Sun International reports 7.4% H1 income growth as online gaming gains momentum
The casino operator increased its first-half income and interim dividend, while continued investment in digital gaming and technology weighed on its EBITDA margin.
Key takeaways
- Sun International’s H1 income rose 7.4 per cent to R6.6bn.
- SunBet income jumped 35.5 per cent to R1.2bn, while casino income grew 1.5 per cent.
- The interim dividend rose 7.6 per cent to 185 cents per share, with full-year capex forecast at R900m–R1.2bn.
South Africa.- South African gambling and hospitality group Sun International has recorded a 7.4 per cent increase in first-half income to R6.6bn (US$413.8m), as growth in digital gaming helped offset mixed results across its other businesses.
According to results released by the group on September 7, net income declined to R719m (US$45.1m) from R745m (US$46.7m) in the corresponding period last year.
Adjusted EBITDA increased 2 per cent to R1.6bn (US$100.3m), while the adjusted EBITDA margin fell to 24.1 per cent from 25.4 per cent. Sun International attributed the margin pressure to increased investment in customer acquisition, marketing, technology and other capabilities aimed at supporting longer-term growth.
SunBet leads growth
SunBet, the company’s digital operations, continued to outperform other parts of the business, with income rising 35.5 per cent to R1.2bn (US$75.2m) over the six months. Online gaming GGR increased 43.2 per cent, while sports betting posted 10.9 per cent growth.
SunBet’s growth was accompanied by higher player activity. Unique active player days increased 32.3 per cent to 5.1m, while first-time depositors rose 17.5 per cent to 330,000.
Land-based casinos regain momentum
The group’s land-based casino operations also showed signs of improvement. After three consecutive years of declines, income from the segment increased 1.5 per cent to R3.4bn (US$213.2m), while gross gaming revenue rose 4.4 per cent.
The recovery was reflected in Sun International’s casino market share, which increased by 2.3 percentage points to 49 per cent year-on-year. The company invested R255m (US$16m) in gaming capital expenditure during the first half, including spending on gaming-floor improvements and new machines.
The company’s hospitality business grew 7.7 per cent to R1.3bn (US$81.5m) in income, led by Sun City. The flagship North West resort recorded a 9.9 per cent increase to R1.1bn (US$69m) in the first half, while its net average daily room rate climbed 7.4 per cent.
Sun International’s limited payout machine subsidiary, Sun Slots, reported a 0.4 per cent decline in income to R698m (US$43.8m), while its adjusted EBITDA fell 8.1 per cent to R148m (US$9.3m). The business had 5,079 machines at the end of the period, compared with 5,095 a year earlier.
Over the six months, adjusted headline earnings per share rose 7.9 per cent to 247 cents, while Sun International increased its interim dividend by 7.6 per cent to 185 cents per share.
The group spent R478m (US$30m) on capital expenditure during the first half, including R255m (US$16m) on gaming and R67m (US$4.2m) on technology. It expects total capital expenditure for the full year to be between R900m (US$56.4m) and R1.2bn (US$75.2m).
Despite the investment programme, Sun International maintained its net debt-to-adjusted EBITDA ratio at 1.6 times, below its 2.0-times through-cycle target. Available liquidity stood at R1.8bn (US$112.9m) at the end of June.
The results come as Sun International continues to direct investment towards its digital operations and an omnichannel gaming model. The company said it is developing its SunBet and Sun International platforms while working towards further changes to its data, player-account and sportsbook infrastructure.
For the remainder of its strategic plan, the group is targeting annual revenue growth of 6 per cent to 8 per cent, an adjusted EBITDA margin of about 29 per cent and free-cash-flow conversion of 55 per cent to 60 per cent.
