Solid annual results in a challenging trading environment

29 March 2010

Gaming and Entertainment Group, Gold Reef Resorts Limited (“Gold Reef” or “the Group”), today announced solid results for the year to 31 December 2009. 

Revenues and earnings before interest, tax, depreciation, amortisation and rentals (“EBITDAR”) were slightly up to R2.2bn and R897m respectively. Trading conditions during the year were challenging due to the economic recession and the impact on consumers’ disposable income.  The Group continued to focus on its controllable cost base which resulted in the EBITDAR margin being maintained at 40.3%.  Headline earnings per share (“HEPS”) were up 1% to 131.9 cents.

Gold Reef achieved market share gains in all but one province through its 18% share of national gaming positions. At year end, the Group had 134 tables and 3 976 slots in seven casinos.

Commenting on the results, Steven Joffe CEO of Gold Reef, said:  “These are good results considering the tough economic conditions with both revenues and profits up.  Our market share gains reflect our new and refurbished strong asset portfolio.”

During the year the Group undertook refurbishment projects at Golden Horse Casino in KwaZulu Natal, Mykonos Casino and Garden Route Casino in the Western Cape and at the Gold Reef City Theme Park hotel.  In addition, smartcard gaming has been rolled out at all remaining properties in the Group. Some small additional refurbishments will be carried out this year to maintain the high quality of the property portfolio.

Cashflow remained strong with R851m generated from operations during the year.  Total capex was R206m.  The Group’s balance sheet also remained strong with group net debt of R1.1bn at year end, which translates to a 1.2 multiple of EBITDAR.  The Group declared a dividend for the year of 65 cents per share which is covered two times by HEPS. 

Gauteng remains by far the largest province for the industry’s gross gaming revenues with a 42% share.  The Group’s market share in Gauteng increased to 25.1% from 24.5% due mainly to growth at Silverstar Casino where patrons benefited from the full range of entertainment options following completion of all facilities in 2008.  Gross gaming revenues at Gold Reef City Casino fell marginally by 1.3% in line with the contraction of revenues for all of Gauteng.  The Theme Park performed well with significant increases in revenues and EBITDAR. 

Steven Joffe commented:  “The difficult trading conditions are expected to continue into 2010.  We are however well positioned to benefit from the economic recovery when it comes because of our high quality asset portfolio, low gearing and strong cashflows.”

Gold Reef announced a proposed merger with Tsogo Sun Holdings (Pty) Limited (“Tsogo”) on 18 February 2010. The proposed merger will create not only a premier gaming and hotel company in South Africa but also a business of significant ranking amongst European, Middle Eastern and African listed gaming groups.  The merged entity will have an improved ability to attract new talent and resources and to capture opportunities that present themselves in the local and international gaming and hotel sectors both in terms of organic and acquisitive growth.

It is estimated that the merged entity will be the 39th largest company by market capitalisation on the JSE Limited at current share prices, and one of the ten largest gaming companies amongst its listed global peers by market capitalisation.

A circular, including revised listing particulars, is expected to be posted to shareholders shortly.

Steven Joffe commented:  “This merger will create a company of significant scale and ranking in the gaming and hotel sector and shareholders will benefit from the earnings, geographical and market segment diversification.”

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