City Lodge lifts normalised earnings by 10%

Occupancies for the six months averaged 60%, compared to 59% for the previous corresponding period which included two weeks of the FIFA World Cup.

Encouragingly, the last quarter of calendar 2011 produced stronger occupancies than in the same months a year earlier, the first time that this has happened since early 2008.

Normalised diluted headline earnings per share rose by 10% to 223.8 cents.

In line with the group's policy of paying out 60% or normalised earnings, an interim dividend of 135 cents has been declared, 9% higher than the previous year's interim dividend.

The group managed to contain the increase in operating cost per room sold to just 5.4% in spite of pressure from higher electricity tariffs, property rates and taxes, and other input costs.

Return on equity for the period was 20% while cash generated by operations was 17.8% higher than a year earlier at R190.6 million.

Significantly, as part of its interim results, the group announced its first foray into the rest of Africa through a lease and development agreement in Gaborone, the capital of Botswana.

Earthworks have commenced on a 106-room Town Lodge which is expected to open in December at an estimated total development cost of R61 million.

Expansion opportunities are continuing to be evaluated elsewhere in Africa and it is anticipated that further announcements will be made during the course of the year.

Commenting on the group's interim results, CEO Clifford Ross described them as "pleasing" during a tough time in the local hospitality industry due largely to subdued business travel and oversupply of hotel rooms in some metropolitan areas.

Looking ahead, Ross said the trend of slightly higher occupancies in the final quarter of 2011 appears to have continued into the beginning of 2012.

"If this trend continues and there is no deterioration in economic conditions over the next few months, the group is well-positioned to achieve satisfactory growth," he said.

"It is exciting for us to be able to announce our first hotel outside of South Africa and we look forward to expanding our group both at home and elsewhere on the continent."

Although the group currently has no hotels under construction within South Africa, it believes that selected opportunities will emerge to increase its domestic footprint which currently comprises 52 hotels offering 6,440 rooms across its four brands - Courtyard, City Lodge Town Lodge and Road Lodge.