Page 18 - Niveus - Integrated report 2013

A bingo site, operating paper bingo, was opened during the year in KwaZulu-Natal.
The KwaZulu-Natal Gambling and Betting Board has not made an announcement
on electronic bingo terminals (“EBTs”) as they await the finalisation of the National
Gambling Board’s review of gaming in South Africa.
The focus in the bingo business is to increase the number of active bingo sites and
to further develop the expertise required to manage the disparate operations at new
locations. The skill set required includes treasury, gaming, food and beverage, and
compliance management.
The acquisition by Niveus of a controlling interest in KWV provides KWV with
a stable controlling shareholder with a longer-term investment horizon. While the
acquisition was made at a substantial discount to net asset value (“NAV”), the upside
of the business remains leveraging its brands and international presence. For the
nine months ended 31 March 2013, KWV’s profit after tax amounted to R7,4 million,
which is a substantial turnaround from the R49,6 million loss for the 12-month
period ended 30 June 2012.
The return to profitability is pleasing as it resulted from operating profits, but remains
tenuous if the group does not continue to execute its strategic plans. The year-on-
year improvement is also impacted by the change in year-end which is seasonally
skewed for nine months and by substantial one-off costs in the prior period. The
current nine-month results include exchange rate losses on the currency hedge book
of R16 million of which R11 million relates to future periods. The group is expected to
continue with its hedging policy which will result in mark-to-market losses if the rand
continues to depreciate. However, the long-term expectation is that the group will be
a net beneficiary in the event of the currency weakening further.
As indicated, the future profitability of the group is predicated on volume growth
rather than cost reduction, which is particularly difficult given world economic
conditions. In addition, significant investments in the sales and marketing function
and in new offices in overseas markets may reduce short-term profit further.
Chairman and chief executive oFFICER’S report
Niveus Investments Limited integrated Report 2013