| Tue 31 Aug 2004, 17:31 | | Profit announcement for the year ended 30 June 04 |
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Sun International Limited - Profit and dividend announcement for the year ended
30 June 2004
Sun International Limited
Registration number 1967/007528/06
Share code: SUI
ISIN: ZAE000054995
(formerly Kersaf Investments Limited)
Profit and dividend announcement for the year ended 30 June 2004
Highlights
- Streamlined group structure
- Adjusted HEPS +45%
- Dividends per share +67%
Group income statement
Year ended 30 June
2004 2003
Reviewed % Audited
Rm change Rm
Revenue 4 476 6 4 214
Casino 3 261 2 983
Rooms 621 631
Food, beverage and other 594 600
Direct costs (1 908) (1 811)
Gross profit 2 568 7 2 403
Indirect costs (1 144) (1 120)
EBITDA 1 424 11 1 283
Depreciation and amortisation (457) (441)
Property rentals (81) (86)
Exceptional items 544 11
Operating profit 1 430 767
Foreign exchange (losses)/profits (76) (116)
Continuing operations (76) (142)
Discontinuing operations - 26
Interest received 63 73
Continuing operations 60 53
Discontinuing operations 3 20
Interest expense (277) (297)
Profit before equity accounted earnings 1 140 427
Share of associate companies`
profits/(losses)
- normal 59 (8)
Continuing operations 64 58
Discontinuing operations (5) (66)
- exceptional
Discontinuing operations - (30)
Profit before taxation 1 199 389
Taxation (270) (190)
Continuing operations (270) (187)
Discontinuing operations - (3)
Profit after taxation 929 199
Minority interests (285) (74)
Net profit 644 125
Number of shares (000`s)
- in issue 90 050 90 050
- for EPS calculation 90 050 90 050
- for fully diluted EPS calculation 90 942 91 761
Earnings per share (cents)
- basic earnings per share 715 139
- headline earnings/(loss) per share 423 (54)
- adjusted headline earnings per share 307 43 214
Fully diluted earnings per share (cents)
- basic earnings per share 708 137
- headline earnings/(loss) per share 419 (53)
- adjusted headline earnings per share 304 45 210
Dividends declared per share (cents) 125 67 75
EBITDA margin (%) 32 30
Interest cover (times) 3 2
Dividend payout (%) 41 36
Determination of headline earnings
and adjusted headline earnings
Net profit per the income statement 644 125
Headline earnings adjustments (355) (205)
Goodwill amortisation (included
in depreciation
and amortisation)* 16 8
KZL dispute legal costs - 2
Impairment of goodwill - 36
Impairment of investments in Ster Century 19 5
Net profits on sale of shares
in subsidiaries (208) (43)
Currency translation reserve realised (182) (213)
Associate headline earnings adjustments - 26
Impairment of cinema assets - 14
Loss on sale of cinema assets - 12
Taxation on the above items 25 3
Minority interests in the above items 66 2
Headline earnings/(loss) 380 (49)
Adjusted headline earnings adjustments (126) 278
Pre-opening expenses 2 -
Write (up)/down of KZL to market value (183) 74
Foreign exchange losses on
intercompany loans* 56 97
Fair value adjustments to long
term liabilities 34 64
Post retirement medical aid - 40
Earnings from discontinuing operations* (4) (20)
Profit realised on discontinued
share purchase scheme (31) -
Provision for gaming levies related
to prior periods - 23
Associate adjusted headline
earnings adjustments 5 70
Discontinuing operations
- Pre-opening expenses - 4
Results from discontinuing operations* 5 66
Taxation relief on the above items (10) (34)
Minority interests in the above items 28 (73)
Adjusted headline earnings 277 44 192
*Not included in exceptional or
associate exceptional items
Group balance sheet
30 June
2004 2003
Reviewed Audited
Rm Rm
ASSETS
Non current assets
Property plant and equipment 4 777 4 595
Intangible assets 855 723
Investments and loans 574 774
6 206 6 092
Current assets
Accounts receivable and other 343 343
Available-for-sale investment 390 364
Loans 48 143
Cash and cash equivalents 477 349
1 258 1 199
Total assets 7 464 7 291
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 2 666 2 470
Outside shareholders` interests 1 454 1 600
4 120 4 070
Non current liabilities
Deferred taxation 364 403
Borrowings 1 760 1 699
Other 40 40
2 164 2 142
Current liabilities
Accounts payable and other 839 783
Borrowings 341 296
1 180 1 079
Total liabilities 3 344 3 221
Total equity and liabilities 7 464 7 291
Borrowings to total shareholders` equity (%) 51 49
Net asset value per share (Rand) 29.60 27.42
Capital expenditure 489 352
Capital commitments
- contracted 522 244
- authorised but not contracted 617 812
Market value of listed investments 806 855
Directors` valuation of unlisted investments
and loans 433 524
Total valuation of investments and loans
and available for sale investment 1 239 1 379
Group cash flow statement
Year ended 30 June
2004 2003
Reviewed Audited
Rm Rm
Cash generated by operations before: 1 316 1 168
Working capital changes (6) 46
Cash generated by operations 1 310 1 214
Investment income 88 93
Interest expense (277) (289)
Taxation paid (161) (184)
Dividends paid (232) (81)
Cash retained from operating activities 728 753
Cash utilised in investing activities (1 213) (720)
Cash realised from investing activities 766 761
Net cash outflow from financing activities (127) (687)
Translation losses on cash balances (26) (44)
Increase in cash balances 128 63
Consolidated statement of changes in equity
Ordinary Foreign Retained Total
shares currency earnings
and share translation
premium reserve
Rm Rm Rm Rm
Balances at 30 June 2003 555 636 1 279 2 470
- Treasury share options (50) - - (50)
- Net profit for the year
to 30 June 2004 - - 644 644
- FCTR movement for the year - (130) - (130)
- FCTR realised - (182) - (182)
- Dividends paid - - (86) (86)
Balances at 30 June 2004 505 324 1 837 2 666
ACCOUNTING POLICIES
The preliminary 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
applied are consistent with those in the annual financial statements for the
year ended 30 June 2003.
AUDIT REVIEW OPINION
The results have been reviewed by the group`s auditors, PricewaterhouseCoopers
Inc., and their unqualified review opinion is available for inspection at the
company`s registered office.
Restructuring
The group has been significantly restructured through the acquisition of the
minority interests in Sun International (South Africa) Limited (SISA), the
delisting of SISA and the renaming of Kersaf Investments Limited as Sun
International Limited (Sun International). This restructuring and repositioning
will enhance the efficiency of the group, improve its financial leverage and
financial capability, allow greater control over cashflows, increase the float
of Sun International shares and should ultimately result in greater value
creation for all shareholders.
Sun International is now well positioned to consolidate its leadership of the
region`s gaming industry and to pursue regional as well as international
opportunities.
EARNINGS AND DIVIDEND
The group had an excellent year with fully diluted adjusted headline earnings of
304 cents per share, 45% higher than last year. This improvement was largely due
to the stronger levels of trading at the group`s gaming operations, particularly
in the second half of the year, as well as the positive impact of lower interest
rates on the group`s borrowing costs.
Revenue for the year of R4.5 billion was 6% higher with gaming revenue up 9% and
rooms revenue marginally below the previous year. Costs were well contained
reflecting modest increases over last year. EBITDA as a result increased by 11%
to R1 424 million and the EBITDA margin improved by two percentage points to
32%. Net interest paid, excluding discontinuing operations, of R217 million was
11% lower than the previous year due to the strong cash flows generated by
operations and lower interest rates. Foreign exchange losses of R76 million
relate primarily to unrealised exchange losses on intercompany loans. Associate
earnings before tax from continuing operations at R64 million were 10% up on the
previous year as a result of the favourable trading of the City Lodge group.
Net exceptional income of R544 million included a profit of R208 million on the
disposal of shares to the BEE partners in certain of the group`s casino
ventures, a fair value adjustment of R183 million in respect of the group`s
investment in Kerzner International Limited (KZL) and R182 million on the part
realisation of the foreign currency translation reserve.
Ster Century Europe Limited (SCE) and Ster Century Middle East Limited (SCME)
have consistently been treated as discontinuing operations. SCE completed the
sale of all remaining operations in the year under review. Negotiations are
currently in progress for the disposal of the cinema operations of SCME.
In view of the strong cashflows and growth in adjusted headline earnings, the
Board has declared a final dividend of 80 cents per share, a 60% increase on
last year`s final dividend. Overall dividends for the year of 125 cents per
share are 67% higher than last year.
TRADING
Segmental Analysis
Year ended 30 June
Revenues EBITDA Operating profit
2004 2003 2004 2003 2004 2003
Rm Rm Rm Rm Rm Rm
GrandWest 1 006 865 400 325 303 228
Sun City 818 790 128 94 70 38
Carnival City 570 532 180 167 115 98
Sugarmill 363 402 118 134 56 76
Boardwalk 281 256 102 88 69 56
Wild Coast 202 180 37 31 21 14
Carousel 175 158 39 21 20 5
Morula 145 140 26 28 21 22
Table Bay 138 144 42 46 12 14
Royal Swazi Sun Complex 134 134 18 28 12 20
Gaborone Sun 122 139 43 50 35 40
Meropa 118 104 40 35 23 17
Sun International
Management 251 241 118 108 89 92
Central office and
other operations 396 362 133 128 40 36
Elimination of
intragroup revenues (243) (233) - - - -
Exceptional items - - - - 544 11
4 476 4 214 1 424 1 283 1 430 767
GAMING
Gaming revenue for the full year was 9% up. Excluding the Sugarmill casino,
which was impacted by the opening of a competitor facility in Durban in December
2002, the growth in revenue over last year was 12%. The group`s gaming
operations experienced strong trading conditions in the second half of the year
with revenues 16% up on the corresponding period in the previous year. This
growth in gaming revenue in the second half of the year can be attributed to
improved levels of disposable income and consumer confidence.
The trend of much higher growth in slots revenue against the relatively flat
tables revenue continued with slots revenue comprising 84% (2003: 82%) of total
gaming revenue in the current year.
GrandWest continued to perform extremely well achieving revenue and EBITDA
growth of 16% and 23% respectively over the previous year.
Carnival City performed satisfactorily during the year in the extremely
competitive Gauteng market. Casino revenues were 10% up on the previous year and
the EBITDA margin at 32% was marginally higher than last year.
Sugarmill`s revenue was 10% below the previous year as a consequence of the
impact of the competitor facility, although revenue in the second half of the
year was 10% higher, benefiting from good growth in the local market.
Boardwalk enjoyed a 12% growth in casino revenue for the year, which translated
into a 17% improvement in EBITDA. Trading conditions in the Port Elizabeth area
benefited from the Coega development as well as the more buoyant motor industry.
RESORTS AND HOTELS
Rooms revenue was 2% below the previous year due to marginal declines in room
occupancy and average room rate. The strong local currency placed downward
pressure on room rates and reduced demand for five star accommodation. The
weaker US dollar has also increased competition from US dollar denominated
destinations in the conference and incentive segments of the market.
Sun City achieved an occupancy of 72% for the year which was 3 percentage points
below last year. The average room rate at R933 was 1% ahead of the previous
year. Occupancy at The Palace fell below last year as a result of lower demand
for five star accommodation and the Cascades was affected by the extensive rooms
refurbishment undertaken throughout the year.
Table Bay achieved an average occupancy of 66% which was 6 percentage points
below last year while the average room rate of R1322 was 5% above the previous
year. The five star market in Cape Town was impacted by the increase in the
city`s rooms inventory at the upper end of the market.
The group`s Zambian operations continued to enjoy improved occupancies which at
53% were 14 percentage points ahead of last year. The results of the group`s
hotels and casinos in Botswana and Swaziland were affected by lower occupancies,
and the introduction of VAT and a currency devaluation in Botswana.
Sun International Management Limited`s management fee income from the group`s
gaming operations was up 12%, offset by a decline in the resort fee contribution
of 10%. EBITDA at R118 million was 10% ahead of the previous year after
expensing R18 million (2003: R10 million) of costs associated with the
evaluation of new investment opportunities. Operating profit of R89 million was
however R3 million lower than last year due to a full year`s amortisation charge
relating to the acquisition of the minority`s effective 27% interest in SIML on
15 November 2002 and higher depreciation charges.
DEVELOPMENTS
The Sibaya casino remains on schedule for opening in November 2004, in line with
the approved cost of R650 million. The Sibaya project is well positioned near
Umhlanga, north of Durban and will enjoy excellent visibility and access.
The group plans to increase its share of the greater Durban market with the new
facility.
Sun City remains the group`s flagship resort and continues to enjoy strong
international demand. Construction of the new Vacation Club at Sun City will
commence in September 2004. Advance sales for the project have been excellent
and the first phase of the project will open in April 2005. The refurbishment of
the Cascades Hotel at Sun City was completed at a cost of R65 million. Work has
commenced on an upgrade of the casino and certain other facilities at the Sun
City Entertainment Centre which together with essential remedial work to the Sun
City Hotel infrastructure is projected to cost R74 million in the 2005 financial
year.
The Morula Sun Casino is currently undergoing an R82 million major
refurbishment, which will include the replacement of all the casino equipment
and the introduction of new facilities. The casino equipment at the Carousel
will be replaced early in 2005 at a cost of R40 million.
Work will commence shortly on the R145 million Bloemfontein casino which is very
well located on the N1. The group will also manage a hotel and family
entertainment facilities at the site of the casino.
The introduction of new gaming legislation in the United Kingdom aimed at
bringing casino gambling into the mainstream leisure economy is well advanced.
The group is actively investigating various casino license opportunities and
plans to develop and operate a limited number of new urban casinos similar in
concept to the group`s new casinos in South Africa. A dedicated team based in
the United Kingdom has been appointed to actively pursue this opportunity.
CITY LODGE
Earnings attributable to Sun International of R39 million were 15% up on the
previous year. The average occupancy at 76% was in line with the previous year
although room nights sold increased by 4% as a result of the additional rooms
inventory in Cape Town and Umhlanga Ridge. The increase in room nights sold and
room rate growth resulted in a 15% increase in revenue to R336 million.
EBITDA increased by 14% to R174 million and headline earnings at R101 million
were 15% up on the previous year. The dividends declared for the year by City
Lodge were up by 38% on last year.
BALANCE SHEET
During the year the group disposed of a further 959 760 KZL shares realising
proceeds of approximately US$38 million. At 30 June 2004 the group held an
effective 998 000 shares in KZL and further disposals are likely to take place
in the year ahead. The sale of shares to the group`s BEE partners in certain of
the group`s casino ventures realised R334 million during the year.
Capital expenditure for the year of R489 million (2003: R352 million) was
incurred which included R254 million on the Sibaya project, R72 million on
replacement of casino equipment and R95 million on ongoing asset replacement.
During the year the group also acquired the North West Development Corporation
(NWDC) shareholding in SISA for R566 million and capitalised certain existing
long term leases totalling R242 million following the renegotiation of the terms
of these leases.
As a consequence of the above, group borrowings increased by R106 million to
R2101 million. Herewith is a summary of the group`s borrowings:
Net Intragroup Third party
borrowings borrowings borrowings
Rm Rm Rm
SunWest International (Pty) Ltd 640 38 602
Emfuleni Resorts (Pty) Ltd 230 160 70
Afrisun KZN (Pty) Ltd 527 429 98
Meropa Leisure and
Entertainment (Pty) Ltd 93 - 93
Teemane (Pty) Ltd 67 - 67
Afrisun Gauteng (Pty) Ltd 242 - 242
Central office and wholly
owned subsidiaries 302 (627) 929
2 101 - 2 101
ACQUISITION OF THE SISA MINORITIES
The group acquired the NWDC`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 March 2004 the group commenced a process to acquire the remaining
minority interest in SISA through a section 311 scheme of arrangement. The
acquisition was concluded on 16 August 2004. The scheme consideration was
settled by the issue of 26 342 597 shares in the company and payment of R346
million in cash to the SISA minority shareholders. This equated to a total
purchase consideration of R1 413 million for the remaining 37.6% of SISA. This
transaction will be accounted for in the 2005 financial year.
DIRECTORATE
The Board is pleased to announce that Ms Louisa Mojela and Messrs Hassen Adams
and Peter Swartz have been appointed non-executive directors of Sun
International with effect from 1 September 2004.
OUTLOOK
We anticipate good growth in earnings in the year ahead and as a consequence of
the strong operating cash flows it is our intention to increase the level of
dividends at a rate in excess of the earnings growth rate.
For and on behalf of the board
D A Hawton P D Bacon
Chairman Chief Executive
31 August 2004
Registered Office Registrar
27 Fredman Drive Computershare Investor Services 2004
(Pty) Ltd
Sandown 70 Marshall Street
Sandton, 2031 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, D M Nurek, E Oblowitz, G R Rosenthal
Group Secretary: S A Bailes *Executive
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that a final dividend of 80 cents (2003: 50 cents) per
share for the year ended 30 June 2004 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 final dividend are as
follows:
2004
Last day to trade cum final dividend Thursday, 23 September
First day to trade ex final dividend Monday, 27 September
Record date Friday, 1 October
Payment date Monday, 4 October
No share certificates may be dematerialised or rematerialised between Monday, 27
September 2004 and Friday, 1 October 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
31 August 2004
Date: 31/08/2004 05:26:23 PM
Produced by the JSE SENS Department
