South African hotel and casino operator Sun International posted information about its financial results for the fiscal year ended June 30, 2015. Revenue rose 6% to R10.5 billion and EBITDA amounted to R3.2 billion, up 9.9% year-on-year.
Despite the increases, Graeme Stephens, Chief Executive Officer of the group, commented that there were two important factors that in a way shadowed Sun International’s financial performance. In the first place, Ocean Sun, the operator’s new gambling venue in Panama, generated a loss of R40 million during the period in review.
Mr. Stephens said that a certain loss was expected but its scale disconcerted him. The executive attributed the Panama casino’s underperformance to the fact that the country’s gambling market is relatively small. In addition to this, Ocean Sun is the company’s first gambling venue in an unregulated casino market.
The other factor that had a somewhat negative effect on the operator’s full-year financial results is the issues that Federal Palace Hotel in Nigeria has been facing due to the collapse of the Nigerian naira. It resulted in a forex loss of R89 million in Nigerian minority shareholder loan denominated in US dollars. Of those, R44 million were attributed to shareholders in Sun International.
Without the above-mentioned two factors, the company’s HEPS would have risen 27% during the fiscal year ended June 30.
During the period in review, the company disposed of some of its hotel properties in Botswana, Namibia, Zambia, Lesotho, etc. in order to focus its attention mainly on its casinos across Africa and South America. Sun International’s casino revenue accounted for 82% of the overall proceeds and increased 6% to reach R8.7 billion during the reported period.
Monticello Grand Casino in Chile, as well as local GrandWest Casino and Entertainment World and Wild Coast Sun Resort & Casino were among the company’s top performing gambling venues. Revenue at the first casino increased 10.7% year-on-year, the second posted a 6.5% increase, and the third generated 7.5% more proceeds during the fiscal year ended June 30.
Hotel operations generated revenue of R825 million, down 3%. Food and beverage proceeds increased 9% year-on-year to R1 billion.
Mr. Stephens also commented that Sun International is about to complete two key deals in the months to come. In the first place, the company is to merge with Latin America’s Dreams. As a result, the biggest gambling group in the region will be created. Mr. Stephens pointed out that they consider it really important to have “a Spanish speaking management team on the ground” and this is why they have turned to Dreams.
The other important deal that is due to be completed is the purchase of rival Peermont. The transaction is currently reviewed by South African regulators and they are expected to announce their decision before March 21, 2016 when the deal is set to expire. Commenting on the matter, Mr. Stephens said that their purpose is to reduce the company’s dependence on Cape Town’s GrandWest. At present, revenue generated at the casino accounts for 35% of the overall gambling proceeds.
