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Unaudited interim results announcement for the six month period ended 30 June 2019
SUN INTERNATIONAL LIMITED
Registration number: 1967/007528/06
Share code: SUI
ISIN: ZAE 000097580 Introduction
Unaudited interim results announcement for the six month period ended 30 June 2019
Despite the difficult political landscape and a challenging operating environment, the group's South African
operations achieved 2% growth in income and 4% in adjusted EBITDAR. The margin improvement achieved was
through a dedicated focus on efficiencies, cost containment and enhancing the guest experience.
In South Africa, we concluded agreements that will result in an increase in our equity interest in Sibaya
and Sun Slots as follows:
- We will increase our interest in Sibaya by 22.4% and mancos for a total consideration of R540 million
resulting in our interest in Sibaya increasing to 87.2%; and
- We will increase our interest in Sun Slots by 30% for a consideration of R504 million resulting in Sun
Slots becoming a wholly-owned subsidiary.
Both Sibaya and Sun Slots have been trading well with the above transactions being concluded at attractive
valuations and at levels where they will be earnings and cash flow enhancing. We completed the restructure
of the Carousel at the end of May 2018 and will shortly complete the restructure of the Boardwalk. Our
Wild Coast land claim was finally settled and we submitted our bid for renewal of the licence. The Eastern
Cape Gambling Board has extended the existing Wild Coast Casino licence for six months to 28 February
2020.
Growth expectations in the Latam countries in which we operate have been subdued although GDP growth of
around 3% for both Chile and Peru is still anticipated. Income from Latam was up by 17% and adjusted
EBITDA (excluding IFRS 16) up by 1%. However, on a comparable basis, income was in line with the prior
period and adjusted EBITDA decreased by 7%.
In Latam, we will be disposing of a 14.94% interest in Sun Dreams for US$86 million, thereby reducing our
equity interest to 50%.
We continued to reduce our debt levels with South African debt down from R9.2 billion as at 31 December
2018 to R8.8 billion and our bank debt covenant of debt to adjusted EBITDA down from 3.0 to 2.8 times. The
group continues to trade within its debt covenant levels and has unutilised borrowing facilities of R1.3
billion plus available cash balances of R429 million from continued operations.
The group's statement of financial position remains resilient and the operations continue to generate
strong cash flows.
Significant reporting changes
Our results were impacted by the accounting for the disposal of a 14.94% interest in Sun Dreams in terms of
IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations wherein the group's entire investment
in Sun Dreams has been treated as a discontinued operation and the adoption of IFRS 16: Leases.
South Africa
Income from our South African operations was up by 2% from the prior period to R5.5 billion with adjusted
EBITDAR up by 4% to R1.5 billion reflecting a EBITDAR margin of 27%. Given the difficult trading environment,
management continued its focus on maximising efficiencies and reducing costs with this effort reflected in
the improved margin. The current period also had the full impact of the 1% increase in the VAT rate, which
was increased in April 2018.
Time Square, Sibaya and Sun Slots performed well with income increasing by 15%, 6% and 13% respectively.
SunBet improved significantly with income up by 146% and EBITDAR at R20 million from R2 million in the prior
period. Disappointingly, Sun City (6%), Wild Coast (9%), Windmill (9%) and the Maslow (9%) experienced
declining income.
Excluding the depreciation of R29 million relating to the right of use assets from capitalised leases,
depreciation and amortisation was down by 2%. Property and equipment rentals for the six-month period
ended 30 June 2019 of R54 million were capitalised in terms of IFRS 16: Leases. Interest charges were
down R90 million due primarily to the prior period's rights offer as well as cash flow from operations
having reduced debt levels. This was offset in part by an interest charge of R37 million relating to the
capitalised leased assets. The net impact of the capitalisation of the leased assets was a charge of R12
million before tax.
Although still high, the effective tax rate reduced from 60% to 46% due to the rights offer proceeds being
used to reduce Time Square debt and reduced losses from Time Square where no tax relief is currently being
accounted for against the losses.
Latam
Income from our Latam operations was up by 17% from the prior period to R2.8 billion with adjusted EBITDA
(excluding IFRS 16 adjustments) up by 1% to R638 million. These results are not directly comparable to the
prior period due to the acquisitions of Thunderbird Resorts in Peru in April 2018 and the Park Hyatt Hotel
and Casino in Mendoza, Argentina in July 2018. On a comparable basis income was in line with the prior
period at R2.4 billion with adjusted EBITDA down by 7% to R606 million.
Financial overview
Nigeria and
South Africa Latam Swaziland Total
R million % 2018 % 2018 % 2018 % 2018
2019 2019 2019 2019
Income 5 526 2 5 405 2 783 17 2 382 156 3 152 8 465 7 7 939
Adjusted EBITDA
(excluding IFRS 16) 1 426 3 1 379 638 1 631 (8) (33) (6) 2 056 3 2 004
Adjusted EBITDA 1 480 7 1 379 668 6 631 (8) (33) (6) 2 140 7 2 004
Adjusted operating profit 900 11 814 370 (6) 393 (24) (9) (22) 1 246 5 1 185
Profit before tax 440 43 308 246 (27) 337 (47) (15) (41) 639 6 604
Profit after tax 258 91 135 150 (40) 250 (44) (19) (37) 364 5 348
Group adjusted headline earnings 107 +100 4 88 (32) 130 (23) (21) (19) 172 50 115
Basic earnings per share (cents) 132 21 109
Diluted basic earnings per share (cents) 132 (1) 133
Headline earnings per share (cents) 128 4 123
Diluted adjusted headline earnings per share (cents) 136 30 105
Dividends per share - - -
Outlook
With an uncertain international environment and the local economy under pressure, combined with weak
local business confidence, we do not anticipate an improvement in trading conditions in the short term.
Notwithstanding the subdued trading conditions, management will continue to focus on its key strategic
objectives and optimising the business. We will place emphasis on improving our operations and guest
experience and will continue to take the necessary action on loss-making entities. Time Square is expected
to gain further market share and grow income and adjusted EBITDA and we will focus on growing our alternate
gaming business.
Sun Dreams management is focusing on improving the performance in the second half of 2019 and will
leverage off Chile and Peru's positive GDP growth forecast. We continue working on the IPO of Sun Dreams
in Chile, exploring further growth opportunities in Latam, including in the online space, where a number
of countries are going through the process of regulating this industry.
FURTHER INFORMATION
This short-form announcement is the responsibility of the directors and is only a summary of the
information contained in the full announcement. Any investment decision should be based on the full
announcement published on Sun International's website and on the SENS link below. Only the short form
announcement will be available on SENS. The full announcement will be available on the link
www.suninternational.com or through this link
https://senspdf.jse.co.za/documents/2019/jse/isse/SUI/interim.pdf
The full announcement is also available at our registered office for inspection, at no charge, during
office hours. Copies of the full announcement may be requested by contacting investor.relations@
za.suninternational.com.
SPONSOR: Investec Bank Limited
www.suninternational.com
Date: 02/09/2019 08:00:00
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