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NIVEUS INVESTMENTS LIMITED - Provisional Reviewed Group Consolidated Results For The Year Ended 31 March 2017

Release Date: 24/05/2017 13:23
Code(s): NIV     PDF:  
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Provisional Reviewed Group Consolidated Results For The Year Ended 31 March 2017

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")

PROVISIONAL REVIEWED GROUP CONSOLIDATED RESULTS
for the year ended 31 March 2017


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                                                      Audited
                                                                                         Reviewed    31 March
                                                                                         31 March        2016
                                                                                             2017    Restated
                                                                                            R'000       R'000

ASSETS
Non-current assets                                                                      1 315 728   1 429 924
Property, plant and equipment                                                             659 202   1 204 622
Investment properties                                                                      28 638       6 978
Goodwill                                                                                   59 944      56 444
Intangible assets                                                                          18 480      76 487
Interest in associates and joint ventures                                                  73 707      35 400
Deferred taxation                                                                          28 251      25 650
Loans receivable                                                                          447 506      24 343

Current assets                                                                          1 057 007   1 548 041
Other                                                                                     348 273   1 386 970
Cash and cash equivalents                                                                 708 734     161 071

Assets of disposal group classified as held for sale                                        5 419           -

Total assets                                                                            2 378 154   2 977 965

EQUITY AND LIABILITIES
Equity                                                                                  1 881 755   2 080 498
Equity attributable to equity holders of the parent                                     1 314 265   1 381 267
Non-controlling interest                                                                  567 490     699 231

Non-current liabilities                                                                   231 344     246 060
Borrowings                                                                                205 623      92 983
Deferred revenue                                                                                -      10 900
Deferred taxation                                                                          21 348     130 010
Operating lease equalisation liability                                                      4 373       5 235
Other payables                                                                                  -       6 932

Current liabilities                                                                       262 596     651 407

Liabilities of disposal group classified as held for sale                                   2 459           -

Total equity and liabilities                                                            2 378 154   2 977 965

Net asset value per share (cents)                                                           1 103       1 159
Net tangible asset value per share (cents)                                                  1 038       1 061


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

                                                                                                      Audited
                                                                                         Reviewed  Year ended
                                                                                       Year ended    31 March
                                                                                         31 March        2016
                                                                                             2017    Restated
                                                                                            R'000       R'000

Revenue                                                                                    86 639      74 941
Net gaming win                                                                          1 322 610   1 162 298
Group revenue                                                                           1 409 249   1 237 239
Other income                                                                                6 489       3 033
Operating expenses                                                                     (1 028 543)   (972 809)
                                                                                          387 195     267 463
Depreciation and amortisation                                                            (125 243)   (132 458)
Share of losses of associates and joint ventures                                           (6 345)     (1 366)
Investment income                                                                          54 073       3 969
Fair value adjustment of remaining investment                                                   -      (1 094)
Fair value adjustments of investment properties                                               403           -
Impairment of assets                                                                       (3 749)     (7 927)
Impairment of goodwill                                                                     (3 958)     (8 190)
Impairment of investment in associate                                                      (6 971)          -
Gain/(loss) on disposal of subsidiaries                                                     6 074      (6 781)
Finance costs                                                                             (30 332)    (29 977)
Profit before taxation                                                                    271 147      83 639
Taxation                                                                                  (71 340)    (50 147)
Profit for the year from continuing operations                                            199 807      33 492
Net result from discontinued operations                                                  (326 255)     23 115
(Loss)/profit for the year                                                               (126 448)     56 607

Attributable to:
Equity holders of the parent                                                               (9 154)     44 721
Non-controlling interest                                                                 (117 294)     11 886
                                                                                         (126 448)     56 607




                                                                                                                             Audited
                                                                                                     Reviewed             Year ended
                                                                                                   Year ended               31 March
                                                                                                     31 March                   2016
                                                                                                         2017               Restated
                                                                                                        R'000                  R'000
Reconciliation of headline earnings                                                         Gross         Net      Gross         Net

Continuing operations
Earnings attributable to equity holders of the parent                                                 178 874                 33 614
IAS 12 Change in tax rate                                                                       -           -      1 295         740
IAS 16 Gains on disposal of plant and equipment                                              (322)       (228)      (638)       (457)
IAS 16 Impairment of assets                                                                 3 749       2 161      7 927       5 674
IAS 27 (Gain)/loss from disposal of subsidiaries                                           (6 074)     (4 252)     6 781       6 781
IAS 28 Impairment of investment in associate                                                6 971       4 880          -           -
IAS 36 Impairment of goodwill                                                               3 958       3 958      8 190       8 190
IAS 40 Fair adjustment to investment property                                                (403)       (313)         -           -
IFRS 3 Fair value adjustment of remaining investment                                            -           -      1 094       1 094
                                                                                                      185 080                 55 636

Discontinued operations
(Loss)/profit attributable to equity holders of the parent                                           (188 028)                11 107
IAS 12 Change in tax rate                                                                       -           -        452         258
IAS 16 Impairment of assets                                                                     -           -      1 457       1 093
IAS 16 (Gains)/losses on disposal of plant and equipment                                     (197)        (81)     2 260         930
IAS 28 Impairment of investment in joint venture                                               85          49        400         177
Loss on disposal of operating assets of KWV                                               503 629     216 485          -           -
                                                                                                       28 425                 13 565




                                                                                                      Audited
                                                                                         Reviewed  Year ended
                                                                                       Year ended    31 March
                                                                                         31 March        2016
                                                                                             2017    Restated

(Loss)/earnings per share (cents)                                                            (7,7)       37,9
- Continuing operations                                                                     150,1        28,5
- Discontinued operations                                                                  (157,8)        9,4

Headline earnings per share (cents)                                                         179,2        58,6
- Continuing operations                                                                     155,3        47,1
- Discontinued operations                                                                    23,9        11,5

Diluted earnings per share (cents)                                                           (7,6)       37,8
- Continuing operations                                                                     149,2        28,4
- Discontinued operations                                                                  (156,8)        9,4

Diluted headline earnings per share (cents)                                                 178,1        58,5
- Continuing operations                                                                     154,4        47,0
- Discontinued operations                                                                    23,7        11,5

Weighted average number of shares in issue ('000)                                         119 163     118 133

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

Weighted average number of shares in issue (diluted) ('000)                               119 909     118 390



CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                                         Reviewed     Audited
                                                                                       Year ended  Year ended
                                                                                         31 March    31 March
                                                                                             2017        2016
                                                                                            R'000       R'000

(Loss)/profit for the year                                                               (126 448)     56 607
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences                                                  (20 725)     24 213
Total comprehensive (loss)/income                                                        (147 173)     80 820

Attributable to:
  Equity holders of the parent                                                            (29 879)     68 648
  Non-controlling interest                                                               (117 294)     12 172
                                                                                         (147 173)     80 820

Total comprehensive income attributable to equity holders of the parent arises from:
- Continuing operations                                                                   157 852      56 618
- Discontinued operations                                                                (187 731)     12 030
                                                                                          (29 879)     68 648



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                         Reviewed     Audited
                                                                                       Year ended  Year ended
                                                                                         31 March    31 March
                                                                                             2017        2016
                                                                                            R'000       R'000

Balance at beginning of year                                                            2 080 498   1 985 645
Shares issued                                                                                   -      57 643
Total comprehensive (loss)/income                                                        (147 173)     80 820
Equity-settled share-based payments                                                         7 303      (5 214)
Effects of changes in shareholding                                                         (4 424)          -
Business combinations                                                                      (1 596)      2 081
Capital reductions and dividends                                                          (52 853)    (40 477)
Balance at end of year                                                                  1 881 755   2 080 498




CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                         Reviewed     Audited
                                                                                       Year ended  Year ended
                                                                                         31 March    31 March
                                                                                             2017        2016
                                                                                            R'000       R'000

Cash flows from operating activities                                                      357 744     162 849
Cash generated from operations                                                            430 038     250 938
Net interest                                                                               (7 519)    (24 422)
Taxation paid                                                                             (64 775)    (63 667)

Cash flows from investing activities                                                      293 536    (182 357)
Property, plant and equipment: additions                                                 (165 154)   (151 242)
Proceeds from disposal of assets                                                          532 791       7 738
Investment in associates and joint ventures                                               (48 516)    (21 196)
Other                                                                                     (25 585)    (17 657)

Cash flows from financing activities                                                     (102 512)     48 293
Dividends paid                                                                            (38 965)    (27 803)
Net long-term funding (repaid)/received                                                   (63 547)     27 003
Proceeds from share issue                                                                       -      45 150
Other                                                                                           -       3 943

Increase in cash and cash equivalents                                                     548 768      28 785
Classified as held for sale                                                                (1 105)          -
Cash and cash equivalents
  At beginning of year                                                                    161 071     132 286
  At end of year                                                                          708 734     161 071



SEGMENTAL ANALYSIS

                                                                                                      Audited
                                                                                         Reviewed  Year ended
                                                                                       Year ended    31 March
                                                                                         31 March        2016
                                                                                             2017    Restated
                                                                                            R'000       R'000

Revenue
Continuing operations                                                                      86 639      74 941
Gaming and entertainment                                                                   81 294      71 544
Property                                                                                    5 345       3 397
Discontinued operations                                                                   566 945   1 224 661
Beverages                                                                                 566 898   1 224 214
Gaming and entertainment                                                                       47         447
                                                                                          653 584   1 299 602

Net gaming win
Continuing operations
Gaming and entertainment                                                                1 322 610   1 162 298
Discontinued operations
Gaming and entertainment                                                                    4 000       4 469
                                                                                        1 326 610   1 166 767

EBITDA
Continuing operations                                                                     387 195     267 463
Gaming and entertainment                                                                  441 409     354 449
Head office                                                                               (47 054)    (79 220)
Property                                                                                   (7 160)     (7 766)
Discontinued operations                                                                    79 926      68 520
Beverages                                                                                  81 725      75 111
Gaming and entertainment                                                                   (1 799)     (6 591)
                                                                                          467 121     335 983

Profit before tax
Continuing operations                                                                     271 147      83 639
Gaming and entertainment                                                                  279 393     169 987
Head office                                                                               (44 610)    (76 975)
Property                                                                                   36 364      (9 373)
Discontinued operations                                                                  (429 280)     34 575
Beverages                                                                                (426 177)     44 342
Gaming and entertainment                                                                   (3 103)     (9 767)
                                                                                         (158 133)    118 214

Headline earnings
Continuing operations                                                                     185 080      55 636
Gaming and entertainment                                                                  208 987     135 444
Head office                                                                               (43 990)    (76 304)
Property                                                                                   20 083      (3 504)
Discontinued operations                                                                    28 425      13 565
Beverages                                                                                  31 528      20 150
Gaming and entertainment                                                                   (3 103)     (6 585)
                                                                                          213 505      69 201


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of preparation and accounting policies
The results for the year ended 31 March 2017 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 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 Muriel Loftie-Eaton CA(SA).

Review report of the independent auditor
The provisional condensed consolidated financial statements for the year ended 31 March 2017 have been reviewed by Grant Thornton 
Johannesburg Partnership, who expressed an unmodified review conclusion. The auditor’s report does not necessarily report on all 
of the information contained in the financial results. Shareholders are therefore advised that in order to obtain a full 
understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the 
accompanying financial information from the issuer’s registered office.

Change in accounting estimate
The annual re-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 year, is a decrease of 
R10 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 current period
is a decrease of R8 million and an expected annual decrease for future periods of R7 million.


Discontinued operations
Operating assets of KWV
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 loss on sale of assets were as follows:

                                                        Reviewed      Audited
                                                      Year ended   Year ended
                                                        31 March     31 March
                                                            2017         2016
                                                           R'000        R'000

(Loss)/profit relating to discontinued operations
Revenue                                                  566 898    1 224 214
Other income and operating costs                        (485 173)  (1 149 103)
Share of losses of associates and joint ventures               -         (653)
Investment income                                            411        1 886
Depreciation and amortisation                             (3 911)     (29 982)
Impairment of investment in joint venture                    (85)        (400)
Loss on disposal of business                            (503 629)           -
Finance costs                                               (688)      (1 620)
(Loss)/profit before taxation                           (426 177)      44 342
Taxation                                                 103 025      (11 460)
(Loss)/profit from discontinued operations              (323 152)      32 882

Cash flows from discontinued operations
Cash flows from operating activities                      34 407       11 914
Cash flows from investing activities                     (16 766)     (41 880)
Cash flows from financing activities                           -       16 395
                                                          17 641      (13 571)



Shares in gaming businesses
During March 2017, it was contracted to dispose of subsidiaries Jacaranda Royal Casino Limited, VSlots Lesotho (Proprietary) 
Limited and VSlots Swaziland (Proprietary) Limited. 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 loss on sale of assets were as follows:

                                                           Reviewed     Audited
                                                         Year ended  Year ended
                                                           31 March    31 March
                                                               2017        2016
                                                              R'000       R'000

Loss relating to discontinued operations
Revenue                                                          47         447
Net gaming win                                                4 000       4 469
Other income and operating costs                             (5 846)    (11 507)
Investment income                                                 -          19
Depreciation and amortisation                                (1 301)     (1 726)
Impairment of assets                                              -      (1 457)
Finance costs                                                    (3)        (12)
Loss from discontinued operations                            (3 103)     (9 767)
Remeasurement of disposal group                                   -           -
Net result from discontinued operations                      (3 103)     (9 767)

Cash flows from discontinued operations
Cash flows from operating activities                         (2 216)     (4 602)
Cash flows from investing activities                          1 571      (1 301)
                                                               (645)     (5 903)

Assets of disposal group classified as held for sale
Property, plant and equipment                                 1 718
Intangible assets                                             1 335
Trade and other receivables                                   1 261
Bank and cash balances                                        1 105
                                                              5 419

Liabilities of disposal group classified as held for sale
Trade and other payables                                     (2 419)
Financial liabilities                                           (40)
                                                             (2 459)

Net asset value of disposal group                             2 960

Fair value less cost to sell ITO IFRS 5                       2 960
Fair value of disposal group assets                           5 419
Fair value of disposal group liabilities                     (2 459)
Remeasurement of disposal group                                   -


Restatement of prior year figures
The acquisition of a controlling interest in Betcoza on 1 December 2015 qualified as a business combination in terms of 
IFRS 3 - Business Combinations. Comparative figures as at 31 March 2016 were determined based on all information available
at the acquisition date ("provisional accounting"). This provisional accounting was adjusted for new information obtained
within the timeframe of 12 months after the acquisition date. These adjustments to the fair values determined in the 
provisional purchase price allocation are not treated as movements in the current financial year, but as an adjustment to
the comparative figures as at 31 March 2016. The effects of the revised acquisition accounting are as follows:

Intangible assets increased by R2,9 million
Goodwill decreased by R0,9 million
Deferred tax liability increased by R0,6 million
Non-controlling interest increased by R1,3 million

COMMENTARY
Consumer spending remains under pressure and is expected to remain under pressure for the next year. We are fortunate that
the Group managed to increase net gaming win by 13,8% compared to the prior period. 

The Group has made representations to the Department of Trade and Industry following the publication of the draft National 
Gaming Amendment Bill. We remain hopeful that our representations, in particular about the operation of electronic bingo
terminals ("EBTs") will be successful. 

Illegal gambling remains a significant concern. We are seeing certain provinces taking more decisive action against these 
operators, but much remains to be done. Our own efforts have resulted in the closure of sites, and a High Court judgement 
in our favour, will assist in expediting the closure of more sites.

Bingo and casino operations
The EBITDA contribution from this the segment increased to R104 million from R62 million in the comparative period. EBITDA 
from fully developed sites (before head office costs) increased to R152 million from R130 million for the prior year. The 
R152 million decreased to R104 million as a result of head office costs, development costs and losses of new sites that 
are not fully operational. If the development sites are closed, and no further bid or legal costs are incurred, the head 
office cost of managing only the fully developed sites is estimated to be R20 million per annum. On a stand alone basis the 
fully developed sites therefore make a pro forma EBITDA of R132 million per annum. 

The Group now operates 2 350 EBTs, an increase of 708 compared to the prior year. 

The depreciation cost of the bingo operation is relatively low as the EBTs and premises are mostly rented. The depreciation
charge decreased to R31 million from R35 million in the prior period.

The discussions with KwaZulu-Natal Gaming and Betting Board to settle numerous court cases are continuing. The main impediment
to the settlement of the various cases, are actions brought by some of the incumbent casino operators against the approval of
EBTs by the KZN gaming board.

During the year the Group was awarded licences in Hazyview, Tonga, Musina, Bochum, Moruleng, Uitenhage, Ngcobo, King Williams
Town and Tzaneen. We have already opened Bochum, Ngcobo, King Williams Town and Moruleng with the balance of licences estimated
to be operational by the end of the calendar year. In addition, the challenge against our Uitenhage licence was dismissed. 
Construction has commenced and we expect to be open by 30 September 2017. 

The performance of the Kuruman casino has improved significantly. The net gaming win grew by 17,6% compared to the prior year 
and the EBITDAR margin of 39% is a 3% improvement compared to the interim report.

Vukani
Vukani increased EBITDA to R343 million from R300 million (R291 million after adding back R9 million of sports betting losses, 
now separately reported) in the comparative period. 

The depreciation charge decreased by R4,1 million for the year. This reduction is mainly as a result of the change of our 
limited pay-out machine useful life estimate from six to seven years. We continue to invest in new machines where required 
and assess our machine replacement requirements to ensure that we achieve an appropriate return on capital on this investment.

The installed machine base increased to 5 603 machines (2016: 5 265) representing an increase of 262 machines since the 
September 2016 report. 

Average monthly gross gaming revenue (“GGR”) per machine was R20 352 (2016: 18 492) with total GGR growing 12% year on year.

Operating expenses for the year were R199 million (2016: R199 million). On a like for like basis expenses increased by 5,9%.

Sports betting
The retail and online sports betting offering have been consolidated under BET.co.za. The online offering is profitable and is 
growing consistently. The BET.co.za mobile app was launched in an effort to further improve the service offering and we will 
continue to invest in this channel. The number of retail shops have been reduced following an evaluation of long term potential 
and investment requirements. The combined operations made an EBITDA loss of R3,6 million for the year compared to R9,5 million 
in 2016.

KWV
The Group concluded the sale of the operating assets of KWV for R1,18 billion and received the first tranche of the purchase 
consideration of R575 million on 14 October 2016. 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, increased from a headline
profit of R20 million to R32 million following the re-measurement of the book value of the operating assets to the purchase 
consideration. Attributable headline profits from continuing operations was R20 million for the year.

Head office costs
Head office costs reduced to R47 million from R79 million and included share-based compensation expenses of R29 million compared 
to R9 million in 2016. On a normalised basis we expect head office costs to be R26 million per year. 

Change in directors
Mr Khutso Mampeule has resigned from his position as independent non-executive director from 19 April 2017.

Dividend 
The directors declared and approved a final gross ordinary dividend of 22 cents out of income reserves. The dividend will be 
payable on 19 June 2017. 

The applicable dates are as follows:
Distribution declared                            Wednesday, 24 May 2017
Last day to trade cum distribution               Monday, 12 June 2017
Shares trade ex distribution                     Tuesday, 13 June 2017
Record date                                      Thursday, 15 June 2017
Payment date                                     Monday, 19 June 2017

Share certificates may not be dematerialised or materialised between Tuesday, 13 June 2017 and Thursday, 15 June 2017, 
both days inclusive.

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 20% is 17,6 cents per share to those shareholders that are not exempt from dividends tax. 
The Company’s tax reference number is 9564/137/84/3.

As at 24 May 2017, there are 119 162 734 ordinary shares in issue.


Andre van der Veen
Chief executive officer

24 May 2017
Paarl

CORPORATE INFORMATION

Directors: JA Copelyn^, MM Loftie-Eaton*, 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

www.niveus.co.za


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