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Hotel operator Southern Sun said on Thursday it swung back into profit in its year to end-March, boosted by a recovery in the tourism industry, and it's still seeing some encouraging trends.
The company reported profit of R1 billion for its six months to end-March, from a loss of R156 million previously, with its free cash flow from operations more than tripling, while it cut its debt by R1.5 billion to R1.3 billion.
Valued at about R6.2 billion on the JSE, the group operates over 90 hotels and resorts under a number of brands, with its portfolio including 54 on Bath, the Sandton Convention Centre, Sandton Towers and the Beverly Hills Hotel in Umhlanga.
Trading levels continued to recover, particularly in the second half of the financial year, as local and international travel patterns normalised and demand for conferencing and events increased, it said. All regions performed well and exceeded pre-Covid-19 levels except the Sandton node, reflecting the delayed recovery in corporate travel exacerbated by many companies in the node still operating a hybrid remote-working model.
Southern Sun CEO Marcel von Aulock said during an investor presentation that SA hotels remain cheap when considered in international terms, with the company encouraged by recent trends.
"The year ended a lot better than we had possibly hoped this time last year," he said, adding that trading "absolutely took off in the second half of the year." Profits are now up from pre-Covid-19 levels, even though occupancies haven't fully recovered, pointing to further upside potential for the group.
"We started Covid-19 with R3.3 billion in debt so we managed to bring it down by R2 billion ... without a rights issue, something which we are very, very, pleased about."
Southern Sun reported its occupancy rose to 51.5% in its 2023 year, up from 30.6% in the prior year, but down from 59.3% achieved in its year to end-March 2020. In 2020 it reported a loss of R1.22 billion, amid exceptional losses of R1.7 billion, mostly related to fair value losses.
In 2023, the company was also boosted of R399 million received from Tsogo Sun Gaming on implementation of its separation agreement, and which relates to its management of various hotels for Tsogo, as well as licensing. The group also sold a hotel in Nigeria - its only one there - with proceeds of $32 million (about R620 million).
Tsogo split its hotel and gaming assets in 2019, with Tsogo Sun Hotels reverting back to the name of Southern Sun. In a separate release on Thursday, Tsogo Sun Gaming said it grew its earnings almost a quarter in its 2023 year, with improvements at Gold Reef City Theme Park helping that operation book record profits. Restaurant and entertainment income also saw recovery, it said, though it was under pressure from load shedding.
Southern Sun said on Thursday it was encouraged by trading levels over the last six months which have continued into April and May. The impact of a winter with a severely constrained electricity system is unknown, it said.
Shares in Southern Sun were down 2.3% in early trade on Thursday, but have risen by over a quarter in the past year.
Click here for details of the group's shares as well as other info.
