| Thu 4 Mar 2004, 17:48 | | Results for six months ended 31 dec 03 |
|
Release Date: 04/03/2004 17:05:01 Code(s): KER
Kersaf Investments Limited - Financial Report
Kersaf Investments Limited
(Registration number 1967/007528/06)
Share code: KER ISIN: ZAE000003844
PROFIT AND DIVIDEND ANNOUNCEMENT FOR THE SIX MONTHS ENDED
* Adjusted Headline Earnings
* 29% * Dividend 80%
GROUP INCOME STATEMENT
Six months ended Year ended
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
%
Rm change Rm Rm
Revenue 2 182 1 2 155 4 214
Direct costs (939) (924) (1 811)
Gross profit 1 243 1 1 231 2 403
Indirect costs (572) (585) (1 120)
EBITDA 671 4 646 1 283
Depreciation and amortisation (226) (218) (441)
Property and equipment rentals (39) (37) (86)
Exceptional items 214 (152) 11
Operating profits 620 239 767
Foreign exchange
(losses)/profits (44) (57) (116)
Continuing operations (44) (72) (142)
Discontinuing operations - 15 26
Interest received 28 33 73
Continuing operations 24 23 53
Discontinuing operations 4 10 20
Interest expense (147) (169) (297)
Profit before equity accounted
earnings 457 46 427
Share of associate
profits/(losses)
normal 27 (9) (8)
Continuing operations 31 26 58
Discontinuing operations (4) (35) (66)
exceptional
Discontinuing operations (2) (1) (30)
Profit before taxation 482 36 389
Taxation (130) (101) (190)
Continuing operations (130) (100) (187)
Discontinuing operations (1) (3)
Profit/(loss) after taxation 352 (65) 199
Minority interests (129) (45) (74)
Net profit/(loss) for the period 223 (110) 125
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 92 616 91 163 91 761
Earnings per share (cents)
basic earnings/(loss) per share 248 (122) 139
headline earnings/(loss) per
share 153 (295) (54)
adjusted headline earnings per
share 127 29 98 214
Fully diluted earnings per
share (cents)
basic earnings/(loss) per share 241 (121) 137
headline earnings/(loss) per
share 149 (292) (53)
adjusted headline earnings per
share 124 97 210
Dividends declared per share
(cents) 45 80 25 75
EBITDA margin (%) 31 30 30
Interest cover (times) 3 2 2
Determination of headline
earnings
and adjusted headline earnings
Net profit/(loss) per the
income statement 223 (110) 125
Headline earnings adjustments (153) (212) (205)
Goodwill (included in
depreciation
and amortisation)* 7 10 8
KZL dispute legal costs - 6 2
Impairment of goodwill - 34 36
Impairment of investments in
associates 23 - 5
Net profits on sale of shares
in subsidiaries (171) - (43)
Currency translation reserve
realised
on sale of KZL shares (12) (262) (213)
Associate headline earnings
adjustments 2 1 26
Impairment of cinema assets 2 14 14
(Profit)/loss on sale of cinema
assets (13) 12
Taxation charge on the above
items 13 - 3
Minority interests in the above
items 53 55 2
Headline earnings/(loss) 138 (266) (49)
Adjusted headline earnings
adjustments (23) 417 278
Write (up)/down of KZL to
market value (90) 356 74
Foreign exchange losses on
intercompany
loans* 35 68 97
Fair value adjustments to long
term
borrowings 36 - 64
Post retirement medical aid
funding 40
Earnings from discontinuing
operations* (4) (25) (20)
Provision for gaming levies
related to prior
periods - 17 23
Other items - 1 -
Associate adjusted headline
earnings
adjustments 4 35 70
Discontinuing operations
Pre-opening
expenses - - 4
Results from discontinuing
operations* 4 35 66
Taxation relief on the above
items (10) (4) (3)
Minority interests in the above
items 6 (93) (7)
Adjusted headline earnings 115 29 89 192
*Not included in exceptional or associate exceptional items
GROUP BALANCE SHEET
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non current assets
Property plant and equipment 4 724 4 595 4 595
Intangible assets 886 808 723
Available-for-sale investment 453 335
Investments and loans 444 202 439
6 054 6 058 6 092
Current assets
Accounts receivable and other 358 429 343
Available-for-sale investment 621 162 364
Loans 52 206 143
Cash and cash equivalents 414 226 349
1 445 1 023 1 199
Total assets 7 499 7 081 7 291
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" equity 2 548 2 394 2 470
Outside shareholders" interests 1 374 1 416 1 600
3 922 3 810 4 070
Non current liabilities
Deferred taxation 405 407 403
Borrowings 1 924 1 693 1 699
Other 41 40
2 370 2 100 2 142
Current liabilities
Accounts payable and other 794 797 783
Borrowings 413 374 296
1 207 1 171 1 079
Total liabilities 3 577 3 271 3 221
Total equity and liabilities 7 499 7 081 7 291
Borrowings to total shareholders"
equity (%) 59 54 49
Net asset value per share (Rand) 28.29 26.59 27.42
Capital expenditure 192 103 352
Capital commitments
contracted 433 20 244
authorised but not contracted 560 770 812
Market value of listed investments 924 748 855
Directors" valuation of unlisted
investments and loans 439 363 524
Total valuation of investments and
loans and
available-for-sale investment 1 363 1 111 1 379
GROUP CASH FLOW STATEMENT
Six months ended Year ended
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
Rm Rm Rm
Cash generated by operations before: 634 622 1 168
Working capital changes (56) (44) 46
Cash generated by operations 578 578 1 214
Investment income 41 44 93
Interest expense (147) (163) (289
Taxation paid (72) (70) (184
Dividends paid (96) (20) (81
Cash retained from operating activities 304 369 753
Cash utilised in investing activities (797) (277) (720
Cash realised from investing activities 484 531 761
Net cash inflow/(outflow) from financing
activities 92 (671) (687)
Translation losses on cash balances (18) (12) (44)
Increase/(decrease) in cash balances 65 (60) 63
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Foreign
shares and currency
share Retained translation
premium earnings reserve Total
Rm Rm Rm Rm
Balances at 30 June 2003 555 1 279 636 2 470
- Net profit for the period to
31 December 2003 - 223 - 223
- Foreign currency translation
adjustment - - (88) (88)
- Foreign currency translation
reserve realised - - (12) (12)
- Dividends paid - (45) - (45)
Balances at 31 December 2003 555 1 457 536 2 548
DIVISIONAL EARNINGS ANALYSIS
Revenues
Six Months ended Year ended
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
Rm Rm Rm
Sun International South Africa 1 953 1 921 3 762
Other southern African activities 227 230 439
Botswana 66 75 139
Swaziland 69 72 134
Namibia 45 42 82
Zambia 47 41 84
Lesotho - - -
Management activities 123 124 241
City Lodge
Central office and other 26 26 55
Elimination of intra-group revenues (147) (146) (283)
2 182 2 155 4 214
EBITDA
Six Months ended Year ended
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
Rm Rm Rm
Sun International South Africa 526 515 1 003
Other southern African activities 60 51 106
Botswana 25 26 50
Swaziland 15 17 28
Namibia 16 15 28
Zambia 4 (7) -
Lesotho - - -
Management activities 60 57 108
City Lodge - - -
Central office and other 25 23 66
Elimination of intra-group revenues - - -
671 646 1 283
Attributable earnings*
Six Months ended Year ended
31 December 30 June
2003 2002 2003
Unaudited Unaudited Audited
Rm Rm Rm
Sun International South Africa 63 44 78
Other southern African activities 22 8 26
Botswana 13 12 27
Swaziland 5 5 9
Namibia 7 7 12
Zambia (5) (19) (26)
Lesotho 2 3 4
Management activities 29 27 52
City Lodge 18 15 34
Central office and other (17) (5) 2
Elimination of intra-group revenues - - -
115 89 192
COMMENTARY
EARNINGS AND DIVIDEND
The group experienced mixed trading conditions in the period under review. Slot
revenues generally showed good growth but this was partly offset by a decline in
table revenues. The group"s Sugarmill casino was impacted by a competitor
facility, which opened in Durban in December 2002. Hospitality revenues came
under pressure as a result of the strength of the Rand and increased competition
from other destinations around the world. Trading at the Zambian resort was,
however, well ahead of last year.
Adjusted headline earnings per share were 29% higher than last year at 127
cents. This improvement was largely due to the decline in interest rates, the
increased shareholding in Sun International (South Africa) Limited (SISA),
improved trading at the Zambian resort and strong growth in earnings from the
group"s associate City Lodge Hotels Limited (City Lodge).
Revenues for the period of R2.2 billion were 1% higher, with gaming revenues up
3% and hospitality and other revenues down 2%. Despite the small growth in
revenues the group achieved a one percentage point increase in the EBITDA margin
to 31% and a 4% increase in EBITDA to R671 million. Depreciation and
amortisation charges increased by 4% whilst net interest paid of R119 million
was 13% lower than the previous period due to the strong cash flows generated by
operations and lower interest rates. Foreign exchange losses of R44 million
relate primarily to unrealised exchange losses on intercompany loans. Associate
earnings from continuing operations at R31 million were 19% up on the previous
period as a result of the trading of City Lodge.
Net exceptional income of R214 million includes a profit of R170 million
realised on the disposal of shares in Afrisun Gauteng (Proprietary) Limited
(Afrisun Gauteng) and SunWest International (Proprietary) Limited (SunWest) to
Afrisun Leisure Investments (Proprietary) Limited, as well as a fair value
adjustment of the group"s investment in Kerzner International Limited (KZL) of
R90 million.
Ster Century Europe Limited (SCE) and Ster Century Middle East Limited (SCME)
have been treated as discontinuing operations and as a consequence, the results
of 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 45 cents per share, an 80% increase on
the prior year.
ACCOUNTING POLICIES
The interim financial information presented has been prepared in accordance with
South African Statements of Generally Accepted Accounting Practice (GAAP) and
International Financial Reporting Standards (IFRS). The accounting policies used
are consistent with those used in the annual financial statements for the year
ended 30 June 2003.
The group has again presented 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 experienced challenging trading conditions in the half-year period. The
group"s hotels and resorts came under pressure and the competitor facility in
Durban significantly impacted the results. Overall group revenues were 2%
higher, with gaming revenues 3% up and rooms revenues 3% down on last year.
Average room occupancy at 73% was 3 percentage points below the previous year,
with Sun City and the Table Bay occupancies five and six percentage points below
respectively. SISA"s average achieved room rate at R761 was 2% 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 year. A decline in table revenues was more than offset by
strong growth in slot revenues. The EBITDA margin remained in line with last
year and EBITDA at R526 million was 2% up on the previous year. Net interest
costs were 22% below the previous year at R105 million. Adjusted headline
earnings of R102 million were 2% ahead of the previous year.
Afrisun Leisure, the SISA group"s national empowerment partner increased its
effective economic interest in Afrisun Gauteng and SunWest by 17.2% and 9.5%
respectively on 31 October 2003 reducing SISA"s effective interest to 69.9% and
60.3% respectively. A consideration of R267 million was received, which was used
to reduce debt in SISA.
Construction of the Sibaya casino at Umdloti is progressing well and is on
schedule for completion in November of this year. The projected capital cost
remains unchanged at R650 million. Approval for the relocation of the casino
licence from Thaba"Nchu to Bloemfontein remains outstanding. Construction of the
planned R138 million project will commence once final approval has been
obtained. Construction of a 150 two-bedroom unit expansion of the successful
Vacation Club at Sun City will commence shortly. The capital cost will be funded
by sales of new memberships.
Other southern African operations had mixed performances, with improved revenues
in Zambia and Namibia, offset in part by disappointing trading in Botswana and
Swaziland. Earnings attributable to Kersaf of R22 million were R14 million
higher than the previous corresponding period (excluding foreign exchange gains
and losses on intercompany loans). The Zambian resort incurred a loss of R5
million (including depreciation charges of R8 million) before a foreign exchange
loss of R27 million. Zambian occupancies rose 18 percentage points to 54% and
EBITDA at US$0.6 million was a US$1.3 million improvement on the previous
period.
Sun International Management Limited (SIML) generated revenues marginally below
the previous year at R123 million due mainly to a decline in management fees
from the Sugarmill casino. Lower costs resulted in EBITDA increasing by 6% on
the prior year to R60 million. Amortisation charges of R12 million were R6
million higher than last year due to the charge relating to the acquisition of
the minority"s effective 27% interest in SIML"s management contracts in November
2002. Despite the higher amortisation charges earnings attributable to Kersaf at
R29 million were 7% up on the prior period due to the additional interest held
in SIML.
Ster Century Europe completed the sale of all remaining operations in the period
under review. The sale of UK and Ireland operations was concluded for a
consideration of GBP16.9 million and the Slovakia complex was sold for a
consideration of 0,9 million.
Ster Century Middle East (SCME) generated revenues 21% higher at US$4.3 million
partly as a consequence of the opening of the Mecato Mall complex in Jumeirah,
Dubai in October 2002. Following significant restructuring and the closure of
one of the cinema complexes costs were significantly reduced and as a
consequence the EBITDA loss of US$1.3 million incurred last year was reduced to
US$0.4 million. As previously advised, the group is seeking to exit this non-
core investment.
City Lodge"s results for the period were very satisfactory. Group average
occupancies were maintained at 77% despite the previous period including the
World Summit on Sustainable Development, which generated significant business
for the group. Room nights sold increased by 4% as a result of the addition of
44 rooms to the City Lodge V & A Waterfront, a full period contribution from
Road Lodge Cape Town Airport and a one month contribution from the recently
opened, 168 room, City Lodge Umhlanga Ridge. The higher room nights sold and
room rate growth resulted in revenues increasing by 14% to R165 million and
EBITDA increasing by 16% to R83 million. Headline earnings increased by 20% to
R46 million and fully diluted earnings per share were up 19% on the prior year.
Earnings attributable to Kersaf at R18 million were R3 million higher than last
year.
BALANCE SHEET
The group acquired the North West Development Corporation"s effective 18.6%
interest in SISA for a cash consideration of R566 million on 2 September 2003,
increasing the group"s effective interest in SISA to 62.4%. During the period
the group disposed of a further 451 591 KZL shares realising proceeds of US$15
million. At 31 December 2003 the group held 1.8 million KZL shares of which
Kersaf effectively owns 1.4 million. Further disposals are likely to take place
in the second half of the year.
Capital expenditure for the period of R192 million (2002: R103 million) was
incurred, including R64 million on the Sibaya project.
Group borrowings increased by R342 million partly as a result of the
reclassification of long-term property leases amounting to R242 million
following their re-negotiation.
OUTLOOK
In the two months subsequent to 31 December 2003, gaming revenues have shown
good growth as a result of improved consumer confidence. Hospitality revenues,
however, remain under pressure although business levels in Zambia continue to
improve. Trading in the Durban market in the second half of the year will be
comparable with the previous period and revenues at Sugarmill are currently
showing growth.
The group continues to focus on maintaining operating margins and borrowing
costs will be lower than in the prior period. The additional shareholding in
SISA will continue to have a positive impact on earnings.
For and on behalf of the board
D A Hawton P D Bacon
Chairman Chief Executive
4 March 2004
Registered Office Registrar
27 Fredman Drive Computershare Limited
Sandown Investor Services Division
Sandton, 2031 70 Marshall Street
Johannesburg, 2001
Directors: D A Hawton (Chairman), P D Bacon (Chief Executive) (British)*, D C
Coutts-Trotter (Deputy Chief Executive)*, L Boyd, P L Campher, M P Egan, I N
Matthews, S C Mildenhall, D M Nurek, E Oblowitz, G R Rosenthal
Group Secretary: S A Bailes *Executive
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that an interim dividend of 45 cents per share (2002: 25
cents) for the six months ended 31 December 2003 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:
2004
Last day to trade cum interim dividend Friday, 26 March
First day to trade ex interim dividend Monday, 29 March
Record date Friday, 2 April
Payment date Monday, 5 April
No share certificates may be dematerialised or rematerialised between Monday, 29
March 2004 and Friday, 2 April 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
broker credited on the payment date.
By order of the board
S A Bailes
Group secretary
4 March 2004
