Wrap Text
Unaudited profit and cash dividend announcement
for the six months ended 31 December 2013
Sun International Limited
("Sun International" or "the group" or "the company") Registration number: 1967/007528/06 Share code: SUI ISIN: ZAE 000097580
Unaudited profit and cash dividend announcement
for the six months ended 31 December 2013
Revenue up +4%
EBITDA down -5%
Adjusted HEPS down -18%
Interim gross cash dividend of 90 cents per share
Condensed group statements of comprehensive income
Six months ended Year ended
31 December 30 June
2013 % 2012 2013
R million Unaudited change Restated Restated
Revenue
Casino 4 221 - 4 208 8 195
Rooms 558 26 444 957
Food, beverage and other 628 10 569 1 115
5 407 4 5 221 10 267
Consumables and services (604) (551) (1 130)
Depreciation and amortisation (464) (412) (851)
Employee costs (1 245) (1 100) (2 256)
Levies and VAT on casino revenue (992) (989) (1 917)
Promotional and marketing costs (391) (389) (717)
Property and equipment rentals (73) (54) (128)
Property costs (291) (261) (541)
Other operational costs (467) (409) (831)
Operating profit 880 (17) 1 056 1 896
Foreign exchange profits 7 10 57
Interest income 11 15 31
Interest expense (272) (264) (505)
Profit before tax 626 (23) 817 1 479
Tax (242) (288) (477)
Profit for the period 384 (27) 529 1 002
Other comprehensive income:
Items that may be reclassified to profit or loss
Net (loss)/profit on cash flow hedges - (3) 3
Tax on net (loss)/profit on cash flow hedges - 1 (1)
Transfer of hedging reserve to statements of comprehensive income 4 2 2
Tax on transfer of hedging reserve to statements of comprehensive income (1) (1) -
Currency translation reserve 73 104 550
Total comprehensive income for the period 460 632 1 556
Profit for the period attributable to:
Minorities 82 149 295
Ordinary shareholders 302 380 707
384 529 1 002
Total comprehensive income for the period attributable to:
Minorities 117 184 592
Ordinary shareholders 343 448 964
460 632 1 556
Cents Cents Cents
per share per share per share
Earnings per share
- basic 324 411 736
- diluted 323 (21) 408 732
Condensed group statements of financial position
Year
Six months ended ended
31 December 30 June
2013 2012 2013
R million Unaudited Restated Restated
ASSETS
Non current assets
Property, plant and equipment 11 288 10 036 10 594
Intangible assets 525 490 494
Available-for-sale investment 48 48 48
Loans and receivables 9 17 13
Pension fund asset 29 38 29
Deferred tax 217 175 214
12 116 10 804 11 392
Current assets
Loans and receivables 31 48 52
Tax 70 42 41
Accounts receivable and other 583 518 557
Cash and cash equivalents 989 923 1 024
1 673 1 531 1 674
Total assets 13 789 12 335 13 066
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' equity 2 121 1 638 2 033
Minorities' interests 1 591 1 287 1 632
3 712 2 925 3 665
Non current liabilities
Deferred tax 513 423 501
Borrowings 3 368 3 937 3 753
Other non current liabilities 419 591 440
4 300 4 951 4 694
Current liabilities
Tax 59 88 69
Accounts payable and other 1 437 1 240 1 472
Borrowings 4 281 3 131 3 166
5 777 4 459 4 707
Total liabilities 10 077 9 410 9 401
Total equity and liabilities 13 789 12 335 13 066
Condensed group statements of cash flows
Year
Six months ended ended
31 December 30 June
2013 2012 2013
R million Unaudited Restated Restated
Cash generated by operations before: 1 449 1 581 2 912
Working capital changes (109) 15 168
Cash generated by operations 1 340 1 596 3 080
Tax paid (275) (307) (498)
Cash generated by operating activities 1 065 1 289 2 582
Settlement of long services award obligation (40) - (120)
Net cash generated by operating activities 1 025 1 289 2 462
Cash utilised in investing activities (1 046) (744) (1 300)
Cash realised from investing activities 19 6 75
Net cash outflow from financing activities (52) (391) (1 031)
Effect of exchange rates upon cash and cash equivalents 19 10 65
(Decrease)/Increase in cash and cash equivalents (35) 170 271
Cash and cash equivalents at beginning of the year 1 024 753 753
Cash and cash equivalents at end of the year 989 923 1 024
Group statements of changes in equity
Share Treasury Foreign Share Reserve Ordinary
capital shares currency based Available- for non- share-
and and share translation payment for-sale controlling Hedging Retained holders' Minorities' Total
R million premium options reserve reserve reserve interests reserve earnings equity interests equity
Unaudited
FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
Balance at 30 June 2013 309 (1 781) 482 86 4 (2 219) 1 5 151 2 033 1 632 3 665
Total comprehensive income for the period - - 40 - - - 1 302 343 117 460
Treasury share options purchased - (16) - - - - - - (16) - (16)
Net deemed treasury shares purchased - (1) - - - - - - (1) - (1)
Vested shares - 13 - (13) - - - - - - -
Employee share based payments - - - 27 - - - - 27 - 27
Release of share based payment reserve - - - (7) - - - 7 - -
Delivery of share awards - - - - - - - (4) (4) - (4)
Acquisition of minorities' interests - - - - - (109) - - (109) (15) (124)
Dividends paid - - - - - - - (152) (152) (143) (295)
Balance at 31 December 2013 309 (1 785) 522 93 4 (2 328) 2 5 304 2 121 1 591 3 712
Restated
FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
Balance at 30 June 2012 as previously reported 277 (1 600) 228 161 4 (2 206) (2) 4 634 1 496 1 227 2 723
Adjustments due to full consolidation of Dinokana - (187) - - - - - - (187) (51) (238)
Restated balance as at 30 June 2012 277 (1 787) 228 161 4 (2 206) (2) 4 634 1 309 1 176 2 485
Total comprehensive income for the period - - 69 - - - (1) 380 448 184 632
Treasury share options purchased - (8) - - - - - - (8) - (8)
Net deemed treasury shares purchased - (3) - - - - - - (3) - (3)
Vested shares - 14 - (14) - - - - - - -
Employee share based payments - - - 27 - - - - 27 - 27
Release of share based payment reserve - - - (7) - - - 7 - - -
Release of SFIR equity option reserve - - - (38) - - - 38 - - -
Delivery of share awards - - - - - - - (4) (4) - (4)
Acquisition of minorities' interests - - - - - 15 - - 15 64 79
Dividends paid - - - - - - - (146) (146) (137) (283)
Balance at 31 December 2012 277 (1 784) 297 129 4 (2 191) (3) 4 909 1 638 1 287 2 925
Restated
FOR THE YEAR ENDED 30 JUNE 2013
Balance at 30 June 2012 as previously reported 277 (1 600) 228 161 4 (2 206) (2) 4 634 1 496 1 227 2 723
Adjustments due to full consolidation of Dinokana - (187) - - - - - - (187) (51) (238)
Restated balance as at 30 June 2012 277 (1 787) 228 161 4 (2 206) (2) 4 634 1 309 1 176 2 485
Total comprehensive income for the year - - 254 - - - 3 707 964 592 1 556
Treasury share options purchased - (34) - - - - - - (34) - (34)
Treasury share options exercised - 29 - - - - - - 29 - 29
Shares issued 32 - - - - - - - 32 - 32
Net deemed treasury shares purchased - (3) - - - - - - (3) - (3)
Vested shares - 14 - (14) - - - - - - -
Employee share based payments - - - 46 - - - - 46 - 46
Release of share based payment reserve - - - (32) - - - 32 - - -
Release of SFIR equity option reserve - - - (75) - - - 33 (42) 42 -
Delivery of share awards - - - - - - - (11) (11) - (11)
Acquisition of minorities' interests - - - - - (13) - 8 (5) 95 90
Dividends paid - - - - - - - (252) (252) (273) (525)
Balance at 30 June 2013 309 (1 781) 482 86 4 (2 219) 1 5 151 2 033 1 632 3 665
Supplementary information
Year
Six months ended ended
31 December 30 June
2013 % 2012 2013
R million Unaudited change Restated Restated
EBITDA RECONCILIATION
Operating profit 880 (17) 1 056 1 896
Depreciation and amortisation 464 412 851
Property and equipment rentals 73 36 104
Pre-opening Maslow lease rentals* - 18 24
Net loss on disposal of property, plant and equipment* 5 1 -
Pre-opening expenses* 13 29 37
Restructure costs* 39 - -
Employee benefits* - - (15)
Other* - - 4
Reversal of Employee Share Trusts' consolidation* 15 18 35
EBITDA 1 489 (5) 1 570 2 936
EBITDA margin (%) 28 30 29
HEADLINE EARNINGS AND ADJUSTED HEADLINE EARNINGS
RECONCILIATION
Profit attributable to ordinary shareholders 302 (21) 380 707
Headline earnings adjustments 5 1 -
Net loss on disposal of property, plant and equipment 5 1 -
Tax relief on the above items (1) - -
Minorities' interests on the above items (2) (1) -
Headline earnings 304 (20) 380 707
Adjusted headline earnings adjustments 43 45 12
Pre-opening expenses 13 29 37
Restructure costs 39 - -
Pre-opening Maslow lease rentals - 18 24
Employee benefits - - (15)
Other - - 4
Foreign exchange profits on intercompany loans (9) (2) (38)
Tax on the above items (10) (14) (1)
Minorities' interests on the above items (5) 1 (2)
Reversal of Employee Share Trusts' consolidation(i) 16 11 24
Adjusted headline earnings 348 (18) 423 740
Year
Six months ended ended
31 December 30 June
2013 % 2012 2013
R million Unaudited change Restated Restated
Number of shares ('000)
- in issue 93 371 92 575 93 234
- for EPS calculation 93 246 92 473 92 589
- for diluted EPS calculation 93 589 93 227 93 110
- for adjusted headline EPS calculation(i) 103 845 102 938 102 991
- for diluted adjusted headline EPS calculation(i) 104 188 103 691 103 512
Earnings per share (cents)
- basic earnings per share 324 (21) 411 764
- headline earnings per share 326 (21) 411 764
- adjusted headline earnings per share 335 (18) 411 719
- diluted basic earnings per share 323 (21) 408 759
- diluted headline earnings per share 325 (20) 408 759
- diluted adjusted headline earnings per share 334 (18) 408 715
Tax rate reconciliation (%)
Effective tax rate 39 35 32
Preference share dividends (4) (3) (3)
Prior year under-provisions (1) (2) -
Foreign taxes (1) 1 1
Capital allowances and disallowed expenditure (5) (3) (2)
SA corporate tax rate 28 28 28
EBITDA to interest (times) 5.7 6.3 6.5
Annualised borrowings to EBITDA (times) 2.7 2.4 2.4
Net asset value per share (Rand) 22.72 17.69 21.81
Capital expenditure 1 065 704 1 300
Capital commitments
- contracted 1 181 230 183
- authorised but not contracted 473 751 1 259
1 654 981 1 442
* Items identified above are included as other expenses and other income in the segmental analysis.
(i) 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.
REVIEW OF THE SIX MONTHS
Trading for the period remained challenging, particularly in South Africa where casino revenue has remained under pressure and at Monticello where the
effects of the smoking ban persist. The weaker Rand has however given a welcome boost to the tourism industry and to the group's hospitality revenues.
Revenue for the period was 4% ahead of the six months ended 31 December 2012 ("last year") at R5.4 billion. Casino revenue was in line with last year
whilst the group experienced strong growth in hospitality revenue with room revenue up 26% and food, beverage and other revenue up 10%. Casino
revenue in the group's South African properties was up 3% following a stronger 2nd quarter where casino revenue was up 4.5%.
EBITDA at R1.5 billion was 5% below last year, with the EBITDA margin declining from 30.1% to 27.5%. As a result of cost cutting initiatives, EBITDA in the
2nd quarter was down by only 2% compared to the 9% decline in the 1st quarter. Further restructuring is currently the focus of a recently announced
consultation process in terms of section 189 and section 189A of the Labour Relations Act, 66 of 1995.
Depreciation and amortisation increased 13% due to additional depreciation charges from the new property openings (Boardwalk and Maslow hotels) and
the installation of the group's enterprise gaming system at a number of our properties.
Property and equipment rentals increased due to higher variable rentals on the Maslow and Table Bay as a result of improved revenue and profitability as
well as an increase in gaming equipment rentals.
Employee costs, which were up 13%, include restructuring costs of R39 million and the cost of employees of the group's two new hotels. On a comparable
basis employee costs were up 6%.
Net interest paid of R261 million increased by 5% due largely to the group no longer capitalising interest on the Boardwalk and Maslow hotel developments
and the costs incurred in refinancing Monticello's debt.
The tax charge of R242 million declined by 16% due mainly to the lower profits. The effective tax rate, excluding non-deductible preference share dividends,
foreign tax charges and prior year under provisions, was 33% (2012: 31%).
Adjusted headline earnings of R348 million and diluted adjusted headline earnings per share of 334 cents were 18% below last year.
The board has declared a gross interim dividend of 90 cents (2012: 110 cents) per share.
REVENUE SEGMENTAL ANALYSIS
Revenue by region and nature is set out below:
GAMING ROOMS F&B & OTHER TOTAL
R million 2013 2012 2013 2012 2013 2012 2013 2012
South Africa* 3 371 3% 3 286 379 30% 292 406 13% 360 4 156 6% 3 938
Other African 222 15% 193 175 15% 152 152 16% 131 549 15% 476
Monticello 628 (14%) 729 4 - - 70 (10%) 78 702 (13%) 807
4 221 - 4 208 558 26% 444 628 10% 569 5 407 4% 5 221
* Includes Management activities and Central office and other eliminations
SEGMENTAL ANALYSIS
REVENUE EBITDA EBITDA MARGIN (%) OPERATING PROFIT
Year Year Year Year
Six months to ended Six months to ended Six months to ended Six months to ended
31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June
R million 2013 2012 2013 2013 2012 2013 2013 2012 2013 2013 2012 2013
South African Operations 4 136 3 914 7 788 1 144 1 135 2 217 27.7 29.0 28.5 778 833 1 586
GrandWest 999 928 1 866 408 387 789 40.8 41.7 42.3 356 333 691
Sun City 720 653 1 291 96 89 168 13.3 13.6 13.0 32 30 45
Sibaya 555 524 1 040 195 178 362 35.1 34.0 34.8 159 144 293
Carnival City 523 554 1 061 156 173 316 29.8 31.2 29.8 110 132 232
Boardwalk 278 236 496 82 71 143 29.5 30.1 28.8 42 41 72
Wild Coast Sun 200 195 389 31 33 67 15.5 16.9 17.2 8 13 26
Carousel 160 166 322 30 36 66 18.8 21.7 20.5 15 24 39
Meropa 134 156 292 49 63 113 36.6 40.4 38.7 40 53 96
Windmill 129 134 255 46 50 94 35.7 37.3 36.9 37 42 78
Morula 108 124 230 9 18 28 8.3 14.5 12.2 - 10 12
Table Bay 108 77 181 22 6 22 20.4 7.8 12.2 10 (3) 2
Flamingo 73 79 152 23 24 44 31.5 30.4 28.9 18 18 33
Golden Valley 70 66 128 9 15 28 12.9 22.7 21.9 2 - 14
Maslow 56 - 41 2 - (6) 3.6 - (14.6) (36) - (29)
Other operating segments 23 22 44 (14) (8) (17) (60.9) (36.4) (38.6) (15) (10) (18)
Other African Operations 549 476 948 101 77 174 18.4 16.2 18.4 43 29 70
Federal Palace 105 101 198 9 15 40 8.6 14.9 20.2 (12) 2 8
Zambia 115 87 182 29 18 41 25.2 20.7 22.5 18 11 23
Botswana 97 89 178 25 22 50 25.8 24.7 28.1 19 17 39
Swaziland 89 84 161 6 5 9 6.7 6.0 5.6 4 1 2
Lesotho 65 60 118 11 9 16 16.9 15.0 13.6 4 2 3
Kalahari Sands 78 55 111 21 8 18 26.9 14.5 16.2 10 (4) (5)
Monticello 702 807 1 498 121 195 318 17.2 24.2 21.2 28 115 149
Management activities 299 323 610 133 164 244 44.5 50.8 40.0 118 145 196
Total operating segments 5 686 5 520 10 844 1 499 1 571 2 953 26.4 28.5 27.2 967 1 122 2 001
Central office and other eliminations (279) (299) (577) (10) (1) (17) - - - (15) - (20)
Other income(ii) - - - - - - - - 21
Other expenses(ii) - - - - - - (72) (66) (106)
5 407 5 221 10 267 1 489 1 570 2 936 27.5 30.1 28.6 880 1 056 1 896
(ii) refer to EBITDA reconciliation denoted*
South Africa contributed 77% (75%) of group revenue with 81% (83%) coming from gaming. Monticello's share of group revenue declined from 15% last
year to 13% due to the smoking ban.
The Boardwalk and Maslow hotels which opened in December 2012 and January 2013 respectively contributed to the strong room's revenue growth. On a
comparative basis rooms' revenue was up 15% for the period. The overall group occupancy of 66.2% was 2.7% ahead of last year at an achieved daily rate
("ADR") of R957, 11% up on last year. Room nights sold increased by 14%. Key properties' occupancies and ADRs are set out below:
OCCUPANCY ADR
2013 2012 2013 2012
Sun City 63.8% 62.2% R1 431 R1 390
Wild Coast Sun 79.7% 76.1% R478 R638
The Table Bay Hotel 61.7% 44.5% R2 176 R2 082
The Maslow 54.9% - R1 102 -
Royal Livingstone and Zambezi Sun 45.2% 40.1% R1 956 R1 823
Gaborone Sun 75.8% 78.3% R855 R744
The Federal Palace 62.4% 60.9% R2 149 R2 035
OPERATIONAL REVIEW
GrandWest revenue was 8% ahead of last year at R999 million with the local economy benefitting from the increased tourism spend in Cape Town. EBITDA
at R408 million was 5% up with the EBITDA margin declining 0.9% to 40.8% due to a 2% increase in gaming levies effective from 1 September 2013, which
resulted in an additional cost of R12 million.
Sibaya grew revenue 6% to R555 million and EBITDA increased 10% to R195 million through excellent cost control resulting in a 1.1% improvement in the
EBITDA margin to 35.1%. Encouragingly, Sibaya's share of the KwaZulu-Natal gaming market of 35.6% (36.7% in the last quarter) has improved over prior
years.
Carnival City, continued to experience a slowdown with revenue declining 6%, well below the 1.7% growth in the Gauteng casino market, and EBITDA down
10%. The decline in revenue is attributed to increased competition from Electronic Bingo Terminals ("EBTs") and Limited Payout Machines ("LPMs") in and
around Ekurhuleni. Revenue from EBTs and LPMs in Gauteng increased 23% in the 2013 calendar year, which has impacted negatively not only on
Carnival City but also Morula.
Boardwalk revenue increased 18% to R278 million with casino revenue up 11%. Included in revenue is room's revenue of R14 million (2012: R0) from the
Boardwalk hotel which opened in mid-December 2012. EBITDA increased 15% to R82 million while the EBITDA margin declined 0.6% to 29.5% as a result
of the increased cost structure resulting from the larger property.
Sun City revenue at R720 million was 10% up on last year, while EBITDA was 8% ahead at R96 million. As a result of new marketing initiatives gaming
revenue was up 15% at R265 million. Rooms revenue was 5% ahead of last year due to a 10% increase in international room nights sold, whilst local room
nights sold were flat on last year.
Wild Coast Sun revenue increased 3% to R200 million with gaming revenue 5% up at R153 million. Given that cost inflation is running ahead of revenue
growth, EBITDA declined 6% to R31 million. [Occupancies were 3.6% ahead of last year while the room rate decreased 25% to R478 in an effort to attract
additional gaming customers.]
Table Bay Hotel had an exceptional six months with revenue 40% ahead of last year at R108 million and EBITDA 267% up at R22 million. The occupancy
and ADR increased 17.2% and 4.5% respectively. International room nights sold (75% of total room nights sold) increased by 43% and local room nights
sold increased by 31%. The weakening Rand continues to benefit the property in relation to the international tourism sector.
The Royal Livingstone and Zambezi Sun's revenue in local currency was 18% ahead of last year whilst EBITDA was 42% up. In Rands, revenue at R115
million and EBITDA at R29 million were 32% and 61% up on last year, respectively. The requirement to have a yellow fever vaccination when visiting
Zambia, and not the Zimbabwean side of the Victoria Falls, continues to be a significant disadvantage to our properties.
Gaborone Sun and the other Botswana operations achieved revenue of Pula82 million and EBITDA of Pula21 million, 0.3% and 0.6% ahead of last year. In
Rands, revenue and EBITDA were 9% and 14% ahead of last year. The lack of growth in local currency is attributed to the subdued macroeconomic
environment currently being experienced in Botswana. The EBITDA margin increased 0.1% to 25.5% due to lower marketing costs and energy usage
savings.
The Federal Palace revenue in local currency was 9% below last year at NGN1 682 million (R105 million) with gaming revenue in line with last year at
NGN738 million. The decline in hospitality revenues is due to the opening of two 180 room 5 star hotels in Lagos which have impacted the achieved room
rate (down 12% in Naira) and food and beverage revenue. EBITDA declined 40% to R9 million as a result of legal and professional fees incurred on a
proposed scheme of arrangement to delist the local company and other legal matters.
Monticello revenue, in Chilean Pesos, was down 22% (13% down in Rands) on last year at CLP35.6 billion due to the impact of the anti-smoking legislation.
Two smoking decks were opened towards the end of September and a further 2 decks in late October and these are starting to have a positive effect on
revenue with the decline in gaming revenue slowing to 11% in November 2013 and 7% in January 2014. As a result of the lower revenues EBITDA declined
45% to CLP6.1 billion. A comprehensive restructure of Monticello was undertaken in September which has resulted in the EBITDA margin improving from
13.9% in the first quarter to 20.4% in the 2nd quarter.
Monticello's share of the Santiago market increased 3.3% to 70.8% due to the introduction of 218 new slot machines and increased entertainment and
promotional activity.
MANAGEMENT ACTIVITIES
Management fees and related income of R299 million was 7% below last year whilst EBITDA of R133 million was 19% below last year. The decline in
EBITDA is due to the cancellation of the Afrisun Gauteng and Teemane Manco management contracts (part of an initiative to simplify the group structure)
which contributed R14 million of revenue and R11 million of EBITDA, lower project fees received and the low revenue and EBITDA growth experienced in
the group.
FINANCIAL POSITION
The group's borrowings at 31 December 2013 of R7.6 billion are R730 million above 30 June 2013. The increase in debt is primarily due to the funding of a
R500 million facility secured for the Ocean Club Casino in Panama and the raising of R120 million preference share funding to acquire WIP Gaming (Pty)
Ltd's, 23.2% interest in Afrisun Leisure.
Borrowings
31 December 31 December 30 June
R million 2013 2012 2013
SunWest (GrandWest and Table Bay) 855 726 721
Emfuleni (Boardwalk and Fish River Sun) 638 704 708
Afrisun Gauteng (Carnival City) 587 492 539
SFI Resorts (Monticello) 566 651 553
The Tourist Company of Nigeria (Federal Palace) 535 413 497
Ocean Club Inc (Ocean Club Casino - Panama) 452 - -
Afrisun KZN (Sibaya) 388 344 318
Transkei Sun (Wild Coast Sun) 338 341 349
Worcester (Golden Valley) 134 136 135
Meropa 128 115 118
Mangaung Sun (Windmill) 106 143 162
Teemane (Flamingo) 66 70 66
Lesotho Sun 18 21 16
Swazispa 12 19 23
Sands Hotels (Kalahari Sands) 8 21 14
Sun International Botswana (Gaborone Sun) 1 2 2
Central office 2 320 2 392 2 210
7 152 6 590 6 431
Employee Share Trusts 497 478 488
7 649 7 068 6 919
Capital expenditure incurred during the year
R million
Expansionary
Ocean Club Casino 451
Refurbishment:
Sun City 48
Table Bay 9
Zambia (Royal Livingstone) 3
60
Ongoing asset replacement 433
Enterprise Gaming System 121
Total capital expenditure 1 065
The expenditure on the Ocean Club Casino relates primarily to the purchase of the casino component, Penthouse and certain apartments in the Trump
Ocean Club International Hotel.
Forecast Project Capital expenditure
The table below sets out the capital expenditure on major projects and the expected timing thereof:
Spend 30 June
R million Total to date 2014 2015
Ocean Club Casino 1 135 451 290 394
Sun City Vacation Club 300 21 126 153
Enterprise Gaming System 680 353 250 77
Enterprise Resource Planning System 141 43 37 61
Total capital expenditure 2 256 868 703 685
ACCOUNTING POLICIES
The condensed consolidated financial information for the six months ended 31 December 2013 has been prepared in accordance with the requirements of
the JSE Limited Listings Requirements and the South African Companies Act No 71 of 2008. The Listings Requirements require interim reports to be
prepared in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and must also, as a minimum, contain the information required by
IAS 34 "Interim Financial Reporting". The accounting policies applied are consistent with those adopted in the financial statements for the year ended 30
June 2013, except for the adoption of IFRS 10: Consolidated Financial Statements which is effective for year ends beginning on or after 1 January 2013.
The impact of IFRS 10 is set out in the restatement note below.
Prior year restatement
In terms of IFRS 10: Consolidated Financial Statements, Dinokana Proprietary Limited ("Dinokana") is deemed to be a subsidiary of Sun International. This
has resulted in the restatement of the 31 December 2012 and 30 June 2013 results. Dinokana is now consolidated as a subsidiary whereas previously 49%
of Dinokana was proportionately consolidated.
The effect of the restatement on the 31 December 2012 statement of financial position is as follows:
As
previously Consolidation
reported of Dinokana Restated
Non current borrowings 3 693 244 3 937
Treasury shares (1 597) (187) (1 784)
Minorities 1 343 (56) 1 287
Cash and cash equivalents 922 1 923
The effect of the restatement on the 31 December 2012 statement of comprehensive income is as follows:
As Consolidation
previously of
reported Dinokana Restated
Interest expense (255) (9) (264)
Profit for the period attributed to Minorities 158 (9) 149
The consolidation of Dinokana has also resulted in a further 3 427 077 Sun International shares which have been recognised as
treasury shares.
Acquisition of Powerbet Gaming (Pty) Ltd
On 30 October 2013, the Group acquired a 100% shareholding in Powerbet Gaming (Pty) Ltd ("Powerbet").
A provisional purchase price allocation has been performed in the results to 31 December 2013 as set out below:
R million
Assets and liabilities acquired:
Intangibles (Software) 18
Accounts receivable 1
Cash and cash equivalents 3
Deferred tax (3)
Accounts payable and accruals (3)
16
Consideration settled in cash (30)
Goodwill recognised 14
Net cash outflow (27)
The business was purchased as an entry into the online market and as entry into the fast growing sports betting industry. The acquisition enables the group
to gain invaluable experience given the expected legalisation of online gaming in South Africa.
Goodwill arises from the acquistion of an experienced management team as well as an existing customer base.
UPDATE ON STRATEGIC INITIATIVES
Initiatives to improve operational performance
Various revenue enhancing and cost saving initiatives have been implemented in recent months and some benefits are evident and flowing through in the
operational results. In the current economic environment however, these initiatives are not sufficient to obviate the need to evaluate a much wider
restructure.
As announced on SENS on 29 January 2014, in terms of sections 189 and 189A, the group has entered into a consultation process with organised labour
and other relevant stakeholders regarding a possible restructure of the business in South Africa. The proposed restructure follows a comprehensive and
thorough review of the group's South African operations, with a focus on becoming more efficient and productive, improving revenues and profitability. The
initial assessment has identified approximately 1 700 positions that could potentially be affected if a restructure were to be implemented.
Initiatives to protect and leverage our existing assets
GrandWest exclusivity
We continue to engage with the authorities and assist them with any information that they require to make an informed decision regarding GrandWest's
exclusivity. There is still no clarity as to the process that they will follow.
We remain of the view, which is based on our extensive database of guests derived from 12 years of operating in the region, that there is no significant
untapped gaming revenue in the Cape metropole. The untapped gaming revenue that exists is found in geographically fragmented areas which cannot be
accessed or serviced by a single new casino - and is certainly nothing that could justify the establishment of another large casino in the catchment area of
the City, which is already being well serviced by GrandWest.
Relocation of Morula casino licence
As announced on SENS on 9 July 2013 the group submitted an application to the Gauteng Gambling Board to amend its Morula casino licence to allow the
group to relocate the casino from Mabopane to Menlyn. The public had until 16 August 2013 to submit objections to the application and the group has
subsequently responded to all the objections received. Public hearings have been set for the first week of April, whereafter the Gauteng Gambling Board will
make its decision.
Sun City
The refurbishment of the Sun City phase 1 Vacation Club has commenced. The sale of these units was launched in November 2013 and take up to date
has been very encouraging.
The refurbishment of public areas at the Cascades hotel is complete and The Desert Suite at the Palace hotel has been converted to a high end Prive to
cater for our top-end MVG Platinum card holders and international players.
GROW OUR BUSINESS INTO NEW AREAS AND PRODUCTS
South Africa
Online Sports betting
The R30 million acquisition of Powerbet Gaming (Pty) Ltd was concluded on 31 October 2013 and the new Sunbet website has been launched. While still
small, business levels have grown strongly within an industry that is fast growing. Strategically, Sunbet provides an entry to internet based gaming in
anticipation of online gaming being legalised at some point in the future.
LPMs and EBTs
We continue to look for opportunities to enter the LPM and EBT markets which continue to experience strong growth, in certain instances at the expense of
our existing businesses.
Latin America
Panama
All approvals necessary for the development of the casino have now been received and we have concluded the acquisition on a freehold basis of the casino
component, the penthouse level (to be used as a Salon Prive) and certain apartments in the Trump Ocean Club International Hotel and Tower in Panama
City, Panama. The development work has commenced with the expected completion and opening of the casino in September 2014 at an estimated cost of
US$105 million.
The casino will have approximately 600 slot machines and 32 tables allocated between the casino component located on the ground floor and the Salon
Prive situated on the top floor overlooking the canal and the City. Both facilities will have entertainment and food and beverage offerings.
Colombia
The application for a casino licence in Colombia is in progress. The group's proposed casino, which forms part of a mixed use development in Cartagena,
will have 310 slots machines and 16 tables and will be developed at an estimated cost of US$30 million. The group will lease the casino component of the
development which includes a 284 room, 5 star InterContinental hotel, convention centre, shops, theatres, apartments and offices. Whilst relatively small,
this opportunity is viewed as a low risk entry into the very attractive Colombian gaming market.
QUARTERLY TRADING STATEMENTS
For some time now the group has been releasing quarterly trading updates on SENS (in addition to the half yearly profit announcements required by the
Johannesburg Stock Exchange). Due to the volatility that we are experiencing in the industry and the change that the group itself is going through, we do
not believe that the quarterly trading updates currently provide meaningful information on which to base investment decisions or are indicative of trends that
we are currently experiencing in the business. Consequently the board has decided to stop publishing the quarterly updates but will in line with the
Johannesburg Stock Exchange requirements continue to publish the half yearly profit announcements which give a better indication of medium and long
term trends.
OUTLOOK
Over the past six months the group has made significant progress with its strategic objectives as set out in the 2013 integrated annual report. These
objectives include a number of key deliverables and revenue growth and cost cutting initiatives, the benefit of which are starting to show in the group's
results. As stated previously, the full benefit of these initiatives and the wider group restructure will only fully reflect in the 2015 financial year.
The trading environment is expected to remain subdued but given the initiatives already implemented and the recent improvement in the performance of
Monticello the group is optimistic that it will achieve growth in both EBITDA and adjusted headline earnings in comparison to the second half of the 2013
financial year.
The forward looking information above has not been reviewed or reported on by the company's auditors.
For and on behalf of the board
MV Moosa GE Stephens
Chairman Chief Executive
DECLARATION OF INTERIM CASH DIVIDEND
Notice is hereby given that a gross interim cash dividend of 90 cents (net 76.50 cents) per share for the half year ended 31 December 2013 has been
declared, payable to shareholders recorded in the register of the company at the close of business on the record date appearing below. This cash dividend
has been declared out of income reserves. The number of ordinary shares in issue at the date of this declaration is 114 129 455 including 10 149 477
million treasury shares. The company has no STC credits to be utilised for offset against the 15% withholding tax. The salient dates applicable to the interim
cash dividend are as follows:
2014
Last day to trade cum interim cash dividend Thursday, 13 March
First day to trade ex interim cash dividend Friday, 14 March
Record date Thursday, 20 March
Payment date Monday, 24 March
No share certificates may be dematerialised or rematerialised between Friday, 14 March and Thursday, 20 March 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.
Sun International Limited's tax reference number is: 9875/186/71/1.
By order of the board
CA Reddiar
Group Secretary
21 February 2014
Registered Office:
27 Fredman Drive, Sandown, Sandton 2196
Sponsor:
Rand Merchant Bank (a division of First Rand Bank Limited)
Transfer secretaries:
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001
The profit announcement was prepared under the supervision of the CFO, AM Leeming; Bcom, BAcc, CA(SA).
Directors:
MV Moosa (Chairman), IN Matthews (Lead Independent Director), GE Stephens (Chief Executive)*, PD Bacon, ZBM Bassa, AM Leeming (Chief Financial Officer)*,
PL Campher, Dr NN Gwagwa, BLM Makgabo-Fiskerstrand, KH Mazwai*, B Modise, LM Mojela, GR Rosenthal
*Executive
Group Secretary: CA Reddiar
24 February 2014
www.suninternational.com
Date: 24/02/2014 08:45:00 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.
Sharenet Sites 
