Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
SANDS CHINA LTD.
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1928)
ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2013
Financial Highlights:
We generated an all-time half year record of US$1,280.1 million (HK$9,931.3 million) of adjusted EBITDA, an increase of 46.6% compared to US$873.0 million (HK$6,771.7 million) in the first half of 2012.
Total net revenues for the Group increased 39.4% to US$4,070.3 million (HK$31,578.2 million) in the first half of 2013, compared to US$2,920.5 million (HK$22,653.7 million) in the first half of 2012.
Profit for the Group increased 113.8% to US$940.5 million (HK$7,296.6 million) in the first half of 2013, compared to US$439.8 million (HK$3,411.4 million) in the first half of 2012.
Excluding pre-opening expenses of Sands Cotai Central and the impairment losses related to Parcels 7 and 8 and the closure of the ZAiA show at The Venetian Macao for the six months ended June 30, 2012, adjusted profit increased 40.0% to US$945.9 million (HK$7,338.5 million) in the first half of 2013, compared to US$675.8 million (HK$5,242.0 million) in the first half of 2012.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in our 2012 Annual Report.
RESULTS OF OPERATIONS
The Board of Directors (the “Board”) of Sands China Ltd. (“we” or our “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended June 30, 2013 compared to the six months ended June 30, 2012.
Note: The translation of US$ amounts into HK$ amounts has been made at the rate of US$1.00 to HK$7.7582 (six months ended June 30, 2012: US$1.00 to HK$7.7568) for the purposes of illustration only.
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Net Revenues
Our net revenues consisted of the following:
Six months ended June 30,
2013 2012 Percent change
(US$ in millions, except percentages)
Casino 3,650.7 2,592.8 40.8%
Rooms 136.1 93.9 44.9%
Mall 119.6 92.5 29.3%
Food and beverage 69.2 43.4 59.4%
Convention, ferry, retail and other 94.7 98.0(3.4)%
Total net revenues 4,070.3 2,920.5 39.4%
Net revenues were US$4,070.3 million for the six months ended June 30, 2013, an increase of US$1,149.8 million, or 39.4%, compared to US$2,920.5 million for the six months ended June 30, 2012. Net revenues increased in most of the segments, mainly driven by the full operation of our newest integrated resort, Sands Cotai Central, as well as strong visitation resulting from continuous efforts in marketing and management’s focus on driving the high-margin mass market gaming segment, while continuing to provide luxury amenities and high service levels to our VIP and premium players.
Our net casino revenues for the six months ended June 30, 2013 were US$3,650.7 million, an increase of US$1,057.9 million, or 40.8%, compared to US$2,592.8 million for the six months ended June 30, 2012. The increase was primarily attributable to an increase of US$807.2 million at Sands Cotai Central driven by the opening of phase IIA in September 2012 and our VIP gaming expansion in February 2013, and an increase of US$341.6 million at The Venetian Macao driven by an increase in volume in our mass market segment.
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The following table summarizes the results of our casino activity:
Six months ended June 30,
2013 2012 Change
(US$ in millions, except percentages and points)
The Venetian Macao
Total net casino revenues 1,565.6 1,224.0 27.9%
Non-Rolling Chip drop 2,927.7 2,126.5 37.7%
Non-Rolling Chip win percentage 30.0% 30.6%(0.6)pts
Rolling Chip volume 23,508.9 24,963.1(5.8)%
Rolling Chip win percentage 3.49% 2.82% 0.67pts
Slot handle 2,341.2 2,389.6(2.0)%
Slot hold percentage 5.5% 5.4% 0.1pts
Sands Cotai Central (Note 1)
Total net casino revenues 1,054.3 247.1 326.7%
Non-Rolling Chip drop 2,263.5 389.4 481.3%
Non-Rolling Chip win percentage 21.8% 21.5% 0.3pts
Rolling Chip volume 27,957.8 6,820.6 309.9%
Rolling Chip win percentage 2.71% 3.12%(0.41)pts
Slot handle 2,478.1 665.4 272.4%
Slot hold percentage 3.9% 4.0%(0.1)pts
The Plaza Macao
Total net casino revenues 446.4 520.7(14.3)%
Non-Rolling Chip drop 296.6 196.9 50.6%
Non-Rolling Chip win percentage 32.3% 42.7%(10.4)pts
Rolling Chip volume 19,424.4 21,910.5(11.3)%
Rolling Chip win percentage 2.58% 2.92%(0.34)pts
Slot handle 366.4 397.3(7.8)%
Slot hold percentage 5.6% 5.7%(0.1)pts
Sands Macao
Total net casino revenues 584.4 601.0(2.8)%
Non-Rolling Chip drop 1,586.1 1,424.9 11.3%
Non-Rolling Chip win percentage 20.7% 20.5% 0.2pts
Rolling Chip volume 12,197.2 12,598.3(3.2)%
Rolling Chip win percentage 2.69% 3.17%(0.48)pts
Slot handle 1,343.7 1,275.0 5.4%
Slot hold percentage 3.9% 4.3%(0.4)pts
Note 1: Phases I, IIA and IIB of Sands Cotai Central opened in April 2012, September 2012 and January 2013, respectively. The property was open for 81 days during the six months ended June 30, 2012.
Net room revenues for the six months ended June 30, 2013 were US$136.1 million, an increase of US$42.2 million, or 44.9%, compared to US$93.9 million for the six months ended June 30, 2012. The increase was primarily driven by the full operation of three hotel towers in our newest integrated resort, Sands Cotai Central.
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The following table summarizes our room activity. Information in this table takes into account rooms provided to customers on a complimentary basis that are recorded at discounted rates.
Six months ended June 30,
2013 2012 Change
(US$, except percentages and points)
The Venetian Macao
Gross room revenues (in millions) 105.5 108.9(3.1)%
Occupancy rate 89.5% 90.1%(0.6)pts
Average daily rate 229 236(3.0)%
Revenue per available room 205 213(3.8)%
Sands Cotai Central (Note 1)
Gross room revenues (in millions) 94.2 15.3 515.7%
Occupancy rate 69.0% 75.1%(6.1)pts
Average daily rate 148 141 5.0%
Revenue per available room 102 106(3.8)%
The Plaza Macao
Gross room revenues (in millions) 19.9 19.0 4.7%
Occupancy rate 81.0% 77.8% 3.2pts
Average daily rate 361 358 0.8%
Revenue per available room 292 279 4.7%
Sands Macao
Gross room revenues (in millions) 12.0 12.0 —%
Occupancy rate 94.9% 93.5% 1.4pts
Average daily rate 244 247(1.2)%
Revenue per available room 232 231 0.4%
Note 1: Phases I, IIA and IIB of Sands Cotai Central opened in April 2012, September 2012 and January 2013, respectively. The property was open for 81 days during the six months ended June 30, 2012.
Mall revenues for the six months ended June 30, 2013 were US$119.6 million, an increase of US$27.1 million, or 29.3%, compared to US$92.5 million for the six months ended June 30, 2012. The increase was primarily driven by higher base fees due to contract renewals and replacements, as well as additional stores opening at Sands Cotai Central in connection with the phase II opening in September 2012.
Net food and beverage revenues for the six months ended June 30, 2013 were US$69.2 million, an increase of US$25.8 million, or 59.4%, compared to US$43.4 million for the six months ended June 30, 2012. The increase was primarily due to the additional food and beverage outlets at Sands Cotai Central. Outlets in other properties also experienced better performance as a result of increased property visitation.
Net convention, ferry, retail and other revenues for the six months ended June 30, 2013 were US$94.7 million, a slight decrease of US$3.3 million, or 3.4%, compared to US$98.0 million for the six months ended June 30, 2012. The decrease was primarily due to the entertainment segment, driven by the closure of the ZAiA show in February 2012.
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Operating Expenses
Operating expenses were US$3,090.0 million for the six months ended June 30, 2013, an increase of US$627.8 million, or 25.5%, compared to US$2,462.2 million for the six months ended June 30, 2012. The increase in operating expenses was primarily attributable to the full operation of Sands Cotai Central, in line with the increase in net revenues, partially offset by decreases in pre-opening expenses of Sands Cotai Central and the impairment losses related to Parcels 7 and 8 and the closure of the ZAiA show at The Venetian Macao in the first half of 2012.
Adjusted EBITDA(1)
The following table summarizes information related to our segments:
Six months ended June 30,
2013 2012 Percent change
(US$ in millions, except percentages)
The Venetian Macao 709.5 511.5 38.7%
Sands Cotai Central 277.0 51.7 435.8%
The Plaza Macao 115.2 144.0(20.0)%
Sands Macao 184.4 177.8 3.7%
Ferry and other operations(6.1)(11.9) 48.7%
Total adjusted EBITDA 1,280.1 873.0 46.6%
Adjusted EBITDA for the six months ended June 30, 2013 was US$1,280.1 million, an increase of US$407.1 million, or 46.6%, compared to US$873.0 million for the six months ended June 30, 2012. This strong performance was driven by revenue increases in most of the business segments, as a result of the full operation of Sands Cotai Central, strong growth in Non-Rolling Chip win and continuous improvement in operational efficiencies at all properties. The management team continues to focus on providing high service levels to our VIP customers and driving the high-margin mass market segment as well as operational efficiencies throughout both gaming and non-gaming areas of the business.
(1) Adjusted EBITDA is profit before share-based compensation, corporate expense, pre-opening expense, depreciation and amortization (net of amortization of show production costs), net foreign exchange gains/(losses), impairment loss, gain/ (loss) on disposal of property and equipment, fair value losses on financial assets at fair value through profit or loss, interest, loss on early retirement of debt and income tax expense. Adjusted EBITDA is used by management as the primary measure of operating performance of the Group’s properties and to compare the operating performance of the Group’s properties with that of its competitors. However, adjusted EBITDA should not be considered in isolation; construed as an alternative to profit or operating profit; as an indicator of the Group’s IFRS operating performance, other combined operations or cash fl ow data; or as an alternative to cash flow as a measure of liquidity. As a result, adjusted EBITDA as presented by the Group may not be directly comparable to other similarly titled measures presented by other companies.
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Interest Expense
The following table summarizes information related to interest expense:
Six months ended June 30,
2013 2012 Percent change
(US$ in millions, except percentages)
Interest and other ?nance cost 46.7 59.5(21.5)%
Less — capitalized interest(2.7)(34.3)(92.1)%
Interest expense, net 44.0 25.2 74.6%
Interest expense, net of amounts capitalized, was US$44.0 million for the six months ended June 30, 2013, compared to US$25.2 million for six months ended June 30, 2012. The increase was primarily due to a decrease in capitalized interest as we opened our Sands Cotai Central property. Capitalized interest was US$2.7 million during the six months ended June 30, 2013, compared to US$34.3 million during the six months ended June 30, 2012. Interest and other fi nance cost decreased 21.5% to US$46.7 million due to a lower average borrowing rate under the 2011 VML Credit Facility, as described below, during the six months ended June 30, 2013 and the repayment of the ferry financing in May 2012.
Profit for the Period
Profit for the six months ended June 30, 2013 was US$940.5 million, an increase of US$500.7 million, or 113.8%, compared to US$439.8 million for the six months ended June 30, 2012. Excluding pre-opening expenses of Sands Cotai Central and the impairment losses related to Parcels 7 and 8 and the closure of the ZAiA show at The Venetian Macao for the six months ended June 30, 2012, adjusted profit increased 40.0% to US$945.9 million in the first half of 2013, compared to US$675.8 million in the first half of 2012.
LIQUIDITY AND CAPITAL RESOURCES
We fund our operations through cash generated from our operations and our debt financings.
On September 22, 2011, two subsidiaries of the Group, VML US Finance LLC (the “Borrower”) and VML, as guarantor, entered into a credit agreement (the “2011 VML Credit Facility”), providing for up to US$3.7 billion (or equivalent in Hong Kong dollars (“HK$”) or Macao patacas
(“MOP”)), which consists of a US$3.2 billion term loan (the “2011 VML Term Facility”) that was fully drawn on November 15, 2011, and a US$500.0 million revolving facility (the “2011 VML Revolving Facility”), none of which was drawn as at June 30, 2013, that is available until October 15, 2016.
We may need to arrange additional financing to fund the balance of our Cotai Strip developments.
As at June 30, 2013, we had cash and cash equivalents of US$1.64 billion, which was primarily generated from our operations.
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Cash Flows — Summary
Our cash flows consisted of the following:
Six months ended June 30,
2013 2012
(US$ in millions)
Net cash generated from operating activities 1,361.3 809.9
Net cash used in investing activities(236.6)(531.1)
Net cash used in financing activities(1,430.1)(1,414.0)
Net decrease in cash and cash equivalents(305.5)(1,135.1)
Cash and cash equivalents at beginning of period 1,948.4 2,491.3
Effect of exchange rate on cash and cash equivalents(3.9) 4.2
Cash and cash equivalents at end of period 1,639.0 1,360.3
Cash Flows — Operating Activities
We derive most of our operating cash flows from our casino, hotel room and mall operations. Net cash generated from operating activities for the six months ended June 30, 2013 was US$1,361.3 million, an increase of US$551.4 million, or 68.1%, compared to US$809.9 million for the six months ended June 30, 2012. The increase in net cash generated from operating activities was primarily due to the increase in our operating results.
Cash Flows — Investing Activities
Capital expenditures for the six months ended June 30, 2013, totaled US$241.7 million, including US$181.9 million for construction activities at Sands Cotai Central and The Parisian Macao and US$59.8 million for our operations, mainly at The Venetian Macao, The Plaza Macao and Sands Macao.
Cash Flows — Financing Activities
For the six months ended June 30, 2013, net cash ? ows used in financing activities were US$1,430.1 million, which was primarily attributable to US$1,381.6 million in dividend payments and payments of US$27.8 million for interest and US$25.5 million for fi nance lease liabilities.
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CAPITAL EXPENDITURES
Capital expenditures were used primarily for new projects and to renovate, upgrade and maintain existing properties. Set forth below is historical information on our capital expenditures, excluding capitalized interest and construction payables:
Six months ended June 30,
2013 2012
(US$ in millions)
The Venetian Macao 44.2 35.6
Sands Cotai Central 123.4 469.6
The Plaza Macao 5.7 19.3
Sands Macao 9.7 12.9
Ferry and other operations 0.2 0.5
The Parisian Macao(1) 58.5 2.3
Total capital expenditures 241.7 540.1
(1) The Parisian Macao was formerly reported under “Other developments” in 2012.
Our capital expenditure plans are significant. In April 2012, September 2012 and January 2013, we opened phases I, IIA and IIB, respectively, of Sands Cotai Central, which is part of our Cotai Strip development. Phase III of the project is expected to include a fourth luxury St. Regis-branded hotel and mixed-use tower. The total cost to complete phase III is expected to be approximately US$450 million. We intend to commence construction of phase III at a future date as demand and market conditions warrant it.
We have commenced construction activities on The Parisian Macao, our integrated resort development on Parcel 3, and have capitalized costs of US$222.6 million, including land, as at June 30, 2013. We have received the requisite government approvals to start construction of The Parisian Macao and have begun on-site work. We expect the cost to design, develop and construct The Parisian Macao will be approximately US$2.7 billion, inclusive of land premium payments.
These investment plans are preliminary and subject to change based upon the execution of our business plan, the progress of our capital projects, market conditions and the outlook on future business conditions.
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CAPITAL COMMITMENTS
Future commitments for property and equipment that are not recorded in the financial statements herein are as follows:
June 30, December 31,
2013 2012
(US$ in millions)
Contracted but not provided for 442.1 190.8
Authorized but not contracted for 2,697.5 553.1
Total capital commitments 3,139.5 743.9
DIVIDENDS
On February 28, 2013, the Company paid an interim dividend of HK$0.67 (equivalent to US$0.086) per share for the year ended December 31, 2012, amounting in aggregate to HK$5.40 billion (equivalent to US$696.4 million), to Shareholders of record on February 19, 2013.
On May 31, 2013, the Shareholders approved a fi nal dividend of HK$0.66 (equivalent to US$0.085) per share for the year ended December 31, 2012 to Shareholders of record on June 7, 2013. This fi nal dividend, amounting in aggregate to HK$5.32 billion (equivalent to US$685.2 million), was paid on June 21, 2013.
The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2013.
As we disclosed in our announcement on February 2, 2012, we anticipate considering declaring an interim and a final dividend each year. It is anticipated that the Board will consider declaring an interim dividend for the year ending December 31, 2013 in the first quarter of 2014.
PLEDGE OF FIXED ASSETS
We have pledged a substantial portion of our fixed assets to secure our loan facilities. As at June 30, 2013, we have pledged leasehold interests in land; buildings; building, land and leasehold improvements; furniture, fittings and equipment; construction in progress and vehicles with an aggregate net book value of approximately US$7.14 billion (December 31, 2012: US$7.24 billion).
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CONTINGENT LIABILITIES AND RISK FACTORS
The Group has contingent liabilities arising in the ordinary course of business. Management has made certain estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material adverse effect on our financial condition, results of operations or cash ? ows.
Under the land concession for Sands Cotai Central, we are required to complete the development by May 2014. We will be applying for an extension from the Macao Government to complete Sands Cotai Central, as we will be unable to meet the May 2014 deadline. The land concession for The Parisian Macao contains a similar requirement, which was extended by the Macao Government in July 2012, that the development be completed by April 2016. Should we determine that we are unable to complete The Parisian Macao by April 2016, we would then also expect to apply for another extension from the Macao Government. If we are unable to meet The Parisian Macao deadline and the deadlines for either development are not extended, we could lose our land concessions for Sands Cotai Central or The Parisian Macao, which would prohibit us from operating any facilities developed under the respective land concessions. As a result, the Group could record a charge for all or some portion of the US$4.17 billion or US$222.6 million in capitalized construction costs including land, as at June 30, 2013, related to Sands Cotai Central and The Parisian Macao, respectively.
CAPITAL RISK MANAGEMENT
The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for Shareholders and benefi ts for other stakeholders, by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of debt, which includes borrowings (including current and non-current borrowings as shown in note 12 to the condensed consolidated financial statements), cash and cash equivalents, and equity attributable to Shareholders, comprising issued share capital and reserves.
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The Group actively and regularly reviews and manages its capital structure to maintain the net debt-to-capital ratio (gearing ratio) at an appropriate level based on its assessment of the current risk and circumstances. This ratio is calculated as net debt divided by total capital. Net debt is calculated as interest bearing borrowings, net of deferred financing costs, less cash and cash equivalents and restricted cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated balance sheet, plus net debt.
June 30, December 31,
2013 2012
(US$ in millions,
except percentages)
Interest bearing borrowings, net of deferred financing costs 3,134.0 3,124.0
Less: cash and cash equivalents(1,639.0)(1,948.4)
restricted cash and cash equivalents(5.0)(4.5)
Net debt 1,489.9 1,171.1
Total equity 5,150.9 5,586.1
Total capital 6,640.9 6,757.2
Gearing ratio 22.4% 17.3%
The increase in the gearing ratio during the six months ended June 30, 2013 was primarily due to payments of US$1,381.6 million of dividends.
BUSINESS REVIEW AND PROSPECTS
Our business strategy is to continue to successfully execute our Cotai Strip developments and to leverage our integrated resort business model to create Asia’s premier gaming, leisure and convention destination. The Company continues to execute on the strategies outlined in our 2012 Annual Report. These strategies have proven to be successful in the first half of 2013 and we are confident they will continue to be so throughout the rest of the year.
Sands Cotai Central
Sands Cotai Central is located opposite The Venetian Macao and The Plaza Macao. It is our largest integrated resort on Cotai. Sands Cotai Central consists of three hotel towers including 636 five-star rooms and suites under the Conrad brand, 1,224 four-star rooms and suites under the Holiday Inn brand and 3,863 rooms and suites under the Sheraton brand. In April 2012, we opened phase I of Sands Cotai Central, which included both the Conrad and Holiday Inn products, a variety of retail offerings, more than 300,000 square feet of meeting space, several food and beverage establishments, along with the Himalaya casino and VIP gaming areas. We opened phase IIA in September 2012 featuring 1,796 rooms and suites managed by Starwood under the Sheraton brand, the Pacifica casino and additional retail, entertainment, dining and meeting facilities. We opened phase IIB in January 2013 consisting of the second Sheraton tower featuring an additional 2,067 rooms and suites.
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Phase III of the project is expected to include a fourth luxury St. Regis-branded hotel and mixed-use tower. The total cost to complete phase III is expected to be approximately US$450 million. We intend to commence construction of phase III of the project as demand and market conditions warrant it.
The Parisian Macao
The Parisian Macao, which is currently expected to open in late 2015, is intended to include a gaming area (to be operated under our gaming subconcession), hotel, a shopping mall and other amenities. We have received the requisite government approvals to start construction of The Parisian Macao and have begun on-site construction work. We expect the cost to design, develop and construct The Parisian Macao to be approximately US$2.7 billion, inclusive of land premium payments. As at June 30, 2013, we had capitalized construction costs of US$222.6 million for The Parisian Macao, including land.
CORPORATE GOVERNANCE
Corporate Governance Practices
Good corporate governance underpins the creation of shareholder value and maintaining the highest standards of corporate governance is a core responsibility of the Board. An effective system of corporate governance requires that our Board approves strategic direction, monitors performance, oversees effective risk management and leads the creation of the right culture across the organization. It also gives our investors confidence that we are exercising our stewardship responsibilities with due skill and care.
To ensure that we adhere to high standards of corporate governance, we have developed our own corporate governance principles and guidelines, that set out how corporate governance operates in practice within the Company. This is based on the policies, principles and practices set out in the Corporate Governance Code (the “CG Code”) contained in Appendix 14 of the Listing Rules and draws on other best practices.
Throughout the six months ended June 30, 2013, the Company fully complied with all the code provisions and certain recommended best practices set out in the CG Code.
The Board has adopted a board diversity policy (the “Policy”) in August 2013 in compliance with the new provisions in the CG Code on board diversity to be effective on September 1, 2013. The Nomination Committee will give consideration to the Policy when identifying suitably qualifi ed individuals to become members of the Board, and the Board (or the Nomination Committee) will review the Policy, as appropriate, to ensure its effectiveness.
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Model Code for Securities Transactions
The Company has adopted its own securities trading code for securities transactions (the “Company Code”) by the Directors and relevant employees who are likely to be in possession of unpublished inside information of the Company on terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules (the “Model Code”). Following specifi c enquiry by the Company, all Directors have confirmed that they have complied with the Company Code and, therefore, with the Model Code during the six months ended June 30, 2013.
Board and Board Committees Composition
Mr. Steven Zygmunt Strasser was elected as an Independent Non-Executive Director of the Company at the annual general meeting held on May 31, 2013.
As at June 30, 2013, the composition of the Board was as follows:
Title Note
Executive Directors
Edward Matthew Tracy President and Appointed July 27, 2011
Chief Executive Of?cer
Toh Hup Hock Chief Financial Of?cer and Appointed June 30, 2010
Executive Vice President
Non-Executive Directors
Sheldon Gary Adelson Chairman of the Board Appointed August 18, 2009
Michael Alan Leven Redesignated July 27, 2011
Jeffrey Howard Schwartz Appointed October 14, 2009
Irwin Abe Siegel Appointed October 14, 2009
Lau Wong William Appointed July 27, 2011
Independent Non-Executive
Directors
Iain Ferguson Bruce Appointed October 14, 2009
Chiang Yun Appointed October 14, 2009
David Muir Turnbull Appointed October 14, 2009
Victor Patrick Hoog Antink Appointed December 7, 2012
Steven Zygmunt Strasser Elected May 31, 2013
Alternate Director
David Alec Andrew Fleming General Counsel, Company Appointed March 1, 2011
Secretary and alternate director
to Michael Alan Leven
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The composition of the Board Committees as at June 30, 2013 was as follows:
Sands China
Capital
Audit Remuneration Nomination Expenditure
Director Committee Committee Committee Committee
Sheldon Gary Adelson — — Chairman(4) —
Edward Matthew Tracy — — — Member(3)
Toh Hup Hock — — — —
Michael Alan Leven — — — Chairman(2)
Jeffrey Howard Schwartz — Member(1) — Member(2)
Irwin Abe Siegel Member(1) — — —
Lau Wong William Member(5) Member(5) — —
Iain Ferguson Bruce Chairman(1) Member(1) Member(4) —(6)
Chiang Yun Member(1) — — —
David Muir Turnbull — Chairman(1) Member(4) —
Victor Patrick Hoog Antink Member(5) Member(5) — Member(5)
Steven Zygmunt Strasser(7) — — — —
Notes:
(1) Appointed by a resolution of the Board on October 14, 2009 (2) Appointed by a resolution of the Board on March 1, 2011 (3) Appointed by a resolution of the Board on July 27, 2011 (4) Appointed by a resolution of the Board on March 2, 2012 (5) Appointed by a resolution of the Board on December 7, 2012 (6) Resigned by a resolution of the Board on December 7, 2012 (7) Elected by a resolution of the Shareholders on May 31, 2013
Audit Committee Review
The Audit Committee has reviewed the accounting policies adopted by the Group and the unaudited condensed consolidated financial statements for the six months ended June 30, 2013. All of the Audit Committee members are Non-Executive Directors, with Mr. Iain Ferguson Bruce (the Chairman) and Mr. Irwin Abe Siegel possessing the appropriate professional qualifications and accounting and related financial management expertise.
Purchase, Sale or Redemption of the Company’s Listed Shares
Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the listed shares of the Company during the six months ended June 30, 2013.
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FINANCIAL RESULTS
The financial information set out below in this announcement represents an extract from the condensed consolidated financial statements, which is unaudited but has been reviewed by the Company’s independent auditor, Deloitte Touche Tohmatsu, in accordance with the International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, and by the Audit Committee.
Consolidated Income Statement
Six months ended June 30,
2013 2012
Note US$’000, except per share data
(Unaudited)
Net revenues 4 4,070,271 2,920,532
Gaming tax(1,777,301)(1,304,631)
Inventories consumed(40,610)(29,851)
Employee bene?t expenses(440,988)(358,878)
Depreciation and amortization(246,276)(150,981)
Gaming promoter/agency commissions(178,766)(162,697)
Other expenses and losses 5(406,105)(455,212)
Operating pro?t 980,225 458,282
Interest income 5,230 9,312
Interest expense, net of amounts capitalized 6(44,011)(25,169)
Loss on early retirement of debt 12 —(1,752)
Pro?t before income tax 941,444 440,673
Income tax expense 7(949)(884)
Pro?t for the period attributable to
equity holders of the Company 940,495 439,789
Earnings per share for pro?t attributable to
equity holders of the Company
— Basic 8 US11.67 cents US5.46 cents
— Diluted 8 US11.66 cents US5.46 cents
Adjusted earnings per share for pro?t
attributable to equity holders of the Company
— Basic 8 US11.74 cents US8.39 cents
— Diluted 8 US11.73 cents US8.39 cents
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Consolidated Statement of Comprehensive Income
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Profit for the period attributable to equity holders
of the Company 940,495 439,789
Other comprehensive (loss)/income, net of tax
Item that will not be reclassified subsequently to profit or loss:
Currency translation differences(4,604) 7,959
Total comprehensive income for the period
attributable to equity holders of the Company 935,891 447,748
Consolidated Balance Sheet
June 30, December 31,
2013 2012
Note US$’000
(Unaudited)(Audited)
ASSETS
Non-current assets
Investment properties, net 909,737 913,126
Property and equipment, net 6,634,725 6,656,730
Intangible assets, net 14,141 16,202
Deferred income tax assets 150 153
Financial assets at fair value through profit or loss 132 183
Other assets, net 34,067 36,119
Trade and other receivables and prepayments, net 12,905 12,196
Total non-current assets 7,605,857 7,634,709
Current assets
Inventories 13,636 15,069
Trade and other receivables and prepayments, net 10 812,299 784,808
Restricted cash and cash equivalents 5,007 4,479
Cash and cash equivalents 1,639,043 1,948,414
Total current assets 2,469,985 2,752,770
Total assets 10,075,842 10,387,479
16
June 30, December 31,
2013 2012
Note US$’000
(Unaudited)(Audited)
EQUITY
Capital and reserves attributable to equity holders
of the Company
Share capital 80,575 80,554
Reserves 5,070,369 5,505,572
Total equity 5,150,944 5,586,126
LIABILITIES
Non-current liabilities
Trade and other payables 11 49,834 35,542
Borrowings 12 3,218,785 3,211,668
Total non-current liabilities 3,268,619 3,247,210
Current liabilities
Trade and other payables 11 1,626,709 1,503,274
Current income tax liabilities 1,018 1,953
Borrowings 12 28,552 48,916
Total current liabilities 1,656,279 1,554,143
Total liabilities 4,924,898 4,801,353
Total equity and liabilities 10,075,842 10,387,479
Net current assets 813,706 1,198,627
Total assets less current liabilities 8,419,563 8,833,336
17
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
The unaudited condensed consolidated financial statements are presented in United States dollars (“US$”), unless otherwise stated. The condensed consolidated financial statements were approved and authorized for issue by the Board of Directors of the Company on August 16, 2013.
The condensed consolidated financial statements for the six months ended June 30, 2013 have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” issued by the International Accounting Standards Board (“IASB”) and the applicable disclosure requirements of Appendix 16 to the Listing Rules. They should be read in conjunction with the Group’s annual financial statements for the year ended December 31, 2012, which were prepared in accordance with International Financial Reporting Standards (“IFRS”).
2. Significant accounting policies
The condensed consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss.
Except as described below, accounting policies adopted in the preparation of the condensed consolidated financial statements for the six months ended June 30, 2013 are consistent with those adopted and as described in the Group’s annual financial statements for the year ended December 31, 2012.
During the period, there have been a number of new or revised standards, amendments to standards and interpretation that have come into effect, which the Group has adopted at their respective effective dates. The adoption of these new or revised standards, amendments to standards and interpretation has no material impact on the results of operations and financial position of the Group.
The Group has not early adopted the new or revised standards, amendments and interpretation that have been issued, but are not yet effective for the period.
The Group has already commenced the assessment of the impact of the new or revised standards, amendments and interpretations to the Group, but is not yet in a position to state whether these would have a significant impact on the results of operations and financial position of the Group.
18
3. Segment information
Management has determined the operating segments based on the reports reviewed by a group of senior management to make strategic decisions. The Group considers the business from a property and service perspective.
The Group’s principal operating and developmental activities occur in Macao, which is the sole geographic area in which the Group is domiciled. The Group reviews the results of operations for each of its key operating segments, which are also the reportable segments: The Venetian Macao, Sands Cotai Central, The Plaza Macao, Sands Macao and ferry and other operations. The Group’s primary projects under development are The Parisian Macao and phase III of Sands Cotai Central.
Revenue comprises turnover from sale of goods and services in the ordinary course of the Group’s activities. The Venetian Macao, Sands Cotai Central, The Plaza Macao, Sands Macao and The Parisian Macao, once in operation will, derive their revenue primarily from casino, hotel, mall, food and beverage, convention, retail and other sources. Ferry and other operations mainly derive their revenue from the sale of ferry tickets for transportation between Hong Kong and Macao.
The Parisian Macao, formerly reported under “Other developments” in 2012, is reported separately in the current period.
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Net revenues
The Venetian Macao 1,759,048 1,416,416
Sands Cotai Central 1,163,650 263,896
The Plaza Macao 495,830 564,462
Sands Macao 600,368 616,783
Ferry and other operations 62,090 67,105
The Parisian Macao — —
Inter-segment revenues (10,715) (8,130)
4,070,271 2,920,532
19
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Adjusted EBITDA (Note)
The Venetian Macao 709,504 511,475
Sands Cotai Central 276,976 51,657
The Plaza Macao 115,248 144,018
Sands Macao 184,402 177,778
Ferry and other operations (6,080) (11,944)
The Parisian Macao — —
1,280,050 872,984
Note: Adjusted EBITDA is profit before share-based compensation, corporate expense, pre-opening expense, depreciation and amortization (net of amortization of show production costs), net foreign exchange gains/(losses), impairment loss, gain/(loss) on disposal of property and equipment, fair value losses on financial assets at fair value through profit or loss, interest, loss on early retirement of debt and income tax expense. Adjusted EBITDA is used by management as the primary measure of operating performance of the Group’s properties and to compare the operating performance of the Group’s properties with that of its competitors. However, adjusted EBITDA should not be considered in isolation; construed as an alternative to profit or operating profit; as an indicator of the Group’s IFRS operating performance, other combined operations or cash flow data; or as an alternative to cash flow as a measure of liquidity. As a result, adjusted EBITDA as presented by the Group may not be directly comparable to other similarly titled measures presented by other companies.
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Depreciation and amortization
The Venetian Macao 69,519 76,277
Sands Cotai Central 129,469 26,371
The Plaza Macao 24,033 25,590
Sands Macao 16,178 15,682
Ferry and other operations 7,077 7,061
The Parisian Macao — —
246,276 150,981
20
The following is a reconciliation of adjusted EBITDA to profit for the period attributable to equity holders of the Company:
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Adjusted EBITDA 1,280,050 872,984
Share-based compensation granted to employees
by LVS and the Company, net of amounts capitalized (5,427) (6,632)
Corporate expense (32,994) (20,779)
Pre-opening expense (7,394) (94,252)
Depreciation and amortization (246,276) (150,981)
Amortization of show production costs — 566
Net foreign exchange (losses)/gains (4,697) 1,185
Impairment loss —(143,649)
Loss on disposal of property and equipment (2,986) (97)
Fair value losses on financial assets at fair value
through profit or loss (51) (63)
Operating profit 980,225 458,282
Interest income 5,230 9,312
Interest expense, net of amounts capitalized (44,011) (25,169)
Loss on early retirement of debt —(1,752)
profit before income tax 941,444 440,673
Income tax expense (949) (884)
profit for the period attributable to equity holders
of the Company 940,495 439,789
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Note 13
Capital expenditures
The Venetian Macao 44,195 35,567
Sands Cotai Central 123,366 469,589
The Plaza Macao 5,668 19,345
Sands Macao 9,740 12,875
Ferry and other operations 205 511
The Parisian Macao 58,486 2,251
241,660 540,138
21
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
Note 13
Total assets
The Venetian Macao 2,970,235 3,226,597
Sands Cotai Central 4,842,366 4,890,665
The Plaza Macao 1,309,467 1,359,310
Sands Macao 413,649 416,660
Ferry and other operations 317,522 349,509
The Parisian Macao 222,603 144,738
10,075,842 10,387,479
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
Total non-current assets
Held locally 7,415,456 7,437,778
Held in foreign countries 190,119 196,595
Deferred income tax assets 150 153
Financial assets at fair value through profit or loss 132 183
7,605,857 7,634,709
4. Net revenues
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Casino 3,650,660 2,592,797
Rooms 136,082 93,860
Mall
— Income from right of use 100,447 78,328
— Management fees and other 19,173 14,158
Food and beverage 69,193 43,436
Convention, ferry, retail and other 94,716 97,953
4,070,271 2,920,532
22
5. Other expenses and losses
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Note 13
Utilities and operating supplies 108,502 85,694
Contract labor and services 45,385 39,373
Advertising and promotions 44,704 29,681
Provision for doubtful accounts 31,948 24,018
Repairs and maintenance 26,437 16,889
Royalty fees 24,003 16,009
Management fees 20,350 14,811
Operating lease payments 13,458 8,181
Net foreign exchange losses/(gains) 4,697(1,185)
Loss on disposal of property and equipment 2,986 97
Auditor’s remuneration 996 566
Suspension costs 390 11,645
Fair value losses on financial assets at fair value
through profit or loss 51 63
Impairment loss — 143,649
Other support services 49,013 40,063
Other operating expenses 33,185 25,658
406,105 455,212
During the six months ended June 30, 2012, the Group recognized an impairment loss of US$143.6 million related to US$100.7 million of capitalized construction costs related to the Group’s former Cotai Strip development on Parcels 7 and 8 and US$42.9 million impairment due to the closure of the ZAiA show at The Venetian Macao.
23
6. Interest expense, net of amounts capitalized
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Bank borrowings 28,517 40,268
Amortization of deferred financing costs 12,132 12,169
Finance lease liabilities 4,057 5,078
Standby fee and other financing costs 1,983 1,937
46,689 59,452
Less: interest capitalized (2,678) (34,283)
Interest expense, net of amounts capitalized 44,011 25,169
7. Income tax expense
Six months ended June 30,
2013 2012
US$’000
(Unaudited)
Current income tax
Macao complementary tax — 3
Lump sum in lieu of Macao complementary tax
on dividend 901 901
Other overseas taxes 141 43
Overprovision in prior years
Macao complementary tax —(25)
Other overseas taxes(98)(7)
Deferred income tax 5(31)
Income tax expense 949 884
24
8. Earnings per share
(a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit for the period attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the six months ended June 30, 2013, the Company has outstanding share options and restricted share units that will potentially dilute the ordinary shares.
The calculation of basic and diluted earnings per share is based on the following:
Six months ended June 30,
2013 2012
(Unaudited)
profit attributable to equity holders of the Company
(US$’000) 940,495 439,789
Weighted average number of shares for basic earnings
per share (thousand shares) 8,056,146 8,050,093
Adjustments for share options and
restricted share units (thousand shares) 7,436 6,399
Weighted average number of shares for
diluted earnings per share (thousand shares) 8,063,582 8,056,492
Earnings per share, basic US11.67 cents US5.46 cents
Earnings per share, basic(i) HK90.54 cents HK42.35 cents
Earnings per share, diluted US11.66 cents US5.46 cents
Earnings per share, diluted(i) HK90.46 cents HK42.35 cents
25
(b) Adjusted basic and diluted earnings per share
To enable an investor to better understand the Group’s results, the pre-opening expenses of Sands Cotai Central and the impairment losses related to Parcels 7 and 8 and the closure of the ZAiA show at The Venetian Macao for the six months ended June 30, 2012 are excluded from the adjusted earnings per share as management does not consider these non-recurring expenses to be indicators of the Group’s operating performance. The reconciliation of the reported earnings to the adjusted earnings (net of tax) is as follows:
Six months ended June 30,
2013 2012
(Unaudited)
Profit attributable to equity holders of the Company
(US$’000) 940,495 439,789
Adjustments for:
Pre-opening expenses of Sands Cotai Central
(US$’000) 5,394 92,359
Impairment loss (US$’000) — 143,649
Adjusted profit attributable to equity holders
of the Company (US$’000) 945,889 675,797
Weighted average number of shares for basic earnings
per share (thousand shares) 8,056,146 8,050,093
Adjusted earnings per share, basic US11.74 cents US8.39 cents
Adjusted earnings per share, basic(i) HK91.08 cents HK65.08 cents
Weighted average number of shares for
diluted earnings per share (thousand shares) 8,063,582 8,056,492
Adjusted earnings per share, diluted US11.73 cents US8.39 cents
Adjusted earnings per share, diluted(i) HK91.00 cents HK65.08 cents
(i) The translation of US$ amounts into HK$ amounts has been made at the rate of US$1.00 to HK$7.7582 (six months ended June 30, 2012: US$1.00 to HK$7.7568). No representation is made that the HK$ amounts have been, could have been or could be converted into US$, or vice versa, at that rate, at any other rates or at all.
26
9. Dividends
The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2013.
10. Trade receivables
The aging analysis of trade receivables, net of provision for doubtful accounts, is as follows:
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
0–30 days 652,909 673,102
31–60 days 48,423 23,295
61–90 days 25,633 20,571
Over 90 days 9,269 17,223
736,234 734,191
Trade receivables mainly consist of casino receivables. The Group generally does not charge interest for credit granted, but requires a personal check or other acceptable forms of security. In respect of gaming promoters, the receivables can be offset against the commission payables. Absent special approval, the credit period granted to selected premium and mass market players is typically 7–15 days, while for gaming promoters, the receivable is typically repayable within one month following the granting of the credit subject to terms of the relevant credit agreement.
27
11. Trade and other payables
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
Trade payables 24,904 21,425
Outstanding chips and other casino liabilities 666,910 520,057
Other tax payables 305,886 308,052
Construction payables and accruals 204,106 214,760
Deposits 235,287 213,681
Accrued employee benefit expenses 83,459 105,522
Interest payables 33,711 27,091
Payables to related companies — non-trade 9,613 12,430
Other payables and accruals 112,667 115,798
1,676,543 1,538,816
Less: non-current portion (49,834) (35,542)
Current portion 1,626,709 1,503,274
The aging analysis of trade payables is as follows:
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
0–30 days 17,937 13,106
31–60 days 4,099 4,917
61–90 days 1,590 2,237
Over 90 days 1,278 1,165
24,904 21,425
28
12. Borrowings
June 30, December 31,
2013 2012
US$’000
(Unaudited)(Audited)
Non-current portion
Bank loans, secured 3,208,154 3,209,839
Finance lease liabilities on leasehold interests in land,
secured 78,341 82,189
Other finance lease liabilities, secured 6,483 5,465
3,292,978 3,297,493
Less: deferred financing costs (74,193) (85,825)
3,218,785 3,211,668
Current portion
Finance lease liabilities on leasehold interests in land,
secured 26,279 47,069
Other finance lease liabilities, secured 2,273 1,847
28,552 48,916
Total borrowings 3,247,337 3,260,584
As at June 30, 2013, the Group had US$500.0 million of available borrowing capacity under the 2011 VML Credit Facility (as at December 31, 2012: US$500.0 million).
In May 2012, the Group repaid the US$131.6 million outstanding balance under the ferry financing facility and recorded a US$1.8 million loss on early retirement of debt during the six months ended June 30, 2012.
13. Comparatives
Certain comparative figures have been reclassified to conform to the presentation of the current period, which management considers it facilitates better analysis of the financial information. These reclassifications have no impact on the overall results and financial position of the Group.
29
PUBLICATION OF INTERIM RESULTS ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY
This announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.sandschinaltd.com). The interim report for the six months ended June 30, 2013 will be dispatched to Shareholders and published on the websites of the Stock Exchange and the Company in due course.
By Order of the Board
SANDS CHINA LTD.
David Alec Andrew Fleming
Company Secretary
Macao, August 16, 2013
As at the date of this announcement, the directors of the Company are:
Executive Directors:
Edward Matthew Tracy
Toh Hup Hock
Non-Executive Directors:
Sheldon Gary Adelson
Michael Alan Leven (David Alec Andrew Fleming as his alternate)
Jeffrey Howard Schwartz Irwin Abe Siegel Lau Wong William
Independent Non-Executive Directors:
Iain Ferguson Bruce
Chiang Yun
David Muir Turnbull
Victor Patrick Hoog Antink
Steven Zygmunt Strasser
This announcement is prepared in English and Chinese. In the case of inconsistency, please refer to the English version as it shall prevail.
30