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GDF
GDF
GDF - Gold Reef - Unaudited interim results for the six months ended 30 June
2007
Gold Reef Resorts Limited
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE000028338
("Gold Reef")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
("the period")
HIGHLIGHTS
Revenue up 17,9%
EBITDA up 22,9%
HEPS up 21,0%
BEE transactions finalised
COMMENTARY
Introduction
Buoyant market conditions continued to drive a pleasing performance at Gold
Reef`s casinos, all of which posted increases in revenue and profitability to
maintain the group`s growth. Capital expansion at group properties continues to
be achieved within both project timelines and capital budgets.
As announced on 9 March 2007, Gold Reef concluded a number of BEE transactions
which became unconditional on 25 June 2007. These transactions increased direct
black shareholding in the group to in excess of 25,1%. Gold Reef increased its
exposure to its high-performing operations and consolidated its gaming platform
by exchanging the BEE interests in certain of the individual casinos, and by
acquiring the remaining 25% and 30% interests respectively in the Gold Reef City
Casino and Goldfields Casino management contracts, for Gold Reef shares ("the
share exchange").
As a result of the share exchange Gold Reef increased its shareholding in Gold
Reef City, Silverstar Casino, Golden Horse Casino and Goldfields Casino to 100%.
In Mykonos Casino, Gold Reef increased its stake to 70,4%. A total of 55,2
million Gold Reef shares were issued for the share exchange, equating to 21,03%
of Gold Reef`s increased issued share capital. In order to achieve a minimum of
25,1% black-owned direct economic shareholding, Gold Reef issued 14 000 000
shares to certain of the BEE shareholders who participated in the share exchange
at R20,50 a share, for R287 million ("the top-up transaction") ("the BEE
transactions"). Shareholders are referred to the detailed circular dated 2 May
2007 for further details of the BEE transactions and the anticipated financial
impact.
The share exchange and the top-up transaction substantially satisfy the final
equity targets of the Codes of Good Practice on Black Economic Empowerment
issued by the Department of Trade and Industry and comply with the gaming
boards` recommendations on black empowerment.
As the BEE transactions will take effect from 1 July 2007, they are not
reflected in the interim results for the period and will be incorporated into
the annual results for the full year to December 2007.
Financial Results
The group reported an increase in revenue of 17,9% to R839,2 million, reflecting
net gaming win up 17,6%. Profit attributable to shareholders grew 25,4% to
R138,2 million. EBITDA of R358,1 million increased 22,9% and represented a 42,7%
margin on revenue. Headline earnings per share ("HEPS") increased by 21,0% to
68,6 cents from 56,7 cents.
SEGMENTAL ANALYSIS
Revenue Revenue Revenue EBITDA EBITDA EBITDA
June June June June
2007 2006 2007 2006
R`000 R`000 % R`000 R`000 %
Change Change
Gold Reef 535,470 467,918 14,4 196,799 162,920 20,8
City
Golden Horse
Casino 111,508 96,682 15,3 50,123 42,506 17,9
Mykonos 57,708 49,510 16,6 26,026 21,711 19,9
Casino
Garden Route
Casino 81,233 66,960 21,3 40,638 32,589 24,7
Goldfields
Casino 51,715 44,636 15,9 24,076 19,959 20,6
Silverstar
Casino - - - (2,416) - -
Gold Reef
Management 30,131 25,790 16,8 5,397 8,150 (33,8)
Gold Reef - - - 24,735 525,570 -
Consolidation (28,587) (39,667) - (7,281) (521,974) -
839,178 711,829 17,9 358,097 291,431 22,9
SEGMENTAL ANALYSIS (continued)
EBITDA % EBITDA % CAPEX CAPEX
June June June June
2007 2006 2007 2006
% % R`000 R`000
Gold Reef 36,8 34,8 87,117 48,062
City
Golden Horse
Casino 45,0 44,0 1,442 3,250
Mykonos 45,1 43,9 541 4,941
Casino
Garden Route
Casino 50,0 48,7 1,744 1,570
Goldfields
Casino 46,6 44,7 33,102 70
Silverstar
Casino - - 115,073 -
Gold Reef
Management - 33,6 - -
Gold Reef - - - -
Consolidation - - - -
42,7 40,9 239,019 57,893
Cash of R287 million in respect of the top-up transaction was received before
the end of the period and has been included in cash and cash equivalents and
recognised as a liability at 30 June 2007. 69,2 million shares were issued on 2
July 2007 thus increasing the number of shares in issue from 220,6 million to
289,8 million. As announced on 24 April 2007 and 25 June 2007 a final dividend
of 55,0 cents per share was declared for the year ended 31 December 2006. Until
payment on 23 July 2007 the dividend totalling R150 million was recognised in
trade and other payables. Following the fulfilment of all conditions precedent
to the BEE transactions the newly issued shares participated in the dividend.
These interim results have been prepared in accordance with International
Financial Reporting Standards. The accounting policies applied in the
preparation of these interim results are consistent with those applied in the
audited annual results for the year ended 31 December 2006. This required the
restatement of goodwill and other reserves in the balance sheet at 30 June 2006.
Operations
Gold Reef City
Robust trade at Gold Reef City Casino saw a 13,7% increase in revenue to R505,2
million and EBITDA up 18,0% to R194,6 million. The casino achieved satisfactory
growth notwithstanding ongoing renovations, which resulted in a small loss of
market share.
The new smoking casino, boasting 570 slot machines and 15 tables, continued to
experience positive trade. Phase 2 of the development was completed during the
period and two refurbished restaurants as well as the upgraded fast food and
children`s entertainment areas were reopened. The final phase is underway and
due for completion in October 2007. This will include additional restaurants and
the 1 100-seater Lyric theatre. Further, the installation of the ceiling over
the casino floor is nearing completion. In line with international developments
cashless gaming has been introduced and will be fully implemented across the
casino floor by October 2007.
Trading at the Theme Park remained strong. The revitalisation programme launched
last year is ongoing and the positive effects are clearly reflected in the Theme
Park`s pleasing financial performance.
The Apartheid Museum continued to increase its profile, benefiting from a number
of corporate sponsorships and charity partnerships.
Golden Horse Casino
On the back of robust trading revenue was up 15,3% to R111,5 million. EBITDA of
R50,1 million rose 17,9% from R42,5 million, with an improved EBITDA: Revenue
ratio of 45,0%.
Renovations at a total cost of R8,9 million, which began in 2006, are complete.
The developments include additional restaurants and entertainment facilities.
Mykonos Casino
The casino traded well off a high base posting a 16,6% increase in revenue to
R57,7 million from June 2006. Higher EBITDA of R26,0 million represented an
increased 45,1% margin on revenue.
In anticipation of capacity constraints, management is considering expansion
alternatives.
Garden Route Casino
The additional 52 new slot machines and three tables contributed to positive
trading at Garden Route Casino with a 21,3% growth in revenue to R81,2 million
from R67,0 million. A 24,7% increase in EBITDA to R40,6 million reflected a
healthy EBITDA:Revenue ratio of 50,0%.
With the opening of the adjacent acclaimed golf course the casino has begun to
attract higher-spend patrons.
Goldfields Casino
Trading at the casino remained solid despite the disruption due to the upgrade
from a temporary to a permanent casino. Revenue increased 15,9% to R51,7 million
with EBITDA of R24,1 million representing a 46,6% margin on revenue.
The upgrade to a permanent casino is now complete. The new Salon Prive, sports
bar, conference facility and additional restaurants as well as refurbishment of
existing facilities are expected to positively impact footfall. The casino now
offers 250 slots and nine tables.
Silverstar Casino
Construction on the Silverstar complex is progressing well. The casino is set to
open in December 2007 with the complex expected to be complete by April 2008.
Silverstar Casino will feature 752 slots and 26 tables. The capital expenditure
to June 2007 amounted to R281 million out of the total anticipated cost of R1,2
billion.
Future Developments
Queenstown
Gold Reef is a 25% shareholder in the consortium awarded the casino license for
Queenstown in the Eastern Cape. A challenge has been launched by a losing
bidder. However, construction of the casino is progressing well.
Vaal River Casino
Gold Reef has acquired a controlling stake in Vaal River Casino Company (Pty)
Limited, the only applicant for a licence in the Sasolburg area of the Free
State. The licence process is being opposed by a competitor.
Directorate
Following the fulfilment of all conditions precedent to the BEE transactions
Bongani Biyela, the former General Manager of Gold Reef City Casino, was
appointed Gold Reef`s executive director of strategy and business development.
Richard Moloko and Patrick September were appointed as non-executive directors.
The appointments became effective on 25 June 2007.
Prospects
The completed refurbishment at two of the casinos and ongoing developments at
existing casinos are expected to be key drivers of organic growth. On completion
of the Queenstown and Silverstar casinos, four casinos representing the majority
of Gold Reef`s portfolio will effectively comprise new properties. In addition,
the Theme Park`s revitalisation programme is anticipated to generate increased
footfall.
The group has financed the developments during the period from a combination of
free cash flow and external debt, and will continue to do so until completion of
the respective projects. This will enhance growth in future periods as de-
gearing takes effect.
Further, the increased BEE shareholding has positioned Gold Reef at the
forefront of transformation in the South African gaming industry. This has
created long-term financial benefits for Gold Reef and its shareholders.
The group has experienced a negligible impact from the increases in interest
rates and anticipates that a growing economy will continue to boost long-term
growth prospects.
Cautionary Announcement
As previously announced on 13 August 2007 shareholders are advised that Gold
Reef has entered into exclusive discussions with a consortium of investors which
may result in an offer to purchase the entire issued and to be issued share
capital of Gold Reef for R34,00 a share, implying an enterprise value for Gold
Reef of approximately R11,6 billion. The consortium led by Ethos Private Equity
Fund V includes, inter alia, management of Gold Reef and the existing Black
Economic Empowerment shareholders. In the event that a firm intention to make an
offer is received by Gold Reef`s board, it is envisaged that the offer will be
implemented by way of a Scheme of Arrangement ("the Scheme`) in terms of section
311 of the Companies Act at which time the listing of the company on the JSE
Limited will be terminated. Approximately 80,5% of the existing shareholders of
the company have irrevocably undertaken to the consortium to accept the offer in
respect of their entire shareholdings, subject to no competing offer being
received which is at least 10% higher than R34,00 a share. Certain members of
the consortium may not be eligible to vote all of their respective shareholdings
on the Scheme. In this event, shareholders holding approximately 52,0% of Gold
Reef`s total fully diluted shares and approximately 72,7% of Gold Reef`s fully
diluted shares which would then be eligible to vote on the Scheme, can be
regarded as having irrevocably undertaken to accept the offer.
Shareholders are advised to continue exercising caution when dealing in their
Gold Reef securities until a further announcement is made.
Dividend
In line with policy no dividend has been declared for the interim period.
Steven Joffe CEO
Jarrod Friedman Financial Director
On behalf of the board.
23 August 2007
Directors: M Krok (Chairman)*; SB Joffe (Chief Executive Officer);
AJ Aaron*; BJ Biyela; JS Friedman; RJ Khoza*; A Krok**; MZ Krok*;
S Krok**; J Leutgeb*#; RT Moloko*; C Neuberger#; BJ Schutte*;
P September*; R Vierziger**#
Non-executive director
**Alternate director
#Austrian Citizen
Registered office: Gold Reef City, Gate 4, Northern Parkway, Ormonde, 2091
Transfer secretaries: Link Market Services South Africa (Pty) Limited, 5th
Floor, 11 Diagonal Street, Johannesburg, 2001 (P O Box 4844, Johannesburg, 2000)
Company secretary: CRT Paul CA (SA)
www.goldreefresorts.com
Group Income Statement
Unaudited Unaudited Audited
for the 6 for the 6 for the
months months 12 months
ended 30 ended 30 ended 31
June 2007 June 2006 December
2006
% R`000 R`000 R`000
Revenue 17,9 839,178 711,829 1,517,113
Net gaming win 17,6 771,217 656,022 1,381,332
Theme Park 49,9 31,032 20,700 58,396
Food and beverage 22,3 18,490 15,119 33,759
Other (7,7) 18,439 19,988 43,626
Other income 6,366 4,280 9,365
845,544 716,109 1,526,478
Gaming levies and VAT (151,332) (129,174) (271,310)
Employee costs (167,098) (151,402) (314,695)
Promotional and marketing costs (57,462) (51,908) (113,679)
Depreciation and amortisation (52,997) (51,731) (101,812)
Other operating expenses (117,599) (99,075) (218,482)
Operating profit 28,4 299,056 232,819 506,500
Finance income 8,527 6,435 11,957
Finance costs (24,269) (14,122) (36,960)
Profit before equity-accounted
earnings 283,314 225,132 481,497
Share of profits of associate - 669 669
Profit before taxation 25,5 283,314 225,801 482,166
Taxation expense (103,718) (87,378) (159,210)
Profit for the period 29,7 179,596 138,423 322,956
Attributable to:
Equity holders of Gold Reef 25,4 138,190 110,228 254,312
Minority interest 41,406 28,195 68,644
179,596 138,423 322,956
Number of shares in issue (000) 220,603 220,603 220,603
Weighted average number of
shares in issue (000) 203,961 203,961 203,961
Earnings per share (cents) 25,6 67,8 54,0 124,7
Diluted earnings per share
(cents) 25,6 67,8 54,0 124,7
Supplementary information
Headline earnings reconciliation
Unaudited Unaudited Audited
for the 6 for the 6 for the
months months 12 months
ended 30 ended 30 ended 31
June 2007 June 2006 December
2006
% R000 R000 R`000
Attributable profit for the
period 25,4 138,190 110,228 254,312
(Profit)/loss on sale of
property, plant and equipment (662) 10 (16)
Pre-opening expenses 2,420 - -
CGT relating to ALI refinancing - 5,466 5,466
Headline earnings 21,0 139,948 115,704 259,762
Headline earnings per share
(cents) 21,0 68,6 56,7 127,4
EBITDA reconciliation
Unaudited Unaudited Audited
for the 6 for the 6 for the
months months 12 months
ended 30 ended 30 ended 31
June 2007 June 2006 December
2006
% R`000 R`000 R`000
Operating profit 28,4 299,056 232,819 506,500
Property and equipment rental 6,044 6,881 15,346
Depreciation and amortisation 52,997 51,731 101,812
EBITDA 22,9 358,097 291,431 623,658
EBITDA margin (%) 42,7 40,9 41,1
Group Balance Sheet
Unaudited Restated Audited at
at 30 June at 30 June 31
2007 2006 December
2006
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 1,464,220 1,013,286 1,278,485
Leasehold improvements 102,037 96,971 101,710
Intangible assets 471,397 376,439 472,717
Deferred tax assets 38,760 51,843 62,627
Investment in joint ventures 37,528 - 36,280
Financial assets 99,962 89,873 94,675
Share incentive scheme 25,982 29,009 25,484
2,239,886 1,657,521 2,071,978
Current assets
Inventories 11,186 5,435 7,584
Receivables and prepayments 61,780 23,491 20,223
Cash and cash equivalents 470,421 124,672 105,735
Amounts owing by related parties 3,910 26,267 4,865
547,297 179,865 138,407
Total assets 2,787,183 1,837,386 2,210,385
Equity and liabilities
Capital and reserves
Ordinary share capital 4,412 4,412 4,412
Share premium 499,280 499,280 499,280
Treasury shares (75,340) (75,340) (75,340)
428,352 428,352 428,352
Share-based payment reserve 31,781 20,964 26,210
Other reserves 39,393 24,140 13,795
Retained earnings 707,840 575,808 719,892
1,207,366 1,049,264 1,188,249
Minority interest 234,745 160,335 196,895
Total equity 1,442,111 1,209,599 1,385,144
Non-current liabilities
Interest-bearing borrowings 564,859 363,500 394,330
Deferred tax liabilities 52,993 49,001 56,453
617,852 412,501 450,783
Current liabilities
Trade and other payables 553,788 81,321 144,623
Provisions 41,234 25,151 46,653
Bank overdraft 2,068 2,630 43,013
Tax liabilities 35,622 81,184 58,779
Current portion of interest-bearing
borrowings 91,499 25,000 76,967
Amounts owing to related parties 3,009 - 4,423
727,220 215,286 374,458
Total equity and liabilities 2,787,183 1,837,386 2,210,385
Group Cash Flow Statement
Unaudited Unaudited Audited
for the 6 for the 6 for the 12
months months months
ended 30 ended 30 ended 31
June 2007 June 2006 December
2006
R`000 R`000 R`000
Cash flow from operating activities
Profit before taxation 283,314 225,801 482,166
Non-cash items and other adjustments 99,908 60,087 137,263
383,222 285,888 619,429
(Increase)/decrease in working (78,655) (3,601) 49,438
capital
Cash flow from operating activities 304,567 282,287 668,867
Interest paid (24,269) (14,122) (36,960)
Interest received 8,527 6,435 11,957
Taxation paid (106,468) (133,037) (227,584)
Dividend paid - (104,020) (104,020)
Net cash generated in operating
activities 182,357 37,543 312,260
Cash flow from investing activities
Additions to property, plant and
equipment (239,019) (57,893) (351,456)
Additions to leasehold improvements (637) (110) (6,530)
Proceeds from disposal of property,
plant and equipment 1,917 525 4,178
Investment in available-for-sale
financial instruments (5,287) (89,872) (94,674)
Investment in intangibles - - (53)
Loans issued to joint ventures (1,248) - (36,280)
Loans repaid by associate - - 691
Net (advances to)/repayments by
related parties (459) 82,179 94,601
Net cash effect of acquisition of
Inkonka - (174,261) (175,623)
Net cash effect of acquisition of
Tanglepark - (111,818) (117,006)
Net cash effect of acquisition of
Silverstar Casino - - (78,278)
Net cash effect of ALI refinancing - 43,300 35,550
Net cash effect of acquisition of
West Coast Leisure - (7,776) (7,776)
Net cash utilised in investing
activities (244,733) (315,726) (732,656)
Cash flow from financing activities
(Increase)/decrease in share
incentive scheme loan (498) 3,830 7,355
Dividend and loan repayments to
outside shareholders (3,556) (40,318) (44,207)
Subscription of shares to be issued
in flip-up transaction 287,000 - -
Increase in interest-bearing
borrowings 185,061 327,351 410,608
Net cash generated in financing
activities 468,007 290,863 373,756
Net increase/(decrease) in cash and
cash equivalents 405,631 12,680 (46,640)
Cash and cash equivalents at
beginning of period 62,722 109,362 109,362
Cash and cash equivalents at end of
period 468,353 122,042 62,722
Group statement of changes in equity
Share Reserves Retained Minority Total
capital earnings interest equity
net of
treasury
shares
Balance at 1 January
2006 428,352 18,996 595,373 96,429 1,139,150
Recognition of share-
based payments - 4,742 - - 4,742
Revaluation of land
as per IFRS3 - 27,519 - - 27,519
Attributable profit
for the period - - 110,228 28,195 138,423
Dividend paid - - (104,020) - (104,020)
Movement in loans
from minorities - - - (1,702) (1,702)
Adjustment arising
on ALI refinancing - - (25,773) 61,323 35,550
Transactions with
minorities in
Mykonos Casinos - (6,153) - (1,623) (7,776)
Dividends paid to
minorities by
subsidiaries - - - (38,616) (38,616)
Minorities created
on Goldfields
acquisition - - - 3,213 3,213
Minorities created
on Garden Route
acquisition - - - 13,116 13,116
Balance at 30 June
2006 428,352 45,104 575,808 160,335 1,209,599
Recognition of share-
based payments - 5,246 - - 5,246
Negative hedge
reserve created - -
during the period - (10,345) - - (10,345)
Attributable profit
for the period - - 144,084 40,449 184,533
Dividends paid to -
minorities by
subsidiaries - - - (3,889) (3,889)
Balance at 31
December 2006 428,352 40,005 719,892 196,895 1,385,144
Recognition of share-
based payments - 5,571 - - 5,571
Positive hedge
reserve created
during the period - 25,868 - - 25,868
Hedge reserve
released during the
period - (270) - - (270)
Attributable profit
for the period - - 138,190 41,406 179,596
Dividend declared - - (150,242) - (150,242)
Dividends paid to
minorities by
subsidiaries - - - (3,556) (3,556)
Balance at 30 June
2007 428,352 71,174 707,840 234,745 1,442,111
Date: 23/08/2007 13:21:22 Produced by the JSE SENS Department.
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