RTG shuts down US subsidiary

Journeys By Exotic (JBE), a United States-based tour subsidiary of Rainbow Tourism Group (RTG), is set to be liquidated due to viability concerns that have been brought about the Covid-19 pandemic in that country.

The US has been badly affected by the health pandemic that has seen cases increasing. As of September 2020, there were over 6,9 million cases of Covid-19 and over 200 000 Covid-19-related deaths in that country.

Covid-19 has seriously affected travel and tourism across the globe, but perhaps moreso in the US.

RTG chairman Arthur Manase said the group has started the process to close the United States-based tour operation.

“The group is in the process of winding up the operations of JBE following an assessment of its ability to continue to operate as a going concern.

“The increasing uncertainty in the American market due to heightened cases of Covid-19, has necessitated the need to discontinue operations in that market effective 31 August 2020,” he said.

Management, however, remains optimistic on its tour operations in Zimbabwe, Heritage Expeditions Africa (HEXA).

“HEXA had already commenced transfer tours, quad bike safaris, white water rafting, third-party activities, services and an adventure park at the Rainbow Towers Hotel, while JBE in USA had commenced selling destinations around the world to the American market,” said Mr Manase.

“HEXA will continue to drive the domestic business segment.”

Meanwhile, for the half year to June 30, 2020 the group’s numbers were expectedly affected by the health pandemic.

The group reported revenues of $230 million, which were achieved during the period, which was 51 percent below the $470 million posted over same period in 2019.

This was largely due to lower occupancies during the period. RTG said occupancy levels for the six months period to June 30, 2020 stood at 25 percent from 43 percent in the prior comparative period.

Gross margins for period under review closed at 63 percent from 74 percent posted in 2019.
“The decline in gross margins can be attributable to revenues lost during the lockdown period,” said the chairman.

The group posted an Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin of 38 percent, a growth of 19 percent compared to 32 percent posted in 2019, which was attributed to “various cost reduction initiatives adopted prior to and during the lockdown period.”

Net profit margin for the period closed on 9 percent in 2020 compared to 15 percent in 2019.

“The group’s profitability was supported by the increase in fair value of its stock market investment.

“The group’s statement of financial position remains strong despite the effects of Covid-19,” said management.

During the period under review, the group paid the debenture of $16,7 million in full. This instrument was issued in February 2018 at an interest rate of 6 percent and tenure of 7 years.

The early payment of the debenture released the group’s assets, which were pledged as security. The group’s gearing now stands at 4 percent.-herald.c.zw