| Mon 19 Mar 2007, 7:59 | | GDF - Gold Reef - Reviewed Financial Results: 12 M |
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GDF
GDF
GDF - Gold Reef - Reviewed Financial Results: 12 Months Ended 31 December 2006
Gold Reef Resorts Limited
(Registration number 1989/002108/06)
Share Code: GDF
ISIN Code: ZAE000028338
("Gold Reef")
REVIEWED FINANCIAL RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2006
("the year")
HIGHLIGHTS
Revenue up 30,2%
HEPS up 24,8%
Construction started on Silverstar
BEE transactions announced
Introduction
Gold Reef is pleased at the continued strong performance of the group`s casinos
reflecting increased revenue and profitability across the board.
As announced on 9 March 2007, Gold Reef has subsequent to year-end concluded a
number of BEE transactions (which are subject to the fulfilment of certain
conditions precedent) to increase direct empowerment at Gold Reef level to at
least 25,1% and to achieve Gold Reef`s objective of increasing its exposure to
existing operations. Further details of these transactions are set out below
under the heading `Post Balance Sheet Events`.
Financial Results
The group reported an increase in revenue of 30,2% to R1,5 billion reflecting
net gaming win up 32,0%. Profit attributable to shareholders grew 10,2% to
R254,3 million. EBITDA of R623,7 million increased 27,8% and represented a 41,1%
margin on revenue. Headline earnings per share increased by 24,8% to 127,4
cents from 102,1 cents in the previous year. Group borrowings increased to
R471,3 million as a result of extensive development taking place at a number of
the casinos, representing a Debt:EBITDA ratio of 75,6% and a gearing ratio of
34,0%, both well within industry norms.
SEGMENTAL ANALYSIS
Revenue Revenue EBITDA EBITDA
2006 2005 2006 2005
R`000 R`000 % R`000 R`000 %
Gold Reef City 977,528 850,258 15,0 343,904 304,202 13,1
Golden Horse 200,352 167,549 19,6 91,938 73,321 25,4
Casino
Mykonos Casino 105,325 83,392 26,3 46,958 34,200 37,3
Garden Route 148,169 123,351 20,1 71,786 60,459 18,7
Casino
Goldfields 94,046 86,241 9,1 45,314 39,460 14,8
Casino*
Silverstar* - - - - - -
Gold Reef 60,158 51,268 17,3 14,027 20,056 (30,1)
Management
Gold Reef - - - 551,423 28,487 -
Consolidation (68,465) (196,637) - (541,692) (72,094) -
1,517,113 1,165,422 30,2 623,658 488,091 27,8
SEGMENTAL ANALYSIS (continued)
EBITDA % EBITDA % CAPEX CAPEX
2006 2005 2006 2005
% % R`000 R`000
Gold Reef City 35,2 35,8 224,358 89,575
Golden Horse 45,9 43,8 18,431 6,975
Casino
Mykonos Casino 44,6 41,0 13,364 8,697
Garden Route 48,4 49,0 11,713 5,687
Casino
Goldfields 48,2 45,8 62,442 1,686
Casino*
Silverstar* - - 56,446 -
Gold Reef 23,3 39,1 192 71
Management
Gold Reef - - - -
Consolidation - - (28,960) (4,856)
41,1 41,9 357,986 107,835
* The figures shown for Goldfields Casino and Silverstar are for the full year
and not for the period during which the properties were
consolidated/proportionately consolidated, respectively.
Operations
Gold Reef City
Driven by continued robust trading Gold Reef City Casino saw a 14,4% increase in
revenue. Notwithstanding disruption as a result of construction during the
latter half of 2006 the casino managed to gain 0,75% market share for the year.
Phase 1 of the new development at the casino has been completed. A new smoking
casino boasting 570 slot machines and 15 tables opened its doors to positive
trade. Further, two refurbished restaurants reopened. Phase 2 of the development
is already underway. The entire development is due to be completed by October
2007 at an estimated total cost of R302 million. Forecast development capital
expenditure for 2007 is estimated to be R218 million.
During the year, trading at the Theme Park recovered and an improvement in
attendance marked a return to profitability of R2,2 million. The revitalisation
programme launched last year is ongoing. The Theme Park`s focus remains on
growing revenue with greater emphasis on strict cost control. R53 million was
invested in new developments including retail outlets, additional food and
beverage facilities and refurbishments. All new attractions are expected to be
open to the public by Easter 2007. The capital expenditure is being funded out
of free cash flow and external debt.
Gold Reef`s claim for damages against M-NET and Carte Blanche is due to be heard
towards the end of 2007.
The Apartheid Museum has steadily increased its profile, benefiting from a
number of corporate sponsorships and charity partnerships as well as the
successful roll-out of a school education programme.
Golden Horse Casino
Driven by increased patronage the casino grew revenue by 19,6% to R200,4
million. EBITDA of R91,9 million rose 25,4% from R73,3 million, with an improved
EBITDA:Revenue ratio of 45,9%.
Renovations started in 2006 include additional restaurants and entertainment
facilities at a cost of R6,3 million at year-end, with a total expected cost of
R9,5 million.
Mykonos Casino
The region`s high macro-economic growth was reflected in the casino`s
exceptional performance. Management continued to steer the casino`s ongoing
success with a concentrated focus on maintaining and driving revenue growth. As
a result the casino exceeded expectations to position itself as the group`s top
growth performer, posting a 26,3% increase in revenue of R105,3 million. Higher
EBITDA of R47,0 million represented an increased 44,6% margin on revenue.
Garden Route Casino
Garden Route Casino traded well with a 20,1% growth in revenue to R148,2 million
from R123,4 million. An 18,7% increase in EBITDA to R71,8 million reflected a
healthy EBITDA:Revenue ratio of 48,4%.
Capitalising on positive growth the casino introduced 52 new slot machines and 3
tables, leading to a marked increase in revenue. The casino intends installing
the remaining 48 slot machines of the total 100 approved by the Western Cape
Gambling and Racing Board in due course. Growth was further driven by the
opening of the adjacent internationally acclaimed golf course in November 2006
and the commencement of construction of approximately 500 upmarket residences.
Goldfields Casino
Trading at the casino reflected pleasing growth with an increase of 9,1% in
revenue to R94,0 million. EBITDA of R45,3 million represented a 48,2% margin on
revenue.
Subsequent to the award of a permanent casino licence by the Free State Gambling
and Racing Board, Goldfields Casino received zoning permission and is currently
converting from a temporary to a permanent casino. R61 million had been invested
at year-end. The entire development is due to be completed by August 2007 at a
total cost of R102 million. The capital expenditure is being funded out of free
cash flow and external debt. A positive impact on footfall is expected once the
new conference facility, Salon Prive and additional restaurants are opened.
Silverstar
As announced on 10 November 2006 Gold Reef received approval for its
acquisition, together with its BEE partner Akani Leisure Silverstar Holdings
(Pty) Limited ("Akani Leisure Silverstar"), of 100% of Silverstar which holds
the seventh and final casino licence for Gauteng. The Gauteng Gambling Board has
also approved the termination of the management contract with Century Resorts
Limited.
Construction on the Silverstar complex has commenced. The casino is set to open
in the first quarter of 2008. It will feature 700 slot machines and 30 tables as
well as a hotel, multiple restaurants and conference and entertainment
facilities.
Capital expenditure amounted to R70,6 million at year-end. A further R1,13
billion is expected, bringing the total anticipated cost to R1,2 billion, which
will be funded primarily by external debt.
Corporate Actions
The following corporate actions announced on 13 February 2006 have been
concluded and were successfully implemented during the year:
Akani Leisure Investments (Pty) Limited ("ALI")
ALI redeemed the participating preference shares and Gold Reef acquired a 49,97%
direct interest in the ordinary share capital of ALI. 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 effective interests in Garden Route Casino (Pty) Limited
to 85,0%; in Goldfields Casino and Entertainment Centre (Pty) Limited to 88,0%
and in West Coast Leisure (Pty) Limited, which operates Mykonos Casino, to
60,3%.
Post Balance Sheet Events
As announced on 9 March 2007, Gold Reef has subsequent to yearend concluded a
number of BEE transactions which increase the black empowerment equity
shareholding to at least 25,1%. By exchanging the BEE interests in certain of
Gold Reef`s individual casinos and by acquiring the remaining 25% and 30%
interests in the Gold Reef City Casino and Goldfields Casino management
contracts respectively, for Gold Reef shares and cash ("the share exchange"),
the group has increased its exposure to its high-performing operations and
consolidated its gaming platform.
As a result of the share exchange Gold Reef will increase its shareholding in
Gold Reef City, Silverstar, Golden Horse Casino and Goldfields Casino to 100%.
In Mykonos Casino, Gold Reef will increase its stake to 70,4%. A total of 55,2
million Gold Reef shares will be issued for the share exchange, equating to
21,03% of Gold Reef`s increased issued share capital.
In addition, in order to achieve a minimum of 25,1% black-owned direct economic
shareholding, Gold Reef will issue 14 000 000 shares to certain of the BEE
shareholders who will participate in the share exchange at R20,50 a share, for
R287,0 million ("the top-up transaction").
The share exchange and the top-up transaction satisfy the equity requirements of
the Codes of Good Practice on Black Economic Empowerment ("the Codes") issued by
the Department of Trade and Industry and comply with the Gaming Boards`
recommendations on black empowerment. Gold Reef is also making good progress in
complying with the other requirements of the Codes. In order to maintain the BEE
equity platform, the BEE shareholders who will be receiving Gold Reef shares in
terms of the transactions are restricted from disposing of their shareholdings
for three years, save amongst each other. Thereafter they will be entitled to
dispose of their Gold Reef shares only to historically disadvantaged individuals
and/or with the approval of the relevant gaming boards.
Bongani Biyela, previously the General Manager of Gold Reef City Casino, will be
appointed Gold Reef`s executive director of strategy and business development.
Richard Moloko and Patrick September will be appointed as non-executive
directors. These appointments will become effective following the successful
implementation of the share exchange and the top-up transaction.
Shareholders are reminded to review the announcement dated 9 March 2007 for the
conditions precedent to the share exchange and the top-up transaction. A general
meeting of Gold Reef shareholders is scheduled to be held on Wednesday, 25 April
2007 at 10:00, for the purposes of considering the share exchange and the top-up
transaction. A circular giving full details of the transactions and a notice of
the general meeting are scheduled to be posted to shareholders on Thursday, 29
March 2007. Any changes in these dates will be published in the media and on
SENS.
Future Developments
Queenstown
Gold Reef is part of a consortium awarded preferred bidder status for the
Queenstown casino licence in the Eastern Cape. The group holds a 25% stake in
the licence applicant, Lukhanji Leisure (Pty) Limited. The proposed casino will
require capital investment of approximately R95 million into the casino (which
will have 180 slot machines and 6 tables), restaurants, a sports bar and a 32-
room hotel with conference facilities.
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 (Zone 4) of the
Free State. The licence application is being opposed by competitor Emerald
Casino.
Prospects
The share exchange and top-up transaction, together with the proposed
appointment of the new directors to the board of Gold Reef, will position the
group at the forefront of transformation in the South African gaming industry.
The increased BEE shareholding is expected to enhance future business
opportunities and to create long-term financial benefits for Gold Reef and its
shareholders. Increased exposure to the individual operations through stakes of
up to 100%, bodes well for the group`s future bottom-line growth. Gold Reef
further expects the consolidation to strengthen its balance sheet leading to a
more effective utilisation of gearing which will be earnings-enhancing going
forward.
New developments at existing operations are anticipated to be key drivers of
organic growth. These include refurbishments at Gold Reef City Casino which will
encompass a 1 000 seat theatre. In addition a number of planned events at Gold
Reef City Theme Park in the wake of completed renovations are expected to
generate further growth. Silverstar, in particular, presents considerable
opportunity for Gold Reef to grow its gaming base and reduce its dependence on
Gold Reef City.
The introduction of cashless gaming should generate further growth for the
group, while future local and international transaction opportunities underpin
positive prospects.
Cautionary Announcement
As previously announced on 9 March 2007, shareholders are reminded that Gold
Reef is currently in discussions which are at an early stage. These may or may
not result in a transaction/s which if concluded may have a material impact on
the price of Gold Reef`s securities. Accordingly shareholders are advised to
continue exercising caution when dealing in their Gold Reef securities until a
further announcement is made.
Dividend
No final dividend has been declared pending the fulfilment of the conditions
precedent as set out in the announcement relating to the BEE transactions
published on 9 March 2007. A further announcement in this regard will be made by
Monday 30 April 2007.
Basis of Preparation
These reviewed annual financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and the requirements of the
South African Companies Act, 1973. The accounting policies are consistent with
those applied in the most recent audited financial statements. These annual
financial statements have been reviewed by the company`s auditors
PricewaterhouseCoopers Inc., and their review opinion is available for
inspection at the company`s registered office.
Steven Joffe
Chief Executive Officer
Jarrod Friedman
Financial Director
On behalf of the board.
19 March 2007
Directors: M Krok (Chairman)*; SB Joffe (Chief Executive Officer); JS Friedman
(Financial Director); C Neuberger (Chief Operating Officer)#; 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: Link Market Services (Pty) Limited (formerly Ultra
Registrars (Pty) Limited), 5th Floor, 11 Diagonal Street, Johannesburg, 2001 (P
O Box 4844, Johannesburg, 2000)
Company secretary: JS Friedman CA(SA)
www.goldreefresorts.com
Group Income Statement
Reviewed for Audited for
the year the year
ended 31 ended 31
December December
2006 2005
% R`000 R`000
Revenue 30,2 1,517,113 1,165,422
Net gaming win 32,0 1,381,332 1,046,409
Theme Park 25,0 58,396 46,700
Food and beverage 25,3 33,759 26,944
Other (3,8) 43,626 45,369
Other income 9,365 27,806
1,526,478 1,193,228
Gaming levies and VAT (271,310) (207,610)
Employee costs (314,695) (253,402)
Promotional and marketing costs (113,679) (107,484)
Depreciation and amortisation (101,812) (90,278)
Other operating expenses (218,482) (147,144)
Operating profit 30,8 506,500 387,310
Finance income 11,957 19,179
Finance costs (36,960) (19,295)
Profit before equity accounted
earnings 481,497 387,194
Share of profits of associate 669 2,613
Profit before taxation 482,166 389,807
Taxation expense (159,210) (121,968)
Profit for the year 20,6 322,956 267,839
Attributable to:
Equity holders of Gold Reef 10,2 254,312 230,732
Minority interest 68,644 37,107
322,956 267,839
Number of shares in issue (000) 220,603 220,603
Weighted average number of shares in
issue (000) 203,961 205,260
Earnings per share (cents) 10,9 124,7 112,4
Diluted earnings per share (cents) 11,0 124,7 112,3
Dividend per share (cents) * 51,0
* Details provided in the commentary under the heading "Dividend"
Supplementary information
Headline earnings reconciliation
Reviewed for Audited for
the year the year
ended 31 ended 31
December December
2006 2005
% R`000 R`000
Attributable profit for the year 10,2 254,312 230,732
Profit on sale of available-for-sale
investments - (21,726)
CGT arising on ALI refinancing 5,466 -
(Profit)/loss on sale of property,
plant and equipment (16) 488
Headline earnings 24,0 259,762 209,494
Headline earnings per share (cents) 24,8 127,4 102,1
EBITDA reconciliation
Reviewed for Audited for
the year the year
ended 31 ended 31
December December
2006 2005
% R`000 R`000
Operating profit 30,8 506,500 387,310
Property and equipment rental 15,346 10,503
Depreciation and amortisation 101,812 90,278
EBITDA 27,8 623,658 488,091
EBITDA margin (%) 41,1 41,9
Group Balance Sheet
Reviewed at Audited at
31 December 31 December
2006 2005
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 1,278,485 857,039
Leasehold improvements 101,710 98,540
Intangible assets 472,717 135,092
Deferred tax assets 62,627 6,046
Investment in associate - 5,315
Investment in joint ventures 36,280 18,591
Financial assets 94,675 1
Share incentive scheme 25,484 32,839
2,071,978 1,153,463
Current assets
Inventories 7,584 2,739
Receivables and prepayments 20,223 15,007
Cash and cash equivalents 105,735 126,547
Amounts owing by related parties 4,865 98,401
138,407 242,694
Total assets 2,210,385 1,396,157
Equity and liabilities
Capital and reserves
Ordinary share capital 4,412 4,412
Share premium 499,280 499,280
Treasury shares (75,340) (75,340)
428,352 428,352
Share-based payment reserve 26,210 16,222
Other reserves 13,795 2,774
Retained earnings 719,892 595,373
1,188,249 1,042,721
Minority interest 196,895 96,429
Total equity 1,385,144 1,139,150
Non-current liabilities
Interest-bearing borrowings 394,330 10,682
Deferred tax liabilities 56,453 42,394
450,783 53,076
Current liabilities
Trade and other payables 144,623 66,033
Provisions 46,653 13,809
Bank overdraft 43,013 17,185
Tax liabilities 58,779 55,443
Current portion of interest-bearing
borrowings 76,967 50,000
Amounts owing to related parties 4,423 1,461
374,458 203,391
Total equity and liabilities 2,210,385 1,396,157
Group Cash Flow Statement
Reviewed for Audited for
the year the year
ended 31 ended 31
December December
2006 2005
R`000 R`000
Cash flow from operating activities
Profit before taxation 482,166 389,807
Non-cash items and other adjustments 137,263 69,775
Cash flow from trading operations 619,429 459,582
Decrease/(increase) in net current assets 49,438 (6,004)
Cash flow from operating activities 668,867 453,578
Interest received 11,957 19,179
Interest paid (36,960) (16,892)
Taxation paid (227,584) (133,308)
Dividend paid (104,020) (98,964)
Net cash generated in operating activities 312,260 223,593
Cash flow from investing activities
Additions to property, plant and equipment (351,456) (107,708)
Additions to leasehold improvements (6,530) (127)
Proceeds from disposal of property, plant and
equipment 4,178 9,433
Proceeds from disposal of management contract - 5,000
(Investment in)/proceeds from disposal of
available-for-sale investments (94,674) 20,411
Investment in intangibles (53) (42,771)
Loans (issued to)/repaid by joint ventures (36,280) 548
Loans repaid by associate 691 5,052
Net repayments by/(advances to) related
parties 94,601 (72,569)
Net cash effect of acquisition of Inkonka (175,623) -
Net cash effect of acquisition of Tanglepark (117,006) -
Net cash effect of acquisition of Silverstar (78,278) -
Net cash effect of ALI refinancing 35,550 -
Net cash effect of acquisition of West Coast
Leisure (7,776) -
Net cash utilised in investing activities (732,656) (182,731)
Cash flow from financing activities
Ordinary shares issued - 12
Share premium raised - 1,392
Net treasury shares acquired by share scheme - (31,134)
Decrease in share incentive scheme loan 7,355 4,774
Dividend and loan repayments to outside
shareholders (44,207) (15,132)
Increase in interest-bearing borrowings 410,608 3,984
Net cash generated/(utilised) in financing
activities 373,756 (36,104)
Net (decrease)/increase in cash and cash
equivalents (46,640) 4,758
Cash and cash equivalents at beginning of
year 109,362 104,604
Cash and cash equivalents at end of year 62,722 109,362
Group statement of changes in equity
Share Reserves Retained Minority
capital earnings interest
net of
treasury
shares
Balance at 1 January 2005 458,131 9,221 463,589 74,454
Ordinary shares issues 1,404 - - -
Treasury shares acquired (31,183) - - -
Recognition of share-based
payments - 9,742 - -
Transfer between reserves - (16) 16 -
Profit on sale of shares by
share trust - 49 - -
Attributable profit for the
year - - 230,732 37,107
Dividend paid - - (98,964) -
Movement in loans from
minorities - - - (15,132)
Balance at 1 January 2006 428,352 18,996 595,373 96,429
Recognition of share-based
payments - 9,988 - -
Revaluation of land per IFRS3
business combination - 27,519 - -
Hedge reserve created during
the year - (10,345) - -
Attributable profit for the
year - - 254,312 68,644
Dividend paid - - (104,020) -
Movement in loans from
minorities - - - (1,702)
Adjustment arising on ALI
refinancing - - (25,773) 61,323
Transaction with minorities
in Mykonos Casino - (6,153) - (1,623)
Dividends paid to minorities
by subsidiaries - - - (42,505)
Minorities created on
Goldfields acquisition - - - 3,213
Minorities created on Garden
Route acquisition - - - 13,116
Balance at 31 December 2006 428,352 40,005 719,892 196,895
Group statement of changes in equity (continued)
Total
equity
Balance at 1 January 2005 1,005,395
Ordinary shares issues 1,404
Treasury shares acquired (31,183)
Recognition of share-based
payments 9,742
Transfer between reserves -
Profit on sale of shares by
share trust 49
Attributable profit for the
year 267,839
Dividend paid (98,964)
Movement in loans from
minorities (15,132)
Balance at 1 January 2006 1,139,150
Recognition of share-based
payments 9,988
Revaluation of land per IFRS3
business combination 27,519
Hedge reserve created during
the year (10,345)
Attributable profit for the
year 322,956
Dividend paid (104,020)
Movement in loans from
minorities (1,702)
Adjustment arising on ALI
refinancing 35,550
Transaction with minorities
in Mykonos Casino (7,776)
Dividends paid to minorities
by subsidiaries (42,505)
Minorities created on
Goldfields acquisition 3,213
Minorities created on Garden
Route acquisition 13,116
Balance at 31 December 2006 1,385,144
Date: 19/03/2007 07:59:53 Produced by the JSE SENS Department.
