RAINBOW Tourism Group (RTG) has posted a modest profit before tax of US$553 000 on the back of a 12% increase in revenue for the period ending December 31, 2017.
By Kudzai Kuwaza
The hotel group is back in the black after incurring a US$3,8 million loss in 2016. This is the first time that the hotel group has posted a profit since 2013.
“We are very encouraged by this (profit),” RTG chief executive Tendai Madzivanyika told journalists on Tuesday.
Business fundamentals are looking very good. The trick now is to drive revenues while keeping our eye on costs. We can truly say the company has turned.”
RTG revenue increased 12% from US$24,1 million in 2016 to US$27 million in 2017 with foreign business increasing by 10% from US$8,1 million in 2016 to US$8,9 million in 2017. Hotel occupancy increased to 57% from 55% prior year.
The hotel group reduced operating costs by 16% during the period under review. Madzivanyika attributed this to the shedding of loss-making projects, which include the Beitbridge Hotel and the reduction of procurement costs. RTG invested US$1,3 million in upgrading its various hotels. The capital expenditure was funded from internally generated cash flows.
Madzivanyika said the group expects to complete the refurbishment of the group’s Victoria Falls Rainbow Hotel within the next two weeks.
Madzivanyika said the outlook of the hotel group includes the expansion of rooms at their Victoria Falls properties, new builds, as well as acquisitions.
He said the challenges the group has faced during the period under review include cash shortages, poor road infrastructure and lack of foreign currency.
RTG did not declare a dividend for the period.
At an extraordinary general meeting in January this year RTG shareholders approved a US$22,5 million recapitalistion transaction meant to address the hotel group’s negative working capital position. The capital raise was through a debenture-linked rights offer.
Following the completion of the transaction, RTG’s negative working capital position was reduced from US$24 million to US$2 million as at December 31 2017.