Tsogo Sun to re-evaluate business after results hit by inflation, load shedding

Tsogo Sun’s The Palazzo Hotel at Montecasino in Johannesburg. Photo: Supplied.

Tsogo Sun’s The Palazzo Hotel at Montecasino in Johannesburg. Photo: Supplied.

Published May 24, 2024


Nicola Mawson

JSE-listed Tsogo Sun will be re-evaluating some of its business units after it delivered less than sterling results in the year to March following headwinds which have burdened the local economy for the past two years.

The country’s largest hospitality group, which is 49.5% owned by Hosken Consolidated Investments, yesterday said it was hampered by load shedding and a lack of disposal income among South African consumers.

However, it said that “good progress” was being made in its solar panel installation, which will continue throughout the 2025 financial year.

Tsogo Sun’s income rose 2% to R11.5 billion, although it noted that “the cost of diesel and the adverse effect on income due to load shedding continued to negatively impact the group's results.”

It reported adjusted earnings before interest, tax, depreciation, and amortisation down 2% to R3.9bn, while adjusted headline earnings down 6% to R1.7bn, although adjusted headline earnings per share dropped 5% to 165 cents per share.

Headline earnings per share were up 11% to 169 cents per share.

In contrast, Southern Sun’s results, released the day prior, showed earnings before interest, tax, depreciation and amortisation growing 32% to R1.9bn, with adjusted headline earnings per share soaring by as much as 88% to 56.4 cents per share.

Excluding the hedge reclassifications to profit or loss in the year under review and the prior year, and the cost of the termination of the hotel management contracts in the prior year, the adjusted headline earnings would be R1.72bn for the current year, and R1.82bn for the previous one, said Tsogo Sun.

Tsogo, which owns Gold Reef City and Monte Casino, also highlighted that many costs increased, such as marketing and diesel, while its solar panel installation has not yet been sufficient to counter the continued higher than inflation energy costs.

However, its operations generated strong cash flow.

In terms of upgrading Emerald Hotel Resort and Casino which it bought in 2022, Tsogo anticipates that this will take another 18 months, but will yield a more sustainable business.

“Overall, fundamentals are in place to continue to deliver fairly strong levels of headline earnings and cash generation and several exciting projects are in process for future growth, although some of these are being frustrated by external parties,” Tsogo said.

It did not, in its results booklet, elaborate on who these external parties were.

The company declared a dividend of 40 cents per share.