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Unaudited interim results of Grand Parade Investments Limited (GPI) for the six months ended 31 December 2012
Grand Parade Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
("GPI" or "the company")
UNAUDITED INTERIM RESULTS
OF GRAND PARADE INVESTMENTS LIMITED (GPI)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
Highlights
- 18% increase in Slots group GGR
- 11% increase in group revenue
- 12% increase in adjusted headline earnings per share
- Increase in dividend paid, in respect to the previous
financial year, to 20.0 cents per share (12.5 cents ordinary
and 7.5 cents special)
- Burger King Master Franchise for Southern Africa acquired
- Rights to manufacture gaming machines locally acquired
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December 2012
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
Notes R'000s R'000s R'000s
Revenue 1 240 937 216 301 430 651
Cost of sales 2 (136 642) (114 518) (231 248)
Gross profit 104 295 101 783 199 403
Operating costs (68 210) (57 947) (107 599)
Operating profit 36 085 43 836 91 804
Profit from equity-accounted investments 3 54 830 76 530 131 072
Profit on disposal of investments 4 60 239 60 248
Realisation of fair value reserve 5 35 588 35 588
Reversal of impairment of investment 6 336 336
Depreciation and amortisation (17 499) (18 342) (38 610)
Net profit before finance costs and taxation 73 416 198 187 280 438
Finance income 7 3 070 3 084 6 797
Finance costs 8 (6 907) (15 595) (24 225)
Net profit before taxation 69 579 185 676 263 010
Taxation 9 (6 796) (4 214) (11 598)
Net profit for the period 62 783 181 462 251 412
Other comprehensive income
Realisation of fair value reserve (35 588) (35 588)
Unrealised fair value losses on available-for-sale investments, net of tax (79) (4 193) (5 676)
Total comprehensive income for the period 62 704 141 681 210 148
Profit for the period attributable to:
Ordinary shareholders 62 783 181 462 251 412
Total comprehensive income attributable to:
Ordinary shareholders 62 704 141 681 210 148
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December 2012
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
Notes R'000s R'000s R'000s
ASSETS
Non-current assets 11 1 443 279 1 360 037 1 406 521
Current assets 12 399 292 741 217 461 805
Total assets 1 842 571 2 101 254 1 868 326
EQUITY AND LIABILITIES
Total equity 1 588 554 1 851 649 1 617 477
Non-current liabilities
Deferred tax liability 11 525 11 640 11 525
Cumulative redeemable preference shares 13 101 670 131 235 101 670
Interest-bearing borrowings 13 24 000 40 000 36 000
Provisions 620 156 173
Finance lease liability 165 1 260 1 134
Current liabilities 14 116 037 65 314 100 347
Total equity and liabilities 1 842 571 2 101 254 1 868 326
Net asset value (before deducting treasury shares) (cents) 345 394 312
Net asset value (after deducting treasury shares) (cents) 346 396 314
Tangible net asset value per share (cents) 306 356 351
Adjusted tangible net asset value per share (cents) 306 358 352
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 December 2012
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
Notes R'000s R'000s R'000s
Cash flows from operating activities
Cash generated from operations 15 48 684 13 893 48 344
Income tax paid (7 722) (11 076) (25 704)
Finance income 3 070 3 084 6 797
Net cash inflow from operating activities 44 032 5 901 29 437
Cash flows from investing activities
Acquisition of plant and equipment (20 713) (18 989) (35 647)
Acquisition of land and buildings (35 675) (25 002)
Acquisition of intangibles (2 939) (2 707) (3 672)
Consideration from disposal of property, plant and equipment 6 74 117
Proceeds from the sale of investments 733 589 733 935
Dividends received 66 203 144 193 182 686
Net cash inflow from investing activities 6 882 856 160 852 417
Cash flows from financing activities
Dividend paid (90 382) (43 891) (322 405)
Shares bought back (24 321)
Decrease in loans 16 (8 053) (173 817) (178 494)
Finance costs (6 907) (15 595) (20 735)
Net cash outflow from financing activities (105 342) (233 303) (545 955)
Net (decrease)/increase in cash and cash equivalents (54 428) 628 758 335 899
Cash and cash equivalents at the beginning of the period 405 147 69 248 69 248
Cash and cash equivalents at the end of the period 350 719 698 006 405 147
GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2012
Capital Available-for-
redemption sale
reserve Ordinary Share Treasury fair value Accumulated
fund share capital premium shares reserve profits Total
R'000s R'000s R'000s R'000s R'000s R'000s R'000s
Balance at 30 June 2011 301 117 754 047 (4 451) 49 396 957 382 1 756 792
Total comprehensive income for the
period (39 781) 181 462 141 681
Ordinary dividends declared (46 824) (46 824)
Balance at 31 December 2011 301 117 754 047 (4 451) 9 615 1 092 020 1 851 649
Total comprehensive income for the
period (1 483) 69 950 68 467
Dividends declared (280 944) (280 944)
Share buy-back (2) (24 319) (24 321)
Treasury shares issued to employees 521 2 105 2 626
Balance at 30 June 2012 301 115 730 249 (2 346) 8 132 881 026 1 617 477
Total comprehensive income for the
period (79) 62 783 62 704
Dividends declared (91 902) (91 902)
Conversion of par value shares to
non-par value shares 730 249 (730 249)
Treasury shares issued to employees 275 275
Balance at 31 December 2012 301 730 364 (2 071) 8 053 851 907 1 588 554
SEGMENTAL ANALYSIS
AND ACCOUNTING POLICIES AND BASIS OF PREPARATION
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.
During the current period the group acquired the Master Franchise of Burger King for Southern Africa. The view of management
is that this business will operate independently from the other businesses in the group and have therefore created a new Food
segment under which this business will be monitored.
Listed below is a detailed analysis:
Unaudited Unaudited Audited Unaudited Unaudited Audited
31 December 31 December 30 June 31 December 31 December 30 June
2012 2011 2012 2012 2011 2012
R'000s R'000s R'000s R'000s R'000s R'000s
Revenue Inter-segment revenue
Casinos 1 218 18 391 18 821
Gaming 233 666 197 832 403 583
Services 108 78 96 34 375 31 240 63 095
Property
Food
Other 5 945 8 151
240 937 216 301 430 651 34 375 31 240 63 095
Interest income Interest expense
Casinos
Gaming 883 672 1 500 (74) (98) (195)
Services 111 90 281 (2 071) (2 657) (5 429)
Property
Food 10 (1)
Other 2 066 2 322 5 016 (4 761) (12 840) (18 601)
3 070 3 084 6 797 (6 907) (15 595) (24 225)
Depreciation and amortisation Equity-accounted earnings
Casinos 54 830 76 530 131 072
Gaming (7 962) (7 534) (15 661)
Services (9 531) (10 650) (22 785)
Property
Food
Other (6) (158) (164)
(17 499) (18 342) (38 610) 54 830 76 530 131 072
Taxation Profit after tax
Casinos 54 928 191 085 231 639
Gaming (7 597) (4 440) (9 826) 15 883 11 262 24 026
Services 1 405 (2 078) (3 015) 2 652 6 109 7 741
Property (83) 55 (398) (141)
Food (2) (9 098)
Other (519) 2 304 1 188 (1 184) (26 994) (11 853)
(6 796) (4 214) (11 598) 62 783 181 462 251 412
Total assets Total liabilities
Casinos 1 102 756 1 083 957 1 109 667 (1 848) (1 428) (1 769)
Gaming 266 059 265 616 273 278 (40 992) (39 171) (38 982)
Services 76 842 67 634 72 270 (65 787) (66 473) (70 570)
Property 63 865 28 574 169 (216)
Food 13 554 (42)
Other 319 495 684 047 384 537 (145 517) (142 533) (139 312)
1 842 571 2 101 254 1 868 326 (254 017) (249 605) (250 849)
Revenue under the "other" segment comprises the dividends received from preference share investments.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The accounting policies applied in the interim financial statements are in accordance with International Financial Reporting
Standards (IFRS), whilst the disclosures contained within comply with IAS 34: Interim Financial Reporting, the AC 500 Standards
as issued by the Accounting Practices Board or its successor 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 2012, except for applying
IFRS 10: Consolidated Financial Statements, IFRS 11: Joint arrangements and IFRS 12: Disclosure of Interests in Other Entities, as
well as IAS 28(R): Investments in Associates and Joint Ventures. The application of these standards as well as the revised IAS 28
has not resulted in changes in the previous treatments of subsidiaries, joint ventures or associates.
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 31 December 2012
It is important to note that the prior period results include the effects of the transaction concluded with Sun International Limited
(Sun International) on 2 December 2011, which resulted in once-off gains of no less than R128.1 million. These once-off gains include
R60.2 million profit from the disposal of investments, R35.6 million realisation of fair value gains relating to disposed investments and net
cancellation fee income from the restructure of the SunWest (Pty) Ltd management fee of R32.3 million. In this context management
considers adjusted headline earnings per share as a more meaningful measure of performance as it adjusts for the effect of these
once-off gains.
1. Revenue
Revenue comprises gross gaming revenue (GGR) from GPI's limited payout machine (LPM) business, dividends received from National
Casino Resort Manco (Pty) Ltd (National Manco), Winelands Manco (Pty) Ltd (Winelands Manco) and preference share investments
held with Grindrod Bank Limited (Grindrod).
GGR is the term used for the net revenue generated by an LPM from the amount of cash played through the LPM less pay-outs to
players. GGR increased by 18.1% on the prior period.
Revenue Revenue
Unaudited Unaudited Revenue
31 December 31 December 30 June
2012 2011 2012
R'000s R'000s R'000s
Gaming revenue 233 773 197 910 403 680
Grandslots 139 830 122 901 249 634
Kingdomslots 71 306 59 603 119 259
Grand Gaming Slots 19 092 11 932 26 713
Other 3 545 3 474 8 074
Dividend income 7 164 18 391 26 971
Total revenue 240 937 216 301 430 651
The dividend income of R7.2 million for the current period consists of R5.9 million from the Grindrod preference shares, R0.4 million
from the National Manco and R0.9 million from the Winelands Manco. The prior period dividend income of R18.4 million included a
R13.4 million dividend from Real Africa Holdings Limited (RAH), which was disposed on 2 December 2011 as part of the restructure
deal with Sun International.
2. Cost of sales
Cost of sales is directly related to GGR, and comprises direct costs such as commissions to site owners, gambling levies and monitoring
fees. Cost of sales has increased by 19.3% as a result of an increase in GGR and contributions to the National Responsible Gaming
Programme and CSI contributions.
3. Profit from equity-accounted investments
Profit from equity-accounted investments is made up of profits from jointly-controlled entities, SunWest International (Pty) Ltd
(SunWest), and profits from associate, Akhona Gaming Portfolio Investments (Pty) Ltd (Akhona GPI).
The 28.4% decrease in the equity-accounted earnings from the prior period results from the cancellation fees paid by SunWest and
received by Western Cape Casino Resort Manco (Pty) Ltd (Western Cape Manco) as part of the restructure with Sun International
being included in the prior year earnings.
4. Profit on disposal of investments
There were no disposal of investments in the period under review. In the prior period a profit of R60.2 million was recognised
on the sale of a 4.9% interest in SunWest, a 21.2% interest in Worcester Casino (Pty) Ltd (Golden Valley) and the entire investment
of 30.6% in RAH, which were sold as part of the deal with Sun International concluded on 2 December 2011 and disclosed in the
2012 Integrated Annual Report.
5. Realisation of fair value reserve
There was no realisation of fair value reserves in the period under review. In the prior period the group released in terms of IAS 39:
Financial Instruments Recognition and Measurement, R35.6 million of fair value adjustments previously recognised through the
statement of comprehensive income, as a result of disposing its interest in RAH in the statement of comprehensive income.
6. Reversal of impairment of investment in associate
There was no reversal of impairment of investment in associates in the period under review. In the prior period in terms of IAS 36:
Impairment of Assets, the group reversed R0.3 million of previously recognised impairments of the investment in Golden Valley when
a portion of the investment was sold to Sun International.
7. comparative reclassification
The finance income generated from investments has been reallocated from revenue to finance income during the period under
review. As a result of this reallocation, the comparative figures have been restated.
8. Finance costs
Finance costs have decreased significantly by 55.7% when compared to the prior period as a result of the lower level of debt. During
the current period R8.0 million was repaid on the term loan with Sanlam Capital Markets (SCM) whilst in the prior period the group
repaid its R40.0 million term loan with Grindrod and redeemed R125.7 million of preference shares held by SCM.
9. Taxation
The tax charge in the statement of comprehensive income has increased by 61.3% when compared to the prior period.
The increase is as a result of the increase in the profitability of the Slots group.
10. Headline earnings, HEPS and adjusted HEPS
Headline earnings per share (HEPS) for the six-month period ended December 2012 when compared to the prior period decreased by 31.2%,
while adjusted HEPS increased by 12.3%. HEPS decreased mainly as a result of the prior period non-recurring income and adjustments
arising from the Sun International deal. The increase in the adjusted HEPS figure is as a result of higher dividends from Winelands
Manco and National Manco, as well as the improved profitability of the Slots group combined with the effect of the reduced weighted
average number of shares in issue.
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
R'000s R'000s R'000s
Basic and diluted earnings per share (cents) 13.63 38.57 53.58
Headline earnings per share (cents) 13.68 19.87 34.88
Adjusted headline earnings per share (cents) 15.86 14.12 29.23
Dividends per share paid (cents) 20.00 10.00 70.00
Headline earnings reconciliation
Earnings attributable to ordinary shareholders 62 783 181 462 251 412
Reversal of impairment of investment (336) (336)
Profit on disposal of investment (60 239) (60 248)
Realisation of fair value reserve (35 588) (35 588)
Loss on sale of Property, plant and equipment 351 145 447
Tax effect on above (98) 8 036 7 950
Headline earnings 63 036 93 480 163 637
Reversal of employee share trust (75) (200) 75
Preference share early redemption fee 2 100 2 100
Change in intended recovery of investments (10 918) (10 918)
Reversal of cancellation fee (32 271) (32 271)
Reversal of transaction costs 9 905 13 907 13 907
Adjusted headline earnings 72 866 66 098 136 530
Reconciliation of shares
Shares in issue (before deducting treasury shares) (000s) 460 680 470 459 460 678
Shares in issue (after deducting treasury shares) (000s) 459 648 468 239 459 508
Weighted average number of shares in issue (000s) 460 680 470 459 469 195
Adjusted weighted average number of shares in issue (000s) 459 541 468 239 467 166
* Final dividend declared in respect of the previous financial year and paid in October.
11. Non-current assets
The increase in the non-current assets is mainly due to the redevelopment of the landmark building in Heerengracht Street,
Cape Town, which will be used as the group's headquarters. In addition, GPI Management Services (Pty) Ltd continued to invest in
new generation LPMs which it leases to the Slots group.
12. Current assets
Current assets have decreased mainly as a result of a decrease in cash and cash equivalents. Since December 2011 the group paid
special dividends in January 2012 of R282.3 million and in October 2012 of R34.6 million. Current assets for the current period consist of
cash and cash equivalents of R351.0 million, trade and other receivables of R27.8 million, loans of R15.6 million, income tax receivables
of R3.3 million and inventories of R1.9 million.
13. Non-current liabilities
The cumulative redeemable preference shares have decreased when compared to the prior period due to R30.7 million being
reclassified to current liabilities, which is the amount to be redeemed in March 2013. The terms of the preference shares are under
negotiation with the funders, Standard Bank of South Africa Limited (SBSA) and Nedbank Limited (Nedbank). R16.0 million has been
repaid on the SCM term loan since the prior period.
14. Current liabilities
Current liabilities comprise trade and other payables of R51.2 million, the current portion of the cumulative redeemable preference
shares of R30.7 million, the current portion of the term loan with SCM of R16.0 million, dividends payable of R12.2 million, income tax
payable of R1.2 million and the current portion of finance leases of R1.1 million.
15. Cash generated from operations
The reconciliation of net profit for the period to cash generated by operations is as follows:
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
R'000s R'000s R'000s
Net profit after tax 62 783 181 462 251 412
Tax for the period as per the statement of comprehensive income 6 796 4 214 11 598
Depreciation and amortisation 17 499 18 342 38 610
Finance income (3 070) (3 084) (6 797)
Finance costs 6 907 15 595 24 225
Shares issued to employees 276
Loss on sale of Property, plant and equipment 351 145 447
Dividends received (7 164) (18 391) (26 971)
Equity-accounted earnings (54 830) (76 530) (131 072)
Profit on sale of investment (60 239) (60 248)
Realisation of expenses previously recognised against share
premium 1 189
Impairment of loans 217
Reversal of impairment of investment (336) (336)
Realisation of fair value reserve (35 588) (35 588)
Net cash generated from operations before working capital
movements 29 548 25 590 66 686
Decrease in inventories 136 201 296
Decrease/(increase) in accounts receivable 5 237 17 860 (11 843)
Increase/(decrease) in accounts payable 13 763 (29 758) (6 795)
Net cash generated from operations 48 684 13 893 48 344
16. Decrease in loans
Loans receivable recovered 2 805
Loans receivable advanced (1 250)
Employee loans receivable recovered 1 692 1 110
Employee loans receivable advances (7)
Redemption of preference shares (125 726) (125 726)
Finance leases advanced 424
Finance leases repaid (550) (91) (1 045)
Term loans repaid (12 000) (48 000) (52 000)
Decrease in loans (8 053) (173 817) (178 494)
COMMENTARY
OPERATIONAL HIGHLIGHTS
The first half of this year saw GPI announcing two very exciting new investments.
The frenzy that greeted us with our announcement of concluding a deal to acquire the Master Franchise of Burger King for Southern
Africa was nothing short of incredible and it confirmed that the South African public are ready for a world-class competitive option
in the quick service restaurant (QSR) market. We are well on track to meeting our development plans and will have opened our first
restaurant before our June year-end.
Our venture into machine manufacturing, facilitated by our partnership with another world-class leader in their field, Merkur Gaming,
has the role of both reducing our costs in our LPM business, as well as allowing us to diversify our asset base.
On the LPM front, we have concluded the acquisition of a route operator licence in Mpumalanga and continue to increase our
number of licensed LPMs nationally. We believe the industry is ready for consolidation and we should be at the forefront thereof.
Review of operations
Casino group
The casino group consists of the group's equity investments in SunWest, Golden Valley and Akhona GPI. Whilst the South African
economy takes time to emerge from the tough trading environment of the last few years, our casino investments have performed
well, showing growth in revenues, earnings before interest, taxes, depreciation and amortisation (EBITDA) and net profit after tax.
SunWest
SunWest consists of GrandWest Casino and the Table Bay Hotel.
GrandWest's revenue increased by 5.3% when compared to the prior period and its EBITDA increased by 5.5% to R387.0 million. In
addition to the growth in the absolute EBITDA value, the EBITDA percentage also increased by 0.1% to 41.7%. These increases have
translated into a 30.5% increase in their profit after tax to R237.6 million. As our anchor investment we are very pleased with the
results for the period and acknowledge the effort that GrandWest's management team has put in to achieve these results.
Unfortunately the Table Bay Hotel incurred a R26.9 million loss after tax for the period. The loss for the period is 20.0% lower than
the loss reflected in the prior period, this negative sentiment is off-set by the fact that the current period EBITDA of R6.2 million is 577%
higher than the prior period and that revenue of R77.4 million which has increased by 12.9% when compared to the prior period.
The board of SunWest is investigating several measures to significantly influence this performance, as the financial performance
thereof is the only blight on an otherwise tremendous asset.
The dividend declared by SunWest of R235.0 million has increased by 10.6% when compared to the prior period.
Golden Valley
The Golden Valley Casino was negatively affected by the farm workers' strikes in its region and as a result was only able to increase
its revenue by 3.1% to R66.0 million. Its EBITDA decreased by 3.6% to R14.5 million and its EBITDA percentage decreased by 0.7%
to 22.7%. As a result the casino narrowly missed breakeven for this period and posted a loss after tax of R0.2 million, which is 92.0%
lower than the prior period.
Akhona GPI
Through our investment in Akhona GPI we hold an indirect holding of 3.29% in Sibaya Casino.
We concluded a deal with our partners in Akhona GPI during the period, where we will acquire the remaining stake in Akhona GPI and
gain full control of the investment. The deal will give us a greater exposure to Sibaya Casino, which is the second-best performing casino
in the Sun International portfolio. The deal is yet to be finalised as we are waiting for one final condition precedent to be concluded.
Gaming group
GPI owns and operates three limited payout slot machine (LPM) route licences: Grandslots in the Western Cape, Kingdomslots in
Kwazulu-Natal and Grand Gaming Slots in Gauteng.
The group's LPM GGR increased by 18.5% from R194.4 million to R230.3 million for the six-month period ended December 2012, whilst
the number of active LPMs in South Africa increased by only 9.1% from 7 018 to 7 659.
The key highlights for the period were the opening of Gauteng's first Type B, 40-slot LPM site at the Royal Park Hotel in Joubert Park
in mid-July, the approval in KwaZulu-Natal of the reallocation of 150 of Kingdomslots' LPMs from less profitable regions in the province
to the Durban metropolitan and South Coast areas in August and the announcement at the end of November of our joint-venture
agreement with German-based Merkur Gaming GmbH to establish Grand Merkur (Pty) Ltd to locally manufacture and distribute
gaming equipment.
Grandslots (Western Cape)
The Western Cape remains the best-performing province in the country in terms of LPM GGR; similarly Grandslots remains our
best-performing LPM operation generating GGR of R139.8 million, 13.8% up on the prior period. With only one competitor, Grandslots
enjoyed a 56.1% GGR market share and a 54.2% (873) LPM market share in December 2012. Our average GGR/Machine/Day
increased from R747 to R875 compared to the prior period.
Kingdomslots (KwaZulu-Natal)
Kingdomslots remained the market leader in KZN, generating GGR of R71.3 million, 19.6% up on the prior period. With three
competitors, Kingdomslots enjoyed a 39.7% GGR market share and a 38.35% (808) LPM market share in December 2012. Despite
the significant increase in our number of active machines from 704 in December 2011 to 808 in December 2012, our average GGR/
Machine/Day increased from R463 to R510 compared to the prior period, further emphasising the value in our aforementioned
successful application for the reallocation of 150 LPMs to the Durban metropole and KwaZulu-Natal South Coast.
Grand Gaming Slots (Gauteng)
Grand Gaming Slots, which is still in its relative infancy, generated GGR of R19.1 million, 60.0% up on the prior period. With four
competitors in Gauteng, Grand Gaming Slots enjoyed a GGR market share of 15.7% at 31 December 2012 and a 17.3% (233) LPM
market share. Despite the fact that this is still below fair market share of 20% the operation's GGR market share has shown steady
growth from the 14.6% GGR and LPM (174) market share it had on the same date in the prior period. Our average GGR/Machine/
Day increased from R400 to R449 over the same period.
Grand Gaming Slots, and the Gauteng Province as a whole, continues to have its LPM roll-out hampered by the fact that since
May 2012 the Gauteng Gambling Board has not been in a position to approve any LPM site licences. That said, we continue to submit
site licence applications and are confident that once the Gauteng Gambling Board is reconstituted we will benefit significantly from
our increased number of active sites and LPMs.
Property group
The Property group commenced with the redevelopment of the new GPI headquarters during the period. R35.7 million was spent on
the redevelopment project during the period and the project is expected to be completed in March 2013. The decision to acquire our
own Property to reduce our occupancy costs and secure our tenure is justified through our continued growth and initial indications
of increases in the Property value. Once the redevelopment is completed we are confident that our headquarters will be a landmark
building and the pride of Heerengracht Street in Cape Town.
Food group
The majority of the activity in the food group over the period related to the acquisition of the Burger King Master Franchise which
resulted in R9.9 million in costs being incurred. These costs consist of deal success fees, legal fees, consulting fees and travel expenses.
RELATED PARTY TRANSACTIONS
The group, in the ordinary course of business, entered into various transactions with related parties. All transactions were concluded
at arm's length. Any intra-group related party transactions and outstanding balances are eliminated in the preparation of the
consolidated financial statements of the group as presented.
DIVIDENDS
An ordinary dividend of 12.5 cents per share and a special dividend of 7.5 cents per share were declared and paid in October 2012.
We will continue to be a dividend-active company.
SUBSEQUENT EVENTS
On 5 February 2013 we signed an offer to purchase 100% of the net assets and operations of Zimele Slots Mpumalanga (Pty) Ltd
(Zimele). Zimele is one of two licensed LPM operators in the province, which currently makes allowance for 2 000 active LPMs. The
purchase is subject to the fulfilment of certain conditions precedent, which include the approval of the purchase by the Mpumalanga
Gambling Board.
PROSPECTS
The future for GPI is extremely bright with our exciting investments in Burger King and Grand Merkur. Both these businesses will
become operational during the second half of our financial year.
Burger King South Africa is scheduled to open its flagship store in our newly completed building in Heerengracht Street before the
end of our financial year, and will plan to have several more sites operational during the first half of the next financial year.
We also expect the first LPM to roll off the Grand Merkur production line before the end of the financial year.
Looking forward, our short-term goals for our LPM business remains to maintain our market leadership in both the Western Cape
and KwaZulu-Natal and to pursue the same objective in Gauteng once its Gambling Board constraints have been resolved and we
are able to roll out more LPMs. The group further continues to focus on its stated objective of attaining LPM route operator licences
for 7 500 machines in the medium term and aggressively looking at entering the technology betting market. The opportunities
in the sports-betting and on-line gaming sector (once it is legalised) are significant as is the case in the LPM sector where, at
31 December 2012, only 7 659 active LPMs were operational in South Africa out of a legislated total of 50 000. These objectives
and opportunities all point towards, what we believe to be, a significant coup in the establishment of Grand Merkur, and we are
confident that through Grand Merkur the group will be able to establish itself as a significant role-player in both the operations and
manufacturing sectors of the gaming industry.
The foundation of our investment base has been our casino investments and whilst gaming assets are not freely available, we
continue to look at opportunities to increase our exposure to cash-generative casino investments.
We will continue monitoring the progress of GrandWest's exclusivity in the Cape metropole and adapt our strategy accordingly.
Many of our opportunities and assets display remarkable synergies. Whilst we will not discard any opportunity that satisfies our
investment criteria, we will concentrate on those from which we can extract the best values that these synergies have to offer.
Please note that we will be moving to our new building at 33 Heerengracht Street, Foreshore, Cape Town during the last week in
February 2013. Our postal address and telephone numbers will remain the same.
For and on behalf of the board
H Adams A Keet
Executive Chairman Chief Executive Officer
Cape Town Cape Town
27 February 2013 27 February 2013
Prepared by: D Pienaar CA(SA)
Directors
H Adams (Executive Chairman), A Abercrombie, AW Bedford#, A Keet (Chief Executive Officer), S Petersen (Financial Director),
D Pienaar+, Dr N Maharaj#*, N Mlambo#, C Priem#*, F Samaai#
(# non-executive * independent + alternate)
Registered office Sponsor
10th Floor, 33 on Heerengracht PSG Capital (Pty) Ltd
Heerengracht Street, Foreshore, Cape Town, 8001
(PO Box 6563, Roggebaai, 8012)
Company Secretary
Transfer secretaries Lazelle Parton
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107) Registration number
1997/003548/06
Attorneys Share code
Bernadt Vukic Potash & Getz Attorneys GPL
ISIN
Corporate advisers ZAE000119814
Leaf Capital (Pty) Ltd
www.grandparade.co.za
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