| Mon 4 Sep 2006, 7:00 | | Peermont Global - Reviewed Condensed Interim Resul |
|
PTG
PTG
Peermont Global - Reviewed Condensed Interim Results and Interim Dividend
PEERMONT GLOBAL LIMITED
Registration number 1995/004449/06
("Peermont Global" or "the company")
Share code: PTG & ISIN code: ZAE000058053
- Revenue up 24% to R697 million (2005: R561 million)
- Operating profit up 27% to R229 million (2005: R181 million)
- Adjusted headline earnings per share ("HEPS") (excluding effects of
prior period foreign currency option gain) up 31% to 34,7 cents
(2005: 26,4 cents)
- HEPS up 8% to 37,2 cents (2005: 34,3 cents)
- Interim dividend per share ("DPS") up 27% to 18,6 cents
(2005: 14,6 cents)
Ernie Joubert, MD commented:
"We are pleased with our performance at Emperors Palace. The additional
positions we added last year contributed to strong growth in gross gaming
revenue of 12.6%. The Mondior Concorde at Emperors Palace has performed to
expectation since opening in March. Trading conditions at Graceland and in
Botswana have continued to be tough. We implemented the acquisition of Tusk
Group in August and believe it will be earnings accretive. We aim to achieve
real growth in group revenues and profits for the full year after considering
the current economic outlook."
Enquiries:
Peermont Global 011 267 9200
Ernie Joubert, Managing Director 011 267 9207
Anthony Puttergill, Deputy Managing Director 011 267 9209
Grant Robinson, Financial Director 011 267 9220
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Louise Brugman 083 504 1186
REVIEWED CONDENSED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
AND INTERIM DIVIDEND ANNOUNCEMENT
Group income statements
Reviewed Reviewed Audited
6 months 6 months Year
ended ended ended
30 Jun 2006 % 30 Jun 2005 31 Dec 2005
Rm change Rm Rm
Revenue 697,4 24,4 560,5 1 236,8
Gaming 556,9 449,6 985,7
Rooms 54,5 42,6 92,6
Food and beverage 63,4 50,8 119,1
Other 22,6 17,5 39,4
Other income/(expenses) 0,2 (0,1) 0,4
697,6 560,4 1 237,2
Operating costs (468,4) 23,4 (379,6) (835,2)
Employee costs (141,6) (122,8) (260,0)
VAT and gaming levies
on gross gaming
revenues (110,6) (90,3) (191,8)
Promotions and
marketing costs (40,8) (25,7) (81,0)
Depreciation and
amortisation (33,5) (30,6) (65,6)
Property and equipment
rentals (10,4) (6,6) (15,6)
Other operational costs (131,5) (103,6) (221,2)
Operating profit 229,2 26,8 180,8 402,0
Net financial
(expenses)/income (54,2) (0,7) (56,0)
Financial income 1,3 41,1 45,3
Financial expenses (55,5) (41,8) (101,3)
Profit before taxation 175,0 (2,8) 180,1 346,0
Taxation (49,6) (63,4) (118,6)
Profit for the period 125,4 7,5 116,7 227,4
Attributable to:
Equityholders of
Peermont 122,8 113,2 220,0
Minority shareholders 2,6 3,5 7,4
125,4 7,5 116,7 227,4
Number of shares
(million)
Issued ordinary shares 330,0 330,0 330,0
For fully diluted
calculations 331,0 331,0 331,0
Basic earnings per
share (cents)
- fully diluted 37,1 8,5 34,2 66,5
- undiluted 37,2 8,5 34,3 66,7
Dividends declared per
ordinary share (cents) 18,6 27,4 14,6 32,4
Headline earnings
reconciliation
Profit attributable to
equityholders of
Peermont 122,8 8,5 113,2 220,0
Headline earnings
adjustments
(Profit)/loss on sale
of assets (0,2) 0,1 (0,4)
Taxation effect of the
above adjustment 0,1 - 0,1
Headline earnings 122,7 8,3 113,3 219,7
Reversal of the effect
of non-recurring option
profit - (36,5) (36,5)
Taxation effect of the
option profit
adjustment (8,1) 10,6 10,6
Adjusted headline
earnings 114,6 31,2 87,4 193,8
Headline earnings per
share (cents)
- fully diluted 37,1 8,5 34,2 66,4
- undiluted 37,2 8,5 34,3 66,6
- adjusted 34,7 31,4 26,4 58,5
Reconciliation of
operating profit
to EBITDA
Operating profit 229,2 26,8 180,8 402,0
Depreciation and
amortisation 33,5 30,6 65,6
Property and equipment
rentals 10,4 6,6 15,6
EBITDA 273,1 25,3 218,0 483,2
Group balance sheets
Reviewed Reviewed Audited
30 Jun 2006 30 Jun 2005 31 Dec 2005
Rm Rm Rm
Assets
Total non-current assets 2 523,0 2 426,4 2 511,0
Property, plant and equipment 1 823,0 1 723,5 1 808,3
Intangible assets 690,5 683,4 691,1
Amount due by joint venture
partners 4,3 4,6 4,4
Derivative instruments 3,7 9,5 4,0
Investments - 3,5 -
Deferred taxation asset 1,5 1,9 3,2
Total current assets 124,3 131,2 136,9
Inventories 24,6 16,9 23,4
Accounts receivable 34,0 33,7 31,5
Amounts due by joint ventures 1,0 1,2 1,3
Current portion of derivative
instruments 10,7 18,2 14,1
Taxation 5,5 - 6,6
Cash and cash equivalents 48,5 61,2 60,0
Total assets 2 647,3 2 557,6 2 647,9
Equity and liabilities
Equity
Attributable to equityholders
of Peermont Global
Capital and reserves 1 231,4 1 102,9 1 158,5
Minority interests 21,4 18,7 22,2
Total equity 1 252,8 1 121,6 1 180,7
Total non-current liabilities 952,0 1 145,2 1 023,5
Interest-bearing long-term
borrowings 191,3 380,6 259,0
Preference share liability 583,8 582,6 583,0
Derivative instruments 0,4 7,8 4,3
Deferred taxation liabilities 176,5 174,2 177,2
Total current liabilities 442,5 290,8 443,7
Accounts and other payables 128,1 113,4 132,6
Provisions 27,2 26,3 32,1
Amounts due to related parties 2,7 0,9 2,8
Current portion of long-term
borrowings 160,6 100,4 146,1
Current portion of derivative
instruments 7,1 14,9 13,3
Taxation liabilities 28,4 34,9 28,0
Bank overdraft 88,4 - 88,8
Total equity and liabilities 2 647,3 2 557,6 2 647,9
Net borrowings
Reviewed Reviewed Audited
30 Jun 2006 30 Jun 2005 31 Dec 2005
Rm Rm Rm
Interest-bearing debt
Non-current 775,1 963,2 842,0
Current 160,6 100,4 146,1
935,7 1 063,6 988,1
Overdraft/(cash balances) 39,9 (61,2) 28,8
Net borrowings 975,6 1 002,4 1 016,9
% % %
Net debt/book value of ordinary
shareholders" equity 79 91 88
Group cash flow statements
Reviewed Reviewed Audited
6 months 6 months Year
ended ended ended
30 Jun 2006 30 Jun 2005 31 Dec 2005
Rm Rm Rm
Cash flows from operating
activities 248,2 201,8 477,0
Financial expenses (54,7) (42,8) (104,6)
Financial income 1,3 4,6 7,2
Taxation paid (47,3) (45,0) (112,2)
Net cash from operating
activities 147,5 118,6 267,4
Cash flows from investing
activities (43,1) (816,2) (940,3)
Replacement of property, plant
and equipment to maintain
operations (10,2) (18,8) (54,2)
Acquisition of property, plant
and equipment to expand
operations (33,7) (34,8) (115,0)
Acquisition of intangible
assets - (170,1) (183,4)
Increased interest in joint
venture - (532,2) (532,2)
Proceeds on disposal of
property,plant and equipment 0,7 0,1 1,2
Acquisition of businesses - (58,3) (58,3)
Decreased interest in joint
venture - (0,2) (0,2)
Decrease/(increase) in
investments and investments
in subsidiaries 0,1 (1,9) 1,5
Repayment of shareholders" loan
by joint venture - - 0,3
Cash flows from financing
activities (115,8) 729,2 614,7
Cash settlement in respect of
derivative instruments 1,5 1,9 6,7
Interest-bearing long-term
borrowings raised 23,4 242,0 242,0
Proceeds on issue of preference
shares - 589,0 589,0
Preference share issue costs - (1,5) (1,5)
Interest-bearing long-term
borrowings repaid (78,3) (46,7) (117,8)
Dividends paid (62,4) (55,5) (103,7)
Net (decrease)/increase in cash
and cash equivalents (11,4) 31,6 (58,2)
Cash and cash equivalents at the
beginning of the period (28,8) 30,2 30,2
Effect of exchange rate
fluctuations on cash held 0,3 (0,6) (0,8)
Cash and cash equivalents at the
end of the period (39,9) 61,2 (28,8)
Group statements of changes in equity
Ordinary
shareholders"Minority
equity interest Total
Rm Rm Rm
Reviewed balance at
30 June 2005 1 102,9 18,7 1 121,6
Profit for the period 106,8 3,9 110,7
Foreign exchange translation
loss (0,9) (0,4) (1,3)
Unrealised loss on fair
value of cash flow hedge (2,8) - (2,8)
Total income and expense for
the period 103,1 3,5 106,6
Dividends paid (48,2) - (48,2)
Share-based payment expense 0,7 - 0,7
Total movement for the period 55,6 3,5 59,1
Audited balance at
31 December 2005 1 158,5 22,2 1 180,7
Profit for the period 122,8 2,6 125,4
Foreign exchange translation
loss 0,4 0,3 0,7
Unrealised gain on fair value
of cash flow hedge 7,8 - 7,8
Total income and expense for
the period 131,0 2,9 133,9
Dividends paid (58,7) (3,7) (62,4)
Share-based payment expense 0,6 - 0,6
Total movement for the period 72,9 (0,8) 72,1
Reviewed balance at
30 June 2006 1 231,4 21,4 1 252,8
Segmental analysis
Segment
revenue EBITDA
Reviewed Reviewed Reviewed Reviewed
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Rm Rm Rm Rm
Emperors Palace - 100% 679,6 600,3 267,1 239,2
Less share not
proportionately
consolidated (115,9) (163,1) (45,5) (64,9)
Emperors Palace -
proportionately
consolidated share 563,7 437,2 221,6 174,3
Graceland - 100% 55,8 52,9 9,8 12,9
Less share not
proportionately
consolidated (1,7) (0,5) (0,3) (0,1)
Graceland -
proportionately
consolidated share 54,1 52,4 9,5 12,8
Botswana # 71,6 67,2 19,7 20,2
Head office 48,5 34,4 22,8 11,5
Mondazur 7,8 3,4 1,7 (0,3)
Bethlehem - - - -
Intercompany (48,3) (34,1) (2,2) (0,5)
Group total 697,4 560,5 273,1 218,0
Segment
operating Net financial
profit expenses
Reviewed Reviewed Reviewed Reviewed
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Rm Rm Rm Rm
Emperors Palace - 100% 229,3 203,0 (51,8) (5,5)
Less share not
proportionately
consolidated (39,8) (55,3) 8,9 3,7
Emperors Palace -
proportionately
consolidated share 189,5 147,7 (42,9) (1,8)
Graceland - 100% 6,2 9,9 (0,1) (0,3)
Less share not
proportionately
consolidated (0,2) - - -
Graceland -
proportionately
consolidated share 6,0 9,9 (0,1) (0,3)
Botswana # 13,1 14,7 (4,1) (3,0)
Head office 21,9 9,8 56,9 70,6
Mondazur 1,1 (0,4) - -
Bethlehem - - (0,2) -
Intercompany (2,4) (0,9) (63,8) (66,2)
Group total 229,2 180,8 (54,2) (0,7)
Profit before
taxation Taxation
Reviewed Reviewed Reviewed Reviewed
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Rm Rm Rm Rm
Emperors Palace - 100% 177,5 197,5 (47,9) (62,1)
Less share not
proportionately
consolidated (30,9) (51,6) 8,4 15,1
Emperors Palace -
proportionately
consolidated share 146,6 145,9 (39,5) (47,0)
Graceland - 100% 6,1 9,6 (2,0) (3,3)
Less share not
proportionately
consolidated (0,2) 0,1 0,1 0,1
Graceland -
proportionately
consolidated share 5,9 9,5 (1,9) (3,2)
Botswana # 9,0 11,7 (2,3) (2,9)
Head office 78,8 80,4 (6,2) (7,9)
Mondazur 1,1 (0,4) (0,4) 0,1
Bethlehem (0,2) - - -
Intercompany (66,2) (67,0) 0,7 (2,5)
Group total 175,0 180,1 (49,6) (63,4)
Profit for Depreciation
the period and amortisation
Reviewed Reviewed Reviewed Reviewed
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Rm Rm Rm Rm
Emperors Palace - 100% 129,6 135,4 (29,3) (30,9)
Less share not
proportionately
consolidated (22,5) (36,5) 4,3 8,1
Emperors Palace -
proportionately
consolidated share 107,1 98,9 (25,0) (22,8)
Graceland - 100% 4,1 6,3 (2,8) (2,3)
Less share not
proportionately
consolidated (0,1) - 0,1 -
Graceland -
proportionately
consolidated share 4,0 6,3 (2,7) (2,3)
Botswana # 6,7 8,8 (4,7) (4,1)
Head office 72,6 72,5 (0,4) (1,1)
Mondazur 0,7 (0,3) (0,5) (0,1)
Bethlehem (0,2) - - -
Intercompany (65,5) (69,5) (0,2) (0,2)
Group total 125,4 116,7 (33,5) (30,6)
Expansion
Net replacement capital expenditure
capital expenditure and investment
Reviewed Reviewed Reviewed Reviewed
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Rm Rm Rm Rm
Emperors Palace - 100% (9,8) (17,1) (8,9) (669,5)
Less share not
proportionately
consolidated 1,7 2,9 1,5 114,1
Emperors Palace -
proportionately
consolidated share (8,1) (14,2) (7,4) (555,4)
Graceland - 100% (1,6) (1,9) 0,1 -
Less share not
proportionately
consolidated 0,1 - - -
Graceland -
proportionately
consolidated share (1,5) (1,9) 0,1 -
Botswana # (1,7) (3,2) - (64,2)
Head office (0,1) (0,3) - (167,8)
Mondazur (0,3) - - (10,1)
Bethlehem - - (26,3) -
Intercompany 2,2 0,9 - -
Group total (9,5) (18,7) (33,6) (797,5)
Net third-party
indebtedness
Reviewed Reviewed
30 June 30 June
2006 2005
Rm Rm
Emperors Palace - 100% 934,2 949,0
Less share not
proportionately
consolidated (159,2) (161,7)
Emperors Palace -
proportionately
consolidated share 775,0 787,3
Graceland - 100% (4,2) (5,5)
Less share not
proportionately
consolidated 0,1 0,6
Graceland -
proportionately
consolidated share (4,1) (4,9)
Botswana # 57,7 71,0
Head office 126,0 149,2
Mondazur (0,1) (0,1)
Bethlehem 21,1 -
Intercompany - (0,1)
Group total 975,6 1 002,4
# Average exchange rate (ZAR/BWP) 1,192 (2005: 1,272) applied to income
statement and cash flow items, closing rate of 1,206 (2005: 1,200) applied to
balance sheet.
Overview
Gaming revenue increased by 24% to R556,9 million and non-gaming revenue
increased by 27% to R140,5 million. Earnings before interest, taxation,
depreciation and amortisation ("EBITDA") increased by 25% to R273,1 million.
Adjusted headline earnings increased by 31% to R114,6 million in 2006, compared
to R87,4 million in 2005, after adjusting for the effects of the prior period
foreign currency option profit.
The results for the current period include the:
- ownership, with effect from 1 April 2005, of a further 20,7% in Emperors
Palace, for a full six months. As a result, 82,96% of the results of
Emperors Palace were proportionately consolidated for the full period under
review, as compared to 62,22% for the first three months of the prior
period and 82,96% thereafter;
- ownership, with effect from 1 March 2005, of the Syringa hotels in Gaborone
and Francistown, for a full six months. The results of this acquisition
were consolidated for the full period under review, as compared to only
four months during the prior period; and
- effects of the full commissioning of the additional gaming capacity at
Emperors Palace (August 2005), the upgrade and refurbishment of the
Mondazur Resort Estate Hotel at San Lameer (September 2005) and the opening
of the Mondior Concorde Hotel at Emperors Palace during March 2006.
Investment activity consisted mainly of the construction of the Frontier Inn and
Casino in Bethlehem, Free State, on which R26,3 million was spent during the
period. 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 a pleasing 13% to R679,6 million compared to
R600,3 million in 2005. Gross gaming revenues ("GGR") grew by 12,4% to R593,4
million, assisted by strong growth in tables revenue, which was largely driven
by the additional tables capacity commissioned in August 2005.
While GGR in Gauteng grew by 14% overall to an annualised R4 570 million, this
was distorted by the inclusion of Morula Sun GGR in the Gauteng GGR as from
March 2006. It is estimated that Gauteng GGR increased by approximately 11,6%
after adjusting for the effect of the abovementioned inclusion of Morula Sun GGR
during the period.
Rooms revenue increased to R28,8 million, up 26% on the prior period. The
Mondior Concorde Hotel opened in March 2006 and contributed revenue of R4,7
million since opening. Revenue from the new hotel is expected to grow as it
establishes its presence and occupancies increase.
Operating profit at Emperors Palace increased by 13% to R229,3 million. EBITDA
growth of 12% was impacted by:
- additional marketing costs of R11,0 million for the period under review.
During 2005, the marketing spend was weighted towards the second half of
the year, whilst marketing spend for 2006 is expected to be weighted
towards the first half of the year. These additional marketing costs in the
first half of 2006 are therefore not expected to impact the full year
margin significantly;
- increased security costs in response to heightened security risks; and
- pre-opening costs expensed in respect of the Mondior Concorde.
Graceland
Graceland revenues grew by 5% to R55,8 million compared to R52,9 million in
2005. EBITDA decreased by 24% to R9,8 million from R12,9 million in 2005. This
was largely due to the payment of R4,1 million in management and service fees in
2006 compared to the R1,4 million incurred in the same period in 2005. In the
prior year, management fees only accrued with effect from May 2005. In addition,
the unit experienced an armed robbery in January 2006 in respect of which a loss
of R0,6 million was expensed.
Botswana
The Botswana operations experienced revenue growth of 12% in Pula terms from
Pula 53,6 million in 2005 to Pula 60,2 million in 2006, which was reduced to
growth of 7% in Rand terms following the relative devaluation of the Pula.
Gaming revenues were flat year on year due to pressure on disposable income in
the local economy as well as intensified competitive activity. Non-gaming
revenues grew by 20% to Pula 39,2 million, assisted by the inclusion of the
Syringa acquisition for an additional two months as compared to the prior
period. EBITDA increased by only 4% in Pula terms to Pula 16,6 million as a
result of the lower than expected gaming revenues and significantly higher
levels of inflation in Botswana.
Head office
Head office revenues increased by 41%, from R34,4 million in 2005 to R48,5
million for 2006, mainly as a result of increased fees from April 2005 generated
by the Caesars buy-out. In addition, Graceland contributed R3,7 million in
management fees compared to R1,4 million for the same period in 2005. The
company has expensed R3,4 million in respect of new casino licence applications
in South Africa in the current period. EBITDA increased from R11,5 million in
2005 to R22,8 million for 2006.
Mondazur
The hotel was fully operational from September 2005 and generated revenues of
R7,8 million for the period. EBITDA of R1,7 million was generated compared to an
EBITDA loss of R0,3 million in 2005.
Key financial aspects
Finance costs
Financial expenses increased to R55,5 million from R41,8 million in 2005. The
increased funding costs were mainly due to the additional three months of costs
relating to the preference shares and long-term borrowings associated with the
Caesars buy-out from April 2005 and the long-term borrowings raised by Peermont
Global (Botswana) (Pty) Limited ("PGB") to fund the Syringa acquisitions. In the
first six months of 2005, the financial income of R41,1 million included a once-
off gain of R36,5 million on the exercise of European call options to acquire US
Dollars required to effect the Caesars buy-out.
Net interest cover amounted to 4,2 times for 2006 (2005 - excluding the once-off
option gain: 4,9 times), well above the Group"s minimum cover target of 2,5 to 3
times.
Taxation
The effective taxation rate for the first six months of 2006 was 28,3%. This was
affected by the reversal of an overprovision for taxation in 2005 on the foreign
currency option profit in PGER Holdings (Pty) Limited ("PGERH") of R9,8 million
(Group share: R8,1 million).
The Group"s effective taxation rate is affected by STC charges on ordinary and
preference dividends as well as the non-deductibility of preference share
coupons included in finance costs.
Balance sheet
Net borrowings reduced to R975,6 million from R1 016,9 million as at 31 December
2005 and R1 002,4 million as at 30 June 2005. The Group"s net debt to equity
ratio (net borrowings/book value of ordinary shareholders" equity) decreased to
79% from 88% as at 31 December 2005 and 91% as at 30 June 2005.
During the period, the Group raised R23,4 million in term loan funding to fund
the Peermont Global (Eastern Free State) (Pty) Limited ("PGEFS") construction of
the Frontier Inn and Casino in Bethlehem. Peermont Global (East Rand) (Pty)
Limited ("PGER"), Peermont Global and PGB repaid R78,3 million of term loan
borrowings during the six months.
Cash flow
Cash flows from operating activities of R248,2 million were 23% higher than the
R201,8 million in 2005. Despite higher interest and taxation payments for the
period, the net cash inflow from operating activities increased by 24,4% to
R147,5 million from R118,6 million in 2005.
R43,1 million in cash was utilised in investing activities, of which R33,7
million related to investment in future growth and capacity. This new investment
was mainly in respect of the construction of the Bethlehem project, which was
funded by the raising of term borrowings.
During the period, the Group made dividend payments to Peermont Global and Group
minority shareholders totalling R62,4 million, up 12,4% from the R55,5 million
paid in 2005.
New ventures
Peermont Global has submitted a bid to the Northern Cape Gambling and Racing
Board for a casino licence in Kuruman as well as bids to the Eastern Cape
Gambling and Betting Board for casino licences in Mthatha and Queenstown. If
these casino licences are awarded to Peermont Global, the total capital
investment in respect of Kuruman is estimated at R75 million, while the capital
investment in respect of Mthatha and Queenstown is estimated at R215 million and
R110 million respectively.
The outcomes of these casino licence bids, which were submitted pursuant to a
competitive tender process, are not expected to become known before 2007. A
total amount of R3,4 million was expensed in respect of the abovementioned
casino licence applications during the period under review, of which R2,3
million related to application fees and investigation deposits paid to the
respective gambling boards.
Graceland BEE
Following discussions with the Mpumalanga Gaming Board ("MGB"), Peermont Global
(Southern Highveld) (Pty) Limited ("PGSH") has applied to the MGB to change its
bid commitments in respect of the required black economic empowerment ("BEE")
shareholding in PGSH. If this change request is approved, it will facilitate the
implementation of the revised shareholding structure proposed to the MGB on 23
December 2005. If the change is approved, Peermont Global"s effective holding
will reduce from 97% to 75%.
The review application submitted by PGSH and Peermont Global to the High Court,
challenging the decision of the MGB to impose revised licence conditions on
PGSH, as set out in the March 2006 results announcement, is being held in
abeyance pending the outcome of the request to change PGSH"s bid commitment, as
set out above.
Acquisition of the Tusk Casino Resorts and Hotels Group and related black
empowerment transactions
Shareholders were advised on 16 August 2006 that all outstanding conditions
precedent in relation to the Tusk transaction had been met. The purchase
consideration of R522,1 million, less retentions of R30,0 million, was paid by
Main Street 382 (Pty) Limited (to be renamed Peermont Global Tusk Holdings (Pty)
Limited ("PGTH")) on 21 August 2006. This gives PGTH effective control over the
operations and management companies of the Tusk Group. If all conditions
precedent relating to the sale of Tusk Taung are fulfilled by 31 March 2007, an
approximate further amount of R7,4 million, calculated as at 31 March 2006, will
become payable to the Tusk sellers.
In addition to the Tusk transaction, two further transactions were concluded by
PGTH in order to meet its BEE objectives and restructure the BEE shareholding
within the Tusk Resorts Group. Once all the conditions precedent to the
transaction have been fulfilled, MIC Leisure (Pty) Limited ("MIC") will
subscribe for 21% of PGTH for approximately R120,0 million. PGTH also acquired
the 20% interest in Tusk Resorts (Pty) Limited, held by Gottam Investments (Pty)
Limited ("Gottam"), for R77,8 million less retentions of R4,1 million. As set
out above, the Gottam purchase consideration will be adjusted by approximately
R2,1 million for the Tusk Taung sale if all conditions precedent are fulfilled
by 31 March 2007. The Gottam transaction is conditional upon the approval of the
MIC transaction by the relevant gambling boards.
Following the above transactions, Peermont Global will own 79% of PGTH, which in
turn will own an effective:
- 90% of the Tusk Rio, Tusk Mmabatho and Tusk Venda operations ("Tusk
Resorts");
- 100% of the Emanzini operation ("Emanzini"); and
- 100% of the Management Companies for the above operations ("Tusk Mancos").
In order to meet the various casino licence conditions imposed on approval of
the transactions above, PGTH is required to:
- sell a further 10% of Tusk Resorts to local BEE investors at its cost of
acquisition plus carrying costs, within a period of 12 to 18 months;
- sell a further 10% of Emanzini to local BEE investors within 12 months;
- sell 10% in the Tusk Mancos and 15% of Emanzini to staff trusts; and
- facilitate the funding for the staff trusts.
Contingent liabilities
Taxation
There have been no material developments as regards the status of the SARS
findings concerning the deductibility of pre-opening expenses amounting to R24,7
million (taxation effect R7,4 million), royalties 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 Group has continued to engage SARS on these matters. Management firmly
believes, supported by legal advice, that SARS has erred in reaching its
conclusions as contained in its letters of findings.
It is impractical, premature and may be misleading to quantify the potential
taxation 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
case law.
Prospects
It is anticipated that the disposable income levels of consumers will be
moderately affected by the recent interest rate and fuel cost increases and the
decline in the Rand/Dollar exchange rate. Nevertheless, the Group believes,
after considering the current outlook for economic factors such as inflation,
interest rates, personal taxation levels and probable salary and wage increases,
that real growth in revenues and profits for the full year is achievable.
Directorate
Messrs RSN Dabengwa and P Papadimitropoulos resigned from the board on 25 May
2006. We thank them for their services.
Dividend declaration
Interim dividend number 6
Notice is hereby given that an interim dividend of 18,6 cents per ordinary share
(2005: 14,6 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, 6 October 2006. In compliance with the requirements of STRATE the
following dates are applicable:
Last day to trade cum dividend Friday, 29 September 2006
Securities start trading ex dividend Monday, 2 October 2006
Record date Friday, 6 October 2006
Payment date Monday, 9 October 2006
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, 2 October 2006 and Friday, 6 October 2006, both
dates inclusive.
On behalf of the board
Alan van Biljon Ernie Joubert Bryanston
Chairman Managing Director 4 September 2006
Basis of preparation
The condensed interim results of the Group for the six months ended 30 June 2006
have been prepared in accordance with the Group"s accounting policies and in
compliance with IAS 34 Interim Financial Reporting. There have been no changes
to accounting polices from those applied in the preparation of the annual
financial statements to 31 December 2005.
Basis of consolidation
Peermont Global has a direct economic interest of 33,33% in PGERH, which owns
100% of 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 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 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 Mondior Summit Hotel and the Metcourt Lodge. Peermont Global
exercises control over PGB and therefore consolidates the results of PGB and
separately deducts the minority interests of 40%.
Peermont Global has a direct shareholding of 57,1% in PGEFS Holdings (Pty)
Limited, which owns 70% of PGEFS, which owns the Frontier Inn and Casino.
Peermont Global exercises control over the companies and therefore consolidates
their results and separately deducts the minority interests.
The Mondazur Resort Estate Hotel at San Lameer is a division of Peermont Global.
Auditors" opinion
KPMG Inc, has reviewed these results and their unqualified opinion is available
for inspection at the company"s registered office.
Directors: AF van Biljon (Chairman)#, EG Joubert (Managing Director and Chief
Executive Officer), AE Puttergill (Deputy Managing Director), WG Robinson (Group
Financial Director), STL Arnold#, MD Brand#, RI Cassim#, KO Kutoane#, SH Muller#
#Non-executive independent director
Company Secretary: DL Petzer
Registered office: Bridgeport House, Hampton Park, 20 Georgian Crescent East,
Bryanston
Sponsor:
The Standard Bank of South Africa Limited, Corporate and Investment Banking
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited
www.peermont.com
Date: 04/09/2006 07:00:39 AM Produced by the JSE SENS Department
