CM: Last week you said you had secured a US$15 million loan from IDC South Africa. Where are you investing the money?
SM: Actually, it is US$10 million from IDC and US$5 million from PTA bank. So, it’s in line with what we are going to do. Remember, in December we said we were going to raise US$20 million in equity funds and US$15 million in debt. The US$10 million was going be in rights issue and then the other US$10 million was going to be in private placement but right now is not the place or the time to do that. The market and trading conditions are not conducive.
At the moment there is a sense that we need to restructure our balance sheet. Our borrowings have to be in line with what the business can carry. Some of the borrowings have been going up to 38% per annum but we have managed to reduce them to 17%. We should further reduce borrowings to 10%.The second one is actually the refurbishment of our Zimbabwean properties which have not seen any investment in the past 15 years. The third aspect is going into the region where we need working capital and support for our leases like in Botswana.
CM: What is going to be your strategy in the region? Are you going to be chasing management contracts or acquisitions?
SM: Because of where the global eco-nomy is, we would like to prioritise management contracts. We want to focus on leases predominantly in West Africa and we are not going for acquisitions at all.
CM: Last year, you spoke of listing on the JSE. What has happened to that?
SM: We found an opportunity to list on the JSE Africa desk by putting some of our shares there and raise capital but with the global financial crisis, that prospect dried up. We are still on course but would like to look at bringing our capacity to a reasonable level. This would then enable us to go for a listing and raise capital and not just pursue a private placement. We are looking at where our main business is coming from. We are looking at whether we want to take the listing to Botswana or Nigeria and whether we want to take it to the London Stock Exchange. That decision of where we want to go does not have to be made now.
CM: Roughly how much of the company’s total issued shares will be floated elsewhere JSE or LSE..?
SM: It’s premature….
CM: How much are you looking to float if you are going to seek a listing?
SM: What we want first and foremost is fungibility. How fungible are the shares going to be? If it’s going to be 100% fungible then the appetite to list more shares will be clearly the way to go because we can transfer shareholding. If it is going to be highly fungible, then we will do it… But if its not going to be fungible, then it will limit the amount of shares. For instance, let me give you an indication; we were only going to list 20% of our shares because it was not going to be that fungible.
CM: Is your plan to grow the business out of Zimbabwe going to stop in Africa or further than that market?
SM: We want to stick around in the sub-Saharan region. We don’t want to be clever by half. I think we have done enough work in West Africa and East Africa and feel that in the next few years that’s a field we want to be playing in.
CM: Has the hotel group seen any benefits or spin-offs from the World Cup? In fact, gong back a few years, one would think the tournament was happening here. It was said business was going to be brilliant.
SM: If you remember correctly, the noise never came from business. Businesses were very clear about the benefits….
CM: Are you not shifting goal posts now?
SM: No, I am not. I am just saying the noise never came from business. Business was always very clear about the benefits. Remember we said as business the only way we were going to benefit from that cup was to ensure that we had operations in SA.
CM: How has business been at the Grace at Rosebank?
SM: Pumping! It’s been at its best.
CM: Figures maybe?
SM: We have 90% occupancy and revenue is at a great yield. Revenue that we normally do in three months we have done in a month. That’s how great it has been. The other benefit is at spill-over effect. We had a group of 200 Mexicans who were specifically here for the World Cup for three days. That was a spillover effect. Going forward we will have some few groups before the World Cup ends. We have been saying to the market the World Cup is a marketing opportunity. Like, for example, the small groups that have come to Zimbabwe, they say ‘wow! Never knew Zim had this.’
What we have started seeing is quite solid bookings going forward. Business was always going to follow and that is consistent with any World Cup. The actual benefits were not felt until after the World Cup. The occupancies and arrivals begin to rise.
So we should see the same thing but we need to be cautious because of the global economic recession. It might not entirely mimic what happened in Germany in the same kind of thrust. Actually, I got into trouble when I said that we had to do deals with Match. .. It was a hell of a misconception because we knew it was not smart to book because they would cancel at the last minute. In SA they cancelled and there was a hell lot of noise there.
CM: How is business?
CM: It’s improving. We turned the corner. The worst is completely behind us now. We are smarting from wounds. It has not been easy to operate in any of the markets except in Ghana. We have had our fair share of problems but the worst is behind us. The cost structures in Zimbabwe were the most challenging in the past 15 months but we have managed to tame the beast. We hope that going forward, the drop-through effect in terms of revenues is going to be okay as we go into the next year.
Occupancies (overall) have grown by over 30% from 29% to 41%. We ended up doing 31% (in terms of overall occupancies) towards the end of the year. It was measly. That is the worst we have done since Independence (1980). Now normal cumulative occupancies are around 40%. We are back in good business. But we are still low on revenue.
CM: How much are you spending on refurbishments?
SM: When it is done we would have spent about US$12 million to US$13 million. That should take us a year. And that has been consuming me.
CM: That and watching the World Cup maybe?
SM: My sincere hope was that African teams would make it to the next round. It would have been nice to have at least three teams in the semi-finals.
CM: Isn’t that too much to hope for?
SM: Well, you score you win.