| Wed 9 Mar 2005, 15:22 | | Financial Results For The Year Ended 31 December 2 |
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GRCR - Reviewed Financial Results For The Year Ended 31 December 2004
Gold Reef Casino Resorts Limited
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE000028338
(`GRCR`)
HIGHLIGHTS
- 6 consecutive years compound growth in headline earnings of 23,9%
- HEPS of 95,2 cents up 46,4%
- Dividend of 48,0 cents up 77,8%
- Net cash from operations of 170,3 cents per share
- Net cash-positive for the first time
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
COMMENTS
The year to 31 December 2004 marked six consecutive years compound growth in
headline earnings of 23,9% and the group`s best performance to date. Headline
earnings of R194,2 million grew 47,8% from R131,4 million.
GRCR focused on optimising operational efficiencies at its casinos,
consolidating group policies and procedures and eliminating group debt. The
casinos performed exceptionally well supported by a buoyant economy with lower
interest rates and inflation. Particularly the group`s two newest casinos,
Garden Route Casino and Goldfields Casino, reported excellent trading results
for the year that beat expectations.
The group`s performance resulted in GRCR being net cash-positive for the first
time.
Financial Results
Exceeding the previous year`s growth, group revenue for the year increased 16,9%
to R1,1 billion while profit attributable to shareholders grew 55,7% to R194,8
million. EBITDA of R437,8 million was up 25,4% and represented a 41,4% margin on
revenue.
The casinos` performances are set out below:
Revenue Revenue Growth EBITDA EBITDA Growth EBITDA EBITDA
% %
2004 2003 2004 2003 2004 2003
R`000 R`000 % R`000 R`000 % % %
Gold Reef 796,029 712,918 11,7 300,944 265,935 13,2 37,8 37,3
City
Golden 142,350 122,534 16,2 52,622 43,662 20,5 37,0 35,6
Horse
Casino 69,742 55,336 26,0 26,684 18,550 43,8 38,3 33,5
Mykonos
Garden 98,449 74,654 31,9 40,489 30,183 34,1 41,1 40,4
Route
Casino
Goldfields 80,532 5,832 1280,9 36,155 2,716 1231,2 44,9 46,6
Casino*
*opened 4 December 2003
The group is net cash-positive by R47,9 million having substantially reduced
external interest-bearing debt by R146,8 million.
HEPS increased by 46,4% to 95,2 cents. Net cash generated from operations of
R347,4 million before deducting secondary tax on companies (STC) and dividends
paid of R56,9 million, equated to 170,3 cents per share, compared with 141,7 for
the previous year.
The annual financial results have been reviewed by PricewaterhouseCoopers Inc.
and their review opinion is available for inspection at the company`s registered
office. The reviewed annual financial results have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice. The
accounting policies used in the preparation of these reviewed annual financial
results are consistent with those used in the audited annual financial
statements for the year ended 31 December 2003.
Operations
Gold Reef City
Gold Reef City continued to perform strongly. EBITDA of R300,9 million
represented a 37,8% margin on revenue of R796 million, up 11,7%.
Gold Reef City Casino traded well and optimised the favourable trading
conditions in the second half of the year through successful promotional
campaigns and the opening of the first phase of a multi-level parking facility.
The covered parking will be completed during the course of 2005 resulting in
facilities for 1 500 extra cars.
The 450-seater conference centre opened in November 2004 and it is anticipated
that it will assist in bringing additional footfall to the casino. The casino
hotel is operating at capacity and will be expanded to accommodate the influx of
patrons.
The Theme Park performed satisfactorily. The new imported rollercoaster became
operational in December 2004 and has begun to yield benefit for the Theme Park
in the new year. Two additional new rides were also introduced. The group
anticipates that the extension to the Theme Park encompassing entertainment,
retail and food outlets, to be completed in the current year, will drive revenue
growth going forward.
The Theme Park invests substantial sums each year in maintaining and servicing
the rides, working with professional consulting engineers to ensure safety.
The Apartheid Museum continued to raise its profile and managed costs well for
2004.
Golden Horse
The casino has continued to show incremental growth year-on-year with revenue of
R142,4 million up 16,2% on the previous year.
Golden Horse benefited from the settling of the KwaZulu-Natal gaming market
following the opening of the region`s final casino, which had no negative impact
on Golden Horse. The casino intends to implement a redesign and revamp strategy
to bolster gaming revenue, including situating non-gaming activities closer to
the casino floor.
Casino Mykonos
Continued robust trading resulted in a 26% increase in revenue to R69,7 million,
on which EBITDA of R26,7 million represented a 38,3% margin.
The casino`s performance was spurred on by general macro-economic growth in the
Western Cape. Mykonos benefited indirectly from holidaymakers` contribution to
the regional economy and property buyers moving further up the Cape`s west
coast. The casino also expanded its smoking area and enhanced its facilities
layout during the year.
Garden Route Casino
Record trading results for December 2004 helped boost revenue to R98,4 million
from R74,7 million. A 34,1% increase in EBITDA to R40,5 million reflected an
EBITDA:Revenue ratio of 41,1%.
The results were underpinned by the expansion of the casino floor and Salon
Prive by 62 slots and an extra table, an extended restaurant facility and the
opening of a new sports bar.
The casino is ideally positioned to benefit from the continued development in
the area of golf and holiday estates. The immediately adjacent golf course and
residential development is progressing well and should impact positively on the
casino.
Goldfields Casino
The casino, in which the group has a 14,67% economic interest, reported revenue
of R80,5 million for its first full year of trading. EBITDA of R36,2 million
reflected an impressive 44,9% margin on revenue, the highest of all the group`s
casinos.
Goldfields` results reflect its success in managing operational efficiencies and
controlling costs. The opening of a casino in neighbouring Klerksdorp during the
year had no impact on Goldfields.
In the year ahead the Free State Gambling & Racing Board will evaluate whether
Goldfields will be required to erect a permanent casino or to enhance the
existing temporary site to convert into a permanent facility.
Corporate Actions
With effect from 11 February 2004 GRCR disposed of its 10% interest in Pinnacle
Point Resorts (Pty) Limited, owner of the golf course development adjacent to
the Garden Route Casino, to the remaining shareholders at a profit of R7,8
million.
Future Developments
As previously announced on 1 December 2004 GRCR and Akani Leisure Investments
(Pty) Limited, GRCR`s BEE partner in Gold Reef City (`ALI`), acquired an option:
- to purchase the entire issued share capital of Silverstar Development Limited
(`Silverstar`), the applicant for the sixth casino licence in Gauteng; and
- to secure the casino`s management contract.
The award of the casino licence is still unresolved. The Gauteng Gambling
Board`s appeal against the decision to issue the licence to Silverstar was heard
in the Appellate Division on 25 February 2005. Judgement was reserved. A further
announcement will be made when judgement is given.
National Gambling Act
GRCR believes that the new Act passed in August 2004 has achieved a constructive
outcome for both the industry and government. Although casinos have been given
one year within which to implement the regulations, which commenced November
2004, the industry will endeavour to accelerate the process as far as possible.
GRCR is confident that the balance between social responsibility and commercial
interest will be achieved as the regulations are implemented.
Empowerment
ALI is in the process of restructuring its funding with GRCR`s assistance with a
view to growing its economic interest in Gold Reef City to 25,01%.
Outlook
The group anticipates that the lower interest and inflation rates will continue
in 2005. In addition wage increases are expected to continue to exceed
inflation, which bodes well for rising real disposable income. The strong Rand,
expected to remain fairly stable, will help to maintain the group`s budgeted
capital expenditure. In addition the gaming environment is now more stable
following the passing of the National Gambling Act.
GRCR is confident that the group is well-positioned to capitalise on these
factors and anticipates continued growth in revenue and operating profit in
2005. The group is also in a unique position to leverage its strong balance
sheet in pursuing acquisitions and developments if appropriate.
Directors
As previously announced Frank McFadden resigned as a director with effect from
26 November 2004 following his resignation from the Casinos Austria Group. The
board thanks Frank for his valuable contribution and wishes him well in his
future endeavours. On 19 January 2005 Joseph Leutgeb, Casinos Austria`s Chief
Financial Officer, was appointed to the board as a non-executive director.
Dividend
The board has declared dividend no.3 of 48,0 cents per share covered twice by
basic HEPS. From time to time the board will reconsider dividend cover based on
the group`s cash flow, gearing and capital requirements. The dividend will be
financed out of GRCR`s free cash flow after servicing the debt of the group`s
underlying operations.
The salient dates for the dividend are as follows:
Last day to trade shares cum dividend Friday, 1 April 2005
Shares trade ex dividend Monday, 4 April 2005
Record date Friday, 8 April 2005
Payment date Monday, 11 April 2005
No share certificates may be dematerialised or rematerialised between Monday 4
April 2005 and Friday 8 April 2005, both dates inclusive.
On behalf of the Board.
9 March 2005
Directors: M Krok (Chairman)*; SB Joffe (CEO); AJ Aaron*; JS Friedman; RJ
Khoza*; A Krok**; MZ Krok*; S Krok**; J Leutgeb*#; C Neuberger#; BJ Schutte*; R
Vierziger**#
*Non-executive director **Alternate director #Austrian citizen
Registered office: Gold Reef City, Gate 4, Northern Parkway, Ormonde, 2157
Transfer secretaries: Ultra Registrars (Pty) Ltd, 5th Floor, 11 Diagonal Street,
Johannesburg, 2001 (P O Box 4844, Johannesburg, 2000)
Company secretary: DR Smith CA(SA)(Grad ICSA).
www.grcresorts.co.za
Group Income Statement
Reviewed Audited for
for the the year
year ended ended 31
31 December December
2004 2003
% R`000 R`000
Revenue 16,9 1,056,666 903,903
Direct costs (443,697) (398,916)
Gross profit 612,969 504,987
Other operating income 11,122 2,887
Other operating expenses (186,279) (158,854)
Operating profit before depreciation 25,4 437,812 349,020
and amortisation
Depreciation and amortisation (86,233) (89,790)
Operating profit 351,579 259,230
Net finance costs (4,700) (31,070)
Associate earnings 1,532 -
Profit before taxation 348,411 228,160
Taxation (123,722) (81,925)
Net profit after taxation 224,689 146,235
Outside shareholders` interests (29,936) (21,166)
Net profit attributable to
shareholders 55,7 194,753 125,069
HEPS reconciliation
Net profit attributable to
shareholders 194,753 125,069
Amortisation of goodwill 5,784 7,320
Loss/(profit) on sale of assets 590 (958)
Profit on sale of shares (6,919) -
47,8 194,208 131,431
Number of shares in issue (000) 220,003 217,860
Weighted average number of shares in 203,938 202,031
issue (000)
HEPS (cents) 46,4 95,2 65,1
EPS (cents) 54,3 95,5 61,9
Diluted EPS (cents) 54,1 95,2 61,8
Net cash generated in operating
activities per share before deducting
dividend and STC (cents) 20,2 170,3 141,7
Dividend per share (cents) 77,8 48,0 27,0
Group Balance Sheet
Reviewed at Audited at
31 December 31 December
2004 2003
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 878,688 865,107
Leasehold improvements 136,764 140,461
Intangible assets 76,121 84,305
Deferred tax assets 1,728 -
Investment in joint ventures 18,472 23,398
Investment in associates 7,275 21,888
Financial assets 1 1
Share incentive scheme 37,613 21,715
1,156,662 1,156,875
Current assets
Inventories 2,986 3,340
Receivables and prepayments 16,962 12,785
Cash and cash equivalents 104,604 65,791
Amounts owing by related parties 27,840 812
152,392 82,728
Total assets 1,309,054 1,239,603
Equity and liabilities
Capital and reserves
Ordinary share capital 4,109 4,064
Share premium 454,022 437,915
Non-distributable reserves 2,741 1,611
Retained earnings 514,710 372,880
975,582 816,470
Outside shareholders` interest 85,950 69,715
Non-current liabilities
Interest-bearing borrowings 26,698 98,338
Deferred tax liabilities 35,867 8,396
62,565 106,734
Current liabilities
Trade and other payables 65,145 59,379
Provisions 23,607 23,999
Tax liabilities 62,736 57,057
Current portion of interest-bearing
borrowings 30,000 105,144
Amounts owing to related parties 3,469 1,105
184,957 246,684
Total equity and liabilities 1,309,054 1,239,603
Group Statement of Changes in Equity
Reviewed Audited for
for the the year
year ended ended 31
31 December December
2004 2003
R`000 R`000
Ordinary share capital
At beginning of year 4,064 4,271
Ordinary shares issued 45 86
Ordinary shares acquired in odd-lot offer - *
Treasury shares acquired - (293)
At end of year 4,109 4,064
Share premium
At beginning of year 437,915 465,454
Share premium raised 16,107 16,064
Ordinary shares acquired in odd-lot offer - (42)
Treasury shares acquired - (43,561)
At end of year 454,022 437,915
Total share capital at end of year 458,131 441,979
Non-distributable reserves
At beginning of year 1,611 1,774
NDR released (12) (163)
Profit on sale of shares by share trust 1,142 -
At end of year 2,741 1,611
Retained earnings
At beginning of year 372,880 276,808
Transfer from NDR 12 163
Attributable profit for the year 194,753 125,069
Dividend declared (52,935) (29,160)
At end of year 514,710 372,880
* Amount less than R1 000
Group Cash Flow Statement
Reviewed Audited for
for the the year
year ended ended 31
31 December December
2004 2003
R`000 R`000
Cash flow from operating activities
Profit before taxation 348,411 228,160
Non-cash items and other adjustments 82,678 121,317
Cash flow from trading operations 431,089 349,477
Decrease in working capital 9,351 21,044
Cash flow from operating activities 440,440 370,521
Net interest paid (4,700) (29,194)
Dividend paid (52,935) (29,160)
Taxation paid (92,300) (55,106)
Net cash generated in operating activities 290,505 257,061
Cash flow from investing activities
Acquisition of property, plant and equipment (88,550) (39,761)
Proceeds from disposal of property, plant and
equipment 2,952 3,103
Additions to leasehold improvements
Investment in subsidiaries (1,297) -
Investment in joint ventures (net of cash - (5,603)
acquired) - (24,219)
Investment in associates
Investment in intangibles - *
Net advances from/(to) joint ventures (2,115) (59)
Net advances from/(to) associates 4,926 (26,051)
Net advances (to)/from subsidiaries and 16,145 (20,667)
related parties (24,664) 2,290
Net cash utilised in investing activities (92,603) (110,967)
Cash flow from financing activities
Treasury shares acquired - (43,854)
Ordinary shares acquired in odd-lot offer - (42)
Decrease in share incentive scheme loan 1,396 2,308
Decrease in outside shareholders` loans (13,701) (15,768)
Decrease in interest-bearing borrowings (146,784) (176,312)
Net cash utilised in financing activities (159,089) (233,668)
Net increase/(decrease) in cash and cash 38,813 (87,574)
equivalents
Cash and cash equivalents at beginning of 65,791 153,365
year
Cash and cash equivalents at end of year 104,604 65,791
* Amount less than R1 000
