Sun International affected by poor casino revenue - CNBC Africa

Sun International affected by poor casino revenue

By: Lesego Motshegwa
Last Updated: 24 February 2014|12:20 GMT

The hotel, casino and resort chain posted weaker earnings for the six months ended 31 December 2014 due to a decline in casino revenue.

Sun City, Sun International. PHOTO: Platinum.org

“Trading for the period remained challenging, particularly in South Africa where casino revenue has remained under pressure and at Monticello where the effects of the smoking ban persist,” said SUN INTERNATIONAL LTD. -0.42%.

Casino revenue in the group’s South African properties only rose three percent while Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was five percent down at 1.5 billion rand due to cost cutting initiatives.

Diluted adjusted headline earnings declined by 18 percent to 334 cents per share however the board did declare a gross interim dividend of 90 cents per share.

On a positive note, the weaker South African rand boosted the country’s tourism industry and hospitality revenues.

Revenue for the period increased four percent at 5.4 billion rand while hospitality revenue, specifically room revenue and food and beverage revenue, were up 26 percent and ten percent respectively.

“The Boardwalk and Maslow hotels which opened in December 2012 and January 2013 respectively contributed to the strong room's revenue growth,” continued the statement.

Grandwest Casino situated in Cape Town posted an eight percent increase in revenue at 999 million rand due to the tourism boost Cape Town experienced during the period while Table Bay Hotel posted an exceptional 40 percent revenue growth at 108 million rand.

Sibaya casino in Durban grew revenue by six percent to 555 million rand due to cost control initiatives and an improvement of Sibaya’s share of the KwaZulu-Natal gaming market.

The Boardwalk in Port Elizabeth saw revenue growth of 18 percent to 278 million rand, with casino revenue up 11 percent, including room revenue contribution of 14 million rand from the Boardwalk Hotel which opened in December 2012.

The Sun City resort in Rustenburg posted a ten percent revenue growth at 720 million rand while the Wild Coast Sun in Durban increased three percent to 200 million rand.

Carnival City casino in Gauteng, on the other hand, continued to experience a slowdown with revenue declining 6 percent, well below the 1.7 percent growth in the Gauteng casino market.

“The decline in revenue is attributed to increased competition from Electronic Bingo Terminals (EBTs) and Limited Payout Machines (LPMs) in and around Ekurhuleni. Revenue from EBTs and LPMs in Gauteng increased 23 percent in the 2013 calendar year, which has impacted negatively not only on Carnival City but also Morula,” said the company.

The group’s Gaborone Sun in Botswana achieved a mere 0.3 percent increase in revenue to 82 million Pula due to the lack of growth in the country’s local currency while the Federal Palace in Nigeria saw a revenue decline of nine percent at 1682 million Naira.

Monticello casino in Chile, South America, took a knock in revenue at 35.6 billion Chilean Pesos, down 22 percent from last year due to the impact of anti-smoking legislation in the country.

“Two smoking decks were opened towards the end of September and a further two decks in late October and these are starting to have a positive effect on revenue,” added the group.

“Various revenue enhancing and cost saving initiatives have been implemented in recent months and some benefits are evident and flowing through in the operational results. In the current economic environment however, these initiatives are not sufficient to obviate the need to evaluate a much wider restructure.”

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