FIRST Mutual Limited (FML) has offered its 20 percent shareholding in Rainbow Tourism Group (RTG) to British tycoon, Nicholas van Hoogstraten, as the Zimbabwe Stock Exchange-listed financial services firm seeks to exit the leisure outfit.
The Financial Gazette’s Companies & Markets (C&M) understands that after announcing its intention to divest from the country’s second largest leisure concern in March, FML approached the deep-pocketed property mogul, an aggressive stock market buyer whose interests include investments in Hwange Colliery Company Limited, CFI Holdings and cables producer, CAFCA.
RTG commands about 27 percent market share in the hospitality and leisure industry.
In an interview with C&M, van Hoogstraten confirmed that FML had approached him for a possible purchase of the shares, but declined to say if he had made an offer to buy or not.
Van Hoogstraten, who already controls about 36 percent shareholding in RTG, is one of only two investors in the group with the financial capacity to purchase the shares.
The other investor with significant liquidity is the National Social Security Authority (NSSA), which already controls 40 percent shareholding in the listed tourism group.
It was not clear if FML had also made a similar offer to NSSA, but given concerns over its past investments in at least two listed counters in which the compulsory pension fund has lost a significant amount of money, NSSA may be coy to shore up its interest in RTG, considering that the hotel and leisure group is not in the best of health and that it may require a huge chunk of cash to turn around its fortunes.
On March 23, FML said it would sell its 20 percent shareholding in RTG, as it moves to concentrate on its core business, which is the insurance sector, as well as general financial services interests.
Chief executive officer, Douglas Hoto, told analysts that the insurance group had reclassified the stake to “available for sale” from strategic investment.
He said FML would be scouting for interested buyers.
“We have reclassified RTG from a strategic investment to one that is available for sale,” said Hoto, during a presentation of FML’s financial results for the year ended December 31, 2015.
“We felt that we have no interest in RTG,” noted Hoto.
He said FML had also sold off its actuarial unit, African Actuarial Consultants.
While FML said it was pursuing core business, there are indications it is not happy with the investment because of its current financial circumstances.
Moreover, hope of a turnaround, particularly in the absence of a huge cash injection, appears remote given that the tourism industry is going through a difficult period.
Attendant risks in the industry range from slowing domestic demand due to the economic crisis to the volatilities on the stock markets, where the two listed leisure counters, African Sun Limited and RTG, have been struggling.
High debts accumulated during the hyperinflationary era at huge interest rates have also affected operations.
During the year ended December 31, 2015, Hoto said FML had achieved an overall profit of US$100 000, from a loss of US$5,1 million the previous year. Gross premiums written for the period, at US$116,1 million, were one percent above the prior year figure of US$115,3 million, which improved on the back of strong performance in the health insurance business.
In the 12 months to December, FML’s rental income decreased by three percent from US$7,5 million in 2014 to US$7,3 million, reflecting the current challenges faced by tenants and the resultant decline in occupancy levels and rentals per square metre.
Hoto noted that the average rental per square metre decreased from US$7,86 in 2014 to US$7,58 in 2015.
“The occupancy rate for the period was 79 percent compared to 80 percent in the prior year. The claims at US$67,7 million declined by US$2,3 million from prior year mainly due to reduced retrenchments in the life and pensions segment and lower claims incurred for the health insurance business,” he said.
During the full-year to December 31, 2015, RTG posted an improved operating performance, with earnings before interest, taxes, depreciation and amortisation soaring nearly 300 percent to US$3,6 million, from US$0,9 million in the prior year.
Occupancies went up by four percentage points during the period to reach 50 percent, from 48 percent during the prior year.
But revenue per room declined, as well as group revenue which shed 0,03 percent to US$30,6 million during the year under review.
Foreign revenue went up to US$9,3 million, and management is hoping this will sustain growth in the current year, although sceptics fear a strong US dollar will undermine foreign traffic into the country.
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