Gold Reef Casino Resorts reports rise in earnings

Posted On Monday, 29 August 2005 02:00 Published by
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Gold Reef Casino Resorts reports a 9.9% rise in its headline earnings per share for the six months to end-June 2005
Listed gaming group Gold Reef Casino Resorts (GRCR, GDF) reports a 9.9% rise in its headline earnings per share (HEPS) for the six months to end-June 2005, to 45.2 cents, the company said.

No interim dividend was declared, in line with group policy.

GRCR's operations include the Gold Reef City Casino and Theme Park in Gauteng, the Golden Horse Casino in Pietermaritzburg, Casino Mykonos in the Western Cape north of Cape Town, the Garden Route casino and Goldfields casino.

The group reported an 11.5% rise in revenue for the six months to 550.1 million rand from 493.2 million rand a year earlier, while operating profit before depreciation and amortization rose 7.2% to 214.4 million rand.

However, net profit attributable to shareholders grew only 6.9% to 97.2 million rand, and headline earnings rose 11.3% to 93 million rand versus 83.6 million rand previously.

The company was hit by its first-time adoption of International Financial Reporting Standards (IFRS), which reduced the bottom line by 7.3 million rand, as well as a 5.6 million rand increase in secondary tax on companies (STC), due to the higher dividend in 2004, and a 4.8 million rand drop in non-recurring profit.

Looking ahead, GRCR CEO Steven Joffe said a favourable interest rate environment should support the group's growth in the traditionally stronger second half of the year. He anticipated that the performance will continue to strengthen in the next six months.

"In light of this, the increase in non-recurring profit 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 may be set to open Gauteng's sixth and last casino, Joffe revealed. GRCR and its black empowerment partner, Akani Leisure Investments, had the option to buy Silverstar Development, which was awarded the license for the casino in March 2005, he explained.

Construction was set to begin as soon as the environmental impact studies were completed.

Turning to the group's casinos, Joffe said that Gold Reef City Casino, its largest operation, had achieved 8.9% revenue growth for the six months and a profit margin of 36.3%, while maintaining its market share. This was despite its Theme Park losing 0.8 million rand and reversing the profit of 7.8 million rand recorded a year earlier.

Joffe attributed the Theme Park's loss entirely to incorrect and negative publicity, causing visitor numbers to drop by 22.6%.

"The Theme Park invests significant sums every year to maintain the structural safety of its rides," he noted. "The rides are monitored regularly by external structural engineers and regulated by the Department of Labour, who has unequivocally affirmed their safety."

Garden Route Casino remained the group's star performer with a 26% increase in revenue to 58.8 million rand, partly due to expanded facilities and more slots and tables in the casino. The casino reported the group's healthiest earnings margin of 48.6%, at the same time slashing net external debt to 3 million rand from 15.9 million rand.

Joffe says that prospects remained positive, with the adjacent golf course and residential development, scheduled to be completed by year-end, set to attract new patrons to the casino.

Pietermaritzburg's growth since becoming KwaZulu-Natal's new capital contributed to Golden Horse's increased revenue of 78.4 million rand. While earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 38.9% to 30.6 million rand, net external debt dropped to 8.6 million rand from 20.1 million rand.

Casino Mykonos posted revenue growth of 21.3% to 39.3 million rand and EBITDA of 15.5 million rand, benefiting from ongoing economic growth in the Western Cape which had the added benefit of boosting sales of holiday accommodation at the resort.

The group's newcomer Goldfields Casino remained cash positive with no external debt, posting 41 million rand in revenue with an EBITDA margin of 44.4% impressing for a growing casino.

Debt-free at the end of last year, the group reported an overall increase in net external debt for the six months to 151.8 million rand. Since June 2005 GRCR had been restored to a strong cash-positive position after selling its 9.9% stake in Johnnic Holdings Limited at a 20 million rand profit.

Joffe said the group would continue to follow its successful strategy at the casinos as well as build on the recovery already evident at the Theme Park. He emphasised that GRCR would leverage its healthy balance sheet and cash base to boost growth above general increases in disposable income over the long- term.

"We intend to pursue strategic acquisitions and enhance earnings through de-gearing," the CEO pledged.

I-Net Bridge
Publisher: I-Net Bridge
Source: I-Net Bridge

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