The Palace in Sun City, Sun International hotel. Picture: Supplied
The Palace in Sun City, Sun International hotel. Picture: Supplied

Sun International firms on the JSE as it turns corner to recovery

By Dineo Faku Time of article published Aug 31, 2021

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Shares in Sun International were firmer on the JSE on Monday after South Africa’s luxury hotel, casino and online sports betting operator turned the corner with less debt and improved income from its operations during the half-year ended June 2021.

Sun International, which operates Sun City, Table Bay Hotel and the Boardwalk among others, announced a more than 51 percent increase in income from operations to R3.8 billion from R2.5bn a year earlier with adjusted earnings before interest, taxation, depreciation and amortisation (Ebidta) to R739 million from R60m.

The share price leapt to a high of more than 4 percent yesterday, before moderating to 0.72 percent higher at R18.24 on the JSE.

Debt was slashed to R7.6bn from R11.1bn a year earlier, following the R1.2bn rights offer in July 2020, and Sun Latam’s disposal of its 64.94 percent equity interest in Sun Dreams for $160m (R2.76bn) to Chile’s Nueva Inversiones Pacifico Sur Limitada.

The group did not pay a dividend during the period under review.

“We are optimistic that with the various cost saving and efficiency initiatives implemented and a dedicated focus on improving the customer experience, the group will recover and resume delivering strong returns to shareholders,” said Sun International. A year earlier the group also restructured operations, resulting in 2 195 job cut.

“This retrenchment exercise particularly impacted Sun City, The Maslow Sandton, Boardwalk, The Table Bay Hotel and the Wild Coast Sun, which would likely have occurred irrespective of the Covid-19 pandemic,” said the group.

Greenshoots included an increase in casino market share in KwaZulu-Natal and Gauteng since the lifting of the lockdown and with the business generating an adjusted Ebidta of R67m for the period under review. The resorts and hospitality business incurred an adjusted Ebitda loss of R88m.

Total resorts and hospitality income was 21 percent higher than a year earlier although food and beverage income was still lower than the prior period due to the closure of certain outlets, lower occupancies and the various Covid-19 restrictions.

“We have, however, been able to manage costs with employees either being temporarily laid off or working reduced hours,” said the group.

Sun Slots posted an overall income of R608 million, up by R303m a year earlier, with adjusted Ebitda up from R56m to R152m for the period under review compared to the prior period.

Sun International was bullish about the recovery from the Covid-19 pandemic, saying the South African vaccination programme was ramping up and infection rates would hopefully reduce over time, boding well for the business.

The tourism sector has been in survival mode due to lockdowns to curb Covid-19.

Consultant at Euromonitor International Christele Chokossa said the group was able to benefit from a stronger recovery in casinos/gaming, which were less dependent on tourism activities.

She said the survival of tourism businesses was no longer just dependent on arrivals, but also on operators’ abilities to navigate the pandemic.

“Hence abilities to rebuild liquidity, and in this case, through divestment from Sun Dream, and fundraised through the right offerings were very important to improve efficiency in the operating system, reduce debts, and provide room for a better recovery.”


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