ANSWERING questions after presenting record annual results to investors, Southern Sun CEO, Marcel von Aulock, confirmed the group had bid for the continued lease of the Southern Sun Elangeni & Maharani hotel on Durban’s Golden Mile. The 50-year lease Sol Kerzner signed with the city is due to expire at the end of 2025. Von Aulock said Southern Sun was the only bidder, a situation Moneyweb confirmed with the eThekwini Municipality.
Regarding Southern Sun’s Durban beachfront hotels, Von Aulock told Moneyweb, “Our leased hotels [of which there are seven] represent about R150 million of the group’s annual Ebitdar, which equates to less than 10% of the group’s overall Ebitdar.”
On 702’s Money Show, Von Aulock told Bruce Whitfield on 22 May that Durban’s PR is worse than what reality is when you’re there and that “it’s not that hard to solve Durban’s problems”. He said that the group trades well in those hotels.
Von Aulock expressed disappointment at the group’s “under-supply” in Umhlanga. He said the group didn’t have enough stock in Umhlanga and had been “too slow”. He told Whitfield that the group had bought another site on the [Umhlanga] Ridge, and it would also be expanding the Beverly Hills Hotel.
Southern Sun would not comment further on these projects.
Back to the results
“Our significant exposure to the Western Cape and Cape Town specifically, which enjoyed a strong tourism, business travel and event-related year contributed to revenue growth of 19%,” Von Aulock said.
“Internal discipline on maintaining the cost efficiencies achieved from the complete restructuring of the group in response to the Covid pandemic, has translated to record profitability with the group achieving Ebitdar growth of 32% to R1.9 billion and Adjusted HEPS of 56.4 cents, up 88% from the prior year. In addition to buying back just under 10% of the shares in issue, we are pleased to announce our first dividend declaration of 12.5 cents per share.”
Luxury hotel guests have proven more resilient to prevailing economic pressures such as inflation and rising interest rates, being influenced more by location and personal preference rather than price.
Aided by more normalised demand from local and international travellers and strong demand for conferencing and events, group occupancy at 58.6% for the year ended 31 March 2024, has increased by 7.1 percentage points (pp) compared to 51.5% in the prior year but is still 0.7pp below the 59.3% achieved for 31 March 2020, being pre-Covid-19.
This shortfall in occupancy largely relates to hotels in individual nodes, in South Africa and offshore, which have not yet fully recovered but are showing signs of improvement and present a focus area for management.
On the outlook for the group Von Aulock said: “Tourism internationally is booming, and 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. The middle-income international traveller has not recovered to pre-Covid-19 levels and represents an opportunity with the high levels of operational gearing in the business resulting in a substantial flow through to Ebitdar, even at reasonable revenue growth.”
The group will continue to pursue its strategy of getting more out of its irreplaceable hotel portfolio by allocating capital to key properties so that they remain best-in-class and our customers’ preferred accommodation provider. Refurbishment programmes are currently underway at the Sandton Towers, the Southern Sun Sandton, the Southern Sun Rosebank and Southern Sun Cullinan. In addition, refurbishment plans are progressing for a number of other hotels with various mock-up rooms in progress.
Highlights of results to year end 31 March 2024
- Revenue up 19% to R6.0 billion
- Ebitdar up 32% to R1.9 billion
- Adjusted HEPS up 88% to 56.4 cents
- Net debt reduced to R1.0 billion
- Share buybacks of R617 million
- Dividend per share of 12.5 cents per share
