Download TPS, East Africa 2008 Annual Report - Serena Hotels

Chairman’s Statement
On behalf of the Board of Directors of TPS Eastern Africa
Limited (TPSEA/the Company), it gives me great pleasure to
present to you the Annual Report and Financial Statements of
the Company for the year ended 31 December 2008.
As you are aware, during the first half of 2008 the tourism
industry in East Africa encountered various serious challenges
as a result of the post-election crisis in Kenya which led to
massive cancellations of bookings to Kenya and, to a lesser
extent, to Tanzania and Zanzibar too. It has been estimated
by the Kenya Tourist Board (KTB) that arrivals to Kenya
dropped by 32% in 2008 compared to 2007. The crisis also
resulted in Kenyan corporate activity slowing down
considerably thereby also negatively impacting business levels
from the local resident market throughout the Kenyan
operations. Tourism players had hoped for a recovery during
the second half of the year. However an economic
slowdown, and even recession, were playing out in many
economies around the world, thus causing a continuing
indeed a further slowdown in travel to all holiday
destinations.
Year 2008 was therefore indeed a challenging year with
matters not made easier by the volatile cost of fuel which
caused a ripple effect of increased prices for most
commodities worldwide especially food and included travel
and in particular air fares. These factors stimulated alarming
inflation trends that have not been experienced in Kenya for
over a decade.
In response to the reduced business levels and in anticipation
of the various challenges ahead, in mid-January 2008
Management implemented various cost-reduction initiatives
without however sacrificing operating standards.
Management also continuously carried out sales and
marketing campaigns with special packages developed to
boost occupancies from the various source markets; these
included diversified and concerted efforts on the domestic
market, the Eastern block, the Middle East, China and India
to fill up the gaps created by the declining performance of
the traditional markets. I am pleased to report that these
efforts bore fruit as market share was retained and
Exterior at Lake Manyara Serena Safari Lodge
Management neither had to close any units nor declare
redundancies as were forced to do some of the other players
in the industry.
Within this challenging context, despite a 24% decline in the
number of bed nights, the Company recorded a turnover of
KShs. 3.24 billion (2007: KShs. 3.67 billion), a decline of
11.7%. Profit Before Tax recorded a 46.5% decline at KShs.
330 million (2007: KShs. 617 million) which was however a
significant achievement in the face of the strengthening of
both the Kenya and the Tanzania shilling against major
currencies that diluted revenues on conversion from foreign
currencies into local currency. The cost control measures that
Management implemented to minimize the negative impact
on the Company's performance resulted in operating
expenses that were reduced below those of the previous year
despite inflation. Given the challenging business environment
above mentioned, the Company's performance was
commendable.
It is during these challenging times that the stakeholders of
the Company will perhaps appreciate the significance of the
strategic decision made in 2006 to integrate the Group's
activities in the Eastern Africa Region. Indeed this has resulted
in TPSEA achieving positive financial results in 2008 despite
the challenges.
Forest view from Serena Mountain Lodge
Despite the reduction in profitability, the Board of Directors is
pleased to recommend for approval, the payment of a final
dividend for year 2008, of KShs. 1.25 per share subject to
8 TPS EASTERN AFRICA LIMITED | ANNUAL REPORT AND FINANCIAL STATEMENTS 2008