Sun International, which owns a portfolio of casinos, hotels and resorts predominantly in SA, says half-year adjusted core profit rose 5.6% to R1.6bn as local and international business travel gathered momentum.
In Cape Town, hotel income and occupancies are back at prepandemic levels, the company said in its interim results to the end of June.
“Our business has performed well — managing to generate cash flow amid a challenging environment with resorts and hotels bouncing back strongly,” CEO Anthony Leeming told Business Day.
Adjusted core profit, or earnings before interest, tax, depreciation and amortisation (ebidta), from resorts and hotels — represented by Sun City, Wild Coast Sun, The Table Bay Hotel and the Maslow Sandton — surged 64% to R314m, off revenue of R1.4bn, which was up 27% year on year.
The company’s share price on the JSE rose as much as 8.1% before ending the day up 6.8% at R39. This was its biggest one-day gain since November.
Leeming said domestic leisure, conferencing and sports and events revenues continue to grow while international leisure business showed a strong recovery.
“The Table Bay Hotel experienced a significant surge in demand from international markets, resulting in growth in both occupancies and room rates.” The Sun City Resort saw occupancies growing from 54% to 63% with room rate growth close to 50%.
Rooms and food and beverage revenue increased 45.1% on 2022, with average occupancy for accommodation rising from 57% to 66.8%.
“We need to consider the current share price against future prospects. The characteristics of the business model are high set-up costs, fairly high operating costs and variable income streams,” independent analyst Liston Meintjes said.
Its SA debt was relatively stable at R5.9bn compared with final results in December. Sun International has come a long way in reducing its debt, which rose to as high as R15bn in 2018, putting its share price under pressure in the process.
The high set-up costs invariably lead to high borrowing, which, in turn, create problems when interest rates rise.
The company declared an interim dividend of R1.48 per share, up 68% on a year ago.
Urban casinos, including Carnival City in the East Rand, were mostly under some pressure, suggesting a reduction in consumers’ discretionary spending amid a cost-of-living crisis. The other cause could be shifting betting patterns as more people migrate to convenient online platforms after the pandemic.
Urban casino growth was just more than 3% to R1.13bn, even as revenue rose 4%, while that of Sun Slots fell 13% to R166m, affected mainly by load-shedding.
Unique active players on its sports betting business, SunBet, surged a whopping eightfold in the six months to end-June.
SunBet jumped to R90m from R14m as first-time depositors rose 469% and deposits jumped 216%. The platform added additional games during the review period, and is seen as one of the key growth areas for Sun International.
Leeming said the Limited Payout Machines business, which relates to the group’s Sun Slots business, had a tough time as these units close during load-shedding.
“We expect hotels and resorts to continue to perform well due to great demand for conferences and meetings, business and incentive trips — and all lines to continue” to grow, as will cash generation, said Leeming.
Update: September 11 2023
This article has been updated with new information from CEO Anthony Leeming and updated share price details.
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