Profit grows slower than revenue at Gold Reef Resorts
Business Report
19 March 2007

By Tom Robbins

Cape Town - Profit grew slower than revenue at Gold Reef Resorts as the company invested heavily in upgrading casinos and started building a new Gauteng casino.

Revenue for the year to December grew 30.2 percent to R1.52 billion compared with a year ago, the gaming and entertainment company said after the market closed on Friday.

Gold Reef was unchanged at R23.75. The leisure and hotel sector lost 1.69 percent.

But attributable profit to shareholders was up 10.2 percent to R254 million as finance charges climbed 91.6 percent to R37 million. Total capital expenditure was R358 million after the company spent just R108 million in 2005.

Gold Reef financial director Jarrod Friedman said its R1.2 billion Gauteng-based Silverstar casino, in which it had already invested R71 million, was expected to open in the first quarter of next year.

Friedman said the group had bagged Gauteng's seventh and last casino licence to further take advantage of the country's most significant gambling market.

He added that Silverstar would also reduce regional reliance on the company's biggest business, the Gold Reef City Casino.

Chief executive Steven Joffe said R224 million was spent upgrading the Gold Reef City casino and theme park and that this had added 0.75 percentage points to market share "despite disruption from construction".

But the company's smallest casino, Mykonos on the Cape west coast, was the star performer, with earnings before interest, tax, depreciation and amortisation (Ebitda) up 37.3 percent to R47 million. This was against overall group Ebitda which grew 27.8 percent to R624 million.

In addition to investing heavily last year and plans to ramp that up at Silverstar, the company is also part of a consortium that is a preferred bidder for a new casino licence in Queenstown in the Eastern Cape and is party to the only applicant for a licence in Sasolburg.

Gold Reef is trading under a cautionary that could see another acquisition. Joffe said the possibility of an international deal could enhance future performance.

Gold Reef said it had "not yet declared a dividend, pending fulfilment of conditions to the black economic empowerment deal, but will make an announcement" at the end of April. The deal took black-owned equity in the company to 25.1 percent.

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