African Sun sees gloomy H1 due to Covid-19 despite strong Q1

Afsun pic
Afsun pic
HARARE – Zimbabwe Stock Exchange listed hotelier African Sun posted a positive Q1 in which it had a 2 percentage point occupancy level increase to 40% from 38% recorded in Q1 2019 as the group recovered from the effects of the civil unrest and national shutdown protests that had been experienced last year.
Room nights sold in the quarter increased 4% to 54 972 from 52 617 reported last year. According to the group’s first quarter trading update, the business mix in the quarter was 67% local and 33% export. Export room nights were down 2% due to the early effects of Covid-19, which affected arrivals particularly in Victoria Falls. Domestic room nights increased by 8%, a growth that was driven by corporate and NGO business.
However the coronavirus pandemic presents the most significant challenge that the hospitality industry has ever faced amid forecasts by the World Travel and Tourism Council that the pandemic could adversely impact travel and tourism by up to 25% this year, an equivalent of three months tourist activity.
The group said that in response to the virus-induced lockdown, the group had temporarily closed all its 11 hotels and two casinos with effect from March 30, 2020. Occupancy therefore was at zero for April. Revenues of the Easter Holidays which the industry projects to be 8% of total revenue were eroded to zero due to various shutdowns from local to international markets. As at May 6, a substantial 31 907 room nights had been cancelled. The group had however opened its hotels under a phased approach starting with the opening of four hotels; Holiday Inn Harare, Holiday Inn Mutare, Holiday Inn Bulawayo and Great Zimbabwe Hotel.
African Sun has to explicitly be on overdrive to capture as much domestic demand as they can especially in their hotels which are located in tourist destinations. Increasing domestic occupancy to over 90% before in the year might help the company cushion itself from external shocks such as grounded flights.
The group anticipates continued disruption to travel and tourism in the short term and forward visibility on the timing and shape of improvements in demand remains very limited. The group expects domestic business largely driven by government and non-governmental organisations programmes centred on Covid-19 health responses and hunger alleviation to resume immediately. International business is expected to gradually resume starting from July as airlines rebuild their networks.
FY2020 occupancy levels are likely to be less than 40% and revenues might be cut by around 35% from 2019 FY levels thanks to the gradual lifts of lockdowns which will spur corporates and NGOs to continue business.  African Sun shares are currently trading at 79.97c, which is also its 52 week high and a 52-week change of 100.53%. The 52-week low is 23.00c and has a year to date gain of 219.88% which is on the lower end of gains on ZSE due to its exposure to Covid-19.

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