Sun International pleased with Latin American performance, growth in online sports betting

Sun International [JSE:SUI] released its full year results on Monday, reporting income growth of 4% and an increase in EBITDAR of 1%.

Adjusted headline earnings increased 109% to R763 million. Diluted adjusted headline earnings per share was up 91% to 605 cents per share.

Sun International CE Anthony Leeming says its goal for the year was to drive sustainable growth and profitability, unlock value in the business and reduce debt.

"We are pleased with the progress we have made against these goals that have assisted us in achieving extremely pleasing results against the backdrop of an increasingly challenging environment," he said in a statement.

"We were particularly pleased with our Latam operations which showed resilience in the face of unexpected and widespread social unrest in Chile during the last quarter. Sun Dreams also demonstrated pleasing de-gearing and balance sheet strength."

The group made considerable progress in reducing its debt, which was down from R9.2 billion to R8.8 billion, and which includes R593 million paid for increased interest in Sibaya. It refinanced its debt in South Africa during the year and this was successfully completed with a 50% oversubscription, with existing lenders renewing their commitment to the group.

Total income in South Africa increased by 2% to R11.5 billion with EBITDAR increasing by 5% to R3.3 billion, reflecting an improvement in the EBITDAR margin to 29% from 28.0% in 2018. This improvement was driven by the continued improvement of the flagship Time Square property, above-market growth at Sibaya, SunSlots and SunBet, and margin improvement. This was partially offset by weaker performances at GrandWest and Sun City, with the latter in the early stages of a full operational turnaround plan.

Online sports betting

The popularity of online sports betting continued to benefit SunBet, which achieved a 82% increase in income and an EBITDAR of R44 million, up from R8 million in the prior year.

Sun Slots has delivered consistent double digit EBITDA growth over the last three years and has now reached critical scale. It delivered income growth of 13% and an increase in EBITDAR of 14%.

Latam comparable operations grew income 1% while adjusted EBITDAR decreased by 11%, following widespread civil protest in Chile which impacted all operations. Monticello increased income by 4%, but the losses due to civil unrest, and increased marketing and promotional costs, affected adjusted EBITDAR.

Despite poor economic conditions in Argentina, The Park Hyatt Hotel, Casino & Spa in Mendoza reported R465 million in income and R77 million in adjusted EBITDAR, with the hotel operation benefiting from dollar-based income.

"Chile and Peru are forecasting positive GDP growth, which augurs well for our operations. A number of countries in Latam are looking to regulate online gaming, and this too represents a good opportunity for us to grow," said Leeming.

"While it is still too early to forecast what impact the Coronavirus might have, we are taking all  necessary precautions to ensure a safe and healthy environment for our guests and staff and preparing operations for any possible disruption to trading."

The group's share price closed down 15.19% at R20.27 on Monday.

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