Gold Reef Resorts Pre-Tax Profits Down

March 19 - Gold Reef Resorts, the company that holds a wide range of casinos and resorts across South Africa, released its annual report this week to show that while revenue increased, pre-tax profits dropped from R482-million a year ago, to R390-million at the end of 2007.

Experts agree that a failed Ethos-led private equity buyout failure last month took a bite out of Gold Reef Resort's profits, costing the company around R19-million. The deal turned sour after it was revealed that a previous bid by industry rival, Tsogo Sun, had been ignored.

While talks are continuing with Tsogo Sun, it is not certain whether a deal will be reached that is acceptable to both sides. It is expected that if an offer is put in by Tsogo Sun, it will be lower than the initial one, although the offerings held by Gold Reef Resorts are considered complimentary to this company's holdings. While Tsogo Sun's first bid was put at R34.50 a share, its current bid is hovering between R32 and R33 a share.

Revenue grew at most of Gold Reef Resorts casinos, as was shown in the annual report. Mykonos Casino took in R116.6-million, an increase of 10.8%, while the Garden Route Casino increased its revenue by 12.6% thanks to a larger number of golf patrons who frequented the resort.

While it cost Gold Reef Resorts over R44-million to turn Goldfields Casino from a temporary to a permanent casino, revenue at this location also increased by 15.7% as a result.

An analyst with Absa Asset Management Private Clients said all in all that the company's results were "not bad, but not great".

Gold Reef management explained that poorer performance in the second half of the year had affected the overall profit situation, as interest rates increased and the economy slowed down slightly.

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