2017 integrated annual report 2017 integrated annual report

59 Pages·2017·6.92 MB·English

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2017 INTEGRATED
2A0N1N7 UINATLE RGERPAOTERDT
ANNUAL REPORT
Our vision
To be an internationally recognised and respected
gaming and hospitality group that provides memorable
experiences for our guests, offers rewarding
employment for our people, delivers superior returns
for our shareholders and creates genuine value for the
communities in which we exist
Improve our existing
operations and our
guest experience
Protect and leverage
VISION, MISSION, our existing asset
portfolio
VALUES AND OUR Grow our business
STRATEGIC into new areas and
products
STRATEGIC OBJECTIVES
OBJECTIVES Our people
Governance and
sustainability
Our mission
To create great
memories for our
guests, people and
stakeholders
Teamwork: We treat each other with
respect and work together to create
great memorable experiences for all
Our values our stakeholders
Our values represent an Customer first: Our customer is at the
heart of all we do and we exceed
unwavering commitment
their expectations every time
to behaving in a
Passion: We inspire each other with
consistent, positive
our positive attitude and energy as we
manner every day, in strive to be the best
everything we do
Professionalism: We use our skills and
competence to provide the highest
standard of work at all times
CONTENTS ABOUT THIS REPORT SALIENT FEATURES
We are pleased to present Sun International Limited’s
Flap Vision, mission, values and strategic objectives
2017 integrated annual report to our stakeholders.
ifc About this report
1 Salient features
INTEGRATED ANNUAL REPORTING FRAMEWORKS
OUR DECK OF CARDS REPORTS AND
RDS 2 Chairman’s message INFORMATION REPORT PURPOSE Othuer In20te1r7n aintitoengaral tIendte agnrantueadl Rreeppoorrtt iins gp rCimouarnilcyi lg’su (iIdIReCd )b y
CA 4 Group structure AVAILABLE ONLINE Sun International Limited reports in a holistic, recommendations for integrated reporting (the <IR>
F 6 Global presence transparent and integrated manner to assist our framework). Our sustainability information contained in this Opened
DECK O 2 812 BOupseinraetsins gm eondveirlonment TaCrcoacrnopsuopnraatrtaeebn igclioytyv aenrnda nce satbaokueth ooludre brsu sinin mesask. iWnge maiomr et oin pforormvideed oduerc isions r(pGerpeRopI)ar trS eaudns dtian oi nanaclbicnoielir tdiysa Rgnuecpeid oewrdtit ihnb ygt h tGheue Ji dSGEelol Linbimeals i.Rt eTedhp ioLs irrstetiinpngog rsItn iist iaaltsiove Rev1e2nu%e up R1D5e bbitl laito n Tcimasein Soq aunadre enTtrearnesda cinttioon t o
UR 15 Stakeholder engagement report stakeholders with a focused and concise report Requirements and the South African Companies Act, 71 of and with South Africa arena on time increase interest
O 18 Material issues Social and ethics report that highlights both our successes and challenges 2008. A register of our application of the King IV governance debt to however, in Sun Dreams
20 Risk management Kreinggis tIeVr application during the period under review. pOruinr cgiproleusp i sa navnauialal bfline aonncliianle s atat twemwewn.stsu n(AinFtSe) rfnoaltloiown al.com. EB1IT3D%A up EBITDA at revenues are to
B-BBEE compliance International Financial Reporting Standards (IFRS). 3.7% well below 64.66%
report
OUR GAME PLAN REPORT SCOPE AND BOUNDARY expectations
24 Strategic objectives Sustainability This is our primary report to stakeholders and covers the ASSURANCE
26 Chief executive’s review Our people financial period 1 January 2017 to 31 December 2017,
30 Strategic performance overview Health and safety following a change in our financial reporting from June to Standard/Code Assurance provider
31 Improve our existing operations Environment December, to align with our Chilean operations statutory
LAN 24 34 a Pnrodt eocutr agnude slet veexrpaegreie onucre Sdoevceiolo-epcmoennotmic rSeuqnu Iinretemrnenattiso fnoarl ’as sDuebcseidmiabreiers y aenadr eonpde.r aTthineg r eupnoitrst, ilnocclauldlye sa nadll Tipnhrfeoes refminnataetnidoc nioa nl IFRS PricewsautenrihnoteursnehaCtttioopon:/pa/eilr.rc2so0 Im1n7c/.
E P existing asset portfolio Enterprise and supplier internationally. Our report is structured around our leadership pages 46 to 55 downloads/downloads/pdf/
M 36 Grow our business into new development reviews, business overview (our deck of cards), our strategic – extracted from Sun_International_IAR2017_
A
OUR G 3379 a OGrouevra esp reanonadpn lcepe r oadnudc stsustainability URIneNdp eGoprleotnbdael nCto amsspuarcatn ce ppaneedrrff ooarrcmmcoaannuccneeta a(boniluditry op (uarutyllooeuos tkos )(f o atuhnred g goaaummr ege o)p. vlaenrn), aonucre f itnraannscpiaalr ency tahued igterodu ApF’sS Group_AFS.pdf Achieved Launched proSpeevretrieasl in Ongoing
Sustainability GRI IRAS Sun
39 Health and safety statement The content covers the reporting period’s most material issues. information1 AA1000AS http://ir2017. a group International’s drought-stricken system
444514 dESEd onneevvcvteeeiirorllopoo-nrppeimscmmeoeee nannnontttdm sicu pplier AsADtuniardnteeiuctm tacoleo rfnsmin't ssamtnaicttteieamel erenpt oorft Ifistnnihtnaf ealsku olseieshmhnaootceriloe tdc, n etamh.rs sMeee rsdaae,i tsugteshamreiirssad salii mnnniscgdsel uuntlohedt sneeo gsafg rtrptehoer eroumm pvpai’.des tIt renaeiro brsosdi l ro itdtuhfye pa crt ta ot tocpo co i ttraauheclle adha t rnieseeud vpvb eaoos lrtouttha’eusen r rot ivveerly Bin-fBoBrmEEa tion KToinugr isIVm Code otherss-uugnnamiinnttineegrrnn-hEaainmttttifioopopnn:ro/maa/willra..ecc2trooi0domm1en7x///. BL-setBvatBeulEs 1E pSrcouugnlrtaWumramey e caorne sa>uswm 3raep0tdet%iruo cne db y imoepfpfreiocraivaenetdnimo c nieeanslt s
responsibility
strategic objectives and manage our risks, these material issues other-gaming-information/
Company secretary
are continuously monitored by Sun International and its board
certificate Property risk Internationally Marsh Risk Consulting
TS 46 Value added statement as the governing body. Further detail on our material issues is audits Recognised
OU OUR PAYOUTS Audit Opinion set out on page 18 and http://ir2017.suninternational.com/ Code of
AY 46 Chief financial officer’s review Directors' report our-deck-of-cards/ Practice:
P NFPA and SANS
R 49 Segmental review Group AFS
OU Accounting policies Codes
Company AFS Internal control Group Internal Audit
DIRECTORS’ APPROVAL functions
Shareholder information
Letter from the chairman The board acknowledges its responsibility to ensure the 1 Sustainability information for the 2016 year was restated due to the change in the
E RULES OF THE GAME Notice of annual general integrity of information contained in the integrated annual group’s year end from June to December.
AM 56 Board of directors meeting (AGM) report and has applied its collective mind in the preparation
G 56 AGM explanatory notes of this report. The group audit committee was instrumental
HE 58 Executive leadership Summarised consolidated in providing guidance on this process and keeping the board OPERATIONAL CONTEXT
F T 59 Corporate governance overview financial results abreast of the reporting progress. South Africa continues to contribute the majority of group OUR NEW FORMULA FOR SUCCESS
O Directors standing for revenue at 70%, with Latam contributing 29% and Nigeria 1%. To improve our business performance, we created our new formula for success that embraces our vision and values in line with our
ES election/re-election CV’s The board is of the opinion that this integrated annual report Gaming is the primary contributor to group revenue at 73%, brand promise and strategic objectives.
UL Remuneration policy is presented in compliance with the <IR> framework and the alternate gaming contributes 7%, food and beverage 9%, rooms
R Remuneration report information is correct and relevant. The report was approved 8% and other revenues 3%. Further detail on our formula for success is set out on page 37
Board of directors and by the board on 29 March 2018. and online http://ir2017.suninternational.com/our-game-plan/
prescribed officers REPORT VERSIONS
Corporate data and
For the period under review, the group has produced limited print Top-line enablers = the positive attributes that engage our people, helping them achieve their full potential, while creating great,
MING TION 63 OINTFHOERRM GAATIMOINNG aFodmrmin oisft rpartoioxyn csuompimesa orifs ethde v ienrtseiognra otefd o aunr nfuulal li nretepgorratt. eTdh ea npnruinatle rde preoprto rt is a memorable experiences for our guests.
R GARMA 63 Administration Ointfhoermr gaatimoning available at www.suninternational.com Breostpteocmte-dli ngea mdiisnagb laenrds =ho tshpei tnaelitgya tgivroeu ppo.ints that we need to eliminate to achieve our vision of being an internationally recognised and
THENFO 63 Forward-looking statements Room statistics Valli Moosa Anthony Leeming REPORT FOOTPRINT
OI Casino statistics Chairman Chief executive Sun International is committed to reducing its environmental footprint
29 March 2018 29 March 2018 wherever possible. With additional information available online, the
printed report remains a summary document. Going forward, the
group will produce an online integrated annual report only.
NAVIGATION ICONS
For more information see our website Please refer to page/s in this Please email us STAKEHOLDER FEEDBACK
at suninternational.com report for more information for more information
We welcome stakeholders’ feedback on our reporting, which can be sent to [email protected]
SUN INTERNATIONAL
INTEGRATED ANNUAL REPORT 2 0 1 7 1
OUR DECK OF CARDS
CHAIRMAN’S MESSAGE
Corporate South Africa and the our debt and debt ratios have increased
international corporate community have significantly. While we remain confident in
been shaken by several corporate scandals the group’s ability to generate strong
involving breaches of good governance free cash flows, we believe it prudent
practices and ethical conduct. In this to strengthen the balance sheet.
climate, it becomes all important to be Consequently, we are looking to raise
hyper-vigilant and reinforce ethical values R1.5 billion through a rights offer.
within the group. At Sun International,
ethics is driven from the top and filtered Some of the key highlights in respect of
down to all levels of the organisation. our significant strategic projects include
Sun International has embraced King IV the opening of Time Square’s casino and
(http://ir2017.suninternational.com/ arena, with the casino opening six months
rules-of-the-game/), as it articulates ahead of the original opening date.
principles the group has long upheld. Revenue has thus far been well behind
As testament to our commitment to expectations and we are focused on
ethical leadership, the board of directors increasing our market share and managing
and executive committee signed an costs. The Maslow Time Square Hotel is
ethics declaration, cementing their on track to formally open in April 2018
pledge to steering the group in a direction and will not disappoint our guests.
that continuously upholds ethical conduct. Sun City’s refurbishments were largely
completed by the end of 2016 and the
From a macroeconomic perspective, the resort has shown a quick turnaround with
global and local operating environment revenue up 7% and EBITDAR up 22%.
remains challenging. In South Africa, the Our operations in Chile have had a mixed
economic slowdown was further performance, with Monticello impacted
exacerbated by heightened political by the tragic shooting and death of two
uncertainty and Rand volatility. In an staff members. A third staff fatality
industry reliant on consumer discretionary occurred at our Royal Swazi Sun property.
spending and positive sentiment, group Our deepest sympathy goes out to the
revenues came under pressure as families of the deceased employees.
consumers become more conservative.
This tough climate has made it even more We have made good progress in the
necessary to strengthen the group’s Sun Dreams governance processes with
balance sheet, contain costs and the establishment of relevant board
streamline operations to ensure that we committees aligned to our South African
operate as efficiently as possible. operations.
Further details on the group’s financial
The group remains passionate about its
performance and operating environment
sustainability commitments and
are included in the chief executive’s
responsibilities to the communities within
review (page 26), chief financial officer’s
Valli Moosa which it operates. Sun International
review (page 46) and the operating
Chairman proudly achieved a Level 1 B-BBEE status
environment report (page 12).
at a group level and was ranked the
Strategically, we are focused on building a second most empowered company on the
strong presence in Latin America (Latam), Johannesburg Stock Exchange. A new
At Sun International, improving and consolidating our operating group diversity policy reinforces the
performance in South Africa, exiting company’s commitment to maintain a
ethics is driven from loss-making operations and strengthening diverse board of directors who can
our balance sheet. In 2017 we exited the confidently lead the group. All properties
the top and filtered International VIP Business, closed Fish continued efforts to further reduce their
River and Sun Nao and downscaled the environmental footprint, and specific
down to all levels
Ocean Sun Casino operations. With energy and water targets were approved
the significant investments made over the for the group in 2017. In view of the water
of the organisation
past four years and the failure of some of crisis in the Western Cape and Eastern
these investments to meet expectations, Cape, GrandWest, Table Bay and
2
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
Boardwalk have significantly reduced their water usage and have contingency plans
to prevent disruption from the current water crisis. In total, South African operations’
water consumption reduced by 3% during the period under review. The Wild Coast
Sun achieved zero-waste-to-landfill during 2017, and Sun City is looking to increase
its local procurement in support of surrounding communities.
Over the past 18 months, there have been changes in senior management with the
resignation of Graeme Stephens and the appointment of Anthony Leeming as the
new chief executive as well as Norman Basthdaw’s appointment as chief financial
officer. It was encouraging to note the seamless transition in the management
structure and the synergy between the board and management.
The group welcomed Graham Dempster as an independent non-executive director
to the board effective 6 October 2017. Graham has over 35 years’ experience in the
local and international banking and financial services industry. He has also been
appointed chairman of the investment committee, effective 1 January 2018.
Nigel Matthews, Sun International’s lead independent director, retired effective
31 December 2017 and was succeeded by Leon Campher as the new lead
independent director and chairman of the group’s remuneration committee on
1 January 2018. Graham Rosenthal, the current audit committee chairman
announced that he will be retiring at the 2018 AGM and Caroline Henry will be
succeeding him as the new audit committee chairman. Zarina Bassa resigned post
year end on 12 February 2018. On behalf of the board, I welcome our new director
and wish the outgoing directors well and thank them for their valuable contribution
and roles played over many years.
In this challenging and sometimes uncertain environment, it is important that
Sun International continually engages with its stakeholders, updating them on
progress against the group’s strategic objectives and listening to any specific issues
that need to be addressed. Widespread management engagement took place during
the year with key stakeholders such as employees, investors, shareholders, gambling
boards and government to keep them informed of developments within the group.
Of particular note was the active engagement around the revised short- and
long-term remuneration incentives following the lack of shareholder support for the
group’s 2016 remuneration policy. The revised policy will be subjected to a
non-binding advisory vote at the upcoming AGM and shareholders are referred to
the annual statutory report (http://ir2017.suninternational.com/downloads/
downloads/pdf/Sun_International_IAR2017_2017_annual_statutory_report.pdf) that
discusses the changes considered based on shareholder feedback.
Finally, I would like to thank the board, management and our employees for their
unwavering support, commitment and passion in these difficult times. I believe in
the group’s ability to emerge a stronger, more efficient and innovative group. Thank
you to all our patrons, without whose support we would not be in business.
Valli Moosa
Chairman
29 March 2018
Meropa Casino – Limpopo
SUN INTERNATIONAL
INTEGRATED ANNUAL REPORT 2 0 1 7 3
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
GROUP STRUCTURE
Sun International’s group
structure remained
largely unchanged from
the prior reporting period.
During the year under
review the group closed
Fish River, Sun Nao
Casino, and transferred its
Morula casino licence
and opened the new
Time Square Casino at
Menlyn Maine.
SOUTH AFRICA OTHER AFRICA LATIN AMERICA
Economic Economic Economic
interest (%)1 Slots Tables Rooms interest (%) Slots Tables Rooms interest (%)2 Slots Tables Rooms
Gauteng Nigeria 49 106 10 146 Chile
Carnival City 91 1 559 57 105 Monticello 55 2 164 81 155
Swaziland 51 158 15 351
Maslow 100 – – 281 Iquique 55 693 22 –
Time Square 85.75 2 000 60 238 Temuco 55 694 36 96
2017 group contribution (%) Valdivia 55 405 22 104
Western Cape
Puerto Varas 55 499 36 50
GrandWest 61 2 563 75 39
Coyhaique 55 168 11 40
Table Bay 61 – – 329
Punta Arenas 55 488 20 88
Worcester 61 220 7 98
SunBet 100 – – – ● South Africa 70 Panama
Revenue
● Latam 29 Ocean Sun
KwaZulu-Natal ● Other Africa 1 Casino 55 600 38 –
Sibaya 63 1 214 48 154
Peru
Limpopo
New York 55 444 17 –
Meropa 68 417 17 60
Eden 55 206 – –
North West Kingdom 55 161 6 –
Sun City 100 700 51 1 296 Pachanga 55 254 8 –
Carousel 100 700 25 94
2 S un International’s economic interest will increase to 65%, once the transaction
to acquire a further 10% interest is concluded.
Northern Cape
Flamingo 71 300 10 –
Eastern Cape
● South Africa 73
Boardwalk 82 920 27 140 EBITDA ● Latam 27
Wild Coast Sun 70 521 19 396 ● Other Africa <1
Free State
Windmill 70 403 18 80
Naledi Sun 100 160 – –
Management
activities
Sun 100 – – –
International
Management
1 Economic interest excludes the interest held by the SIEST.
SUN INTERNATIONAL
4 INTEGRATED ANNUAL REPORT 2 0 1 7 5
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
GLOBAL PRESENCE
GROUP 2017 GROUP CONTRIBUTION (%)
EBITDA
Other Africa <1%
(2016: –)
27 4 303 18 717 3 720 764 12 959 384
GAMING ROOMS SLOTS LPMs1 TABLES EMPLOYEES VACATION 73%
LICENCES (2016: 4 147) (2016: 17 451) (2016: 3 651) (2016: 665) (2016: 13 179) CLUB UNITS
(2016: 28) (2016: 382)
Latin America 27% South Africa
(2016: 32) (2016: 68)
Panama
KEY GLOBAL PRESENCE STATISTICS
Sun International owns and operates casino,
Colombia
hotel and resort properties in South Africa,
Nigeria, Swaziland and Latin America. Our Nigeria
casino operations contribute the largest SLOTS
1 146 106 10 333
share of group revenue.
(2016: 1) (2016: 146) (2016: 158) (2016: 10) (2016: 354)
Peru
Latin
America
SLOTS
12 533 6 776 325 4 167
SLOTS
(2016: 13) (2016: 533) (2016: 6 996) (2016: 313) (2016: 4 013) 1 351 158 15 215
(2016: 1) (2016: 351) (2016: 158) (2016: 13) (2016: 206)
Chile
Swaziland
South Africa
2017 GROUP CONTRIBUTION (%)
Revenue
Other Africa 1%
(2016: 1)
70%
SLOTS LPMs1
13 3 273 11 677 3 720 414 8 244 384
29%
Latin America South Africa
(2016: 32) (2016: 67) (2016: 13) (2016: 3 117) (2016: 158) (2016: 3 651) (2016: 329) (2016: 8 606) (2016: 382)
OPEN HERE OPEN HERE
1 Limited Payout Machines (LPMs)
SUN INTERNATIONAL
6 INTEGRATED ANNUAL REPORT 2 0 1 7 7
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
OUR DECK OF CARDS | BUSINESS MODEL continued OUR DECK OF CARDS | BUSINESS MODEL continued
BUSINESS MODEL
Value created through outcomes
Our business model requires utilising our inputs in the form of the six capitals,
Business activities Outputs
which through our business activities, culminate in outputs and outcomes Our business model culminates in specific outcomes that continue to create stakeholder value
which has a far-reaching impact on the economy and society. These outcomes also align
that create value for our various stakeholders. Good corporate governance,
Delivering memorable guest experiences that align with our vision of being a directly to our strategic objectives.
sustainable business principles and risk management underpin our business We offer gaming, events and hospitality, food and beverage and entertainment to our guests through
preferred internationally recognised and respected gaming, event and hospitality,
model and provide the foundation on which we build and grow our business. our casino, hotel and resort properties. We are leveraging our core assets, unused land, our track record, Improve our Protect and Grow our Our Governance
food and beverage, and entertainment group. existing leverage our business into people and
past experiences and management skills to take advantage of growth opportunities in emerging markets operations existing asset new areas sustainability
but at the same time we focus on leveraging our existing assets to provide our overall memorable guest and our guest portfolio and products
experience
experience. We are invested in alternate gaming such as the LPM industry and online sports betting.
CAPITALS CAPITALS
OUTCOMES
FINANCIAL Revenues generated Interest payments to debt funders
GAMING – tables, slots, online sports
R15 609 million R1 204 million
Our source of funds includes debt 12 959 Creating memorable Stimulating Creating
and equity which we use for business betting and LPMs (2016: R13 884 million) (2016: R508 million) experiences through economies through opportunities for
operations including running costs,
group employees Cash flows from internal Government taxes including our casinos and hotel taxes and salaries enterprise
pmraoipnetertnya rnecfue rabnisdh mstreantetsg aicn d Our gaming licences are the single most critical operations levies and VAT Stakeholders resorts to encourage paid. development
acquisitions. 31 enabler allowing us to operate. Gaming contributes FINANCIAL R3 billion R3 654 million guests to return through our supply
to our properties. chain.
73% of group revenue. We continuously evaluate our (2016: R3 152 million)
properties across South Africa, Dividends paid to minority
PRODUCTIVE other Africa and Latam licence conditions to ensure they are relevant and are | shareholders
Our unique properties form the bricks 27 used optimally. ES R330 million
and mortar where our business V (2016: R321 million)
aocffteivri toieusr agruee csatsr raiend u onufot rtgoe ettnasbulere we group gaming licences CTI Employees SSuopuptho rAtfirnigca ’s Uthprolifutginhg o cuor mvamriuonuist ies Renevdiurocninmg etnhtea l
ectorxe puaentrelioes cnokcp efpu. orOtrhtuuern ru istniheuassr eefodhr o ladldneedvre alvolaspolum ee.nt food and beverage facilities HOTELS AND RESORTS BJE TRim1 e5 S9qu4ar em deilvleiolopnm ent MRe5ro0p am Hoiltleilo dnevelopment tMcruaalnitnustrfaeoi nraminndagt wiaonen le lg-thoiaclasl. sdoecvieallo apnmde encto pnroomjecict s. irmespoaucrtc eosn. natural
The uniqueness of our properties and customer O PRODUCTIVE governed organisation
Inputs 764 tables across the group service skills of our employees are our key C NT SRu7n 1C imty rielfluiorbnishments TRo2ta l 5ca9pi2tal emxpielnlidoitunre in our countries of
HUMAN differentiators to offering an unforgettable GI E representation.
Owiuthr poeuor pgleu easrtes tahned p trhime acruys tinotdeirafnasc eo f 4 303 experience for our guests, which keeps them ATE EM South African employee Employee Share Trust distributions pEaqrtunietyrs Customers
We use each of the memorable experience we strive to rooms across the group choosing Sun International as a destination of R G development spend R22.4 million and debt and guests
tahned saixp pcraepcitiaatlse offer our guests. Debt and equity funding cchasoinicoe .g Oueusr ths,o ptealr toicpuelararltyio tnhso asels osi tsueartveicde a ot uoru r | ST NGA HUMAN R(209165: R 8m4 miillllioino)n (E2m01p6l:o Ry2e5e.0 t rmaiilnlioinng) interventions funders CA RGEAAMTIBNLGIN VGA ALUNED AS Tcvaohrneio tgruiabsm uttaiinxogens i innadn tudhs elter fyvo’iser msfi sp coaafi dl asinp tietoinatatti lvb oeysf CRfoA1c5Su5As mminigell mioonbn:e wrsa os n
ttthrhaaedtm et-.h oTefhrfese saberee tt rwaedeen- IOgNaumrT iinnEgteL llilLceecEntCucaeTls c,U abprAaitnaLdl i nacnldu dkenso wou-rh ow R3e8spe4cted brand and reputation casino properties. ALUES LDER E ER(2m031p6 :l 0oR2y2 e7e132 r memmilliouinnl)leioratnio n 4(20 126: 46 6900 ) HTafo hssOeitge gnrTaiinfmEicgaL benl ictnIo Ngcn oioDnnmdtUruiicbsS utgrtTyroo rrRwe imnYth a ins tbSahmoye uto htyuheen a ACtref arediscn itando oe( CRd A A53s.Ss91Ao Mb)c imialalritoeciomnhn2 b2 ione0fr 1 s7 . reaeendnsduvpi crocoauntnilsotmiubnrel,ee nh, tgea. aan mldth bt,hl isnepg o, rts, arts
offs are carefully wanhdic chu pltrivoavtiedse sa owuera llitche nocf em taon oagpeemrateen t Vacation Club units FOOD AND BEVERAGE D V HO 27 Regaunladt o rs ajonbds .s Tuhpep oSrotiuntgh oAvferirc a6n4 000 Stou ng oInvteerrnnmateionnt adlu’sr icnogn tthrieb uyteioarn Seucon nInotmericn adteiovnealol’ps msoecniot -aligns
ctoo npsreidseerrevde expertise and innovative IT. Energy and water The group’s food and beverage offers something for AN KE INTELLECTUAL g(2a0m16:i n2g8) licences industry gabamoubtl iRn2g7 i nbdiluliostnry, uisp w4o%r tohn the ewnadsi nRg3 ,3615 4D emciellmionb er 2017 wedituhc tahtieo nC,A sSpAo rftosc, uasrt as raenads of
A bodies
shareholder value. all food lovers – from fine dining to take-away N T comparative period1 and is (2016: R3,152 million). culture and the group
SROELCAITAILO ANNSDH IP ARc1tiv6e stmakeihlolildoern engagement options and everything in-between. SSIO S SRo1c5io.-9ec omnoimlliico dnev elopment Ednevteerlporpimsee anntd supplier aeblsyst oitmh pear teeedndidc t toos frt eh2a0act1 h8th .R eR2 ei8ns debuailsrlcitorhyn2 Talhseo tfroarvmels aannd i mtopuorirstman itn pdaurstt ry cd3o1u nrDintergicb etuhmteeb dye eRra 12r6 0e m1n7di.l ilniogn
Our guests, shareholders, employees, MI SOCIAL AND R43.5 million will grow at a compounded of South Africa’s economy as
communities, gambling boards, it continues to attract domestic Good progress continues to be
government and regulators are key invested in socio-economic development , RELATIONSHIP B-BBEE LEVEL (2016: R30.2 million) rate of over 5% during the next and foreign travellers. Although made in supporting B-BBEE
satotna dpk ermohmaonlodategere sa ta hsnhedas rewe sdet aavkaceltuihveoe llpdyr eoernp rogeaslaigttieioo nn.s Unused land within the group EVENTS AND CONFERENCING SION L(20e16v: eLelv e1l 2) Gbaomaridnsg Unions fgwoeaunsre gyraeetnaeredsr.,a Otthefed t hmfriosa mjtoo rtciatayl s r(ien6vo6e%sn, )u e tdshpaeem nwpdee oankne dele cdiosounmroeem asytni cdh atrsa vellers’ mcwoietnhmt r3bib6eu%rts3o rorasft ebthdae sae 3sd 8L o eCnvAe tSlh A1e
I despite the 1.8% drop in gross
18 717 V entertainment, it has also Tourism Sector Code.
Most of our properties have the facilities and gambling revenues year-on-
Carbon emissions (Scope 1 and Water consumption encouraged some travellers Sun International’s B-BBEE
NATURAL Sun International slot machines infrastructure to host world-class events and Scope 2) 5 340 041 kl year. The gross gambling to opt for domestic travel as current rating was externally
revenue of LPMs increased
Oonu rn batuusrianle rsess aocutricvietise sp adretipceunladr ly 3 720 conferences, which drive footfall at properties and 268 632 CO2e (2016: 5 072 217 kl) by 14.1% to R2.7 million1 , tfohere digenp rteracviaetl inmgo Rrea nedx pmenaksievse . verified as a Level 1 contributor.
wpraotpeer ratnieds  eanree rlogcy.a Steodm ine porfi sotuinre Limited payout machines (LPMs) in South Africa cflaregastheisp manenmuoalr aebvleen etsx pinecrileundcee tsh. eS oNmedeb oafn ok uGr olf NATURAL (E2n01e6r:g 2y9 0c o57n0s uCOm2ep)tion T3o.t7al twoasnten reecsy cled laacrtgiveely L dPuMes t oin tahlel pinrocvreinacsees i.n Souf nw Ionrtledr-ncalatisosn haol’ste wlsi dseit uaartready 1 RNr eeapvtoieornnt uafeol rGr etahpmeo brptleeindrgi oi ndB oSeaonruddti’nhs g aA nfrnicuaa’ls
ewnhvicirho nwmee pnrtos treiccht ainn db ipordeisveerrvseit.y Challenge, SunMet and Miss South Africa. 307 060 056 kWh (2016: 3.6 tonnes) Communities Sreuvne nInuteesr naamtioonuanlt’es dc atosi no in pristine locations around 2 3C 1A MSAa r2c0h1 72 0s1u7rv.ey of casino
(20N16A: 2T9U0 5R16A 5L60 kWh) R11.5 billion, 11.4% up on the the world. entertainment in South Africa.
comparative period ending As part of the industry’s 3 P ricewaterhouseCoopers Gambling
Outlook South Africa 2017 – 2021
31 December 2016. commitment to uplifting report.
South African communities,
EXTERNAL ENVIRONMENT: REGULATION | ECONOMY INDUSTRY | GOVERNMENT | TECHNOLOGY | SOCIETY NATURAL ENVIRONMENT | POLITICAL CLIMATE
SUN INTERNATIONAL SUN INTERNATIONAL
INTEGRATED ANNUAL REPORT 2 0 1 7 9 10 INTEGRATED ANNUAL REPORT 2 0 1 7 11
8
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
Peru2 PRIMARY GAMBLING The FICA commenced in October 2017,
Peru’s economic growth gained LEGISLATION however, the gambling industry will be
momentum in the third quarter of operating within a transition period to
2017, underpinned by stronger domestic allow for system changes and training of
demand, particularly a turnaround in fixed employees, among others. In the
investment. Public investment improved as South Africa meantime, Sun International has designed
key infrastructure projects restarted. Higher The National Gambling and implemented its anti-money
commodity prices also boosted private Act, 7 of 2004 laundering and anti-corruption policies
investment in the mining and hydrocarbon taking account of legislative changes.
industries. With business confidence up
Liquor legislation
towards the end of 2017, growth should
The liquor licence conditions at
pick up in 2018, buoyed by strong global
Time Square have negatively impacted
demand for minerals and a ramp up in
operating hours and revenue. The group
infrastructure spending. However, volatility
recently received approval for extended
in global commodity prices is always
trading hours from the Gauteng Liquor
present and could impact growth.
Board.
REGULATORY ENVIRONMENT
Chile – The Law No 19.995 B-BBEE legislation
The group monitors its dynamic regulatory The group continues to embrace
environment through its legal and Colombia – The Law No 643 transformation and remains committed to
compliance departments in South Africa continually improving its B-BBEE
and Latam. Peru – The Law No 27.153 credentials in its South African operations.
Sun International achieved a Level 1
The National Gambling Board (NGB) Panama – T he Law No 19
B-BBEE status as at 31 July 2017.
oversees the regulation in South Africa’s of 8 May 1947
gaming industry. In addition, each GAMING AND HOSPITALITY
province has its own gaming legislation. ENVIRONMENT
There are 40 authorised gaming licences
Gaming
in South Africa and 38 have been issued.
Sun International has 13 of these licences South Africa’s casino industry remains
in the eight provinces where it operates. under pressure on the back of a struggling
We are also a member of The Casino economy placing increased pressure on
Association of South Africa (CASA), which consumer disposable income. Despite
represents the interests of the country’s these challenges, the gaming industry
legal casino gaming industry. continues to contribute significantly to
the economy through employment
Following the move of one of the North opportunities (direct and indirect) and
West licences (Morula Sun) to Gauteng, boosting government tax revenues.
the dti authorised a 41st licence in North
There was an increase in illegal and online
West, which has been challenged by CASA
gambling (currently prohibited in South
as no socio-economic study was conducted
Africa) resulting in negative socio-
to justify the additional licence and there is
economic impacts. These include less
a concern that this may set a precedent
collected taxes for national development
for the granting of future licences.
and redundancies in casino jobs. Illegal
In Chile The Superintendent of Casinos gambling remains a concern and it was
(SCJ) oversees 18 authorised casinos in Sun International is also in the process of encouraging to note the ongoing support
13 regions of the country, with another implementing alternative non-tobacco from CASA and the dti in combatting this,
seven casinos operating under concession smoking options, at certain South African but more needs to be done in South Africa
granted by certain municipalities. In terms casino properties beginning with Sun City and Chile.
and in Chile, we have increased the
of a new casino law, the licence for these In 2017 the High Court of South Africa
number of outdoor smoking decks.
casinos expired in December 2017 and the ruled that winnings obtained through
group is in the process of submitting bids Taxation legislation illegal gambling will be forfeited.
for these licences, with the successful
applicant to be named by mid 2018. The increased maximum marginal tax rate The proliferation of Electronic Bingo
The new licences will fall under the of 45% for individuals earning more than Terminals (EBTs) continues to impact the
R1.5 million from the 2018 tax year as well casino market in South Africa. While the
regulations of the SCJ. as the increase in VAT, from 14% to 15%, NGB is against the roll out of EBTs, certain
Smoking legislation are further factors that could negatively provinces continue to issue licences or are
New anti-smoking regulations to ban impact customer disposable income going looking to do so. Sun International is not
forward. The increase in VAT will come as opposed to EBTs, but we do object to
smoking in public places are expected to
a direct increase in costs as we cannot having them licenced in the catchment
be published soon. The legislation aims to pass on the increase to our gaming areas of casinos where significant
introduce several amendments to South customers. investments have been made in return for
African smoking laws, which could
negatively impact casino revenues. CASA Financial Intelligence Centre Act the casino licence.
engaged with the Department of Health to The amendments to the Financial The casino industry in Latam showed
determine if concessions could be granted Intelligence Centre Act (FICA) has placed mixed results in 2017. Chile was impacted
to enable casinos to retain the current 25% onerous control requirements on the by the challenging economic climate and
smoking areas within casinos. group for transactions under R5 000. the tragic shooting in Monticello. In Peru,
1 IMF World Economic Outlook Update, January 2018.
2 The World Factbook.
SUN INTERNATIONAL
INTEGRATED ANNUAL REPORT 2 0 1 7 13
OTHER
OUR DECK OUR OUR RULES OF GAMING
OF CARDS GAME PLAN PAYOUTS THE GAME INFORMATION
Peru2 PRIMARY GAMBLING The FICA commenced in October 2017,
Peru’s economic growth gained LEGISLATION however, the gambling industry will be
momentum in the third quarter of operating within a transition period to
2017, underpinned by stronger domestic allow for system changes and training of
demand, particularly a turnaround in fixed employees, among others. In the
investment. Public investment improved as South Africa meantime, Sun International has designed
key infrastructure projects restarted. Higher The National Gambling and implemented its anti-money
commodity prices also boosted private Act, 7 of 2004 laundering and anti-corruption policies
investment in the mining and hydrocarbon taking account of legislative changes.
industries. With business confidence up
Liquor legislation
towards the end of 2017, growth should
The liquor licence conditions at
pick up in 2018, buoyed by strong global
Time Square have negatively impacted
demand for minerals and a ramp up in
operating hours and revenue. The group
infrastructure spending. However, volatility
recently received approval for extended
in global commodity prices is always
trading hours from the Gauteng Liquor
present and could impact growth.
Board.
REGULATORY ENVIRONMENT
Chile – The Law No 19.995 B-BBEE legislation
The group monitors its dynamic regulatory The group continues to embrace
environment through its legal and Colombia – The Law No 643 transformation and remains committed to
compliance departments in South Africa continually improving its B-BBEE
and Latam. Peru – The Law No 27.153 credentials in its South African operations.
Sun International achieved a Level 1
The National Gambling Board (NGB) Panama – T he Law No 19
B-BBEE status as at 31 July 2017.
oversees the regulation in South Africa’s of 8 May 1947
gaming industry. In addition, each GAMING AND HOSPITALITY
province has its own gaming legislation. ENVIRONMENT
There are 40 authorised gaming licences
Gaming
in South Africa and 38 have been issued.
Sun International has 13 of these licences South Africa’s casino industry remains
in the eight provinces where it operates. under pressure on the back of a struggling
We are also a member of The Casino economy placing increased pressure on
Association of South Africa (CASA), which consumer disposable income. Despite
represents the interests of the country’s these challenges, the gaming industry
legal casino gaming industry. continues to contribute significantly to
the economy through employment
Following the move of one of the North opportunities (direct and indirect) and
West licences (Morula Sun) to Gauteng, boosting government tax revenues.
the dti authorised a 41st licence in North
There was an increase in illegal and online
West, which has been challenged by CASA
gambling (currently prohibited in South
as no socio-economic study was conducted
Africa) resulting in negative socio-
to justify the additional licence and there is
economic impacts. These include less
a concern that this may set a precedent
collected taxes for national development
for the granting of future licences.
and redundancies in casino jobs. Illegal
In Chile The Superintendent of Casinos gambling remains a concern and it was
(SCJ) oversees 18 authorised casinos in Sun International is also in the process of encouraging to note the ongoing support
13 regions of the country, with another implementing alternative non-tobacco from CASA and the dti in combatting this,
seven casinos operating under concession smoking options, at certain South African but more needs to be done in South Africa
granted by certain municipalities. In terms casino properties beginning with Sun City and Chile.
and in Chile, we have increased the
of a new casino law, the licence for these In 2017 the High Court of South Africa
number of outdoor smoking decks.
casinos expired in December 2017 and the ruled that winnings obtained through
group is in the process of submitting bids Taxation legislation illegal gambling will be forfeited.
for these licences, with the successful
applicant to be named by mid 2018. The increased maximum marginal tax rate The proliferation of Electronic Bingo
The new licences will fall under the of 45% for individuals earning more than Terminals (EBTs) continues to impact the
R1.5 million from the 2018 tax year as well casino market in South Africa. While the
regulations of the SCJ. as the increase in VAT, from 14% to 15%, NGB is against the roll out of EBTs, certain
Smoking legislation are further factors that could negatively provinces continue to issue licences or are
New anti-smoking regulations to ban impact customer disposable income going looking to do so. Sun International is not
forward. The increase in VAT will come as opposed to EBTs, but we do object to
smoking in public places are expected to
a direct increase in costs as we cannot having them licenced in the catchment
be published soon. The legislation aims to pass on the increase to our gaming areas of casinos where significant
introduce several amendments to South customers. investments have been made in return for
African smoking laws, which could
negatively impact casino revenues. CASA Financial Intelligence Centre Act the casino licence.
engaged with the Department of Health to The amendments to the Financial The casino industry in Latam showed
determine if concessions could be granted Intelligence Centre Act (FICA) has placed mixed results in 2017. Chile was impacted
to enable casinos to retain the current 25% onerous control requirements on the by the challenging economic climate and
smoking areas within casinos. group for transactions under R5 000. the tragic shooting in Monticello. In Peru,
1 IMF World Economic Outlook Update, January 2018.
2 The World Factbook.
SUN INTERNATIONAL
INTEGRATED ANNUAL REPORT 2 0 1 7 13