Sun International braces for travel ban knock
The hotel and casino group says it has not quantified the financial impact of the coronavirus
The travel ban from high-risk countries is set to hit Sun International, especially its five-star Table Bay hotel in Cape Town, as the group relies heavily on foreign tourists, says CEO Anthony Leeming.
On Sunday, President Cyril Ramaphosa announced a travel ban from high-risk countries such as Italy, Iran, South Korea, Spain, Germany, the UK and the US with effect from March 18 to prevent the spread of the coronavirus which is wreaking havoc across the world. Ramaphosa also imposed a number of restrictions, including limiting large gatherings to 100 people.
Speaking after the release of the listed resort and casino group’s results for the year ended December 31, Leeming said the travel restrictions would have an impact on financial performance. “We are going to have a loss of income,” he said.
About 80% of the luxury hotel’s guests were foreign tourists, he said.
Leeming said the prohibition of gatherings of more than 100 people was unlikely to affect the group’s gaming business. “We do not believe it restricts us because there are no crowds at the tables,” he said.
Gaming is the largest contributor to Sun International’s income at 72%.
Sun International owns a number of hotels and casinos around SA. These include the Sun City resort in North West and The Maslow Hotel in Sandton.
“While it is still too early to forecast what impact the coronavirus might have, we are taking all necessary precautions to ensure a safe and healthy environment for our guests and staff and preparing operations for any possible disruption to trading,” Sun International said.
The group’s share price lost 15.19% to R20.27 on Monday. “The market is in a panic mode. No-one knows how long we are going to have these challenges. We are comfortable that we are managing the business well,” Leeming said.
The travel ban comes as the group battles a tough trading environment, which includes low GDP growth and high unemployment.
In the year to end-December, Sun International’s total income increased by 4% to R17.2bn. Adjusted headline earnings increased 109% to R763m while adjusted headline earnings per share went up by 91% to 605c per share. Income increased by 2%.
Sun International reported increases in income from the flagship Time Square property (15%), Sibaya casino in KwaZulu-Natal (6%), SunSlots (13%) and SunBet (82%).
“This was partially offset by weaker performances at GrandWest and Sun City, the latter of which is in the early stages of a full operational turnaround plan,” the company said.
Sun City experienced difficult trading conditions, with income down 4%. “Trading for the year was volatile with a difficult start to the year following the December hailstorm which resulted in us being unable to capitalise on the peak season.”
Due to continued underperformance, Sun International said The Maslow was impaired for R163m. Leeming attributed the poor performance to lack of demand.
In the year, Sun International reduced South African debt from R9.2bn at December 31, 2018 to R8.8bn. Net debt in Latin America reduced from R4.9bn to R3.9bn.
Income from Sun International’s Latin American operations was up 8% to R5.4bn. The income included contributions from the recently acquired Thunderbird Resorts in Peru (acquired in April 2018) and the Park Hyatt Hotel and Casino in Mendoza, Argentina (acquired in July 2018).
Without these acquisitions, income from Latin American operations was up 1% to R4.6bn, while adjusted earnings before interest, taxes, depreciation and amortisation decreased 11% to R1.2bn.
Leeming said the Latin American operations performed below expectations mainly due to civil protests that erupted across Chile.
SA contributes 67% of Sun International’s income, followed by Latin America at 31%. Nigeria and Eswatini contribute 1% each.
Correction: March 17 2020
An earlier version of this article referred to Sun International's CEO as Anthony Lemming