| Wed 23 Aug 2006, 14:26 | | Gold Reef - Unaudited interim results for the six |
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GDF
GDF
Gold Reef - Unaudited interim results for the six months ended 30 June 2006
Gold Reef Resorts Limited
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE000028338
Gold Reef Resorts Limited
("Gold Reef" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
("the period")
Revenue up 28,4% to R711,8 million
EBITDA up 32,9% to 291,4 million
HEPS up 29,2% to 56,7 cents
INTRODUCTION
All the group"s casinos continued to trade well with Golden Horse Casino and
Casino Mykonos achieving improved EBITDA margins.
The results presented for the six month period from 1 January 2005 to 30 June
2005 ("the 2005 interim period") have been restated to be consistent with the
group"s audited 2005 annual report. IFRS equivalent results previously reported
for the 2005 interim period excluded certain changes disclosed in the 2005
annual report. These changes arose during the completion of the IFRS transition
at the end of the 2005 financial year. The results for the period have been
prepared in accordance with IFRS.
FINANCIAL RESULTS
Net gaming win increased by 31,4%. Group revenue for the year increased 28,4% to
R711,8 million. EBITDA of R291,4 million was up 32,9% and represented a 40,9%
margin on revenue. Profit attributable to shareholders grew 16,7% to R110,2
million.
Headline earnings per share (HEPS) increased by 29,2% to 56,7 cents from the
restated comparative of 43,9 cents.
Revenue Revenue EBITDA EBITDA
2006 2005 2006 2005
R"000 R"000 % R"000 R"000 %
Gold Reef City 467,918 404,151 15,8 162,920 140,841 15,7
Golden Horse 96,682 78,705 22,8 42,506 33,248 27,8
Casino
Casino Mykonos 49,510 39,686 24,8 21,711 15,740 37,9
Garden Route 66,960 58,826 13,8 32,589 29,476 10,6
Casino
Goldfields 44,636 41,229 8,3 19,959 19,044 4,8
Casino
Gold Reef 25,790 24,050 7,2 8,150 12,159 (33,0)
Management
Gold Reef - - - 525,570 4,721
Consolidation (39,667) (92,367) (521,974) (35,871)
711,829 554,280 28,4 291,431 219,358 32,9
EBITDA % EBITDA % CAPEX CAPEX
2006 2005 2006 2005
% % R"000 R"000
Gold Reef City 34,8 34,8 48,062 32,876
Golden Horse 44,0 42,2 3,250 3,631
Casino
Casino Mykonos 43,9 39,7 4,941 5,672
Garden Route 48,7 50,1 1,570 4,638
Casino
Goldfields 44,7 46,2 70 489
Casino
Gold Reef 31,6 50,6 - -
Management
Gold Reef - -
Consolidation - (3,061)
40,9 39,6 57,893 44,245
OPERATIONS
Gold Reef City
Gold Reef City Casino"s performance saw a 16,0% increase in revenue to R447,2
million, driven by continued strong trading. The Theme Park posted an 11,3%
increase in revenue off a reduced base, contributing to overall growth for Gold
Reef City of 15,8% to R467,9 million.
Gold Reef City Casino achieved EBITDA of R165,8 million and posted an EBITDA
margin on revenue of 37,1%. The casino gained 1% market share in the highly
competitive Gauteng region on a comparable basis (taking into account the change
of borders of Gauteng which incorporated an additional casino).
Shortly after the period, the casino embarked on a comprehensive refurbishment
plan which is expected to be completed in the third quarter of 2007. Plans
include renovations to the gaming floor, casino area and restaurants. Casino
access points from the covered parking area will also be improved and a new
smoking facility is under construction. The casino has implemented steps to
mitigate any short-term inconvenience to patrons in the interests of an enhanced
long-term offering.
Trading at the Theme Park remained subdued while it successfully focused on
rebuilding a solid platform for future growth. However special events during the
period exceeded expectations in attracting patrons.
The continued improvement plan was marked with the successful opening of the new
4D cinema and the major attraction - The Tower of Terror - is expected to open
towards the end of the year. Further plans include new facilities and increased
capacity at the Theme Park.
Gold Reef has issued summons against M-Net and Carte Blanche for damages
suffered as a result of incorrect negative publicity aired during March 2005.
The case is expected to be heard during 2007.
Golden Horse Casino
Strong trading boosted the casino"s revenue 22,8% to R96,7 million, while EBITDA
rose 27,8% to R42,5 million. The casino maintained a good EBITDA:Revenue ratio
of 44,0%.
Upgrades and new developments, which will ultimately include a revitalised
casino floor and new restaurants, continued during the period. The first phase
is due for completion by year-end.
Casino Mykonos
The casino continued to trade exceptionally well with revenue up 24,8% to R49,5
million, driven by ongoing macro-economic growth in the region. Increased EBITDA
of R21,7 million reflected a higher 43,9% margin on revenue.
Garden Route Casino
The casino posted revenue of R67,0 million, 13,8% up on the previous period.
EBITDA increased 10,6% to R32,6 million with an EBITDA:Revenue ratio of 48,7%.
Although pleasing, the casino"s revenue growth was limited by capacity
constraints. In order to accommodate increasing patronage the casino recently
received approval for a further three tables and 100 slot machines. Three tables
and 52 slot machines will be introduced immediately, with the balance following
an expansion of the casino to house the additional machines.
Further enhancing prospects, the adjacent golf development is nearing completion
and is expected to attract greater footfall to the casino. The proposed November
opening is motivating the casino"s immediate focus on increasing capacity.
Goldfields Casino
Notwithstanding difficult economic conditions and increased competition in the
region, trading at the casino was satisfactory. Revenue of R44,6 million saw an
increase of 8,3% compared to the previous period, while EBITDA rose 4,8% to
R20,0 million.
Following the award of a permanent casino licence by the Free State Gambling &
Racing Board, the casino is planning a R49,1 million expansion including a new
Salon Prive, additional restaurants and conference facilities. Construction will
commence once zoning permission has been granted, which is anticipated shortly.
CORPORATE ACTION
As announced on 13 February 2006 Gold Reef concluded a number of corporate
actions ("the transactions") in line with its objectives to consolidate its
gaming platform by increasing exposure to its existing operations and to
increase BEE beneficial shareholding in all properties to a minimum of 25,01%.
Akani Leisure Investments (Pty) Limited ("ALI") transaction
The ALI transaction has been implemented following approval from the Gauteng
Gambling Board. ALI has redeemed the participating preference shares and Gold
Reef has acquired a 49,97% direct interest in the ordinary share capital of ALI
in order to fund the redemption. Gold Reef"s economic interest in Akani Egoli
(Pty) Limited ("Akani Egoli") (which operates Gold Reef City) reduced from
83,94% to 74,99% resulting in a 25,01% BEE beneficial shareholding in Akani
Egoli.
Garden Route, Goldfields and Mykonos transactions
Gold Reef increased its beneficial shareholding in Garden Route Casino (Pty)
Limited from 42,5% to 85,0%. Black economic empowerment investors have an option
to increase their beneficial shareholding in Garden Route Casino to 25,01%. Gold
Reef similarly increased its beneficial shareholding in Goldfields Casino and
Entertainment Centre (Pty) Limited from 14,67% to 88,0%, and in West Coast
Leisure (Pty) Limited, which operates Casino Mykonos, from 54,3% to 60,3%.
The finalisation of the Goldfields and Garden Route transactions has resulted in
the consolidation of the two casinos" results, as opposed to the equity
accounting and proportionate consolidation bases that were used in the prior
period. This has increased minority interests and intangible assets.
Electronic bingo terminals
Gold Reef, together with other Gauteng casino licence holders, has launched an
application to set aside the decision of the Gauteng Gambling Board to approve
the use of electronic bingo terminals in licensed bingo premises in Gauteng. It
is anticipated that the matter will be heard towards the end of 2006.
SARS
Gold Reef is currently engaged in negotiations with SARS to resolve the matter
of the revised SARS assessments which disallow the deduction of pre-opening
expenses of casinos. In the interests of prudence, provision for the potential
tax liability has been made at the affected casinos.
POST BALANCE SHEET EVENTS
Silverstar Development Limited ("Silverstar")
As announced on 18 July 2006 Gold Reef and its BEE partners ("option holders")
have jointly acquired 92% of the issued share capital of Silverstar. Application
has been made to the Gauteng Gambling Board for permission to hold this
financial interest. Novomatic AG and Century Resorts Limited are respectively
disputing the option holders" right to exercise the option over the remaining 8%
of Silverstar and their right to terminate the casino management contract.
Senior council has advised that the options are valid and enforceable.
FUTURE DEVELOPMENT
Queenstown
Gold Reef has entered into a management agreement with and holds a 25% stake in
Lukhanji Leisure (Pty) Limited, which has applied for a gaming licence in
Queenstown in the Eastern Cape. The preferred bidder is expected to be announced
in November 2006, with the licence to be awarded by February 2007.
Vaal River Casino
Gold Reef has acquired controlling stakes in Vaal River Casino Company (Pty)
Limited, which is the only applicant for a licence in Sasolburg, and its
management company.
PROSPECTS
A number of Gold Reef"s casinos have refurbishment and development projects
underway which will drive future revenue growth.
The Silverstar development has commenced and is expected to open for trading
during the first quarter of 2008.
The transactions, including Silverstar, provide the opportunity to re-gear the
balance sheet through the reintroduction of debt. The subsequent de-gearing will
be earnings-enhancing. The group has entered into hedging transactions to manage
the risk of an increasing interest rate environment.
Dividend
In line with policy no dividend has been declared for the interim period.
Steven Joffe Jarrod Friedman
CEO Financial Director
On behalf of the board.
23 August 2006
Directors: M Krok (Chairman)*; SB Joffe (CEO); JS Friedman (Financial Director);
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) Ltd, 5th Floor, 11 Diagonal Street,
Johannesburg, 2001 (P O Box 4844, Johannesburg, 2000)
Company secretary: JS Friedman
Group Income Statement
Unaudited Restated for Audited for
for the 6 the 6 months the 12
months ended ended 30 months
30 June 2006 June 2005 ended 31
Dec 2005
% R"000 R"000 R"000
Revenue 28,4 711,829 554,280 1,165,422
Net gaming win 31,4 656,022 499,236 1,046,409
Theme Park 11,3 20,700 18,602 46,700
Food and beverage 11,7 15,119 13,535 26,944
Other (12,7) 19,988 22,907 45,369
Other income 4,280 1,517 27,806
716,109 555,797 1,193,228
Gaming levies and VAT (129,174) (99,270) (207,610)
Employee costs (151,402) (122,245) (253,402)
Promotional and (51,908) (48,514) (107,484)
marketing costs
Depreciation and (51,731) (47,246) (90,278)
amortisation
Other operating expenses (99,075) (71,076) (147,144)
Operating profit 39,0 232,819 167,446 387,310
Finance income 6,435 8,819 19,179
Finance costs (14,122) (10,504) (19,295)
Profit before equity 225,132 165,761 387,194
accounted earnings
Share of profits of 669 1,196 2,613
associate
Profit before taxation 35,2 225,801 166,957 389,807
Taxation expense (87,378) (56,679) (121,968)
Profit for the period 25,5 138,423 110,278 267,839
Attributable to:
Equity holders of Gold 16,7 110,228 94,438 230,732
Reef
Minority interest 28,195 15,840 37,107
138,423 110,278 267,839
Number of shares in 220,603 220,603 220,603
issue (000)
Weighted average number 203,961 205,708 205,260
of shares in issue (000)
EPS (cents) 17,7 54,0 45,9 112,4
Diluted EPS (cents) 17,7 54,0 45,9 112,3
HEADLINE EARNINGS RECONCILIATION
Attributable profit for 16,7 110,228 94,438 230,732
the period
Profit on sale of - (4,250) (21,726)
financial instruments
Loss on sale of 10 120 488
property, plant and
equipment
CGT relating to ALI 5,466 - -
refinancing transaction
Headline earnings 28,1 115,704 90,308 209,494
HEPS (cents) 29,2 56,7 43,9 102,1
EBITDA RECONCILIATION
Operating profit 39,0 232,819 167,446 387,310
Property and equipment 6,881 4,666 10,503
rental
Depreciation and 51,731 47,246 90,278
amortisation
EBITDA 32,9 291,431 219,358 488,091
EBITDA margin 40,9% 39,6% 41,9%
GROUP BALANCE SHEET
Unaudited at Restated at Audited at
30 June 2006 30 June 2005 31 Dec 2005
R"000 R"000 R"000
Assets
Non-current assets
Property, plant and equipment 1,013,386 841,939 857,039
Leasehold improvements 96,971 100,147 98,540
Intangible assets 381,792 95,364 135,092
Deferred tax assets 51,843 6,238 6,046
Investment in joint ventures - 18,046 18,591
Investment in associate - 6,615 5,315
Financial assets 89,873 156,448 1
Share incentive scheme 29,009 33,154 32,839
1,662,874 1,257,951 1,153,463
Inventories 5,435 4,138 2,739
Receivables and prepayments 23,491 19,850 15,007
Cash and cash equivalents 124,672 24,627 126,547
Amounts owing by related 26,267 39,027 98,401
parties
179,865 87,642 242,694
Total assets 1,842,739 1,345,593 1,396,157
Equity and Liabilities
Capital and reserves
Ordinary share capital 4,414 4,414 4,414
Share premium 498,975 498,975 498,975
Treasury shares (75,037) (43,854) (75,037)
428,352 459,535 428,352
Share-based payment reserve 20,964 11,518 16,222
Other reserves 30,293 2,733 2,774
Retained earnings 575,008 459,071 595,373
1,054,617 932,857 1,042,721
Minority interest 160,335 86,078 96,429
Total equity 1,214,952 1,018,935 1,139,150
Non-current liabilities
Interest-bearing borrowings 363,500 16,294 10,682
Deferred tax liabilities 49,001 43,494 42,394
412,501 59,788 53,076
Current liabilities
Trade and other payables 81,321 64,325 66,033
Provisions 25,151 11,730 13,809
Bank overdraft 2,630 4,727 17,185
Tax liabilities 81,184 27,060 55,443
Current portion of interest- 25,000 155,388 50,000
bearing borrowings
Amounts owing to related - 3,640 1,461
parties
215,286 266,870 203,931
Total equity and liabilities 1,842,739 1,345,593 1,396,157
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Restated for Audited for
for the 6 the 6 months the 12
months ended ended 30 June months
30 June 2006 2005 ended 31
Dec 2005
R"000 R"000 R"000
Ordinary share capital
At beginning of period 4,414 4,402 4,402
Ordinary shares issued - 12 12
At end of period 4,414 4,414 4,414
Share premium
At beginning of period 498,975 497,583 497,583
Share premium raised - 1,392 1,392
At end of period 498,975 498,975 498,975
Treasury shares
At beginning of period (75,037) (43,854) (43,854)
Treasury shares acquired - - (31,183)
At end of period (75,037) (43,854) (75,037)
Total share capital 428,352 459,535 428,352
Share-based payment reserve
At beginning of period 16,222 6,480 6,480
Recognition of share-based 4,742 5,038 9,742
payments
At end of period 20,964 11,518 16,222
Other reserves
At beginning of period 2,774 2,741 2,741
Transfer to retained earnings - (8) (16)
Revaluation of land 27,519 - -
Profit on sale of shares by - - 49
share trust
At end of period 30,293 2,733 2,774
Retained earnings
At beginning of period 595,373 463,589 463,589
Transfer from other reserves - 8 16
Attributable profit for the 110,228 94,438 230,732
period
Dividend declared (104,020) (98,964) (98,964)
Transfer to minorities on ALI (26,573) - -
refinancing
At end of period 575,008 459,071 595,373
Total equity holders" interest 1,054,617 932,857 1,042,721
Minority interest
At beginning of period 96,429 74,454 74,454
Decrease in loans from outside (1,702) (4,216) (15,132)
shareholders
Attributable profit for the 28,195 15,840 37,107
period
Increase in minorities on ALI 61,323 - -
refinancing
Dividend paid to minorities by (38,616) - -
subsidiaries
Minorities created on 3,213 - -
Goldfields acquisition
Minorities created on Garden 13,116 - -
Route acquisition
Decrease in minorities on (1,623) - -
acquisition of Casino Mykonos
At end of period 160,335 86,078 96,429
Total equity 1,214,952 1,018,935 1,139,150
GROUP CASH FLOW STATEMENT
Unaudited Restated for Audited for
for the 6 the 6 months the 12
months ended ended 30 June months
30 June 2006 2005 ended 31
Dec 2005
R"000 R"000 R"000
Cash flow from operating
activities
Profit before taxation 225,801 166,957 389,807
Non-cash items and other 60,087 52,025 69,775
adjustments
285,888 218,982 459,582
Increase in working capital (3,601) (16,033) (6,004)
Cash flow from operating 282,287 202,949 453,578
activities
Interest received 6,435 8,819 19,179
Interest paid (14,122) (9,880) (16,892)
Taxation paid (133,037) (96,076) (133,308)
Dividend paid (104,020) (98,964) (98,964)
Net cash generated in operating 37,543 6,848 223,593
activities
Cash flow from investing
activities
Additions to property, plant (57,893) (44,245) (107,708)
and equipment
Additions to leasehold (110) - (127)
improvements
Proceeds from disposal of 525 346 9,433
property, plant and equipment
Proceeds from disposal of - - 5,000
management contract
Investment in financial assets (89,872) (156,132) (156,132)
Proceeds from disposal of - - 176,543
financial assets
Investment in intangibles - (178) (42,771)
Loans repaid by joint ventures - 903 548
Loans repaid by associate - 2,140 5,052
Net repayments by/(advances to) 82,179 (11,016) (72,569)
related parties
Net cash effect of purchase of (149,141) - -
ordinary shares in Inkonka
(Pty) Ltd
Net cash effect of purchase of (25,120) - -
loan to Inkonka (Pty) Ltd
Net cash effect of purchase of (111,818) - -
ordinary shares in Tanglepark
Trading (Pty) Ltd
Proceeds on sale of shares in 43,300 - -
Newshelf 698 (Pty) Ltd
Net cash effect of purchase of (7,776) - -
ordinary shares in Casino
Mykonos
Net cash utilised in investing (315,726) (208,182) (182,731)
activities
Cash flow from financing
activities
Ordinary shares issued - 12 12
Share premium raised - 1,392 1,392
Net treasury shares acquired by - - (31,134)
share scheme
Dividend paid to minorities by (38,616) - -
subsidiaries
Decrease in share incentive 3,830 4,459 4,774
scheme loan
Decrease in loans from outside (1,702) (4,216) (15,132)
shareholders
Increase in interest-bearing 327,351 114,983 3,984
borrowings
Net cash generated/(utilised) 290,863 116,630 (36,104)
in financing activities
Net increase/(decrease) in cash 12,680 (84,704) 4,758
and cash equivalents
Cash and cash equivalents at 109,362 104,604 104,604
beginning of period
Cash and cash equivalents at 122,042 19,900 109,362
end of period
Date: 23/08/2006 02:26:13 PM Produced by the JSE SENS Department
