Operator News

South Africa – Sun International closes loss-making venues at home and abroad

By Phil - 19 March 2018

South African casino operator Sun International has shut some of its loss-making operations at home and abroad to ease its debt with more closures to come if performances don’t improve.

It will close the Fish River Sun Resort in the Eastern Cape, Sun Nao Casino in Colombia, pictured, and the International VIP Businesses in both South Africa and Panama.

The company stated: “Despite difficult trading conditions, our business has remained resilient, cash generative and is adapting to the ever-changing environment. In this regard, we have taken action on loss making operations including the closure of the Fish River, Sun Nao Casino in Colombia and the International VIP Businesses in both South Africa and Panama, as well as downscaled the Ocean Sun Casino by closing the 66th floor casino and significantly reducing staff. We have applied to the Eastern Cape Gaming Board to restructure the Boardwalk and are in the process of addressing the performances of the Carousel and Naledi. The performance of the Latam operations has remained subdued. The Chilean operations, and in particular Monticello, were impacted by the shooting incident at half-year. Due to the continued underperformance of the Ocean Sun Casino, its operations have been scaled down and the International VIP Business closed while the Sun Nao Casino in Colombia, which has continued to incur losses, was closed in December 2017. ”

CEO Anthony Leeming added: “Closing loss-making entities will have a positive impact, as will the interventions we’ve put in place at the Ocean Sun Casino, the Boardwalk and the Carousel. We are anticipating much-improved performances from these operations.”

The move to close some of its venues came as the company delivered its full year results with its core casino operations in South Africa reporting a one per cent fall in revenue, while its hospitality operations saw six per cent growth.
For the year, group revenue increased by 12 per cent to R15.6bnwith the growth attributable to the inclusion of the results of Sun Dreams, Sun Slots and Time Square.

Revenue generated by the comparable South African operations (excluding alternative gaming, International VIP Business, Time Square and Morula) was flat when compared to the prior year. Sibaya, Sun City, Sun Slots and Table Bay produced encouraging results with growth in revenue and EBITDA. The trading conditions in Nigeria have not improved during the last six months and as a result revenue decreased by 12 per cent.

GGR in Chile decreased by five per cent to CLP197bn (R4.1bn) with Monticello’s gaming revenue down six per cent. The performance of the Panama operation continues to disappoint. Revenue decreased by four per cent from R231m due to bad debts and high marketing, promotion and tournament costs which did not drive the expected revenues. With the closure of the International VIP Business and the 66th floor casino, the cost structure has been reduced significantly. The Sun Nao Casino in Colombia continued to incur an EBITDAR loss and consequently the business was closed in December 2017.

Sun stated: “While the refurbishment of Sun City and the acquisition of Sun Slots have produced pleasing results, the other developments have fallen well short, increasing the group’s debt levels and debt ratios significantly. Trading at our new property Time Square, that opened in April 2017, remains well below expectations. Over this period, economic growth in South Africa and Latam has slowed, political uncertainty has increased and social challenges, particularly in South Africa, are at an all-time high. Together, this has pressured consumer discretionary spending and slowed gaming revenue growth. Given the challenging environment and high debt levels, we have shifted our focus, realigned our strategy and are committed to getting the basics right and operating as efficiently and optimally as possible. At the same time, we are increasing our efforts to deliver outstanding service and creating lasting memories for our guests.”