eBusiness Weekly
Enacy Mapakame
Victoria Falls Stock Exchange (VFEX) listed hospitality group, African Sun Limited, says it terminated casino operations on the back of its links to the Makasa Sun.
This forms part of the discontinued operations which weighed on the group’s earnings heavily, as after-tax loss for the half year to June 30, 2023, came in at US$1,81 million.
During the half year period, costs escalated at a faster pace than revenue, exacerbated by losses from discontinued operations, which incurred a loss of US$0,75 million.
The group mutually terminated the lease agreement of The Kingdom Hotel at Victoria Falls with Makasa Sun (Private) Limited effective 31 December 2022. This was following approval by the board on 20 June 2022 to exit from the lease and discontinue operations by 31 December 2022. As a result, the casino operations were also discontinued.
“Following the closure of The Kingdom Hotel at Victoria Falls, the group terminated Casino operations.
“The Harare Sun Casino license was linked to the Makasa Casino which operated at the Kingdom Hotel.
Due to the closure of the Kingdom Hotel both casinos were subsequently closed,” said the group in a performance update for the half year period.
While group chairman, Constantine Chikosi, said the depressed earnings were primarily included property and equipment impairments following the closure of the Kingdom Hotel at Victoria Falls, he also acknowledged the effects of the challenging environment.
The period under review was also characterised by currency volatility as inflationary pressures continued to bite. The local currency experienced significant depreciation in the first half of the year, particularly in May and June. Statistics show that the local Zimbabwe dollar lost 88 percent of its value over the six-month period to 30 June 2023, leading to heightened inflation in the second quarter of 2023.
“While the official and parallel market exchange rates began to converge, the ongoing disparity remains a significant concern, negatively affecting operating margins and intensifying operating costs,” said Chikosi.
Revenue performance for the period was US$22,36 million, reflecting a 2 percent increase compared to the same period last year on the back of higher business volumes, with hotel occupancy increasing by 5 percentage points to 46 percent.
Operating expenses, excluding depreciation, amounted to US$13,91 million, a 36 percent increase compared to the prior year due to inflationary pressures and increased volumes, resulting in higher variable costs.
“The group is actively monitoring and implementing cost-saving initiatives,” said Chikosi.
However, it’s not all doom and gloom as the international tourism sector is displaying resilience in its recovery from the pandemic, despite enduring significant economic and geopolitical challenges.
According to the United Nations World Tourism Organisation (UNWTO) World Tourism Barometer, global international arrivals reached 80 percent of pre-pandemic levels in the first quarter of 2023.
During the period in review, this recovery stimulated an increase in export revenue contribution, which rose from 20 percent to 25 percent of total hotel segment revenue.
However, the UNWTO Panel of Experts has cautioned that persistent high global inflation and escalating oil prices, translating into increased transport and accommodation costs, could potentially hinder the full-scale recovery of international tourism in 2023.
African Sun has also maintained a strong financial position, with no outstanding debt, and cash and cash equivalents totaling US$6,98 million as of 30 June 2023.
“We are in discussions with local financial institutions to establish standby financing facilities for significant hotel refurbishment projects in progress,” said Chikosi.
The group is currently proceeding with its portfolio transformation with hotel refurbishments continuing.
“We are focused on capital allocation for targeted hotel refurbishments to enhance the guest experience.
“Progress continues in this regard, with the refurbishment of the remaining 46 rooms at Hwange Safari Lodge nearing completion,” said Chikosi.
The group is also upbeat of recovery in international travel coupled with a resurgence in conference business as controlled spending resumes post-elections, following significant occupancies from election-related activities after 30 June 2023.
