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SUN INTERNATIONAL LIMITED - Business update and trading statement

Release Date: 15/03/2017 09:15
Code(s): SUI     PDF:  
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Business update and trading statement

SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000097580
("Sun International" or “the Company”)



Business Update and Trading Statement

The Sun International group (“the group”) is currently finalising its results for the 6 months
ended 31 December 2016, which are expected to be released on the Stock Exchange News
Service of the JSE Limited (“SENS”) on or about 27 March 2017. Shareholders are reminded
that, in terms of announcements released by the Company on SENS on 22 August 2016 and
24 February 2017, Sun International has changed its financial year end from 30 June to 31
December in order to align with its Chilean operations.


Accordingly and for purposes of the Trading Statement below, the expected earnings per share
ranges for the 6 months ended 31 December 2016 are compared against the unaudited results
for the prior corresponding period, 1 July 2015 to 31 December 2015 (“the corresponding
period”).


Business Update
Dreams S.A. and GPI Slots’ operations were consolidated for the first time from 1 June 2016
and 1 July 2016 respectively, contributing to a 30% increase in revenue and 24% increase in
EBITDA over the corresponding period. EBITDA was previously reported before property and
equipment rentals. The group’s South African casino operations continue to be affected by
difficult trading conditions linked to an uncertain macro-economic environment and reduced
consumer spend. As a result, South African casino revenue declined by 2.7% following weaker
than expected December trading. Sun City and Table Bay continued to benefit from an increase
in international tourists which helped boost overall rooms’ revenue by 14%. EBITDA of the
group’s South Africa casino, hotel and resort operations, excluding International VIP business
(IB), was down 8%.


The opening of the Time Square casino in Menlyn, Pretoria remains on track for 1 April 2017
with the arena expected to open in November 2017 and the hotel in March 2018. The
development is expected to be completed in line with the budget.


While the group’s IB experienced an increase in volumes, this was offset by a low win
percentage of only 0.28%, compared to the theoretical win of 1.35%, which resulted in a
revenue loss after commission of R30 million. As a result of the revenue loss, the IB incurred
an EBITDA loss of R55 million compared to last year’s loss of R19 million.


GPI Slots (included as an associate in the corresponding period) continues to trade well with
revenue increasing by 10% and EBITDA by 13%, over the corresponding period.


With the inclusion of Dreams S.A.’s operations in the review period’s results and not in the
corresponding period, the group’s Latam results will reflect strong growth in revenue and
EBITDA. Growth in Chile, including the Dreams S.A. properties for the corresponding period,
has however slowed with revenue up 1% and EBITDA down 1.6% in local currency. Monticello
was impacted by the toll road relocating to the Santiago side of Monticello while Iquique, which
is located in a copper mining region was impacted by the weak copper price.


Interest charges are significantly higher due to a number of factors including, the conversion of
US Dollar debt in September/October 2015 to Rand based debt with higher effective Rand
interest rates, R27 million of unamortised debt raising costs expensed on the refinance of the
Latam debt and the consolidation of the GPI Slots and Dreams S.A. results for the 6 months.


The minorities’ share of earnings are up with the disposal of the 10% interest in SunWest
and Worcester and the consolidation of GPI Slots and Dreams S.A.


Trading Statement
As a consequence of, inter alia the factors described in the Business Update above,
shareholders are advised that a reasonable degree of certainty exists that the financial
results for the 6 months ended 31 December 2016 when compared to the results for the
corresponding period, released on SENS on 22 February 2016 (“last year”), are likely to be
as follows:


   -   Diluted adjusted headline earnings per share (“diluted AHEPS”), which the group
       considers the most meaningful measure of its performance, is likely to be between
       189 cents and 223 cents per share or 35% to 45% lower when compared to the
       corresponding period’s reported diluted AHEPS of 344 cents per share. Last year’s
       diluted AHEPS has also been restated to include an adjustment for rentals that have
       been included at the actual amount paid as opposed to the straight line accounting
       charge (R11 million adjustment);

   -   Earnings per share (“EPS”) is likely to be between 75 cents and 120 cents per share
       or 117% to 128% higher when compared to the corresponding period’s reported loss
       of 453 cents per share; and


   -   Headline earnings per share (“HEPS”) is likely to be between 260 cents and 305
       cents per share or 155% to 165% higher when compared to the corresponding
       period’s reported loss of 473 cents per share.


The expected difference between EPS and HEPS is primarily due to impairment charges of
R208 million of the Carousel assets (R156 million after tax) as a result of the likely negative
impact Time Square will have on Carousel’s revenue and R61 million (R34 million attributed to
the group) of the Sun Nao Casino assets due to its continued underperformance. In determining
expected diluted AHEPS the following adjustments have been made to HEPS:


   -   A reduction in the fair value of the put options of R247 million as a result of a reduction
       in the fair value of the underlying investments to which the put options are related;


   -   Interest charges on the debt raised for the Time Square settlements (with Peermont and
       Gold Rush) of R43 million (R23 million attributed to the group after tax) which will be
       adjusted for up until the opening of Time Square;

   -   A present value charge of R20 million on the early settlement of the Tsogo note relating
       to the 10% disposal of SunWest and Worcester;

   -   An unrealised forex loss of R80 million (R45 million after tax attributed to the group) on
       US Dollar denominated shareholder loans owed by the Federal Palace property in
       Nigeria;

   -   Reversal of deferred tax assets of R87 million (R47 million attributed to the group) of
       Ocean Sun Casino and Sun Nao Casino; and

   -   Amortisation of the Dreams S.A. intangibles of R104 million (R41 million after tax
       attributed to the group). As indicated in the Profit and Dividend announcement for the
       financial year ended 30 June 2016, the intangibles recognised on the Dreams S.A.
       purchase price allocation will be amortised with the amortisation charge being
       recognised as an adjusted headline earnings adjustment.

The financial information contained in this trading statement has not been reviewed or reported
on by Sun International’s external auditor.


By order of the board.


Johannesburg
15 March 2017


Sponsor to Sun International
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 15/03/2017 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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