Sun International to dish out R2 a share dividend
August 31, 2005
By Ingrid Salgado
Cape Town - Sun International, whose headline earnings grew 45 percent in the year to June, will pay shareholders a dividend of R2 a share, a 60 percent increase over last year, and says dividend cover will continue to rise next year.
Analysts said the news signalled that South Africa's young gaming industry, which required significant capital spending in its infancy, was beginning to mature.
Sun International chief executive Peter Bacon said: "For a long period our shareholders did not see the dividend as we went through an intensive period of expansion. Quite frankly, I think our shareholders are entitled to a more generous dividend payout."
He said the 2006 dividend would again increase faster than the group's earnings growth rate, although the board had not predetermined dividend cover.
The hotel and gaming group's performance was in line with analysts' expectations and came in at the upper end of profit growth forecast in an earlier trading statement.
On the JSE, the results announcement added 0.4 percent to Sun International shares, which closed at R74.50. The leisure and hotels sector rose 0.13 percent.
The group said good progress was being made in negotiating a deal with a black economic empowerment consortium.
The transaction would involve the black empowerment partners holding 5 percent of Sun International, a stake that was now valued at about R430 million. Bacon expected an announcement around November.
In the year under review, headline earnings increased 45 percent to R4.17 a share, while net profit was up 62 percent at R709 million.
Bacon, who announced he would retire at the end of financial 2006, attributed the performance to strong revenue growth in casinos of 18 percent. This contributed to an improvement in the margins of earnings before interest, tax, depreciation and amortisation.
The resorts and hotels had "a more challenging year", Bacon said, although Sun International managed to nudge up occupancy rates by 1 percentage point to 68 percent. Group revenue grew 15 percent to R5.1 billion.
Bacon said that while borrowings remained more or less static at R2.3 billion due to development costs at the Sibaya casino in KwaZulu-Natal, the cost of borrowing had fallen.
He expected a similar level of borrowings in 2006 because of capital spending commitments for projects in Bloemfontein and Worcester, as well as a second hotel at Sibaya.
Bacon said Sun International planned to sell its remaining stake in Kerzner International within 12 months, having sold off half its shareholding during the year for $34 million (about R221.7 million at yesterday's exchange rate).
Sun International was keen on offshore expansion opportunities and was "well positioned" to compete for two of eight regional casino licences in the UK.
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