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Harare Bureau
African Sun shareholders on Friday approved the disposal of its 16,4 percent shareholding in Dawn Properties to Lengrah Investment, a subsidiary of Brainworks Capital for $5,9 million.
Brainworks Capital Management is a private equity investment and advisory firm that holds 56,42 percent in Lengrah Investments. Wallal Superannuation Fund and Mudhut Trading (Jersey) each have 21,79 percent stake in Lengrah.
The transaction was approved at an extraordinary general meeting of the hospitality group. Proceeds from the disposal will go towards reduction of African Sun’s short-term debt.
The reduction of the debt would lead to a further decrease of the company’s finance costs by $975,165 per annum after a $740,000 cut achieved through an earlier disposal of 12 percent Dawn Properties shares.
The initial reduction in debt, said African Sun, resulted in $0,066 increase in earnings per share and the latest transaction is anticipated to increase the EPS by further a $0,087.
African Sun said the group’s short term debt will decrease by 70 percent from $14,2 million to $4,2 million while the target is to whittle down total debt by 44,7 from $22,3 million to $12,3 million.
The first disposal of 294,705,134 Dawn Properties linked units at $0,0147 per share for total cash consideration of $4,2 million. The second disposal will be done at the same price.
Brainworks Capital first acquired a 32 percent shareholding in African Sun last year through three vehicles that were previously controlled by ASL chief executive Dr Shingi Munyeza through his family trust, Nhaka Trust. In return Nhaka got 17 percent stake in Brainworks Capital. Brainworks later increased its stake to 43 percent.
Meanwhile, Dr Munyeza told the AGM held earlier on Friday that revenue for five months to February dipped 4 percent due to a decline in hotel occupancies. Sales from the local market dropped by 12 percent.
Dr Munyeza said that EBITDA was ahead of budget, but below the comparative period last year. This was because the drop in revenue was mitigated by a 1 percent fall in operating expenses and 30 percent interest cost saving.
He said Amber Accra Ghana, operated under lease and still in soft opening phase, has seen revenue doubling each month since December. Dr Munyeza said break even is expected in May 2014 and profitability expected in June 2014 going forward.
The domestic market was affected by the liquidity situation in the country while regional markets were weighed by a 40 percent retreat on the South African market due to the weak rand.
The foreign market bookings in African Sun grew by 1,6 percent driven by United Kingdom, France, Germany, Europe, US with Japan and China showing strong recovery.
Dr Munyeza said African Sun’s refurbishment is now complete and the group’s branded hotels had passed the annual inspections and are matching global standards. He said further asset improvements will be financed through internal funds.
Going forward, the group will emphasise driving the international market to grow average daily rate and volumes.
“We foresee the domestic market’s current decline being sustained. We will continue to defend and sustain our conferencing business. We will re-launch our timeshare business to assist with domestic tourism,” Dr Munyeza said.
He said further cost rationalisation was being pursued to align the cost structures to the current business performance.
The group said after disposal of the Dawn Properties shareholding, it will explore further options to strengthen the balance sheet.
African Sun is pursuing value-unlocking initiatives which are portfolio rationalisation, amendments to the lease agreements as well as exploring a possibility of business combination.
Online Reporter