Sun International hit by sluggish economic growth, reduced consumer spend

SOUTH African casino and hotel operator Sun International scrapped its dividend after reporting a drop in annual profit yesterday, seeking to conserve capital to reduce debt and complete a casino complex in Pretoria.

One of two listed casino operators in South Africa, Sun International has been hit by sluggish economic growth in its home market.

It is scheduled to open its second-largest casino and entertainment complex, the R4.2-billion Time Square project, in Pretoria next month.

“Taking account of the difficult trading conditions, the need to complete strategic group initiatives, particularly Time Square, and the need to reduce debt, the board decided not to declare a dividend for the period,” the company said.

The owner of the Sun City resort said the slowing economy, foreign exchange losses and settlement charges resulted in a 35% drop in full-year profit.

The group’s core casino operations were negatively affected by sagging demand from gamblers due to difficult trading conditions and reduced consumer spend, with casino revenue down 2.7%.

Chief executive Anthony Leeming, who took the helm last month, said gaming revenue would remain under pressure due, in part, to increased personal income taxes and reduced disposable income.

“Hotel occupancy is, however, anticipated to grow for the remainder of the year and will be boosted by the refurbished conference and entertainment centre at Sun City, where forward bookings for conferences are well up on last year,” Leeming said.

“The opening of the casino at Time Square is expected to have a positive impact on the group’s performance going forward.”

Sun International also said it was considering options for its Latin American unit, Sun Dreams, after a minority shareholder called for the business to be listed in New York or Santiago.

Sun Dreams was created last year when Sun International merged its Latin American business with Chile’s Dreams SA.

The minority shareholder is a private investment fund with a 20% stake in Sun Dreams, while Sun International owns 55% but has said it wants to increase its stake in the long term.

Sun International, which recently changed its financial year, said its diluted adjusted headline earnings per share (HEPS) for July 1 to December last year fell to 223 cents per share from 344 cents in the comparable year. – Reuters