Tsogo Sun warns profits will fall due to tough economy

SA’s largest hotel group, Tsogo Sun, expects revenue to have marginally increased by between 1% and 3% for the year to end-March, it said on Thursday.

Trading during the first nine months of the group’s financial year was affected by the depressed macro-economic environment, both locally and with its African operations, and with demand by corporate and leisure groups, as well the transient traveller, showing little sign of recovery.

Earnings per share is expected to be between 84c and 89c lower.

The coronavirus pandemic has also made an impact on the group’s fourth-quarter trading, with international demand retracting as early as February 2020.

“The group’s entire portfolio, in SA, Africa and the Seychelles, has been deactivated with the exception of those designated as quarantine facilities or as accommodation for essential service providers, and persons awaiting repatriation,” Tsogo Sun said in a statement.

“Despite strict cost controls during the year to counteract the above-inflationary increases in administered costs, including property rates and utilities, the shortfall in revenue as a result of the decline in demand, which was further exacerbated by the Covid-19 pandemic, has meant that earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (ebitdar) are expected to decline by between 8% and 10%, and by 11% and 13% once the inorganic impact of the Sandton hotels are excluded,” the group said.

The share price jumped 8.15% to close at R1.46.

tsobol@businesslive.co.za