| Wed 5 Mar 2003, 12:41 | | Kersaf Investment Limited - Profit and dividend an |
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Kersaf Investment Limited
(Registration number 1967/007528/06)
Share code : KER ISIN: ZAE000003844
Profit and dividend announcement for the six months ended 31 December 2002
Revenue 23% higher
EBITDA up 55%
Adjusted Headline Earnings per Share up 158% to 98 cents
Group income statement
Six months ended Year ended
31 December 30 June
2002 2001 2002
Unaudited Unaudited Audited
%
Rm change Rm Rm
Revenue 2 155 23 1 759 3 719
Direct costs (924) (829) (1 692)
Gross profit 1 231 33 930 2 027
Indirect costs (585) (513) (1 064)
EBITDA 646 55 417 963
Depreciation and amortisation (218) (201) (415)
Property rentals (37) (30) (68)
Exceptional items (152) (29) (374)
Operating profits 239 52 157 106
Foreign exchange (losses)/profits (57) 59 59
Continuing operations (72) 59 44
Discontinuing operations 15 - 15
Interest received 33 44 38
Continuing operations 23 36 23
Discontinuing operations 10 8 15
Interest expense (169) (162) (295)
Profits/(losses) before equity
accounted earnings 46 (53) 98 (92)
Share of associate companies`
(losses)/profits
- normal (9) (17) (79)
Continuing operations 26 16 38
Discontinuing operations (35) (33) (117)
- exceptional
Discontinuing operations (1) (96) (122)
Profit/(loss) before taxation 36 (15) (293)
Taxation (101) (47) (114)
Continuing operations (100) (46) (111)
Discontinuing operations (1) (1) (3)
Loss after taxation (65) (62) (407)
Minority interests (45) 15 110
Net loss for the period (110) (47) (297)
Number of shares (000`s)
- in issue 90 050 90 050 90 050
- for EPS calculation 90 050 90 050 90 050
- for fully diluted EPS calculation 91 163 90 584 91 695
Earnings per share (cents)
- headline (loss)/earnings
per share (295) 53 18
- adjusted headline earnings
per share 98 158 38 99
- basic loss per share (122) (52) (330)
Fully diluted earnings
per share (cents)
- headline (loss)/earnings
per share (292) 53 18
- adjusted headline earnings
per share 97 38 97
- basic loss per share (121) (52) (324)
Dividend declared
per share (cents) 25 - -
EBITDA margin 30 24 26
Interest cover (times) 2 2 2
Determination of headline
and adjusted headline earnings
Attributable loss per the
income statement (110) (47) (297)
Headline earnings adjustments (212) 34 314
Net write downs due to
sale and closure of operations - 15 15
Goodwill (included in
depreciation and amortisation)* 10 11 24
KZL dispute legal costs 6 8 16
Recognition of KZL long-term
obligation and termination
of litigation - - 297
Dilution loss on City Lodge
debenture conversion - - 38
Impairment of goodwill 34 - -
Profit on disposal of aircraft - - (21)
Currency translation reserve
realised on sale of KZL shares (262) - (55)
Associate headline earnings
adjustments 1 93 118
Impairment of cinema assets 14 73 122
(Profit)/loss on sale of
cinema assets (13) 20 (4)
Taxation relief on the above items - - 4
Minority interests in the
above items 55 (32) (122)
Headline earnings (266) 48 17
Adjusted headline earnings
adjustments 417 (42) 24
Pre-opening expenses - 4 18
Write down of KZL to
market value 356 3 60
Foreign exchange losses/(gains)
on intercompany accounts* 68 (40) (30)
Earnings from discontinuing
operations* (25) (8) (30)
Provision for gaming levies
related to prior periods 17 - -
Other items 1 (1) 6
Associate adjusted headline
earnings adjustments 36 37 124
Discontinuing operations
Pre-opening expenses - 3 4
Results from discontinuing
operations* 36 34 120
Taxation relief on the above items (4) - -
Minority interests in the above
items (94) (9) (76)
Adjusted headline earnings 89 34 89
*Not included in exceptional or associated exceptional items.
Group balance sheet
Six months ended Year ended
31 December 30 June
2002 2001 2002
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non current assets
Property, plant and equipment 4 595 4 876 4 798
Intangible assets 808 698 665
Investments and loans 1 023 2 909 1 849
6 426 8 483 7 312
Current assets
Accounts receivable and other 429 440 380
Available for sale investment - - 507
Cash and cash equivalents 226 200 286
655 640 1 173
Total assets 7 081 9 123 8 485
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 2 394 3 510 2 888
Outside shareholders` interests 1 416 1 838 1 657
3 810 5 348 4 545
Non current liabilities
Deferred taxation 407 376 395
Borrowings 1 693 2 013 2 438
2 100 2 389 2 833
Current liabilities
Accounts payable and other 797 761 748
Borrowings 374 625 359
1 171 1 386 1 107
Total liabilities 3 271 3 775 3 940
Total equity and liabilities 7 081 9 123 8 485
Borrowings to total shareholders`
equity (%) 54 49 62
Net asset value per share (Rand) 26,59 38,98 32,07
Capital expenditure 103 328 559
Capital commitments
- contracted 20 148 11
- authorised but not contracted 770 655 837
Market value of listed investments 748 2 394 1 951
Directors` valuation of unlisted
investments and loans 363 597 390
Total valuation of investments and
loans and available for sale investment 1 111 2 991 2 341
GROUP CASH FLOW INVESTMENT
Six months ended Year ended
31 December 30 June
2002 2001 2002
Unaudited Unaudited Audited
Rm Rm Rm
Cash generated by operations before: 622 439 934
Working capital changes (44) (94) (44)
Pre-opening expenses - (4) (18)
Cash generated by operations 578 341 872
Investment income 44 50 49
Interest expense (163) (162) (286)
Taxation paid (70) (68) (129)
Dividends paid (20) (13) (32)
Cash retained from operating activities 369 148 474
Cash utilised in investing activities (277) (522) (774)
Cash realised from investing activities 531 47 170
Net cash (outflow)/inflow from
financing activities (671) 275 167
Translation (losses)/gains on
cash balances (12) 14 11
(Decrease)/increase in cash balances (60) (38) 48
Consolidated statement of changes in equity
Ordinary Foreign
shares currency
and Retained translation
share premium earnings reserve Total
Rm Rm Rm Rm
Balances at 30 June 2002 555 1 201 1 132 2 888
- Net loss for the period
to 31 December 2002 - (110) - (110)
- Foreign currency translation
adjustment - - (184) (184)
- Foreign currency translation
reserve realised - - (192) (192)
- Fair value loss - (8) - (8)
Balances at 31 December 2002 555 1 083 756 2 394
Divisional earnings analysis
Six months ended Year ended
31 December 30 June
2002 2001 2002
Unaudited Unaudited Audited
Rm Rm Rm
Sun International South Africa 44 9 28
Other southern African activities 9 (3) (12)
Management activities 27 16 53
City Lodge 15 9 22
Central office and other (6) 3 (2)
89 34 89
This analysis represents the Kersaf share of adjusted headline earnings.
COMMENTARY
Earnings and Dividend
The group`s casinos continued to benefit from the strength of the South African
economy, producing strong growth in revenues and EBITDA. The hotels and resorts
achieved occupancies and room rates well above those achieved in the previous
year, due in part to the impact of 11 September 2001 on the corresponding period
in the prior year, and to the increasing popularity of South Africa as a tourist
destination. Adjusted headline earnings per share were 158% higher than last
year at 98 cents. The increase is largely due to the higher earnings of Sun
International (South Africa) Limited (SISA), Sun International Management
Limited (SIML), City Lodge Hotels Limited (City Lodge) and the lower losses
incurred in the Zambian operations.
Revenues for the period of R2,2 billion were 23% higher, with gaming
revenues up 24% and hospitality and other revenues up 19%. The increase in
gaming revenues was due to excellent trading at GrandWest which benefited from
the vibrant Western Cape economy, strong growth in revenues at the Boardwalk and
the inclusion of the Meropa and Flamingo casinos which opened in the second half
of the prior year. The increase in hospitality revenues was due to the strong
trading of the Table Bay Hotel and Sun City. Trading at the Zambian operations
although well up on the prior period remained disappointing. The strong trading
and well-contained costs resulted in a 6-percentage point increase in the EBITDA
margin to 30%, and a 55% increase in EBITDA to R646 million. Depreciation and
amortisation charges increased by 18% whilst net interest paid of R136 million
was 15% higher than last year. Foreign exchange losses of R57 million compare to
profits of R59 million in the prior year.
Ster Century Europe Limited (SCE) and Ster Century Middle East Limited (SCME)
have been treated as discontinuing operations and as a consequence the earnings
and results from these operations have been disclosed separately.
In view of the strong cashflows and growth in adjusted headline earnings, the
board has declared an interim dividend of 25 cents per share (2001: nil).
ACCOUNTING POLICIES
The interim financial information presented has been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice (GAAP)
and International Accounting Standards (IAS) and comply with AC127 "Interim
financial reporting". The accounting policies used are consistent with those
used in the annual financial statements for the year ended 30 June 2002.
The calculation of headline earnings has been based upon the Interpretation of
Statement of Investment Practice No. 1, issued by the South African Institute of
Chartered Accountants in December 2002 (circular 7/2002). In terms of this
circular the prior year figures have been re-stated where applicable.
The group has decided to present "adjusted headline earnings" to assist users
of the group`s financial statements. Adjusted headline earnings exclude certain
items of income or expense so as to enable users to obtain a more meaningful
comparison of the group`s performance with prior periods. These adjustments
include pre-opening expenses, earnings and results from discontinuing operations
and material items considered to be outside of the normal operating activities
of the group and/or of a non-recurring nature.
OPERATIONAL REVIEW
SISA`s trading continued the strong trend of the last six months of the
previous financial year. Group revenues of R1,9 billion were 23% up on last year
with gaming and hospitality revenues 25% and 19% up respectively. The increased
revenues combined with cost containment resulted in EBITDA increasing 48% to
R518 million with the EBITDA margin at 27%, 5 percentage points up on the the
prior year. Adjusted headline earnings of R100 million were R79 million up on
the previous year.
The strong growth in gaming revenues resulted from the excellent trading of
the group`s new operations and the opening of the Flamingo and Meropa casinos.
Gaming revenues at the group`s biggest casino operation, GrandWest were 32% up
on the previous year at R407 million with EBITDA at R156 million, 65% up on the
prior year. The Boardwalk casino revenues grew by 33% to R122 million. The
opening of a competitor casino in Durban at the end of November 2002 impacted
the SugarMill temporary casino, although displacement of revenues was less than
expected. The Carousel, Morula Sun, Thaba`Nchu Sun and Wild Coast Sun continued
to be impacted by competition from more conveniently located urban casinos,
albeit to a lesser extent than in the past. The launch of the group`s "Mystery
Jackpots" and other new product releases helped differentiate the group from its
competitors and also contributed to the increased revenues.
SISA`s average room occupancy at 76% was eleven percentage points above the
previous year at an average rate of R748, 24% up on last year. Occupancies at
Sun City, the Table Bay and Zimbali were 6, 20 and 4 percentage points ahead of
the previous year at 78%, 71% and 68% respectively. The strong growth in both
occupancy and rate experienced over the last year is attributed to the
popularity and perceived relative safety of South Africa as a tourist
destination as well as the value for money the country offers international
tourists.
Construction of the Sibaya permanent casino at Umdloti will commence shortly
and is scheduled for completion in December 2004. Consideration is being given
to the relocation of the Thaba`Nchu Sun casino licence to Bloemfontein.
Other southern African operations had a mixed performance with strong trading at
the Swaziland, Namibia and Lesotho operations, offset in part by disappointing
trading at the Botswana and Zambia operations. Earnings attributable to Kersaf
of R9 million were R12 million better than the loss incurred in the first half
of the prior year (excluding foreign exchange gains and losses on intercompany
accounts). The Zambian operations incurred a loss of R19 million (including
depreciation charges of R10 million) before a foreign exchange loss of R42
million. Occupancies at 36%, 6 percentage points ahead of last year continue to
be disappointing.
Management activities generated revenues 24% higher at R124 million as a
consequence of the growth in SISA revenues and profitability. Earnings
attributable to Kersaf of R27 million were 69% higher than last year. The
increase is due to a number of factors including the higher revenues and the
acquisition of the minority`s effective 26,7% interest in SIML on 15 November
2002, which contributed an additional R3 million to attributable earnings.
SCE generated revenues of US$25,7 million, 21% lower than last year. Excluding
the revenues from sold operations, revenues were 86% higher. The strong revenue
growth was achieved as a result of new cinema openings during and since the
prior period, good product and a continued improvement in trading at certain of
the more established sites. The SCE group incurred an EBITDA loss of US$0,9
million compared to last year`s loss of US$3,6 million. Attributable losses
before exceptional items of US$5,6 million were 34% better than last year`s
US$8,4 million loss.
Processes are underway for the sale of SCE`s remaining cinema interests in
Spain, the United Kingdom and the Republic of Ireland.
SCME. A comprehensive restructuring of the business is near completion resulting
in the closure of one of the sites in Sharjah and the downsizing of the other.
Significant rental and cost reductions have also been achieved and it is
anticipated that SCME will generate positive cashflows going forward. The
instability in this region will make a sale in the short-term difficult although
the group will continue to seek to exit this business.
City Lodge results for the period were outstanding with revenues increasing by
29% to R145 million and EBITDA increasing by 38% to R72 million. This was
achieved by a 5 percentage point increase in occupancy to 77%, good rate growth
and contribution for the full period from Road Lodge Kimberley and Town Lodge
Polokwane as well as a three month contribution from Road Lodge Cape Town
International Airport. Headline earnings increased by 68% to R39 million and
fully diluted earnings per share were up 64% on the prior year. Earnings
attributable to Kersaf at R15 million were R6 million higher than last year.
BALANCE SHEET
Effective 15 November 2002 the group acquired the minority`s effective 26,7%
interest in SIML. The consideration paid was US$16,9 million and was settled
with 850 000 KZL shares. The group`s obligation to dispose of two million KZL
shares was discharged during December 2002 when it sold 2,3 million shares by
way of a public offering, realising US$42 million after costs. The proceeds were
largely utilised to discharge borrowings including the US$32 million owing to
KZL. The group continues to hold 2,8 million KZL shares of which Kersaf
effectively owns 2,2 million. In terms of the arrangement with KZL the group may
dispose of up to 400 000 KZL shares per quarter through the market and it is
likely that further sales will be completed during the second half of the
financial year.
Capital expenditure for the six months of R103 million (2001: R328 million)
was incurred on various projects including the establishment of a smoking casino
at Sun City. It is anticipated that a further R135 million (2002: R153 million)
capital expenditure will be incurred in the second half of the financial year.
The reduction in net asset value per share is primarily due to the decline in
the KZL share price and the impact of the stronger Rand on the carrying values
of the group`s offshore assets.
During the period the group reduced borrowings by R671 million.
PROSPECTS
The positive outlook for the local economy should benefit the group`s casino
operations although growth in casino revenues in the second half will be lower,
in part due to the new competitor facility in Durban.
Forward bookings at the group`s hotels and resorts remain strong, but may be
impacted by a conflict in the Middle East. Of further concern is the slowdown in
economic growth of certain of the group`s primary markets of Germany, United
Kingdom and The United States of America and the potential negative impact this
may have on tourism to the region.
Nevertheless the contribution from the group`s casino and hotel operations in
the second half is expected to be higher than the prior financial year. This
together with an increased contribution from SIML, following the purchase of the
minority`s interest and a reduction in the losses from the Zambian operations
should reflect strong growth in adjusted headline earnings over the second half
of the prior year.
For and on behalf of the board
D A Hawton D C Coutts-Trotter
Executive Chairman Executive Director
5 March 2003
Registered Office Transfer Office
27 Fredman Drive Computershare Investor Services Limited
Sandown 70 Marshall Street
Sandton, 2031 Johannesburg, 2001
Directors: D A Hawton (Chairman)*, P D Bacon (British)*, L Boyd, P L Campher,
D C Coutts-Trotter*, M P Egan, I N Matthews, S C Mildenhall,
D M Nurek, E Oblowitz, G R Rosenthal. *Executive
Group Secretary: S A Bailes
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that an interim dividend of 25 cents per share (2001:
nil) for the six months ended 31 December 2002 has been declared, payable to
shareholders recorded in the register of the company at the close of business on
the record date appearing below. The salient dates applicable to the interim
dividend are as follows:
2003
Last day to trade cum interim dividend Thursday, 20 March
First day to trade ex interim dividend Monday, 24 March
Record date Friday, 28 March
Payment date Monday, 31 March
No share certificates may be dematerialised or rematerialised between Monday, 24
March 2003 and Friday, 28 March 2003, both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable,
to certificated shareholders on the payment date. Dematerialised shareholders
will have their accounts with their Central Securities Depository Participant or
broker credited on the payment date.
By order of the board
S A Bailes
Group secretary
5 March 2003
Date: 05/03/2003 12:34:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
