African Sun to drive international market

Published: 25 March 2014

African Sun will focus on driving the international market to grow ADR and volumes, group chief executive Shingi Munyeza told the AGM today.

"Driving international market to grow ADR and volumes; this is what we're doing, now that international market is growing, is sustainable and we're confident that the 11% growth that we've seen in the first 5 months will even be around 15% ," he said.

He noted that they foresee the domestic market's current decline being sustained therefore they will continue to defend and sustain the conferencing business.

Munyeza told the meeting that further cost realignment are being pursued to align the cost structures to the current business performance.

Giving the trading update for the first 5 months up to February, he said; "The five months performance up to date; Revenue is down by 4% from the same period last year. Drop in occupancies cited resulting from a 12% drop in the domestic market."

He highlighted that the drop in revenue was mitigated by 1% drop in operating expenses and interest cost saving of 30%.

EBITDA, however, is ahead of budget but down on the same period last year while interest cost was 30% down from the same period last year and "this is the impact after the sale of the first chunk of the Dawn Properties linked units which was $4.2 mln received in October."

Munyeza indicated that Amber Accra Ghana is on the soft opening phase at the moment and revenues have been doubling each month since December.

"Break-even is expected to be in May and profitability is expected to be from June onwards," he noted.

He stated that the domestic market is down by 8%, international market is up by 11% and the regional market is down by 24%.

"If you split that regional market you'll find that it is the South African market that is down by 40% whilst the rest of Africa is up by 15%. The total rooms sold therefore, is down by 7% although the regional and international market has a better yield than the local market so there is that mitigation…So we find the other regional markets outside South Africa growing and the international market growth is sustainable," added Munyeza.

He noted that the decline in the local market is also sustained because of the harsh liquidity situation

"The liquidity crisis is severe and is pointing to a deflation in the country. This has been hindering the growth of the domestic market which we've seen shrinking over the protracted period of time," he said.

Moving to the sales mix he noted that domestic went down from 66% to 63%, international up to 22% from 18% and regional 15% from 16%.

Munyeza told the meeting that stage one of debt reduction and restructuring was completed with the disposal of the 12% investment in Dawn Properties which realised $4.2 mln used to repay short term loans.

Stage two, which was the disposal of the remaining 16.54% investment of the issued share capital of Dawn to reduce short-term debt, was unanimously approved at the EGM held after the AGM today.

"The impact of these disposals as you can see… we're reducing our gearing to 34% from 53%. I did mention in our FY results that we're targeting at least 30% reduction in our debt," he said.

On refurbishment, Munyeza pointed out that they have now completed their refurbishment and further hotel asset improvements are to be funded through internal funds.

The group's directors were re-elected and fees of $69 502 approved while auditors PricewaterhouseCoopers were re-appointed with remuneration of $155 000 also approved.
- zfn