Sun International Limited (1094.HK) Earnings Call Transcript & Summary

Thank you very much. Norman, David would like to know if there's any further potential payouts expected from the sale of the South American business? Or are these all done now? Yes.

The remaining payments are -- there's about R174 million net in that region that's due and payable this year. We will receive a tranche of that in September and the balance in November. And then there is a further final tranche of about R50 million net in May of next year. And that will bring the conclusion of those contingent payments to an end.

Again, from David. He just wants to know an indication of overlap between land-based and online customer base, particularly on the online casino segment.

Yes. So we look increasingly at our business as one customer ecosystem or one customer platform, if you will. And I keep saying that SunBet that probably wouldn't be where it is today without a land-based business. And the land-based business probably wouldn't be where it is today without SunBet. So we continuously leverage off one each other. Now having said that, we know that almost all of us or at least the vast majority of our land-based customers are playing online, but not all of them are playing with SunBet. So we see that as the opportunity.

As a follow-up on SunBet, Wallace Barnes wants to know, you mentioned strong SunBet trading through the World Cup period. Have you seen better momentum continuing after the end of the tournament?

Yes. The World Cup, as you know, is largely a customer acquisition opportunity, and it was also combined with a good turnover period for us. And yes, that has continued. Now having said that, we've also been in a low sportsbook activity environment during July when most football leagues have been closed. But we have that underlying improvement in momentum, and we'll continue that now throughout the rest of the year.

Thank you. Tuelo at M&G wants to know GrandWest and Sibaya EBITDA seem to be under quite some pressure with EBITDA declining significantly over the period. Please, will you speak to some of the pressures being experienced here and the outlook for these 2 casinos for the remainder of the year?

Yes. I think there's a couple of items that impacted. I think we have been spending and investing a fair amount of -- making a fair amount of investment in our marketing initiatives. And that has been to support the top line. So again, a fair amount of investment in marketing initiatives -- and as we've indicated in our book, we've been building capabilities. So various capabilities exercise to make sure that we can deliver on our value creation plan. So capabilities and then the big investment that we've been making in our properties is around technology. So that's all to support the value creation plan and to kind of build that momentum for our future EBITDA.

Thank you very much. Charles Boles, Titanium asks, in your presentation, you referred to 150 management changes. This is significant. Can you give us some insights as to what drove this? Were these legacy issues not addressed?

So I don't think we said management change. I think we said 150 new hires or appointments across the line. So we have embarked on arguably the largest capability and upskilling project in the company's history, as I mentioned in the book. And we have strengthened capabilities across the line, not only management but also across the company. Priority has been technology, data, but also operational execution functions, whether it's customer acquisition, marketing, et cetera. So it's across all those functions and all those areas where we are upskilling and improving our capabilities in order to be delivering on our plan.

Thank you. Some years ago from Charles Still, San spoke to value not reflected. This included a number of land holdings. It seems very few of these land holdings have been sold. Does Sun still believe that there are significant land holdings that could be sold? If so, how significant are these?

So we've, in the past, spoken about value that remained unlocked. One of those items was our equity interest in Swaziland, Swazi Spa. So that was -- Swazi Spa was in liquidation. And as you would see in our results, we've actually now unlocked that. We disposed of that -- those shares in liquidation for R50 million. We've -- part of the discussion was also around the land that we had, that we've contributed to the mall at GrandWest. So that we've unlocked. Other parts of land and assets that we've had that we are currently working on was in our Carousel land, where we had our Carousel casino. That's taken a long time. We continue working with various partners to see how best we can realize the value inherent in that land. So that's in flight. We've got excess land at Time Square adjacent to our property. We are working with partners there and in the final throes of finalization of the arrangements in that. So that will take care of that land. So we -- it's still in flight. To get things done from a regulatory perspective, the local municipalities takes a long time to get the various approvals, but we are working on those.

Alexandra would like to know the presentation shows a cash flow summary seemingly strained by large CapEx commitments, share buybacks and dividends for shareholders. Why has the company forecasted continued high CapEx commitments? Is the current dividend trajectory sustainable given a return to borrowing this half year? And could the dividend policy face a tightening to assist cash availability?

All right. Quite a few questions I get all of them. Firstly, I think we've got to split the investment in the company in terms of CapEx and the return of capital to shareholders. So in terms of CapEx and continuous investment into the business, all of those CapEx are basically invested on a returns-led basis. So we evaluate all of our CapEx from a returns basis and make sure that it generates the returns that we set ourselves up for to ensure that it creates value. So from a CapEx perspective, certainly, we are continuing investing, as we've indicated in capabilities and technologies. In terms of returning capital to shareholders, as I've indicated, our capital allocation framework is -- we've put that out, and we are compliant with that. In terms of returns to shareholders, we've been consistent with our dividend guidance at 75% of our earnings, and that we've stayed through for the last couple of years. We did have excess capital where we felt in the last year, we returned a special dividend to shareholders of R1, and that was done within our capital needs and requirements and how we deploy capital. In terms of making sure that our balance sheet is robust, we're currently at the end of June at 1.6x debt to EBITDA. So not a demanding CapEx, our level of debt. We've stated that our long-term debt-to-EBITDA through the cycle will be at 2x, so well within that. At this point of time, we don't see any reason to adjust our dividend guidance.

Thank you very much, Norman. Wallace, maybe on the same trajectory, I would like to know if we're able to expand on the various productivity initiatives underway, including any potential one-off costs and run rate savings? Yes.

So we are -- as we've indicated, there's a number of initiatives within the organization at the moment. We've indicated -- Ulrik just indicated we are in the process of building capability -- so there's investment in building capability. So really redefining and reshaping the capabilities within the organization. So both from a getting the right capabilities and talent within the organization at the same time, reshaping and optimizing what currently there is. So at this point in time, I think it would be remiss for me to start giving guidance on the costs and the savings, but that certainly will come through.

I might just add to that, that we flagged very clearly at the Capital Markets Day that we were looking at finding solutions for our smaller properties or underperforming properties. That's absolutely one of them. We're also looking at productivity gains at our central offices.

Thank you very much. Rowan Williams at Nitrogen Fund Managers would like to know that you mentioned a large upskilling initiative in the business. Can you provide some detail on how you are implementing AI into your business given the large amount of customer data that you have access to?

Yes. So obviously, as any well-managed business, we deploy AI in numerous ways and numerous places. But as an example, you've seen the SunBet front end, a completely new in-house proprietary build platform for SunBet being launched in what I would refer to almost record time. That would not have been possible 2 years ago and the use of AI tools for testing, et cetera, has been incredibly helpful in making this happen. And other areas, of course, we roll out a new data platform with Databricks, which allows us for natural language querying of reports, et cetera, which completely democratized data across the group and allows us to run the business with much better visibility.

Thank you. Richard Cheesman has some questions on the smoking bill. Please update us on the current status of the smoking bill -- what would the group's response plan be if the bill was to pass in its current form?

So I think generally speaking, our feeling is that, that has stalled quite a bit. We don't see a lot of movement on that. Having said that, and I've said this many times, this is largely a one-off effect we've seen from other territories that once you're through that one-off effect, you will get back to basically normal business. So it is a thing that is largely out of our control. When we get there, we will manage it, but I'm reasonably confident that once we're through that, we will work our way back to business as usual.

Again, from Richard Cheesman. Would you consider revisiting Peermont at a more reasonable valuation?

I've learned after many, many years in this business never to say never, but the answer now is no.

Thank you. David Fraser has a regulatory question. Any further progress with the DTI in regards to online gaming regulation framework? Sorry, can you repeat that? Further progress with the DTI with regards to online gaming regulation framework.

So there's been very little movement on the actual discussion paper, but we have had indication from DTI that we are looking into -- or coming into a consultation process with the industry on a future regulatory framework somewhere in October time frame. So we're looking forward to that to be able to give our inputs and contribute.

Thank you very much. I think we've come to the end of the questions. I have no further questions from the panel.

So I'd like to thank everyone for tuning in. And also one more time, thanking Norman for his incredible service to this company over 13 years. Thank you.

Thank you, Ulrik.