Friday, 08 July 2011 20:06
DAWN Properties Ltd could offer leases to other hotel operators and dispose of some of its hotel buildings to raise funds for the refurbishment of its other hotel properties, business digest has established.
The property company is also to dispose of estate agent subsidiary, CB Richard Ellis and its agro business operations. The company sees its future lying in property development.
According to a document made available to businessdigest, Dawn Properties would also seek potential merger partners. Most of Dawn’s hotels are on lease to African Sun Ltd. Dawn was spun off from African Sun and listed separately in 2003.
“Some hotels may be offered to other hotel operators on a lease basis while some may be sold to raise funding for the diversification drive and the refurbishment of the remaining hotels. Options are still being considered. Potential merger partners will be sought to accelerate the diversification drive,” the document said.
The board has also approved the disposal of CB Richard Ellis (Private) Ltd (CBRE) from its portfolio and gave management pre-emptive rights to acquire the business.
Dawn Properties board of directors feel that while CBRE was a sound business, the property management company had a better future as a stand-alone entity.
The board, according to the document, felt CBRE was better off aligned to a different industry sector.
“Similarly, the agro business is also (up) for disposal. This is a unique business which requires oversight skills that the group does not have at board or at senior management level. These divests will enable management to focus energies on core business,” the document said.
According to the document, the future growth of the company is expected to come from property development, particularly residential development given the huge housing backlog in the country. The board, according to the document, has also taken a position to restructure its hotel portfolio.
“Some hotels may be offered to other hotel operators on a lease basis while some may be sold to raise funding for the diversification drive and the refurbishment of the remaining hotels. Options are still being considered. Potential merger partners will be sought to accelerate the diversification drive,” he said.
The board, according to the document, recognised that weak corporate governance structures contribute to the breeding of unhealthy corporate values which may lead to corporate governance transgressions.
“Consequently, board committees have been reconstituted to enhance the structures. Unfortunately this has been overtaken by the resignation of two directors,” the document said. The Group’s revenue rose 48% for the year to December 31 2010 when compared to the prior year. The increase in turnover to US$5,7 million from US$3,9 million was, however, adversely affected by an 81% rise in operating costs.
Included in operating costs was US$1,2 million being the cost of Hypericum flowers that were written off. Operating expenses net of the write-off increased by 43%, which is comparable to the increase in revenue of 48%.
The group managed a profit before tax of US$267 000, before making adjustments for fair value gains of US$4,9 million.
Chairman Chimuriwo said the carrying value of the Investment Property increased by US$4,9 million following a revaluation conducted by CBRE. The fair value gain was credited to the statement of comprehensive income.
“The deferred tax liability reduction is a result of change in tax rates applied in computing the deferred tax as promulgated in the Tax Act. The reduction of US$6,2 million was credited to the statement of comprehensive income,” he said.
Dawn said its hotel performance improved by 52% and achieved a turnover of US$2 million. The improved turnover was said to be mainly attributable to decent performances from the city hotels, which continue to exhibit signs of recovering from the economic decline.
Chimuriwo said city hotels (Holiday Inn Mutare, Express by Beitbridge and Crowne Plaza) are currently achieving occupancy rates in the range of 58%- 62%.
“The occupancy rates are in line with expectations, however, the revenue being generated is heavily discounted as evidenced by an average yield of 3,6% achieved on the city hotels,” he said.
He said the resort properties’ fortunes were fairly mixed, with properties in Nyanga, Kariba and Masvingo performing relatively better than properties in Hwange and Victoria Falls.
Chimuriwo said Elephant Hills and Hwange Safari Lodge pulled down the average yield of resort hotels to 2,4% as they posted yields of 1,6% and 2.5%.