Published: 18 March 2014

RTG posted a $1.058 million PAT for the year ended 31 December 2013 from a loss of $5.887 million in 2012 after meeting its targets in restructuring the balance sheet, reducing costs and reducing the interest burden, group CE Tendai Madziwanyika told an analyst briefing today.

"RTG posted a profit after tax of $1.1 million for 2013. This marks a pleasing consolidation of the turn to profitability posted at half year of $108 000, the first profit in many years.

"This set of results is especially significant considering the history of the group that was characterised by accumulated losses since dollarisation," he said.

This "landmark turn around" is attributable to the several changes that took place within the group since November 2012 mainly driven by various strategic initiatives implemented by RTG.

Madziwanyika also noted that the group had managed to restructure its balance sheet resulting in a reduced funding gap of $3.8 million in the period under review from $9.4 million in 2012.

He noted that the business showed a tremendous cash generation ability that resulted in the group being able to service its long term obligations in line with its loan agreements.

The level of gearing also reduced from 69% in 2012 to 59% in 2013 mainly driven by the capital injection by shareholders of $4.5 million as well as the free cashflows generated by the business during the year of $4.3 million.

"The only increase in indebtedness was in the financing of furniture, fittings and equipment for the Beitbridge hotel to the tune of $4.4 million," said Madziwanyika.

He indicated the enhancement of current ratio to 1.03 from 0.46. Total assets increased to $50.92 million from $48.38 million posted in the prior period.

Under cost reduction, he noted that the company adopted an aggressive cocktail of cost reduction measures during the year and at the same time much attention was given to the tightening of operational controls in order to plug revenue leakages from the company.

Overall, costs went down 18% on prior year with the cost of sale closing at the targeted 10%.

"During the year, the group dismissed more than 20 employees for various acts of fraud, regrettably these leakages cost RTG an excess of $1.5 million in revenue leakages over a period of 3 years," he added.

Furthermore, he said to achieve the reduction in costs, various measures were implemented including the centralisation of the procurement function which achieved a 16% reduction in costs equivalent to $500 000.

He noted that they will focus on reduction in central procurement by a further 15%.

RTG received capital from its shareholders and restructured expensive short term loans which were at an average interest rate of 24%.

The group's short term debt was reduced from $16 million to $4 million and "these were reduced through a combination of debt retirement and restructuring of the balance of debt from short term to long term instruments."

"This had the effect of reducing the overall average cost of capital from 19% to the current 11%. It is the aim of the company to further reduce the interest rate to a more sustainable average rate of 7% per annum during the course of the year," noted Madziwanyika.

Interest costs as stated by Madziwanyika went down 51% to $1.8 million.

He noted that they managed to improve debtor days from 74 days to 38 days. As a result of all these successful initiatives, EBITDA grew 593% to $4.3 million in FY13.

Madziwanyika said he was pleased with the performance of the group in achieving the turnaround and he highlighted the ability of the business to generate significant cashflows as shown by the huge growth in EBITDA.

"The responsiveness of the business to cost reduction, tightening of operational controls and revenue generation are self-evident," he added.

The firm's revenue grew by 6% to $29.32 million with Zimbabwe operations leading the growth with a 9% increase in revenue to $27.7 million.

He noted that the South Africa office achieved revenues of $2.5 million in 2013 compared with $1.5 million in 2012 while 2013 foreign business revenues were $5.2 million compared with 2012's $1.5 million.

Domestic revenues grew by $1.4 million while foreign revenues grew by $1 million.  Meanwhile, group occupancies grew 9% to 47% and Zimbabwe occupancy increased by 15% to 54%.

"The Rainbow Towers Hotel and Conference Centre recorded the highest occupancy of 76% in May 2013 and another record occupancy of 78% in November 2013," he said.

He noted that this performance is pleasing in light with the group's focus on domestic tourism.

As indicated by Madziwanyika, the group's RevPAR went up 8% to $39 while under Zimbabwe operations it went up 13% to $44.

The average revenue per room grew by 16% to $34 100 in 2013.

Moving to product refurbishment, he stated that they reduced the cost per room from $38 000 to $9 000 and 48 rooms were refurbished in the period under review.

The rest of the refurbishment is to be completed from internal resources as noted by Madziwanyika.

He indicated that arrivals into RTG properties grew by 26% to 36 028 with arrivals from Africa and Europe increasing by 14% and 38% respectively while Asia went down 9%.

"RTG will continue to focus on reviving business from the traditional source markets and growing volumes from emerging markets for example South Korea, Japan, India and Chinese speaking source markets," said Madziwanyika.

Going forward, he noted that RTG will adopt a sustainable business model that focuses on the core Zimbabwe business.

"We will consolidate our gains in Zimbabwe to consolidate our dominance in the domestic market, we will work closely with our RTG Virtual partners to achieve this. People are a key component in our business. Going forward, we will focus on training and development programs that will be sure to deliver refreshing hotels, amazing experiences every time," he said.

He added that they are finalising the operational model for Beitbridge Hotel with NSSA and proposals are being considered to change the lease arrangement to a management contract.

Giving the outlook, group finance director Napoleon Mtukwa noted that they are expecting a 9% increase in occupancy to 51%, 4% growth in ADR to $86, 10% increase in RevPAR to $43.

Mtukwa added that they are targeting a 10% growth in revenue to $32.6 million even though they're "aware that the economy is showing signs of depression."
- zfn