AFRICAN SUN has entered into a sale agreement for Dawn Properties’ linked units with Lengrah Investments, a related party. This will result in the hotel group disposing of 406 466 976 Dawn Properties’ linked units, constituting 16,54 percent of the total issued linked units of Dawn Properties, to Lengrah Investments for a cash consideration of US$5,97 million subject to African Sun shareholders’ approval at an extra-ordinary general meeting to be held on March 21, 2014.
The group expects proceeds from the disposal to be applied towards the reduction of short term debt. Finance costs will be reduced by US$986 711 per annum going forward in addition to the US$740 000 saving in finance costs per annum from the first disposal of 12 percent of the issued linked units in Dawn Properties.
The first disposal had an incremental impact on earnings per share of US$0,066 and the second will have an incremental impact on EPS of US$0,087.
A cumulative reduction of the group’s short term debt of 70,27 percent (from US$14,22 million to US$4,22 million) as at September 30 2013. Total debt will be reduced by 44,79 percent from (US$22,32 million to US$12,32 million). The group says gearing will reduce to 34 percent from 53 percent.
“This second disposal will result in a loss on disposal of US$92 881 in the statement of comprehensive income for the six months ending 31 March 2014.
“Nonetheless, it is the group’s view that the benefits that will accrue from the disposal of the linked units will outweigh the impairment charge suffered by African Sun.”
Last week African Sun issued a retraction after they published a notice which had not been approved by the Zimbabwe Stock Exchange.
“This week the transaction has been approved and hence the EGM.”
African Sun, which went through a difficult period as relations deteriorated with its landlord, Dawn Properties, last year, seems to have turned a corner, helped by the restoration of cordial relations between the two parties and an improved operating environment which was topped by the hosting of the United Nations World Tourism Organisation General Assembly in August 2013 in Victoria Falls.
Revenue for the 2013 financial year was up 3,4 percent to US$56,3 million despite a drop in occupancy from 52 percent to 49 percent.
The drop in occupancies was largely due to the refurbishment in various properties and the decreased occupancies were mitigated by an increase in the gross margin from 71 percent in 2012 to 73 percent during the year. – FinX.