African Sun turns the corner

African Sun turns the corner
Published: 10 August 2017
African Sun reported an improved operating performance showing a profit before tax of $24,886 compared to a loss of $1.2m for the comparable period.

The performance was on the back of increased occupancies, reduced average daily rate (ADR), cost containment and the reduction in finance costs. Occupancies improved to 45% from 37% supported by a growth of 21% on the local source market, 33% on international and 2% on regional source markets. ADR was reduced by 5% to stimulate the domestic market which resulted in revenue per available room (RevPAR) increasing by 14% to $40 from $35. Operating expenses grew by 7.3% to $14.3m lower than the revenue growth of 16.8%.

Segmental reporting reveals that the best performing hotel for the group is the one run under partnership (The Victoria Falls Hotel with Meikles Hospitality) which contributed $3.2m to group revenue and $1.2m to earnings before interest, tax, depreciation and amortisation (EBITDA).

Hotels under management (five hotels managed by Legacy Group: Monomotapa, Elephant Hills, The Kingdom, Hwange Safari Lodge and Troutbeck) reported revenues of $9.6m and an EBITDA loss of $0.9m compared to a loss of $1.5m for the prior period. Group managed hotels (under standalone brands: Holiday Inn Harare, Holiday Inn Bulawayo and Holiday Inn Mutare) posted revenues of $1.5m and EBITDA of $83,719 compared to a loss of $82,040 for the corresponding period.

Cash generation improved due to the better operating performance as the group recorded a cash inflow from operation of $0.6m against an outflow of $0.3m, for the corresponding period. Net finance charges reduced by 34.3% to $0.4m following the debt restructuring. Net gearing increased to 57.7% from 50.8% at year-end, although total borrowings reduced to $7.3m from $8.3m.

Head of Research at Imara Edwards Securities, Addmore Chakurira, in his note to investors said, "Following the restructuring the group has turned the corner although profitability is mainly driven by one hotel (The Victoria Falls Hotel). Nonetheless, we note that the losses at the other hotels reduced significantly. Traditionally the second half is the busier period for the group. Occupancies are expected to improve significantly in the second half especially in the Victoria Falls area."
- Business Daily
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