Bingo competition knocks Boardwalk casino performance
Sun International half year gaming revenue down 9%
THE chips were down for the first half of this year for Nelson Mandela Bay’s flagship casino offering, the Sun Boardwalk Casino and Hotel, with the Sun International group recording a 9% drop in casino revenue and an overall revenue decline of 7%.
This emerged from Sun International Ltd’s bi-annual, unaudited interim results (January to June ), which showed a generally disappointing performance across the group’s South African and South American operations for the period under review.
Weak economic conditions and debt recovery were among the reasons cited.
The release of the results follows Sun International’s surprise announcement late last month that it would be closing its Fish River Sun Hotel and Resort on the outskirts of Port Alfred due to falling profits and rising costs, among other challenges, at the end of next month.
Pointing to competition from recently introduced bingo operations as having a big impact, Sun International attributed the performance of the Port Elizabeth beachfront operation to cost inflation and increased expenditure on marketing to counter the threats posed to the business by Electronic Bingo Terminals (EBT).
Reporting that the operation’s Ebitda (earnings before interest, tax, depreciation and amortisation) had decreased by 44% from R61-million to R34-million, Sun International expressed concern over the recent opening of an EBT outlet in Uitenhage.
It said this would affect the Boardwalk’s revenue further.
“We are looking to restructure the business to improve profitability,” the company said.
“However, this will require the consent of the Eastern Cape Gaming Board.
“We are also working on the development of a shopping mall in a joint venture arrangement.
“The Boardwalk will only contribute the existing retail and land to the joint venture.”
Sun International chief executive Anthony Leeming said the declining profits in the Bay could be attributed to a combination of a weak economy and the competitive threat from bingo terminals.
“The company [was affected] by the EBT in Port Elizabeth and expects a further loss in revenue now that one has opened in Uitenhage as well,” he said.
“We definitely saw a loss when the Uitenhage one opened in September.”
Leeming said the company had filed court papers over the EBTs, as Sun International had renewed the casino licence at the Boardwalk with the understanding that it would have exclusivity in the metro.
Now the casino had to reduce costs to ensure the business stayed profitable.
“The closure of the Fish River Sun, which was subsidised by the same company as the Boardwalk, will save us R25-million in cash flow,” Leeming said.
“We have to go back to basics and reduce costs [where we can].
“We’re also keen to start pushing for retail development [soon], which should help in the long term.”
Overall, he said the company could still have tough times ahead.
“I don’t think there is a lot of positivity to speak of [in the business space] and I don’t anticipate a strong recovery in the short term.
“We have to prepare for the worst and keep costs under control.”
Regarding the group’s overall performance, Sun International said its core casino operations continued to be affected by the current economic climate in South Africa, with comparable casino revenue down 4%.
Hospitality operations, however, performed well, with 9% growth in rooms revenue, and food and beverage revenue up by 10%.
“On a comparable basis, revenue generated by the South African operations declined by 1%, while Ebitda declined by 9%,” the company said.