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AFRICAN Sun and Dawn Properties are facing suspension from trading after it emerged this week that the Zimbabwe Stock Exchange (ZSE) is concerned that a legal battle between the two companies will result in the cancellation of the bulk of the group’s leases.
The ZSE, according to well-placed sources, is concerned that the pending case could have a material impact on African Sun’s going-concern status and plans to protect shareholders from prejudice in the event that the courts uphold Dawn’s application.
Dawn dragged African Sun to court for allegedly failing to pay its rentals on time and other violations relating to maintenance of properties on lease to the hotel group.
Ideally, the two companies were supposed to issue joint cautionary statements following a dispute over the status of the lease agreements of eight hotels under the group.
A cautionary statement would guide shareholders when dealing or trading in the shares of the two groups as the dispute is considered to be price sensitive. This might then affect the going-concern status of African Sun as the majority of its business is derived from the hotels.
Dawn is seeking to terminate the lease agreements of eight hotel properties that are leased to African Sun. The properties are Hwange Safari Lodge in Hwange, Holiday Inn Mutare (now African Sun Amber Mutare), Carribea Bay Sun in Kariba, Elephant Hills Hotel in Victoria Falls, Crowne Plaza Monomotapa Hotel in Harare, Express Holiday Inn in Beitbridge and Troutbeck Hotel in Nyanga.
However, well-placed sources say that the ZSE is currently talking to the two companies in order to ensure they come to an understanding and subsequent comprise. But in the event that talks fail, the two companies are likely to be suspended.
Meanwhile, African Sun is targeting a top-line of US$59, 88 million in this current financial year, which will be a marginal growth from US$49,8 million last year.
The group is expecting earnings before interest, taxes, depreciation and amortisation of 8%.
African Sun CEO Shingi Munyeza told shareholders two weeks ago at the group’s annual general meeting recently that the austerity measures, which were implemented last year, had begun to bear fruit.
Munyeza said the group had negotiated an earlier exit from Holiday Inn Accra as well as Holiday Inn Gaborone.
The group said it has started the refurbishment of the three city hotels –– Holiday Inn Harare, Holiday Inn Bulawayo and Crowne Plaza Monomotapa. The process is expected to be completed by June 2012.
Its resorts were currently performing well, with forward bookings at Elephant Hills at 30% until September, The Kingdom at 21% and Victoria Falls Hotel at 61% until September.
In terms of performance in the five months to February, the Victoria Falls Hotel had 58% occupancy and revenue per room of US$78, Crowne Plaza Monomotapa at 67% and US$67, Holiday Inn Harare 69% and US$61 Elephant Hills Conferencing at 44% and US$36 and the Kingdom at Victoria Falls 35% and US$34.
African Sun’s borrowings in the same period are at US$13,41 million, consisting of US$8,76 million short-term and US$4,65 million long-term borrowings.
The hotel group is currently trading with a year-to-date gain of 10% at 0,77c but is being touted as a recovery stock as it is coming from a low base. –– Staff Writer.