African Sun posts US$4,8m profit

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AFRICAN SUN LTD reported an after-tax profit of US$4,8 million in the full year to December 2016 (FY16) from an US$8,3 million loss in the 15-month period to December 2015 (FY15) amid depressed room occupancy.

By Fidelity Mhlanga

The company said overall international market declined as arrivals from the United States into its hotels recorded a 9% drop compared to prior year.

“Zimbabwe tourism continues to show resilience in spite of macro-economic conditions. There was a noticeable decline in the average monthly revenues for the period under review, reflected by a drop in room occupancy from 48% in the prior year to 44%.The weak South African rand against the US dollar has a negative impact on tourist arrivals in Zimbabwe, as the US Dollar-dominated costs render Zimbabwe a more expensive option compared to other regional destinations,” said African Sun chairperson Herbert Nkala.

A combination of these factors saw the revenue per available room recede from US$45 recorded in the same period for the previous year to US$41, mitigated by the average daily rate which remained unchanged at US$93. Regionally, the weak South African rand to the US dollar affected the South African market, which contributes significantly to tourist arrivals into Zimbabwe.

Nkala said an increasing import strain, low liquidity and the weak regional currencies against the US dollar resulted in subdued performance for the period under review. He said traffic from international markets was markedly depressed despite competitive room rates, forcing the group to adopt a targeted volume-stimulation drive backed by cost reduction initiatives to mitigate the composite effect of the local, regional and international markets’ downturn on hotel occupancy and room mates.

“These initiatives included targeting regional conventions business, increasing the group’s representation in our source markets and attendance at international travel and trade shows and increased promotions to our domestic market. The initiatives culminated in a successful turnaround of our business as the group reported a profit after tax of US$4,8 million compared to a loss of US$8,3 million posted in the 15 months period ended December 31 2015,” Nkala said.

Group revenue for the year ended December 31 2016 was US$43,6 million, a 31% decline from US$63,2 million reported in the 15-month period ended December 2015.

The reported revenue represents a 12% decrease for the comparable 12-month period last year. At US$5,48 million, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA ) was 1% below the prior 12-month period despite a 12% drop in revenues, whereas costs of financing business declined by 70%, due to debt restructuring.

During the year, African Sun Ltd and Dawn Properties Ltd agreed to settle a long-standing dispute relating to the ownership of timeshare units at the Troutbeck and Carribea Bay Resorts alongside a dispute over leasehold improvements. In the settlement, Dawn Properties Ltd agreed to pay African Sun Ltd the sum of US$1,4 million.

Going forward, the company said it will drive volume growth through specific and targeted promotions in the domestic and international markets, as well as reducing cost of sales and operating overheads.

Nkala said he was encouraged by the optimism of the tourism industry arising from the completion of the Victoria Falls Airport expansion and refurbishment, which will lead to increased foreign arrivals.

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