GAME CHANGER: Sun International turns corner with higher revenue, lower debt
JOHANNESBURG – Sun International impaired R306 million of the value in its flagship Sun City hotel in North West in the year ended December as the group turned the corner with higher revenue and lower debt.
The JSE-listed hotel and gaming group said on Monday that Sun City’s income declined 3 percent during the period as a result of the difficult trading environment.
“Occupancy was partly impacted by the severe hailstorm on December 15 last year, which resulted in the resort temporarily losing a number of rooms,” said the company, adding that the hotel was hit with a R25m business interruption claim as a result of the storm.
Sun City rooms revenue fell 1 percent compared to the prior year with occupancy down 5 percent at 67 percent and the average room rate up 3 percent at R1 823.
The group said the lower income and the high fixed cost base brought down adjusted earnings before tax, depreciation and amortisation (Ebitda) 14 percent compared to the corresponding period in 2017.
It said it was also dealing with loss-making casinos and had commenced the restructuring of Boardwalk in Port Elizabeth and Carousel in North West.
Sun International said it raised R1.3 billion in income and R305m in adjusted Ebitda from the Time Square in Menlyn, Pretoria.
“Casino market share for the year was at 13.5 percent although for the second half of the year market share was 14.2 percent, reflecting steady growth, which has continued in the early part of 2019 where revenue for January and February were up 9 percent and 32 percent respectively,” the company said.
It said the hotel achieved occupancy of 48 percent at a room rate of R1 197. Time Square’s casino income was up 19 percent in the second half of the year.
“With the opening of the Maslow Hotel in April 2018, Time Square is now fully operational and we anticipate that it will continue to gain further market share and achieve strong growth in revenue and Ebitda.”
The group’s attributable share of the losses from Time Square increased to R310m from R254m in the prior year resulting in continuing adjusted headline earnings operations declining to R472m from R485m, 3 percent below the prior year.
The financial highlight included a 7 percent growth in revenue last year to R16.4bn and slashed debt to R9.2bn from R11.4bn at December 2017.
The board decided not to declare and pay a dividend for the year under review as a result of the continued focus on reducing debt levels.
Group adjusted headline earnings per share was up 4 percent to 316 cents. The company said while it was encouraged by government’s positive steps to combat corruption and boost the economy, it did not believe this would have a material impact on the economy in the short term.
“As a result we expect continued pressure on disposable income for the South African consumers. While these are factors beyond our control, for our part we will continue to work hard on maximising efficiencies and reducing costs in an economic environment that is demanding the very best of us.”
Sun International rose 1.37 percent on the JSE on Monday to close at R57.11.