Tapiwanashe Mangwiro
Rainbow Tourism Group (RTG) reported impressive profit growth for 2024, with profit before tax rising 36 percent to US$7.9 million and profit after tax increasing 18 percent to US$5.37 million.
Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) also surged 52 percent to US$9.75 million, driven by higher revenues, improved margins, and strict cost management.
RTG chairman Douglas Hoto, in a statement accompanying the results, said, “The group has achieved another year of growth, driven by strong guest demand and an increase in foreign currency revenues. Occupancy levels at 54 percent have surpassed the 2019 pre-COVID levels.”
Additionally, he said cost management contributed to operating profit growth.
“EBITDA improved 52 percent, reaching US$9.7 million, compared to US$6.4 million in 2023. This growth was primarily driven by a combination of cost-saving measures and increased revenues,” he added.
“Despite persistent inflationary pressures impacting margins, gross profit margins improved to 70 percent, up from 69 percent in the prior year.”
However, a closer look at cash flow dynamics reveals underlying liquidity concerns that could pose operational challenges.
Despite the strong profit performance, cash generated from operations declined significantly by 21 percent, falling from US$10.03 million in 2023 to US$7.95 million in 2024. This reduction suggests that a higher portion of earnings remains tied up in non-cash assets or is absorbed by rising working capital requirements.
A notable increase in trade receivables, from US$3.17 million to US$6.57 million, indicates potential delays in collections, which could strain liquidity.
On expansion, RTG chairman Hoto said the company was now effectively the owner of Montclair Hotel and Casino.
“The Company is in the final stages of completing a transaction to acquire Montclair Hotel and Casino. A detailed notice will be issued in due course advising all stakeholders. This acquisition presents significant opportunities for revenue growth, operational synergies, and enhanced brand positioning,” he said.
He added that by integrating Montclair Hotel into their portfolio, they are well-positioned to capitalise on the increasing demand for quality hospitality experiences, reinforcing their commitment to sustainable expansion and long-term value creation.
RTG has been heavily investing in expansion and asset acquisitions, with net outflows from investing activities rising 42 percent to US$8.4 million.
The acquisition of new properties and refurbishments, while promising long-term returns, has put pressure on short-term cash availability.
The company also invested in short-term deposits of US$2.47 million, further reducing available cash.
In total, the group declared a dividend of US$2.5 million for the 2024 financial year.
“Following a strong financial performance in 2024, I am pleased to announce that the board has declared a second and final dividend of US$1.5 million, of which US$500,000 (0.020 US cents per share) will be paid in foreign currency and the balance of US$1 million (1.057 ZiG cents per share) in local currency,” the chairman said.
The company’s total liabilities increased by 37 percent to US$26,56 million, with borrowings rising from US$568,000 to US$3.5 million. While leveraging debt can support expansion, servicing these obligations, coupled with a 67 percent rise in dividend payouts to US$2.5 million, may restrict operational cash flows.
RTG’s profitability growth is commendable, but the decline in operating cash flows, high capital expenditure, and increasing debt raise liquidity risks. To sustain financial stability, the company should focus on improving receivables collection, balancing investment outflows, and optimising its debt strategy.
