Southern Sun expects first-half earnings to rise by at least 20%

Southern Sun expects its first-half earnings to be at least 20% higher as trading volumes picked up marginally and group occupancy improved.

The group said in a preliminary update for the six months to end-September that trading volumes had improved marginally for the first five months of the 2025 financial year, with group occupancy at 57.1%, compared with 55.9% in the prior period.

The group’s average room rate has increased by 1.7% for the five-month period ending August 2024 from a year ago.

Despite the modest revenue growth in the first half, which was traditionally the group’s quieter period, savings in finance costs due to the reduction in debt levels contributed to the expected higher earnings, the group said.

The reduced number of shares in issue after the share buyback in the second half of the 2024 financial year meant that earnings per share (EPS), headline earnings per shares (HEPS) and adjusted HEPS for the first six months to end-September were expected to be at least 20% higher.

Southern Sun, which is valued at R9.3bn on the JSE, attributed the “subdued” trading statistics to three factors.

First, the 15th Brics Summit hosted at the Sandton Convention Centre during August 2023, and which led to substantial demand for accommodation at the surrounding hotels, did not repeat in the current financial year.

Second, the closure of Southern Sun The Cullinan for June and the Sandton Towers from April 26 to the end of the interim reporting period reduced the group’s available room stock, negatively affecting occupancy and rate, and consequently revenue.

These closures were necessary to complete major refurbishments that would relaunch the flagship properties as premium hotels in their respective markets, it said.

The third factor was a slowdown in travel and accommodation demand from the corporate, government and leisure segments in the lead-up to the elections in May.

While demand in this segment returned after the elections, the government segment was slower to normalise, which it expected to happen during the second half.

It said the recent announcements by the department of home affairs regarding the simplification of visa processes were encouraging for the local tourism industry.

The group, which owns hotels in SA, Mozambique, Zambia, Tanzania, Seychelles and the United Arab Emirates (UAE), plans to release its first-half earnings on November 21.

In May, the group reported a jump in full-year earnings as it benefited from the restructuring it started during the Covid-19 period and the exposure of its hotels in the Western Cape to a strong tourism, business travel and event-related year.

Its 2024 financial year adjusted HEPS jumped 88% to 56.4c and a final dividend of 12.5c per share was declared. The group described the year under review as “a record one for Southern Sun’s profitability”.

mackenziej@arena.africa