Wrap Text
SUI - Sun International - Profit And Dividend Announcement For The Six
Months Ended 31 December 2007
Sun International Limited
(Incorporated in South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000097580
("Sun International")
Profit and Dividend Announcement
for the six months ended 31 December 2007
- +12% Revenue
- +14% EBITDA
- +4% Adjusted HEPS
- +20% Dividend per share
- +R2,3 billion share buy back concluded
Group income statement
Six months ended Year
ended
31 December 30 June
Restated+
Unaudited % Unaudited Audited
R million 2007 change 2006 2007
Revenue 3 796 12 3 380 6 937
Casino 2 931 13 2 594 5 359
Rooms 421 9 386 776
Food, beverage and other 444 400 802
Other income - 84 85
Pension fund surplus - 10 10
recognition
Employee costs (709) (661) (1 317)
Levies and VAT on casino (624) (546) (1 133)
revenues
Depreciation and (278) (253) (518)
amortisation
Promotional and marketing (338) (293) (577)
costs
Consumables and services (376) (344) (683)
Property and equipment (52) (37) (74)
rental
Property costs (125) (110) (224)
Other operational costs (268) (225) (472)
Impairment of investment - (97) (97)
BEE transaction charge (182) - -
Operating profit 844 908 1 937
Foreign exchange losses (22) (11) (10)
Interest income 43 57 77
Interest expense (289) (168) (313)
Profit before taxation 576 786 1 691
Taxation (351) (321) (669)
Profit 225 465 1 022
Attributable to
Minorities 122 96 224
Ordinary shareholders 103 369 798
225 465 1 022
+ At 31 December 2006 IAS 19 Employee benefits was applied
resulting in the recognition of a pension fund surplus of R142
million. At 30 June 2007 the group early adopted IFRIC 14
resulting in the surplus being reassessed at R10 million. The net
after tax effect of the restatement of the financial results for
the six months ended 31 December 2006 is a decrease in profit of
R94 million.
Number of shares (000`s)
- in issue 88 504 104 589 104 589
- for EPS calculation 91 185 105 135 104 864
- for diluted EPS 93 389 107 132 106 800
calculation
Earnings per share (cents)
- basic 113 351 761
- headline 120 414 829
Diluted earnings per share
(cents)
- basic 110 344 747
- headline 117 406 814
Dividends declared per 222 20 185 400
share (cents)
EBITDA to interest (times) 5,6 11,0 10,9
Dividend payout (%) 63,7 55,4 54,7
HEADLINE EARNINGS
RECONCILIATION
Profit attributable to
ordinary shareholders 103 369 798
Net loss/(profit) on
disposal and impairment
of property, plant and 2 (3) 2
equipment
Impairment of investment - 97 97
Loss on disposal of 2 - -
investment
Taxation relief on the 6 - 2
above items
Minorities` interests in (4) (28) (30)
the above items
Headline earnings 109 435 869
Supplementary information
Six months ended Year
ended
31 December 30 June
Restated+
Unaudited % Unaudited Audited
R million 2007 change 2006 2007
EBITDA RECONCILIATION
Operating profit 844 (7) 908 1 937
Depreciation and 278 253 518
amortisation
Other income - (84) (85)
Pension fund surplus - (10) (10)
recognition*
Property & equipment 52 37 74
rental
BEE transaction charge* 182 - -
Net loss/(profit) on
disposal and impairment
of property, plant and 2 (3) 2
equipment*
Impairment of investment* - 97 97
Ster Century guarantee 4 - -
provision*
Loss on disposal of 2 - -
investment*
Pre-opening expenses* 7 6 8
Reversal of Employee Share
Trusts` consolidation* 18 13 20
EBITDA 1 389 14 1 217 2 561
EBITDA margin (%) 37 36 37
ADJUSTED HEADLINE EARNINGS
RECONCILIATION
Headline earnings 109 435 869
Pre-opening expenses 7 6 8
Realisation of fair value - (84) (84)
gains on KZL shares
BEE transaction charge 182 - -
Pension fund surplus - (10) (10)
recognition
Foreign exchange losses on
intercompany loans 8 4 2
Ster Century guarantee 4 - -
provision
Fair value adjustments on - - (1)
loan origination
Taxation relief on the 16 15 12
above items
Minorities` interests in (8) (4) (3)
the above items
Reversal of Employee Share
Trusts`
consolidation# 22 11 21
Adjusted headline earnings 340 ( 9) 373 814
Number of shares (000`s)#
- for adjusted headline 97 627 111 577 111 306
EPS calculation
- for diluted adjusted
headline
EPS calculation 99 831 113 574 113 242
Earnings per share (cents)
- adjusted headline 348 334 731
- diluted adjusted 341 4 328 719
headline
# The consolidation of the Employee Share Trusts is reversed as the group
does not receive the economic benefits of these trusts.
Group Balance Sheet
31 December 30 June
2007 2006 2007
Restated+
R million Unaudited Unaudited Audited
Assets
Non current assets
Property, plant and equipment 6 069 5 613 5 883
Intangible assets 339 372 361
Available-for-sale investment 44 44 44
Pension fund asset 10 10 10
Loans and receivables 129 194 159
Deferred taxation 36 17 25
6 627 6 250 6 482
Current assets
Non current asset held for - 164 164
sale
Loans and receivables - 5 1
Accounts receivable and other 477 411 398
Cash and cash equivalents 1 111 993 1 089
1 588 1 573 1 652
Total assets 8 215 7 823 8 134
Equity And Liabilities
Capital and reserves
Ordinary shareholders` equity 15 2 197 2 348
Minorities` interests 594 609 642
609 2 806 2 990
Non current liabilities
Borrowings 4 421 2 461 2 271
Other non current liabilities 154 133 139
Deferred taxation 410 404 394
4 985 2 998 2 804
Current liabilities
Accounts payable and other 1 084 813 1 065
Borrowings 1 537 1 206 1 275
2 621 2 019 2 340
Total liabilities 7 606 5 017 5 144
Total equity and liabilities 8 215 7 823 8 134
Borrowings to EBITDA (times) 4,29 3,01 1,39
Net asset value per share 0,17 21,01 22,45
(Rand)
Capital expenditure 456 465 972
Capital commitments
- contracted 592 471 385
- authorised but not
contracted 1 541 506 961
- conditionally authorised 812 - 2 250
Directors` valuation of
unlisted investments
and loans 183 417 378
Group Cash Flow Statement
Six months ended Year
ended
31 December 30 June
Restated+
Unaudited Unaudited Audited
R million 2007 2006 2007
Cash generated by operations 1 237 1 173 2 488
before:
Working capital changes (13) (76) 120
Cash generated by operations 1 224 1 097 2 608
Taxation paid (375) (381) (704)
Cash retained from operating 849 716 1 904
activities
Cash utilised in investing (650) (1 415) (1 941)
activities
Cash realised from investing 530 327 424
activities
Net cash (outflow)/inflow (699) 576 (48)
from financing activities
Translation losses on cash (13) (9) (6)
balances
Cash acquired through 5 42 -
acquisition of subsidiary
Increase in cash balances 22 237 333
Consolidated Statement Of Changes In Equity
Ordinary Other
reserves
Note1
shares
and Treasury Retained Minority
share
R million premium shares earnings interest Total
Balances at 1 551 (1 004) (1 360) 3 161 642 2 990
30 June
2007
- Share buy (1 544) (691) (110) (2 345)
back
- Treasury (85) (85)
share
options
purchased
- Employee 11 11
share based
payments
- BEE 121 61 182
transaction
charge
-Acquisitio (119) (32) (151)
n of
minorities`
interest
- Sale of 188 26 214
shares to
minority
- Share (88) (88)
premium
reduction
- Profit 103 122 225
- Foreign
currency
translation (17) (3) (20)
adjustment
- Dividends (190) (134) (324)
paid
Balances at 7 (1 780) (1 176) 2 964 594 609
31 December
2007
Note 1: Included in other reserves are FCTR, fair value reserves,
share based payments` reserve and reserve for non-controlling
interests.
Accounting policies
The condensed consolidated financial information has been prepared in
accordance with the recognition and measurement criteria of all applicable
statements and interpretations of International Financial Reporting
Standards (IFRS) and is presented in terms of the disclosure requirements
set out in IAS 34 - Interim Financial Reporting. The accounting policies
applied to the condensed consolidated financial information are consistent
with those as set out in the annual financial statements for the year
ended 30 June 2007.
Earnings And Dividend
The group achieved satisfactory growth in revenues to R3,8 billion for the
six months to 31 December 2007 which were 12% ahead of last year. Growth
in gaming revenues of 13% and hospitality and other revenues of 10% were
achieved. Revenue growth however slowed towards the end of the period,
with revenue and gaming revenue aggregated growth for the months of
November and December at 10%. EBITDA of R1,4 billion for the six months
was 14% up on last year and the EBITDA margin improved 0,6 percentage
points to 36,6%.
The results include a BEE transaction charge of R182 million which
recognises the difference between the price at which Grand Parade
Investments Limited (GPI) was granted an option over 5% of the equity in
SunWest International (Pty) Limited (SunWest) and the estimated fair
value.
The Rand strengthened during the period resulting in an exchange loss of
R22 million, compared with a loss of R11 million in the comparable half
year.
The group net interest charge increased by R135 million over last year to
R246 million, arising predominantly from additional funding in respect of
the acquisition of 61,3% of Real Africa Holdings Limited (RAH) in
September 2006, and the share buy back on 30 July 2007 for R2,3 billion.
Taxation at R351 million was 9% higher than the comparable period. The
overall effective tax rate increased significantly due to the non-
deductibility of the BEE charge above and as a consequence of additional
preference share funding used to fund the share buy back and the
acquisition of RAH.
Adjusted headline earnings of R340 million were 9% below the previous year
due primarily to the increased interest charge. However, the diluted
adjusted headline earnings per share of 341 cents were 4% ahead of last
year as a result of the lower number of shares in issue as a result of the
share buy back.
The board has declared an interim dividend of 222 cents per share which is
20% ahead of last year`s interim dividend paid. This is in line with the
group`s stated intention to continue increasing the dividends payable to
shareholders.
Trading
Segmental Analysis
R million Revenues EBITDA
Six months Year Six months Year
to 31 Dec ended ended
30 June to 31 Dec 30 June
2007 2006 2007 2007 2006 2007
Unaudit Unaudit Audited Unaudit Unaudit Audited
ed ed ed ed
GrandWest 879 778 1595 363 336 693
Sun City 563 538 1059 98 93 190
Carnival 485 437 908 165 154 333
City
Sibaya 392 318 684 142 103 247
Boardwalk 230 208 435 93 84 179
Carousel 158 150 295 46 44 88
Wild Coast 150 135 274 30 28 55
Morula 123 108 231 28 23 56
Meropa 107 93 199 43 38 83
Windmill 101 90 184 41 37 77
Zambia 97 91 181 29 24 51
Table Bay 90 85 173 31 30 63
Swaziland 84 78 148 13 12 19
Botswana 71 57 118 24 17 34
Flamingo 65 63 125 23 25 47
Namibia 59 54 102 17 15 29
Lesotho 49 48 92 9 11 17
Golden 40 12 46 11 4 14
Valley
Management 327 283 586 189 145 278
Activities
Central 29 19 64 (6) (6) 8
Office
Eliminations (303) (265) (562) - - -
Other Income
Other
Expenses#
3 796 3 380 6 937 1 389 1 217 2 561
# Items
included
indicated by
* on EBITDA
reconciliati
on.
R million Operating Profit
Six months Year
to 31 Dec ended
30 June
2007 2006 2007
Restated
+
Unaudited Unaudited Audited
GrandWest 293 285 594
Sun City 47 44 89
Carnival City 125 123 268
Sibaya 107 72 181
Boardwalk 78 70 151
Carousel 34 33 65
Wild Coast 22 20 39
Morula 16 12 32
Meropa 35 30 68
Windmill 33 29 60
Zambia 21 16 33
Table Bay 16 16 34
Swaziland 9 8 10
Botswana 18 11 19
Flamingo 18 20 37
Namibia 9 7 10
Lesotho 7 9 7
Golden Valley 4 2 6
Management 185 140 269
Activities
Central Office (18) (20) (3)
Eliminations - - -
Other Income - 84 85
Other Expenses# (222) (103) (117)
837 908 1 937
# Items included
indicated by * on
EBITDA
reconciliation.
Gaming
Gaming revenue improved 13% to R2,9 billion, with slot and table revenues
12% and 20% ahead of last year respectively. The rate of revenue growth
has slowed compared to the growth rates achieved in recent periods mainly
as a result of the impacts on disposable income and consumer confidence
due to recent interest rate increases and the higher rate of inflation.
GrandWest generated revenue growth of 13% over last year and EBITDA grew
8% to R363 million. The additional costs associated with the significantly
enlarged casino and entertainment facilities resulted in an EBITDA margin
decline of
1,9 percentage points to 41,3%. Management is focused on improving this
margin.
Carnival City achieved revenue growth of 11% over last year. EBITDA of
R165 million grew 7% with margins declining
1,2 percentage points to 34,0% due to higher marketing and promotional
expenditure, although the margin is anticipated to improve over the full
year. The group`s share of the Gauteng market, which includes Morula,
improved marginally to 22%.
Sibaya achieved revenues of R392 million and EBITDA of R142 million, 23%
and 38% ahead of last year`s respectively. The improvement in EBITDA
margin of 3,8 percentage points to 36,2% was primarily due to strong
revenue growth. Sibaya improved its overall share of the KwaZulu Natal
market to 36% with the additional rooms at Sibaya Lodge assisting this
performance.
Boardwalk`s revenue grew by 11% to R230 million despite the local economy
being affected by labour strikes in the motor industry. The EBITDA margin
of 40,4% was in line with the previous year. Revenue growth has been
particularly slow at this unit over the last few months.
Hotels And Resorts
Rooms revenue of R421 million was 9% ahead of the previous year. The
overall group occupancy of 80% (73%) was 7 percentage points ahead,
although the average room rate only improved 2% to R794 due to the
addition of lower yielding rooms at Carnival City and Sibaya.
Sun City`s room occupancy, at 84%, was 5 percentage points ahead of last
year. The average room rate of R1 091 was 7% ahead. The resort generated
an EBITDA of R98 million, 5% ahead of last year which is particularly
pleasing given the closure of 170 rooms for five months of the half year
as part of the Sun City Main Hotel refurbishment programme.
The Table Bay achieved an occupancy of 72% (70%) for the period, while the
average room rate of R1 609 was 4% ahead of the previous year.
The Royal Livingstone and Zambezi Sun achieved an aggregate occupancy of
79% (75%), and an average room rate of US$169, 14% ahead of last year.
Total revenue was 14% ahead in US dollar terms, with much of the occupancy
growth attributable to a further increase in international visitors.
Trading conditions in Botswana improved significantly during the year as a
result of an improvement in the economy and a higher market share,
following the refurbishment programme to the casino, rooms and certain
public areas in 2006.
Management Activities
Management fee and related income of R327 million was 16% ahead of last
year, which was attributable to the good growth in the profitability of
the operations, as well as the development fee earned on the project in
Chile. EBITDA of R189 million was 30% higher as a result of an improved
margin of 58% (51%) in part due to lower costs of R16 million (R23
million) incurred during the period in pursuing international
opportunities.
Developments
The GrandWest expansion was completed within the forecast R450 million.
The multi-purpose arena opened in October 2007 and the refurbishment of
the original casino areas was completed in early December 2007.
Construction of the 98 room Golden Valley Lodge in Worcester at a cost of
R65 million is progressing well and is expected to be completed during
March 2008.
At Carnival City, construction of an R82 million multilevel parkade for
over 1 000 vehicles will be completed by June 2008 and will provide
customers with improved access and convenience.
The phased Sun City Main Hotel refurbishment and enhancements commenced in
February 2007. The first phase consisting of 170 rooms was successfully
completed in November 2007. The balance of the rooms is planned to be
completed by November 2008. The total cost of the Sun City Main Hotel
refurbishment is projected at R260 million which includes the cost of
replacing infrastructural items such as air-conditioning, plumbing and
electrical items and refurbishing back of house areas including the
kitchens.
Balance Sheet
The share buy back was successfully completed on 30 July 2007 when the
group purchased 16 084 883 shares at a price of R145,35 representing 13,8%
of the group`s issued share capital.
The group`s borrowings have increased by R2,4 billion to
R6,0 billion with R2,0 billion relating to the preference share funding
raised to finance the share buy back.
Third Party Borrowings
31 December 30 June
R million 2007 2007
SunWest International (Pty) Ltd 513 448
Emfuleni Resorts (Pty) Ltd 116 133
Afrisun KZN (Pty) Ltd 369 434
Meropa Leisure and Entertainment 98 61
(Pty) Ltd
Teemane (Pty) Ltd 59 48
Afrisun Gauteng (Pty) Ltd 367 266
Mangaung Sun (Pty) Ltd 18 44
Worcester Casino (Pty) Ltd 191 131
Central Office 4 033 1 787
5 764 3 352
Employee Share Trusts 194 194
5 958 3 546
Capital expenditure incurred
during the six months:
R million
Expansionary:
GrandWest 120
Golden Valley Lodge 39
Carnival City Parkade 31
190
Refurbishment:
Sun City Main Hotel 76
Meropa 14
90
Other ongoing asset replacement 176
Total Capital Expenditure 456
Offshore expansion
Chile
Construction of the casino project located south of Santiago in Chile, is
progressing well with the casino component anticipated to open to the
public in October 2008. The retail and entertainment components are
scheduled for completion at the end of calendar 2008 and the hotel is due
to open in May 2009.
The development will comprise a casino with 1 500 slot machines and 80
tables, a large conference centre, a 150-room hotel, bars and restaurants,
and other entertainment facilities. The project is estimated to cost
US$200 million.
The group`s investment has been approved by the country`s gaming
regulator.
Nigeria
Sun International assumed operational responsibility for the existing
Federal Palace Towers hotel on Victoria Island in
October 2007 and having provided bridging finance of US$10 million has
commenced the furnishing of the 150-room Federal Palace Hotel. The terms
of the gaming licence are being finalised with the Nigerian authorities.
Once the licence is issued,the group will acquire its equity interest and
commence the refurbishment of the 230-room Federal Palace Towers hotel and
the building of a new casino with 24 tables and an initial 300 slot
machines. The cost of the project is now estimated at US$150 million.
Egypt
The Port Ghalib resort in Egypt opened in January 2008. Located on the Red
Sea, this resort, for which the group has a management contract, includes
three hotels totalling 948 rooms and an international conference centre.
Changes to Shareholding in SunWest
Shareholders were advised in an announcement released on SENS on 15
October 2007 that Sun International had entered into agreements with GPI
whereby GPI will ultimately hold a 30% economic interest in SunWest.
In terms of this transaction, GPI acquired an additional 4% in SunWest
from Sun International (South Africa) Limited (SISA) for R83,4 million on
28 November 2007, and exercised its option from SISA over 2,46% in SunWest
at R425 per share on 14 December 2007.
The option granted by SunWest for GPI to acquire a further 5% in SunWest
at R165 per share, which expires in 2010, has not as yet been exercised.
The group`s effective economic interest in SunWest after the exercise of
this option will be 59,3%.
Eastern Cape Casino Licences
In accordance with the Eastern Cape gaming legislation, casino licences in
that province are of a ten year duration.
The Wild Coast Sun`s casino licence expires on 31 August 2009. The Eastern
Cape Gambling and Betting Board has issued a request for proposal which
invites applications for a new casino licence in Zone 5 of the province,
in which the Wild Coast Sun is located. The group will be submitting an
application which will include a significant upgrade and an enhancement to
the resort. The issue of the new licence for the zone is currently
scheduled for October 2008.
The Boardwalk`s casino licence expires on 2 October 2010. No process has
as yet been announced for the issue of a new casino licence.
Sun International Brand
During the period the enhanced Sun International brand identity and pay-
off line of "A Million Thrills. One Destination" was introduced at all Sun
International properties.
A contract has been successfully concluded with Oscar-winning actress
Charlize Theron to star in the soon to be completed, multi-media brand
campaign. It is expected that the television commercial will first be
screened on 26 April 2008.
Directorate
Peter Swartz resigned from the board on 11 Febraury 2008 and the board
wishes to convey its thanks to Mr Swartz for his contribution during his
period as a director.
Outlook
Current trading, particularly in the group`s casinos in South Africa,
reflects a significant slowdown in the rate of revenue growth.
The group is projecting a lower rate of revenue and EBITDA growth in the
second half that will impact adjusted headline earnings per share for the
full year.
The intention is to increase the final dividend by a similar percentage to
the increase in the declared interim dividend.
For and on behalf of the board
DA Hawton DC Coutts-Trotter
Chairman Chief Executive
Registered office:
27 Fredman Drive, Sandown, Sandton 2031
Registrar:
Computershare Investor Services (Pty) Ltd, 70 Marshall Street,
Johannesburg 2001
Directors:
DA Hawton (Chairman), DC Coutts-Trotter (Chief Executive)*,
H Adams, RP Becker*, L Boyd, PL Campher, MP Egan, Dr NN Gwagwa,
IN Matthews, LM Mojela, MV Moosa, DM Nurek, E Oblowitz,
GR Rosenthal *Executive
Group secretary:
SA Bailes
Declaration of interim dividend
Notice is hereby given that an interim dividend of 222 cents (2007 : 185
cents) per share for the six months ended 31 December 2007 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:
2008
Last day to trade cum interim Friday, 28 March
dividend
First day to trade ex interim Monday, 31 March
dividend
Record date Friday, 4 April
Payment date Monday, 7 April
No share certificates may be dematerialised or rematerialised between
Monday, 31 March and Friday, 4 April 2008, 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
SA Bailes
Group Secretary
6 March 2008
Date: 06/03/2008 14:00:01 Supplied by www.sharenet.co.za
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