Wrap Text
Unaudited Group Interim Results For The Six Months Ended 30 September 2016
Niveus Investments Limited
Incorporated in the Republic of South Africa
Registration number: 1996/005744/06
JSE share code: NIV ISIN code: ZAE000169553
("the Company" or "the Group" or "Niveus")
UNAUDITED GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R'000 R'000 R'000
ASSETS
Non-current assets 883 480 1 406 640 1 428 016
Property, plant and equipment 707 675 1 212 986 1 204 622
Investment properties 7 056 6 813 6 978
Goodwill 57 386 60 360 57 386
Intangible assets 16 307 75 034 73 637
Interest in associates and joint ventures 33 290 30 775 35 400
Deferred taxation 29 677 13 175 25 650
Loans receivable 32 089 7 497 24 343
Current assets 296 019 1 590 115 1 548 041
Other 151 970 1 444 757 1 386 970
Cash and cash equivalents 144 049 145 358 161 071
Assets of disposal group classified as held for sale 1 704 332 - -
Total assets 2 883 831 2 996 755 2 976 057
EQUITY AND LIABILITIES
Equity 2 047 978 1 984 530 2 079 228
Equity attributable to equity holders of the parent 1 390 022 1 305 028 1 381 267
Non-controlling interest 657 956 679 502 697 961
Non-current liabilities 186 641 417 680 245 422
Borrowings 74 347 286 254 92 983
Deferred revenue - - 10 900
Deferred taxation 84 321 117 208 129 372
Operating lease equalisation liability 5 694 5 457 5 235
Other payables 22 279 8 761 6 932
Current liabilities 437 532 594 545 651 407
Liabilities of disposal group classified as held for sale 211 680 - -
Total equity and liabilities 2 883 831 2 996 755 2 976 057
Net asset value per share (cents) 1 166 1 095 1 159
Net tangible asset value per share (cents) 1 116 993 1 061
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Unaudited
Unaudited Six months Unaudited
Six months ended Year ended
ended 30 September 31 March
30 September 2015 2016
2016 Restated Restated
R'000 R'000 R'000
Revenue 46 036 25 390 71 991
Net gaming win 646 009 555 435 1 166 767
Group revenue 692 045 580 825 1 238 758
Other income 6 727 9 561 6 430
Operating expenses (520 281) (506 904) (984 316)
178 491 83 482 260 872
Depreciation and amortisation (61 759) (62 280) (134 184)
Share of losses of associates (2 359) (483) (1 366)
Investment income 3 555 1 384 3 988
Fair value adjustment of remaining investment - - (1 094)
Impairment of assets (385) (504) (9 384)
Impairment of goodwill - - (8 190)
Gain/(loss) on disposal of subsidiaries - 529 (6 781)
Finance costs (16 054) (14 664) (29 989)
Profit before taxation 101 489 7 464 73 872
Taxation (36 703) (36 998) (50 147)
Profit/(loss) for the period from continuing operations 64 786 (29 534) 23 725
Net result from discontinued operations (71 200) (4 310) 32 882
(Loss)/profit for the period (6 414) (33 844) 56 607
Attributable to:
Equity holders of the parent 25 350 (27 942) 44 721
Non-controlling interest (31 764) (5 902) 11 886
(6 414) (33 844) 56 607
Unaudited
Unaudited Six months Unaudited
Six months ended Year ended
ended 30 September 31 March
30 September 2015 2016
2016 Restated Restated
R'000 R'000 R'000
Reconciliation of headline earnings Gross Net Gross Net Gross Net
Continuing operations
Earnings/(loss) attributable to equity holders of the parent 66 027 (25 480) 25 936
IAS 12 Change in tax rate - - - - 1 295 740
IAS 16 (Gains)/losses on disposal of plant and equipment (751) (563) (760) (547) 1 622 473
IAS 16 Impairment of assets 385 265 504 363 7 124 5 837
IAS 27 (Gain)/loss from disposal of subsidiaries - - (529) (529) 6 781 6 781
IAS 36 Impairment of goodwill - - - - 8 190 8 190
IFRS 3 Fair value adjustment of remaining investment - - - - 1 094 1 094
65 729 (26 193) 49 051
Discontinued operations
(Loss)/profit attributable to equity holders of the parent (40 677) (2 462) 18 785
IAS 12 Change in tax rate - - - - 452 258
IAS 16 Losses on disposal of plant and equipment 599 246 2 132 877 2 260 930
IFRS 5 Remeasurement to fair value less cost to sell 191 134 72 054 - - - -
IAS 28 Impairment of investment in joint venture 85 35 - - 400 177
31 658 (1 585) 20 150
Total headline earnings/(loss) 97 387 (27 778) 69 201
Unaudited
Unaudited Six months Unaudited
Six months ended Year ended
ended 30 September 31 March
30 September 2015 2016
2016 Restated Restated
Earnings per share (cents) 21,3 (23,9) 37,9
- Continuing operations 55,4 (21,8) 22,0
- Discontinued operations (34,1) (2,1) 15,9
Headline earnings per share (cents) 81,7 (23,7) 58,6
- Continuing operations 55,1 (22,3) 41,5
- Discontinued operations 26,6 (1,4) 17,1
Diluted earnings per share (cents) 21,1 (23,8) 37,8
- Continuing operations 54,9 (21,7) 21,9
- Discontinued operations (33,8) (2,1) 15,9
Diluted headline earnings per share (cents) 81,0 (23,7) 58,5
- Continuing operations 54,7 (22,3) 41,5
- Discontinued operations 26,3 (1,4) 17,0
Weighted average number of shares in issue ('000) 119 163 117 103 118 133
Actual number of shares in issue at end of period ('000) 119 163 119 163 119 163
Weighted average number of shares in issue (diluted) ('000) 120 258 117 351 118 390
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Unaudited
Unaudited Six months Unaudited
Six months ended Year ended
ended 30 September 31 March
30 September 2015 2016
2016 Restated Restated
R'000 R'000 R'000
(Loss)/profit for the period (6 414) (33 844) 56 607
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences (11 268) 15 661 24 213
Total comprehensive (loss)/income (17 682) (18 183) 80 820
Attributable to:
Equity holders of the parent 14 264 (12 708) 68 648
Non-controlling interest (31 946) (5 475) 12 172
(17 682) (18 183) 80 820
Total comprehensive income attributable to equity holders of the parent arises from:
- Continuing operations 54 995 (10 143) 49 911
- Discontinued operations (40 731) (2 565) 18 737
14 264 (12 708) 68 648
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 R'000 R'000
Balance at beginning of the period 2 079 228 1 985 645 1 985 645
Shares issued - 57 643 57 643
Total comprehensive (loss)/income (17 682) (18 183) 80 820
Equity-settled share-based payments 5 341 (8 439) (5 214)
Effects of changes in holding (1 043) - -
Business combination - - 811
Capital reductions and dividends (17 866) (32 136) (40 477)
Balance at end of the period 2 047 978 1 984 530 2 079 228
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 R'000 R'000
Cash flows from operating activities 195 442 (50 778) 162 849
Cash generated from/(utilised by) operations 248 490 (9 530) 250 938
Net interest 12 174 (12 881) (24 422)
Taxation paid (40 874) (28 367) (63 667)
Cash flows from investing activities (120 969) (92 643) (182 357)
Property, plant and equipment: additions (102 386) (77 583) (151 242)
Other (18 583) (15 060) (31 115)
Cash flows from financing activities (36 978) 73 472 48 293
Divdends paid (17 516) (19 462) (27 803)
Long-term funding (repaid)/recieved (19 462) 47 784 27 003
Proceeds from share issue - 45 150 45 150
Other - - 3 943
Increase/(decrease) in cash and cash equivalents 37 495 (69 949) 28 785
Classified as held for sale (54 517) - -
Cash and cash equivalents
At beginning of the period 161 071 132 286 132 286
At end of the period 144 049 62 337 161 071
SEGMENTAL ANALYSIS
Unaudited
Unaudited Six months Unaudited
Six months ended Year ended
ended 30 September 31 March
30 September 2015 2016
2016 Restated Restated
R'000 R'000 R'000
Revenue
Continuing operations
Gaming and entertainment 46 036 25 390 71 991
Discontinued operations
Beverages 566 898 548 669 1 224 214
612 934 574 059 1 296 205
Net gaming win
Gaming and entertainment 646 009 555 435 1 166 767
EBITDA
Continuing operations 178 491 83 482 260 872
Gaming and entertainment 210 366 153 640 347 858
Head office (26 502) (67 136) (79 220)
Property (5 373) (3 022) (7 766)
Discontinued operations
Beverages 81 725 10 132 75 111
260 216 93 614 335 983
Profit before tax
Continuing operations 101 489 7 464 73 872
Gaming and entertainment 132 984 77 476 160 220
Head office (25 424) (66 402) (76 975)
Property (6 071) (3 610) (9 373)
Discontinued operations
Beverages 77 452 (5 532) 44 342
178 941 1 932 118 214
Headline earnings
Continuing operations 65 729 (26 193) 49 051
Gaming and entertainment 93 324 40 976 128 859
Head office (25 212) (66 026) (76 304)
Property (2 383) (1 143) (3 504)
Discontinued operations
Beverages 31 658 (1 585) 20 150
97 387 (27 778) 69 201
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of preparation and accounting policies
The results for the six months ended 30 September 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, 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 2016.
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), and have neither been audited nor independantly reviewed by the Group's auditors.
Change in accounting estimate
The review of the useful life of gaming machines resulted in an increase in the useful life due to the extended use of gaming machines than originally
expected. The Group revised the useful life of gaming machines from six years to seven years effective 1 April 2016.
The effect of the change in the useful life of gaming machines on the depreciation expense for the six months is a decrease of R5 million and an expected
annual decrease for future years of R10 million per annum.
Galaxy's site development costs were previously depreciated over the term of the initial lease, but the estimated depreciation period has been amended to
include guaranteed renewal options, limited to a 10-year total depreciation term.
The effect of the change in the depreciation term for site development costs on the depreciation expense for the six months is a decrease of R4 million
and an expected annual decrease for future years of R7 million.
Discontinued operation
During May 2016, it was decided to dispose of the operating assets of KWV to the Vasari group. Revenue and expenses, and gains and losses relating to these
assets, have been removed from the results of continuing operations and are shown as a single line item on the face of the consolidated statement of profit
or loss ("Net result from discontinued operations"). The operating results of the discontinued operations and the effect of remeasurement of assets that
were classified as held for sale were as follows:
Unaudited Unaudited
Six months Six months Unaudited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 R'000 R'000
Profit/(loss) relating to discontinued operations
Revenue 566 898 548 669 1 224 214
Other income and operating costs (485 173) (538 537) (1 149 103)
Share of losses of associates and joint ventures - (507) (653)
Investment income - 250 1 886
Depreciation and amortisation (3 911) (14 424) (29 982)
Impairment of investment in joint ventures (85) - (400)
Finance costs (277) (983) (1 620)
Profit/(loss) before taxation 77 452 (5 532) 44 342
Taxation (22 529) 1 222 (11 460)
Profit/(loss) from discontinued operations 54 923 (4 310) 32 882
Remeasurement of disposal group (191 134) - -
Taxation 65 011 - -
Net result from discontinued operations (71 200) (4 310) 32 882
Unaudited Unaudited
Six months Six months Unaudited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 R'000 R'000
Cash flows from discontinued operations
Cash flows from operating activities 34 407 (65 728) 11 914
Cash flows from investing activities (16 766) (17 638) (41 880)
Cash flows from financing activities - - 16 395
17 641 (83 366) (13 571)
Assets of disposal group classified as held for sale
Property, plant and equipment 488 060
Intangible assets 56 481
Investments in associates and joint ventures 5 463
Inventory 1 052 928
Trade and other receivables 212 416
Current income tax assets 7
Derivative financial instruments 25 594
Bank and cash balances 54 517
1 895 466
Liabilities of disposal group classified as held for sale
Trade and other payables (205 637)
Loans (51)
Derivative financial instruments (5 992)
(211 680)
Net asset value of disposal group 1 683 786
Fair value less cost to sell i.t.o. IFRS 5 1 492 652
Fair value of disposal group assets 1 704 332
Fair value of disposal group liabilities (211 680)
Remeasurement of disposal group (191 134)
COMMENTARY
While consumer spending is under pressure and competition for discretionary spending is increasing, the Group still managed to increase net gaming win by
16% compared to the prior period.
The Department of Trade and Industry ("dti") published the draft National Gambling Amendment Bill. Unfortunately, despite our extensive representations of the
logical inconsistency of the position, the Bill persists with its view that electronic bingo terminals ("EBTs") should not "look and feel" like slot
machines. It seems like the dti attempts to curtail gambling and targets gambling outside casinos. Evidence indicates that most of the increase in gambling
occurred in casinos, in line with the growth in the number of slot machines on casino floors. The dti is taking no steps to curb this growth and holds the
view that gambling in casinos has less negative social impact, despite evidence from the National Responsible Gambling Board indicating the contrary.
The average gross gaming revenue ("GGR") per slot machine is appreciably higher than the average GGR per EBT. We will continue to present arguments in line with
the above.
In addition, the draft Liquor Amendment Bill has provisions that may be detrimental to Vukani, mainly relating to the location of liquor outlets and the
diminishment of the power of the provincial liquor authorities to adjudicate applications on a case-by-case basis, depending on their circumstances.
The Group continued with its own project to counter illegal gambling and we hope that the dti and South African Police Service will also take action against
these illegal internet establishments in due course. The North Gauteng High Court ruled that certain internet cafes are facilitating illegal gambling and
ordered the closure of the site that was the subject of the judgment.
Bingo and casino operations
The EBITDA contribution from the segment increased to R43 million from R19 million in the comparative period. EBITDA for fully developed sites increased to
R75 million from R62 million in the comparative six months. The R75 million decreased by R32 million (consisting of: head office costs, development costs
and losses from sites that are not complete) to a segment EBITDA of R43 million. If the development sites are closed and no further bid or legal costs are
incurred, the cost of managing only the fully operational sites is estimated to be R15 million per annum. On a stand-alone basis, for the six months, the
fully developed sites would therefore contribute R67,5 million to Group EBITDA.
We are in discussions with the KwaZulu-Natal Gaming and Betting Board to settle the numerous court cases impeding the roll-out of EBTs in the province.
Currently, four bingo sites are operational in the province, but they may only operate limited pay-out machines ("LPMs") and paper-based bingo.
The Group was awarded bingo licences in Hazyview, Tonga, Musina, Bochum, Moruleng and Tzaneen. Of these licences, only Moruleng is open. The Group's
interest in these licences ranges from 29% to 51%. The Group also commenced trading in Ngcobo. Other licences that are undeveloped are King William's Town,
Uitenhage, and two licences in KwaZulu-Natal. We are challenging the licence awards in Mahikeng and Klerksdorp as we believe the scoring was flawed.
The Group is now operating 1 886 EBTs (1 642 at 31 March 2016) and 174 slot machines. The average monthly income per EBT is R19 727 for the six months
ending September 2016.
Galaxy's depreciation charge includes depreciation of some EBTs, but the bulk of the base remains rented. The depreciation charge for the period was
R13,5 million (R16,5 million in the comparative period).
The Kuruman casino is still trading below our expectation, but the EBITDAR margin of 36% indicates that our cost structure is not out of line with other
similar-sized casino operations.
Vukani
Vukani increased EBITDA to R170 million from R143 million, excluding the losses in the sports betting business that were previously reported in this segment.
The installed base increased to 5 341 from 5 265 LPMs, despite the closure of sites with a total of 285 machines, as part of a capital optimisation
programme. The increase in installed machines remains below target and is expected to improve in future.
The average GGR per machine increased to R19 989 from R18 492 at year-end and R18 092 at September 2015. The depreciation charge of R46 million is
marginally lower than the comparative period, mainly due to the revision of the useful life of LPMs from six to seven years.
Excluding expenses associated with sports betting, operating expenses of R95 million increased by 6% from the comparative period.
The retail and online sports betting offerings have been combined in BET.co.za, which enabled us to reduce overall costs and provide customers with a
consistent experience. Sports betting remains an attractive business segment, but our execution has been poor in the past. The combined management team
appears to be making progress to develop a sustainable business with uniform branding.
KWV
The Group concluded the sale of the operating assets of KWV for R1,15 billion and received the first tranche of the purchase consideration of R575 million
on 14 October. The balance of the purchase price will be received in three tranches, supported by an Investec Bank payment guarantee.
The trading results of KWV, included in discontinued operations, decreased from a profit of R55 million to a loss of R71 million following the remeasurement
of the book value of the operating assets to the purchase consideration. Attributable headline profits from discontinued operations increased to R32 million
from a loss in the prior period.
The board of KWV will advise shareholders, in due course, about their future plans to use the cash reserves in the company.
Head office costs
Following the restructuring of the management agreement with Hosken Consolidated Investments Limited at an average share price of R26, head office costs
reduced to R26 million from R67 million during the comparative period. Head office costs include share-based compensation costs of R17,8 million, which is
significantly higher than the comparative period due to the increase in Niveus's share price. Excluding abnormal expenses, head office costs amounted to
R13 million.
Dividend to shareholders
The directors declared and approved an interim gross ordinary dividend for the six months ended 30 September 2016 of 18 cents per share on Friday,
18 November 2016, out of income reserves. The dividend will be payable on Monday, 19 December 2016. As at 23 November 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, 58 of 1962. The dividend amount net of South African dividends tax of 15% is
15,3 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 Monday, 12 December 2016
Trading ex dividend commences Tuesday, 13 December 2016
Record date Thursday, 15 December 2016
Payment date Monday, 19 December 2016
Share certificates may not be dematerialised or rematerialised between Tuesday, 13 December 2016 and Thursday, 15 December 2016, both days inclusive.
Andre van der Veen
Chief executive officer
23 November 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
Sponsor: PSG Capital Proprietary Limited
Website: www.niveus.co.za
Date: 23/11/2016 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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