Gold Reef shrugs off tough times  
Business Day
4 September 2008

THE inclusion of the new Silverstar casino helped gaming and leisure group Gold Reef Resorts lift revenue 29,4% to R1,07bn in the six months to June despite difficult trading conditions.

Gambling revenue was up 28,9% at R984,6m while revenue from group theme parks rose 4,2% to R32m, curbed by wet weather.

However, earnings before interest, taxation, depreciation and rentals (Ebitdar) — rising 8,5% to R388m — came under pressure with footfall in the group’s casinos affected by a drop in consumers’ disposable income. Increased costs related to the opening of the Silverstar and Queens casinos as well as the upgrade of Gold Reef City and Goldfields casinos also put earnings under pressure.

Due to these projects, borrowing rose substantially, with interest-bearing debt rising to R1,5bn from R564859 in the previous period. But Jarrod Friedman, Gold Reef financial director, said yesterday he expected gearing to peak in the second half as it completed the bulk of refurbishment and development projects.

Higher operating costs reduced Ebitda margins to 36,1% from 43% in the previous corresponding period. The group said significantly higher inflation was a major contributor to higher expenditure.

Friedman said the increased cost of living was the main factor in driving up employee costs, as enumeration was raised to keep up with inflation. Employee costs rose 43,4% to R239m. Using generators during the many power failures also put pressure on costs.

Gauteng’s gambling market grew 7,3% with Silverstar securing 8% of the province’s gaming market. This resulted in Silverstar — Gauteng’s seventh and final casino — claiming some of Gold Reef City’s market. Revenue at the flagship resort was down 1,9% to R486m.

Silverstar posted revenue of R240m. The casino opened for business in December with food and entertainment facilities and the hotel coming on stream in March. The spa is expected to open soon, completing the development. The entire project is expected to come in well within budget at R1,1bn.

Friedman said Silverstar was likely to secure a greater share of the Gauteng market in the year ahead, benefiting from the larger development and extended trading period.

Queens Casino, the group’s other new property, which opened last December, posted revenue of R20m and Ebitdar of R0,8m.

The conversion of Goldfields Casino from a temporary to a permanent casino helped it to increase market share, increasing revenue 12,3% to R57,7m and Ebitdar up 6,2% to R25,6m.

The group believes that the revamp of the two casinos as well as the opening of two others places it in an ideal position to benefit from an upturn in the economy.

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