Sun International profit falls as South Africans cut back on their gambling

TAGs: Chile, latin america, South Africa, sun international, sunbet

south-africa-sun-internationalLeisure and casino operator Sun International Ltd. saw profit fall in the first half of its fiscal year as South African gamblers cut their spending and labor costs increased. Group revenue rose 3.6% to R5.4b (US $504m) but gambling revenue was up only 1% to R4.2b. Sun’s South African operations contributed 77% of group revenue, while other African operations accounted for 10% and the Monticello casino in Santiago, Chile saw its revenue share slip to 13%. Net income in the six months ending Dec. 31 was down 21% to R302m ($28.1m).

Sun’s GrandWest Casino in Cape Town led all properties with R999m (+8%) as tourists took advantage of the weak local currency. Sun City took second prize domestically with R720m (+10%) followed by the Sibaya Casino in Durban with R555 (+6%) but Carnival City in Gauteng saw revenue fall 6% to R523 as it struggled with local competition. Sun’s operations on the continent beyond South Africa produced total revenue of R549m (+15%).

The introduction of 218 new slots allowed Monticello to increase its share of the Santiago market to 70.8% but the lingering impact of a smoking ban pushed revenue down 13% to R702m. The company is installing more smoking decks and has managed to reduce the revenue decline to 7% in January.

As for Sun’s fledgling online sports betting operation SunBet, the site only launched in November and the company has yet to break its earnings out into a separate column. Sun did say that although the operation was “still small, business levels have grown strongly” in a market that has shown strong overall growth. Sun also alluded to the possibility of South Africa passing legislation to allow operators to offer casino games online, noting that “strategically, Sunbet provides an entry to internet based gaming” should MP Geordin Hill-Lewis find sufficient support in parliament for his online gambling bill.

Employee costs rose nearly 14% to R1.25b in H1. In January, Sun began talks with labor groups about a restructuring that could affect 1,700 employees, or about a quarter of Sun’s domestic workforce. Sun International Graeme Stephens said the balance sheet won’t reflect the cost-cutting initiatives until the 2015 financial year.

Looking ahead, Sun’s Latin American ambitions will get a boost from the September opening of its revamped Ocean Club Casino casino in Panama City, which will feature 600 slot machines and 32 gaming tables split between a main gaming floor and a penthouse Salon Prive. Sun is also applying to build a casino in Colombia featuring 310 slots and 16 tables along with a 284-room five-star hotel.


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