THABANG MOKOPANELE A drop in international tourist numbers coupled with the withdrawal of financial institutions from the hotel development market took their toll on Queensgate Hotel & Leisure's bottom line for the six months ended February.

Adding to the group’s woes was that its traditional source of funding, German investors, became cautious and risk averse, and equity financing for emerging companies — the primary motivation for the group’s reverse- listing transaction — became extremely difficult to access.

The group said in a regulatory announcement on Tuesday that the combination of operational and funding pressure had a negative effect on its cash flow to the point where most of its leases could no longer be serviced. The result was a vicious cycle of lease cancellations, reputational fallout, a collapse of the share price and the cancellation of a number of new development opportunities.

Queensgate’s financial situation led to one of its largest creditors withdrawing, putting Queensgate Leisure into provisional liquidation subsequent to its interim results to the end of February. The results reflected an attributable loss and headline earnings loss of 18,54c and 5,14c per share respectively.

The group said the decrease in the attributable earnings was as a result of the decision to impair and write off intangible assets of R323,3m and loans of R42,41m.

The group said operating costs were also higher due to the resultant write off of prepaid operating lease premiums of R31m.

The group has hospitality and business development units. The hospitality unit is involved in the hotel and leisure industry, while the business development unit is involved in developing properties in the hospitality sector.

Although the operational arm of the company, Queensgate Leisure, is in provisional liquidation, the business development division remained in operation.

Queensgate said it had access to a variety of projects with “good” opportunity to make profits.

“The key to a successful turn around lies in retaining a small team of key players on board to realise these opportunities, while at the same time attracting new investment into the listed company,” the group said.

It said the challenge was to find the right investor and the process should be concluded by the end of next month.

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Source: Business Day