South African gaming and resorts group Gold Reef on Thursday reported an 8% decline in diluted headline earnings per share to 50.9 cents for the six months ended June 2009 from 55.5 cents a year ago.

Operating profit was up 1% at R311 million, while profit for the period was 9% lower at R146 million.

The Group said there had been a particularly strong performance in Gauteng.

Total revenue was up 3% to R1.1 billion while earnings before interest, tax, depreciation, amortisation and rentals (EBITDAR) increased by 4% to R410 million on the back of an active focus on cost controls. Cash flows also remained strong with cash generated from operations of R406 million.

CEO Steven Joffe said the results were 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%," he said.

With the phased opening of Silverstar Casino completed by September last year, the markets for Silverstar Casino and Gold Reef City Casino have now stabilised. Revenue at Gold Reef City increased 2% with Silverstar Casino up 12%. Going forward, plans are to leverage each casino's strong market position with joint marketing promotions.

The theatre performance showed a marked improvement with losses substantially reduced from R14 million to R5 million following a successful change in its production mix.

Trading at the Theme Park was adversely affected by difficult economic conditions. A refurbishment of the hotel has recently commenced.

All properties within the group will be recently opened or newly refurbished by the end of 2009, Gold Reef said.

The Garden Route Casino in the Western Cape is to undergo a major refurbishment, while the current refurbishment at the Golden Horse Casino in Kwazulu-Natal is expected to be completed on budget within the current quarter.

Goldfields Casino in the Free State is expected to benefit from an upgrade to the adjacent shopping complex. In addition, the company is also embarking on the conversion of all remaining properties to smart card gaming, which should be completed in the first half of 2010.

The group's balance sheet is strong with a conservative level of gearing which will see Gold Reef well positioned to pursue other initiatives within its current casino portfolio.

Overall net external debt amounted to 1.3 billion rand on 30 June 2009, comprising mainly Silverstar Casino's debt of 1.2 billion rand, which peaked in the final quarter of 2008 and is repayable over 10 years. Three of the company's interest rate hedges have expired after period end with a further one due to expire in November 2009.

In conclusion, Joffe commented: "While we have not yet seen any uptick in consumer activity, which remains subdued, Gold Reef is well placed to benefit from an improvement in economic conditions. Going forward our priorities will remain focused on cost controls and enhancing our current strong portfolio of casinos."

Source: I-Net Bridge