‘ASL, Dawn integration to enhance earnings’

June 24, 2021


The integration of African Sun Limited (ASL) and property firm, Dawn Properties Limited into one, will provide a compelling scale of strength and cost leverage against the volatile economic environment which has affected the tourism sector, a company executive said.

ASL managing director, Ed Shangwa, said the process of full integration is expected to take two years.

The two companies—ASL and Dawn—operated individually, with Dawn leasing about several of its hotels to the former.

At one time, Dawn threatened to evict ASL from its hotels.

But, last year, the two companies took a hard look at their portfolios and decided to consolidate the two businesses at a time the hospitality industry was hit the hardest by the Covid-19 pandemic, which resulted in the group recording a low occupancy rate of 23%, representing a 25 percentage points decline from 48% recorded in 2019.

ASL is banking now on Dawn which is expected to strengthen the company’s balance sheet. 

Consequently, ASL expects to unlock value and hedge its investments as tourism sector continue to be affected by the travel restrictions.

“Following full integration of the two businesses, which is expected to be achieved within two years, the group anticipates significant enhancement of its earnings through envisaged cost-saving opportunities and synergies that will arise from the transaction which include among other things leveraging property for raising debt,” Shangwa said.

The benefits of the acquisition include the consolidation of African Sun’s position to be the largest hospitality entity in Zimbabwe.

In 2003, Zimbabwe Sun Limited, which rebranded to African Sun, restructured its business and unbundled  its properties  by transferring title to a newly created company, Dawn Properties as part of efforts to unlock value in its properties.

But, last year, the shareholders of the two companies approved the acquisition of Dawn to cut duplicate costs, improve efficiency and liquidity of both entities.

In its financial results for the 12 months to December 31, 2020, ASL swung into a ZWL$1,5bn loss, reversing a profit of ZWL$839m reported in 2019 due to the adverse effects of Covid-19 that affected the tourism industry.

Revenue for the group plunged to ZWL$1.84bn from ZWL$4.1bn in 2019.

Room nights sold went down by 52% to 137 162 from 288 224 reported last year.

The decline in room nights was across all market segments, with those attributable to export and domestic reducing by 82% and 35% respectively.

The decrease in revenue and volumes resulted in the group posting an inflation adjusted EBITDA of ZWL$5,42m compared to ZWL$1, 74bn that was achieved in 2019.

ASL has successfully established capital facilities amounting to US$2m which would be strengthened by a further government supported tourism sector relief facility of ZWL $150m which agreement has been signed.

The group said given the inherent uncertainty associated with the Covid-19 pandemic, it is currently difficult to determine a reasonable worst-case scenario.

The hospitality group operates the Monomotapa Hotel in the capital, Caribbean Bay Resort in Kariba, the Kingdom Hotel, Elephant Hills, Victoria Falls in the resort town of Victoria Falls, Great Zimbabwe Hotel in Masvingo, Holiday Inn in Harare, Bulawayo and Mutare, Troutbeck Resort in Nyanga and Hwange Safari Lodge.

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