Sun International Limited · JSE:SUI
Sun International — H1 2018 Earnings Presentation
41 slides from Sun International's earnings presentation, September 2018
Slide 1: Results Presentation for the interim period 30 June 2018
RESULTS PRESENTATION for the interim period 30 June 2018
Slide 2: Disclaimer
Certain statements in this document may constitute employees and affiliates or any other person as to the ’forward looking statements’. Such forward looking fairness, accuracy or completeness of the information statements reflect the company’s beliefs and (including data obtained from external sourc
Slide 3: Income, EBITDA and HEPS headline figures
ADJUSTED DILUTED HEPS INCOME EBITDA 47% down to 4% up to 6% up to 105 cents R7.9 billion R2.0 billion per share 3
Slide 4: Overview
Overview SOUTH AFRICA LATAM Trading in the first half of the year remained challenging Trading in Chile remained subdued while Peru performed well • Continued pressure on disposable income • Monticello income up 6% and EBITDA up 10% • VAT increase • The Peruvian operations (excluding Thunderbird) in
Slide 5: Strategic Objectives
STRATEGIC OBJECTIVES can International
Slide 6: Improve Guest Experience
IMPROVE GUEST STRATEGIC EXPERIENCE OBJECTIVES • Increased focus on service and customer engagement • MVG loyalty programme • Further training of staff required • Issues with power loyalty devices to be resolved • Acceptance of leisure points improving • Centralised marketing • Communication improved
Slide 7: Efficiency and Optimisation
EFFICIENCY AND STRATEGIC OPTIMISATION OBJECTIVES • Established an efficiency and optimisation team to drive • System optimisation and utilisation • Integration of key systems • Standardisation of process and enhanced information flow • Resultant cost reduction and improved control • Operating margin
Slide 8: Protect and Leverage Existing Asset Portfolio
STRATEGIC PROTECT AND LEVERAGE EXISTING OBJECTIVES ASSET PORTFOLIO • SOUTH AFRICA • Comments submitted on draft Tobacco Bill • No developments with regards to the increase in Gauteng gaming taxes • Amended National Gambling Amendment Bill 2018 formally released to Parliament – Includes amendments re
Slide 9: Protect and Leverage Existing Asset Portfolio | cont.
STRATEGIC PROTECT AND LEVERAGE EXISTING OBJECTIVES ASSET PORTFOLIO | cont. • SOUTH AFRICA • Boardwalk Mall development progressing with key anchor tenants signed up • Carnival land development progressing with various approvals underway • Disposal of Sibaya excess land for R45 million approved by ga
Slide 10: Grow Our Business into New Areas and Products
STRATEGIC GROW OUR BUSINESS INTO OBJECTIVES NEW AREAS AND PRODUCTS • Acquisition of Thunderbird Resorts in Peru was concluded in April 2018 • Acquired 100% of the Park Hyatt Hotel and Casino in Mendoza, Argentina • Good prospects exist for online sports betting and casinos in Latam which are being e
Slide 11: Our People
STRATEGIC OUR PEOPLE OBJECTIVES • Constitutional Court ruling on labour brokers • Approximately 2 500 temporary employees • Will have short term effect • Remove disproportionate income differential levels over time – equal pay for work of equal value • First year of three-year wage agreement • Partn
Slide 12: Governance and Sustainability
STRATEGIC GOVERNANCE AND OBJECTIVES SUSTAINABILITY • Remuneration policy approved with further changes under discussion • Dedicated group ethics office established to reinforce ethical culture • Risk methodology and risk ranking revised • Focused group sustainability hub incorporating occupational h
Slide 13: Latam Acquisitions
LATAM ACQUISITIONS
Slide 14: Thunderbird, Peru Update
THUNDERBIRD, PERU UPDATE • Purchase consideration of US$26 million which included premises valued at US$12.5 million Capital • EBITDA generated at the time of US$4.2 million investment • Adjusting the purchase consideration with the value of premises and imputing a lease cost would result in an acqu
Slide 15: Mendoza, Argentina Update
MENDOZA, ARGENTINA UPDATE • Purchase consideration of US$22.5 million and a potential US$3 million earn out payment Capital • EBITDA generated during 2017 was US$4.7 million investment • Historical EBITDA multiple of 5.4x • The transaction became unconditional on 11 July 2018 • 20 year casino licenc
Slide 16: Time Square Update
TIME SQUARE UPDATE can International
Slide 17: Time Square Update
TIME SQUARE UPDATE • Time Square captured 13% of Gauteng's market share, which is below initial expectation Gauteng • Recent performance has shown positive growth in market share, with slots market share at gambling market 13.57% and tables market share at 12.44% • R4.3 billion invested Capital • R6
Slide 18: Time Square Arena Line-up
TIME SQUARE ARENA LINE-UP FAREWELL SOUTH AFRICA, WITH LOVE RANDY CRAW 26 OCTOBER 2018 SUN ARENA, TIME SQUARE BIG CONCERTS BIG 702 (Fa
Slide 19: Financial Review
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Slide 20: Financial Overview
FINANCIAL REVIEW FINANCIAL OVERVIEW June June • Group income increased R million 2018 % 2017 by 4% to R7.9 billion Income 7 851 4 7 560 EBITDA 2 010 6 1 894 • Growth attributable to: Depreciation and amortisation (815) (9) (747) - Sun Slots achieving EBITDA growth of 11% Adjusted operating profit 1
Slide 21: Earnings Reconciliation
FINANCIAL REVIEW EARNINGS RECONCILIATION R million 2018 2017 Profit/(loss) attributable to ordinary shareholders 137 (58) 1. Profit on the sale of the Fish River Impairment of assets - 8 land of R15 million Profit on disposal of property, plant and equipment1 (15) - 2. The straight-line adjustment r
Slide 22: Factors Impacting Decrease in Adjusted Headline Earnings
FINANCIAL REVIEW FACTORS IMPACTING DECREASE IN ADJUSTED HEADLINE EARNINGS R million 300 63 56 83 61 95 18 7 0 56 206 5 8 71 115 Group Income Employee Cost Depreciation Levies and VAT LPM site Other costs Foreign Net interest Fair value Tax Discontinued Minorities Adjusted Group Adjusted and on casin
Slide 23: Segmental Review
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Slide 24: Segmental Review: Income per Geography
SEGMENTAL REVIEW 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 after PPA 814 804 393 358 (12) (15) 1 195 1 147 1% 3% (1%) 9% (3%) 14% (9%) (14%
Slide 25: South African Segmental Review
SEGMENTAL REVIEW SOUTH AFRICAN SEGMENTAL REVIEW 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 Boa
Slide 26: Latam Segmental Review
SEGMENTAL REVIEW LATAM SEGMENTAL REVIEW Depreciation and Income EBITDA 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
Slide 27: Capital Investment
CAPITAL INVESTMENT can International
Slide 28: Capex
CAPITAL INVESTMENT CAPEX H1 H2 December Six months Six months 12 months R million Actual 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 O
Slide 29: Capex - Time Square
CAPITAL INVESTMENT CAPEX-TIME SQUARE Total Project Capitalised development • Time Square’s development was R million Capex Interest spend completed in the first half of 2018 Spend up to 31 December 2016 2 069 130 2 199 with the completion of the 238 room hotel in March 2018 Spend for the 12 months 3
Slide 30: Borrowings and Cash Flow
BORROWINGS AND CASH FLOW can International
Slide 31: Borrowings
BORROWINGS AND CASH FLOW BORROWINGS Attributable to Sun • Proceeds from the rights R million Total debt Minorities International offer was applied to reduce South Africa South African debt Operating subsidiaries* 2 827 655 2 172 Time Square 5 060 722 4 338 • Latam debt increased Central office 1 836
Slide 32: South African Cash Flow
BORROWINGS AND CASH FLOW SOUTH AFRICAN CASH FLOW 1.599 1.703 R million 1.448 9 278 538 261 362 166 94 290 130 254 286 17 7 Generated by Working Tax paid Interest paid Capex Free cash Project capex Other Cashflow Dividends to Investment Rights offer Borrowings Other Cash at Cash at end operations cap
Slide 33: Sun Dreams Cash Flow
BORROWINGS AND CASH FLOW SUN DREAMS CASH FLOW R million 605 12 130 387 515 57 86 344 10 354 321 138 662 1.357 27 713 Generated Working Tax paid Interest paid Capex Free cash Other Cashflow Acquisition Acquisition Advance Shareholder Borrowings Effect of Cash at Cash at by capital investing prior to
Slide 34: Supplementary Information
SUPPLEMENTARY INFORMATION can International
Slide 35: Latam Segmental (CLP)
SUPPLEMENTARY INFORMATION LATAM SEGMENTAL (CLP) Income EBITDA Operating profit CLP million 2018 % 2017 2018 % 2017 2018 % 2017 Iquique 10 225 (2) 10 468 3 190 (9) 3 518 2 978 (10) 3 311 Puerto Varas 9 981 (3) 10 244 4 049 (6) 4 318 3 368 - 3 378 Temuco 14 748 2 14 455 5 487 (3) 5 650 5 160 (4) 5 369
Slide 36: Group Structure
SUPPLEMENTARY INFORMATION GROUP STRUCTURE Economic interest % * Slots Tables Rooms South Africa Gauteng Carnival City 91 1 542 49 105 Maslow 100 - - 281 Time Square 82 2 000 60 238 Western Cape GrandWest 61 2 563 68 39 Table Bay 61 - - 329 Worcester 61 220 6 98 Sun Bet 100 - - - KwaZulu-Natal Sibaya
Slide 37: Analysis of Minority Shareholders
SUPPLEMENTARY INFORMATION ANALYSIS OF MINORITY SHAREHOLDERS Adjusted headline Minority portion earnings % Shareholding including SIEST R million 2018 2017 2018 2017 2018 2017 South Africa 136 249 (134) (142) SunWest 227 218 61.40% 61.40% (86) (85) Sibaya 116 115 63.27% 62.65% (43) (43) Carnival City
Slide 38: Borrowings by Subsidiary
SUPPLEMENTARY INFORMATION BORROWINGS BY SUBSIDIARY 2018 2017 Attributable to Total Minority Sun Total Attributable to R million Borrowings Share International Borrowings Minority share Sun International South Africa 9 723 1 377 8 346 11 424 1 373 10 051 SunWest 817 286 531 869 305 564 Afrisun Gauten
Slide 39: Issued Share Capital
SUPPLEMENTARY INFORMATION ISSUED SHARE CAPITAL June December ‘000 2018 2018 Number of shares in issue before rights offer 109 087 109 087 Rights offer 27 644 27 644 Number of shares in issue 136 731 136 731 Less all shares held through Dinokana, employee share trust and deemed treasury shares (11 21
Slide 40: Group Effective Tax Rate (ETR)
GROUP TAX GROUP EFFECTIVE TAX RATE (ETR) R million South Africa Other Africa Latam Total Profit before tax 380 (30) 248 598 Adjustment items Preference share funding 44 - - 44 Movement in put option (54) - - (54) Foreign inflation adjustments - - (121) (121) Non-deductible interest 32 - - 32 Tax los
Slide 41: Results Presentation
RESULTS PRESENTATION for the interim period 30 June 2018