Faced with lethargic growth in the South African market, Sun International had diversified into new markets, most notably in Latin America, beginning in Chile 10 years ago. It was hoped this would offset slow growth in the South African market.
But with the immediate need to reduce debt, Sun International yesterday announced the closure of the Fish River Sun resort near Port Alfred, Sun Nao Casino in Colombia and the International VIP Business in South Africa and Panama.
Sun International chief executive Anthony Leeming said the group had closed the Fish River Sun in November, following land claims on the property.
He said the group would also downscale the Ocean Sun Casino in Panama by cutting staff numbers.
Leeming said the company had also applied to the Eastern Cape Gaming Board to restructure the Boardwalk Casino in Port Elizabeth.
Sun International said it would address performance problems at Carousel Casino in the North West and Naledi Sun Hotel and Casino in the Free State.
De Wet Schutte, an analyst at Avior Capital Markets, yesterday said that the move to close some of the businesses was expected.
“These businesses have been a drag on the overall performance of the company for years now. It is absolutely reasonable for the company to focus on profitable businesses,” Schutte said.
In its results for the year ended December 31, Sun International said some of its recent investments, such as Time Square in Pretoria, had performed below expectation.
But Schutte said Time Square, which opened in November last year, needed more time. “It has not been a year since it started operating. It has performed below expectation, but it needs a bit of time,” he said.
The underperformance of some of the company’s businesses had increased the group’s debt levels and debt ratios, Sun International said.
Sun International last month announced a decision to raise R1.5billion through a rights offer to reduce the company’s debt.
At December 31 last year, Sun International’s borrowings were R15bn.
Leeming said the rights offer was an appropriate course of action for the company.
In the year ended December 31, Sun International’s revenue increased 12percent to R15.6bn.
Earnings before interest, tax, depreciation and amortization was up 13percent to R4bn, while adjusted headline earnings per share were down 41percent to 298cents a share.
The company did not declare a dividend, “given the need to reduce the high debt levels”.
Sun International shares on the JSE were yesterday down 2.52 percent at R58 a share.
- BUSINESS REPORT