Sun City owner hit by 400% hike in load shedding bills
Sun City owner Sun International managed to boost income and profits in 2023, despite absorbing a 400% increase in its diesel costs to combat load shedding – averaging R5 million a month.
Sun International recorded a 7% annual increase in income to R12.1 billion for the 12 months ended 31 December 2023, while its adjusted EBITDA was up 3% to R3.4 billion.
Headline earnings were up a massive 86% to R1.037 billion from R559 million the year before.
Adjusted headline earnings – discounting once-off and ‘unusual’ items – saw a smaller 4.6% increase to R1.142 billion from R1.092 billion in 2022. Adjusted headline earnings per share were up 5.9% to 468 cents per share (425cps unadjusted, from 226cps in 2022).
The adjustments to headline earnings in 2023 amount to a net R168 million gain from valuation redemptions, foreign exchange losses, acquisition transaction costs and other considerations.
Like previous years, the majority (76.8%) of itotal group income came from the gaming market.
Income from this sector increased 3.3% from the previous year, partly as a result of a third consecutive year of growth in the South African gaming market (sitting at a value of R55.8 billion).
Contrastingly, casino income dropped by nearly 2% to R1.462 billion, as “Sun Slots’ operations were impacted by load shedding with income slightly behind the prior year,” said the group.
Its betting division, SunBet, saw a 116.2% annual increase, generating record income for this division, amounting to R729 million for the financial year.
Resorts and hotel income increased by 17.4%, with the flagship Sun City achieving record profitability and a net positive cash flow contribution to the group.
Importantly, much of the group’s margins were impacted by load shedding costs, with diesel costs amounting to R60 million – an estimated 400% increase from the previous year.
Adjusted EBITDA margin improved from 27.2% at the 2023 half-year to 28.1% for the full year; however, it would have been better if load shedding expenses like diesel costs were not a factor.
As a result, the group is looking to implement a renewable energy strategy “to protect margins and ensure energy security.”
The group’s South African debt (excluding IFRS 16 lease liabilities) now sits at R5.7 billion, down from R5.9 billion the previous year.
The debt levels take into account the payment of the 2022 final dividend of R632 million and the interim dividend of R388 million.
The board declared a final gross cash dividend of 203 cents per share, bringing total dividends for the year to 351 cents per share.
Outlook
The group said it is looking to acquire hospitality and entertainment group Peermont sometime in 2024. However, this is not expected to have a significant impact on the group’s 2024 financial performance.
Overall, Sun International has a notably optimistic outlook for its performance in 2024.
“While the economy and load shedding is placing pressure on our urban casinos, trading levels at the start of 2024 have improved marginally,” said the group.
The group has said that many of its revenue streams are “achieving significant income growth and is exceeding key performance indicators”.
“This strong momentum is expected to continue with another substantial increase this year as the business expands rapidly… and we anticipate another good year from them in 2024.”
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