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Audited Summary Group Financial Results announcement for the year ended 31 December 2019
SUN INTERNATIONAL LIMITED
Registration number: 1967/007528/06
Share code: SUI
ISIN: ZAE 000097580
Audited Summary Group Financial Results announcement for the year ended 31 December 2019
Introduction
The 2019 financial year marked a period of critical inflection in terms of delivering against our strategy to
drive sustainable growth and profitability and unlocking value in the business. The board has remained focused
on our key strategic priorities which continue to be:
- investing in quality assets for growth;
- protecting and leveraging the existing portfolio;
- accelerating balance sheet de-gearing;
- driving efficiencies, optimisation and quality of earnings; and
- dealing with loss making units.
We achieved significant progress against all of these objectives during the 2019 financial year.
Total income for the year under review increased by 4% from R16.6 billion to R17.2 billion, primarily driven by
above-market organic growth from key operations in South Africa and the impact of acquisitions made in Latin
America (Latam) during the prior year. Adjusted EBITDAR, was marginally up on the prior year at R4.6 billion,
with pleasing margin expansion achieved in South Africa, offset by the impact of unexpected social unrest and
instability in Chile.
Debt
We continue to reduce our debt levels, with South African debt (excluding lease liabilities) down from R9.2
billion at 31 December 2018 to R8.8 billion at year end. Organic cash flow supported an improvement in the Debt
to Adjusted EBITDA (after lease payments) ratio, to 2.8x as at 31 December 2019, down from 3.0x a year earlier
and considerably lower than the current bank covenant of 3.5x. Excluding the debt raised for the Sibaya minority
stake acquisition of R593 million, Debt to Adjusted EBITDA would have been 2.6x. During the year, the
refinancing of the South African debt facilities was also successfully completed in a transaction that was 50%
oversubscribed, with all existing lenders renewing their commitment to the group. The restructure has extended
maturities, increased covenant headroom and reduced overall net finance costs through a more efficient facilities
package. The weighted average cost of interest fell from 9.6% in the prior year to 8.6% for 2019.
Notwithstanding the various challenges faced in Latam, Sun Dreams' operations continued to demonstrate pleasing
de-gearing and balance sheet strength. After minority dividends of R113 million, net financial debt in Latam
(excluding lease liabilities), reduced to R3.9 billion from R4.9 billion in the prior year. Sun Dreams' Net Debt
to EBITDA (excluding the effect of IFRS 16) reduced from 3.0x to 2.6x at 31 December 2019.
South Africa
Despite a tough trading environment, which includes low GDP growth, high unemployment and an uncertain political
landscape, the group's South African operations delivered a pleasing result. With income up 2% and adjusted
EBITDAR up 5%, the EBITDAR margin improved from 28% in 2018 to 29%. The improved margins were driven by the
better results of the flagship Time Square property, above-market growth at Sibaya, SunSlots and SunBet and cost
containment. This was partially offset by weaker performances at GrandWest and Sun City, the latter of which is
in the early stages of a full operational turnaround plan.
During the second half of the 2019 financial year, a simplified head office and group operational structure was
implemented in South Africa, with a renewed focus on our different customer-end markets in gaming and
hospitality. The revised structure will result in enhanced focus on the guest experience, improved operational
efficiencies, as well as support continued margin improvement at our casino and hotel properties.
Our Wild Coast land claim was finally settled and we submitted our bid for renewal of the licence. The Eastern
Cape Gambling Board has extended the existing Wild Coast Casino licence to 31 March 2020.
Latam
Our Latam operations showed tremendous resilience despite the significant impact of unexpected and widespread
social unrest which erupted in Chile during the last quarter of the year, resulting in curtailment of
operations, some damage to our properties and significant deterioration in trading conditions during October and
November.
Income from the Latam operations was up by 8% to R5.4 billion with adjusted EBITDAR declining by 8% to R1 294
million. These results are not directly comparable to the prior year due to the acquisitions of Thunderbird
Resorts in Peru in April 2018 and the Park Hyatt Hotel and Casino in Mendoza, Argentina in July 2018.
On a comparable basis, income was up 1% from the prior year at R4.6 billion and adjusted EBITDA decreased by 11%
to R1.2 billion.
Acquisitions
- We increased our interest in Sibaya (Afrisun KZN) to 87.2% with the effective acquisition of a further 23.9%
equity interest from minorities; and
- We concluded agreements that will result in the acquisition of a 30% minority equity interest in Sun Slots for
a purchase consideration of R504 million, resulting in Sun Slots becoming a wholly-owned subsidiary. This
transaction is awaiting certain regulatory approvals which we anticipate will be received in the short term.
Both Sibaya and Sun Slots have been trading above expectations, with the above transactions being concluded at
attractive valuations and at levels which will be earnings and cash flow enhancing.
Reference is made to the SENS announcement of 1 November 2019 when shareholders were informed that Sun
International's announced disposal of a 14.94% interest in Sun Dreams to Pacifico Sur Limitada ("Pacifico"),
which would result in each party holding a 50% equity interest in Sun Dreams, was not concluded.
Adjusted headline earnings
Given the increase in EBITDAR, lower interest and depreciation and a significantly lower effective tax rate, we
have achieved strong growth in adjusted headline earnings which increased 109% to R763 million with adjusted
headline earnings per share increasing 91% to 605 cents per share.
Significant reporting changes
The group has adopted IFRS 16: Leases, from 1 January 2019 and applied the simplified transition approach, the
group has therefore not restated comparative amounts for the year prior. At transition, for leases classified as
operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease
payments, discounted at the rate implicit to the lease or the lessee's incremental borrowing rate (IBR) as at 1
January 2019.
Financial overview
South Africa Latam Nigeria and Swaziland Total
R million 2019 % 2018 2019 % 2018 2019 % 2018 2019 % 2018
Income 11 481 2 11 254 5 396 8 5 018 355 9 342 17 232 4 16 614
EBITDAR 3 303 5 3 143 1 294 (8) 1 406 13 33 11 4 610 1 4 560
Adjusted operating profit 2 222 15 1 926 777 (14) 906 (20) 13 (22) 2 979 6 2 810
Profit before tax 1 349 39 974 543 (24) 714 (67) (7) (64) 1 825 12 1 624
Profit after tax 973 81 538 322 (33) 484 (67) (10) (62) 1 228 28 960
Group adjusted headline
earnings 625 100+ 229 173 3 166 (34) (18) (30) 763 100+ 365
Earnings/(loss) per share (cents)
Basic earnings and diluted basic earnings/(loss) per share 518 100+ (6)
Headline earnings per share 603 100+ 213
Diluted adjusted headline earnings per share 605 91 316
Dividend per share - - -
Outlook
Given the current uncertainty in global markets linked to a depressed local economy and subdued consumer
confidence, we do not anticipate an improvement in trading conditions in the short term. In spite of the subdued
trading conditions, management will continue to focus on its key strategic objectives, including creating ongoing
efficiencies and optimising business opportunities. We will place emphasis on improving our operations and guest
experience and will continue to take the necessary action on loss-making entities. Time Square is expected to
gain further market share as well as grow income and adjusted EBITDA and we will focus on growing our alternative
gaming business.
Notwithstanding the various challenges faced in Latin America, we are focusing on our current operations to
improve their performance and will leverage off Chile and Peru's positive GDP growth forecast. We continue
exploring further growth opportunities in Latam, including in the online space, where a number of countries are
going through the process of regulating this industry.
While it is still to early to forecast what impact the coronavirus might have, we are taking all necessary
precautions to ensure a safe and healthy environment for our guests and staff and preparing operations for any
possible disruption to trading.
Independent Audit
The summary group financial statements have been derived from the audited group financial statements. The
directors of the company take full responsibility for the preparation of the summary group financial statements
and that the financial information has been correctly derived and is consistent in all material respects with
the underlying group financial statements. The summary group financial statements for the year ended 31
December 2019 have been audited by our auditor PricewaterhouseCoopers Inc., which has expressed an unmodified
opinion thereon. The auditors also expressed an unmodified opinion on the group financial statements from which
the summary group financial statements were derived. The individual auditor assigned to perform the audit is
Johan Potgieter. The auditor's report (which contains the key audit matters identified by the auditors for the
financial year ended 31 December 2019) does not necessarily cover all the information contained in the
summarised financial results. Shareholders are therefore advised that, in order to obtain a full understanding
of the nature of the auditor's work, they should obtain a copy of that report, together with the group
financial statements from the registered office of the company. These documents will be available from the
company's registered office from 16 March 2020. The group financial statements will be available on the
company's website, suninternational.com, on or about 31 March 2020.
FURTHER INFORMATION
This short-form announcement is the responsibility of the directors and is only a summary of the information
contained in the full announcement. Any investment decision should be based on the full announcement published
on Sun International's website and on the SENS link below. Only the short form announcement will be available
on SENS. The full announcement will be available on the link http://www.suninternational.com or through this link
https://senspdf.jse.co.za/documents/2020/jse/isse/SUI/FY2020.pdf
The full announcement is also available at our registered office for inspection, at no charge, during office
hours. Copies of the full announcement may be requested by contacting
investor.relations@za.suninternational.com.
Sponsor: Investec Bank Limited
16 March 2020
Sandton
http://www.suninternational.com
Date: 16-03-2020 08:00:00
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