Turnover to leave African Sun ‘fully shining ’

AFRICAN Sun Ltd (ASL) CEO Shingi Munyeza believes the sun will be “fully shinning” on the country’s largest hospitality group next year as he expects the company to achieve a turnover of US$64 million for the financial year ending September 30.

ASL achieved a turnover of US$38,4 million for the financial year ending September 2010, a 59% increase from US$24,1 million recorded during the same period last year.

“It has been a tough call to run business in this environment, more so over the past two years,” said Munyeza while announcing ASL’s year end results to December 31 2010 last wek.

Earnings Before Interest Tax, Depreciation and Amortisation (EBITDA) — an approximate measure of a company’s operating cash flow based on data from the income statement — of 7% is expected to be recorded from 0,6% achieved during the period under review.

“We anticipate an increase in rooms under management from our pipeline. Projects include Holiday Inn Gaborone with 151 rooms scheduled to open its doors to the public in the second quarter of 2011 and an additional 583 rooms are expected to be opened in West Africa under management contract in the coming year,” Munyeza said.

During the period under review, global tourism rose 7%, while Sub Saharan Africa experienced a growth of 8% compared to the same period last year.
“The overall pattern of the group’s arrivals into our hotels from our major source markets mirrors this positive trend with Zimbabwe experiencing a 58% growth from the prior year,” he said.

At a group level, African Sun’s Revenue Per Available Room (RevPAR) in leased operations, increased by 50% and closed the year with an EBITDA margin of +0,6% from a negative position of minus 11,7% last year with Zimbabwe being the main contributor to this figure with an EBITDA margin of 6,7% compared to -8,4% last year.

In Zimbabwe, strong occupancies in the city hotels and the resurgence of foreign traffic to resort hotels resulted in occupancies closing at 46% compared to 32% recorded last year.

Foreign arrivals, which now contribute 32% of room nights from 27% last year, grew by 58%. Local arrivals constituting 68% of room nights grew by 36% during the period under review.

“Overall we achieved an increase of 50% in RevPAR up from US$24 achieved last year to US$36 as occupancies surged to 45% from 32% achieved last year,” Munyeza said.

Despite the strengthening of the rand and increase in payroll and other costs, cost of sales of 31% was within budget achieving an EBITDA of US$2,3 million (6,7% margin). City hotels contributed 56% to revenue and 85% to EBITDA anchored by strong occupancies although room rates remain depressed.

The contribution by resort hotels from both revenue and EBITDA are expected to improve as business into these hotels strengthens.

“From June 2010 to September 2010 Zimbabwe has seen average occupancies of above 50%, a scenario last experienced in the 1990s when the tourism industry was at its peak,” he said.

Munyeza said the group expected to maintain these levels of growth at a sustainable pace as they expect liquidity in the market and the increase in foreign travel to continue on an upward trend.

In absolute terms, cost of sales increased by 61% over last year, ahead of the increase of 54% in revenue, as cost structures crystallised in US dollars and wage increase following dollarization in Zimbabwe.

The cost of sales percentage therefore increased from 34,3% achieved last year to close at 36%. This is however, an improvement from the 38% achieved in the last half of the prior year.

 

Paul Nyakazeya

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