Oliver Kazunga Senior Business Reporter
HOTEL group, African Sun Limited (ASL), has terminated the lease agreement for its Ghana hotel owing to continued losses. In the group’s unaudited financial results for the year ended September 30, 2015, the chairman, Herbert Nkala, said the losses were due to high fixed costs structure. Losses for the year from Ghana operations stood at $1,97 million, from a loss position of $1,64 million.
“The losses were due to a high fixed cost structure and a slow revenue upturn,” Nkala said. He said the lease agreement was mutually revoked on August 31. Nkala also said the group has changed from its traditional hotel management model to a hotel investment strategy that management believes was more optimal to the needs of the company going forward.
“Under the hotel investment model, the group exited its Ghana and Nigerian foreign operations and established five strategic business divisions, which are hotels under management, franchised hotels (Holiday Inn), the Victoria Falls Hotel partnership, owner managed hotels and other complementary operations such as Sun Casinos and Sun Vacations (Timeshares),” he said.
During the period under review, the group achieved revenue of $50,15 million, which was an eight percent decline from $54,55 million achieved in the comparable period. The drop in revenue was largely as a result of a seven percent reduction in the average daily rate from $96 achieved last year to $90.
Finance costs for the period under review decreased by $32 percent from $3,09 million to $2,11 million following repayment of borrowings amounting to $9,08 million in the year. “Loss from continuing operations, ASL said amounted to $1,39 million from a prior year loss of $0,64 million.
“The current year loss was driven by the $4,23 million that was incurred by the company on other expenses, which include retrenchments and separation costs of $2,02 million,” said Nkala.
On the outlook, he said following the change of business model, discontinuation of the loss making operations in Ghana and Nigeria as well as the recent retrenchments, the group was poised to move from a loss making to a profit position.
“We expect our foreign arrivals, particularly for the Victoria Falls properties, to rebound, not only due to the positive change in our business model but also due to the curbing of Ebola epidemic and the expansion of Victoria Falls airport. “The domestic market is however expected to remain subdued; with low demand and pressure on rates,” said Nkala.