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RTG records first dollarisation profit

19/03/2014 00:00:00
by Business Reporter
 
Huge cash generating ability ... Tendai Madziwanyika
 
RELATED STORIES

RAINBOW Tourism Group (RTG) on Tuesday announced it recorded its first profit since the country’s economy was dollarized in 2009.

The hotel and leisure group reported profit after tax of US$1,1 million for the year ending December 2013, up from a loss of US$5,9 million.

Management attributed the profit to changes implemented since November 2012 when Tendai Madziwanyika took over as CEO.

Strategic initiatives adopted to move from a loss-making position included restructuring the balance sheet resulting in a reduced funding gap of US$3,8 million last December from a funding gap of US$9,4 million in December 2012.

“The business showed a tremendous cash generating ability that resulted in the group being able to service its long term obligations in line with its loan covenants.

"The free cash flow being equivalent to the amount injected by shareholders during the rights issue a year ago,” said Madziwanyika.

He said gearing levels eased from 69% in 2012 to 59% in 2013 mainly driven by capital injection by shareholders of US$4,5 million as well as free cash-flows generated by the business during the year of US$4,3 million.

The only increase in indebtedness was in the financing of furniture, fitting and equipment for the Beitbridge hotel to the tune of US$4,4 million.

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

Leakages however, cost RTG over US$1,5 million in potential revenue leakages over a period of three years.

“To achieve the reduction in cost various measures were implemented including the centralisation of the procurement function which achieved a 16 percent reduction in cost equivalent to US$500 000,” Madziwanyika said.

“Through the use of energy saving bulbs as well as extensive use of gas throughout the kitchens, RTG achieved an overall reduction in the electricity bill of 18 percent.”

Overall group revenue grew by 6 percent. Domestic earnings grew by US$1,4 million while foreign income grew by US$1 million.

Occupancies grew by 15 percent to close at 54 percent against 47 percent in the previous year.

RTG introduced several innovative revenue generation packages including the Stay-Now-Pay-Later platform, RTG virtual and RTG Mobile which are meant for domestic market.



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