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un International Limited - Business Update for the quarter to 30 September 2005
Sun International Limited
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000070678
BUSINESS UPDATE - for the quarter to 30 September 2005
Developments regarding shareholding in SunWest International (Proprietary)
Limited ("SunWest")
Trading
The group continued to enjoy excellent trading conditions in the quarter, with
casino revenues 19% ahead of last year. Rooms revenue remained under pressure
but total hospitality revenue increased by 8% over the last year. GrandWest,
Sibaya, Boardwalk and Carnival City performed well achieving revenue growth of
23%, 32%, 15% and 16% respectively. In addition the recently refurbished Morula
and Carousel casinos had an excellent quarter with revenues 24% and 20% up
respectively.
EBITDA at R429 million in the quarter was 20% up on last year.
Summary of group revenue and EBITDA
Quarter to September
2005 Change 2004
(Rm) (%) (Rm)
Revenue 1374 17 1177
Casino 1057 19 891
Rooms 148 5 140
Food and beverage
and other 169 16 146
EBITDA 429 20 357
EBITDA margin (%) 31,2 30,3
Developments
The Windmill Casino and Entertainment Centre in Bloemfontein was successfully
opened to the public on 30 September 2005 at a cost to the group of R165
million. Initial trading has exceeded expectations.
Construction has commenced on the 118 room Sibaya Lodge that is expected to be
completed during the first quarter of the 2007 financial year at a cost of
approximately R83 million.
Development of the 150-slot Worcester casino has commenced and is expected to be
completed during the second quarter of the 2007 financial year at a cost of
approximately R135 million.
Approval has been obtained from the Western Cape Gambling and Racing Board for a
significant expansion of the GrandWest Casino & Entertainment World including an
increase in the number of slot positions from the current 1814 to 2324. The
extension is expected to cost approximately R320 million and will include the
construction of a new smoking casino and related facilities, an upgrade to the
Salon Prive, an extension to the covered parking, the construction of a 5000
seat multipurpose arena, and a significant enhancement to the family
entertainment facilities. Detailed design development has commenced following
which the required submissions will be made to the relevant authorities for
planning and related approvals. It is anticipated that the additions to the
casino will open late in the second quarter of the 2007 financial year.
Black Economic Empowerment ("BEE")
Sun International is well advanced in finalising the introduction of an
empowerment consortium as shareholders in Sun International Limited , which is a
requirement in terms of the group"s North West Province gaming licences. It is
proposed that the consortium will include various broad-based North West
Province groupings and the Sun International Employee Share Trust.
The group is in the process of finalising the shareholding and funding
structures and a further announcement will be made shortly.
DEVELOPMENTS REGARDING SHAREHOLDING IN SUNWEST
Shareholding in SunWest
In terms of the GrandWest casino licence bid, Sun International"s Western Cape
based empowerment partner, Grand Parade Investments Limited ("GPI"), was
allocated a 34% shareholding in SunWest, of which 8,5% was acquired at
inception. The balance of such potential interest was warehoused by Sun
International on the basis that GPI acquired an option to take it up at a later
stage. During 2003 GPI expressed a wish to exercise part of the option, but was
unable to raise the requisite funding at the time due to the challenging
economic environment. In these circumstances, Sun International entered into a
transaction with GPI whereby Sun International sold to GPI an 11,5% shareholding
in SunWest at a discount to the then option strike price and facilitated the
transaction with attractively priced preference share funding in return for GPI
foregoing its option over further shares in SunWest.
Subsequently a disagreement arose between Sun International and GPI regarding
the option. In light of the partnership that exists between Sun International
and GPI, and in order to address GPI"s aspirations to increase its shareholding
in SunWest, Sun International has reached an agreement in principle, subject to
GPI shareholder approval, to facilitate an increase in GPI"s SunWest
shareholding. In terms of the agreement, Sun International will facilitate the
acquisition by GPI of 1.7% of SunWest from Sun International, and the
acquisition by GPI of a further 1.5% in SunWest from certain other SunWest
shareholders for a total consideration of R36 million.
Potential GPI listing and new option
GPI has also indicated to SunWest and its shareholders (including Sun
International) that it is considering a listing of its shares in order to
enhance the value and liquidity in its shares that are currently traded on an
informal over the counter basis. Of concern to SunWest is obviously the
potential for significant dilution of the Western Cape based BEE credentials of
GPI and as a consequence SunWest. SunWest with the support of its other
shareholders has in response to the potential listing of GPI offered GPI an
option over a 5% new issue of SunWest shares at a strike price of R116 million
in aggregate, on condition that the overall BEE shareholding within GPI remains
above 35% until June 2012.
Potential dilution
The sale of shares and exercise of the option could ultimately reduce Sun
International"s shareholding in GrandWest from 58.8% to 54.3% and increase GPI"s
shareholding to 25% that will ensure that SunWest has an appropriate level of
empowerment. The impact on the group adjusted headline earnings will not be
material.
A further announcement to shareholders will be made in due course.
Sandton
25 October 2005
Sponsor:
Investec Bank Limited
Date: 25/10/2005 12:47:05 PM Produced by the JSE SENS Department
