Gaming profits take a hit at Sun InternationalComment on this story
The rise in foreign tourism, encouraged by the weak rand, helped Sun International to increase revenue by 4 percent to R5.4 billion in the six months to December last year.
But the interim dividend of 90c a share was down from R1.10 last year, mainly due to a drop in profits from gaming.
Gaming profits took a knock because escalating costs outstripped the pace of revenue growth and were hurt by bans on smoking in casinos in South Africa and in Chile. This is being mitigated by the introduction of open air smoking decks.
Chief executive Graeme Stephens said yesterday that other difficulties were being overcome to an extent by “various revenue enhancing and cost savings initiatives”.
But a more comprehensive restructuring to avoid redundancies, which aimed at having more staff on duty at the busiest periods, was being negotiated.
“The proposed [restructuring] follows a comprehensive and thorough review of the group’s South African operations, with a focus on becoming more productive and efficient, improving revenues and profitability. The initial assessment has identified about 1 700 positions that could be affected if a full restructure were implemented,” Stephens said.
Revenue in local currency from Nigeria, where Sun International was one of the first to recognise demand from business travellers and for gaming opportunities, was 9 percent lower than last year as a result of competition from two new five-star hotels in Lagos.
The group was increasing its presence in South America, where it would open a casino in the Trump tower development in Panama in September. It had also identified opportunities in Colombia and was looking for more in Chile and Peru.
Overall casino income was little changed from last year at R4.2bn. In South Africa, there were improved performances from Sun City, where revenue was 10 percent higher than last year at R720m, GrandWest in Cape Town, where revenue rose 8 percent to R999m, and the enlarged Boardwalk in Port Elizabeth, where revenue rose 18 percent to R278m.
Revenue from the Royal Livingstone and Zambezi Sun hotels on the Zambian side of the Victoria Falls was 18 percent more than last year at a combined rand value of R115m.
Stephens said: “We’re feeling optimistic about the second half of this financial year.”
Public hearings would he held in the first week of April into Sun International’s application to close its Marula casino and transfer the licence to a new one to be built in the suburb of Menlyn Mayne, on the eastern side of Pretoria.
The proposal, which includes a theatre, shops and a hotel, has drawn objections from ratepayers’ organisations in the area, partly because of its proposed location near a school. Sun International shares closed 10c stronger at R93.50 on the JSE yesterday, after initially falling as low as R89.