HomeNewsAfrican Sun suspends private placement

African Sun suspends private placement

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African Sun, Zimbabwe’s largest hotels group with operations in nine African countries says it will no longer pursue its private placement as the prevailing business conditions were not favourable.

However, they have secured a deal for the debt instrument that will be concluded early next year.

African Sun wanted to raise $60 million in the next two to three years for recapitalisation.

The group got shareholders’ permission to raise $35 million but so far only $10 million has been raised through a rights offer.

Private placement is when shares are offered to few institutional investors.

Shingi Munyeza, African Sun group chief executive officer said the loans and rights issue have sailed through and the debt instrument has been secured while the group was currently dealing with the conditions precedent that should be concluded by early 2011.

“We will not be doing the private placement because the market is down, and market conditions are not right. We will do the private placement when our figures start showing up, and the pan-African conditions begin to improve although it’s still a long way to go,” Munyeza said.

The group recorded an increase in earnings before interest, tax, depreciation and amortisation (EBIDTA) of $335 677 to a 0,6% margin for the period ended September 30, 2010, from a loss of $4,1 million (-11,7% margin) same period last year.

“This improvement would have been higher but was negated by the combined EBIDTA loss of $1,485 million experienced by Elephant Hills Resort, Carribea Bay Resort, Hwange Safari Lodge and The Grace in Rosebank due to relatively higher fixed costs against a low occupancy performance.

“We have implemented initiatives which will further reduce fixed costs and enhance revenues. This is expected to bring about an improvement in business performance,” Munyeza said.

He said Zimbabwe’s operations recorded strong occupancies in city hotels which contributed 56% of the total revenue and 85% EBIDTA anchored by strong occupancies although room rates remained depressed.

“The contribution by resort hotels from both revenue and EBIDTA are expected to improve as business into these hotels strengthens,” Munyeza said.

He said Zimbabwe has been averaging occupancies of above 50% from the period June to September this year a; scenario last experienced in the 1990s.

South Africa’s operations posted an EBIDTA loss of $1,696 million. This was exacerbated by non-recurring costs amounting to $833 000 incurred in the period under review.

Revenue for the group grew by 54% to $54,2 million from $35,2 million due to strong RevPar growth recorded in Zimbabwe and South Africa.

“The RevPAR increase was driven primarily by an occupancy recovery in the Zimbabwe hotels and an exceptional performance from the South African hotels during the 2010 World Cup period.”

The group achieved a RevPAR of $36 from $24 indicating a 50% increase from last year’s figure. Finance costs increased during the period under review as the group had highly priced short- term loans.

African Sun is looking forward to achieve a turnover of $64 million and an EBIDTA margin of 7% in the next financial year.

African Sun revised its rooms growth target downwards to 5 500 rooms from 8 500 rooms by 2012 due to the impact of global economic slowdown.

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