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SUI
SUI
Sun International Limited - Profit And Dividend Announcement For The Six Months
Ended 31 December 2005
SUN INTERNATIONAL LIMITED
Registration Number:1967/007528/06
Share Code : SUI
ISIN: ZAE ZAE000070678
Profit and Dividend Announcement
for the six months ended 31 December 2005
Highlights
- Revenue + 17%
- EBITDA + 23%
- Adjusted HEPS + 34%
- Dividends per share + 50%
Group income statement
Six months Year ended
ended
31 30 June
December
2005 2004 2005
Unaudited Unaudited Audited
% Restated Restated
Rm change Rm Rm
Continuing operations
Revenue 2 943 17 2 512
5 139
Casino 2 232 19 1 873
3 857
Rooms 7
334 313 623
Food, beverage and 16
other 377 326 659
Other income
97 78 222
Realisation of write up 72
of KZL shares 81 65
Fair value adjustments -
on loan origination 16 47
Profit realised on 6
discontinued share - 6
purchase scheme
Employee costs
(610) (542) (1 102)
Casino - Levies & VAT
(468) (385) (813)
Depreciation and
amortisation (235) (214) (438)
Promotional and
marketing costs (260) (237) (449)
Other operational costs
(667) (598) (1 201)
BEE transaction charge
(218) - -
Operating profit
582 614 1 358
Foreign exchange
(losses)/profits (29) (20) 35
Interest income
26 19 79
Interest expense
(113) (108) (258)
Profit before equity
accounted earnings 466 505 1 214
Share of associate
profits/(losses) - - -
Profit before taxation
466 505 1 214
Taxation
(242) (183) (384)
Profit for the period
from continuing 224 322 830
operations
Discontinued operations
Profit for the period
from discontinued 380 22 47
operations
Profit for the period
604 344 877
Attributable to
Minority interest
135 100 212
Ordinary shareholders
469 92 244 665
604 344 877
Number of shares
(000"s)
- in issue 105 805 113 777
113 777
- for EPS calculation 108 167 107 191
110 484
- for fully diluted EPS 109 564 108 648
calculation 112 054
Earnings per share
(cents)
- basic earnings per
share 434 228 602
- headline earnings per
share 98 221 507
Fully diluted earnings
per share (cents)
- fully diluted basic
earnings per share 428 225 618
- fully diluted
headline earnings per 97 218 500
share
Dividends declared per
share (cents) 135 50 90 200
Interest cover (times)
6.4 5.1 4.5
Dividend payout (%)
53.8 47.9 48.6
HEADLINE EARNINGS
RECONCILIATION
Profit attributable to
ordinary shareholders 469 92 244 665
Net loss/(profit) on
disposal and closure of 4 (12) (15)
operations
Profit on disposal of
City Lodge (395) - -
Impairment and disposal
of property,plant and 2 - -
equipment
Currency translation
reserve realised - (1) (104)
Taxation relief on the
above items 27 4 4
Minority interests in
the above items (1) 2 10
Headline earnings (55)
106 237 560
Group balance sheet
31 December 30 June
2005 2004 2005
Unaudited Unaudited Audited
Restated Restated
Rm Rm Rm
ASSETS
Non current assets
Property, plant and 5 381 5 064 5 265
equipment
Intangible assets 411 457 433
Available-for-sale 141 141 141
investment
Investments and loans 289 480 490
6 222 6 142 6 329
Current assets
Accounts receivable and 372 373 341
other
Available-for-sale 190 349 287
investment
Loans - 3 16
Cash and cash 705 386 589
equivalents
1 267 1 111 1 233
Total assets 7 489 7 253 7 562
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" 2 894 2 897 3 151
equity
Minority interest 768 681 693
3 662 3 578 3 844
Non current liabilities
Deferred taxation 397 364 365
Borrowings 1 718 2 061 1 584
Other non current 106 42 90
liabilities
2 221 2 467 2 039
Current liabilities
Accounts payable and 808 753 933
other
Borrowings 798 455 746
1 606 1 208 1 679
Total liabilities 3 827 3 675 3 718
Total equity and 7 489 7 253 7 562
liabilities
Borrowings to total 69 70 61
shareholders" equity
(%)
Net asset value per 27.35 25.46 27.69
share (Rand)
Capital expenditure 350 620 981
Capital commitments
- contracted 159 254 85
- authorised but not 688 325 729
contracted
Market value of listed 190 924 898
investments
Directors" valuation of 499 501 494
unlisted investments
and loans
Total valuation of 689 1 425 1 392
investments and loans
and available-for-sale
investments
Group cash flow
statement
Year ended
Six months ended 31 30 June
December
2005 2004 2005
Unaudited Unaudited Audited
Restated Restated
Rm Rm Rm
Cash generated by 950 782
operations before: 1 645
Working capital (34) (62)
changes 109
Cash generated by 916 720
operations 1 754
Investment income 26 39
107
Interest expense (108) (104)
(235)
Taxation paid (348) (229)
(374)
Dividends paid (207) (164)
(385)
Cash retained from 279 262
operating activities 867
Cash utilised in (451) (1 082)
investing activities (1 490)
Cash realised from 230 207
investing activities 337
Net cash inflow from 59 538
financing activities 388
Consolidation of 9
operations previously - -
equity accounted
Translation (10) (16)
losses/(gains) on 10
cash balances
Increase/(decrease) 116 (91)
in cash balances 112
Consolidated
statement of changes
in equity
Ordinary Other Retained Minority Total
shares and reserves earnings interest
share Note 1
premium
Rm Rm Rm Rm Rm
Balances at 30 June
2005 1 533 285 1 443 749 4 010
Restatement ito IAS
1 (700) 700 -
Restatement ito IAS (33) (10) (41)
16 2
Restatement ito IAS (89)
39 89 -
Restatement ito SIC 35
12 (86) (46) (97)
Reversal of share
option valuation (28) (28)
Balances at 30 June
2005 restated 1 447 (324) 2 028 693 3 844
- Share issue
248 248
- Share buy back
(627) (627)
- Consolidation of
Sun International (180) (180)
Employee Share Trust
- Treasury share
options purchased (91) (91)
- Treasury share
options realised 76 76
- Consolidation of
operations 15 15
previously equity
accounted
- Share option cost
11 11
- Additional
minority funding 22 22
- Acquisiton of
minorities interest 5 (6) (1)
- Disposal of
minority inteterest -
- Net profit for the
period to 31 469 135 604
December 2005
- Foreign currency
translation (23) (4) (27)
adjustment
- Movement on
valuation reserve (17) ( 8) (25)
- Dividends paid
(128) (79) (207)
Balances at 31
December 2005 873 (348) 2 369 768 3 662
Note 1 : Included in other reserves are FCTR, fair value reserves, share based
payments reserve and profit and losses on purchase and sale non-controlling
interests.
SUPPLEMENTARY
INFORMATION
Six months Year ended
ended
31 December 30 June
2005 2004 2005
Unaudited Unaudited Audited
Rm % change Rm Rm
EBITDA RECONCILIATION
Operating profit 1
582 (5) 614 358
Depreciation and
amortisation 235 214 438
Other income
(97) (78) (222)
BEE transaction charge
* 218 - -
Property & equipment
rental 31 42 71
Net (losses)/profits on
disposal and closure of 4 (12) (15)
operations *
Indirect taxes relating
to prior years * - - 13
Impairment and disposal
of property, plant and 2 - -
equipment *
Pre-opening expenses *
5 18 19
Reversal of Sun
International Employee 6 4 10
Share Trust
consolidation
EBITDA 1
986 23 802 672
EBITDA margin (%)
34 32 33
Headline earnings (55)
106 237 560
Pre-opening expenses
5 18 19
Realisation of write up
of KZL shares (81) (72) (65)
Foreign exchange
(profits)/losses on 16 21 (17)
intercompany loans
Fair value adjustments
on loan origination (16) - (47)
Corporate tax rate
change on deferred tax - - (12)
opening balance
Indirect taxes relating
to prior years - - 13
BEE transaction charge
218 - -
Profit realised on
discontinued share - (6) (6)
purchase scheme
Taxation relief on the
above items 12 - 15
Minority interests in
the above items 22 13 14
Reversal of Sun
International Employee 2 1 3
Share Trust
consolidation #
Results from
discontinued operations (12) (22) (47)
Adjusted headline
earnings 272 43 190 430
Number of shares
(000"s) #
- for adjusted headline 101 217 104 510
EPS calculation 108,400
- for fully diluted 109 797 102 674 106 080
adjusted headline EPS
calculation
Earnings per share
(cents)
- adjusted headline
earnings per share 251 188 411
- fully diluted
adjusted headline 248 34 185 405
earnings per share
# The consolidation of the Sun International Employee Share Trust is reversed as
the group does not receive the economic benefits of the trust.
ACCOUNTING POLICIES
The preliminary financial information presented has been prepared in accordance
with International Financial Reporting Standards (IFRS) and comply with IAS 34,
Interim Financial Reporting. The accounting policies applied are consistent with
those in the annual financial statements for the year ended 30 June 2005 except
for the adoption of the following standards:
- IAS 1 - Presentation of Financial Statements: the presentation of the group
income statement has been changed to reflect the group"s election to disclose
items of income and expenditure by nature;
- IAS 16 - Property, Plant and Equipment: the reassessment of the lives and
terminal values of assets did not have a material effect on either the income
statement or the balance sheet;
- IAS 39 - Financial Instruments: Recognition and Measurement. This resulted
in the re-allocation of unrealised gains on the revaluation of Kerzner
International Limited shares to reserves, which were previously disclosed as
exceptional items;
- IFRS 5 - Non Current Assets Held for Sale and Discontinued Operations: this
resulted in the revised disclosure of discontinued operations in respect of the
City Lodge disposal;
- SIC 12 - Consolidation Special Purpose Entities: resulted in the
consolidation of the Sun International Employee Share Trust.
EARNINGS AND DIVIDEND
The group achieved strong growth in revenue and earnings as a result of
continued growth in casino revenue and a further improvement in margins. Group
revenue at R2.9 billion was 17% ahead of last year, which combined with an
improvement in margins resulted in a 23% increase in EBITDA to R986 million.
Gaming, rooms, and food and beverage revenue was 19%, 7% and 15% higher than in
the previous year respectively.
Other income of R97 million comprises a R16 million fair value adjustment on the
Sun International Vacation Club interest free borrowings and an R81 million gain
on the disposal of shares of Kerzner International Limited (KZL).
Employee costs increased by 13% over the previous period mainly as a result of
Sibaya trading for the full period and the consolidation of the Lesotho
operations for the first time. Casino levies and VAT increased by 22% over the
last year due to the impact of fiscal drag in certain provinces which have a
graduated casino levy structure.
The group incurred higher foreign exchange losses due to the impact of the
stronger Rand on offshore cash and inter-company funding.
Taxation at R242 million was 32% higher than last year as a result of the
increased profitability and STC charges on the dividends paid by the group.
Profit from discontinued operations comprises profits of R11 million from Ster
Century Middle East and City Lodge Hotels Limited, and the profit on the sale of
the group"s interest in City Lodge of R369 million.
Adjusted headline earnings of R272 million were 43% ahead of the previous year
and fully diluted adjusted headline earnings per share of 248 cents were 34%
above last year.
The board has declared an interim dividend of 135 cents per share, which
represents a 50% increase on last year"s interim dividend of 90 cents per share.
TRADING
Segmental Analysis
Revenue EBITDA
Unaudited Audited Unaudited Audited
Six Months to Year Six Months to Year
31 December ended 31 December ended
30 June 30 June
2005 2004 2005 2005 2004 2005
GrandWest 689 565 1193 290 229 501
Sun City 488 459 902 78 65 139
Carnival City 389 344 697 126 110 227
Sibaya/Sugarmi 289 219 484 81 67 148
ll
Boardwalk 187 162 334 73 61 129
Carousel 120 101 198 31 25 44
Wild Coast 116 110 223 21 20 45
Morula 94 77 158 22 13 27
Meropa 78 67 142 29 25 54
Swaziland 75 72 135 11 14 25
Table Bay 73 63 134 23 18 43
Zambia 70 59 119 15 9 22
Flamingo 53 43 89 20 15 31
Botswana 50 61 112 16 21 35
Namibia 47 50 96 13 17 29
Lesotho 41 - - 6 - -
Windmill 40 - - 14 - -
SI Management 194 157 316 90 73 110
Central Office
& other 73 80 180 27 20 63
operations
Eliminations (223) (177) (373) - - -
Other income
Other
expenses#
2943 2512 5139 986 802 1672
Operating Profit
Unaudited Audited
Six Months to Year
31 December ended
30 June
2005 2004
2005
GrandWest 242 178 401
Sun City 38 28 64
Carnival City 97 75 162
Sibaya/Sugarmi 52 33 86
ll
Boardwalk 58 46 100
Carousel 20 19 31
Wild Coast 13 13 32
Morula 12 10 17
Meropa 22 16 39
Swaziland 6 11 12
Table Bay 7 5 15
Zambia 8 1 4
Flamingo 13 9 20
Botswana 12 17 27
Namibia 7 11 17
Lesotho 4 - -
Windmill 9 - -
SI Management 79 62 89
Central Office
& other 15 8 37
operations
Eliminations - - -
714 542 1153
Other income 97 78 222
Other (229) (6) (17)
expenses#
582 614 1358
Trading for the 3 months from opening on 30 September 2005
# Items included indicated by * on EBITDA reconciliation
GAMING
Gaming revenue was 19% ahead of the previous year with slot and table revenue up
18% and 25% respectively. This continued growth is attributable to the
improvement in levels of disposable income and the continued favourable economic
environment in South Africa. The group launched the exclusive and innovative
"Hollywood Slots" product in December 2005, which has been extremely well
received by customers and has added excitement to the group"s gaming floors.
The group enjoyed a particularly buoyant December, with all gaming operations
achieving significant growth over last year.
GrandWest achieved excellent growth of 22% in revenue over last year, while
EBITDA of R290 million grew 27%, reflecting further improvements in operating
margins.
Carnival City performed well in the competitive Gauteng market, achieving market
share of 19.0% for the period compared to 18.6% in the same period last year.
Revenue was 13% ahead of the previous year, while EBITDA grew 15% to R126
million.
Sibaya, which opened on 1 December 2004, generated gaming revenue which was 29%
ahead of last year. EBITDA of R81.0 million grew by 21%.
Boardwalk performed well, achieving growth in revenue and EBITDA of 15% and 20%
over last year respectively.
RESORTS AND HOTELS
Rooms revenue of R334 million was generated in the period, 7% ahead of last
year. The average room rate increased by 3% to R720 and the overall occupancy
of 77% was 1.6 percentage points ahead of last year.
Sun City achieved a room occupancy of 75%, which was 2 percentage points below
last year. The average room rate of R949 was 3% ahead of the previous year.
Occupancy at The Palace remained under pressure as a result of the strong Rand
and declined 7 percentage points to 70%. The Cascades enjoyed satisfactory
revenue growth and the new Vacation Club has been extremely well received by
customers.
Table Bay occupancies improved by 7 percentage points to 66% and room rate
increased 4% to R1386 in the period. This improvement was mainly due to
increased volumes in the individual travel market seeking Cape Town as a
destination.
The Zambian operations traded well in the period under review achieving a room
occupancy of 69%, 4 percentage points ahead of last year at an average room rate
of US$135, which was 9% better than the previous year.
SUN INTERNATIONAL MANAGEMENT
Management fee income of R194 million was 24% ahead of last year as a result of
the favourable trading conditions enjoyed by the major gaming operations.
EBITDA of R90 million was 23% ahead of last year. The EBITDA margin of 46% was
in line with last year after expensing costs associated with the new
opportunities in the UK and elsewhere including Africa of R12 million (2004: R11
million).
DEVELOPMENTS
The Windmill Casino located on the N1 highway in Bloemfontein opened
successfully to the public on 30 September 2005 at a capital cost of R166
million and has performed ahead of expectations in its first three months of
trading.
Construction has commenced on the new casino in Worcester, in which the group
will have a 40% equity interest and a long-term management contract. The
estimated cost of the development is R150 million and includes 150 slot
machines, a conference facility, restaurant, entertainment bar and children"s
entertainment facility. The development is expected to open in November 2006.
The expansion of the GrandWest casino facilities at an estimated cost of R320
million has been approved by the Western Cape Gambling and Racing Board. The
scope of the project is being reviewed to expand certain of the planned
facilities and to create significant additional multi-storey parking, increasing
the estimated cost to R425 million. The construction is anticipated to commence
in the second quarter of calendar 2006 and will be completed within
approximately twelve months.
Construction of the 118 room Sibaya Lodge hotel has commenced, remains in line
with the projected cost of R83 million and is due for completion by October
2006. The insurers have rejected the insurance claim submitted in respect of
the Sibaya Casino development cost overruns, on the basis that the loss has not
been proven. The group will continue to pursue the claim.
A further 14 units are being added to phase 2 of the Sun City Vacation Club at a
cost of R16 million which will be completed in April 2006.
BALANCE SHEET
In September 2005 the company disposed of its entire shareholding in City Lodge
under a scheme of arrangement for a consideration of R627 million, resulting in
the company effectively acquiring 8 590 275 of its own shares as treasury stock.
In terms of the BEE transaction concluded in December 2005, the company
transferred 2 801 793 treasury shares to Dinokana for no consideration, and a
further 1 467 044 shares were sold to Dinokana by the Sun International Share
Option Trust at R75.92 per share. The impact of the transaction to the group
resulted in a non recurring R218 million charge to the income statement.
During the period, 319 200 KZL shares were disposed of, which realised US$21
million. At 31 December 2005 the group held an effective 320 537 shares in KZL.
Capital expenditure incurred in the period was as follows:
Rm
Expansion projects 125
Sibaya Lodge 10
Windmill Casino 95
New Casino in Worcester 4
Sun International Vacation 16
Club at Sun City
Ongoing asset replacement 225
350
The group"s borrowings, before consolidating the Sun International Employee
Share Trust, declined marginally with the strong cash flow generated being
largely utilised for capital expenditure and increased dividend payments. The
group"s borrowings are summarised below:
(Rm) Intragroup Third Party Third
Borrowi Borrowings Borrowings Party
ngs Borrowings
31 December 2005 30 June
2005
SunWest International 483 30 453 504
(Pty) Ltd
Emfuleni Resorts (Pty) 171 40 131 103
Ltd
Afrisun KZN (Pty) Ltd 489 75 414 431
Meropa Leisure and 76 - 76 74
Entertainment (Pty) Ltd
Teemane (Pty) Ltd 48 - 48 53
Afrisun Gauteng (Pty) 214 - 214 211
Ltd
Mangaung Sun (Pty) Ltd 121 - 121 -
Central Office 720 (145) 865 954
2322 - 2322 2330
Sun International 194 - 194 -
Employee Share Trust
2516 - 2516 2330
Cash and cash equivalents of R705 million increased as a result of the disposal
of the KZL shares and the proceeds received on the sale of shares to the BEE
consortium. The increase was partly offset by the acquisition of options over
Sun International shares from participants in the Sun International Share Option
Scheme.
CONTINGENT LIABILITY
The disallowance by the South African Revenue Service of the deductibility of
pre-opening expenditure is unresolved. However, the group remains confident
that it can successfully defend this matter. The potential exposure is R60
million across the group of which R36 million would be attributable to Sun
International Limited.
DEVELOPMENTS REGARDING SHAREHOLDING IN SUNWEST
Shareholders were advised in a business update published in the press on 25th
October 2005 that a disagreement had arisen between Grand Parade Investments
(GPI) and the group regarding the exercise of an option held by GPI over "N"
shares in SunWest warehoused by Sun International. An agreement in principle
was reached subject to various conditions precedent whereby the group undertook
to facilitate the acquisition by GPI of a 1.7% shareholding in SunWest from Sun
International and the acquisition by GPI of a further 1.5% shareholding in
SunWest from other shareholders for a total consideration of R36 million. The
completion of this in principle agreement remains outstanding due to the
conditions precedent being unfulfilled and a potential challenge from Afrisun
Leisure which holds a 15.4% interest in SunWest. Afrisun Leisure claims it had
a pre-emptive right over a proportion of the shares sold to GPI in terms of an
agreement concluded between GPI and Sun International in 2003. The 2003
agreement increased GPI"s shareholding in SunWest on a facilitated basis to 20%
and significantly improved SunWest"s empowerment profile. Any challenge brought
by Afrisun Leisure against the group will be vigorously defended.
DIRECTORATE
Dr Lulu Gwagwa and Mr Valli Moosa were appointed to the board as non-executive
directors on 30 November 2005.
OUTLOOK
The growth in casino revenue and improved outlook for the group"s hotels and
resorts should continue for the second half of the year. Accordingly, the group
expects good growth in adjusted headline earnings per share for the full year,
although the rate of growth in the second half of the year is expected to be
below that experienced in the first half. The group intends to continue
increasing the level of dividends per share at a rate in excess of the adjusted
headline earnings per share growth rate.
For and on behalf of the board
D A Hawton P D Bacon
Chairman Chief Executive
2 March 2006
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 (Chief Executive Designate)*, H Adams, R P Becker*, L Boyd, P L
Campher, M P Egan, Dr N N Gwagwa, I N Matthews, L M Mojela, M V Moosa, D M
Nurek, E Oblowitz, G R Rosenthal, P E Swartz
*Executive
Group Secretary: S A Bailes
Declaration of Interim Dividend
Notice is hereby given that an interim dividend of 135 cents (2004: 90 cents)
per share for the six months ended 31 December 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
interim dividend are as follows:
2006
Last day to trade cum interim Friday, 24 March
dividend
First day to trade ex interim Monday, 27 March
dividend
Record date Friday, 31 March
Payment date Monday, 3 April
No share certificates may be dematerialised or rematerialised between Monday, 27
March 2006. and Friday 31 March 2006, 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
2 March 2006
Date: 02/03/2006 04:03:14 PM Produced by the JSE SENS Department
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