We have extracted below the Chairman’s Statement from the 2018 half year interim report of Rainbow Tours Group Limited (RTG.zw), listed on the Zimbabwe Stock Exchange:
On behalf of the Board of Directors of Rainbow Tourism Group Limited (RTG), I am pleased to present the financial results for the half year ended 30 June 2018. The Company’s performance continued to improve on all performance indices. The improvement is attributed to a successful low season strategy, growth in conferencing business as well as revenue from foreign currency generating channels including e-commerce platforms.
2. OPERATING ENVIRONMENT
Despite the challenges endured during the previous year within our local operating environment which include shortages in foreign currency and cash as well as the resultant distortions in prices, we are optimistic of a bright future. The acceptance by the international community of the new government with its efforts of re-engaging the international community and our optimism of business-friendly government policies all contribute to creating an enabling environment for our business. The level of engagement and accountability being initiated by government as demonstrated by the commencement of weekly post-cabinet updates to the nation are a welcome development.
3. PERFORMANCE REVIEW
In the first half of 2018, the Company recorded a 18% growth in revenue to $13.7 million from $11.6 million recorded in prior year. All RTG hotels registered growth in revenue during the first half of 2018 compared to same period in 2017. The two Harare hotels registered a 42% increase in revenue to $6.4 million from $4.5 million in 2017. This is evidence of the opening up of the economy to business travel. It therefore gives us optimism for sustained recovery for our city properties.
Foreign revenues continued on an upward trajectory, registering a 24% growth to $4.7 million from $3.8 million, constituting a contribution of 33% of total revenue. This growth in foreign revenue contribution is encouraging as we continue to grow our share of the $1.2 trillion global tourism industry. The company’s focus on digital commerce has driven revenue from e-commerce platforms which have grown by 49%. Again, the company is well positioned to benefit from the global migration towards internet-based business.
Gross margins improved to 67% from 65% recorded in 2017. This was notwithstanding price distortions as driven primarily by foreign currency shortages. The Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin for the period closed at 16% ($2.2 million) compared to 9% ($1.1 million) recorded in 2017, a growth of 110%. The growth in EBITDA is in response to the growth in revenue as well as various cost reduction measures that were implemented during the period.
Operating expenses for the period under review increased by 9% from $6.7 million in 2017 to $7.3 million in 2018. The increase in costs was mainly due to increased business activity particularly in conferencing for city hotels which had the impact of increased variable costs such as labour and electricity. However, the total costs increased at a rate (9%) that was 50% of the increase in revenues (18%). Finance costs remained unchanged at $574,000.
The Company posted a $1.1 million swing in profit before tax to $415,000, up from a loss of $684,000 recorded in 2017. The profit after tax closed at $214,000 compared to a loss of $290,000 recorded in 2017.
4. FINANCIAL POSITION RESTRUCTURE
I am pleased to report that the Company finalised the restructuring of the balance sheet on 21 February 2018. This marked the end of a journey that started in 2012. We believe that the working capital gap will be closed by December 2018. RTG’s balance sheet is now strong and the company is poised for growth. Going forward, our focus shall be to grow the business through rooms expansion as well as diversifying into non-hoteling complimentary activities.
5. PRODUCT UPGRADE
During the period under review, RTG invested $1.4 million in upgrading its various hotels. The capital expenditure was funded mainly from internally generated cash flows. We are pleased to announce the total refurbishment of the Victoria Falls Rainbow Hotel rooms that was completed in April 2018. The response from the market has been positive and even though we lost the first four months of the year, we believe the hotel will achieve revenues which approximate prior year revenues. Soft refurbishments are being carried out across other hotels as the Company continues to improve its product offering. Going forward, the main focus for the refurbishment shall be Rainbow Towers Hotel, Bulawayo Rainbow Hotel and New Ambassador Hotel.
In view of the need to address the existing working capital gap, the Board resolved to not declare a dividend.
Mr. Simon Masanga was co-opted onto the board on 20 February 2018. Mr. Never Nyemudzo and Mrs. Cynthia Dinka Malaba were co-opted onto the board on 12 March 2018. I welcome the new members onto the board.
We are encouraged by the opportunities that are being presented by an economy that is opening up to the world. Tourism globally depends on a strong and positive nation brand that guarantees travellers their safety, security and unique experiences. The changes that have taken place culminating in a successful holding of the country’s elections have sent the right message to the world. The upgrading of various core infrastructure around the country including airports, roads and hotels will go a long way in generating enhanced revenues for the industry and business. We are focussed on and have projects at various stages of development in the Victoria Falls, Harare and the Eastern Highlands.
The Company launched a mobile and web-based application, The RTG Gateway. The platform is growing in significance as the gateway to a world of tourism and hospitality options. It is a means of growing value beyond the company’s investment in brick and mortar. We see a bright and unfolding future for this product. Our efforts at creating alternative revenue streams from tour operations both domestic and international are now at an advanced stage. We will continue to report on this focus area.
On behalf of the Board, I would like to thank all RTG customers and business partners for their invaluable support. I also extend my gratitude to the Board of Directors for their wise counsel as well as management and staff for their dedication, professionalism and determination to succeed.
25 September 2018