| Fri 22 Aug 2003, 17:53 | | Reviewed Results for the Yeear ended 30 June 2003 |
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SIS
Sun International - Reviewed Results for the Yeear ended 30 June 2003
Sun International (South Africa) Limited
Registration number: 1977/071333/06
Share code: SIS
ISIN: ZAE 000010104
Highlights
* Group revenues up 14%
* Gaming revenues up 16% to R2.8 billion
* Group occupancy up to 74%
* EBITDA up 27% to R1.0 billion
* Adjusted headline earnings per share of 15.0 cents up 107%
Preliminary Profit and Dividend Announcement for the year ended 30 June 2003
Reviewed Results
Group Income Statements
(Associates Equity Accounted)
Year ended 30 June
2003 % 2002
Rm change Rm
Revenue 1 869 8 1 732
Casino 1 160 1 098
Rooms 365 310
Food, beverage and other 344 324
Direct costs (885) (828)
Gross profit 984 904
Indirect costs (630) (606)
EBITDA 354 19 298
Depreciation (155) (151)
Property rentals (33) (22)
Exceptional items (38) (1)
Operating profits 128 124
Foreign exchange losses (5)
Interest income 120 80
Interest expense (97) (83)
Share of associate companies" profits/(losses)
- normal 114 13
- exceptional (23) (18)
Profit before tax 237 116
Taxation (91) (60)
Profit after taxation 146 56
Minority interest (3) (1)
Earnings attributable to ordinary shareholders 143 160 55
Number of ordinary shares in issue (million) 1 175 1 175
Basic earnings per ordinary share (cents) 12,2 4,7
Headline earnings per share (cents) 8,6 5,7
Adjusted headline earnings per share (cents) 15,0 7,2
EBITDA as a percentage of revenue (%) 19,0 17,0
Interest cover (times) 2,5 2,5
Determination of headline earnings:
Earnings attributable to ordinary shareholders 143 55
Headline earnings adjustments: (46) 11
Loss on sale and write down of assets - 10
Net profit on sale of investments (46) -
Other items - 1
Taxation relief on above items 3 -
Minority interest - -
Goodwill amortised (included in depreciation) 1 1
Headline earnings 101 51 67
Adjustments to headline earnings: 110 18
Pre-opening expenditure written-off 18
Fair value adjustment to share trust loan 62 -
Provision for post retirement
medical aid funding 25 -
Gaming levies relating to prior periods 23 -
Taxation on above items (30) -
Minority interest (5) -
Adjusted headline earnings 176 107 85
Analysis of exceptional items:
Net profit on sale of investments 46 -
Provision for post retirement
medical aid funding (21) -
Gaming levies relating to prior periods (17) -
Fair value adjustment to share trust loans (46) -
Other items (1)
(38) (1)
Share of associate companies exceptional items:
Pre-opening expenditure written-off - (18)
Provision for post retirement
medical aid funding (4) -
Gaming levies relating to prior periods (5) -
Fair value adjustment to share trust loan (14) -
(23) (18)
Group Balance Sheets
(Associates Equity Accounted)
Year ended 30 June
2003 2002
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 2 124 2 123
Intangible assets 53 59
Investment and loans 1 163 1 149
3 340 3 331
Current assets
Accounts receivable and other 172 148
Cash and cash equivalents 24 41
196 189
Total assets 3 536 3 520
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share premium 1 223 1 223
Retained earnings 815 677
Ordinary shareholders" equity 2 038 1 900
Minority interests 76 27
Total shareholders" equity 2 114 1 927
Non-current liabilities
Borrowings 533 785
Deferred taxation 367 384
Other non-current liabilities 20 -
920 1 169
Current liabilities
Borrowings 118 67
Other liabilities 384 357
502 424
Total liabilities 1 422 1 593
Total equity and liabilities 3 536 3 520
Interest bearing borrowings to total
shareholders" equity (%) 32 44
Net asset value per share (Rand) 1,73 1,62
Capital expenditure 161 59
Capital commitments - -
- contracted - -
- authorised but not contracted 228 156
Group Cash Flow Statements
(Associates Equity Accounted)
Year ended 30 June
2003 2002
Rm Rm
Cash flows from operating activities
Cash generated from operations 414 315
Property rentals (33) (22)
Exceptional items (38) (19)
Net movement in working capital 13 102
Investment income 154 93
Interest expense (97) (83)
Taxation paid (87) (77)
Dividends paid (32) -
Net cash inflow from operating activities 294 309
Cash flows from investing activities
Purchase of property, plant and equipment (161) (59)
New investments and loans made (20) (301)
Net cash outflow from investing activities (181) (360)
Cash flows from financing activities
Increase in shareholders" funding 11 1
(Decrease)/increase in borrowings (143) 53
Net cash (outflow)/inflow from financing
activities (132) 54
(Decrease)/increase in cash and cash equivalents (19) 3
Cash and cash equivalents at beginning of period 42 39
Cash and cash equivalents at end of period 23 42
Statement of Changes in Equity
(Associates Equity Accounted)
Ordinary shares Retained
and share premium earnings Total
Rm Rm Rm
Balances at 30 June 2002 1 223 677 1 900
Effect of adopting AC133 - 24 24
Restated balances as 30 June 2002 1 223 701 1 924
Earnings for the period - 143 143
Dividend paid - (29) (29)
Balances at 30 June 2003 1 223 815 2 038
Segmental Analysis
Revenues EBITDA Segment result
Year ended Year ended Year ended
30 June 30 June 30 June
2003 2002 2003 2002 2003 2002
Rm Rm Rm Rm Rm Rm
Sun City 790 694 94 74 38 25
Carnival City 532 488 167 130 97 69
Wild Coast 180 173 31 32 (6) 13
Carousel 158 158 21 16 5 5
Morula 140 140 28 33 22 27
Thaba"Nchu/Naledi 68 66 6 3 (4) (10)
Corporate/other 1 13 7 10 (24) (5)
Group 1 869 1 732 354 298 128 124
Group Income Statements
(Associates Consolidated)
Year ended 30 June
2003 % 2002
Rm change Rm
Revenue 3 762 14 3 294
Casino 2 796 2 417
Rooms 500 415
Food, beverage and other 466 462
Direct costs (1 625) (1 508)
Gross profit 2 137 1 786
Indirect costs (1 134) (999)
EBITDA 1 003 27 787
Depreciation (367) (340)
Property rentals (78) (63)
Exceptional items (64) (19)
Operating profits 494 365
Foreign exchange losses (9) -
Interest income 33 11
Interest expense (274) (257)
Profit before taxation 244 119
Taxation (98) (63)
Profit after taxation 146 56
Minority interest (3) (1)
Earnings attributable to ordinary
shareholders 143 160 55
Number of ordinary shares in issue (million) 1 175 1 175
Basic earnings per ordinary share (cents) 12,2 4,7
Headline earnings per share (cents) 8,6 5,7
Adjusted headline earnings per share (cents) 15,0 7,2
EBITDA as a percentage of revenue 27 24
Interest cover (times) 1,9 1,5
Determination of headline earnings:
Earnings attributable to ordinary
shareholders 143 55
Headline earnings adjustments: (46) 18
Loss on sale and write down of assets - 17
Net profit on sale of investments (46) -
Other items - 1
Taxation on the above items 3 (5)
Minority interest - (2)
Goodwill amortised 1 1
Headline earnings 101 51 67
Adjustments to headline earnings: 110 18
Pre-opening expenditure written-off 18
Fair value adjustment to share trust loans 62 -
Provision for post retirement medical aid
funding 25 -
Gaming levies relating to prior periods 23 -
Taxation on above items (30) -
Minority interest (5) -
Adjusted headline earnings 176 107 85
Analysis of exceptional items:
Pre-opening expenditure written-off (18)
Gaming levies relating to prior periods (23) -
Net profit on sale of investments 46 -
Fair value adjustment to share trust loan (62) -
Provision for post retirement
medical aid funding (25) -
Other items ( 1)
(64) (19)
Group Balance Sheets
(Associates Consolidated)
Year ended 30 June
2003 2002
Rm Rm
ASSETS
Non current assets
Property, plant and equipment 4 070 4 132
Bid costs and goodwill 412 452
Investments and loans 365 173
4 847 4 757
Current assets
Accounts receivable and other 281 252
Cash and cash equivalents 80 128
361 380
Total assets 5 208 5 137
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share premium 1 223 1 223
Retained earnings 815 677
Ordinary shareholders" equity 2 038 1 900
Minority interests 251 108
Total shareholders" equity 2 289 2 008
Non-current liabilities
Borrowings 1 598 1 976
Deferred taxation 386 370
Other non-current liabilities 25
2 009 2 346
Current liabilities
Borrowings 270 217
Other liabilities 640 566
910 783
Total liabilities 2 919 3 129
Total equity and liabilities 5 208 5 137
Interest bearing borrowings to total
shareholders" equity (%) 82 109
Net asset value per share (Rand) 1,73 1,62
Capital expenditure 296 423
Capital commitments
- contracted 242 10
- authorised but not contracted 773 826
Group Cash Flow Statements
(Associates Consolidated)
Year ended 30 June
2003 2002
Rm Rm
Cash flows from operating activities
Cash generated from operations 1 036 811
Property rentals (78) (63)
Exceptional items (64) (19)
Net movement in working capital 43 113
Net interest expense (241) (246)
Taxation paid (95) (81)
Dividends paid (38) (2)
Net cash inflow from operating activities 563 513
Cash flows from investing activities
Purchase of property, plant and equipment (296) (423)
Proceeds on disposal of property, plant &
equipment 9 10
New investments and loans made (247) (105)
Investments and loans realised 138 -
Net cash outflow from investing activities (396) (518)
Cash flows from financing activities
Increase in shareholders" funding 58 1
(Decrease)/increase in borrowings (273) 47
Net cash (outflow)/inflow from financing
activities (215) 48
(Decrease)/increase in cash and cash equivalents (48) 43
Cash and cash equivalents at beginning of year 128 85
Cash and cash equivalents at end of year 80 128
Segmental Analysis
Revenues EBITDA Segment result
Year ended Year ended Year ended
30 June 30 June 30 June
2003 2002 2003 2002 2003 2002
Rm Rm Rm Rm Rm Rm
GrandWest 865 741 325 236 220 141
Sun City 790 694 94 74 38 25
Carnival City 532 488 167 130 97 69
Sugarmill 402 421 134 164 73 105
Boardwalk 256 214 88 60 47 22
Wild Coast 180 173 31 32 (6) 13
Carousel 158 158 21 16 5 5
Table Bay 144 110 46 31 14 4
Morula 140 140 28 33 22 27
Meropa 104 24 35 8 17 (5)
Flamingo 73 25 24 7 9 (2)
Thaba"Nchu/Naledi 68 66 6 3 (4) (10)
Zimbali 31 26 4 3 - (1)
Corporate/other 19 14 - (10) (38) (28)
Group 3 762 3 294 1 003 787 494 365
Comments
REPORTING
The reviewed financial information (associates equity accounted) has been
prepared in accordance with South African Statements of Generally Accepted
Accounting Practice (GAAP). The results have been reviewed by the group"s
auditors, PricewaterhouseCoopers, and their unqualified review opinion is
available for inspection at the company"s registered office.
Consistent with the prior years, the group has prepared the results for the
year under review on a consolidated basis, including the consolidation of
associates, which reflects the group"s economic interests in certain of its
major 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 group"s
auditors concur that the consolidated financial information is prepared in
accordance with the underlying reviewed financial statements of the group.
Furthermore, the statements comply with GAAP other than the consolidation of
associates in which the group does not have voting control. The accounting
policies used are consistent with those used in the annual financial statements
at 30 June 2002, with exception of the adoption of AC133, Financial Instruments:
Recognition and Measurement, which became effective in the current financial
year and resulted in an adjustment to opening reserves of R24 million.
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. 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 to better interpret the operating
performance of the group for the year under review. 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 and material items considered to be
outside of the normal operating activities of the group and/or of a non-
recurring nature.
COMMENTARY
The group enjoyed improved trading conditions compared to the previous
financial year and this was particularly evident in the first half of the
financial year. During the second half of the financial year, the results of the
group"s hotels and resorts were impacted by SARS (Severe Acute Respiratory
Syndrome). Notwithstanding continued high real interest rates and their effect
on disposable income, trading at the group"s casinos was satisfactory.
EARNINGS AND DIVIDEND
Group revenue at R3.8 billion was 14% up on the previous year. Both the
Flamingo (Kimberley) and Meropa (Polokwane) casinos traded for the full year
under review, as opposed to four and three months respectively in the previous
year. The Sugarmill Casino near Mount Edgecombe in Durban was negatively
affected by the opening of a competitor facility in Durban at the end of
November 2002.
EBITDA at R1 billion for the year was 27% ahead of the previous year and the
EBITDA margin improved significantly by 3 percentage points to 27%.
Exceptional items totalling R64 million were substantially higher than last
year and included a R62 million fair value adjustment in terms of AC133 relating
to the write down of the interest free loan to the recently established employee
share trust. A provision of R25 million was created for post retirement medical
aid funding, as a result of the group"s decision to continue to provide benefits
to existing employees. As previously reported, there was uncertainty surrounding
the basis of computation of certain gaming levies relating to prior periods. The
issues have been resolved, resulting in the payment of R23 million, which has
been reflected as an exceptional item.
Net interest costs were R5 million below the previous year, while taxation
increased by R35 million over the previous year to R98 million, as a result of
the improved profitability of the group.
Adjusted headline earnings of R176 million were 107% ahead of the previous
year, resulting in adjusted headline earnings per share of 15,0 cents.
In view of the improved performance of the group, the board has declared a
final dividend of 3,5 cents per share (2002: nil). The total dividends declared
for the year were 6 cents per share (2002: nil).
GAMING
Gaming revenues increased by 16% to R2,8 billion with strong contributions
from both GrandWest and Boardwalk, partly as a result of improved local
economies in the Western and Eastern Cape provinces. Both Flamingo and Meropa
contributed for the full year with Meropa performing well ahead of expectations.
The Sugarmill temporary casino maintained more than its fair market share
despite being significantly impacted by the opening of a new casino in Durban at
the end of November 2002. Carousel, Morula Sun and Wild Coast maintained
revenues at the same level as the previous year notwithstanding continued
competition from more conveniently located urban casinos.
HOTELS AND RESORTS
Average group occupancy grew five percentage points to 74%. Despite the impact
of SARS, Sun City achieved an average occupancy of 75% which was the same as the
previous year. The average room rate at R922 was 19% up on the previous year.
The Table Bay Hotel"s occupancy improved nine percentage points over the
previous year to 72% and the average room rate of R1 254 was 17% above last
year. Zimbali Lodge achieved occupancy of 70%, which was 4 percentage points
better than the previous year.
Foreign visitor numbers to South Africa remain strong and forward bookings
currently exceed levels of the previous year. It is therefore likely that
occupancy levels can be sustained.
NEW DEVELOPMENTS
Construction of the Sibaya permanent casino at Umdloti has commenced and is
scheduled for completion in December 2004 at a cost of R650 million.
An application has been submitted to the Free State Gambling Board to relocate
the licence from Thaba"Nchu to Bloemfontein. If granted, construction of the new
facility will commence in the second half of the financial year. This new
location is well positioned next to the N1 highway, providing good access to
customers and guests. Capital spend is estimated at R138 million.
CAPITAL EXPENDITURE AND BORROWINGS
The Sun City Hotel slots floor has been successfully upgraded to comply with
the North West Provincial Gambling Board"s requirements. The group"s smart card
technology has been introduced and bedroom refurbishment at the Cascades has
commenced.
Capital expenditure for the year totalled R296 million (2002:R423 million)
with R78 million spent at Sun City in respect of upgrades and refurbishments and
R79 million spent to date on the Sibaya project.
During the year the group repaid R273 million in borrowings, as a result of
the lower capital expenditure and improved profitability.
EMPOWERMENT AND OWNERSHIP
The group is committed to ensuring that there is an appropriate level of
economic empowerment participation in its operations. In furtherance of this
objective, on the 30th June 2003, the group disposed of a 12% interest in
SunWest to Grand Parade Investments (GPI), its empowerment partner in the
Western Cape, increasing GPI"s effective interest in SunWest to 20%. With effect
from 1 May 2003, the group disposed of 30% of its interest in the Wild Coast Sun
to a local community trust. The group has facilitated both these transactions
through preference share funding.
EMPLOYEE SHARE TRUST
Sun International"s proposal to establish an Employee Share Trust was approved
by the company"s shareholders and by the relevant provincial gambling boards.
The Trust holds interests in the group and its underlying operations and will
benefit all employees other than management. The trust has been financed by
interest free loans from group companies of R123 million.
We believe this to be one of the most comprehensive employee empowerment
schemes implemented in the tourism and leisure sector in this country which
underpins Sun International"s commitment to transformation in respect of the
ownership and benefits of our industry in South Africa.
NATIONAL GAMBLING BILL
The Department of Trade and Industry has recently made available a revised
draft of the proposed National Gambling Bill. The casino industry, represented
by the Casino Association of South Africa, will make representation to the
Parliamentary Portfolio Committee on Trade and Industry, on the provisions of
concern prior to the finalisation of the bill.
PROSPECTS
High real interest rates have placed disposable income under pressure and this
will have an effect on gaming revenues in the first half of the new financial
year. The group"s forward bookings are strong and we feel confident that growth
in foreign visitor arrivals will be sustained.
The Sugarmill casino traded without competition up to December 2002 and this
will impact the group"s comparative results for the first half of the 2004
financial year. We nevertheless anticipate that group earnings for the full year
to 30 June 2004 will exceed those of the current year.
DIRECTORATE
Mr M F McWilliam was appointed to the board on 22 August 2003.
Messrs K O Omar and K D Wienand have resigned as director and alternate director
respectively of the company, with effect from 28 July 2003. Messrs Omar and
Wienand, who were both with MSGM Masuku Jeena Inc ("MSGM"), are no longer able
to serve on the board following the recent merger between MSGM and
PricewaterhouseCoopers Inc ("PwC"), who are also the company"s auditors, as this
would give rise to a conflict with PwC"s independence rules. Their contribution
has been invaluable over the past few years.
Mr D C Coutts-Trotter has been appointed deputy chief executive of the group
with specific responsibility for the group"s gaming portfolio.
Registered office: Transfer office:
27 Fredman Drive Computershare Limited
Sandown Investor Services Division
Sandton 70 Marshall Street
2031 Johannesburg
2001
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that a final dividend of 3,5 cents per share (2002:nil)
for the year ended 30 June 2003 has been declared, payable to shareholders
recorded in the books of the company at the close of business on the record date
appearing below. The salient dates applicable to the final dividend are as
follows:
2003
Last day to trade cum final dividend Friday, 12 September
First day to trade ex final dividend Monday, 15 September
Record date Friday, 19 September
Payment date Monday, 22 September
No share certificates may be dematerialised or rematerialised between Monday,
15 September 2003 and Friday, 19 September 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 brokers credited on the payment date.
By order of the board
S A Bailes
Group Secretary
22 August 2003
Directorate: D M J Ncube (Chairman), P D Bacon (Chief Executive) (British)*,
B P Botha, D C Coutts-Trotter*, G A Macmillan,
Mr M F McWilliam (British) T B Mparutsa, *Executive.
Group Secretary: S A Bailes
www.suninternational.com
Date: 22/08/2003 05:38:12 PM Produced by the JSE SENS Department
