DISPOSAL OF HOTELS IN KENYA AND TANZANIA

As previously reported, the group accepted an offer in respect of four of the group's hotels in Kenya and Tanzania. The rationale behind the disposal of its entire East African hotel portfolio was that the sale was necessary in order to:

• reduce debt levels within the group;
• increase group liquidity; and
• eliminate ongoing operating losses and further funding requirements.

The proceeds from the sale were a welcome injection of funds into the group's balance sheet after two difficult years of reduced occupancies and revenue.

The sale consideration was used to settle a large portion of the group's outstanding debt in order to reduce future interest and to enable the group to refinance its debt facilities. These actions have significantly improved our liquidity position, to meet our operational needs and resume reinvestment in our portfolio of hotels. It also enables the group to resume its previous capital expenditure strategies.

 Repositioning of underperforming hotels

City Lodge Hotel Eastgate and Road Lodge Sandton were rebranded by the group while they were closed in order to reposition them to better suit the market needs of the area. With the bulk of guests staying in the City Lodge Hotel (previously the Courtyard Hotel) in Eastgate in the East of Johannesburg while on business, it made sense to rebrand the property as the more widely recognised City Lodge Hotel and reprice it accordingly.

Road Lodge Sandton is the rebranded name of the Town Lodge Sandton, Grayston Drive in the north of Johannesburg. The group's decision was influenced by the fact that CLHG has a number of hotels in the region and adding a Road Lodge to the mix ensures the overall accommodation offering in the area meets the needs of all budgets. The Road Lodge was intended to bring truly affordable, comfortable accommodation to price-conscious, yet discerning travellers to the area.

 MEET OUR COVENANTS

Management secured the waiver of the original debt covenants for measurement periods from June 2021 to September 2022. The remaining Loan to Value covenant was met at all measurement periods during the year. Management liaised regularly with the group's lenders to ensure access to facilities was maintained.

In June 2022, the loans maturing within 12 months were repaid and a new refinanced package was finalised, which provides total debt facilities of R600 million maturing over three to five year periods at more favourable financial terms and covenants.

 BROAD-BASED BLACK ECONOMIC EMPOWERMENT (B-BBEE) SCORE

The group currently holds a level 5 B-BBEE score, which expires in November 2022. We are currently undergoing our current year verification audit for the new certificate. The level 5 B-BBEE score is currently below our target level 4 score, mainly due to the cost-containment measures put in place during the prior year, as we prioritised cash management and operational sustainability in response to the liquidity challenges caused by the pandemic. In the current year, we have resumed to prioritise spend on training, procurement and other criteria beneficial to our scorecard. We have focused on youth development and employment and have 36 participants in our in-house YES programme. Our transformation committee, chaired by the COO, meets regularly to plan and monitor the transformation strategy and plans.

 Training and talent development

We are passionate about the hospitality industry and about inspiring young people to explore just how rewarding a career in hospitality can be. As the world recovers from the pandemic, millions of jobs are returning to the travel and tourism sector, which presents an opportunity for us to contribute towards reducing the current levels of unemployment. Our partnership with YES and our YES programme identifies young people with a promising future in hospitality. The Youth Employment Service (YES) is a social initiative that focuses on youth employability and employment in South Africa in a partnership that includes government, business, labour and civil society; it is a private sector-funded and self-sustaining non-profit organisation. We participate in the Yes programme initiative which is a 12-month learning programme where we assist South Africa's youth to gain work experience and thereby enhance their employability prospects.

The focus of this year's initiative was the Food & Beverage Department as this is an area where we are expanding our operations. This proved an ideal opportunity to involve and upskill the youth who were chosen to participate. We strive to provide ongoing learning opportunities for the youth and during the programme we provide on-the-job training, support and mentoring which builds on their strengths and develops their skills. Our ultimate goal is to provide these Yes programme individuals with employment opportunities ourselves by absorbing them into our operations where opportunity exists. Where that is not possible, however, they have a year's worth of experience on their CVs and all the input and development they have received both from the group and the Yes programme.

We currently have 36 young people between the ages of 20 and 35 placed in various hotels within Gauteng.

For more information on our employee training and development, please refer to our Sustainability review.

 Corporate Social Investment (CSI)

Our social investment initiatives also contribute to transformation and eradicating inequalities. Hotel general managers have prioritised community engagement during this period of cost containment and have taken part in events raising awareness of social issues.

CSI on the part of the group has been effected through our ongoing relationship with the Emthonjeni Community Centre. In April 2022 CLHG again visited Emthonjeni Community Centre to deliver another donation of soft goods and toiletries. The donation included 1 935 items of linen and towelling, 415 pillows and 3 000 bars of soap worth approximately R266 000.

Staff at Town Lodge Gaborone joined 12 500 runners who took part in the 10km Diacore Gaborone Marathon 2022 in the fight against Gender-Based Violence.

By measuring and monitoring our environmental performance, we aim to increase efficiency throughout our portfolio and mitigate environmental and regulatory risks. Our cost containment strategy, unfortunately, prompted us to halt all sustainability investment initiatives during the year under review.

 Solar energy

In 2019, we completed 25 solar energy installations, at a total investment of approximately R20 million.

The group is pleased with the success of the solar power initiative as not only does it allow the group to minimise its electricity and diesel spend, but it reduces the overall dependency of South Africans and South African companies on fossil fuels.

 Reduced single-use plastic usage

We are driven to eliminate single-use plastics throughout our operations.

We reduced the need for bottled water by introducing new filtered hydration stations at all hotels, which provides magnesium-enriched water to our guests at no cost.

Together with our South African supplier, we were the first hotel group to launch a range of plastic free bathroom amenities in packaging which is completely recyclable.

The Zero Bars are a waterless solution, and reduce the carbon footprint of the supply chain, as previously the liquid products meant trucking water around the country.

We continue to look for opportunities to reduce our plastic usage.

 Commitment to using only cage-free eggs by 2025

With our greater food offering and increased ingredient costs, sourcing our ingredients wisely and responsibly is crucial in achieving our environmental sustainability objectives. The group has committed to using only suppliers that can provide verifiably cage-free chicken eggs by 2025.

During the year under review, the percentage of cage-free eggs used in our kitchens was 55% (2021: 45%).

 Optimising performance

We are currently using machine learning and predictive analytics to inform our pricing methodology. We introduced a Business-Intelligence (BI) tool in 2021 and this serves to analyse key clients, track new business and personalise offerings for guests, corporate clients and agents. It also reviews historic, environmental and industry data. We will continue to benefit from the advantages of predictive analytics in the coming months as results thus far have been very positive.

At the beginning of the year under review, the group introduced the best-available-rate (BAR) pricing methodology so as to guarantee that our guests are quoted the lowest available rate for each night of their stay. In this way we are able to assure our guests that our rates are the best that they can possibly be.

 Cyber security

Given our focus on enhancing our technology infrastructure and engaging more fully with our guests over digital channels, we are very aware of the heightened need to protect ourselves and our customers from technology-based criminal activity.

These technological upgrades are for convenience and safety, but not only physical safety. The safety of our guests' personal information has become more crucial with the rise of ransomware and data leaks. In order to pre-empt these types of incidents, we have taken the following steps:

• Actively working with assurance providers to identify new developments and safeguards against cyber security breaches.
• Using and regularly updating anti-virus software and patch management processes.
• Consolidating our servers at our primary data centre.
• Introducing multi-factor authentication ("MFA") for users accessing our network.
• Mandating a security awareness programme for all employees.
• Remediating the gaps identified as part of a POPIA gap analysis.
• Introducing phishing exercises to raise staff awareness.
• Establishing and regularly testing our Disaster Recovery Plan ("DRP").
• Confirming that our hosting provider has a comprehensive physical security and DRP in place.

 Gaining a technological advantage: online training

Before the Covid-19 pandemic, our kitchen staff were trained in-person and on-the-job. While we still do a large portion of our staff development training in this way, this year our members of staff have made use of the Unilever Food Solutions (UFS) Academy app and have completed many of the short courses aimed at teaching skills and providing tips and tricks to aspiring chefs. The International Centre for Culinary Arts (ICCA) has endorsed certain courses provided on the app and participants can also be awarded ICCA-endorsed certificates of completion.