Earnings down but Gold Reef ‘happy’
Business Day
28 August 2009

Julius Baumann

Casino group Gold Reef Resorts yesterday reported an 8% drop in headline earnings to R140m for the six months to June 30 as punters continued to feel the pinch of the tough economic conditions.

“We are happy with these results, achieved despite a deterioration in footfall as consumers continued to feel the pressure of high interest rates and the inflationary environment. In particular we are pleased with the performance in Gauteng, which managed to grow its market share from 24,5% to 25,6%,” said CEO Steven Joffe.

Despite the softer trading conditions, the group eked out a 3% rise in revenue to R1,1bn, with solid performances from both its Gauteng properties. Gold Reef City grew its contribution 2% to R482m compared with the same time last year, while Silverstar, which was fully operational last September, saw revenue rise 12% to R262m.

“It appears that trading at Silverstar has stabilised and our share of the Gauteng market is likely to settle at about 25%-26%. However, our management at Gold Reef City has worked hard to achieve improvements in cost containment and revenue,” said Joffe.

Gaming revenue at Gold Reef City rose 3% compared to the same time last year, while revenue from the theme park was flat due to the economic climate.

Group earnings before interest, tax, depreciation, amortisation and rentals increased 4% to R410m after an active focus on cost controls, the group said in its announcement to the market.

Finance costs surged 42% to R68m, largely due to the interest costs incurred on increased borrowing used to build Silverstar. Overall borrowings at the end of the halfway stage reached R1,3bn but was expected to recede.

Included in the finance costs is a R1m fair-value adjustment on the interest rate hedge. “When we decided to build Silverstar I was eager to ensure that we controlled the financing costs and therefore we took out an interest rate hedge,” said Joffe. Three of the hedges expired after June 30 and a further one is due to expire in November.

The company said all its properties would be refurbished by the end of this year. It is also in the process of converting all its casinos into smart-card gaming facilities.  

Joffe said that the group’s outlook for the next six months remained subdued.

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