Posted: 2005-08-30 23:56 Sun International earnings up 45%  Presenter: Lindsay Williams Guest(s): Peter Bacon Hotel and gaming group Sun International reports a 45% increase in fully diluted headline earnings per share for the year ended June 2005. The dividend totals 200 cents for the year - 60% up from 2004 - and revenue is up 15%. With outgoing chief executive Peter Bacon LINDSAY WILLIAMS: Peter, why have you decided to move on? PETER BACON: I reach the mandatory retirement age of 60 in June 2006 - so I think it was important for me to indicate that I would be retiring at that time. LINDSAY WILLIAMS: You’ll miss the business? PETER BACON: I will, indeed, but I’ve had 33 great years with Sun International and I’ve seen a lot of changes over that period of time - I’m very pleased with the progress that we’ve made, and the group will be left in very capable hands. LINDSAY WILLIAMS: Let’s go to the business now - revenue, as I said in my introduction, was up 15% - but that’s not the full story. It seems to me a tale of two different businesses - gaming being the driver of the group’s numbers, casino revenues I think were up 18% - whereas hotel revenues in terms of occupancies was flat. Is that a fair assessment of the numbers? PETER BACON: That’s the situation. In fact our casinos have performed very well - overall revenue 18% up, slot revenues 19% up - very pleasing. The star performers being Grand West and the Cape Metropole - excellent revenue growth of 19%. Carnival City also performed well - increasing its share of the Gauteng market - so overall a very good performance on the casino side of the business. Hotels and resorts had a more challenging year - when you adjust for the disposal of Ngwenya and Nhlangano, two small resorts - we grew room revenue by 4% on a comparable basis. Disappointing - occupancy up 2%, the average room rate just over R700 - the same level as the previous year. LINDSAY WILLIAMS: Is it because of the rand? Is it because the international tourist market is slightly depressed because of the strong currency from two or three years ago, or is it simply because you’re not focusing on the domestic market? PETER BACON: We do focus on the domestic market, in fact the domestic market is very important to us - if you take an operation like Sun City, our largest resort with 1,300 rooms, we improved occupancy there from 72% to 76%. Only 35% to 40% of Sun City is international, the balance is local - so that’s quite a healthy mix. The problem really is increased competition from dollar-denominated destinations - that’s put some downward pressure on demand at the upper end of the market, that combined with an increase in supply in Cape Town following the opening of a competitive facility in 2003. So in overall terms we were able to improve our occupancy, but as a result of the strength of the currency we’ve had to adjust to that and hold rates. LINDSAY WILLIAMS: So outbound tourism has been a drag on your business? PETER BACON: Not really, in fact we’ve experienced quite buoyant local conditions over the past year. In Zambia our resort at Victoria Falls has done particularly well - increasing occupancy from 53% to 62% year on year with an 8% growth in room rate - that operation is very heavily geared to the local market. LINDSAY WILLIAMS: The split between gaming and hotels - is it a function of the spending patterns of the economy, the economy changing rapidly with an emerging middle class coming through that we keep on hearing about - are you now starting to focus your attention more on the casino side because of the trends of the last couple of years? PETER BACON: I think that the fact that our casino revenues are substantially ahead of our hotel resort revenues is really by design - we are a company involved in the development, operation and management of casinos, hotels and resorts. We competed for new opportunities under a new gambling dispensation in South Africa - we were successful in winning a number of licences, and I think the fact that these casinos are performing well is really the result of the process that we went through to retain our leadership of the market. LINDSAY WILLIAMS: Looking ahead talking about licences - we spoke about the UK six months ago, I think legislation seems to be the hurdle in your way at the moment? What is the current situation? PETER BACON: There has been an election since then - in May as you probably know. There has been some progress, the country has a new gambling Act, but there’s still quite a long process ahead - the UK government through an advisory panel must determine how many new regional opportunities there will be, and the location of these opportunities. We will continue to position ourselves to take advantage of the de-regulation process, and have two specific locations in mind - but it will be quite a drawn out process. LINDSAY WILLIAMS: As local licences dry up in the gaming arena will you look more and more to the international market? PETER BACON: I think we’re bound to do that in the case of the gaming side of our business - there are unlikely to be any new opportunities in South Africa. So we will look at opportunities in other parts of the world - jurisdictions that are opening up such as the United Kingdom. There are other jurisdictions in Africa, and some in Asia that we will look at. LINDSAY WILLIAMS: The City Lodge situation - your near 39% stake, can you summarise what the situation is there? PETER BACON: Yes, we had our scheme and general meetings yesterday 29 August 2005 - the disposal of our City Lodge shareholding to our shareholders in exchange for Sun International shares was approved - so we will be proceeding with that disposal. Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :