Silverstar contributes to Gold Reef’s growth
16 March 2009

Gaming and Entertainment Group, Gold Reef Resorts, today announced its results for the year ended 31 December 2008.

The Group increased revenue by 29.1% to R2.2 billion with the first full year of contribution from Silverstar Casino expanding the Group’s share of the Gauteng gaming market to 24.5%. Silverstar Casino contributed a pleasing R510 million to Group revenue and R191 million to EBITDAR on an adjusted basis.

Commenting on the results, Steven Joffe, CEO of Gold Reef Resorts, said: “ Our overall performance has been impacted by weaker consumer spend with our revenue mix changing and trading volumes contracting in line with the deteriorating economic environment. Silverstar Casino made a pleasing contribution to revenue and profit in its first year of operation, it broadens our participation in the Gauteng gaming market and reduces our dependence on Gold Reef City.”

In order to better compare year on year operational growth, adjustments have been made to Earnings Before Interest, Taxation, Depreciation, Amortisation and Rental (EBITDAR) and Headline Earnings Per Share (HEPS) to eliminate once-off charges relating to pre-opening expenses at Silverstar and Queens casinos, costs relating to corporate activity and various non-recurring items.

Adjusted EBITDAR of R904 million increased 18,3% over the previous year and represented a 41,1% margin on revenue. Adjusted headline earnings increased by 3.9% to R375 million.

Net Group debt increased by R120 million to R1.3 billion which represents a 1,4 multiple of EBITDAR. In order to protect the Company’s earnings from increases in interest rates, the Group has hedged most of its debt. This resulted in a saving of R34 million in finance costs for the year.

The 69,2 million ordinary shares issued by Gold Reef for the share exchange and top-up transaction, effective 1 July 2007, afforded Gold Reef full control over cash flows from material subsidiaries but with a dilutionary effect on earnings per share and headline earnings per share, as expected. Accordingly adjusted HEPS for 2008 decreased by 9,4% to 136.5 cents. Future dilution will reduce with growth in contributions from these underlying operations.

During the year under review a total of R445 million was spent on capital expenditure. With all properties expected to be refurbished or new by the end of 2009, limited capital expenditure is anticipated in the short term. This, coupled with de-gearing, which is expected to enhance earnings growth, will result in increased cash resources.

In conclusion, Joffe commented: “Our ongoing efforts to grow revenue and protect margin will underpin earnings growth. We enjoy strong cash flow generation and our businesses are appropriately geared without onerous debt requirements.

Notwithstanding the impact of the deteriorating global economy, Gold Reef remains well positioned to benefit from decreasing interest rates and reduced inflation. As four of the Group’s interest rate hedge contracts expire during 2009, Gold Reef will benefit from the decreasing interest rate cycle anticipated in 2009.Silverstar is expected to contribute further in the coming year.

<< Back