Minority shareholders in Rainbow Tourism Group (RTG) refused to approve directors’ fees amounting to US$95 000 and their reappointment to the board at an annual shareholders meeting this week, but lost the war when the issue was put to vote.
BY MELODY CHIKONO
The minority shareholders were up in arms against the company’s board of directors for pocketing large sums of money despite passing dividends in the past six years.
The disagreement stemmed from RTG’s failure to declare a dividend in the past six years. Minorities said they could not continue having a company in the hands of incapable directors who had failed them.
The shareholders questioned how a company that has been failing to pay a dividend for so many years could pay US$95 069 to directors in fees. They also argued that the board was bloated.
However, their proposal failed to pass when a representative of the National Social Security Authority (Nssa), who are the major shareholders, requested that the resolutions be put to poll. This saw all resolutions being passed against the wishes of the minority shareholders.
Nssa owns more than 70% of RTG’s issued share capital. Management said the company was now turning the corner following its recapitalisation last year, but would not immediately declare a dividend.
RTG chief executive Tendai Madziwanyika told shareholders that the group now has a strong balance sheet compared to the parlous state of the company in 2012. He indicated that in 2012, the company was technically insolvent, saddled with total borrowings of US$25,74 million largely from the Afreximbank loan of US$7,5 million and the PTA Bank loan of US$3 million while local banks were owed US$15 million.
The group had a funding gap of US$16 million, resulting in net exposure of US$41,73 million. However, following the various initiatives of debt restructuring that include debt write-offs and capital calls, the group’s net exposure was now US$19,48 million. Total borrowings are now at US$17 million while the Afreximbank and PTA Bank were paid off. Debtors to local banks now stand at US$800 000.
In the last five years, Madziwanyika said, shareholders injected in excess of US$9,6 million into the company through a rights issue. He added that revenue grew 16% to US$11,1 million in the five months to May 2018 compared to US$9,6 million in the same period in 2017, largely driven by growth within the two Harare properties as well as increased occupancy across the group’s hotels.
Rainbow Towers Hotel and Conference Centre revenues grew 44% to US$4,4 million from US$3 million prior year, while New Ambassador Hotel grew 23% to US$727 000 comparable to the same period last year. He added that the group was looking at US$2,5 million in revenues from elections business. The country will hold elections on July 30 2018 when hotel occupancies usually go up. In that regard, Madziwanyika said the group is targeting revenue in excess of US$2,5 million from the elections business.
During the period, foreign revenues grew 23% to US$3,66 million from US$2,97 million in the same period of 2017, largely due to improved foreign arrival particularly at A’ Zambezi River Lodge in Victoria Falls.
This resulted in foreign revenue contribution increasing to 33% compared to 31% last year same period. In the same period, occupancy grew to 55% from 52% in 2017 while market share increased to 28% against a fair share of 25%. Revenue per available room grew by 20% to US$42 from US$35 during the first five months of 2017.