Financial strength and durability

The group believes that the relative resilience of its financial performance throughout the global economic downturn can be attributed in part to the general stability of its gaming income. Demand for the type of gaming-related services the group offers is sensitive to decreases in discretionary consumer spending but, because of its relatively high disposable income levels, the group’s core customer base has largely maintained its spending on gaming activities through the adverse macro-economic conditions of recent years. In addition, the group’s gaming business is largely unaffected by seasonality. The group believes that these factors are a significant strength of its business that alleviates the volatility usually inherent in operating in emerging markets.

Macro-economic conditions will vary in cycles. This is particularly relevant in the hotel industry, which is regularly in a state of under or over supply. In order to be able to withstand the impacts of these cycles, the group aims to ensure that debt is used prudently, with careful monitoring of the net debt to Ebitdar ratio.

In addition, the group ensures availability of sufficient credit facilities with long-term maturities, providing additional liquidity in the event of deterioration in economic conditions.

Key performance indicators

  2014   2013  
Net debt to Ebitdar   1.1 times   0.9 times  
Unutilised net facilities (including available cash on hand)  R3.4 billion   R4.1 billion  
Weighted average number of months to expiry of debt facilities (excluding permanent revolving credit facilities)  39 months   50 months  


2014 performance

Net interest-bearing debt

Interest-bearing debt net of cash as at 31 March 2014 totalled R4.4 billion, which is R859 million higher than the 31 March 2013 balance of R3.6 billion, with R897 million paid in dividends to company and non-controlling shareholders and investment activities of R2.4 billion during the year ended 31 March 2014.

For more detail on the group’s borrowings and cash position refer to notes 29 and 32 of the annual financial statements.

Net debt to Ebitdar as at 31 March 2014 was 1.1 times with unutilised net facilities (including available cash on hand) of R3.4 billion. The weighted average number of months to expiry of the debt facilities (excluding 364-day revolving credit facilities) was 39 months.

Interest rate and currency risk management

The group has hedged a significant proportion of debt facilities to maturity to lock in the current historically low interest rate environment. In order to limit income statement volatility, the group does not normally enter into speculative hedges. As at 31 March 2014, 67% of net debt was hedged through fixed interest rate swaps and other fixed rate instruments.

Debt at year end is either Rand or US Dollar denominated, dependent on the nature of the cash flows in the underlying operations, with offshore cash held approximately 70% in US Dollar, 20% in Euro and 5% in Naira with limited other local currency deposits.

Looking ahead

Post-year end, the group entered into a share buy-back and a number of acquisitions detailed in the inorganic growth section which are expected to significantly increase the group’s gearing to around 2.5 times net debt to Ebitdar which is considered to be well within manageable levels. An additional R5.7 billion in term loans were negotiated and the tenures on the majority of existing facilities were extended to June 2020 and June 2021. The facility pricing with the group’s existing consortium of banks remains competitive and thus there is no immediate requirement to access the debt capital markets.

Further future dated interest rate swaps will be concluded due to the extension of the tenure of the group’s facilities and due to the increased requirement for the level of debt. In the event of a significant spike in interest rates the group would be protected until March 2021 and could restrict investment to ensure debt levels would not cause financial distress.