A booming economy has given South Africans more disposable income and the leisure industries, including gaming, are profiting. The strong Rand has been detrimental to room occupancy rates at hotels accustomed to strong tourist numbers and corporate conventions. Sun International, with just over half of the country’s casino market, has reported a 19% increase in casino revenues.

In order to support its hotels the company has embarked on a selling campaign overseas. It is aiming to attract tourists and convention business from countries as diverse as China, Argentina and Russia, as well as maintain its high profile in Europe. On the gaming side Sun International is also looking overseas, as there is little probability of the further expansion of casino numbers in South Africa. The company is one of nineteen to submit a concept for an integrated casino resort to the Singapore government and pursues its interest in the UK market, although the casino expansion there will be later and much smaller than anticipated.

In view of its strong operating cash flows and growth in adjusted headline earnings per share (up 61% in the six months to 31 December 2004), the company has declared a 100% increase on its interim dividend – up to 90 cents per share from last year’s 45 cents. According to the Profit and Dividend Announcement released by Sun International for the six months ended 31 December 2004, the group anticipates strong growth in adjusted headline earnings per share for the full year. Growth in the second half, however, is expected to be lower due to the level of earnings in the second half of last year and the impact of additional shares in issue.

The outlook is promising for Sun International. The opening of the Sibaya complex last December should see the company increase its market share in the Durban area. The replacement of the temporary Sugar Mill casino by Sibaya has meant additional entertainment venues, restaurants, bars and hotel on offer to customers. Upgrades and extensions at Sun City are expected to increase overall profitability of the company’s flagship operation, and its Victoria Falls operation in Zambia posted the strongest improvement with visitor numbers up 10%. Room rates and occupancy at the Table Bay Hotel in Cape Town remain steady despite increased competition in the 5-star market and down trading by overseas tourists.

The group is contesting a R36 million charge by the South African Revenue Service (SARS) for a change in the deductibility of pre-opening expenditure. If it has to pay it is not expected to affect the overall scale of business, and the group believes it will be successful in its challenge. All in all, 2005 looks to be shaping up for another good year for Sun International. (E-03.09.05)

© Copyright 2005 CasinoCompendium



>>> return to archives
>>> return to frontpage