Hotel bailout pays offBy: JO-MARÉ DUDDY
BUSINESS mind Sven Thieme yesterday once more showed that he has earned his title as ‘Mr Fix-it’ when, as Windhoek Country Club and Resorts (WCCR) Chairman, he presented Government with a dividend cheque of N$5 million – proof of a successful turnaround strategy the past five years which saw liabilities slashed by N$188 million, while assets boomed by N$75 million.
Thieme, whose turnaround recipe also put the fizz back into a once flat Namibia Breweries, was all smiles yesterday morning: “I can confidently say that the fortunes of the WCCR have been turned around from a smallish operating profit of N$600 000 in 2003 to N$22 million at the end of April 2009.
“Now if that isn’t an achievement, I don’t know what is,” Thieme told an audience including Prime Minister Nahas Angula and Environment and Tourism Minister Netumbo Nandi-Ndaitwah.
The Prime Minister was equally pleased: “I must say I am glad that the team decided some five or six years ago not to privatise the hotel, thereby getting rid of it.”
Although the hotel still owes Government N$227 million and the Government Institutions Pension Fund (GIPF) about N$40 million, “the future no longer looks bleak in terms of repaying the debts”, Thieme said.
“(The) GIPF will be repaid, while Government, although being a shareholder already, received additional shares on November 19 2009, which will now be redeemed on an annual basis to repay the debt owed to them.”
When Thieme and his new board of directors ‘inherited’ the WCCR in 2003, it was technically insolvent with liabilities outstripping assets by N$170 million.
The hotel had just defaulted on its GIPF loan that was guaranteed by Government. The loan was honoured, courtesy of the taxpayer, with Government subsequently becoming the sole shareholder in the beleaguered parastatal, and paid Legacy Resorts and Hotels to manage it.
In January 2004, the board brainstormed their options. Their conclusions: WCCR was stuck in an onerous management agreement, its loans of N$267 million was financed by non-market-related interest rates, it didn’t own the land it was built on, and the hotel didn’t operate at industry benchmark levels.
At the time, Legacy was paid a management fee based on revenue, not profitability or performance. Furthermore, WCCR had to lease the land it was built on from the Windhoek Golf Club, which owned it at the time.
As part of the board’s survival plan, WCCR bought the land and renegotiated Legacy’s management agreement. They also negotiated with the GIPF, agreeing on a settlement of N$40 million, effectively reversing N$50 million of “excessive interest”, Thieme said.
The results were visible almost immediately: in 2004, WCCR recorded a gross operating profit of N$2,6 million, followed by N$4,3 million the year after. The figure climbed to N$9,3 million in 2006, and further to N$12,1 million in 2007.
Last year WCCR reached a gross operating profit of N$16,9 million.
Meanwhile, the hotel embarked on a room refurbishment of N$8,6 million and a casino upgrade of N$3,2 million – paid in cash.
Hard work, honesty, integrity and professionalism from the board, the hotel management and its staff are what WCCR through, Thieme said.
“I read somewhere that many of the great achievements of the world were accomplished by tired and discouraged men (and women) who kept on working. I think this sums up the last fie years of our life with regard to the WCCR,” he said.
The hotel still has a long way to go, though, Thieme said.
“Believe me, there are some exciting prospects ahead, which will make this hotel an even better one.”
WCCR started yesterday by entering into a new ten-plus-five-year management agreement with Legacy.
“(This) conforms to internationally accepted performance clauses and incentivises continued good performance, which did not exist in the old agreement,” Thieme said.