain low.

City Lodge has warned that it will swing to a full-year loss as it prepares for a R1.2 billion rights issue due to the impact of Covid-19 on its operations.

In a trading statement, the hotel group said the pandemic had an adverse impact on its results for year to end-June, but more specifically in the last three months. While it made revenue of R1.14 billion in the ten months to end-April, for the full 12 months turnover only reached R1.16 billion as most of its hotels remained closed. That's a 25% decline from last year. At the same time, its salary bill for the year was just 5% lower, while interest expenses shot up. It will account for R488 million of impairments.

Last month the group said it planned to raise R1.2 billion in a rights issue so it could pay down debt and cover the cash flow shortfall that it faced due to the closure of its hotels. A circular for the rights issue will be released on 3 August.

It earned no revenue from its 62 hotels after the lockdown came into effect in late March, with all 55 SA hotels closing as well as seven outside the country. While 23 of its hotels had reopened by the end of June, including two serving as quarantine hotels and a further 21 for stranded guests, essential service workers and business travellers, occupancies remained low.

Debt on its balance sheet includes its guarantee of funding for the black economic empowerment transaction it entered in 2008. The BEE structure is materially out of the money.

City Lodge said it would reported a normalised headline loss of between R70.1 million and R86.1 million for the year to end-June. Last year it reported headline earnings of R267 million. That would result in a normalised headline loss per share of between 161.5c and 198.4c, down from earnings of 613.4c last year. Basic earnings per share would swing to a loss of as much as 1,344.5c from earnings of 562c previously. The normalised figures are adjusted for the effects of transactions related to the special purpose BEE vehicle.

It expects to release its results on 27 August. Its shares rose 0.2% to R18.37 on Friday.

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