Covid-19 pushes African Sun into the red

FIDELITY MHLANGA

LISTED hotelier African Sun Limited (ASL) recorded a loss of ZW$218 million (US$2,69 million) during the first half of 2020 down from ZW$757 million (US$9,35 million) recorded in the prior period due to the Covid-19-induced lockdowns.

Tourism and hospitality business took a knock as authorities across the globe, Zimbabwe included, announced a lockdown to contain the spreading of the virus, resulting in the closure of hotels in April and May, with limited services restored at the end of May.

“Covid-19 represents the most significant challenge that our industry has ever faced. Our key source markets such as Europe, the Americas and South Africa are amongst the worst affected. The half year results reflect the significant curtailment of economic and social activities due to Covid-19 lockdowns across the world and the subsequent temporary suspension of operations at all our 11 hotels and two casinos,” ASL chairperson Alex Makamure said in a statement accompanying half year results.

Makamure said the promising performance recorded in the first quarter was diluted by the subdued performance of the second quarter due to Covid-19 with inflation adjusted revenue for the period going down 48% at ZW$461,85 million (US$5,70 million) split as 63% and 37% between domestic and foreign currency earnings respectively.

Prior year revenue was ZW$890 million(US$10,98 million).

Occupancy closed at 22%, a significant reduction of 23 percentage points compared to 45% recorded same period last year.

Room nights sold dropped by 52% to 63 116 from 132 525 reported last year.

“The decline in room nights was across all market segments, with export and domestic reducing by 62% and 49% respectively, mainly due to the Covid-19 lockdowns and the related reduction in travel and tourism, resulting in the complete or partial suspension of hotel operations,” Makamure said.

The decreases in revenue and volumes resulted in the Group posting inflation adjusted EBITDA loss of ZW$53,61 million (US$661 851).

After completing the entire month of April without business, in May, the group took a decision to reopen its hotels on a phased approach following the easing of lockdown measures.

Under phase one, four hotels that include Holiday Inn Harare, Holiday Inn Mutare, Holiday Inn Bulawayo and Great Zimbabwe Hotel were reopened on May 11, 2020.

Subsequently, Troutbeck and Caribbea Bay Resorts were opened under phase 2 on July 1, 2020 and August 1, 2020, respectively. As the business positions itself to benefit from the reopening of the economy, the group reopened Monomotapa Hotel and Elephant Hills Resort and Conference Centre on September 1 and 14, 2020 respectively under phase 3. The Group is likely to embark on phase 4 of the opening programme, focusing on the remainder of the Victoria Falls properties, in Q4 2020.

The group shelved the refurbishment programme, to preserve cash and increase financial flexibility, resulting in the Group having total cash and equivalents of ZW$466,57 million (US$5,76 million) as at June 30, 2020, compared to ZW$519,93 million (US$6,42 million) as at December 31, 2019.

“As we look at the remainder of the year, we are confident that we have enough liquidity to continue to navigate the current environment and prepare for recovery,” Makamure said.

The group pins hope on the recent announcement by government on the lifting of the ban on domestic and international flights and inter provincial travel resumption in bringing life to the tourism sector.

Domestic flights were cleared to resume with effect from September 10, 2020, with international flights scheduled to start on October 1, 2020. On the domestic market, airlines plying domestic routes have committed to start flights before the end of September.

The group said: “The operating environment remains extremely challenging as characterised by the global impact of the novel corona virus (Covid-19), low business confidence, shortages of foreign currency and low disposable incomes. Both the International Monetary Fund (IMF) and the World Bank have downgraded Zimbabwe’s growth prospects from rates of around 3% initially to negative growth of 7,4% and 10% respectively. The advent of Covid-19 exasperated the economic recession and rising inflationary pressures in an economy already reeling under a multiplicity of negative socio-economic factors.”