| Mon 19 Aug 2002, 0:00 | | Sun International (south Africa) Limited - Financi |
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Sun International (South Africa) Limited - Financial Report
Sun International (South Africa) Limited
JSE Share code: SIS ISIN: ZAE 000010104
Registration number: 1977/071333/06
Reviewed preliminary profit announcement
FOR THE YEAR ENDED 30 JUNE 2002-08-16
Group Income Statements (Associates Consolidated)
2002 % 2001
Rm change Rm
Reviewed Audited
Revenue 3 294 16 2 834
Casino 2 417 2 045
Rooms 415 355
Food, beverage and other 462 434
Direct costs (1 508) (1 320)
Gross profit 1 786 1 514
Indirect costs (999) (815)
EBITDA 787 13 699
Depreciation (340) (264)
Property rentals (63) (57)
Exceptional items (19) (137)
Profit from operations 365 241
Interest income 11 12
Operating profit 376 253
Interest expense (257) (135)
Profit before taxation 119 118
Taxation (63) (39)
Profit after taxation 56 79
Minority interest (1) 6
Earnings attributable to
ordinary shareholders 55 85
Number of ordinary shares
in issue (million) 1 175 1 175
Average number of ordinary shares
in issue (million) 1 175 1 175
Earnings per ordinary share (cents) 4,7 7,2
Headline earnings per share (cents) 6,4 17,0
EBITDA as a percentage of revenue 23,9 24,7
Interest cover (times) 1,5 1,9
Determination of headline earnings
Earnings attributable to
ordinary shareholders 55 85
Exceptional items 19 137
Pre-opening expenditure written-off 18 117
Restructuring of operations - 14
Bid costs written-off 1 -
Closure/sale of operations - 3
Loss on disposal of interests in subsidiaries - 3
Goodwill amortised - included in depreciation)- 1 -
Taxation on exceptional items - (8)
Minority interest - (14)
Headline earnings 75 200
Group Balance Sheets (Associates Consolidated)
Year ended 30 June
2002 2001
Rm Rm
Reviewed Audited
ASSETS
Operating assets and investments 4 654 4 557
Current assets 400 357
Total assets 5 054 4 914
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share premium 1 223 1 223
Retained earnings 677 622
Ordinary shareholders` equity 1 900 1 845
Minority interests 98 97
Total shareholders` equity 1 998 1 942
Non-current liabilities
Borrowings 1 734 1 778
Deferred taxation 370 362
2 104 2 140
Current liabilities
Borrowings 459 368
Other liabilities 493 464
952 832
Total liabilities 3 056 2 972
Total equity and liabilities 5 054 4 914
Interest bearing borrowings to
total shareholders` equity (%) 110 110
Net asset value per share (Rand) 1,62 1,57
Capital expenditure 423 1 334
Capital commitments
- contracted 10 471
- authorised but not contracted 826 817
Group Cash Flow Statements (Associates Consolidated)
Year ended 30 June
2002 2001
Rm Rm
Reviewed Audited
Cash flows from operating activities
Cash generated from operations 804 708
Property rentals (63) (57)
Exceptional items (19) (137)
Net movement in working capital 113 84
Net interest expense (246) (122)
Taxation paid (81) (55)
Dividends paid (2) (3)
Net cash inflow from operating activities 506 418
Cash flows from investing activities
Purchase of operating assets (423) (1 334)
Proceeds on disposal of operating assets 10 22
New investments and loans made (105) (35)
Investments and loans realised 7 (4)
Net cash outflow from investing activities (511) (1 351)
Cash inflow from financing activities
- increase in shareholders` funding 1 82
- increase in borrowings 47 894
Net cash inflow from financing activities 48 976
Increase in deposits and cash 43 43
Cash and cash equivalents at beginning of year 85 42
Cash and casf equivalents at end of year 128 85
Consolidated Statements of Changes in Equity
Ordinary
shares
and share Retained
premium earnings Total
Rm Rm Rm
Balances at 30 June 2001 1 223 622 1 845
Earnings for year - 55 55
Balances at 31 June 2002 1 223 677 1 900
Segmental Analysis
Revenues EBITDA
2002 2001 2002 2001
Rm Rm Rm Rm
GrandWest 741 443 236 148
Sun City 694 627 74 65
Carnival City 488 559 130 151
Sugarmill 421 163 164 63
Boardwalk 214 201 60 70
Wild Coast 173 276 32 77
Carousel 158 182 16 38
Morula 140 159 33 46
Table Bay 110 92 31 21
Thaba`Nchu/Naledi 68 81 3 15
Zimbali 26 21 3 1
Flamingo 25 - 7 -
Meropa 24 - 8 -
Corporate/other 12 30 (10) 4
Group 3294 2 834 787 699
Group Income Statements (Associates Equity Accounted)
Year ended 30 June
2002 % 2001
Rm change Rm
Reviewed Audited
Revenue 1 720 1 902
Casino 1 098 1 308
Rooms 310 271
Food, beverage and other 312 323
Direct costs (828) (917)
Gross profit 892 985
Indirect costs (607) (582)
EBITDA 285 403
Depreciation (151) (160)
Property rentals (22) (22)
Exceptional items (1) (20)
Profit from operations 111 201
Interest income 80 135
Operating profit 191 336
Interest expense (83) (101)
Share of associate companies
profits/(losses)
- normal 26 (2)
- exceptional (18) (103)
Profit before taxation 116 130
Taxation (60) (44)
Profit after taxation 56 86
Minority interest (1) (1)
Earnings attributable to
ordinary shareholders 55 85
Number of ordinary shares
in issue (million) 1 175 1 175
Average number of ordinary shares
in issue (million) 1 175 1 175
Earnings per ordinary share (cents) 4,7 7,2
Headline earnings per share (cents) 6,4 17,0
EBITDA as a percentage of revenue (%) 16,6 21,2
Interest cover (times) 2,3 3,3
Determination of headline earnings:
Earnings attriburable to
ordinary shareholders 55 85
Exceptional items 19 123
Pre-opening expenditure written-off 18 103
Restructuring of operations - 14
Bid costs written-off 1 -
Closure/sale of operations - 3
Loss on disposal of interests in subsidiaries - 3
Goodwill amortised (included in depreciation) 1 -
Taxation on exceptional items - (8)
Minority interest - -
Headline earnings 75 200
Group Balance Sheets (Associates Equity Accounted)
Year ended 30 June
2002 2001
Rm Rm
Reviewed Audited
ASSETS
Property,plant and equipment,
intangibles and investments 3 251 3 113
Current assets 221 254
Total assets 3 472 3 367
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share premium 1 223 1 223
Retained earnings 677 622
Ordinary shareholders` equity 1 900 1 845
Minority interests 28 15
Total shareholders` equity 1 928 1 860
Non-current liabilities
Borrowings 535 591
Deferred taxation 384 397
919 988
Current liabilities
Borrowings 317 207
Other liabilities 308 312
625 519
Total liabilities 1 544 1 507
Total equity and liabilities 3 472 3 367
Interest bearing borrowings
to total shareholders` equity (%) 44 43
Net asset value per share (Rand) 1,62 1,57
Capital expenditure 67 150
Capital commitments
- contracted - 89
- authorised but not contracted 156 57
Group Cash Flow Statements (Associates Equity Accounted)
Year ended 30 June
2002 2001
Rm Rm
Reviewed Audited
Cash flows from operating activities:
Cash generated from operations 353 410
Property rentals (22) (22)
Exceptional items (1) (20)
Net movement in working capital 32 (80)
Investment income 93 136
Interest expense (83) (101)
Taxation paid (77) (53)
Dividends paid - (3)
Net cash inflow from operating activities 295 267
Net cash outflow from investing activities (347) (256)
- purchase of property,plant and equipment (63) (132)
- net cash outflow from other
investing activities (284) (124)
Net cash inflow/(outflow) from
financing activities 55 (14)
- increase in shareholders` funding 1 1
- increase/(decrease) in borrowings 54 (15)
Increase/(decrease) in deposits and cash 3 (3)
Cash and cash equivalents at beginning of period 39 42
Cash and cash equivalents at end of period 42 39
Comments
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 results, which comply with statements of South African
Generally Accepted Accounting Practice, are prepared on a consistent basis with
the policies as applied in the previous year and reflect an equity accounted
position for the year to 30 June 2002, 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, Afrisun KZN, Teemane and
Meropa.
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. The unqualified
review report of the auditors is available for inspection at the company`s
registered office.
Commentary
Trading improved substantially in the second half of the financial year
following the disappointing trading results achieved in the first half of the
year. This was largely led by the group`s resort properties which, following a
successful December 2001, achieved occupancies well ahead of the previous year.
The group`s major gaming operations also experienced improved trading
conditions, in particular at GrandWest in Cape Town and Sugarmill in Durban. The
group successfully opened the Flamingo casino in Kimberley and the Meropa casino
in Polokwane in March 2002 and April 2002, respectively.
Earnings
Group revenues at R3.3 billion were 16% ahead of the previous year. The
Boardwalk at Port Elizabeth, GrandWest and Sugarmill traded for part of the
previous year and therefore the growth in revenues over the last year is not as
a consequence comparable. EBITDA at R787 million was 13% up on the previous
year.
The depreciation charge of R340 million was 29% up on the previous year due to
the aforementioned operations trading for a full year, as well as the opening of
Flamingo and Meropa.
Exceptional items in the current year relate mainly to pre-opening expenditure
incurred at the Flamingo and Meropa operations.
The group`s substantial capital expenditure programme resulted in an increase
in the interest charge, from R135 million to R257 million in the current year.
The overall level of taxation in the group remains high due to disallowed
depreciation charges relating to casino buildings and the inclusion of non-
deductible preference share dividends in interest paid.
Headline earnings for the group of R75 million and headline earnings per share
of 6.4 cents were below the previous year, mainly as a result of the
disappointing trading experienced in the first half of the year and the higher
levels of depreciation and interest.
As previously advised no dividends has been declared in respect of the year
under review. It is anticipated that the Company will be in a position to resume
dividend payments in 2003.
Gaming
Gaming revenues were 18% ahead of the previous year with much of the growth
generated by the Sugarmill and GrandWest operations, which were open for five
and seven months respectively, in the previous financial year. Both these
operations traded particularly well in the second half of the year. Carnival
City`s revenues were 13% below the previous year mainly as a result of a full
year`s competition in Gauteng. This was also reflected in the revenue declines
at Morula and Carousel which were 13% below last year. Trading at the Boardwalk
in Port Elizabeth was disappointing largely as a result of the stagnant local
economy. The Flamingo and Meropa operations opened successfully and traded for
four and three months respectively, generating revenues in line with
expectations.
The smoking facilities available at all of the group`s gaming operations have
proved to be successful and have assisted these operations in achieving improved
revenues. In Gauteng the market showed disappointing growth over last year and
competition remains strong. Carnival City, however, traded satisfactorily and
increased its share of the market in the second half of the year under review.
As expected, the group`s operations in the Free State at Thaba`Nchu and Naledi
experienced declining revenues, due to their remote locations and the impact of
more conveniently located operations in neighbouring provinces.
Hotels and Resorts
The events of September 11 and the consequent reduction in foreign tourist
arrivals during the first half of the year was mitigated by a significant
increase in arrivals in the second half. This can be attributed to the
depreciation in the currency and a changed perception regarding the safety of
the country as well as joint public and private sector initiatives aimed at
stimulating interest in the destination.
The group achieved an occupancy of 69% for the year, which was four percentage
points ahead of the previous year. Sun City`s occupancy at 75% was also four
percentage points ahead of last year. Occupancies at Table Bay of 63% and
Zimbali Lodge of 66% were six and seven percentage points ahead of last year,
respectively. The group also enjoyed a substantial improvement in average room
rate that was 14% above the previous year.
New Developments
The Flamingo casino at Kimberley was successfully opened in March 2002 at a
cost of R125 million. The Meropa casino at Polokwane opened in April 2002 at a
cost of R184 million. An amount of R650 million has been approved in respect of
the Sibaya project at Umdloti, the construction of which is scheduled to
commence toward the end of the 2003 financial year.
Capital Expenditure and Borrowings
The group incurred capital expenditure of R423 million in the year of which
R351 million related to new projects and R72 million related to replacement
capital expenditure. Borrowings increased by R47 million in the year.
Capital expenditure for the year ahead is forecast at R194 million which
includes the group`s plans to spend R100 million at Sun City on the partial
upgrade of the casino floor, together with the refurbishment of rooms.
Prospects
The group`s resorts are well placed to continue to take advantage of the
increase in the number of foreign visitors to the country and the forward
booking trend is encouraging. The casinos have also experienced an improvement
in trading conditions with the exception of those in outlying locations which
continue to be impacted by more conveniently located urban casinos. The
declining profitability of these outlying operations combined with the opening
of a new competitor facility in Durban in December 2002 will impact on group
earnings in the year ahead. The medium term outlook remains positive and the
group`s ability to generate cash and reduce debt should result in strong future
earnings growth.
For and on behalf of the board
D M J Ncube P D Bacon
Chairman Managing Director
16 August 2002
Registered office: Transfer office:
27 Fredman Drive Computershare Investor Services Limited
Sandown Edura
Sandton 41 Fox Street
2031 Johannesburg
2001
Directorate: D M J Ncube (Chairman), P D Bacon (Managing) (British)*,
B P Botha, D C Coutts-Trotter*, G A Macmillan, T B Mparutsa,
K O Omar, K D Wienand (alt). *Executive
Company Secretary: S A Bailes
www.suninternational.com
Date: 19/08/2002 09:00:00 AM Produced by the JSE SENS Department
