African Sun flush with cash for capital investments
HOSPITALITY group, African Sun Limited (ASL), has planned major capital investments into refurbishments of its properties and upscaling its information technology for the year amid a projected increase in business.
The commitment comes after the firm increased its capital commitments last year to US$11,01 million, up 20,22% on the 2022 figures.
Funding for these capital investments is expected to come from normal operating cash flows and debt finance, as the firm entered the year in a liquid position with a current ratio of 1,76.
In a statement accompanying its financial results for the year ended December 31, 2023, ASL chairman Constantine Chikosi said they were expecting robust business from growing demand for meetings, incentives, conferencing and events.
“While macroeconomic uncertainty around inflation and currency instability persists, we are fortunate to have the liquidity and financial flexibility to make prudent investments, aligning with our vision of ensuring a seamless and enjoyable guest experience,” he said.
“During 2024, we have planned significant capital investments into enabling information technology and further hotel refurbishments. These investments set the stage for a sustainable growth trajectory for the group and enhanced returns for our shareholders.”
Chikosi said the group was engaging financiers to support its capital commitments for the year.
“The group is currently in discussions with leading financial institutions to secure funding to complement its healthy cash balances for deployment in carrying out accelerated material hotel refurbishment projects,” he revealed.
The group’s improved liquidity position comes as it is operating free of debt, recording cash and cash equivalents of US$10,87 million as of the end of last year, although this was 5% below the 2022 buffer.
Chikosi said the cash deployment strategy last year mainly focused on completing targeted hotel refurbishments to enhance guest experience.
“During the period under review, we continued to prioritise strategic capital allocation initiatives,” he said.
“This included the completion of the refurbishment of the remaining 46 rooms at Hwange Safari Lodge and the refurbishment of the public areas which is progressing well. The refurbishment of the public areas at Troutbeck and the Great Zimbabwe conference centre was also completed during the period under review.”
However, the group’s operating and other expenses remain a threat to profitability as these rose by a combined 38,18% last year.
Chikosi attributed the increase to exchange rate volatility, inflationary pressures and the crystallisation of expenses in US dollars as the economy increased the dollarisation pace.
Such challenges saw the firm’s income tax expense also expand to US$2,09 million during the period under review, from nearly US$592 000 in 2022.
Profit after tax from continuing operations dropped by 93,14% to US$521 045 in the period under review, from US$7,6 million in 2022.
“The group will continue to monitor costs and implement various cost-saving initiatives,” Chikosi said.
Increased revenue of US$54,73 million, up 30% against the comparable period, managed to keep the group from entering into a loss-making position, he said.
“The improved performance was driven by firmer average daily rates which closed 2023 at US$110, an increase of 39% against US$79 achieved during the comparable period as a result of changes in customer mix,” Chikosi said.
“Hotel occupancies increased to 52%, 6 percentage points above 2022. Revenue per available room for accommodation revenue increased by 58% to US$57, up from US$36 in the comparative period.”
Total assets rose to US$142,33 million during the period under review, from a 2022 comparative of US$121,52 million.
This was driven by an increase in the rights of use of assets, the lessee’s right to occupy, operate, or hold a leased asset during the rental period.
https://www.newsday.co.zw/business/article/200026364/african-sun-flush-with-cash-for-capital-investments