Sun International reports half year profits drop

Sun International CEO Graeme Stephens said despite the subdued trading environment, the company had implemented initiatives that should secure growth in profits and adjusted headline earnings compared with the second half of the 2013 financial year.

SA’s second-biggest hotels‚ gaming and resorts group, Sun International on Monday reported first-half year profit dropped 21 percent as gambling revenue stagnated and the cost of eliminating jobs rose.

The gaming giant’s diluted earnings dropped 21% to 323c per share. Adjusted HEPS were 18% lower at 348c.

Net income in the six months ended December fell to R302 million from R380 million a year earlier.

Sun said that trading for the period remained challenging‚ particularly in South Africa where casino revenue had remained under pressure and at Monticello‚ in Chile‚ where the effects of the smoking ban persisted.

However‚ the weaker rand boosted the tourism industry and the group’s hospitality revenues.

Revenue for the period was 4% higher at R5.4bn‚ with casino revenue in line with last year‚ while the group experienced strong growth in hospitality revenue‚ with room revenue up 26% and food‚ beverage and other revenue up 10%.

Casino revenue in the group’s South African properties was up 3%‚ following a stronger second quarter where casino revenue was up 4.5%‚ it said.

Earnings before interest‚ tax‚ depreciation and amortisation (ebitda) at R1.5bn‚ was 5% less than last year. Operating profit was down 17% at R880m.

The group said that due to the volatility it was experiencing in the industry and the changes the group itself was going through‚ it did not believe quarterly trading updates currently provided meaningful information on which to base investment decisions or were indicative of trends that it was currently experiencing in the business.

Consequently the board has decided to stop publishing the quarterly updates but would continue to publish the half-yearly profit announcements that gave a better indication of medium- and long-term trends.

Sun International announced last month that it would consult with organised labour around a possible restructure to drive efficiencies in the South African businesses, an exercise that could affect as many as 1,700 staff.

Looking ahead, Sun International CEO Graeme Stephens said despite the subdued trading environment, the company had implemented initiatives that should secure growth in profits and adjusted headline earnings compared with the second half of the 2013 financial year.

The objectives included revenue growth and cost-cutting initiatives‚ the benefit of which were beginning to show in the group’s results.

The full benefit of these initiatives and the wider group restructure would only fully reflect in the 2015 financial year.

The trading environment was expected to remain subdued‚ but given the initiatives already implemented and the recent improvement in the performance of Monticello the group was optimistic that it would achieve growth in both ebitda and adjusted headline earnings in comparison with the second half of the 2013 financial year‚ it said.