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This is only the beginning.

2015 was a year of consolidation. Significant effort was channelled towards building the platforms to extract maximum value out of the existing businesses and embedding a set of common values, goals and strategy across the Group. Given all the corporate activity of the prior year, the time was right to refine the strategic direction of GPI into the future and ensure the culture we build enables our vision of being a great South African investment holding company.

Strategy

During the process of refining our strategy, we considered a quote from an old legal case where the judge commented: “Did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?” This sentiment, held by many, implies that a company can have no personality. At GPI, we take the opposite view; not only that the Group has personality and flair, but that our uniqueness is both a key strength and critical differentiator. Through a comprehensive process, we have settled on the core values of Excellence, Sustainability, Entrepreneurship, Ethics and Respect. These have been carefully selected to propel the Group along a path of success and sustainability, whereby these values underpin all strategic and governance decisions going forward. Having begun on this path, management is now focused on embedding the values and strategy throughout the business and clearly communicating the Group’s enhanced prospects with stakeholders.

Since inception, GPI has achieved phenomenal growth of some 26% compounded annually. Our strategy going forward is to accelerate growth across all spheres of the business, including assets, staff and processes. Each business will pursue the goal of being the best team, ensuring healthy shareholder returns and focusing on a diversified portfolio while maintaining investment growth.

Various human resources practice have been implemented to ensure GPI and the businesses in its investment portfolio attract, retain and reward the right people by delivering on a demonstrable succession plan and offering value-adding development opportunities. GPI is committed to providing consistent returns to shareholders in the form of an annual dividend, which it will achieve through a conservative and transparent approach to budgeting and capital allocation.

The change in the broad-based black economic empowerment (BBBEE) codes has presented some challenges. The Group has developed plans to assess its adherence to and alignment with the tenets of BBBEE, which have long been a fundamental characteristic of the business and its legacy. We are committed to identifying strategies for the new scorecard that go beyond achieving the best rating, but that add real value to the business.

While GPI will ultimately strive to diversify its portfolio of assets, the clear focus is on the gaming and food-related assets. Diversification will be achieved in the short term through a combination of listed and unlisted holdings and the stage of maturity of the assets. The Company takes a conservative view on capital allocation and will only consider assets outside these industries that meet the criteria of our investment approach that underpin the overarching growth strategy. This growth will be measured using the intrinsic net asset value of each asset and GPI will maximise this by leveraging synergies with target companies, providing strategic direction, allocating appropriate funding and maintaining a robust reporting process.

Performance

Gaming

Casinos

These investments satisfy several of our criteria in that they are significant shareholdings, cash generative, well managed and displaying steady growth, with GPI retaining the ability to add strategic value. Therefore, the disappointment was minimal when the intended sale of the 25.1% holding in SunWest and Worcester Casino did not materialise following the withdrawal of interested parties in response to an objection from the Competition Commission, which promised to derail the transaction ahead of the deadline. Concurrent to the approval process for the proposed deal, GPI continued receiving dividends from SunWest which, on the back of 9.9% EBITDA growth achieved at GrandWest Casino, and the continued recovery in the performance of the Table Bay Hotel, amounted to a healthy dividend. It has long been part of our approach that GPI is content to remain the holder of the asset, while, continuing to investigate alternatives that create maximum value for shareholders. Worcester Casino had satisfactory results for the year in a very tough environment and management have done well to stem the losses to a position from which they will be able to take advantage of improvements in the trading environment.

LPMs

GPI Slots produced stellar results for 2015. All performance criteria set were exceeded and costs were well managed, resulting in a 43% growth in EBITDA from R127 million to R182 million. The transaction to sell a further 25% to SISA is progressing as scheduled, pending regulatory approvals. This will result in cash proceeds to GPI of approximately R300 million on the successful conclusion of this tranche of the deal.

Sports betting

grandplay.co.za has gathered reasonable momentum in the last while and, although still reflecting losses, the business has taken huge strides in establishing a good brand, a smartphone app and a formidable online platform. This type of business typically takes a while to establish itself and achieve critical mass. Currently, 29 retail licences have been secured and this will add the necessary impetus to accelerate the development of the business. There is substantial latent synergistic potential between this business and the LPM business, which will be explored and extracted to the ultimate benefit of both.

Food

BURGER KING®

BURGER KING® has reached a point where the trading at store level is profitable, on a monthly basis, as at year-end. This has been achieved in difficult trading conditions and is convincing evidence that the business is now well-positioned to deliver on its vast value potential. The 44 stores at year-end provide a good platform from which to grow to double the current footprint in the next 12 months, and it is expected that BURGER KING® will achieve the necessary cash generation levels to repay its loan account to GPI commencing from July 2016. Having committed some R410 million to the development of this business, GPI is pleased with the value created to date. The goal going forward is to optimise operating processes, including leveraging the benefits of the localised and integrated supply chain, so that maximum growth is attained to the 2020 milestone year when BURGER KING® anticipates having between 5% and 7% of the Fast Food market and between 15% and 20% of the Burger market.

The opportunity to expand into Africa is currently being investigated, as well as discussions around when the best time would be to start franchising restaurants. Both these potential strategies present a significant boost to the business and will be introduced as appropriate.

Excellent Meat Burger Plant

Excellent Meat Burger Plant is poised to contribute to the Group’s results in a meaningful way and, as such, an agreement to acquire the remaining 65% of the company not already owned by the Group, has been concluded, taking the Group’s effective holding to 96.89%. The acquisition is subject to certain conditions precedent, but is expected to be concluded by the end of the 2015 calendar year. With full control of the plant, there will be more flexibility in terms of its operations, with the potential to expand its market reach to include clients other than BURGER KING®.

Spur Corporation Ltd

The investment in Spur Corporation Ltd has yielded very positive financial results, with the valuation having shown some 19% growth relative to its purchase price. Equally important though, are the many hours spent in discussion with Spur’s management on how best to use the combined purchasing power of the two companies to enhance both the Spur and BURGER KING® brands. A positive working relationship exists between the two teams, which will yield good results in future.

Mac Brothers Catering Equipment

During the year, the business became a wholly-owned subsidiary of GPI. The revenue for the full year grew at 9.7%, which was slightly less than anticipated due to the reduced number of BURGER KING® stores. Necessary investment to bolster capacity and gear for growth further impeded profitability, but the forecast going forward and order book for 2016 are strong indicators of impending returns in the short term. The business is well managed, but disruption in the form of the various corporate transactions and implementation of new software has affected performance. The prospects nevertheless remain exciting and the extraction of this potential will be driven by the GPI team.

Since inception, GPI has achieved phenomenal growth of some 26% compounded annually. Our strategy going forward is to accelerate growth across all spheres of the business, including assets, staff and processes. Each business will pursue the goal of being the best team, ensuring healthy shareholder returns and focusing on a diversified portfolio while maintaining investment growth.

Diversified investments

Grand Tellumat Manufacturing (GTM)

GTM had quite a disappointing year and, while the loss was not material, it is evident that the industry is fraught with uncertainty in relation to tenders and government-related work. Management highlighted this at an early stage and took proactive measures to make the business less reliant on contracts manufacturing and to explore the development of its own intellectual property. The order book for 2016 is sound and a significant improvement is expected in the coming year. With the expected increase in the manufacturing of gaming machines, supported by the deal with Atlas Gaming Holdings, GTM is ideally placed to become a leader in the industry in South Africa.

Future

The clearly delineated silos of gaming and food present exciting opportunities within our existing assets and those for the future. The ownership of the gaming assets including SunWest, Worcester Casino and the GPI Slots business, underpins the growth of the food business by providing the equity and income to finance the expansion as well as the necessary cash flows to maintain our dividend policy. The balance sheet gearing at 34.5% has peaked in terms of the forecast until 2020, which provides adequate resources to continue with the BURGER KING® expansion plans and, over time, to fund further acquisitions.

The intention is to explore acquisitions in the food industry that support the supply chain of BURGER KING®, while also benefiting the Spur Corporation. With this mindset and confidence acquired in the QSR space, other acquisitions (where synergies with existing businesses could be extracted) would be considered, provided they meet GPI’s exacting criteria.

The minority stake in Atlas Gaming and options to acquire further equity in that company are also expected to benefit GPI on several fronts. Atlas Gaming is a gaming machine manufacturer based in Australia and GPI’s first investment internationally and opens the door to further diversification of our asset base.

The best team

Huge strides were taken in 2015 to embed the philosophy of the BEST TEAM throughout the Group. GPI’s ambitious growth targets can only be achieved with the correct team in place and with appropriate rewards and incentives being offered. The opportunity for all stakeholders to participate in this journey depends on the team and there is a strong sense of commitment from everyone within GPI. Thanks go to all employees for once again producing good results for GPI – the financial manifestation of that will follow as a consequence of the hard work, dedication and application that so many of our personnel have displayed.

The Executive Committee is to be acknowledged for the many hours spent on defining and implementing the strategy – this is only the beginning. A special thanks to Hassen Adams, our tireless Executive Chairman and Dylan Pienaar, our recently appointed Financial Director, for their guidance and support.

To the Board and our advisors – thank you for the support during the year.