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GPL: GPL - Grand Parade Investments - Unaudited Interim Results For The Six Months
GPL - Grand Parade Investments - Unaudited Interim Results For The Six Months
Ended 31 December 2009
GRAND PARADE INVESTMENTS LIMITED
("GPI" or "the company")
(Incorporated in the Republic of South Africa)
Registration number 1997/003548/06
Share code GPL
ISIN ZAE000119814
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009
HEADLINES
- UP 4% increase in NAV to R3,68
- DOWN 13,8% decline in headline earnings per share
- UP Increased indirect stake in Thuo KZN
- UP Increased indirect stake in Sibaya Casino
- Agreement to acquire 100% of Carentan (Thuo Gaming)
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited
31 Dec
2009
Notes R'000
Revenue 1 12 005
Operating costs 2 (9 469)
Profit from operations 2 536
Share of profit from associates 3 52 616
Negative goodwill from associate 4 -
Net income before finance costs and taxation 55 152
Finance costs 5 (11 657)
Net profit before tax 43 495
Taxation (3 663)
Net profit for the year 39 832
Other comprehensive income
Transfer to capital redemption reserve fund -
Change in reserves of associated companies (15 431)
Unrealised fair value gains/(losses) on
available-for-sale investments, net of tax 1 553
Total comprehensive income for the year 25 954
Profit attributable to ordinary shareholders 39 832
Total comprehensive income attributable to
ordinary shareholders 25 954
Headline earnings reconciliation
Basic earnings 39 832
Negative goodwill from associate -
Profit on sale of investment -
Loss on sale of plant and equipment -
Adjustments by associates
- Impairment of casino licence -
- Gain on disposal of plant and equipment -
- Gain on disposal of investments recycled
to income statement -
- Provision for pension fund exposure -
Tax effect of above -
Headline earnings 39 832
Reversal of employee share trust -
Adjusted headline earnings 39 832
Headline earnings calculation
Shares in issue (000s) (before deducting
treasury shares) 449 581
Shares in issue (000s) (after deducting
treasury shares) 443 761
Weighted average number of shares (000s) 449 581
Adjusted weighted average number of shares (000s) 443 761
Basic and diluted earnings per share (cents) 8,86
Headline earnings per share (cents) 7 8,86
Adjusted headline earnings per share (cents) 8,98
Dividends paid per share (cents)* 7,50
Restated
Unaudited Audited
31 Dec 30 Jun
2008 2009
R'000 R'000
Revenue 13 320 27 246
Operating costs (8 222) (14 932)
Profit from operations 5 098 12 314
Share of profit from associates 58 804 118 191
Negative goodwill from associate 80 623 80 623
Net income before finance costs and taxation 144 525 211 128
Finance costs (15 176) (31 938)
Net profit before tax 129 349 179 190
Taxation (3 760) (7 470)
Net profit for the year 125 589 171 720
Other comprehensive income
Transfer to capital redemption reserve fund - (22)
Change in reserves of associated companies - -
Unrealised fair value gains/(losses) on
available-for-sale investments, net of tax 1 279 (4 414)
Total comprehensive income for the year 126 868 167 284
Profit attributable to ordinary shareholders 125 589 171 720
Total comprehensive income attributable to
ordinary shareholders 126 868 167 284
Headline earnings reconciliation
Basic earnings 125 589 171 720
Negative goodwill from associate (80 623) (80 623)
Profit on sale of investment - (213)
Loss on sale of plant and equipment - 12
Adjustments by associates 2 754 5 548
- Impairment of casino licence - 3 613
- Gain on disposal of plant and equipment - 53
- Gain on disposal of investments recycled
to income statement - (869)
- Provision for pension fund exposure 2 754 2 751
Tax effect of above - 28
Headline earnings 47 720 96 472
Reversal of employee share trust - 43
Adjusted headline earnings 47 720 96 515
Headline earnings calculation
Shares in issue (000s) (before deducting
treasury shares) 460 667 449 581
Shares in issue (000s) (after deducting
treasury shares) 460 667 443 761
Weighted average number of shares (000s) 464 003 462 033
Adjusted weighted average number of shares (000s) 464 003 462 033
Basic and diluted earnings per share (cents) 27,07 37,17
Headline earnings per share (cents) 10,28 20,88
Adjusted headline earnings per share (cents) 10,28 20,89
Dividends paid per share (cents)* 10,00 7,50
* Final dividend declared in respect of the previous financial year and paid in
December.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited
31 Dec
2009
Note R'000
ASSETS
Non-current assets 1 852 221
Current assets 81 020
Total assets 1 933 241
EQUITY AND LIABILITIES
Capital and reserves
Shareholders' interest 1 632 387
Non-current liabilities 5 287 736
Current liabilities 13 118
Total equity and liabilities 1 933 241
Net asset value (cents) (before deducting
treasury shares) 363
Net asset value (cents) (after deducting treasury
shares) 368
Restated
Unaudited Audited
31 Dec 30 Jun
2008 2009
R'000 R'000
ASSETS
Non-current assets 1 854 676 1 872 354
Current assets 102 823 84 017
Total assets 1 957 499 1 956 371
EQUITY AND LIABILITIES
Capital and reserves
Shareholders' interest 1 632 701 1 639 715
Non-current liabilities 310 174 287 496
Current liabilities 14 624 29 160
Total equity and liabilities 1 957 499 1 956 371
Net asset value (cents) (before deducting
treasury shares) 354 365
Net asset value (cents) (after deducting
treasury shares) 354 370
CONDENSED GROUP STATEMENT OF CASH FLOW
Restated
Unaudited Unaudited Audited
31 Dec 31 Dec 30 Jun
2009 2008 2009
R'000 R'000 R'000
Cash and cash equivalents at start
of period 55 754 81 834 81 834
Profit before tax 43 495 129 349 179 190
Non-cash flow items
- Depreciation 233 135 310
- Other non-cash flow items - - (201)
- Negative goodwill from
associate - (80 623) (80 623)
- Share of profit from associates (52 616) (58 804) (118 191)
Adjustments for:
- Finance costs per the income
statement 11 657 15 176 31 938
- Interest received per the
income statement (1 609) (2 167) (3 235)
- Dividends received per the
income statement (1 075) (785) (3 650)
Net working capital changes (21 850) (5 129) 8 216
Income tax paid (3 946) (6 551) (10 401)
Cash flows from operating
activities (25 711) (9 399) 3 353
Plant and equipment acquired (164) (340) (566)
Net loans advanced - (3 235) (11 601)
Net investments made (298) (98 485) (110 032)
Cash flows from investing
activities (462) (102 060) (122 199)
Dividends received - group 60 697 78 413 132 111
Finance costs paid (6 324) (7 964) (25 281)
Interest received 1 609 2 167 3 235
Capital raised - treasury shares - - 3 774
Shares repurchased - treasury
shares - - (15 238)
Shares repurchased - ordinary - (20 420) (43 659)
Ordinary dividends paid (32 251) (45 088) (45 902)
Preference shares redeemed - - (22 000)
Preference share capital raised - 105 726 105 726
Cash flows from financing
activities 23 731 112 834 92 766
Cash and cash equivalents at
end of period 53 312 83 209 55 754
GROUP STATEMENT OF CHANGES IN EQUITY
Capital Ordinary
redemption share
reserve fund capital
R'000 R'000
Balance at 30 June 2008 230 117
Total comprehensive income for the period - -
Ordinary dividends paid - -
Shares repurchased - (2)
Restated balance at 31 December 2008 230 115
Total comprehensive income for the period 22 -
Ordinary dividends paid - -
Shares repurchased - (3)
Treasury shares purchased - -
Treasury shares issued - -
Balance at 30 June 2009 252 112
Total comprehensive income for the period - -
Ordinary dividends paid - -
Balance at 31 December 2009 252 112
Share Treasury
premium shares
R'000 R'000
Balance at 30 June 2008 740 718 -
Total comprehensive income for the period - -
Ordinary dividends paid - -
Shares repurchased (20 418) -
Restated balance at 31 December 2008 720 300 -
Total comprehensive income for the period - -
Ordinary dividends paid - -
Shares repurchased (23 236) -
Treasury shares purchased - (15 238)
Treasury shares issued 205 3 569
Balance at 30 June 2009 697 269 (11 669)
Total comprehensive income for the period - -
Ordinary dividends paid - -
Balance at 31 December 2009 697 269 (11 669)
Available-
for-sale
fair value Accumulative
reserve profits Total
R'000 R'000 R'000
Balance at 30 June 2008 17 484 813 985 1 572 534
Total comprehensive income
for the period 1 279 125 589 126 868
Ordinary dividends paid - (46 281) (46 281)
Shares repurchased - - (20 420)
Restated balance at
31 December 2008 18 763 893 293 1 632 701
Total comprehensive income
for the period (4 414) 46 109 41 717
Ordinary dividends paid - -
Shares repurchased - - (23 239)
Treasury shares purchased - - (15 238)
Treasury shares issued - - 3 774
Balance at 30 June 2009 14 349 939 402 1 639 715
Total comprehensive income
for the period (13 878) 39 832 25 954
Ordinary dividends paid - (33 282) (33 282)
Balance at 31 December 2009 471 945 952 1 632 387
SEGMENTAL ANALYSIS
IFRS 8: Operating Segments requires a "management approach" whereby segment
information is presented on the same basis as that used for internal reporting
purposes to the chief operating decision-maker/s who have been identified as
the board of directors. These directors review the group's internal reporting by
investment. The tables below reflect the group's internal reporting by
investment in accordance with IFRS 8: Operating Segments. Only GPI's share of
income from associates can be reconciled to the income statement.
Unaudited
31 Dec
2009 %
R'000 variance
TOTAL REVENUE
SunWest 868 449 (7,8)
- GrandWest 787 179 (6,5)
- Table Bay Hotel 81 270 (19,3)
RAH 34 404 (19,7)
Thuo WC 96 017 3,4
Akhona GPI 3 199 327,1
TOTAL EBITDA
SunWest 318 433 (15,1)
- GrandWest 303 161 (11,5)
- Table Bay Hotel 15 272 (53,1)
RAH 50 834 (11,7)
Thuo WC 22 234 14,7
Akhona GPI 2 719 309,5
TOTAL ATTRIBUTABLE EARNINGS
SunWest 119 763 (15,4)
- GrandWest 139 463 (5,7)
- Table Bay Hotel (19 700) (213,8)
RAH 42 899 (12,9)
Thuo WC 10 001 24,5
Akhona GPI 2 630 305,9
SHARE OF PROFIT FROM ASSOCIATES
SunWest 35 019 (15,4)
- GrandWest 40 779 (5,7)
- Table Bay Hotel (5 760) (213,9)
RAH 13 114 (12,9)
Thuo WC 2 510 24,5
Akhona GPI 1 973 508,9
52 616 (10,5)
Unaudited Audited
31 Dec 30 Jun
2008 2009
R'000 R'000
TOTAL REVENUE
SunWest 942 112 1 841 382
- GrandWest 841 412 1 641 977
- Table Bay Hotel 100 700 199 405
RAH 42 839 77 041
Thuo WC 92 889 83 407
Akhona GPI 749 2 427
TOTAL EBITDA
SunWest 375 129 739 526
- GrandWest 342 563 674 630
- Table Bay Hotel 32 566 64 896
RAH 57 536 105 152
Thuo WC 19 389 39 408
Akhona GPI 664 389
TOTAL ATTRIBUTABLE EARNINGS
SunWest 141 618 291 718
- GrandWest 147 895 304 107
- Table Bay Hotel (6 277) (12 389)
RAH 49 246 91 948
Thuo WC 8 032 18 192
Akhona GPI 648 348
SHARE OF PROFIT FROM ASSOCIATES Restated
SunWest 41 409 85 298
- GrandWest 43 244 88 921
- Table Bay Hotel (1 835) (3 623)
RAH 15 055 28 109
Thuo WC 2 016 4 566
Akhona GPI 324 218
58 804 118 191
NOTES
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The interim financial statements were prepared in accordance with International
Financial Reporting Standards ("IFRS") and comply with IAS 34 (Interim Financial
Reporting) and the Companies Act of South Africa, as amended. The interim
report has not been audited and therefore no review opinion has been obtained.
The accounting policies and methods of computation are consistent with those
applied in the financial results for the year ended 30 June 2009 except for the
following standards which are effective for the financial years beginning
1 July 2009:
- IAS 1 (revised): Presentation of Financial Statements; and
- IFRS 8: Operating Segments.
Neither statement has an impact on the reported results with the former dealing
with certain presentation changes and the latter the provision of additional
information.
PRIOR PERIOD RESTATEMENT
The prior period share of profit from RAH was restated as net profit after tax
was erroneously used instead of net profit attributable to ordinary
shareholders. This error was identified and corrected at 30 June 2009.
Restated
Unaudited
31 Dec
2008
R'000
Effects on non-current assets
Balance previously stated 1 855 858
Decrease in investments in associates (1 182)
Restated balance 1 854 676
Effect on equity
Balance previously stated 1 633 883
Decrease in net profit after tax (1 182)
Restated balance 1 632 701
Restated
basic and Restated
diluted headline
earnings earnings
per share per share
Unaudited Unaudited
31 Dec 31 Dec
2008 2008
Effect on earnings per share
Earnings previously stated (cents) 27,32 10,54
Earnings per share adjustment (cents) (0,25) (0,26)
Restated earnings per share (cents) 27,07 10,28
COMMENTARY
INVESTMENT HIGHLIGHTS
The following table reflects Grand Parade Investments Limited's ("GPI") direct
economic holding in its various investments.
31 Dec 31 Dec 30 Jun
2009 2008 2009
Direct interest % % %
SunWest 29,24 29,24 29,24
RAH 30,57 30,57 30,57
Akhona GPI 75,00 50,00 75,00
Golden Valley (Worcester Casino) 36,70 36,70 36,70
Thuo WC 25,10 25,10 25,10
Wild Rush (Thuo KZN) - 10,00 -
National Manco 5,67 5,67 5,67
Western Cape Manco 50,00 50,00 50,00
Grand World Vision Events 33,33 - -
Carentan acquisition
As announced on SENS in October 2009, an offer of R170 million was made and
accepted by The Tatts Group for all its shares and shareholders' loan accounts
in Carentan Investments (Proprietary) Limited ("Carentan"). Carentan owns 90% of
Thuo SA (Proprietary) Limited ("Thuo"), which in turn owns 70% of Thuo Gaming
Western Cape (Proprietary) Limited ("Thuo WC") (GPI currently owns 25,1%) and
70%
of Thuo Gaming KwaZulu-Natal (Proprietary) Limited ("Thuo KZN") (GPI, through
Akhona Gaming Portfolio Investment Holdings (Proprietary) Limited ("Akhona GPI")
effectively already owns 22,5%).
This transaction increases GPI's exposure to the Limited Payout Machine ("LPM")
industry, which has held up well during this distressed period. This
transaction represents a milestone for the South African gambling industry in
that it advances a key objective of the legalisation process, namely uplifting
previously disadvantaged communities by catapulting GPI into the exclusive club
of gaming operators. From this launch pad GPI is better positioned to develop
its gaming investment portfolio.
Competition Commission approval has been obtained and applications for Gambling
Board approval and Reserve Bank approval are under way.
Akhona GPI
GPI's economic stake in Akhona GPI increased to 75% with its voting rights
increasing to 49,99% as a result of GPI advancing additional funds for Akhona
GPI to take up its pre-emptive rights in Dolcoast Investments Limited
("Dolcoast") and the sale of Wild Rush Trading 97 (Proprietary) Limited ("Wild
Rush"), which owns 10% of Thuo KZN to Akhona GPI. These transactions had the
effect of increasing GPI's indirect stake in Sibaya Casino to 7,3% and Thuo KZN
to 22,5%. Akhona Investment Holdings Limited has the option to call on GPI to
restore its economic shareholding to 50% on specific dates expiring in three
years commencing in January 2009.
Grand World Vision Events
GPI is a 33,3% shareholder in Grand World Vision Events (Proprietary) Limited,
which has secured the contract to manage the FIFA Fan Fest 2010 at the Grand
Parade on behalf of the City of Cape Town. Its partners in this venture are
World Sport South Africa (Proprietary) Limited, an event management company and
VWV Group (Proprietary) Limited, an experiential marketing company.
COMMENTARY ON GPI'S FINANCIAL PERFORMANCE AND POSITION
1. Revenue
The decrease in revenue is primarily due to lower fees generated by Western Cape
Casino Resort Manco (Proprietary) Limited ("Western Cape Manco"), in line with
the decline in GrandWest Casino and Entertainment World's ("GrandWest") revenue
and EBITDA from which its management fees are derived.
2. Operating costs
Operating costs increased by R1,2 million, R0,7 million of which relates to the
Carentan acquisition, which in terms of IFRS 3R: Business Combinations can no
longer be capitalised. Costs continue to be managed carefully, whilst
acknowledging the need for additional expenditure incurred on governance in a
listed environment and the decision to develop GPI's operational capability
through the acquisition of Carentan.
3. Share of profit from associates
GPI's associate income decreased by 10,5% due to the decrease in attributable
earnings from SunWest International (Proprietary) Limited ("SunWest") and Real
Africa Holdings Limited ("RAH").
GrandWest's attributable earnings declined by 5,7% and while this casino was
unable to escape the downturn in the global economy it certainly has been
resilient notwithstanding its dependence on severely pressured household
discretionary spend. The Table Bay Hotel was badly affected by the economic
crisis and its impact on the international tourism market.
Earnings from RAH decreased by 12,9% compared to the prior period, driven by
lower profits from Carnival City and Boardwalk, but offset by an excellent
performance by Sibaya Casino, which grew its revenues, EBITDA and operating
profit. A 15% decrease in SunWest's dividends, which RAH accounts for as an
investment also contributed to this decline in associate income.
Pleasingly, GPI's share of Thuo WC's income increased by 24,5% to R2,5 million
which highlights the resilience of the LPM market and supports GPI's decision to
acquire Carentan.
GPI's share of Akhona GPI's income increased significantly to R2,0 million. This
is due to GPI's increased economic interest in Akhona GPI and therefore
indirectly an increased exposure to Sibaya and Thuo KZN, which is nearing its
break-even point in terms of its machine roll-out.
4. Negative goodwill from associate
No fair value adjustments were required as no change in business combinations
took place this year. The R80,6 million negative goodwill adjustment in the
comparative period arose from the increase in GPI's direct stake in SunWest in
July 2008.
5. Finance costs
Finance costs decreased by 23,2% due to a combination of lower interest rates
(10,5% compared to 15.51%) and a lower average level of interest-bearing debt
due to R22 million of the Standard Bank/Depfin preference shares having been
redeemed in March 2009.
6. Impairment of assets
In accordance with IAS 36: Impairment of Assets, no impairment of assets was
considered necessary based on discounted free cash flow valuations prepared by
management.
7. Headline earnings and HEPS
Headline earnings decreased by 16,5%, but due to the positive effect of GPI's
share buy-back programme, headline earnings per share declined by only 13,8%.
If the transaction fees had been capitalised this decline in headline earnings
per share would reduce further to 12,2%.
The table below highlights the different components of GPI's adjusted headline
earnings.
Unaudited
31 Dec
2009 %
R'000 variance
Headline earnings 39 832 (16,5)
Share of profit from associates
- SunWest 35 019 (15,4)
- RAH 13 114 (12,9)
- Thuo WC 2 510 24,5
- Akhona GPI 1 973 508,9
Income from joint venture
- WC Manco 9 286 (9,4)
Other (944) (145,8)
Operating costs (9 469) 15,2
Finance costs (11 657) (23,2)
Restated
Unaudited Audited
31 Dec 30 Jun
2008 2009
R'000 R'000
Headline earnings 47 720 96 515
Share of profit from associates
- SunWest 41 409 85 298
- RAH 15 055 28 109
- Thuo WC 2 016 4 566
- Akhona GPI 324 218
Income from joint venture
- WC Manco 10 253 20 115
Other 2 061 5 079
Operating costs (8 222) (14 932)
Finance costs (15 176) (31 938)
8. Related party transactions
The group, in the ordinary course of business, entered into various arm's
length transactions with related parties. Any intra-group related party
transactions and balances are eliminated in the preparation of the financial
statements of the group as presented.
9. Dividends
GPI believes it prudent to continue with its past practice of not paying
interim dividends.
10. Subsequent events
In February 2010 the JSE approved the issue of 12,75 million new shares at
R2,35 per share to an institutional investor representing a 6% discount to
the 30-day VWAP.
11. Prospects
While the trading environment remains challenging, GPI is well positioned to
take advantage of a recovering economy. The extra capacity at GrandWest is
already paid for and GPI's other urban casino interests held through its share
of RAH and Akhona GPI are all well established and therefore positioned for
renewed economic growth. The acquisition of Carentan bodes well for GPI's
future and its new operating capability will be leveraged to grow the gaming
component of GPI's investment portfolio. The World Cup is an exciting
development especially in light of the very exciting FIFA Fan Fest 2010
opportunity. GPI's hotels are also well positioned to benefit from the influx
of tourists during this event.
For and on behalf of the board
H Adams A Funkey
Chairman Chief Executive Officer
Cape Town, 9 March 2010
GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Directors: H Adams (Chairman), A Abercrombie, A W Bedford, A Funkey#,
R Freese, R Hoption#, Dr N Maharaj*, N Mlambo, C Williams*
# executive * independent
Registration number: 1997/003548/06
Share code: GPL
ISIN: ZAE000119814
Registered offices: 15th Floor, Triangle House, 22 Riebeeck Street,
Cape Town, 8001. PO Box 7746, Roggebaai, 8012
Transfer secretaries: Computershare Investor Services (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001
Attorneys: Bernadt Vukic Potash & Getz Attorneys
Corporate advisers: Leaf Capital (Proprietary) Limited
Sponsor: PSG Capital (Proprietary) Limited
Company Secretary: Richard Hoption
View these results on: www.grandparade.co.za
Date: 09/03/2010 09:42:01 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
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