African Sun recovers, betters pre-Covid era
LISTED hospitality group, African Sun Limited is progressing well in its recovery journey with the group surpassing pre-Covid 19 occupancy levels across its operations during the year to December 31, 2023.
According to the group, hotel occupancies increased to 52 percent, which was 6 percentage points above 2022.
The improved occupancy paid dividends during the year under review, with the group recording a revenue growth of 30 percent to US$54,73 million compared to the same period in the prior year.
The improved performance was driven by firmer Average Daily Rates (ADR), which closed the year at US$110, representing an increase of 39 percent against US$79 achieved during the comparable period as a result of changes in customer mix.
Revenue per Available Room (RevPAR) increased by 58 percent to US$57, up from US$36 in the comparative period.
However, further growth was counterbalanced by an increase in operating expenses stemming from exchange rate fluctuations and inflationary pressures, tempering the overall financial performance.
African Sun’s operating expenses, excluding depreciation, increased by 43 percent to US$27,63 million compared to US$19,29 million in 2022 driven largely by exchange rate volatility, inflationary pressures, and the crystallisation of expenses in US dollar as the economy continued to dollarise at a rapid pace.
Management at the Victoria Falls Stock Exchange (VFEX) listed firm indicated that the troup will continue to monitor costs and implement various cost-saving initiatives.
During the year under review, the group posted an operating profit of US$3,74 million. African Sun, however, recorded a marginal profit after tax from continuing operations of US$0,52 million, largely as a result of the harsh macroeconomic operating environment, characterised by costs escalating at a higher rate than revenues, compounded by material exchange rate losses triggered by the above mentioned rebasing of the group’s functional currency, as highlighted below.
The group had a high effective tax rate for the year under review, worsened by declining values of capital allowances due to inflation.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) was US$9,45 million, a decrease from US$17,86 million in 2022, and the loss for the period was US$0,36 million.
Two of the group’s hotels under external leases had their base rentals changed from local currency to US dollar, and this had the downstream effect of significantly increasing the lease liability interest and right-of-use assets depreciation compared to 2022.
The discontinued operations loss of US$0,89 million largely comprises property and equipment impairments post the closure of The Kingdom at Victoria Falls Hotel and the Makasa Sun Casino. This follows the mutual termination of the lease at The Kingdom at Victoria Falls Hotel, due to an untenable lease tenure.
The group will continue looking for suitable expansion opportunities in appropriate locations and with the right timing and funding structures. While the business environment may remain uncertain due to the adverse impacts of the El Nino induced drought on agriculture, the United Nations World Tourism Organisation (UNWTO) projections of improved arrivals are encouraging for the hospitality group and the tourism industry in general.
The UNWTO projects international tourist arrivals to fully recover to pre-pandemic levels in 2024, with initial estimates pointing to a 2 percent growth above the 2019 levels, underpinned by increased air connectivity, and continued recovery of Asian markets and destinations.
On the domestic front, African Sun anticipates yield on the growing demand for Meetings, Incentives, Conferencing, and Events (MICE) business as well as benefits from several high-profile events, including the just ended Zimbabwe International Trade Fair (ZITF) and the Victoria Falls Carnival, an event they are hosting at Elephant Hills Resort and Conference Centre, among others.