Sun International has had a tough lesson in “winning some, losing some” as the hotel, gaming and entertainment group received a welcome boost from gaming – but had to shell out R54-million over the course of 2022 to keep ahead of rolling blackouts.

It’s only going to get worse: diesel ate into its profits last year and this year, Sun International expects to spend between R12m to R14m each month on fuel – 20% of which will be offset by electricity savings.

On Monday, the group released its results for the year ending December 2022, reflecting that income for the year was up 44% from the prior year, to R11.3-billion.

Owing to sustainable cost savings, the group’s South African operational performance margin improved from 28.2% in 2019 to 29.7%. Without blackouts to contend with, the group would have achieved its target of 30%. 

It said a combination of market share gains for its “urban casinos” (casinos not attached to hotel resorts), the turnaround of Sun City and “exceptional growth” in its alternate gaming businesses, plus sustainable cost savings, contributed to the SA adjusted operational performance being up by 96% to R3.3-billion.

Adjusted headline earnings grew tenfold, from R110-million to R1.1-billion, with adjusted headline earnings of 439c per share, up from 44c per share in the prior year.

The group’s bounce-back was welcomed by the market, as the board declared a final gross cash dividend of 241c per share. By lunchtime, shares were up 4.59%, declining somewhat towards the end of the day to about 3.9%. 

Sun International derives most of its income from casinos, Sun Slots and SunBet gaming.

Income from its urban casinos has proven resilient, growing by 43% year on year, regaining market share in all key provinces. Overall, urban casino operations generated R2.445-billion for the year, while the adjusted Ebitda margin (earnings before interest, taxes, depreciation and amortisation) was up 2% on pre-Covid, at 36.4%.

The group’s sports and casino betting platform, SunBet, generated record income during the year under review. Overall, income was up 86% in the same period in 2021, with growth of 135% in the second half of the financial year. It also concluded its 70% investment in SunBet Africa Holdings for $3.2-billion (R58.3-billion) last year.

They were particularly pleased by the progress of their online strategy, with SunBet showing strong growth. Sun Slots is also on the up, with income from slots increasing from R1.242-billion to R1.49-billion. 

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“We anticipate that SunBet will continue with strong revenue growth which will be aided by the introduction of the recently launched slots offering. Our omni-channel offering, with Sun International’s premium hotel and casino portfolio and integrated [gaming loyalty] MVG programme, will assist in increasing our share of the online gaming market,” said group CEO Anthony Leeming.

Sun International, which has online sports betting and casino licences to operate in Ghana, Zambia and Kenya, is in the early stages of rolling out the SunBet operating brand in these markets, where it sees long-term growth potential.

Leeming attributed the success of their casinos to the lifting of Covid restrictions; a return to staff training, which helped with guest experience; looking after employees and doing work on the casino floor, such as focusing on understanding customer data. 

The group has also given blackouts significant attention and will be approaching the power crisis from various angles: 

“One is leasing agreements for supply, so we will get together with other corporate clients and try to put more energy into the grid by off-take agreements. We’re also going to push on-site solar quite aggressively.”

Not all properties will be equally suitable for solar: “We don’t always have the capacity to do so. Some properties, for example, Times Square, don’t have many options, but GrandWest has a massive amount of space for solar and storage, which is far better than running a generator and more energy efficient.”

Total resorts and hotels revenue was up 65% to R2.571-million in the prior year. 

As at the end of 2022, the group acquired 22.6% of the issued share capital in Grand Parade Investments Limited for R374-million and repurchased 1.9 million of Sun International’s shares for R58-million.

Even with these investments, it is in a strong financial position, with SA debt (excluding lease liabilities) at R5.9-billion, down from R6.4-billion YoY.

“Our balance sheet remains strong and we are focused on efficiencies and returns as we look to protect and grow our revenue and margins,” said Leeming. BM/DM