Wrap Text
Profit and dividend announcement for the year ended 30 June 2014 and changes to the board
Sun International Limited
("Sun International" or "the group" or "the company")
Registration number: 1967/007528/06
Share code: SUI ISIN: ZAE 000097580
PROFIT AND DIVIDEND ANNOUNCEMENT
for the year ended 30 June 2014 and changes to the board
Revenue up +5.4%
First half +3.6%
Second half +7.4%
EBITDA up +4.5%
First half -5.2%
Second half +15.8%
Adjusted HEPS down -7.3%
First half -18.5%
Second half +8.1%
Final gross cash dividend of 155 cents per share
Condensed group statements of comprehensive income
Year ended 30 June
2014 % 2013
R million Reviewed change Restated
Revenue
Casino 8 469 3 8 195
Rooms 1 114 16 957
Food, beverage and other 1 242 11 1 115
10 825 5 10 267
Consumables and services (1 205) (1 130)
Depreciation and amortisation (958) (851)
Employee costs (2 544) (2 272)
Levies and VAT on casino revenue (2 003) (1 917)
Promotional and marketing costs (718) (717)
Property and equipment rentals (148) (128)
Property costs (580) (541)
Other operational costs (990) (831)
Operating profit 1 679 (11) 1 880
Foreign exchange profits 12 57
Interest income 25 31
Interest expense (550) (505)
Profit before tax 1 166 (20) 1 463
Tax (417) (473)
Profit for the year 749 (24) 990
Other comprehensive income:
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations 17 16
Tax on remeasurements of post employment benefit obligations (5) (4)
Items that may be reclassified to profit or loss
Net profit on cash flow hedges 1 3
Tax on net profit on cash flow hedges - (1)
Transfer of hedging reserve to statements of comprehensive income 4 2
Tax on transfer of hedging reserve to statements of comprehensive income (1) -
Currency translation reserve (45) 550
Total comprehensive income for the year 720 1 556
Year ended 30 June
2014 % 2013
R million Reviewed change Restated
Profit for the year attributable to:
Minorities 231 293
Ordinary shareholders 518 697
749 990
Total comprehensive income for the year attributable to:
Minorities 221 592
Ordinary shareholders 499 964
720 1 556
Cents per % Cents per
share change share
Earnings per share
- basic 555 753
- diluted 553 (26) 749
Condensed group statements of financial position
Year ended 30 June
2014 2013
R million Reviewed Restated
ASSETS
Non current assets
Property, plant and equipment 11 380 10 594
Intangible assets 721 494
Available-for-sale investment 48 48
Loans and receivables 10 13
Pension fund asset 45 29
Deferred tax 249 214
12 453 11 392
Current assets
Loans and receivables 4 52
Tax 42 41
Accounts receivable and other 614 557
Cash and cash equivalents 958 1 024
1 618 1 674
Total assets 14 071 13 066
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' equity 1 497 2 033
Minorities' interests 491 1 632
1 988 3 665
Non current liabilities
Deferred tax 460 501
Borrowings 3 772 3 753
Other non current liabilities 2 316 440
6 548 4 694
Current liabilities
Tax 79 69
Accounts payable and other 1 646 1 472
Borrowings 3 810 3 166
5 535 4 707
Total liabilities 12 083 9 401
Total equity and liabilities 14 071 13 066
Condensed group statements of cash flows
Year ended 30 June
2014 2013
R million Reviewed Restated
Cash generated by operations before: 3 086 2 912
Working capital changes 98 168
Cash generated by operations 3 184 3 080
Tax paid (494) (498)
Cash generated by operating activities 2 690 2 582
Settlement of long services award obligation (40) (120)
Net cash generated by operating activities 2 650 2 462
Cash utilised in investing activities (2 189) (1 300)
Cash realised from investing activities 65 75
Net cash outflow from financing activities (600) (1 031)
Effect of exchange rates upon cash and cash equivalents 8 65
(Decrease)/increase in cash and cash equivalents (66) 271
Cash and cash equivalents at beginning of the year 1 024 753
Cash and cash equivalents at end of the year 958 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 Other controlling Hedging Retained holders' Minorities' Total
R million premium options reserve reserve reserve reserves interests reserve earnings equity interests equity
Reviewed
FOR THE YEAR ENDED 30 JUNE 2014
Balance as 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 year - - (33) - - - - 2 530 499 221 720
Treasury share options purchased - (29) - - - - - - - (29) - (29)
Net deemed treasury shares purchased - (32) - - - - - - - (32) - (32)
Vested shares - 13 - (13) - - - - - - - -
Employee share based payments - - - 53 - - - - - 53 - 53
Release of share based payment reserve - - - (14) - - - - 14 - - -
Monticello acquisition consideration - - - - - (673) - - - (673) (1 014) (1 687)
Minority share capital reduction - - - - - - - - - - (84) (84)
Delivery of share awards - - - - - - - - (7) (7) - (7)
Acquisition of minorities' interests - - - - - - (107) - - (107) (15) (122)
Dividends paid - - - - - - - - (240) (240) (249) (489)
Balance at 30 June 2014 309 (1 829) 449 112 4 (673) (2 326) 3 5 448 1 497 491 1 988
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 ended 30 June
2014 % 2013
R million Reviewed change Restated
EBITDA RECONCILIATION
Operating profit 1 679 (11) 1 880
Depreciation and amortisation 958 851
Property and equipment rentals 148 104
Pre-opening Maslow lease rentals* - 24
Net profit on disposal of property, plant and equipment* (9) -
Impairment of Maslow assets* 39 -
Pre-opening expenses* 36 37
Restructure costs* 165 -
Termination of BEE shareholder options* 16 -
Employee benefits* - (15)
Insurance Captive Trust Distribution* (25) -
Other* 13 4
Reversal of Employee Share Trusts' consolidation* 32 35
EBITDA 3 052 5 2 920
EBITDA margin (%) 28 28
HEADLINE EARNINGS AND ADJUSTED HEADLINE EARNINGS RECONCILIATION
Profit attributable to ordinary shareholders 518 (26) 697
Headline earnings adjustments 30 -
Net profit on disposal of property, plant and equipment (9) -
Impairment of Maslow assets 39 -
Tax relief on the above items (15) -
Minorities' interests on the above items (3) -
Headline earnings 530 (24) 697
Adjusted headline earnings adjustments 192 12
Pre-opening expenses 36 37
Termination of BEE shareholder options 16 -
Pre-opening Maslow lease rentals - 24
Employee benefits - (15)
Restructure costs 165 -
Insurance Captive Trust Distribution (25) -
Other 13 4
Foreign exchange profits on intercompany loans (13) (38)
Tax on the above items (44) (1)
Minorities' interests on the above items (18) (2)
Reversal of Employee Share Trusts' consolidation(i) 23 24
Adjusted headline earnings 683 (6) 730
Year ended 30 June
2014 % 2013
R million Reviewed change Restated
Number of shares (‘000)
- in issue 93 047 93 234
- for EPS calculation 93 301 92 589
- for diluted EPS calculation 93 718 93 110
- for adjusted headline EPS calculation(i) 103 912 102 991
- for diluted adjusted headline EPS calculation(i) 104 329 103 512
Earnings per share (cents)
- basic earnings per share 555 (26) 753
- headline earnings per share 568 (25) 753
- adjusted headline earnings per share 657 (7) 709
- diluted basic earnings per share 553 (26) 749
- diluted headline earnings per share 566 (24) 749
- diluted adjusted headline earnings per share 655 (7) 705
Tax rate reconciliation (%)
Effective tax rate 36 32
Preference share dividends (4) (3)
Prior year under-provisions 2 -
Foreign taxes - 1
Withholding taxes (2) -
Exempt Income 1 -
Capital allowances and disallowed expenditure (5) (2)
SA corporate tax rate 28 28
EBITDA to interest (times) 5.8 6.5
Annualised borrowings to EBITDA (times) 2.5 2.4
Net asset value per share (Rand) 16.09 21.81
Capital expenditure 2 083 1 300
Capital commitments
- contracted 630 183
- authorised but not contracted 1 374 1 259
2 004 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 OPINION
The condensed consolidated financial information for the year ended 30 June 2014 has been reviewed by the group's auditors, PricewaterhouseCoopers Inc. This
review has been conducted in accordance with the 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.
REVIEW OF THE YEAR
Over the past year the group has made significant progress with its strategic objectives as set out in the 2013 integrated annual report. These objectives included a
number of key deliverables and revenue growth and cost cutting initiatives, the benefit of which can clearly be seen in the second half of the 2014 financial year where
revenue growth improved and margins were significantly better than that of the first half. This was supplemented in recent months by a strong recovery at Monticello
which was severely impacted by the smoking ban implemented in Chile in March 2013.
Revenue for the year ended 30 June 2014 was 5.4% ahead of last year at R10.8 billion, reflecting a significant turnaround in the second half in which revenue was up
7.4% compared to 3.6% in the first half of the year. EBITDA for the year was 5% ahead at R3.1 billion, with EBITDA growth of 16% achieved in the second half
offsetting the 5% decline in the first half. The EBITDA margin for the year was marginally below last year at 28.2%, however in the second half it improved to 28.8%.
This was achieved after absorbing additional gaming taxes and levies - on a like-for-like basis the second half EBITDA margin would have been 29.2%.
Depreciation and amortisation increased by 13% due to additional depreciation charges from the new property openings (Boardwalk and Maslow hotels) and the
implementation of the group's enterprise gaming system ("EGS").
Employee costs which were 12% up on last year included restructuring costs of R165 million. Excluding these costs, employee costs were only up 5% for the year.
Property and equipment rentals increased due to higher variable rentals on the Maslow and Table Bay.
Other operational costs included a number of one-off charges, however excluding these charges they were still up 16%. The increase is attributable to higher IT costs
(relating to the implementation of the group's new EGS gaming system and software licence increases due to the weaker Rand), significant increases in rates and taxes,
increased CSI and Socio Economic Development contributions and a full years trading at both the Boardwalk and Maslow hotels.
Net interest paid of R525 million was 11% ahead of last year due to no longer capitalising interest on the Boardwalk and Maslow developments, higher average debt
as a result of these developments and higher local interest rates.
The tax charge of R417 million decreased in line with profitability. The effective tax rate, excluding non-deductible preference share dividends and withholding taxes
was 30% (2013: 29%). The increase is due to the prior year including the reversal of tax over-provisions and the effect of other foreign taxes.
Adjusted headline earnings of R683 million and diluted adjusted headline earnings per share of 655 cents were 6% and 7% below last year, respectively.
In light of the improved trading in the second half, and taking cognisance of the number of expansion projects under consideration, the board has declared a final
dividend of 155 cents (2013: 155 cents). This brings the total dividend for the 2014 financial year to 245 cents (2013: 265 cents).
Segmental analysis
EBITDA OPERATING
REVENUE EBITDA MARGIN (%) PROFIT
Year ended Year ended Year ended Year ended
30 June 30 June* 30 June 30 June
R million 2014 2013 2014 2013 2014 2013 2014 2013
South African Operations 8 266 7 788 2 334 2 201 28.2 28.3 1 562 1 568
GrandWest 2 020 1 866 833 788 41.2 42.2 723 690
Sun City 1 403 1 291 176 162 12.5 12.5 38 39
Sibaya 1 095 1 040 398 361 36.3 34.7 318 292
Carnival City 1 042 1 061 312 315 29.9 29.7 217 231
Boardwalk 554 496 168 142 30.3 28.6 87 71
Wild Coast Sun 400 389 70 65 17.5 16.7 22 24
Carousel 311 322 56 64 18.0 19.9 24 37
Meropa 278 292 106 114 38.1 39.0 86 96
Windmill 257 255 96 93 37.4 36.5 77 77
Table Bay 233 181 50 22 21.5 12.2 23 2
Morula 208 230 16 26 7.7 11.3 (2) 10
Flamingo 152 152 49 44 32.2 28.9 37 33
Worcester 144 128 27 28 18.8 21.9 13 14
Maslow 113 41 6 (6) 5.3 (14.6) (70) (29)
Other operating segments 56 44 (29) (17) (51.8) (38.6) (31) (19)
Other African Operations 1 071 948 195 173 18.2 18.2 68 68
Zambia 222 182 52 41 23.4 22.5 30 23
Federal Palace 216 198 28 40 13.0 20.2 (21) 8
Botswana 186 178 44 50 23.7 28.1 31 39
Swaziland 172 161 13 8 7.6 5.0 8 2
Kalahari Sands 148 111 39 18 26.4 16.2 15 (6)
Lesotho 127 118 19 16 15.0 13.6 5 2
Monticello 1 443 1 498 303 318 21.0 21.2 126 149
Management activities 612 610 248 245 40.5 40.2 216 197
Total operating segments 11 392 10 844 3 080 2 937 27.0 27.1 1 972 1 982
Central office and other eliminations (567) (577) (28) (17) - - (26) (17)
Other income(ii) - - - - - - - 21
Other expenses(ii) - - - - - - (267) (106)
10 825 10 267 3 052 2 920 28.2 28.4 1 679 1 880
* Adjusted for remeasurements of post employment obligations.
(ii) Refer to EBITDA reconciliation denoted*
REVENUE SEGMENTAL ANALYSIS
Revenue by region and nature is set out below:
GAMING ROOMS F&B & OTHER TOTAL
R million 2014 2013 2014 2013 2014 2013 2014 2013
South Africa* 6 738 4% 6 457 764 17% 652 809 14% 712 8 311 6% 7 821
First half 3 371 3% 3 286 379 30% 292 406 13% 360 4 156 6% 3 938
Second half 3 367 6% 3 171 385 7% 360 403 14% 352 4 155 7% 3 883
Other African 428 11% 385 342 13% 303 301 16% 260 1 071 13% 948
First half 222 15% 193 175 15% 152 152 16% 131 549 15% 476
Second half 206 7% 192 167 11% 151 149 16% 129 522 11% 472
Monticello 1 303 (4%) 1 353 8 300% 2 132 (8%) 143 1 443 (4%) 1 498
First half 628 (14%) 729 4 - - 70 (10%) 78 702 (13%) 807
Second half 675 8% 624 4 100% 2 62 (5%) 65 741 7% 691
8 469 3% 8 195 1 114 16% 957 1 242 11% 1 115 10 825 5% 10 267
* Includes Management activities and Central office and other eliminations.
The improvement in gaming revenue growth in the second half of the year in South Africa and Monticello is clearly demonstrated in the table above. Monticello has
continued to recover from the smoking ban instituted in March 2013 and on a like-for-like basis (March to June) gaming revenues in Chilean Pesos are up 23% on last
year and 2.4% below revenue levels in the pre-smoking ban era.
Rooms' revenue grew strongly, with the first half assisted by the opening of the Boardwalk and Maslow hotels in December 2012 and January 2013 respectively. On a
comparative basis rooms' revenue was up 10% for the year. Key properties' occupancies and average daily rates ("ADRs") are set out below:
OCCUPANCY ADR
2014 2013 2014 2013
Sun City 64.3% 63.6% R1 639 R1 616
Wild Coast Sun 80.6% 78.3% R445 R647
The Table Bay Hotel 68.3% 53.0% R2 121 R2 086
The Maslow 56.0% 36.3% R1 098 R1 130
Royal Livingstone and Zambezi Sun 43.1% 39.8% R1 965 R1 827
Gaborone Sun 71.6% 77.4% R889 R792
The Federal Palace 63.8% 67.6% R2 486 R2 142
OPERATIONAL REVIEW
South African Properties
GrandWest revenue was 8% ahead of last year at R2 020 million. EBITDA however increased by only 6% due to a 2% increase (an additional R26 million) in gaming
levies with effect from 1 September 2013, which were increased in lieu of GrandWest's ongoing exclusivity. Cost savings helped offset the increase in levies and as a
result the EBITDA margin only declined 1.0% to 41.2%.
Sun City revenue at R1.4 billion and EBITDA at R176 million were up 9% on last year. The current year included R12 million sales costs relating to the refurbished phase
1 Vacation Club units. If excluded EBITDA would have been up 16%. Although costs are recognised when incurred, the revenue from the sale of Vacation Club units
(R105 million achieved to date) is deferred and will be recognised over the 10 year contract period. The casino continues to do well with revenue up 16% to R519
million. Room's revenue was only up 1% at R434 million due to weak local demand.
Sibaya revenue was 5% up at R1 095 million and through excellent cost containment EBITDA increased by 10% to R398 million, despite an increase in gaming levies in
November 2012 which resulted in an additional cost of R4.1 million. The EBITDA margin improved by 1.6% to 36.3%. Sibaya's 35.9% share of the KwaZulu-Natal
gaming market was 0.6% higher than last year.
Carnival City revenue declined 2% for the year to R1 042 million. While Carnival City continues to be impacted by increased competition from Electronic Bingo
Terminals ("EBTs") and Limited Payout Machines ("LPMs") it has refocused its marketing efforts and is starting to gain market share which in the second half of the year
increased 1% to 15.0%. EBITDA was down 1% for the year, despite a strong second half performance that saw revenues increase by 3% and, due to cost savings,
EBITDA for the second half of the year improved by 10%.
Boardwalk revenue increased 12% to R554 million, with casino revenue 8% up to R512 million. The property is starting to benefit from the new hotel but its gaming
business is going to face competition in the future from EBT operations that have opened and will be opening in its catchment area. Through excellent cost control the
Boardwalk increased EBITDA 18% and the EBITDA margin 1.7% to 30.3%.
In the group's hotel operations, The Table Bay Hotel achieved excellent revenue growth with revenues up 29% to R233 million driven by a 40% increase in international
room nights sold which accounted for 73% of rooms' revenue. EBITDA was up 127% to R50 million (2013: R22 million) with the EBITDA margin improving 9.3% to
21.5%.
The recently opened Maslow has established itself in the Johannesburg corporate market and managed to achieve a profit before rentals and depreciation. The high
rental charge due to accounting straight lining over the period of the lease results in an operating loss.
African Properties
The Royal Livingstone and Zambezi Sun's revenue in local currency was up 15% with EBITDA up 21%. In Rands, revenue at R222 million and EBITDA at R52 million
were up 22% and 27% respectively. The improvement in revenue is due to an increase in conferences and events hosted at the properties.
The Federal Palace experienced a decline in hospitality revenues due to the opening of two 180 room 5 star hotels in Lagos and the continued political turmoil in the
country. Gaming revenue was maintained in line with the prior year. EBITDA declined 40% in local currency to NGN421 million (R28 million). The outbreak of the Ebola
virus in West Africa is likely to impact trading at the Federal Palace in the year ahead.
Latin America
Monticello has been dealing with the severely negative impact of anti-smoking legislation which caused revenue at the half year to be down by 22%. Due to corrective
action taken, the second half was however significantly improved with casino revenue up 10%. The revenue recovery is partly due to customers getting use to the new
laws but primarily due to the construction and opening of four new smoking decks in September and October of last year. Overall for the year revenue was down 8%
on last year at CLP74.2 billion, but despite the significant drop in revenue the reduction in EBITDA for the year was contained to 8.8% (CLP15.7 billion). The recovery in
revenues in recent months and a comprehensive restructure of the business resulted in EBITDA in the second half of the year increasing by 56% to CLP9.5 billion on
last year at an EBITDA margin of 24.8%, which creates a positive outlook for the year ahead.
MANAGEMENT ACTIVITIES
Management fees and related income at R612 million were in line with last year with EBITDA up 1% at R248 million. Revenue and EBITDA in the prior year included
R24 million of revenue and R19 million of EBITDA relating to the Afrisun Gauteng and Teemane Manco contracts which were cancelled in the prior year as part of an
initiative to simplify the group structure.
FINANCIAL POSITION
The group's borrowings at 30 June 2014 of R7.6 billion are R663 million above last year. The increase in borrowings is primarily due to the Ocean Club Casino
development in Panama (R719 million) as well as the raising of R120 million preference funding to acquire the remaining 23.2% interest in Afrisun Leisure not already
owned, partly offset by strong cash flows generated by operations.
30 June 30 June
R million 2014 2013
SunWest (GrandWest and Table Bay) 821 721
Ocean Club Inc (Ocean Club Casino - Panama) 719 -
Emfuleni (Boardwalk and Fish River Sun) 657 708
Afrisun Gauteng (Carnival City) 575 539
SFI Resorts (Monticello) 556 553
The Tourist Company of Nigeria (Federal Palace) 362 497
Afrisun KZN (Sibaya) 357 318
Transkei Sun (Wild Coast Sun) 337 349
Worcester (Golden Valley) 128 135
Meropa 118 118
Mangaung Sun (Windmill) 98 162
Teemane (Flamingo) 69 66
Swazispa 16 23
Lesotho Sun 2 16
Sands Hotels (Kalahari Sands) - 14
Sun International Botswana (Gaborone Sun) - 2
Central office 2 256 2 210
7 071 6 431
Employee Share Trusts 511 488
7 582 6 919
Capital expenditure incurred during the year
R million
Expansionary
Ocean Club Casino 672
672
Refurbishment
Sun City 179
Zambia (Royal Livingstone) 14
Table Bay 9
202
Ongoing asset replacement* 878
Enterprise Gaming System 268
Enterprise Resource Planning 63
Total capital expenditure 2 083
* Ongoing asset replacement relates primarily to the replacement of gaming and IT equipment.
Forecast project capital expenditure
The table below sets out the capital expenditure on major projects and the expected timing thereof:
30 June
Spend
R million Total to date 2015 2016
Ocean Club Casino 1 135 672 463 -
Sun City Vacation Club 300 179 121 -
Sun City Casino 50 - 50 -
Sun City Cabanas 100 - 40 60
Enterprise Gaming System 647 501 146 -
Enterprise Resource Planning
System 157 67 63 27
2 389 1 419 883 87
ACCOUNTING POLICIES
The condensed consolidated financial information for the year ended 30 June 2014 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 provisional 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 and IAS 19: Employee Benefits which are effective for year ends beginning on or after 1 January 2013. The impact of these standards 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 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 30 June 2013 statement of financial position is as follows:
As previously Consolidation
R million reported of Dinokana Restated
Non current borrowings 6 670 249 6 919
Treasury shares (1 594) (187) (1 781)
Minorities interest 1 693 (61) 1 632
Cash and cash equivalents 1 023 1 1 024
The effect of the restatement on the 30 June 2013 statement of comprehensive income is as follows:
As previously Consolidation
reported of Dinokana Restated
Interest expense (486) (19) (505)
Profit for the year attributable to minorities 314 (19) 295
The consolidation of Dinokana has also resulted in a further 3 427 077 Sun International shares being recognised as treasury shares.
In terms of IAS 19: Employee Benefits, remeasurements of post employment benefit obligations should be included in other comprehensive income and no longer in
profit and loss. The effect of the change on the 30 June 2013 statement of comprehensive income is as follows:
As previously Effective
reported change Restated
Employee benefits (2 256) (16) (2 272)
Tax (477) 4 (473)
Profit for the year attributable to minorities 295 (2) 293
Acquisition of Powerbet Gaming Proprietary Limited
On 30 October 2013, the group acquired a 100% shareholding in Powerbet Gaming Proprietary Limited ("Powerbet").
A purchase price allocation has been performed in the results to 30 June 2014 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 acquisition of an experienced management team as well as an existing customer base.
UPDATE ON STRATEGIC INITIATIVES
Initiatives to improve operational performance
Various revenue enhancing/cost saving initiatives have been implemented over the past year with the benefits of many of these initiatives reflecting in the group's
performance over the past six months.
The sections 189 and 189A restructuring process as announced on SENS on 29 January 2014 is still ongoing and has taken longer than expected due to extensive but
constructive consultation with the unions and affected parties. The process is now in its final stages and should be completed by the end of September 2014.
To date the group has received, and is processing, applications from 630 employees seeking voluntary retrenchment as well as 100 employees wishing to take early
retirement. In addition to the R53 million already incurred on staff restructuring a provision of R112 million has been raised in the 2014 accounts for the voluntary
retrenchments and early retirements. Further costs relating to the remaining retrenchments will be expensed in the 2015 financial year, however, these are likely to be
lower than originally anticipated due to the natural attrition of staff leaving since the restructure was announced.
Existing assets
GrandWest
It was announced on 13 May 2014 that the group has concluded a transaction which will see Grand Parade Investments Limited ("GPI") exit its investments in SunWest
and Worcester. Tsogo Sun Holdings Limited ("Tsogo") will acquire a 40% shareholding in both properties including the acquisition from Sun International of a 14.9%
interest in each of SunWest and Worcester for a combined cash consideration of R635 million. GPI has, since inception, been the primary BEE stakeholder in SunWest
and Worcester and wishes to monetise its stake in these assets in order to pursue other interests. Tsogo has limited exposure to the Western Cape metropolitan markets
and wishes to enhance its presence in this market. Sun International and GPI are of the considered view that Tsogo is the only party that can provide similar BEE
ownership credentials to that of GPI and furthermore Tsogo has the financial capability to implement a transaction of this magnitude.
Tsogo will have representation on the board of directors of SunWest and Worcester, however it will have no operational responsibility or interaction as all operations will
continue to be managed by Sun International Management Limited under each of its existing management contracts.
The proposed transaction is subject to competition commission and gambling board approval and the relevant submissions have been made. Shareholders voted in
favour of the transaction at the general meeting held on 22 August 2014.
Amendment of the Morula casino licence
During April 2014, public hearings were held in relation to the group's application (previously announced) to amend its Morula licence to allow the relocation of the
license to Menlyn Maine on the east side of Pretoria. On the 31st of July 2014, the Gauteng Gambling Board ("GGB") announced that the group's application had
been approved thereby permitting the relocation of the casino from Mabopane to Menlyn. The approval is subject to conditions that are reflective of the commitments
made in the application.
Detailed planning of the R3 billion development will now commence in conjunction with further engagement with the GGB to conclude detailed agreements for the
amendment of the Morula licence conditions.
Notification has been received of certain legal objections to the proposed relocation and development and these are being addressed. Once the amendments to the
Morula licence are issued by the GGB and in the absence of any legal impediment the detailed planning and construction of the casino is anticipated to take
approximately 36 months.
Sun City
The R300 million refurbishment of the Sun City phase 1 Vacation Club is well under way with R179 million spent and an expected completion date of November 2014.
Sales of Vacation Club units of R105 million were achieved by 30 June 2014. With the completed units we now have the ability to offer "try and buy" options which
should expedite sales.
With encouraging growth in casino revenue we have commenced the refurbishment of the main casino at an estimated cost of R50 million. The refurbishment will
include a significant modernisation of the casino floor and will include the development of food and beverage outlets in and around the casino to improve the gaming
and entertainment experience.
A long overdue R100 million refurbishment of the popular Cabanas hotel will also commence shortly and will be phased over the next two financial years. Further plans
for the resort, in particular the convention and conferencing aspects of the business, are under consideration.
Monticello
As announced on SENS on 2 July 2014 Sun International, on 30 June 2014, reached agreement to acquire a further 54.7% interest in Monticello for approximately
US$114 million giving the group an effective 98.9% interest. In addition, Sun International will acquire shareholder loans and cash of approximately US$32 million.
The acquisition provides the group with the opportunity to positively leverage its investment in Monticello, which is well entrenched as the leading gaming and
entertainment destination in Chile. It provides the opportunity for Sun International to acquire an increased economic interest in, and gain strategic control over, what is
regarded as one of Latam's best casinos. The transaction acts as a catalyst for the establishment of a portfolio of premier assets in the region as well as providing the
platform for further growth and consolidation of Sun International's strategic position in the casino industry.
The purchase is subject to Chilean Gambling Board approval and the relevant submission has been made, together with Shareholder approval.
An accrual of R1 687 million has been raised in non current liabilities for the purchase consideration.
Disposal of a majority interest in our African portfolio to the Minor Group
As announced on SENS on 18 August 2014, Sun International has entered into agreements with Minor International Pcl ("Minor"), a large global company with
investments in hotels, restaurants and lifestyle brands whereby Sun International will dispose of a significant portion of its African portfolio to Minor. The interests Sun
International will dispose of and its shareholding pre and post the transaction is set out in the table below:
EFFECTIVE OWNERSHIP
Pre the % Post the
transaction disposed transaction
Gaborone Sun 80% 80% 16%
Kalahari Sands 100% 80% 20%
Lesotho Sun and Maseru Sun 47% 80% 9%
Royal Swazi and Ezulwini Sun 51% 80% 10%
Royal Livingstone and Zambezi Sun 100% 50% 50%
On conclusion of the transaction the Royal Livingstone and Zambezi Sun will be accounted for as a joint venture, Gaborone Sun and Kalahari Sands as associates and
Lesotho Sun, Maseru Sun, Royal Swazi and Ezulwini Sun as available-for-sale assets. The collective purchase consideration amounts to R664 million plus the face value
of any shareholder loans.
Sun International will continue to manage the casino operations situated at each of the assets and Minor will assume day-to-day management responsibility for the
hotel operations other than in Zambia, which will be jointly managed under a joint venture arrangement. The agreements reached cater for a sharing of management
fees, the marketing of the properties, and the provision by Sun International of support services. Starting with the existing African assets it is the intention of the
alliance to explore other hotel and gaming opportunities, in particular those that may arise in Africa and Asia.
NEW AREAS AND NEW PRODUCTS
South Africa
Online sports betting
The acquisition of Powerbet Gaming Proprietary Limited was concluded on 31 October 2013 and the new Sunbet site was 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 and gives the group the ability to launch the brand in the market.
GPI Slots
As announced on SENS on 13 May 2014, Sun International will acquire up to a 70% interest in GPI Slots. GPI Slots is the holding company of GPI's limited payout
gaming operations that own and operate LPMs. Given the fast growing nature of the LPM and EBT industry in South Africa and the negative impact thereof on the
group's traditional casino business, a strategic decision was taken to look for opportunities to enter this space.
The acquisition will be made in three tranches with an initial acquisition of a 25.1% interest in GPI Slots for a cash consideration of R225 million plus 25.1% of the face
value of shareholder loans. The group has options to acquire a further 25% interest in one year's time and an additional 20% one year thereafter.
The relevant submissions to the Competition Commission and gambling boards have been made. While the regulatory process may still take some time we expect all
approvals to be received by November 2014. Shareholders voted in favour of the transaction at the general meeting held on 22 August 2014.
Latin America
Panama
The development of the casino and apartments in the Trump Ocean Club International Hotel and Tower in Panama City, Panama is nearing completion with an
expected opening on 12 September 2014. The development remains within the estimated cost of US$105 million.
Once complete the casino will have approximately 600 slot machines and 32 tables allocated between the main floor casino component located on the ground floor
and the Privé situated on the top floor overlooking the Panama Canal and the City. Both facilities will have entertainment and food and beverage offerings.
Colombia
The group's application for a casino licence in Cartagena, Colombia was approved by the Colombian gaming regulator on 28 July 2014. This paves the way for the
group's proposed casino, which forms part of a mixed use development in Cartagena. The casino, which will be developed at a cost of US$30 million, will have 310
slots machines and 16 tables. 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 market. We are
starting to mobilise the construction company and expect the casino to open in 2015.
DIRECTORATE
The Board is pleased to announce the appointment of Mr Enrique Cibie as a non-executive director to the board with effect from 22 August 2014. Enrique is a
Chilean national and currently serves as a non-executive director on various boards in Chile having previously served as the chief executive of various multi-national and
Chilean companies. With the group's increasing exposure to Latin America, Enrique's experiences and in-depth knowledge of business in Latin America will be of
significant value to the group.
OUTLOOK
Over the past year there has been little change in the trading environment which remains subdued and minimal improvement is expected in the medium term. Despite
the poor economic conditions, the second half of the financial year has reflected an encouraging improvement in both revenue and EBITDA as a result of the revenue
enhancing and cost cutting initiatives implemented during the year and the significantly improved trading of Monticello. The benefit of these initiatives should continue
to have a positive effect in the new financial year, in particular the imminent conclusion of the restructure in South Africa. As can be expected these initiatives have
brought about significant change in the group and a key focus of management in the year ahead will be ensuring that the benefits achieved are sustainable. The group
will also benefit from the opening of the Ocean Club Casino in September 2014.
On balance, the group is confident that it will achieve growth in both EBITDA and adjusted headline earnings in the 2015 financial year.
The forward looking information above has not been reviewed or reported on by the company's auditors.
INVESTOR PRESENTATION
An investor presentation which contains further strategic and financial information will be made available on the Company's website www.suninternational.com at
08h00 on 26 August 2014.
For and on behalf of the board
MV Moosa GE Stephens
Chairman Chief Executive
Registered office:
6 Sandown Valley Crescent, Sandown, Sandton 2196
Sponsor:
Rand Merchant Bank (a division of FirstRand 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, E Cibie, 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
25 August 2014
DECLARATION OF FINAL CASH DIVIDEND
Notice is hereby given that a gross final cash dividend of 155 cents per share (131.75 cents net of dividend withholding tax) for the year ended 30 June 2014 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 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 treasury shares. The company has
no STC credits to be utilised to offset against the 15% dividend withholding tax. The salient dates applicable to the final dividend are as follows:
2014
Last day to trade cum final dividend Friday, 12 September
First to trade ex final dividend Monday, 15 September
Record date Friday, 19 September
Payment date Monday, 22 September
No share certificates may be dematerialised or rematerialised between Monday, 15 September 2014 and Friday, 19 September 2014 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
25 August 2014
www.suninternational.com
Date: 25/08/2014 08:30:00 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
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