Notes to the Annual Financial Statements | for the year ended 30 June 2009


 
   
11 Investments in associates
  Note 11
           
  RAH        
  In order to secure the preference share funding from Sanlam, GPI had to transfer the stake it held in RAH at the time to Utish.
   
  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.
        2009 2008
            R R
  Share of fair value of net assets on acquisition     173 022 752 1 231 250 046
  Negative goodwill on acquisition     (80 622 752) (784 087 333)
  Total consideration     92 400 000 447 162 713
  Cash consideration     539 562 713 447 162 713
  Cash paid in previous years     447 162 713 206 722 482
  Cash paid during the current year     92 400 000 240 440 231
           
  Negative goodwill arising on the acquisition of the investment has been recognised immediately in profit.
  Akhona GPI        
  GPI holds a 75% (2008: 50%) interest in Akhona GPI.
  Thuo Gaming WC        
  GPI Slots has a 25,1% (2007: 25,1%) stake in Thuo Gaming WC.
  Worcester Casino        
  GPI has a 36,7% (2008: 36,7%) direct interest in Worcester Casino.
           
  COMPANY        
  Akhona GPI     24 849 328 7 014 000
  SunWest     182 548 110 90 148 109
  Worcester Casino     – –
  RAH     9 998 513 990 108
  – cost     513 990 108 600 640 285
  – sale of investment     (337 123 298) –
  – impairment of investment in associate     (176 856 812) (86 650 177)
           
        207 407 436 611 152 217
  The price of a RAH share at year-end traded at R2,50 (2008: R4,65) per share.
   
    GROUP COMPANY
    2009 2008 2009 2008
    R R R R
12  Related party loans        
  GPI and its subsidiary companies, in the ordinary course        
  of business, entered into various service and investment        
  transactions.        
  Employee loans 3 783 034 – – –
  – Non-directors 318 795 – – –
  – Directors 3 464 239 – – –
  GPSIT – – 15 400 000 –
  Akhona GPI 15 935 989 8 118 000 15 935 989 8 118 000
  Utish – – 264 652 135 –
  BVI – – – 23 753 673
  Total current assets 19 719 023 8 118 000 295 988 124 31 871 673
           
  BVI – – (34 173 809) –
  GPI Slots – – (486 343) (565 081)
           
  Total current liabilities – – (34 660 152) (565 081)
  Employee loans are secured by the shares issued to employees.        
           
  Other related party loans are unsecured, interest free and payable on demand.        
           
13 Share capital and premium        
  Authorised        
  2 000 000 000 ordinary shares of 0,00025 cent each 500 000 500 000 500 000 500 000
  Opening balance – 1 July 740 835 489 112 283 566 740 835 489 112 283 566
  Shares issued before share split – 175 599 071 – 175 599 071
  Shares issued after share split – 461 350 092 – 461 350 092
  Share issue expenses – (8 397 240) – (8 397 240)
  Gain on treasury shares issued 204 700 – – –
  Shares repurchased (43 658 451) – (43 658 451) –
  Closing balance (issued and fully paid) – 30 June 697 381 738 740 835 489 697 177 038 740 835 489
  Reconciliation of number of shares in issue        
  Opening balance – 1 July 469 028 354 83 009 513 469 028 354 83 009 513
  Issued before share split – 10 670 519 – 10 670 519
  Share split – 281 040 096 – 281 040 096
  Issued after share split – 94 308 226 – 94 308 226
  Shares repurchased (19 447 035) – (19 447 035) –
  Closing balance – 30 June 449 581 319 469 028 354 449 581 319 469 028 354
  Treasury shares        
  Opening balance – 1 July – – – –
  Shares repurchased (15 238 000) – – –
  Shares issued 3 568 900 – – –
  Closing balance – 30 June (11 669 100) – – –
  Reconciliation of number of treasury shares        
  Opening balance – 1 July – – – –
  Shares repurchased (7 600 000) – – –
  Shares issued 1 780 000 – – –
  Closing balance – 30 June (5 820 000) – – –
           
14 Cash and cash equivalents        
  Cash at bank and deposit bank accounts consist of Money Market call accounts with floating interest rates that fluctuated between 10,46% and 8,77% during the year. 55 754 405 81 834 197 4 293 033 44 478 668
               
15 Cumulative redeemable preference share capital and premium        
  15.1 Redeemable at the option of the group – equity        
    Authorised        
    2009: Nil (2008: Nil redeemable preference shares of R1 per share)        
    Issued preference shares        
    Opening balance – 57 797 500 – –
    Preference shares redeemed during the year – (57 797 500) – –
    Closing balance – – – –
               
  15.2 Redeemable at the option of the holder – debt        
    15.2.1 Authorised        
      203 356 redeemable preference shares of        
      R1 per share (2008: 203 356)        
      Issued preference shares – Standard Bank/Depfin        
      Balance at beginning of year – 1 July 201 398 108 – – –
      Preference shares issued – par value – 203 356 – –
      Preference share premium – 203 152 643 – –
      Preference shares redeemed (22 000 000) – – –
      Share issue expenses – (1 957 891) – –
      Closing balance – 30 June 179 398 108 201 398 108 – –
      Interest is calculated at 75% of the prime rate.        
               
      Preference interest is paid semi-annually on 31 March and 30 September. The preference shares are redeemable from 2011.        
               
      This facility is secured by SunWest ordinary shares.        
               
    15.2.2 Authorised        
      200 redeemable preference shares of R0,01 per share (2008: Nil).        
      Issued preference shares – Sanlam        
      Balance at beginning of year – 1 July – – – –
      Preference shares issued – par value* 1 – – –
      Preference share premium 105 725 756 – – –
      Closing balance – 30 June 105 725 757 – – –
      Total closing balance – 30 June 285 123 865 201 398 108 – –
      New preference shares were issued to Sanlam. Interest is calculated at 83% of the prime rate. Preference interest is paid semi-annually on 31 March and 30 September. This facility is secured by 110 535 507 RAH ordinary shares.
       
      * The par value of the preference shares issued to Sanlam is less than R1. It has therefore been rounded to R1.
               
    Computer
equipment		 Software Audiovisual Furniture
and fittings		 Leasehold
improvements		 Total
  GROUP/COMPANY R R R R R R
16  Plant and equipment            
  2009            
  Beginning of year            
  – Cost 153 211 7 513 979 394 976 544 201 1 100 880
  – Accumulated depreciation (36 876) (7 513) (979) (51 214) (67 889) (164 471)
  Net book value 116 335 – – 343 762 476 312 936 409
  Current year movements            
  – Disposal cost (21 430) – – – – (21 430)
  – Disposal accumulated depreciation 8 729 – – – – 8 729
  – Additions 224 968 245 237 – 85 751 10 384 566 340
  – Depreciation (77 539) (30 235) – (92 225) (110 292) (310 291)
  Balance at end of year 251 063 215 002 – 337 288 376 404 1 179 757
  Made up as follows:            
  – Cost 356 749 252 750 979 480 727 554 585 1 645 790
  – Accumulated depreciation (105 686) (37 748) (979) (143 439) (178 181) (466 033)
  Net book value 251 063 215 002 – 337 288 376 404 1 179 757
  2008            
  Beginning of year            
  – Cost 32 166 7 513 979 – – 40 658
  – Accumulated depreciation (11 614) (4 383) (979) – – (16 976)
  Net book value 20 552 3 130 – – – 23 682
  Current year movements            
  – Additions 121 045 – – 394 976 544 201 1 060 222
  – Depreciation (25 262) (3 130) – (51 214) (67 889) (147 495)
  Balance at end of year 116 335 – – 343 762 476 312 936 409
  Made up as follows:            
  – Cost 153 211 7 513 979 394 976 544 201 1 100 880
  – Accumulated depreciation (36 876) (7 513) (979) (51 214) (67 889) (164 471)
  Net book value 116 335 – – 343 762 476 312 936 409
               
        GROUP COMPANY
        2009 2008 2009 2008
        R R R R
17 Trade and other receivables            
  Trade receivables     5 904 578 5 664 138 20 920 255 138
  Prepayments     139 532 9 380 139 532 9 380
  Related party – Akhona GPI     2 500 000 – 2 500 000 –
        8 544 110 5 673 518 2 660 452 264 518
  No debtors were past due nor impaired.        
               
18  Trade and other payables            
  Trade payables     8 887 496 7 664 841 1 889 968 1 404 540
  Operating lease accrual     78 353 33 655 78 353 33 655
  Amounts owed to third parties     15 247 434 – 15 247 434 –
        24 213 283 7 698 496 17 215 755 1 438 195
               
19 Operating leases            
  Operating lease payments represent rentals payable for office premises. The office premises are leased in terms of a sublease agreement. Leases are negotiated on an average term of four years and rentals are variable. No contingent rent is payable.        
               
  Rentals due within 1 year     489 879 448 418 489 879 448 418
  Due within 1 to 5 years     719 484 1 209 363 719 484 1 209 363
        1 209 363 1 657 781 1 209 363 1 657 781
               
20 Investments            
  Interest in joint venture            
  GPI has a 50% interest in Western Cape Manco, a jointly-controlled entity whose principal activity is the management of the empowerment aspects of GrandWest.        
               
  The share of the assets, liabilities, income and expenses of the jointly-controlled entity, which are included in the consolidated financial statements, are as follows:        
  Current assets     4 654 000 5 409 000 – –
  Current liabilities     (626 500) (1 539 500) – –
  Net current assets     4 027 500 3 869 500 – –
  Revenue     20 115 000 21 735 000 – –
  Net operating costs     (1 742 500) (2 005 500) – –
  Interest received     398 500 326 000 – –
  Net profit before tax     18 771 000 20 055 500 – –
  Taxation     (6 469 500) (6 931 000) – –
  Net profit after tax     12 301 500 13 124 500 – –
               
21 Segmental information
  Based on their assessment of risks and returns the directors consider that the primary reporting format is by business segment. The directors consider that there is only one business segment, being the provision of investment and management expertise to the gaming and leisure industry and the disclosure for the primary segment has already been given in these financial statements. The secondary reporting format is considered to be a geographical analysis by origin and destination. Since the group’s business operations are conducted exclusively in South Africa, a segment report has not been presented.
   
22 Financial instruments
  The group’s principal financial liabilities comprise cumulative redeemable preference shares, trade and other payables and related party loans payable. The main purpose of these instruments is to raise finance for the group operations and investments.
   
  The group has financial assets such as available-for-sale investments, trade and other receivables and cash which arise directly from its operations. The main risks arising from financial instruments are market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk.
   
  The fair values of each class of financial instrument approximate the carrying amounts.
            Non-  
        Loans and Available- financial  
        receivables for-sale assets Total
        R R R R
  Financial assets – GROUP        
  2009            
  Cash and cash equivalents     55 754 405 – – 55 754 405
  Related party loans     19 719 023 – – 19 719 023
  Trade and other receivables     8 404 578 – 139 532 8 544 110
  Available-for-sale investments – 16 685 000 – 16 685 000
  Total     83 878 006 16 685 000 139 532 100 702 538
  2008            
  Cash and cash equivalents     81 834 197 – – 81 834 197
  Related party loans     8 118 000 – – 8 118 000
  Trade and other receivables 5 664 138 – 9 380 5 673 518
  Available-for-sale investments – 20 329 677 – 20 329 677
  Total     95 616 335 20 329 677 9 380 115 955 392
               
        Financial    
    liabilities    
    measured at Non-  
    amortised financial  
    cost liabilities Total
    R R R
  Financial liabilities – GROUP      
  2009      
  Trade and other payables 24 134 930 78 353 24 213 283
  Dividends payable 4 245 736 – 4 245 736
  Preference shares 285 123 865 – 285 123 865
  Total 313 504 531 78 353 313 582 884
  2008      
  Trade and other payables 7 664 841 33 655 7 698 496
  Dividends payable 3 866 268 – 3 866 268
  Preference shares 201 398 108 – 201 398 108
  Total 212 929 217 33 655 212 962 872
         
      Non-  
    Loans and financial  
    receivables assets Total
    R R R
  Financial assets – COMPANY      
  2009      
  Cash and cash equivalents 4 293 033 – 4 293 033
  Related party loans 295 988 124 – 295 988 124
  Trade and other receivables 2 520 920 139 532 2 660 452
  Total 302 802 077 139 532 302 941 609
  2008      
  Cash and cash equivalents 44 478 668 – 44 478 668
  Related party loans 31 871 673 – 31 871 673
  Trade and other receivables 255 138 9 380 264 518
  Total 76 605 479 9 380 76 614 859
         
    Financial    
    liabilities    
    measured at Non-  
    amortised financial  
    cost liabilities Total
    R R R
  Financial liabilities – COMPANY      
  2009      
  Trade and other payables 17 137 402 78 353 17 215 755
  Related party loans 34 660 152 – 34 660 152
  Dividends payable 4 245 736 – 4 245 736
  Total 56 043 290 78 353 56 121 643
  2008      
  Trade and other payables 1 404 540 33 655 1 438 195
  Related party loans 565 081 – 565 081
  Dividends payable 3 866 268 – 3 866 268
  Total 5 835 889 33 655 5 869 544
   
  Market risk
  Market risk is the risk that the fair vale of future cash flows of the financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The group does not have any exposure to currency risk.
   
  Interest rate risk
  Interest rate risk is the risk that the cash flows of a financial instrument will fluctuate due to changes in market interest rates. The group’s exposure to the risk of changes in interest rates relates primarily to the group’s obligation in terms of the preference shares and bank accounts. The group manages this by ensuring that sufficient available funds are maintained in bank accounts. The table below reflects the interest rate sensitivity analysis. The analysis was calculated by increasing or decreasing the group’s interest rate by 100 basis points assuming all other variables remain constant.
   
        Increase in Effect on Decrease in Effect on
    basis points pre-tax profit basis points pre-tax profit
  GROUP   R   R
  Current year 100 2 649 733 (100) (2 649 733)
  Prior year 100 508 390 (100) (508 390)
  COMPANY        
  Current year 100 42 930 (100) (42 930)
  Prior year 100 444 787 (100) (444 787)
           
  Other price risk
  Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in the cash flows received from the investment. Discounted cash flows have been used in order to determine the fair values of unlisted investments. The valuation requires management to make estimates about the expected future cash flows of the shares which are discounted at current rates. The fair value of the investment was calculated with reference to the growth in the cash flows to be received from the investment. The fair value sensitivity analysis was calculated by increasing or decreasing the group’s growth on investment by 1% assuming that all other variables remain constant.
   
    Increase in Effect on Decrease in Effect on
    growth rate equity growth rate equity
  GROUP % R % R
  Current year 1 1 401 629 1 1 611 544
  Prior year 1 9 466 832 1 1 467 784
   
  Credit risk
  Credit risk is the risk of financial loss caused by the inability or unwillingness of a counterparty to a financial instrument to discharge its contractual obligations. The group does not have “normal” trade receivables. The majority of the trade receivables relate to current account balances with companies within the group. No allowance account has been made use of during the year. No financial assets were past due or impaired at year-end.
   
  The group only deposits cash surpluses with major banks of high quality and credit standing. At year-end, the group did not consider there to be any significant concentration of credit risk which has not been adequately provided for.
   
  The group’s maximum exposure to credit risk in terms of cash and cash equivalents, loans and receivables equals the carrying amounts of these instruments as disclosed above.
   
  Liquidity risk
  Liquidity risk is the risk that the group will encounter difficulty in raising funds to meet commitments associated with financial liabilities.
   
  The group monitors its risk to a shortage of funds based on future cash flow commitments. The group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans.
   
  The group has minimised its liquidity risk by ensuring that it has adequate banking facilities.
   
  The following table presents the contractual maturity analysis of financial liabilities.
   
        On Less than 3 – 12      
    demand 3 months months 1 – 2 years > 2 years Total
  GROUP R R R R R R
  2009            
  Trade and other payables – 24 134 930 – – – 24 134 930
  Preference shares – – 46 000 000 30 207 000 210 874 757 287 081 757
  Interest on preference shares – 6 376 015 14 442 775 42 787 461 20 510 767 84 117 018
  Dividends payable 4 245 736 – – – – 4 245 736
  Total 4 245 736 30 510 945 60 442 775 72 994 461 231 385 524 399 579 441
  2008            
  Trade and other payables – 7 664 841 – – – 7 664 841
  Preference shares – – – – 203 356 000 203 356 000
  Interest on preference shares – 11 894 129 24 220 667 24 220 667 67 222 775 127 558 238
  Dividends payable 3 866 268 – – – – 3 866 268
  Total 3 866 268 19 558 970 24 220 667 24 220 667 270 578 775 342 445 347
  COMPANY            
  2009            
  Trade and other payables – 17 137 402 – – – 17 137 402
  Related party loan 34 660 152 – – – – 34 660 152
  Dividends payable 4 245 736 – – – – 4 245 736
  Total 38 905 888 17 137 402 – – – 56 043 290
  2008            
  Trade and other payables – 1 404 540 – – – 1 404 540
  Related party loan 565 081 – – – – 565 081
  Dividends payable 3 866 268 – – – – 3 866 268
  Total 4 431 349 1 404 540 – – – 5 835 889
   
  Gains and losses on financial instruments
  The table below summarises the gains and losses on financial instruments.
               
        Fair value Interest Interest  
        movement income expense Total
  GROUP     R R R R
  2009            
  Loans and receivables     – 3 235 132 – 3 235 132
  Available-for-sale investments     (3 134 422) – – (3 134 422)
  Financial liabilities at amortised cost – – (31 938 621) (31 938 621)
  Total     (3 134 422) 3 235 132 (31 938 621) (31 837 911)
  2008            
  Loans and receivables     – 10 429 084 – 10 429 084
  Available-for-sale investments     (446 574) – – (446 574)
  Financial liabilities at amortised cost – – (8 934 260) (8 934 260)
  Total     (446 574) 10 429 084 (8 934 260) 1 048 250
  COMPANY            
  2009            
  Loans and receivables     – 1 315 483 (2 089 389) (773 906)
  Total     – 1 315 483 (2 089 389) (773 906)
  2008            
  Loans and receivables     – 7 891 925 – 7 891 925
  Total     – 7 891 925 – 7 891 925
               
    GROUP COMPANY
    2009 2008 2009 2008
    R R R R
23 Directors’ emoluments        
  Executive directors        
  – directors’ fees – 1 228 500 – 1 228 500
  – salary 2 030 923 225 000 2 030 923 225 000
  Non-executive directors        
  – directors’ fees 1 490 958 1 707 000 1 490 958 1 707 000
    3 521 881 3 160 500 3 521 881 3 160 500
  Paid by:        
  – the company 3 521 881 3 160 500 3 521 881 3 160 500
           
24 Dividends declared and paid        
  Final dividend in respect of the 2008 financial year of 10 cents (2007: 30 cents per share) (pre the 4:1 share split) 46 281 570 24 902 854 46 281 570 24 902 854
  The final dividend in respect of the 2009 financial year of 7,5 cents per share was declared on 2 September 2009.        
           
25 Notes to the cash flow statement        
  25.1 Taxation paid        
    Taxation – beginning of the year 3 673 291 2 424 125 1 836 278 732 262
    Amount per income statement (note 5)        
    – current year 6 066 036 7 984 844 332 347 1 780 292
    – prior year underprovision – 92 851 – –
    – STC 1 363 231 1 315 501 149 231 –
    Taxation – closing balance for the year (701 509) (3 673 291) (128 925) (1 836 278)
      10 401 049 8 144 030 2 188 931 676 276
  25.2 Dividends paid        
    Opening balance 3 866 268 3 757 380 3 866 268 3 757 380
    Dividends declared 46 281 570 24 902 854 46 281 570 24 902 854
    Closing balance (4 245 736) (3 866 268) (4 245 736) (3 866 268)
      45 902 102 24 793 966 45 902 102 24 793 966
             
      Balance (owed)/ Receipts/ Receipts/ Balance (owed)/
      receivable (payments) (payments) receivable
      2009 2009 2008 2008
  GROUP R R R R
26  Related party transactions        
  Nadesons (Pty) Limited – – (481 512) 11 750
  DLA Cliffe Dekker Hofmeyr – – (242 650) (181 255)
  Shares purchased by directors – 7 250 600 98 420 –
  Shares sold by directors – (3 750 000) – –
  Proman Project Management Services (Pty) Limited 49 183 (619 223) (770 684) 44 804
  Joint ventures – 12 143 500 – 12 422 000
  GPSIT loans to directors 3 464 239 3 464 239 – –
  Asch Consulting Engineering (Pty) Limited (7 757) (136 129) (153 883) (100)
  Short-term employee benefits – (3 521 881) (3 160 050) –
  COMPANY        
  Nadesons (Pty) Limited – – (481 512) 11 750
  DLA Cliffe Dekker Hofmeyr – – (242 650) (181 255)
  Shares purchased by directors – 7 250 600 98 420 –
  Shares sold by directors – (3 750 000) – –
  Proman Project Management Services (Pty) Limited 49 183 (619 223) (770 684) 44 804
  Asch Consulting Engineering (Pty) Limited (7 757) (136 129) (153 883) (100)
  Subsidiaries 245 391 983 114 929 905 23 188 592 (7 333 894)
  Special purpose entities 15 400 000 15 400 000 – –
  Short-term employee benefits – (3 521 881) (3 160 000) –
           
  Third parties        
  DLA Cliffe Dekker Hofmeyr (formerly known as Hofmeyr Herbstein & Gihwala Inc.) is a firm of attorneys that provides legal services to the group. No transactions occurred during the year. Directors of DLA Cliffe Dekker Hofmeyr, Messrs Alexander Abercrombie and Charl Williams, are also directors of the company.
   
  GPI rents office space from Proman Project Management Services (Pty) Limited. Mr Hassen Adams, a director of the company, is also a director of Proman Project Management Services (Pty) Limited.
   
  Asch Consulting Engineers are engineering consultants. Asch Consulting Engineers provides GPI with IT support services. Mr Hassen Adams, a director of the company, is also a director of Asch Consulting Engineers.
   
  Of the available cash balances at year-end, R25 million has been invested with Grindrod Bank. A director of GPI, Mr Hassen Adams, is also a shareholder of Grindrod Bank.
   
  Subsidiaries
  Refer to note 12 for balances owed/due to subsidiaries.
   
  Associates
  Refer to note 11 for transactions and balances relating to associates.
   
27 Capital management

  		 The primary objective of the group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholders’ value. The group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The primary source of capital is issued share capital and preference share capital.
   
28 Capital redemption reserve fund

  		 In terms of section 98 of the Companies Act of South Africa, 1973 (No. 61 of 1973), as amended, a capital redemption reserve fund must be created for the par value of the preference shares redeemed during the year.
   
29 Breaches

  		 During the year the convenants on both preference shares were breached, marginally and for approximately a week each, which can be attributed to the market uncertainty caused by the financial crisis. These breaches have since been remedied with the SISA and RAH share prices rallying above the breach ratio for each of the respective preference shares.