Legal costs bite into Sun International’s profit

Posted On Wednesday, 24 August 2016 20:35 Published by
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Sun International’s (SUI) expansion into Latin America helped it grow overall revenue 15% to R12bn‚ but the casino group lost R503m in the year to end-June due to purchasing costs and legal settlements.

Graeme_Stephens_Sun_International_CEO

Revenue from its Latin American casinos surged 40% to R2.45bn‚ contributing a fifth of its total revenue.

Sun International is still heavily dependent on its South African gambling income which remained flat at R7bn‚ its financial results released on Monday morning showed.

The overall revenue contribution from its South African operations grew 11% to R9.5bn‚ helped by a 67% jump in food and beverage sales to R807m following its move to in-source catering.

The group’s loss was largely due to a R675m settlement with Peermont whereby the rival group has agreed to lift its objection for Morula’s casino licence to be transferred to a new casino‚ Time Square‚ which is under construction at Menlyn Maine.

Shareholders will receive a final dividend of R1.35‚ a 23% cut from the previous year’s R1.75. Together with its 90c interim dividend‚ this took the total payout for the year to R2.25‚ a 21% drop from the previous year’s R2.85.

Sun International said it intended to exit Nigeria whose revenue contribution grew slightly to R214m‚ contributing less than 2% of the group’s total.

“Continued setbacks in Nigeria as well as the ongoing shareholder dispute have frustrated all attempts to develop and improve the property. Five of our staff members who were detained by the Economic and Financial Crimes Commission earlier in the year have still not had their passports returned to them despite no charges being laid against the individuals‚ the company or Sun International‚” the company said in its results statement.

“As a result of the current environment and issues facing the company‚ the board has taken the decision to exit our investment in Nigeria. This is‚ however‚ expected to be a protracted process given the challenges we are facing and to ensure we receive fair value for our investment.”

Highlights of the year included buying a controlling stake in Grand Parade Investment’s slots business. Sun International said it triggered a call option to raise its stake in this business to 70%.

The merger of Sun International’s Latin American operations with a casino group called Dreams‚ leaving the JSE-listed group the 55% owner of the enlarged operation‚ was completed in may.

Sun International said its Chilean casinos recovered from a smoking ban implemented in 2013. Overall‚ its Chilean operations achieved revenue growth of 6.6% and earnings before interest‚ tax‚ depreciation and amortisation (ebitda) growth of 15% thanks to its Monticello casino not paying any management fees in 2016 against the previous year’s R83m.

Source: BDpro

Last modified on Wednesday, 24 August 2016 20:48

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