| Mon 5 Sep 2005, 8:50 | | RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 |
|
Peermont Global Limited - Reviewed Condensed Interim Group Results For The Six
Months Ended 30 June 2005 And Interim Dividend Announcement
Peermont Global Limited
Registration number 1995/004449/06
Share code: PTG
ISIN code: ZAE000058053
(`Peermont Global` or `the company`)
REVIEWED CONDENSED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
AND INTERIM DIVIDEND ANNOUNCEMENT
- Revenue up 26% to R560,8 million (2004: R443,4 million)
- EBITDA up 32% to R218,4 million (2004: R166,0 million)
- EBITDA margin up to 38,9% (2004: 37,4%)
- HEPS up 52% to 34,3 cents (2004: 22,5 cents)
- Adjusted HEPS (excluding once-off option gain) up 18% to 26,5
cents
Interim DPS up 28% to 14,6 cents (2004: 11,4 cents)
Ernie Joubert, CEO commented: `We have delivered a strong set of results and are
very pleased with the margin improvement shown at all our facilities. We have
good expansion and growth opportunities at our existing facilities and are
actively investigating further growth opportunities mainly in the Southern
African region. With the sustained strong consumer environment we expect to
deliver a solid set of results to the full year ending December 2005.`
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
REACHING NEW HEIGHTS
REVIEWED CONDENSED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
AND INTERIM DIVIDEND ANNOUNCEMENT
- Revenue up 26% to R560,8 million (2004: R443,4 million)
- Earnings before interest, taxation, depreciation and amortisation (`EBITDA`)
up 32% to R218,4 million (2004: R166,0 million)
- EBITDA margin up to 38,9% (2004: 37,4%)
- Headline earnings per share (`HEPS`) up 52% to 34,3 cents (2004: 22,5 cents)
- Adjusted HEPS (excluding once-off option gain) up 18% to 26,5 cents
- Interim dividend per share (`DPS`) up 28% to 14,6 cents (2004: 11,4 cents)
Group income statements
Reviewed Reviewed
Reviewed Restated Restated
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2005 % 2004 2004
Rm change Rm Rm
Revenue 560,8 26 443,4 917,1
Gaming 449,6 361,8 738,5
Rooms 42,6 30,1 62,2
Food and beverage 50,8 40,3 88,1
Other 17,8 11,2 28,3
VAT and gaming levies on
gross gaming revenue (90,3) (72,1) (145,4)
Operating costs (252,1) 23 (205,3) (417,7)
Direct costs (111,1) 18 (94,1) (195,5)
Gaming (43,6) (37,4) (80,5)
Rooms (10,9) (7,9) (13,8)
Food and beverage -
Cost of sales (13,6) (11,6) (27,6)
Food and beverage - Other (28,5) (20,8) (41,8)
Other (14,5) (16,4) (31,8)
Indirect costs (141,0) 27 (111,2) (222,2)
Sales and marketing costs (25,2) (23,2) (41,8)
Other indirect costs (115,8) (88,0) (180,4)
Earnings before interest,
taxation, depreciation
and amortisation 218,4 32 166,0 354,0
Depreciation (30,6) (31,1) (63,1)
Property and equipment
rentals (6,6) (5,6) (11,8)
Earnings before interest,
taxation and amortisation 181,2 40 129,3 279,1
Exceptional items - - 2,3
Operating profits 181,2 40 129,3 281,4
Net finance costs (37,6) (20,9) (37,1)
Option profit 36,5 - -
Profit before taxation 180,1 66 108,4 244,3
Taxation (63,4) (31,1) (69,7)
Profit after taxation 116,7 51 77,3 174,6
Attributable to:
Minority shareholders 3,5 3,0 7,3
Shareholders of
Peermont Global 113,2 52 74,3 167,3
116,7 77,3 174,6
Headline earnings calculation
Profits attributable to ordinary shareholders 113,2 74,3
167,3
Add back loss on sale of assets 0,1 -
0,4
Taxation credit on the above adjustment - -
(0,1)
Add back loss on implementing PMIH BEE structure -
- 8,4
Less reversal of building impairment - -
(10,7)
Headline earnings 113,3 52 74,3 165,3
Issued ordinary shares (million)* 330,0 330,0 330,0
Ordinary shares after dilution (million)* 331,0 330,0
330,4
Earnings per ordinary share (cents)*
Attributable earnings per share 34,3 52 22,5
50,7
Headline earnings per share 34,3 52 22,5 50,1
Diluted earnings per ordinary share (cents)*
Attributable earnings per share 34,2 52 22,5
50,6
Headline earnings per share 34,2 52 22,5 50,0
*June 2004 restated for share split
Group balance sheets
Reviewed Reviewed
Reviewed Restated Restated
30 Jun 30 Jun 31 Dec
2005 2004 2004
Rm Rm Rm
Assets
Non-current assets 2 426,4 1 333,5 1 452,8
Property, plant and equipment 1 724,8 1 174,3 1 303,4
Goodwill 417,1 121,4 74,7
Intangible assets 265,0 12,1 58,1
Derivative instruments 9,5 12,4 12,4
Amount due by joint venture 4,6 - -
Investments 3,5 12,1 1,5
Deferred taxation asset 1,9 1,2 2,7
Current assets 131,2 103,9 118,4
Inventories 16,9 12,2 14,6
Accounts receivable 33,7 9,4 16,9
Amounts due by joint ventures 1,2 1,1 1,1
Current portion of derivative
instruments 18,2 15,9 35,0
Cash 61,2 65,3 50,8
Total assets 2 557,6 1 437,4 1 571,2
Equity and liabilities
Ordinary shareholders` equity 1 102,9 963,7 1 045,0
Share capital 0,0 0,0 0,0
Share premium 32,9 32,9 32,9
Share-based payments reserve 1,0 - 0,4
Non-distributable reserves 31,4 373,0 34,2
Accumulated profit 1 037,6 557,8 977,5
Minority interest 18,7 16,6 20,1
Total equity 1 121,6 980,3 1 065,1
Non-current liabilities 1 145,2 289,7 305,6
Long-term borrowings 380,6 167,4 158,5
Preference shares 582,6 - -
Derivative instruments 7,8 9,4 10,1
Deferred taxation liabilities 174,2 112,9 137,0
Current liabilities 290,8 167,4 200,5
Trade and other payables 113,4 77,7 81,8
Provisions 26,3 12,6 21,8
Amounts due to related parties 0,9 2,0 2,3
Current portion of long-term
borrowings 100,4 54,7 55,4
Current portion of derivative
instruments 14,9 12,1 13,0
Taxation liabilities 34,9 8,3 5,6
Bank overdraft - - 20,6
Total equity and liabilities 2 557,6 1 437,4 1 571,2
Group cash flow statements
Reviewed Reviewed
Reviewed Restated Restated
6 months 6 months 6 months
ended ended ended
30 Jun 30 Jun 31 Dec
2005 2004 2004
Rm Rm Rm
Cash generated by operations 201,8 164,7 347,8
Net interest paid (33,3) (21,1) (37,6)
Taxation paid (45,0) (40,2) (86,3)
Net cash inflow from operating
activities 123,5 103,4 223,9
Cash outflows from investing
activities (816,2) (36,0) (133,3)
Replacement of property, plant and
equipment to maintain operations (18,8) (8,2) (28,0)
Acquisition of property, plant and
equipment to expand operations (34,8) (26,5) (114,9)
Acquisition of intangible assets (170,1) - (0,1)
Share buy-back in joint venture (532,2) - -
Proceeds on disposal of property,
plant and equipment 0,1 0,1 0,4
Acquisition of businesses (58,3) - -
Disposal of interest in
joint venture (0,2) - -
Increase in investments (1,9) (1,4) 9,3
Cash inflows/(outflows) from
financing activities 724,3 (87,3) (149,3)
Cash settlement in respect of
derivative instruments 1,9 2,0 3,8
Derivative instruments purchased - - (19,1)
Long-term borrowings raised 242,0 - -
Proceeds on issue of preference
shares 582,6 - -
Long-term borrowings repaid (46,7) (50,4) (56,8)
Repayment of shareholders` loans - (35,8) (35,8)
Dividends paid (55,5) (3,1) (41,4)
Net increase/(decrease) in cash
and cash equivalents 31,6 (19,9) (58,7)
Cash and cash equivalents at the
beginning of the period 30,2 86,3 89,6
Effect of exchange rate fluctuations
on cash held (0,6) (1,1) (0,7)
Cash and cash equivalents at the
end of the period 61,2 65,3 30,2
Group statements of changes in equity
Ordinary
shareholders` Minority
equity interest Total
Rm Rm Rm
Audited balance at
31 December 2003 711,0 18,8 729,8
Revaluation of buildings on
transition to IFRS 181,6 - 181,6
Reviewed restated opening
balance on transition to IFRS 892,6 18,8 911,4
Profit for the period 74,3 3,0 77,3
Dividends paid - (3,1) (3,1)
Foreign exchange translation
loss (3,2) (2,1) (5,3)
Reviewed restated balance at
30 June 2004 963,7 16,6 980,3
Profit for the period 93,0 4,3 97,3
Dividends paid (37,6) (0,7) (38,3)
Foreign exchange translation
loss (0,2) (0,1) (0,3)
Share-based payment charge 0,4 - 0,4
Revaluation of buildings on
increase in holding in
joint venture 25,7 - 25,7
Reviewed restated balance at
31 December 2004 1 045,0 20,1 1 065,1
Profit for the period 113,2 3,5 116,7
Dividends paid (52,8) (2,7) (55,5)
Foreign exchange translation
loss (3,1) (2,2) (5,3)
Share-based payment charge 0,6 - 0,6
Reviewed balance at 30 June 2005 1 102,9 18,7 1 121,6
Net borrowings
Reviewed Reviewed
Reviewed Restated Restated
30 Jun 30 Jun 31 Dec
2005 2004 2004
Rm Rm Rm
Interest-bearing debt
Non-current 963,2 167,4 158,5
Current 100,4 54,7 55,4
1 063,6 222,1 213,9
Cash balances (61,2) (65,3) (30,2)
Net borrowings 1 002,4 156,8 183,7
Net debt/book value of ordinary
shareholders` equity (%) 91 16 18
Introduction
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 Emperors Palace Hotel Casino and Convention Resort (`Emperors
Palace`). In addition, Peermont Global has a presence in Mpumalanga, KwaZulu-
Natal and Botswana, where it has an ownership interest in and manages the
operations of the Graceland Hotel Casino and Country Club (`Graceland`) in
Secunda, Mondazur Resort Estate Hotel at San Lameer (`Mondazur San Lameer`), The
Grand Palm Hotel Casino and Convention Resort (`The Grand Palm`) and the Syringa
Hotel in Gaborone (to be rebranded as the Mondior Summit Hotel) and the Syringa
Lodge (to be rebranded as the Metcourt Lodge) in Francistown.
Basis of preparation
These condensed interim financial statements have been prepared in accordance
with International Financial Reporting Standards (`IFRS`) with the date of
transition to IFRS for the group being 1 January 2004. Current IFRS and the
interpretation thereof may differ from IFRS actually in effect at 31 December
2005 due to ongoing review and therefore reported results may be subject to
change.
These are the group`s first condensed interim financial statements prepared in
accordance with IFRS and therefore, in terms of IFRS 1, the group has restated
the opening reserves at 1 January 2004, the consolidated balance sheets as at 30
June 2004 and 31 December 2004 and the consolidated income statements for the
periods then ended. There have been no adjustments to the cash flows previously
reported as a result of the adoption of IFRS.
Accounting policies and independent review
These condensed interim financial statements have been prepared in accordance
with IAS 34 and have been reviewed by KPMG Inc., whose unqualified review report
is available for inspection at the company`s registered office. The accounting
policies used in the preparation of the condensed interim financial statements
are compliant with IFRS and consistent with those applied in the Annual
Financial Statements for the year ended 31 December 2004, except as disclosed
below.
Effect of the first time adoption of IFRS
IFRS 1 allows a number of exemptions upon adoption of IFRS and the group has
elected to utilise the following transitional arrangements:
- Business combinations: the group has elected not to retrospectively apply the
requirements of IFRS 3 Business Combinations for business combinations that
occurred prior to transition date and consequently no adjustment has been made
for business combinations prior to 31 March 2004.
- Property, plant and equipment: the group has elected to measure certain
individual items of property, plant and equipment at fair value at the date of
transition to IFRS, hence fair value is deemed to be cost at that date.
- Share-based payments: the group`s first share-based awards were made in
September 2004 and therefore IFRS 2 was adopted from that date.
The only estimates that had previously been made under SA GAAP, and were
affected by the adoption of IFRS, were those relating to share-based payments.
These were restated based on the requirements of the statement.
Adjustments on adoption of IFRS
During the period, the group changed its accounting policies with regard to
share-based payments, goodwill and intangible assets to comply with IFRS.
Costs associated with share awards to employees under employee share incentive
schemes, that were previously valued at their intrinsic value, are now charged
to the income statement over the vesting periods. The cost is determined by
using independent valuations of the share awards.
Goodwill and intangible assets, which were previously carried at amortised cost,
are no longer amortised and are now assessed at least annually for impairment.
All amortisation of intangible assets after transition date was reversed. This
affected goodwill, licence application costs and bid commitment costs previously
capitalised.
Owner-occupied buildings have been recognised at revalued amounts, being the
fair value at the date of transition less subsequent accumulated depreciation
and accumulated impairment losses. Fair value adjustments on transition were
taken directly to equity reserves.
While examining the component aspects of IAS 16, the group reviewed the expected
useful life of its owner-occupied buildings. The buildings were viewed to be
special purpose buildings having a finite useful life. Based on advice from
structural engineers and architects, after taking into account the high level of
continuing maintenance expenditure on the buildings, the life expectancy of the
owner-occupied buildings was revised from 40 to 100 years, with no residual
value. The change was treated as a change in estimate with effect from 1 January
2005.
The effects of the above changes in accounting policies resulted in changes to
the underlying assets acquired/sold in the empowerment transaction, involving
Peermont Marang Investment Holdings (Pty) Limited (`PMIH`), reported at 31
December 2004. This acquisition/sale was restated based on the revised financial
statements, prepared in accordance with IFRS, as at that date.
The effect of the adjustments was to increase shareholders` funds by R181,6
million at 1 January 2004 due to the owner-occupied building revaluations. The
effects on attributable income are summarised below and the changes in equity
are reflected as part of that statement:
6 months 12 months
ended ended
30 Jun 2004 31 Dec 2004
Rm Rm
Attributable profit after taxation
as previously reported 68,6 170,3
Share-based payment credit - 4,6
Goodwill amortisation reversal 7,1 14,3
Reversal of amortisation on intangible
assets 0,9 2,7
Additional depreciation on revalued
buildings (3,2) (6,3)
Adjustment of impairment of buildings - (10,2)
Loss on implementation of empowerment
structure - (8,4)
Minorities` share - (0,1)
Deferred taxation effects 0,9 0,4
Attributable profit after taxation
as restated 74,3 167,3
Basis of consolidation
Peermont Global has a direct economic interest of 33,33% in PGER Holdings (Pty)
Limited (`PGERH`), which owns 100% of Peermont Global (East Rand) (Pty) Limited
(`PGER`), which in turn owns Emperors Palace. In addition, Peermont Global has a
further indirect economic interest of 49,63% in PGERH. Peermont Global`s total
economic interest in PGERH of 82,96% is proportionately consolidated due to
Peermont Global exercising joint control over PGERH.
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. Since PGSH`s accumulated loss was eliminated by May 2005, Peermont
Global has proportionately consolidated 97% of the results of PGSH from 1 May
2005. Prior to 1 May 2005, 100% of the PGSH results was consolidated.
Peermont Global has a direct shareholding of 60% in Peermont Global (Botswana)
(Pty) Limited (`PGB`), which owns The Grand Palm as well as the Syringa Hotel
(to be rebranded as the Mondior Summit Hotel) and Syringa Lodge (to be rebranded
as the Metcourt Lodge). Peermont Global exercises control over PGB and therefore
consolidates the results of PGB and separately deducts the minority interests of
40%.
Financial results
Note: All comparisons to prior period figures refer to the results as restated
Income statement Group revenues for the six months increased to R560,8
million, a 26% increase on the prior period, mainly due to continued favourable
trading conditions and an increased stake in the Emperors Palace operation
following the successful buyout of the Caesars Entertainment Inc. interest (`the
CEI buyout`) with effect from 31 March 2005. Gaming revenues increased by 24% to
R449,6 million, whilst non-gaming revenues increased by 36% to R111,2 million.
Non-gaming revenues were boosted by the acquisition, with effect from 1 March
2005, of the Syringa Hotel and Syringa Lodge in Botswana (`the Syringa
acquisition`), as well as the opening of the Metcourt Inn at The Grand Palm in
January 2005.
Whilst direct operating costs for the six months increased by 18%, mainly as a
result of proportionately consolidating an additional 20,7% of Emperors Palace
with effect from 31 March 2005, the increase in indirect costs of 27% was
substantially higher. Indirect operating costs were impacted by rebranding and
transaction costs of R7,5 million resulting from the CEI buyout as well as
provisions made in terms of the group`s share incentive schemes which increased
by R4,4 million to R7 million (2004: R2,6 million). Indirect operating costs,
excluding share incentive provisions, rebranding and transaction costs,
increased by 17%.
EBITDA at R218,4 million was 32% up on 2004. The EBITDA margin of 38,9% was
significantly better than the 37,4% achieved in 2004, mainly as a result of the
increased economic interest in Emperors Palace and continued margin enhancement
at all resort properties.
Depreciation for the six months benefited from the change in estimate of the
useful life of buildings described above. Had the changed estimate been
effective in the comparative period, the prior period comparative depreciation
charge would have been R7,5 million lower.
Net finance costs were significantly higher as a result of the issue of
preference shares and the raising of long-term borrowings associated with the
CEI buyout. In addition, PGB raised additional long-term borrowings to effect
the Syringa acquisition as well as to complete the construction of the Metcourt
Inn at The Grand Palm.
The group recorded a once-off profit of R36,5 million on the exercise of
European call options to acquire US dollars required to effect the CEI buyout.
The effective taxation rate increased substantially to 35,2%, due mainly to
increased STC charges, the non-deductibility of the preference share coupon
included in finance costs, the non-deductibility of certain rebranding and
transaction costs and the fact that Graceland is now in a tax paying position.
HEPS grew by 52% to 34,3 cents. If the after taxation effect of the once-off
option profit is excluded from HEPS, the HEPS as adjusted (`adjusted HEPS`)
would have grown by 18% to 26,5 cents.
Balance sheet Net borrowings increased to R1 002,4 million from R183,7
million as at 31 December 2004. The group`s net debt to equity ratio (net
borrowings/book value of ordinary shareholders` equity) increased to 91% from
18% as at 31 December 2004.
During the period, the group raised R582,6 million in redeemable preference
share funding, carrying a coupon of 73% of the prime overdraft rate, to enable
PGERH to effect a share buyback in terms of the CEI buyout. In addition, as part
of the CEI buyout, the group raised a term loan of R170 million, carrying
interest at JIBAR plus 160 basis points, to enable Peermont Global to increase
its fee income from Emperors Palace. The group increased its stake in the
Emperors Palace management company from 50% to 100%.
PGB raised debt of R72 million during the period to effect the Syringa
acquisition and to complete the development of the Metcourt Inn at The Grand
Palm. The debt is without recourse to Peermont Global and is denominated in
Botswana Pula to mitigate the group`s currency exposure. R30 million of the PGB
debt raised carries a fixed rate of 12,25%, while the balance of R42 million
carries interest at 2% below the Botswana prime overdraft rate.
Cash flow Cash generated from operations for the six months was up 23% to
R201,8 million (2004: R164,7 million). This was affected by insurance
prepayments totalling R11,6 million in the first half of 2005, whereas in the
prior period, the insurance payments occurred in the second half of 2004.
Interest payments were also significantly higher due to the increased debt
levels mentioned above.
Cash outflows arising from investing activities to expand operations, consisted
of the construction work-in-progress at the Mondior Concorde Hotel at Emperors
Palace (R9,4 million), the select-services Metcourt Inn at The Grand Palm (R5,4
million), the refurbishment of Mondazur San Lameer (R10,1 million), and the
completion of the gaming facilities expansion at Emperors Palace amounting to
R9,9 million.
The cash flows associated with the CEI buyout consisted of the acquisition of an
intangible asset for R167,9 million and a share buyback at PGERH, of which the
group`s share amounted to R532,2 million. The cash flows are stated net of
hedging gains arising which related to the CEI buyout and did not have a cash
flow impact.
The group raised new borrowings of R242 million and preference share funding of
R582,6 million to fund its acquisitions and expansion activities, while
continuing to repay R46,7 million of existing debt.
During the six months, the group made dividend payments to Peermont Global
shareholders and minorities totalling R55,5 million, significantly up from the
R3,1 million dividend payment in the prior period.
Contingent liability Following a similar challenge by South African Revenue
Service (`SARS`) of other gaming companies, SARS has recently queried the
deductibility of what is termed `pre-opening expenditure` incurred in connection
with the opening of new gaming resorts in the group. These expenses consist
mainly of payroll, training and marketing costs and have historically been
allowed as a deduction for income tax purposes. We are informed that SARS has
raised an assessment in respect of Graceland and intends to raise an assessment
in respect of Emperors Palace in due course. The group will follow a similar
approach to other gaming companies already assessed and will object to such
assessments based on legal advice received to date. Should the SARS challenge be
successful, the potential exposure to the group could amount to an additional
tax charge of approximately R13 million, excluding the effect of any possible
interest or penalties thereon.
Operational review
Emperors Palace
Peermont Global Limited (`PGL`)
effective economic interest: 82,96% 62,22% 62,22%
Reviewed Reviewed
Reviewed Restated Restated
30 June 30 June 31 Dec
2005 % 2004 2004
Rm change Rm Rm
Revenue 600,3 10 545,9 1 126,5
EBITDA 239,2 12 214,1 458,4
Profit before interest
and taxation 203,0 20 168,7 368,2
Net finance costs (39,4) 22 (32,4) (60,2)
Option profit 33,9 - -
Profit before taxation 197,5 45 136,3 308,0
Taxation (62,1) (53) (40,6) (89,8)
Profit after taxation 135,4 41 95,7 218,2
Attributable to PGL at 62,22% 41,2 59,5 135,8
Attributable to PGL at 82,96% 57,4 n/a n/a
While gaming market share at 27,2% was slightly lower than the 27,7% achieved in
the prior six month period, it was slightly higher than the 27,1% for the full
year ended 31 December 2004. The Gauteng gaming market size increased by 12,6%,
from an annualised R3 560 million in 2004 to an annualised R4 010 million for
the same six months in 2005. Non-gaming revenues increased by 9% to R72,5
million.
During May 2005, the group commenced a new marketing and promotional programme
to create and maintain brand awareness, commencing with its `stash the cash`
promotion. This momentum has continued with the launch of the second `Dream
House` promotion in August 2005.
Emperors Palace has not yet been able to take full advantage of the additional
slots and tables capacity acquired in October 2004. From November 2004 until
August 2005, 140 additional slots were temporarily located in areas where
revenue could not be maximised, while the facilities were modified to
accommodate the new machines in appropriate areas. These additional slot
machines were relocated to more suitable areas during July and August 2005.
Construction of facilities to house the additional tables was completed during
July 2005 and all 17 tables, of which only seven were operational during the six
months, were subsequently commissioned. The gaming expansion activities and, to
a lesser extent, the construction of the Mondior Concorde Hotel, have resulted
in disruption to the operations over the past six months, which is likely to be
significantly diminished by the end of 2005.
The EBITDA margin of 39,8% for the six-months year showed a continued
improvement on the 39,2% margin for the prior period as a result of tight cost
control.
Graceland
Peermont Global Limited effective
economic interest: 97% 100% 100%
Reviewed Reviewed
Reviewed Restated Restated
30 June 30 June 31 Dec
2005 % 2004 2004
Rm change Rm Rm
Revenue 52,9 15 46,0 97,4
EBITDA 12,9 42 9,1 22,4
Profit before interest
and taxation 9,9 62 6,1 26,2
Net finance costs (0,3) (50) (0,2) (0,2)
Profit before taxation 9,6 63 5,9 26,0
Taxation (3,3) - (1,6)
Profit after taxation 6,3 7 5,9 24,4
Attributable to PGL at 100% 5,1 5,9 24,4
Attributable to PGL at 97% 1,2 n/a n/a
Revenues exceeded expectation, in particular gaming revenues which grew by 17%
during the six months.
As a result of tight cost control, a high proportion of the additional revenues
flowed down to EBITDA level. EBITDA is stated after deducting management fees of
R1,4 million which commenced during May 2005. Despite these additional costs,
EBITDA grew by 42% from R9,1 million to R12,9 million. The EBITDA margin
improved to a net 24,4% (or 27,0% excluding the effect of management fees) from
19,8% in the prior six months.
Botswana
Peermont Global Limited effective
economic interest: 60% 60% 60%
Reviewed Reviewed
Reviewed Restated Restated
30 June 30 June 31 Dec
2005 % 2004 2004
Pula m change Pula m Pula m
Revenue 53,1 38 38,5 80,8
EBITDA 16,2 64 9,9 22,2
Profit before interest
and taxation 11,9 80 6,6 15,5
Net finance (costs)/income (2,7) (775) 0,4 0,6
Profit before taxation 9,2 31 7,0 16,1
Taxation (2,3) (28) (1,8) (3,2)
Profit after taxation 6,9 33 5,2 12,9
Attributable to PGL (Pula m) 4,1 3,1 7,7
Average exchange rate
(ZAR/BWP) 1,27 1,42 1,42
Attributable to PGL (Rm) 5,3 4,4 11,0
Gaming revenues grew by 10% during the six months, while non-gaming revenues
increased by 67% during the same period. The increase in non-gaming revenues is
mainly as a result of the Syringa acquisition with effect from 1 March 2005 and
the opening of the Metcourt Inn during January 2005.
EBITDA increased by 64% to Pula 16,2 million, which represents a margin of
30,5%, up from a margin of 25,7% in the prior period. The margin improvement is
mainly due to the fact that the new Metcourt Inn and Syringa properties operate
at higher margins than The Grand Palm in its previous form.
Finance costs have increased significantly to Pula 2,7 million for the six
months as a result of the entire Syringa acquisition and Metcourt Inn
construction costs being funded from cash and new debt raised.
The impact in Rand terms of the improved Botswana performance was somewhat muted
by the 12% devaluation of the Pula during the six months.
Head office
Reviewed Reviewed
Reviewed Restated Restated
30 June 30 June 31 Dec
2005 % 2004 2004
Rm change Rm Rm
Fee income 29,0 63 17,8 37,2
EBITDA 11,5 15 10,0 14,3
Profit before interest
and taxation 9,8 7 9,2 12,0
Net finance income/(costs) 4,4 540 (1,0) (0,4)
Profit before taxation 14,2 73 8,2 11,6
Taxation (7,9) (139) (3,3) (9,5)
Profit after taxation 6,3 29 4,9 2,1
Attributable to PGL 6,3 4,9 2,1
Note: Inter-group items, which are eliminated from headline earnings on
consolidation (e.g. dividends received), are excluded from these figures.
Revenues increased significantly as a result of the CEI buyout which resulted in
additional fee income. In addition, management fees of R1,4 million were
received from Graceland during the six months.
The EBITDA margin of 40% was lower than the comparable period, due mainly to
expenditure of R3,9 million on participation in the Singapore Request for
Concepts (`RFC`) process during the six months.
Net interest paid of R4,1 million was more than offset by the once-off option
profit of R8,4 million for the company. The tax charge was higher due to the
above-mentioned option profit and increased levels of non-deductible
expenditure.
Analysis of headline earnings contribution
Reviewed Reviewed
Reviewed Restated Restated
30 June 30 June 31 Dec
2005 % 2004 2004
Rm change Rm Rm
Emperors Palace 98,6 66 59,5 135,8
Graceland 6,3 7 5,9 24,4
Botswana 5,3 20 4,4 11,0
Head Office 6,3 29 4,9 2,1
Mondazur, San Lameer (0,3) (100) - 0,6
Net consolidation entries (2,9) (0,4) (8,6)
113,3 52 74,3 165,3
CEI buyout
On 30 March 2005, Peermont Global announced that the CEI buyout had become
unconditional and that the company had increased its economic interest in
Emperors Palace to 82,96%. As a result, Peermont Global has proportionately
consolidated an additional 20,7% of the results, assets, liabilities and cash
flows of Emperors Palace with effect from 31 March 2005.
BEE
Following the CEI buyout, the fully paid-up economic interest of Marang (East
Rand) Gaming Investments (Pty) Limited (`MER`), Peermont Global`s empowerment
partner in Emperors Palace, increased to 17,04%. In terms of the PMIH
empowerment transaction, which was implemented in December 2004, MER`s fully
paid-up economic interest in Emperors Palace is guaranteed to increase to 33,33%
by 31 December 2016.
Peermont Global is currently negotiating with Marang (Southern Highveld) (Pty)
Gaming Investments Limited (`MSH`) to increase the effective MSH economic
interest in Graceland from its current level of 3% to 25%. Once finalised, these
agreements will be subject to approval by the Mpumalanga Gaming Board.
R50 million community contribution
On 25 June 2005, the Gauteng Gambling Board (`the GGB`) approved an application
by the group to spend its R50 million contribution for community development
projects on supplementary mathematics, science and english education for
previously disadvantaged school learners in the East Rand and Vaal communities.
The R50 million was paid in Trust to the GGB in October 2004 to obtain
additional licensed gaming capacity at Emperors Palace.
Singapore
Peermont Global previously announced that it had qualified to participate in the
Request for Proposals (`RFP`) phase of the Integrated Resort project in
Singapore, following the conclusion of the Request for Concepts (`RFC`) phase.
Nineteen interested parties submitted proposals by 28 February 2005 in terms of
the RFC process initiated by the Singapore Tourism Board, acting on behalf of
the Singapore Government. Twelve interested parties remain qualified to
participate in the RFP phase.
The Singapore government has announced that gaming concessions will be awarded
for two Integrated Resort projects, one on the Marina Bayfront and the other on
Sentosa Island, following the adjudication of the RFP process.
It is anticipated that the RFP document will be issued by 30 September 2005.
Peermont Global will carefully evaluate the contents of the RFP document and
will assess the costs and benefits of participation, prior to proceeding to the
RFP phase. To date, Peermont Global has spent R3,9 million on its participation
in this process.
Bethlehem casino project
The agreements relating to the Bethlehem casino project, in respect of which the
company will acquire an effective 40% shareholding, have not yet become
unconditional as they are subject to approval by the Free State Gambling and
Racing Board (`FSGRB`). New members were appointed to the FSGRB on 27 June 2005
and the FSGRB has indicated that the company`s application will be adjudicated
during October 2005. If the application is approved, it is likely that
construction will commence in November 2005 for completion by the end of 2006.
Mondazur Resort Estate Hotel at San Lameer
During the six months, the hotel was closed for interior refurbishment. The
refurbishment is expected to be completed by September 2005 at an estimated cost
of R25 million.
Mondior Concorde Hotel at Emperors Palace
Construction of a 150 room hotel at Emperors Palace commenced according to plan
at a budgeted capital expenditure of R70 million. It is anticipated that this
hotel will be opened in January 2006 and will increase the ability of Emperors
Palace to attract and host larger conference and convention groups.
Prospects
Revenues are largely dependent on the level of disposable income available to
consumers, which in turn is affected by macro economic factors. To the extent
that economic fundamentals remain positive, we expect satisfactory growth in
revenues and profits for the rest of the year.
Dividend number 4
Notice is hereby given that an interim dividend of 14,6 (2004: 11,4) 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, 30
September 2005. In compliance with the requirements of STRATE the following
dates are applicable:
Last day to trade cum dividend Friday, 23 September 2005
Securities start trading ex dividend Monday, 26 September 2005
Record date Friday, 30 September 2005
Payment date Monday, 3 October 2005
The interim dividend is declared and will be paid in the currency of the
Republic of South Africa. Share certificates may not be dematerialised or
rematerialised between Monday, 26 September 2005 and Friday, 30 September 2005,
both dates inclusive.
On behalf of the board
Alan van Biljon Ernie Joubert Bryanston
Chairman Chief Executive Officer 5 September 2005
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), 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 Limited, Corporate and Investment
Banking
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited
www.peermont.com
Date: 05/09/2005 07:06:16 AM
Produced by the JSE SENS Department
