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NIVEUS INVESTMENTS LIMITED - Reviewed Provisional Group Consolidated Results For The Year Ended 31 March 2016

Release Date: 25/05/2016 13:00
Code(s): NIV     PDF:  
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Reviewed Provisional Group Consolidated Results For The Year Ended 31 March 2016

Niveus Investments Limited 
Registration number: 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 PROVISIONAL GROUP CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2016

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                   Reviewed           Audited
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000
ASSETS

Non-current assets                                                1 428 016         1 338 005
Property, plant and equipment                                     1 204 622         1 150 507
Investment properties                                                 6 978             6 813
Goodwill                                                             57 386            60 360
Intangible assets                                                    73 637            77 279
Interest in associates and joint ventures                            35 400            21 693
Deferred taxation                                                    25 650            16 991
Loans receivable                                                     24 343             4 362

Current assets                                                    1 548 041         1 514 756
Other                                                             1 386 970         1 382 470
Cash and cash equivalents                                           161 071           132 286


Total assets                                                      2 976 057         2 852 761



EQUITY AND LIABILITIES

Equity                                                            2 079 228         1 985 645
Equity attributable to equity holders of the parent               1 381 267         1 295 018
Non-controlling interest                                            697 961           690 627

Non-current liabilities                                             245 422           391 526
Borrowings                                                           92 983           261 033
Deferred revenue                                                     10 900                 -
Deferred taxation                                                   129 372           120 591
Operating lease equalisation liability                                5 235             4 079
Other payables                                                        6 932             5 823

Current liabilities                                                 651 407           475 590
Total equity and liabilities                                      2 976 057         2 852 761


Net asset value per share (cents)                                     1 159             1 107
Net tangible asset value per share (cents)                            1 061             1 002



CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000

Revenue                                                           1 296 205         1 205 348
Net gaming win                                                    1 166 767           999 695
Group revenue                                                     2 462 972         2 205 043
Other income                                                         17 852            32 603
Other operating expenses                                         (2 144 841)       (1 917 810)
                                                                    335 983           319 836
Depreciation and amortisation                                      (164 166)         (129 820)
Share of (losses)/profits of associates and joint ventures           (2 019)            1 474
Investment income                                                     5 874             5 801
Fair value adjustment of remaining investment                        (1 094)                -
Impairment of assets                                                 (9 384)           (4 837)
Impairment of goodwill                                               (8 190)                -
Impairment of investment in joint ventures                             (400)             (903)
Loss on disposal of subsidiaries                                     (6 781)                -
Finance costs                                                       (31 609)          (24 217)
Profit before taxation                                              118 214           167 334
Taxation                                                            (61 607)          (73 326)
Profit for the year                                                  56 607            94 008

Attributable to:
  Equity holders of the parent                                       44 721            80 286
  Non-controlling interest                                           11 886            13 722
                                                                     56 607            94 008


                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000

Reconciliation of headline earnings                        Gross        Net  Gross        Net

Earnings attributable to equity holders of the parent                44 721            80 286
IAS 12 Change in tax rate                                  1 747        998      -          -
IAS 16 Losses/(gains) on disposal of plant and equipment   1 622        473     76        (37)
IAS 16 Impairment of assets                                9 384      6 767  4 837      3 585
IAS 27 Loss from disposal of subsidiaries                  6 781      6 781      -          -
IAS 28 Impairment of investment in joint ventures            400        177    903        419
IAS 36 Impairment of goodwill                                190      8 190      -          -
IFRS 10 Fair value adjustment of remaining investment      1 094      1 094      -          -
Headline earnings                                                    69 201            84 253


                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015

Earnings per share (cents)                                             37,9              69,0
Headline earnings per share (cents)                                    58,6              72,4

Diluted earnings per share (cents)                                     37,8              67,8
Diluted headline earnings per share (cents)                            58,5              71,2

Weighted average number of shares in issue ('000)                   118 133           116 402

Actual number of shares in issue at end of year ('000)              119 163           116 957

Weighted average number of shares in issue (diluted) ('000)         118 390           118 367



CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000

Profit for the year                                                  56 607            94 008
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences                             24 213             2 875
Total comprehensive income                                           80 820            96 883


Attributable to:
  Equity holders of the parent                                       68 648            83 030
  Non-controlling interest                                           12 172            13 853
                                                                     80 820            96 883



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000

Balance at beginning of year                                      1 985 645         1 902 357
Stated capital
Shares issued                                                        57 643            30 754
Current operations
Total comprehensive income                                           80 820            96 883
Equity-settled share-based payments                                  (5 214)            6 194
Effects of changes in holding                                             -           (12 550)
Business combination                                                    811                 -
Capital reductions and dividends                                    (40 477)          (37 993)
Balance at end of year                                            2 079 228         1 985 645



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000            R'000

Cash flows from operating activities                                162 849           130 264
Cash flows from investing activities                               (182 357)         (292 620)
Cash flows from financing activities                                 48 293            71 202
Increase/(decrease) in cash and cash equivalents                     28 785           (91 154)
Cash and cash equivalents
  At beginning of year                                              132 286           223 440
  At end of year                                                    161 071           132 286

Bank balances and deposits                                          161 071           132 286
Cash and cash equivalents                                           161 071           132 286



SEGMENTAL ANALYSIS

                                                                   Reviewed           Audited
                                                                 Year ended        Year ended
                                                                   31 March          31 March
                                                                       2016              2015
                                                                      R'000             R'000
Revenue
Gaming and entertainment                                             71 991            49 963
Beverages                                                         1 224 214         1 155 385
Total                                                             1 296 205         1 205 348


Net gaming win
Gaming and entertainment                                          1 166 767           999 695


EBITDA
Gaming and entertainment                                            347 858           266 064
Beverages                                                            67 345            92 152
Head office                                                         (79 220)          (38 380)
Total                                                               335 983           319 836


Profit before tax
Gaming and entertainment                                            160 220           127 276
Beverages                                                            34 969            61 678
Head office                                                         (76 975)          (21 620)
Total                                                               118 214           167 334


Headline earnings
Gaming and entertainment                                            128 859            93 304
Beverages                                                            16 646            26 958
Head office                                                         (76 304)          (36 009)
Total                                                                69 201            84 253



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Basis of preparation and accounting policies

The results for the year ended 31 March 2016 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, No. 71 of 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 2015. 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 2/2015 - 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 15 September 2015, 1 750 000 shares were issued to Johnnic Holdings Management Services Limited for 
R45 million in cash as approved by shareholders at the general meeting held on 9 September 2015. 
On 29 September 2015, 455 964 shares were issued to Group employees in terms of the Niveus Employee 
Share Scheme.



COMMENTARY


The growth in our gaming division continues to outperform the general economy and other sectors of the gaming  
industry. We are very fortunate to achieve this and remain positive that our growth will continue to surpass 
the country's overall growth rate. However, our gaming business is impacted by the lower profitability of the 
hospitality sector in general where our own in-house restaurants in Galaxy and our site owners' businesses in 
Vukani are affected by reduced profitability.

Legislative changes remain the most significant threat to the group. The recent release of the Department of 
Trade and Industry's ("dti") National Gambling Policy provides an indication of National Government's policy 
direction. The policy still contains provisions that are negative to the bingo industry, especially regarding 
the number and type of electronic bingo terminals ("EBTs"). We are engaging with the provincial gaming boards 
to ensure that the roll-out of EBTs continue and that economic feasibility of bingo licences are not 
compromised significantly.

Illegal gaming is growing unabated. The South African Police Service and other regulatory structures are not 
able to curtail the growth, and the illegal operators are becoming even more audacious in the location and 
type of sites they are opening. In some instances illegal gaming is conducted in premises in very close 
proximity to police stations. The dti continues to focus on restricting legal gaming when millions of rands 
in taxes are being lost through illegal gaming activities.

The significant depreciation of the rand will have a negative effect on our gaming business as most of our 
equipment is imported. In KWV it will have a positive effect since a large portion of our wine is exported 
and our bulk brandy sales are predominantly to the export market.

During the year, we invested R185 million in capital expenditure in the gaming business, including losses 
from new operations and R45 million in capital expenditure in KWV. The level of the group's capital 
expenditure is mainly determined by our machine replacement policy in Vukani and new licences in Galaxy.

Debt held with recourse to Niveus is R312 million, which at 1,16 times EBITDA (excluding KWV) is well within 
tolerable risk limits.


Gaming - Galaxy Gaming and Casino ("Galaxy")

EBITDA increased to R62 million (2015: R33 million), of which fully developed sites contributed R130 million 
(2015: R86 million). The fully developed sites' EBITDA was reduced to R62 million by head office costs, 
development and bid costs for new sites, start-up costs and trading losses. We estimate that the head office 
costs to manage the fully developed sites would be less than R10 million per annum.

The new bid costs and legal costs of the group amounted to approximately R12 million. These costs are expected 
to increase due to litigation over the award of our licences in the Eastern Cape and the legal cases relating 
to the KwaZulu-Natal ("KZN") province where the province's bingo licences and EBT awards were challenged by 
the MEC of Finance.

The number of EBTs in operation in the group is 1 642. Galaxy's site development costs are depreciated over 
the term of our leases and we expect the costs of redeveloping/maintaining the sites following the initial 
lease term to be substantially lower than the current depreciation charge. There is a limited depreciation 
charge associated with our EBTs since most are rented.

The performance of the Kuruman casino is poor, partly due to the decline of the mining industry in the region, 
and operational issues. The business has positive cash-flows, but it is not generating an economic return 
on our investment. We are working on plans to increase activity in the complex, but this remains a challenge 
given the economic conditions. We remain positive about this licence and its prospects.


Gaming - Vukani

Vukani increased its EBITDA to R291 million (2015: R260 million). This included losses in sports betting of 
R9 million (2015: R7 million) and exceptional items of R12 million (2015: R8 million). Adjusted for these 
items, the core business grew EBITDA by 14%. This is a satisfactory performance but below our expectations, 
mainly due to the underperformance of the Eastern Cape licence where a new competitor reduced our market 
share and the KZN province where we did not receive many new licences due to the issues at the KZN Gaming 
and Betting Board.

The installed machine base increased to 5 265 machines (2015: 5 052). This is only 41 machines more than 
what we reported in our September results. While this increase is very small and below our expectation, 
the Group also closed approximately 100 sites (500 limited pay-out machines ("LPMs")) during the year as 
part of a programme to optimise our return on capital. The gross new site installations for the year 
were 213 (approximately 715 LPMs). We will continue with this programme as we think there is significant 
capacity to replace underperforming sites in the group, rather than purely focusing on new roll-outs.

The average monthly gross gaming revenue ("GGR") per machine was R18 492 (2015: R17 832) with total GGR 
growing 11% year on year.

Operating expenses for the year were R199 million (2015: R184 million). On a like-for-like basis expenses 
increased by 7,3%, which included the full operating cost of the new Northern Cape licence.

The depreciation charge increased by 27% as the cost of machine replacements at a higher cost was accounted 
for. It is our policy to depreciate gaming machines over six years and assess machine replacement requirements 
based on a number of factors to ensure that we receive an appropriate return on capital on this significant 
investment.

Despite incurring losses in our sports betting offering, we remain confident that it is a profitable gaming 
sector and acknowledge that we need to improve our execution and focus. Our effective shareholding in 
Bet.co.za is 42,6%. We incurred greater losses in this business segment than we expected at the prior 
reporting date and have subsequently adapted our business model. We intend to combine our retail operations 
with Bet.co.za and to consolidate our sports betting offering under one brand, Bet.co.za, that will leverage 
marketing spend and overhead costs.


KWV

KWV reported headline earnings of R31 million (2015: R48 million). While this is lower than the previous year, 
it included foreign exchange losses of R40 million (2015: profit R31 million) and reduced income from bulk 
brandy sales of R8 million (2015: R34 million).

Revenue from wine sales increased by 13%, with volume growth of 8%. Our core brands are performing well and 
despite a decline in the South African wine category internationally, our brands have managed to retain and 
grow volume.

Revenue from spirit sales only declined by 17,5% despite a 31% decline in volume, mainly as a result of lower 
bulk spirits sales. Despite the lower sales volume, the profitability of our core brands increased significantly 
as a result of our premiumisation strategy.

The core business of KWV is improving every year and the depreciation of the rand will have a positive effect 
on earnings in the 2017 financial year.

The Group has announced the disposal of the core operating assets of KWV subsequent to the end of the financial 
year. The disposal for R1,15 billion is subject to a number of conditions precedent, including a due diligence 
and approval by the regulatory authorities.


Auditors' review

The Provisional Condensed Consolidated Results have been reviewed by the Company's auditors, Grant Thornton 
Johannesburg Partnership. Their unqualified review opinion is available for inspection at the registered office 
of the Company.


Dividend to Shareholders

On Friday, 20 May 2016, the directors declared and approved a gross ordinary dividend of 10 cents per share 
for the year ended 31 March 2016 out of income reserves. The dividend will be payable on Monday, 20 June 2016. 
As at 25 May 2016, there are 119 162 734 ordinary shares in issue.

The dividend meets the definition of a dividend in terms of the Income Tax Act, No. 58 of 1962. The dividend 
amount, net of South African dividends tax of 15%, is 8,5 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                                                         Thursday, 9 June 2016
Trading ex dividend commences                                                           Friday, 10 June 2016
Record date                                                                             Friday, 17 June 2016
Payment date                                                                            Monday, 20 June 2016

Share certificates may not be dematerialised or rematerialised between Friday, 10 June 2016 and 
Friday, 17 June 2016, both days inclusive.

Andre van der Veen

Chief executive officer

25 May 2016

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: 25/05/2016 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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