| Fri 14 Mar 2008, 15:45 | | GDF - Gold Reef Resorts Limited - Reviewed results |
|
GDF
GDF
GDF - Gold Reef Resorts Limited - Reviewed results for the year ended 31
December 2007 and renewal of cautionary announcement
Gold Reef Resorts Limited
("Gold Reef")
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE 000028338
REVIEWED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
("the year") AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Revenue up 14,8%
Adjusted EBITDAR up 21,9%
Adjusted HEPS up 18,3%
Two additional casinos successfully opened
COMMENTARY
Introduction
All of Gold Reef`s existing casinos posted increases in revenue for the year to
continue the group`s overall growth.
Two new casinos were successfully opened - Silverstar Casino in Gauteng and
Queens Casino in the Eastern Cape - and the refurbishment of Gold Reef City and
Goldfields Casino was substantially completed. All casinos have been adequately
equipped to counter power outages.
Corporate Activity
As previously announced on 4 February 2008, the scheme of arrangement proposed
by Fluxrab Investments No. 159 (Proprietary) Limited ("BidCo") to acquire all of
the Gold Reef shares ("the BidCo offer") failed due to the non-fulfilment of
certain conditions precedent to the proposed transaction, namely the approval of
regional gambling boards which had not been secured by the extended deadline of
17h00 Friday 1 February 2008. As BidCo had elected not to extend the deadline to
accommodate these approvals, the proposed transaction lapsed.
This has had no adverse effect on the operational solidity of the group. The
board and management remain confident of Gold Reef`s long-term prospects.
SRP
Although an adverse ruling in respect of the BidCo offer has been handed down by
the Securities Regulation Panel, Gold Reef continues to await the reasons for
the ruling. Gold Reef maintains its original good standing in respect of the
BidCo offer and will evaluate the best course of action once the reasons become
available.
BEE
As announced on 9 March 2007, Gold Reef concluded a number of BEE transactions
which became unconditional on 25 June 2007 and were accounted for effective 1
July 2007. These transactions increased direct black shareholding in the group
to more than 25,1%. At the same time Gold Reef increased its exposure to its
high-performing operations and consolidated its gaming platform.
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%. Gold Reef further acquired the remaining 25% and
30% interests, respectively, in the management contracts of Gold Reef City
Casino and Goldfields Casino ("the share exchange"). 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.
14 million new Gold Reef shares were issued to the BEE participants at R20,50
per share for a total cash consideration of R287 million ("the top-up
transaction"). Shareholders are referred to the detailed circular dated 2 May
2007 for further details of the share exchange and top-up transaction.
The positive effects of the BEE transactions are reflected for the first time in
these annual financial results.
Basis of Preparation
These reviewed annual financial results have been prepared in accordance with
International Financial Reporting Standards including IAS 34 (Interim Financial
Reporting) and the requirements of the South African Companies Act, 1973. The
accounting policies are consistent with those applied in the most recent audited
annual financial results. These annual financial results have been reviewed by
the company`s auditors PricewaterhouseCoopers Inc. and their review opinion is
available for inspection at the company`s registered offices.
Financial Results
Including Silverstar Casino for its opening month, the group reported a 14,8%
increase in revenue to R1,7 billion from the previous year, reflecting net
gaming win up 14,5%.
Adjusted headline earnings per share ("Adjusted HEPS") at 150,7 cents is 18,3%
higher than headlines earnings per share ("HEPS") for the previous year. To
calculate Adjusted HEPS, adjustments were made to headline earnings to eliminate
the once-off effects of pre-opening expenses at Silverstar Casino and Queens
Casino, IFRS 2 charges resulting from the BEE transactions and various
transaction costs associated with these BEE transactions as well as the BidCo
offer ("once-off charges"). Gold Reef is of the opinion that it is appropriate
to compare Adjusted HEPS for the year with HEPS for the previous year in order
to illustrate year-on-year operating growth. HEPS decreased by 39,8% to 76,7
cents from 127,4 cents in the previous year.
As a result of the once-off charges, profit attributable to shareholders reduced
by 42,7% to R145,8 million from December 2006. Adjusted Earnings Before
Interest, Tax, Depreciation, Amortisation and Rentals ("EBITDAR") of R760,0
million increased 21,9% when compared to EBITDAR for the previous year and
represented a 43,6% margin on revenue compared to an EBITDAR margin of 41,1% in
2006.
Interest expensed has not increased commensurate with the level of borrowings as
borrowing costs on new casinos or developments are capitalised until opening of
the respective property or development.
SEGMENTAL ANALYSIS
Revenue Revenue Revenue
2007 2006
R`000 R`000 %
Gold Reef City 1,098,646 977,528 12,4
Silverstar Casino* 24,974 -
Golden Horse Casino 225,853 200,352 12,7
Mykonos Casino 116,648 105,325 10,8
Garden Route Casino 166,826 148,169 12,6
Goldfields Casino 108,817 94,046 15,7
Queens Casino* 1,429 -
Gold Reef Management 70,160 60,158 16,6
Gold Reef Resorts - -
Consolidation (71,552) (68,465)
1,741,801 1,517,113 14,8
SEGMENTAL ANALYSIS (continued)
EBITDAR EBITDAR EBITDAR EBITDAR
2007 Adjusted 2006 Adjusted
R`000 2007** R`000 2007 vs
R`000 2006 %
Gold Reef City 417,021 417,021 343,904 21,3
Silverstar Casino* (50,124) 7,702 -
Golden Horse Casino 109,217 109,217 91,938 18,8
Mykonos Casino 53,508 53,508 46,958 13,9
Garden Route Casino 83,692 83,692 71,786 16,6
Goldfields Casino 50,122 50,122 45,314 10,6
Queens Casino* (5,657) 266 -
Gold Reef Management (22,447) 16,350 14,027 16,6
Gold Reef Resorts 9,980 62,786 551,423
Consolidation (67,221) (40,658) (541,692)
578,091 760,006 623,658 21,9
SEGMENTAL ANALYSIS (continued)
EBITDAR EBITDAR EBITDAR CAPEX CAPEX
% % %
2007 Adjusted 2006 2007 2006
% 2007** % % R`000 R`000
Gold Reef City 38,0 38,0 35,2 235,061 224,358
Silverstar Casino* 30,8 758,801 56,446
Golden Horse Casino 48,4 48,4 45,9 15,763 18,431
Mykonos Casino 45,9 45,9 44,6 3,996 13,364
Garden Route Casino 50,2 50,2 48,4 11,142 11,713
Goldfields Casino 46,1 46,1 48,2 44,700 62,442
Queens Casino* 18,6 92,508 -
Gold Reef Management 23,3 23,3 65 192
Gold Reef Resorts 885 -
Consolidation (92,277) (28,960)
33,2 43,6 41,1 1,070,644 357,986
* The figures shown above represent 100% of the respective casinos` results,
albeit that Silverstar Casino was only accounted for as a subsidiary effective 1
July 2007 and the investment in Queens Casino is accounted for as an investment
in associate.
** See financial results commentary for details of the adjustments made to
EBITDAR.
Operations
Gold Reef City
Gold Reef City Casino achieved an 11,1% increase in revenue with EBITDAR up
19,6% from the previous year. The second half of the year, traditionally the
more robust trading period, proved more challenging than the first six months as
a result of interest rate increases and a general slowdown in the economy.
The refurbishment and expansion programme was successfully completed on schedule
to positive response. Only refurbishment of the Salon Prive is continuing and is
set for completion by the end of March 2008. The capital expenditure to December
2007 amounted to R235,1 million.
The Theme Park recorded solid growth for the year with revenue up 26,9% to R74,1
million. Trading has recovered well and the Theme Park is recording pleasing
increases in footfall. The revitalisation programme launched in 2006 is ongoing.
The Theme Park is continuing to focus on implementing strict cost controls to
further boost profitability.
The Apartheid Museum continued to increase its profile, benefiting from a number
of corporate sponsorships and charity partnerships.
Silverstar Casino
The new casino floor was opened on 11 December 2007. Silverstar Casino features
756 slots and 26 tables.
Gold Reef anticipates that all facilities other than the spa will be complete
and open for trading by April 2008. The development will offer covered parking,
a five star hotel, spa, restaurants, entertainment, and conference facilities
and a creche.
The capital expenditure to December 2007 amounted to R758,8 million out of the
total anticipated cost of R1,1 billion. Pre-opening expenses of R53,2 million
(net of deferred tax) have been incurred and are included in the once-off
charges removed from Adjusted HEPS.
Golden Horse Casino
Revenue was up 12,7% to R225,9 million, benefiting from renovations to the Salon
Prive that drew increased patronage. EBITDAR of R109,2 million rose 18,8% from
R91,9 million, with an improved EBITDAR: Revenue ratio of 48,4%.
Further development plans for additional refurbishments are underway.
Mykonos Casino
The casino`s performance for the year was satisfactory with a 10,8% increase in
revenue to R116,6 million. EBITDAR was up 13,9% to R53,5 million resulting in a
strong margin on revenue of 45,9%.
Management is currently reviewing possible expansion plans for the casino.
Garden Route Casino
Trading at Garden Route Casino was satisfactory with increased footfall from the
golf course and higher-spend patrons beginning to impact on performance. The
casino reported 12,6% growth in revenue to R166,8 million from R148,2 million.
EBITDAR increased 16,6% to R83,7 million. The group`s top performer on margin,
Garden Route Casino achieved an EBITDAR: Revenue ratio of 50,2%.
Goldfields Casino
The conversion from a temporary to a permanent casino at an additional cost of
R44,7 million during the year boosted revenue 15,7% to R108,8 million. EBITDAR
increased to R50,1 million. Increased expenses as a result of conversion to a
permanent casino and the addition of non-gaming facilities saw a slight
reduction in margin on revenue to 46,1%.
Queens Casino
The new gaming floor was opened on 21 December 2007 featuring 180 slots and 6
tables. The remaining facilities are expected to be completed in the first
quarter of 2008.
The capital expenditure to December 2007 amounted to R92,5 million out of the
total anticipated cost of R125 million. Pre-opening expenses of R4,2 million
(net of deferred tax) have been incurred, 25,1% of which is included in income
from associate together with the initial trading results of the casino.
The challenge from the losing bidder to the license application remains
unresolved.
Future Developments
Vaal River Casino
The group continues to hold a controlling stake in Vaal River Casino Company
(Proprietary) Limited, the only applicant for a license in the Sasolburg area.
The applicant intends to submit an amended project presentation to the Free
State Gambling and Racing Board during the second quarter of 2008.
Directorate
In accordance with Section 3.59 of the JSE Limited Listings Requirements, Gold
Reef shareholders are informed that Mr Mzolisi Diliza has been appointed as a
non-executive director of Gold Reef with effect from 14 March 2008. Mzolisi is
the CEO of the Chamber of Mines of SA and the non-executive chairman of Black
Management Forum Investments Company (Proprietary) Limited.
As announced on 7 February 2008, Reuel Khoza resigned as a non-executive
director with effect from 6 February 2008. The board thanks Reuel for his
contribution.
Prospects
With gearing at an acceptable level, Gold Reef is positioned to withstand an
economic downturn and is hedged against potential increases in interest rates.
In the year ahead Gold Reef will focus on optimising its existing properties
with improved facilities at Gold Reef City and Goldfields Casino set to enhance
performance.
The two new properties position Gold Reef for growth, with the benefits of the
first full year of trading for both Silverstar Casino and Queens Casino to be
realised in the current year. Silverstar Casino in particular presents an
opportunity to increase Gold Reef`s market share in Gauteng, the largest and
most lucrative gaming market in the country.
Dividend and Special Dividend
The board has declared a dividend for the year of 65 cents (2006: 55 cents) per
share covered 2,3 times by Adjusted HEPS (2006: 2,3 times). From time to time
the board will reconsider dividend cover based on the group`s cash flow, gearing
and capital requirements. Further, and having regard to the positive cash flow
of the group, the board has declared a Special Dividend of 35 cents per share to
be paid out of retained earnings. The Special Dividend will not result in an
additional STC burden on Gold Reef given the existence of excess STC credits.
Both dividends will be financed out of Gold Reef`s cash resources after
servicing the debt of the group`s underlying operations.
The salient dates for both dividends are as follows:
Last day to trade shares cum dividend Friday 2 May 2008
Shares commence trading ex dividend Monday 5 May 2008
Record date Friday 9 May 2008
Payment date Monday 12 May 2008
Share certificates may not be dematerialised or rematerialised between Monday, 5
May 2008 and Friday, 9 May 2008,both days inclusive.
Renewal of Cautionary Announcement
Shareholders are referred to the announcement dated 21 February 2008 in which
the company advised that Gold Reef had been approached by Tsogo Sun Holdings
(Proprietary) Limited ("Tsogo Sun") and had held a preliminary meeting in which
Tsogo Sun indicated that it was contemplating a potential offer for Gold Reef.
Discussions with Tsogo Sun are ongoing. There can be no certainty that an offer
will ultimately be forthcoming. Accordingly, shareholders are advised to
continue to exercise caution when dealing in the company`s shares until a
further announcement is made.
Steven Joffe
CEO
Jarrod Friedman
Financial Director
On behalf of the board.
14 March 2008
Directors: M Krok (Chairman)*; SB Joffe (CEO); BJ Biyela; JS Friedman;
C Neuberger#; AJ Aaron*; A Krok**; MZ Krok*; S Krok**; J Leutgeb*#;
RT Moloko*; BJ Schutte*; PCM September*; R Vierziger**#
Non-executive director
**Alternate director
#Austrian Citizen
Company secretary: CRT Paul
Registered office: Gold Reef City, Gate 4, Northern Parkway, Ormonde, 2091
Transfer secretaries: Link Market Services (Pty) Limited, 5th Floor, 11 Diagonal
Street, Johannesburg, 2001 (P O Box 4844, Johannesburg, 2000)
Sponsor: Nedbank Capital
Investor relations: Envisage Investor & Corporate Relations
Group Income Statement
Reviewed for Audited for
the year the year
ended 31 ended 31
December 2007 December 2006
% R`000 R`000
Revenue 14,8 1,741,801 1,517,113
Net gaming win 14,5 1,581,663 1,381,332
Theme Park 26,9 74,095 58,396
Food and beverage 21,7 41,080 33,759
Other 3,1 44,963 43,626
Other income 8,572 9,365
1,750,373 1,526,478
Gaming levies and VAT (310,238) (271,310)
Employee costs (362,409) (314,695)
Promotional and marketing costs (126,289) (113,679)
Depreciation and amortisation (152,823) (101,812)
Other operating expenses (389,337) (218,482)
Operating profit 409,277 506,500
Finance income 37,555 11,957
Finance costs (55,604) (36,960)
Profit before equity-accounted
earnings 391,228 481,497
Share of (loss) / profit of (934) 669
associate
Profit before taxation 390,294 482,166
Taxation expense (195,307) (159,210)
Profit for the year (39,6) 194,987 322,956
Attributable to:
Equity holders of Gold Reef (42,7) 145,814 254,312
Minority interest 49,173 68,644
194,987 322,956
Number of shares in issue (000) 291,990 220,603
Weighted average number of
shares in issue (000) 239,662 203,961
Earnings per share (cents) (51,2) 60,8 124,7
Diluted earnings per share
(cents) (51,2) 60,8 124,7
Dividend per share (cents) 18,2 65,0 55,0
Special Dividend per share
(cents) 35,0 -
Supplementary information
EBITDAR reconciliation
Reviewed for Audited for
the year the year
ended 31 ended 31
December 2007 December 2006
% R`000 R`000
Operating profit 409,277 506,500
Property and equipment rental 15,991 15,346
Depreciation and amortisation 152,823 101,812
EBITDAR (7,3) 578,091 623,658
EBITDAR margin 33,2% 41,1%
ADJUSTED EBITDAR RECONCILIATION
EBITDAR 578,091 623,658
Pre-opening expenses at
Silverstar Casino 57,826 -
IFRS2 charges resulting from
the share exchange and top-up
transaction 100,790 -
Transaction costs incurred on
the share exchange and top-up
transaction 4,372 -
Transaction costs incurred on
the scheme of arrangement
proposed by Fluxrab Investments
No 159 (Pty) Ltd 18,927 -
Adjusted EBITDAR 21,9 760,006 623,658
Adjusted EBITDAR margin
compared to EBITDAR margin 43,6% 41,1%
HEADLINE EARNINGS RECONCILIATION
Attributable profit for the
year 145,814 254,312
Impairment of intangible 40,261 -
CGT arising on ALI refinancing - 5,466
Fair value of land and accounts
receivable (867) -
Profit on sale of property,
plant and equipment (1 330) (16)
Headline earnings (29,2) 183,878 259,762
Headline earnings per share
(cents) (39,8) 76,7 127,4
ADJUSTED HEADLINE EARNINGS RECONCILIATION
Headline earnings 183,878 259,762
Pre-opening expenses at
Silverstar Casino and Queens
Casino 53,183 -
IFRS2 charges resulting from
the share exchange and top-up
transaction 100,790 -
Transaction costs incurred on
the share exchange and top-up
transaction 4,372 -
Transaction costs incurred on
the scheme of arrangement
proposed by Fluxrab Investments
No 159 (Pty) Ltd 18,927 -
Adjusted headline earnings 39,0 361,150 259,762
Adjusted headline earnings per
share compared to headline
earnings per share (cents) 18,3 150,7 127,4
Group Balance Sheet
Reviewed Audited at
at 31 31
December December
2007 2006
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 2,280,196 1,278,485
Leasehold improvements 103,661 101,710
Intangible assets 1,189,423 472,717
Deferred tax assets 46,788 62,627
Investment in associate 42,134 -
Investment in joint ventures - 36,280
Available-for-sale financial assets - 94,675
Derivative financial instruments 43,213 -
Share incentive scheme 79,812 25,484
3,785,227 2,071,978
Current assets
Inventories 18,414 7,584
Trade and other receivables 74,622 20,223
Cash and cash equivalents 332,016 105,735
Amounts owing by related parties 67 4,865
425,119 138,407
Total assets 4,210,346 2,210,385
Equity and liabilities
Capital and reserves
Ordinary share capital 5,840 4,412
Share premium 1,860,132 499,280
Treasury shares (41,961) (75,340)
1,824,011 428,352
Share-based payment reserve 378,117 26,210
Other reserves (493,699) 13,795
Retained earnings 718,238 719,892
2,426,667 1,188,249
Minority interest 32,405 196,895
2,459,072 1,385,144
Non-current liabilities
Interest-bearing borrowings 1,309,242 394,330
Deferred tax liabilities 53,946 56,453
1,363,188 450,783
Current liabilities
Trade and other payables 136,029 144,623
Provisions 54,923 46,653
Bank overdraft 15,420 43,013
Current tax liabilities 40,825 58,779
Current portion of interest-bearing
borrowings 138,378 76,967
Amounts owing to related parties 1,511 4,423
388,086 374,458
Total equity and liabilities 4,210,346 2,210,385
Group Cash Flow Statement
Reviewed for Audited for
the year the year
ended 31 ended 31
December December
2007 2006
R`000 R`000
Cash flow from operating activities
Profit before taxation 390,294 482,166
Non-cash items and other adjustments 284,588 137,263
Cash flow from trading operations 674,882 619,429
(Increase)/decrease in net current
assets (63,068) 49,438
Cash flow from operating activities 611,814 668,867
Interest received 32,442 11,957
Interest paid (55,604) (36,960)
Taxation paid (199,929) (227,584)
Dividend paid (150,242) (104,020)
Net cash generated in operating
activities 238,481 312,260
Cash flow from investing activities
Additions to property, plant and
equipment (1,065,315) (351,456)
Additions to leasehold improvements (5,329) (6,530)
Proceeds from disposal of property,
plant and equipment 9,963 4,178
Investment in intangibles (276) (53)
Investment in available-for-sale
financial instruments - (94,674)
Investment in associate (67) -
Loans issued to joint ventures - (36,280)
Loans (issued to) / repaid by
associate (43,001) 691
Net repayments by related parties 1,886 94,601
Net cash effect of the share exchange
and top-up transaction (138,908) -
Net cash effect of acquisition of
ordinary shares in Inkonka - (150,503)
Net cash effect of acquisition of loan
to Inkonka - (25,120)
Net cash effect of ALI refinancing - 35,550
Net cash effect of acquisition of
Tanglepark - (117,006)
Net cash effect of acquisition of
Silverstar Casino - (78,278)
Net cash effect of acquisition of
Mykonos Casino (7,776)
Net cash utilised in investing
activities (1,241,047) (732,656)
Cash flow from financing activities
Issue of shares to share scheme 59,737 -
Issue of shares as part of top-up
transaction 287,000 -
(Increase)/decrease in share incentive
scheme loan (54,328) 7,355
Dividend and loan repayments to
outside shareholders (13,292) (44,207)
Increase in interest-bearing
borrowings 977,323 410,608
Net cash generated in financing
activities 1,256,440 373,756
Net increase/(decrease) in cash and
cash equivalents 253,874 (46,640)
Cash and cash equivalents at beginning
of year 62,722 109,362
Cash and cash equivalents at end of
year 316,596 62,722
Group statement of changes in equity
Share Reserves Retained Minority Total
capital earnings interest equity
net of
treasury
R`000 R`000 R`000 R`000 R`000
Balance at 1 January
2006 428,352 18,996 595,373 96,429 1,139,150
Recognition of share-
based payments - 9,988 - - 9,988
Revaluation of land
as per IFRS3 - 27,519 - - 27,519
Hedge reserve
created during the
year - (10,345) - - (10,345)
Attributable profit
for the year - - 254,312 68 644 322,956
Dividend paid - - (104,020) - (104,020)
Movement in loans
from minorities - - - (1,702) (1,702)
Transactions with
minorities in Gold
Reef City - - (25,773) 61,323 35,550
Transactions with
minorities in
Mykonos Casino - (6,153) - (1,623) (7,776)
Dividends paid to
minorities by
subsidiaries - - - (42,505) (42,505)
Minorities created
on Goldfields Casino
acquisition - - - 3,213 3,213
Minorities created
on Garden Route
Casino acquisition - - - 13,116 13,116
Balance at 1 January
2007 428,352 40,005 719,892 196,895 1,385,144
Issue of shares as
part of the share
exchange and top-up
transaction 1,335,922 340,257 - - 1,676,179
Effect of the share
exchange and top-up
transaction on group
equity - (542,107) - (200,371) (742,478)
Transfer between
reserves - (2,774) 2,774 - -
Issue of shares to
share scheme 59,737 - - - 59,737
Recognition of share-
based payments - 11,650 - - 11,650
Effective portion of
derivative hedge
recognized in equity
during the year - 37,387 - - 37,387
Attributable profit
for the year - - 145,814 49,173 194,987
Dividend paid - - (150,242) - (150,242)
Dividends paid to
minorities by
subsidiaries - - - (13,292) (13,292)
Balance at 31
December 2007 1,824,011 (115,582) 718,238 32,405 2,459,072
Date: 14/03/2008 15:45:00 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
