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NIVEUS INVESTMENTS LTD - Reviewed Group Consolidated Results for the year ended 31 March 2015

Release Date: 21/05/2015 15:32
Code(s): NIV     PDF:  
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Reviewed Group Consolidated Results for the year ended 31 March 2015

Niveus Investments Limited

Reg. no: 1996/005744/06
Incorporated in the Republic of South Africa
JSE share code: NIV
ISIN code: ZAE000169553
("the Company" or "the Group" or "Niveus")


REVIEWED GROUP CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION


                                                                 Reviewed               Audited
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000
ASSETS
Non-current assets                                              1 338 005             1 200 750
Property, plant and equipment                                   1 150 507             1 023 845
Investment properties                                               6 813                 3 900
Goodwill                                                           60 360                49 730
Intangible assets                                                  77 279                78 450
Interest in associates and joint arrangements                      21 693                15 272
Deferred taxation                                                  16 991                17 996
Loans receivable                                                    4 362                11 557

Current assets                                                  1 514 756             1 533 880
Other                                                           1 382 470             1 310 440
Cash and cash equivalents                                         132 286               223 440

Total assets                                                    2 852 761             2 734 630

EQUITY AND LIABILITIES
Equity                                                          1 985 645             1 902 357
Equity attributable to equity holders of the parent             1 295 018             1 173 574
Non-controlling interests                                         690 627               728 783

Non-current liabilities                                           391 526               277 034
Deferred taxation                                                 120 591               107 629
Borrowings                                                        261 033               163 225
Finance lease liabilities                                              ­                  2 404
Accruals                                                            5 823                   420
Operating lease equalisation liability                              4 079                 3 356

Current liabilities                                               475 590               555 239
Total equity and liabilities                                    2 852 761             2 734 630

Net asset value per share (cents)                                   1 107                 1 016
Net tangible asset value per share (cents)                          1 002                   918


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS


                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000

Revenue                                                         1 205 348             1 154 982
Net gaming win                                                    999 695               818 421
Group revenue                                                   2 205 043             1 973 403
Other income                                                       32 603                12 540
Other operating expenses                                       (1 917 810)           (1 773 760)
EBITDA                                                            319 836               212 183
Depreciation and amortisation                                    (129 820)             (107 588)
EBIT                                                              190 016               104 595
Investment income                                                   5 801                11 136
Share of profits of associates and joint arrangements               1 474                   331
Asset impairments                                                  (4 837)               (6 412)
Impairment of investments                                            (903)                    ­
Finance costs                                                     (24 217)              (16 496)
Profit before taxation                                            167 334                93 154
Taxation                                                          (73 326)              (34 044)
Profit for the year                                                94 008                59 110

Attributable to:
Equity holders of the parent                                       80 286                61 471
Non-controlling interests                                          13 722                (2 361)
                                                                   94 008                59 110


                                                                 Reviewed               Audited
                                                               Year ended            Year ended
                                                            31 March 2015         31 March 2014
                                                                    R'000                 R'000

Reconciliation of headline earnings                       Gross       Net      Gross        Net

Earnings attributable to equity holders of the parent              80 286                61 471
IAS 16 losses/(gains) on disposal of plant and equipment     76       (37)      (679)      (475)
IAS 16 impairment of plant and equipment                  4 837     3 585      6 412      4 230
IAS 40 fair value adjustment to investment property           ­         ­       (200)      (163)
IAS 28 impairment of investment in joint arrangement        903       419          ­          ­
Headline earnings                                                  84 253                65 063



                                                                 Reviewed               Audited
                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014

Earnings per share (cents)                                           69,0                  54,1

Headline earnings per share (cents)                                  72,4                  57,2
        
Diluted earnings per share (cents)                                   67,8                  52,8

Diluted headline earnings per share (cents)                          71,2                  55,9

Weighted average number of shares in issue ('000)                 116 402               113 677

Actual number of shares in issue at end of year ('000)            116 957               115 512

Weighted average number of shares in issue (diluted) ('000)       118 367               116 330


CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                 Reviewed               Audited
                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000

Profit for the year                                                94 008                59 110
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences                            2 875                 2 773
Total comprehensive income                                         96 883                61 883

Attributable to:
 Equity holders of the parent                                      83 030                63 927
 Non-controlling interests                                         13 853                (2 044)
                                                                   96 883                61 883


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                 Reviewed               Audited 
                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000

Balance at beginning of year                                    1 902 357             1 856 025
Stated capital
Shares issued                                                      30 754                46 657
Current operations
Total comprehensive income                                         96 883                61 883
Equity-settled share-based payments                                 6 194                 5 647
Effects of changes in holding                                     (12 550)              (19 450)
Capital reductions and dividends                                  (37 993)              (48 405)
Balance at end of year                                          1 985 645             1 902 357


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                 Reviewed               Audited
                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000

Cash flows from operating activities                              130 264               219 772
Cash flows from investing activities                             (292 620)             (235 051)
Cash flows from financing activities                               71 202               (21 246)
Decrease in cash and cash equivalents                             (91 154)              (36 525)
Cash and cash equivalents
 At beginning of year                                             223 440               259 965
 At end of year                                                   132 286               223 440
    
Bank balances and deposits                                        132 286               223 440
Cash and cash equivalents                                         132 286               223 440


SEGMENTAL ANALYSIS

                                                                 Reviewed               Audited
                                                               Year ended            Year ended
                                                                 31 March              31 March
                                                                     2015                  2014
                                                                    R'000                 R'000
Revenue
Gaming and entertainment                                           49 963                44 770
Beverages                                                       1 155 385             1 110 212
Total                                                           1 205 348             1 154 982

Net gaming win
Gaming and entertainment                                          999 695               818 421

EBITDA
Gaming and entertainment                                          266 064               216 035
Beverages                                                          92 152                26 075
Head office                                                       (38 380)              (29 927)
Total                                                             319 836               212 183


Profit before tax
Gaming and entertainment                                          127 276               117 946
Beverages                                                          61 678                  (448)
Head office                                                       (21 620)              (24 344)
Total                                                             167 334                93 154

Headline earnings
Gaming and entertainment                                           93 304                83 395
Beverages                                                          26 958                 1 050
Head office                                                       (36 009)              (19 382)
Total                                                              84 253                65 063



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of preparation and accounting policies

The results for the year ended 31 March 2015 have been prepared in accordance with International 
Financial Reporting Standards (“IFRS”), IAS 34: Interim Financial Reporting, the SAICA Financial 
Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements 
as issued by the Financial Reporting Standards Council, the requirements of the South African 
Companies Act, 2008 (as amended) and the Listings Requirements of the JSE Limited. The accounting 
policies of the Group are consistent with those applied for the year ended 31 March 2014. The adoption 
of new standards that are applicable for this financial year had no impact on the figures presented. 
Details of the standards adopted will be provided in the annual financial statements. As required by 
the Listings Requirements of the JSE Limited, the Group reports headline earnings in accordance with 
Circular 2/2013: Headline Earnings as issued by the South African Institute of Chartered Accountants. 
These financial statements were prepared under the supervision of the financial director, 
Ms MM Loftie-Eaton CA(SA).

Shares issued

On 29 July 2014, a gross dividend of 28 cents per ordinary share, with a net dividend of 23,8 cents 
per share after Dividend Withholding Tax of 15%, or the option to elect a capitalisation issue 
alternative of 1 share for every 76 shares held, was approved at the general meeting. A gross cash 
dividend of R1,6 million was paid and 1 445 185 capitalisation shares were issued on 18 August 2014.

COMMENTARY

In the face of reduced consumer spending and cost pressure in the general business environment we are 
pleased that our gaming businesses continued to show growth in earnings and margins. During the year 
we invested R309 million in capital expenditure, including losses from new operations and support 
structures, in the gaming businesses, with a significant portion thereof invested in KwaZulu-Natal (“KZN”) 
where the Group is facing material regulatory hurdles.

As indicated last year, the potential returns in the gaming sector remain good but the risk of regulatory 
interference and uncertainty has increased. The recent statements from the Department of Trade and 
Industry (“DTI”) are not investment friendly for the bingo industry and also reflect a fixation with 
legalised gambling when illegal gambling is growing at an unprecedented rate. The DTI also incorrectly 
believes that gaming outside formal casinos is more harmful to society and that the investment by casino 
operators needs to be protected. Illegal gaming is now one of the largest risks to the Group, and the 
communities they operate in. The inability of the DTI, SAPS and SARS to stop these operations is concerning. 
Numerous complaints have been lodged in multiple jurisdictions, by the gaming boards as well as the Group, 
but action remains very limited and slow.

KWV Holdings Limited (“KWV”) increased its profits substantially from the previous year but it is expected 
that profits in 2016 will be lower following a relative strengthening in the rand and sustained pressure in 
the South African brandy category.

Bingo and casino operations

The EBITDA contribution of these businesses declined from R33 million in the comparative year to R10 million 
in the current financial year. EBITDA for sites that are operationally fully developed (including the 
Kuruman casino that opened in December) was R86 million. This was reduced to R10 million by head office 
costs, development costs and losses from sites that are not yet operationally complete. It is estimated 
that the head office costs associated with fully developed sites is less than R15 million.

A significant portion of the cost and losses were incurred in KZN, where the provincial finance authorities 
have revoked licences issued to the Group in 2010. If the Group is unsuccessful in appeal and ultimately 
loses its bingo licences the Group will be required to impair assets to the value of R35 million and may be 
liable for rent and the retrenchment costs of 300 staff members.

Other costs include development costs for the new licences in the Eastern Cape and the costs of various 
bids in other provinces. Bingo licences in Uitenhage and King Williams Town, awarded to the Group, have 
been challenged by another bidder.

Vukani

Vukani continued to grow earnings despite slower than expected machine roll-out in the second half of the 
financial year. The suspension of the KZN Gaming Board members, the delay in appointment of the 
Northern Cape Gambling Board as well as reaching licence capacity in the Eastern Cape contributed to the slow
machine roll-out. The installed machine base increased from 4 643 in the prior year to 5 052 at March 2015 
(4 932 September 2014). The average Gross Gaming Revenue (“GGR”) per machine per month increased from R16 848
in March 2014 to R17 832 with total GGR growing 16% year on year.

The current year operating expenses of R184 million include an additional R8 million in marketing expenses 
compared to the R199 million expenses incurred in the prior year, which included a one-off R31 million share-
based payment expense. Operating expenses on a normalised basis therefore increased by 5%, which is largely 
inflation based.

Vukani contributed EBITDA of R260 million to the R266 million EBITDA reported for the gaming segment. This is up 
from R183 million in the prior year. Year-on-year EBITDA growth of 25% was achieved on a normalised operating 
expense basis.

At year-end the Group had nine operating sports betting licences, which did not make a significant contribution 
to GGR performance for the year and resulted in operating losses from this segment. The Group anticipates to 
operate close to breakeven levels towards the end of the 2016 financial year.

KWV

KWV reported attributable headline earnings of R48 million (R2 million March 2014). While the business has 
improved and its cost base is well controlled, the majority of the earnings were as a result of the depreciation 
of the rand and the resultant profits on foreign exchange hedges.

KWV is recognised as the foremost brandy producer in South Africa and this was reflected in numerous awards, 
including the recognition of KWV 12 year as the best brandy in the world.The volume of packed spirits sold 
remained flat, but the Group increased its market share in the brandy category to 13,8%. The brandy category is 
dominated by Distell, with nearly 70% market share, and until Distell increases prices in real terms, the category 
will remain marginally profitable at the lower end.

Wine sales in South Africa improved in the core Roodeberg, KWV and Laborie brands. The South African wine category 
is, however, under pressure internationally and the increase in bulk wine exports is further entrenching South 
African wine as a low-cost offering, at the expense of our premium offerings. In 2015, KWV was the only South African 
wine brand recognised as one of the World’s Top 50 Most Admired Wine Brands by Drinks International (33rd).

KWV will continue to hedge its foreign exchange exports and, following the appreciation of the exchange rate against 
its trading currencies, in particular the euro, expects the profits in 2016 to be lower than 2015. It is unlikely 
that it will be able to increase prices in foreign markets with local cost pressure expected to reduce overall margins. 
KWV’s investment in sales and marketing will be maintained even if it reduces profitability in the short term.

Head office costs

Head office costs amounted to R38 million, with the cost of senior management and the 50 basis points management 
fee payable to Johnnic Holdings Management Services (“JHMS”) included in this amount along with administration 
costs, i.e. listing, legal and consulting fees and internal and external audit fees. Niveus conducted an 
administration restructuring agreement with JHMS, subject to shareholder approval, whereby 50 basis points 
management fee portion of the contract is cancelled, in exchange for the issue of 1,75 million Niveus shares and 
an annual payment of R3 million, increasing by the Consumer Price Index. If approved by shareholders, head office 
costs would be reduced by R13 million using the current year management fee payment as reference. Please refer to 
the detailed announcement released on SENS on 21 May 2015.

Auditors’ review

The Condensed Consolidated Results have been reviewed by the Company’s auditors, Grant Thornton (Jhb) Inc. Their 
unqualified review opinion is available for inspection at the registered office of the Company.

Dividend to Shareholders

The directors declared and approved a gross ordinary dividend for the year ended 31 March 2015 of 12 cents per 
share on Thursday, 21 May 2015. The dividend will be payable on Monday, 15 June 2015. There are 116 956 770 
ordinary shares in issue, as at 21 May 2015. 

The dividend meets the definition of a dividend in terms of the Income Tax Act (Act 58 of 1962). The dividend 
amount net of South African dividends tax of 15% is 10,2 cents per share to those shareholders that are not 
exempt from dividends tax. The Company's tax reference number is 9564/137/84/3.

Last day to trade cum dividend                                                             Friday, 5 June 2015
Trading ex dividend commences                                                              Monday, 8 June 2015
Record date                                                                               Friday, 12 June 2015
Payment date                                                                              Monday, 15 June 2015

Share certificates may not be dematerialised or rematerialised between Monday, 8 June 2015 and Friday, 12 June 
2015, both days inclusive.

In the Company's prelisting statement it indicated its intention to pay dividends equating to 50% of headline 
earnings. In the light of the Group's growth and investment requirements, coupled with the uncertainty of the 
KZN Bingo licences, the directors resolved to amend the principle and will in future determine the dividends on 
an annual basis after considering capital requirements.

André van der Veen

Chief executive officer

21 May 2015

Paarl


CORPORATE INFORMATION

Directors: JA Copelyn†, MM Loftie-Eaton*, KI Mampeule#, ML Molefi#, JG Ngcobo#, Y Shaik†, A van der Veen* 
(* executive † non-executive # independent non-executive)

Company secretary: HCI Managerial Services Proprietary Limited

Transfer secretaries: Computershare Investor Services Proprietary Limited 70 Marshall Street, Johannesburg 2001

Sponsor: PSG Capital Proprietary Limited

Website: www.niveus.co.za
Date: 21/05/2015 03:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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