Oliver Kazunga, Senior Business Reporter
RAINBOW Tourism Group (RTG) has spent $1 million in upgrading its hotels despite 11 percent drop in revenue in 2016.
In a statement accompanying the group’s financial results from the year ended December 31, 2016, RTG chairman Mr John Chikura said the capital expenditure for the refurbishment exercise was secured from internally generated cash flows.
“The company spent $1 million in upgrading its hotels. The capital expenditure was funded from internally generated cash flows. The focus hotels were Kadoma Hotel and Conference Centre (KHCC), New Ambassador Hotel and Victoria Falls Rainbow Hotel.
“The refurbishment works at KHCC commenced during the last quarter of 2015,” he said adding that as at December 31, 2016 about 40 percent of the rooms had been refurbished with external painting of the hotel completed.
New Ambassador Hotel has refurbished 50 percent of its 72 rooms with a focus on the in-room furniture, floors and bathrooms.
“The refurbishment at Victoria Falls Rainbow Hotel commenced in November 2016. A complete facelift of the rooms, which includes replacing furniture, fittings and soft furnishings as well as air conditioning equipment is being undertaken. Half of the rooms have now been completely refurbished,” said Mr Chikura.
During the period under review, RTG recorded a 11 percent drop in revenue from $26,9 million in 2015 to $24,1 million last year.
In the first four months of 2016, RTG experienced steady revenue growth, which decelerated during the second into the third quarter of the year due to exogenous factors in the country.
Mr Chikura said during the period his organisation lost $800 000 in revenue due to direct cancellation of confirmed bookings.
“The net effect of these disturbances resulted in Rainbow Towers Hotel recording a revenue decline of $3.2 million compared to its 2015 performance. This had a negative impact on the company’s overall performance as the hotel contributes over 40 percent to the company total revenues. In contrast, the company’s other hotels recorded one percent revenue growth compared to 2015,” he said.
RTG’s total loss for the year including discontinued operations closed at $4.7 million compared to a loss of $29 000 recorded in the previous year.
Discontinued operations alone posted a loss of $1,6 million, which translates to 34 percent of the total loss for the year.
“Notwithstanding depressed cash flows, the company made significant progress on debt reduction. During the year, the debt was reduced by $2 million (11 percent) from 2015 position of $19 million to $17 million as at December 31, 2016,” said Mr Chikura.
The firm’s negative working capital as at December 31, 2016 was $25.6 million and the amount includes the $13,6 million loan from the National Social Security Authority (NSSA) and its accrued interest arrears all contributing 60 percent of the negative working capital.
RTG board chairman said during the course of last year, NSSA tabled a term sheet to restructure the $13.6 million loan facility by further seven years at a reduced interest rate of six percent.
The board approved the term sheet in March last year.
“However, the restructuring proposal was not presented before shareholders as it later became apparent to the board during the year that a resolution would not obtain requisite approval at an extraordinary general meeting.
“Subsequent to this, NSSA instituted legal proceedings against RTG in order to recover the initial loan of $10 million plus interest. In December, 2016, the High Court issued a judgment in favour of NSSA for the $10 million facility.
“NSSA is yet to execute its judgment and has allowed the company to focus on alternative ways of restructuring the balance sheet, including the NSSA debt,” said Mr Chikura.