Although it comes as no surprise that the hospitality and casino industries were badly impacted from the pandemic, it was still a difficult moment for the South African group, Tsogo Sun, to see its revenue drop nearly 74% year on year. The results were reported for the first half of its fiscal year – the six months ending September 30th, 2020. For the first quarter of the financial period, which began in April 2020, all Tsogo Sun businesses were closed because of COVID-19. Even now, they are not all fully operational, and those that have reopened, have done so in a staggered and restricted capacity.
Some of the highlights from the Tsogo Sun H1 2020 revenue report
- Revenue for the six months fell to R1.57 billion.
- Gaming revenue made up the vast majority of the total.
- Casinos contributed R1.15 billion of the total.
- Tsogo Sun’s Galaxy Bingo chain reported revenue drops of 75% to R117 million.
- The food and beverage business saw business drop 93.6% to R21 million.
- Revenue from 14 of the group’s hotels was down 91.2% to R22 million.
- Revenue from entertainment facilities (theme parks, cinemas, etc.) drop to R17 million.
According to Tsogo Sun: “Government’s regulatory restrictions such as the curfew, limited capacity and ban on alcohol sales, had a substantial negative impact on the results for this interim reporting period.”
Cautious Optimism in October 2020
Looking ahead, Tsogo Sun reported that it has already seen its businesses delivering a “solid” performance in October 2020, due to the relaxing of the government curfew. “With reduced levels of revenue due to restricted trading, offset by a lower cost base, only essential capex to be spent and no dividends paid to shareholders, we are of the view that debt levels can be reduced significantly by September 2021,” Tsogoadded.
Tsogo Sun Welcomes Lifting of International Travel Ban
In the meantime, Tsogo Sun, along with the rest of South Africa’s hospitality and casino industries, welcomed the lifting of the international travel ban, as announced by President Cyril Ramaphosa. The group said that this move would certainly provide relief to the tourism sector, as international travelers will be able to return to South Africa.
Tsogo Sun May Need to Cut Jobs
However, Tsogo Sun has made it clear that the current situation may force it to cut jobs at some of its properties.
“The UIF temporary employer/employee relief scheme has been of great assistance in alleviating the cash flow burden on both the company and its employees, while hotels have been closed or operating at low occupancy levels. The group has processed R103 million in grants over the period.”
“However, with this assistance coming to an end and with occupancy levels unlikely to improve in the short term, the group will have to consider further operational restructuring to align headcount with trading levels,” Tsogo Sun said. While Tsogo Sun is encouraged by the country’s move to level 1 of the lockdown, it is currently trading at 68% of its hotels, and the recovery of the industry is expected to be a slow one.