SOUTHERN Sun yesterday declared its first ever dividend since listing after wealthy and international tourists helped to drive earnings in the full year to end March 2024, and said that a more certain government policy framework would boost hotel room occupancy.
Marcel von Aulock, the CEO of the multinational hospitality group, told Business Report in an interview yesterday there was potential to boost Southern Sun’s occupancy levels from the current 58.6% to around 65% with a better economic environment and more certain policy framework.
“We don’t want to be at 58.6% in terms of occupancy; we want to be somewhere in the mid sixties. The economy is in trouble. We need the South African economy to perform smoothly,” he said.
Southern Sun reckons that its current occupancy levels reflect “the low growth” economic environment.
However, the company is “optimistic that if there is certainty regarding government policy” and deeper public and private sector collaborations already initiated to solve the challenges facing the country, then the pent-up demand for travel and accommodation will begin to materialise.
With hotels in Gauteng and KwaZulu Natal, Southern Sun said it was primed to benefit from this.
“South Africa continues to benefit from strong international demand and this could be even stronger with the removal of visa restrictions to some markets and further activation of inbound air capacity to the country,” it said.
In the full year period to end March 2024, Southern Sun declared a 12.5 cents dividend per share, its first shareholder payout since listing on the JSE.
Shares in the company traded 5.02% stronger in the afternoon trade session on South Africa’s biggest bourse.
The stronger dividend yield for the period was driven by a stronger financial out-turn by the company which saw revenues climbing by 19% to R6 billion.
Earnings before interest, tax, depreciation and amortisation strengthened 32% to R1.9bn, and adjusted headline earnings per share soared by as much as 88% to 56.4 cents.
Further support came from a share buyback scheme undertaken during the period worth R617m and a reduction in net debt to R1bn.
Rooms revenues for the company grew 23% during the period under review to R4.1bn, “supported by average room rate growth which has increased by 9%” and a 15% heightening in food and beverage revenue, which amounted to R1.5bn.
Property rental income for the company was also 17% stronger at R229m.
Market watchers said yesterday that Southern Sun had “surprisingly” paid a dividend despite reducing its debt by R500m in the past half year, reflecting “absolute cash generating” capacity by the group.
The group’s Sandton segment, encompassing the Sandton Sun and Towers complex, the Garden Court Sandton City and its management of the Sandton Convention Centre, top performed.
“These hotels have been star performers in Gauteng thanks to their location and the increased demand for events and conferencing at the Sandton Convention Centre,” said Southern Sun.
“The Sandton Towers is currently undergoing a full bedroom and corridor refurbishment which is expected to be complete by November 2024.”
In Cape Town, increased foreign inbound travel and large-scale conferences and events across all segments boosted demand for the company, helping drive up volumes and growth in accommodation services.
However, the austerity measures put in place by National Treasury to reduce government travel expenditure had an impact on the group’s hotels along the Durban beachfront.
There was resultantly a notable dip in groups and conferencing demand from government functions at Southern Sun’s hotels in Durban.
Nonetheless, the company has acquired additional land adjacent to one of its existing hotels in Umhlanga for R36m.
The land has been earmarked for future development, with Umhlanga seen as a “key growth node” for the group.
BUSINESS REPORT