Wrap Text
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
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