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Mr Madzivanyika

Business Reporter
Rainbow Tourism Group posted a 32 percent increase in profit to $139 000 for the half year to June from $105 000 recorded during the same period last year. The group realised a profit increase regardless of the fact that during the period, there were retrenchment costs for central office and start up costs of a newly opened Rainbow Beitbridge hotel. RTG attained revenues of $13,5 million during the first half to June, representing a 2 percent increase from $13,2 million achieved in the same period last year.

“The top line performance is a testament to the enhanced ability of the business to generate revenues considering that during the same period last year there were non-recurring mega events such as the referendum and elections which generated business worth $2,5 million ,” said RTG chief executive Mr Tendai Madzivanyika.

He said the group demonstrated the ability to sustain revenue growth and continues to enjoy the momentum from re-engineered business processes.
For the half year, the total debt reduced to $23,5 million from $23,9 million as at 31 December 2013.

Mr Madzivanyika said this includes the $3,5 million used to fund furniture, fittings, equipment and service stocks for the new operation.
The effective cost of debt remained at 11 percent since beginning of the year and the gearing ratio improved by one percent point to 58 percent from the reported position as at end of year 2013.

RTG’s performance per available room decreased by11 percent to $32 from $36 during the same period last year.
Mr Madzivanyika said the drop in revenue per available room (RevPar) was mainly due to the newly opened Rainbow Beitbridge Hotel which entered the market with penetration prices.
Rainbow Hotel Mozambique registered low occupancy during the period and this effectively diluted the group’s RevPar.

He said the pressure on selling prices remained high especially on the local market as reflected in the drop in average daily rate.
Zimbabwe hotels occupancies excluding Rainbow Beitbridge hotel increased by 8 percent to 52 percent from 48 percent thereby compensating for the drop in ADR and effectively maintaining RevPar for Zimbabwe operations (without RBBH) at $40 compared to the same period last year.

Mr Madzivanyika said the business continued its drive to reduce costs and particularly pleasing was the success of the energy saving initiatives which resulted in the energy cost per room sold decreasing by 24,4 percent.

The other notable success was the 6,5 percent reduction in cost of sales per room sold compared to the prior year which was achieved through efficient procurement and operating processes.

The group also embarked on a staff retrenchment exercise at central office to re-align staff costs to business levels.
The retrenchment costs amounted to $130 000 and were accounted for during the reporting period. He said initiatives taken so far are continually correcting the business model and ensuring a sustainable turnaround.

Overall operating costs remained unchanged at $7,2 million in the face of 16 percent growth in rooms sold and the addition of a new business unit; RBBH.
The earnings before interest, taxes, depreciation, and amortization margin was $1,5 million in the first half of 2014 compared to $1,6 million in the corresponding period last year.

The drop in EBITDA was mainly due to the newly opened RBBH which posted a negative EBITDA of $350 000 as a result of high start up costs and low revenues as is typical of a new hotel in its first year of operation.

Total assets for the group increased five percent to $15,4 million from $48,8 recorded in the prior year.