* Ditches dividend for FY to conserve cash
* Diluted adjusted headline earnings per share fall 35 pct
* Expects gaming revenue to remain under pressure (Adds details, CEO comments about Latin American business)
By Nqobile Dludla
JOHANNESBURG, March 27 (Reuters) - South African casino and hotel operator Sun International scrapped its dividend after reporting a drop in annual profit on Monday, seeking to conserve capital to reduce debt and complete a casino complex in Pretoria.
One of two listed casino operators in South Africa, Sun International has been hit by sluggish economic growth in its home market. It is scheduled to open its second-largest casino and entertainment complex there, the 4.2 billion rand ($340 million) Time Square project in Pretoria, next month.
"Taking account of the difficult trading conditions, the need to complete strategic group initiatives, particularly Time Square, and the need to reduce debt, the board decided not to declare a dividend for the period," the company said in a statement.
The owner of Sun City resort and the Sibaya Casino in South Africa said the slowing economy, foreign exchange losses and settlement charges resulted in a 35 percent drop in full-year profit.
The group's core casino operations in South Africa were negatively affected by sagging demand from gamblers due to "difficult trading conditions and reduced consumer spend", with casino revenue down 2.7 percent.
CEO Anthony Leeming, who took the helm in February, said gaming revenue in South Africa would remain under pressure due in part to increased personal income taxes and reduced disposable income.
"Hotel occupancy is however anticipated to grow for the remainder of the year and will be boosted by the refurbished conference and entertainment centre at Sun City, where forward bookings for conferences are well up on last year," Leeming said in the company's statement.
"The opening of the casino at Time Square in April 2017 is expected to have a positive impact on the group's performance going forward."
Sun International also said it was considering options for its Latin American unit Sun Dreams after a minority shareholder called for the business to be listed in New York or Santiago.
Sun Dreams was created last year when Sun International merged its Latin American business with Chile's Dreams S.A.
The minority shareholder is a private investment fund with a 20 percent stake in Sun Dreams, while Sun International owns 55 percent but has said it wants to increase its stake longer term.
"When we did the deal, the fund wanted an exit out of the business at some point in time. We have the option to either put the shares to us or to list," Leeming told Reuters by phone.
Leeming said if the group decides against a listing, the fund has said it would exercise its option to sell its stake to Sun International.
"It's still very early days to decide on what is going to happen," Leeming added.
Sun International, which recently changed its financial year, said its diluted adjusted headline earnings per share (HEPS) for July 1 to December 2016 fell to 223 cents per share from 344 cents in the comparable year.
HEPS is the most widely watched profit gauge in South Africa and strips out certain one-off items.
Shares in the group, which have fallen more than 12 percent year-to-date, were down 1 percent at 76.20 rand by 1141 GMT.
Sun International said group revenue for the year ended December was 31 percent higher than a year ago at 7.7 billion rand, with growth attributable to the inclusion of the Dreams S.A. merger and GPI Slots operations for the full period. ($1 = 12.3275 rand) (Reporting by Nqobile Dludla; editing by Susan Thomas and Susan Fenton)