Directors’ Report | for the year ended 30 June 2009

The directors present their report on the activities of the company and the group for the year ended 30 June 2009.

Nature of the business of the company
The nature of the business is to act as an investment holding company. The group also provides management services to the gaming industry.

Earnings
The results of the company and the group are set out in the income statement. Headline earnings per share decreased 10% from 23,17 cents per share to 20,88 cents per share.

Dividends
A dividend totalling 7,5 cents per share (2008: 10 cents) has been declared by the directors in respect of the year under review. This final dividend will be accounted for in the 2010 annual financial statements as it was declared subsequent to the year-end.

Review of operations and future developments
Detailed commentary on the nature of the business of the company, subsidiaries, acquisitions, future developments and prospects of the group is given in the Chairman’s, Chief Executive’s and Financial Director’s Reports.

Share capital
GPI repurchased its own shares in terms of its general authority granted by shareholders at the annual general meeting on 9 December 2008. GPI has, through the market, acquired some 19,4 million shares during the reporting period at an average cost of R2,24 cents per share. The outstanding shares at year-end amounted to 449 581 319 before deducting the 5 820 000 treasury shares.

In addition, the GPSIT, with the assistance of GPI, acquired a further 7 600 000 shares in GPI at R2,00 per share. Key executives of GPI, in accordance with the rules of the GPSIT, were granted and exercised options over 1,7 million of these shares during the year, with the remaining 5 820 000 shares held as treasury shares. Therefore, overall GPI and the GPSIT repurchased 27 million shares at an average of R2,18 per share.

Preference shares
New preference shares classified as debt of R105 725 757 were issued to Sanlam by wholly-owned subsidiary Utish. The salient features are as follows:

  • the preference shares are variable rate, cumulative, redeemable preference shares and have a dividend rate of 83% of the prime rate;
  • Utish may redeem the preference shares at its choice, but subject to a predetermined redemption profile;
  • GPI guarantees the fulfilment by Utish of its obligations in terms of the preference shares; and
  • Utish has pledged the 30,57% interest it holds in RAH as security.


R22 million of the preference shares held by BVI with Standard Bank and Depfin were redeemed. The capital due at the year-end after this repayment on these preference shares was R181 million.

Subsidiary companies
At the year-end, the group consisted of GPI and its wholly-owned subsidiaries, namely BVI, Utish, GPI Management Services, GPI Slots and GPSIT.

  Ordinary share capital Percentage Profit
  and premium held after tax
  2009 2008 2009 2008 2009 2008
  R R % % R R
Direct subsidiary companies            
BVI 1 000 000 1 000 000 100 100 63 119 654 88 492 236
GPI Slots 100 100 100 100 4 524 281 4 806 360
Utish 100 – 100 – (1 635 104) –
GPI Management Services 100 – 100 – – –
             
Special purpose entities            
  Ordinary share capital Percentage Profit
  and premium held after tax
  2009 2008 2009 2008 2009 2008
  R R % % R R
GPSIT 1 000 – 100 – 161 980 –
             

GPSIT is consolidated in terms of SIC 12 – Special Purpose Entities. The consolidation of this trust is, however, reversed to calculate the adjusted headline earnings as the group does not receive the economic benefits of the trust.

Investments, associates and joint ventures

  Economic Voting
  percentage percentage
  2009 2008 2009 2008
  % % % %
Direct interest (held by GPI)        
SunWest 9,35 5,72 0,04 0,03
Akhona GPI 75,00 50,00 49,99 25,00
Worcester Casino 36,70 36,70 36,70 36,70
Indirect interest (held by subsidiaries)        
RAH 30,57 30,57 30,57 30,57
SunWest 19,89 20,69 49,98 49,98
National Manco 5,67 5,67 5,67 5,67
Thuo Gaming WC 25,10 25,10 25,10 25,10
Western Cape Manco 50,00 50,00 50,00 50,00

Subsidiaries
BVI 575
BVI 575 is a wholly-owned special purpose vehicle established to obtain preference share funding from Standard Bank and Depfin.

GPI Slots
GPI Slots is a wholly-owned subsidiary with a significant stake in Thuo Gaming WC.

Utish
Utish is a wholly-owned special purpose vehicle established to obtain preference share funding from Sanlam.

GPI Management Services
GPI Management Services was registered during the year. GPI Management Services is a wholly-owned entity established to perform management services for the group and third parties. The company is a strategic component of the group’s longer-term vision.

Special purpose entities
GPSIT
The trust was established based on the approval received by the shareholders in the annual general meeting on 9 December 2008. The trust was established as an incentive scheme. On 30 June 2009 the trust purchased 7,6 million of GPI shares. 1,78 million shares were issued to executive management on 30 June 2009. The balance of 5,82 million shares is available for future issues to staff members. This trust is consolidated as required by IFRS.

Investments, associates and joint ventures
GPI has investments in SunWest, RAH, Akhona GPI and Thuo Gaming WC which it accounts for as associates. It jointly controls Western Cape Manco which it proportionately consolidates. GPI also owns a relatively small percentage in National Manco which it accounts for as an available-for-sale investment.

SunWest
During the period under review GPI increased its direct stake in SunWest by 2,83% at a cost of R92,4 million by exercising 560 000 of its 700 182 SunWest share options at an exercise price of R165 per SunWest share. As a result of accounting for the business combination in terms of IFRS 3 – Business Combinations, an adjustment of R80,6 million has been made for negative goodwill. The exercising of these options diluted the direct shareholding held by BVI. (Refer to note 11.)

On 17 August 2007, GPI concluded an agreement with SunWest and Sun International South Africa Limited (“SISA”) which provided GPI with an option to increase its shareholding in SunWest. The salient features of this agreement are as follows:

  • SunWest granted GPI options to subscribe for between 500 131 and 700 182 new SunWest N ordinary shares.
  • The subscription price was R165 per SunWest share, irrespective of the date of exercise of the option.
  • The options expire on 30 June 2010.
  • The granting of the options is subject to GPI locking in between 25% and 35% of its shareholding in the hands of black shareholders. The take-up of between 500 131 and 700 182 N ordinary shares is based on a sliding scale, with the minimum number of 500 131 shares available for take-up should GPI lock in 25% of its shareholding in the hands of black shareholders.


Of the available options, GPI can exercise a further 140 182 SunWest shares before the expiry date.

Akhona GPI
GPI, through its associate Akhona GPI, increased its indirect stake in the well positioned Sibaya Casino. GPI provided Akhona GPI with the funds to exercise its pre-emptive rights in acquiring additional Dolcoast shares.

As a consequence, GPI's economic stake increased to 75% and its voting rights to 49,99% in Akhona GPI. Akhona GPI in turn owns an 18,5% stake in Dolcoast, which in turn holds a 22,4% stake in Sibaya Casino in KwaZulu-Natal, together with a 30% shareholding in Thuo Gaming KZN. Akhona Investments Holdings Limited, the other shareholder of Akhona GPI, was granted an option to call a portion of these shares so issued in order to restore the economic shareholding to parity. They are able to exercise this option over a period of three years at a price of prime +5%.

Worcester Casino
GPI’s stake in Worcester Casino remained unchanged at 36,7%. This investment is accounted for as an associate.

RAH
In order to secure the preference share funding from Sanlam, GPI had to transfer the stake it held in RAH at that time to Utish.

National Manco
GPI holds a 5,67% shareholding in National Manco that was initially purchased at a cost of R57,00. This investment is classified as available-for-sale, and has been revalued in terms of IAS 39 – Financial Instruments: Recognition and Measurement.

Thuo Gaming WC
GPI Slots accounts for its 25,1% stake in Thuo Gaming WC as an associate investment. Its share of associate net income amounted to R4,5 million (2008: R4,7 million).

Western Cape Manco
GPI owns 50% of Western Cape Manco. This investment is accounted for as a joint venture.

Directors and secretary
Particulars of the present directors and Secretary are given here.

Directors’ dealings
Directors’ interest in contracts
Messrs Abercrombie, Williams and Adams have material direct interests in the following contracts entered into between the group and the companies listed below:

Mr Abercrombie
– DLA Cliffe Dekker Hofmeyr


Mr C W Williams
– DLA Cliffe Dekker Hofmeyr

Mr Adams
– Asch Professional Services (Pty) Limited
– Proman Project Management Services (Pty) Limited

No other director has a material interest in the period under review.

Directors’ shareholding
As at 30 June 2009, the directors of the company beneficially held direct and indirect ordinary shares in the issued capital of the company as follows:

  2009 2008
A Abercrombie** 3 434 634 3 193 285
H Adams 24 309 363 22 809 363
A W Bedford 3 471 780 4 951 420
R G Freese 2 740 923 2 740 923
N Mlambo 56 900 56 900
A Funkey 1 180 000 –
R Hoption 450 000 –
N V Maharaj – –
C W Williams – –
  35 643 600 33 751 891

The following direct/indirect share purchases were made by directors during the year:

H Adams 1 500 000
A W Bedford 20 000
A Funkey* 1 180 000
R Hoption* 450 000
 
* These shares were purchased from the GPSIT.
** Increased shareholding in indirect beneficiary.

The following indirect sale was made during the year:

A W Bedford 1 500 000

Subsequent events
There were no material events subsequent to the balance sheet date.