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Hotel and gaming group Sun International suffered a brutal first half of the year, with overall losses for the six months ending June 2020 dropping 615% to R885 million, from overall earnings of R172 million in the same period in 2019. .
Group revenue was 56% lower with R3.7 billion, from R8.46 billion earlier, while Ebitda was down 96% to R79 million, from R2.14 billion the previous year.
Sun International said that operations were severely affected by the pandemic and the Covid-19 shutdown, which led to the closure of most of its hotels and gaming venues between March and June 2020.
However, he said trading was tense before the crisis hit, though he said he was making progress in reversing that trend before the close.
“The group’s ongoing efforts to manage costs, implement efficiencies, and improve the customer experience were paying off before the start of the Covid-19 pandemic, and the group achieved growth in revenue, adjusted Ebitda, and adjusted Ebitda margin. “, said. “
Debt was well controlled and the benefits of deleveraging were strongly reflected in financial results. “
In response to the outbreak, Sun International said it moved to protect balance sheet liquidity and minimize cash outflow, while reducing costs. Short-term liquidity risk was addressed by negotiating debt deferrals and an offer of R 1.2 billion partially waivable rights.
“The resumption of casino operations below the current level further improves the liquidity outlook for the group,” he said. “Once a stable business environment returns, the company will continue its progress in deleveraging its balance sheet, simplifying its complex group structure and growing its attractive alternative gaming business.”
South Africa
South African operations were particularly affected during the period, the group noted, recording around R1.2 billion in impairments on some of its largest assets.
This includes R900 million in Sun City, which suffered most of the deficiencies, followed by R180 million in the Boardwalk, R99 million in Maslow, Sandton and R12 million in Sun Dreams, which the group is currently in the process of shedding its investment. in.
Revenue from South Africa operations decreased 55% from the prior period.
Most of the group’s portfolio operations have run into deficits, after being largely profitable in the same period in 2019.
Reductions
As a result of the tense operations, although not necessarily related to the Covid-19 outbreak and shutdown, on June 10, 2020, Sun International informed its union, Saccawu, that it would carry out a downsizing exercise for the Section 189A, which would affect approximately 2,300 employees, with an estimated cost of R280 million.
“This reduction exercise will particularly affect Sun City, Maslow Sandton, Boardwalk, The Table Bay, and Wild Coast and would likely have occurred independently of the Covid-19 pandemic,” he said.
The Covid-19 pandemic has had an impact on the downsizing process, he said.
The 60-day consultation process that would have initially ended on August 18, 2020, was extended to allow for a voluntary downsizing and early retirement exercise to take place, in order to reduce the impact of the number of employees potentially will be laid off under exercise Section 189A.
“This latest exercise, agreed by the Union on August 17, 2020, will take approximately 2 weeks to complete. Thereafter, the group will resume and conclude the Section 189A consultation process with the union. Certain reductions in the various units affected will require approval from the gaming table and may take a little longer to implement, ”he said.
panorama
Sun International said the Covid-19 pandemic and the lockdown will continue to have an impact on operations, with a slow recovery anticipated.
Most of the group’s bars and restaurants in the casinos, although allowed to reopen under lockdown level 2, remained closed due to limited demand and various restrictions on the sale and distribution of alcohol.
Given restrictions on interprovincial travel until August 18, 2020, the Sun City Casino has also remained closed. The initial impact of the curfew saw an immediate drop in gaming revenue, which improved towards the end of July and has continued to improve in August.
Hotel properties were predominantly closed for the month of July, given restrictions on interprovincial leisure travel in South Africa. With the recent announcement of the move to Level 2, which allows all interprovincial travel to resume, Sun City will reopen on September 2, 2020.
“Given the ongoing restrictions on international travel, we expect the recovery in hospitality to be slower and as such The Table Bay and Maslow Sandton will remain closed until there is enough demand to justify reopening,” he said.
Read: Warning from South African companies: more layoffs on the way
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