Sun International is on the mend

Shares gain on news the group would swing to a profit in the 2018 financial year

GAMING and entertainment group Sun International shares strengthened more than 3 percent on the JSE yesterday on the hotel resort group’s news that it would swing to a profit in the 2018 financial year.

The company shares traded at R57.54 each at the JSE close yesterday, 3.47 percent higher than the previous day, after it told shareholders it would recover from the hefty loss in 2017 despite the subdued economy putting a strain on the pockets of South African consumers.

The group said in a trading statement that it expected a 100 percent increase in headline earnings to between 190 cents and 225c a share, from a loss of 180c in the previous period.

The hotel, leisure and gaming company said its basic earnings share loss would ease to between 5c and 7c from 248c recorded during the corresponding period last year.

It said the recovery would be between 97 and 98 percent.

Sun International said adjusted diluted headline earnings was also projected at a profit of between 275c and 330c compared to the prior year’s profit of 298 cents, a decrease of between 8 percent and an increase of 11 percent.

The group said it had delivered on its commitment to trim debt, narrowing its borrowings to R14.7 billion from R15bn in 2017 following the R1.6bn rights offer.

It said the South African debt fell to R9.2bn in 2018 from R11.4bn in 2017.

Last year Sun International said it was confident it would revert to satisfactory debt levels over the next few years after the completion of the rights issue.

“Despite the ongoing weakness in the South African economy and challenging trading conditions, the group’s South African comparable operations achieved growth in gaming revenue and a satisfactory earnings before interest, tax, depreciation and amortisation (Ebitda) performance, given the 1 percent VAT increase in April 2018,” the company said.

In the six months to June last year, the group’s Ebitda increased by 6 percent to R2bn, and on a comparable basis by 2 percent to R1.8bn.

It also said Sun Slots had produced strong results while Time Square in Pretoria, which became fully operational following the opening of the hotel in April 2018, continued to increase its market share in the Gauteng gaming market.

“Management remains optimistic regarding the future performance of Time Square, which delivered pleasing results during the second half of 2018,” the company said.

The group said the proposed 1 percent gambling levy to fund rehabilitation and awareness-raising programmes could likely have a medium-term impact on Sun International and competitor, Tsogo Sun.