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| Increase in inbound tourism |
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| ECONOMIC CONDITIONS |
| The past year in our country was a period characterised
by a strong requirement for resources, increased infrastructure investment and sustained consumer demand.
These conditions, together with an increase in inbound
tourism, underpinned the performance of the group over
the past year. |
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| EXCELLENT PERFORMANCE CONTINUES |
An excellent performance for the year was achieved by
our casinos, hotels and resorts.
The group achieved strong growth in revenue, which was
17% ahead of last year at
R6,9 billion. The growth in
revenue was advanced by a full year's trading from
the Windmill Casino in Bloemfontein which opened
in September 2005, the opening of the Golden Valley
Casino in Worcester in November 2006, further strong
contributions from the casino properties, together with
pleasing increases in occupancy and achieved room rates
at our hotels and resorts.
EBITDA at R2,6 billion is 27% higher than the R2,0 billion
achieved in the 2006 financial year. The EBITDA margin
improved from 34% last year to 37% in the current year.
Diluted adjusted headline earnings per share of 719 cents
per share were 33% ahead of last year.
The board increased the dividends for the year to 400 cents
per share which is a 38% growth on last year and in excess
of the adjusted headline earnings per share growth rate. |
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| DEVELOPMENTS |
| The group invested significantly in new constructions and
refurbishments. These include an upgrade to the nonsmoking
casino at GrandWest, the Golden Valley Hotel
in Worcester and the Sun City Main Hotel. |
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| STRATEGIC INITIATIVES |
The thrust of our strategic initiatives revolve around
maintaining the competitive advantages we have
established in our core businesses and expanding our
operations geographically.
We continue to focus on IT and innovation with a
view to improving the experience of our customers
at our numerous facilities and also providing the
group with improvements in marketing, operational
and financial information.
The present legislation relating to the restrictions on the
granting of additional gaming licences in South Africa is serving as the primary catalyst for the group to seek new
opportunities internationally in its areas of business. |
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| INTERNATIONAL EXPANSION |
The involvement of the group in the Chilean opportunity
remains subject to that country's regulator approving
the application. On approval, the group will contribute
US$45 million for a 40% equity interest in the venture,
and will in addition benefit from development management
and long term consultancy agreements. The project is
estimated to cost US$200 million. Construction on the
project has commenced and the casino component is
scheduled for opening in September 2008.
Good progress has been made in respect of the opportunity
in Lagos, Nigeria. The group will acquire for US$38 million a
49% interest in the existing Federal Palace Hotel property
on Victoria Island. The estimated cost including refurbishing
and additions is US$120 million. The group will benefit from
long term development and management agreements.
The Port Ghalib project located on the Red Sea coastline in
Egypt, for which the group has operational management
responsibility, is planned to open at the end of 2007.
The Casino Advisory Control Panel's recommendation to
locate a super casino in Manchester in the United Kingdom
did not obtain the approval from the British Parliament.
The British Prime Minister has publicly indicated that the
issue of granting licences for the establishment of large
regional casinos is most unlikely to be progressed in the
near future. |
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| ACQUISITION OF REAL AFRICA HOLDINGS |
Sun International acquired a controlling interest of 61,3%
in Real Africa Holdings on
15 September 2006. It is the
intention of the group to increase its shareholding in the
company subject to availability of shares at acceptable
price levels. |
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| SHARE BUY BACK |
| The share buy back was successfully concluded on 30 July
2007 resulting in the purchase of 14,5% of the group's
share capital at an average price of R145,35 per share.
The transaction was funded by way of a R2,0 billion issue
of preference shares, together with funds sourced from
internally generated cash flows. The group will continue
to explore the need to improve returns to shareholders
while also actively seeking expansion opportunities. |
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| BLACK ECONOMIC EMPOWERMENT AND
OUR PARTNERSHIPS IN THE GAMING
OPERATIONS |
Our success in attaining numerous licences in the
regulated gambling industry in South Africa has enabled
us to significantly enhance the wealth and influence of
our various BEE partners throughout the country. This
wealth creation has increased substantially with the
growth and performance of our operations and in many
instances the group continues to assist our partners by
providing them with facilitated funding.
We have committed considerable resource and effort
in fulfilling our intention to increase SunWest's principal
partner, GPI's share in the business. The parties have
recently signed binding agreements and are in the process
of implementing a transaction providing GPI with the
opportunity of increasing its economic interest to 30% in
SunWest, by acquiring an additional 6,5% shareholding in
SunWest from Sun International and being granted an
option over a further 5% shareholding in SunWest.
The new B-BBEE Code was promulgated earlier in the year
and the group is currently participating in an initiative with
CASA to measure all member casinos against the code.
The verification process has been challenging particularly
in the areas of skills development and procurement.
Good progress has been made in assessing all our casino
properties to enable the group to establish accurate
measures to be used as a basis for future progress in the
area of transformation. |
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| CORPORATE GOVERNANCE |
Corporate governance in the group is of a high standard
and we continue to strive toward improving our practices.
Considerable emphasis is placed on the identification
and management of risks facing the group and our
risk management philosophy is well embedded in all our
processes. Our risk committee is effectively contributing to
this process. |
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| SOCIAL RESPONSIBILITY AND
SUSTAINABILITY |
The group remains focused in ensuring that we operate
our gaming activities in a responsible manner and
that there is strict adherence within the group to the standards that have been implemented with regard to
problem gambling.
We actively support the communities in which the group
operates by working with community members with the
objective of promoting the upliftment and socio-economic
development of these communities. The group contributes
2% of group net profits after tax to its corporate social
investment projects.
Good progress has been made towards meeting our
sustainable development goals over the past year. |
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| OUR PEOPLE |
The investment we make in our people contributes
significantly to our ability to retain our market leadership
position in the gaming and leisure sector. We have been
able to attract and retain key people in the organisation.
We are committed to achieving our employment equity,
training and development and affirmative procurement
targets and have made good inroads in this area.
I would like to thank the non-executive directors, the
management and all our people for their support,
commitment and hard work, which has undoubtedly
contributed to the group being able to achieve this
excellent performance. |
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| PROSPECTS FOR 2007 |
The economic outlook remains positive in the year ahead
despite the higher levels of inflation and interest rates
which are likely to temper the growth in consumer
spending. Real growth in disposable income is nevertheless
anticipated, as is continued growth in inbound tourism.
The group expects good growth in EBITDA from our
hotels, resorts and casinos in the coming year. However,
the additional financing costs attributable to the share buy
back implemented in July 2007 will significantly impact on
the growth in adjusted headline earnings per share.
It is the intention of the group to continue increasing the
dividends paid to shareholders. |
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 The investment we make in our people contributes significantly to our ability to retain our market
leadership position. |
|
Buddy Hawton
Chairman |
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