HomeBusiness DigestCost-cutting inches RTG into the black

Cost-cutting inches RTG into the black

RAINBOW Tourism Group (RTG) reported a US$105 000 after-tax profit in the six months to June, the last time the tourism company went into the black after the introduction multi-currencies being in the full year to December of that year.

Taurai Mangudhla

Presenting the company’s interim results in the capital recently, RTG CEO Tendai Madziwanyika attributed the slight half-year profit, compared to a US$3,2 million loss in the same period last year, to a number of key initiatives such as a cost-cutting exercise, debt rescheduling and capital-raising.

Madziwanyika said in the period under review, the company recorded a 4% revenue growth to US$13,2 million versus US$12,7 million for the same period in 2012, while earnings before interest, taxes, depreciation and amortisation (Ebitda) went up 982% to US$1,644 million compared to US$150 000 in the same period last year.

“The Ebitda is an exciting number for all of us and that is an almost 1 000% increase coming directly from cost reduction. We have cut down costs by about US$1,6 million, so we managed to generate US$1,6 million in cash benefit,” Madziwanyika said.

RTG’s gearing had improved by 12% from 69% in December 2012. A US$4,5 million rights issue last year, and a US$10 million Nssa loan helped retire all short-term debt. Of RTG’s current liabilities, of US$21 million as at June last year, US$16 million was in short-term borrowings, Madziwanyika pointed out.

He added management had renegotiated the remaining of its short-term debt to long-term, lowering interest rates from last year’s average of 17% to 11%. The group was working towards lowering the interest rate to around 7% going forward.

Shedding light on the cost-cutting measures introduced, Madziwanyika said the group effected a 64% reduction in its water bill, a 13% drop in electricity costs, a 38% fall in travel expenses and lower telephone charges through use of Skype and Voip.

While revenue was 10% lower in the quarter to March, a marked improvement was witnessed in the second quarter.
Although last month’s revenue, at US$2,9 million, was the highest the group ever recorded since dollarisation in 2009, the group had borne the brunt of uncertainty surrounding the recently-concluded general elections as some significant bookings had been cancelled.

Madziwanyika sees occupancy levels closing the year at 50% from the current 43%.

RTG had reported a string of losses since 2010, posting a US$1,2 million loss that year, a US$371 433 loss in 2011 and a US$5,9 million loss in 2012, owing to a general lack of capital and operating inefficiencies.

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