| Tue 30 Aug 2005, 13:00 | | Sun International Limited - Reviewed results for t |
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Sun International Limited - Reviewed results for the year-ended 30 June 2005
SUN INTERNATIONAL LIMITED
Registration Number: 1967/007528/06
Share Code: SUI
ISIN: ZAE000054995
Profit and Dividend Announcement for the year ended 30 June 2005
Highlights
Revenue + 15%
EBITDA + 19%
Fully Diluted Adjusted HEPS + 45%
Dividends per share + 60%
EARNINGS AND DIVIDEND
The group achieved excellent results for the year, mainly due to continued
strong growth in casino revenues, improved operating margins and lower borrowing
costs.
Group revenue at R5.1 billion was 15% up on the previous year. Strong growth in
gaming revenues continued in the second half with annual revenue at R3,9 billion
up 18% on the prior year. Hotel and resort revenues remained under pressure,
particularly at the upper end of the market. Consequently, rooms revenue showed
only marginal improvement. The group EBITDA margin improved by one percentage
point to 32.5%, resulting in a 19% increase in EBITDA to R1.7 billion.
Net exceptional income of R253 million includes a mark-to-market write up of the
group`s shareholding in Kerzner International Limited (KZL) amounting to R86
million, and R104 million on the part realisation of the foreign currency
translation reserve.
Net interest expense at R170 million was R44 million below the previous year as
a result of lower interest rates and strong operating cash flows. Taxation at
R406 million was 50% up on the previous year due to improved profitability and
the STC charges on increased dividends paid by the group.
Discontinuing operations include City Lodge and Ster Century Middle East.
Adjusted headline earnings were 87% higher than last year at R435 million. Fully
diluted adjusted HEPS were 45% higher at 411 cents as a consequence of the
increase in the weighted average number of shares in issue, following the issue
of shares for the acquisition of the Sun International (South Africa) Limited
(SISA) minority interests in August 2004.
The board has declared a final dividend of 110 cents per share, bringing the
total dividend for the year to 200 cents per share, a 60% increase over the
previous year.
TRADING
Segmental Analysis
Year ended 30 June 2005
Revenues EBITDA Operating Profit
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
GrandWest 1193 1006 501 400 402 303
Sun City 902 818 139 128 65 70
Carnival City 697 570 227 180 171 115
Sugarmill/Sibaya 484 363 148 118 85 56
Boardwalk 334 281 129 102 99 69
Wild Coast 223 202 45 37 31 21
Carousel 198 175 44 39 25 20
Morula 158 145 27 26 15 21
Meropa 142 118 54 40 36 23
Swaziland 135 134 25 18 18 12
Table Bay 134 138 43 42 15 12
Zambia 119 96 22 14 6 <3>
Botswana 112 122 35 43 26 35
Namibia 96 89 29 29 17 19
Flamingo 89 78 31 26 18 12
SI Management 316 251 110 102* 100 85*
Central Office & other
operations 180 177 62 63 34 19*
Elimination <373> <287> - - - -
5,139 4,476 1,671 1,407 1,163 889
Exceptional items 253 336*
5,139 4,476 1,671 1,407 1,416 1,225
* Restated for the implementation of IFRS 2 -Share Based Payments and revised
IAS 27 - Consolidated and Separate Financial Statements
GAMING
Gaming revenue was 18% ahead of the previous year with slot and table revenues
19% and 16% up respectively. This growth can be attributed primarily to a
continuing improvement in disposable income and consumer confidence.
GrandWest continues to trade exceptionally well with gaming revenue at R1.2
billion, 19% up on the previous year. EBITDA at R501 million was 25% up on the
previous year.
Carnival City increased its marketing effort and related event and promotional
activity. These resulted in an increase in its share of the competitive Gauteng
market. Gaming revenues were 22% higher than last year, compared with a 14%
improvement in the Gauteng market. The higher revenues resulted in a 26%
increase in EBITDA to R227 million.
Sibaya has performed well since opening on 1 December 2004, with gaming revenue
36% higher than that achieved by Sugarmill for the comparable seven-month
period. The combined revenue and EBITDA for Sibaya and Sugarmill were 33% and
25% ahead of last year respectively. Sibaya currently has an estimated 43% share
of the Durban casino market.
Boardwalk continues to perform extremely well, benefiting from increased
economic activity in the Port Elizabeth region. Revenue and EBITDA were 19% and
26% ahead of last year respectively.
RESORTS AND HOTELS
Rooms revenue of R623 million was in line with the previous year. The growth in
rooms revenue was 4% after adjusting for the disposals of Mpekweni and Zimbali
Lodge.
Sun City achieved an overall occupancy of 76%, four percentage points ahead of
the previous year. This improvement was largely the result of the increase in
occupancy at The Cascades which was substantially refurbished in the prior year.
The overall room rate of R931 was unchanged on last year, reflecting challenging
market conditions resulting primarily from the strength of the Rand, which had
the greatest impact at The Palace.
Table Bay`s occupancy of 63% for the year was three percentage points below last
year whilst the average room rate at R1352 was 2% higher. The decline in room
occupancy is the result of an increase in the Cape Town four and five star rooms
inventory and the `trading down` being experienced particularly in the
international group market.
The Zambian resort continued to enjoy increased demand, with room occupancy at
62% - nine percentage points better than last year. Rooms revenue in US
dollars grew by 34% as the resort benefitted from increased regional and
international demand coupled with the contribution of `Dreams`, the group`s in-
house tour operator.
The contribution to earnings from the group`s operations in Botswana, Namibia
and Swaziland was well down on the previous year due to the generally weaker
economic conditions in those countries, and the introduction of VAT in Botswana.
SUN INTERNATIONAL MANAGEMENT LIMITED
Management fees and related income of R316 million grew 26% over last year,
mainly as a result of favourable trading conditions enjoyed by the major group
operations. However, EBITDA of R110 million was only 8% ahead of the adjusted
comparative as a result of additional costs incurred. These costs included an
amount of R19 million (2004: R16 million) in respect of the group`s share option
scheme, R5 million additional lease charges relating to the straight line
recognition of operating lease payments, the cost of software development at R14
million, and R25 million (2004: R18 million) incurred during the year
investigating new casino license opportunities in the United Kingdom, Singapore
and Africa.
BALANCE SHEET
On 16 August 2004 the group acquired the remaining 37.6% interest in SISA. The
purchase consideration of R1,4 billion was settled by the issue of 26.3 million
shares and the payment of R346 million in cash.
During the year, 577 200 KZL shares were disposed of, which realised US$34
million. At 30 June 2005 the group held an effective 554 478 shares in KZL.
Capital expenditure for the year is detailed in the table below:
Rm
Expansionary projects 585
Sibaya permanent casino 410
Windmill casino 53
Worcester casino 8
Sun International Vacation Club at Sun City 114
Upgrade and refurbishment of properties 207
Morula refurbishment and casino upgrade 77
Carousel casino refurbishment and upgrade 66
Sun City refurbishment and casino upgrade 64
Ongoing asset replacement 189
981
The strong cash flow for the year assisted the group in funding both capital
expenditure and the acquisition of SISA minorities, and providing the
opportunity to increase dividends. The group`s borrowings increasing marginally
as summarised below:
Borrowings Intragroup Third Par
Borrowings Borrowing
30 June 2005
(Rm)
SunWest International (Pty) Ltd 534 30 504
Emfuleni Resorts (Pty) Ltd 167 64 103
Afrisun KZN (Pty) Ltd 503 72 431
Meropa Leisure and Entertainment (Pty) Ltd 74 - 74
Teemane (Pty) Ltd 53 - 53
Afrisun Gauteng (Pty) Ltd 211 - 211
Mangaung (Pty) Ltd 98 98 -
Central Office 690 <264> 954
2330 - 2330
DEVELOPMENTS
The first phase of the Sibaya property opened at the beginning of December 2004
at a capital cost of R733 million. The investigation into certain overruns has
been completed and an insurance claim has been submitted for the recovery of R46
million. Construction of the 118-room three star hotel is expected to commence
shortly at an estimated cost of R83 million, and is scheduled for completion in
July 2006.
Both the Morula and Carousel casino floors were upgraded during the year with
the introduction of the group`s smart card technology and the installation of
new slot machines. The Morula casino was substantially refurbished and the
construction of a new off-ramp has commenced, which will provide direct access
to the Carousel casino from the N1. Both casinos are performing well, with
revenues in the last quarter of the financial year 20% ahead of last year.
The Bloemfontein casino project is on schedule for completion in October 2005 at
an estimated cost of R166 million. The casino is well located on the N1 highway
and will be named the Windmill Casino. In keeping with its name, the casino
will feature a Moulin Rouge theme and will include an 80-room hotel and a
restaurant and family entertainment centre. R96 million has been spent since
inception to 30 June 2005 on the project.
Construction of the second phase of the Sun International Vacation Club at Sun
City was completed in June 2005 within the budgeted cost of R130 million. Sales
are well ahead of projections with 73% of units having been sold at year-end.
Winelands Casino (Pty) Ltd, in which the group holds a 40% economic interest,
has been awarded the Worcester casino licence in the Western Cape. It plans to
spend R150 million in developing a 150 slot machine casino, a conference
facility, restaurant, entertainment bar and children`s entertainment facility.
The development is scheduled to open in October 2006.
OFFSHORE EXPANSION
The group continues to investigate a select number of offshore casino expansion
opportunities. The new Gambling Act in the UK could give rise to the licensing
of up to eight regional casinos. The group is well positioned to compete for
two of these opportunities, although the timing will depend to a large degree on
the outcome of a government process to determine the number and locations of
these casinos. The group is also investigating a number of opportunities in
Africa and Asia.
CITY LODGE
Results
Earnings attributable to Sun International of R47 million were 21% higher than
last year. Average occupancy at 77% was up one percentage point on last year.
Revenues were 16% up on last year as a result of room rate growth, the increase
in occupancy and the inclusion of City Lodge Umhlanga Ridge and Road Lodge
Rustenburg for the full year. EBITDA was 18% up on the prior year at R205
million.
Disposal of interest
Approval was obtained from Sun International`s shareholders at the scheme and
general meetings held on 29 August 2005 for the disposal of the 38.6%
shareholding in City Lodge to Sun International shareholders in exchange for Sun
International shares.
Application will therefore be made to the High Court of South Africa
(Witwatersrand Local Division) on 6 September 2005 for the sanctioning of the
scheme.
A further announcement will be made to shareholders regarding the fulfilment of
the remaining conditions precedent and details of the purchase ratio and
resultant number of Sun International shares to be acquired as determined, based
on the Sun International share price on the close of business on the disposal
date.
BLACK ECONOMIC EMPOWERMENT
The group is making good progress with the introduction of a consortium of BEE
partners as shareholders at the Sun International Limited level. It is
anticipated that once this transaction is implemented, and including the
empowerment participation at subsidiary level, the overall economic
participation in the group by previously disadvantaged groupings will exceed
25%.
CONTINGENT LIABILITY
The challenge from the South African Revenue Service on the deductibility of pre
opening expenditure is unresolved. However, the group remains confident that it
can successfully defend this matter. The potential exposure remains a tax
charge of up to R60 million across the group of which R36 million would be
attributable to Sun International Limited.
DIRECTORATE
Having served 33 years with the group, Peter Bacon, Chief Executive, has advised
the board of his intention to retire at the end of the current financial year,
when he will reach the group`s retirement age.
David Coutts-Trotter has been appointed Chief Executive Designate, effective 1
September 2005.
Rob Becker joined the group on 1 July 2005 as Chief Financial Officer and was
appointed to the Board on 30 July 2005.
OUTLOOK
The group`s casinos will benefit from the anticipated ongoing growth in
disposable income. The outlook for the group`s hotels and resorts has improved
and the trend in forward bookings is up on last year. Accordingly, the group
anticipates good growth in adjusted headline earnings per share in the year
ahead and will again 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
30 August 2005
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)*, H. Adams, R P Becker*, L Boyd, P L
Campher, M P Egan, I N Matthews, L M Mojela, D M Nurek, E Oblowitz, G R
Rosenthal, P E Swartz *Executive
Group Secretary: S A Bailes
Declaration of Final Dividend
Notice is hereby given that a final dividend of 110 cents (2004: 80 cents) per
share for the year ended 30 June 2005 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:
2005
Last day to trade cum final dividend Friday, 16 September
First day to trade ex final dividend Monday, 19 September
Record date Friday, 23 September
Payment date Monday, 26 September
No share certificates may be dematerialised or rematerialised between Monday, 19
September 2005 and Friday, 23 September 2005, 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
30 August 2005
ACCOUNTING POLICIES
The preliminary financial information presented has been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice 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 2004 except for the adoption of IAS27 (revised) -
Consolidated and Separate Financial Statements, IAS38 - Intangible Assets and
IFRS 2 - Share Based Payments.
The group has elected to adopt the economic entity model in accounting for
transactions with minority shareholders in terms of the revisions to IAS27.
This model requires all premiums paid and profits and/or losses on transactions
with minorities to be recognised directly in equity. As a consequence, the 2004
income statement has been restated and the intangible assets and distributable
reserves at 30 June 2004 have been reduced by R376 million. The impact on the
current year is that R529 million, relating primarily to the acquisition of the
minority interests in SISA, has been recognised directly in equity.
The adoption of IAS 38 results in the amortisation of indefinite life assets
being discontinued in the current year whereas the prior year included
amortisation of R6 million
The adoption of IFRS 2 requires the group to expense share options granted after
7 November 2002 in the current year and effect a prior year adjustment. The
amount expensed in the current year is R19 million (2004: R16 million)
equivalent to 18 cents per share (2004: 20 cents per share)
In accordance with the group`s practice of excluding discontinuing operations
from adjusted headline earnings per share (adjusted HEPS), the results from City
Lodge have been excluded. The number of shares used in the adjusted HEPS
calculation has been reduced by 8 709 000 to reflect the anticipated number of
Sun International shares that are likely to be acquired through the scheme of
arrangement announced on 23 March 2005.
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.
Group income statement
Year ended 30 June
2005 2004
Reviewed % Audited
Rm change Rm
Revenue 5 139 15 4 476
Casino 3 857 3 261
Rooms 623 621
Food, beverage and other 659 594
Direct costs (2 162) (1 908)
Gross profit 2 977 16 2 568
Indirect costs (1 306) (1 161)
EBITDA 1 671 19 1 407
Depreciation and amortisation (438) (437)
Property rentals (70) (81)
Exceptional items 253 336
Operating profit 1 416 1 225
Foreign exchange profits/(losses) 35 (76)
Interest received 79 63
Continuing operations 79 60
Discontinuing operations - 3
Interest expense (249) (277)
Profit before equity accounted earnings 1 281 935
Share of associate companies` profits 73 59
Continuing operations 1 5
Discontinuing operations 72 54
Profit before taxation 1 354 994
Taxation (406) (270)
Continuing operations (381) (250)
Discontinuing operations (25) (20)
Profit after taxation 948 724
Minority interests (239) (285)
Net profit for the year 709 62 439
Number of shares (000`s)
- in issue 116 393 90 050
- for EPS calculation 113 100 90 050
- for adjusted headline EPS calculation 104 391 81 341
- for fully diluted EPS calculation 114 670 90 942
- for fully diluted adjusted headline EPS 105 961 82 233
calculation
Earnings per share (cents)
- basic earnings per share 627 488
- headline earnings per share 534 28 418
- adjusted headline earnings per share 417 45 287
Fully diluted earnings per share (cents)
- basic earnings per share 618 483
- headline earnings per share 527 27 414
- adjusted headline earnings per share 411 45 284
Dividends declared per share (cents) 200 60 125
EBITDA margin (%) 32.5 31.4
Interest cover (times) 5.1 3.2
Dividend payout (%) 48.7 44.0
Year ended 30 June
2005 2004
Reviewed % Audited
Rm change Rm
Determination of headline earnings and adjusted headline
earnings
Attributable earnings per the income 709 62 439
statement
Headline earnings adjustments (119) (154)
Associate goodwill (included in depreciation - 8
and amortisation)*
Impairment of investments in associates - 20
Impairment of property, plant and equipment 1 4
Net profit on disposal and closure of (15) -
operations
Net profit on disposal of property, plant (1) (4)
and equipment*
Currency translation reserve realised (104) (182)
Taxation on the above items 4 25
Minority interests in the above items 10 66
Headline earnings 604 61 376
Adjusted headline earnings adjustments (164) (126)
Pre-opening expenses 19 2
Write up of KZL to market value (86) (183)
Foreign exchange (profits)/losses on (17) 56
intercompany loans*
Fair value adjustments on loan origination (43) 34
Earnings from discontinuing operations* - (4)
Profit on share option scheme (32) -
Profit realised on discontinued share (6) (31)
purchase scheme
Corporate tax rate change on deferred tax (12) -
opening balance*
Indirect taxes relating to prior years 13 -
Associate adjusted headline earnings (72) (54)
adjustments
Results from discontinuing operations* (72) (54)
Taxation relief on the above items 45 10
Minority interests in the above items 22 27
Adjusted headline earnings 435 87 233
* Not included in exceptional or associate
exceptional items
Group balance sheet
Year ended 30 June
2005 2004
Reviewed Audited
Rm Rm
ASSETS
Non current assets
Property plant and equipment 5 311 4 777
Intangible assets 433 479
Available-for-sale investment 141 143
Investments and loans 568 471
6 453 5 870
Current assets
Accounts receivable and other 369 343
Available-for-sale investment 287 390
Loans 16 7
Cash and cash equivalents 589 477
1 261 1 217
Total assets 7 714 7 087
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 3 261 2 290
Outside shareholders` interests 749 1 454
4 010 3 744
Non current liabilities
Deferred taxation 353 364
Borrowings 1 584 1 760
Other 90 40
2 027 2 164
Current liabilities
Accounts payable and other 931 838
Borrowings 746 341
1 677 1 179
Total liabilities 3 704 3 343
Total equity and liabilities 7 714 7 087
Borrowings to total shareholders` equity 58 56
(%)
Net asset value per share (Rand) 28.01 25.42
Capital expenditure 981 489
Capital commitments
- contracted 85 522
- authorised but not contracted 729 617
Market value of listed investments 898 806
Directors` valuation of unlisted investments 494 433
and loans
Total valuation of investments and loans 1 392 1 239
and available for sale investment
Group cash flow statement
Year ended 30 June
2005 2004
Reviewed Audited
Rm Rm
Cash generated by operations before: 1 655 1 316
Working capital changes 109 (6)
Cash generated by operations 1 764 1 310
Investment income 107 88
Interest expense (235) (277)
Taxation paid (374) (161)
Dividends paid (395) (232)
Cash retained from operating activities 867 728
Cash utilised in investing activities (1 490) (1 213)
Cash realised from investing activities 337 766
Net cash inflow/(outflow) from financing 388 (127)
activities
Translation gains/(losses) on cash balances 10 (26)
Increase in cash balances 112 128
Consolidated statement of changes in
equity
Ordinary Other Retained Total
share reserves earnings
capital
and
premium
Rm Rm Rm Rm
Balances at 30 June 2004 505 324 1 837 2 666
Effect of adoption of IAS 27 revised - - (376) (376)
Share option cost - 17 (17) -
Balances at 30 June 2004 restated 505 341 1 444 2 290
Share capital issued 1 066 1 066
Treasury share options (37) - - (37)
Share option cost - 19 - 19
Premium on transactions with - - (529) (529)
minorities
Profit arising on disposal of - - 17 17
interest to minorities
Net profit for the year to 30 June - - 709 709
2005
Currency translation differences
- movement for the year - 28 - 28
- realised during the year - (104) - (104)
Dividends paid - - (198) (198)
Balances at 30 June 2005 1 534 284 1 443 3 261
Date: 30/08/2005 12:48:20 PM
Produced by the JSE SENS Department
