SOUTH AFRICA:Sun International reduces losses as Sun City remains a key focus for future growth

  • 02 September 2021 / News / 123 / Fares RAHAHLIA

SOUTH AFRICA:Sun International reduces losses as Sun City remains a key focus for future growth

Sun International has published its interim results for the six months ended June 2021, reporting a loss of R59 million for the period.

While this is reduced significantly from the loss of R1.4 billion experienced over the same period in 2020, the group’s operations remain under pressure due to lockdown restrictions imposed on the tourism sector to curb the spread of Covid-19 in South Africa.

Income from 2021 continuing operations increased by 51% from R2.5 billion to R3.8 billion, while adjusted headline earnings improved from a loss of R885 million in the prior comparative period to a loss of R7 million, with an adjusted headline loss of 3 cents per share.

In South Africa, overall income from operations improved by 52% from the prior comparative period to R3.7 billion.

“With the easing of adjusted alert level 3 restrictions on 1 February 2021 and return to alert level 1 restrictions on 28 February 2021, income and adjusted EBITDA improved steadily throughout the period,” the group said.

Sun International highlighted several key issues affecting its operations over the period:

  • The imposition of curfew hours;
  • The restrictions on the serving of alcohol;
  • Limited capacity resulting from machines being switched off, caused challenges during peak periods.

“While the hotel industry has re-opened for domestic leisure and business travel, trading levels remain severely muted. International travel for business and leisure purposes resumed on 1 October 2020, albeit with strict restrictions in place and limited demand.

“Food and Beverage income remains well below the prior year due to the closure of certain outlets, lower occupancies and the various Covid-19 restrictions,” the group said.

Sun International said it has been able to manage costs, though this has come with employees either being temporarily laid off or working reduced hours. In August 2020, Sun International launched a Section 189 retrenchment process, which ultimately affected 2,195 employees.

This retrenchment exercise impacted Sun City, The Maslow Sandton, Boardwalk, The Table Bay Hotel and the Wild Coast Sun.

The company has seen its employee base decline to 7,000 people in South Africa, from 9,340 in 2019.

Further cost savings were identified in outsourcing and service provider contracts, IT systems, marketing, and other general costs of approximately R309 million, it said.

Sun City

Sun City is by far the largest contributor to Sun International’s hotel, casino, and resorts portfolio, ending the reporting period in the red.

While the easing of lockdown restrictions to alert level 1 during the period under review increased domestic leisure travel demand to the resort, the various restrictions on inter-provincial and international travel have had a significant adverse impact on revenues, Sun International said.

Revenue totalled R442 million for the period, with adjusted EBITDA showing a loss of R88 million. Sun City’s adjusted loss for the period was R194 million, reduced from a loss of R251 million in the same period in 2020.

Despite this, the resort remains a key focus area, Sun International said, with the group working alongside the North West provincial government to develop both the destination’s facilities and the surrounding areas.

In April 2021, Sun City’s management announced that it concluded meetings with the provincial government where it laid out plans for the resort, which include expanding the establishment with a new hotel to attract more visitors for sports, conferencing, arts and cultural activities or leisure, among others.

The group said that its main focus in the short term is on the recovery and growth in the domestic leisure and gaming market segments, and focusing on international groups which travel in larger numbers (200-plus people) and who spend more.

“The North West provincial government has given its full commitment to supporting our initiatives. In this regard, the government has acknowledged the need to invest in road infrastructure as well as upgrade the facilities at the Pilanesberg Airport and the Pilanesberg Nature Reserve,” it said.

source: businiesstech