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African Sun in huge loss

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Hospitality group, African Sun, recorded an after-tax loss of $10,23 million weighed down by the impact of discontinued operations for the full-year ended September 30.

During the year African Sun resolved to discontinue its South African operations of The Grace and The Lake Hotel and Conference.

Revenue for continuing operations grew by 22% to $48,8 million up from $$39,95 million driven by strong revenue per room (RevPar) from Zimbabwe hotels.

The RevPar of 21% achieved by local hotels was as a result of a 13% growth in volumes and an 8% ADR during the year.

The hotel group achieved earnings before, interest, taxation, deductions and amortisation (EBITDA) of $2,7 million from continuing operations, which is a 432% growth from same period last year, of $0,51 million.

“This positive EBITDA performance from continuing operations was, however, negated by non-recurring items charge emanating from the impairment of property, plant and equipment and restructuring costs, amounting to $5,96 million,” said African Sun chairperson Tim Chiganze in a statement accompanying the groups’ financial results.

“This resulted in a loss before tax from continuing operations of $4,77 million increasing the loss by 90% from the prior year loss of $2,51 million. ”

“The overall loss after tax for the period was $10,23 million after taking into account the impact of discontinued operations, which reported a loss after tax of $6,62 million, with 28% of the loss arising from depreciation, impairment of intangible assets and a deferred tax asset reversal.”

During the period under review operating expenses (excluding once-off cots of $3,28 million) increased by 12,7%.

Chiganze said following the restricting exercise, closure of the loss-making operating units and disposal of non-core assets and the outlook for continuing operations was positive with a forecast growth in RevPar of at least 25% from the $40 achieved this year.

The group forecasts an EBITDA margin of at least 8% in 2012 financial year, supported by cost savings as well as volumes growth.

Chiganze said despite the volatile world travel industry, Zimbabwe hotels have continued on recovery path , realising a volumes growth of 13% last year, with foreign room nights sold increasing by 14% over the same period.

The South African operations remained depressed during the year under review posting an EBITDA loss of $3,77 million.

In July African Sun chief executive officer Shingi Munyeza indicated the move to exit the hotels was in line with the company’s business objectives and strategy to focus on operations that have a positive impact on the bottom-line in the short to medium term.

“In line with these new market dynamics, African Sun has elected to exit out of its operating agreement from The Grace in Rosebank, and the hotel will cease to operate on August 31 2011.
Hyprop Investments Limited, owners of the building and lessees of The Grace Hotel, will assess its options with respect to the building,” Munyeza said.

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