Wrap Text
Abridged Audited Financial Statements For The Year Ended 30 June 2017
Grand Parade Investments Limited
Registration number: 1997/003548/06
Share code: GPL
ISIN: ZAE000119814
("GPI" or "the Company" or "the Group")
ABRIDGED AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
SALIENT FEATURES
25% increase in revenue (R'millions)
30 June 2017 30 June 2016
R963 R772
331% decrease in headline (loss)/ earnings (cents per share)
30 June 2017 30 June 2016
(4.59) 1.99
90% decrease in basic earnings (cents per share)
30 June 2017 30 June 2016
4.39 43.01
2.5% increase in intrinsic NAV (cents per share)
30 June 2017 30 June 2016
698 681
38% decrease reduction in debt equity ratio
30 June 2017 30 June 2016
16.8% 27.1%
INTRODUCTION
GPI's major investments in the Food and Gaming and Leisure industries continued to face significant pressure from the South African consumer during the year. South
Africa is currently in the midst of economic and political uncertainty which was evidenced by the ratings downgrades which occurred during the financial year. Consumer
spending will continue to be strained in the short to medium term due to the impact of these downgrades starting to negatively affect food and fuel prices through
higher inflation and import costs.
GPI has remained focussed on driving operational efficiencies and identifying opportunities to increase revenues across its Food operations. Total revenue for the year
has increased by 25% from R772 million in the prior year to R963 million in the current year. The increase is largely driven by the commencement of trading in Dunkin Brands
and an increase in revenue in Burger King driven from higher traffic across the stores resulting from more consumer-focussed value offerings. Our operational efficiencies
focus stemming from a management restructure as well as an integrated approach to procurement has resulted in a reduction in costs, the benefits which will be fully realised
in the coming years.
GPI's limited exit from the Gaming and Leisure investments has continued in the current year with the disposal of a 19.9% equity interest in Sun Slots (Pty) Ltd (Sun
Slots), being the third and final tranche of the staged disposal. After these disposals, GPI's Gaming and Leisure investment portfolio consists of a 15.1% holding in
Sunwest (Pty) Ltd (SunWest) and Worcester Casino (Pty) Ltd (Worcester) and a 30% holding in Sun Slots.
Overall headline earnings per share have reduced to a loss of 4.59 cents per share from 1.99 cents per share profit in the prior year, which is as result of the reduced
stake in SunWest which contributed 9.20 cents per share to the decrease.
INVESTMENT ACTIVITIES
During the past financial year, the Group continued to restructure its investment portfolio in line with its strategy of increasing its investments in food, moving
towards strategic investments in gaming and leisure and completely divesting from its non-core investments. Details of these transactions are set out below.
FOOD
The recently acquired brands, namely Dunkin' Donuts and Baskin-Robbins, were successfuly launched in the Western Cape and were received exceptionally well by the local
consumer.
GAMING AND LEISURE
The Group's exit from its gaming assets is indicative of the Group's intention to remain a strategic investment player with significant minority stakes in its Assets.
The final disposal of Sun Slots during the year, reduced the Group's holding down to 30% with Sun International holding 70%.
The transaction to dispose of a 10.0% holding in both SunWest and Worcester Casino to Tsogo Sun Gaming (Pty) Ltd (Tsogo), concluded in the prior year, with a deferred
payment arrangement was accelerated in the current year.
The details of these transactions are as follows:
Sun Slots Disposal
On 16 November 2016, GPI concluded the disposal of a 19.9% equity interest in Sun Slots, being the third and final tranche of the staged deal to dispose of a 70%
equity investment in Sun Slots to Sun. GPI received proceeds of R262.5 million and recognised a profit on disposal of R32.4 million, net of Capital Gains Tax, in
profit or loss for the period.
Payment of deferred proceeds from disposal of casino assets
In terms of the disposal of 10.0% of SunWest and Worcester, Tsogo had agreed to pay a total of R675.0 million for the investments by way of an upfront payment
of R112.5 million and the balance by way of 15 equal monthly instalments of R37.5 million ending September 2017. GPI received the R112.5 million upfront payment
during the prior financial period and R187.5 million in installments up to 30 November 2016. On 30 November 2016, GPI concluded an agreement with Tsogo to accelerate
the payment of the remaining R375.0 million in deferred proceeds. A total payment of R360.0 million was made by Tsogo, which represented a R15.0 million discount on
the outstanding balance of R375.0 million.
NON-CORE INVESTMENTS
During the year the Group entered into an agreement to dispose of the Mac Brothers properties located in Epping and Sebenza. Both properties were sold for a total
consideration of R59.5 million. This resulted in a profit on sale of R4.5 million before tax, net of attorneys fees of R1.5 million and other costs to sell
of R1.6 million.
The Group also disposed of its property situated in Atlantis for a total consideration of R35 million, resulting in a profit before tax, after selling costs, of
R12.9 million.
GPI exited two non-core investments during the period by concluding sale agreements in respect of Grand Linkstate (Pty) Ltd and Grand Sport (Pty) Ltd. Subsequent to
year end GPI also concluded an agreement to sell its 51% share in Grand Tellumat Manufacturing (Pty) Ltd. Furthermore the Group also entered into a agreement to swap
its stake in Atlas Gaming Australia for a 26% stake in a local company called Infinity Gaming Africa (Pty) Ltd (IGA). The sale of these non-core investments will enable
GPI to dedicate resources efficiently to its core investments in the coming financial year.
GROUP FINANCIAL REVIEW
The Group uses headline earnings to assess the underlying investment contributions to the Group's earnings. The reason for using headline earnings is that it
eliminates the once-off effects of the Group's investment activities and therefore provides a comparable view of the Group's continuing earnings.
The Group's headline earnings have continued to come under pressure since its initial investment into food during the 2013 financial year with the total headline
earnings per share declining from 18.23 cents per share for the year ended 30 June 2013 to a headline loss of 4.59 cents per share in the current year. The decline
in headline earnings is largely due to the commencement of trading in respect of Dunkin' Donuts and Baskin-Robbins which collectively contributed a R35.7 million
headline loss for the period but was offset by an improvement in Burger King for the period which reduced its loss to R11.0 million. The decreased holding in SunWest
of 15.1% (2016: 25.1%) also contributed to the decline in earnings, with SunWest contribution decreasing by R40.3 million to R70.3 million.
GPI showed an overall decrease in its headline earnings from core investments for the year, which declined by R60.0 million from a profit of R96.3 million last year
to R36 million this year. The core investment headline earnings decrease is attributed to the sale of the 10% stake in SunWest.
During the current year, Grand Sport and Grand Linkstate was sold which is in line with the Group's strategy to divest of non-core investments and subsequent to year
end GPI signed a sale agreement in respect of Grand Tellumat subject to certain conditions. These non-core investments collectively contributed R12.4 million losses to
the headline loss in the financial year.
The table below shows the contribution each investment made to the Group headline earnings:
30 June 30 June
2017 2016 Movement
Company R'000s R'000s R'000s %
Food (67 657) (33 895) (33 762) (100)
Burger King (10 953) (29 938) 18 985 63
Dunkin'Donuts (22 254) (3 713) (18 541) (499)
Baskin-Robbins (13 481) (1 856) (11 625) (626)
Mac Brothers (8 051) 7 493 (15 544) (207)
Spur (4 939) (5 816) 877 15
Grand Foods Meat Plant (7 979) (65) (7 914) (12 175)
Gaming and Leisure 103 755 130 209 (26 454) (20)
SunWest 70 354 110 665 (40 311) (36)
Sun Slots 30 102 27 734 2 368 9
Worcester Casino 3 299 (8 190) 11 489 140
Central costs (43 816) (73 508) 29 692 40%
GPI properties 2 158 (6 241) 8 399 135%
Central costs (45 974) (67 267) 21 293 32%
Non-core Investments (12 408) (13 421) 1 013 8
GTM (9 350) (5 118) (4 232) (83)
Grand Sport (3 058) (7 455) 4 397 59
Grand Linkstate - (848) 848 100
Headline (loss)/earnings (20 126) 9 385 (29 511) (314)
INTRINSIC NET ASSET VALUE (iNAV)
As at 30 June 2017, GPI's management has valued the GPI Group on a sum of the parts (SOTP) basis at 698 cents per share (excluding head office costs and CGT impact).
This represents a 2.5% increase in the intrinsic net asset value in the year since 30 June 2016, where management's valuation of the Group was 681 cents per share
(excluding head office costs and CGT impact).
The GPI closing share price at 30 June 2017 was 291 cents per share, which when compared against the year-end iNAV implies it is trading at a 58% share price discount.
The values of most of the investments held by GPI are not regarded as complex valuations. The Group attributes the discount to its share mainly to the early stage food
investment which is still at the bottom of the J-curve, save for Burger King, which recently has started to move into the early growth phase of its life cycle. The GPI
management team are confident that the forecasts used in determining the discounted cash flows for Food Assets are both conservative and achievable.
The table below provides a detailed breakdown of the 30 June 2017 iNAV by investment:
GPI Related % of
Valuation 100% GPI Equity Holding co Intrinsic port-
methodology Equity value Holding % value borrowings NAV folio
Company R'000s R'000s R'000s R'000s R'000s R'000s %
Food - - - 1 514 212 (240 742) 1 273 470 42
BKSA DCF 854 236 91,1 778 209 - 778 209 26
Dunkin' Donuts NAV 35 681 100,0 35 681 - 35 681 1
Baskin-Robbins NAV 16 371 100,0 16 371 - 16 371 1
Spur Traded price 3 048 314 17,5 514 650 (240 742) 273 908 9
Mac Brothers DCF 120 429 100,0 120 429 - 120 429 4
Grand Foods Meat Plant DCF 50 435 96,6 48 872 - 48 872 22
Gaming and Leisure - - - 1 539 142 - 1 539 142 51
SunWest EV/EBITDA 5 737 496 15,1 866 362 - 866 362 29
Worcester Casino EV/EBITDA 180 571 15,1 27 266 - 27 266 1
GPI Slots EV/EBITDA 2 151 715 30,0 645 514 - 645 514 22
Other investments - - - 235 800 (74 903) 160 897 5
GPI properties Various 235 800 100 235 800 (74 903) 160 897 5
Other Group companies cash and
cash equivalents 22 020
Other Group companies net assets 5 946
iNAV: Ordinary shareholders (pre-head
office costs) 3 001 475
Number of issued ordinary shares ('000s)
excluding treasury shares 429 989
iNAV per share (cents) 698
DIVIDENDS
On 25 November 2016 GPI declared a dividend of 25.0 cents per share in respect of the 2016 financial year, which amounted to R122.2 million of which R9.1 million
related to GPI shares held as treasury shares. GPI is committed to remaining dividend-active. Any distribution relating to 2017 profits will be considered once future cash
flows can be determined with more certainty.
CAPITAL STRUCTURE
The Group has recognised that whilst its food investments are in its early or start-up phase and currently not contributing significantly to the Group's earnings, the
Group will continue to adopt a conservative approach on its gearing for existing operations. Over the past 36 months the Group decreased its gearing levels from 35.5%
to 16.8% as a result of part disposals in its gaming and leisure investments. The proceeds received from its part disposal of SunWest were utilised to repay the full
Standard Bank revolving credit facility of R225.0 million. The Group's targeted debt equity range is set between 20.0% and 35.0%. At 30 June 2017, the debt equity
ratio decrease by 10.3% from 27.1% last year to 16.8%, which is below the targeted range and will potentially allow the Group to raise funding at more preferential
rates.
The continued local political and economic environment has resulted in uncertainty in the credit markets and the Group's exposure to the South African consumer
has created further uncertainty which has resulted in a significant increase over the past year in the cost of debt available. Therefore as part of the debt reduction
process, the Group has identified the facilities which are relatively cheap in comparison to the prevailing market rates and will look to retain those facilities, such
as the Spur preference share facilities. The facilities which are being reduced are the Group's most expensive facilities and are costly in comparison to the prevailing
market rates.
30 June 30 June
2017 2016 Movement
R'000s R'000s R'000s %
Holding company facilities 240 401 459 671 (219 270) (48)
Burger King Credit facilities - 225 000 (225 000) (100)
Spur Preference shares 240 401 234 671 5 730 2
Subsidiary facilities 113 973 183 191 (69 218) (38)
GPI Properties Term loans (Mortgage) 74 641 131 999 (57 358) (43)
Mac Brothers Finance leases 12 880 16 486 (3 606) (22)
GF Meat Plant Finance leases 24 246 32 235 (7 989) (25)
Burger King Finance leases 1 594 1 898 (304) (16)
Baskin-Robbins Finance leases 146 - 146 100
Dunkin' Donuts Finance leases 357 434 (77) (18)
GPIMS Finance leases 109 139 (30) (22)
Total debt 354 374 642 862 (288 488) (45)
Debt/Equity 16.8 27.1 10.3 (38)
REVIEW OF INVESTMENT OPERATIONS
FOOD
BURGER KING
Stand Alone Results for the year:
The total number of Burger King restaurants at 30 June 2017 closed at 61. The net restaurant movement included the opening of four new restaurants and closure of five
unprofitable restaurants, located in the Johannesburg CBD and Kwa-Zulu Natal. The average monthly restaurant revenues (ARS) increased by 9.26% from R0.785 million last
year to R0.865 million this year, largely as a result of positive restaurant comparative sales of 1.82% (2016: -27.23%) and a proportional increase in revenue from
Drive Thru sites opened towards the end of the 2016 financial year. Despite a reduction in the net restaurant count, Burger King's total revenue for the year increased
by 22.19% from R485.2 million in the prior year to R623.5 million in the current year.
Burger King continued to improve the restaurant operating model during the financial year with active food cost management and labour cost control. This resulted in an
increase in the restaurant EBITDA margin from 3% in the prior year to 9% in the current year.
Of significant importance is the improvement of Company EBITDA from a loss of R37.5 million to a profit of R11.1 million in the current financial period. Included in
the Company EBITDA are charges that relate to once off lease settlement and de-commission costs of R3.7 million in respect of stores closed during the year.
The depreciation and amortisation costs for the year of R60.9 million was R15.2 million higher than the R45.4 million cost incurred in the prior year. This includes
impairment costs of R11.8 million, before taxation, in respect of the stores closed. The interest expense increased significantly during the year from R20.8 million
last year to R49.3 million this year as a result of interest being charged on the shareholder loan from GPI with effect from 1 January 2016. After the tax charge for
the year this resulted in an increase in the net loss for the year from R76.6 million to R80.9 million.
Investment's contribution to Group headline earnings for the year:
Burger King's contribution to the Group headline earnings for the year amounts to a loss of R11.0 million (2016: R29.9 million loss), which is after the elimination of
depreciation and equity accounted earnings of R8.0 million (2016: R12.5 million) and inter-group interest of R45.6 million (2016: R20.4 million); adding back non-
controlling interests of R7.9 million (2016: R12.4 million), losses on property, plant and equipment of R0.3 million (2016: R0.7 million) and impairment of property,
plant and equipment of R8.5 million.
DUNKIN' DONUTS
Dunkin' Donuts opened its first outlet on 13 October 2016 and the response from the local consumer was overwhelming, with over 330 000 doughnuts sold in the outlet's
first month of trade. A further five outlets were opened subsequently; bringing the total outlets to six at 30 June 2017. All the outlets are corporate-owned.
The outlets reported sales of R24 million and a gross profit of R6.2 million for the period. The gross margin achieved for the period of 25.7% is well below the target
as a result of doughnuts being imported via airfreight due to higher than anticipated demand. Dunkin' Donuts achieved an EBITDA loss of R24.5 million for the period
which was due to the initial marketing and launch costs to build brand awareness and the importation of the majority of the product offerings. Dunkin' Donuts has
subsequently embarked on a programme of localisation to reduce the reliance on foreign suppliers and has commenced the construction of a local bakery to lower the
overall doughnut unit cost.
BASKIN-ROBBINS
Following on the success of the Dunkin' Donuts launch, Baskin-Robbins opened its first store on 9 December 2016. Two additional stores were subsequently opened taking
the total number of stores to three at 30 June 2017.
The three stores reported revenue of R5.5 million and collectively contributed to a Company EBITDA loss for the period of R14.4 million. Similar to Dunkin' Donuts the
majority of the costs incurred in the current year were in relation to marketing and launch cost to build brand awareness.
SPUR
GPI increased its shareholding in Spur by 7.48% to 17.48% by year end. A total dividend of R16.9 million was received during the period with a related finance charge
of R21.7 million, resulting in a R4.9 million reported net loss for the period.
GRAND FOODS MEAT PLANT
Stand Alone results for the year:
Grand Foods Meat Plant is exposed to Burger King indirectly through their agreement with Burger King's main supplier, Vector. As a result of Burger Kings's 30%
increase in revenue, Grand Foods Meat Plant's revenue increased by 33% from R69.1 million last year to R92 million this year. Cost of sales in the current year
increased by 55.6% from R53.9 million to R83.9 million. This is a direct result of higher input costs due to increased food inflation. Grand Foods Meat Plant's
earnings for the year resulted in a R9.3 million loss after tax, which was 107% higher than the R1.5 million net loss after tax incurred last year.
Investment's contribution to Group headline earnings for the year:
Grand Foods Meat Plant's net loss after tax for the year of R9.3 million (2016: R1.5 million loss) decreased by R1.3 million after eliminating the inter-group interest
expense. As a result of this adjustment, Grand Foods Meat Plant contributed a loss of R8.0 million (2016: R0.1 million loss) to the Group headline earnings for the
year.
MAC BROTHERS CATERING EQUIPMENT
Stand Alone results for the year:
Amidst tough trading conditions experienced in the manufacturing sector, Mac Brothers revenue decreased by 21.8% to R209.4 million (2016: R267.7 million). Mainly as
a result of a 2% decrease in local catering equipment sales (excluding Grand Foods) which decreased from R71.1 million last year to R27.9 million this year, and a
51.1% decrease in cold room and extraction sales which decreased from R25.3 million last year to R12.4 million this year. The operating costs for the year amounted to
R59.6 million which is 10.0% lower than the operating costs of R66.2 million incurred last year. The decrease in costs is mainly attributable to decreases in head count.
The EBITDA for the year of R1.4 million is 92.5% lower than the R18.2 million EBITDA from last year. Depreciation for the year of R4.2 million increased slightly by
R95k and the interest costs of R4.7 million increased by R1.0 million when compared to last year.
Mac Brothers recorded a loss after tax for the year of R5.3 million, representing a 173% decrease from the net profit after tax of R7.3 million in the prior year.
Investment's contribution to Group headline earnings for the year:
Mac Brothers net loss after tax for the year of R5.3 million was increased by R5.2 million (2016: R7.3 million) to eliminate inter-group profits for the year and
decreased by R2.4 million (2016: R1.3 million) to eliminate the inter-group interest expense. After these adjustments, Mac Brothers contributed a loss of R8.1 million
(2016: R7.5 million profit) to the Group headline earnings.
GAMING
SUNWEST
Stand-alone results for the year:
SunWest's revenue for the year decreased by 0.4% from R2 488.0 million last year to R2 478.0 million this year. Its EBITDA decreased by 3.1% to R912.2 million for the
year (2016: R941.8 million) and its net profit after tax decreased by 6.4% to R465.9 million for the year (2016: R497.9 million).
Investment's contribution to Group headline earnings for the year:
GPI's remaining 15.1% share of SunWest's earnings for the year amounts to R70.3 million compared to R110.7 million in the prior year. The decrease is due to the sale
of 10% in SunWest in the prior year.
SUN SLOTS
Stand-alone results for the year:
Sun Slots increased their revenue by 9% from R934.7 million last year to R1 019.5 million this year. This was as a result of an addition of 153 Limited Pay-out
Machines (LPMs) being added to the national network during the year and a 4.7% increase in the average Gross Gaming Revenue (GGR) per machine per day from R721.52 last
year to R755.40 this year. Sun Slots EBITDA increased by 10% from R217.2 million in the prior year to R239.6 million in the current year. This resulted in a marginal
increase in their EBITDA percentage increasing from 23.4% last year to 23.5% this year. Their depreciation for the year of R89 million was 19% higher than last year
due to the increase in the number of active LPMs. Their finance costs for the year of R20.1 million decreased by 22.4% when compared to last years' costs of R25.9 million,
which is due to a decrease in the shareholder loans of R120 million in respect of repayments during the year. Sun Slots Net Profit After Tax decreased by 14% from
R108 million in the prior year to R92.8 million in the current year.
Investment's contribution to Group headline earnings for the year:
GPI's 30.0% share of Sun Slot's earnings for the year amounted to R30.1 million, which increased by R2.9 million from the prior year of R27.7 million. The current year
earnings includes an impairment recognised for Grand Sport of R2.3 million which was added back in respect of headline earnings.
OTHER
CENTRAL COSTS
The Group's net central costs for the year amounted to R46.0 million, which is 31% lower than the central costs of R67.3 million last year as a result of lowered interest
expense from reduced gearing for the financial year.
SHARE CAPITAL
The Company bought back 15.0 million shares during the year at a average price of R3.52. These shares were subsequently cancelled. No new shares were issued during the
year.
TREASURY SHARES
At 30 June 2017 a total of 43.8 million GPI shares were held as treasury shares by the Grand Parade Share Incentive Trust, GPI Management Servcices and the GPI Women's
BBBEE Empowerment Trust. These entities are controlled by the Group, with the Grand Parade Share Incentive Trust holding 4.98 million treasury shares, GPI Management
Services holding 24 million shares and the GPI Womens' BBBEE Empowerment Trust holding 14.82 million treasury shares.
DIRECTORS
Tasneem Karriem was previously appointed to the GPI board on 9 September 2016 and on 1 July 2017 has been appointed as Chief Executive Officer of the Group. Alan Keet
resigned as Chief Executive Officer and Director of the Group on 3 April 2017. Dylan Pienaar, who stepped down from Financial Director was appointed as the Chief
Executive Officer of the Food Group whilst still remaining on the GPI Board of Directors as an Executive Director effective 1 July 2017. On 1 July 2017, Shaun Barends
was appointed as Financial Director of the Group.
SUBSEQUENT EVENTS
Disposal of Properties
On 9 March 2017 the Group entered into a sales agreement with UBUD Developments (Pty) Ltd to sell its property, with a carrying value of R40.2 million, situated at
1 Heerengracht for R52.5 milion. The property was transferred on 18 August 2017.
On 19 July 2017 the Group entered into a sale agreement to dispose of its property situated on Sandton Drive, with a carrying value of R11.3 million, for R11.5 million.
Disposal of GTM
On 1 August 2017, the Group entered into a share sale agreement for its 51% holding in Grand Tellumat Manufacturing for R15.0 million. The conclusion of the disposal
is contingent on obtaining any necessary regulatory approvals, which are expected to be obtained before the end of September 2017.
Disposal of Atlas Gaming Africa
On 29 August 2017, the Group entered into a share swap agreement with DRGT International SARL, for its 4.95% holding in Atlas Gaming Holdings and its 100% holding in
Atlas Gaming Africa in exchange for a 26% stake in DRGT's local wholly-owned subsidiary Infinit-e Gaming Africa. This swap is subject to certain conditions precedent,
including SARB approval, which are expected to be fulfilled by 31 October 2017. Infinit-e Gaming Africa is an industry-leading gaming systems supplier servicing
licenced customers in Africa and the Indian Ocean islands.
RELATED PARTIES
The Group, in the ordinary course of business, entered into various transactions with related parties consistent with those as reported at 30 June 2016.
During the period, employees exercised share options with the strike price settled by loan financing.
PROSPECTS
The Group's focus during the next financial year will be to continue on delivering on its strategy to grow its food business which includes the continued improvement
in the profitability of Burger King, roll out of both Dunkin' Donuts and Baskin-Robbins and unlocking the synergies between the various food investments. In addition
the Group will look to continue investing in food businesses via premium restaurant brands and supply chain services and product to support the restaurant brands.
The Group will remain dividend active and will look to realign its dividend policy to align its ordinary dividends with the Group's earnings profile. Special dividends
will be paid out of surplus proceeds from the realisation of the Group's investments.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
2017 2016
Notes R'000s R'000s
Revenue 962 998 772 344
Cost of Sales (508 724) (385 229)
Gross Profit 454 274 387 115
Operating costs (515 342) (462 788)
Loss from operations (61 068) (75 673)
Profit from equity-accounted investments 96 094 144 168
Profit on disposal of investments 3.2 91 929 270 565
Reversal of impairment of investment - 21 362
Impairment of property, plant, equipment and intangible assets (18 549) -
Impairment of investment (8 271) (3 468)
Impairment of loans (4 701) -
Remeasurement of investments - 18 687
Depreciation (66 083) (45 876)
Amortisation (4 906) (2 975)
Profit before finance costs and taxation 24 445 326 790
Finance income 31 583 23 660
Finance costs (50 093) (72 537)
Profit before taxation 5 935 277 913
Taxation 5 018 (85 394)
Profit for the year 10 953 192 519
Other comprehensive (loss)/income
Items that will be reclassified subsequently to profit or loss
Unrealised fair value adjustments on available-for-sale investments, net of tax (51 099) (37 009)
Total comprehensive (loss)/income for the year (40 146) 155 510
Profit/(loss) for the year attributable to:
- Ordinary shareholders 19 281 202 809
- Non-controlling interest (8 328) (10 290)
10 953 192 519
Total comprehensive (loss)/income attributable to:
- Ordinary shareholders (31 818) 165 800
- Non-controlling interest (8 328) (10 290)
(40 146) 155 510
Cents Cents
Basic earnings per share 4 4.39 43.01
Diluted earnings per share 4 4.39 42.80
Headline (loss)/earnings per share 4 (4.59) 1.99
Diluted headline (loss)/earnings per share 4 (4.59) 1.98
Ordinary dividend per share 25.00 15.00
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
2017 2016
Notes R'000s R'000s
ASSETS
Non-current assets 2 361 016 2 189 326
Investments in jointly controlled entities 616 099 629 635
Investments in associates 358 157 327 768
Available-for-sale investment 520 435 307 355
Investment properties 6 821 69 798
Property, plant and equipment 575 789 626 045
Intangible assets 44 079 40 599
Goodwill 92 508 92 885
Deferred tax assets 147 128 95 241
Assets classified as held-for-sale 2 40 175 192 479
Current assets 230 023 842 970
Inventory 88 763 91 231
Deferred proceeds - 528 445
Trade and other receivables 64 135 106 794
Related party loans 44 774 36 452
Cash and cash equivalents 22 911 65 594
Income tax receivable 9 440 14 454
Total assets 2 631 214 3 224 775
EQUITY AND LIABILITIES
Capital and reserves
Total equity 2 141 147 2 397 492
Ordinary share capital 806 707 859 517
Treasury shares (166 286) (105 971)
Accumulated profit 1 532 361 1 626 255
Available-for-sale reserve at fair value (43 044) 8 055
Share based payment reserve 11 409 9 636
Non-controlling interest (29 754) (28 038)
Total shareholder's equity 2 111 393 2 369 454
Non-current liabilities 337 912 381 448
Preference shares 238 390 232 560
Interest-bearing borrowings 67 238 102 096
Finance lease liabilities 25 023 38 103
Deferred tax liabilities 4 469 6 245
Provisions 2 792 2 444
Liabilities associated with assets held-for-sale - 16 690
Current liabilities 181 909 457 183
Trade and other payables 103 877 149 955
Provisions 17 833 16 636
Bank overdraft 25 474 7 919
Preference shares 2 011 2 111
Interest-bearing borrowings 7 403 254 903
Finance lease liabilities 14 309 13 089
Dividends payable 9 744 8 826
Income tax payable 1 258 3 744
Total equity and liabilities 2 631 214 3 224 775
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Available Share Capital
Ordinary for-sale based redemption Non-
share Treasury Accumulated reserve at payment reserve controlling Total
capital shares profits fair value reserve fund interest equity
R'000s R'000s R'000s R'000s R'000s R'000s R'000s R'000s
Balance at 30 June 2015 859 517 (76 222) 1 494 635 45 064 10 289 301 (17 575) 2 316 009
Total comprehensive income/(loss)
for the year - - 202 809 (37 009) - - (10 290) 155 510
- Profit/(loss) for the year from continuing operations - - 202 809 - - - (10 290) 192 519
- Other comprehensive loss - - - (37 009) - - - (37 009)
Dividends declared - - (71 455) - - - - (71 455)
Treasury shares acquired - (40 330) - - - - - (40 330)
Share based payment reserve expense - - - - 1 915 - - 1 915
IFRS 2 charge relating to equity accounted investments - - - - 329 - - 329
Acquisition of non-controlling interest - - (6 700) - - - 4 700 (2 000)
Decrease of interest in subsidiary - - 4 873 - - - (4 873) -
Treasury shares allocated to employees - 10 581 1 792 - (2 897) - - 9 476
Release of capital redempton reserve - - 301 - - (301) - -
Balance at 30 June 2016 859 517 (105 971) 1 626 255 8 055 9 636 - (28 038) 2 369 454
Total comprehensive income/(loss) for the year - - 19 281 (51 099) - - (8 328) (40 146)
- Profit/(loss) for the year from continuing operations - - 19 281 - - - (8 328) 10 953
- Other comprehensive loss - - - (51 099) - - - (51 099)
Dividends declared - - (113 070) - - - - (113 070)
Shares cancelled(*) (52 810) - - - - - - (52 810)
Treasury shares acquired - (69 317) - - - - - (69 317)
Share based payment reserve expense - - - - 3 453 - - 3 453
Sale of subsidiary - - - - - - 6 612 6 612
Treasury shares allocated to employees - 9 002 (105) - (1 680) - - 7 217
Balance at 30 June 2017 806 707 (166 286) 1 532 361 (43 044) 11 409 - (29 754) 2 111 393
Notes
* Shares bought back are deducted from share capital at cost.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
2017 2016
Notes R'000s R'000s
Cash flows from operating activities
Net cash utilised from operations (95 787) (86 697)
Income tax paid (60 501) (145 145)
Finance income 31 583 23 660
Net cash outflow from operating activities (124 705) (208 182)
Cash flows from investing activities
Acquisition of plant and equipment (80 941) (179 926)
Acquisition of land and buildings (7 799) (23 027)
Acquisition of investment properties (15) (7 127)
Acquisition of intangibles (8 694) (30 269)
Proceeds from disposal of property, plant and equipment 61 862 1 724
Proceeds from disposal of investment property 56 000 -
Loans advanced (6 849) (4 842)
Loan repayment received 1 128 192 367
Cash paid through business combinations - (39 259)
Investments made (266 555) (35 906)
Consideration received from the disposal of subsidiaries 3.1 10 215 -
Consideration received from the disposal of equity
accounted investment 790 937 382 760
Dividends received 87 829 170 855
Net cash inflow from investing activities 637 118 427 350
Cash flows from financing activities
Dividends paid (112 152) (70 905)
Consideration on exercise of employee options - 1 658
Treasury shares acquired (69 317) (40 330)
Shares bought back for cancellation (52 810) -
Acquisition of minority interest - (2 000)
Loans received - 400 000
Repayment of loans (301 754) (631 439)
Finance costs (36 618) (60 786)
Net cash outflow from financing activities (572 651) (403 802)
Net decrease in cash and cash equivalents (60 238) (184 634)
Cash and cash equivalents at the beginning of the year 57 675 242 309
Total cash and cash equivalents at the end of the year (2 563) 57 675
Total cash and cash equivalents at year-end comprises: (2 563) 57 675
Cash and cash equivalents 22 911 65 594
Overdraft (25 474) (7 919)
NOTES TO THE FINANCIAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2017
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The abridged audited Group financial statements for the period ended 30 June 2017 are prepared in accordance with the requirements of the JSE Listings
Requirements for abridged reports, and the requirements of the Companies Act applicable to summarised financial statements. The Listing Requirements require
abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The abridged Group financial statements do not include all the information required by IFRS for full financial statements and should be read in conjunction
with the 2017 audited Group annual financial statements. The accounting policies applied in the preparation of the audited Group annual financial statements,
from which the abridged Group financial statements were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation
of previous audited Group financial statements. During the period, various new and revised accounting standards became effective, however, their implementation
had no impact on the results of either the current or prior year.
These abridged Group financial statements are not audited but are extracted from audited information. The audited Group annual financial statements were
audited by Ernst & Young Inc., who expressed an unmodified opinion thereon. The audited Group annual financial statements and the auditor's report thereon
are available for inspection at the Company's registered office. The Directors take full responsibility for the preparation of these abridged Group financial
statements and the financial information has been correctly extracted from the underlying audited Group annual financial statements.
These abridged Group financial statements have been prepared under the supervision of the Financial Director, Mr Shaun Barends CA(SA).
2. ASSETS HELD-FOR-SALE
The assets and liabilities included in assets classified as held-for-sale are as follows:
2017 2016
R'000s R'000s
ASSETS
Non-current assets
Investment in associate (Sun Slots) - 171 140
Investment property (1 Heerengracht) 40 175 -
Investment property (21 Friesland Drive) - 21 339
Assets classified as held-for-sale 40 175 192 479
Non-current liabilities
Deferred tax liabilities (Sun Slots) - 16 690
Liabilities associated with assets-held-for sale - 16 690
Net assets 40 175 175 789
At year end the Group entered into an agreement with UBUD Developments (Pty) Ltd to dispose of its property situated at 1 Heerengracht for R52.5 million. The transfer
of the property was affected on 18 August 2017. The property was previously disclosed as investment property. Non-current assets held-for-sale are measured at the
lower of carrying amount and fair value less cost of sale.
3. DISPOSAL OF BUSINESSES
3.1 DISPOSAL OF BUSINESSES
The profit or loss on disposal of businesses is included in profit/(loss) for the year in the statement of comprehensive income.
2017
R'000s
Cash inflow on disposal of businesses 10 215
Net profit on disposal of investment 1 341
3.1.1 DISPOSAL OF GRAND LINKSTATE
The Group disposed of its interest in Grand Linkstate, effective 12 August 2016, for a gross consideration of R1.0 million. The consideration was received on the
effective date.
2017
R'000s
Property, plant and equipment (581)
Intangible assets (10)
Trade and other receivables (2 579)
Cash and cash equivalents (629)
Goodwill (377)
Trade and other liabilities 1 288
Provisions 639
Non-controlling interest (6 612)
GPI's share of net asset disposed of (8 861)
Consideration received in cash and cash equivalents 961
Loss on disposal of business (7 900)
Net cash inflow on disposal of business
Consideration received in cash and cash equivalents 961
Less: Cash and cash equivalents balance disposed of (629)
332
3.1.2 DISPOSAL OF GRAND SPORT
The Group disposed of its interest in Grand Sport (Pty) Ltd, effective 24 January 2017, for a gross consideration of R10.0 million. The consideration was received on
the effective date.
2017
R'000s
Property, plant and equipment (30)
Intangible assets (369)
Trade and other receivables (1 158)
Cash and cash equivalents (117)
Trade and other liabilities 817
Provisions 98
Net asset disposed of (759)
Consideration received in cash and cash equivalents 10 000
Profit on disposal of business 9 241
Net cash inflow on disposal of business
Consideration received in cash and cash equivalents 10 000
Less: Cash and cash equivalents balance disposed of (117)
9 883
2017 2016
3.2 PROFIT/(LOSS) ON DISPOSAL OF INVESTMENTS R'000s R'000s
Profit on disposal of Sun Slots 90 588 55 258
Loss on disposal of Grand Linkstate (7 900) -
Profit on disposal of Grand Sport 9 241 -
Profit on disposal of SunWest and Worcester - 215 307
91 929 270 565
4. BASIC AND DILUTED EARNINGS PER SHARE
2017 2016
R'000s R'000s
4.1 Reconciliation of the profit for the year
Basic and diluted earnings per share reconciliation
Profit for the year 10 953 192 519
Non-controlling interest 8 328 10 290
Profit for the year attributable to ordinary shareholders 19 281 202 809
R'000s R'000s
4.2 Reconciliation of headline (loss)/earnings for the year
Profit for the year attributable to ordinary shareholders 19 281 202 809
Profit on sale of investments (59 819) (158 621)
Impairment of investments 4 490 2 691
Reversal of impairments - (21 362)
Loss on disposal of property, plant, equipment and intangibles 12 910 769
Remeasurement of investment - (17 023)
Adjustments by jointly-controlled entities 3 012 122
- Impairment of investment 2 889 -
- Loss on disposal of plant and equipment 123 122
Headline (loss)/earnings (20 126) 9 385
'000s '000s
4.3 Reconciliation of WANOS - net of treasury shares
Shares in issue at beginning of the year 461 732 470 076
Shares repurchased during year weighted for period held
by Group (17 020) (497)
Shares repurchased and cancelled during the year weighted
for period held by Group (7 148) -
Shares issued during the year weighted for period in issue 1 271 2 003
438 835 471 582
'000s '000s
4.4 Reconciliation of diluted WANOS - net of treasury shares
WANOS in issue - net of treasury shares 438 835 471 582
Effects of dilution from:
- Share options - 2 274
Diluted WANOS in issue - net of treasury shares 438 835 473 856
Cents Cents
4.5 Statistics
Basic earnings per share 4.39 43.01
Diluted earnings per share 4.39 42.80
Headline (loss)/earnings per share (4.59) 1.99
Diluted (loss)/headline earnings per share (4.59) 1.98
5. FAIR VALUE MEASUREMENTS
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value and are observable, either directly or indirectly.
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
As at 30 June, the Group held the following instruments measured at fair value:
Level 1 Level 2 Level 3 Total
2017 R'000s R'000s R'000s R'000s
Available-for-sale investment - Spur(i) 228 108 - 286 540 514 648
Available-for-sale investment - Atlas Gaming - - 5 787 5 787
Total 228 108 - 292 327 520 435
Level 1 Level 2 Level 3 Total
2016 R'000s R'000s R'000s R'000s
Available-for-sale investment - Spur(i) - - 305 036 305 036
Available-for-sale investment - Atlas Gaming - - 2 319 2 319
Available-for-sale investment - Spur(i) - - - -
Total - - 307 355 307 355
(i) Available-for-sale investment - Spur
The carrying value of the investment in Spur at 30 June 2017 of R514.7 million is made up of the original acquisition price of R294.7 million, the acquisition during
current year of R266.6 million and fair value adjustments of R56.9 million (2016: R10.3 million). The Group's initial investment in Spur is subject to a
trading restriction linked to the Group's empowerment credentials. The restriction expires on 29 October 2019, after which the instrument may be traded without
restriction. The fair value of the investment has been measured by applying a tradability discount of 3% per year remaining on the restriction against the market price
of Spur, as quoted on the JSE. The tradability discount was determined with reference to the agreements which govern the trading restrictions and industry standards
applied to empowerment transactions. As the terms of the trading restictions are unobservable the instrument has been classified under level 3, had the trading
restrictions not been in place, the instrument would have been classified under level 1. A change of 1.0% in the discount rate used to determine the fair value at the
reporting date would have increased/decreased other comprehensive income after tax by R2.4 million (2016: R2.6 million). There were no additions to level 3 instruments
in the current year.
6. SEGMENT ANALYSIS
The chief decision makers are considered to be the members of the GPI Executive Committee, who review the Group's internal reporting firstly by industry and secondly
by significant business unit. The chief decision makers do not review the Group's perfomance by geographical sector and therefore no such disclosure has been made.
Listed below is a detailed segment analysis:
Equity-
External Intersegment Operating accounted
review revenue(1) costs(2) earnings
2017 2016 2017 2016 2017 2016 2017 2016
R'000s R'000s R'000s R'000s R'000s R'000s R'000s R'000s
Food 948 853 743 106 27 919 69 361 (463 284) (378 995) - 28
Gaming and leisure - - - - 836 (3 891) 100 743 149 256
Group costs 13 506 16 237 247 042 247 731 (51 463) (64 124) - -
Non-core 639 13 001 - 9 873 (1 431) (15 778) (4 649) (5 116)
962 998 772 344 274 961 326 965 (515 342) (462 788) 96 094 144 168
1 Heerengracht - - - - - - - -
21 Friesland - - - - - - - -
Sun Slots - - - - - - - -
Held-for-sale - - - - - - - -
Net
profit/(loss) Total
EBITDA after tax Total Assets Liabilities
2017 2016 2017 2016 2017 2016 2017 2016
R'000s R'000s R'000s R'000s R'000s R'000s R'000s R'000s
Food (32 119) 2 709 (86 123) (26 193) 1 297 578 1 063 457 (479 264) (458 493)
Gaming and leisure 101 580 136 866 101 580 83 014 974 256 1 472 928 - -
Group costs 46 037 249 073 15 805 150 856 304 205 464 910 (40 557) (377 619)
Non-core (20 064) (13 007) (20 309) (15 158) 15 000 31 001 - (2 519)
95 434 375 641 10 953 192 519 2 591 039 3 032 296 (519 821) (838 631)
1 Heerengracht - - - - 40 175 - - -
21 Friesland - - - - - 21 339 - -
Sun Slots - - - - - 171 140 - (16 690)
Held-for-sale - - - - 40 175 192 479 - (16 690)
(1) Transactions between segments are concluded at arms length.
(2) Certain costs are presented pre elimination of intergroup charges and therefore net profit are after these eliminations.
(3) The income tax expense is based on the net profit before tax and pre elimination of intergroup charges.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders of GPI will be held on Thursday, 7 December 2017, at 18:00 in the Ballroom, Table Bay
Hotel, Breakwater Boulevard, Victoria Wharf Shopping Centre, V&A Waterfront, Cape Town, Western Cape, to transact the business stated in the notice of
annual general meeting.
The notice of annual general meeting will be despatched to shareholders, together with the abridged audited financial statements for the year ended 30 June
2016, on or around 29 September 2017 and will be available on the Company's website at www.grandparade.co.za from that date.
The date on which shareholders must be recorded in the share register of the Company for purposes of being entitled to attend and vote at the annual general
meeting is Friday, 1 December 2017, with the last day to trade being Tuesday, 28 November 2017.
14 September 2017
Sponsor: PSG Capital Proprietary Limited
Grand Parade Investments Limited will hold the annual results presentation on the following date:
Cape Town: Thursday 14 September 2017 at 10:30
Please refer to the invitation on the Company's website that includes the dial in details and further information regarding the presentation.
www.grandparade.co.za
Live conference call numbers
Live Call Access Numbers for Participants
Country Access Number
South Africa - Johannesburg (Neotel) 011 535 3600
South Africa - Johannesburg (Telkom) 010 201 6800
South Africa - Toll-Free 0 800 200 648
Other Countries (Neotel) +27 11 535 3600
Other Countries (Telkom) +27 10 201 6800
UK - Toll-Free 0 808 162 4061
USA and Canada - Toll Free 1 855 481 5362
Date: 14/09/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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