Sun International is on the mend, if the set of results for the six months to the end of June 2021 is anything to follow.
The hotel and gaming group set out to include the results for the first six months of 2019, before the Covid-19 pandemic and subsequent business closures, in the 2021 and 2020 results, to show shareholders that things are returning to normal, but still well below “normal”.
The income statement shows that revenue increased by 62% to just under R4 billion in the six months to the end of June 2021, compared to R2.48 billion in 2020. While there has been a remarkable recovery in business in general, revenue is still significantly lower. than R5.5 billion in the first half of 2019, when Sun International was already struggling.
Adjusted earnings before interest, tax depreciation and amortization (Ebitda) were recovered to R739 million compared to R60 million in 2020 and R1.5 billion in 2019.
Summary of provisional results for the six-year term up to June
|Operating profit||503||-1 612||131.2%|
|Total earnings per share||-3c||-702c||> 100%|
|12 months maximum||R20.64|
|12 month minimum||R10.26|
Source: Sun International interim results, JSE market information
Read: Sun International Hit R1bn + Pandemic Headline Loss (March 2021)
Interestingly, players were trying their luck again at resort slots and tables, as well as smaller gambling venues and online sports betting operations.
Sun International revealed that net gaming earnings increased to R3.2 billion in the six months under review, compared to R1.9 billion in the same six months a year earlier.
Unfortunately, the revenue recovery was not enough for Sun International to return to profit.
The bottom line still showed a loss of R59 million, although this is much less than the loss of R1.4 billion in 2020.
Management said the results were credible during a difficult period, adding that they had demonstrated the benefits of cost savings, efficiency and continued balance sheet deleveraging.
The figures are beginning to differ. The income statement shows that costs continued to rise over the past six months, from employee costs (R875 million compared to R759 million a year ago) to consumables and services (R409 million compared to R327 million).
The interest bill alone decreased, from R564 million to R270 million, as Sun International reduced its debts from R11.8 billion a year ago to R8.4 billion at the end of June 2021.
Management says that during the period under review, it continued to focus on ensuring that the business remained in a strong position to negotiate during the blackout periods and related restrictions imposed on its operations.
“Our core casino business, which accounts for approximately 70% of earnings, has proven its resilience and we anticipate that we will continue to see an improvement in revenue and adjusted Ebitda as restrictions are further eased and ultimately instance, are removed.
“Management has done extensive work on its cost base and has achieved substantial sustainable savings in the company’s cost structure going forward. The capital increase after the offer of rights concluded in 2020, as well as the sale of Sun Dreams last year, have improved our liquidity position and have significantly strengthened the group’s balance sheet ”, according to the announcement of results.
Management noted that the cost structure was under review even before the Covid-19 pandemic, but the pandemic seemed to have focused the process even more. For example, additional cost savings were identified on outsourced and service provider contracts, information technology systems, marketing, and other overhead costs. This cut costs by an additional R309 million.
Listen: CEO Anthony Leeming discusses Sun International’s results
Looking ahead, Sun International expects the Covid-19 pandemic, along with ongoing restrictions imposed on business activities, to continue to have a significant impact on the South African economy. “It will take some time to recover and it will impact our business results.
“However… the South African vaccination program is now gaining much needed momentum and infection rates are decreasing over time, it bodes well for our business. We are optimistic that with the various savings and efficiency initiatives implemented and a dedicated focus on improving the customer experience, the group will recover and resume delivering strong returns to shareholders, ”according to management.
Read: Soccer bosses buy license to Sun International’s Carousel casino
Shareholders appear to be quite cautious for now. The stock has recovered from its very low levels of between R8 and R9 a year ago to the current R18. This is still a long way from where it was before Covid-19 when it was comfortably above R62. Even then, investors expected a recovery.