Economic recovery buoys up TA investment drive

1 September 2010

The Herald Business
Business News

TA Holdings Limited last week held its analyst and media briefing for the half-year ended June 2010 and told shareholders that the group is positioning its investments in the country to take advantage of the economic recovery.

Management also indicated that they would be exploiting offshore growth opportunities in the insurance and hotel sectors.

Currently, the group is negotiating with a potential financier for the refurbishment of their hotels in Zimbabwe and they are hoping to conclude these negotiations by year-end.

A successful deal would see the commencement of the refurbishment work in early 2011 with Cresta Lodge Harare being the target.

As for fertiliser manufacturer Sable Chemicals, management also said negotiations are on-going for a viable power tariff while the group is also looking to consider other less electricity-intensive options of obtaining hydrogen.

Commenting on the performance, analysts said indications are that they will at best break even at year-end while equity holders are likely to remain with an attributable loss at year-end.

The group’s operating units continue to recover slowly, with the notable increase in capacity utilisation for Sable coupled with prospects of refurbishment of their hotel properties that could see an improvement in average room rates.

Analysts believe that the group’s major hindrance is that of over-diversification and as such they are of the belief that TA should hasten its restructuring and strategic positioning plans to return to acceptable profitability levels.

In the half-year to June 30, 2010 TA posted a lukewarm set of results in which the group merely broke even.

Revenues for the first half amounted to US$23.6 million against group total expenses of US$22.4 million and incurred finance costs to the tune of US$235 131 and a share of losses in associate companies of US$578 022.

Profit before tax for the period was US$366 247 from which income tax obligations of US$195 544 were deducted giving the group a paltry profit for the period of US$170 703.

The group’s balance sheet weakened by some US$13 million from their December 31 position to US$156 million attributed to translation losses on conversion of Pula denominated balance sheets the reporting currency.

Likewise net asset value was down by a similar magnitude to US$56.6 million.

The group, however, closed in a positive cash and cash equivalents position of US$14.8 million.

TA’s Zimbabwe operations incurred an operating loss of US$760 000 as all local operations with the exception of Zimbabwe Fertiliser Company and AON posted losses for the half-year.

Sable remained their Achilles heel contributing US$1.2 million and capacity utilisation is at 36 percent on the back of an increase in electrolyters from four last year to 10 as at June 2010.

Volumes produced improved to 43 592 tonnes though this could have been bettered had it not been for the lower-than-budgeted for ammonia imports coupled with the exorbitant electricity tariffs at which the group would need to reach capacities of 45 percent – 50 percent for them to break even in this unit.

TA’s offshore operations remain lucrative buoyed by a stellar underwriting profit performance from Botswana Insurance company to the tune of US$1.4 million.
Botswana’s Stock Exchange-listed Cresta Morakanelo contributed a US$716 390 profit and was accounted for as an associate in the half-year.