GPI lifts profit but future gets tougher – Cape Argus

GRAND Parade Investments (GPI) lifted headline earnings by 8 percent in the second half of last year, but the leisure and casino group says it now faces “extremely challenging” trading conditions.

In light of the difficult environment, the company’s chief executive, Adrian Funkey, has suggested that levelling more taxes on the gambling industry would not be ideal.

Western Cape Finance MEC Garth Strachan said last month that the provincial Treasury hoped to boost its tax revenues from gambling sector.

Funkey said taxes already made up a big chunk of the expenses on the gaming industry’s balance sheets.

“Taxation in the gaming industry is at appropriate levels, given the way the industry is rolled out,” he told the Cape Argus in response to Strachan’s comments.

A large portion of gambling revenue is paid out as tax in one form or another.”

He would not comment on talks surrounding the renewal of GrandWest Casino’s exclusive licence to operate in the Cape Town metropole.

GPI controls GrandWest through its holding in SunWest International.

Despite the harsh economic climate, GPI said it was still keen on growing its portfolio.

In keeping with this strategy, GPI increased its holdings in several subsidiaries towards the end of last year.

“GPI will… in the midst of these increasingly uncertain times, take a medium- to long-term view in expanding its portfolio,” Funkey said in a statement.

“GPI is in a unique position to cherry pick these investment opportunities in this distressed economic market.

“We are also hopeful that positive events such as the 2010 soccer World Cup will bode will for our investments in the hotel and leisure sector.”

GPI reported a 16 percent fall in headline earnings a share for the six months to December as a result of new shares being issued.

Headline earnings a share – the main profit measure for local investors – fell to 10.54c from 12.52c in the corresponding period a year earlier.

The company’s headline earnings, which exclude certain one-off, financial and non trading items, rose from R45.1 million to R48.9 million.

GPI’s net asset value grew 13 percent to R354.7 million.

During the half-year, GPI increased its direct stake in SunWest by 2.83 percentage points at a cost of R92.4 million by exercising share options.

GPI also indirectly increased its effective interest in Sibaya Casino by advancing R7 million to its associate, Akhona Gaming Portfolio Investments.

By the end of December, Akhona GPI’s direct stake in Dolcoast, which owns 22.4 percent of Sibaya Casino, had increased from 6 percent to 9.5 percent.

That was built on further in January, when Akhona GPI’s stake Dolcoast increased to 18.5 percent at a cost of R13 million. These deals give GPI an indirect share in Sibaya Casino of 6.3 percent.

GPI raised its direct stake in Thuo Gaming KwaZulu-Natal through its acquisition of Wild Rush Trading 97, which owns 10 percent of Thuo KZN, at a cost if R6 million.