March 19, 2018 / 10:12 AM / a year ago

UPDATE 1-South Africa's Sun International closes loss-making operations

(Recasts with loss making operations, adds CEO comment, details)

JOHANNESBURG, March 19 (Reuters) - South African Hotel and casino operator Sun International Ltd has closed loss-making operations to cut debt, its chief executive said on Monday, after reporting a drop in full-year adjusted earnings.

The gaming group had expanded in Latin America after its home market came under pressure from stiff competition, a drop in available casino licences and a consumer downturn in Africa’s most industrialised country.

But some of its businesses overseas and in South Africa have fallen short of expectations, putting increasing pressure on its debt.

On March 9 the company said it will raise 1.5 billion rand ($124.65 million) through a rights issue to de-risk its balance sheet and make sure it does not breach debt covenants.

On Monday it announced the closure of loss-making operations, including the Fish River Sun, Sun Nao Casino in Colombia and the International VIP Businesses in both South Africa and Panama. It also closed the 66th floor casino and cut staff at its Ocean Sun Casino.

In South Africa it plans to restructure the Boardwalk casino and hotel and address the performance of its Carousel casino in the North West province.

“Closing loss making entities will have a positive impact, as will the interventions we’ve put in place at the Ocean Sun Casino, the Boardwalk and the Carousel. We are anticipating much improved performances from these operations,” CEO Anthony Leeming said.

Leeming said that while the mood in South Africa has definitely lifted since the election of President Cyril Ramaphosa, he doesn’t expect this to translate immediately into an increase in spending on gaming “but should have a positive effect in the medium term.”

The group’s core casino operations in South Africa reported a 1 percent fall in revenue, while its hospitality operations saw 6 percent growth in room revenue.

The group said diluted adjusted headline earnings per share, which the group considers the most meaningful measure of its performance, fell to 298 cents in the full year ended Dec.31 from 503 cents in the previous year due to once-off items.

Shares were down 2.86 percent to 57.80 rand at 1005 GMT. ($1 = 12.0339 rand) (Reporting by Nqobile Dludla; Editing by Subhranshu Sahu and Louise Heavens)

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