JOHANNESBURG - JSE-listed hotel and gaming group Sun International plans to pare down its debt and boost its balance sheet in the year ahead after having made a number of significant investments and acquisitions in recent years to diversify its global portfolio.
At the end of June Sun International’s borrowings were at R15.1 billion with R11.4bn attributed to the South African balance sheet.
The group said that the increase in debt of R600 million in the first six months since the year started was primarily attributable to the capital investment at Time Square.
The group has stakes in casino gaming in Chile, and it developed the Ocean Sun Casino in Panama and the Sun Nao casino in Colombia to bulk-up international operations.
These developments have come at a huge cost for the company.
“All of the above investments and acquisitions were funded with debt resulting in a significant increase in the group’s gearing levels,” the group said as it released its results yesterday.
“The group’s balance sheet remains resilient and the operations continue to generate strong cash flows.
"Following negotiations with the group’s lenders during the review period, the debt covenant levels were adjusted and the group continues to trade within these levels,” the group said.
Its chief executive, Anthony Leeming, agreed that the debt would receive the company's attention as they want to keep it under control.
“We want to strengthen the balance sheet and deal with the debt as we focus on the year ahead,” Lemming said.
Even though the group wants to have a tight control in its finances, it has not lost appetite for new acquisitions.
In Peru Sun Dreams is finalising an acquisition of Thunderbird Resorts for $27million (R365.73m) comprising of four gambling operations. The group said the acquisition presented an opportunity for Sun Dreams to strengthen its position in the Peru market and diversify its asset base in Latam.
In the results for the six months to end June, group revenue increased by 19% to R7.6bn, up from R6.4bn, with the growth attributable to the inclusion of Sun Dreams and Sun Slots in June last year and Time Square in April this year.
However, revenue generated by the South African operations, excluding alternative gaming, international business, Time Square and Morula, declined by 1.9% with consumers affected by a slowdown in the economy.
The group said Sibaya, Sun City, Sun Slots and Table Bay produced encouraging results with solid growth in revenue and earnings before interest, tax, depreciation and amortisation (Ebitda).
Group Ebitda increased by 15% to R1.9bn, while Ebitda generated by the South African operations declined by 9%
The group had some positives in the period with some of its South Africa operations performing well.
Sun City revenue was up 6% and Ebitda increased by 25%, while Sibaya reported 6% growth in revenue and Ebitda up 8%.
The Nigerian environment has continued to deteriorate and as a result revenue decreased by 28% with an Ebitda loss of R1m.
In Chile trading has improved at most of the properties other than Iquique and Monticello.
Iquique has been affected by strike action in the mining industry, while Monticello continues to be impacted due to the relocation of the toll road.
The Panama and Colombia operations continue to struggle and plans are in place to downscale these properties.
The group did not declare a dividend for the period as it wants to reduce its debt levels.
Sun International shares rose 1.78% to close at R52.15 on the JSE yesterday.