Tsogo Sun forecasts a slow recovery


Tsogo Sun forecasts a slow recovery


Published Date: 2020-11-16 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tsogo Sun forecasts a slow recovery

The hotel operator, which is buying out Hospitality Property Fund, says uncertainty and the weak economy will continue to weigh on the sector.

Tsogo Sun Hotels says its interim results clearly reflect the devastating impact that Covid-19 and the accompanying lockdown regulations have had on the hospitality industry in general and it in particular. Despite the recent move to level 1 lockdown restrictions, it says the recovery of the hospitality industry is likely to be slow due to the uncertainties around the health of travellers, and the negative economic impact on government, corporates and individuals leading to reduced spend on hotel accommodation and conferences.

Tsogo Sun Hotels, which owns the Southern Sun and Garden Court brands, said its entire portfolio of hotels in SA, the rest of Africa and the Seychelles was deactivated at the height of the lockdown, with the exception of hotels designated as quarantine facilities or accommodation for essential service workers and people waiting repatriation. It took steps to reduce costs, including the temporary layoff of staff in order to materially reduce pay for all levels including executive management and board directors. While about 68% of the hotels in its portfolio were trading again, it said it would continue operating on reduced staffing levels until demand returned.

The hotel operator processed about R103 million of grants under the UIF Temporary Employer/Employee Relief Scheme (TERS). However, with that coming to an end and occupancy levels unlikely to improve in the short term, it said it would have to consider further operational restructuring to align its headcount with trading levels. It also received rental concessions with various landlords and negotiated reduced or extended payment terms with major suppliers.

Income slumped 84% to R335 million for the six months to end-September and earnings before interest, tax, depreciation, amortisation and rent costs swung to a R206 million loss from a positive R559 million last year. It reported a basic loss per share of 16.2c, down from earnings of 9.8c previously, while its adjusted headline loss came in at 39.1c per share from earnings of 13.3c last year. It hasn't declared an interim dividend.

Tsogo Sun said last week's announcement by President Cyril Ramaphosa that the ban on international travel to SA would be lifted, subject to strict health and safety protocols, was a positive step towards revising the tourism sector.

Last month, Tsogo Sun said it was going ahead with the full takeover of Hospitality Property Fund in a move the companies said will save on costs, simplify Tsogo's operating structure and give Hospitality shareholders shares in a more liquid stock. Hospitality owns a portfolio of 54 properties with more than 9,000 rooms across the country. Hotels owned by Hospitality and operated by Tsogo Sun Hotels make up the majority of both groups' economic value. Also, Tsogo now owns more than 75% of Hospitality's issued share capital.

Tsogo Sun's shares fell 2.8% to R1.75 on Friday. The results were released after the close of trade.


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