Sun International expects Sun City to turn around in 2019
Excluding write-downs, Sun International said it was profitable on a headline-earnings basis in 2018
Sun International expects its flagship resort, Sun City, to bounce back after a weak 2018, despite it writing-down the value of that asset.
The group said on Wednesday that the resort, which was opened in 1979, had underperformed partly due to the cancellation of a few large conferences. It did not say which conferences or when they were meant to be held.
In mid-December, the resort was flooded during a major hail storm.
Sun International said the resort’s performance “is expected to improve during the second half of 2019 based on the rate of forward bookings”.
The group’s shares rose 6.1% to R58.99 on Wednesday morning after the hotel, casino and resort operator said its loss in the year ended December would narrow.
Its basic loss per share for the year would be between 5c and 7c, versus a loss of 248c per share in 2017.
The company said it had impaired the carrying value of its Sun City and certain Panama assets by R337m.
Excluding the write-downs and other one-offs, Sun International said it was profitable on a headline-earnings basis.
Adjusted diluted headline earnings per share were expected to be between 275c and 330c a share, versus the prior year’s 298c profit per share.
“Despite the ongoing weakness in the South African economy and challenging trading conditions, the group’s South African comparable operations achieved growth in gaming revenue and a satisfactory earnings performance given the 1% VAT increase in April 2018.”
The group’s Sun Slots unit “produced strong results” while the Time Square precinct in Pretoria, which became fully operational in April 2018, “continued to increase its market share in the Gauteng gaming market”.
The company was “optimistic” about that casino, it said.
Meanwhile, its Latin American operations recorded “strong performances” in the second half of the year, led by Monticello, which recovered following a shooting incident in June 2017.
Sun International, which raised R1.6bn via a rights offer, said it reduced borrowings through the year, from R15bn to R14.7bn.
South African debt decreased from R11.4bn to R9.2bn, although debt in Latin America rose following the raising of a ten-year bond by Sun Dreams for acquisitions.
“Given the strong cash generation of the group and the completion of Time Square, the group is comfortable that it will continue to reduce its debt levels,” it said.