Inorganic growth
Inorganic growth will be a combination of capacity increases in existing businesses, greenfield developments in new markets and acquisitions within the group’s core competence. In all situations, a discipline around due diligence and feasibility is critical to ensuring the success of growth projects.
The propensity for growth projects to absorb both financial and human resources must be carefully evaluated within the group’s capacity tolerances as these can impact on some of the pillars of sustainability.
Key performance indicators
| 2014 | 2013 | |
| Investment activity expenditure | R1 643 million | R639 million |
2014 performance
Tsogo Sun has continued to allocate capital in terms of its stated growth strategy and accordingly has invested R2.4 billion during the year as follows:- acquired an additional 8.7% effective interest in Tsogo Sun KwaZulu-Natal Proprietary Limited in May 2013 at a cost of R363 million and the remaining 1.3% effective interest in November 2013 for R37 million with the resultant shareholding in Suncoast being 100%;
- completed the R400 million redevelopment of the Hemingways Casino in East London;
- spent R154 million during the year on the R206 million expansion of the Emnotweni Casino, which included the construction of an expanded casino floor, additional gaming positions, additional covered parking, a conference and eventing area and restaurants. The project was completed during May 2014;
- commenced construction of the US$30 million expansion of Southern Sun Maputo including the addition of 111 rooms and conference facilities, the expansion of the existing restaurant, lobby and back-of-house facilities and the refurbishment of the existing 158 rooms. The hotel closed with effect from 1 April 2014 and the project was completed during August 2014;
- completed the acquisition of a 75.5% stake in Ikoyi Hotels Limited in Lagos, Nigeria on 29 June 2013 for US$50.6 million and the refinancing of US$19.7 million debt in the business. The property was previously managed by the group on behalf of the third-party owners;
- acquired shares in various properties during the year for an aggregate R73 million;
- acquired additional effective interests from non-controlling interests and in associates in various cinemas and hotels during the year for an aggregate R41 million;
- completed the expansion project at Blackrock Casino including an additional 50 slot machines and three tables and an expansion of the Garden Court Blackrock hotel by an additional 40 rooms;
- commenced construction on the R560 million expansion and redevelopment of the Silverstar Casino which includes additional dining options, an outdoor events area, cinemas, ten-pin bowling alley, laser tag games, an expanded and enhanced casino floor and parking. R160 million was spent during the year and the project is scheduled for completion by September 2014;
- commenced the R630 million refurbishment and expansion of the Gold Reef City Casino and Theme Park which will include an increased casino offering, cinemas and additional restaurants at the casino and additional food and beverage outlets and improved access systems at the Theme Park with an improved linkage to the casino complex and an expansion of the Apartheid Museum. R22 million was spent during the year on the project; and
- in addition to these acquisitions and expansion projects, the group also invested R769 million on maintenance capex group-wide, including gaming system replacements and major hotel refurbishments, ensuring our assets remain best in class.
Investment activity expenditure
| 31 March 2014 Rm |
31 March 2013 Rm |
|
| Hemingways expansion | 50 | 231 |
| Suncoast redevelopment | 8 | 14 |
| Emnotweni expansion | 154 | 18 |
| Silverstar redevelopment | 160 | 62 |
| Blackrock expansion | 33 | – |
| Mpumalanga 4th licence bid | 5 | 16 |
| Gold Reef City redevelopment | 22 | 40 |
| Southern Sun Maputo expansion | 111 | – |
| Montecasino expansion | – | 70 |
| Other | 13 | 17 |
| Expansion capex | 556 | 468 |
| Suncoast minorities | 406 | – |
| Cinemas | 20 | – |
| Monte Circle and Signature square land | 45 | – |
| Southern Sun Ikoyi equity(1) | 505 | – |
| Southern Sun Hyde Park | 67 | 65 |
| Garden Route Hotel | 6 | 25 |
| 54 on Bath | – | 22 |
| Millennium contingency settlement | – | 58 |
| Other | 14 | – |
| Acquisitions and minorities | 1 063 | 170 |
| Loans and investments | 24 | 1 |
| Investment activity expenditure | 1 643 | 639 |
| (1) | The total investment in Southern Sun Ikoyi is R702 million including take on debt of R197 million included acquired with acquisitions in the increase in net interest-bearing debt in the cash flow |