SUN INTERNATIONAL LIMITED - Business update pro forma group income statement and trading statement

2017-09-13 16:45:00

SUI 201709130033A
Business update, pro forma group income statement and trading statement

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


BUSINESS UPDATE, PRO FORMA GROUP INCOME STATEMENT AND TRADING STATEMENT


BUSINESS UPDATE

Shareholders are referred to the Company’s outlook statement contained in its reviewed
condensed consolidated financial statements for the six months ended 31 December 2016,
which was released on SENS on 24 March 2017 and are advised that the financial results for
the six month period ended 30 June 2017 reflect the challenging trading environment within
which the Company operates, both in South Africa and Latin America. The financial
performance of the South African operations has continued to be negatively affected by
difficult trading conditions largely attributable to the poor performance of the South African
economy, the on-going political uncertainty in South Africa and consumers who have less
disposable income to spend on entertainment and gaming.

In Chile, trading has improved at most of the properties other than at Iquique and Monticello.
Iquique has been affected by strike action in the mining industry, while Monticello continues
to be impacted due to the relocation of the toll road to the Santiago side of Monticello. The
Panama and Colombia operations continue to struggle and plans are in place to downscale
these properties, dispose of certain assets and exit or reduce the term of the Colombia lease.

For the review period, total group revenue increased by 19% from R6.4 billion to R7.7 billion,
largely attributable to the inclusion of Sun Dreams, Sun Slots and Time Square’s results
during this period, the latter of which commenced trading on 1 April 2017. EBITDA increased
by 15% from R1.6 billion to R1.9 billion. Revenue generated by the South African
operations, declined by 1% while EBITDA declined by 9%, on a comparable basis.


                                                                                   
Total group segmental revenue and EBITDA for the review period is reflected below:-

                                                             Revenue                           EBITDA                      EBITDA %

                                                 June 2017             June 2016   June 2017            June 2016    June       June 2016
                                                                                                                     2017
Rm                                               6 months       %      6 months    6 months       %     6 months       6        6 months
                                                                                                                    months
GrandWest                                          1,031       (2)       1,049        391        (8)       426        38           41

Sun City                                            859        10         808         139        90        110        17           15

Sun City - vacation club accounting adjustment     (51)        (29)      (72)        (44)        27       (60)         -            -

Sibaya                                              612         6         576         207         8        192        34           33

Carnival City                                       471        (14)       546         117        (32)      173        25           32

Boardwalk                                           276        (7)        296         34         (44)      61         12           21

Wild Coast Sun                                      231         1         229         38         (17)      46         16           20

Meropa                                              147        (7)        158         49         (16)      58         33           37

Windmill                                            123        (13)       141         36         (25)      48         29           34

Flamingo                                            84         (5)        88          22         (19)      27         26           31

Golden Valley                                       84          2         82          15         (12)      17         18           21

Carousel                                            130        (17)       157         19         (34)      29         15           18

Table Bay                                           175         5         167         45         18        38         26           23

Maslow                                              71          3         69         (14)        (27)     (11)       (20)         (16)

Naledi                                              10         (17)       12          (4)       (100)      (2)       (40)         (17)

Fish River                                          12          9         11         (12)        (9)      (11)       (100)        (100)

                                                   4,265       (1)       4,317       1,038       (9)      1,141       24           26

International business                               9         (95)       165        (15)       (171)      21        (167)         13

Sun Slots                                           504        113        237         114        107       55         23           23

Time Square                                         276        100         -          72         100        -         26            -

Morula                                              38         (64)       105         (4)       (129)      14        (11)          13

SunBet                                              25         67         15           1         133       (3)        4           (20)

Management activities                               293        (2)        298         98         21        81         33           27

Central office and other eliminations              (258)        0        (259)         -          -         -                       -

South Africa                                       5,152        6        4,878       1,304       (0)      1,309       25           27



Iquique                                             218        (4)        227         72         (4)       75         33           33

Puerto Varas                                        205         4         197         87          6        82         42           42

Temuco                                              290         5         277         113         6        107        39           39

Valdivia                                            182         5         174         63          3        61         34           35

Coyhaique                                           71         10         64          22         15        19         31           30

Punta Arenas                                        238         5         228         103         2        101        43           44

Monticello                                          874        (4)        908         255        (10)      282        29           31

Central office                                       -          -          -         (88)         5       (92)

Chile                                              2,078        0        2,075        627        (1)       635        30           31

Panama                                              119        (4)        124        (37)       (477)      (6)       (31)          (5)

Colombia                                            15         (37)       23         (21)        (24)     (17)       (147)        (74)

Peru                                                127         3         123         23         (11)      25         18           21


                                                                                                                 
                                                   2,339       (0)       2,345       591         (7)       636

Constant currency adjustment                        -         (100)      319          -         (100)      85

Pre-acquisition adjustment                          -          100       (1,289)      -          100      (380)

Latam                                              2,339       70        1,375       591         73        341        25           25



Nigeria                                             69        (28)        96         (1)         67        (3)        (1)          (3)

Total continued operations                         7,560       19        6,349       1,894       15       1,647       25           26



Discontinued operations                             100        10         91        5            25         4          5            4

Group total                                        7,660       19        6,440     1,899         15       1,651        25      



TIME SQUARE

Following a soft opening of the Time Square Casino at Menlyn, Pretoria to the public on
1 April 2017, for the quarter ended 30 June 2017, Time Square Casino achieved gaming
revenue of R251 million. Despite the opening of the casino, the Gauteng gaming market has
not grown, with gross gaming revenue for the quarter that Time Square has been trading, in
line with the prior year. In its first quarter, Time Square captured 13.4% of Gauteng’s market
share, which is below expectations. Recent trading has however reflected growth in activity
and visitation and with the opening of the arena in November 2017 and the hotel in March
2018, strong growth in revenue is anticipated.

BORROWINGS

Sun International’s borrowings as at 30 June 2017 were approximately R15 Billion of which
R11.4 billion is attributable to the South African balance sheet. The Company’s balance
sheet remains resilient and the group continues to generate strong cash flow from
operations. Following negotiations with the group’s lenders during the review period, the
debt covenant levels were adjusted and the group continues to trade within these levels.

PROPOSED ACQUISITION BY SUN INTERNATIONAL OF 50% OF EDS’S EQUITY INTEREST IN SUN
DREAMS

Shareholders are referred to the announcement released by the Company on SENS on 30
May 2017 which provided details of Sun International’s intention to increase its shareholding
to approximately 65% in Sun Dreams which is aligned to its strategic objective of increasing
its interests in Latin America and also eliminates the put options given by Sun International to
EDS and Pacifico.

The proposed transaction is still awaiting the relevant gambling board approvals which is
anticipated to be received in the near future.

                                                                                         
TRADING STATEMENT FOR THE PERIOD ENDED JUNE 2017 AND PRO FORMA GROUP INCOME
STATEMENT FOR THE PERIOD ENDED JUNE 2016

Shareholders are reminded that in terms of announcements released by the Company on
SENS on 22 August 2016 and 24 February 2017, Sun International has changed its financial
year end from 30 June to 31 December, in order to align with its Chilean operations.

Accordingly and for purposes of this trading statement, the earnings per share ranges for the
six month period from 1 January 2017 to 30 June 2017 are compared against the pro forma
results for the prior corresponding period from 1 January 2016 to 30 June 2016, which are
disclosed below.
                                                                     Audited         Unaudited       Pro forma

                                                                 12 months ended   6 months ended    6 months
                                                                                                       ended
                                                                      June          31 December         June

Rm                                                                    2016             2015            2016

Continuing operations

Revenue                                                              12,186            5,837           6,349

Other income                                                           18                 -             18

Other expenses                                                       (11,278)          (5,822)        (5,456)

Operating profit                                                       926               15            911

Foreign exchange (losses)/profit                                      (227)             254            (481)

Interest income                                                        33                20             13

Interest expense                                                      (756)             (349)          (407)

Fair value adjustment to put liability                                  -                 -              -

Share of equity accounted profits                                      18                32            (14)

(Loss)/profit before tax                                               (6)              (28)            22

Tax                                                                   (533)             (303)          (230)

Loss for the period from continuing operations                        (539)             (331)          (208)

Profit for the period from discontinued operations                     36                4              32

Loss for the year                                                     (503)             (327)          (176)



Minorities                                                             (89)             118            (207)

Ordinary shareholders                                                 (414)             (445)           31

Loss for the period attributable to:                                  (503)             (327)          (176)



Adjusted for :

(Loss)/profit attributable to ordinary shareholders                   (414)             (445)           31

Net (profit)/loss on disposal of property, plant and equipment         (3)              (24)            21

Profit on disposal of shares in subsidiaries                           (18)               -            (18)

Impairment of assets                                                    -                 -              -

Tax expense on the above items                                         57                4              53

Minorities' interests on the above items                               (2)                -             (2)

Headline (loss)/earnings                                              (380)             (465)           85




                                                                                                    
Number of shares ('000)

- in issue after excluding deemed treasury shares                     97,977                            97,977

- for EPS calculation                                                 98,214                            98,214

- for diluted EPS calculation                                         98,214                            98,214

- for adjusted headline EPS calculation (i)                           104,140                           104,140

- for diluted adjusted headline EPS calculation (i)                   104,140                           104,140



Earnings per share (cents) - recalculated

- basic earnings/(loss) per share                                                                       32

- headline earnings/(loss) per share                                                                    87

- adjusted headline earnings per share                                                                  280

- diluted adjusted headline earnings per share                                                          280



Notes to the Group Pro Forma Income Statement:-

1.          The group pro forma income statement and earnings per share have been prepared for
            purposes of comparison to the review period.

2.          The group pro forma income statement was derived by deducting the unaudited, published
            results for December 2015 from the audited financial results for June 2016.

3.          The minority share of attributable earnings was impacted by their share of a significant
            Nigerian foreign exchange loss on inter-company loans.

4.          The Directors of Sun International, as at the date of this announcement. collectively and
            individually, accept full responsibility for the accuracy of the information given in this pro forma
            group income statement and certify that, to the best of their knowledge and belief, there are
            no other facts, the omission of which would make any statement in this pro forma group
            income statement false or misleading and all reasonable enquiries to ascertain such facts
            have been made and that this pro forma group income statement contains all information
            required by the Listings Requirements of the JSE Limited.

Shareholders are advised that a reasonable degree of certainty exists that the Company’s
headline earnings per share for the financial half-year ended 30 June 2017 is expected to be
a loss of between 65 cents per share and 77 cents per share compared against the prior
corresponding period’s headline earnings profit of 87 cents per share. Basic earnings per
share for the financial half year ended 30 June 2017 is expected to be a loss of between 90
cents per share and 96 cents per share compared against the prior corresponding period’s
profit of 32 cents per share. Furthermore shareholders are advised that Sun International’s
adjusted diluted headline earnings per share is expected to be between 25% - 35% lower
compared to the prior corresponding period profit of 280 cents per share

Headline and adjusted headline charges includes, inter alia, fair value adjustment on the put
options (R162 million), Time Square pre-opening expenses (R40 million) and amortisation of
Dreams S.A intangibles (R73 million).

Sun International’s interim financial statements for the financial half year ended 30 June
2017 are expected to be announced on or about Monday, 2 October 2017.

This business update, pro forma group income statement and trading statement has not
been reviewed or reported on by Sun International’s external auditor.


By order of the board.


Johannesburg
13 September 2017


Sponsor to Sun International
RAND MERCHANT BANK (a division of Firstrand Bank Limited)


                                                         

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