| Thu 9 Mar 2006, 8:00 | | Peermont Global - Audited Condensed Group Results |
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PTG
PTG
Peermont Global - Audited Condensed Group Results And Final Dividend Declaration
For The Year Ended 31 December 2005
Peermont Global Limited
Registration number 1995/004449/06
("Peermont Global" or "the company")
Share code: PTG & ISIN code: ZAE000058053
AUDITED CONDENSED GROUP RESULTS AND FINAL DIVIDEND DECLARATION FOR THE YEAR
ENDED 31 DECEMBER 2005
- Revenue up 35% to R1 237 million (2004: R917 million)
- Operating profits up 43% to R402 million (2004: R281 million)
- Profit before taxation up 42% to R346 million (2004: R244 million)
- Headline earnings per share ("HEPS") up 33% to 66,6 cents (2004: 50,1 cents)
- Adjusted HEPS (excluding once-off option gain) up 17% to 58,7 cents
- Total dividend per share ("DPS") up 18% to 32,4 cents (2004: 27,4 cents)
Ernie Joubert, MD commented: "We have made substantial investments in future
growth and capacity during the year which has already begun to contribute
towards increased Group earnings. We experienced better revenue growth at
Emperors Palace in the second half of the year, following the full commissioning
of the additional gaming positions in August 2005 and increased marketing
activity. It"s likely that Group revenues and profits will continue to grow in
real terms during 2006."
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
Louise Brugman 083 504 1186
GROUP INCOME STATEMENT
Audited
Audited Restated
Year ended Year ended
31 Dec 2005 % 31 Dec 2004
Rm change Rm
Revenue 1 236,8 34,9 916,8
Gaming 985,7 738,5
Rooms 92,6 62,2
Food and beverage 119,1 88,1
Other 39,4 28,0
Other income 0,4 1,9
1 237,2 918,7
Operating costs (835,2) 31,0 (637,6)
Employee costs (260,0) (200,3)
VAT and gaming levies on gross
gaming revenues (191,8) (145,4)
Promotions and marketing costs (81,0) (42,1)
Depreciation and amortisation (65,6) (63,1)
Property and equipment rentals (15,6) (11,8)
Other operational costs (221,2) (174,9)
Operating profit 402,0 43,0 281,1
Net financial (expenses)/income (56,0) (36,8)
Financial income 45,3 15,6
Financial expenses (101,3) (52,4)
Profit before taxation 346,0 41,6 244,3
Taxation (118,6) (69,7)
Profit for the year 227,4 30,2 174,6
Attributable to:
Equityholders of Peermont 220,0 167,3
Minority shareholders 7,4 7,3
227,4 30,2 174,6
Headline earnings reconciliation
Profit attributable to
equityholders of Peermont 220,0 167,3
Headline earnings adjustments (0,4) (1,9)
Reversal of PGSH building
impairment - (10,7)
Loss on implementation of
PMIH BEE structure - 8,4
(Profit)/loss on sale of assets (0,4) 0,4
Taxation effect of the above
adjustments 0,1 (0,1)
Headline earnings 219,7 165,3
Reversal of the after taxation
effect of non-recurring profit
on foreign exchange options (25,9) -
Adjusted headline earnings 193,8 165,3
Number of shares (million)
Issued ordinary shares 330,0 330,0
For fully diluted EPS
calculation 331,0 330,4
Earnings per ordinary share
(cents)
Basic earnings 66,7 31,5 50,7
Headline earnings 66,6 32,9 50,1
Adjusted headline earnings 58,7 17,2 50,1
Diluted earnings per ordinary
share (cents)
Basic earnings 66,5 31,4 50,6
Headline earnings 66,4 32,8 50,0
Adjusted headline earnings 58,5 17,0 50,0
Dividends declared per
Share (cents) 32,4 18,2 27,4
Reconciliation of operating
profit to EBITDA
Operating profit 402,0 43,0 281,1
Property and equipment rentals 15,6 11,8
Depreciation and amortisation 65,6 63,1
EBITDA 483,2 35,7 356,0
GROUP BALANCE SHEET
Audited
Audited Restated
31 Dec 2005 31 Dec 2004
Rm Rm
Assets
Total non-current assets 2 511,0 1 452,9
Property, plant and equipment 1 808,3 1 302,5
Intangible assets 691,1 133,8
Derivative instruments 4,0 12,4
Amount due by joint venture 4,4 -
Investments - 1,5
Deferred taxation asset 3,2 2,7
Total current assets 136,9 119,9
Inventories 23,4 14,6
Accounts receivable 31,5 16,9
Amounts due by joint ventures 1,3 1,1
Current portion of derivative instruments 14,1 35,0
Taxation 6,6 1,5
Cash and cash equivalents 60,0 50,8
Total assets 2 647,9 1 572,8
Equity and liabilities
Equity 1 158,5 1 045,0
Share capital 0,0 0,0
Share premium 32,9 32,9
Reserves 29,3 34,6
Retained income 1 096,3 977,5
Minority interest 22,2 20,1
Total equity 1 180,7 1 065,1
Total non-current liabilities 1 023,5 305,6
Interest-bearing long-term borrowings 259,0 158,5
Preference share liability 583,0 -
Derivative instruments 4,3 10,1
Deferred taxation liabilities 177,2 137,0
Total current liabilities 443,7 202,1
Accounts and other payables 132,6 81,8
Provisions 32,1 21,8
Amounts due to related parties 2,8 2,3
Current portion of long-term borrowings 146,1 55,4
Current portion of derivative instruments 13,3 13,0
Taxation liabilities 28,0 7,2
Bank overdraft 88,8 20,6
Total equity and liabilities 2 647,9 1 572,8
NET BORROWINGS
Audited Audited
31 Dec 2005 31 Dec 2004
Rm Rm
Interest-bearing debt
Non-current 842,0 158,5
Current 146,1 55,4
988,1 213,9
Cash balances 28,8 (30,2)
Net borrowings 1 016,9 183,7
% %
Net debt/book value of ordinary
shareholders" equity (%) 88 18
GROUP CASH FLOW STATEMENT
Audited Audited
Year Year
ended ended
31 Dec 2005 31 Dec 2004
Rm Rm
Cash flows from operating activities 477,0 347,5
Financial expenses (104,6) (45,0)
Financial income 7,2 7,7
Taxation paid (112,2) (86,3)
Net cash from operating activities 267,4 223,9
Cash flows from investing activities (940,3) (133,4)
Replacement of property, plant and
equipment to maintain operations (54,2) (27,3)
Acquisition of property, plant and equipment
to expand operations (115,0) (68,1)
Acquisition of intangible assets (183,4) (47,7)
Share buy-back in joint venture (532,2) -
Proceeds on disposal of property, plant
and equipment 1,2 0,4
Acquisition of businesses (58,3) -
Disposal of interest in joint venture (0,2) -
Decrease in investments 1,5 9,3
Repayment of shareholders" loan by joint
venture 0,3 -
Cash flows from financing activities 614,7 (149,2)
Cash settlement in respect of derivative
instruments 6,7 3,9
Derivative instruments purchased - (19,1)
Interest-bearing long-term borrowings raised 242,0 -
Proceeds on issue of preference shares 589,0 -
Preference share issue costs (1,5) -
Interest-bearing long-term borrowings repaid (117,8) (56,8)
Repayment of shareholders" loans - (35,8)
Dividends paid (103,7) (41,4)
Net decrease in cash and cash equivalents (58,2) (58,7)
Cash and cash equivalents at the beginning
of the year 30,2 89,6
Effect of exchange rate fluctuations
on cash held (0,8) (0,7)
Cash and cash equivalents at the end of
the year (28,8) 30,2
GROUP STATEMENT OF CHANGES IN EQUITY
Ordinary
shareholders"
equity Minorities Total
Rm Rm Rm
Balance at 31 December 2003 711,0 18,8 729,8
Revaluation of buildings on
transition to IFRS 181,6 - 181,6
Restated opening balance on
transition to IFRS 892,6 18,8 911,4
Profit for the 2004 year 167,3 7,3 174,6
Dividends paid (37,6) (3,8) (41,4)
Foreign exchange translation
loss (3,4) (2,2) (5,6)
Share-based payment charge 0,4 - 0,4
Revaluation of buildings on
increase in holding in joint
venture 25,7 - 25,7
Restated balance at
31 December 2004 1 045,0 20,1 1 065,1
Profit for the 2005 year 220,0 7,4 227,4
Dividends paid (101,0) (2,7) (103,7)
Foreign exchange translation
loss (4,0) (2,6) (6,6)
Share-based payment charge 1,3 - 1,3
Recognised hedging expense (2,8) - (2,8)
Balance at 31 December 2005 1 158,5 22,2 1 180,7
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
IFRS
transition date
31 Dec 2004 1 Jan 2004
BALANCE SHEET Rm Rm
Equity as previously reported 860,3 729,8
Revaluation of buildings on transition
to IFRS 181,6 181,6
Restated equity at date of transition 1 041,9 911,4
Effect of income statement adjustments (2,9)
Share-based payment reserve
reclassification 0,4
Revaluation arising on adjusted PMIH
business combination 25,7
1 065,1 911,4
Year ended
31 Dec 2004
INCOME STATEMENT R"m
Profit for the year as previously reported 177,5
Share-based payment credit 4,6
Goodwill amortisation reversal 14,3
Reversal of intangible assets amortisation 2,7
Additional depreciation on revalued buildings (6,3)
Reversal of impairment of buildings (10,2)
Loss on implementation of PMIH empowerment structure (8,4)
Deferred taxation effects 0,4
Profit for the year as restated 174,6
SEGMENTAL ANALYSIS
Revenue EBITDA Operating profit
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Emperors Palace -
100% 1 250,4 1 126,3 483,9 458,2 410,7 368,0
Less share not
proportionately
consolidated (273,9) (425,5) (106,7) (173,1) (91,1) (139,1)
Emperors Palace -
proportionately
consolidated
share 976,5 700,8 377,2 285,1 319,6 228,9
Graceland - 100% 110,5 97,4 25,6 22,4 19,9 26,2
Less share not
proportionately
consolidated (2,3) - (0,5) - (0,4) -
Graceland -
proportionately
consolidated
share 108,2 97,4 25,1 22,4 19,5 26,2
Botswana # 144,2 114,5 43,8 31,3 31,1 21,8
Head office 80,8 45,2 38,4 14,3 34,3 12,0
Mondazur 7,5 2,5 (0,5) 0,9 (1,3) 0,8
Bethlehem - - - - - -
Intercompany (80,4) (43,6) (0,8) 2,0 (1,2) (8,6)
Group total 1 236,8 916,8 483,2 356,0 402,0 281,1
SEGMENTAL ANALYSIS
Net financial Profit
expenses before taxation Taxation
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Emperors Palace -
100% (57,4) (60,0) 353,3 308,0 (117,9) (89,8)
Less share not
proportionately
consolidated 12,5 22,7 (78,6) (116,4) 24,7 33,9
Emperors Palace -
proportionately
consolidated
share (44,9) (37,3) 274,7 191,6 (93,2) (55,9)
Graceland - 100% (0,2) (0,2) 19,7 26,0 (5,7) (1,6)
Less share not
proportionately
consolidated - - (0,4) - 0,1 -
Graceland -
proportionately
consolidated
share (0,2) (0,2) 19,3 26,0 (5,6) (1,6)
Botswana # (7,4) 1,1 23,7 22,9 (5,1) (4,5)
Head office (3,5) (0,4) 30,8 11,6 (13,5) (9,5)
Mondazur - - (1,3) 0,8 0,4 (0,2)
Bethlehem - - - - - -
Intercompany - - (1,2) (8,6) (1,6) 2,0
Group total (56,0) (36,8) 346,0 244,3 (118,6) (69,7)
SEGMENTAL ANALYSIS
Profit Depreciation Net replacement
for the year and amortisation capital expenditure
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Emperors Palace
- 100% (235,4 218,2 (62,5) (80,0) (50,0) (18,3)
Less share not
proportionately
consolidated (53,9) (82,5) 13,1 30,2 9,1 6,9
Emperors Palace
- proportionately
consolidated
share 181,5 135,7 (49,4) (49,8) (40,9) (11,4)
Graceland -
100% 14,0 24,4 (4,3) (6,1) (5,4) (3,4)
Less share not
proportionately
consolidated (0,3) - 0,1 - 0,2 -
Graceland -
proportionately
consolidated
share 13,7 24,4 (4,2) (6,1) (5,2) (3,4)
Botswana # 18,6 18,4 (8,1) (6,0) (7,1) (12,0)
Head office 17,3 2,1 (2,9) (1,2) (0,7) (0,4)
Mondazur (0,9) 0,6 (0,6) - - -
Bethlehem - - - - - -
Intercompany (2,8) (6,6) (0,4) - 0,9 0,3
Group total 227,4 174,6 (65,6) (63,1) (53,0) 26,9
SEGMENTAL ANALYSIS
Expansion
capital Net
expenditure third-party
and investment indebtedness
2005 2004 2005 2004
Rm Rm Rm Rm
Emperors Palace -
100% (749,0) (126,9) 995,6 313,4
Less share not
proportionately
consolidated 130,2 47,9 (169,7) (118,4)
Emperors Palace -
proportionately
consolidated
share (618,8) (79,0) 825,9 195,0
Graceland - 100% - - (2,7) (3,5)
Less share not
proportionately
consolidated - - 0,1 -
Graceland -
proportionately
consolidated
share - - (2,6) (3,5)
Botswana # (64,2) (27,8) 57,6 10,9
Head office (167,8) - 137,0 (17,9)
Mondazur (22,7) (9,0) (1,0) (0,8)
Bethlehem (13,9) (1,5) - -
Intercompany - - - -
Group total (887,4) (117,3) 1 016,9 183,7
# Average exchange rate (ZAR/BWP) 1,26 (2004: 1,42) applied to income statement
and cash flow items, year end rate of 1,178 (2004: 1,34) applied to balance
sheet
OVERVIEW
Gaming revenue increased by 33% to R985,7 million and non-gaming revenue
increased by 41% to R251,1 million. Earnings before interest, taxation,
depreciation and amortisation ("EBITDA") increased by 36% to R483,2 million,
while the EBITDA margin increased to 39% (2004: 38,8%). Profit before taxation
rose 42% to R346 million (2004: R244,3 million). Adjusted headline earnings
increased by 17% to R193,8 million in 2005, compared to R165,3 million in 2004.
The year saw substantial investment in future growth and capacity totalling
R887,4 million, which has already begun to contribute towards increased
earnings. Investment activity for the year primarily consisted of the following
cash flows:
- The acquisition, with effect from 1 April 2005, of a further effective 20,7%
in Emperors Palace from Caesars South Africa Inc. for R532,2 million and 50% of
the Emperors Palace management contract for R167,8 million ("the CEI buyout");
- The acquisition, with effect from 1 March 2005, of the Syringa hotels in
Gaborone (67 rooms) and Francistown (53 rooms) for R58,3 million, which have
been rebranded as Mondior Summit and Metcourt Lodge hotels respectively;
- The full commissioning of an additional 140 slot machines and 17 tables at
Emperors Palace with effect from 1 August 2005, at a total cost of R112 million
(group share: R92,9 million) of which R21,4 million (group share: R17,8 million)
was spent in 2005;
- The construction of the Metcourt Inn (149 rooms) in Gaborone, which opened in
February 2005 at a total cost of R33,7 million, of which R5,9 million was spent
in 2005;
- The acquisition, upgrade and refurbishment of the Mondazur Resort Estate Hotel
at San Lameer, which re-opened in September 2005 at a total cost of R31,7
million, of which R22,7 million was spent in 2005;
- The construction of the Mondior Concorde hotel (150 rooms) at Emperors Palace,
on which R64,3 million (group share: R53,3 million) was spent during the year.
The hotel is expected to open during March 2006 at a total cost of R78 million
(group share: R64,7 million); and
- The construction of the Frontier Inn and Casino in Bethlehem, Free State, on
which R13,9 million was spent during the year. Following lengthy delays in the
appointment of new board members to the Free State Gambling and Racing Board,
the company"s application to relocate the licensed premises and acquire a
financial interest was approved in October 2005. Construction commenced in
November 2005 and the property is expected to open during the last quarter of
2006 at a total cost of R103 million.
OPERATIONS
EMPERORS PALACE
Revenues at Emperors Palace grew by 11% to R1 250 million compared to R1 126
million in 2004, with better growth experienced in the second half of the year
following the full commissioning of the additional gaming positions in August
2005 and increased marketing activity. Gaming revenues grew by 11,6% for the
full year, with improved growth in the second half of 13% as compared to the
same period in 2004. The growth rate in the overall Gauteng gaming market size
was 11,7% for the full year as compared to 12,6% for the first six months,
resulting in a total market size of R4 117 million for 2005.
Operating profits at Emperors Palace increased by 12% to R411 million. EBITDA
growth of 6% was affected by additional marketing and name change costs
following the CEI buyout, as well as by the costs of the industrial action and
the armed robbery which occurred in August and September 2005 respectively.
Following the robbery, security measures have been improved, resulting in a
permanent increase in ongoing security costs.
GRACELAND
Graceland revenues grew by 13% to R111 million compared to R97 million in 2004,
mainly as a result of a continued focus on the leisure market and an improved
local economy. EBITDA increased by 14% to R25,6 million, after deducting R5,8
million in management fees paid and accrued from May 2005 (2004: nil). Profit
for the year decreased to R14 million (2004: R24,4 million) as the prior year
included a reversal of building impairment amounting to R10,7 million. In
addition, Graceland"s taxation rate increased significantly due to the full
utilisation of prior year"s taxation losses.
BOTSWANA
The Botswana operations experienced revenue growth of 42% in Pula terms from
Pula 81 million in 2004 to Pula 115 million in 2005, which was reduced to growth
of 26% in Rand terms following the devaluation of the Pula during the year. The
significant revenue growth in Botswana was mainly due to the launch of the new
Metcourt Inn in February 2005 and the acquisition of the Syringa hotels in March
2005, which offset the effect of slower growth in gaming revenues due to higher
inflation and the resultant pressure on disposable income in the local economy.
EBITDA increased by 58% in Pula terms to Pula 35 million as a result of the
higher margins generated by the Metcourt Inn and Syringa properties.
MONDAZUR
The hotel was either partially or fully closed at various times during its
refurbishment in the first eight months of the year and only became fully
operational in September 2005. Business levels returned to normal by the end of
the year and 2006 will see the first full year of operations of the upgraded
property.
HEAD OFFICE
Head office revenues increased by 78%, from R45,2 million in 2004 to R80,8
million for 2005, mainly as a result of increased fees generated by the CEI
acquisition. In addition, Graceland contributed R5,3 million in management fees
from May 2005 (2004: nil). The cost of the company"s participation in the
Singapore project, up until its withdrawal in November 2005, amounted to R3,9
million, which amount was expensed in the year. EBITDA increased from R14,3
million in 2004 to R38,4 million for 2005.
KEY FINANCIAL ASPECTS
FINANCE COSTS
Financial expenses of R101,3 million included interest paid of R100,0 million,
which was significantly up from R45,0 million in 2004. The increase in funding
costs was mainly due to 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. Financial
income of R45,3 million for 2005 included a once-off gain of R36,5 million on
the exercise of European call options to acquire US Dollars needed to effect the
CEI buyout. Net interest cover, excluding the once-off option gain, amounted to
4,3 times for 2005 (2004: 7,6 times), well above the group"s target minimum
cover of 2,5 to 3 times.
TAXATION
The effective taxation rate increased substantially to 34,3%, due mainly to
increased STC charges, the non-deductibility of preference share coupons
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.
BALANCE SHEET STRUCTURE
Net borrowings increased to R1016,9 million from R183,7 million as at 31
December 2004 and R1 002,4 million at 30 June 2005. The increase in net
borrowings, as compared to 30 June 2005, was due largely to capital expenditure
on the Mondior Concorde Hotel, the Mondazur San Lameer refurbishment and the
Bethlehem project. The group"s net debt-to-equity ratio (net borrowings/book
value of ordinary shareholders" equity) increased to 88% from 18% as at 31
December 2004 and reduced moderately compared to the 91% as at 30 June 2005.
During the period, the group raised R589,0 million in redeemable preference
share funding to enable PGER Holdings (Proprietary) Limited ("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 to enable Peermont Global
to increase its stake in the Emperors Palace management company from 50% to 100%
and consequently acquire the right to additional fee income from Emperors
Palace.
Peermont Global (Botswana) (Proprietary) Limited ("PGB") raised debt of R72
million during the period to effect the Syringa acquisition and complete the
development of the Metcourt Inn at The Grand Palm. The debt is without recourse
to Peermont Global and is denominated in Pula to mitigate the group"s currency
exposure.
CASH FLOW
Cash flows from operating activities of R477 million were 37% higher than the
R347,5 million in 2004. Significantly higher interest and tax payments reduced
the growth in net cash flow from operating activities to 19% from R223,9 million
in 2004 to R267,4 million in 2005.
R940,3 million in cash was utilised in investing activities, of which R887,4
million related to investment in future growth and capacity as detailed above.
These investment cash flows were funded by financing activities, operating
activities and a decrease in cash balances.
The group raised new borrowings of R242 million and preference share funding of
R589 million to fund its acquisitions and expansion activities, while repaying
R117,8 million of existing debt.
During the year, the group made dividend payments to Peermont Global and
minority shareholders totalling R103,7 million, significantly up from the R41,4
million paid in 2004.
ACQUISITION OF THE TUSK RESORTS GROUP
The acquisition of control of The Tusk Resorts Group was announced on 21
December 2005, followed by a circular containing further details which was
posted to shareholders on 28 February 2006. It is anticipated that the
transaction will be implemented on or about 21 June 2006. Peermont Global will
pay a total purchase consideration, in cash, of a minimum of R440,3 million and
a maximum of R583 million, for a controlling interest in the following casino
and hotel operations:
- Tusk Mmabatho in Mafikeng, North West Province;
- Tusk Rio in Klerksdorp, North West Province;
- Tusk Taung in Taung, North West Province;
- Tusk Venda in Thohoyandou, Limpopo Province; and
- Tusk Umfolozi in Empangeni, KwaZulu-Natal Province.
The purchase consideration will be determined based on the audited EBITDA of
The Tusk Resorts Group for the financial year ending 31 March 2006, multiplied
by an average EBITDA multiple of 6,8 times and adjusted for actual levels of
indebtedness and working capital at 31 March 2006. The purchase consideration
for the Tusk transaction will be financed by means of additional preference
share funding facilities extended by financial institutions to Peermont Global,
amounting to R375 million, and from Peermont Global"s own resources and existing
facilities. The preference share facilities will be redeemable over the last
five years of an eight-year term, in equal quarterly instalments.
In addition, Peermont Global has negotiated the refinancing of the existing debt
within The Tusk Resorts Group on more favourable terms, which is expected to
contribute towards moderate earnings accretion following the first full year of
implementation of the transaction.
The transaction is still subject, inter alia, to the following conditions
precedent, which are required to be obtained by no later than 31 May 2006:
- the unconditional approval of the South African competition authorities; and
- the unconditional approval by the North West Gambling Board (in respect of the
change of ownership in Tusk Rio and Tusk Mmabatho), the Limpopo Gaming Board (in
respect of the change of ownership in Tusk Venda) and the KwaZulu-Natal Gambling
Board (in respect of the change of ownership in Tusk Umfolozi).
SINGAPORE
After careful evaluation of the costs, risks and benefits of participation in
the Request for Proposals ("RFP") phase of the Integrated Resort project in
Singapore, Peermont Global decided not to pursue the opportunity further.
Peermont Global expensed a total of R3,9 million in the year on its
participation.
GRACELAND BEE
Peermont Global concluded negotiations with Marang (Southern Highveld) Gaming
Investments (Pty) Ltd ("MSH") in December 2005 to increase the fully diluted MSH
shareholding in Peermont Global (Southern Highveld) (Pty) Ltd ("PGSH") from its
current level of approximately 3% to an effective 25%. MSH"s interest will be
indirectly held via a holding company in which it will hold 50,1%, which in turn
will own 50% of PGSH. Peermont Global will continue to hold the remaining 50% in
PGSH directly and will indirectly own a further 24,9% via its holding of 49,9%
in the new BEE controlled holding company. 50% of PGSH"s shareholding will thus
be directly held by the new BEE controlled holding company and the remaining 50%
will continue to be held by Peermont Global. In terms of the above-mentioned
agreements, PGSH"s ability to declare dividends to ordinary shareholders will be
restricted until such time as all shareholder loans are fully repaid. The
shareholder loans, which were originally contributed by Peermont Global, are
interest free and amount to R145,5 million as at 31 December 2005. These
agreements were submitted to the Mpumalanga Gaming Board ("MGB") on 23 December
2005 and are subject to their approval. The outcome of the application for
approval of these agreements is still awaited.
During August 2005, the MGB imposed an additional licence condition requiring
Graceland to ensure that "at least 50% direct shareholding with full economic
benefits and voting rights by black-owned entities is maintained at all times in
Peermont Global (Southern Highveld) (Pty) Ltd". Peermont Global and PGSH believe
that the imposition of such a perpetual condition is not in accordance with
Graceland"s bid commitments, is unfairly restrictive on the company and its
shareholders, is not within the power of the MGB to impose, is not clearly
defined and is subject to differing interpretation. Accordingly, after
unsuccessfully engaging with the MGB on the matter, PGSH and Peermont Global
have launched a review application in the High Court, challenging the decision
of the MGB to impose this condition.
Peermont Global fully supports the compelling aim of black economic empowerment,
as evidenced by the group"s track record of creating significant value for
broad-based BEE shareholders. The agreements reached with MSH in December 2005
further demonstrate Peermont Global"s contribution to advancing BEE. Its
objection to the imposition of this condition is thus not on the basis that it
objects to BEE, but is rather based on the imposition of an unduly restrictive
licence condition long after the award of the licence.
PROSPECTS
It is anticipated that the disposable income levels of consumers for the year
ahead will benefit from the positive outlook for inflation, interest rates,
personal taxation levels and probable increases in salaries and wages.
Accordingly, it is expected that the group"s revenues and earnings will continue
to show real growth in 2006, assisted by the substantial investment made in
additional capacity in 2005.
AUDITORS" OPINION
KPMG Inc. have audited these results and their opinion is available for
inspection at the company"s registered office.
BASIS OF PREPARATION
The audited results of the group for the year ended 31 December 2005 have been
prepared in accordance with the group"s accounting policies which comply with
International Financial Reporting Standards (IFRS).
This is the first set of audited annual results prepared in accordance with IFRS
and therefore, in terms of IFRS 1 First-time Adoption of International Financial
Reporting Standards (IFRS 1), the group has restated the consolidated balance
sheet as at 31 December 2004 and the consolidated income statement for the
period then ended. There have been no adjustments to the cash flows previously
reported as a result of the adoption of IFRS. The disclosures required by IFRS 1
concerning the transition of South African Statements of Generally Accepted
Accounting Practice (SA GAAP) to IFRS and the requisite changes to accounting
policies are set out in the reconciliation of previous SA GAAP to IFRS above.
BASIS OF CONSOLIDATION
Peermont Global has a direct economic interest of 33,33% in PGERH which owns
100% of Peermont Global (East Rand) (Pty) Ltd, which in turn owns Emperors
Palace. In addition, Peermont Global has a further indirect effective economic
interest of 49,63% in PGERH. Peermont Global"s total effective 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 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 were
consolidated.
Peermont Global has a direct shareholding of 60% in PGB which owns The Grand
Palm as well as the Syringa Hotel (rebranded as the Mondior Summit Hotel) and
Syringa Lodge (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%.
CONTINGENT LIABILITIES
TAXATION
SARS has performed integrated audits at two of the group companies in respect of
the 1999 to 2003 years of assessment and issued final letters of findings to
both companies by the end of January 2006. The most significant findings relate
to the deductibility of pre-opening expenses amounting to R24,7 million
(taxation effect R7,4 million), royalties previously allowed amounting to R60,1
million (taxation effect R18,0 million) and the wear-and-tear write-off periods
claimed in respect of certain asset categories, predominantly slot machines.
The companies, following consultation with their legal and taxation advisors,
rejected SARS" contentions on all significant items in comprehensive letters
written to SARS. The companies continue to engage SARS on these matters.
Management"s view is strongly supported by legal advice.
It is premature and may be misleading to quantify the potential tax exposure
emanating from the SARS letters of findings at present, as certain factual
issues and calculations are still being debated and the substance of the
contentions is predominantly based on the interpretation of a variety of case
law.
DIVIDEND DECLARATION
FINAL DIVIDEND NUMBER 5
Notice is hereby given that a final dividend of 17,8 cents per ordinary share
(2004: 16,0 cents) 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, 31 March 2006. In compliance with the requirements of STRATE the
following dates are applicable:
Last day to trade cum dividend Friday, 24 March 2006
Securities start trading ex dividend Monday, 27 March 2006
Record date Friday, 31 March 2006
Payment date Monday, 3 April 2006
The final 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, 27 March 2006 and Friday, 31 March 2006, both dates inclusive.
On behalf of the board
Alan van Biljon Ernie Joubert Bryanston
Chairman Managing Director 9 March 2006
Directors: AF van Biljon (Chairman)#, EG Joubert (Managing Director and Chief
Executive Officer), AE Puttergill (Deputy Managing Director and Group Financial
Director), STL Arnold#, MD Brand#, RI Cassim#, RSN Dabengwa#, KO Kutoane#, SH
Muller#, P 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
Date: 09/03/2006 08:00:20 AM Produced by the JSE SENS Department
