JSE-listed luxury and entertainment company Sun International released its half-year figures on Monday. The company reported a 4% growth in income and a 6% increase in earnings before interest, tax, depreciation, and amortisation (EBITDA).
The growth is attributed to the company shifting its focus to strategic realignment centred on improving efficiencies and reducing costs over the past year.
Sun International Time Square in Limbo
Also, this is the first report that Sun International has had to factor in Time Square, its latest casino which opened in March 2018. It made R582 million in income, and the hotel’s EBITA is reportedly at R130 million. However, this figure is somewhat of a loss for Sun International the company’s CEO said. “The problem with Time Square is it has high depreciation costs, and when you get down to adjusted headline earnings, this drops down profits significantly,” said CEO Anthony Leeming.
Time Square’s share of losses have increased to R182 million, compared to R63 million in the previous period.
Sun International is aiming to decrease its debt levels. It will use the R1.6 billion in equity raised in June to reduce its South African debt. “While gearing remains high, we are confident that consistently strong cash generation will continue to reduce debt levels over time,” said Leeming.
Operations at home have been impacted by the sluggish economic state in South Africa. Casino income increases were a paltry 2%. Sun Slots saw the best performance with income at 12% and EBITA at 11%. Rooms revenue dropped 3% due to pressure on disposable income and the water crisis in Cape Town.
Vat Affects Casino and Gamblers
The increase in value-added tax (Vat) in April 2018 also impacted Sun International and their consumers. “Obviously the consumer comes under pressure, and you can’t separate that,” he said. “We have to pay the Vat on whatever we keep, and on that basis, it comes with a direct cost. That in itself cost us R19 million in the three months that [the higher rate of] Vat was in place.”
Foreign Ventures Not Profitable
Sun International’s foreign ventures have also not been promising. Operations in their Latin American establishments were lacklustre. This has been attributed to low economic growth in the region and the Monticello shooting in Chile in July 2017.