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Brainworks Limited: DEEP DIVE
OVERVIEW

Brainworks eyes swing into profit as it exits financial services

Directors have 'a reasonable degree of certainty' that positive basic earnings per share will be achieved in 2018
elephants
OVERVIEW: BRA The Big Picture
Brainworks runs a game park in ZImbabwe

 

  • Brainworks Limited (JSE:BRA) owns hotels, property and a logistics business in Zimbabwe

  • Company is registered in Mauritius but listed on the Johannesburg Stock Exchange

  • 2018 saw growth across all segments even though economy and political situation in Zimbabwe remains unsettled

 

How is it doing

Occupancy at its hotels rose by 7 percentage points in 2018 to 59% (17:5%), with room rates rising 17% to US$109 on average.

Hotel occupancy was driven by 'strong performance from all our source markets with room nights sold for domestic, international and regional increasing by 12%, 14% and 7%, respectively'.

Brainworks’ real estate arm also recorded a notable increase in revenue, with 70% of the growth attributable to first property sales at the maiden development project in Harare.

Over 60% of the units were sold in 2018 and although there was demand for the remaining 22 units, the group adopted a strategic decision of deferring sales as the Zimbabwe currency environment became volatile during the third quarter of 2018.

Efforts to sell the remaining units have resumed.

The group reduced debt by 55% from US$38.3mln at the end of the prior year.

 

What the boss says

Brett Childs, chief executive, said: “Despite Zimbabwe’s economic and political headwinds and the current currency reforms, the group has done exceptionally well for the year under review.

“The successful disposal of the group’s equity investments in GetSure and GetBucks has had a positive financial impact on profitability and reaffirms the strategic focus on the core business sector namely hospitality and real estate. 

“Earnings per share are expected to be positive given the growth in revenues, reduction in finance charges, and the positive contribution to profitability resulting from the group exiting the financial services sector.”

Due to currency shortages in the country, the Zimbabwe Stock Exchange has issued a one-month extension to all issuers with December year-ends and Brainworks hopes to publish its full results on or about 30 April.

 

Inflection points

  • The Board has 'a reasonable degree of certainty' that positive basic earnings per share will be achieved for the financial year ended 31 December 2018.
  • This would mark 'a notable turnaround' given the fact that the Group recorded net losses after tax of US8mln in the prior year.
  • Currency pronouncements by the monetary authorities are however expected to drive confidence and stabilise the exchange rate in Zimbabwe.
  • Growth in tourism to Victoria Falls
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