7 December 2012

Zimbabwe: Afrisun Puts Plans On Hold

A Planned major restructuring exercise at hotel group African Sun Limited ,which could see the company offloading non-performing hotels, has been put on ice until the country holds its general elections next year.

With tourism players arguing the polls are likely to be held after the country co-hosts the United Nations World Tourism (UNWTO) organisation general assembly with Zambia in August 2013, African Sun is awaiting a more defined economic environment after the decisive election to implement the strategic move.

CEO Shingi Munyeza told businessdigest it was too early to make a decision on whether or not to dispose of some of its hotels.

"It's too early to tell whether it's this hotel or that one, you don't know exactly where it is going,You can't have good assessment pre-elections. Post elections, we will be looking at these specific hotels to say do they need upgrading - which is different from refurbishing - or more rooms?" he said.

"If it doesn't meet standards then we will sell it," he quickly added.

Apart from disposing of non-performing hotels, the group planned to reduce costs from 59% of revenue as at the end of year to September 30 2012 to around 50% by next year.

Presenting its annual results this week, African Sun said it was forecasting a 10% revenue growth and a 12% Earnings Before Interest, Taxation, Depreciation and Armotisation (EBITDA) increase in the current financial year after posting its first annual profit since the country adopted a multiple currency regime in 2009.

Munyeza told analysts the group had taken a conservative approach to the 2013 budget, taking into consideration the upcoming elections which would potentially affect results if held early 2013.

In the reporting period, African Sun's revenue went up 12% to US$54,43 million, driven by Average Daily Room rate (ADR) growth while EBITDA was 161% up on prior year to US$6,3million, on the back of improved margins that almost doubled to 11.6% from 6% prior year.

Profit before tax was up 171% on prior year to US$3,4mln, while net profit stood at US$2,7mln from a prior loss position of US$10, 2million, after a successful restructuring exercise which included staff rationalisation.

The company said it had saved US$2,9million due from staff restructuring.

Interest expenses were up 86% following an increase in short term loans and effective borrowing. Revenue Per Available Room (RevPAR) saw an 18% growth on prior year to US$47, driven by a 14% spike in room occupancy.

The group forecasts RevPAR will grow to US$57 at the end of the current year.

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