SUNBIRD 2022 HALF YEAR FINANCIAL PERFORMANCE QUESTION & ANSWER

Posted 27 September 2022

Q1. How has Sunbird Tourism plc faired in the half year trading?

Total revenue for the Group grew by 57.5%, with occupancy increasing by 42% in comparison to prior year. Profit at half year grew by 184% in comparison with same period last year, when the Group posted a loss.  The Corporate Segment continued to be the anchor segment with 82.1% of the rooms sold, and 83% revenue contribution. The corporate segment is expected to remain the key driver for the business in the second half of the year. Efforts to grow other segments with focus on domestic leisure remains, despite the challenges associated with the cost of living due to the prevailing economic environment that has direct impact on disposable income hence shrinking demand for the segment.

Globally, tourism continues to show signs of a strong and steady recovery from the impact of the COVID-19 pandemic despite mounting economic and geopolitical challenges, with Malawi adversely affected due to its import reliance for fertilizer from the affected countries with Russia vs Ukraine conflict, that has worsened the global recession and disrupted the supply chain. According to UNWTO, International tourism saw a strong rebound in the first five months of 2022, with almost 250 million international arrivals recorded. This compares to 77 million arrivals from January to May 2021, with Africa growing by 156% in comparison to same period previous year

Q2. We have noticed steady recovery of the brand, what in your opinion has helped with the performance?

The Group focused on enhancing Sales & Marketing strategies for increased production for key segments, and improved production from the various channels in order to optimise on the improved business environment, and a show of a strong and steady recovery from the impact of the COVID-19 as evidenced by increased international arrivals.

Responsive revenue management strategies, prudent cost management, continued efforts to deliver unrivalled guest experience with a view to ensure a robust customer satisfaction and retention remained key strategies while mitigating against industry specific challenges, with a potential to derail gains from the improved trading environment.

Q3. Looking at the half year performance, should shareholders anticipate a dividend payout this year?

Due to the half year performance, the board declared an interim dividend of MK 131million for our shareholders, the declaration of dividend is a testament to the turn around and steady recovery of the industry. Our commitment remains to maximize stakeholders value which is our company mission, and forecast shows that despite the economic situation in the country and austerity measures taken by organizations including government, we should be able to record meaningful return for our shareholders by close of the year.

Q4. In your opinion, currently, what are the challenges for the industry?

Despite International tourism showing signs of a strong and steady recovery from the impact of the COVID-19 pandemic, Malawi as a destination remains reliant on domestic source market with over 85% being business traveller, this makes the tourism industry susceptible to policy changes, coupled with prevailing economic challenges that have continued to pose a threat to gains made thus far, and have a potential to derail performance of the local tourism industry. Case in point the Lakeshore travel ban which has posed a significant challenge for the performance of the corporate segment in the markets affected, in mitigating the challenge, the Group focused on other market segments by optimising sales & marketing strategies with a view to maintaining the trajectory for a strong performance on the top line.

The prevailing economic conditions on the market remain a key challenge, putting pressure on consumer’s disposable income and the cost of doing business significantly increasing in the period due to inflationary pressures and requiring prudent cost management strategies to mitigate from eroding the bottom line.

Just like many other businesses in Malawi, we have also been challenged with the frequent interruption of delivery of utilities, especially power blackouts, and associated increasing costs from these disruptions. For example, we have had to consistently use our generators at the respective hotels for power, requiring significant spend on diesel, which currently due to the inconsistent supply on the market has proved to be a key challenge. These unplanned expenditures continue to have a negative effect on our business. However, that being the case, Sunbird has positioned itself as the leading Green conscious hospitality entity, and as part of our strategic plan in reducing the carbon footprint, our investment in solar energies will be further enhanced with a focus to ensuring our respective hotels are solar powered similar to what we have already implemented at Sunbird Waterfront to reduce over dependence on the power grid.

Q5. Do you think there are still more opportunities for growth in the tourism sector?

Absolutely. We are very much encouraged with the increase in international arrivals in the country post COVID-19 and we are confident that the trajectory will be maintained and can be further improved with the introduction of more flight routes to Malawi, especially in the southern region in order to increase the demand. Post COVID -19 pandemic we are positioning the Group for an increased foot print, and to further diversify focusing on the leisure sector as well as eco-tourism so that we remain favorably positioned for growth and enhance customer destination experience within the Group. The recent appointments of Tourism attaches by the Ministry of Tourism, Wildlife and Culture in the priority markets will also be key in the destination marketing efforts for Malawi, we believe that their appointments will add value to positioning Malawi as one of new destinations for international tourists for both the leisure and corporate segments. We are further encouraged by the optimism that Tourism will continue to grow and will significantly contribute to the country’s GDP. The recently launched Tourism Master plan provides a key road map, and opportunities for investment in the sector.

Q5. What are some of the key planned strategic initiatives or investments planned in the near future for Sunbird?

Our focus remains on offering an unrivalled guest experience in our hotels and resorts, by continuously improving our products and services. In making sure that we remain committed to this focus, the Group continues to extend its foot print through investments in new and improved products and services. Sunbird launched its 5-year strategic plan with plans to improve existing products and growth of the brand through refurbishments and green field investment. Currently works are underway for a complete refurbishment of Sunbird Kuchawe and Sunbird Mzuzu with a planned completion by Q1 2023.  Furthermore, expansion projects for Sunbird Livingstonia’ s 500 seater conference centre and an additional 30 executive rooms at Sunbird Nkopola are at inception stage.  Looking ahead, Sunbird is conducting a feasibility study to invest in a mix use development in Lilongwe and a five-star resort in Mangochi, this is in line with our vision to remain the preferred brand in the hospitality industry.

Sunbird Tourism continues to focus on the expansion of its foot print and brand extension to ensure delivery of a rich, and diverse tourism experience for our customers while leading the drive to position Malawi as the preferred tourism destination for economic empowerment and job creation. Through management contracts the Group intends to ensure that the product offer remains attractive for both the domestic and international markets, while targeting new markets

Q6. Looking towards the end of year, how is Sunbird confident of its performance?

Looking ahead, the second half of the year looks relatively positive, as confidence in travel has returned both at local and international level. The trajectory for a strong and steady recovery is anticipated to be maintained despite economic dynamics that have caused forex scarcity, more than doubled the inflation, and increased the cost of doing business and affecting demand. The recent Lakeshore ban on conference and accommodation activities by government and shortage of fuel is going to adversely affect the industry and requires a quick intervention not to erode the gains.  

Despite the prevailing economic challenges, management and Directors are confident that the performance trajectory of the Group will be maintained towards a strong and steady recovery.