| Wed 24 Aug 2005, 14:51 | | Gold Reef - Unaudited interim results for the six |
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Gold Reef - Unaudited interim results for the six months ended 30 June 2005
Gold Reef Casino Resorts Limited
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE000028338
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 (`the period`)
COMMENTS
INTRODUCTION
The directors are pleased to present the results of Gold Reef Casino Resorts
Limited (`GRCR`) for the period.
GRCR`s casinos continued to trade strongly and achieved improved EBITDA margins.
Golden Horse, Casino Mykonos and Garden Route Casino especially, reported
excellent results. Gold Reef City`s performance remained solid notwithstanding
poor trading at the Theme Park following incorrect negative publicity.
FINANCIAL RESULTS
Group revenue for the period of R550,1 million increased by 11,5% while profit
attributable to shareholders grew by 6,9%. This growth must be viewed in light
of an operating loss incurred by Gold Reef City Theme Park of R0,8 million
compared with an operating profit for the comparative period of R7,8 million,
the R7,3 million impact of adopting IFRS, an 82,5% increase in secondary tax on
companies (STC) equating to R5,6 million and a R4,8 million reduction in non-
recurring profit for the period.
Headline earnings per share increased to 45,2 cents.
The group`s performance is set out below:
Revenue Revenue
2005 2004
R`000 R`000
Gold Reef City 404,193 371,326
Golden Horse 78,399 65,425
Garden Route 58,826 46,709
Casino Mykonos 39,321 32,424
Goldfields Casino 40,959 38,720
CAI Gold Reef Management 24,050 22,034
GRCR - -
Consolidation (95,674) (83,425)
550,074 493,213
EBITDA EBITDA EBITDA % EBITDA %
2005 2004 2005 2004
R`000 R`000 % %
Gold Reef City 139,341 135,461 34,5% 36,5%
Golden Horse 30,560 22,001 39,0% 33,6%
Garden Route 28,579 20,363 48,6% 43,6%
Casino Mykonos 15,468 11,752 39,3% 36,2%
Goldfields Casino 18,206 16,778 44,4% 43,3%
CAI Gold Reef Management 14,772 12,413 61,4% 56,3%
GRCR 2,220 8,962 - -
Consolidation (34,731) (27,657) - -
214,415 200,073 39,0% 40,6%
CAPEX CAPEX
2005 2004
R`000 R`000
Gold Reef City 32,876 20,494
Golden Horse 3,631 2,533
Garden Route 4,638 2,466
Casino Mykonos 5,672 1,809
Goldfields Casino 489 -
CAI Gold Reef Management - -
GRCR - -
Consolidation (3,061) (1,395)
44,245 25,907
OPERATIONS
Gold Reef City
While Gold Reef City Casino maintained its market share in Gauteng, the Theme
Park`s dismal performance resulted in total revenue growth of 8,9% for Gold Reef
City.
The casino`s reported EBITDA of R140,1 million represented a 36,3% margin. To
enhance patron convenience the new covered parking facility, which will be
completed by the end of the year, will facilitate a total of 1 460 cars. The 450
seater conference centre opened in November 2004 and is beginning to secure a
foothold in the Gauteng conference market.
The number of visitors to the Theme Park declined by 22,6% from the comparative
period. Marketing expenses increased to address the situation brought about by
the incorrect negative publicity. Indications of improvement at the Theme Park
are already evident.
The Theme Park continues to invest significant sums in maintaining the safety of
its rides. In addition the safety of the rides continues to be regularly
assessed by external structural engineers and regulated by the Department of
Labour, whose reports have affirmed the safety of the rides.
Golden Horse
The casino sustained its growth by achieving a 19,8% increase in revenue to
R78,4 million. EBITDA of R30,6 million was up 38,9% from R22 million in the
comparative period, reflecting an improved margin on revenue of 39,0%. The
casino also reduced net external debt to R8,6 million from R20,1 million at 31
December 2004.
The redesign of the casino floor was a key contributor to the performance. In
addition Golden Horse benefited directly from Pietermaritzburg`s growth as an
economic hub following its designation as the new capital city of the KwaZulu-
Natal province.
Casino Mykonos
The casino achieved significant growth in revenue of 21,3% to R39,3 million, on
which EBITDA of R15,5 million represented a higher 39,3% margin. Casino Mykonos
remained cash-positive for the period with no external debt.
The benefits of expanding the smoking facility and enhancing the casino floor
layout were reflected in the performance, supported by robust sales of holiday
accomodation at the resort and ongoing economic growth in the Western Cape.
Garden Route Casino
Remaining the group`s stellar performer the casino raised revenue by 25,9% to
R58,8 million from R46,7 million, while reducing net external debt to R3 million
from R15,9 million at 31 December 2004. A 40,4% increase in EBITDA to R28,6
million reflected in an EBITDA: Revenue ratio of 48,6%, up on the 43,6% margin
for the comparative period. This marked the highest EBITDA margin in the group.
The expansion of the casino floor and Salon Prive, an extended restaurant
facility and the introduction of a new sports bar benefited the casino and
generally robust tourism along the Garden Route continued to boost its
performance.
A number of lodges in the immediately adjacent golf course and residential
development are already open to the public and the golf course is expected to be
completed by the end of 2005. It is anticipated that the additional footfall at
the casino will help to sustain Garden Route Casino`s exponential growth.
Goldfields Casino
The casino in which the group has a 14,67% interest, recorded a good performance
in the face of tough trading conditions. As a young casino Goldfields reported
impressive revenue of R41 million. EBITDA of R18,2 million represented a healthy
margin on revenue of 44,4% and the casino retained its debt-free position to
remain cash positive. During the period certain mines in the area experienced
difficulties resulting in closures, which impacted indirectly on the casino.
The Free State Gambling & Racing Board has awarded Goldfields a permanent casino
licence and it is intended to enhance and upgrade the existing site to support
future growth.
CORPORATE ACTIONS
During the period GRCR purchased 9,9% of the issued share capital of Johnnic
Holdings Limited in trades on the open market, to hold for investment purposes.
On 1 July 2005 the shares were sold at a profit of R20 million which will be
used to fund the group`s growth strategy.
Although gearing for the period increased to R151,8 million, post the period the
group has been restored to a cash-positive position following its exit of the
investment at a profit.
Following GRCR`s expression of interest to SAB Miller plc (`SABM`) to acquire
SABM`s 49% interest in Tsogo Sun Holdings (Pty) Limited, SABM has notified GRCR
that it is not a seller and therefore discussions between GRCR and SABM have
ceased.
FUTURE DEVELOPMENT
As announced on 29 March 2005 Silverstar Development Limited (`Silverstar`) was
awarded the sixth and final casino licence in Gauteng. GRCR and Akani Leisure
Investments (Pty) Limited (`ALI`), GRCR`s BEE partner in Gold Reef City, have an
option to purchase the entire issued share capital of Silverstar and to secure
the new casino`s management contract.
With the financial support of GRCR and ALI, Silverstar has provided the required
financial guarantees and proof of funding to the Gauteng Gambling Board.
PROSPECTS
A favourable interest rate environment should support the group`s growth in the
traditionally stronger second half of the year. The group anticipates that the
performance will continue to strengthen in the next six months. In light of
this, the increase in non-recurring profit (see `Corporate Actions` above) and
the absence of STC in the second half of the year, GRCR expects improved growth
in revenue and operating profit for the six months to year-end.
The group has a strong balance sheet and is cash-positive. In order to enable
growth to exceed the increase in disposable income over the long-term, GRCR will
seek to leverage these advantages to actively pursue strategic acquisitions and
enhance earnings through degearing. Silverstar presents such an opportunity.
DIVIDEND
In line with policy no interim dividend has been declared.
On behalf of the Board.
24 August 2005
BASIS OF PRESENTATION
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards (`IFRS`) expected to be applicable
at 31 December 2005 and comply with IAS 34 - Interim Reporting. These standards
and practices are subject to ongoing review and may change.
As the group`s annual financial statements for the year ending 31 December 2005
will be the first annual financial statements to comply with IFRS, the group has
applied IFRS 1 (First Time Adoption of International Financial Reporting
Standards) in preparing the interim financial statements.
GRCR`s transition date is 1 January 2004 (`the transition date`). The group`s
opening IFRS balance sheet at the transition date has therefore been restated to
reflect all IFRS statements expected to be applicable at 31 December 2005.
Certain accounting policy changes, reclassifications and share-based payment
valuations were applied to comply with IFRS 1 and the comparative figures in
respect of 2004 have been restated to reflect these adjustments.
At the transition date IFRS 1 allows a number of exemptions to the retrospective
application of adopting IFRS. The group has accordingly applied the mandatory
exceptions and all of the applicable optional exemptions, as detailed below,
from full retrospective application of IFRS. All other exemptions under IFRS 1
were either not selected or did not apply to GRCR.
Business combinations exemption
GRCR has not restated business combinations that took place prior to the
transition date. In terms of IFRS 3 (Business Combinations) goodwill is no
longer amortised but is subject to a mandatory annual impairment test,
regardless of whether there are any indications of impairment. All negative
goodwill that was present on the transition date was fully recognised in
retained earnings.
Share-based payment transaction exemption
In terms of IFRS 2 (Share-based Payments) equity instruments granted under
equity-settled awards are measured at the fair value of the equity instruments
granted. By applying the exemption, share-based payments that were granted
before 7 November 2002 or that were granted after 7 November 2002 but vested
before 1 January 2005, are not subject to IFRS 2.
The following new accounting polices were applied:
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the group`s share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Goodwill is allocated to
cash-generating units for the purpose of impairment testing.
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment and whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable. An
impairment loss is recognised for the amount by which the asset`s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
the asset`s fair value less costs to sell and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Share-based payments
Share options granted to employees are subject to service vesting conditions,
and their fair value is recognised as an employee benefits expense with a
corresponding increase to the share-based payments reserve in equity over the
vesting period. The expense is adjusted at the end of each reporting period to
reflect actual and expected levels of vesting. The proceeds received net of any
directly attributable transaction costs are credited to share capital (nominal
value) and share premium when the options are exercised.
Reconciliations and descriptions of the effect of the transition from South
African standards of Generally Accepted Accounting Practice to IFRS on the
group`s assets, liabilities, equity and net profit are provided below.
Reconciliation of assets, liabilities and equity
Assets Liabilities Equity
R`000 R`000 R`000
1 January 2004
As previously reported 1,239,603 353,418 886,185
Adjusted for:
Property, plant and equipment (23,651) - (18,142)
Intangible assets 17,261 - 11,752
Deferred tax - (4,105) 4,105
Associate earnings (5) - (5)
As reported under IFRS 1,233,208 349,313 883,895
30 June 2004
As previously reported 1,163,863 230,396 933,467
Adjusted for:
Property, plant and equipment (22,809) 4 (19,671)
Intangible assets 20,614 - 17,473
Deferred tax 2,411 (3,027) 5,436
Associate earnings (12) - (11)
As reported under IFRS 1,164,067 227,373 936,694
31 December 2004
As previously reported 1,309,054 247,522 1,061,532
Adjusted for:
Property, plant and equipment (23,271) - (22,193)
Intangible assets 22,981 - 21,903
Deferred tax 4,725 (4,325) 9,046
Associate earnings (44) - (40)
As reported under IFRS 1,313,445 243,197 1,070,248
Reconciliation of income statement
Restated for Restated for
the 6 months the 12 months
ended 30 June ended 31
2004 December 2004
Net profit attributable to
shareholders
As previously reported 86,764 194,753
Adjusted for:
Property, plant and equipment 834 (1,254)
Intangibles 3,358 7,357
Associate earnings (8) (39)
Employee share option scheme (968) (4,289)
Tax 1,332 4,942
Outside shareholders` interest (463) (880)
As reported under IFRS 90,849 200,590
Directors: M Krok (Chairman)*; SB Joffe (CEO); JS Friedman (FD); C Neuberger
(COO)#; AJ Aaron*; RJ Khoza*; A Krok**; MZ Krok*; S Krok**; J Leutgeb*#; 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) Limited, 5th Floor, 11 Diagonal
Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000)
Company secretary: DR Smith
www.grcresorts.co.za
Unaudited Group Income Statement
For the 6 Restated Restated
months for the 6 for the 12
ended 30 months months
June 2005 ended 30 ended 31
June 2004 December
2004
% R`000 R`000 R`000
Revenue 11,5 550,074 493,213 1,056,666
Direct costs (211 644) (200,657) (443,697)
Gross profit 338,430 292,556 612,969
Other operating income 5,030 11,916 11,122
Other operating expenses (129,045) (104,399) (190,764)
Operating profit before 7,2 214,415 200,073 433,327
depreciation and amortisation (42,731) (38,738) (80,271)
Depreciation and amortisation
Operating profit 171,684 161,335 353,056
Net finance costs (1,061) (5,530) (4,700)
Associate earnings 1,167 529 1,493
Profit before taxation 171,790 156,334 349,849
Taxation (57,733) (51,636) (118,780)
Net profit after taxation 114,057 104,698 231,069
Outside shareholders` interests (16,902) (13,849) (30,479)
Net profit attributable to
shareholders 6,9 97,155 90,849 200,590
HEPS reconciliation
Net profit attributable to
shareholders 97,155 90,849 200,590
Loss/(profit) on disposal of
property, plant and equipment 120 (315) 590
Profit on sale of shares - (6,919) (6,919)
Profit on sale of capital asset (4,250) - -
Headline earnings 11,3 93,025 83,615 194,261
Number of shares in issue (000) 220,603 217,860 220,003
Weighted average number of shares
in issue (000) 205,708 203,258 203,938
HEPS (cents) 9,9 45,2 41,1 95,3
EPS (cents) 5,7 47,2 44,7 98,4
Diluted EPS (cents) 6,0 47,3 44,6 98,1
Net cash generated in operating
activities per share before
deducting dividend and STC(cents) 11,6 57,5 51,5 170,3
Unaudited Group Balance Sheet
At 30 June Restated Restated
2005 at 30 June at 31
2004 December
2004
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 894,825 864,248 890,555
Leasehold improvements 100,147 102,705 101,626
Intangible assets 97,537 102,302 99,102
Deferred tax assets 7,496 5,221 6,453
Investment in joint ventures 17,569 18,564 18,472
Investment in associates 6,258 9,113 7,231
Financial assets 156,133 1 1
Share incentive scheme 33,154 21,177 37,613
1,313,119 1,123,331 1,161,053
Current assets
Inventories 4,138 3,244 2,986
Receivables and prepayments 19,058 23,084 16,962
Cash and cash equivalents 19,900 12,669 104,604
Amounts owing by related parties 39,027 1,739 27,840
82,123 40,736 152,392
Total assets 1,395,242 1,164,067 1,313,445
Equity and liabilities
Capital and reserves
Ordinary share capital 4,121 4,064 4,109
Share premium 455,414 437,915 454,022
Non-distributable reserves 2,733 1,605 2,741
Retained earnings 516,952 409,006 518,753
Employee share option scheme 10,018 1,898 5,489
989,238 854,488 985,114
Outside shareholders` interest 97,820 82,206 85,134
1,087,058 936,694 1,070,248
Non-current liabilities
Interest-bearing borrowings 16,294 50,141 26,698
Deferred tax liabilities 29,922 8,029 31,542
46,216 58,170 58,240
Current liabilities
Trade and other payables 64,150 58,160 65,145
Provisions 11,730 24,175 23,607
Tax liabilities 27,060 24,012 62,736
Current portion of interest-bearing
borrowings 155,388 61,650 30,000
Amounts owing to related parties 3,640 1,206 3,469
261,968 169,203 184,957
Total equity and liabilities 1,395,242 1,164,067 1,313,445
Unaudited Group Statement of Changes in Equity
For the 6 Restated Restated
months for the 6 for the 12
ended 30 months months
June 2005 ended 30 ended 31
June 2004 December
2004
R`000 R`000 R`000
Share capital
Ordinary share capital
At beginning of period 4,109 4,064 4,064
Ordinary shares issued 12 - 45
At end of period 4,121 4,064 4,109
Share premium
At beginning of period 454,022 437,915 437,915
Share premium raised 1,392 - 16,107
At end of period 455,414 437,915 454,022
Total share capital at end of period 459,535 441,979 458,131
Non-distributable reserves
At beginning of period 2,741 1,611 1,611
Transfer to retained earnings (8) (6) (12)
Profit on sale of shares by share trust - - 1,142
At end of period 2,733 1,605 2,741
Retained earnings
At beginning of period 518,753 371,086 371,086
Transfer from NDR 8 6 12
Attributable profit for the period 97,155 90,849 200,590
Dividend declared (98,964) (52,935) (52,935)
At end of period 516,952 409,006 518,753
Employee share option scheme
At beginning of period 5,489 863 863
Recognised in income statement 4,529 1,035 4,626
At end of period 10,018 1,898 5,489
Unaudited Group Cash Flow Statement
For the 6 Restated Restated
months for the 6 for the 12
ended 30 months months
June 2005 ended 30 ended 31
June 2004 December
2004
R`000 R`000 R`000
Cash flow from operating activities
Profit before taxation 171,790 156,334 349,849
Non-cash items and other adjustments 47,274 44,457 81,380
Cash flow from trading operations 219,064 200,791 431,229
(Increase)/decrease in working capital (16,115) (11,243) 9,215
Cash flow from operating activities 202,949 189,548 440,444
Net interest paid (1,061) (5,530) (4,700)
Dividend paid (98,964) (52,935) (52,935)
Taxation paid (96,076) (86,164) (92,304)
Net cash generated in operating 6,848 44,919 290,505
activities
Cash flow from investing activities
Acquisition of property, plant and
equipment (44,245) (25,907) (90,048)
Proceeds from disposal of property,
plant and equipment 346 2,648 2,952
Investment in intangibles (178) (933) (1,914)
Investment in financial assets (156,132) - -
Net advances from joint ventures 903 4,834 4,926
Net advances from associates 2,140 13,300 16,145
Net advances to subsidiaries and related
parties (11,016) (826) (24,664)
Net cash utilised in investing (208,182) (6,884) (92,603)
activities
Cash flow from financing activities
Ordinary shares issues 12 - -
Share premium raised 1,392 - -
Decrease in share incentive scheme loans 4,459 538 1,396
Decrease in outside shareholders` loans (4,217) - (13,701)
Increase/(decrease) in interest-bearing
borrowings 114,984 (91,695) (146,784)
Net cash generated/(utilised) in 116,630 (91,157) (159,089)
financing activities
Net (decrease)/increase in cash and cash (84,704) (53,122) 38,813
equivalents
Cash and cash equivalents at beginning
of period 104,604 65,791 65,791
Cash and cash equivalents at end of 19,900 12,669 104,604
period
Date: 24/08/2005 02:30:13 PM
Produced by the JSE SENS Department
