City Lodge shares drop 6% after interim earnings halve
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DURBAN - JSE-listed City Lodge's share price slid by more than 6percent after the hotel group flagged that its interim earnings would halve, hurt by weaker trading conditions and the adoption of IFRS 16 leases.
City Lodge, which has operations in South Africa, Namibia, Kenya, Tanzania and Botswana, said yesterday that for the six months to end December it expected its normalised headline earnings to decline by between 49 and 54percent to between R75.1million and R83.3m, from R163.3m compared to last year.
The group’s normalised diluted headline earnings per share (Eps) was expected to decline by between 172.6cents a share and 191.3c, or 49percent and 54percent, from 375.1c.
The group said the normalised headline earnings and normalised diluted headline Eps consisted of headline earnings adjusted for the effects of transactions relating to black economic empowerment and non-recurring.
Its basic earnings per share of between 117.5c and 136.4c would decrease by between 64 and 69percent compared to the basic earnings per share of 378.9c. Headline earnings per share (Heps) was expected to decline by between 64 and 69percent from last year’s Heps of 378.9c.
“On a comparable basis, excluding the effects of implementing IFRS 16 and unrealised exchange gains or losses, normalised headline earnings would be between R119.2m to R111m, being a decrease of between 27 and 32percent,” the group said.
In South Africa, its primary market, City Lodge said normalised profit after tax, excluding IFRS 16, decreased by between 12 and 17percent.
City Lodge last year flagged that its occupancies had slid, hurt by low levels of business and consumer confidence, high unemployment, uncertainty around power utility Eskom’s sustainability and land expropriation.
Despite this, the group forged ahead with its expansion strategy by opening 154-room Town Lodge uMhlanga, its 55th hotel in South Africa to go with another expansion in Mozambique, a 148-room City Lodge Hotel Maputo.
City Lodge will release its results on February 20.
The share fell to R67 a share in the morning, after the release of the trading update, before closing the day at R67.71.