Southern Sun, formerly known as Tsogo Sun Hotels, while taking a hit on diesel costs amid load shedding, had seen its revenue recover post-Covid-19 as it eyes a pipeline of events in South Africa that will boost its hotel occupancy.
Releasing its 2023 annual report on Friday, the hotel group said Southern Sun had spent R41 million on diesel in financial year 2023 (FY23) to power its owned hotels from R10m the prior year.
The financial year 2024 calendar had a number of large events including the upcoming BRICS summit in Johannesburg, multiple sporting events from the Netball World Cup, club and Test rugby, to the world table tennis championship and the second ePrix scheduled to return to Cape Town.
John Copelyn, the chairman and Marcel von Aulock, the CEO, said in a joint statement: “International visitors are showing good demand for the summer season and South Africa continues to be a popular destination for the European and US market, and so despite the challenges we remain optimistic for the year.
“Trading volumes are expected to continue to recover. The challenges we face are numerous and well documented, including load shedding and the cost of diesel, high interest rates, poor business confidence and large-scale municipal dysfunctionality across the country,” they said.
They said the 2023 financial year began with a great deal of uncertainty despite the recovery in trading volumes post the Covid-19 pandemic.
Although financial year 2023 quarter one was subdued, the balance of the year resumed the path to recovery and ended up surpassing all expectations, particularly in the second half of the year, they said.
Overall occupancy of 51.5% for the year was the result of financial year 2023 first-half occupancy at just more than 46% and financial year second half occupancy at just under 57%.
“Due to the group’s high level of operational gearing, the second half consequently produced much higher profitability and pleasingly adjusted headline earnings per share (heps) for the year, which at 30 cents per share (cps) is above the pre-Covid adjusted heps of 26cps, albeit that the month of March 2020 was already heavily impacted by the pandemic,” they said.
During financial year 2023, the executive team said they had reduced the group’s gearing levels by R947m, strengthening the balance sheet and positioning the group to maximise benefits from the recovery in trading.
The year-end net debt position of some R1.3 billion was significantly down from R3.3bn at the start of the pandemic.
Copelyn and Von Aulock said the company had taken advantage of the discount at which the group traded to invest in its business and had repurchased just under 100 million ordinary shares representing some 6.7% of the company’s issued share capital for a total investment of some R430m.
The group achieved total revenue for the year ended March 31, 2023, of R5.1bn from R2.7bn the prior year, a growth of 87.6%.
Southern Sun had grown average room rates by 18.3% and 16.3% from financial year 2022 and financial year 2020, respectively.
Meanwhile, Laurelle McDonald, the chief financial officer, said: “Notwithstanding the upward trend in trading and return to normalised travel patterns, the group remains heavily exposed to the South African economy, which faces slow GDP (gross domestic product) growth, high unemployment and a lack of policy certainty and solutions to the country’s ongoing energy crisis from government.
“The continuous load shedding has a detrimental impact on consumer and corporate sentiment,” she said.
“Given our learnings from the pandemic, the group can quickly reduce costs in response to revenue contraction and after the refinancing of the group’s debt package and significantly reduced debt levels, a short to medium-term retraction in occupancy no longer poses an existential threat to the group,” she said.
BUSINESS REPORT