INVESTMENT HIGHLIGHTS
The following table reflects Grand Parade Investments Limited's (GPI) direct economic holding in its various investments. |
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31 Dec |
31 Dec |
30 Jun |
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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 |
– |
– |
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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 (Grand West) revenue and EBITDA from which its management fees are derived. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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.
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Restated |
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Unaudited |
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Unaudited |
Audited |
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31 Dec |
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31 Dec |
30 Jun |
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2009 |
% |
2008 |
2009 |
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R’000 |
variance |
R’000 |
R’000 |
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Headline earnings |
39 832 |
(16,5) |
47 720 |
96 515 |
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Share of profit from associates |
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– SunWest |
35 019 |
(15,4) |
41 409 |
85 298 |
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– RAH |
13 114 |
(12,9) |
15 055 |
28 109 |
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– Thuo WC |
2 510 |
24,5 |
2 016 |
4 566 |
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– Akhona GPI |
1 973 |
508,9 |
324 |
218 |
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Income from joint venture |
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– WC Manco |
9 286 |
(9,4) |
10 253 |
20 115 |
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Other |
(944) |
(145,8) |
2 061 |
5 079 |
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Operating costs |
(9 469) |
15,2 |
(8 222) |
(14 932) |
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Finance costs |
(11 657) |
(23,2) |
(15 176) |
(31 938) |
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| 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. |
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| 9. |
Dividends
GPI believes it prudent to continue with its past practice of not paying interim dividends. |
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| 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. |
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| 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. |
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For and on behalf of the board:
| H Adams |
A Funkey |
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| Chairman |
Chief Executive Officer |
Cape Town, 9 March 2010 |
GRAND PARADE INVESTMENTS LIMITED ("GPI" or "the company") (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: Transfer secretaries Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001
Attorneys: Bernadt Vukic Potash & Getz Attorneys
Corporate advisers: Corporate advisers Leaf Capital (Proprietary) Limited
Sponsor: PSG Capital (Proprietary) Limited
Company Secretary: Richard Hoption
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