Nicola Mawson

Consumer Industries Correspondent

Hotel and gaming company Gold Reef Resorts said on Friday talks with rival group Tsogo Sun were continuing, although there was no certainty that an offer would be made.

A R9,8bn Ethos-led private equity buyout collapsed last month after allegations that an earlier Tsogo bid had been

The company grew revenue for the year to December to R1,7 billion from R1,5 billion, but pretax profit dropped to R390 millionfrom R482 million a year ago.

Net profit dropped 39,6% to R195 million from R323 million.

The company’s shares closed 0,93% higher on Friday at R27.

Chris Gilmour, an analyst at Absa Asset Management Private Clients, said if Tsogo put in a bid at a 20% premium, an offer was likely to come in at between R32-R33 a share, lower than the company’s original R34,50 offer.

Gilmour said the company’s results were “not bad, but not great”. Gold Reef had seen an increase in costs as it had spent money on refurbishments and to open quickly its latest casino, Silverstar, on December 11. All other facilities, apart from the spa, were expected to be complete by next month.

The development cost R758,8 million out of the total anticipated cost of R1,1 billion.

Gold Reef said the second half of the year, usually a more robust period, was more challenging than the first six months as interest rates had increased and there had been a general slowdown in the economy.

Gilmour said that Gold Reef was an ideal target for Tsogo as its offerings were complementary and there were no geographic overlaps, although Tsogo was likely to put in a lower offer than its initial one.

He said the market was down, consumer spending was coming off a peak and there was no competition on the horizon.

The deal could make the combined entity the largest such operation in the country.

However, as Tsogo is not listed, this would be difficult to work out, Gilmour said.

The group’s theme park reported revenue up 26,9% to R74,1 million. Gold Reef said trading had recovered and the park aimed to boost profitability further.

At the Golden Horse Casino, revenue improved 12,7% to R225,9 million. Earnings before interest, tax, depreciation, amortisation and rentals (ebitdar) improved 18,8% to R109,2 million. The company was planning additional refurbishments.

Mykonos Casino grew revenue 10,8% to R116,6 million and management was looking into plans to expand the casino. Ebitdar grew 13,9% to R53,5 million.

Trading at Garden Route Casino benefited from greater numbers of golf course patrons and the casino reported 12,6% growth in revenue to R166,8 million. Ebitdar grew 16,6% to R83,7 million.

Gold Reef said converting Goldfields Casino from a temporary to a permanent casino, at a R44,7 million cost, had boosted revenue by 15,7% to R108,8 million with Ebitdar up 10,6% to R50,1 million.

At Queens Casino, the new gaming floor was opened on December 21 and the rest of the facilities were expected to open in the first quarter of this year.

Source: Business Day