Despite the continued global economic challenges, GPI has again managed to find opportunities which crystallized its strategy for the short term. The Group results include for the first time BURGER KING®‘s full year performance since the first store opened on 9 May 2013. Certain of the Group’s major achievements during the 2014 financial year include:

  • Increased Slots Group GGR by 26%
  • Opened 18 BURGER KING® stores, employing in excess of 1 000 people
  • Acquired two additional route operator licences in Gauteng and Mpumalanga
  • Concluded agreements to dispose of certain gaming assets


The AFS have been prepared in accordance with IFRS, the Companies Act, and the JSE Listings Requirements.

The Board of Directors approved the IAR, the AFS and the abridged AFS on 22 September 2014.

The accounting policies adopted and methods of computation used in the preparation of the AFS are in terms of IFRS and are consistent with those for the year ended 30 June 2013, except for the adoption of new or revised accounting standards and interpretations. For further information refer to accounting policy note 1.4 in the full AFS.


Abridged AFS have been included in this IAR. A full set of AFS are available on our website.


Summarised below are a few of the key financial challenges the Group faced during the financial year.

Skilled resources

For the opportunities mentioned elsewhere in the IAR, AFS and the Group’s strategy going forward to realise, the Group will remain focused on retaining and acquiring skilled resources. Employee costs are budgeted to double during the next financial year especially in light of the BURGER KING® roll out.

Cost savings initiatives

Management continuously reviews expenditure and finds ways of implementing cost savings initiatives. Overcoming these financial challenges are key to the Group’s business model. GPI aims to realise maximum returns on its investments and to ensure that shareholder value is increased in the medium to long term, while acting responsibly and appropriately. One such initiative is localising BURGER KING® supply chain as discussed in the Food Division review which will result in food margins increasing during the 2015 financial year.

Broad-based black economic empowerment

BBBEE remains one of the key focus areas of the business to ensure that we procure and implement systems that will enhance the Group’s rating over time.


The 2014 financial year has definitely proven to be one of significant milestones and implementing strategic growth.

During the year, GPI entered into various sale agreements with Sun International, as discussed in the Chairman’s and Chief Executive Officer’s reports. The related assets and liabilities have been disclosed separately on the statement of financial position, comprehensive income and cash flow as discontinued operations. This disclosure makes it difficult to compare year-on-year, as these amounts are now disclosed in a different category. The profit after tax from discontinued operations includes the deferred tax effect of R69.9 million due to the decision to sell these assets. For more information on the separately disclosed assets and liabilities refer to note 21 of the full AFS.

GPI’s main revenue streams for the 2014 financial year are the Slots Group and Burger King®. GGR from the Slots Group increased by 26% from R463.3 million to R585.4 million. BURGER KING® contributed R126.8 million towards revenue. BURGER KING® was only part of the Group for six weeks during the 2013 financial year and generated revenue of R4.9 million during this period. Though only 18 stores were rolled-out in 2014, the increase in revenue is astonishing. Other revenue contributors are our property, IT and corporate divisions. Going forward revenue from continuing operations will consist of foods sales, dividend income, property income and IT fees.

The 2014 results include the Group’s stake in Mac Brothers and Excellent Meat. These investments have been accounted for as investments in joint ventures and associates, and their earnings as loss from equity-accounted investments.

Overall the net loss from continuing operations after tax decreased from R51.4 million to R58.8 million, mainly due to the BURGER KING® roll-out costs incurred.









– Continuing operations

134 976

15 593


– Discontinued operations

599 616

473 692



210 734

182 566


Net profit after tax

– Continuing operations

(58 883)

(51 411)


– Discontinued operations

121 972

178 526




Headline earnings per share




Adjusted headline earnings per share





Overall operating costs increased from R142.8 million to R270.7 million mainly due to the BURGER KING® roll-out. Operating costs also include R21 million in transaction fees, which are expensed and reversed for adjusted headline earnings per share (HEPS). Of these costs, R13 million relate to GPI’s lottery bid and the remainder to all deals concluded during the year. The roll-out of BURGER KING® affected all levels of costs as the Group are currently investing in the infrastructure to support future roll-out plans.


During the year, management identified areas of non-compliance in the supplier VAT status of some of GPI’s subsidiaries. This stemmed from the fact that the legacy accounting system was not configured to distinguish between VAT registered vendors and non-VAT registered vendors. The total impact of the error was quantified and disclosed to the South African Revenue Service (SARS) as part of the voluntary disclosure programme. Management has corrected the treatment through month-end adjustments, until the accounting system can be reconfigured accordingly.


HEPS decreased by 88.7% from 28.2 cents per share to 3.2 cents per share and adjusted HEPS decreased by 24.9% from 30.5 cents per share to 22.9 cents per share. The decrease is mainly due to the additional establishment costs incurred by BURGER KING®, which is consistent with the growth phase.



SunWest’s attributable profit consists of profit from attributable earnings from GrandWest and the Table Bay Hotel. Overall, SunWest’s revenue increased by 10% to R2.2 billion (2013: R2 billion) and its attributable earnings increased by 4.3% to R459 million (2013: R440 million).


GrandWest remains our prime asset. GrandWest’s revenue increased by 8.2% to R2 billion (2013: R1.9 billion) resulting in its earnings before interest tax depreciation and amortisation (EBITDA) increasing by 5.6% to R833 million (2013: R789 million). These increases resulted in profit after tax increasing by 0.5% to R489 million.

The Table Bay Hotel

The Table Bay Hotel incurred a R25.4 million loss after tax for the year. The loss is 45.4% lower than that of 2013. The Table Bay Hotel’s revenue increased by 28.6% from R181.2 million to R233.1 million resulting in an EBITDA increase of 127% to R49 million. Average room occupancy was 68.3% (2013: 53.0%) for the year at an average rate of R2 121 per room (2013: R2 086). Management continuously assesses ways of reducing the cost base.

Golden Valley Casino

Golden Valley Casino’s revenue increased by 12.2% to R144.1 million (2013: R128.5 million). However, its EBITDA decreased by 6.3% to R26.7 million.

Grand Casino Investments KZN

Through GPI’s investment in Grand Casino KZN, GPI has an indirect stake of 5.6% in Sibaya Casino. On 19 November 2013, all conditions precedent were met and we effectively acquired 100% of Grand Casino KZN. GPI’s stake in Sibaya Casino is one of the assets in the Sun International transaction referred to below. For the 2014 financial year, we received R10.3 million in dividends from this investment.


For a detail overview of the Slots Group refer to the Gaming Division overview report.


All stores currently in operation are owner-occupied stores. No debt has been incurred to date as the roll-out was funded from available cash resources within the Group. A debt model is currently being considered for BURGER KING® and will be implemented during the 2015 financial year. Refer to the Food Division overview report for further information on the performance of BURGER KING®.


During the year GPI, through its wholly-owned subsidiary GPI House Properties (Pty) Ltd (GPI House), acquired three additional properties situated in Atlantis and Goodwood, Western Cape. The third property in Atlantis is in the process of being transferred into the name of GPI House. The Goodwood property has been earmarked for a BURGER KING® drive-through and related plans are currently being reviewed.


As mentioned above, GPI entered into various sale agreements with Sun International to decrease or dispose of certain of its assets. Listed below are further details of these transactions.

Disposal of investment in Dolcoast Investments (Pty) Ltd

On 13 May 2014, Grand Casino KZN entered into an agreement with SISA whereby Grand Casino KZN will dispose of its 24.9% stake in Dolcoast to SISA for a cash consideration of R130 million. The transaction is subject to the fulfilment or waiver of certain conditions precedent.

One of the conditions precedent require the remaining shareholders of Dolcoast to: (a) waive their pre-emptive rights, that were triggered by the sale agreement with SISA and (b) provide consent for SISA to conduct a due diligence investigation on Dolcoast. Neither of these conditions have been fulfilled as the remaining shareholders have indicated that they would like to enter into an agreement with Grand Casino KZN whereby Dolcoast buys back its shares from Grand Casino KZN. The terms of the buy-back are currently being negotiating with the remaining shareholders. SISA have agreed to extend their agreement with GPI and Grand Casino KZN until 30 September 2014.

Management expects to conclude the share buy-back agreement with Dolcoast and for the transaction to become effective prior to 31 December 2014. GPI shareholder approval was obtained on 21 August 2014.

Disposal of GPI Slots (Pty) Ltd

On 13 May 2014, GPI entered into an agreement with Sun International to dispose of up to 70% of its stake in GPI Slots. The disposal will comprise three tranches, whereby 25.1% will be sold to Sun International in the first tranche allowing Sun International to exercise call options to acquire an additional 25.0% in the second tranche and 19.9% in the third tranche. The call option available to Sun International in the second tranche will be available from 1 July 2015, while the call option available in the third tranche, subject to the second option being exercised, will be available from 1 July 2016.

The agreement also provides GPI with two call repurchase options, whereby it can acquire the total amount previously sold to Sun International, to bring its stake in GPI Slots back to 100%, in the event that Sun International does not exercise either the second or third tranches of their call options.

The purchase consideration for each tranche has been set at a multiple of the consolidated EBITDA of the GPI Slots group, being 8.5 times for the first tranche and 7.5 times for the second and third tranches.

The transaction is subject to the fulfilment or waiver of certain conditions precedent, which includes; approval of the transaction by the shareholders of Sun International and GPI, the respective gambling authorities in each of the provinces that GPI Slots operates in and the Competitions Commission. Management expects that the first tranche of the transaction will become effective prior to 31 December 2014. GPI shareholder approval was obtained on 21 August 2014.

Disposal of SunWest International (Pty) Ltd

On 13 May 2014, GPI and Grand Casino Investments (Pty) Ltd (Grand Casino) entered into an agreement with Sun International and SunWest, whereby SunWest will buy back 25.1% of its shares being the combined holding of GPI and Grand Casino in SunWest, for a cash consideration of R1 527.9 million. The transaction is subject to the fulfilment or waiver of certain conditions precedent, which includes approval of the transaction by GPI shareholders, the Western Cape Gambling and Racing Board (WCGRB) and the Competitions Commission. Management expects the transaction to become effective before 31 December 2014. GPI shareholder approval was obtained on 21 August 2014.

Disposal of Worcester Casino (Pty) Ltd

On 13 May 2014, GPI entered into an agreement with Sun International and Worcester Casino, whereby Worcester Casino will buy back 25.1% of its shares from GPI for a cash consideration of R22.1 million. The transaction is subject to the fulfilment or waiver of certain conditions precedent, which includes approval of the transaction by the shareholders of GPI, the WCGRB and the Competitions Commission. Management expects the transaction to become effective before 31 December 2014. GPI shareholder approval was obtained on 21 August 2014.

Acquisition of 10% of Spur Corporation Ltd

On 30 July 2014, GPI, through its wholly-owned subsidiary GPI Investments 1 (Pty) Ltd (BEECo) entered in to an agreement with Spur whereby BEECo will subscribe for 10% of the shares of Spur for a total consideration of R294.7 million. The purchase consideration represents a 10% BBBEE lock-in discount to the volume-weighted average trading price (VWAP) of Spur’s shares on the JSE for the 90-days trading prior to 30 July 2014. In terms of the BBBEE lock-in discount, BEECo are restricted from trading their Spur shares and are required to maintain their BBBEE ownership credentials for a five-year period starting from the effective date of the transaction. The purchase consideration in made up of R72.3 million cash and the balance of an issue of BEECo cumulative redeemable preference shares to the Standard Bank of South Africa Ltd (Standard Bank) (R150.0 million) and Spur (R72.3 million). The transaction is subject to the fulfilment or waiver of certain conditions precedent, which include approval of the transaction by the shareholders of Spur. Management expects the transaction to become effective before 31 December 2014.

Acquisition of 65% of Mac Brothers Catering Equipment (Pty) Ltd

The acquisition of Mac Brothers took place in two transactions. In the first transaction, which became effective on 4 April 2014, Grand Foods (Pty) Ltd (Grand Foods), a wholly-owned subsidiary of GPI, acquired 22.2% of Mac Brothers for a cash consideration of R22.2 million. In the second transaction, which became effective on 23 July 2014, Grand Foods acquired a further 42.8% of Mac Brothers for a cash consideration of R42.8 million and increased its total investment to 65%.

Acquisition of 51% of Grand Tellumat (Pty) Ltd

On 21 August 2014, GPI announced that it has entered into a manufacturing joint venture with leading electronics contract manufacturer Tellumat (Pty) Ltd (Tellumat). In this deal, GPI will acquire 51% of the new company Grand Tellumat Manufacturing (Pty) Ltd (Grand Tellumat) for R25.5 million, the remaining 49% will be owned by Tellumat. The transaction is essentially a merger of the engineering skills and manufacturing capabilities of Grand Tellumat with the investment know-how of GPI. The newly created company aims to position itself as the manufacturer of choice for electronic and related technology products, which will be eligible for procurement by government departments and local infrastructure projects. The partners anticipate that the government’s localisation initiative will create more local manufacturing opportunities and act as a catalyst for job creation.


Tangible net asset value decreased from 309 cents per share to 293 cents per share while net asset value per share decreased from 358 cents per share to 345 cents per share mainly due to the decrease in profits for the year and the issuing of GPI shares. The dilution effect of the share option was also taken into account in number of shares in issue at year-end.


Property, plant and equipment increased significantly due to the BURGER KING® roll-out and the increase in the number of properties acquired by the Group.

Based on the steep roll-out plan for BURGER KING®, capital expenditure of approximately R350 million will be incurred during the next financial year.

Net asset value per share


The Group’s overall debt exposure is fairly minimal. The debt remaining on the Group’s statement of financial position are preference shares owing to Standard Bank and Depfin Investments (Pty) Ltd (Depfin), finance lease liabilities and the term loan in respect of 33 On Heerengracht, our head office building. This preference share facility will be settled once all conditions precedent are met on the sale of SunWest. Interest rates incurred on the preference share facility and the term loan are 90% of the prime interest rate and JIBAR plus 3.15% respectively. Finance charges increased during the year as a result of the term loan relating to GPI’s head office. The original term loan obtained at the time of acquiring the Slots Group in 2010 was repaid in June 2014. The Group obtained additional facilities with Investec Ltd (Investec) and Standard Bank to the value of R100 million and R120 million respectively. The cash equivalents held with Investec of R100 million, are held as security for the R100 million preference share facility. The facilities with Investec and Standard Bank were fully drawn down subsequent to year-end.

30 June


30 June


Total debt equity ratio*



Interest cover ratio**



*Debt equity ratio is the relationship between shareholder equity after minority interest and total debt.

**Interest cover ratio is the relationship between earnings before interest and tax and finance charged.

The above ratios take both continuing and discontinued operations into account.


To align key employee remuneration goals with the creation of shareholder wealth, 20.2 million options were awarded to key personnel, which included the executive directors, on 9 October 2013. These options will vest in 4 annual tranches starting from 30 August 2015. Participants have a 180-day period from the respective strike dates during which options can be exercised. This resulted in to R3.0 million being expensed in profit or loss in the statement of comprehensive income.


GPI has a track record of paying dividends. Our policy is to pay out as much of the dividends received after adjusting for capital and interest payments on borrowings and reserving an appropriate amount for projected capital expenditure and working capital. No dividend has been declared in respect of the 2014 financial year.


As referred to in the corporate governance report – governance of IT– Grand Technology is servicing the Group entities with providing and reviewing our IT framework in which we operate. During the year, approximately R2.5 million was spent on acquiring additional infrastructure to support the Group infrastructure. Various projects are currently being reviewed by Grand Technology to provide a central IT service.


Currently the food margins are tight. However, by largely localising the BURGER KING® input, the margins will reset during the 2015 financial year.

As mentioned in the challenges section above, containing of operating costs remains a challenge and each division will implement the necessary strategies to achieve their targets. The Group will continue focusing on operating costs to ensure that we are able to unlock efficiency within the various business units.

With the roll-out of BURGER KING®, net profit after tax will be affected by the accelerated roll-out plan, the budget for 2015 indicate that BURGER KING® will be in a breakeven position at a store level by the end of 2015.

Ordinary dividends per share


In closing, I would like to thank my finance team and colleagues, fellow Board members and all our advisors for their commitment and dedication shown in achieving and maintaining high standards of financial reporting and disclosure.

Sukena Petersen

Financial Director