JULIUS BAUMANN

Aviation and Tourism Editor

HOTEL group City Lodge said yesterday it expected normalised headline earnings for the six months to December to be 12% 17% lower than during the same period the previous year, no doubt hit by the slowdown in the domestic travel market.

CEO Clifford Ross said in August last year that the trading in the first weeks of the new financial year were in line with the softer trend observed in the first six months of the calendar year and occupancies would remain under pressure in the short term.

In terms of the BEE scheme, the Injabulo Staff Trust and Vuwa Investments each acquired a 6% stake in the hotel group while the University of Johannesburg School of Tourism and Hospitality Education Trust bought 3%.

The deal was funded by the issuing of preference shares and a R50m equity contribution by Vuwa. At the time of implementation an interest rate swap agreement was entered whereby the interest rate was fixed for the period of outstanding debt.

Overall this resulted in a R64m charge in the income statement at the interim stage. This included a once-off IFRS charge of R25,84m as the terms on part of the funding was deemed to constitute an option. There was also a R31,1m mark-to-market expense related on the interest rate swap.

With far less volatility in interest rates in the first six months of the year, it is likely the mark-to-market charge on the interest rate swap is likely to have dropped sharply reducing the remaining cost related to the BEE deal substantially.

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CITY LODGE HOTELS

Full year20092008

Revenue (Rm) 665 599,9

Operating (Rm) 274,9 312,1

Net income (Rm)131,9 225,6

Headline EPS (c) 360,2 524,9

Dividend PS (c) 361 371

Source: Business Day