Forex earnings boost Afsun H1 as group embarks on major soft refurbishments

Published: 28 September 2019

Foreign currency earnings, which constituted 45% of revenue, helped African Sun post a 765% increase in the bottom-line for the half year to June 30. This is in spite of a drop in occupancy levels to 45% from 55% last year, a drop which is however still with reasonable standards.

Revenue for the period was at $79.13m with a mix of 55% local and 45% export. EBITDA was at $42.72m though its inclusive of a foreign exchange gain of $18.97m. Excluding the other income, EBITDA at a margin of 30% was at $23.8m.

In its results statement, the group said room nights dropped 16% to 132 525 with the fall spread across markets after domestic and exports both closed the period 7% and 19% lower. This is mainly attributed to the cancellations and deferred bookings experienced in the first quarter after the January demonstration and stayaways. Total RevPar increased to $271 from $94, rooms RevPAR at $150 from $53 while the ADR was at $331 from $97.

Country and City Hotels contributed the most to revenue at $36.95m, an increase from $13.2m reported last year. Resort Hotels revenue was at $29.95m while Vic Falls Hotel, which is jointly operated by Meikles and the group had revenue of $11.78m. On EBITDA, Country and City hotels were on $20.05m, Resort at $4.11m and Vic Falls Hotel at $18.44m reflective of where the foreign currency earnings mostly came from.

Total cost of sales and operating expenses doubled to $53.3m from $24.88m last year. The group noted there were still distortions in local pricing of goods and services as market players apply different models in factoring inflation and the interbank exchange rates.

The group closed with no borrowings and insignificant finance costs. It however recognised a lease liability in line with IFRS 16 requirements on leases. "The impact of IFRS 16, Leases adoption was increasing assets by recognition of right of use assets amounting to $18.35,m and increasing liabilities by recognising a lease liability of the same amount resulting in a nil impact on equity on first time adoption," said chairman Alex Makamure.

Profit before tax was at $39.15m (profit margin of 49%) compared to a profit of $3.55m. This was due to the foreign exchange gain and effective cost management. Profit for the year was $26.9m compared to $3m last year. The group declared a dividend of 0.0061c per share of $5.25m.

Cash generated from operations amounted to ZWL$41.69 million from ZWL$4.15 million in the previous period. The group's total assets went up to ZWL$356.97 million from ZWL$47.51 million. The termination of the hotel management agreement with Legacy Hospitality Management Serves Limited covering five of its hotels is still going through legal processes.

African Sun said it had strengthened its investment in sales and marketing initiatives to support and promote international and regional tourism so as to stay afloat. The market which is characterised by policy changes, high inflation and severe power outages and reduced aggregate demand across all sectors, has remained challenging for the hotelier.

"We remain hopeful the international and regional arrivals particularly into the Victoria Falls destination will benefit our hotels. We have intensified our investment in sales and marketing initiatives to support and promote international and regional tourism as we anticipate the domestic market to remain subdued," Makamure said.

"We will continue leveraging our foreign currency generation capacity to invest in our refurbishment programme to ensure that our hotels are in line with international standards and comply with franchisor's brand standards where required."

In addition to that, the group has also embarked on massive soft refurbishments at Hwange Safari Lodge, Troutbeck Resort, Carribea Bay Resort, Great Zimbabwe Hotel, Vic Falls Hotel while the completion of campsites at Great Zimbabwe and Carribea Bay remains on schedule.
- finx

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