Gold Reef Resorts on winning streak with strong results and BEE Deal
18 March 2007

Following its announcement last week of a BEE deal that took black-owned equity in the company to a minimum of 25,1%, Gold Reef Resorts has today announced strong results for the year to December 2006. Driven by robust trading at all casinos the group reported 30,2% growth in revenue to R1,5 billion with net gaming win up 32%.

EBITDA increased 27,8% to R623,7 million representing 41,1% of revenue. The bottom line grew 10,2% to R254,3 million while headline earnings per share climbed 24,8% to 127,4 cents per share. The group has not yet declared a dividend pending fulfilment of conditions to the BEE deal, but will make an announcement in this regard at the end of April.

Gold Reef CEO Steven Joffe says that flagship Gold Reef City Casino did well to increase revenue by 14,4% and secure a further 0,75% market share despite disruption from construction in the second half of the year. The new development programme, which will cost Gold Reef R302 million in total, is due for completion by October 2007.

A significant increase in visitors at the Theme Park saw a return to profitability of R2,2 million. Gold Reef invested R53 million during the year in attractions, retail outlets and additional food and beverage facilities which are expected to continue attracting footfall.

Mykonos Casino was the group’s top growth performer. Gold Reef Financial Director Jarrod Friedman attributes the casino’s performance to continued economic growth in the Western Cape. Revenue leapt 26,3% to R105,3 million with EBITDA of R47,0 million. As part of the BEE deal Gold Reef will increase its stake in Mykonos Casino to 70,4%. Friedman says: “This was in line with strategy to increase exposure to high-performing operations in the group.”

Gold Reef’s remaining casinos also achieved excellent results. A renovation at Pietermaritzburg-based Golden Horse Casino saw a 19,6% increase in revenue to
R200,4 million and EBITDA up 25,4% to R91,9 million. Both Garden Route Casino and Free State-based Goldfields Casino traded well with revenue up 20,1% to R148,2 million and 9,1% to 94,0 million, respectively. Garden Route Casino introduced an additional 52 slot machines and 3 tables to accommodate rising demand, enhanced by the opening of the adjacent golf course. The group invested R61 million in Goldfields Casino following the award of a permanent casino licence to develop a new conference facility, Salon Privé and restaurants at a total cost of R102 million.

Commenting on the latest casino in the group, Silverstar, Friedman says: “Construction of the Silverstar casino complex started in August 2006 and is expected to reduce reliance on Gold Reef City and increase our market share of the lucrative Gauteng region.”

Gauteng is the largest regional gaming market in South Africa. In November Gold Reef and its BEE partner Akani Leisure Silverstar Holdings received approval for the acquisition of 100% of Silverstar, which holds the seventh and final casino licence in Gauteng. At an anticipated total development cost of R1,2 billion the casino is set to open 2 in the first quarter of 2008. With 700 slot machines, 30 tables, a hotel, restaurants and conference and entertainment facilities Friedman is confident Silverstar will be earningsenhancing for the group from 2008 onwards.

The post year-end BEE deal will see Gold Reef bring in a minimum of 25,1% black
shareholders at group level during 2007. In terms of the R1,4 billion transaction Gold Reef will exchange 55,2 million shares in the company for the shareholdings of its BEE partners in certain of the group’s casinos, increasing its stakes in Gold Reef City, Silverstar, Golden Horse Casino and Goldfields Casino to 100%. In order to take BEE participation to at least 25,1%, a further 14 million Gold Reef shares will be issued for cash to certain of the same BEE partners at R20,50 a share.

“The BEE deal has introduced broad-based BEE at group level and at the same time simplified our group structure, increased our exposure to our high-performing casinos and consolidated our gaming platform. Further, the transaction provided us with the opportunity to increase gearing on our balance sheet which over time will be earningsenhancing for the group,” says Joffe.

A number of new developments at existing operations are expected to drive further organic growth going forward. Refurbishments at Gold Reef City Casino include a 1 000 seater theatre while planned events at the renovated Theme Park are expected to further drive up attendance numbers. Joffe reiterates: “Silverstar in particular offers the group the opportunity to grow its gaming base and reduce its dependence on Gold Reef City.”

Looking ahead to ongoing expansion he points out that Gold Reef is part of a consortium that is the preferred bidder for a new casino license in Queenstown in the Eastern Cape, and is party to the only applicant for a licence in Sasolburg.

Joffe concludes that “additional local and international transaction possibilities further enhance the group’s prospects.” Gold Reef is currently trading under cautionary in respect of early stage discussions. Details of the discussions and parties have not yet been disclosed.

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