Sun International Limited – Business update pro forma group income statement and trading statement

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)

Date: 13/09/2017 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
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