Sun International is recovering, if all results for the six months until the end of June 2021, that’s it.
The hotel and gaming group was keen to include the results of the first six months of 2019 – before the Covid-19 pandemic and subsequent business closures – with the results of 2021 and 2020, to show shareholders that things are starting again on on the right track, but that it is still well below “normal”.
The income statement shows that revenue increased 62% to just under R4 billion in the six months ending June 2021, up from R2.48 billion in 2020. Although there is had a noticeable recovery in activity as a whole, revenues are still significantly lower. than the 5.5 billion rand in the first half of 2019, when Sun International was already fighting.
Adjusted earnings before interest, depreciation and amortization (Ebitda) fell to Rand 739 million, compared to Rand 60 million in 2020 and Rand 1.5 billion in 2019.
Summary of interim results for the six months to June
|Operating result||503||-1 612||131.2%|
|Overall earnings per share||-3c||-702c||> 100%|
|12 months high||R20.64|
|12 month low||R10.26|
Source: Sun International interim results, JSE market information
Interestingly, players were again trying their luck at slots and station tables, as well as smaller venues and online sports betting operations.
Sun International revealed that net gambling winnings increased to R3.2 billion in the six months under review, from R1.9 billion in the same six months of the previous year.
Unfortunately, the recovery in sales was not enough to bring Sun International back to profit.
The end result still showed a loss of Rand 59 million, although this was far less than the loss of Rand 1.4 billion in 2020.
Management said the results were credible during a difficult time, adding that they demonstrated the benefits of cost savings, efficiency and continued balance sheet deleveraging.
The numbers seem to differ. The income statement shows that costs have continued to increase over the past six months, ranging from personnel costs (R 875 million compared to R 759 million a year ago) to consumables and services (R 409 million. against 327 million rand).
Only the interest bill fell from 564 million rand to 270 million rand, as Sun International reduced its debts from 11.8 billion rand a year ago to 8.4 billion rand at the end of June 2021. .
Management said that during the period under review it continued to focus on ensuring that the company remains in a strong negotiating position during periods of foreclosure and related restrictions on its operations.
“Our core casino business, which accounts for around 70% of profits, has proven to be resilient and we expect we will continue to see improved revenues and Adjusted EBITDA as restrictions are relaxed and eventually lifted.
“Management has done extensive work on its cost base and achieved substantial sustainable savings in the cost structure of the business going forward. The capital increase following the rights offer concluded in 2020, as well as the elimination of Sun Dreams last year, we improved our liquidity position and considerably strengthened the group’s balance sheet ”, according to the results announcement.
Management noted that the cost structure was being revised even before the Covid-19 pandemic, but the pandemic appeared to have concentrated the process even more. For example, other cost savings have been identified in outsourcing and service provider contracts, IT systems, marketing and other overheads. This reduced costs by an additional 309 million rand.
Listen: Anthony Leeming, CEO of Sun International, discusses Sun International’s results
Looking ahead, Sun International expects the Covid-19 pandemic, coupled with ongoing restrictions on business activities, to continue to have a significant impact on the South African economy. “It will take some time to recover and will impact our business results.
“However… the South African immunization program is now gaining much needed momentum and infection rates are hopefully declining over time, which bodes well for our business. We are optimistic that with the various cost reduction and efficiency initiatives implemented and the focus on improving the customer experience, the group will recover and resume delivering strong returns to shareholders ”, management said.
Shareholders seem rather cautious for now. The stock recovered from its very low levels between R8 and R9 a year ago until the current R18. It’s still a long way from where it was before Covid-19 when it sat comfortably over R62. Even then, investors were hoping for a recovery.