South Africa – Time Square helps Sun International post positive resultsBy Phil - 2 September 2019
Despite the difficult political landscape and a challenging operating environment, Sun International’s South African operations achieved two per cent growth in income and four per cent in adjusted EBITDAR due to ‘a dedicated focus on efficiencies, cost containment and enhancing the guest experience.’
Time Square, Sibaya and Sun Slots performed well with income increasing by 15 per cent, six per cent and 13 per cent respectively during the first six months of the year. SunBet improved significantly with income up by 146 per cent and EBITDAR at R20m from R2m in the prior period. Disappointingly, Sun City (six per cent), Wild Coast (nine per cent), Windmill (nine per cent) and the Maslow (nine per cent) experienced declining income.
Although still high, the effective tax rate reduced from 60 per cent to 46 per cent due to the rights offer proceeds being used to reduce Time Square debt and reduced losses from Time Square where no tax relief is currently being accounted for against the losses.
In South Africa, the company will increase its interest in Sibaya by 22.4 per cent for a total consideration of R540m resulting in its interest in Sibaya increasing to 87.2 per cent. It is also increasing its share in Sun Slots by 30 per cent for a consideration of R504m resulting in Sun Slots becoming a wholly-owned subsidiary.
Sun stated: “Both Sibaya and Sun Slots have been trading well with the above transactions being concluded at attractive valuations and at levels where they will be earnings and cash flow enhancing. We completed the restructure of the Carousel at the end of May 2018 and will shortly complete the restructure of the Boardwalk. Our Wild Coast land claim was finally settled and we submitted our bid for renewal of the licence. The Eastern Cape Gambling Board has extended the existing Wild Coast Casino licence for six months to 28 February 2020.
“Growth expectations in the Latam countries in which we operate have been subdued although GDP growth of around three per cent for both Chile and Peru is still anticipated. Income from Latam was up by 17 per cent and adjusted EBITDA (excluding IFRS 16) up by one per cent. However, on a comparable basis, income was in line with the prior period and adjusted EBITDA decreased by seven per cent. In Latam, we will be disposing of a 14.94 per cent interest in Sun Dreams for US$86m, thereby reducing our equity interest to 50 per cent.
We continued to reduce our debt levels with South African debt down from R9.2bn as at 31 December 2018 to R8.8bn and our bank debt covenant of debt to adjusted EBITDA down from 3.0 to 2.8 times. The group continues to trade within its debt covenant levels and has unutilised borrowing facilities of R1.3bn plus available cash balances of R429m from continued operations.”
Income from Latam operations was up by 17 per cent from the prior period to R2.8bn with adjusted EBITDA (excluding IFRS 16 adjustments) up by one per cent to R638m. These results are not directly comparable to the prior period due to the acquisitions of Thunderbird Resorts in Peru in April 2018 and the Park Hyatt Hotel and Casino in Mendoza, Argentina in July 2018. On a comparable basis income was in line with the prior period at R2.4bn with adjusted EBITDA down by seven per cent to R606m.