| Fri 16 Feb 2001, 0:00 | | Sun International (south Africa) Limited - Profit |
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Sun International (South Africa) Limited
(Registration number 1977/071333/06)
Profit Announcement for the half year ended 31 December 2000
Independent Review
The financial information contained in this report has been prepared in
accordance with Generally Accepted Accounting Practices in South Africa and is
consistent with the 2000 financial statements.
The group's auditors, PricewaterhouseCoopers Inc, have reviewed but not audited
the financial information for the six-month period ended 31 December 2000, and
their report is available for inspection at the registered office of the
company.
Commentary
Earnings
Group revenues at R1.2 billion were 12% up on the previous year primarily due
to the material increase in gaming revenues. EBITDA at R275 million was 16% up
on the previous year. The EBITDA margin at 23% showed a 1 percentage point
improvement over the previous year.
The depreciation charge at R98 million was R22 million higher than the previous
year, following the opening of the Carnival City permanent casino in October
1999 and the Boardwalk and GrandWest casinos in October and December 2000
respectively.
Pre-opening expenditure of R90 million relating to the new developments, was
written off in the period under review as an exceptional item.
The effective tax rate for the six months to December remains above the
statutory level, primarily as a result of tax losses in certain of the group's
subsidiaries, which to date remain largely unutilised. The effective tax rate
in the second half of the year will reduce, following the opening of the
GrandWest and Sugarmill casinos.
Attributable earnings of R96 million were 22% ahead of the previous year.
Earnings per share of 8 cents were 8% below the previous year, calculated on
the increased number of shares in issue as a consequence of the May 2000 rights
issue.
Gaming
Gaming revenues were 18% up on the previous year in the period under review.
This can be attributed to Carnival City's permanent casino in Brakpan, trading
for the full six months compared to three months in the previous year and the
opening of the Boardwalk casino in Port Elizabeth in October 2000.
Both the Carousel and Morula casinos continued to experience a reduction in
revenues, following the opening by competitors at Kempton Park and Fourways in
Gauteng.
The group's operations in the Free State have also experienced a decline in
gaming revenues compared to the previous year, largely as a result of a
deterioration in the local economy and the opening of new urban casinos in
Gauteng, the Eastern Cape and the Western Cape.
Hotels and Resorts
The group's hotels and resorts experienced difficult trading conditions in the
period under review. Group occupancy at 65% was 2% percentage points below the
previous year. Sun City achieved an average room occupancy of 74%, which was 1
percentage point below the previous year. Whereas the group's hotels and
resorts are well placed to benefit from the expected upturn in foreign tourism
in the future, regional instability combined with the cholera outbreak in
KwaZulu-Natal resulted in reduced overseas demand in the period to December
2000.
Developments
The Boardwalk casino in Port Elizabeth was opened on 2nd October 2000 followed
by the retail component in December 2000, at a total capital cost of R428m
(excluding pre-opening expenditure of R22-million). The casino is trading well
and the response from customers and the community has been positive.
The GrandWest casino and entertainment complex in the Cape Metropole, was
opened on 19th December 2000. Trading to date is in line with expectations and
again the complex has been extremely well received by the public at large. The
final capital expenditure is expected to be in line with the estimated cost of
R1.45 billion (excluding pre-opening costs of R74-million).
The Sugarmill temporary casino located at Mount Edgecombe was opened during
February 2001 at a cost of R200 million (excluding pre-opening expenditure of
R20-million). Construction of the Sibaya permanent casino and resort at Umdloti
is scheduled to commence in 2002.
The group's associate Teemane, the successful applicant for the casino licence
in Kimberley, has concluded an agreement with the appropriate authorities
regarding the radius of exclusivity and closure of the so-called "Special
Licenses". Teemane is planning to proceed with the development of the project
during the last quarter of this financial year at an estimated cost of
R120-million.
The group's associate Meropa, was awarded a casino licence by the Northern
Province Casino and Gaming Board on 15th February. Meropa will proceed shortly
with the development of a R200 million casino project on the outskirts of
Pietersburg.
An agreement has been reached with the Free State Gambling and Racing Board,
whereby the group will be granted exclusivity in the Bloemfontein zone for a
period of ten years. A condition of this agreement is that the group will
surrender its Naledi casino licence for re-allocation elsewhere in the
Province. An objection to the agreement been lodged.
Capital Commitments
The group has total capital commitments of R1.5 billion, inclusive of the
Sibaya project at Umdloti, the Meropa project at Pietersburg and the Flamingo
casino development at Kimberley. Capital expenditure of R400 million will be
incurred in the six months to 30 June 2001.
Borrowings
Capital expenditure of R1.1 billion was incurred in the period, which was
funded by increased borrowings of R905 million and internally generated funds.
Prospects
The group remains well positioned to achieve the 18 cents earnings per share as
previously indicated to shareholders. The group's success in acquiring new
casino licences will contribute to a significant improvement in earnings in the
forthcoming years.
Dividend
As indicated previously, no dividend has been declared in the light of the
group's major ongoing capital expenditure programme.
For and behalf of the board
K S Mthembu
Chairman
P D Bacon
Managing Director
16 February 2001
Registered office:
3 Sandown Valley Crescent
Sandown
Sandton, 2031
Transfer office:
Fraser Street Registrars(Pty) Limited
Ground Floor, Sage Centre
10 Fraser Street
Johannesburg, 2001
Directorate: K S Mthembu (Chairman), P D Bacon (Managing) (British), D C
Coutts-Trotter, Dr D Konar, G A Macmillan, D M J Ncube.
Company Secretary: S A Bailes
Sun International (South Africa) Limited
(Registration number 1977/071333/06)
Profit Announcement
for the six months ended 31 December 2000
GROUP INCOME STATEMENTS
Six months ended Year ended
31 31 30
December December June
2000 1999 2000
Rm % Rm Rm
Reviewed Change Reviewed Audited
Revenue 1209 12 1075 2229
Casino 827 701 1471
Rooms 176 174 362
Food, beverage and other 206 200 396
Direct costs (566) (507) (1037)
Gross profit 643 568 1192
Indirect costs (368) (330) (669)
EBITDA 275 16 238 523
Depreciation (98) (76) (166)
Property rentals (16) (19) (37)
Exceptional items (90) (31) (76)
Profit from operations 71 112 244
Net interest charge (13) (22) (61)
Profit before taxation 58 90 183
Taxation (51) (33) (99)
Profit after taxation 7 57 84
Minority interest 6 (7) 1
Earnings attributable to
ordinary shareholders 13 (74) 50 85
Number of ordinary shares
in issue (millions) 1175 904 1175
Average number of ordinary
shares in issue (millions) 1175 904 932
Earnings per ordinary
share (cents) 1.1 5.5 9.1
Headline earnings per
share (cents) 8.0 (8) 8.7 15.3
EBITDA as a percentage
of revenue (%) 23 22 23
Interest cover (times) 4.6 4.0 3.9
Determination of headline earnings:
Earnings attributable to
ordinary shareholders 13 50 85
Exceptional items 90 31 76
Pre-opening expenditure
written-off 90 23 69
Restructuring of operations - - 15
Indirect taxation claims - - (5)
Closure/sale of operations - - 5
Gain on disposal of interests
in subsidiaries - - (8)
Property write-down/loan
recovery - 8 -
Taxation on exceptional items - - (14)
Minority interest (7) (2) (4)
Headline earnings 96 22 79 143
GROUP BALANCE SHEETS
31 December 31 December 30 June
2000 1999 2000
Rm Rm Rm
Reviewed Reviewed Audited
ASSETS
Operating assets and
Investments 4363 3119 3478
Current assets 494 367 339
Total assets 4857 3486 3817
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share
Premium 1223 883 1223
Retained earnings 550 502 537
Ordinary shareholders' equity 1773 1385 1760
Minority interests 52 29 24
Total shareholders' equity 1825 1414 1784
Non-current liabilities
Borrowings 2108 1085 1235
Deferred taxation 408 374 408
2516 1459 1643
Current liabilities
Borrowings 85 80 53
Other liabilities 431 533 337
516 613 390
Total liabilities 3032 2072 2033
Total equity and liabilities 4857 3486 3817
Interest bearing borrowings to
total shareholders' equity (%) 120 82 72
Net asset value per share (Rand) 1.51 1.53 1.50
Capital expenditure 1071 355 855
Capital commitments
- contracted 448 479 1187
- authorised but not contracted 1031 1173 1123
GROUP CASH FLOW STATEMENTS
Six months ended Year ended
31 December 31 December 30 June
2000 1999 2000
Rm Rm Rm
Reviewed Reviewed Audited
Cash flows from operating
activities:
Cash generated from operations 234 225 471
Pre-opening expenditure written
off (90) (23) (69)
Net movement in working capital 28 (76) (233)
Investment income 3 8 2
Interest expense (16) (30) (61)
Taxation paid (26) (47) (64)
Dividends paid (2) (36) (38)
Net cash inflow from operating
activities 131 21 8
Net cash outflow from investing
activities (1028) (356) (819)
Net cash inflow from financing
activities 940 338 823
- increase in shareholders
funding 35 10 408
- increase in borrowings 905 328 415
Increase in
deposits and cash 43 3 12
Deposits and cash at
beginning of period 42 30 30
Deposits and cash at end of period 85 33 42
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary shares Retained Total
and share premium earnings
Balance at 30 June 2000 1223 537 1760
Earnings for the period
to 31 December 2000 - 13 13
Balance at 31 December 2000 1223 550 1773
