Group revenue grows 14,8% to R903,9m

Consumer Industries Editor

CAPE TOWN Casino and resorts operator Gold Reef Casino Resorts, whose flagship is Gold Reef City in Gauteng, reported excellent trading last year, driven partly by the effect of reduced inflation and interest rates on disposable income.

CEO Steven Joffe said the group supported government's efforts to overcome compulsive gambling problems, and it would be making representations to it on the regulations to accompany the National Gambling Bill.

"The group is hopeful that the regulations will be drafted based on international research and best practice and looks forward to engaging with the trade and industry department to ensure a mutually desirable outcome,"

he said.

Financial director Jarrod Friedman said that in the next year to 18 months Gold Reef's bottom-line growth would be spurred on by a reduction in its debt.

But Future revenue increases will depend on trends in disposable incomes, and it may be difficult to match growth rates of the past unless new opportunities can be found.

The group has always been interested in expansion within SA, but opportunities must meet certain criteria. If it were to look outside SA, it could do so in partnership with Casinos Austria, the international group that is a major shareholder in Gold Reef.

The group's confidence in its future growth prospects is reflected in the 80% increase in the dividend to 27c a share.

Friedman said the group's policy was to distribute to its shareholders cash for which it had no immediate need.

If investment opportunities arose, it would use its cash resources for those rather than pay dividends. But it was also prepared to fund its growth with borrowings as it did not make sense to degear altogether. Gearing is currently 24,9%.

Group revenue grew 14,8% to R903,9m, of which Gold Reef City contributed R712,9m. There was a substantially higher contribution from Garden Route Casino near Mossel Bay, as it traded for its first full year and the group also increased its stake in the development by 32,5% to 42,5% last September.

The newest addition to the group, the Goldfields Casino, near Welkom, contributed R5,8m to revenue in its first three weeks of trading to end December.

All the casinos traded at healthy margins. Friedman said it was difficult to maintain margins in an intensely competitive environment. The group's Gold Reef City competed with five other casinos in the province .

Promotion, including loyalty programmes and above-the-line advertising, helped, as did Gold Reef's exposure on M-Net's Idols programme. Also, as the group bedded down a new property it would adjust its overhead costs to the revenues that each business generated.

Net finance costs fell to R31,1m from R50,9m as the group cut total external net debt R74,2m. Headline earnings grew 29,4% to 65,1c a share on fewer shares in issue after buy backs.

The group has imported a new rollercoaster for the Gold Reef theme park and taken advantage of the strong rand to import new video gaming equipment to keep abreast of the latest trends.

Friedman said continuing capital expenditure was expected to be below the current consolidated depreciation charge of about R90m for the year.

Mar 10 2004 07:42:08:000AM Charlotte Mathews Business Day 1st Edition