Sun International has consolidated its leading position in South Africa’s R7,34-billion casino industry over the past year, and is now ready to pursue regional and international opportunities in the gaming, hotel and resort sectors, according to CEO Peter Bacon.
The group was significantly restructured this year, with majority shareholder Kersaf Investments acquiring the minority interests in Sun International (South Africa) (Sisa), delisting Sisa from the JSE Securities Exchange and renaming Kersaf to Sun International.
Sun International now holds all of Sisa’s hotel, gaming and resort interests, as well as the hotel operations of City Lodge Hotels.
Writing in Sun International’s 2004 annual report, released on Monday, Bacon said the restructuring and repositioning will enhance the group’s efficiency, improve its financial leverage and capability, allow greater control over cash flows, increase the float of Sun International shares and ultimately result in greater value creation for all shareholders.
Statistics from South Africa’s National Gambling Board showed that South Africa’s overall gaming market grew strongly for the year to the end of March, posting growth of 17% year-on-year (y/y) to R10,8-billion, from R9,24-billion in 2003, on the back of higher consumer confidence, higher disposable income and low inflation and interest rates.
Besides casinos, the gaming market includes the national lottery, horseracing, limited payout machines and betting on sports and bingo.
For the year, casinos experienced revenue growth of 18% to R7,34-billion, slightly ahead of that of the overall market, while the lottery grew only 12% to R2,56-billion, effectively losing market share to other forms of gaming.
In its gaming businesses, the board’s data showed that Sun remained the largest gaming operator by market share, taking 42% of all gross gaming revenues in the country for the year to the end of March 2004, compared with 46% in 2003.
It also held 44% of the total number of gaming positions in South Africa, versus 45% in 2003.
By province, Sun International has the highest market share in the North West, with 86% of gross gaming revenue and 87% of the total gaming positions, followed closely by Limpopo and the Northern Cape with 85% of total revenues from each of these provinces, and 82% in the Western Cape.
The most competitive provincial market remained Gauteng, where Sun had only a 17% share of total gross gaming revenues and 24% of total gaming positions.
Looking ahead, Bacon said the company is looking forward to opening its new, R650-million casino resort, Sibaya, north of Durban, in November. No other major new casino openings, from either Sun or its competitors, are planned for South Africa in the coming year.
The planned roll-out of limited payout machines in South Africa is not expected to have a material impact on the casino industry, he added.
The group’s Morula casino is undergoing an R82-million major refurbishment, involving the replacement of all casino equipment to give customers access to the group’s smart-card technology, and the introduction of new facilities including an entertainment bar, most valued guest lounge and the refurbishment of the hotel and restaurant. The property will be repositioned and relaunched in December 2005.
The casino equipment at the Carousel will also be replaced early in 2005 at a cost of R40-million, including the introduction of smart-card technology, and some refurbishment at a cost of R25-million.
Bacon revealed that work has started on Sun’s new, R145-million casino complex in Bloemfontein. Located on the N1, it will have 200 slot machines and 10 tables, a conference centre, restaurant and bars.
The group also has successful applicant status and plans to develop and operate a small casino facility at Worcester in the Western Cape. Construction of this property will, in all likelihood, only start in the 2006 financial year at an estimated cost of about R90-million.
Finally, Bacon said, Sun is looking at a number of prospects for new casino licences in the United Kingdom. The UK government is set to pass new legislation allowing more gaming operations in that country shortly. — I-Net Bridge