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SUI - Sun International Limited - Profit and Dividend Announcement for the

Release Date: 27/08/2009 13:00
Code(s): SUI
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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 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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