Gaming

GPI Slots

Profile

GPI Slots supplies, installs and operates limited payout machines (LPMs) in the premises of licenced sites primarily with age-controlled access such as bars, taverns, restaurants, clubs and sports betting shops. LPMs function in the same way as casino slot machines, though with limited payout capacity, in line with prevailing gambling laws.

ownership structure

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74.9%
effective ownership (as at 30 June 2015)*
R101.7 million
contribution to GPI headline earnings for the period

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“GPI Slots is a market leader with a licence to operate over 5 000 LPMs and has established a solid operating platform from which to grow.”

* Effective ownership of 100% for the period 1 July 2014 to 30 December 2014 decreased to 74.9% from 31 December 2014 to 30 June 2015 as a result of the sale of 25.1% to Sun International (South Africa) Ltd.

factsheet

managing executive

Felix Mthembu

GPI directors at GPI Slots board level

Hassen Adams, Alan Keet, Nombeko Mlambo

BBBEE rating

Level 2 (measured as part of GPI consolidated scorecard)

Employees

Total employee complement: 208
Historically disadvantaged individuals (HDIs) represent 90% of the total employee complement
Females represent 40% of the total employee complement

Head office

Cape Town

Operational footprint

GPI Slots is licensed by the relevant provincial gambling boards to operate in the following provinces:

  • Western Cape: 1 000 LPMs
  • KwaZulu-Natal: 2 000 LPMs
  • Gauteng: 2 000 LPMs
  • Mpumalanga: 122 LPMs
Subsidiaries’ ratings vary, with some achieving level 2 and 3 according to the former codes and in line with their licence conditions.

Key financial performance indicators (R’000s)

2015 2014 2013
Revenue 799 573 599 616 470 760
EBITDA 182 104 127 442 61 779
Net profit after tax 78 327 51 336 48 728
Shareholder loan 253 544 204 047 100 326
Total debt excluding shareholder loans 94 578 2 289 877
 

Operating context and performance

Against a background of low economic growth, labour unrest in certain sectors and power supply interruptions, the local LPM sector grew by 16% overall. The number of machines in South Africa grew by only 8%, indicating that the bulk of the revenue growth was the result of improved performance from existing licences.

The total number of machines licensed nationally at the end of June 2015 was below expectations at 10 546 machines, which equates to less than half the number of machines (25 000) that regulators are collectively empowered to license in Phase 1 of the prescribed roll-out programme. This poses a challenge to the expansion prospects of the industry and the business is engaging with the relevant authorities to identify solutions.

There was, however, an increase in the number of requests for applications issued by some regulators for other licence types, including LPM site licences permitting the operation of more than five machines up to a maximum of 40 machines (referred to as Type-B and Type-C site licences), electronic bingo terminals (EBTs) and bookmaker licences. The impact of these applications will only be visible in the coming year, once the process of awarding licences has been completed.

Combined revenue for the GPI Slots Group increased by 33.3% to R799.6 million, largely due the acquisition of KZN Slots, which had a positive impact of 19% on the top line. The balance of the growth was as a result of organic gains from a range of value-adding improvements to the product offering, resulting in increased customer activity. Net profit after tax increased by 52% to R78.3 million, supported by the traction of various cost containment initiatives across the business.

In terms of market position, the acquisition of KZN Slots strengthened the Group’s market share, which is approximately 48.7% of GGR and 48.7% of LPM numbers. The average GGR per machine per day remained in line with the market average at R662.

Grandslots in the Western Cape significantly outperformed the market, with average GGR per machine per day in excess of R1 000. Operations in KwaZulu-Natal and Gauteng showed improvements year-on-year as the market in these two regions is starting to mature. Gauteng was further bolstered by the activation of the second phase of Type-B site licences which saw another flagship 40-machine site opening in Kempton Park.

Prospects

Going forward, the Group will focus on expanding the number of route operator licences by bidding for new licences, as well as through the acquisition of existing licences. The LPM industry is experiencing an increasing trend towards consolidation, which is expected to contribute to further improvements in operating efficiencies and profitability.

The GPI Slots Group will, along with other participants in the industry, be impacted by the implementation of the new BBBEE codes and will take action focussed on driving further empowerment in the business during 2016.

As the GPI Slots Group grows the LPM footprint through mutually value-adding partnerships with site owners, opportunities continue to emerge to diversify and expand the product and services offering in the medium to long term. The strategic aim of the GPI Slots Group is to build the business within the broader gaming sector and maintain double-digit year-on-year growth into the future. Further improvement in the machine mix will continue to play a major role in achieving this growth.