RTG eyes sustained profitability

Published: 29 September 2017

LISTED Hotel group Rainbow Tourism Group (RTG), sees sustained profitability into the future on stability stemming from cost cutting initiatives over the past five years and a soon to be implemented balance sheet restructuring, management has said. An extraordinary general meeting, expected to be held by year-end, will seal the fate and manner of restructuring, but management is fixated on expunging all interest bearing debt.

"On the balance sheet the target really, if you look at the current year total liabilities are $34,26 million so there hasn't been any movement from the same period last year and it means that the whole balance sheet is being affected by the liabilities so our approach to attack is to deal with borrowings, eliminating the entire borrowings," RTG finance director Mr Napoleon Mtukwa yesterday told The Herald Business ahead of publication of the company's 2017 half year results briefing.

"The outstanding borrowings are with local banks at $1,8 million and Nssa, which is the outstanding principal amount about $13,6 million plus interests arrears making it a total of about $16 million. The focus is dealing with interest bearing debt in full and we will also be trying to target key accounts like your Zimra, the transaction is to clean up those, dealing with the borrowings first," Mtukwa added without being drawn to share intricate details of the crucial move, which awaits regulatory and shareholder approval.

The balance sheet restructuring, coupled with a host of strategic initiatives with a bias towards cost cutting, are seen driving the group into profitability going forward. In the first half of 2017, RTG posted a loss after tax of $300 000, 90 percent down from a $2,9 million in the first half of the year on account of cost cutting.

The company reported a 2 percent increase in revenues to $11, 6 million attributed to strong performance across all hotels except for its two Harare hotels, Rainbow Towers and Ambassador hotel, which averaged a 13 percent slump in revenues due to social media attacks. Revenues from foreign arrivals went up 9 percent to $3,8 million compared to the same period prior year due to aggressive marketing across the globe. In the second half of the year, CEO Tendai Madziwanyika expects a profit and double digit revenue growth.

"Hotels normally don't make a profit in the first half of the year. Sixty percent of our business is in the second half of the year," Madziwanyika said.

Basic loss per share from continuing operations was 0,0155 compared to 0,0672 last year. The group is leveraging on its online platform RTG virtual and a new service RTG Gateway – which links consumers with different services like hotels restaurants across the country – for growth. On our accounts receivables the major component is Government, contributing between 55 and 60 percent with payment terms of up to a month.

The company has been doing some settlements like clearing Zimra obligations and rentals for the property and the process sometimes now takes two months. Foreign debtors constitute about 25 to 30 percent with accounts of between 21 and 45 days then individuals constitute the balance. Our approach has to be reducing receivables, to manage the operating environment. In 2013, Madziwanyika said, RTG committed to reduce the cost of procurement and delivered.

"In terms of cost reduction, that is the one thing that has helped us to survive, now we have a very efficient model," Madziwanyika said.
- the herald

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