Sun International’s half-year results, released today (Monday, August 29), show strong growth in income and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
This was largely driven by gaming income from casinos, Sun Slots and SunBet, which make up 82% of group income.
As a result of substantial sustainable savings in the group’s cost structure, the South African operation’s adjusted EBITDA margin improved from 26,8% in 2019 to 29,1% during the period under review.
Sun International CEO, Anthony Leeming, said: “These exceptional results were achieved despite a trading environment that was impacted by the ongoing effects of COVID-19, power outages, increasing fuel prices, high inflation and international supply chain disruptions.
“The group was able to successfully defend and grow market share in most provinces, while income generated from Sun Slots recovered to exceed pre-pandemic levels. SunBet generated record income during the period under review and is well on its way to achieving our aggressive growth targets for this business.”
Leeming highlighted that the group was in a strong financial position. “Our balance sheet is in a strong position with unutilised facilities of R1,5 billion. We continue to prioritise increasing free cash flows and disciplined capital allocation to maximise stakeholder value within a set of fundamental capital allocation principles.
“With the significantly lower debt levels, and as the business returns to pre-pandemic levels, we anticipate that our debt to adjusted EBITDA ratio will continue to improve.”
Strong recovery in resorts and hotels
With the exception of transient business and international travel segments, Leeming noted that the group had seen a strong recovery in the resorts and hotels business. Domestic leisure, conferencing and sports and events revenues exceeded 2019 levels, while transient corporate and international leisure revenues remained behind 2019.
Total resorts and hotels income was up 63% on the prior comparative period (half year 2021). Although total income remained 6% below 2019 levels, casino income exceeded 2019 as a result of the group leveraging the Sun City Resort and Wild Coast Sun for the enjoyment of its MVG and SunBet customers.
“Overall, our resorts and hotels generated an adjusted EBITDA of R152 million, which is an improvement from the loss of R88 million in the comparative period and adjusted EBITDA of R120 million in the 2019 comparative period.
Hotel upgrades
Leeming pointed out that the financial outlook for Sun International was positive, on the back of new developments at some of the properties.
The refurbishment of The Palace at Sun City and the addition of a spa will be completed in November at a total cost of R208 million. The group expects to achieve higher rates and occupancies following the completion of the refurbishments.
Work on the expansion of the GrandWest Hotel has commenced. The hotel will be expanded from 39 to 103 keys at a cost of R122 million. Opening is anticipated to be in the third quarter of 2023.
“The existing 39-room hotel achieves an occupancy of 99% and can only accommodate a limited number of top-end customers. The additional rooms ensure that the group can fully implement its out-of-town strategy and offer an enhanced customer experience, which in turn will impact positively on gaming income,” said Leeming.
He concluded: “Our operations improved significantly during the first six months as the last pandemic-related restrictions were lifted and we anticipate this to continue for the remainder of the year. Our overall July 2022 income was in line with 2019 and ahead of the run rate achieved in the first six months.
“With our ongoing focus on costs and efficiency, we anticipate a significant improvement in the second half of the year on the prior comparative period and consequently, strong growth in adjusted EBITDA and earnings per share.”
