Thursday, February 19, 2015

Reef bleached by Aquis

Reef Casino has released its full year results for 2014. Distributable profit for the year down 13.4% on revenue down 5.9%. At the time of the distribution announcement in November I posted a chart of recent years profit history with 2014 estimated and adjusted for the Aquis takeover costs of $600k: Reef Casino treads water

The result was still short on 2013 even after allowing for the Aquis costs but more interesting were such as this in today's results commentary:

“The Aquis takeover bid implementation agreement requirements resulted in the management team devoting significant resources for most of the year to assist Aquis in “integration and planning” which otherwise would have been devoted wholly to the day to day operations of the Reef Hotel Casino.”

Commentary that follows then includes some very poor outcomes on casino visitation and table games:

Overall, the Reef Hotel Casino achieved a commendable outcome given the interruptions to day to day operations because of the Aquis takeover bid proposal.

Casino visitations were down 16.1% on last year. Contributing factors included a soft and flat local economy, a competitive local market and the cessation of year round direct flights from China into Cairns.

Electronic gaming machine turnover was up 10.8% on last year and revenues were up 12.5% on last year. Patron support from local, domestic and international markets was strong throughout the year. The Reef Casino achieved a record level of electronic gaming machine turnover and revenue in 2014. Electronic gaming’s strong performance was underpinned by the introduction of new games and machines and a full program of promotions and entertainment.

Table games: Total revenues were down 25.7% on last year mainly due to cessation of year round direct flights from China and a change in the mix of the Chinese tourist market (with a bias towards the lower end of the market). Compared to 2013, premium play revenues were lower in 2014 due to a lower win rate and less activity.

Rooms revenues were 6.2% higher compared to last year, due to good yield management.

Overall, food and beverage revenues held up well and were down just 1.1% on last year reflecting lower casino visitations.

The RCT valuation range in the independent experts report for the Aquis takeover was based on relative EBITDA multiples. An updated comparison based on further analysis of this result relative to other listed casinos (Crown, Echo, Sky City) could be interesting.

Nothing in this result deters my suspicion that the shenanigans around the probity dispute with OLGR last year could well have been a deliberate exit strategy by the Friendly Fung Family (FFF) to back out of the deal and defeat the implementation agreement.

Meanwhile down in Canberra the FFF have called in the painters, extended opening hours to 4am, and hired a rugby team to promote the casino.

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