Business / Companies
Africa Sun not renewing operating agreements for Johannesburg properties
04 Aug 2011 at 07:01hrs | Views
African Sun Limited has issued a statement notifying shareholders that it has elected not to renew its operating agreements for both of the properties that it operates in Johannesburg, as highlighted in the group's interim results to 31 March 2011.
This will see the Grace in Rosebank ceasing operations on 31 August 2011. The company also exited from its lease agreement with the Lakes Hotel and Conference Centre with effect from 31 July 2011.
Central Reservations and Marketing will however remain in Johannesburg. On the rest of Africa operations, the company reports that it will continue to pursue profitable management contracts in major cities using the Best Western, Intercontinental Hotels Groups and own brands. Variable lease rentals should however subsist in Zimbabwe and Botswana.
The company's refurbishment programme has resumed and the first draw down of US$3.4m was made on 2 June 2011. The total cost of the refurbishment has been capped at US$10.0m, whilst priority has been given to the re-launch requirements of the hotels operated under the Holiday Inn Franchise. Plans are at an advanced stage to unlock value through the disposal of Hotelserve Holdings Limited. The unit has been non-performing since the introduction of multi-currencies.
Nontando Zunga of Imara in a morning research note said although efforts are being made to reign in costs at the operating line, they (Imara) remain wary of the high finance costs. The company's liquidity position remains weak, with a negative working capital position and high gearing ratio at 36%. We rate the counter a SELL. There is better value elsewhere.
This will see the Grace in Rosebank ceasing operations on 31 August 2011. The company also exited from its lease agreement with the Lakes Hotel and Conference Centre with effect from 31 July 2011.
Central Reservations and Marketing will however remain in Johannesburg. On the rest of Africa operations, the company reports that it will continue to pursue profitable management contracts in major cities using the Best Western, Intercontinental Hotels Groups and own brands. Variable lease rentals should however subsist in Zimbabwe and Botswana.
The company's refurbishment programme has resumed and the first draw down of US$3.4m was made on 2 June 2011. The total cost of the refurbishment has been capped at US$10.0m, whilst priority has been given to the re-launch requirements of the hotels operated under the Holiday Inn Franchise. Plans are at an advanced stage to unlock value through the disposal of Hotelserve Holdings Limited. The unit has been non-performing since the introduction of multi-currencies.
Nontando Zunga of Imara in a morning research note said although efforts are being made to reign in costs at the operating line, they (Imara) remain wary of the high finance costs. The company's liquidity position remains weak, with a negative working capital position and high gearing ratio at 36%. We rate the counter a SELL. There is better value elsewhere.
Source - Imara
