ASL exits regional market

HARARE - Zimbabwe Stock Exchange-listed hotel group, African Sun Limited (ASL), says it has exited all its regional markets focusing on local operations to plug cash haemorrhages from the external operations.

ASL chairman Herbert Nkala said the group had abandoned its regional strategy to focus on Zimbabwe operations shutting down business in Nigeria, Ghana, South Africa and Mauritius.

“…this will stop the cash drain from the profitable Zimbabwe operations… There was no financial impact from the exit of Nigeria as the company was in a net liabilities position. The exit from Nigeria was effective September 30, 2015.

“The decision to exit Ghana was premised on the sustained losses driven by low revenues and high fixed costs which were pushed by fixed operating lease costs,” Nkala said in a statement accompanying the group’s financials for the year to December 31, 2015.

The ASL boss also said the group had tried to engage its Ghana landlord to revise the operating lease costs without success resulting in a mutual termination of the lease contract and disposal of operating assets to the landlord on August 31, 2015.

During the year under review, ASL also mutually-terminated the lease agreement of its Beitbridge Express Hotel with Dawn Properties effective January 31, 2016.

“This was following approval by the board on November 19, 2015 to exit from the lease. The decision was based on prolonged losses by the hotel which was eroding the group’s equity,” he said.

Nkala said the Beitbridge Express Hotel had reported a loss of $336 311 for the 15 months ended December 31, 2015 up from the $218 535 loss recorded prior comparable period.

ASL implemented a staff reduction exercise that reduced the group employees from 1 490 to 1 179 at a cost of $2,4 million, with annual savings expected from the initiative at about $2,7 million.

The hotel group recorded a loss for the period of $8,3 million from a $2,2 million loss noted prior comparable period.

Revenue for the year at $63,3 million was eight percent lower on prior comparable period attributed to a decline in average monthly revenues.

“The drop in average monthly revenues was mainly a result of a five percent reduction in the average daily rate (ADR) from $98 achieved last year to $93.

“The ADR drop is partly attributed to the introduction of Value Added Tax on foreign revenue,” he said.

Occupancy marginally increased to 49 percent from 48 percent as the effect of the ADR drop and occupancy increase was a four percent drop in revenue per available room from $47 to $45.

During the year under review ASL also changed its business model from a hotel operator to hotel investment company resulting in the appointment of Legacy Hotels as a manager for selected hotels.

This business review resulted in the shrinkage of head office staff complement from 44 to 17 reducing annual costs from $2,1 million to $2,7 million.

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