Silverstar brightens Gold Reef results
Business Day
17 March 2009

Julius Baumann

THE opening of Silverstar Casino, Gauteng's seventh and last casino in December 2007 has helped Gold Reef Resorts grow its share of the Gauteng gaming market to 24,5% and driven the group's revenue in the year to December 31.

The group's main property, Gold Reef City, held onto its market share, with a slight 0,4% dip in revenue to R990m. Silverstar, meanwhile, generated new revenues of R510m.

CEO Steven Joffe expects further strong revenue growth in the year ahead from Silverstar. "While the gaming facilities were opened in December 2007, the entertainment and food components were only completed during the first half of the year and therefore the benefits of the fully completed Silverstar were only felt in the second six months. Therefore we are still to see the full effect of Silverstar on our results," said Joffe
yesterday.

He expected Silverstar would help the group to grow its share of the Gauteng market above 25% in the year ahead. "Silverstar broadens our participation in the Gauteng gaming market and reduces our dependence on Gold Reef City."

In the year to December last year Gold Reef Resorts grew revenue 29,1% to R2,2bn while adjusted earnings before interest, taxation, depreciation amortisation and rental rose 18,3% to R904m. Gaming revenue across the group's seven casinos remained robust, rising 30,4% to R2bn, and food and beverage increased 52,4% to R32m.

By year-end the group's debt swelled by R120m to Rl,3bn, largely due to the development of Silverstar, which cost Rl.lbn.

As a result net finance costs climbed from R23m in the previous financial year to R134m in 2008.

Joffe said that, with six of the seven properties either newly built or refurbished, limited capital expenditure was anticipated in the short term. "This, coupled with de-gearing, which is expected to enhance earnings growth, will result in increased cash resources," he said.

During the year, Tsogo Sun built up a 23% stake in the group through the acquisition of shares in the open market as well as the purchase of a 15,01% empowerment stake from two former Gold Reef directors. Last year former directors, Bongani Biyela and Richard Moloko, sold their 41-million shares to Mainstreet 581, an indirect wholly owned subsidiary of Tsogo Sun after facing foreclosure from the financiers.

Joffe said the sale of the 15,01% stake to Tsogo may have compromised the group's black empowerment credentials and it would petition the various gaming boards to confirm that its empowerment commitments in relation to shareholding remain adequate.

He said while a bid for Gold Reef by Tsogo Sun was not under discussion, Tsogo Sun continued to buy Gold Reef shares on the market.

Meanwhile, Gold Reef is to launch proceedings in the high court this month to obtain an order correcting or setting aside a ruling in February by the Securities Regulation Panel (SRP). Last year a R9,3bn buyout of Gold Reef by a private equity consortium collapsed after the SRP ruled that the transaction was in breach of several its rules. Gold Reef took exception to the reasons it gave.

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