Revenue at Peermont Global increased 24% in the interim period to June, boosted by its increased stake in Emperors Palace, a core asset.

In afternoon trade on Monday, Peermont's shares were trading 2,49% higher at R9,45.

Group revenue rose to R697m, while operating profit increased 27% to R229m. Headline earnings per share increased 8% to 37,2c. Adjusted headline earnings per share, excluding the effects of the previous period's foreign currency option gain, rose 31% to 34,7c.

Nesi Chetty, a fund manager at RMB Asset Management, said the results were good, with particular emphasis on the "strong" gaming growth in Emperors Palace.

Peermont CEO Ernie Joubert said revenue growth was boosted by the increased stake in Emperors Palace. The group had acquired a further 20,7% of Emperors Palace in April last year, taking its stake in the operation to 82,9%, compared with 62,2% in the previous period.

Stripping out the increased stake, group revenue would have grown 11,6% for the period.

Emperors Palace revenue grew 13% to R679,6m, with gross gaming revenue up 12,4% to R593,4m and operating profit up 13% to R229,3m.

The figures were boosted by strong growth in tables revenues, driven by additional tables capacity, commissioned in August last year.

Gross gaming revenue in Gauteng was up 14% to an annualised R4,5bn, a figure the group said was distorted by the inclusion of the Morula Sun in the Gauteng market from March this year. Excluding the Morula Sun, the group estimates that Gauteng gaming revenue increased approximately 11,6%.

The group's smaller casino operation, the Graceland, experienced revenue growth of 5% to R55,8m, but earnings before interest, taxes, depreciation and amortisation (ebitda) decreased 24% to R9,8m.

The group said ebitda decline was largely due to higher management and service fees. Payment of R4,1m was made, compared with R1,4m previously. Joubert said an armed robbery cost the operation R600,000.

In Botswana, the group also did not fare too well, with revenue growth of 12% in pula terms to 60,2-million pula. This equated to a 7% rise in rand terms. Gaming revenues were flat. Joubert said the government's spending in Botswana was down and the currency devaluation boosted inflation to as much as 18%.

Lower spending by the government and the higher inflation levels had hit disposable income. Joubert also said a price war with a South African rival - Sun International, through the Gaborone Sun - made the environment much tougher.

Peermont submitted bids to the Northern Cape Gambling and Racing Board for a casino licence in Kuruman and to the Eastern Cape Gambling and Betting Board for casino licences in Mthatha and Queenstown.

If the licences are granted, the group expects total capital investment to be about R400m for all three projects.

"Small casinos in small areas can be very profitable, as they are economically designed to have low overheads. We are putting in a big effort into getting the licences," Joubert said.

Chetty said the regions that Northern and Eastern Cape offered were good growth catalysts for the group. "There aren't too many licences left in the country."

Emperors Palace earnings account for 81% of group ebitda - a figure it said would change on the full integration of Tusk Group. Peermont acquired a controlling stake in Tusk last month.

With the inclusion of Tusk's earnings next year, Emperors Palace's contribution to ebitda should fall to 66%.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge