Welcome everybody. I'm going to get started. Rosa will manage the few light covers. Thank you for joining our fifth results presentation since we unbundled from gaming. Obviously, we quite chuckled. I think the numbers are pretty good. I don't think it's going to be a terribly long presentation. I guess the highlight of the story is doing exactly what it is supposed to do. What is interesting is we had a revenue number of ZAR 6.6 billion, and our budget that we set in February of last year was about ZAR 50 million below this. So it was also ZAR 6.6 billion. We got there in a route different to what we thought, with more performance in Cape Town. We didn't foresee Mozambique and Durban problems and so on, but in the end, we were only ZAR 50 million out on ZAR 6.6 billion budget. So the system is doing what it should do.
As you can see on the cover, the headline numbers that we're quite proud of: income up 9%. As we indicated, if you get reasonable revenue growth, the fixed cost base should give you good EBITDA growth. That's gone up 14%, and adjusted earnings up 30%, and then earnings per share up 34%, as we're still benefiting from the buybacks we did last year. We have increased our dividend quite a lot. Obviously, we doubled that to ZAR 0.25, a function of being quite comfortable with the cash flows and also the fact that we started our dividend at a very low policy last year. In discussion with the board, we said, "Let's go for our one-third policy." We can put it in place this year. As you'll see in the cash flow, we pretty much paid dividend and used all the cash for settling debt.
We are largely ungeared at the end of the year. We have net debt of ZAR 260 million, which is as good as nothing. We have increased our dividend to ZAR 0.25 a share, which is about one-third of earnings, which I think is a nice policy to stick to going forward. Okay, I am going to run through the presentation, and then we will take any questions at the end. I am looking at the presentation. I cannot see names or hands or anything, so I will rely on Laurel and Rosa here to guide me. Right, our group structure and analysis has changed. We are still pretty much controlled by HCI together with the foundation, which they consolidate. That is 45% of it, and then 55% is the market. We have an offshore division and an onshore division. Onshore is obviously the largest hotel operator in South Africa.
Our board also unchanged since last year. No change there. Our portfolio unchanged from last year. The only change in it was that we opened Tanzania in the year, which was the last hotel that we had not opened since the COVID debacle. Otherwise, it has all stayed the same. Just over 90 hotels, over 16,000 rooms, or just under 17,000 rooms, and 300 conference centers, banquet facilities, etc. I guess that really is, if you look at the split in the Western Cape and so on, that is the heart of why we are doing better than, for example, a City Lodge, is the nature of the portfolio. We have got a large amount of room stock in Cape Town, which is trading very well, and we have got a large amount of high-end, large conferencing room stock, which is where the demand is.
Our performance in the pure transient economy product is very much in line, I think, with what these are doing. It is a nature of the portfolio that has worked well. We've done some tricks, we think, quite well on revenue management and so on, but overall, if we didn't have the big room stock in Cape Town, and we didn't have the big convention and meeting hotels, you still got an underlying economy that's battling along. We are finding ourselves in the right place, which is deals we did 10 years ago that got us there. Our brands have remained the same.
I should really update this to include the brands that we do not manage, where we manage the manager, such as the Westin and the two Radissons, because those are trading very nicely, and we have worked very closely with those management companies to refine their international model for better local use. The Westin on the CTICC in Cape Town, it is a great property. We converted the Radisson Waterfront Hotel to a Collection hotel, the first Collection hotel in Africa, I think, which is good. We will probably add those brands in here in the future and give it a bit more color on the thing. All right, as usual, I am going to start with the cash flow because the income statement gets messed around by exceptional items and IFRS. Probably the most ridiculous thing auditors have ever come up with is IFRS 16. EBITDA up 14%.
9% revenue growth, 14% EBITDA, which is exactly what we wanted to do. Property rentals not that much up. If you remember, we've got a big portion of these rentals by, and this is the cash rent, so this has not got IFRS 16 in it. A big chunk of this is what we pay Liberty for the Sandton Strip, and that portfolio was only up 1% in the year because the Towers were closed for refurb for most of the year. That portion of rent that we pay Liberty was kind of flat year-on-year in a buoyant market. The fact that it was flat with one Tower closed for refurb during the year, I think, is a great performance and actually speaks to the underlying strength that we've had in the Sandton Strip.
As a result, property rentals, a lot of the EBITDA growth was not out of the strip, and you'll see it in our segmentation later. Working capital, we did give an indication that last year's working capital positive inflow was exceptionally strong. We had a very nice reduction in our debtors book last year, and you can't repeat that. We haven't had a deterioration in debtors. We just haven't had as much of an inflow of debtor cash, but still positive working capital. We did expect that to normalize to an extent. Difficult to forecast, but nonetheless positive. Dividend income from associates is our U.K. stuff, and that has come down as we've been exiting on the back of Starwood with exiting properties in the U.K.
The actual technical dividend, when you look in the booklet, is higher, but I've split it in these accounts between what was a return of profits from our management company and the hotel trading, and what was a return of capital from selling hotels underneath. You will see a disposal line on the next page here, which I think that nature is important, even though technically it's a dividend. We sell the hotel, we have cash, and we pay dividend out of the U.K. The return of capital should not be going into free cash flow. That's the sort of fundamental point. Cash generated from operations up nicely. Our finance cost comes down, obviously, as we now effectively degeared. The only debt, real debt we have left is the dollars in Mozambique, and everywhere else we're on cash.
Tax pay goes up along with profits, and also with utilizing assessed losses. We've pretty much utilized them all. There are little pools of assessed loss sitting around, but you're going to find that shield in the cash flow is largely gone now. From now on, any increase in profits is going to equal cash increase. Our effective tax rate for the year, which I'll get to a bit later in the income statement, is a bit higher than normal, and that's because of the poor performance of the offshore business. Losses in Mozambique, for example, are obviously not shielded by South African profits. We haven't recognized deferred tax assets on it. If you have a bad-performing hotel in South Africa, you offset those losses against other profits. You don't have that if it happens in the offshore jurisdictions.
It's not material in our numbers, but you see a slight uptick in the effective tax rate because the losses are in countries where they're not shielded by the SA profits. Operating equipment, as expected, and then maintenance CapEx below what I guided on. It's a bane of my life. We've been saying we're going to spend around about ZAR 500 million a year. I'll give you some color on what we spent it on, but we just don't seem to get to the spend as much as we think. As recently as three months ago, we still thought it was going to be about ZAR 520 million, and we came into the saving by the end of the year. We did all the work that was on plan, but the cash flow goes slower.
Now, that's very good for the accountant in us, but harder when I'm giving you guidance, because at some point, I'm going to overshoot on this number because I'm going to catch up spend, because nothing here has changed in what we're doing. We just haven't paid the supplier. That saving, by and large, falls straight into the FY 2026 here. Probably what I forecast in FY 2026 will have some of it deferred into FY 2027, and it goes. At some point, I'm going to have a spark, and it's these savings that you can't be in the back of your head. Our guidance is still north of ZAR 500 million in maintenance CapEx, and I'll talk to that a bit later.
Free cash flow just under a billion, ZAR 950 million, more or less the same as last year, even with the big increase in tax payments and the big increase in CapEx. Obviously, a lot more spent this year than last year, so we're pretty chuffed with that. What do we do with the money? We gave back to shareholders ZAR 168 million in dividend. That is going to jump to ZAR 335 million in 2026 on the back of the dividend that is declared now. A little bit of expansion activity, which I'll highlight in the next slide, but by and large, we took the balance of the cash flow and paid down debt. We started the year with just over a billion rand debt, and we finished the year with ZAR 266 million net debt. That is lower than what I gave us, what I thought it would be.
A couple of months ago, we were forecasting sort of ZAR 300 million-ZAR 400 million net debt, but it is the back of better working capital, lower CapEx, better trading. Then we get these cash flow forecasts dead right, but at 266 million net debt, we are effectively ungeared. What did we spend on investment activities? We paid for that land that we bought in 2024 in Umhlanga, so we have some future expansion land up on the ridge. We paid professional fees which we capitalized on the Beverly Hills expansion. That is a lot of architects' fees, town planning, parting with the Oyster Box and the objectors next door, all the usual things you need to do to get a project in executable form. We continue to be the biodiverse resort of any timeshare units that go into distressed stock.
We've got repos and some people don't want their timeshare anymore because they don't want to pay the levy. We've been buying back that stock, and we spent about ZAR 5 million on that this year, as we did last year. Obviously, last year, we had the Oakford Birchwood acquisition. I have concluded a deal with the family that we bought Birchwood from to sell back 10% to them, which was going through in 2026. Kevin said he'd be happier owning Birchwood than sitting on lots of money, so we took some of his money back and let them back into the ownership structure. They run it. We manage the manager there. In 2026, you're going to see a cash inflow from selling 10% back to them at a marginally higher price than what we bought it from them.
I'm very comfortable with them owning and having skin in the business. We have done that deal in April of this year. Talk to our maintenance CapEx. As I said, there is ZAR 450 million, which I thought would be higher, and it is split essentially into two categories. You have your ongoing maintenance CapEx further down, the ZAR 273 million, which will give you some regional feel on. That is what we need to spend to keep the portfolio as it is and in good condition and alive. That is everything from buying new beds, bird cages, those little things we move the trolleys on, fixing air handling plants, painting buildings, changing carpets in public areas. You do not get a substantial renovation of a hotel.
You do not change, you do not expand, you do not do a big modern upgrade, but there is a lot of maintenance that goes into just keeping the system going. Included in there is IT. We spent ZAR 20 million on the SAP upgrade this year, which Laurel and I have concluded. That sort of thing all sits in that ZAR 300 million a year. It was ZAR 273 million in this year, which is keeping the system working. In addition to that, in the income statement, there is about ZAR 200 million of expensed R&M, pure repairs and maintenance. There is ZAR 500 million out of total cash a year, keeping this portfolio of properties in the condition that they are and they work and they are good. That is very important spend. We have the major projects that we have highlighted above, and that is when we go and tackle our hotels. Most of you are well aware.
We've done the Cullinan, the Rosebank, Southern Sun Sandton, Cloud Train. Paradise Sun we closed on 1st April to start the refurb, but we did a lot of procurement of FF&E and sanitary ware and all the stuff that we need to have the long lead time to get it imported into the stations we actually paid for in the last quarter of F2025. The cash flow has gone. Those individual projects, that's where you come out with a very different product at the end. You go from an old hotel to a new hotel, completely gutted and renovated and total upgrade. We highlight those different. That number can be quite volatile because it depends when we push the button. We've worked on these hotels. There are still things to finish.
At Cullinan, we haven't finished all the rooms because you're going to get through so many in winter, and then you need to stop back. We will finish those in 2026. We have mock-ups going for Mount Grace, for Bloemfontein, for Pretoria, for Newlands. I forget the list. We triggered. I think Newlands we've already started. They've stripped and they're working there. Mbombela in Nelspruit. That Southern Sun, we've stripped half the rooms there. They're underway. The major projects are, I can switch them off, and you can trade the hotel as it is for another year, two years, three years, whatever you want to do, or you decide now's the time to do it and keep your product completely renovated. You do those in sort of quite long cycles.
Your softs, for example, would probably be 12 years before you change it all out, and your bathrooms can be 20-30 years. We kind of split those two categories to give you some feel. The ZAR 300 million a year ongoing maintenance CapEx should not have a big surprise other than, for example, you undergo a big IT refresh. The major project is completely discretionary on our side in the short term as to whether we push the button or not, and we are focusing a lot on that at the moment. There is ZAR 266 million debt. It is effectively all offshore. We have got the U.S. dollar-based debt in Mozambique. We have got some rent-based facilities floating around here, but that is offset by cash on hand in South Africa.
We still have cash on hand that we have offshore, and a lot of that is going into the stations refurb. Ultimately, surplus cash will come back or be used for acquisitions or something like that. I have not decided what to do with that dollar-based debt in Mozambique yet. For those of you that met with us, I said I am not that comfortable having dollar debt around. I would prefer to turn it into rand debt. We need to understand what that does to the functional currency accounting in Mozambique and what the reserve bank laws in Mozambique are. Laurel is busying herself with that whole project. Essentially, if we degear, I would like to get that sorted out. It is the last dollar liability that floats around in our books, which I think we should find some way to get rid of.
Anyway, we're doing some work on that. Basically, degear. So ZAR 1 billion debt last year, ZAR 266 million this year. You might find that this number increases by our half-year numbers in 2026. In the first half of the year, as you will well see in our income statement, we only make about 1/3 of our profits. 2/3 come in the second half of the year. We are going to pay out all our STIs to staff now at the end of May, so there's a big bonus run that goes. We pay our dividend in June, I think it is. That's a big check that goes. We spend a lot of our CapEx in the winter months because that's when we can access the rooms. You do not want to be closing off rooms in Cape Town in summer to be doing refurb.
You may well see an uptick in debt at the half-year if the earnings do not cover all of those big payments, but then the big cash flows come in in the second half of the year. Do not take fright if you see our debt go up by the half-year. It is just timing of cash flows. That is covered most of what is on here. I think what is important is at the bottom, we have cash and cash equivalents of ZAR 396 million, and we have ZAR 1.8 billion of unutilized facilities. The world's done a refinancing, so we have basically gone back to all the banks. We have ZAR 1.5 billion of two-year actively accessed bonds up, revolving credit facilities. Pricing is coming great. It is very easy to borrow from the banks when you do not have debt. It is a bit harder when you have got a lot of debt.
At the moment, obviously, our credit risk is like substantially reduced. We have kept that as surplus facilities for if we want to do anything big or cover short-term cash flows up and down. Obviously, our liquidity is great, and our leverage ratios are now a bit meaningless. We have debt to EBITDA of 0.1x and interest cover of 12.5 x. Just a fantastic position compared to where we were five years ago today, where we had ZAR 3.5 billion worth of debt and no hotels open. We are much, much happier than what we were then as our shareholders. Talk a little bit to the trading. It is, as we say, another year of profits. I probably should have deleted another year. It is a record year of profits.
We are pretty chuffed that we got to ZAR 1 billion bottom line. It's quite a notable achievement. We did indicate at the half-year, and the half-year numbers didn't look that strong, but it was that, don't worry, it's going to come. We opened up the Cullinan. We opened up the Towers. Feedback's been fantastic, so we've seen good growth in there. All the upgrades have really been well received by the market and the customers. I'll show you in some quarterly stats later. We actually saw acceleration in growth in the third quarter and then into the fourth quarter. It was a good year. I mean, Cape Town is the reason we look so clever. It was particularly strong.
I said we met our budget revenue within 1%, but it was an outperformance in Cape Town, which came along with increased profitability and an underperformance of KwaZulu-Natal and Mozambique. Neither of those did we particularly see coming. The hazard is not a beachfront infrastructure dirty water problem. It is a grouping events problem. I did an interview with CNBC this morning, and we have just had the Nedbank Cup in Durban and the Africa Travel in Durban, and we were basically full in all those beachfront hotels for about 10 days. The place just heaved, and the feedback is fantastic. We host a cocktail function on the Durban nights. We had like 300 guests. It was magnificent. If you do not have the activities, you cannot drive activity there because your business market is in Umhlanga.
If you get those events right, if that ICC kicks in, Cape Town is full, Sandton is full, that one's empty. We need to get that ICC going, and then you have the events going. Durban is disappointed. I think the politics there has also been a problem because it is an unstable political coalition in many ways, and you have had the budget disaster, and you just had sort of negative spend in there. Mozambique is an entire separate saga. We saw the reduction in demand. Nobody saw the trouble coming. You got a guy with a Facebook account and brought the country to rights. It ended, and I thought that the pent-up demand would come back, and it did not. We are still running at relatively low occupancies, 30%-40%. Food and beverages normalized.
The people of Maputo are in a hotel eating, drinking, day conferencing, but you're not getting inbound visitors to fill the bedrooms. I don't really know why that demand has not bounced back. It's not just us, we know from what's happening in the rest of the market. It's the entire thing. It still has a lot of potential. The oil and gas is there. Total has been in, but it is a slower recovery than I would have thought. Great year. Very good Cape Town. Very nice recovery in Johannesburg. Strong clouding numbers. In fact, the highest growth was clouding, but off a low base. That has come back nicely to normalize and then weakness in Durban and particularly in Mozambique. What does our overall income statement look like? We did 60.8% occupancy. You can see on the right-hand side there.
I think if Mozambique and Durban hadn't faltered, we were hoping for closer to 62% than 61% occupancy. It's the first time since 2019 that we're above the 60%, so I'm quite pleased with that. A combination of occupancy and rate growth, about half-half between the two to get us to our room revenue growth of 10%. We did a lot of work with OTAs in the year, some more than others. I think we've gained market share. It's hard in this industry because it's not like the gaming stats. You get a published number. We have worked very hard at making sure that every puck comes into our dam and that every channel is clear so we can get every bit of business that's out there.
I've said at presentations before, if you say around about 60%, 58.6% and 60.8% are both around about 60%, but the bottom line outcome of those two answers is very, very different. It is just every incremental room that you sell with a fixed cost base your flow through is fantastic. You see that we had 5.5 million, 5 million, just over 5 million room nights available, and we sold just over 3 million room nights available. The slight increase in the rooms available was bringing Tanzania back onto the system. Room revenue up to 10, food and beverage up to 6. There's not a problem in food and beverage. I did not until the very end of the year give the chefs a price increase.
Your increase in food and beverage revenue is by and large volume related because a big chunk of it, remember, we make our money out of breakfast, banqueting, and beverages, booze. The breakfast is an allocation by and large out of the room price. You, as the guest, you get a bowl for ZAR 2,500. I allocate ZAR 250 to the chef for the breakfast or ZAR 500 if there were two of you in the room. I have not moved that number for quite a long time. We have now given the chefs an increase because we keep that very tightly controlled because that is how you measure your food cost percentages. The fact that we charged a lot more for the rooms, whether I charge you ZAR 3,000 for the room or ZAR 8,000 for the room, the chef still gets ZAR 250.
He doesn't get a percentage of it. What you should see is exactly the same in FY 2026. You would have an increase in food and beverage because I have given them a price increase and a slightly less room revenue growth because the surplus didn't all go to them. Once you go down the rabbit warren of hotel accounting, that's kind of a relationship between those two. Overall, very happy with our food and beverage. I mean, ZAR 1.6 billion a year of food and beverage turnover is significant. Property rental income, those are the properties where we still treat them as investment properties. Essentially, Birchwood, on the back of having a full year of earning 100%, that'll probably come down a bit because now 10% of those rentals are going to go back to Kevin and them. Radisson Collection performed very nicely.
We've got very good, that's Cape Town, we've got a good growth there. Our other income, which is everything from no shows to all the ancillary charges that you get, meeting and event hire, etc. That's your revenue growth of 9%. Overhead's well controlled. Our single biggest overhead is still payroll. We did a 6% payroll increase last year. We're implementing 5.5% this year. After that, it's variable, controlling your variable hours. Making sure you don't roster too many staff if you're empty and that you roster enough when you're busy. That line is under good control. We have great relations with our workforce. No union issues. We do try and be a very, very good employer. That line is our number one expense line, is payroll.
Other notable items in overheads, like heat, light, and power, only went up 1%, which was a ZAR 36 million saving in diesel versus last year, offset by a ZAR 37 million increase in tariffs and rate costs courtesy of Eskom and municipalities and so on. Net flat year-on-year and does not show any increase. Your administered costs and so on, all the usual pressures. By and large, overheads well controlled at 7%, and that is probably an inflationary type of increase of around 6% and another one relating to volume coming through. Property rentals, amortization, depreciation, and your interest line on this income statement, that is all busted out by IFRS 16. What we do note is you will see a big increase, sorry, a big decrease in property rentals and a big increase in depreciation.
That was because the auditors came up with some bright idea that we've got to effectively straightline the deal we have with Liberty on the Sandton Consortium strip, which would have meant me reporting double the profits that I actually make out of that for a few years and then half the profits. We were actually not doing that. Whatever they made us put through the rental line, we'd depreciate out. What is in our income statement is what we have made as our profit out of that relationship that we have, no more, no less. It is required. You have a 29% saving on property rentals after IFRS 16 and a 15% accounting depreciation. We made sure that balance is to net in the income statement, which is as it should be. Exceptional items is a detailed explanation later.
Finance costs has an IFRS 16 effect in it, but it's the same impact as what you saw in the cash flow. Much lower debts than finance costs comes down. Chief earnings from associate also has a whole lot of exceptional stuff in it. The actual clean number there is about ZAR 38 million, which is lower than last year, as you would expect as we're selling off properties. I've got an adjusted earnings number here that takes all of this out. Income tax is in line with increasing profits. When you throw that through to the bottom line, there's a proper adjusted earnings clean number of ZAR 1 billion. If you look at what all those exceptionals are, that's at higher income statement. I don't think there's anything controversial there. We had fair value gain on investment properties. We had impairments on property, plant and equipment.
Essentially, the renovations we've done in places like Rosebank. The value of the property hasn't changed, but I've spent a whole lot of cash on fully renovating rooms and things. The auditors say you've got to write it all off. I wouldn't have spent the cash if I thought it was a write-off, but anyway, I bless them. We've impaired it, but in truth, we think that property is going to trade quite well. Those are gain on the one, impairments on the other. There is some fair value on derivative increments and the exceptionals in the associates, quite a lot there because you've got impairments that are reversed and etc. We clean all of that out. Most of it is profits that we're cleaning out.
In the end, adjusted earnings is a good number, just over ZAR 1 billion, 30% up on last year. The average number of shares comes down on the back of the buyback we did in FY 2024. Your earnings per share goes up to ZAR 75.60, 34% increase. That ZAR 1 billion bottom line profit talks very nicely to our free cash flow of about ZAR 950 million. Largely our profits are matched by cash. I've been through most of the explanations on here. They said you can kind of read it in your own time. There's an awful lot of explanation here around IFRS 16 and just the missing it. I mean, there's a whole page and associates that only makes us ZAR 40 million a year, but bless them. We'll give you all the details so you can work it out on your own.
If you have any questions on it, send us a note and we'll try and answer it as much as we can. Covered all of that. This is quite interesting, supported performance. This is where I took some cautious happiness in the second half of the year. We had revenue growth in the first half. I remember we reported 6% growth in income and 10% growth in EBITDA, and we were all very chuffed with that. We said it will do better because Towers will open, Cullinan will open. We've got 12% growth in revenue in the second half of the year with occupancies at 62.7%, so nearly 63%, and a 16% growth in EBITDA for the second half of the year. The last quarter being very strong. That is good news. That is what we're looking for, that we're pushing forward.
I do put just a sense of warning in here. We were very lucky in this year, and I did not appreciate it until recently. We actually never had an Easter in our FY 2025 because Easter fell in March 2024 and in April 2025. We had a full 12 months with no Easter. Easter is bad for us. That holiday month is not a good month because it interrupts business travel. We fill up the resorts and we fill up the beach hotels. I mean, we saw it now in April of 2025. It was a terrible month because you have a public holiday on the Monday, another public holiday on the Thursday. You are not going to get corporate travel. You are not going to get a conference or a group event. You can hardly get people to come to work, to be honest.
We were running an advertising campaign saying, "Take these five days off, and you do not have to come to work for the whole of April." Not great for a business-related hotel. This year actually had no Easter in it. I think that is worth at least one to one and a half cents a share in our bottom line earnings. You are going to go backwards just because you have a month where you have all the holidays in. Anyway, those are just the timings of the Gregorian calendar. Nice second half did what it is supposed to do and gives you a feel of that seasonality. Overall, our earnings came in one third, two thirds. At some points, I am going to get caught out. I mean, the maths does not work this perfectly every time.
At some point, something's going to happen strong in the first half and move the number, or weak in the first half and move the number. It is a strong indication your peak periods are Q3 and Q4 compared to Q1 and Q2. You always have this heavily weighting to the second half of the year. We are seeing, like at the moment, the G20 stuff can kick in and out and change patterns a little bit because you get these big events in funny sort of times, which you do not have on your normal calendar. There is a segmental analysis. I have spoken to quite a lot of it, and I have got some notes that I am not going to read the slides to you. There is the Sandton Consortium. That is Southern Sun, Towers, Garden Court, Sandton City, and the Convention Center.
Flat year-on-year, despite Towers being closed for most of the year. For a, I do say so, ourselves beautiful renovation in that hotel is singularly impressive when you walk in that lobby and still flat. That is good, and it is really trading well. The market is happy with it. It is going to be the home of G20, the biggest stuff in that half year. It has got a lot of it coming in now. Even if the actual event happens at Mezrich, we do not know yet. The accommodation is going to come to us. The big banquets, the state stuff, etc., will come to there. I am not worried about the lack of growth there that was without 230 rooms in play. The Western Cape, as you can see that growth off of a good year to come in 45% EBITDA margin, kept our efficiencies in place.
That's the power of rate. If you get the proper rate, it works. The sad part is, even at these prices, it's still a hard decision to build because your build cost is just so high. We have the stock. We bought it many, many years ago, in most cases, 10 years ago or more. We have done really well on that. Nearly half our EBITDA coming out of the Western Cape now. Brazilian Hotel is, as I said, the disappointment of the year, along with Mozambique and the offshore, down 25% on our EBITDA. That is just the lack of events. This weekend with Indaba and the last two weekends with Indaba and Nedbank Cup, it just shows you. Put the trigger of the mind on the top and the whole thing works beautifully. If you do not have those events, do not ask.
We engage a lot with the city on that, and we're doing as much as we can to try and activate that. Gauteng, very good growth, off a low base. We had Rosebank closed last year after the restaurant collapse. Across the board, we've seen Katherine Street, Morningside, the airport node, Sandton properties, they've all done well. Nice recovery from Gauteng. The other is all the outlying from Kimberley, Bloemfontein, Polokwane, Queenstown, everywhere you can imagine. I'm a little disappointed with that. A lot of that business is government-related, and I think it's been impacted by elections, by budget constraints, by the budget not being passed. One of the things I've been hoping for is that with the lifting of the government rate cap and the normalization of government procurement policies, we should be getting more than our fair share of that.
What we found is just disarray within government departments because Treasury said, "Make your own policy." They have not had a policy. We have been running workshops to try and explain to them how they should do their policy, that the number that was the rate cap is available. The difference is we are going to yield you out if you are out of demand. You need to book; if you book at the last minute, you are going to pay more. If you plan your travel, you pay less. We will always make sure we have an old rate cap rate available so that the procurement systems do not get out of whack. There is a transition period to get lots of various government departments and provincial bureaucracy out of the way. It has been a bit slower than I had hoped.
All of that said, net government was up this year, but I think there's a lot of G20 on the back of that. If you took G20 out, government would probably be flat. That is kind of reflected in that other segment there. Offshore, the real disappointment being Mozambique. Tanzania lost as much money open as it did when it was closed, but it is now open, and we think it'll get to break even this year. That is the target. Zambia actually had a very good year. I don't know if it's copper price or, I mean, last year it had cholera and all sorts of problems, but Zambia has been on the boil lately. Nice occupancy, a lot of conferencing. I mean, these little markets kick in and out. Seychelles was great. I've got really high hopes for Seychelles when it reopens.
It's now gutted and we've got 100 workers on site. You kind of take a breath. I mean, it hasn't been broken down in years, but I think it's going to be magnificent when it opens. They've got a hard deadline to get this open by the end of August. There's a lot of pressure on getting that project done. Your central unrecovered costs is a lot to do with sun rains and bonuses, etc. There's your overall 14% increase in EBITDA and overall our margin up from 31% to 33%. I've covered all of these. There are some notes for you to understand what happened in all of the provinces. Prospects, I mean, this should continue. If we can get reasonable revenue growth slightly above our overhead growth, then you get the Jaws effect and your EBITDA improves.
Sorry, I've just got a last minute head call here that I'm trying to get rid of. Our long-term occupancies should still be sort of mid-60s, high 60s. We don't want to be a low 60s or worse still 50s occupancy group. This is the first time we've gone over 60% since 2019, and we were 63 or something in 2019. It has been so long that you don't believe it anymore. Actually, if you just get a little bit of government stability, if the Reserve Bank can just release the throttle a little bit on the economy and stop strangling the consumer to such an extent with high interest rates, if you could just basically have people not stuff up too much, your demand in travel will go. Your local will flow.
Your international, there's such good work done by Home Affairs on increasing the visa availability, streamlining systems. All the potential is there. You have a GNU blow-up and everyone gets nervous and the rand falls out of bed and all that sort of stuff. If there was just a little bit of stability, it's not in the medium term, we should be trading in the mid to high-60s, not in the low 60s. That's really the big opportunity in the paper. Whether that will come in the next year, two years, three years, I mean, Nostradamus himself doesn't know. What do we do? We're sticking with our strategy. We're very internally focused. You cannot rebuild what we got if I gave you ZAR 30 billion in 10 years. We see that with acquisitions that are out there.
You kind of look at it and go, "Why would I pay that?" Buy my own shares, back it off that price. It is a fantastic portfolio. The refurbs are paying off. In some cases, it is just eye-watering what they cost, but the end product is great. You have got all the sunk costs. I do not have to have land. I do not have to have infrastructure. I do not have to have staffing or all of that there. We remain very internally focused, and we spend a lot of time on our refurbs, less time on new build and acquisitions, but we do not ignore those. We can switch ones on and off. I mean, Newlands was not high on my list, and it has traded well. We have got a great mock-up done. Designer was fantastic, and we have pushed the button, so now it is underway.
You can build what you want. You can have the greatest hotel in the world. If your service is shit, you're going to lose your customers. Very much focused on our internal proposition, customer service, passed off interact, our own management systems, your revenue management, your interaction with all the channels, how we deal with our suppliers as respectfully as we deal with our customers, because that's how we just push this business and make sure whatever is coming through the pipe, as much of it possibly comes to us. Capital allocation discipline is we will kind of stick to a third policy on our dividends. The balance is, in the absence of really great expansion ideas, share buybacks remain a very attractive option. We can see what they do to the power and income statement.
Our share is still trading at a very attractive pre-tax cash flow yield, well above our cost of borrowing. Buybacks make sense. There is not a lot of liquidity out there, but every now and again, someone sells, and we just remain in the market. We did not buy back any in this year, but we certainly will be there. That is it. I cannot see you guys, but if there are any questions, I am happy to answer any questions. A relatively simple set of results for the year that we are quite happy with. Any questions? Stunning silence. Is anybody out there? There is a sound on.
There's one. Warren now.
Hello, Warren.
Hi, Marcel. How are you doing?
Yeah, good. Thanks.
Good. Good. Thank you. A couple of questions. Maybe in the past, you've talked about the opportunity on the redevelopment of Beverly Hills, a new hotel potentially in Umhlanga, and then the Cullinan land. I know these are all medium terms, but just to get an idea of how you're thinking about those three and the relative capital spend that could come if those were all turned on.
It's a pretty big capital spend. Beverly Hills, I'm very keen to do, but I'm trying to get the capital cost down. I mean, we got to a point where we were sitting on a ZAR 1.2 billion budget, and we've just gone back and re-engineered it. We're down to ZAR 950 million now, and I'm assuming that they've got another ZAR 150 million to go. The problem in general with new build is that it is so expensive and your yields are low. You've really got to be very convinced that it's very good for the portfolio long term, and you're not doing an ego build, and that your timing is right. What we do have is a balance sheet that can absolutely handle these things. I would prefer to have partners in with some of them, which we're working on.
I also need to be convinced that the market is stable, as stable as it can be. I do not want to be in the middle of a crisis on floor 28 of a 40-story building. All of this is we're working on it. We're doing a lot of work on it, but we are very cautious. You're not going to see a gung-ho flurry of announcements saying we're doing ZAR 5 billion spend unless we've come to some remarkable arrangements in between. These do not go away. We own all that land. It's not going to leave us. It is important that we do the work in between. That is how we think about it at the moment.
Okay. If I look at your cash flow and your guide on about ZAR 500 million in maintenance CapEx, the business generates probably about ZAR 800 million plus in surplus cash per year. That is after your dividend. As things stand, you are going to move into a net cash position. How do we think then about how you allocate that to buybacks given the illiquidity of the share? I am sure you do not want to get in a position where you are building up significant amounts of cash. Maybe just, are you building cash into your portfolio?
I didn't mind too much of a problem with it, but I'm cool with sitting on the cash. It's not quite ZAR 800 million because the dividend is going up. I mean, we've now doubled it. We look at it and we say, if we make ZAR 900 million and we pay ZAR 350 million out as dividend, you've got ZAR 550 million of excess cash. Now, let's say we grow from here. That ZAR 550 million number ends with your ZAR 900 million should grow to a billion and so on. In the short, medium term, I don't mind sitting on cash. I've got a lot more ideas than I've got money, to be honest. That said, we're not going to waste it, and we're not trying to build an empire for the sake of it. Buybacks are very attractive until the price goes above our cost of debt.
That does not make sense because the income statement is negative. The liquidity is low, but every now and again, somebody decides they have made enough money and there is a chunk of shares that go. We are probably more interested in those than sweeping half the daily 300,000 volume. To the extent we do not have ideas, or the ideas we have are not sufficient return for our capital, we can always special dividend or up the dividend policy. I am pretty heavily invested personally in this company. I really do not mind dividend at all. What we do not want to do, it has a delicacy to hotels, and it is cyclical that you did not have in the casino world. I do not want to go into a big debt position. We are not going to grow earnings in a straight line for the rest of our lives.
At some point, there's going to be a wobble. If you've got cash on hand, that's when you buy assets at very attractive prices. Just understand that you are cyclical and know that it's going to come somewhere along the line. Or some other person's going to build a hotel right next to your main profit producer, and you're going to have to suck that up for a while. Sitting on cash, I mean, I get the maths of it being a drag on returns and so on. If you're looking at sort of medium-term stuff, it really doesn't worry me. It's easy enough to give it back to the shareholders.
Okay. Thank you. One last question. You had a couple of leases which were coming up, Elangeni, the Oliver Tambo Airport. Can you maybe just update on what's happening on those leases?
Not a lot, but ongoing solo. I mean, I was in Durban yesterday. We remain the preferred bidder and only bidder, and I think only hope for the Durban Beachfront. We are negotiating the lease with the city. That's going to take a while because there is a two-node ring, but it's a slow and steady two-node ring between very different views on how the commercial world works. I think we are getting there, so that will carry on. Our Tambo, limited progress, well, not limited progress. They have said they are going to go on tender, but they need to, there's a lot of change happening within AXA. They've got a lot of stuff they need to put into tender. They understand that they are not going to, they just don't have the capacity to get all the stuff in a hurry.
They are negotiating a temporary measure with us. They do have to go to tender in the end, just like the city of Durban did, because these are all governed by Treasury procurement laws. We wait for those and we carry on in the meantime. There is not a lot of update, but it is not totally idle. We are dealing with all those parties.
Okay. I don't see any other questions. I'm going to ask one last one. I mean, maybe you can just talk to your forward bookings. I don't know how much visibility you have with the G20 and so on, but I mean, net-net, are you feeling quite confident or comfortable with the state of things, how they're looking the year ahead?
You know, it's interesting. We had our board meeting on Monday, and I started with these spectacular results. Laurel and I should be dancing around like we're just the heroes of the day type thing. We don't feel like that. The numbers are good. It is what it should be doing, but it's a 61% performance. The potential is so much higher. It needs things that are beyond our control to happen to grow nicely. I don't see us falling apart. I don't see us going backwards. The things that make it grow, can we get additional rates, additional volume in capital? I think we absolutely can. Is picking a political fight with the Americans a good idea? It's always the idea in the world. They are fantastic tourists. If the rand strengthens, we all feel much better.
I'm not sure what that does to inbound tourism exactly, but it certainly helps the local economy, brings inflation down. If Lesotho lets go of the interest rate leash that's on the economy, I think that would just be wonderful. You get a never mind two pots. You get proper economic stimulus just because the cost of capital at the moment is so high. All of these things are way out of my pay grade. Do we see problems in our books? No, we don't. Do we see a rapid growth? Am I going to have a 20%-30% increase in revenue? Absolutely not. You kind of just tick along. You control your costs. You manage your channels. You push the guys on price, but it is sensitive. If you go ZAR 50 too much, you lose the business, and there's always someone snapping from the side.
We think we're going to have another good year, but it does require particularly government to behave themselves. That government includes the old bloody lot of them, not just ANC. They've got to behave themselves, and the potential's there.
Related to Mozambique, what did Mozambique lose this year? Just maybe a sense of do you expect those losses, if there were losses, to continue in the forthcoming year?
Yeah, it made EBITDA 8. At the moment, it's cash positive there, but it's not enough to cover interest on the loan. Since the start of the crisis here, we've put $2.6 million cash into the country, pretty much to pay interest on the $26 million loan, and initially some pretty heavy losses. We took a view. We didn't cut staff wages. We didn't cut their bonuses. I mean, the strikes and crap happened in November. They'd worked their year. We paid the Christmas bonuses. We treated our staff properly. That meant I had to send money from South Africa that wasn't going to come out of Mozambique. I'd hope that if the hassles continue, Mozambique should remain relatively cash neutral, borrowing interest on the loan. Our forecast is that it goes back to cash positive and actually has a decent recovery. The violence is gone.
I cannot get a coherent answer why our volumes are not back to what they should be. I'm not asking for 70% or 80%. They're just back at the 55%, and everything's normal. That inbound just isn't happening. I don't know why. I'm going on holiday now, but when I get back, I'm going to Mozambique and try to see if I can get a better feel for it. I was with the GM at [Ndongo] last week, and he's also just like pulling his hair out. He says, "Talk to everyone. Everyone's around it, but there's just no movement on it." I think it's just a shock factor. As shocked as we were that this could happen there, I think the Mozambicans are in shock that this could happen there. We think worst case, cash neutral.
Thanks. Thanks so much.
Kirsten, you got a question?
Perfect. Thanks. You mentioned that your hotels that are similar to the City Lodge offering aren't performing as well. Would you just be able to, one, elaborate on which hotels or segments these are in, and two, your rationale of why this hotel market isn't performing as well?
Yeah. So I mean, in the brands, our brands that are similar to City Lodge or Garden Court and Stay Easy are similar to City Lodge and Town Lodge. However, we have very different products. So something like Garden Court Sandton City, its location is superb. It flies. Something like Garden Court Marine Parade or Sun Square City Ball or PE Kings Beach, it's still got pretty good conferencing facilities. They're big hotels. We have very good contracted business relationships. They work. Where you've got a like-for-like, 150-room Garden Court hotel, not in a very key business node that's got similar to what a City Lodge might have, let's say, a Bloemfontein or something, but they generally don't have big hotels, and they don't have the big conference facilities that we've got, and all they're not attached to something like a Sandton Convention Center.
That gives us in that market, the big conferencing market and the up market, the four and five star, which they do not have, gives us a benefit because that is where the demand is at the moment. City Lodge, for example, the City Lodge Waterfront Hotel, which is across the road from our big node opposite the CTICC, I am pretty sure is doing just fine for them. It is in Cape Town. It is near the CTICC. I reckon I do not have any insight to the numbers, but I would be astounded if that hotel is not shooting the lights out. Their big one on O.R. Tambo, I can guarantee you is printing a lot of money. Probably makes 20%-25% of their profit, lock, stock, and barrel, as do we from hotels in the O.R. Tambo node.
When you start going into the Bryanstons and the off node, in our case, the Morningsides and so on, I reckon we're both sitting in that high 50s, maybe early 60s, not a lot of rate growth, ticking along. I mean, not a disaster, but not the type of market. I guess the end lines I'm trying to get to, why are we at 61% and they're at 56%? Because we have high-end stock and we have stock in great locations and we have a lot of stock in Cape Town. When you get that general economic growth, their market will come back. When you've got the transient business traveler person X running around, wants a room for GBP 1,000 a night, that market is weak.
It is a now, I get such thing glories to management and all that, but if you happen to have the right type of ship when the winds are sailing, then you sell faster.
Perfect. Thanks so much.
[Yolanda], you got a question?
Yeah. Thanks, Marcel. Just quick two on my side. The first one is just maybe a little bit more firm and numbers. So next year, if we're expecting a recovery in Mars, annualization of the housing markets boosted by G20 and a recovery in other regions, where would you place occupancy if we're currently at 61%? Are we expecting around about 63%, or is that too ambitious?
No, if I get to 63%, I'd be happy. If I get above that, I'd be really happy. If I didn't get to that, I'd be annoyed. Can't guarantee anything, but I think we should be ticking upwards. Unless something goes wrong, we should be ticking upwards. It needs Mozambique to recover. It needs Durban to recover. It needs Cape Town to hold and probably do a little bit better. It needs your outlying stuff to tick up in some form of economic stability, if not recovery. I don't think 63% is a bad something to aim for. It's perfectly doable as long as the world doesn't blow up on us.
Okay. No, perfect. My next question is a bit more strategic. You mentioned that we're benefiting from deals that we did in the last 10 years. Where do you see the market going in the next 10 years, and where should we be investing?
Yeah, that's a great question. That comes down to the build cost versus the low returns at the moment. When I sit with you guys and I say, "Actually, I can build this thing and I get a 6% return," I can see everyone turning green and going, "Please take away the checkbook." If we do not, take Beverly Hills. It is a 60-year-old hotel. It has got shower over the bath, and I get GBP 10 in season for it. How much longer am I going to do that? Ten years from now, I do not see Beverly Hills looking the same as it is, or I think we have failed. That project, whether it is three years out, one year out, or five years out, has got to be done. I have got to manage the cost. I have got to assure we built the right thing.
I've got to make sure I don't destroy the legacy that is Beverly Hills. I've got to go to Saul Kirsner talks to us in that place. You don't want to mess this thing up, but it has to be done. That 10-year view is very important. You've got to be in the nodes that you think are going to grow. You've got to manage your way out of nodes that you think are bad. Ultimately, it doesn't necessarily mean we have to have more stock, but we have to make sure we have the right stock. We do well out of big hotels in good locations. Those don't come along easily, so pay attention to it when the opportunity arises.
If we could, over a long period of time, reduce our shares in issue by 30% or 40%, grow our earnings by a reasonable rate, you can imagine what EPS does. If in between that, I have used surplus cash to build strategic new product, and it does not always have to be only our cash. I am quite keen on partnerships with others who want to invest in this stuff because it ramps up our yields and it lowers our risk. I think we would have done a really good job in 10 years' time. The other unknown is just like 10 years ago, maybe more, what are we now, 2025, 15 years ago, we knew what hospitality fund was. We had absolutely no interest in it whatsoever. Hospitality became interesting when the ANB class shares fell apart and there was an opportunity.
Nobody wrote that story in a strategy that said, "Look, we've got to focus on these guys. ANB shares are going to be the death knell of property industry." When the opportunity arose, we had the cash and the, in hindsight, insight to do it. You also have to, and that's where I'd rather take a beating from you guys for sitting on cash for two years, but that moment comes when the right asset pops up and you can execute is a really important thing. It will come. We don't know what it is, but there will be a chance.
Okay. Are we looking at any offshore expansion opportunities, or are we focusing mainly in SA?
Focus is mainly in SA. I am uncertain of our U.K. strategy. We've got a good management company there. It's a white-label management company. We are riding on the coattails of Starwood in disposing the Travelodge properties and the last few hotels. We're going to be left with 25% of two really good hotels, the Holiday Inn Express in Edinburgh and the Hilton in Gatwick. In this year, there's going to be a moment where they're going to say, "Right, it's part of their," because they have one of these funds. You have seven years. You have to exit the assets, etc.
There's going to be a point where we're going to say, "Look, are we just going to take our GBP 10 million and leave, or are we going to stump up GBP 20 million and go bigger?" I'm not that excited about it because GBP 20 million doesn't sound like a lot. It's GBP 500 million once you get going. I'm uncertain that we should just be exiting the U.K. We've got a very nice structure there. Stephen Oakenfold, his team have got great asset managers. The management company knows what they're doing. Again, it's too big for us to do on our own, but there are partners around that we can talk to. I'm uncertain whether we should exit and call it quits or whether we should actually invest more.
I'm very certain it's unlikely we're going to push money into new African markets or even into the markets we're in, but I don't really have appetite to sell those. For all my traumas around Mozambique, I still think it's got a lot of potential. It's close to South Africa. It might be speaking Portuguese, but it is like a sister to South Africa. Zambia is fine. Seychelles is a wonderful product. We're putting a lot of money into that refurb there. It's about GBP 100 million. I don't see, other than potentially U.K., I don't see big aggressive offshore expansion whatsoever. Even the U.K. stuff will be small measured and using advice that we already have.
Okay. Perfect. I'm also assuming as the SA economy recovers, Mozambique also benefits from the SA market as well.
It must help. The cross-border traffic between Lubumbashi and Maputo is important. Just stability. Stability is the biggest thing in all of this. We all know it is economic theory that capital hates instability, etc., but people hate instability. If you're scared and nervous, that's where sentiment drives the desire to spend on business or leisure. Stability gives you good sentiment.
Okay. Thank you very much, Marcel. And congrats again on great set of results.
Thank you.
Two questions on checking. Can you comment on industry capacity? Is everyone taking the opportunity on your build, or are there more great suppliers out there? Are there any nodes you're looking to manage yourself out of London?
Obviously in Cape Town, everybody thinks they're on our hotel gods. And anybody who's got a piece of land and a dream wants to build a hotel on it because they know that tourism is booming in Cape Town. That said, there's not a lot of really meaningful new stock that I'm aware of. There's a Marriott hotel going into the V&A Waterfront. We see a lot of plans come across our desks, but the people that would push the button on it are property companies who think an 8% yield funded by 7.5% debt is a great answer. They're looking to use that bulk that they haven't got any other ideas for because they can't build more offices and everyone's done with residential flats and they don't know what to do. There's a bit of that around, but nothing big and meaningful.
If you do not have a crane in the ground at the moment, you are not going to get new stock out of the ground in under three to five years. New supply is a longer-term worry, but not a current worry. I think the banks are relatively wary. I certainly preach the lecture every time I meet with the banks that this is technical. This is not property like sign a 20-year lease and you are off to go. Hopefully sense prevails. As I have said often, if you are worried about competition, hotels are not the business for you because any hotel, any idiot can build a hotel and sooner or later one will. That risk remains. We are not seeing massive stuff at the moment, but there is a lot on paper. We are not seeing the building plans yet.
Nodes we want to work ourselves out of, not really. The individual, I mean, even the Eastgate node I was worried about, but it's actually ticked up quite nicely. It's not performing where it was long term ago, but it's no longer losing money. It's making money. That makes it very hard to say, "Look, I know what this hotel would cost to rebuild. I know what this hotel is capable of doing. Why would I give it away tomorrow?" There are a couple of the small SUN1 properties that we are wanting to exit just because they're never going to come right. They don't lose money, but at some point, the CapEx is going to catch me. We've done a whole lot of work.
We think these can be converted into residential, and actually, we would sell out and sell it to a residential developer you could take. It's not a lot. It's maybe 300 or 400 of the SUN1 rooms, a few of the smaller hotels. The core portfolio I absolutely want to hold. I'm pretty sure our SUN1s are performing like Road Lodges are. It's a battling market, but that can turn in a heartbeat. Your replacement cost on that is billions. I don't want to be selling that off for short term, particularly as we don't need the money. When the market turns and the bottom end comes back in because you are achieving 3% or 4% economic growth, we look like idiots because we can't find or get our hands on the stuff.
No, there's not a lot of actively out of the nodes that we want to get out. The Rowena every day do say a little prayer, thank you, that we're out of Nigeria just to remind ourselves that the world can be very hard. We don't miss Nigeria at all. Otherwise, we find where we are.
Where does that stand compared to the large independent companies? Where do you see this coming?
What are large independent? I presume we're talking international brands. International brands are the leeches of society. They sign contracts. They take fees, but they contribute far more. They don't put any money in. They don't invest. When you read a thing that International Brand X is building a hotel somewhere, no, absolutely for sure, it is not their money. They have teams of exceptional salespeople who will sell us to the Eskimo that sign up contracts. We play in a completely different space. We're asset heavy. We own our assets, and we manage our assets by and large ourselves. Where we don't is where we have long-term, we bought hotels that have got long-term contracts in place, like the Radissons and the Marriotts. I will honor those contracts, but we work very closely with the manager to say, "In this market, we know how labor works.
We know how unions work. We know how. And you're not going to bullshit us with STR stats, etc. This is where your rate profile needs to be. It is not a hostile thing. They, in many ways, are not our competitors. Our competitors are the property developers who want to build more stock, who listen to the non—I mean, I've never seen an international hotel group produce a feasibility that says the hotel will not work. I've seen lots of international hotels go bust, but I have not seen a feasibility that said it would not work. Our competitor is property developers with low yield expectations and access to large capital and risk appetite that we do not have, more so than the international brands. I am assuming that is what independence means by brands. It is a very fragmented market.
Just in case I've misunderstood the question, you've got the branded hotel market, which includes us, which is formal hotels like we know them. We're about a third of that in the country, maybe 30%. Then you've got a huge array of independently owned guesthouses, up to luxury hotels, eight, nine rooms, 20 rooms in some cases, right down to caravan parks and Airbnbs and everything else it goes. It's a very fragmented market. In our world of formal hotels, we are by far the biggest, and we think we're performing about the best if you take the whole country into account. I mean, we don't get the rates that the hotels in the V&A get because they get their pure inbound tourist thing. I know the brands like to claim it's the reason that the inbound tourist there is because of them. That's bullshit.
It's because they've got great hotels in a great facility. We call them George's Hotel. It would still make money. That is just location. I mean, what I hear, the Waterfront spending on the—I think it's an Endeavour Marriott that they're building out on the quay there is like $10 million-$12 million a quay to build the thing. That is proper money. You're going to need a rate of $50,000-$60,000 a night to start justifying spending that kind of money on a hotel.
Are that the outbound result? As a group, is high occupancies? What is the relationship with the other ones?
I don't know. But we would hope to keep our costs in the, I guess, the sort of 6%-7% mark. If our payroll's going up 5.5%, any increase in volume, your overall payroll is probably going to head up by 7% because you're bringing more of your variable pay element. The costs that'll hit us in the next year are like IT. We're spending a lot on IT. This software as a service, I think our IT costs are going up about 10%. You might get a—if you get a rand strength, you get a benefit that kicks through that because it's all dollar-based. But there's a lot of license renewals, and you can't buy the licenses anymore. So you kind of got that moving around.
If our costs run at 7% and we can get revenue growth at 9%, I haven't worked out what that does to margin, but you can obviously see margin goes up. In this year, it was 9% on costs and 7% on overheads, and that gave us 14% on EBITDA and 2 percentage points on margin. It is also not directly related to occupancy. The one trap everyone falls into about hotels is they talk about occupancy. Far more important is rate. One of the reasons our profits are so good is that the outperformance was in Cape Town and driven by rate. The underperformance was volume in Durban and Mozambique. That incremental rate that I get in Cape Town is 100% flow-through to EBITDA with the exception of direct channel costs such as commission or like a booking.com commission or a credit card commission.
When you sleep in that room, if I charge you ZAR 3,000 or ZAR 5,000, it does not cost me any more. You use the same amount of water, same amount of shampoo, wash the same amount of sheets, vacuum the same carpet. That incremental flow-through is very strong. When I have a reduction in volume, I can manage costs down. If I have a reduction in rate, all I save is commissions. It works positively the other way. We should keep the positive Jaws effect if we can keep that little bit of revenue above overhead. It does not have to be massively above. It is all quiet out there. Last chance. If there is nothing else, then done. Thank you very much for attending today. If you have any other more detailed questions, feel free to contact us, and we will answer whatever we can. Thank you.