Supplier News

Chile- Monticello investment boosts Sun’s full year results

By Phil - 25 August 2015

Improved revenue in South Africa and Chile helped Sun International post increased revenue of 5.8 per cent to R10.6bn for the full year.

These were in line with the company’s medium term strategic objectives, which are to improve operational performance, maximise the potential within its existing assets and grow its business into new areas and new products.

In South Africa, Sun’s main casinos, GrandWest in Cape Town, Carnival City in Gauteng and Sibaya in Durban, all performed better due to earlier cost cutting. The core South African operations were 3.5 per cent ahead of the prior year with growth in the past six months slowing to two per cent reflecting the weak economic environment in South Africa.

South Africa continues to contribute just over 81 per cent of group revenues and gaming revenue remains the primary contributor to the group at 82 per cent.

The significant restructure of operations was predominantly implemented during calendar 2014 and resulted in a strong improvement in the 2014 calendar year. Since then the business has settled down and trading in the past 6 months to 30 June 2015 was more reflective of the environment within which the group is operating.

Revenue of R10.6bn for the year ended 30 June 2015 was six per cent ahead of the previous year, boosted by a strong performance from Monticello.

Latam’s share of group revenue increased with the strong growth in Monticello’s revenue and the opening of the Ocean Sun Casino in Panama and Sun Nao Casino in Colombia, partly offsetting the lost revenue contribution resulting from the sale of the African assets.

CE Graeme Stephens said: “The South African economy is showing no signs of any meaningful improvement in the short term. In Chile the short term outlook is for lower growth than in recent years, and this is reflected in the recent currency depreciation. Against this background the group expects the suninternational.com subdued casino trading experienced in the second half of the 2015 year to continue for the year ahead.

The acquisition of the second tranche of 25 per cent in GPI Slots will result in GPI Slots being consolidated and increasing group revenue and EBITDA. Monticello is expected to continue to perform well, despite the weak economic conditions and we anticipate that the Ocean Sun Casino and Sun Nao Casino will contribute positively to EBITDA in the year ahead as they continue to establish themselves.
“Through the new properties, new lines of business, insourcing of food and beverage and a continued focus on cost savings and efficiencies, we anticipate growth in both revenue and EBITDA. Although we expect a difficult operating environment, the group is confident that it can achieve growth in adjusted headline earnings in the 2016 financial year.

“We have recently concluded a number of significant strategic transactions and we have a number of others that are still to be concluded which will have an impact on the group’s 2016 results and financial position. We anticipate that these transactions position the group for growth in the medium to long term.”

Ocean Sun Casino started trading in mid-September 2014 and has contributed R140m to revenue.
“Although the casino has been well received by the local market it is taking longer than expected to ramp up,” Sun stated. “The casino is starting to attract more VIP players and recent trading levels have been encouraging.

The VIP play is, however, volatile and is also lower margin business and consequently the flow through to EBITDA is disappointing. A further challenge facing the property is a recently introduced 5.5 per cent tax on casino pay-outs. The prospects for Panama as a destination remain positive and management remain optimistic that the property can achieve its medium term revenue projections and profitability.

Kagiso Asset Management analyst Dirk van Vlaanderen said of the results: “On top of a very tough trading environment, the challenge now is for the management team to bed down the numerous transactions currently pending, thus providing the market with some certainty as to the ultimate shape and direction of the group.”

Initiatives and transactions concluded during the year included: the opening of the Ocean Sun Casino in Panama and the Sun Nao Casino in Colombia, the acquisition of an additional 55 per cent interest in Monticello, Chile, and the acquisition of a 25.1 per cent interest in GPI Slots. It also disposed of the majority of the group’s interest in Gaborone Sun, Kalahari Sands, Lesotho Sun and Maseru Sun as well as a 50 per cent interest in the Royal Livingstone and Zambezi Sun to Minor International.

In addition to these initiatives, the group has been involved in a number of other strategic initiatives including the relocation of its Morula licence to Menlyn Maine; a transaction to restructure its Western Cape assets; a merger of its Latin American assets and the acquisition of Peermont Global.