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African Sun Amber Hotel, Accra Ghana

Oliver Kazunga, Senior Business Reporter
HOSPITALITY group African Sun has shut down its loss making hotels in and outside Zimbabwe and is undertaking major cost rationalisation measures to bring back existing operations to profitability.

In a statement accompanying the group’s audited financial results for the 15 months ended December 31, 2015, it indicated that as part of measures to return to profitability, Amber Accra Hotel in Ghana and the local operation Beitbridge Express had been closed.

“The two hotels weren’t self-sustaining, and had a consolidated loss of $2,62 million for the period under review, which will be avoided going forward.

“Regional strategy has also been abandoned to focus on the Zimbabwe operations. Consequently, all foreign operations (Nigeria, Ghana, South Africa and Mauritius) were closed, and this will stop the cash drain from the profitable Zimbabwe operations,” it said.

The hospitality concern also said it had implemented a staff reduction exercise that has reduced its workers from 1,490 to 1,179.

The exercise was done at a cost of $2,24 million with an expected annual savings of about $2,7 million.

African Sun has also changed its business model from a hotel operator to hotel investment company.

“This resulted in the appointment of Legacy Hotels as a manager for selected hotels, and retaining the IHG franchise on others. The business review resulted in the shrinkage of the head office staff complement from 44 to 17, and reduce annual costs from $4.1 million to $2,77 million,” said African Sun.

During the period under review, the hospitality concern said it continued to drive the clean balance sheet by reducing borrowings, from a total of $17,35 million reported in September 2014 to $7,74 million.

“This has helped reduce our financing costs on a like for like basis by 31 percent and our effective cost of funds to 11 percent from 13 percent reported in September 2014,” it said.

During the period under review, African Sun posted a loss after tax of $8.3 million. The group’s low revenue performance was attributed to the broader negative performance within the country’s tourism sector. Operating expenses stood at $43.4 million rising from $33 million in the prior 12-month period. Presently, African Sun operates 11 hotels in Zimbabwe.

Last October, the group operated Legacy Group of hotels to manage five of its hotels — Elephant Hills, Troutbeck, Hwange Safari Lodge, the Kingdom and Monomotapa hotels.