Business / Companies
City Hotels supports RTG revenue growth
26 Aug 2011 at 12:11hrs | Views
Revenue for the interim period amounted to $13.8 million up 32% from the prior period mainly supported by the city hotels which contributed a hefty 74%. The revenue split was 50%:50% between room revenue and conferencing.
There was an impressive growth in EBITDA to $1.8 million up 190% from the prior period indicating an EBITDA margin of 12%. This was attributed to increased operating efficiencies which saw the expenses to turnover ratio declining to 78% from 86%. High finance costs at $1.2 million however lowered the group's overall profitability to a $68,925 PBT from a loss of $386,059 the prior period. After a tax credit of $980,164, the attributable profit for the period was $1 million (H1 2011: $111,865).
The balance sheet reflects a dire financial position, with gearing at a high of 36% (H1 2010: 9%) when considering long term debt and even higher at 46% inclusive of short term debt. Borrowings are currently $10.6 million for short term debt and $9.3m for long term debt. $12.2 million went into capex projects and the remainder into working capital. Exposure to Renaissance Merchant Bank, was $5.1 million which the company is expectant they will recover. The cash flow statement shows that although $213,055 was registered from operations, the high finance costs reduced the overall operating cash flow position.
Management is looking at undertaking a $15 million rights issue to boost the company's capex and working capital position. The recapitalisation should result in the gearing ratio declining to 30%. By year end, management targets to reduce the interest rate on short term debt to 15% from the current 17.7% which will lower the total effective interest rate to 11%. The company will not be increasing its room stock but will continue with its ingoing effort to improve the quality of the existing products. The safari and touring businesses have been earmarked for disposal since they have been generating a negative operating profit. The disposal should raise about $2 million Unfavourable pressures are clouding RTG's outlook.
Management had gone on an aggressive drive to refurbish the group's hotels with expectation that the new look facilities would yield better occupancies, and higher rates, thereby increasing the RevPar. However the outlook does not look as promising, due to a myriad of factors, notably, the local airlines' continued operational challenges, which has seen them failing to deliver a consistent service. In addition, given the working capital strain, high finance costs are likely to continue devouring the company's profits in the short term.
Critical source markets in the region and internationally, have also been undergoing a rough patch, with unstable political and environmental climates. We also expect the local scenario to add salt to the wound with a tense political environment obtaining as we draw closer to the elections.
There was an impressive growth in EBITDA to $1.8 million up 190% from the prior period indicating an EBITDA margin of 12%. This was attributed to increased operating efficiencies which saw the expenses to turnover ratio declining to 78% from 86%. High finance costs at $1.2 million however lowered the group's overall profitability to a $68,925 PBT from a loss of $386,059 the prior period. After a tax credit of $980,164, the attributable profit for the period was $1 million (H1 2011: $111,865).
The balance sheet reflects a dire financial position, with gearing at a high of 36% (H1 2010: 9%) when considering long term debt and even higher at 46% inclusive of short term debt. Borrowings are currently $10.6 million for short term debt and $9.3m for long term debt. $12.2 million went into capex projects and the remainder into working capital. Exposure to Renaissance Merchant Bank, was $5.1 million which the company is expectant they will recover. The cash flow statement shows that although $213,055 was registered from operations, the high finance costs reduced the overall operating cash flow position.
Management is looking at undertaking a $15 million rights issue to boost the company's capex and working capital position. The recapitalisation should result in the gearing ratio declining to 30%. By year end, management targets to reduce the interest rate on short term debt to 15% from the current 17.7% which will lower the total effective interest rate to 11%. The company will not be increasing its room stock but will continue with its ingoing effort to improve the quality of the existing products. The safari and touring businesses have been earmarked for disposal since they have been generating a negative operating profit. The disposal should raise about $2 million Unfavourable pressures are clouding RTG's outlook.
Management had gone on an aggressive drive to refurbish the group's hotels with expectation that the new look facilities would yield better occupancies, and higher rates, thereby increasing the RevPar. However the outlook does not look as promising, due to a myriad of factors, notably, the local airlines' continued operational challenges, which has seen them failing to deliver a consistent service. In addition, given the working capital strain, high finance costs are likely to continue devouring the company's profits in the short term.
Critical source markets in the region and internationally, have also been undergoing a rough patch, with unstable political and environmental climates. We also expect the local scenario to add salt to the wound with a tense political environment obtaining as we draw closer to the elections.
Source - Imara
