Announcing its interim results, Sun International said total revenue from continuing operations rose 17% to 2.9 billion rand from 2.5 billion rand a year earlier, with casino revenue up an impressive 19% to 2.23 billion rand from 1.87 billion rand previously, and revenue from rooms 7% higher at 334 million rand versus 313 million rand. Revenue from food and beverages, at 377 million rand, was 16% higher than that of the previous year.
Operating profit from continuing operations came in at 582 million rand compared to 614 million rand a year earlier, hit by the group's BEE transaction charge of 218 million rand, higher casino levies and VAT, higher promotional, marketing and other operational costs, and higher employee costs. Profit for the period from continuing operations stood at 224 million rand, down from 322 million rand previously.
Net asset value per share was reported at 27.35 rand, an improvement on the 25.46 rand seen a year earlier.
Cash generated from operations was also higher at 950 million rand compared to 782 million rand previously.
The company said that, adjusted for the BEE transaction charge and its disposal of its interest in City Lodge Hotels (CLH) during the period, fully diluted adjusted HEPS were 34% higher at 248 cents per share versus 185 cents per share the previous year.
CEO-designate David Coutts-Trotter said that the group's newly launched "Hollywood Slots" product had been extremely well received by customers and that the group had enjoyed a particularly buoyant December, with all gaming operations achieving significant growth over last year.
GrandWest casino had achieved excellent growth of 22% in revenue, while earnings before interest, tax, depreciation and amortisation (EBITDA) of 290 million rand grew 27%, reflecting further improvements in operating margins.
Carnival City had performed well in the competitive Gauteng market, achieving market share of 19% for the period compared to 18.6% in the same period last year. Revenue was 13% higher, while EBITDA grew 15% to 126 million rand.
Sibaya saw a 29% rise in revenue, while EBITDA rose by 21% to 81 million rand. Meanwhile, Boardwalk performed well, achieving growth in revenue and EBITDA of 15% and 20% over last year, respectively.
Regarding rooms, Sun International said the average room rate increased by 3% to 720 rand and the overall occupancy of 77% was 1.6 percentage points ahead of last year.
Sun City achieved an overall occupancy of 75%, two percentage points below last year, while the average room rate of 949 rand was 3% ahead. Occupancy at The Palace remained under pressure as a result of the strong rand, declining seven percentage points to 70%.
The Cascades enjoyed satisfactory revenue growth and the new Vacation Club had been extremely well received by customers, Coutts-Trotter reported.
Table Bay occupancy improved seven percentage points to 66% and the hotel enjoyed a room rate increase of 4% to 1,386 rand over the period, reflecting increased volumes in the individual travel market to Cape Town.
The Zambian operations traded well, achieving a room occupancy of 69%, four percentage points ahead of last year, at an average room rate of US$135, which was 9% better than the previous year.
Coutts-Trotter said that management fee income of 194 million rand was 24% ahead of last year as a result of the favourable trading conditions enjoyed by the major gaming operations.
EBITDA of 90 million rand was 23% ahead of last year. The EBITDA margin of 46% was in line with last year after expensing costs associated with the new opportunities in the UK and elsewhere including Africa of 12 million rand versus 11 million rand the prior year.
Regarding new developments, Coutts-Trotter said that the Windmill Casino in Bloemfontein had opened successfully to the public in September 2005 at a capital cost of 166 million rand and had performed ahead of expectations in its first three months of trading.
Construction had begun on the new Worcester Casino, estimated to cost 150 million rand and set to open in November 2006. Sun would have a 40% stake in the group and the long-term management contract.
He said the expansion of the GrandWest casino had been approved by the Western Cape Gambling and Racing Board. The project was being enlarged, increasing the estimated cost to 425 million rand from 320 million rand. Construction was expected to begin in the second quarter of 2006 and to be finished within about twelve months.
Construction of the 118-room Sibaya Lodge hotel had commenced and remained in line with the projected 83 million rand cost. It was due for completion by October 2006. The insurers had rejected the insurance claim submitted in respect of the Sibaya Casino development cost overruns, on the basis that the loss had not been proven. The group would continue to pursue the claim, the CEO-designate said.
Looking to future prospects, Coutts-Trotter said that the growth in casino revenues and improved outlook for the group's hotels and resorts should continue for the second half of the year.
"Accordingly, the group expects good growth in adjusted headline earnings per share for the full year, although the rate of growth in the second half of the year is expected to be below that experienced in the first half. The group intends to continue increasing the level of dividends per share at a rate in excess of the adjusted headline earnings per share growth rate."
I-Net Bridge
Publisher: I-Net Bridge
Source: I-Net Bridge
