Wrap Text
SUI - Sun International Limited - Profit and Dividend Announcement for the
year ended 30 June 2009
Sun International Limited
("Sun International" or "the group" or "the company") Registration no
1967/007528/06 Share code: SUI ISIN: ZAE000097580
Profit and Dividend Announcement for the year ended 30 June 2009
Revenue +6%
EBITDA -3%
Adjusted HEPS -16%
GROUP INCOME STATEMENTS
for the year ended 30 June
% 2008
2009 Restated
R million Reviewed change Audited
Revenue
Casino 6 234 7 5 845
Rooms 900 2 881
Food, beverage and other 907 2 892
8 041 6 7 618
Less: Promotional allowances (126) (117)
7 915 7 501
Other income 47 13
Pension fund surplus recognition 9 12
Employee costs (1 520) (1 400)
Levies and VAT on casino revenue (1 353) (1 244)
Depreciation and amortisation (658) (568)
Promotional and marketing costs (592) (522)
Consumables and services (819) (777)
Property and equipment rental (74) (102)
Property costs (298) (252)
Other operational costs (654) (529)
Impairment of goodwill (108) -
BEE transaction charge - (182)
Operating profit 1 895 (3) 1 950
Foreign exchange profits 42 69
Interest income 93 79
Interest expense (719) (601)
Profit before tax 1 311 1 497
Tax (611) (784)
Profit 700 (2) 713
Attributable to:
Minorities 199 256
Ordinary shareholders 501 457
700 713
Number of shares (000`s)
- in issue 91 740 88 014
- for EPS calculation 88 492 89 826
- for diluted EPS calculation 89 719 91 028
Earnings per share (cents)
- basic 566 509
- headline 645 23 524
Diluted earnings per share
(cents)
- basic 558 502
- headline 636 517
Dividends declared per share - 480
(cents)
EBITDA to interest (times) 4,4 5,4
Dividend payout (%) - 64,2
HEADLINE EARNINGS RECONCILIATION
Profit attributable to ordinary 501 457
shareholders
Headline earnings adjustments 76 10
Net loss on disposal and
impairment of property,
plant and equipment and 9 14
intangible assets
Loss/(profit) on disposal of 6 (4)
investments
Currency translation reserve (47) -
realised(i)
Impairment of goodwill 108 -
Tax relief on the above items (2) 5
Minorities` interests in the (4) (1)
above items
Headline earnings 571 21 471
(i) Realisation of foreign currency translation reserve on
distribution of dividend.
SUPPLEMENTARY INFORMATION
for the year ended 30 June
2009 % 2008
R million change
EBITDA RECONCILIATION
Operating profit 1 895 (3) 1 950
Depreciation and amortisation 658 568
Other income (47) (13)
Pension fund surplus (9) (12)
recognition*
BEE transaction charge* - 182
Property and equipment rental 74 102
Net loss on disposal and
impairment of property,
plant and equipment and 9 14
intangible assets*
Ster Century guarantee - 3
provision*
Impairment of goodwill 108 -
Loss/(profit) on disposal of 6 (4)
investments*
Pre-opening expenses* 21 8
Reversal of Employee Share 31 38
Trusts` consolidation*
EBITDA 2 746 (3) 2 836
EBITDA margin (%)(ii) 34 37
ADJUSTED HEADLINE EARNINGS
RECONCILIATION
Headline earnings 571 21 471
Adjusted headline earnings 3 157
adjustments
Pre-opening expenses 21 8
Realisation of management - (13)
contract
Pension fund surplus recognition (9) (12)
Foreign exchange profits on (9) (11)
intercompany loans
Ster Century guarantee provision - 3
BEE transaction charge - 182
Tax relief on the above items (1) 20
Tax on share premium (5) 48
distributions received
Minorities` interests in the (9) (15)
above items
Reversal of Employee Share 41 39
Trusts` consolidation(iii)
Adjusted headline earnings 600 (17) 720
Number of shares (000`s)(iii)
- for adjusted headline EPS 95 884 96 268
calculation
- for diluted adjusted headline 97 111 97 470
EPS calculation
Earnings per share (cents)
- adjusted headline 626 (16) 748
- diluted adjusted headline 618 (16) 739
(ii) The EBITDA margin has been calculated on revenue before
deducting promotional allowances.
(iii) The consolidation of the Employee Share Trusts is
reversed as the group does not receive the economic
benefits of the trusts.
GROUP BALANCE SHEETS
at 30 June
2009 2008
R million Reviewed Audited
ASSETS
Non current assets
Property, plant and equipment 7 878 6 229
Intangible assets 382 308
Available-for-sale investment 48 44
Loans and other non current assets 49 76
Pension fund asset 31 22
Deferred tax 85 31
8 473 6 710
Current assets
Loans and receivables 184 501
Accounts receivable and other 536 571
Cash and cash equivalents 794 850
1 514 1 922
Total assets 9 987 8 632
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 569 119
Minorities` interests 1 020 546
1 589 665
Non current liabilities
Deferred tax 418 412
Borrowings 4 525 3 821
Other non current liabilities 233 210
5 176 4 443
Current liabilities
Accounts payable and other 1 240 1 247
Borrowings 1 982 2 277
3 222 3 524
Total liabilities 8 398 7 967
Total equity and liabilities 9 987 8 632
Borrowings to EBITDA (times) 2,37 2,15
Net asset value per share (Rands) 6,20 1,35
Capital expenditure 1 476 861
Capital commitments
- contracted 349 1 168
- authorised but not contracted 1 186 2 005
- conditionally authorised 1 000 -
2 535 3 173
GROUP CASH FLOW STATEMENTS
for the year ended 30 June
2009 % 2008
R million Reviewed change Audited
Cash generated by operations 2 676 2 804
before:
Working capital changes (52) 68
Cash generated by operations 2 624 (9) 2 872
Tax paid (622) (783)
Cash retained from operating 2 002 2 089
activities
Cash utilised in investing (1 814) (1 548)
activities
Cash realised from investing 482 484
activities
Net cash outflow from (728) (1 305)
financing activities
Effects of exchange rate
changes on
cash and cash equivalents 2 41
Decrease in cash balances (56) (239)
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Reviewed Share Treasury
capital shares Other
and and Reserves
R million premium options (iv)
Balances at 30 June 2008 8 (1 839) (1 170)
Share issue 99
Treasury shares purchased (78)
Treasury shares disposed of 12
Treasury share options
purchased (21)
Treasury share options 241
exercised
Employee share based payments 28
Release of share based
payment reserve (55)
Fair value adjustment on
available-for-sale investment 5
Net loss on cash flow hedges (87)
Transfer from hedging reserve
to income statement 32
Acquisition of subsidiary
Increase in minority funding
Disposal of interests to 52
minorities
Acquisiton of minorities` (26)
interests
Profit
Movement in currency
translation differences (22)
Realisation of foreign
currency translation reserve (64)
Dividends paid
Balances at 30 June 2009 107 (1 685) (1 307)
Reviewed
Retained Minorities`
R million earnings interests Total
Balances at 30 June 2008 3 120 546 665
Share issue 99
Treasury shares purchased (78)
Treasury shares disposed of 5 17
Treasury share options
purchased (21)
Treasury share options 241
exercised
Employee share based payments 28
Release of share based
payment reserve 55 -
Fair value adjustment on
available-for-sale investment 5
Net loss on cash flow hedges (27) (114)
Transfer from hedging reserve
to income statement 32
Acquisition of subsidiary 240 240
Increase in minority funding 354 354
Disposal of interests to 47 99
minorities
Acquisiton of minorities` 4 (22)
interests
Profit 501 199 700
Movement in currency
translation differences (11) (33)
Realisation of foreign
currency translation reserve (64)
Dividends paid (227) (332) (559)
Balances at 30 June 2009 3 454 1 020 1 589
(iv) Included in other reserves are foreign currency
translation reserve, share based payment reserve,
available-for-sale investment reserve, financial
instrument hedging reserve and profits and losses on
purchase and sale of 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, other than as described below,
are consistent with those as set out in the annual financial statements for
the year ended 30 June 2008.
As previously reported in the profit and dividend announcement for the six
months ended 31 December 2008, the group has applied hedge accounting in
respect of certain qualifying hedging instruments as permitted by IAS 39 -
Financial Instruments and has also changed the disclosure of revenue in line
with IAS 18 - Revenue.
In preparing the group`s results the assumption has been made that Boardwalk
will be successful with its bid for the renewal of its casino licence that
expires in October 2010.
REVIEW OPINION
The condensed consolidated financial information for the year ended 30 June
2009 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 at R8 billion was 6% ahead of last year but in line with
last year if non-comparable revenue from the new Monticello Grand Casino and
Entertainment World (Monticello) in Chile is excluded. Gaming revenue grew by
7% and hospitality and other revenue by 2%. EBITDA of R2,7 billion was 3%
down on last year and the EBITDA margin 3 percentage points down to 34,2%.
The margin decline was driven by subdued revenue growth, inflationary
increases in operating costs in South Africa and the loss incurred by
Monticello in its first nine months of trading. EBITDA excluding the
Monticello loss was 2% down on the prior year.
The current year operating profit includes an impairment of goodwill of R108
million relating to Monticello. This is as a result of the valuation of
Monticello being based on the current trading levels as required by IAS 36 -
Impairment of Assets. The group remains confident that the business will
perform to expectations and generate acceptable returns over the medium term.
In the prior year, a BEE transaction charge of R182 million was incurred on
the transaction with Grand Parade Investments Limited.
Fluctuations in the value of the Rand during the course of the year, as well
as foreign exchange profits in Chile, resulted in a net exchange profit of
R42 million, albeit that this was lower than the R69 million profit last
year.
Net interest costs increased by R104 million to R626 million primarily due to
the additional funding costs associated with the Monticello project in part
offset by the lower prevailing interest rates.
Tax at R611 million was 22% lower than last year. The high overall effective
tax rate was mainly as a result of the non deductibility of preference share
dividends, STC charges on dividend payments by subsidiaries and the losses
incurred by Monticello.
Adjusted headline earnings of R600 million and diluted adjusted headline
earnings per share of 618 cents were 17% and 16% below last year
respectively.
In light of prevailing economic conditions, funding requirements in Chile,
Nigeria and the Eastern Cape, and lower gearing levels required generally
from funding institutions in the current market, the board has elected to
preserve cash flows and strengthen the balance sheet. It has therefore been
resolved not to declare a final dividend for 2009.
TRADING
Segmental analysis
Revenues EBITDA Operating
Profit
R million 2009 2008 2009 2008 2009 2008
GrandWest 1 642 1 756 675 734 535 591
Sun City 1 146 1 147 207 223 95 115
Carnival City 997 954 351 329 267 252
Sibaya 810 782 295 294 233 224
Boardwalk 418 451 172 185 142 156
Carousel 308 318 81 91 52 66
Wild Coast Sun 302 299 56 62 41 47
Morula 250 243 56 55 33 31
Meropa 227 215 93 86 78 69
Zambia 217 208 55 63 34 45
Windmill 204 198 84 80 63 62
Table Bay 199 197 65 69 33 36
Botswana 181 151 68 51 55 39
Swaziland 177 157 23 21 15 12
Flamingo 129 127 42 44 32 33
Namibia 128 120 36 33 22 18
Golden Valley 109 87 34 24 14 10
Lesotho 98 97 15 16 11 12
Existing 7 542 7 507 2 408 2 460 1 755 1 818
operations
Monticello - 397 - (22) - (81) -
Chile
7 939 7 507 2 386 2 460 1 674 1 818
Management 664 659 382 380 381 371
activities
Central office 47 65 (22) (4) (149) (23)
& other
Eliminations (609) (613) - - - -
Other income 47 13
Other (58) (229)
expenses(v)
8 041 7 618 2 746 2 836 1 895 1 950
Promotional (126) (117) - - - -
allowances
7 915 7 501 2 746 2 836 1 895 1 950
(v) Refer EBITDA reconciliation denoted*.
GAMING
Comparable gaming revenue improved by 1% on last year. Recessionary economic
conditions and the impact on personal disposable incomes kept revenues under
pressure.
GrandWest and Boardwalk continued to experience challenging trading
conditions in their local markets. Cost containments have been particularly
focused at these operations which reduced the impacts on margins. GrandWest
revenue at R1 642 million and EBITDA at R675 million were 7% and 8% below
last year respectively with the EBITDA margin declining marginally by 0,7
percentage points to 41,1%. Boardwalk experienced a decline in revenues and
EBITDA of 7% to R418 million and R172 million respectively, resulting in an
unchanged EBITDA margin of 41,1%.
Carnival City achieved revenue of R997 million, an increase of 5% over last
year. EBITDA grew by 7% to R351 million with a 0,7 percentage point increase
in margin to 35,2%. The group`s share of the Gauteng market at 20,9% remained
in line with last year despite the opening of the seventh casino in Gauteng
in December 2007.
Sibaya revenue increased 4% to R810 million while EBITDA of R295 million
remained in line with last year. The EBITDA margin of 36,4% was 1,2
percentage points below last year. The KwaZulu-Natal market grew by 6% during
the year and Sibaya`s share of the market at 33,7% declined by 0,7 percentage
points due predominantly to the lower levels of play from our top end tables
market.
HOTELS AND RESORTS
Rooms revenue of R900 million was 2% ahead of the previous year with overall
group occupancy of 72% (76%) at an average room rate of R915, an improvement
of 8% on last year. The significant decline in occupancies is due to weaker
demand in the current economic climate, especially from international markets
and the groups and conventions sector.
Sun City`s room occupancy was 74% (84%) while the average room rate was 7%
ahead at R1 243. EBITDA at R207 million was 7% below last year as a result of
the lower occupancies.
The Table Bay achieved occupancy of 67% (74%), with an average room rate of
R1 930, an 11% improvement on last year. EBITDA declined by 6% to R65 million
due primarily to higher operating costs that were significantly impacted by
higher property taxes.
The Royal Livingstone and Zambezi Sun achieved an aggregate occupancy of 60%
(76%) at an average room rate of US$215, 21% ahead of last year. Revenue in
Rands at R217 million improved by 4% on last year.
Botswana achieved excellent growth with revenue increasing by 20% to R181
million and EBITDA by 33% to R68 million. Contributing to this growth was the
disruption caused by the refurbishment of a competitor`s property, the
group`s tiered rate strategy, and strong corporate business.
MANAGEMENT ACTIVITIES
Management fees and related income grew by 1% to R664 million reflecting the
difficult trading conditions. EBITDA of R382 million was in line with
the previous year.
BALANCE SHEET
The group`s borrowings have increased since June 2008 by R0,4 billion
to R6,5 billion due to the consolidation of Monticello from 20 August 2008
and further capital expenditure on this project, partially offset by reduced
gearing at various units and the central office.
Third party borrowings
30 June 30 June
R million 2009 2008
SFI Resorts SA (Chile) 912 -
SunWest International (Pty) Ltd 771 759
Afrisun KZN (Pty) Ltd 457 447
Afrisun Gauteng (Pty) Ltd 352 454
Worcester Casino (Pty) Ltd 194 200
Meropa Leisure and Entertainment (Pty) Ltd 117 117
Emfuleni Resorts (Pty) Ltd 97 119
Mangaung Sun (Pty) Ltd 73 10
Teemane (Pty) Ltd 69 69
Central office 3 196 3 675
6 238 5 850
Employee Share Trusts 269 248
6 507 6 098
Capital expenditure incurred during the year
R million
Expansionary
Monticello(vi) 969
Carnival City parkade 15
984
Refurbishment
Sun City Main Hotel 54
Lesotho Sun 9
63
Other ongoing asset replacement 429
Total capital expenditure 1 476
(vi) Capital expenditure post 20 August 2008
BUSINESS COMBINATION - IFRS 3
On 20 August 2008 Monticello was consolidated as follows:
R million
Property, plant and equipment 893
Other non current assets 74
Current assets 300
Non current liabilities (305)
Current liabilities (562)
Net assets 400
Minorities` interests (240)
Net assets acquired 160
Goodwill recognised 198
Consideration settled in cash 358
Cash and cash equivalents in Monticello (169)
Cash outflow 189
Goodwill comprises intellectual property and the casino licence. The fair
value of assets and liabilities approximate their carrying values.
DEVELOPMENTS
South Africa
The second phase of the Sun City Main Hotel refurbishment was completed in
November 2008. The total cost of the refurbishment was R260 million including
the cost of replacing air-conditioning, plumbing and electrical items and
refurbishment of back-of-house areas, including the kitchens.
Lesotho
The R140 million comprehensive refurbishment of the Lesotho Sun hotel, casino
and conference facility commenced in May 2009. Completion is anticipated
during November 2009.
Chile
The casino (1 500 slots and 80 tables) at Monticello, located 60 km south of
Santiago, opened in October 2008. The retail and entertainment areas are now
expected to open in September 2009 and the 155 room hotel two months later.
The overall projected capital expenditure is now US$247 million (US$236
million), the increase principally due to the group taking over funding of
the fast food and children`s entertainment areas and providing assistance in
the funding of certain retail concessionaires.
Trading to date has been impacted by the adverse economic conditions in Chile
and by delays in completion of the retail and hotel component and the
permanent access and egress to the property. Revenue is however showing
steady growth from month to month, with a positive EBITDA of R8 million being
achieved for the final quarter compared to the R8 million loss in the
previous quarter. There continues to be strong sign-up to the MVG customer
loyalty programme and the group remains confident that once all the ancillary
facilities are open and the access constraints resolved, revenues will show
good growth.
Nigeria
The 150-room five star Federal Palace Hotel opened in August 2008 following
the US$10 million re-furbishing of the building. The gaming laws in Lagos
State have been promulgated and the licence to operate the casino has now
been issued.
The US$24 million development has commenced which will include a 200 slot and
8 table casino, a conference facility, swimming pool, gymnasium and
refurbishment to the Federal Palace Towers Hotel. The casino is expected to
open in December 2009 and the Federal Palace Towers Hotel, which is currently
closed, will be reopened early in 2010.
The process of acquiring a 49,5% interest in the Nigerian company which owns
and operates the property is underway, with the group having subscribed for
the first tranche of equity in August 2009. It is expected that this process
will be completed before the end of the calendar year. On completion, the
group will have invested US$28 million in equity and advanced a loan to the
company of US$15 million.
EASTERN CAPE CASINO LICENCES
The Eastern Cape Gambling & Betting Board ("ECGBB") has confirmed the award
of a new ten year year casino licence to the Wild Coast Sun with effect from
1 September 2009. The group has committed R340 million to refurbish the
existing 246 bedrooms, convert the existing 50 Vacation Club units into a
further 150 bedrooms, upgrade the convention centre, refurbish the
entertainment areas and add a water park. Construction will commence in
January 2010 and in order to limit disruption over the peak seasons and
during the World Cup, is expected to be completed in the first half of the
2012 calendar year.
The Boardwalk`s casino licence in Port Elizabeth expires in October 2010. A
bid for a new fifteen year casino licence was submitted on 30 January 2009
which includes plans for a five star hotel and conference centre, expanded
gaming facilities and covered parking at an estimated cost of R1 billion. The
competitive applicant sought to have an amendment to its bid, including an
alternative site for its casino project, approved by the ECGBB. The ECGBB has
declined to approve the change. The adjudication process is in its final
stages.
DIRECTORATE
As previously announced, Mr DA Hawton retired from the board on 30 June 2009
having been chairman since 1989. Mr MV Moosa has assumed the chairmanship of
the board with effect from 1 July 2009 and as he is not an independent
director, Mr IN Matthews has been appointed as lead independent director from
the same date.
The board thanks Mr Hawton for his wise counsel and years of dedicated
service and wishes him a fulfilling retirement.
OUTLOOK
Subdued trading is expected to persist through the 2010 financial year as
little improvement in the current economic conditions is anticipated.
Contributions are however expected from the operations in Chile and Nigeria
which should result in growth in revenue and EBITDA in the year ahead. The
increased capital charges relating to these investments will however offset
any contribution to adjusted headline earnings per share.
The above 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)*, PL Campher,
MP Egan, Dr NN Gwagwa, LM Mojela, DM Nurek, E Oblowitz, GR Rosenthal
*Executive
Group Secretary:
SA Bailes
27 August 2009
www.suninternational.com
Date: 27/08/2009 13:00:01 Supplied by www.sharenet.co.za
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