| Mon 14 Mar 2005, 9:12 | | Results for the year ended 31 December 2004 |
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Peermont - Audited group results for the year ended 31 December 2004
Peermont Global Limited
(formerly Global Resorts SA (Pty) Limited)
Registration number 1995/004449/06
Share code: PTG
ISIN: ZAE000058053
AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
- Reaching new heights
- Revenue up 11,6% to R917,1 million (2003: R822,1 million)
- Earnings before interest, taxation, depreciation and amortisation
(`EBITDA`) up 16% to R349,4 million (2003: R301,1 million)
- EBITDA margin up to 38,1% (2003: 36,6%)
- Headline earnings per share (`HEPS`) up 24,6% to 49,7 cents, 8% ahead of
pre-listing profit forecast
- Final dividend per share (`DPS`) of 16 cents (in addition to interim DPS of
11,4 cents declared in September 2004)
- Total DPS of 27,4 cents (2003: 1,2 cents)
- Headline return on equity (`ROE`) of 21,1% (2003: 20,2%)
- Buyout of Caesars South Africa Inc. (`CSA`) approved by shareholders and
expected to close by 30 April 2005
- R50 million paid to Gauteng Gambling Board in trust for community
upliftment projects
Ernie Joubert, CEO commented: `We delivered pleasing results ahead of our pre-
listing forecast. We`re optimistic about the future. There are excellent growth
opportunities available to Peermont in hotels, gaming, resorts and conferencing
both locally and further afield.`
Enquiries:
Peermont Global 011 267 9200
Ernie Joubert 011 267 9207
Anthony Puttergill 011 267 9209
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Nicola White 083 293 1146
Introduction
Peermont Global Limited (`Peermont Global`) designs, develops, owns and manages
hotel, gaming, convention and leisure interests. The group has a strong market
position in Gauteng where it operates the Caesars Gauteng Hotel Casino and
Convention Resort (`Caesars Gauteng`). In addition, Peermont Global has a
presence in Mpumalanga, KwaZulu-Natal and Botswana, where it has an ownership
interest and manages the operations of the Graceland Hotel Casino and Country
Club (`Graceland`) in Secunda, Mondazur Hotel at San Lameer (`Mondazur San
Lameer`) and The Grand Palm Hotel Casino and Convention Resort (`The Grand
Palm`) in Gaborone.
Financial Results
Income statement
Group revenues of R917,1 million increased by a pleasing 11,6% on the prior
year. Gaming revenues increased by 13,5% to R738,5 million. Gaming revenues at
Caesars Gauteng increased by 14,0%, whilst Graceland and The Grand Palm recorded
increases in gaming revenue of 6,6% and 25,5% respectively.
Costs were well controlled, with direct costs increasing by only 2,4% as a
result of improved efficiencies. Other indirect costs were 13% higher due mainly
to provisions made in terms of the group`s share incentive schemes, which
increased by R11,8 million to R14,6 million (2003: R2,8 million) and reduced
headline earnings per share (`HEPS`) by 2,5 cents per share. These increased
provisions were driven by the adoption of new schemes, growth in the company`s
share price and profitability levels. In excess of 1 000 employees benefit
directly from one or more of the group`s various share incentive schemes.
Indirect costs, excluding share incentive provisions, increased by 7,2%.
EBITDA at R349,4 million was 16% up on 2003. The EBITDA margin of 38,1% was
significantly better than the 36,6% achieved in 2003, as a result of the cost
efficiencies mentioned above.
The effect of a flat depreciation charge at Caesars Gauteng, coupled to lower
depreciation charges for Graceland and The Grand Palm, helped to lift EBITA
growth by 22%.
Net finance costs were up by R4,5 million i.e. 14%, as a result of significantly
lower interest received during the year. Cash balances during the year were
lower than during 2003 due mainly to the group`s capital expansion activities in
the second half of 2004 and the repayment of shareholders` loans during the
second half of 2003 and the first half of 2004.
The effective taxation rate decreased from 32,2% in the prior year to 28,3%, due
mainly to the non-taxable revaluation of land and buildings at Graceland. This
revaluation was recorded in the income statement as an exceptional item, as it
was a reversal of a previous impairment charge.
HEPS grew by 24,6% to 49,7 cents per share. The group`s attributable earnings
per share (`EPS`) increased by 45,4% mainly due to the increased HEPS and the
reversal of the land and buildings impairment at Graceland.
Balance sheet
Net borrowings decreased to R183,7 million from R218,8 million reported as at 31
December 2003, but increased from R156,9 million reported as at 30 June 2004.
The group`s net debt to equity ratio (net borrowings/book value of ordinary
shareholders` equity) reduced to 21,9% from 30,8% in the prior year, but
increased from 20,2% reported as at 30 June 2004. The increase in net
borrowings, as compared to 30 June 2004, is attributable to the group`s capital
expansion activities, in respect of which R88,5 million was spent during the
second half of 2004, as more fully detailed in the cash flow commentary below.
Cash flow
Cash generated by operations was up 15,9% to R347,8 million (December 2003:
R300,1 million), in line with the 16% increase in EBITDA. Taxation payments
increased significantly, by R33,5 million, to R86,3 million. The increase in
taxation payments was due to increased STC paid of R9,8 million, current year
provisional tax payments more closely aligned with the estimated tax charge for
the year and the `topping up` of the prior year`s tax payments due.
Cash outflows arising from investing activities to expand operations, consisted
mainly of the acquisition of the assets and business of Hydrogen Entertainment
World at Caesars Gauteng for R31 million (group share: R19,3 million), the
construction of the select-services Metcourt Inn at The Grand Palm (R27,8
million), additional gaming capacity at Caesars Gauteng amounting to R90,6
million (group share: R56,4 million) and the purchase of the San Lameer Hotel
land and buildings for R8 million.
The group continued to reduce borrowings by making capital repayments of R56,8
million during the year and also repaid the remaining shareholder loans
outstanding of R35,8 million during the first half of 2004.
The group made payments of R19,1 million to acquire US$ European call options to
hedge its currency exposure in terms of the buyout of CSA.
Reporting
The consolidated financial results for the year ended 31 December 2004 have been
audited by KPMG Inc. A copy of the auditors` unqualified opinion is available
for inspection at the company`s registered office.
These results have been prepared in accordance with The South African Statements
of Generally Accepted Accounting Practice. The accounting policies used in the
preparation of these audited financial results are materially consistent with
those used in the annual financial statements for the year ended 31 December
2003.
Basis of consolidation
Peermont Global has a direct shareholding of 25% in GRER Holdings (Pty) Limited
(`GRERH`), which owns 100% of Global Resorts (East Rand) (Pty) (`GRER`), which
in turn owns Caesars Gauteng Hotel Casino and Convention Resort. In addition,
Peermont Global has a further indirect shareholding of 37,22% in GRERH. Peermont
Global`s total economic interest in GRERH of 62,22% is proportionately
consolidated due to Peermont Global exercising joint control over GRERH.
Peermont Global has a direct shareholding of 50% in Peermont Global (Southern
Highveld) (Pty) Limited (`PGSH`), which owns Graceland. In addition, Peermont
Global has a right to a further 47% in PGSH in terms of the PGSH shareholders`
agreement. Peermont Global currently consolidates 100% of the results of PGSH
and will continue to do so until such time as PGSH`s accumulated loss is
eliminated, whereafter it will account for a 97% interest.
Peermont Global has a direct shareholding of 60% in Peermont Global (Botswana)
(Pty) Limited (`PGB`), which owns The Grand Palm Hotel Casino and Convention
Resort in Gaborone. Peermont Global exercises control over PGB and therefore
consolidates 100% of the results of PGB and separately deducts the minority
interests of 40%.
Operational Review
Caesars Gauteng Audited Audited
Peermont Global effective economic
interest: 62,22% R`m % R`m
31 Dec 2004 change 31 Dec 2003
Revenue 1 126,5 14,2 986,8
EBITDA 454,2 21,9 372,5
Profit before interest and
taxation 373,9 27,0 294,5
Net finance costs (60,2) 7,1 (64,8)
Profit before taxation 313,7 36,6 229,7
Taxation (92,7) (24,4) (74,5)
Profit after taxation 221,0 42,4 155,2
Attributable to Peermont Global 137,5 96,6
Caesars Gauteng`s market share at 27,1% was slightly less than the prior year`s
27,5%. The Gauteng gaming market size increased by 15,3%, from R3,186 billion in
2003 to R3,674 billion for 2004.
The EBITDA margin of 40,3% for the 2004 year showed a significant improvement
year on year (2003: 37,7%) and was a major achievement for the resort.
During the first half of 2004, the group acquired the right to operate an
additional 140 slots and 17 tables from Emerald Safari Resorts. The acquisition
was approved by the Gauteng Gambling Board following payment by GRER of R50
million into a trust account set aside for community upliftment projects. During
November 2004, all 140 slots and six of the 17 tables became operational. The
remaining 11 tables are expected to be commissioned during the second half of
2005.
Graceland Audited Audited
Peermont Global effective
economic interest:100% R`m % R`m
31 Dec 2004 change 31 Dec 2003
Revenue 97,4 6,7 91,3
EBITDA 22,2 5,7 21,0
Profit before interest and
taxation 36,3 207,6 11,8
Net finance costs (0,2) 93,5 (3,1)
Profit before taxation 36,1 314,9 8,7
Taxation (1,5) (>100,0) -
Profit after taxation 34,6 297,7 8,7
Attributable to Peermont Global 34,6 8,7
Revenues were in line with expectations and the EBITDA margin of approximately
23% is in line with that of the prior year.
On 31 December 2004 the land and buildings were revalued, which resulted in the
partial reversal, amounting to R20,9 million, of a previous impairment charge
against land and buildings.
The Grand Palm Audited Audited
Peermont Global effective
economic interest: 60% Pula`m % Pula`m
31 Dec 2004 change 31 Dec 2003
Revenue 80,8 7,2 75,4
EBITDA 21,8 17,8 18,5
Profit before interest and
taxation 15,1 34,8 11,2
Net finance income 0,6 0,0 0,6
Profit before taxation 15,7 33,1 11,8
Taxation (3,0) (20,0) (2,5)
Profit after taxation 12,7 36,6 9,3
Attributable to
Peermont Global (Pm) 7,6 5,6
Average exchange rate (ZAR/BWP) 1,42 1,54
Attributable to
Peermont Global (Rm) 10,8 8,6
Whilst non-gaming revenues have been disappointing, gaming revenue has shown
exceptional growth of 25,5% as compared to the prior year.
The strong gaming revenue growth, together with tight control of costs, has
resulted in an improved EBITDA margin of 27,0% (2003: 24,5%).
Peermont Global Head Office Audited Audited
R`m % R`m
31 Dec 2004 change 31 Dec 2003
Revenue 37,2 11,0 33,5
EBITDA 13,0 (34,3) 19,8
Profit before interest and
taxation 10,7 (41,9) 18,4
Net finance (costs)/income (0,4) (104,0) 10,0
Profit before taxation 10,3 (63,7) 28,4
Taxation (9,1) (2,2) (8,9)
Profit after taxation 1,2 (93,9) 19,5
Attributable to Peermont Global 1,2 19,5
Note: Inter-group items, which are eliminated from headline earnings on
consolidation (e.g. dividends received), are excluded from these figures.
EBITDA was lower than the comparable period, due mainly to listing costs of R2,4
million, additional share incentive scheme provisions of R5,9 million and
additional new project investigation costs of R1,7 million. Finance income
declined as a result of the significantly lower cash balances held during 2004.
The tax charge was higher due to capital gains tax of R2,1 million incurred as a
result of the implementation of the Main Street empowerment structure at Caesars
Gauteng (details of which were contained in the pre-listing statement) and
increased levels of non-deductible expenditure.
Analysis of headline earnings contribution
R`m % R`m
31 Dec 04 change 31 Dec 03
Caesars Gauteng 137,5 42,3 96,6
Graceland 13,7 57,5 8,7
Grand Palm 10,8 25,6 8,6
San Lameer 0,6 >100 -
Head Office 1,2 (93,9) 19,5
Net Consolidation entries 0,2 (111,7) (1,7)
164,0 24,5 131,7
Buyout of Caesars South Africa
On 28 December 2004 Peermont Global announced that it had entered into
agreements which will result in the group increasing its effective stake in
GRERH to 82,96%. GRERH is the holding company of GRER, which operates Caesars
Gauteng. Peermont Global will also increase its stake in the Caesars Gauteng
management company to 100%, which will enable Peermont Global to benefit from
increased management fee income. Net debt levels are expected to increase by
approximately R880 million (group share: approximately R760 million) as a result
of the buyout transaction. These agreements are still subject to approval by the
Competition Commission and the Gauteng Gambling Board, which approvals are
expected to be obtained by 30 April 2005.
The buyout transaction will result in estimated transaction costs of R26,1
million (detailed in the circular), which will have a once-off negative effect
on the interim results to be reported for the
six months ending 30 June 2005. These transaction costs include an estimate for
hedging costs amounting to nil, which assumes a R/US$ spot rate of R5,94 on the
date that the CSA buyout transaction becomes unconditional. To the extent that
the actual spot R/US$ exchange rate differs from R5,94 on the transaction close
date, the actual hedging costs will differ. As the hedging mechanism entails the
purchase of US$ call options, the maximum potential loss to the group is limited
to the option premiums paid. To the extent that the rand is weaker than the
hedged rate of R5,94/US$ on the date that the transaction closes, a net hedging
gain is likely to be reported.
As a result of the buyout, Caesars Gauteng will be renamed. An announcement is
expected during the course of 2005.
Result of general meeting in respect of the acquisition of interests held by
Caesars South Africa Inc.
At the general meeting of the shareholders of Peermont Global held on 9 March
2005, the requisite majority of shareholders approved the ordinary resolution as
set out in the circular to shareholders posted on 16 February 2005.
Bethlehem casino project
The agreements relating to the Bethlehem casino project, in respect of which the
company will have a 40% stake, have not yet become unconditional as these are
subject to approval by the Free State Gambling and Racing Board (`FSGRB`). All
the members of the FSGRB have resigned and therefore the FSGRB cannot consider
our application. The responsible MEC has initiated a process to select and
appoint new FSGRB members. In the circumstances, it is unlikely that
construction will begin until late in 2005 or early in 2006. It is anticipated
that the total capital expenditure for this project will be R67 million.
Acquisition of Syringa Hotels
As announced on SENS on 10 March 2005, the company`s 60%-held Botswana
subsidiary, PGB, has entered into an agreement to acquire the Syringa Hotels in
Gaborone (67 rooms) and Francistown (53 rooms) for a total of Pula 47,5 million.
PGB has financed the transaction by raising debt of Pula 47,5 million without
recourse to Peermont Global.
Metcourt Inn
The Metcourt Inn at The Grand Palm opened during January 2005. The new hotel has
been well received and early trading results show occupancies in excess of
budgeted levels.
Mondazur Hotel, San Lameer
The Mondazur hotel at San Lameer was acquired for R8 million in October 2004.
During 2005, the group plans to refurbish and upgrade the hotel at a further
budgeted cost of R21 million.
Mondior Concorde hotel at Caesars Gauteng
The group has commenced construction of a 150 room hotel at Caesars Gauteng at a
budgeted capital expenditure of R70 million. It is anticipated that this hotel
will be opened by February 2006 and will increase the ability of Caesars Gauteng
to attract and host larger conference and convention groups.
Outlook
Revenues are largely dependent on the level of disposable income available to
consumers, which in turn is affected by economic factors such as inflation,
interest rates, personal tax levels and salary and wage increases. To the extent
that these economic fundamentals remain positive, we anticipate that revenue and
profit in 2005 will continue to show real growth. Through the expansion of its
capacity, the group is well placed to take advantage of continued positive
economic conditions.
Dividend number 3
Notice is hereby given that a dividend at the rate of 16 cents per ordinary
share has been declared by the directors and is payable to shareholders recorded
in the books of the company, at the close of business on Friday, 8 April, 2005.
In compliance with the requirements of STRATE the following dates are
applicable:
Last day to trade cum dividend Friday, 1 April 2005
Securities start trading ex-dividend Monday, 4 April 2005
Record date Friday, 8 April 2005
Payment date Monday, 11 April 2005
The dividend is declared and will be paid in the currency of the Republic of
South Africa. Share certificates may not be de-materialised or re-materialised
between Monday, 4 April 2005 and Friday, 8 April 2005, both dates inclusive.
On behalf of the board
Alan van Biljon
Chairman
Ernie Joubert
Managing Director
Bryanston
14 March 2005
Group Income Statement
Audited Audited
31 Dec 2004 % 31 Dec 2003
R`000 change R`000
Revenue 917 080 11,6 822 109
Gaming 738 549 650 639
Rooms 62 226 60 303
Food and Beverage 88 083 84 335
Other 28 222 26 832
VAT and gaming levies on gross
gaming revenues (145 364) (129 268)
Operating costs (422 320) 7,8 (391 746)
Direct costs (195 541) 2,4 (190 999)
Gaming (80 509) (80 035)
Rooms (13 812) (12 674)
Food and Beverage -
Cost of sales (27 590) (27 727)
Food and Beverage - Other (41 829) (39 042)
Other (31 801) (31 521)
Indirect costs (226 779) 13,0 (200 747)
Sales and marketing costs (41 829) (40 802)
Other indirect costs (184 950) (159 945)
Earnings before interest,
taxation, depreciation and
amortisation 349 396 16,0 301 095
Depreciation (59 520) (62 285)
Property and equipment
rentals (11 792) (10 826)
Earnings before interest,
taxation and amortisation 278 084 22,0 227 984
Amortisation of goodwill (14 280) (14 280)
Exceptional item 20 856 -
Operating profits 284 660 33,2 213 704
Net finance costs (37 057) (32 518)
Profit before taxation 247 603 36,7 181 186
Taxation (70 134) (58 351)
Profit after tax 177 469 44,5 122 835
Share of profits attributable
to minority shareholders (7 191) (5 714)
Profits attributable to
ordinary shareholders 170 278 45,4 117 121
Headline earnings calculation
Profits attributable to
ordinary shareholders 170 278 117 121
Add back goodwill
amortisation 14 280 14 280
Add back loss on sale
of assets 412 320
Less reversal of building
impairment (20 856) -
Taxation credit on the
above adjustments (124) (96)
Headline earnings 163 990 24,6 131 625
Issued ordinary shares (`000) 330 000 330 000*
Earnings per ordinary
share (cents)
Attributable earnings
per share 51,6 45,4 35,5*
Headline earnings per share 49,7 24,6 39,9*
Diluted earnings per
ordinary share (cents)
Attributable earnings
per share 51,5 45,1 35,5*
Headline earnings per share 49,6 24,3 39,9*
*Restated for share split
Group Balance Sheet
Audited Audited
31 Dec 2004 31 Dec 2003
R`000 R`000
Assets
Non-current assets 1 153 114 1 083 777
Property, plant and equipment 1 026 654 926 208
Goodwill 107 099 121 379
Derivative instruments 12 427 20 996
Investments 1 519 10 773
Intangible assets 2 309 2 943
Deferred taxation asset 3 106 1 478
Current assets 118 393 142 804
Inventories 14 542 12 424
Accounts receivable 16 870 21 194
Amount due by joint venture 1 128 1 629
Current portion of derivative
instruments 35 037 17 998
Cash 50 816 89 559
Total assets 1 271 507 1 226 581
Equity and liabilities
Capital and reserves 840 280 710 969
Share capital 33 33
Share premium 32 879 32 879
Non distributable reserves 37 172 405 558
Accumulated profit 770 196 272 499
Minority interests 19 959 18 799
Non-current liabilities 205 708 259 082
Long term borrowings 158 485 196 930
Derivative instruments 10 080 16 102
Deferred taxation liability 37 143 46 050
Current liabilities 205 560 237 731
Shareholders` loans - 35 786
Trade and other payables 81 784 84 259
Provisions 26 767 14 932
Amounts due to related parties 2 327 1 466
Current portion of long term loans 55 428 75 634
Current portion of derivative
instruments 12 977 14 255
Taxation liabilities 5 646 11 399
Bank overdraft 20 631 -
Total equity and liabilities 1 271 507 1 226 581
Net Borrowings
Audited Audited
31 Dec 2004 31 Dec 2003
R`000 R`000
Interest-bearing debt
Non-current 158 485 196 930
Current 55 428 75 634
213 913 272 564
Shareholders` loans - 35 786
Cash balances (30 185) (89 559)
Net borrowings 183 728 218 791
Net debt/book value of ordinary
shareholders` equity 21,9% 30,8%
Group Statement of Changes in Equity
Non-
distri
Share Share butable Accumulated
Capital Premium reserves profit Total
R`000 R`000 R`000 R`000 R`000
Balance at
31 December 2002 33 32 879 408 022 158 686 599 620
Profits
attributable
to ordinary
shareholders - - - 117 121 117 121
Dividends paid - - - (4 072) (4 072)
Foreign exchange
translation loss - - (1 700) - (1 700)
Depreciation on
revalued land
and buildings - - (764) 764 -
Balance at
31 December 2003 33 32 879 405 558 272 499 710 969
Profits
attributable
to ordinary
shareholders - - - 170 278 170 278
Dividends paid - - - (37 620) (37 620)
Foreign exchange
translation loss - - (3 347) - (3 347)
Depreciation on
revalued land
and buildings - - (764) 764 -
Transfer of
investment
valuation gain - - (364 275) 364 275 -
Balance at
31 December 2004 33 32 879 37 172 770 196 840 280
Group Cash Flow Statement
Audited Audited
31 Dec 2004 31 Dec 2003
R`000 R`000
Cash generated by operations 347 826 300 142
Net interest paid (37 614) (33 843)
Taxation paid (86 281) (52 742)
Net cash inflow from operating
activities 223 931 213 557
Cash outflows from investing activities (133 464) (12 961)
Replacement of property, plant and
equipment to maintain operations (28 017) (29 905)
Acquisition of property, plant and
equipment to expand operations (114 930) -
Acquisition of intangible asset (136) (631)
Proceeds on disposal of property,
plant and equipment 365 319
Decrease in investments 9 254 17 256
Cash outflows from financing activities (149 170) (303 337)
Cash settlement in respect of derivative
instruments 3 845 4 385
Derivative instruments purchased (19 058) -
Long term borrowings repaid (56 752) (72 508)
Repayment of shareholders` loans (35 786) (228 714)
Dividends paid (41 419) (6 500)
Net decrease in cash and cash
equivalents (58 703) (102 741)
Cash and cash equivalents at the
beginning of the year 89 559 193 272
Effect of exchange rate fluctuations
on cash held (671) (972)
Cash and cash equivalents at the
end of the year 30 185 89 559
Directors:
Alan Francis van Biljon (Chairman)#, Ernest Guillaume Joubert (Managing Director
and Chief Executive Officer), Anthony Edward Puttergill (Deputy Managing
Director and Group Financial Director), Johannes Eksteen Forrer (Executive
Director), Kathleen Houston (Executive Director), Shirley Therese Lue Arnold#,
Martin Dods Brand#, Rashad Ismail Cassim#, Raymond Sifiso Ndlovu Dabengwa#,
Kutoane Obed Kutoane#, Stephanus Hilgard Muller#, Peter Papadimitropoulos#
# Non-executive independent director
Registered Office:
Bridgeport House, Hampton Park, 20 Georgian Crescent East, Bryanston
Company Secretary: DL Petzer
Sponsor: The Standard Bank of South Africa Ltd, Corporate and Investment Banking
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited
www.peermont.com
