Tsogo Sun Shines: Strong Profits, Unwavering Dividends, and Prudent Debt Management Fuel Optimism in Challenging Times

  • Financial Strength: Tsogo Sun Limited reported a 7% increase in total income, reaching R5.86 billion, showcasing robust performance.
  • Dividend Commitment: Despite challenges, the company declared an unchanged interim dividend of 30.0 cents per share.
  • Debt Management: Tsogo Sun demonstrated prudent debt management, reducing net debt and guarantees by 4% to R8.18 billion.
By Lethabo Ntsoane

In a recent announcement, Tsogo Sun Limited revealed its condensed unaudited consolidated interim financial statements for the six months ending 30 September 2023. The company, a key player in the South African hospitality and gaming sector, showcased robust financials, despite facing several challenges during the period.

Revenue and Operating Costs:

Total income for the stated period reached R5.86 billion, reflecting a commendable 7% increase. However, operating costs rose by 10% to R3.89 billion, indicating the impact of economic factors on the company’s cost structure.

Profitability Measures:

Despite the surge in operating costs, Tsogo Sun maintained a solid position in terms of profitability:

  • EBITDA: The company reported EBITDA of R1.97 billion, representing a modest 1% increase.
  • Headline Earnings: Impressively, headline earnings surged by 47% to reach R895 million.
  • Earnings per Share (EPS): EPS rose by 34%, reaching 85.9 cents.
  • Headline Earnings per Share (HEPS): HEPS increased by 48%, standing at 85.8 cents.

Debt Management:

Tsogo Sun demonstrated prudent debt management during the reporting period:

  • Net Debt and Guarantees: The company reduced net debt and guarantees by 4%, amounting to R8.18 billion.
  • Debt Covenant Ratio: The net debt to adjusted EBITDA ratio remained at a comfortable 2.0 times, aligning with the group’s requirement of maintaining a ratio below 3.0 times.

Financial Challenges:

The financial achievements were not without challenges, as highlighted by the company:

  • Cost of Diesel: A notable expense during the period was the cost of diesel, amounting to R55 million.
  • Impact of Load Shedding: High levels of load shedding adversely affected the group’s interim position and profit margins.
  • Interest Costs: Higher interest costs of R54 million also contributed to a dip in headline earnings.

Dividend Declaration:

Despite the challenges, Tsogo Sun remained committed to its shareholders:

  • Interim Dividend: The Board of Directors declared an interim gross cash dividend of 30.0 cents per share for the period ending 30 September 2023.
  • Dividend Dates: The dividend, payable from distributable reserves, is scheduled to be paid on 18 December 2023. Shareholders are urged to take note of the important dates:
    • Last Date to Trade Cum Dividend: Monday, 11 December 2023.
    • Trading Ex-Dividend Commences: Tuesday, 12 December 2023.
    • Record Date: Thursday, 14 December 2023.
    • Payment Date: Monday, 18 December 2023.

Tax Implications:

Shareholders should be aware of the tax implications associated with the dividend:

  • The dividend is subject to a local dividend tax rate of 20%.
  • Non-exempt shareholders can expect a net dividend of 24.00000 cents per share.

Comparative Analysis:

To provide context to the financial results, it’s essential to consider the comparative period:

  • Adjusted Headline Earnings: Excluding the cost of terminating hotel management contracts in the prior period, adjusted headline earnings for the comparable period amounted to R896 million.

Market Response and Analyst Insights:

The financial results have sparked interest among market participants and analysts:

  • Market Performance: Tsogo Sun’s stock performance is expected to be influenced by these robust financials and the commitment to dividend distribution.
  • Analyst Recommendations: Analysts may assess the impact of load shedding and other challenges on the company’s overall performance and sustainability.

Corporate Governance and Responsibility:

Tsogo Sun emphasizes the importance of responsible corporate governance:

  • Board Responsibility: The board takes responsibility for the accuracy of the condensed unaudited consolidated interim financial statements.
  • Investor Caution: Shareholders are advised to base their investment decisions on the complete announcement, available on the group’s website.

Important Dates and Shareholder Information:

EventDate
Last Date to Trade Cum DividendMonday, 11 December 2023
Trading Ex-Dividend CommencesTuesday, 12 December 2023
Record DateThursday, 14 December 2023
Payment DateMonday, 18 December 2023
  • Share certificates may not be dematerialized or re-materialized from Tuesday, 12 December 2023, to Thursday, 14 December 2023, both days inclusive.

Conclusion:

Tsogo Sun Limited’s financial performance for the first half of 2023 showcases resilience amid economic challenges. While facing headwinds such as load shedding and increased costs, the company has managed to deliver strong results and maintain its commitment to shareholders through the declaration of an unchanged interim dividend. Shareholders and investors are encouraged to delve into the complete financial statements for a comprehensive understanding of Tsogo Sun’s performance.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo