No luck for Sun International’s shareholders as dividends put on hold
The odds of Sun International shareholders winning anything soon from the R1.6bn they bet on the casino group in June do not look high, judging from its interim results released on Monday morning.
Sun International has not paid a dividend since 2016, and in June its shareholders were asked to buy additional shares at R57.82 each to help reduce its debt. Its share last traded at R53.50.
Closing its loss-making Fish River and Morula casinos helped the group more than double its net profit to R335m in the six months to end-June from R132m in the first half of its 2017 financial year.
Interim income from continuing operations grew 3.9% to R7.85bn.
"SA continues to contribute the majority of the group’s income at 69%, with Latin America contributing 30% and Nigeria 1%. Gaming is the primary contributor to group income at 73%, alternate gaming contributes 7%, food and beverage 9%, rooms 8% and other income 3%," the company said in its results statement.
The group’s biggest casino complex, GrandWest, grew income 4% to R1.1bn and operating profit 7% to R337m.
"Footfall to the complex is still maintaining an upward trend with strong play from the local Chinese market," the company said.
Sun City suffered a 3% decline in revenue to R784m and its operating loss widened to R30m from R18m.
"Tables was impacted by a low hold percentage while slots came under pressure in the local market following the opening of a third electronic bingo terminals outlet in Rustenburg in October 2017 and a weak local economy," Sun International said.
Its recently opened Time Square casino doubled its income contribution to R582m, but its operating profit contribution of R9m was only a third of the R27m in the first half of 2017.
"Although we have seen a significant increase in activity, casino income for April to June was only in line with the prior corresponding period," the results statement said.
"This was partly due to low win percentages and high income experienced in April 2017, due to the opening."
The rights issue increased Sun International’s number of shares in issue by 28% to 125.5-million.
"While the equity raise has improved our debt covenants, the group remains highly geared. As a result of the group’s strong cash generation, we are confident debt will continue to reduce and we will revert to satisfactory debt levels over the next few years," Sun International said.