Theme Park a Drag On Gold Reef's Profit
GOLD Reef City's theme park recorded an operating loss of R800000, dragging down listed gaming stock Gold Reef Casino Resorts' interim results, which were released yesterday. Gold Reef's share price shed 5,2% to close at R15,50 yesterday.The group attributed the fall in Gold Reef City's theme park revenue to negative publicity on the safety of five rides earlier in the year.
Gold Reef CEO Steven Joffe said the "incorrect" publicity resulted in the number of visitors to the park declining 22,6%. The Group revenue increased 11,5% to R550,1m, with operating profit rising 7,2% to R214,4m. Headline earnings rose 11,3% to R93m, with headline earnings a share increasing 9,9% to 45,2c from 41,1c. "The rides are monitored daily, weekly and by external structural engineers and regulated by the labour department, which has unequivocally affirmed their safety," Joffe said.
Visitor numbers had started to recover, he said. Despite the decrease in visitors at the group's theme park, Joffe said the casino, which reported revenue growth of 8,9%, managed to maintain its Gauteng market share. In addition to the loss in theme park revenue, the first-time adoption of international financial reporting standards reduced the group's bottom-line by a further R7,3m, compounded by a R5,6m rise in secondary tax on companies, due to a higher dividend last year, and a R4,8m drop in nonrecurring profit.
The group's star performer in the period was the Garden Route Casino in Western Cape, which reported a 26% increase in revenue to R58,8m. Joffe said prospects remained positive for the casino, with the adjacent golf course and residential development, scheduled to be completed by year-end. Mykonos, the group's other Western Cape casino, posted revenue growth of 21,3% to R39,3m.
Joffe said that the group's Pietermaritzburg casino, Golden Horse, hardly grew last year. In the current period, Golden Horse contributed revenue of R78,4m, boosted by the city's recent capital status. Gold Reef has a 14,67% interest in Free State's Goldfields Casino, which recorded revenue of R41m. Joffe said the casino reported 6% year-on-year revenue growth.
"It is slow growth, but in light of what is going on, we are pretty happy," he said. During the period, certain mines in the area closed, indirectly affecting the casino. Gold Reef may be set to open Gauteng's sixth and last casino, in Krugersdorp, with its empowerment partner in Gold Reef City, Akani Leisure Investments. Since selling its 9,9% stake in Johnnic Holdings at a R20m profit, Gold Reef lost exposure to key gaming asset Tsogo Sun.
With SABMiller unwilling to sell its 49% stake in Tsogo Sun, Gold Reef's ambition of merging its assets with that of Tsogo seem off the immediate radar. No interim dividend was declared.