Zimbabwe’s largest hospitality group, African Sun Ltd, yesterday reported that core earnings for the six months to March this year rose 65% due to a reduction in operating expenses and costs of sales.
The core earnings or Earnings Before Interest, Tax, Depreciation and Amortisation rose to US$3,6 million from US$2,1 million a year ago, group chief executive Dr Shingi Munyeza told analysts yesterday. EBITDA is a measure of a company’s ability to generate cash and profit from operations.
Revenues increased by 1,6% from US$26,1 million in last year’s corresponding period to US$26,2 million, marginally lifted by a 6% growth in average daily rate. The profitability was not much derived from the revenues but was largely as a result of aggressive costs alignment.
Cost of sales and operating expenses were down 4% and 5% respectively, driving the EBITDA.
“Profitability would have been higher had it not been high capital and borrowing costs,” Dr Munyeza said.
He said the management intended to lower the cost of debt, currently at US$16 million, from 16 to 12% before the end of the financial year and set to further reduce it to below 10%.
He said the debt would be reduced to US$7 million and “this will be done though a balance sheet restructuring”.
|Fast facts about African Sun Ltd:|
|Africa Sun Ltd.||Zimbabwe’s largest hospitality group|
|Earnings for the past 6 months||Up 65% (to US$3.6 million)|
|Increase in revenue in last year’s corresponding period||1.6% (Approx. US$200 000)|
|Cost of debt currently||US$16 million (intended to be lowered to 12%)|
|Revenue per average room as it stands now||US$44|
|Refurbishment costs by September this year||US$14 million|
Dr Munyeza also announced that plans were at an advanced stage to resuscitate a loan facility with the Industrial Development Corporation of South Africa which will be offered at a Libor+2,5%. In other words, the total cost of the money would be less than 5% per annum.
Occupancy rate fell 5 percentage points to 47%, resulting in decline of revenue per average room to US$44.
However, business is expected to rebound from the domestic market as the industry enters its peak period.
Cash generation improved from US$580 000 in the previous comparable period to US$3,13 million and this was “evident that the business model has become more efficient”, said Dr Munyeza.
The group targets to have completed refurbishment of city hotels by July this year while Victoria Falls properties would also be completed before the United Nations World Tourism Organisation General Assembly to be co-hosted by Zimbabwe and Zambia in August.
By September this year, African Sun would have spent US$14 million on the refurbishment exercise.
“It is an on-going exercise and we intend to undertake refurbishment at some of our properties using cash resources,” Dr Munyeza said.
He added that the UNWTO General Assembly would provide the company, and the industry at large, a unique marketing platform which will enhance the visibility of the country going forward.
Giving an update on African Sun’s average occupancies during the week of the UNWTO conference, the three hotels in Victoria Falls are almost fully booked.
“This week, we are at 90% for the three properties and we are forecasting 100% occupancy in all hotels during that week. We have also partnered Government to ensure it is a success,” he said.
Date: 27 June 2013