Pleasing expansion in SA keeps the Sun shining
This after restructuring and despite unexpected social unrest that disrupted the group operations in South America. Total income increased by 3.7percent to R17.2billion, driven by organic growth from key operations in South Africa, and the impact of acquisitions made in Latin America the prior year, the group said in a trading statement on Friday.
Adjusted earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (Ebitdar) was marginally up on the prior year at R4.6bn, with “pleasing” margin expansion in South Africa, offset by the impact of social unrest in Chile.
In South Africa, total income increased 2percent to R11.5bn, with Ebitdar rising 4percent to R3.3bn. The Ebitdar margin improved to 28.7percent from 28percent in 2018. This was driven by the ramp-up of the flagship Time Square property, above-market growth at Sibaya, SunSlots and SunBet and margin improvement.
There was a slightly weaker performances at GrandWest and Sun City, which were in the early stages of full operational turnaround plans.
During the second half of the year, a simplified head office and operational structure was implemented, with a renewed focus on different customer-end markets.
“The revised structure will enhance focus on the guest experience, operational efficiencies, as well as support continued margin improvement at our casino and hotel properties,” the group said.
The effective tax rate reduced with most of the deferred tax asset relating to Time Square being recognised.
External South African debt amounted to R8.8bn, reflecting a R384m net reduction after acquiring the minority interests in Sibaya for R593m.
In South America, Sun Dreams’ operations were resilient despite social unrest in Chile in the last quarter of 2019 and which caused the curtailment of certain operations, damage to several properties and significant deterioration in trading conditions in October and November.
Sun Dreams’ Ebitdar was down 5percent to R1.29bn. The contribution from the Chilean operations was down 12percent, partially offset by full year contributions of the Mendoza Hyatt (Argentina) and Thunderbird (Peru) acquisitions in 2018.
Sun Dreams’ operations continued to de-gear and strengthen its balance sheet. Net debt in Latin America reduced to R3.8bn from R4.3bbn.
Directors said they made “significant progress” in delivering. Key priorities were to protect and leverage the portfolio, accelerate de-gearing, deal with loss-making units and investing in quality, growth assets.
Its annual results are expected to be released on March 16. Group basic earnings per share were expected to be between 475c and 570c compared with the prior corresponding period’s loss of 6c per share, an increase of more than 100percent.
Headline earnings per share were expected to between 580c and 622c compared with the prior corresponding period’s headline earnings profit of 213c, an increase of between 172 and 192percent.
The share price was up 1.1 percent at R30.54 on the JSE Friday afternoon, before closing 4.13percent stronger at R31.50.