Sun International declares dividend for the first time in six years
As a result of its significantly stronger financial position and strong cash generation, the board has resolved to resume dividend payments, declaring a gross interim cash dividend of 88c per share.
Despite economic pressure, or perhaps because of it, South Africans appear to be turning to gambling, with Sun International posting a strong growth in income for the six months to the end of June and declaring a dividend for the first time since 2016.
Adjusted headline earnings improved from a loss of R7-million to earnings of R438-million, equivalent to adjusted headline earnings of 177 cents per share from a loss of 3c per share in the prior comparative period. Sun International’s finances look healthy, with its South African debt having been reduced to R5.9-billion from R6.4-billion at 31 December. Chief executive Anthony Leeming says the group’s balance sheet is in a strong position with unutilised facilities of R1.5-billion.
As a result of the significantly stronger financial position and the strong cash generation, the board has resolved to resume dividend payments, declaring a gross interim cash dividend of 88c per share, representing a dividend cover of two times on adjusted headline earnings per share of 177c cents per share.
Leeming says gaming income from casinos, Sun Slots and SunBet, which make up 82% of group income, showed a significant recovery, with income up 30%. Substantial sustainable savings in the group’s cost structure saw the South African operation’s adjusted Ebitda margin improve from 26.8% in 2019 to 29.1% during the period under review.
“These exceptional results were achieved despite a trading environment which was impacted by the ongoing effects of Covid-19, power outages, increasing fuel prices, high inflation and international supply chain disruptions,” Leeming said.
“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.”
Casino income has proven resilient and is swiftly recovering from the effects of the pandemic. Despite urban casino income being 13% below levels achieved in 2019, improved use of data and analytics combined with a selective focus on certain market segments allowed the group to grow market share. For the year to date, Sun International grew its market share to 27.8% in Gauteng, 80.4% in the Eastern Cape, 38.6% in KwaZulu-Natal and 78.1% in the Western Cape.
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SunBet, a secure betting website for sports fans, has continued its strong growth trajectory and remains an exciting prospect for the group. Active players on the rapidly expanding online sports betting and gaming platform continued to grow, with additional games being offered and the overall player experience enhanced.
At the end of the period under review, SunBet achieved substantial growth in its key performance indicators against 2021, which included income up by 37%, sports turnover up by 16% and deposits up by 64%.
“We believe that SunBet offers the group significant and exciting growth potential and with this in mind, we continue to invest in people, marketing and our omni-channel approach in order to significantly increase our share of the fast-growing online gaming market,” said Leeming.
To this end, the group has appointed a new chief operating officer of SunBet, Simon Gregory, who has significant international online gaming experience, having worked at one of the world’s largest online gaming groups, Sportingbet.
Looking abroad, and after the interim period to the end of June, Sun International concluded a 70% investment in a Mauritian company, for a subscription price of $3.2-million (R52-million). The company has online sports betting and casino licences to operate in Ghana, Zambia and Kenya. Leeming says the group is in the early stages of rolling out the SunBet operating model and brand in these markets, which have attractive long-term growth potential.
“Based on international precedents, we believe online slots has immense potential for driving scale in SunBet and supporting our omni-channel strategy between land-based and online gaming,” said Leeming.
On the hotel side, 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, of which R54-million was incurred last year, R67-million in the current reporting period and R87-million during the second six months of this year. The group expects to achieve higher rates and occupancies following the completion of the refurbishments.
A R122-million expansion project at the popular GrandWest hotel in Cape Town will see the number of guest rooms more than doubling from 39 to 103, with their opening anticipated in the third quarter of next year. The existing 39-room hotel achieves an occupancy of 99% and can only accommodate a limited number of top-end customers.
“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,” said Leeming.DM/BM