Blood, sweat and tears at RTG

The-Rainbow-Towers-HarareAS Rainbow Tourism Group’s management prepare for the next phase of its restructuring exercise, market watchers believe that shareholders are likely to sanction their plans, especially in the wake of last year’s financial performance. Last year, the hospitality group managed to recover from a US$5,9 million loss recorded in 2012 to post a US$1,1 million profit for the year ended December 31, 2013.

As part of deliberate measures put in place by management under the stewardship of Mr Tendai Madziwanyika, who assumed the reins at the hotelier in the latter part of 2012, RTG managed to reduce both its funding gap and gearing from US$9,4 million to US$3,8 million and 69 percent to 59 percent respectively.

In particular, revenues for the local operations rose by 9 percent to US$27,7 million on cost rationalisation strategies such as the centralisation of the sales function, acquisition of new accounts, the launch of the Rainbow Virtual and RainPower programmes.
Currently, RTG holds sway over 26 percent of the market.

But it has not always been rosy for the company, as it is slowly emerging from an era characterised by expensive short-term debt, nasty in-house fighting and intense boardroom squabbles.

At the centre of some of the nasty episodes at the company was business magnate Mr Nicholas van Hoogstraten who, since 2005, had been up in arms with management at the group for “defrauding” him of the stake he was entitled to after underwriting the company’s rights issue.

By then the businessman had a 34 percent equity in RTG controlled through his firms Banhams Investments, Messina Investments, Edwards Nominees, Stanleys Limited and direct holdings in the names of his children.

In 2009, the businessman embarked on a crusade to get rid of management as he claimed they did not have the requisite skills to run the business.

“I do not wish to enter into any personal attacks. It is suffice to say that since the recent AGM circular to shareholders highlighted the prospect of the sacking of the entire board and their replacement with competent businessmen with substantial financial backing, the RTG share price has increased from two-and-half cents to six cents. Should other significant shareholders not support our resolutions the share price will surely drop back again,” Mr van Hoogstraten was quoted as saying in March 2009. The directors that were targeted by Mr van Hoogstraten included former RTG chief executive officer Ms Chipo Mtasa, chairperson Mrs Grace Muradzikwa and six other board members — Mr Pascal Changunda (finance director), Mr Canaan Dube, Ms Charmaine Daniels, Mr Godfrey Manhambara, Mr Yardim Mariuma and Mr Elliot Nyoni.

Ms Mtasa subsequently resigned from the group and is now with TelOne.
However, the shareholders managed to find each other, resulting in the businessman’s appointees on the RTG board — Messrs Ian Haruperi, Shingirayi Chibhanguza and Edgeton Tsanga —being confirmed as directors.

Dr Joseph Kanyekanye, as the National Social Security Authority appointee, also became board chairperson.
Dr Kanyekanye, however, resigned as board chairman claiming that Nssa had decided to have independent chairpersons in all its investments.

RTG believes that revenues and profits are likey to grow further.
Forecasts suggest that room occupancy will grow by 9 percent to 51 percent in 2014, from 47 percent in 2013, while Average Daily Rates are expected to jump by 4 percent to US$86 in 2014 from US$83 last year .

Revenue per average room (RevPAR) is estimated to rise by 10 percent to US$43 from US$39 in 2013.
On the overall, turnover is expected to grow by 10 percent to US$32,5 million from US$29,3 million a year earlier.

But it is the staff rationalisation exercise that provides another test for the company as many of the RTG staffers believe they should also take credit for the recent successes.

They also feel that is unfair for management to sacrifice them to appease shareholders.

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