| Fri 15 Feb 2002, 0:00 | | Sun International - Profit Announcement For |
|
2001
Sun International (South Africa) Limited
(Registration number 1977/071333/06)
JSE Share code: SIS
ISIN code: ZAE 000010104
Profit Announcement for the six months ended 31 December 2001
Group Income Statements
(Associates Consolidated)
Six months ended Year ended
31 December % 31 December 30 June
2001 Change 2000 2001
Rm Rm Rm
Reviewed Reviewed Audited
Revenue 1 560 29 1 209 2 834
Casino 1 146 827 2 045
Rooms 179 176 355
Food, beverage and other 235 206 434
Direct costs (741) (566) (1 320)
Gross profit 819 643 1 514
Indirect costs (470) (368) (815)
EBITDA 349 27 275 699
Depreciation (167) (98) (264)
Property rentals (28) (16) (57)
Exceptional items (3) (90) (137)
Profit from operations 151 71 241
Interest income 34 21 12
Operating profit 185 92 253
Interest expense (152) (34) (135)
Profit before taxation 33 58 118
Taxation (20) (51) (39)
Profit after taxation 13 7 79
Minority interest 5 6 6
Earnings attributable to
ordinary shareholders 18 38 13 85
Number of ordinary shares
in issue (million) 1 175 1 175 1 175
Average number of ordinary
shares in issue (million) 1 175 1 175 1 175
Earnings per ordinary
share (cents) 1,5 1,1 7,2
Headline earnings per
share (cents) 1,8 8,2 17,0
EBITDA as a percentage
of revenue (%) 22,4 22,7 24,7
Interest cover (times) 1,2 2,7 1,9
Determination of headline earnings:
Earnings attributable to
ordinary shareholders 18 13 85
Exceptional items 3 90 137
Pre-opening expenditure
written-off 4 90 117
Restructuring of
operations 1 - 14
Bid costs recouped (2) - -
Closure/sale of operations - - 3
Loss on disposal of
interests in subsidiaries - - 3
Taxation on
exceptional items - - (8)
Minority interest - (7) (14)
Headline earnings 21 (78) 96 200
Group Balance Sheets
(Associates Consolidated)
31 December 31 December 30 June
2001 2000 2001
Rm Rm Rm
Reviewed Reviewed Audited
ASSETS
Operating assets and investments 4 667 4 363 4 557
Current assets 411 494 357
Total assets 5 078 4 857 4 914
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share premium 1 223 1 223 1 223
Retained earnings 640 550 622
Ordinary shareholders' equity 1 863 1 773 1 845
Minority interests 93 52 97
Total shareholders' equity 1 956 1 825 1 942
Non-current liabilities
Borrowings 1 823 2 108 1 778
Deferred taxation 362 408 362
2 185 2 516 2 140
Current liabilities
Borrowings 415 85 368
Other liabilities 522 431 464
937 516 832
Total liabilities 3 122 3 032 2 972
Total equity and liabilities 5 078 4 857 4 914
Interest bearing borrowings to total
shareholders' equity (%) 114 120 110
Net asset value per share (Rand) 1,59 1,51 1,57
Capital expenditure 202 1 071 1 334
Capital commitments
- contracted 148 448 471
- authorised but not contracted 642 1 031 817
Group Cash Flow Statements
(Associates Consolidated)
Six months ended Year ended
31 December 31 December 30 June
2001 2000 2001
Rm Rm Rm
Reviewed Reviewed Audited
Cash flows from operating activities:
Cash generated from operations 350 250 704
Property rentals (28) (16) (57)
Exceptional items (3) (90) (137)
Net movement in working capital 48 28 84
Interest expense (118) (13) (122)
Taxation paid (53) (26) (55)
Dividends paid - (2) (3)
Net cash inflow from operating
activities 196 131 414
Net cash outflow from investing
activities (286) (1 028) (1 347)
Net cash inflow from financing
activities 92 940 976
- increase in shareholders' funding - 35 82
- increase in borrowings 92 905 894
Increase in deposits and cash 2 43 43
Deposits and cash at
beginning of period 85 42 42
Deposits and cash at end of period 87 85 85
Consolidated Statement of Changes in Equity
Ordinary
shares
and share Retained
Retained earnings Total
Rm Rm Rm
Balance at 30 June 2001 1 223 622 1 845
Earnings for the period
to 31 December 2001 - 18 18
Balance at 31 December 2001 1 223 640 1 863
Segmental Analysis
Revenues EBITDA
Six months ended Year ended Six months ended
Year ended
31 December 30 June 31 December 30 June
2001 2000 2001 2001 2000 2001
Rm Rm Rm Rm Rm Rm
Sun City 339 325 627 34 36 65
Carnival City 233 303 559 63 85 151
GrandWest 345 40 443 95 18 148
Wild Coast 85 165 276 13 51 77
Boardwalk 104 80 201 28 31 70
Carousel 86 93 182 12 19 38
Sugarmill 201 - 163 77 - 63
Morula 72 85 159 19 25 46
Table Bay 43 42 92 9 9 21
Thaba'Nchu/Naledi 34 44 81 2 8 15
Corporate/other 18 32 51 (3) (7) 5
Group 1 560 1 209 2 834 349 275 699
Independent Review
The group's auditors, PricewaterhouseCoopers Inc., have reviewed but not
audited the financial information contained in this announcement and their
report is available for inspection at the registered office of the company.
Reporting
The group has prepared the results for the period under review on a
consolidated basis, including the consolidation of associates, which
reflects the underlying economic interests in its major new casino
operations. This is consistent with prior periods. 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. These results, which comply with
generally accepted accounting practice and in particular AC132, reflect an
equity accounted basis for the six months to 31 December 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 above is prepared in accordance
with the underlying reviewed financial statements of the group.
Commentary
The group continued to be adversely affected by the general deterioration
in the trading environment in the six months to 31 December 2001.
Hospitality revenues were negatively impacted by the events of 11 September
2001, mitigated somewhat by trading in December 2001, which was better than
expected. Gaming revenues were subdued largely as a result of continued
downward pressure on disposable income and the introduction of smoking
restrictions on 1 July 2001. The mid-week draw introduced by the National
Lottery also resulted in the displacement of casino revenues. The effect
these external factors had on the trading environment is evidenced by the
fact that the overall casino market in Gauteng for the six months ended 31
December 2001 grew 4% over the same period in the previous year, despite the
opening of three permanent competitor facilities.
Earnings
Group revenues at R1.56 billion were 29% up on the previous year,
primarily due to the increase in gaming revenues. EBITDA at R349 million was
27% up on the previous year. The depreciation charge at R167 million was 70%
up on the previous year, following the opening of The Boardwalk, GrandWest
and Sugarmill casinos in October 2000, December 2000 and February 2001
respectively.
The interest charge of R152 million was R118 million more than the
previous year as a result of the group's major capital expenditure
programme.
The effective tax rate for the six months remains above the statutory
level, primarily as a result of losses in certain group companies.
Attributable earnings at R18 million and earnings per share at 1.5 cents
were up 38% over the comparable period.
Headline earnings at R21 million and headline earnings per share at 1.8
cents were 78% below the previous year.
As previously advised to shareholders no dividend has been declared.
Gaming
Gaming revenues were 39% up on the previous year. This can be attributed
to the opening of The Boardwalk, GrandWest and Sugarmill casinos, offset by
a significant decline in gaming revenues at the Wild Coast Sun and Carnival
City. The Gauteng market remains very competitive and Carnival City lost
market share relative to the previous year following the opening of
permanent competitor facilities at Kempton Park and Fourways. Trading at
Carnival City did however, improve in the last quarter. Trading at GrandWest
in the Cape metropole and The Boardwalk in Port Elizabeth was below
expectations in the period under review, although GrandWest achieved good
trading results for December, following an increase in tourism to Cape Town.
Trading at Sugarmill Casino in Mount Edgecombe was most satisfactory,
however, competition will arise from the new facility at Village Green
towards the end of 2002.
Carousel, Morula and Thaba'Nchu Sun continued to experience a
deterioration in revenues but remain cash positive despite their relative
geographic disadvantage when compared to more conveniently located urban
casinos.
During the last quarter of 2001 the group has established smoking areas
at its major casinos to ensure compliance with the National Tobacco
Legislation and to cater for its smoking patrons. The introduction of these
facilities has had a positive impact on trading.
Hotels and Resorts
The number of foreign visitors reduced significantly during the period
following the events of 11 September 2001. There has, however, been a marked
improvement since December 2001 and joint initiatives between the private
and public sectors are yielding encouraging results.
Group occupancy at 65% was in line with the previous year, while Sun
City's occupancy was one percentage point below at 72%. The group's average
room rate was 8% up on last year.
New Developments
The Flamingo Casino at Kimberley and the Meropa Casino at Pietersburg are
being developed by the group's associates, Teemane and Meropa, and are
scheduled to open in March and April 2002, respectively. Through its
associate Afrisun KZN, the group is proceeding with certain preliminary work
on the development of its Sibaya project at Umdloti in KwaZulu-Natal.
Capital Commitments and Borrowings
The group incurred capital expenditure of R290 million in the six months
to 31 December 2001 of which R251 million related to new projects
commissioned or to be commissioned. Borrowings increased by R92 million as
a result. A further R160 million is to be spent in the six months to 30 June
2002.
An amount of R650 million has been approved in respect of the Sibaya
project. This capital expenditure will be incurred in future financial
years.
Prospects
The group's hotels and resorts are well placed to benefit from an
increase in foreign tourism to the country. We believe that discretionary
spending and consequently gaming revenues will continue to be negatively
impacted by ongoing downward pressure on disposable income brought about
primarily by rising prices as well as increased interest rates.
Nevertheless, the new casino developments continue to generate significant
cash flows. The downward pressure on revenues, combined with higher
interest and depreciation charges, will result in earnings for the year to
30 June 2002 being materially below the previous year.
For and on behalf of the board
K S Mthembu P D Bacon
Chairman Managing Director
15 February 2002
Registered office: Transfer office:
3 Sandown Valley Crescent Compushare Services Limited
Sandown 2nd Floor, Edura
Sandton, 2031 41 Fox Street
Johannesburg, 2001
Directorate:
K S Mthembu (Chairman), P D Bacon (Managing) (British),
Dr B P Botha, D C Coutts-Trotter, G A Macmillan, T B Mparutsa, D M J
Ncube,
K O Omar, K D Wienand (alt).
Company Secretary:
S A Bailes
