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SUI
SUI
SUI - Sun International Limited - Profit and dividend announcement for the
six months ended 31 December 2009
Sun International Limited
Registration number: 1967/007528/06
Share code: SUI
ISIN: ZAE 000097580
Profit and dividend announcement for the six months ended 31 December 2009
+2% Revenue
-11% EBITDA
-36% Adjusted HEPS
Group income statements
Six months ended Year
31 December ended
30 June
2009 % 2008 2009
R million Unaudited change Unaudited Audited
Revenue
Casino 3 229 5 3 074 6 234
Rooms 409 (14) 474 900
Food, beverage and other 466 (2) 474 907
4 104 2 4 022 8 041
Less: promotional allowances (61) (62) (126)
4 043 3 960 7 915
Other income - - 47
Pension fund surplus recognition - - 9
Employee costs (821) (788) (1 520)
Levies and VAT on casino revenue (725) (664) (1 353)
Depreciation and amortisation (347) (317) (658)
Promotional and marketing costs (341) (290) (592)
Consumables and services (440) (429) (819)
Property and equipment rental (44) (44) (74)
Property costs (180) (148) (298)
Other operational costs (364) (315) (654)
Impairment of goodwill - - (108)
Operating profit 781 (19) 965 1 895
Foreign exchange (losses)/gains (16) 65 42
Interest income 34 40 93
Interest expense (297) (361) (719)
Share of associate`s loss (3) - -
Profit before tax 499 709 1 311
Tax (184) (327) (611)
Profit for period 315 (18) 382 700
Attributable to:
- minorities 72 74 199
- ordinary shareholders 243 (21) 308 501
315 382 700
Cents Cents Cents
per per per
share share share
Earnings per share
- basic 263 350 566
- diluted 259 (24) 343 558
Headline earnings
- basic 263 351 645
- diluted 259 (25) 344 636
Dividends per share - - -
Group statements of comprehensive income
Six months ended Year
31 December ended
30 June
2009 2008 2009
R million Unaudited Unaudited Audited
Profit for the period 315 382 700
Other comprehensive income
Fair value adjustment on available-for-sale - 4 4
investment, net of tax
Net profit/(loss) on cash flow hedges,
net of tax 30 143 (114)
Transfer from hedging reserve to income 11 (165) 32
statement, net of tax
Currency translation differences (28) 71 (32)
Realisation of currency translation reserve - (17) (64)
Total comprehensive income
for the period 328 418 526
Total comprehensive income
attributable to:
- minorities 85 78 161
- ordinary shareholders 243 340 365
328 418 526
Condensed group cashflow statements
Six months ended Year ended
31 December 30 June
2009 2008 2009
R million Unaudited Unaudited Audited
Cash generated by operations before: 1 193 1 344 2 676
Working capital changes 56 10 (52)
Cash generated by operations 1 249 1 354 2 624
Tax paid (279) (384) (622)
Cash retained from operating activities 970 970 2 002
Cash utilised in investing activities (732) (1 035) (1 814)
Cash realised from investing activities 65 519 482
Net cash outflow from financing (211) (237) (728)
activities
Effect of exchange rates upon cash
and cash equivalents (10) 42 2
Increase/(decrease) in cash balances 82 259 (56)
Group balance sheets
Six months ended Year
31 December ended
30 June
2009 2008 2009
R million Unaudited Unaudited Audited
ASSETS
Non current assets
Property, plant and equipment 8 009 7 684 7 878
Intangible assets 366 497 382
Investment in associate 326 - -
Available-for-sale investment 48 48 48
Loans and other non current assets 47 225 49
Pension fund asset 31 22 31
Deferred tax 100 94 85
8 927 8 570 8 473
Current assets
Loans and receivables 32 89 184
Accounts receivable and other 544 857 536
Cash and cash equivalents 876 1 109 794
1 452 2 055 1 514
Total assets 10 379 10 625 9 987
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 984 363 569
Minorities` interests 1 160 843 1 020
2 144 1 206 1 589
Non current liabilities
Deferred tax 422 405 418
Borrowings 3 952 4 897 4 525
Other non current liabilities 261 212 233
4 635 5 514 5 176
Current liabilities
Accounts payable and other 1 217 1 447 1 240
Borrowings 2 383 2 458 1 982
3 600 3 905 3 222
Total liabilities 8 235 9 419 8 398
Total equity and liabilities 10 379 10 625 9 987
Condensed group statements of changes in equity
Ordinary
share- Minori-
holders` ties` Total
R million equity interests equity
FOR THE SIX MONTHS ENDED
31 DECEMBER 2009 (UNAUDITED)
Balance at 30 June 2009 569 1 020 1 589
Total comprehensive income for the period 243 85 328
Share issue 39 - 39
Deemed treasury shares purchased (1) - (1)
Treasury share options purchased (12) - (12)
Treasury share options exercised 79 - 79
Shares disposed by Dinokana 46 - 46
Employee share based payments 25 - 25
Loss on vesting of share awards (4) - (4)
Increase in minority funding - 185 185
Dividends paid - (130) (130)
Balance at 31 December 2009 984 1 160 2 144
FOR THE SIX MONTHS ENDED
31 DECEMBER 2008 (UNAUDITED)
Balance at 30 June 2008 119 546 665
Total comprehensive income for the period 340 78 418
Share issue 22 - 22
Treasury share options purchased (10) - (10)
Treasury share options exercised 56 - 56
Employee share based payments 15 - 15
Acquisition of subsidiary - 240 240
Increase in minority funding - 117 117
Disposal of interest in subsidiary 52 47 99
Acquisition of minority interests (4) (3) (7)
Dividends paid (227) (182) (409)
Balance at 31 December 2008 363 843 1 206
FOR THE YEAR ENDED
30 JUNE 2009 (AUDITED)
Balance at 30 June 2008 119 546 665
Total comprehensive income for the year 365 161 526
Share issue 99 - 99
Deemed treasury shares purchased (78) - (78)
Shares disposed by Dinokana 17 - 17
Treasury share options purchased (21) - (21)
Treasury share options exercised 241 - 241
Employee share based payments 28 - 28
Acquisition of subsidiary - 240 240
Disposal of interest in subsidiary 52 47 99
Increase in minority funding - 354 354
Acquisition of minority interests (26) 4 (22)
Dividends paid (227) (332) (559)
Balance at 30 June 2009 569 1 020 1 589
Supplementary information
Six months ended Year
31 December ended
R million 2009 % 2008 30 June
Unaudited change Unaudited 2009
Audited
EBITDA RECONCILIATION
Operating profit 781 (19) 965 1 895
Other income - - (47)
Depreciation and amortisation 347 317 658
Property and equipment rental 44 44 74
Pension fund surplus recognition* - - (9)
Net loss on disposal
of property, plant and equipment* - 2 9
Impairment of goodwill - - 108
Loss on disposal of investments* - - 6
Pre-opening expenses* 28 19 21
Reversal of Employee Share Trusts` 10 20 31
consolidation*
EBITDA 1 210 (11) 1 367 2 746
EBITDA margin (%)(i) 29 34 34
HEADLINE EARNINGS
AND ADJUSTED HEADLINE
EARNINGS RECONCILIATION
Profit attributable to
ordinary shareholders 243 (21) 308 501
Headline earnings adjustments - 2 76
Net loss on disposal of property,
plant and equipment - 2 9
Loss on disposal of investments - - 6
Currency translation reserve - - (47)
realised(ii)
Impairment of goodwill - - 108
Tax relief on the above items - - (2)
Minorities` interests on the
above items - (1) (4)
Headline earnings 243 (21) 309 571
Adjusted headline earnings 30 - 3
adjustments
Pre-opening expenses 28 19 21
Pension fund surplus recognition - - (9)
Foreign exchange losses/(profits)
on intercompany loans 2 (19) (9)
Tax relief on above items (5) (3) (1)
SARS tax refund (53) - -
Tax on share premium
distributions received - - (5)
Minorities` interests in above items (13) (10) (9)
Reversal of Employee Share Trusts` 13 27 41
consolidation (iii)
Adjusted headline earnings 215 (33) 323 600
Number of shares (`000)
- in issue 93 577 88 849 91 740
- for EPS calculation 92 356 88 105 88 492
- for diluted EPS 93 814 89 915 89 719
calculation
- for adjusted headline
EPS calculation (iii) 99 541 95 036 95 884
- for diluted adjusted
headline
EPS calculation (iii) 101 000 96 846 97 111
Earnings per share (cents)
- basic earnings per share 263 (25) 350 566
- headline earnings per 263 (25) 351 645
share
- adjusted headline earnings
per share 216 (36) 340 626
- diluted basic earnings 259 (24) 343 558
per share
- diluted headline earnings 259 (25) 344 636
per share
- diluted adjusted headline earnings 213 (36) 334 618
per share
Tax rate reconciliation (%)
Effective tax rate 37 46 47
Preference share dividends (6) (6) (6)
STC (7) (8) (8)
Tax refund 11 - -
Foreign taxes and tax losses (2) - (1)
Other (5) (4) (4)
SA corporate tax rate 28 28 28
EBITDA to interest (times) 4.7 4.3 4.4
Annualised borrowings to
EBITDA (times) 2.45 2.61 2.37
Net asset value per share (Rand) 10.52 4.09 6.20
Capital expenditure 517 833 1 476
Capital commitments
- contracted 296 611 349
- authorised but not 807 882 1 186
contracted
- conditionally authorised 987 - 1 000
2 090 1 493 2 535
(i) The EBITDA margin has been calculated on revenue before
deducting promotional allowances.
(ii) Realisation of foreign currency translation reserve on distribution
of dividend.
(iii) The consolidation of the Employee Share Trust is reversed in the
calculation of adjusted headline earnings as the group does not receive the
economic benefits of the trust.
Accounting policies
The condensed consolidated financial information for the six months ended 31
December 2009 has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards (IFRS)
and the presentation and disclosure requirements of IAS 34 - Interim
Financial Reporting. The accounting policies applied, other than those
described below, are consistent with those adopted in the financial
statements for the year ended 30 June 2009.
The group has adopted the following new standard and amendment which are
mandatory for the first time for the financial year beginning 1 July 2009:
IAS 1 (Revised) - Presentation of Financial Statements, which requires
changes in equity not relating to equity owners to be disclosed in a
separate statement. As permitted by the standard, the group has elected to
present the required information in two separate statements, an income
statement and a statement of comprehensive income.
IFRS 8 - Operating Segments, which requires an entity to present segment
information on the same basis as that used for internal reporting purposes.
The group determined that the operating segments were the same as the
business segments previously identified under IAS 14 - Segmental Reporting,
resulting in no material change to the segmental report.
Earnings and dividend
Revenue for the six months ended 31 December 2009 was 2% ahead of last year
at R4.1 billion, however comparable revenue (excluding Monticello in Chile)
was 5% lower. Gaming revenue grew by 5% whilst rooms revenue was 14% lower
than last year.
EBITDA of R1.2 billion for the six months was 11% lower than last year and
the EBITDA margin declined 4.5 percentage points to 29.5%. The lower margin
is due to the contraction in comparable revenue and inflationary increases
in operating costs, together with the impact of the lower margins at
Monticello. Excluding Monticello, the EBITDA margin was 31.6% (35.4%).
The strengthening of the Rand and Chilean Peso against the US Dollar
resulted in a foreign exchange loss of R16 million compared to a gain of R65
million last year.
Net interest paid decreased by R58 million to R263 million, an 18% reduction
over last year. This was the result of lower interest rates, although these
were partly offset by the additional funding costs of Monticello.
Tax at R184 million, a decrease of 44%, included a tax refund of R53 million
relating to prior years` assessments. The effective tax rate, excluding non
deductible preference share dividends, STC and the tax refund, was 35% due
primarily to the tax losses incurred by Monticello and other permanent
differences.
Adjusted headline earnings of R215 million and diluted adjusted headline
earnings per share of 213 cents were 33% and 36% below last year
respectively.
Trading conditions remain uncertain in the near term. With the continued
focus on cash flows and strengthening the balance sheet, no interim dividend
has been declared.
Segmental analysis
Revenue
Six months to Year
31 December ended
30 June
2009 2008 2009
R million
GrandWest 787 841 1 642
Sun City 583 590 1 146
Carnival City 472 514 997
Sibaya 424 402 810
Boardwalk 202 217 418
Carousel 159 156 308
Wild Coast Sun 145 153 302
Morula 135 130 250
Meropa 115 114 227
Windmill 96 107 204
Swaziland 91 93 177
Table Bay 81 101 199
Botswana 81 95 181
Zambia 75 125 217
Flamingo 66 66 129
Namibia 62 64 128
Golden Valley 55 54 109
Lesotho 44 50 98
Other operating segments 21 24 47
Management activities 298 337 664
3 992 4 233 8 253
Monticello - Chile 394 97 397
Total operating segments 4 386 4 330 8 650
Central office and other - - -
Eliminations (282) (308) (609)
Other income
Other expenses (iv)
4 104 4 022 8 041
Promotional allowances (61) (62) (126)
4 043 3 960 7 915
(iv) Refer to EBITDA reconciliation denoted*.
EBITDA
Six months to Year
31 December ended
30 June
2009 2008 2009
R million
GrandWest 303 343 675
Sun City 68 89 207
Carnival City 142 180 351
Sibaya 150 142 295
Boardwalk 75 89 172
Carousel 40 43 81
Wild Coast Sun 16 27 56
Morula 28 28 56
Meropa 46 45 93
Windmill 34 45 84
Swaziland 7 15 23
Table Bay 15 33 65
Botswana 25 34 68
Zambia 16 40 55
Flamingo 21 22 42
Namibia 16 18 36
Golden Valley 14 16 34
Lesotho 4 7 15
Other operating segments (7) (3) (7)
Management activities 166 190 382
1 179 1 403 2 783
Monticello - Chile 36 (23) (22)
Total operating segments 1 215 1 380 2 761
Central office and other (5) (13) (15)
Eliminations - - -
Other income
Other expenses (iv)
1 210 1 367 2 746
Promotional allowances
1 210 1 367 2 746
(iv) Refer to EBITDA reconciliation denoted*.
Operating profit
Six months to Year
31 December ended
30 June
2009 2008 2009
R million
GrandWest 233 272 535
Sun City 3 32 95
Carnival City 97 140 267
Sibaya 113 108 233
Boardwalk 61 75 142
Carousel 25 29 52
Wild Coast Sun 8 20 41
Morula 18 16 33
Meropa 38 36 78
Windmill 25 35 63
Swaziland 4 11 15
Table Bay 4 16 33
Botswana 20 27 55
Zambia 8 30 34
Flamingo 15 17 32
Namibia 6 11 22
Golden Valley 5 7 14
Lesotho 2 6 11
Other operating segments (8) (8) (16)
Management activities 160 183 381
837 1 063 2 120
Monticello - Chile (12) (37) (81)
Total operating segments 825 1 026 2 039
Central office and other (6) (20) (133)
Eliminations - - -
Other income - - 47
Other expenses (iv) (38) (41) (58)
781 965 1 895
Promotional allowances
781 965 1 895
(iv) Refer to EBITDA reconciliation denoted*.
Gaming
Comparable gaming revenue decreased by 3% due to continuing pressure on
consumer disposable income.
GrandWest and Boardwalk continued to experience difficult trading
conditions. GrandWest`s revenue at R787 million and EBITDA at R303 million
were 6% and 12% below last year respectively with the EBITDA margin
declining by 2.3 percentage points to 38.5%. Boardwalk experienced a decline
in revenue of 7% to R202 million and in EBITDA of 16% to R75 million. As a
result the EBITDA margin declined 3.9 percentage points to 37.1%.
Carnival City achieved revenue of R472 million, a decline of 8% from last
year. With the EBITDA margin decreasing 5 percentage points, EBITDA
decreased by 21% to R142 million. Some disruption on the casino floor due to
refurbishment and the depressed local market conditions resulted in a
marginal loss of market share, particularly in the first quarter, with the
group`s share of the Gauteng market for the six months declining from 21.3%
to 20.3%. This has been recovered in recent months.
Sibaya revenue increased 5% to R424 million and EBITDA by 6% to R150
million. The EBITDA margin of 35.4% was in line with last year. The KwaZulu-
Natal market grew by 3% in the period and Sibaya`s market share of 36% was 1
percentage point higher than last year.
Monticello revenue is showing good growth from quarter to quarter, with a
13% increase in the second quarter ending 31 December 2009 compared to the
previous quarter. EBITDA of R36 million was achieved for the six months
compared to a loss of R23 million last year.
Hotels and resorts
Overall rooms revenue of R409 million declined by 14% over last year with
overall group occupancy of 70% (77%) and an average room rate of R824, a
decline of 9% on last year. The occupancy decline is due to weaker demand
from international markets and the groups and conventions sector, which
severely impacted Sun City, our Zambian operations and The Table Bay. Local
markets have also shown a decline although not as high as their
international counterparts.
Sun City`s room occupancy was 71% (81%) while the average room rate was 3%
below last year at R1 188. EBITDA at R68 million declined by 24%. The lower
EBITDA was primarily the result of increased indirect costs (including the
cost of additional security), increased energy costs and various maintenance
initiatives to improve standards.
The Table Bay achieved occupancy of 54% (69%). The average room rate
achieved was in line with the previous year despite both declining demand
and new supply in the five star market in Cape Town. EBITDA declined by 55%
due to the lower occupancy levels.
The Royal Livingstone and Zambezi Sun achieved an aggregate occupancy of 54%
(71%) at an average room rate of US$171, a 4% decline against last year.
EBITDA in US dollars was 53% below last year, whilst EBITDA in Rand declined
by 60% on last year.
Revenue from Botswana declined by 15% to R81 million and EBITDA by 26% to
R25 million. This decline is as a direct result of the prevailing economic
conditions in Botswana which have led to a decline in disposable income.
This decline was further exacerbated by the 10% strengthening in the value
of the Rand against the Botswana Pula.
Our current 29% investment in Nigeria is treated as an associate. The
process of acquiring the balance of the shares and ultimately owning a 49%
interest is nearing completion. On completion the group will have invested
US$28 million in equity and advanced a loan to the company of US$15 million.
The loss reported of R3 million is due to the low occupancy achieved of 30%,
a direct result of the depressed investment and business environment,
including the impact of the slowdown in the oil and gas sectors on the
Nigerian market.
Management activities
Management fees and related income of R298 million was 12% lower than last
year. EBITDA of R166 million was 13% lower than last year. Included in
revenue are development fees of R15 million compared to R25 million last
year.
Balance sheet
The group`s borrowings are marginally lower than at 30 June 2009 at R6.3
billion. The Chilean facilities have been restructured resulting in the
shareholders repaying and funding US$50 million of the long term facility.
Third party borrowings
31 December 31 December 30 June
R million 2009 2008 2009
SunWest International 757 837 771
(Pty) Ltd
SFI Resorts SA (Chile) 666 1 258 912
Afrisun Gauteng (Pty) Ltd 508 511 522
Afrisun KZN (Pty) Ltd 455 441 457
Worcester Casino (Pty) Ltd 211 208 211
Meropa Leisure and Entertainment 116 120 117
(Pty) Ltd
Mangaung Sun (Pty) Ltd 71 68 73
Teemane (Pty) Ltd 68 67 69
Emfuleni Resorts (Pty) Ltd 56 117 97
Lesotho Sun (Pty) Ltd 30 - -
Central office 3 168 3 470 3 009
6 106 7 097 6 238
Employee Share Trusts 229 258 269
6 335 7 355 6 507
Capital expenditure incurred during
the six months
R million
Expansionary
Monticello 233
Sibaya 15
248
Refurbishment
Lesotho 76
Wild Coast Sun 21
97
Other ongoing asset replacement 172
Total capital expenditure 517
Developments
South Africa
Following the award of the casino licence for the Wild Coast Sun, the
upgrade and enhancement of the property has commenced. The upgrade and
expansion of the casino floor was completed in December 2009 and the rooms
refurbishment commenced in January 2010 and will be completed by mid-2012.
The delay in commencement of the project and minimising the disruption to
2010 World Cup guests have resulted in some significant changes to the
refurbishment programme, and as a result the overall projected capital
expenditure is now expected to be R400 million as against the original
forecast of R340 million.
Lesotho
The main components of the R140 million refurbishment of the Lesotho Sun
hotel, casino and conference facility was completed in early December 2009.
Chile
The final components of the Monticello development were completed in the
period with the retail and entertainment facilities opening in October 2009
and the 155-room hotel in December 2009. The overall capital expenditure
increased by US$15 million to US$262 million, mainly due to cost
escalations, the significant weakening of the US Dollar and additional
capitalised interest.
Nigeria
The 200-slot and 8-table casino at the Federal Palace hotel was opened
during December 2009 and the conference facility during January 2010 at a
cost of US$19 million. Trading at the casino commenced slowly during the
holiday season but has shown encouraging growth since the launch of the
first major promotion and the associated communications plan.
Boardwalk casino licence
The Boardwalk`s casino licence in Port Elizabeth expires in October 2010.
The Boardwalk was announced as the preferred bidder during September 2009
and the conditions attached to the licence are still to be finalised with
the Eastern Cape Gambling and Betting Board. The project includes plans for
a five star hotel and conference centre, expanded gaming facilities and
covered parking at an estimated cost of R1 billion. The project will
commence in late 2010 and is likely to be completed in 2012.
Directorate and group secretary
Zarina Bassa and Tumi Makgabo have been appointed as independent non-
executive directors with effect from 1 March 2010.
Silvia Bailes will be taking early retirement as from 31 March 2010 and
Chantel Reddiar has been appointed as group secretary with effect from 1
April 2010.
Outlook
Trading conditions are stabilising and some growth in revenue is forecast
for the remainder of the year in part due to the anticipated benefits of the
2010 World Cup.
The expected improved revenue performance, lower interest costs and non-
recurrence of the significant foreign exchange movements that occurred in
the first half are anticipated to result in an improved earnings performance
in the second half. Headline earnings per share for the full year however
will be below last year.
The outlook has not been reviewed or reported on by the company`s auditors.
For and on behalf of the board
MV Moosa DC Coutts-Trotter
Chairman Chief Executive
Registered Office: 27 Fredman Drive, Sandown, Sandton 2031
Sponsor: Investec Bank Limited
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001
Directors: MV Moosa (Chairman), IN Matthews (Lead Independent Director), DC
Coutts-Trotter (Chief Executive)*, RP Becker (Chief Financial Officer)*, PL
Campher, MP Egan, Dr NN Gwagwa, LM Mojela, DM Nurek, E Oblowitz, GR
Rosenthal *Executive
Group Secretary: SA Bailes
26 February 2010
Sponsor: Investec Bank Limited
Date: 26/02/2010 14:23:02 Produced by the JSE SENS Department.
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