Gaming giant Sun International resisted paying a dividend and focused on easing gearing as tough trading conditions persist in its main markets in SA and Latin America.

Sun CEO Anthony Leeming said difficult trading conditions and the need to complete strategic group initiatives and curb debt levels had prompted the board not to declare a dividend.

Results released on Monday showed Sun, which has changed its financial year-end to December, finished the six months to end December 2016 with borrowings of R14.5bn. This was R455m more than at the end of June 2016.

The increase in borrowings stems mainly from acquisition of another 19.9% interest in GPI Slots for R262m and expenditure on the soon-to-be-opened casino at Times Square near Pretoria (R1.2bn).

Sun still has unutilised borrowing facilities of R1.6bn and available cash balances of R767m. But projected capital expenditure was almost R1.7bn for the financial year to December 2017, mainly related to further developments at Time Square and revamps at Sun City. Sun’s operational cash flow in the trading period remained strong at more than R2.4bn before working capital changes.

Sun has already disposed of certain African leisure investments and portions of its holdings in the GrandWest and Worcester casinos.

There has also been ongoing speculation that the company might sell off certain smaller casino properties.

The star performers were Sun’s 70%-owned limited payout machine operation, GPI Slots, and sports betting business SunBet

Kagiso Asset Management’s associate portfolio manager, Dirk van Vlaanderen, said bundling the smaller casinos into a separate vehicle and selling these remained a strategic option for Sun, especially in light of its stretched balance sheet. "Interestingly, these casinos were the best performers in the group and are decent cash generators with relatively low capital requirements," he said.

Sun’s biggest casino, GrandWest in Cape Town, reported revenue and profits down slightly at R1.1bn and R440m respectively. But Sibaya in Durban and Carnival City in Gauteng were harder hit, reporting revenue down to R581m (R602m) and R526m (R561m) respectively and profits decreasing to R186m (R201m) and R141m (R171m). The Golden Valley Casino in Worcester increased profits to R17m from R13m previously.

The star performers were Sun’s 70%-owned limited payout machine operation, GPI Slots, and sports betting business SunBet. These alternative gaming operations increased revenue 12% to R540m and profits to R129m.

The results for the full financial year to December 2017 will be more interesting to gauge with the Times Square casino in Menlyn opening this week.

This will be the second-largest casino in SA and it is expected to have a marked influence on Sun’s bottom line in the years ahead.

Leeming said Times Square casino would open on time and in line with its R4.2bn budget.

"The Arena [at Times Square] will open in September [2017] and the hotel and conference centre in April 2018. Times Square will be key to our portfolio and to our growth in SA."

Van Vlaanderen said Sun’s management team had guided for an additional earnings before interest, tax, depreciation and amortisation of R750m from the new Times Square complex once the casino, arena and hotel were all open in March 2018.

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