The hotel and gaming group says there will be no quick recovery to previous trading levels but it will continue to reduce debt.
Sun International has slumped into a first-half loss after all its hotels and casinos were closed from late March until the end of June, cutting off revenue. However, it hopes to get something back from insurance.
Releasing its interim results, Sun International said it incurred impairment charges of R1.18 billion on its SA operations due to the extended lockdown and anticipated slow recovery, with the bulk booked against Sun City. Action taken to protect balance sheet liquidity and minimise the outflow of cash helped it to significantly reduce costs, manage cash flow and available facilities. It negotiated deferrals on its debt payments with lenders to manage its short-term liquidity risk. It is also strengthening its balance sheet with a R1.2 billion rights offer.
Income fell 56% to R3.71 billion in the six months to end-June and adjusted earnings before interest, tax, depreciation and amortisation sank 96% to R79 million. It reported a net loss of R1.1 billion, down from last year’s interim profit of R363 million, and an adjusted headline loss of R885 million from earnings of R172 million previously. That left it with an adjusted headline loss per share of 702c from earnings of 136c.
The company said with the recent resumption of trading in SA and the further lifting of restrictions it expected trading levels to continue to improve. Casino income was resilient in July and it anticipated a stronger recovery following the lifting of the lock-down. With the resumption of inter-provincial travel, it said it would also open Sun City from tomorrow. With the recovery in its hospitality division likely to be slower due to restrictions on international travel, The Table Bay hotel in Cape Town and the Maslow Sandton would remain closed until there was sufficient demand to justify their reopening.
The group’s alternate gaming operations, including Sun Slots and Sun Bets, had reported a faster recovery and it expected online gaming to continue to be a key source of growth for the business going forward.
While we do not expect that there will be a quick recovery to previous trading levels we are optimistic that with the various costs saving and efficiency initiatives implemented and a dedicated focus on improving the customer experience, that the group will recover from the Covid-19 pandemic and resume delivering strong returns to shareholders,” Sun International said.
Last month, Sun said it planned to sell its remaining stake in Sun Dreams for $160 million after settling a dispute with its joint-venture partner in the Latin American casino business. It said the move would significantly strengthen its balance sheet and reduce interest charges. Sun Dreams’ results were disclosed as discontinued operations.
Sun said it had an Assets All Risk insurance policy in place for its SA operations, with an extension providing cover for Business Interruption (BI) following a Contraction and Infectious Diseases incident. It said a Loss Adjustor was actively engaging with its insurers for an urgent response to a claim it submitted in the middle of July. A court case brought by two Santam clients against the short-term insurer is expected to be heard in court today after the industry pushed back against BI claims due to the government-enforced lockdown.
Sun International’s shares fell 0.2% to R12.48 yesterday.
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