African Sun ditches procurement subsidiary

4 January 2012

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4 January 2012 | Adam Leach

Hotel chain African Sun is disposing of procurement subsidiary Hotelserve to focus efforts on its core business.

The hotel and tourism company, which owns and operates hotels across the southern Africa region, purchased the firm in 2008 in an attempt to tighten costs. However, it now feels that competitive prices for supplies are once again available, so has decided to offload the catering and hotel supplies buyer in a deal expected to be completed in the first quarter of the coming business year.

Timothy Chiganze, chairman of African Sun, said: “In addition and pursuant to a decision taken to disinvest out of non-core operations as previously advised, Hotelserve was disposed of, with completion of the transaction expected in the first quarter of the next financial year.

“The entity was disposed of as it had become non-core to the group’s operations. Revenue from Hotelserve was depressed during the year under review [2010/11], falling 39 per cent short of what was achieved in 2009/10 as volumes declined and margins were affected by the USD/Rand volatility, registering an EBITDA [earning before interest, taxes and amortisation] loss of $279,100.”

The sale of Hotelserve was first mooted in the company’s results for the first half of 2011. In a later statement to shareholders, dated 2 August 2011, the company explained that the introduction of multiple currencies had depressed earnings in the subsidiary and, as a result, it would look to dispose of it.

In addition to the disposal of Hotelserve, the company also announced that it would be closing its two hotels in South Africa, citing “difficult trading conditions” as the reason behind the decision. As a result of the closures, disposals and general restructuring of the business, it expects to turn a profit in 2013.


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