Financial strength and durability


The group is highly cash generative but it is important to ensure that the capital structure of the group is appropriate so that the business survives through economic cycles.

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 other industries.

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

  2016   2015
Net debt to Ebitdar 2.0 times   2.2 times
Unutilised net facilities (including available cash on hand) R4.8 billion   R4.8 billion
Weighted average expiry of debt facilities (excluding permanent revolving credit facilities) 49 months   58 months
Net debt hedged through fixed interest rate swaps 57%   61%

2016 performance

Net interest-bearing debt
Interest-bearing debt net of cash at 31 March 2016 totalled R9.2 billion, which is R37 million above the 31 March 2015 balance of R9.2 billion, with R878 million paid in dividends to shareholders in addition to the investment activities of R2.0 billion during the year.

For more detail on the group's borrowings and cash position refer to notes 29 and 32 on pages 51 and 52 of the annual financial statements.

During the year, an additional US Dollar 22 million in facilities were negotiated for offshore acquisitions. The tenures on the majority of existing facilities are to June 2020 and June 2021. Net debt to Ebitdar as at 31 March 2016 was 2.0 times with unutilised net facilities (including available cash on hand) of R4.8 billion. The weighted average number of months to expiry of the debt facilities (excluding 364-day revolving credit facilities) was 49 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 2016, 57% of net debt was hedged through fixed interest rate swaps and other fixed rate instruments. The weighted average effective interest rate for the year was 9.1% (2015: 9.1%). The interest rate is flat on the prior year, despite the repo rate increases due to the hedging and the impact of the additional US Dollar denominated funding.

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 28% in US Dollar, 10% in Euro, 19% in Nigerian Naira and 24% in Mozambican Metical with limited other local currency deposits. Access to foreign currency in Nigeria and Mozambique is becoming severely constrained by liquidity issues in both countries, which may require the restructuring of debt facilities.

Looking ahead

The facility pricing with the group's existing consortium of banks remains competitive, however, the capital structure, including the impact of the acquisition of HPF, is under review with the intention to reduce the cost of funding while managing liquidity risks. The acquisition of HPF will bring an additional R1.7 billion in debt onto the balance sheet at a higher level of gearing.

In the event of an increase in the level of debt, further future dated interest rate swaps will be concluded. In the case 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.