Southern Sun has reported a jump in full-year earnings as it benefited from the restructuring it started during the Covid-19 period and the exposure of its hotels in the Western Cape to a strong tourism, business travel and event-related year.
Profit for the year ended March from continuing operations rose to R856m from R741m. while total revenue increased 19% to R6bn, it said in a statement on Wednesday.
Adjusted headline earnings per share jumped 88% to 56.4c and a final dividend of 12.5c per share was declared. The group described the year under review as “a record one for Southern Sun’s profitability”.
Free cash flow of R970m was applied to share buybacks of R617m, expansion capex of R180m with the balance for reduction of net debt to R1bn.
“This performance is anchored first, through the strict maintenance of the cost efficiencies achieved through the complete restructuring of the group during the Covid-19 period and second, through the significant exposure of the owned portfolio of hotels in the Western Cape and particularly the City of Cape Town, which has enjoyed a strong tourism, business travel and event-related year,” the group said.
Aided by more normalised demand from local and international travellers and strong demand for conferencing and events, group occupancy increased by 7.1 percentage points to at 58.6%, but is still 0.7pp below the 59.3% achieved pre-Covid-19.
This shortfall in occupancy largely relates to hotels in individual nodes in SA and offshore, which have not yet fully recovered but are showing signs of improvement and present a focus area for management, it said. The group’s rooms revenue grew 23% to R4.1bn.
Food and beverage revenue is up 15%, property rental income was 17% higher and other revenue increased by 15%.
Overall occupancy at 58.6% reflects SA’s low-growth economic environment. However, the group said it was optimistic that if there were certainty about government policy and private sector collaboration to solve the country’s challenges, the pent-up demand for travel and accommodation by both domestic and international corporates, as well as the government, should begin to materialise. That would benefit Southern Sun’s hotels in both Gauteng and KwaZulu-Natal, which are weighted towards these segments.
SA continued to benefit from strong international demand and that could strengthen with the removal of visa restrictions to some markets and further activation of inbound air capacity to the country. The middle-income international traveller had not recovered to pre-Covid-19 levels and represented an opportunity, it said.
SA is set to host several events such as the G20 Summit in 2025, Mining Indaba and the African Energy Indaba, where the group can capitalise on its national distribution and ability to successfully host and co-ordinate large conferences, it said.
Debt levels have been reduced to a sustainable level and the group will continue to pursue its strategy of getting more out of its hotel portfolio by allocating capital to key properties.
Refurbishment programmes are under way at the Sandton Towers, the Southern Sun Sandton, the Southern Sun Rosebank and Southern Sun Cullinan. Refurbishment plans are progressing for a number of other hotels with various mock-up rooms in progress, it said.
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