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SUI - Sun International Limited - Profit and dividend announcement
for the year ended 30 June 2010
SUN INTERNATIONAL LIMITED
("Sun International" or "the group" or "the company") Registration
number: 1967/007528/06''Share code: SUI ISIN: ZAE000097580
PROFIT AND DIVIDEND ANNOUNCEMENT
for the year ended 30 June 2010
REVENUE -1%
EBITDA -7%
ADJUSTED HEPS -18%
DIVIDENDS RESUMED 100 CENTS PER SHARE
GROUP STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 30 June
R million 2010 % 2009
Reviewed change Audited
Revenue
Casino 6 212 - 6 234
Rooms 857 (5) 900
Food, beverage and other 892 (2) 907
7 961 (1) 8 041
Less: promotional allowances (164) (126)
7 797 7 915
Insurance proceeds 180 -
Other income - 47
Pension fund (deficit)/surplus (1) 9
recognition
Employee costs (1 633) (1 520)
Levies and VAT on casino revenue (1 364) (1 353)
Depreciation and amortisation (685) (658)
Promotional and marketing costs (614) (592)
Consumables and services (846) (819)
Property and equipment rental (114) (74)
Property costs (351) (298)
Other operational costs (728) (654)
Impairment of goodwill - (108)
Operating profit 1 641 (13) 1 895
Foreign exchange (loss)/gain (15) 42
Interest income 60 93
Interest expense (566) (719)
Share of associate`s loss (3) -
Profit before tax 1 117 1 311
Tax (452) (611)
Profit for the year 665 (5) 700
Other comprehensive income:
Fair value adjustment on available- - 4
for-sale investment, net of tax
Net loss on cash flow hedges, net (8) (114)
of tax
Transfer of hedging reserve to 68 32
statement of comprehensive income,
net of tax
Currency translation differences (90) (32)
Realisation of currency translation - (64)
reserve
Total comprehensive income for the 635 526
year
Profit for the year attributable
to:
Minorities 152 199
Ordinary shareholders 513 501
665 700
Total comprehensive income for the
year attributable to:
Minorities 144 161
Ordinary shareholders 491 35 365
635 526
Cents % Cents
per share change per share
Earnings per share
- basic 552 566
- diluted 546 (2) 558
Headline earnings
- basic 568 645
- diluted 562 (12) 636
Dividend per share 100 -
CONDENSED GROUP STATEMENTS OF CASH FLOWS
for the year ended 30 June
R million 2010 2009
Reviewed Audited
Cash generated by operations before: 2 416 2 676
Working capital changes (70) (52)
Cash generated by operations 2 346 2 624
Tax paid (519) (622)
Cash retained from operating activities 1 827 2 002
Cash utilised in investing activities (1 236) (1 814)
Cash realised from investing activities 164 482
Net cash outflow from financing activities (819) (728)
Effect of exchange rates upon cash and cash (9) 2
equivalents
Decrease in cash balances (73) (56)
GROUP STATEMENTS OF FINANCIAL POSITION
at 30 June
R million 2010 2009
Reviewed Audited
ASSETS
Non current assets
Property, plant and equipment 8 846 7 878
Intangible assets 349 382
Available-for-sale investment 48 48
Loans and receivables 45 49
Pension fund asset 30 31
Deferred tax 95 85
9 413 8 473
Current assets
Loans and receivables 31 184
Accounts receivable and other 639 536
Cash and cash equivalents 721 794
1 391 1 514
Total assets 10 804 9 987
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 1 210 569
Minorities` interests 1 398 1 020
2 608 1 589
Non current liabilities
Deferred tax 432 418
Borrowings 3 940 4 525
Other non current liabilities 201 233
4 573 5 176
Current liabilities
Accounts payable and other 1 273 1 240
Borrowings 2 350 1 982
3 623 3 222
Total liabilities 8 196 8 398
Total equity and liabilities 10 804 9 987
CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
R million Ordinary Minorities` Total
share- interests equity
holders`
equity
FOR THE YEAR ENDED 30 JUNE 2010
(REVIEWED)
Balance at 30 June 2009 569 1 020 1 589
Total comprehensive income for the 491 144 635
year
Share issue 39 - 39
Deemed treasury shares purchased (1) - (1)
Deemed treasury shares disposed 2 - 2
Treasury share options purchased (40) - (40)
Treasury share options exercised 79 - 79
Shares disposed by Dinokana 55 - 55
Employee share based payments 37 - 37
Delivery of share awards (4) - (4)
Acquisition of minorities` (28) (5) (33)
interests
Increase in minorities funding 11 266 277
Acquisition of subsidiary - 219 219
Dividends paid - (246) (246)
Balance at 30 June 2010 1 210 1 398 2 608
FOR THE YEAR ENDED 30 JUNE 2009
(AUDITED)
Balance at 30 June 2008 119 546 665
Total comprehensive income for the 365 161 526
year
Share issue 99 - 99
Deemed treasury shares purchased (78) - (78)
Shares disposed by Dinokana 17 - 17
Treasury share options purchased (21) - (21)
Treasury share options exercised 241 - 241
Employee share based payments 28 - 28
Acquisition of subsidiary - 240 240
Disposal of interests to 52 47 99
minorities
Increase in minority funding - 354 354
Acquisition of minorities` (26) 4 (22)
interests
Dividends paid (227) (332) (559)
Balance at 30 June 2009 569 1 020 1 589
SUPPLEMENTARY INFORMATION
for the year ended 30 June
R million 2010 % 2009
change
EBITDA RECONCILIATION
Operating profit 1 641 (13) 1 895
Other income - (47)
Monticello insurance deductible* 59 -
Depreciation and amortisation 685 658
Property and equipment rental 114 74
Pension fund deficit/(surplus) 1 (9)
recognition*
Net loss on disposal and 1 9
impairment of property, plant and
equipment*
Impairment of goodwill - 108
(Profit)/loss on disposal of (2) 6
investments*
Pre-opening expenses* 28 21
Reversal of Employee Share Trusts` 18 31
consolidation*
EBITDA 2 545 (7) 2 746
EBITDA margin (%)(i) 32 34
HEADLINE EARNINGS AND ADJUSTED
HEADLINE EARNINGS RECONCILIATION
Profit attributable to ordinary 513 2 501
shareholders
Headline earnings adjustments 36 76
Net loss on disposal and 1 9
impairment of property, plant and
equipment
(Profit)/loss on disposal of (2) 6
investments
Monticello insurance deductible 37 -
relating to asset reinstatement
Currency translation reserve - (47)
realised(ii)
Impairment of goodwill - 108
Tax on the above items (4) (2)
Minorities` interests on the above (17) (4)
items
Headline earnings 528 (8) 571
Adjusted headline earnings 52 3
adjustments
Pre-opening expenses 28 21
Pension fund deficit/(surplus) 1 (9)
recognition
Monticello insurance deductible 22 -
relating to business interruption
Foreign exchange loss/(gain) on 1 (9)
intercompany loans
Tax on the above items (9) (1)
SARS tax refund (53) -
Tax on share premium distributions (2) (5)
received
Minorities` interests on the above (22) (9)
items
Reversal of Employee Share Trusts` 18 41
consolidation(iii)
Adjusted headline earnings 512 (15) 600
Number of shares (`000)
- in issue 93 700 91 740
- for EPS calculation 92 967 88 492
- for diluted EPS calculation 93 982 89 719
- for adjusted headline EPS 100 040 95 884
calculation(iii)
- for diluted adjusted headline 101 055 97 111
EPS calculation(iii)
Earnings per share (cents)
- basic earnings per share 552 (3) 566
- headline earnings per share 568 (12) 645
- adjusted headline earnings per 512 (18) 626
share
- diluted basic earnings per share 546 (2) 558
- diluted headline earnings per 562 (12) 636
share
- diluted adjusted headline 507 (18) 618
earnings per share
Tax rate reconciliation (%)
Effective tax rate 40 47
Preference share dividends (5) (6)
STC (6) (8)
Prior year over-provisions 7 -
Foreign taxes (1) (1)
Other (7) (4)
SA corporate tax rate 28 28
EBITDA to interest (times) 5.0 4.4
Borrowings to EBITDA (times) 2.47 2.37
Net asset value per share (Rand) 12.91 6.20
Capital expenditure 1 031 1 476
Capital commitments
- contracted 289 349
- authorised but not contracted 880 1 186
- conditionally authorised 986 1 000
2 155 2 535
(i) The EBITDA margin has been calculated on revenue before
deducting promotional allowances.
(ii) Realisation of foreign currency translation reserve on
distribution of dividend.
(iii) The consolidation of the Employee Share Trust is reversed
in the calculation of adjusted headline earnings as the group
does not receive the economic benefits of the trust.
ACCOUNTING POLICIES
The condensed consolidated financial information for the year ended
30 June 2010 has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS) and the presentation and disclosure requirements
of IAS 34 - Interim Financial Reporting. The accounting policies
applied, other than those described below, are consistent with
those adopted in the financial statements for the year ended 30
June 2009.
The group has adopted the following new standard and amendment
which are mandatory for the first time for the financial year
beginning 1 July 2009:
- IAS 1 (Revised) - Presentation of Financial Statements, which
requires changes in equity not relating to equity owners to be
disclosed in a separate statement. The group has elected to present
a statement of comprehensive income.
- IFRS 8 - Operating Segments, which requires an entity to present
segment information on the same basis as that used for internal
reporting purposes. The group determined that the operating
segments were the same as the business segments previously
identified under IAS 14 - Segmental Reporting, resulting in no
material change to the segmental report.
REVIEW OPINION
The condensed consolidated financial information for the year ended
30 June 2010 has been reviewed by the group`s auditors,
PricewaterhouseCoopers Inc. This review has been conducted in
accordance with International Standard on Review Engagements 2410,
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity", and their unmodified review
opinion is available for inspection at the company`s registered
office.
EARNINGS AND DIVIDEND
Revenue for the year ended 30 June 2010 declined 1% from last year
to R8.0 billion, while comparable revenue (excluding Monticello in
Chile and the Federal Palace in Nigeria) was 3% lower. Gaming
revenue was in line with last year at R6.2 billion while rooms
revenue declined by 5%.
EBITDA of R2.5 billion was 7% lower than last year and the EBITDA
margin declined 2.2 percentage points to 32.0%. The lower margin is
due to the contraction in comparable revenue and increases in
operating costs. Excluding the results of Monticello and the
Federal Palace, the EBITDA margin was 32.9% versus 36.2% last year.
Fluctuations in the Rand and Chilean Peso against the US Dollar
during the year resulted in a net exchange loss of R15 million
compared to a gain of R42 million last year.
Net interest paid decreased by 19% from R626 million to R506
million as a result of lower prevailing interest rates and lower
borrowings.
Tax at R452 million declined by 26% from last year as a result of
the lower earnings in the current year and the reversal of prior
year over-provisions. The effective tax rate excluding non
deductible preference share dividends, STC and prior year over-
provisions was 36% (33%) due primarily to other permanent
differences.
Adjusted headline earnings of R512 million and diluted adjusted
headline earnings per share of 507 cents were 15% and 18% below
last year respectively.
Trading conditions are stabilising and the group`s financial
position and debt ratios have strengthened. Capital expenditure for
the year ahead is expected to be significantly lower than
originally forecast and the board has therefore resolved to resume
dividend payments. A dividend of 100 cents per share has been
declared.
SEGMENTAL ANALYSIS
Revenue EBITDA Operating
profit
R million 2010 2009 2010 2009 2010 2009
GrandWest 1 582 1 642 614 675 470 535
Sun City 1 160 1 146 173 207 61 95
Carnival City 965 997 303 351 214 267
Sibaya 849 810 296 295 222 233
Boardwalk 414 418 160 172 130 142
Carousel 310 308 77 81 47 52
Wild Coast Sun 287 302 48 56 26 41
Morula 254 250 51 56 31 33
Meropa 236 227 98 93 81 78
Windmill 193 204 71 84 52 63
Table Bay 167 199 35 65 9 33
Swaziland 166 177 7 23 (3) 15
Botswana 156 181 48 68 37 55
Zambia 149 217 26 55 8 34
Flamingo 127 129 38 42 26 32
Kalahari Sands 123 128 34 36 13 22
Golden Valley 112 109 27 34 9 14
Lesotho 93 98 12 15 5 11
Other operating 40 47 (12) (7) (14) (16)
segments
Management activities 607 664 345 382 332 381
7 990 8 253 2 451 2 783 1 756 2 120
Monticello - Chile+ 881 397 99 (22) (3) (81)
Federal Palace - 11 - 4 - 2 -
Nigeria
Total operating 8 882 8 650 2 554 2 761 1 755 2 039
segments
Central office and - - (9) (15) (9) (133)
other
Eliminations (575) (609) - - - -
Other income - - - - - 47
Other expenses(iv) - - - - (105) (58)
Monticello - Chile (346) - - - - -
(business
interruption)+
7 961 8 041 2 545 2 746 1 641 1 895
Promotional (164) (126) - - - -
allowances
7 797 7 915 2 545 2 746 1 641 1 895
+ Impacted by earthquake - see commentary on Monticello.
(iv) Refer to EBITDA reconciliation denoted*.
GAMING
Comparable revenue from gaming decreased by 2% from last year as
customers continued to feel the economic pressures. Popularity of
the properties remains high and footfalls strong but spend per
customer has declined across the board.
GrandWest was again specifically impacted by the depressed regional
economy and achieved revenue of R1 582 million and EBITDA of R614
million which were 4% and 9% below last year respectively. The
EBITDA margin of 38.8% declined by 2.3 percentage points from
41.1%.
Carnival City achieved revenue of R965 million and EBITDA of R303
million, a decline compared to last year of 3% and 14%
respectively. This resulted in an EBITDA margin of 31.4% which was
3.8 percentage points below last year. Some disruption on the
casino floor due to refurbishment resulted in a marginal loss of
market share, with the group`s share of the Gauteng market for the
year declining from 20.9% to 20.6%. EBITDA was also impacted by
increased property taxes and energy costs.
Sibaya performed satisfactorily, increasing revenue by 5% to R849
million. EBITDA of R296 million was in line with last year, while
the EBITDA margin of 34.9% declined by 1.5 percentage points. The
KwaZulu-Natal market grew by 3.8% in the year and Sibaya`s market
share at 35.5% was 0.3 percentage points higher.
Boardwalk`s revenue declined by 1% to R414 million and EBITDA by 7%
to R160 million. As a result the EBITDA margin declined 2.5
percentage points to 38.6%.
Monticello closed for repairs following the earthquake on 27
February 2010, and re-opened again on 30 June. Property damage of
US$8.2 million and a business interruption claim of US$25 million
was finalised with insurers. This amount includes re-launch costs
of US$2.2 million which will be spent in the 2011 financial year.
The group results include trading for Monticello up to the date of
the earthquake and the opening day of 30 June 2010, the business
interruption claim of US$22.8 million and operating costs incurred
during the closed period. Included in adjusted headline earnings is
the insurance deductible of US$7.5 million.
The earthquake and its consequences masked a positive trading trend
at Monticello. Without it, revenue was anticipated to have
increased by more than 122% over last year, and the EBITDA achieved
of R99 million (which did include the business interruption
proceeds) compares favourably to the R22 million loss in the
previous year.
HOTELS AND RESORTS
Rooms revenue of R857 million declined by 5% from last year. Group
occupancy was down 5 percentage points at 67% and an average room
rate of R898 was achieved, which was a marginal decline on last
year. The occupancy decline was due primarily to Sun City, The
Table Bay and the Zambian hotels experiencing weaker demand from
both international markets and the groups and conventions sector.
While occupancy levels during the World Cup were below
expectations, higher room rates were achieved, improving the
overall achieved room rates particularly at Sun City and The Table
Bay.
Sun City`s room occupancy was 5 percentage points lower at 69%
while the average room rate was 7% higher than last year at R1 334.
EBITDA declined by 16% to R173 million. The lower EBITDA was
primarily the result of the lower occupancy achieved and increased
property and energy costs.
The Table Bay achieved occupancy of 53% (67%) and the average room
rate increased by 5% in the current year to R2 033 resulting in an
EBITDA decline of 46% from last year to R35 million.
The Royal Livingstone and Zambezi Sun achieved an aggregate
occupancy of 49% (60%) at an average room rate of US$189, a 12%
decline against last year. In US dollars, EBITDA was 45% below last
year.
The Botswana operations achieved revenue of R156 million and EBITDA
of R48 million, which was 14% and 29% below last year respectively.
The decline was exacerbated by the 10% strengthening of the Rand
against the Botswana Pula.
The Federal Palace transaction was completed on 26 May 2010 with
the group now owning 49% of the company. Prior to this date, the
29% investment was held as an associate. The group has invested
US$28 million in equity and advanced a loan of US$15 million to the
company. An associate loss of R3 million was incurred for the nine
months from September to May 2010. The casino opened in December
2009 and steady progress has been made in attracting gaming
customers to the property. Demand in Lagos was subdued for the year
with consequent pressure on occupancy and rates resulting in an
aggregate occupancy of 36% at an average room rate of US$320.
MANAGEMENT ACTIVITIES
Management fees and related income of R607 million was 9% lower
than last year, while EBITDA of R345 million was 10% lower.
Included in revenue are development fees of R26 million compared to
R40 million last year.
FINANCIAL POSITION
The group`s borrowings decreased by R217 million to R6.3 billion at
30 June 2010. The Chilean facilities have been restructured
resulting in the shareholders funding a US$50 million repayment of
the long term facility.
30 June 2010 30 June
2009
R million Borrowings Intergroup Third Third
borrowings party party
borrowings borrowings
SFI Resorts SA (Chile) 796 (104) 692 912
SunWest International 741 - 741 771
(Pty) Ltd
Afrisun Gauteng (Pty) 504 (110) 394 352
Ltd
Afrisun KZN (Pty) Ltd 446 - 446 457
The Tourist Company of 337 (110) 227 -
Nigeria Plc
Worcester Casino (Pty) 211 (37) 174 194
Ltd
Meropa Leisure and 110 - 110 117
Entertainment (Pty) Ltd
Mangaung Sun (Pty) Ltd 80 - 80 73
Teemane (Pty) Ltd 68 - 68 69
Lesotho Sun (Pty) Ltd 46 (46) - -
Transkei Sun 45 (45) - -
International Ltd
Emfuleni Resorts (Pty) 5 - 5 97
Ltd
Central office 2 676 452 3 128 3 196
6 065 - 6 065 6 238
Employee Share Trusts 225 - 225 269
6 290 - 6 290 6 507
Capital expenditure incurred during the year
R million
Expansionary
Monticello* 313
Sibaya 41
354
Refurbishment
Lesotho 101
Wild Coast Sun 88
189
Other ongoing asset replacement 424
967
Monticello reinstatement costs 64
Total capital expenditure 1 031
* Includes capitalised interest of R21 million.
BUSINESS COMBINATION - IFRS 3
On 26 May 2010 the Federal Palace in Nigeria was consolidated as
follows:
R million
Property, plant and equipment 798
Current assets 92
Deferred tax (13)
Current liabilities (443)
Net assets 434
Minorities` interests (220)
Net assets acquired 214
Previously held associate (93)
Net assets acquired and consideration 121
settled in cash
Cash and cash equivalents (65)
Net cash outflow 56
As permitted by IFRS 3 - Business Combinations, a provisional
purchase price allocation (PPA) was performed, resulting in a fair
value increase of the land. The final PPA will be completed within
the next reporting period.
DEVELOPMENTS
Wild Coast Sun
The first two phases of the Wild Coast Sun refurbishment programme,
which comprised the refurbishment of the casino and 54 rooms, were
completed during the year. The next phase, the refurbishment of an
additional 57 rooms, will be completed by December 2010. The total
project will be completed by mid-2012 at a capital cost of R400
million.
Windmill
Construction of the new Prive area commenced in May 2010 and should
be completed by December 2010. The total capital expenditure on
this project is estimated at R35 million and includes both smoking
and non-smoking facilities, a lounge and separate entrance from a
new private parking area.
Monticello
Monticello was completed just ahead of the earthquake in February
2010 at a final cost of US$262 million.
Federal Palace
The 200-slot and 8-table casino at the Federal Palace Hotel was
opened during December 2009 and the conference facility during
January 2010, at a combined cost of US$19 million. The
refurbishment of the swimming pool and creation of a pool club,
including a water park, sports facilities and exercise area, is
well advanced and is expected to be completed during September 2010
at a cost of US$2.5 million.
SUNWEST EXCLUSIVITY
GrandWest`s initial 10-year casino exclusivity in the Cape
Metropole expires during December 2010. The Provincial Government
of the Western Cape (PGWC) is considering whether to permit one of
the other casino licence holders in the Western Cape to relocate to
the Cape Metropole and is engaging interested stakeholders before
taking a final decision in this regard. The PGWC has indicated that
it would seek to extend GrandWest`s exclusivity to enable proper
completion of this exercise and any consequential processes.
Insufficient information is currently available to assess the
potential impacts on GrandWest`s revenue and profitability.
However, in the event that a relocation and establishment of a new
casino goes ahead, it is likely to be material to GrandWest once
opened, which is unlikely to be before the end of 2012.
BOARDWALK`S CASINO LICENCE
The Eastern Cape Gambling and Betting Board (ECGBB) announced
during September 2009 that Boardwalk is the preferred bidder for
the exclusive gaming licence in Port Elizabeth. Currently the
licensee and the ECGBB are in final consultations on the licence
conditions and finalisation is anticipated in advance of the expiry
of the current licence in October 2010.
OUTLOOK
Although trading conditions are stabilising, it is anticipated that
demand within the gaming and hospitality industries will remain
weak in the year ahead.
Notwithstanding this, some growth in revenue is expected from
existing operations in addition to greater contributions from
Monticello and the Federal Palace. Accordingly, the group expects
growth in adjusted headline earnings per share.
The outlook has not been reviewed or reported on by the company`s
auditors.
For and on behalf of the board
MV Moosa DC Coutts-Trotter
Chairman Chief Executive
Registered Office: 27 Fredman Drive, Sandown, Sandton 2031
Sponsor: Investec Bank Limited
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70
Marshall Street, Johannesburg 2001
Directors: MV Moosa (Chairman), IN Matthews (Lead Independent
Director), DC Coutts-Trotter (Chief Executive)*, RP Becker (Chief
Financial Officer)*, ZBM Bassa, PL Campher, MP Egan, Dr NN Gwagwa,
BLM Makgabo-Fiskerstrand, LM Mojela, DM Nurek, E Oblowitz, GR
Rosenthal.
*Executive
Group Secretary: CA Reddiar
27 August 2010
DECLARATION OF DIVIDEND
Notice is hereby given that a dividend of 100 cents per share for
the year ended 30 June 2010 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 dividend are as follows:
2010
Last day to trade cum dividend Friday, 10 September
First day to trade ex dividend Monday, 13 September
Record date Friday, 17 September
Payment date Monday, 20 September
No share certificates may be dematerialised or rematerialised
between Monday, 13 September and Friday, 17 September 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
CA Reddiar
Group Secretary
27 August 2010
www.suninternational.com
Sponsor: Investec Bank Limited
Date: 27/08/2010 07:30:01 Supplied by www.sharenet.co.za
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