Chairman’s statement

Performance and dividend

The year under review saw adjusted headline earnings per share increase by a very pleasing 18% to 176.5 cents per share and the dividend declared in respect of the year totalling 89 cents per share is in line with the group policy of declaring 50% of adjusted headline earnings per share.

The group should be in a position to continue delivering increased earnings and dividends, both through organic and expansionary activity in the medium term. The rate of growth is, however, largely reliant on the rate of recovery in the South African economy and the distinct caveats that we do not experience another recession and that the various regulatory authorities under which the group operates do not inhibit our ability to trade.

This integrated annual report has set out the key strategic priorities of the group (see our strategy in action here), and seeks to describe the programmes that will be required to achieve them. In the Chief Executive Officer’s review it is described how every activity of the group is aimed at meeting these strategic priorities of ensuring the sustainability of the business and growing free cash flow.

BBBEE and CSI

Our 2014 BBBEE rating has been reaffirmed at level 2. This achievement is the result of a continued dedicated effort and focus on all areas of the business and an operating philosophy that ensures the BBBEE impacts of each decision the business makes are taken into account.

There continues to be significant uncertainty as to what the group’s BBBEE rating will be under the new codes as a result of the uncommercial nature in which they have been drafted, particularly with regard to the sub-minimum demotions and the change in scoring scales. The group continues to litigate against attempts by various gambling boards to impose the achievement of defined levels of empowerment, as measured against the codes, as a licence condition due to the uncertainty and the extent to which the levels achieved are moved out of the group’s control. We remain committed to enhancing the group’s BBBEE credentials in every commercially reasonable way, but cannot expose our licences to regulatory risk against uncertain moving targets.

The CSI activities are an ongoing focus of the group. The deliver to our stakeholders section here sets out the Tsogo Sun SunCares programme in more detail.

Appreciation

I wish to extend my appreciation to both management and the board for their successful efforts during the year and the significant step change transactions achieved in the first half of the 2015 financial year. With the exit of SABMiller, the representatives of SABMiller on our board have resigned and I thank them for their contributions to the group, particularly Malcolm Wyman who served on the board together with Graham Mackay and Meyer Kahn for over 20 years.

Jabu Mabuza, the previous CEO of Tsogo Sun and current Deputy Chairman, a founder of the group as we currently know it, will also be stepping down after some 20 years’ service as a director of the group. Jabu played an immense role in establishing Tsogo as a successful player in the modern casino industry in South Africa and the subsequent growth initiatives undertaken by the group. Jabu will always be a part of the Tsogo Sun family.

I would like to welcome Busi Mabuza to the board as an independent non-executive director. Busi is an experienced executive and serves on the boards of IDC and ACSA and we look forward to her contributions.

Lastly and with great sadness, I’d like to acknowledge Graham Mackay, who passed away in December 2013. Graham was one of the finest business minds South Africa has produced and his intellect and clarity of thought will be sorely missed. It was a privilege to work with Graham and Tsogo Sun is deeply in debt to his support over his years of service. Our condolences to his family, friends and colleagues.

John Copelyn
Chairman

29 August 2014