The move comes after last year’s US$10 million rights issue by the company. The company is also expected to have a private placement that would raise the remaining US$10 million at a time when the market is short of liquidity.
“We successfully secured a long term loan with IDC at a very good rate, which is part of our efforts to raise capital,” group chief executive officer Shingi Munyeza said on Wednesday. The loan, according to Munyeza, would be serviced in seven years.
Munyeza said this when the group presented its results for the period January to March this year. Analysts however say the plan to raise US$35 million could be an ambitious project for a company with a US$29 market capitalisation. African Sun was worth US$50 last year when it announced plans to raise the capital.
African Sun increased hotel occupancy to 40% during the period, marking a slight improvement on the 29% rate last year.
The hotel group also marginally improved its operational efficiency as the cost of sales was 37% of revenue down from 38 percent during the same period last year.
Revenue generated during the first three months amounted to US$26 055 908 compared to US$13 619 733 during the same period last year.
Of the revenue generated, US$9 718 520 was gobbled by cost of sales, leaving the hotel group with US$16 337 388 as gross profit.
In a statement accompanying the group’s results, African Sun said there was “low liquidity and high borrowing costs but reduced cost of borrowing to 17% from 38%”.
Despite the increase in revenue and improved efficiency, African Sun posted a US$221 514 loss during the period.
Timothy Chiganze, African Sun chairperson, said their focus remained sub-Saharan Africa with an emphasis on West Africa “where the drop through effect of adding rooms will be higher, given that the structures in place can run additional rooms without a corresponding increase in costs”.
African Sun, according to Munyeza, is planning to get six hotels — five in West Africa and another from Botswana. The West African hotels will be run through management contracts while the Botswana hotel will be under a lease agreement.
“The expansion of operations into South Africa, Ghana and Nigeria has diluted concentration risk and is set to enhance future earnings while reducing earnings variability,” said Chiganze. “The recovery volumes to the resort hotels, albeit at a slow pace, is expected to drive the increase in yields in Zimbabwe and growth in corporate business will improve the cash generation of the city hotels.”
On the benefits of the ongoing World Cup Munyeza said: “The World Cup is in South Africa,
99, 9% of arrivals will be in South Africa. The benefit of Zimbabwe will be for future marketing. However we have received significant business this week when a group of 225 Mexicans checked in at Victoria Falls.”
Bernard Mpofu/Leonard Makombe