Sun International, the hotel chain and casino group says that the Covid-19 pandemic had a significant impact on its business for the year ended December 2020, with group adjusted headline earnings down from R763 million to a loss of R1.1 billion, and an adjusted headline loss of 633 cents per share.
Income from continuing operations declined by 49% from R11.8 billion to R6.1 billion and continuing adjusted EBITDA reduced by 72% from R3.2 billion to R897 million, it said.
For the first six months of the year in South Africa, income declined by 55% to R2.5 billion compared to the prior corresponding period, with adjusted EBITDA down by 95% to R80 million.
With the resumption of trading of most operations from 1 July 2020, income and adjusted EBITDA improved steadily throughout the remaining six months until the move to an adjusted level 3 lockdown, the imposition of the 8pm curfew and alcohol sales ban in mid-December 2020.
This led to a significant drop in activity and cancellation of bookings for the second half of December 2020 and into January 2021, the group said.
Overall income from the South African operations declined by 48% from the prior year to R6 billion with adjusted EBITDA down by 70% to R984 million.
As a result of the extended lockdown and anticipated slow recovery, Sun International incurred impairment charges of R1.3 billion – being Sun City (R900 million), Boardwalk (R180 million), The Maslow Sandton (R96 million), intangible assets of R72 million, and other individual assets of R9 million.
For South Africa, casino income slumped to R4 billion, down 50% from 2019, while rooms revenue declined 38% to R368 million, and food and beverage revenue dropped 37% to R335 million.
The group said that despite the extensive restrictions on trading, South African casino income showed a positive trend in the second half of the year and increased as a percentage of 2019 from 52% in the third quarter to 71% in the last quarter of 2020.
“Our casino market share since the lifting of the lockdown in the competitive Gauteng and KZN markets increased to 28.4% and 39.6% respectively which was 2.5% and 2.0% higher compared to the prior corresponding period in 2019.”
The South African hotel industry continues to be significantly impacted by the effects of the Covid-19 pandemic and the associated lockdown, it noted.
“While the hotel industry has re-opened for domestic leisure and business travel, trading levels remain severely muted. International travel for business and leisure purposes resumed on 1 October 2020 albeit with strict restrictions in place.”
Sun City re-opened on 2 September 2020, The Maslow Sandton on 1 October 2020 and The Table Bay Hotel at the beginning of November 2020.
“The easing of lockdown restrictions to level 1 increased domestic leisure travel demand into our resort destinations such as Sun City and the Wild Coast Sun. The Sun Vacation Club at Sun City performed well under these trading conditions achieving occupancies of 79%,” the group said.
Midweek demand from the corporate transient and Meetings, Incentives, Conventions and Exhibitions (MICE) segments remains weak, however.
This, it said, is due to the restrictions on numbers allowed for gatherings and meetings. In addition, there is still limited corporate travel into Sandton and Menlyn, which is affecting midweek occupancies at these two properties.
“We expect a slow recovery from our international business segment which will impact trading at The Table Bay in Cape Town and at The Palace at Sun City.
“Food and beverage income remains well below the prior year due to the closure of certain outlets, lower occupancies and the various Covid-19 restrictions. We have however been able to manage costs with employees either being laid off or working reduced hours,” Sun International said.
Prior to the Covid-19 pandemic, the group said that management was in the process of reviewing employee structures as well as the cost base across the local South African operations.
The South African Central Office restructure was concluded in February 2020 resulting in a head count reduction of 63 and realising a TCOE saving of approximately R50 million per annum.
In June 2020, Sun International informed its trade union, SACCAWU that it was embarking on a Section 189A retrenchment exercise. The retrenchment impacted 2,195 employees across the group, with an estimated TCOE reduction of R291 million.
This retrenchment exercise particularly impacted Sun City, The Maslow Sandton, Boardwalk, The Table Bay and the Wild Coast Sun, which would likely have occurred irrespective of the Covid-19 pandemic.
The entire process was finally completed at the end of 2020.
“The closure of our operations gave us the chance to undertake an in-depth review of our processes, operating structures, systems and guest offering and experience. This review resulted in the identification of costs savings in outsource and service provider contracts, IT systems and other general costs of over R250 million in South Africa,” Sun International said.
During 2020, the group appointed a property broker to dispose of its Carousel property, which was severely impacted by the opening of Time Square. “We have received various expressions of interest and are working closely with the brokers to secure a sale of the property,” it said.
At the onset of the pandemic and lockdown, it also took the decision to cease trading at Naledi Sun in Bloemfontein. Subsequently the casino licence was surrendered to the gambling board and its employees retrenched, the group said.