Sun International : Integrated Annual Report (PDF)

STRATEGIC LEADERSHIP SUSTAINABLE VALUE CREATION STRONG BUSINESS RESPONSE CORPORATE DATA AND ADMINISTRATION 32 Chairman's message Board of directors Executive management Chief executive's review 4 5 5 6 Our presence and group structure 8 Our strategy 21 Operating environment 9 Strategic progress 22 Business model 11 • Customer centricity 23 Stakeholder management 12 Material matters 14 • Operational excellence and efficiencies 24 • People and culture Risk management 16 24 • Environmental, social and governance 25 • Maximise shareholder value 27 Chief financial officer's review Segmental review 28 30

CONTENTS

2021 SUN INTERNATIONAL Integrated Annual Report

ABOUT THIS REPORT

We are pleased to present Sun International Limited's (Sun International) 2021 integrated annual report (IAR) to our stakeholders.

Sun International reports in a holistic, transparent and integrated manner to assist our stakeholders in making informed decisions about our business. We aim to provide our stakeholders with a focused and balanced report that demonstrates our integrated thinking and our ability to create and preserve value for the year under review. This report covers the financial period 1 January 2021 to 31 December 2021 and incorporates all Sun International's subsidiaries and operating units in the geographic locations where we operate - South Africa and Nigeria.

Our operating environment in the tourism and entertainment industry continues to be impacted by the Covid-19 pandemic, with lockdowns at various alert levels and several Covid-19 waves experienced during 2021. These Covid-19 impacts are discussed in various sections throughout this IAR. Our integrated thinking, regular stakeholder engagement, risk and opportunity identification, capital resource prioritisation and the ability to take decisive action proved to be imperative during these challenging times. Our strategic progress, driven through our business model, continues to position the group for growth opportunities and value creation over the short, medium and long term.

This report is structured around our leadership overviews, business overview, our strategic performance and outlook, and our financial performance. Our corporate governance information is detailed in the ESG report. The other suite of reports include the group's annual financial statements (AFS), statutory information and our environmental, social and governance (ESG) information.

Our IAR's content covers the reporting period's most material matters and where applicable, content includes the period up to the report's finalisation on 31 March 2022. Sun International's material matters are topics that could substantively influence the assessment of providers of capital and other stakeholders, regarding the group's ability to create sustainable value for its stakeholders over the short, medium and long term. The process of determining materiality, outlined in the materiality section of this report, involves reviewing and assessing our risks, opportunities, the external environment, capital resources and stakeholder concerns. This process is dynamic and evolves annually to ensure our material matters remain relevant and enable the group to achieve its strategic objectives, vision and purpose.

Our South African gaming operations are the group's single biggest revenue contributor and primary revenue generator.

Bet responsibly with SunBet. Gambling is for 18 years and older. Winners know when to stop. Call the South African National Responsible Gambling Foundation's tollfree helpline on 0800 006 008 or WhatsApp "help" to 076 675 0710. Licensed by the Western Cape Gambling and Racing Board.

REPORTING SUITES, REPORTING FRAMEWORKS, PROCESS AND ASSURANCE

The group's suite of reports is guided by various frameworks as depicted below. Our IAR is primarily guided by the International Integrated Reporting Council's (IIRC) recommendations for integrated reporting (the framework). Our AFS follow the International Financial Reporting Standards (IFRS) and are externally assured by PricewaterhouseCoopers Inc. Certain sustainability information is externally assured by Integrated Reporting and Assurance Services (IRAS) Assurance. A detailed register of our King IVTM application of governance principles is available in the ESG report. The group also embraces the United Nations Sustainable Development Goals (SDGs), which encourage companies and individuals to take the necessary action to achieve the SDGs by 2030.

SOUTH AFRICAN SEGMENTAL CONTRIBUTION TO GROUP INCOME

Integrated reporting process

Report content is guided by the International Framework (January 2021) and several other reporting frameworks/codes, various management discussions, a review of board reports and minutes. All content is informed by the group's material matters, risks and opportunities as well as stakeholder feedback.

• ► Reporting frameworks, regulations, codes and standards

• ► Material matters

• ► Board and management reportsReport integrity is provided throughout the reporting process by various board, executive and management oversight. Our combined assurance model also supports the integrity of the information.

► Combined assurance modelReport approval is based on the group's robust governance framework, with the audit, risk and social and ethics committees providing valuable oversight. The board, based on recommendations from the audit committee, approves the report. Certain information is reviewed by external assurance providers (PwC and IRAS).

► Robust governance framework

Suite of reports and reporting frameworks

https://suninternational.onlinereport.co.za/2021/

Casino operationsResorts and hotelsAlternate gaming

INTEGRATED ANNUAL REPORT

IIRC frameworkCompanies ActKing IVTM

JSE LR

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

Companies Act

King IVTM

JSE LR

SDGs

GRI

AA1000AS

Combined assurance model

Sun International's combined assurance strategy and framework (page 17) ensures optimal, cost-efficient and focused assurance coverage group-wide. Our hybrid top-down and bottom-up approach, which aligns with the JSE Listings Requirements (JSE LR) and King IVTM outcomes, ensures adequate assurance on key business risks and processes. This model also enables an effective internal control environment and supports the integrity of information used by management and other stakeholders for internal and external decision-making.

About this report continued

REPORTING FOOTPRINT AND NAVIGATION

Sun International continues to minimise its environmental footprint by only producing an online integrated annual report. Our reporting design and report generator function enhances the overall user experience and enables the reader to select and print any section of the report or create their own PDF report. Our interactive icons, footnotes and links below further add to the user-experience and interface.

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DIRECTORS' APPROVAL

The board acknowledges its responsibility to ensure the IAR's information integrity, completeness as well as the reports' preparation in accordance with the International Framework (January 2021). The audit, risk and social and ethics committees were involved in the review and guidance of this year's IAR. The board is kept abreast of the reporting progress through various board committees' feedback and the audit committee recommends the IAR to the board for approval.

The board is of the opinion that the group's rigorous integrated reporting process includes relevant executive oversight of the report's content, its accuracy, relevance and transparency and that the report is presented in compliance with the Framework (January 2021). The IAR was approved by the board on 31 March 2022.

SAM SITHOLE	ANTHONY LEEMING
Chairman	Chief executive
31 March 2022	31 March 2022

2021 SUN INTERNATIONAL Integrated Annual Report

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STAKEHOLDER FEEDBACK

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We welcome stakeholders' feedback on our reporting, particularly regarding our suite of reports. Feedback can be sent [e-mail]

FORWARD-LOOKING STATEMENTS

This report may contain certain forward-looking statements other than the statements of historical fact, which cannot be construed as reported financial results. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein, as they have not been reviewed or reported on by the group's external auditors. Such statements may include predictions of or indicate future earnings, objectives, savings, events, trends or plans based on current expectations, forecasts and assumptions. As with any forward-looking statement, prediction or forecast, there are inherently unexpected events which could cause uncertainty and unexpected change which have not, and could not, be accounted for. Whereas the company has made every effort to accurately and reasonably ensure the accuracy and completeness of the information contained within this report, any forward-looking statements speak only as at the date that they are made; the actual results may vary materially from those expressed or implied; and the company undertakes no obligation to publicly update or alter these or to release revisions after the date of publication of this report.

CHAIRMAN'S MESSAGE

SAM SITHOLE Chairman

Before I proceed with my message, I would like to express a word of remembrance on the untimely passing of Dr Jabulane ('Jabu') Mabuza in 2021. Jabu was a passionate leader and visionary who contributed immensely to our group. He was larger than life and made everyone feel safe enough to share their views; a man of kindness who spoke the truth at any cost. We have truly lost a leader, mentor, friend and colleague. On behalf of the group: Jabu, we miss you. Your legacy lives on here and we convey our heartfelt condolences to your family.

I was honoured when my board colleagues asked me to step in as Sun International's chairman, and the seamless transition reflects how well this board works together. When Jabu became chairman, he introduced a monthly chairman's meeting group consisting of himself, the chief executive, two board directors and myself. These monthly meetings were an opportunity to work together closely on key strategic matters facing the group, which made my appointment as chairman less daunting.

While there are early indications that the world is managing the global pandemic, with rising vaccination rates and easing of travel restrictions, the Omicron variant triggered another dip in both travel bookings and industry optimism in December 2021. World tourism is still a fraction of pre-pandemic levels, with a full recovery expected by 2024,

2021 SUN INTERNATIONAL Integrated Annual Report

As a board we are excited about

Sun International's prospects and positioning.

however the pace of recovery remains slow globally. Locally this is evidenced by the International Monetary Fund's (IMF) GDP growth forecast of 1.9% as the economy struggles to rebound. South Africa also faces various economic and social threats including increasing debt levels, high unemployment, an electricity crisis, poor infrastructure and increased poverty and inequality. The civil unrest of July 2021 was a low point in our democracy. However, following President Cyril Ramaphosa's State of the Nation Address in February 2022 and the outcomes of the State Capture Commission report, we are encouraged by the positive steps government is planning to address these economic and social issues. In support of the government's national strategic plan to eliminate gender-based violence (GBV) and femicide, Sun International launched its 365 days of activism campaign to create awareness around this social pandemic.

Given the decimation of the 2020 operating environment, the group produced an extremely strong set of results in 2021 and our focus for 2022 is to reach financial result levels that broadly match 2019. I encourage you to read the chief financial officer's review for further details on our financial results.

Providing a memorable experience to our guests and customers is our main purpose. Covid-19 has been challenging for our operations, with travel restrictions preventing our international guests from enjoying memorable experiences at our properties. Positively, we enjoyed seeing local tourists enjoy our properties, particularly Sun City and the Wild Coast Sun, once the more stringent lockdown protocols had ended. As part of the group's growth strategy, the board approved the Sun Vacation Club expansion in 2021, with the first phase commencing during 2022 and a completion date set for 2025. To further enhance our guest and customer experience the group focused on its omni-channel offering by implementing several important initiatives. These included launching the Sun International app for loyalty members to manage their loyalty journey from the palm of their hand, implementing a new online booking engine for seamless reservations and payments, collaborating with Global Hotels Alliance to better recognise and reward customers and guests, expanding SunBet's product offering and replacing our Bally gaming system with the industry leading Playtech Neon system.

Ironically, the Covid-19 pandemic meant we paused and reflected on opportunities to streamline the business. Highlights over the past two years include how management rose to the challenge in a very uncertain operating environment during the global Covid-19 pandemic, which could have threatened the group's survival. Management took immediate and decisive action during the various lockdown levels by preserving cash, taking salary sacrifices, managing debt, exiting Latam, finalising the R1.2 billion rights offer and enhancing operational efficiencies group-wide. All these decisions strengthened the group's balance sheet, which has resulted in the group being in a much stronger position as we move into a post-lockdown operating environment. Furthermore, management used the lockdown as an opportunity to zero-base group costs and in this process identified sustainable cost savings of over R650 million. This contributed to continuing adjusted EBITDA being up by 80% to R1 685 million - an impressive accomplishment.

Amid the pandemic and all these decisions and actions, management also focused on strategic decisions. An imperative strategic decision was Nigel Payne's appointment to the board effective 11 May 2021, as Nigel is at the forefront of the online and sports betting industry in the United Kingdom and the United States of America. Given that the group's alternate gaming strategy is earmarked for growth opportunities, Nigel's experience and skills are a tremendous advantage for the group to study the online and sports betting industry, understand what drives it, and where Sun International could participate. The strategic advice Nigel provides has already proven to be invaluable.

From a board perspective it is important that we have the right skills to navigate the evolving operating environment, from a gaming and hospitality viewpoint as well as the new normal business environment, which incorporates online and digitisation skills. With Peter Bacon stepping down from the board effective 31 March 2022, we will focus on closing this skills gap from a hospitality perspective. Ms Tumi Makgabo-Fiskerstrand will be retiring at the upcoming annual general meeting. I want to thank Peter and Tumi for their invaluable support and contribution during their tenure and I wish them well in their future endeavours. Other skills gaps identified include general IT and digital skills, including online sales and marketing. Going forward we will focus on identifying suitable candidates to fill these gaps.

As South Africans continue to emigrate, the group is mindful of the need to ensure that it can attract and retain top talent with the necessary skills to execute our group-wide strategy. Our employees have been remarkable ambassadors for the group as they remain committed to achieving our purpose of creating memorable experiences. This in a working environment where they have made many sacrifices, personally and financially. We made good succession and talent management progress, with a focus on female leadership and empowerment. Our gaming and hospitality learnership remain popular, with a focus on placing interns in suitable departments and offering permanent positions to graduates at our units where possible. We also streamlined our recruitment process for potential candidates.

The group continued to provide a safe work environment for employees, concessionaires and our guests by adhering to our Covid-19 protocols, in compliance with relevant legislation. Sadly ten employees lost their lives to Covid-19 during 2021. On behalf of the board, I extend condolences to all family and friends during this difficult time.

We remain committed to the group's integrated environmental, social and governance (ESG) journey and see sustainability as a strength for Sun International, which also builds trust in our brand. During 2021, we continued to support programmes that focus on empowering our youth through education, helping to alleviate food insecurity and creating economic value by supporting community-based organisations, as detailed in the socio-economic development section of our ESG report. We are proud ofbeing rated the 20th best company overall when it came to ESG reporting following the assessment of 266 companies by Integrated Reporting and Assurance Services (IRAS). Sun international was also rated the best ESG reporting company in the travel and leisure industry by IRAS.

Being in the gaming industry, it is important that we promote responsible gambling to avoid customer over-indebtedness. This will be a focus area as we make sure that our systems are constantly geared up to follow best practice and to ensure responsible gambling.

Looking forward, the board has a clear direction for the group. Firstly, we need to lock in the resizing of the business, to ensure that the cost reductions identified in 2020 and 2021 become a permanent part of the business in 2022. This will result in improved margins in a way that enhances our customer experience in gaming and hospitality products and service offerings. Secondly, we will focus on leveraging growth opportunities in our alternate gaming market (online and sports betting). We also need to simplify the group's equity story to clarify the value proposition of why people should invest in Sun International from a shareholder and customer perspective. We want our stakeholders to understand our business model and what we offer in terms of a simple and streamlined value proposition. Finally, we will ensure that the group attracts and retains the right skills to execute our strategy and maximise shareholder value.

In closing, I would like to thank all employees. You are our greatest assets as you continue to show passion and deliver memorable experiences for our guests, even in these challenging times. Management's stewardship remains exemplary, particularly that of Anthony Leeming and his leadership team. Their decisive action over the past two years has placed Sun International in a strong position, poised for growth. Thank you to our guests for returning to our properties and enjoying Sun International's hospitality and entertainment. To my fellow board members, thank you for your wisdom and unwavering support as I assumed the reins as chairman. I am confident in our abilities to steer the group into the future. A particular note of thanks goes to Graham Dempster, in his position as our lead independent director, for providing guidance as I transitioned to the chairman's position.

We remain optimistic about the group's future and confident in our ability to continue creating lasting memories for our guests and customers.

SAM SITHOLE Chairman

31 March 2022