SUN INTERNATIONAL LIMITED - Unaudited interim results announcement for the six month period ended 30 June 2018

Release Date: 03/09/2018 08:00
Code(s): SUI
 
Wrap Text
Unaudited interim results announcement for the six month period ended 30 June 2018

SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 1967/007528/06
Share Code: SUI ISIN: ZAE 000097580
("Sun International" or "the company")

UNAUDITED INTERIM RESULTS ANNOUNCEMENT
for the six month period ended 30 June 2018

ACCOUNTING POLICY

The condensed consolidated financial information for the six months interim period ended 30 June 2018 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 31 December 2017, unless mentioned otherwise.

CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME

                                                                                              Unaudited
                                                                                          six months ended

                                                                                       30 June         30 June
R million                                                                                 2018            2017

Continuing operations
Income                                                                                   7 851           7 560

Consumables and services                                                                  (996)           (798)
Depreciation and amortisation                                                             (878)           (822)
Employee costs                                                                          (1 562)         (1 501)
Impairment of assets                                                                         -              (8)
Levies and VAT on casino income                                                         (1 625)         (1 548)
LPM site owners commission                                                                (159)           (141)
Promotional and marketing costs                                                           (482)           (494)
Property and equipment rentals                                                             (94)           (101)
Property costs                                                                            (378)           (358)
Other operational costs                                                                   (585)           (782)

Operating profit                                                                         1 092           1 007
Foreign exchange profit/(losses)                                                            49             (12)
Interest income                                                                             10              10
Fair value adjustment to put option liability                                               54            (162)
Interest expense                                                                          (610)           (515)
Share of equity accounted profits                                                            3               1

Profit before tax                                                                          598             329
Tax                                                                                       (254)           (198)

Profit for the period from continuing operations                                           344             131
(Loss)/profit for the period from discontinued operations                                   (9)              1

Profit for the period                                                                      335             132

Other comprehensive income:

Items that may be reclassified to profit or loss
 Gross profit/(loss) on cash flow hedges                                                    19             (19)
 Currency translation reserve                                                              267            (170)
Total comprehensive profit/(loss) for the period                                           621             (57)

Profit for the period attributable to:                                                     335             132

 Minorities                                                                                198             190
 Ordinary shareholders                                                                     137             (58)

Total comprehensive profit/(loss) for the period attributable to:                          621             (57)

 Minorities                                                                                337              91
 Ordinary shareholders                                                                     284            (148)

Total comprehensive profit/(loss) attributable to ordinary shareholders arises from:       284            (148)

 Discontinued operations                                                                    (5)              1
 Continuing operations                                                                     289            (149)


HEADLINE EARNINGS AND ADJUSTED HEADLINE EARNINGS RECONCILIATION

                                                                                                Unaudited
                                                                                            six months ended

                                                                                       30 June         30 June
R million                                                                                 2018            2017

Profit/(loss) attributable to ordinary shareholders                                        137             (58)
Net profit on disposal of property, plant and equipment                                    (15)              -
Profit on disposal of shares in associates                                                   -             (27)
Impairment of assets                                                                         -               8
Tax on the above items                                                                       2               2
Minorities' interests on the above items                                                     2              (2)

Headline earnings/(loss)                                                                   126             (77)
Straight-line adjustment for rentals                                                         6               9
Pre-opening expenses                                                                         3              40
Latam acquisition costs                                                                     10               -
Restructure and related costs                                                                8              15
Fair value adjustment on put options                                                       (54)            162
Amortisation of Dreams intangible assets raised as part of the PPA                          63              73
Share-based payments expense                                                                 -               8
Reversal of Employee Share Trust consolidation(i)                                            7               2
Foreign exchange (profits)/losses on intercompany and minority loans                       (30)             12
Interest on Time Square Note                                                                 -              22
Other                                                                                       15              12
Tax on the above items                                                                      (7)            (36)
Minorities' interests on the above items                                                   (32)            (36)

Adjusted headline earnings                                                                 115             206

(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.

                                                                                                Unaudited
                                                                                            six months ended

                                                                                         Cents           Cents
R million                                                                            per share       per share

Earnings/(loss) per share
 basic                                                                                     109             (59)
 diluted                                                                                   133             (59)
Diluted adjusted headline earnings per share                                               105             198


CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION

                                                                                                Unaudited
                                                                                            six months ended

                                                                                       30 June         30 June
R million                                                                                 2018            2017

ASSETS
Non-current assets
Property, plant and equipment                                                           18 588          17 978
Intangible assets                                                                        2 824           2 669
Equity accounted investments                                                                21              17
Available-for-sale investment                                                                -              48
Loans and receivables                                                                       55              83
Pension fund asset                                                                          33              33
Deferred tax                                                                               814             402
                                                                                        22 335          21 230
Current assets
Accounts receivable and other                                                            1 555           1 498
Shareholder loans                                                                          943               -
Cash and cash equivalents                                                                  862           1 060
                                                                                         3 360           2 558
Non-current assets held for sale                                                           108              76

Total assets                                                                            25 803          23 864

EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' equity before put option reserve                                  3 907           2 340
Put option reserve                                                                      (1 286)         (4 799)

Ordinary shareholders' equity                                                            2 621          (2 459)
Minorities' interests                                                                    2 486           2 907
                                                                                         5 107             448
Non-current liabilities
Deferred tax                                                                               878             251
Borrowings                                                                              10 814          11 292
Other non-current liabilities                                                            1 054             966
Put option liability                                                                     1 251           4 799
                                                                                        13 997          17 308
Current liabilities
Accounts payable and other                                                               2 314           2 299
Borrowings                                                                               4 249           3 763
                                                                                         6 563           6 062
Non-current liabilities held for sale                                                      136              46

Total liabilities                                                                       20 696          23 416

Total equity and liabilities                                                            25 803          23 864


GROUP STATEMENT OF CHANGES IN EQUITY

                                                                                                                                                             Ordinary
                                                                                                                                                               share-
                                                                   Treasury                                                                                  holders'
                                                           Share     shares       Foreign    Share-                     Reserve     Hedging                    equity               Ordinary
                                                         capital        and      currency     based    Available-      for non-         and                before put        Put      share-
                                                             and      share   translation   payment      for-sale   controlling       other    Retained        option     option    holders'   Minorities'     Total
R million                                                premium    options       reserve   reserve       reserve     interests     reserve    earnings       reserve    reserve      equity     interests    equity

Unaudited
FOR THE SIX MONTHS ENDED 30 JUNE 2018
Balance at 31 December 2017                                  295        424           126        89             -        (2 386)          5       4 353         2 058     (4 651)     (2 593)        2 899       306
Total comprehensive income for the period                      -          -           128         -             -             -          19         137           284          -         284           337       621
Rights issue                                               1 599          -             -         -             -             -           -           -         1 599          -       1 599             -     1 599
Realisation of Sun Dreams option                               -          -          (108)        -             -             -           -         277           169      3 365       3 534             -     3 534
Acquisition of minorities' interest in Sibaya                  -          -             -         -             -           (16)          -           -           (16)         -         (16)           (2)      (18)
Acquisition of minorities' interest in Sun Dreams              -          -             -         -             -           618           -           -           618          -         618          (618)        -
Increase in investment in Sun Dreams                                                                                       (805)                                 (805)                  (805)                   (805)
Dividends paid to minorities                                   -          -             -         -             -             -           -           -             -          -           -          (130)     (130)

Balance at 30 June 2018                                    1 894       (424)          146        89             -        (2 589)         24       4 767         3 907     (1 286)      2 621         2 486     5 107

Audited
FOR THE YEAR ENDED 31 DECEMBER 2017
Balance at 31 December 2016                                  295       (604)          165       116             4        (2 411)        (54)      4 502         2 013     (4 651)     (2 638)        3 171       533
Correction of PPA misallocation                                -          -             -         -             -           235           -           -           235          -         235          (235)        -
Dreams S.A. merger PPA finalisation adjustment                 -          -             -         -             -           131           -           -           131          -         131             -       131
                                                             295       (604)          165       116             4        (2 045)        (54)      4 502         2 379     (4 651)     (2 272)        2 936       664
Total comprehensive income for the period                      -          -           (39)        -             -             -          59        (243)         (223)         -        (223)          209       (14)
Treasury share options purchased                               -        (11)            -         -             -             -           -           -           (11)         -         (11)            -       (11)
Employee share schemes                                         -         27             -       (27)            -             -           -           1             1          -           1             -         1
Time Square SPV                                                -          -             -         -             -           (84)          -           -           (84)         -         (84)           84         -
Fair value adjustment on investment held for sale              -          -             -         -            (4)            -           -           -            (4)         -          (4)            -        (4)
Disposal of interest in Botswana, Namibia and Lesotho          -          -             -         -             -          (257)          -         257             -          -           -             -         -
Release of share options                                       -        164             -         -             -             -           -        (164)            -          -           -             -         -
Dividends paid to minorities                                   -          -             -         -             -             -           -           -             -          -           -          (330)     (330)

Balance at 31 December 2017                                  295       (424)          126        89             -        (2 386)          5       4 353         2 058     (4 651)     (2 593)        2 899       306

Unaudited
FOR THE SIX MONTHS ENDED 30 JUNE 2017
Balance at 31 December 2016                                  295       (604)          165       116             4        (2 411)        (54)      4 502         2 013     (4 651)     (2 638)        3 171       533
Correction of PPA misallocation                                -          -             -         -             -           235           -           -           235          -         235          (235)        -
Dreams S.A. merger PPA finalisation adjustment                 -          -             -         -             -           131           -           -           131          -         131             -       131
                                                             295       (604)          165       116             4        (2 045)        (54)      4 502         2 379     (4 651)     (2 272)        2 936       664
Total comprehensive income for the period                      -          -           (71)        -             -             -         (19)        (58)         (148)         -        (148)           91       (57)
Employee share schemes                                         -          -             -        (1)            -             -           -           1             -          -           -             -         -
Decrease in SunWest option                                     -          -             -         -             -             -           -         (55)          (55)        55           -             -         -
Increase in Sun Dreams option                                  -          -             -         -             -             -           -         217           217       (217)          -             -         -
Time Square option                                             -          -             -         -             -             -           -           -             -        (89)        (89)            -       (89)
Foreign exchange on put option                                 -          -          (103)        -             -             -           -           -          (103)       103           -             -         -
Realised hedge                                                 -          -             -         -             -             -          50           -            50          -          50            16        66
Dividends paid to minorities                                   -          -             -         -             -             -           -           -             -          -           -          (136)     (136)

Balance at 30 June 2017                                      295       (604)           (9)      115             4        (2 045)        (23)      4 607         2 340     (4 799)     (2 459)        2 907       448


SUPPLEMENTARY INFORMATION

                                                                                                      Unaudited
                                                                                                  six months ended
 
                                                                                              30 June         30 June
R million                                                                                        2018            2017

EBITDA RECONCILIATION
Operating profit                                                                                1 092           1 007
Depreciation and amortisation                                                                     878             822
Net profit on disposal of property, plant and equipment*                                          (15)              -
Straight-line adjustment for rentals*                                                               6               9
Impairment of assets*                                                                               -               8
Pre-opening expenses*                                                                               3              40
Latam acquisition costs*                                                                           10               -
Profit on disposal of shares in associates*                                                         -             (27)
Restructure and related costs*                                                                     12              15
Share-based payments expense*                                                                       -               8
Other*                                                                                             17              10
Reversal of Employee Share Trust consolidation*                                                     7               2

EBITDA                                                                                          2 010           1 894

EBITDA margin (%)                                                                                  26              25

Number of shares ('000)
- in issue after excluding deemed treasury shares                                             125 516          97 856
- for HEPS calculation                                                                        102 410          97 933
- for diluted EPS calculation                                                                 102 410          97 933
- for adjusted headline EPS calculation(i)                                                    108 561         104 132
- for diluted adjusted headline EPS calculation(i)                                            108 561         104 132

Earnings/(loss) per share (cents)
- basic earnings/(loss) per share                                                                 109             (59)
- headline earnings/(loss) per share                                                              123             (78)
- adjusted headline earnings per share                                                            105             198
- diluted basic earnings/(loss) per share                                                         133             (59)
- diluted headline earnings/(loss) per share                                                      123             (78)
- diluted adjusted headline earnings per share                                                    105             198

Continuing - earnings/(loss) per share (cents)
- basic earnings/(loss) per share                                                                 113             (60)
- headline earnings/(loss) per share                                                              128             (79)
- adjusted headline earnings per share                                                            110             197
- diluted basic earnings/(loss) per share                                                         138             (60)
- diluted headline earnings/(loss) per share                                                      128             (79)
- diluted adjusted headline earnings per share                                                    110             197


                                                                                                      Unaudited
                                                                                                   six months ended

                                                                                              30 June         30 June
R million                                                                                        2018            2017

Discontinuing - (loss)/earnings per share (cents)
- basic (loss)/earnings per share                                                                  (4)              1
- headline (loss)/earnings per share                                                               (5)              1
- adjusted (loss)/headline earnings per share                                                      (5)              1
- diluted basic (loss)/earnings per share                                                          (5)              1
- diluted headline (loss)/earnings per share                                                       (5)              1
- diluted adjusted headline (loss)/earnings per share                                              (5)              1

TAX RATE RECONCILIATION
Profit before tax                                                                                 598             329
Share of associates' losses                                                                        (3)             (1)

Adjusted profit before tax                                                                        595             328

                                                                                                    %               %

Effective tax rate (excluding Time Square settlements)                                             43              60
Preference share dividends                                                                         (2)             (5)
Withholding taxes                                                                                  (1)             (1)
Foreign tax rate variation                                                                          2               2
Exempt income                                                                                       1               2
Exempt income - capital gains                                                                       1               1
Foreign monetary adjustments and government incentives                                              5               9
Capital allowances and disallowed expenditure                                                     (21)            (40)

South African corporate tax rate                                                                   28              28

EBITDA to interest (times)                                                                        3.1             3.4
Borrowings to EBITDA (times)                                                                      3.2             3.9
Net asset value per share (Rand)                                                                28.57           21.15
Capital expenditure (R million)                                                                   519           1 517
Capital commitments (R million)                                                                   164             871

*   Items identified above are included as headline and adjusted headline adjustments impacting operating profit
    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.


CONDENSED GROUP STATEMENTS OF CASH FLOW

                                                                                   Unaudited
                                                                               six months ended

                                                                            30 June       30 June
R million                                                                      2018          2017

Cash generated by operations before:                                          1 966         1 898
Vacation Club timeshare sales                                                    74            78
Working capital changes                                                         (13)         (135)

Cash generated by operations                                                  2 027         1 841
Tax paid                                                                       (407)         (411)

Cash generated by operating activities                                        1 620         1 430

Purchase of property, plant and equipment                                      (485)       (1 485)
Purchase of intangible assets                                                   (34)          (32)
Acquisition of Thunderbird Resorts                                             (321)            -
Acquisition of minorities' interest in Sibaya                                   (17)            -
Acquisition of minorities' interest in Sun Dreams                              (662)            -
Advance payment of Mendoza                                                      (27)            -
Proceeds on disposal of PPE and intangibles                                      83             4
Proceeds on disposal of investment in joint venture                               -           121
Loan and investment income                                                       22             9

Cash flows from investing activities                                         (1 441)       (1 383)

Purchase of treasury shares                                                      (7)          (11)
Dividends paid to minorities                                                   (130)         (136)
Interest paid                                                                  (626)         (592)
Sun Dreams shareholder loan                                                    (713)            -
Rights issue                                                                  1 599             -
Movement in borrowings                                                         (277)          685

Net cash flows from financing activities                                       (154)          (54)

Effect of exchange rates upon cash and cash equivalents                         139           (58)

Increase/(decrease) in cash and cash equivalents                                164           (65)
Cash and cash equivalents at beginning of the period                            709         1 134

Cash and cash equivalents at end of the period                                  873         1 069
Assets held for sale                                                            (11)           (9)

Cash and cash equivalents at end of the period excluding non-current assets
held for sale                                                                   862         1 060


COMMENTARY

INTRODUCTION

Trading in South Africa during the first half of the year remained challenging with continued pressure on disposable income, a VAT increase and a
deteriorating economic climate. Trading in Chile remained subdued while Peru experienced good growth.

As indicated, we have shifted our focus, realigned our strategy and are committed to getting the basics right and operating as efficiently and optimally
as possible. The benefits of this strategy are clearly demonstrated in the results from the South African operations where we have managed to hold
comparable EBITDA in line with the prior corresponding period. This was despite comparable income only being up by 1%, significant cost pressures and a 1%
increase in the South African VAT rate. 

In June 2018, we concluded the R1.6 billion equity raise and used the proceeds to reduce South African debt. While the equity raise has improved our
debt covenants, the group remains highly geared. As a result of the group's strong cash generation, we are confident debt will continue to reduce and
we will revert to satisfactory debt levels over the next few years.

In Latam, we concluded the acquisition of an additional 10% interest in Sun Dreams during May 2018, increasing our interest to approximately 65%. We
further concluded the acquisitions of Thunderbird Resorts in Peru for US$26 million in April 2018 and the Park Hyatt Hotel and Casino in Mendoza,
Argentina for US$25.5 million in July 2018. Both these acquisitions were concluded at attractive valuations and will contribute positively to the group's
performance. Disappointingly, we only secured one of the five municipal licences which we bid for in Chile. While our bids all met the minimum
criteria, we lost out to a competitor whose economic offer (additional tax) was substantially above ours and at levels which would not generate
satisfactory returns.

We continue to deal with loss making entities and in this regard plan to restructure the Boardwalk and Carousel operations. Applications for the required
approvals have been submitted to the respective gaming boards. Time Square has experienced a significant increase in activity although income for the
comparable period (April - June) is only marginally up on the prior corresponding period. Recent trading has however been encouraging with
July and August 2018 gaming income up by 32% and 33% respectively.

BASIS FOR ACCOUNTING AND DISCLOSURE

The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for
summary financial statements and the requirements of the Companies Act applicable to summary financial statements. The summary financial
statements were prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial
Pronouncements as issued by the Financial Reporting Standards Council (FRSC), and to also, as a minimum, contain the information required by IAS 34
"Interim Financial Reporting". The accounting policies applied in the preparation of the consolidated financial statements from which the summary
consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the
previous consolidated financial statements, unless otherwise stated.

The group has, however, adopted IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers" which are both effective for
financial periods commencing on or after 1 January 2018.

The impact of these statements on the group is set out below:

- IFRS 9: The measurement of provisions against trade receivables were revised to comply with the expected credit loss method. The change had no
  material impact on operating profit.

- IFRS 15: It was assessed that, other than certain disclosures, the basis of the group's revenue recognition is in line with IFRS 15, and there was
  therefore no impact on the financial results. There is, however, a change in the statement of comprehensive income disclosure as net gaming
  revenue is classified as a derivative in terms of IAS 32 and IAS 39, and as a result is being disclosed as 'Income' whereas in prior periods it was disclosed
  as 'Revenue'. The reclassification had no impact on operating profit.

The presentation and functional currency is the South African rand, rounded to the nearest million, except where otherwise indicated.

FINANCIAL OVERVIEW

The income statement below includes Adjusted Headline Earnings adjustments.

                                                                                                            Unaudited
                                                                                                        six months ended

                                                                                            30 June                %        30 June
R million                                                                                      2018         movement           2017

Income                                                                                        7 851                4          7 560
EBITDA                                                                                        2 010                6          1 894
Depreciation and amortisation                                                                  (815)              (9)          (747)

Adjusted operating profit                                                                     1 195                4          1 147
Foreign exchange profit                                                                          19              100              -
Net interest                                                                                   (600)             (24)          (483)

Profit before tax                                                                               614               (8)           664
Tax                                                                                            (259)             (12)          (232)

Profit after tax                                                                                355              (18)           432
Minorities                                                                                     (238)              (4)          (228)

Attributable profit                                                                             117              (43)           204
Share of associates                                                                               3             >100              1

Continued adjusted headline earnings                                                            120              (41)           205
Discontinued operations                                                                          (5)           <(100)             1

Adjusted headline earnings                                                                      115              (44)           206


For the six months under review, group income increased by 4% to R7.9 billion. South African comparable income (excluding Time Square,
Fish River and Morula) increased by 1%. In Chile, income increased by 2% with Monticello income up by 6%. Due to the closure of Sun Nao casino in
December 2017 and the downscaling of the Ocean Sun casino operation, income from Colombia and Panama respectively was well down on the prior
corresponding period.

Group EBITDA increased by 6% to R2.0 billion and on a comparable basis by 2% to R1.8 billion. The increase in the VAT rate from 14% to 15% negatively
impacted EBITDA by approximately R21 million. With the full six months trading of Time Square and the opening of the arena and hotel, depreciation
was up by 8% resulting in adjusted operating profit increasing by only 4%.

Interest charges were 24% higher due to the debt funding of Time Square. Minorities' share of earnings has decreased with the acquisition of the
approximately 10% interest in Sun Dreams.

Due primarily to the group's attributable share of the losses from Time Square increasing from R63 million in the prior corresponding period to R182
million, adjusted headline earnings decreased from R206 million to R115 million, 44% below the prior corresponding period. Adjusted headline earnings
per share were down by 47% at 105 cents per share.

HEADLINE AND ADJUSTED HEADLINE EARNINGS ADJUSTMENTS

The group has incurred a number of once-off or unusual items that have been adjusted for in headline and adjusted headline earnings, the most
significant of which are described below.

Headline earnings adjustments include the following:

- profit on disposal of Fish River land of R15 million.

Adjusted headline earnings adjustments include the following:

- restructuring costs relating to the closing of Sun Nao in Colombia of R12 million;
- R10 million acquisition costs relating to Thunderbird Resorts and acquisition of the minorities' interest in Sun Dreams;
- foreign exchange profit on Shareholder loans of R30 million;
- amortisation of R63 million of the Sun Dreams intangible assets raised as part of a purchase price adjustment; and 
- an increase in the value of the Tsogo Sun put options of R54 million.


INTERIM DIVIDEND

The board has decided not to declare an interim dividend for the six months ended 30 June 2018.


INCOME BY NATURE AND GEOGRAPHICAL SEGMENT

                                                                                            South Africa                         Latam                               Nigeria                         Group

R million                                                                           2018            %       2017        2018          %         2017        2018            %     2017      2018          %        2017

Casinos                                                                            3 713            6      3 489       2 022          2        1 976          27          (13)      31     5 762          5       5 496
International VIP Business                                                             -         (100)         9           -          -            -           -            -        -         -       (100)          9
Sun Slots                                                                            562           12        504           -          -            -           -            -        -       562         12         504
SunBet                                                                                25            -         25           -          -            -           -            -        -        25          -          25
Rooms                                                                                473           (1)       480         115          2          113          21           11       19       609          -         612
Food and Beverage                                                                    426            -        424         245          2          241          16          (11)      18       687          1         683
Other                                                                                206           (7)       221           -       (100)           9           -         (100)       1       206        (11)        231
                                                                                   5 405            5      5 152       2 382          2        2 339          64           (7)      69     7 851          4       7 560


South Africa continues to contribute the majority of the group's income at 69%, with Latam contributing 30% and Nigeria 1%. Gaming is the primary contributor to group income at 73%, alternate gaming contributes 7%, Food
and Beverage 9%, rooms 8% and other income 3%.

The table below sets out the consolidated income, EBITDA and operating profit by geographical region as reflected in the income statement above, which includes headline and adjusted headline earnings adjustments and
the reconciliation to depreciation and amortisation and operating profit in the statement of comprehensive income.

                                                                                              Income                             EBITDA                    Depreciation and amortisation         Operating profit

R million                                                                           2018            %       2017        2018          %         2017        2018            %     2017      2018          %        2017

South African operations*                                                          4 236           (1)     4 288       1 124         (2)       1 149        (397)           3     (409)      727         (2)        740
Time Square                                                                          582         >100        276         130         81           72        (121)       <(100)     (45)        9        (67)         27
Morula                                                                                 -         (100)        38          (1)        75           (4)          -          100       (1)       (1)        80          (5)
Fish River                                                                             -         (100)        12          (1)        92          (13)          -            -        -        (1)        92         (13)
International VIP Business                                                             -         (100)         9           -        100          (15)          -            -        -         -        100         (15)
Alternate Gaming
 Sunbet                                                                               25            -         25           -       (100)           1           -          100       (1)        -          -           -
 Sun Slots                                                                           562           12        504         127         12          114         (47)          (7)     (44)       80         14          70

South Africa                                                                       5 405            5      5 152       1 379          6        1 304        (565)         (13)    (500)      814          1         804
Latam                                                                              2 382            2      2 339         631          7          591        (238)          (2)    (233)      393         10         358
Nigeria                                                                               64           (7)        69           -        100           (1)        (12)          14      (14)      (12)        20         (15)

Total continued operations                                                         7 851            4      7 560       2 010          6        1 894        (815)          (9)    (747)    1 195          4       1 147

Headline and adjusted headline adjustments
to impact operating profit                                                                                                                                   (63)                  (75)     (103)                  (140)

Unadjusted group operating profit                                                  7 851            4      7 560       2 010          6        1 894        (878)          (7)    (822)    1 092          8       1 007

* South African operations excluding new and discontinued operations.


SEGMENTAL REVIEW

The segmental review throughout includes all headline and adjusted headline earnings adjustments.

The table below sets out the operating performance of the group's geographic segments.

                                                                                      South Africa               Latam                  Nigeria                   Group

R million                                                                           2018         2017       2018        2017       2018         2017         2018        2017

Income                                                                             5 405        5 152      2 382       2 339         64           69        7 851       7 560
EBITDA                                                                             1 379        1 304        631         591          -           (1)       2 010       1 894
Adjusted operating profit                                                            814          804        403         368        (11)         (13)       1 206       1 159
PPA adjustment                                                                         -            -        (10)        (10)        (1)          (2)         (11)        (12)

Operating profit/(losses) after PPA                                                  814          804        393         358        (12)         (15)       1 195       1 147


South Africa

Income increased by 5% with EBITDA up by 6%. The growth in income and EBITDA was primarily driven by Time Square while EBITDA was positively impacted by no longer incurring the Fish River and International
VIP Business losses. On a comparable basis, income for the first half of 2018 increased by 1% while EBITDA was in line with the prior corresponding period reflecting the benefits of the various efficiency and cost cutting
measures implemented over the past year. The increase in VAT impacted EBITDA by approximately R21 million.

Casino operations continue to be impacted by the current economic climate in South Africa, with comparable casino income increasing by 2%. Sun Slots continued its strong performance with income and EBITDA up by
12% and 11% respectively. Rooms revenue, which was down by 3%, came under pressure due to the water crisis in Cape Town and the pressure on disposable income.

South African segment review set out below

                                                                                                      Income                                  EBITDA                             Operating profit

R million                                                                                 2018              %        2017          2018             %         2017         2018              %       2017

GrandWest                                                                                1 075              4       1 031           407             4          391          337              7        316
Sun City                                                                                   784             (3)        808            81           (15)          95          (30)           (67)       (18)
Sibaya                                                                                     632              3         612           213             3          207          178              2        175
Carnival City                                                                              469              -         471           118             1          117           71             (4)        74
Boardwalk                                                                                  252             (9)        276            43            26           34            8           >100         (6)
Wild Coast Sun                                                                             247              7         231            44            16           38           20             54         13
Meropa                                                                                     146             (1)        147            42           (14)          49           31            (18)        38
Windmill                                                                                   138             12         123            47            31           36           37             48         25
Flamingo                                                                                    80             (5)         84            18           (18)          22           11            (27)        15
Golden Valley                                                                               84              -          84            16             7           15            8             14          7
Carousel                                                                                    82            (37)        130            (8)        <(100)          19          (17)         <(100)         5
Table Bay                                                                                  162             (7)        175            36           (20)          45           26            (30)        37
The Maslow                                                                                  68             (4)         71           (18)          (29)         (14)         (25)            (9)       (23)
Naledi                                                                                      10              -          10            (2)           50           (4)          (3)            40         (5)

South African operations                                                                 4 229             (1)      4 253         1 037            (1)       1 050          652              -        653
Sun Slots                                                                                  562             12         504           127            11          114           80             14         70
SunBet                                                                                      25              -          25             -          (100)           1            -              -          -

South African operations including alternative gaming                                    4 816              1       4 782         1 164             -        1 165          732              1        723
Time Square                                                                                582           >100         276           130            81           72            9            (67)        27

South African operations including Time Square                                           5 398              7       5 058         1 294             5        1 237          741             (1)       750
Fish River                                                                                   -           (100)         12            (1)           92          (12)          (1)            92        (13)
Morula                                                                                       -           (100)         38            (1)           75           (4)          (1)            80         (5)
International VIP Business                                                                   -           (100)          9             -           100          (15)           -            100        (15)
Management companies                                                                       276             (6)        293            87           (11)          98           75            (14)        87
Intercompany management fees                                                              (269)            (4)       (258)            -             -            -            -              -          -
                                                                                         5 405              5       5 152         1 379             6        1 304          814              1        804


GrandWest's income and EBITDA both increased by 4% to R1.1 billion and R407 million respectively. Footfall to the complex is still maintaining an upward trend with strong play from the local Chinese market.

Sun City experienced difficult trading conditions, with income down by 3%. Tables was impacted by a low hold percentage while slots came under pressure in the local market following the opening of a third EBT outlet in
Rustenburg in October 2017 and a weak local economy. Rooms revenue was in line with the prior corresponding period with occupancy down by 3% at 68% and the average room rate up by 4% at R1 835. As a result of the
lower income and the high fixed cost base, EBITDA was down by 15% compared to the prior corresponding period.

Sibaya income and EBITDA both increased by 3%. Of concern is the recent opening of two EBT outlets within Sibaya's catchment area. We continue to challenge the award of these licences on the basis that the correct
process has not been followed. The Sibaya Prive and food and beverage offering is currently undergoing a refurbishment that will be completed during September 2018.

Time Square achieved income of R582 million and EBITDA of R130 million respectively. Although we have seen a significant increase in activity, casino income for April 2018 to June 2018 was only in line with the prior
corresponding period. This was partly due to low win percentages and high income experienced in April 2017, due to the opening. Despite the low win, casino income in July 2018 and August 2018 was up 32% and
33% respectively, compared to the prior corresponding period. The hotel that opened at the end of March 2018 achieved occupancy of 40% at a room rate of R1 112, which is in line with expectations, while
July 2018 showed encouraging growth with occupancy increasing to 46%. Casino market share for the period has remained at 13% although in recent months it has picked up. We are encouraged by the positive feedback
we have received on the hotel and Time Square in general and are confident that it will continue to gain market share and grow income and EBITDA.

Carnival City casino income increased by 1% with EBITDA up by 1%. We continue to experience increased footfall to Carnival City. However, average spend continues to drop, reflecting the weak economic conditions.

Boardwalk's overall income decreased by 9% with casino income down by 3%, while EBITDA increased by 26% following certain restructures and cost-cutting initiatives. Further reductions in costs is possible; however, our
LA10 application was recently only partly approved, which will limit our ability to implement a full restructure. We are in discussions with the gambling board in this regard. The shopping mall development is progressing. To
date, we have received gaming board approval and are in the process of signing up the anchor tenants for the premises. The Boardwalk's sole contribution to the development will be the inclusion of the existing retail and
land in return for a 50% equity interest in a joint venture with the developer of the mall.

Wild Coast Sun income and EBITDA increased by 7% and 16% respectively, with the EBITDA margin increasing by 2% to 17%. The casino licence expires in 2019 and the Eastern Cape Gambling and Betting Board has issued a
request for proposal.

We are in the process of preparing our submission, which is due by 28 October 2018.

The Table Bay was impacted by the water crisis in Cape Town, which resulted in a number of cancellations and a slowdown in bookings. We are, however, seeing an improvement in forward bookings given the indefinite
move out of day zero. Room occupancy decreased by 11% to 68% while the average room rate improved by 6% to R3 070.

The small urban casinos, which include Meropa (Limpopo), Windmill (Free State), Flamingo (Northern Cape) and Golden Valley (Western Cape) collectively grew their income and EBITDA by 2% and 1% respectively.

The Carousel has been severely impacted by Time Square, resulting in income declining by 37%. We have applied to the North West Gaming Board to restructure the Carousel operations, which we expect will return it to
profitability.

Sun Slots income and EBITDA increased by 12% and 11% respectively, with EBITDA impacted by the increase in the VAT rate.

Management fees and related income of R276 million was 6% lower than the prior corresponding period due to lower project fees received of R11 million compared to the prior comparable period of R36 million.
Management company costs of R189 million were R7 million lower than the prior corresponding period.

Latam

The table below includes the historic trading of Sun Dreams for the six months ended 30 June 2017, with the conversion at the average exchange rate for the six-month period ended 30 June 2018, to enable comparison in
Rands.

The table is inclusive of the presentation of constant currency information.

                                                                                                   Income                        EBITDA                Depreciation and amortisation        Operating profit

R million                                                                                   2018            2017          2018            2017             2018           2017           2018             2017

Monticello                                                                                   913             863           270             246              (76)           (67)           194              179
Sun Dreams SCJ licences                                                                      801             782           297             302              (18)           (19)           279              283
Sun Dreams municipal licences                                                                406             416           145             157              (18)           (23)           127              135
Sun Chile office                                                                               -               9             -               8                -              -              -                8
Central office                                                                                 -               -          (105)            (83)             (56)           (55)          (161)            (138)

Chile operations                                                                           2 120           2 070           607             630             (168)          (164)           439              467
Ocean Sun                                                                                     57             120           (11)            (37)             (38)           (42)           (49)             (79)
Sun Nao Colombia                                                                               9              14            (3)            (21)             (12)           (13)           (15)             (35)
Peru excluding Thunderbird Resorts                                                           142             126            30              18              (17)           (14)            13                4
Thunderbird Resorts                                                                           54               -             8               -               (3)             -              5                -

Latam total                                                                                2 382           2 330           631             590             (238)          (233)           393              357

Constant currency adjustment                                                                   -               9             -               1                -             (1)             -                1
                                                                                           2 382           2 339           631             591             (238)          (234)           393              358

Average ZAR: CLP exchange rate                                                             49.81           49.65


The presentation of financial information on a constant currency basis falls into the category of non-application of a specific IFRS requirement and is
therefore regarded as pro forma information, per the JSE Listings Requirements. The pro forma information has been prepared for illustrative purposes
only and because of its nature, it may not fairly present the group's financial position, changes in equity, results of operations or cash flow. The pro
forma information has been extracted from management accounts. Shareholders are further advised that the above information has not been reviewed
or reported on by our auditors.

Overall, income from Chile increased by 2% to CLP106 billion (R2.1 billion) while EBITDA decreased by 3% to CLP30.2 billion (R607 million). Monticello
benefitted from its new arena and a refresh of its restaurant offering. This helped drive footfall and income, which was up 6%, with EBITDA up by 10%. In
addition, certain costs were moved from Monticello to the central office.

The closure of the International VIP Business and the 66th floor of the Ocean Sun Casino led to a decrease in income and a significant reduction in
costs. While the property has continued to incur a loss, we are moving closer to a breakeven situation. We continue pursuing opportunities to sell the
65th and 66th floors of the Towers where the Ocean Sun Casino is situated.

Following the closure of the Sun Nao Casino in Colombia, we opened a few small low-cost slot halls utilising the machines and tables from the Sun
Nao casino. This model is more appropriate for the Colombian market and although we continue to incur a small loss, we believe there is further
potential to expand in Colombia and turn the business into a profitable venture. We have settled the outstanding rental for the Sun Nao casino at US$1.5
million, $US2.3 million below what we have provided for.

The Peruvian operations (excluding Thunderbird Resorts) increased income by 13% and EBITDA by 67% to R30 million. Thunderbird Resorts, which was
consolidated from April 2018, contributed R54 million in income and R8 million in EBITDA. The performance was below expectation in the first few
months due to low win percentages; however, in the last few months, the property has met expectations.

GROUP BORROWINGS

In June 2018, Sun International concluded an equity capital raise through a renounceable rights offer ("Rights Offer") when it successfully raised an
amount of R1.6 billion. The Rights Offer was significantly oversubscribed. The funds from the Rights Offer were utilised against the settlement of debt,
and a saving in interest of approximately R75 million is expected in the second half of 2018.

Sun International's borrowings as at 30 June 2018 were R15.1 billion, in line with December 2017. Following the R1.6 billion Rights Offer, South African
debt reduced from R11.4 billion at 31 December 2017 to R9.7 billion. Latam debt, however, increased following the raising of a 10-year bond by Sun
Dreams for the acquisition of the minority's approximate 20% interest in Sun Dreams, which was funded by Sun Dreams.

The group's balance sheet remains resilient and the operations continue to generate strong cash flows. Debt covenant levels were adjusted and the group 
continues to trade within these levels.

The group has unutilised borrowing facilities of R1.4 billion and available cash balances of R862 million.

                                                                                                        Minorities              Sun
R million                                                                               Total debt           share    International

South Africa                                                                                 9 723           1 377            8 346

SunWest                                                                                        571             200              371
SunWest - V&A loan                                                                             246              86              160
Afrisun Gauteng                                                                                627              34              593
Afrisun KZN                                                                                    293              97              196
Emfuleni                                                                                       533              80              453
Wild Coast                                                                                     266              80              186
Meropa                                                                                         115              33               82
Teemane                                                                                         76              19               57
Windmill                                                                                        93              25               68
Golden Valley                                                                                   (8)             (3)              (5)
Sun Slots                                                                                       15               4               11
Time Square                                                                                  4 874             695            4 179
Menlyn Maine                                                                                   186              27              159
Management and corporate                                                                     1 836               -            1 836

Nigeria                                                                                        560             284              276

Shareholder loans                                                                              862             437              425
Sun International intercompany debt                                                           (302)           (153)            (149)

Latam                                                                                        4 779           1 421            3 358

Sun Dreams                                                                                   3 986           1 421            2 565
Sun Chile                                                                                      793               -              793

30 June 2018                                                                                15 062           3 082           11 980

31 December 2017                                                                            14 995           2 654           12 341


Debt covenants
                                                                                                 South Africa                    Sun Dreams

                                                                                           Covenant          Actual        Covenant        Actual
Debt to EBITDA                                                                                 3.5x            3.2x           4.75x          3.5x
Interest cover                                                                                 2.5x            3.1x


CAPITAL EXPENDITURE

Set out below is a breakdown of the capital expenditure for the six months ended 30 June 2018 and forecast spend up to 31 December 2018.
 
                                                                                                H1              H2        December
                                                                                        six months      six months       12 months
R million                                                                                  Actuals        Forecast        Forecast

South African operations
 Expansionary
  Time Square                                                                                  166               -             166
                                                                                               166               -             166
 Refurbishment and ongoing                                                                                       -
  Sun City                                                                                      52             146             198
  GrandWest                                                                                     43             106             149
  Sibaya                                                                                        26              64              90
  SunSlots                                                                                      50              57             107
  Time Square                                                                                    7               2               9
  Other                                                                                         83             145             228

Total South African capital expenditure                                                        427             520             947

Latam operations
 Refurbishment and ongoing                                                                      86             207             293

Total Latam capital expenditure                                                                 86             207             293

Nigeria operations
 Refurbishment and ongoing                                                                       6               7              13

Total capital expenditure                                                                        6               7              13

Total group capital expenditure                                                                519             734           1 253


UPDATE ON STRATEGIC INITIATIVES

Time Square

With the commencement of operations of the 238-key hotel on 1 April 2018, Time Square is now fully operational with all components complete. The
total cost of the development equalled R4.3 billion.

Tourist Company of Nigeria (TCN)

The board of the TCN - Federal Palace - has been reconstituted with the Securities Exchange Commission appointing two directors thereto. Deloitte is
expected to complete its investigation of the shareholder dispute shortly. Once the Deloitte investigation has been completed, it will pave the way for
Sun International to exit its investment in Nigeria.

Acquisition by Sun International of 50% of Entretenimientos Del Sur Limitada's (EDS) equity interest in Sun Dreams and put options

On 30 May 2017, Sun International advised shareholders that it had acquired 50% of EDS's approximately 20% shareholding in Sun Dreams, thereby
increasing its interest in Sun Dreams to approximately 65%. Nueva Inversiones Pacifico Sur Limitada ("Pacifico"), the other minority in Sun Dreams,
acquired the balance, thereby increasing its interest to approximately 35%. The acquisition of EDS's interest was funded through Sun Dreams' available
cash resources and through the issue of a 10-year bullet bond of R1.5 billion (CLP65 billion) at a rate of Chile inflation in the range of (2.5% to 3.0%) + 3.97%. 
This resulted in both Sun International (R810 million) and Pacifico (R810 million) receiving shareholder loans (in Chilean Pesos) from Sun Dreams to fund
the acquisition of EDS shareholding. As part of the transaction, the put options previously exercisable by Pacifico and EDS against Sun International fell
away with the put option liability and reserve derecognised from the balance sheet.

Chile municipal licence bidding process

Shareholders are referred to the announcement released on SENS on 12 June 2018, regarding the outcome of the Chilean Municipal Licence Bidding
process. As previously reported, Sun Dreams submitted bids for the two municipal licences that it currently holds, namely Iquique and Puerto Varas and
for an additional three licences. On Friday, 8 June 2018, the SCJ adjudicated the bidding process in respect of the five Chilean municipal licences. The
bid for the Iquique municipal licence was awarded to Sun Dreams for a further period of 15 years. Although Sun Dreams' bids met the minimum bid requirements, 
the remaining four licences were not awarded to Sun Dreams. The economic offers submitted would not have delivered acceptable rates of return as required by the 
boards of Sun Dreams and Sun International for similar projects of this nature.

Peru acquisition

Sun Dreams finalised the acquisition in Peru of Thunderbird Resorts on 11 April 2018. Thunderbird includes four gambling operations generating EBITDA
of US$4.2 million. The purchase consideration of US$26 million includes premises valued at US$12.5 million. The acquisition presents an opportunity for
Sun Dreams to strengthen its position in Peru and diversify its asset base in Latam.

Argentina acquisition

On 29 June 2018, Sun Dreams entered into an agreement to acquire 100% of the issued share capital of the Park Hyatt Hotel and Casino in Mendoza,
Argentina, for a purchase price of US$22.5 million and a potential earn out payment of $3 million. The acquisition consideration is at an approximate
5.4x historic EBITDA. The Park Hyatt Hotel and Casino comprises of 186 rooms, 647 slot machines and 19 tables and the transaction became
unconditional on 11 July 2018.

The acquisition of this hotel and casino is aligned with the board's strategy of diversifying the group's assets across Latam and extending the average
length of the licences of the group. The casino license is for a 20 year period.

SUNWEST EXCLUSIVITY

The Western Cape Government gazetted draft legislation on 28 February 2018 to establish three zones for casinos in the Cape Metropole and to allow
for the relocation of casino licences. The legislation includes changes to the gaming tax tables and conditions for relocation, which will entail additional
taxes and fees, obligations to mitigate any negative impacts that relocating a casino may have on the area from where the casino relocates, and
provides for economic opportunities for designated groups that reside in the area to which the casino will relocate.

We have submitted comments on the draft legislation and simultaneously engaged with a number of stakeholders, which included the media, local
municipalities in Worcester, Caledon and Mykonos and other interested stakeholder groupings.

SMOKING LEGISLATION

The Department of Health published the Draft Control of Tobacco Products and Electronic Delivery Systems Bill 2018 ("the Draft Bill") for public
comment. The Draft Bill, inter alia, proposes prohibiting any person from smoking in an enclosed public place or an enclosed workplace. The operation
of casinos falls within the scope of this provision. The effect is that casinos will no longer be permitted to designate separate, indoor smoking areas/
rooms. We have engaged with the gaming regulators on the matter and the Casino Association of South Africa and have made submissions on the
Draft Bill.

CHANGES TO THE BOARD OF DIRECTORS AND COMMITTEES

Mr GR Rosenthal, who held the position of chairman of the company's audit committee, retired as a non-executive director of Sun International on
15 May 2018 and was succeeded by Ms CM Henry as the new chairman of the audit committee.

On 1 June 2018, Ms CM Henry was appointed as an additional member of the Sun International Social and Ethics Committee, while Dr NN Gwagwa and
Mr GW Dempster were appointed as members of Sun International's Remuneration and Risk Committees respectively.

Shareholders are further advised that with effect from 20 June 2018, Mr S Sithole was appointed as a non-executive director of Sun International. 
Mr S Sithole, who is a Chartered Accountant by profession, is the Chief Executive Officer and Founder of Value Capital Partners, an activist 
investment company, and also serves on the boards of a number of public listed companies in South Africa. Effective 31 August 2018, Mr S Sithole 
was appointed as a member of  Sun International's Remuneration and Investment committees.

OUTLOOK

As a result of the subdued local economy and low economic growth experienced in Chile, we expect trading to remain under pressure. We are however
encouraged by the trading at Time Square, Monticello, Sun Slots and our Peru operations. Forward bookings on the hospitality front have also improved
which will assist both Sun City and Table Bay.

The continued focus on maximizing efficiencies and reducing costs will help us protect our margins in this difficult trading environment. We will,
however, need to deal with the full impact of the increase in VAT in the second half as well as the requirement to permanently employ temporary
contract labour workers at our properties in terms of the recent Constitutional Court ruling.

While we expect our new operations in Peru and Argentina to contribute positively in the second half, interest costs in Latam will increase following
these acquisitions and the acquisition of the minority interest in Sun Dreams. Earnings attributable to Latam minorities will, as a consequence of the
acquisition, reduce.

The proceeds from the rights offer will help reduce interest costs in South Africa although the number of shares in issue has increased.

We will continue focusing on reducing our debt levels and improving our debt covenants.

AUDIT OPINION

The interim group financial results have not been reviewed or audited.

DIRECTORS' RESPONSIBILITY STATEMENT

The financial information for the six months ended 30 June 2018 and the constant currency adjustments is the responsibility of the directors and has
been prepared for illustrative purposes only to show what the results may have looked like had the currency been the same in both periods.
Accordingly, the information contained in this announcement may not fairly present Sun International's financial position, changes in equity, results of
operations or cash flows.

APPROVAL OF INTERIM GROUP FINANCIAL RESULTS

The interim group financial results were prepared under the supervision of the Chief Financial Officer, N Basthdaw; B Compt (Hons), CTA, CA(SA), M
Com, HDip Company Law and approved by the board of directors on 31 August 2018.

For and on behalf of the board

MV Moosa           AM Leeming                N Basthdaw
Chairman           Chief Executive           Chief Financial Officer


Registered office:
6 Sandown Valley Crescent, Sandown, Sandton 2196

Sponsor:
Investec Bank Limited

Transfer secretaries:
Computershare Investor Services (Pty) Ltd,
1st Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196

Directors:
MV Moosa (Chairman), PL Campher
(Lead Independent Director), AM Leeming (Chief Executive)*, PD Bacon (British),
N Basthdaw (Chief Financial Officer)*, EAMMG Cibie (Chilean), GW Dempster,
CM Henry, Dr NN Gwagwa,
BLM Makgabo-Fiskerstrand,
DR Mokhobo*, S Sithole (Zimbabwean)
* Executive

Group Company Secretary
AG Johnston

Date: 03/09/2018 08:00:00 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.

Email this JSE Sens Item to a Friend.

Share This Story