NO ROOM AT THE INN
THE SIX MONTHS TO December extended this company’s remarkable growth record, with a best-ever room occupancy of 83% (80% a year before). Even though there were only 120 more rooms than a year ago, as the only opening was the George Town Lodge, revenue rose a healthy if not exciting 15%.
But thanks to tight cost control, this was topped by a 21% gain at operating level, and with a marginally lower tax rate HEPS rose 24% to give a rolling 12-month figure of 377c. The interim dividend is up from 117c to 145c, to make 266c for the past 12 months, in line with the policy to distribute about 70% of available earnings. A formal process has been started to introduce a “significant” BEE ownership. OPPORTUNITIES City Lodge says it’s entered its biggest expansion phase for many years, which will see the number of hotels grow from 38 to 42 and the number of rooms from 4 169 to 4 772. The total cost of this programme will be about R171m, of which R20m has already been spent. • The company is continuing to look for further possible expansion sites. Like most of the leisure sector, City Lodge should benefit from the 210 Soccer World Cup. In the shorter term, City Lodge says trading conditions for the rest of the financial year should remain “favourable”. RISKS Frankly, none are apparent, though there’s always the potential for an adverse re-rating of the share (unlikely) or a general market downturn (uncontrollable). But investors must always remember that even the best run companies can encounter unexpected setbacks – there’s no such thing as a risk-free investment.