| Fri 20 Feb 2004, 17:09 | | Unaudited Interim Profit and Dividend Announcemen |
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International - Unaudited Interim Profit and Dividend Announcement
Sun International (South Africa) Limited
(Registration number: 1977/071333/06)
Share code: SIS
ISIN: ZAE000010104
Unaudited Interim Profit and Dividend Announcement
FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
Group Income Statements
(Associates Equity Accounted)
Six months ended Year ended
31 December 31 December 30 June
2003 2002 2003
Rm % Rm Rm
Unaudited change Unaudited Audited
Revenue 979 3 955 1 869
Casino 624 591 1 160
Rooms 179 184 365
Food, beverage and other 176 180 344
Direct costs (459) (446) (885)
Gross profit 520 509 984
Indirect costs (323) (321) (630)
EBITDA 197 5 188 354
Depreciation (82) (76) (155)
Property and equipment
rentals (13) (19) (33)
Exceptional items 170 (14) (38)
Operating profits 272 79 128
Foreign exchange
(profits/(losses) 1 - (5)
Interest income 14 12 120
Interest expense (23) (6) (97)
Share of associate
companies"
profits/(losses)
normal 73 61 114
exceptional (25) (4) (23)
Profit before taxation 312 142 237
Taxation (65) (54) (91)
Profit after taxation 247 88 146
Minority interest (5) (2) (3)
Earnings attributable to
ordinary shareholders 242 181 86 143
Number of ordinary shares in
issue (million) 1 175 1 175 1 175
Basic earnings per ordinary
share (cents) 20,6 7,3 12,2
Headline earnings per share
(cents) 7,1 7,4 8,6
Adjusted headline earnings
per share (cents) 8,7 8,5 15,0
Dividend declared per share
(cents) 3,5 2,5 6,0
EBITDA as a percentage of
revenue (%) 20,1 19,7 19,0
Interest cover (times) 12,5 15,2 2,5
Determination of headline
earnings and adjusted
headline earnings:
Earnings attributable to
ordinary
shareholders 242 86 143
Headline earnings
adjustments: (171) 1 ( 46)
Net profit on sale of
investments (171) - ( 46)
Other items - 1
Taxation relief on the
above items 13 - 3
Goodwill amortised
(included in - - -
depreciation) 1
Headline earnings 84 (3) 87 101
Adjustments to headline
earnings: 26 17 110
Fair value adjustments to
loans 26 - 62
Provision for post
retirement
medical aid funding - - 25
Gaming levies relating to
prior
periods - 17 23
Taxation on above items (8) (4) (30)
Minority interest - (5)
Adjusted headline earnings 102 2 100 176
Analysis of exceptional
items:
Net profit on sale of
investments 171 - 46
Provision for post
retirement
medical aid funding - - (21)
Gaming levies relating to
prior
periods - (13) (17)
Fair value adjustment to
loans (1) (46)
Other items - (1) -
170 (14) (38)
Share of associate companies
exceptional items:
Provision for post
retirement
medical aid funding - - (4)
Gaming levies relating to
prior
periods - (4) (5)
Fair value adjustment to
loans (25) - (14)
(25) (4) (23)
Group Balance Sheets
(Associates Equity Accounted)
Year ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Unaudited Unaudited Audited
ASSETS
Non current assets
Property, plant and equipment 2 332 2 079 2 124
Bid costs and goodwill 73 57 53
Investments and loans 1 092 930 1 163
3 497 3 066 3 340
Current assets
Accounts receivable and other 167 187 172
Cash and cash equivalents 78 33 24
245 220 196
Total assets 3 742 3 286 3 536
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share
premium 1 223 1 223 1 223
Retained earnings 1 016 788 815
Ordinary shareholders" equity 2 239 2 011 2 038
Minority interests 91 19 76
Total shareholders" equity 2 330 2 030 2 114
Non current liabilities
Borrowings 468 361 533
Deferred taxation 370 388 367
Other non current liabilities 20 20
858 749 920
Current liabilities
Borrowings 229 140 118
Other liabilities 325 367 384
554 507 502
Total liabilities 1 412 1 256 1 422
Total equity and liabilities 3 742 3 286 3 536
Interest bearing borrowings to
total shareholders" equity (%) 30 25 31
Net asset value per share (Ra nd) 1,90 1,71 1,73
Capital expenditure 86 34 161
Capital commitments
contracted - 20 -
authorised but not contracted 224 95 228
Group Cash Flow Statements
(Associates Equity Accounted)
Six months ended Year ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Unaudited Unaudited Audited
Cash flows from operating
activities
Cash generated from operations 163 212 414
Property and equipment rentals (13) (19) (33)
Exceptional items - (18) (38)
Net movement in working capital 5 167 13
Investment income 42 29 154
Interest expense (23) (5) (97)
Taxation paid (52) (42) (87)
Dividends paid (44) (2) (32)
Net cash inflow from operating
activities 78 322 294
Cash flows from investing
activities
Purchase of property, plant and
equipment (86) (34) (161)
Proceeds on disposal of
property,
plant and equipment 3 - -
Proceeds on disposal of
investments 275 - -
New investments and loans made (20)
Investments and loans realised (19) -
Net cash outflow from investing
activities 173 (34) (181)
Cash flows from financing
activities
Increase in shareholders"
funding - - 11
Decrease in borrowings (197) (297) (143)
Net cash (outflow)/inflow from
financing activities (197) (297) (132)
Increase/(decrease) in cash and
cash equivalents 54 (9) (19)
Cash and cash equivalents at
beginning of period 24 42 43
Cash and cash equivalents at
end of period 78 33 24
Consolidated Statement of Changes in Equity
Ordinary
shares
and share Retained
premium earnings Total
Rm Rm Rm
Balances at 30 June 2003 1 223 815 2 038
Earnings for the period - 242 242
Dividend paid - (41) (41)
Balances at 31 December 2003 1 223 1 016 2 239
Segmental Analysis
Revenues
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Unaudited Unaudited Audited
Sun City 411 408 790
Carnival City 276 272 532
Wild Coast 96 85 180
Carousel 84 81 158
Morula 74 73 140
Thaba"Nchu/Naledi 38 36 68
Corporate/other - - 1
Group 979 955 1,869
EBITDA
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Unaudited Unaudited Audited
Sun City 57 52 94
Carnival City 87 87 167
Wild Coast 17 8 31
Carousel 18 9 21
Morula 15 16 28
Thaba"Nchu/Naledi 6 3 6
Corporate/other (3) 13 7
Group 197 188 354
Segment result
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Unaudited Unaudited Audited
Sun City 27 24 38
Carnival City 54 56 97
Wild Coast 9 1 (6)
Carousel 9 4 5
Morula 12 13 22
Thaba"Nchu/Naledi (1) (2) (4)
Corporate/other 162 (17) (24)
Group 272 79 128
Group Income Statements
(Associates Consolidated)
Six months ended Year ended
31 December 31 December 30 June
2003 % 2002 2003
Rm change Rm Rm
Revenue 1 953 2 1 921 3 762
Casino 1 480 1430 2 796
Rooms 242 248 500
Food, beverage
and other 231 243 466
Direct costs (842) (828) (1 625)
Gross profit 1 111 1 093 2 137
Indirect costs (585) (578) (1 134)
EBITDA 526 2 515 1003
Depreciation (190) (180) (367)
Property and
equipment
rentals (36) (33) (78)
Exceptional items 128 (18) (64)
Operating profits 428 284 494
Foreign exchange
losses (2) - (9)
Interest income 16 14 33
Interest expense (123) (151) (274)
Profit before
taxation 319 117 147 244
Taxation (75) (59) (98)
Profit after
taxation 244 88 146
Minority interest (2) (2) (3)
Earnings
attributable to
ordinary
shareholders 242 181 86 143
Number of
ordinary shares
in
issue (million) 1 175 1 175 1 175
Basic earnings
per ordinary
share (cents) 20,6 7,3 12.2
Headline
earnings per
share
(cents) 7,1 7,4 8,6
Adjusted
headline
earnings
per share (cents) 8,7 8,5 15,0
Dividends
declared per
share (cents) 3,5 2,5 6,0
EBITDA as a
percentage of
revenue 27 27 27
Interest cover
(times) 3,6 2,0 1,9
Determination of
headline
earnings and
adjusted
headline
earnings:
Earnings
attributable to
ordinary
shareholders 242 86 143
Headline
earnings
adjustments: (171) 1 ( 46)
Net profit on
sale of - - -
investments (171) ( 46)
Other items - 1 -
Taxation on the
above items 13 3
Goodwill
amortised - - 1
Headline earnings 84 (3) 87 101
Adjustments to
headline
earnings: 43 17 110
Fair value
adjustment to
loans 43 - 62
Provision for
post retirement
medical aid
funding - 25
Gaming levies
relating to
prior
periods - 17 23
Taxation on
above items (13) (4) ( 30)
Minority interest (12) - (5)
Adjusted
headline
earnings 102 2 100 176
Analysis of
exceptional
items:
Gaming levies
relating to
prior
periods - (17) (23)
Net profit on
sale of
investments 171 - 46
Fair value
adjustment to
loans (43) - (62)
Provision for
post retirement
medical aid
funding - - (25)
Other items - (1)
128 (18) (64)
Group Balance Sheets
(Associates Consolidated)
Year ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
ASSETS
Non current assets
Property, plant and
equipment 4 251 4 026 4 070
Bid costs and goodwill 415 458 412
Investments and loans 364 142 365
5 030 4 626 4 847
Current assets
Accounts receivables and
other 264 313 281
Cash and cash equivalents 142 101 80
406 414 361
Total assets 5 436 5 040 5 208
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares and share
premium 1 223 1 223 1 223
Retained earnings 1 016 788 815
Ordinary shareholders"
equity 2 239 2 011 2 038
Minority interests 331 93 251
Total shareholders"
equity 2 570 2 104 2 289
Non current liabilities
Borrowings 1 429 1 564 1 598
Deferred taxation 379 391 386
Other non current
liabilities 26 - 25
1 834 1 955 2 009
Current liabilities
Borrowings 416 343 270
Other liabilities 616 638 640
1 032 981 910
Total liabilities 2 866 2 936 2 919
Total equity and
liabilities 5 436 5 040 5 208
Interest bearing
borrowings to
total shareholders"
equity (%) 72 91 82
Net asset value per
share (Rand) 1,90 1,71 1,73
Capital expenditure 180 84 296
Capital commitments
contracted 433 20 242
authorised but not
contracted 550 756 773
Group Cash Flow Statements
(Associates Consolidated)
Six months ended Year ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
Cash flows from operating
activities
Cash generated from operations 489 548 1 036
Property Property and equipment
rentals (36) (36) (78)
Exceptional items - (18) (64)
Net movement in working capital 15 5 43
Net interest expense (107) (137) ( 241)
Taxation paid (59) (45) (95)
Dividends paid (56) (5) (38)
Net cash inflow from operating
activities 246 312 563
Cash flows from investing
activities
Purchase of property, plant and
equipment (180) (84) (296)
Proceeds on disposal of property,
plant and equipment 3 - 9
Proceeds on disposal of
investments 275 - -
New investments and loans made - - (247)
Investments and loans realised - - 138
Net cash inflow/(outflow) from
investing activities 98 (84) (396)
Cash flows from financing
activities
Increase in shareholders" funding 25 - 58
Decrease in borrowings (307) (255) (273)
Net cash outflow from financing
activities (282) (255) (215)
Increase/(decrease) in cash and
cash equivalents 62 (27) (48)
Cash and cash equivalents at
beginning of period 80 128 128
Cash and cash equivalents at end
of period 142 101 80
Segmental Analysis
Revenues
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
GrandWest 478 421 865
Sun City 411 408 790
Carnival City 276 272 532
Sugarmill 176 232 402
Boardwalk 135 128 256
Wild Coast 96 85 180
Carousel 84 81 158
Table Bay 66 71 144
Morula 74 73 140
Meropa 57 53 104
Flamingo 39 37 73
Thaba"Nchu/Naledi 38 36 68
Zimbali 14 15 31
Corporate/other 9 9 19
Group 1 953 1 921 3 762
EBITDA
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
GrandWest 181 156 325
Sun City 57 52 94
Carnival City 87 87 167
Sugarmill 52 83 134
Boardwalk 47 45 88
Wild Coast 17 8 31
Carousel 18 9 21
Table Bay 19 22 46
Morula 15 16 28
Meropa 20 18 35
Flamingo 12 12 24
Thaba"Nchu/Naledi 6 3 6
Zimbali 1 1 4
Corporate/other (6) 3
Group 526 515 1 003
Segment results
Year
Six months ended ended
31 December 31 December 30 June
2003 2002 2003
Rm Rm Rm
GrandWest 131 108 220
Sun City 27 24 38
Carnival City 54 56 97
Sugarmill 21 54 73
Boardwalk 30 34 47
Wild Coast 9 1 (6)
Carousel 9 4 5
Table Bay (38) 7 14
Morula 12 13 22
Meropa 11 11 17
Flamingo 6 6 9
Thaba"Nchu/Naledi (1) (2) ( 4)
Zimbali (1) - -
Corporate/other 158 ( 32) ( 38)
Group 428 284 494
Comments
REPORTING
The financial information (associates equity accounted) has been prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice (GAAP).
Consistent with the prior years, the group has also prepared the results for the
period 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. These additional statements comply with GAAP other than
the consolidation of associates in which the group does not have voting control.
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 accounting policies used are consistent with those used in the annual
financial statements at 30 June 2003.
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.
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 period 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 material items considered to be outside of the normal
operating activities of the group and/or of a non-recurring nature.
COMMENTARY
The group experienced challenging trading conditions in the first half of the
year. Gaming revenues were impacted by the opening of a competitor facility in
Durban in December 2002. Hospitality revenues came under pressure, in particular
at The Palace, Sun City and The Table Bay Hotel, Cape Town, largely as a result
of the strengthening local currency and intensified competition from other
destinations around the world.
EARNINGS AND DIVIDEND
Group revenues at R1,95 billion were 2% up on the previous period. Adjusting for
the impact of the new competitor facility in Durban on the group"s Sugarmill
temporary casino at Mount Edgecombe, group revenues were 5% up on the previous
period. As a result of a number of cost reduction initiatives, EBITDA at R526
million was 2% up on the previ- ous year and the EBITDA margin at 27% was in
line with the previous period.
Exceptional items of R128 million include an accounting profit arising on the
disposal of the shares to Afrisun Leisure as well as a fair value charge
relating to long term borrowings.
The proceeds from the share disposals, combined with strong operating cash flows
of the group and lower interest rates, resulted in a net interest charge of R107
million, 22% below the previous year.
Adjusted headline earnings of R102 million and adjusted headline earnings per
share at 8,7 cents were 2% up on the previous year.
In view of the strong operating cash flows and reduced interest costs the
company has declared an interim dividend of 3,5 cents per share, an increase of
40% over the previous year.
GAMING
Gaming revenues at R1,5 billion were 3% up on the previous year.
Adjusting for the impact of the opening of the competitor facility in Durban in
December 2002, gaming revenues, on a comparable basis, were 9% up on the
previous period.
Table revenues declined year on year, offset by good growth in slot machine
revenues. This can be attributed to the increasing popularity of new slot
machine products and the success of the group"s "Most Valued Guest" programme
and "Mystery Jackpots".
The group"s new casino operations performed well and in line with expectations.
The Carousel and Morula traded in line with the previous year but the Wild Coast
Sun exceeded expectations with casino revenue 16% up on the previous period.
HOTELS AND RESORTS
The average occupancy of the group"s hotels and resorts at 73% and the average
room rate at R761 were respectively 3 percentage points below and 2% ahead of
the same period in the previous year. Sun City and The Table Bay Hotel achieved
average room occupancies of 73% and 65%, five and six percentage points,
respectively, below last year.
The group experienced a decline in international corporate demand, particularly
in the MICE (meetings, incentives, conferences and exhibitions) market largely
as a result of the strengthening currency and difficult economic conditions in
the group"s primary markets.
NEW DEVELOPMENTS
Construction of the Sibaya permanent casino at Umdloti is progressing well and
is on schedule for completion in November this year. The overall cost remains
unchanged at R650 million.
Approval from the Free State Gambling and Racing Board to relocate the casino
licence from Thaba"Nchu to Bloemfontein remains outstanding. Construction of the
planned R138 million project can only commence once final approval has been
granted.
The group has plans to develop a 150 two-bedroom unit extension to the highly
successful Vacation Club (timeshare) at Sun City. The capital cost will be
funded by sales of new memberships.
Capital expenditure for the half year totalled R180 million (2002: R84 million)
and it is estimated that a further R310 million will be spent in the six months
to June 2004, which relates primarily to the Sibaya development and
refurbishment of The Palace and Cascades bedrooms at Sun City.
BORROWINGS
During the period to 31 December 2003, the group made net repayments of R307
million on its borrowings. Included in borrowings at 31 December 2003 is an
amount of R242 million, relating to long-term leases that were capitalised
during the period as a consequence of their reclassification as finance leases,
following re-negotiation of the terms of these leases.
EMPOWERMENT AND OWNERSHIP
Afrisun Leisure Investments, the group"s national empowerment partner increased
its effective interest in Afrisun Gauteng (Proprietary) Limited (Afrisun
Gauteng) and SunWest International (Proprietary) Limited (SunWest) by 17,2% and
9,5% respectively on 31 October 2003. This reduced the company"s effective
interest in Afrisun Gauteng and SunWest to an effective 69,9% and 60,3%
respectively. A consideration of R267 million was received, which was used to
reduce the company"s debt.
The employee share trust made its first income distribution of R2,2 million to 5
879 employees on 31 October 2003.
NATIONAL GAMBLING BILL
The bill was tabled and approved by the National Council of Provinces on 19
February 2004 and should be signed into law by the President shortly.
DIRECTORATE
Dr Charles C Okeahalam was appointed a non-executive director on 3 December
2003.
Mr Alistair Macmillan retired from the board and as chairman of the audit
committee on 31 December 2003 after many years on the board. His contribution to
the group over the many years has been invaluable. Dr Piet Botha has replaced
Mr Macmillan as chairman of the audit committee.
OUTLOOK
In the period subsequent to 31 December 2003, gaming revenues have shown good
growth as a result of improved consumer confidence; hospitality revenues,
however, remain under some pressure. Trading in the Durban market in the second
half of the year will be comparable with the previous year and revenues at
Sugarmill are currently showing some growth. The group continues to focus on
maintaining operating margins and the borrowing costs will be significantly
lower than in the prior period.
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that an interim dividend of 3,5 cents per share (2002 :
2,5 cents) for the six months ended 31 December 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 interim
dividend are as follows:
2004
Last day to trade cum interim dividend Thursday, 18 March
First day to trade ex interim dividend Friday, 19 March
Record date Friday, 26 March
Payment date Monday, 29 March
No share certificates may be dematerialised or rematerialised between Friday, 19
March 2004 and Friday, 26 March 2004, 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
20 February 2004
Registered office: Registrar:
27 Fredman Drive Computershare Limited
Sandown 70 Marshall Street
Sandton Johannesburg
2031 2001
Directorate:
D M J Ncube (Chairman), P D Bacon (Chief Executive) (British)*, D C Coutts-
Trotter (Deputy Chief Executive)*, Dr. B P Botha, M F McWilliam (British), T B
Mparutsa, Dr C C Okeahalam (British). *Executive.
Group Secretary:
S A Bailes
Sun International (South Africa) Limited
Registration number: 1977/071333/06 Share code: SIS
ISIN: ZAE000010104
