Sun International sees “credible results” as lockdowns ease, says CFO Norman Basthdaw
The hospitality company has seen significant improvements following the easing of Covid-19 restrictions.
Sun International has delivered a “credible result” for the half year ended 30 June 2021, reporting an increase in adjusted EBITDA from R89 million to R749 million.
The group also managed to significantly reduce its debt by R3.5 billion from R11.1 billion at June 2020 following the successful completion of its R1.2 billion rights offer in July 2020 and the disposal of its 64.94 percent equity interest in Sun Dreams for US$160 million (approximately R2.3 billion) in November 2020.
CFO Norman Basthdaw says the results demonstrate the benefits of achieved cost savings, efficiencies and continued deleveraging. “The performance was achieved despite the extremely challenging South African trading environment, which saw businesses either locked down or operating under significant and varied restrictions as a result of the Covid-19 pandemic.”
The hospitality and entertainment industries thath Sun International operate in were especially affected during the various lockdown levels of Covid-19, having only been allowed to operate at adjusted levels two and one.
Norman explains that the group has successfully concluded and settled its Covid-19 business interruption insurance claims for five of its operating units, the proceeds of which were R235 million. He also anticipates that the group’s remaining claims will be settled shortly for an approximate amount of R260 million, bringing its total claims to approximately R500 million.
“With the easing of adjusted alert level three restrictions on 1 February 2021 and return to alert level one restrictions on 28 February 2021, income and adjusted EBITDA improved steadily throughout the period,” Norman says.
Overall, he explains that Sun International’s income from its South African operations improved by 52 percent to R3.7 billion compared to the prior comparative period, which was characterised by various hard lockdowns.
Norman adds that casino income across the group’s South African operations increased by 61 percent for the period despite the impact of Covid-19 restrictions. “Trading was impacted by, inter alia, the imposition of curfew hours and the restrictions on the serving of alcohol,” he says. “The limited capacity resulting from slot machines being switched off caused challenges during peak periods.”
He explains that Sun International’s online sport betting business is also on a growth trajectory after sports were able to resume after the easing of lockdown restrictions, which is “an exciting strategic prospect for the group”.
The easing of lockdown restrictions during this time also meant there was an increase in domestic leisure travel demand into Sun International’s resort destinations, including Sun City and the Wild Coast Sun. Norman says that the Sun Vacation Club at Sun City performed relatively well under these trading conditions, achieving occupancies of 64 percent.
He adds that Sun International is investing in its current portfolio of casinos and hotels to ensure that it maintains “the Sun International standard”. The group is also investing in a new gaming system, hotel booking system and APP to ensure that it “enhances the customer experience”.
“The South African hotel industry continues to be significantly impacted by the effects of the Covid-19 pandemic and the associated restrictions and lockdowns,” Norman adds. “While the hotel industry has reopened for domestic leisure and business travel, trading levels remain severely muted.”
He adds that, despite international travel for business and leisure resuming on 1 October 2020 under strict restrictions, there has been limited demand in this area. “Midweek demand from the corporate transient and meetings, incentives, conventions and exhibitions (MICE) segments remain weak. This is due to the restrictions on numbers allowed for gatherings and meetings.”
In addition, he says there is still limited corporate travel into Sandton and Menlyn in Johannesburg, which is affecting midweek occupancies at these properties.