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Disposable income of SA consumers under considerable pressure - Sun International CEO

Mar 18 2019 22:02
Carin Smith

The trading environment in South Africa remains extremely challenging, with consumers' disposable income under considerable pressure, Sun International [JSE:SUI] CEO Anthony Leeming told Fin24 on Monday.

"The environment has been tough for the gaming industry for a while already, but now it is particularly tough due to the SA economy and consumers being under pressure," he said.

"We depend on the disposable income of consumers and we can see they are more careful with their discretion spend like gaming."

Fin24 reported earlier on Monday on Sun International's full year results. It reported revenue growth of 7% and an increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of 5%.

The increase in VAT in SA from 14% to 15% took R44m off Sun International's the operating profit line.

"There is not much we can do about this kind of impact. We just have to look at getting operations as efficient as possible and manage costs as best we can. We cannot just pass on the extra expenses to our customers," said Leeming.

Furthermore, the company is continuing its efforts to reduce debt and Leeming is confident it will continue to bring debt down.

He said the GrandWest Casino and Entertainment World in Cape Town performed well after a couple of years of stagnant growth.

The Sibaya Casino in Durban had some expansion and improvements. Leeming describes it as "the right thing at the right place".

As for the Wild Coast Sun, Leeming says it did "nicely" in a difficult environment.

At Sun City occupancy slipped slightly and the leisure business was under pressure. The company is busy with refurbishments at some of the properties.

"Sun City remains a very popular weekend destination and its 40th anniversary is coming up. We are optimistic about growth potential at Sun City and would especially like to see it attracting more international visitors," said Leeming.

The Table Bay Hotel in Cape Town was severely impacted by the water crisis in Cape Town, but according to Leeming, the situation has now improved with bookings picking up towards the end of the year.

Leeming is particularly pleased with the performance of the Time Square Casino in Pretoria, which showed good growth, particularly in the second half of the year with casino income up 19%. Sun International wants to grow its market share at Time Square.

He added that Sun International is dealing firmly with loss-making operations and has already begun the restructure of both Boardwalk Casino in Port Elizabeth and the Carousel Casino in North West.

Looking ahead for Sun International, Leeming expects continued pressure on the disposable income of SA consumers.

"Our results are very credible in a tough environment. For the longer term we are happy that we are in right place in SA, but in the short term we will continue to struggle with revenue growth. So, we will maintain our focus on costs," said Leeming.

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