Wrap Text
Unaudited profit and cash dividend announcement for the six months ended 31 December 2014
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 2014
Revenue up +6.6%
Ebitda up +14.5%
Adjusted diluted HEPS +23%
Interim gross cash dividend of 110 cents per share
Condensed group statements of comprehensive income
Six months ended Year ended
31 December 30 June
2014 % 2013 2014
R million Unaudited change Restated Restated
Continuing operations
Revenue
Casino 4 339 7 4 047 8 134
Rooms 428 2 419 848
Food, beverage and other 523 5 497 988
5 290 7 4 963 9 970
Other income 462 - -
Consumables and services (530) (517) (1 027)
Depreciation and amortisation (484) (434) (900)
Employee costs (1 106) (1 137) (2 327)
Levies and VAT on casino revenue (1 059) (965) (1 952)
Promotional and marketing costs (356) (365) (672)
Property and equipment rentals (71) (64) (129)
Property costs (267) (260) (520)
Other operational costs (497) (396) (853)
Operating profit 1 382 68 825 1 590
Foreign exchange (losses)/profits (32) 5 7
Interest income 12 11 22
Interest expense (288) (270) (546)
Share of associates losses (1) - -
Profit before tax 1 073 571 1 073
Tax (235) (224) (391)
Profit from continuing operations 838 141 347 682
Profit from discontinued operations 47 37 67
Profit for the period 885 130 384 749
Other comprehensive income:
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations - - 17
Tax on remeasurements of post employment benefit obligations - - (5)
Items that may be reclassified to profit or loss
Net (loss)/profit on cash flow hedges (2) - 1
Tax on net (loss)/profit on cash flow hedges 1 - -
Transfer of hedging reserve to statements of comprehensive income - 4 4
Tax on transfer of hedging reserve to statements of comprehensive income - (1) (1)
Currency translation reserve (13) 73 (45)
Total comprehensive income 871 460 720
Six months ended Year ended
31 December 30 June
2014 % 2013 2014
R million Unaudited change Restated Restated
Profit for the period attributable to:
Minorities 95 82 231
Ordinary shareholders 790 302 518
885 384 749
Total comprehensive income for the period attributable to:
Minorities 98 117 221
Ordinary shareholders 773 125 343 499
871 460 720
Total comprehensive income attributable to ordinary shareholders arises from:
Discontinued operations 41 29 64
Continuing operations 732 314 435
773 343 499
HEADLINE EARNINGS RECONCILIATION
Profit attributable to ordinary shareholders 790 162 302 518
Net loss/(profit) on disposal of property, plant and equipment - 5 (9)
Profit on disposal of shares in subsidiaries (462) - -
Impairment of Maslow assets - - 39
Tax relief on the above items 18 (1) (15)
Minorities' interests on the above items - (2) (3)
Headline earnings 346 14 304 530
Pre-opening expenses 48 13 36
Termination of BEE shareholder options - - 16
Restructure costs 35 39 165
Insurance Captive Trust Distribution - - (25)
Monticello purchase price adjustment 23 - -
Monticello profits - consolidated from 1 July 2014 to 31 October 2014 (27) - -
Other 12 - 13
Foreign exchange losses/(profits) on intercompany loans 13 (9) (13)
Tax on the above items (20) (10) (44)
Minorities' interests on the above items (11) (5) (18)
Reversal of Employee Share Trusts(i) 10 16 23
Adjusted headline earnings 429 23 348 683
Cents per Cents per Cents per
share share share
Earnings per share
- basic 849 324 555
- diluted 843 161 323 553
Dividends per share 110 90 245
(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.
Condensed group statements of financial position
Six months ended Year ended
31 December 30 June
2014 2013 2014
R million Unaudited Unaudited Audited
ASSETS
Non current assets
Property, plant and equipment 11 298 11 288 11 380
Intangible assets 758 525 721
Investment in associates 392 - -
Investment in joint ventures 191 - -
Available-for-sale investment 48 48 48
Loans and receivables 10 9 10
Pension fund asset 45 29 45
Deferred tax 287 217 249
13 029 12 116 12 453
Current assets
Loans and receivables 2 31 4
Tax 75 70 42
Accounts receivable and other 636 583 614
Cash and cash equivalents 567 989 958
1 280 1 673 1 618
Non current assets held for sale 75 - -
Total assets 14 384 13 789 14 071
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' equity 1 954 2 121 1 497
Minorities' interests 406 1 591 491
2 360 3 712 1 988
Non current liabilities
Deferred tax 448 513 460
Borrowings 5 904 3 368 3 772
Other non current liabilities 842 419 2 316
7 194 4 300 6 548
Current liabilities
Tax 58 59 79
Accounts payable and other 1 253 1 437 1 646
Borrowings 3 467 4 281 3 810
4 778 5 777 5 535
Non current liabilities held for sale 52 - -
Total liabilities 12 024 10 077 12 083
Total equity and liabilities 14 384 13 789 14 071
Condensed group statements of cash flows
Six months ended Year ended
31 December 30 June
2014 2013 2014
R million Unaudited Unaudited Audited
Cash generated by operations before: 1 741 1 449 3 086
Working capital changes (371) (109) 98
Cash generated by operations 1 370 1 340 3 184
Tax paid (300) (275) (494)
Cash generated by operating activities 1 070 1 065 2 690
Settlement of long services award obligation - (40) (40)
Net cash generated by operating activities 1 070 1 025 2 650
Cash utilised in investing activities (1 418) (1 046) (2 189)
Cash realised from investing activities 528 19 65
Acquisition of shares in subsidiaries (1 726) - -
Net cash inflow/(outflow) from financing activities 1 168 (52) (600)
Effect of exchange rates upon cash and cash equivalents (2) 19 8
Decrease in cash and cash equivalents (380) (35) (66)
Cash and cash equivalents at beginning of the period 958 1 024 1 024
Cash and cash equivalents at end of the period 578 989 958
Assets held for sale (11) - -
Cash and cash equivalents at end of the period 567 989 958
excluding non current assets held for sale
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
Unaudited
FOR THE SIX MONTHS ENDED 31 DECEMBER 2014
Balance at 30 June 2014 309 (1 829) 449 112 4 (673) (2 326) 3 5 448 1 497 491 1 988
Total comprehensive income - - (16) - - - - (1) 790 773 98 871
Treasury share options purchased - (10) - - - - - - - (10) - (10)
Net deemed treasury shares purchased - (2) - - - - - - - (2) - (2)
Vested shares - 4 - (4) - - - - - - - -
Employee share based payments - - - 31 - - - - - 31 - 31
Release of share based payment reserve - - - (27) - - - - 27 - - -
Delivery of share awards - - - - - - - - (24) (24) - (24)
Disposal of shares in African operations - - (117) - - - - - - (117) (62) (179)
Acquisition of minority interests in Monticello - - (127) - - 673 (550) - - (4) 2 (2)
Acquisition of minorities' interests - - - - - - (37) - - (37) (2) (39)
Dividends paid - - - - - - - - (153) (153) (121) (274)
Balance at 31 December 2014 309 (1 837) 189 112 4 - (2 913) 2 6 088 1 954 406 2 360
Unaudited
FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
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 - - 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
Audited
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 - - (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
Supplementary information
Six months ended Year ended
31 December 30 June
2014 % 2013 2014
R million Unaudited change Restated Restated
EBITDA RECONCILIATION
Operating profit 1 382 68 825 1 590
Operating profit of discontinued operations 62 55 89
Depreciation and amortisation 509 464 958
Property and equipment rental 80 73 148
Net loss/(profit) on disposal of property, plant and equipment* - 5 (9)
Impairment of assets* - - 39
Pre-opening expenses* 48 13 36
Restructure costs* 35 39 165
Termination of BEE shareholder options* - - 16
Insurance Captive Trust Distribution* - - (25)
Profit on disposal of shares in subsidiaries* (462) - -
Monticello purchase price consideration* 23 - -
Other* 12 - 13
Reversal of Employee Share Trusts*(i) 16 15 32
EBITDA 1 705 15 1 489 3 052
EBITDA margin (%) 32 30 31
Number of shares (‘000)
- in issue 93 072 93 371 93 047
- for EPS calculation 93 065 93 246 93 301
- for diluted EPS calculation 93 681 93 589 93 718
- for adjusted headline EPS calculation(i) 103 980 103 845 103 912
- for diluted adjusted headline EPS calculation(i) 104 596 104 188 104 329
Earnings per share (cents)
- basic earnings per share 849 162 324 555
- headline earnings per share 372 14 326 568
- adjusted headline earnings per share 413 23 335 657
- diluted basic earnings per share 843 161 323 553
- diluted headline earnings per share 369 14 325 566
- diluted adjusted headline earnings per share 410 23 334 655
Continuing - Earnings per share (cents)
- basic earnings per share 805 178 290 491
- headline earnings per share 328 12 293 504
- adjusted headline earnings per share 374 23 305 600
- diluted basic earnings per share 800 177 289 489
- diluted headline earnings per share 326 12 291 502
- diluted adjusted headline earnings per share 371 22 304 597
Discontinuing - Earnings per share (cents)
- basic earnings per share 44 29 34 64
- headline earnings per share 44 33 33 64
- adjusted headline earnings per share 39 29 30 58
- diluted basic earnings per share 43 28 34 64
- diluted headline earnings per share 43 29 34 64
- diluted adjusted headline earnings per share 39 28 30 58
* 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
Six months ended Year ended
31 December 30 June
2014 % 2013 2014
R million Unaudited change Restated Restated
Tax rate reconciliation
Profit before tax 1 073 571 1 073
Share of associates losses 1 - -
Adjusted profit before tax 1 074 571 1 073
% % %
Effective tax rate 22 39 36
Preference share dividends (2) (4) (4)
Prior year over/(under) - provisions - (1) 2
Withholding taxes - (2) (2)
Foreign tax rate variation (1) 1 -
Exempt income 11 - 1
Foreign monetary adjustments and government incentives 2 4 2
Capital allowances and disallowed expenditure (4) (9) (7)
SA corporate tax rate 28 28 28
EBITDA to interest (times) 6.2 5.7 5.8
Annualised borrowings to EBITDA (times) 2.9 2.7 2.5
Net asset value per share (Rand) 20.99 22.72 16.09
Capital expenditure 1 084 1 065 2 083
Capital commitments
- contracted 214 1 181 630
- authorised but not contracted 690 473 1 374
904 1 654 2 004
REVIEW OF THE SIX MONTHS
During the past 6 months there have been significant changes in the group. These include the opening of the Ocean Sun Casino in Panama in September 2014,
the acquisition of an additional 55% interest in Monticello, Chile with effect from 1 November 2014 and the acquisition of a 25% interest in GPI Slots effective
31 December 2014. The group also disposed of the majority of its interests in Gaborone Sun, Kalahari Sands, Lesotho Sun and Maseru Sun as well as a 50%
interest in the Royal Livingstone and Zambezi Sun ("the African properties") to Minor International Pcl ("Minor").
On the operational front the group concluded the section 189 restructure which has resulted in the group's South African head count reducing by approximately
1 500 since the start of the restructure.
These transactions and the Section 189 restructure are in line with the medium term strategic objectives the group set out in its 2013 and 2014 Integrated
Annual Report.
The results of the African properties disposed of to Minor and the Swaziland operations have been reclassified in the current and prior periods in the Statements
of comprehensive income and are disclosed as a single line item under "Profit from discontinued operations".
Revenue for the period was 7% ahead of the six months ended 31 December 2013 ("last year") at R5.3 billion, reflecting a similar trend to that experienced in
the second half of the 2014 financial year. Excluding revenues from the new Ocean Sun Casino, revenue was up 6% on last year with the South African
operations and Monticello up 5% and 18% (In local currency) respectively. The growth in South Africa was achieved despite a disappointing December in which
gaming revenue was actually down 1% compared to last year. Good growth resumed in January 2015 with South African gaming revenue up by 6%.
EBITDA, including all adjusted headline earnings adjustments, as well as the African operations up to 30 November 2014 (the date of disposal to Minor) was
R1.7 billion, 15% ahead of last year. The increase is primarily due to a strong performance from Monticello coupled with the savings from the section 189
restructure and other cost cutting measures implemented. The EBITDA margin improved 2.4% to 29.9%, and excluding the discontinued African operations,
improved to 30.5%.
Depreciation and amortisation was up 12% (7% on a comparative basis) primarily due to the inclusion of R20 million depreciation from the Ocean Sun Casino
and a full period's depreciation of the group's EGS gaming system. Despite the inclusion of the Ocean Sun Casino, employee costs were down 3% (5% on a
comparative basis) as a result of the Section 189 restructure. Levies and VAT on casino revenue were up 10% on last year. The increase is well ahead of the 7%
growth in casino revenue due to the 2% increase in the gaming levy in the Western Cape from 1 September 2013 and the higher portion of gaming revenue
from Monticello where the levy and VAT rate (together 33%) is significantly higher than South Africa. Property and equipment rentals were up 11% primarily due
to the straight line charge for the management company office rentals.
Other income of R462 million is the profit on disposal of the African properties and assignment of the management contract to Minor.
Other operational costs include certain non-recurring items such as pre-opening expenses for Ocean Sun Casino of R48 million (2013: R13 million), corporate
transaction costs of R12 million and an adjustment to the Monticello acquisition consideration of R23 million. Excluding these, other operational costs are up 8%
with the above inflationary increase due primarily to higher IT costs.
Net interest paid of R276 million was 7% ahead of last year due to higher debt levels as a result of the Ocean Sun Casino development and the acquisition of the
additional interest in Monticello. Included in the foreign exchange losses for the period was the translation loss of R27 million incurred on the US Dollar
shareholder loans in the Tourist Company of Nigeria.
The effective tax rate, excluding non-deductible preference share dividends, withholding taxes and CGT on South African income was 31% (2013: 32%). The
Latin America ("Latam") operations had a positive tax charge as a result of the Ocean Sun Casino start up loss and a monetary adjustment on capital that is
allowed as a deduction from taxable income in Chile.
Adjusted headline earnings of R429 million and diluted adjusted headline earnings per share of 410 cents were 23% ahead of last year. Excluding the initial losses
incurred in the start-up phase of the Ocean Sun Casino diluted adjusted headline earnings per share would have been up 33%.
In light of the improved trading the board has declared a gross interim dividend of 110 cents (2013: 90 cents) per share.
SEGMENTAL ANALYSIS
REVENUE EBITDA EBITDA MARGIN (%) OPERATING PROFIT
Six months ended Year ended Six months ended Year ended Six months ended Year ended Six months ended Year ended
31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June
R million 2014 2013 2014 2014 2013 2014 2014 2013 2014 2014 2013 2014
South African 4 340 4 136 8 266 1 287 1 144 2 334 29.7 27.7 28.2 867 778 1 562
Operations
GrandWest 1 103 999 2 020 470 408 833 42.6 40.8 41.2 404 356 723
Sun City 712 720 1 403 94 96 176 13.2 13.3 12.5 19 32 38
Sibaya 566 555 1 095 206 195 398 36.4 35.1 36.3 162 159 318
Carnival City 547 523 1 042 190 156 312 34.7 29.8 29.9 139 110 217
Boardwalk 282 278 554 86 82 168 30.5 29.5 30.3 43 42 87
Wild Coast Sun 218 200 400 38 31 70 17.4 15.5 17.5 13 8 22
Carousel 164 160 311 36 30 56 22.0 18.8 18.0 21 15 24
Meropa 141 134 278 53 49 106 37.6 36.6 38.1 42 40 86
Windmill 131 129 257 48 46 96 36.6 35.7 37.4 37 37 77
Table Bay 119 108 233 30 22 50 25.2 20.4 21.5 15 10 23
Morula 113 108 208 15 9 16 13.3 8.3 7.7 5 - (2)
Flamingo 82 73 152 26 23 49 31.7 31.5 32.2 20 18 37
Worcester 73 70 144 10 9 27 13.7 12.9 18.8 1 2 13
Maslow 62 56 113 1 2 6 1.6 3.6 5.3 (37) (36) (70)
Other operating 27 23 56 (16) (14) (29) (59.3) (60.9) (51.8) (17) (15) (31)
segments
Other African 515 549 1 071 110 101 195 21.4 18.4 18.2 58 43 68
Operations
Zambia 108 115 222 38 29 52 35.2 25.2 23.4 28 18 30
Federal Palace 107 105 216 16 9 28 15.0 8.6 13.0 (4) (12) (21)
Swaziland 90 89 172 5 6 13 5.6 6.7 7.6 3 4 8
Botswana 88 97 186 23 25 44 26.1 25.8 23.7 18 19 31
Kalahari Sands 64 78 148 17 21 39 26.6 26.9 26.4 7 10 15
Lesotho 58 65 127 11 11 19 19.0 16.9 15.0 6 4 5
LATAM 823 702 1 443 180 121 303 21.9 17.2 21.0 88 28 126
Monticello 782 702 1 443 192 121 303 24.6 17.2 21.0 120 29 126
Ocean Sun Casino 41 - - (12) - - - - - (32) (1) -
Management 334 299 612 142 133 248 42.5 44.5 40.5 116 118 216
activities
Total operating 6 012 5 686 11 392 1 719 1 499 3 080 28.6 26.4 27.0 1 129 967 1 972
segments
Central office and (314) (279) (567) (14) (10) (28) - - - (13) (15) (26)
other eliminations
Other income(ii) - - - - - - 462 - -
Other expenses(ii) - - - - - - (134) (72) (267)
Group total 5 698 5 407 10 825 1 705 1 489 3 052 29.9 27.5 28.2 1 444 880 1 679
Less: Discontinued (408) (444) (855) (94) (92) (167) 23.0 23.0 23.0 (62) (55) (89)
operations
Continuing 5 290 4 963 9 970 1 611 1 397 2 885 30.5 28.1 28.9 1 382 825 1 590
operations
(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* 3 552 5% 3 371 393 4% 379 415 2% 406 4 360 5% 4 156
Nigeria 48 - 48 28 (22%) 36 31 48% 21 107 2% 105
Latin America 739 18% 628 7 75% 4 77 10% 70 823 17% 702
4 339 7% 4 047 428 2% 419 523 5% 497 5 290 7% 4 963
* Includes Management activities and Central office and other eliminations
South Africa continues to contribute the bulk of group revenues with an 82.4% (83.7%) share and gaming revenue remains the primary source of revenue for
the group at 82% (81.5%). Latam's share of group revenue increased with the strong growth in Monticello's revenue and the opening of the Ocean Sun Casino.
Key properties' occupancies and ADRs are set out below:
OCCUPANCY ADR
2014 2013 2014 2013
Sun City 64.8% 63.8% R1 691 R1 647
Wild Coast Sun 75.2% 79.7% R500 R478
The Table Bay Hotel 62.7% 61.7% R2 287 R2 176
The Maslow 61.4% 54.9% R1 095 R1 102
Royal Livingstone and Zambezi Sun 50.1% 45.2% R1 944 R1 956
The Federal Palace 48.5% 62.4% R2 412 R2 401
OPERATIONAL REVIEW
South African Properties
GrandWest revenue was 10% ahead of last year at R1 103 million with the local economy benefitting from increased tourism. EBITDA increased by 15% due to
good cost control, the improved revenue growth and despite the 2% increase in gaming levies effective from 1 September 2013. The EBITDA margin increased
1.8% to 42.6%.
Sun City revenue at R712 million was 1% below last year due primarily to a 1% decline in casino revenue as a result of the significant renovations to the main
casino floor undertaken during the period and a low tables win percentage which offset the tables drop increase of 16%. Through enhanced efficiencies, EBITDA
from operations was up 8% at R104 million (2013: R96 million) however a charge of R10 million was accounted for relating to costs of selling vacation club units
which was not incurred last year. In the 6 months under review, sales of the refurbished Vacation Club units amounted to R65 million (R170 million in sales since
the launch of the refurbished units). While indirect costs are accounted for as incurred, the sale proceeds will only be recognised over 10 years.
Sibaya, with revenue only 2% up at R566 million, managed to improve EBITDA by 6% to R206 million as a result of cost savings with the EBITDA margin
improving 1.3% to 36.4%. December 2014 trading was negatively impacted by improved weather at the coast compared to December 2013 and as a result
gaming revenue was down 9% for the month. Sibaya's market share for the six months was at 35.5% (last year: 35.6%).
Carnival City revenue increased 5% for the 6 months to R547 million. Through cost saving initiatives, including a reduction in employee costs and a revised
marketing strategy, EBITDA improved by 22% to R190 million. Carnival City's share of the Gauteng market grew 0.2% to 15.2%.
Boardwalk revenue increased 1% to R282 million. The disappointing growth is due to the opening of 2 Electronic Bingo Terminals ("EBT") licences within the
Boardwalk's catchment area and, despite ongoing engagement with the Eastern Cape Gambling Board, we expect further EBT sites to open in the near future.
Despite the low revenue growth the Boardwalk improved EBITDA by 5% to R86 million as a result of cost savings.
In the group's hotel operations, despite the negative impact of the Ebola scare, The Table Bay Hotel achieved revenue growth of 10% driven by 1% increase in
occupancy and a 20% growth in food and beverage revenue. Costs were well managed resulting in a 36% increase in EBITDA to R30 million.
The Maslow occupancy increased by 6.5% to 61.4% while the room rate was largely in line with the prior year. The property is fast gaining a reputation as the
best corporate hotel and small conference destination in Sandton.
African Properties
With effect from 1 December 2014 the group's remaining interests in its Namibia, Botswana and Lesotho operations have been accounted for as associates and
the Zambian operation as a joint venture. The interest remaining in Swaziland will likewise be treated as an associate on the imminent conclusion of the sale to
Minor. The table below sets out the revenue and EBITDA of these properties for the full 6 month period to 31 December 2014:
REVENUE EBITDA
R million 2014 2013 2014 2013
Royal Livingstone & Zambezi Sun (Zambia) 126 115 41 29
Royal Swazi & Ezulwini Sun (Swaziland) 90 89 5 6
Lesotho Sun & Maseru Sun (Lesotho) 71 65 13 11
Kalahari Sands (Namibia) 76 78 19 21
Gaborone Sun (Botswana) 106 97 28 25
469 444 106 92
The Royal Livingstone and Zambezi Sun's revenue was up 9%, (15% in local currency) due to a 4.9% improvement in occupancies. EBITDA improved 38% (46%
in local currency) as a result of the increase in revenue, release of a R6 million VAT accrual and non-recurring costs incurred in the prior period. The yellow fever
vaccination requirement for Zambia was recently lifted and this is expected to have a positive impact on trading.
The Federal Palace revenue declined 8% in local currency largely as a result of a 13.9% decline in occupancies due to the Ebola crisis and the ongoing Boko
Haram threat. Occupancies fell as low as 33% in September, 28% lower than last year. The property is, however, slowly recovering with occupancies having
improved but still well below last year. Gaming revenue for the 6 months was also impacted and as a result was 5% lower than last year. Despite the decrease in
revenue EBITDA improved 78% following savings in all areas including payroll and legal fees and the release of excess accruals from prior years.
Latam
Monticello revenue was up 18% in local currency (11% in ZAR) as the property recovers from the smoking ban introduced in Chile in March 2013. New smoking
decks were being installed in the comparative period and the current year shows the positive impact that the decks are having. Due to the strong revenue growth
and cost savings implemented EBITDA was up 71% (59% in ZAR to R192 million).
Ocean Sun Casino started trading in mid-September 2014 and has contributed R41 million to revenue. While the property is currently trading behind expectations
it is still in its ramp up phase. The casino has been well received by the local market and is starting to receive strong interest from regional VIP players.
Management remains confident that the property will achieve its medium term revenue projections and profitability.
MANAGEMENT ACTIVITIES
Management fees and related income, at R334 million, were 12% ahead of last year. The increase in revenue is due largely to the improved trading and higher
EBITDA of the group's operations. EBITDA improved by 7% to R142 million. The lower growth in EBITDA compared to revenue is largely due to an increase in
new business development costs of R12 million (2013: R5 million), professional fees incurred as the group prepares to insource a major part of its food and
beverage operations and a higher bonus accrual which will only be payable if the group achieves its targets for the year.
FINANCIAL POSITION
The group's borrowings at 31 December 2014 of R9.4 billion are R1.7 billion above last year. The increase in borrowings is largely due to the acquisition of an
additional 54.7% interest in Monticello (R1.3 billion), the acquisition of a 25% interest and shareholder loans in GPI Slots (R311 million) and the development of
the Ocean Sun Casino and the casino under development in Cartagena, Colombia, offset in part by the proceeds from the Minor transaction (R671 million).
31 December 30 June
R million 2014 2013 2014
SFI Resorts (Monticello) 1 854 566 556
Ocean Club Inc (Ocean Sun Casino - Panama) 1 039 452 719
SunWest (GrandWest and Table Bay) 873 855 821
Emfuleni (Boardwalk and Fish River Sun) 613 638 657
Afrisun Gauteng (Carnival City) 587 587 575
The Tourist Company of Nigeria (Federal Palace) 406 535 362
Afrisun KZN (Sibaya) 339 388 357
Transkei Sun (Wild Coast Sun) 325 338 337
Worcester (Golden Valley) 146 134 128
Mangaung Sun (Windmill) 124 106 98
Meropa 113 128 118
Teemane (Flamingo) 85 66 69
Cartagena Casino, Colombia 75
Swazispa 12 16
Lesotho Sun - 18 2
Sands Hotel (Kalahari Sands) - 8 -
Sun International Botswana (Gaborone Sun) - 1 -
Central office 2 270 2 320 2 256
8 849 7 152 7 071
Employee Share Trusts 522 497 511
9 371 7 649 7 582
CAPITAL EXPENDITURE INCURRED DURING THE PERIOD
R million
Expansionary
Ocean Sun Casino 278
Sun City 130
Cartagena Casino, Colombia 44
Other 11
463
Refurbishment:
Sun City 60
Zambia 53
Federal Palace 2
SIML 2
117
Other ongoing asset replacement* 463
Enterprise Gaming System 10
Enterprise Resource Planning 31
Total capital expenditure 1 084
* Other ongoing asset replacement relates primarily to the replacement of gaming and IT equipment
PROJECT CAPITAL EXPENDITURE
The table below sets out the capital expenditure on major projects and the expected timing thereof:
Forecast to 30 June
Project Spent
R million budget to date 2015 2016
Ocean Sun Casino
US$ million 105 90 15 -
R million 1 135 950 185 -
Cartagena Casino, Columbia
US$ million 30 4 26 -
R million 347 44 303 -
Sun City
Vacation Club 295 262 33 -
Cabanas 100 - 40 60
Enterprise Resource Planning System 162 98 37 27
2 039 1 354 598 87
We are in the planning stages of additional refurbishments and renovations to Sun City, in particular to the convention and conference facilities, the
entertainment centre, the Valley of Waves theme park as well as food and beverage offerings. The costing and feasibility of these has not yet been finalised.
ACCOUNTING POLICIES
The condensed consolidated financial information for the six months ended 31 December 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 2014.
UPDATE ON STRATEGIC INITIATIVES
Initiatives to improve operational performance
Restructure
The bulk of the sections 189 and 189A restructuring process as announced on SENS on 29 January 2014 was finalised in November 2014. In total 697 employees
accepted voluntary retrenchment and 134 employees took early retirement packages. Compulsory retrenchment amounted to 111 employees. The cost to the
group was R190 million which was largely expensed in the 2014 financial year. Between January 2014 and January 2015, the group's South African headcount
through a combination of natural attrition and the restructure reduced by approximately 1 500 employees. The annual saving on employee costs achieved by the
restructure is approximately R250 million.
Food and beverage insourcing
We have strategically identified the need to take ownership, where appropriate, of the food and beverage operations on our properties. This will enable us to
provide a better guest experience, improved employee morale and should also be a source of additional profit. Negotiations are well advanced and in this regard
we expect that we will take control of a significant number of the group's outsourced food and beverage operations in the current financial year. Although this
will increase revenue we do not expect a significant change to profitability in the short term.
Protect and leverage our existing asset portfolio
Restructure of Western Cape assets
It was announced on 13 May 2014 that the group had concluded a transaction which will see Grand Parade Investments Limited exit its investments in SunWest
and Worcester. Tsogo Sun Holdings Limited will acquire GPI's 25% interest and a 15% interest from Sun International in both properties. The transaction was
subject to the approval of the Competition Tribunal and in this regard we have recently been informed that the Competition Commission has recommended to
the Competition Tribunal ("Tribunal") that the transaction be prohibited in terms of section 14A(1)(b)(iii) of the Competition Act, No. 89 of 1998, as amended.
The Parties do not agree with the recommendation made by the Competition Commission and will be opposing such recommendation before the Tribunal. The
Tribunal hearing will take place on various dates in April with closing arguments provisionally scheduled for 12 May 2015 with a ruling from the Tribunal expected
10 days thereafter.
Amendment of the Morula casino licence
On the 31st of July 2014, the Gauteng Gambling Board ("GGB") announced that the group's application to relocate its Morula licence to Menlyn Maine on the
east side of Pretoria 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.
Certain objections have been received to the GGB's approval of the relocation and these are being addressed through the appropriate legal processes.
Detailed planning of the R3 billion development has commenced with the plans having being submitted to the GGB for approval. The development will only
commence once the remaining objections have been resolved.
Sun City
The refurbishment of the Sun City phase 1 Vacation Club was completed in November 2014 within the R295 million budget. Sales of Vacation Club units of R170
million have been achieved to date.
The redevelopment of the main casino was completed in November 2014 in time for the Nedbank Golf Challenge. The refurbishment has resulted in a significant
modernisation of the gaming floor and its surrounds and has been well received by customers. Additional food and beverage offerings are being developed
around the casino floor.
The long overdue refurbishment of the Cabana rooms and public areas has commenced with an expected completion in November 2015, at a cost of R100
million.
Further plans for the resort, in particular the convention and conferencing aspects of the business, are under consideration.
Monticello
The acquisition of a further 54.7% interest in Monticello was concluded in November 2014. The acquisition was at a cost of US$146 million (including
shareholder loans) and gives the group an effective 98.9% interest in Monticello.
Proposed merger of the group's Latam assets with Dreams S.A. ("Dreams")
As announced on SENS on Friday 13 February 2015, Sun International has concluded an MOU with the shareholders of Dreams to merge its casino and hotel
portfolio of assets with Sun International's Latam portfolio. It is anticipated that the merger of assets will give Sun International approximately 50% of the
combined entity. As part of the proposed merger, Sun International will increase its shareholding to 55% and consolidate the results of the merged entity. The
effective date of the proposed merger of assets will be upon the fulfillment or waiver of certain conditions precedent including shareholder approval, entering into
definitive agreements, due diligence and various regulatory approvals. Further details of the transaction can be found in the SENS announcement and a circular to
shareholders will be sent in due course.
Disposal of a majority interest in the group's African portfolio to Minor
As announced on SENS the disposal of the majority interest in the African portfolio to Minor was concluded in December 2014 with the exception of the
Swaziland leg of the transaction which is now unconditional but has been delayed pending final interaction with the King of Swaziland. Proceeds from the
disposal (R671 million) were received in December 2014 and a profit of R462 million has been realised.
Sun International will continue to operate the casino operations situated at each of the assets and Minor has assumed day to day management responsibility for
the hotel operations other than in Zambia, which will be jointly managed under a joint venture arrangement.
Tourist Company of Nigeria - Federal Palace
Nigeria is currently facing a number of challenges including the perceived ebola risk, Boko Haram, delayed elections and a falling oil price. These factors are likely
to have a significant impact on Nigeria's economy if they persist and as result the Naira has depreciated by 25% since October 2014.
As a consequence of the above factors the Federal Palace is dealing with a drop in demand and at the same time the staff in the hotel industry have initiated
illegal strikes which resulted in the property having to close for a few days in January 2015. The dispute between the group's local partners in the business
continues.
The Federal Palace property has significant potential and real estate value but unfortunately the issues facing the country and company are making it increasingly
difficult to advance any strategic issues or to realise any value in the short to medium term. The group continues to evaluate all options for its investment.
Initiatives to grow our business into new areas and new products
South Africa
Grand Slots
As announced on SENS on 13 May 2014, Sun International will acquire up to a 70% interest in GPI Slots in a 3 tranche acquisition. GPI Slots is the holding
company of GPI's limited payout gaming operations that own and operate LPM's.
The first part of the acquisition became unconditional during December and with effect from 31 December 2014 Sun International acquired a 25.1% interest in
GPI Slots and shareholder loans of R73 million for a total consideration of R311 million. The next tranche acquisition will be for a further 25% effective 1 July
2015 and the third tranche for a further 20% on 1 July 2016. Implementation of the acquisition of the next two tranches will be subject to gaming board and
competition commission approval.
Latam
Panama
The Ocean Sun Casino in Panama opened on 12 September 2014 with the official opening on 23 October 2014. The project was concluded within the US$105
million budget.
Colombia
The group's application for a casino licence in Cartagena, Colombia was approved by the Colombian gaming regulator on 28 July 2014. Construction of the
US$30 million casino commenced in August 2014 with an anticipated late April 2015 opening.
DIRECTORATE
As announced on SENS on 23 January 2015, Ms Kele Mazwai resigned as an executive director of the company. The Chairman and Board of Directors extend
their appreciation to Ms Mazwai for her dedicated and outstanding contribution to the Sun International group during her tenure and wish her well in her future
career.
OUTLOOK
The group continues to operate in a subdued and challenging economic environment, in particular in its core South African business. As indicated in the June
2014 profit and dividend announcement little improvement is expected in the medium term. Despite the poor economic conditions, the group has continued to
benefit from the revenue enhancing and cost cutting initiatives implemented over the past 18 months, including those implemented at Monticello, which has
delivered significantly improved trading. The benefits of the various initiatives should continue to be felt in the second half of the year, albeit the same relative
revenue growth from Monticello is not expected given that restructuring initiatives at that property were undertaken at the end of 2013 and are already in the
base comparative for the second half. The Ocean Sun Casino trading is expected to improve as it establishes itself in the market and grows its VIP gaming
business.
On balance, the group is confident that it will achieve growth in both EBITDA and adjusted headline earnings in the second half of the 2015 financial year.
The group has recently concluded a number of significant strategic transactions which will have an impact on the group's results and financial position in the
future. We anticipate that these transactions position the group for growth in the medium to long term.
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 110 cents per share (93.5 cents net of dividend withholding tax) for the six months ended 31
December 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 interim
dividend are as follows:
2015
Last day to trade cum interim cash dividend Friday, 20 March
First to trade ex interim cash dividend Monday, 23 March
Record date Friday, 27 March
Payment date Monday, 30 March
No share certificates may be dematerialised or rematerialised between Monday, 23 March 2015 and Friday, 27 March 2015 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
23 February 2015
Registered Office:
6 Sandown Valley Crescent, 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 (British), ZBM Bassa, EAMMG Cibie, AM Leeming
(Chief Financial Officer)*, PL Campher, Dr NN Gwagwa, BLM Makgabo-Fiskerstrand, B Modise, LM Mojela, GR Rosenthal
*Executive
Group Secretary:
CA Reddiar
23 February 2015
Date: 23/02/2015 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
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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