Southern Sun reports mixed trading results as occupancy rates improve in South Africa

Southern Sun has shared encouraging news ahead of its annual general meeting on Monday, reporting an uptick in trading volumes for the first five months of its financial year to March 31, 2026.

While the group's South African operations demonstrated notable growth, challenges persisted in its offshore segments, revealing a mixed performance overall.

In South Africa, the hotel group's occupancy rates climbed to 59.2%, representing a 1.6 percentage point increase from 57.6% in the same period last year. Accompanying this rise was a 6.7% increase in the average room rate, propelling room revenue growth to 9.7%. However, this positive trajectory was not mirrored across all geographical segments.

Southern Sun's share price slipped by 0.22% to 686 cents per share on Monday mornin, although this figure remains 31% higher than it was a year ago, highlighting the resilience of its market position.

Unfortunately, the group's offshore segment faced hurdles, with average occupancy dropping to 33.4%—a staggering 13.1 percentage points lower than the previous year’s 46.5%. The primary cause for this decline was the temporary closure of Paradise Sun in Seychelles for a major refurbishment, which commenced on April 1, 2025. However, the company expressed confidence in a strong recovery for the hotel’s trading as it reopens.

Maputo and Tanzania also grappled with weak trading conditions. In Maputo, the lingering effects of political unrest from December 2024 curtailed demand, while in Tanzania, the Southern Sun Dar es Salaam location has struggled to regain momentum since reopening in October 2024.

Despite these challenges, the group's overall occupancy edged higher to 57.8%, up from 57.1%, benefitting marginally from a 4% increase in average room rates and resulting in room revenue growth of 6.4%.

The South African operations particularly thrived, supported by robust demand in Eventing, Groups and Conferencing, especially in the Western Cape and Gauteng, although uncertainties surrounding government travel from corporate sectors contributed to moderated earnings growth.

The group's financial ecosystem is not without its cost pressures. Issues including increased IT expenditures, higher utility costs due to electricity tariff hikes, unexpected water shortages, and rising channel costs have weighed heavily on performance. Moreover, the closure of Paradise Sun is anticipated to impact earnings by about R30 million after tax for the first half of the year, although its reopening is expected to facilitate a return to profitability.

A reassessment of IFRS16 accounting policies will further influence the half-year results, registering a R14m taxed profit impact, while long-term perspectives remain optimistic without affecting the full-year outcomes. For September, trading conditions appear muted, with sporting events factoring into the anticipated dip when compared to last year.

Looking ahead, Southern Sun is focusing on refurbishments and enhancing its footprint. The group is progressing with several significant projects, including the redevelopment of Paradise Sun and various other properties in South Africa. There are exciting developments on the horizon in the Western Cape and KwaZulu-Natal, notably a joint venture in Cape Town for two new iconic mixed-use sites and ongoing plans for the Beverly Hills hotel's expansion.

Southern Sun's commitment to sustainable growth is further evidenced by its recent share repurchase of R79m at an average of R8.83 and a final dividend payout of R335m for the fiscal year ending March 31, 2025. This showcases the group’s robust financial capacity and dedication to return cash to shareholders, insisting that these projects will be realised through existing operational cash flows and facilities.

With full interim results set to be unveiled on November 19, stakeholders remain watchful for any signs of recovery and growth in a turbulent economic climate.

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