- Real Estate Growth: Contribution increased from 2% to 6%, generating $1.28 million
- Challenging Financial Performance: $2.17 million loss after tax, despite improved topline numbers
- Upside: Occupancy increased by 4 percentage points to 50%, and cash reserves rose to $10.56 million
Harare- Largest hotelier group, African Sun Limited's (ASUN), real estate market performed well during the first half of 2024 (1HY), with its contribution increasing from 2% to 6% and generating an additional $1.28 million in revenue from residential stand sales.
The group announced its interest in venturing into real estate in 2023, developing 55 additional residential stands in Marlborough's Sunset Views.
"Real Estate's contribution increased during the period from 2% to 6%, generating an incremental revenue of $1.28 million from residential stand sales," said Lloyd Mhishi, the group's chairperson, in a statement accompanying the financials.
With Zimbabwe's national housing backlog exceeding 1.5 million, investing in affordable low-cost housing remains crucial for unlocking shareholder value.
The up-market residential cluster developments sector is also growing and presents a good investment opportunity.
Real estate serves as a buffer against inflationary pressures and currency volatility, as most obligations are settled in US dollars.
West Properties and Tigere collect over 70% of their revenues in US dollars, mitigating currency fluctuations.
ASUN's real estate portfolio comprises eight hotels, two timeshare lodges, residential properties in Harare, and vast undeveloped land held for sale or capital appreciation.
The group ventured into real estate to offset the adverse impacts of discontinued operations, emanating with the closure of the Kingdom Hotel in Victoria Falls.
The closure had a significant impact on ASUN's financial performance, with an after-tax loss of $1.8 million for the half-year ended June 30, 2023, which widened in HY2024.
Since HY2023, the company has struggled to realize profits due to continued discontinued operations.
During the review period, the group recorded a loss after tax of $2.17 million, despite improved topline numbers ($25.58 million from $22.36 million), largely due to higher taxes, a loss from property sales ($0.27 million), discontinued operations loss ($0.35 million), and non-recurring costs ($0.60 million).
The group discontinued the Great Zimbabwe Hotel and Beitbridge Express Hotel, with the transaction expected to be completed by year-end.
Further divestments in key assets are planned to solidify ASUN's position, although details remain unclear.
On a positive note, occupancy increased by 4 percentage points to 50%, and cash reserves rose to $10.56 million from $6.98 million.
“Targeted refurbishments progressed well, including the completion of Hwange Safari Lodge's public areas and soft refurbishment of Monomotapa Hotel's Executive and Presidential Suites.”
This strategic capital allocation aims to position the group for market share growth and enhanced hospitality experience. To expedite refurbishments, the Board resolved to sell selected non-core assets.
"Going into the second half of the year, typically our peak period, we anticipate increased international travelers, conference business, and local tourism demand," Mhishi said.
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