Hotels and casinos operator Sun International has doubled its interim dividend on the back of strong cash flows in line with a commitment to increase the dividend faster than earnings growth, it said yesterday.

A dividend of 90c a share was declared for the six months to December, up from 45c last year.

This outstrips the 64,7% increase in headline earnings to 252c a share over last year, which was restrained by the increase in the number of issued shares after the buyout of Sun International minorities last year.

Group revenue rose 15% to R2,5bn, reflecting mainly a 19% surge in revenue from casinos. Revenue from hotel rooms was slightly lower compared with last year. The bottom line benefited from a lower interest charge and higher income earned from associate City Lodge Hotels.

The biggest contributor to group revenues and operating profit is the GrandWest Casino near Cape Town, where revenue surged 18% to R565m and operating profit grew 37% to R179m.

There were also strong performances from Carnival City, which increased its marketing, and the Boardwalk in Port Elizabeth, which is benefiting from economic activity in the region.

Management fees rose 28% to R157m because of the improved revenues and trading at casinos.

Room occupancies rose at Sun City and in Zambia, and fell at the Table Bay hotel in Cape Town.
 

But Sun International CE Peter Bacon said the group would not embark on a dramatic discounting strategy. Future price increases will be carefully considered and the group will be promoting more strongly, particularly in markets such as South America, Russia and the Far East.

Early indications from the recently opened Sibaya resort north of Durban are positive. It attracted more than 500000 visitors in December. The project came in R83m over budget because additional slot machines were installed, an interchange was needed and there was a two-week delay in opening. Sun International management is also investigating underestimates of costs by the quantity surveyors.

The groups current capital projects include completing refurbishment of the Morula Casino, upgrading the Carousel casino floor, and beginning construction on a new casino at Bloemfontein and expansions and refurbishments at Sun City. It spent R620m on developments in the six months to December and has commitments of R579m for the second half of the year.

Management expects strong growth in headline earnings for the full year but the rate of growth in the second half will be slower because of comparison with the high base set in the previous year and additional issued shares.

Business Day