African Sun targets 20% pretax profit

Published: 13 December 2013

African Sun Chief Executive Dr Shingi Munyeza told analysts yesterday that the Group is targeting a pre-tax return of 20% in FY14 after experiencing improved foreign arrivals this year.

The company achieved 10.5% return excluding the exceptional items in F13 compared to last year's 4%.

"This will be on the back of improved debt reduction to 30% gearing and cost containment. Completion of refurbishments and release of rooms specifically in city hotels to be launched early next year will also support our target," Dr Munyeza told the meeting.

"We also want to see growth in rooms to be supported by creating win-win solutions for our leases and management contracts. Currently we have 5 management contracts in Nigeria and 12 leases in Zimbabwe."

Dr Munyeza also told the meeting that they had opened a new hotel in Ghana which is a 10-year lease with 200 rooms and a potential ADR of $150. "Ghana is expected to contribute 10% to our revenues," he added.

Dr Munyeza highlighted that they will be targeting growth in natural resource centres and emphasised that focus for the business was mainly in Zimbabwe.

"We also like West Africa particularly Nigeria and Ghana through management contracts," he added.

"Declining destinations will be rationalised with one example being the Beitbridge area as business has shifted on the other side of the river. So we want to see how we can rationalise our product offerings."

"We managed to realise strong growth in our hotels from international business. Notable growth was recorded particularly from the USA, Germany, UK and Japan. The foreign business continues to grow steadily and sustainably which augurs well with the trends being witnessed in the local market."

Possible new opportunities such as the lease in Ghana and other openings will be considered. "We should open two new hotels in Nigeria taking our management contracts to 7 and we expect their contribution to be half a million," added Dr Munyeza.

Finance director Nigel Mangwiro said full year performance was mainly lifted by an increase in foreign arrivals.

"The group realised an 8% growth in foreign business arrivals compared to prior year and this managed to offset the subdued domestic market," Mangwiro said.

Mangwiro told the meeting that the sales mix shifted in favour of the foreign business from 35% last year to 39% in the current results for the room nights sold.

"We are slowly returning back to the normal set up where foreigners used to contribute to 40% of group revenues," he added.

He added that liquidity constraints saw the domestic market declining by 9% during the financial year resultantly leading to 2% decline in occupancies at 48%.

Group revenues rose by a marginal 3.4% to $56.28 million driven primarily by an 8% increase in foreign room nights and an improvement in the food and beverage business. H

Ebitda grew by 11% to $6.97 million attributed to the 3.4% growth in revenues and the 3.5% cost savings.

"A loss before tax of $5.94 million was recorded on account of the impairment on the Dawn investment of $7.63 million. If you were to isolate that impairment, it would have been a profit before tax of $1.9 million," Mangwiro added.

Total assets increased following the adjustment of the omitted assets upon dollarisation.

"The disposal of our Dawn will also be seen in the coming year as these were classified as non-current assets held for sale." Mangwiro added.

Dr Munyeza revealed that they seek to reposition the safari and lodge business.

"We have through our new shareholding structure a potential partner who will explore opportunities in our safari business starting off with Kariba, Hwange and the Vic Falls area. This will complement what we do and will not be under direct management of Afsun as lodge business is a different business altogether."

"We are expecting the foreign market to remain resilient. Currently, we forecast 10-15% growth in the Victoria Falls area especially if peace and stability is maintained," the group CE told the meeting.

Turning to the update for the 2 months of October and November, Dr Munyeza told the meeting that revenues were ahead of budget whilst festive bookings were already full.

- zfn