New Zimbabwe (London)

Zimbabwe: African Sun to Eliminate Short Term Debt

THE country's largest hospitality group African Sun's Limited (ASL) is targeting a pre-tax return of 20 percent for the year ending September 2014 after recording improved foreign arrivals this year.

The group's revenue increased marginally by 3,4 percent to US$56,2 million for the year ended September 30 2013 from US$54,4 million on the back of an eight percent increase in foreign room nights coupled with an improvement in food and beverage revenue.

Group CEO Shingi Munyeza said the period under review witnessed a notable growth in tourist arrivals into the group's hotels. The market recorded a 11 percent growth from USA, Germany -18 percent, Japan 31 percent and the UK 26 percent.

A decline was recorded in Arrivals from China and France by 26 percent and nine percent respectively.

The company says it expects arrivals witnessed in 2013 to continue into 2014. Recovery of the domestic patronage will be curtailed in 2014 if the current difficult trading conditions facing the economy continue.

Growth in foreign business lifted ADR by seven percent to US$100 compared to US$93 achieved last year due to higher yields from this group relative to domestic business.

"Consequently this gave rise to a two percent increase in Revpar at US$48 which could have been higher where it not for the depressed domestic business," Chief financial officer Nigel Mangwiro said.

Mangwiro told the meeting that African Sun intends to retain long term debt only whilst eliminating all the short term debt and this is expected to reduce the interest burden by US$0,74million next year.

The company posted an 11 percent increase in earnings before interest, depreciation and amortisation compared with the prior year 2012.

This was, however, significantly reduced by a once-off adjustment in fair value of the disposal of 12 percent shareholding in Dawn Properties and the impairment of the remaining 16,54 percent shareholding in Dawn Properties by African Sun.

Reduction of the short-term debt is expected to boost earnings by saving an estimated US$3 million in finance charges which the company has been paying over the last two financial years.

On future plans Munyeza revealed that they would 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," the group CE told the meeting.

"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."

Turning to the update for the two months of October and November, Munyeza said revenues were ahead of budget whilst festive bookings were already full.

Mangwiro said the group's 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.

Short term loans stood at US$12,58 million whilst long term loans stood at US$9,4million.

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