| Fri 24 Aug 2001, 0:00 | | Sun International (south Africa) Limited - Profit |
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ENDED 30 JUNE 2001
Sun International (South Africa) Limited
(Registration number 1977/071333/06)
Profit Announcement for the year ended 30 June 2001
GROUP INCOME STATEMENTS
(Associates Consolidated)
Year ended 30 June
2001 2000
Rm % Rm
Change
Revenue 2834 27 2229
Casino 2045 1471
Rooms 355 362
Food, beverage and other 434 396
Direct costs (1320) (1037)
Gross profit 1514 1192
Indirect costs (815) (669)
EBITDA 699 34 523
Depreciation (264) (166)
Property rentals (57) (37)
Exceptional items (137) (76)
Profit from operations 241 244
Interest income 12 1
Operating profit 253 245
Interest expense (135) (62)
Profit before taxation 118 183
Taxation (39) (99)
Profit after taxation 79 84
Minority interest 6 1
Earnings attributable to
ordinary shareholders 85 - 85
Number of ordinary shares in
issue (million's) 1175 1175
Average number of ordinary
shares in issue (million's) 1175 932
Earnings per ordinary share
(cents) 7.2 9.1
Headline earnings per
ordinary share (cents) 17.0 11 15.3
EBITDA as a percentage of
revenue (%) 24.7 23.5
Interest cover (times) 1.9 3.9
Determination of headline earnings:
Earnings attributable to
ordinary shareholders 85 85
Exceptional items 137 76
Pre-opening expenditure
written-off 117 69
Restructuring of operations 14 15
Indirect taxation claims - (5)
Closure/sale of operations 3 5
Loss/(gain) on disposal of
interests in subsidiaries 3 (8)
Taxation on exceptional items (8) (14)
Minority interest (14) (4)
Headline earnings 200 40 143
GROUP BALANCE SHEETS
(Associates Consolidated)
Year ended 30 June
2001 2000
Rm Rm
ASSETS
Operating assets and
Investments 4557 3478
Current assets 357 339
Total assets 4914 3817
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share
premium 1223 1223
Retained earnings 622 537
Ordinary shareholders'
Equity 1845 1760
Minority interests 97 24
Total shareholders' equity 1942 1784
Non-current liabilities
Borrowings 1778 1199
Deferred taxation 362 408
2140 1607
Current liabilities
Borrowings 368 53
Other liabilities 464 373
832 426
Total liabilities 2972 2033
Total equity and liabilities 4914 3817
Interest bearing borrowings
to total shareholders'
equity (%) 110 72
Net asset value per share
(Rand) .57 1.50
Capital expenditure 1334 855
Capital commitments
contracted 471 2191
authorised but not
contracted 817 63
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary shares Retained Total
and share premium earnings
Balances at 30 June 2000 1223 537 1760
Earnings for the year 85 85
Balance at 30 June 2001 1223 622 1845
GROUP CASH FLOW STATEMENTS
(Associates Consolidated)
Year ended 30 June
2001 2000
Rm Rm
Cash flows from operating
activities:
Cash generated from
operations 704 515
Property rentals (57) (37)
Exceptional items (137) (76)
Net movement in working
Capital 84 (196)
Net interest expense (122) (59)
Taxation paid (55) (64)
Dividends paid (3) (38)
Net cash inflow from operating
activities 414 45
Net cash outflow from
investing activities (1347) (819)
Net cash inflow from
financing activities 976 786
increase in shareholders
funding 82 371
increase in borrowings 894 415
Increase in deposits and cash 43 12
Deposits and cash at beginning
of period 42 30
Deposits and cash at end of
period 85 42
SEGMENTAL ANALYSIS
Revenues EBITDA
2001 2000 2001 2000
Rm Rm Rm Rm
Sun City 627 640 65 87
Carnival City 559 587 151 209
GrandWest 443 - 148 -
Wild Coast 276 329 77 88
Boardwalk 201 - 70 -
Carousel 182 202 38 39
Sugarmill 163 - 63 -
Morula 159 188 46 57
Table Bay 92 96 21 28
Thaba'Nchu/Naledi 81 114 15 28
Corporate/other 51 73 5 (13)
Group 2 834 2 229 699 523
GROUP INCOME STATEMENTS
(Associates Equity Accounted)
Year ended 30 June
2001 2000
Rm % Rm
Audited Change Audited
Revenue 1902 (15) 2229
Casino 1308 1471
Rooms 271 362
Food, beverage and other 323 396
Direct costs (917) (1037)
Gross profit 985 1192
Indirect costs (582) (669)
EBITDA 403 (23) 523
Depreciation (160) (166)
Property rentals (22) (37)
Exceptional items (20) (76)
Profit from operations 201 244
Interest income 135 1
Operating profit 336 245
Interest expense (101) (62)
Share of associate companies
profits/(losses)
normal (2) -
exceptional (103) -
Profit before taxation 130 183
Taxation (44) (99)
Profit after taxation 86 84
Minority interest (1) 1
Earnings attributable to
ordinary shareholders 85 - 85
Number of ordinary shares in
issue (million's) 1175 1175
Average number of ordinary
shares in issue (million's) 1175 932
Earnings per ordinary share
(cents) 7.2 9.1
Headline earnings per
ordinary share (cents) 17.0 11 15.3
EBITDA as a percentage of
revenue (%) 21.2 23.5
Interest cover (times) 3.3 3.9
Determination of headline
earnings:
Earnings attributable to
ordinary
shareholders 85 85
Exceptional items 123 76
Pre-opening expenditure
written-off 103 69
Restructuring of operations 14 15
Indirect taxation claims - (5)
Closure/sale of operations 3 5
Loss/(gain) on disposal of
interests in subsidiaries 3 (8)
Taxation on exceptional items (8) (14)
Minority interest - (4)
Headline earnings 200 40 143
GROUP BALANCE SHEETS
(Associates Equity Accounted)
Year ended 30 June
2001 2000
Rm Rm
Audited Audited
ASSETS
Operating assets and
Investments 3113 3478
Current assets 254 339
Total assets 3367 3817
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share
premium 1223 1223
Retained earnings 622 537
Ordinary shareholders'
equity 1845 1760
Minority interests 15 24
Total shareholders' equity 1860 1784
Non-current liabilities
Borrowings 592 1199
Deferred taxation 397 408
989 1607
Current liabilities
Borrowings 207 53
Other liabilities 311 373
518 426
Total liabilities 1507 2033
Total equity and
liabilities 3367 3817
Interest bearing borrowings
to total shareholders'
equity (%) 43 72
Net asset value per share
(Rand) 1.57 1.50
Capital expenditure 150 855
Capital commitments
contracted 89 2191
authorised but not
contracted 57 63
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary shares Retained Total
and share premium earnings
Balances at 30 June 2000 1223 537 1760
Earnings for the year 85 85
Balance at 30 June 2001 1223 622 1845
GROUP CASH FLOW STATEMENTS
(Associates Equity Accounted)
Year ended 30 June
2001 2000
Rm Rm
Audited Audited
Cash flows from operating
activities:
Cash generated from
operations 410 515
Property rentals (22) (37)
Exceptional items (20) (76)
Net movement in working
capital (65) (233)
Investment income 136 2
Interest expense (101) (61)
Taxation paid (53) (64)
Dividends paid (3) (38)
Net cash inflow from
operating activities 282 8
Net cash outflow from
Investing activities (271) (819)
Purchase of operating
Assets (144) (817)
Net cash outflow from
investing activities (127) (2)
Net cash (outflow)/inflow from
financing activities (14) 823
increase in shareholders
funding 1 408
(decrease)/increase in
borrowings (15) 415
(Decrease)/increase in deposits
and cash (3) 12
Deposits and cash at beginning
of period 42 30
Deposits and cash at end of
period 39 42
Highlights
- Revenues +27%
- EBITDA +34%
- Earnings before exceptional items +40%
- Three new operations opened successfully
Reporting
The group has prepared the results for the year under review on a
consolidated basis, including the consolidation of associates, which
reflects the underlying economic interests in its major new casino
operations. The consolidated results show the gross revenues and costs as
well as the total assets and liabilities, of the group. The board of
directors is of the opinion that this gives shareholders a more complete
presentation of the overall financial position of the group.
The equity accounted financial statements will be included in the profit
announcement to be posted to shareholders as well as in the annual financial
statements. These audited results, which comply with generally accepted
accounting practice and in particular AC132, reflect an equity accounted
position for the year to 30 June 2001 as the group does not control the
voting rights or boards of directors of the new casino companies. These
include associates SunWest International, Emfuleni Resorts and Afrisun KZN.
The group's auditors, PricewaterhouseCoopers Inc., concur that the
consolidated financial information set out below is prepared in accordance
with the underlying audited financial statements of the group.
Commentary
Earnings
The group has seen a deterioration in the trading environment in the past
six months, brought about by increased pressure on domestic disposable
income and a decline in foreign visitors to southern Africa. As a
consequence, both gaming and hospitality revenues have fallen short of
original projections.
The group achieved revenues for the year of R2.8 billion, which were 27%
ahead of the previous year. This significant improvement was a result of
the opening of new casinos in Port Elizabeth, Cape Town and Durban. EBITDA
at R699 million was 34% ahead of last year with the EBITDA margin improving
1.2 percentage points over the previous year to 24.7%.
Significant increases in both depreciation and rental charges over last
year, resulted from the opening of the three new operations during the year,
as well as the inclusion of Carnival City's permanent facility for the full
year compared to nine months in the previous financial year. Net interest
costs increased by R62 million to R123 million, as a result of the higher
borrowings required to fund new projects. Taxation at R39 million was
substantially below the previous year and included a R35 million deferred
tax credit arising from the accounting requirement to recognise the tax
losses in SunWest, the utilisation of which has become reasonably certain.
During the year R117 million in pre-opening expenditure was included in
exceptional items which were written-off.
Headline earnings of R200 million were achieved in the year, 40% ahead of
last year. Headline earnings per share were 11% ahead of 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 39% ahead of last year. This improvement can be
attributed to the successful opening of the Boardwalk casino in Port
Elizabeth, the GrandWest casino in Cape Town and the temporary Sugarmill
casino north of Durban in October 2000, mid-December 2000 and February 2001
respectively. All three new operations contributed substantially to the
growth in gaming revenues, although the Sugarmill casino did have a negative
impact on the Wild Coast Sun, located south of Durban. The Venda Sun
operation was sold effective 1 January 2001.
Carnival City's revenues were below those achieved in the previous year,
primarily as a result of the opening of competitor facilities at Kempton
Park and Fourways, which has had an adverse impact on market share. Morula
and Carousel continue to trade satisfactorily albeit with lower revenues.
The group's operations in the Free State continued to experience a
deterioration in revenues, mainly as a result of the opening of new casinos
in major centres throughout the country and a depressed regional economy.
Hotels and Resorts
The group's hotels and resorts experienced difficult trading conditions.
Group occupancy at 65% was 2 percentage points below the previous year,
while growth in the average room rate was 5% ahead of last year. Sun City
achieved an occupancy of 71% for the year, 4 percentage points below last
year. The decline in occupancy has been the result of a lower number of
foreign visitors to southern Africa due to the unstable environment in
Zimbabwe, as well as the weaker global economy, which has resulted in many
late cancellations of conference and incentive business. The Table Bay
Hotel and Zimbali Lodge also experienced a decline in occupancies compared
to the previous year. The group has reduced its room inventory further at
the Wild Coast Sun, through the conversion of rooms into timeshare units and
is currently assessing various plans to enhance margins at Fish River Sun
and Mpekweni.
Developments
The Boardwalk casino which opened on 2 October 2000, was finalised at a
capital cost of R444 million, excluding pre-opening expenditure of R32
million. Trading at this operation has been below expectations over the
past six months which has been the result of a weak local economy.
The GrandWest casino and entertainment complex in the Cape Metropole was
opened on 19 December 2000. The capital expenditure of R1.45 billion,
excluding pre-opening expenditure of R81 million, remained in line with
projections. Trading has been satisfactory, however table revenues fell
short of expectations and margins have been under pressure.
The Sugarmill temporary casino located at Mount Edgecombe was opened in
February 2001 at a cost of R190 million, excluding pre-opening expenditure
of R25 million. Trading at this operation has been strong and has met
expectations. Construction of the permanent Sibaya casino and resort is
scheduled to commence in 2002.
Construction has commenced on the group's Kimberley casino project, which is
anticipated to cost R110 million. The development in conjunction with the
group's associate Teemane, is scheduled to open in April 2002. Construction
has also commenced on the group's Pietersburg licence at a projected cost of
R190 million and is scheduled to open in April 2002.
In the Free State, the group has casino exclusivity in the Bloemfontein zone
for a period of ten years. An objection which had been lodged against the
exclusivity arrangement has been withdrawn. A condition of the exclusivity
is that the company withdraw one of its two licences in the province.
Capital Commitments
The group has total capital commitments of R1.3 billion, which is inclusive
of the Sibaya project at Umdloti, of which approximately R450 million will
be spent in the 2002 financial year. The Meropa project at Pietersburg and
the Flamingo casino development at Kimberley will incur the majority of the
contractual spends in the new financial year.
Borrowings
Capital expenditure of R1.3 billion was incurred in the year and this has
been funded by a net increase in borrowings of R894 million and a R82
million contribution from the empowerment equity partners in the new
projects. The balance of the funding has been generated internally.
Prospects and Dividends
Whilst trading conditions worsened over the last six months, the situation
deteriorated markedly in the last quarter. Continued downward pressure on
disposable income combined with a decline in tourism to the region, will
place revenues under pressure in the year ahead. Notwithstanding the trading
conditions, the new casino properties will contribute to a further
significant increase in revenues and EBITDA in the year ahead. Higher
capital and taxation charges will however result in a reduction in headline
earnings.
The group's new casino developments are strongly cash generative and the
medium term earnings prospects for the group remain good, in part as a
consequence of deleveraging. No dividends have been declared in view of the
group's extensive capital expenditure programme. The group is likely to
resume the payment of dividends for the 2003 financial year.
STRATE
The company has been advised by the JSE Securities Exchange South Africa
("JSE") that its shares will be transferred to the STRATE system on 15
October 2001. Trading for electronic settlement will commence on 5 November
2001, with electronic settlement taking place from 12 November 2001.
Existing share certificates will no longer be good for delivery for
transactions entered into on the JSE on or after 5 November 2001.
For and behalf of the board
K S Mthembu
Chairman
P D Bacon
Managing Director
23 August 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, G A Macmillan, D M J Ncube.
Company Secretary: S A Bailes
