Rainbow Tourism Group (RTG) will soon float a rights issue to retire debt and deal with its capital structure issues, Nssa chairman Robin Vela said.
By Chris Muronzi
In an interview with businessdigest this week in Harare, Vela said the proceeds of the RTG rights issue would be applied into retiring debt.
Although Vela would not be drawn into disclosing how much the group was seeking to raise, according to its balance sheet, the company had current debts of about US$14,8 million in the six months to June period. Apart from the current debts, it had accounts payable amounting to US$18 million.
“There is going to be a rights issue at RTG. The funds will go towards retiring debt and paying off creditors. It’s a forex generating business,” Vela said. “Once debt is eliminated, RTG is a very profitable business at an Ebitda level.”
RTG had a gross profit of US$7,6 million, implying a gross profit margin of 65%. Also, a total US$609 000 was paid in the same period in finance costs. With a clean balance sheet, the US$609 000 could have gone into the bottom line.
Nssa is also looking at underwriting the rights issue, he said. Should Nssa underwrite the offer, this would see the fund’s shareholding in the group rising beyond 60%. In the event that shareholders do not follow their rights, Nssa could end up with an equity stake as high as 80%.
Nssa recently concluded the acquisition of First Mutual Holdings equity stake in RTG. The transaction gave Nssa a controlling equity stake.
Since dollarisation, subscription rates of rights offers have been as low as 20% in some instances.
On this week’s resignation of CBZ chief executive Never Nyemudzo, Vela said Nssa had no involvement in it, adding he was sorry to see Nyemudzo leave.
“Never’s departure has zero to do with Nssa. We had issues with the board previously, but the chairman left and we have been working together with the board and management,” he said.
Vela said work to unlock value at Nssa was progressing well.
“I think we are getting there. People tend to think that the work I am doing is some ego trip. It’s not driven by the need to unlock value for pensioners. If you sit in my chair, you are bound to make enemies,” he said.
Nssa reported a 329,7% boost in after-tax earnings to US$105,87 million for the financial year ended December 2016 on the back of fewer write downs and improved contributions.
The growth was from a comparative profit after tax of US$32,11 million recorded in 2015.
This, Vela said, was testament to the work he is doing.