Sun International Limited · JSE:SUI
Sun International — FY2019 Earnings Presentation
42 slides from Sun International's earnings presentation, Mar 16, 2020
Slide 1: Audited Group Financial Results for the year ended 31 December 2019
AUDITED GROUP FINANCIAL RESULTS for the year ended 31 December 2019
Slide 2: Disclaimer
DISCLAIMER Certain statements in this document may inducement to subscribe for or purchase any constitute ‘forward looking statements’. Such securities, and nothing contained herein forward looking statements reflect the shall form the basis of any contract or company’s beliefs and expectations and
Slide 3: Contents
CONTENTS Overview and key highlights Strategic objectives Financial review Segmental review Capital allocation Borrowings and cash flow Conclusion Supplementary information 2
Slide 4: Overview and Key Highlights
The Maslow Hotel, Sandton, South Africa OVERVIEW AND KEY HIGHLIGHTS 3
Slide 5: Overview and Key Highlights
OVERVIEW AND KEY HIGHLIGHTS GROUP INCOME up 4% to R17.2 billion GROUP ADJUSTED EBITDAR up 1% to R4.6 billion GROUP ADJUSTED OPERATING PROFIT up 6% to R3.0 billion GROUP ADJUSTED DILUTED HEPS up 91% to 605 cents per share 4
Slide 6: Key Operational and Strategic Themes
OVERVIEW AND KEY HIGHLIGHTS KEY OPERATIONAL AND STRATEGIC THEMES EXCEPTIONAL GROWTH FROM KEY ASSETS • Adjusted operating profit from South Africa up 15% • Exceptional growth from Time Square and Sibaya • Alternate Gaming adjusted EBITDAR up 25% ACCELERATING DE-GEARING • R1.9 billion in free cash flo
Slide 7: Key Highlights
OVERVIEW AND KEY HIGHLIGHTS KEY HIGHLIGHTS Despite a tough trading environment, • Income increased by 2% to R11.5 billion South African • Adjusted EBITDAR increased by 5% to R3.3 billion operations delivered • Adjusted EBITDAR margins improved from 28% to 29% a pleasing result A simplified South Afr
Slide 8: Key Highlights
OVERVIEW AND KEY HIGHLIGHTS KEY HIGHLIGHTS • Income increased by 15% to R1.4 billion Continuous • Adjusted EBITDAR increased by 42% to R452 million with margin improved to 32% improvement at Time Square • The casino market share to date was at 16.0%, up from 13.6% in December 2018 • Continued improv
Slide 9: Key Highlights
OVERVIEW AND KEY HIGHLIGHTS KEY HIGHLIGHTS • Comprehensive review of Sun City’s operations underway Sun City • New General Manager Brett Hoppe appointed turnaround strategy been executed • Senior management team strengthened • Cascades rooms refurbishment to be completed by October 2020 • The shoppi
Slide 10: Time Square: Sustaining Market Share Growth
OVERVIEW AND KEY HIGHLIGHTS TIME SQUARE: SUSTAINING MARKET SHARE GROWTH Time Square captured 16% of Gauteng’s gaming market share so far in 2020 8 week rolling total regional market share (%) 18% 16% 16.0% 14% 12% 06 Jan 03 Feb 03 Mar 31 Mar 28 Apr 26 May 23 Jun 21 Jul 18 Aug 15 Sep 13 Oct 10 Nov 08
Slide 11: SunBet: Accelerating Customer Acquisition
OVERVIEW AND KEY HIGHLIGHTS SUNBET: ACCELERATING CUSTOMER ACQUISITION SunBet is achieving exponential growth by capturing the exciting sports betting opportunity Turnover vs database size Turnover (Rm) 160 000 200 Database (number of customers) 180 140 000 160 120 000 140 100 000 120 80 000 100 80 6
Slide 12: Strengthening Our Leadership
OVERVIEW AND KEY HIGHLIGHTS STRENGHTENING OUR LEADERSHIP Graham Wood Glenn Joseph Appointed Appointed Chief Operating Chief Operating Officer: Hospitality Officer: Gaming Glenn started his career at Amalgamated Hospitals Limited Graham, an experienced executive in the hospitality as Group Cost Analy
Slide 13: Strategic Objectives
The Table Bay Hotel, Cape Town, South Africa STRATEGIC OBJECTIVES 12
Slide 14: Near Term Strategic Priorities
STRATEGIC OBJECTIVES NEAR TERM STRATEGIC PRIORITIES PROTECT AND ACCELERATE DRIVE EFFICIENCY, DEAL WITH DISCIPLINED LEVERAGE BALANCE OPTIMISATION UNDER- INVESTMENT IN OUR EXISTING SHEET AND QUALITY PERFORMING QUALITY ASSETS PORTFOLIO DE-GEARING OF EARNINGS UNITS FOR GROWTH • Table Bay lease • Strong
Slide 15: Strengthening Our Business and Governance
STRATEGIC OBJECTIVES STRENGTHENING OUR BUSINESS AND GOVERNANCE IMPROVING INVESTING LEADERSHIP THE GUEST IN OUR IN GOVERNANCE EXPERIENCE PEOPLE & SUSTAINABILITY • Bedding down new, • Head office restructure • The appointment of channel-focused Sales streamlined the operating Jabu Mabuza as & Marketin
Slide 16: Financial Review
Grand Hotel, Goodwood, South Africa FINANCIAL REVIEW 15
Slide 17: Financial Overview
FINANCIAL REVIEW FINANCIAL OVERVIEW R million 2019 % 2018 Income 17 232 4 16 614 Adjusted EBITDAR 4 610 1 4 560 Adjusted operating profit 2 979 6 2 810 Foreign exchange profit 4 >100 (9) Net interest (1 158) 2 (1 177) Net external interest (1 063) 10 (1 177) IFRS 16 interest (95) (100) - Profit be
Slide 18: Segmental Review
The Boardwalk, Port Elizabeth, South Africa SEGMENTAL REVIEW 17
Slide 19: Segmental Highlights
SEGMENTAL REVIEW SEGMENTAL HIGHLIGHTS R million South Africa Latam Nigeria eSwatini Total 2019 % 2018 2019 % 2018 2019 % 2018 2019 % 2018 2019 % 2018 Income 11 481 2 11 254 5 396 8 5 018 162 9 148 193 (1) 194 17 232 4 16 614 Adjusted EBITDAR 3 303 5 3 143 1 294 (8) 1 406 12 33 9 1 (50) 2 4 610 1 4 5
Slide 20: South African Segmental Review
SEGMENTAL REVIEW SOUTH AFRICAN SEGMENTAL REVIEW Income Adjusted EBITDAR Depreciation & amortisation Operating profit R million 2019 % 2018 2019 % 2018 2019 % 2018 2019 % 2018 GrandWest 2 144 (3) 2 214 831 (5) 874 (117) 17 (141) 710 (2) 727 Sibaya 1 368 6 1 289 496 14 435 (63) 10 (70) 430 19 360 Time
Slide 21: Latam Segmental Review
SEGMENTAL REVIEW LATAM SEGMENTAL REVIEW Income Adjusted EBITDAR Operating profit* R million 2019 2018 2019 2018 2019 2018 Monticello 1 976 1 900 539 571 368 404 Sun Dreams SCJ licences 1 561 1 576 573 610 530 572 Sun Dreams municipal licences 793 821 266 286 228 249 Sun Chile office - - (9) (8) (9)
Slide 22: Capital Allocation
Time Square, Pretoria, South Africa CAPITAL ALLOCATION 21
Slide 23: Capital Expenditure
CAPITAL ALLOCATION CAPITAL EXPENDITURE R million December 2019 Actual December 2018 Actual South African operations Expansionary Time Square - 126 - 126 Refurbishment and ongoing Sun City 267 134 GrandWest 119 110 Sibaya 93 72 Sun Slots 87 105 Other 247 201 Total South African capital expenditure 81
Slide 24: Borrowings and Cash Flow
Sun City, The Palace, South Africa BORROWINGS AND CASH FLOW 23
Slide 25: Borrowings
BORROWINGS AND CASH FLOW BORROWINGS IFRS 16 Total Minority Sun R million Debt Lease liability debt share share South Africa 8 790 779 9 569 1 218 8 351 Operating subsidiaries 7 191 597 7 788 1 218 6 570 Central office 1 599 182 1 781 - 1 781 Nigeria 617 - 617 313 304 Shareholder loans 951 - 951 482
Slide 26: South African Cash Flow
BORROWINGS AND CASH FLOW SOUTH AFRICAN CASH FLOW R million Capex of 7% of income including refurbishments and Alternate Gaming ramp-up 3 177 (43) (420) R1.9 billion in free cash flow generation after working capital, tax and capex (797) Interest paid lower by R163 million year on year, driving R1.1
Slide 27: Latam Cashflow
BORROWINGS AND CASH FLOW LATAM CASHFLOW R million 1 200 (62) (205) (319) 614 (232) 616 429 (16) 366 (113) (678) 272 (34) Generated Working Tax paid Capex Free Interest Other Cashflow Dividends Borrowings Shareholder Effect of Beginning Cash by capital cash paid investing prior to to minority loan to
Slide 28: Conclusion
Royal Sibaya Hotel, uMhlanga, South Africa CONCLUSION 27
Slide 29: Robust Business Fundamentals to Deal with Challenges Ahead
CONCLUSION ROBUST BUSINESS FUNDAMENTALS TO DEAL WITH CHALLENGES AHEAD CHALLENGES AHEAD • Tough trading conditions in South African and Latam • Impact of the coronavirus pandemic • Potential impact of regulatory changes from smoking ban, gaming taxes and licence relocations • SCJ licence renewals BUS
Slide 30: Supplementary Information
Royal Sibaya Hotel, uMhlanga, South Africa SUPPLEMENTARY INFORMATION 29
Slide 31: Significant Changes to Reporting
SUPPLEMENTARY INFORMATION SIGNIFICANT CHANGES TO REPORTING IFRS 16: LEASES • Effective 1 January 2019 • Distinction between operating and finance leases removed. Results in almost all leases being recognised on the balance sheet • Impact on adjusted headline earnings of R63 million, R34 million afte
Slide 32: Earnings Reconciliation
SUPPLEMENTARY INFORMATION EARNINGS RECONCILIATION R million 2019 2018 Profit/(loss) attributable to ordinary shareholders 653 (7) Net loss on disposal of property, plant and equipment 21 29 Profit on sale of management contract (Lesotho, Botswana and Colombia)) (19) - Reversal of impairment of asset
Slide 33: Latam Segmental (CLP)
SUPPLEMENTARY INFORMATION LATAM SEGMENTAL (CLP) Income Adjusted EBITDAR Depreciation & amortisation Adjusted operating profit CLP million 2019 % 2018 2019 % 2018 2019 % 2018 2019 % 2018 Iquique 19 199 (5) 20 256 5 613 (10) 6 218 (543) (28) (425) 5 070 (12) 5 793 Puerto Varas 19 512 (2) 19 851 7 387
Slide 34: Comparing Group H2 2019 to H1 2019
SUPPLEMENTARY INFORMATION COMPARING GROUP H2 2019 TO H1 2019 Revenue (Rm) Adjusted EBITDAR (Rm) Margin (%) H2 2019 % H1 2019 H2 2019 % H1 2019 H2 2019 % H1 2019 GrandWest 1 097 5 1 047 432 9 398 39.4 4 38.0 Sun City 865 18 740 97 73 56 11.2 47 7.6 Sibaya 701 5 667 262 12 234 37.4 7 35.1 Time Square
Slide 35: Comparing South Africa H1 2019 to H1 2018
SUPPLEMENTARY INFORMATION COMPARING SOUTH AFRICA H1 2019 TO H1 2018 Revenue (Rm) Adjusted EBITDAR (Rm) Margin (%) H1 2019 % H1 2018 H1 2019 % H1 2018 H1 2019 % H1 2018 GrandWest 1 047 (2) 1 073 398 (3) 410 38.1 - 38.2 Sun City 740 (5) 783 56 (38) 88 7.4 (34) 11.2 Sibaya 667 6 632 234 9 214 35.1 4 33
Slide 36: Comparing South Africa H2 2019 to H2 2018
SUPPLEMENTARY INFORMATION COMPARING SOUTH AFRICA H2 2019 TO H2 2018 Revenue (Rm) Adjusted EBITDAR (Rm) Margin (%) H2 2019 % H2 2018 H2 2019 % H2 2018 H2 2019 % H2 2018 GrandWest 1 097 (4) 1 143 432 (6) 460 39.4 (2) 40.2 Sun City 865 (3) 888 97 (22) 124 11.2 (20) 14.0 Sibaya 701 7 657 262 20 218 37.4
Slide 37: Group Effective Tax Rate
SUPPLEMENTARY INFORMATION GROUP EFFECTIVE TAX RATE South R million Africa Nigeria Latam eSwatini Total Profit before tax continuing operations 1 252 (57) 396 (8) 1 583 Profit before tax discontinuing operations - - - - - Preference share funding 85 - - - 85 Depreciation on non-qualifying buildings 7
Slide 38: Group Effective Tax Rate continued
SUPPLEMENTARY INFORMATION GROUP EFFECTIVE TAX RATE continued Note 1: Other non-deductible expenses Amount Amortisation of bid expenditure 5 Foreign exchange losses 7 CSI expenditure not qualifying under s18A 2 Other non deductible expenditure 30 Non-deductible legal or professional costs 17 Fines an
Slide 39: Borrowings by Subsidiary
SUPPLEMENTARY INFORMATION BORROWINGS BY SUBSIDIARY 2019 2018 Attributable Attributable IFRS 16 Total Minority to Sun Minority to Sun R million Borrowings Lease liability borrowings share International Borrowings share International South Africa 8 790 779 9 569 1 218 8 351 9 174 1 310 7 864 SunWest 6
Slide 40: Group Structure
SUPPLEMENTARY INFORMATION GROUP STRUCTURE South Africa Economic interest %* Slots Tables Rooms Gauteng Carnival City 91.2 1 400 47 105 The Maslow 100.0 - - 281 Time Square 82.3 1 736 61 238 Western Cape GrandWest 61.6 2 563 75 39 The Table Bay 61.6 - - 329 Golden Valley 61.4 227 6 98 SunBet 100.0 -
Slide 41: Analysis of Minority Shareholders
SUPPLEMENTARY INFORMATION ANALYSIS OF MINORITY SHAREHOLDERS Profit after tax % Shareholding Minority portion including SIEST R million 2019 2018 2019 2018 2019 2018 South Africa 972 538 (350) (317) SunWest 501 501 61.6 61.6 (192) (192) Sibaya 290 234 87.2 87.2 (77) (88) Carnival City 81 84 91.2 91.2
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