Sun International braces for knock from new travel ban
• Group says it has not quantified effect of coronavirus
The travel ban from high-risk countries is set to hit Sun International, especially its five-star Table Bay hotel in Cape Town, as it relies heavily on tourism, says CEO Anthony Leeming.
On Sunday, President Cyril Ramaphosa announced a travel ban from high-risk countries such as Italy, Iran, South Korea, Spain, Germany, the UK and the US with effect from March 18 to prevent the spread of the coronavirus. Ramaphosa also imposed a number of restrictions, including limiting large gatherings to 100 people.
Speaking after the release of the listed resort and casino group’s results for the year ended December 31, Leeming said the travel restrictions would have an effect on financial performance. “We are going to have a loss of income,” he said.
About 80% of the Table Bay hotel’s guests were foreign tourists, he said.
Leeming said the prohibition of gatherings of more than 100 people was unlikely to affect the group’s gaming business. “We do not believe it restricts us because there are no crowds at the tables,” he said.
Gaming is the largest contributor to Sun International’s income at 72%.
Sun International owns a number of hotels and casinos around SA. These include the Sun City resort in North West and The Maslow hotel in Sandton, Johannesburg
“While it is still too early to forecast what impact the coronavirus might have, we are taking all necessary precautions to ensure a safe and healthy environment for our guests and staff and preparing operations for any possible disruption to trading,” Sun International said.
The group’s share price lost 15.19% to R20.27 on Monday. “The market is in a panic mode. No-one knows how long we are going to have these challenges. We are comfortable that we are managing the business well,” Leeming said.
The travel ban comes as the group battles a tough trading environment that includes low GDP growth and high unemployment.
In the year to end-December, Sun International’s total income increased by 4% to R17.2bn.
Adjusted headline earnings increased 109% to R763m while adjusted headline earnings per share went up by 91% to 605c per share. Income increased by 2%.
Sun International reported increases in income from the flagship Time Square property (15%), Sibaya casino in KwaZuluNatal (6%), SunSlots (13%) and SunBet (82%).
“This was partially offset by weaker performances at
GrandWest and Sun City, the latter of which is in the early stages of a full operational turnaround plan,” the company said.
Sun City experienced difficult trading conditions, with income down 4%. “Trading for the year was volatile with a difficult start to the year following the December hailstorm which resulted in us being unable to capitalise on the peak season.”
Due to continued underperformance, Sun International said The Maslow was impaired for R163m. Leeming attributed the poor performance to lack of demand.
Income from Sun International’s Latin American operations was up 8% to R5.4bn. The income included contributions from the recently acquired Thunderbird Resorts in Peru (acquired in April 2018) and the Park Hyatt Hotel and Casino in Mendoza, Argentina (acquired in July 2018).
Without these acquisitions, income from Latin American operations was up 1% to R4.6bn
Leeming said the Latin American operations performed below expectations mainly due to civil protests that erupted across Chile.