Sun International Achieves Revenue Growth and Reduces Debt Levels

• Group income for the half year increases by 7% • Group EBITDAR increases by 3% • Time Square, Sibaya and Sun Slots income up 15%, 6% and 13% respectively • Acquisition of an additional 22.4% interest in Sibaya and 30% in Sun Slots • SA debt reduced from R9.2-billion at 31 December 2018 to R8.8-billion • Growth in Latam has been subdued although solid GDP growth prospects for Chile and Peru anticipated • Business focused, resilient, cash generative

Sun International released its half year results, reporting group income growth of 7% and an increase in EBITDAR of 3%. Adjusted headline earnings increased from R115-milion to R172-million, with adjusted diluted headline earnings per share up by 30% to 136c from the prior period.

A focus on efficiencies and cost containment and enhancing the guest experience resulted in a 2% increase in South African income while adjusted EBITDAR was up 4% reflecting an improvement in the EBITDAR margin. This was achieved despite a challenging economic environment.

In Latam, income increased by 17% and adjusted EBITDA (excluding IFRS 16) was up 1%, with the growth in income and EBITDA driven by the acquisition of Thunderbird Resorts in Peru and the Mendoza Haytt in Argentine. On a comparable basis, income in line with the prior period and adjusted EBITDA decreased by 7%. Sun International CE Anthony Leeming remarked, “The trading environment in South Africa remains extremely challenging, and disposable income remains under pressure. Despite this, management’s continued focus on improving efficiencies and cost reduction resulted in an improvement in our margins and in EBITDAR.

“The ongoing reduction to our debt is most encouraging. In South Africa, our debt reduced from R9.2-billion at 31 December 2018 to R8.8-billion with the group continuing to trade well within its bank debt covenants.”

In South Africa, the company finalised agreements to increase its equity interest in Sibaya and Sun Slots. The group’s interest in Sibaya will increase by 22.4% to 87.2% for a consideration of R540-million and its interest in Sun Slots will increase by 30% at a cost of R504-million. As a result, Sun Slots will become a wholly owned subsidiary of the group.

Leeming reported that both Sibaya and Sun Slots had been trading well, with income increasing by 6% and 13% respectively, and with the acquisitions concluded at attractive valuations they will enhance earnings and cash flow.

“I am particularly pleased with the performance of Time Square, which posted a 15% increase in income and continued to gain market share, while SunBet saw a significant improvement with income up 146% and EBITDAR at R20-million from R2-million in the prior period. Sun City, Wild Coast, Windmill and The Maslow battled with income declining 6%, 9%, 9% and 9% respectively. We are working hard to improve the performance of these operations.”

The restructure of the Carousel was completed at the end of May 2018, and that of the Boardwalk will be finalised shortly. The Wild Coast land claim was finally settled and we submitted our bid for renewal of the licence. The Eastern Cape Gambling Board has extended the existing Wild Coast Casino licence for six months to 28 February 2020.

Sun International’s Latam operations achieved growth in income of 17% to R2.8-billion, with adjusted EBITDAR up 1% to R638-million. However, due to the acquisition of Thunderbird Resorts in Peru and the Park Hyatt and Casino in Argentina in 2018, these results are not directly comparable. On a comparable basis, income is in line with the prior period at R2.4- billion, with adjusted EBITDA decreasing by 7% to R606-million.

Sun International has concluded agreements to dispose of 15% of its equity interest in Sun Dreams in Latam for US$86-million, which will reduce the company’s interest in Sun Dreams to 50%.

Looking ahead, Leeming said, “In light of the pressure that the local economy is under, combined with the uncertain international environment, we do not expect trading conditions to improve in the short term. “For our part, we will continue to focus on our key strategic objectives to optimise the business by improving operations and the experience of our guests, and taking the necessary action on our lossmaking entities. We will also focus on growing our alternate gaming business. Times Square is expected to gain further market share, income and EBITDAR.

“In Latam, we anticipate an improved performance from our operations in the second half with both Chile and Peru’s GDP growing at 3%. We believe there are good growth opportunities in Latam which we will continue to explore, notably in the online space given that several countries are regulating this industry.” Sun International’s Times Square Casino in Menlyn Maine.