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Tawanda Musarurwa  and Walter Muchinguri
Hospitality group, Rainbow Tourism Group Limited (RTG) is optimistic that it is now on a sustainable growth path after posting a good set of numbers for the year to December 31, 2018.

Underpinning the optimism is the successful completion of the group’s balance sheet restructuring.

“The balance sheet restructuring has been completed, with the debenture issue completed this February. It’s now all good, we have managed to take away that whole legacy debt that was unstructured and was sitting in current liabilities.

“And we are also serving our obligations to debenture holders on time and the company has enough capacity to do that in a consistent way,” said group CEO Mr Tendai Madziwanyika.

The restructuring has left the group with a strong working capital base.

The latest figures show that gearing ratio is now at 39 percent from 55 percent last year.

Management said there has been a shift in working capital position from negative US$24 million last year to a positive of almost US$4 million in the period under review. And key elements of that working capital are the current ratio of 1,26 in 2018 from 0,28 in 2017, and the acid test ratio stood at 1.02 in 2018 from 0.20 in the previous year.

“Those two ratios obviously show that we are really quite liquid now,” said Mr Madziwanyika.

Total revenue for the period amounted to US$34 million, a 27 percent improvement from FY2017.

Foreign revenues grew 24 percent to US$11 million in the year under review, from US$8,9 million previously.

Operating profit jumped tenfold to US$5,6 million from US$0,55 million in the prior comparable period as the group delivered growth in both rooms and food & beverages (F&B) revenue streams.

ADR grew by 28 percent, “driven partly by the need to recover increasing costs as well as our ability to command better prices from foreign suppliers.”

City hotels grew by 34 percent from US$20 million in 2017 to US$26,8 million last year. Rainbow Towers Hotel and Conference Centre in particular posted a 42 percent growth in revenue to US$13,6 million from US$9,6 million in the prior comparable period.

Revenue per Available Room (RevPAR) closed at US$53, which is 36 percent above $39 in 2017.

Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at US$9,2 million, a 115 percent improvement above FY2017.

“The growth in EBITDA is exceptional given the challenges obtaining in the operating environment. Included in the EBITDA is a recovery of a US$2,5 million debt from Capital Bank.

“On a like-for-like basis, the EBITDA for 2018 closed on US$6,7 million, a growth of 56 percent above same period in 2017,” said management.

“The company is now in a strong position to comply with its borrowing covenants and to complete refurbishments.”

Profit after tax for the year under review amounted to US$5 million, from just $112 000 in 2017.

Going forward, the group is looking to leverage on what it terms an “asset-light growth model.”

“We also trying to pursue asset-light businesses, that is, instead of looking to acquire a hotel that we will pay back in 10 years or so, we are seeing a lot of inefficiency where people have invested in assets and they are operating at 40 percent capacity. Why not identify those properties and make money from them ourselves through a win-win situation,” said the CEO.

The company has since invested in a mobile and web application – Gateway Stream – that is already making significant traction both locally and internationally.

For the period just ended, the group will give out its first cash dividend of $10 million since the group listed on the Zimbabwe Stock Exchange, which Mr Madziwanyika said the group can “sustain going forward.”

The board approved a dividend of 0,041 cents per share.