Western Cape Business News

Send  Share  RSS  Twitter  23 Oct 2008

GAMBLING: Our Gambling Houses are Struggling


Recent Western Cape Business News

WESTERN Cape based casinos came under a bit of strain in the first half of 2008 as tougher trading conditions – caused mainly by a squeeze on disposable income – took its toll.

But most contenders still seem willing to invest in the existing casinos – which suggests that longer term prospects are still rosy.

The region’s flagship casino, Sun International’s GrandWest in Cape Town, managed encouraging revenue growth of 10% to over R1.7 billion and maintained its trading margins well above 40% in the year to end June.

But net profits fell slightly to R591 million (last year R594 million) due to higher costs associated with the enlarged casino and entertainment facilities as well as higher effective casino levies.

Sun International though is looking forward with some confidence after the R450 million GrandWest expansion was completed in the first half of the year. This includes a multipurpose arena and the refurbished non-smoking casino, which opened in October and December 2007 respectively.

The recently opened Golden Valley casino in Worcester also looks promising with revenues of R87 million, gross profits of R14 million and net profits of R10 million.

Things should pick up pace at the Golden Valley in the year ahead as the R65 million Golden Valley Lodge was opened in March 2008. Sun International says trading at the casino has already improved markedly as a result of the lodge opening.

Further east, the Garden Route Casino – operated by Gold Reef Resorts – increased revenue by a sliver to R81 million but saw a 3% decline in profits to R39 million for the half-year to end June.

Gold Reef Resorts has a development project in the planning phase, which will include additional food and beverage and entertainment facilities at the Garden Route casino.

On the West Coast it was Mykonos casino that seemed to suffer the most in more trying economic conditions. Gold Reef Resorts reports that gaming revenue came under pressure with a 2% drop in turnover to R56 million.

The profit drop was a more pronounced 7% to R24 million as margins were eroded during the period.

Still Gold Reef was prepared to spend R10 million on a refurbishment programme that will add 22 slots to ‘relieve capacity constraints during the busy holiday season.’

The Caledon Hotel, Spa and Casino appears to be also facing a trading squeeze.

The company’s Nasdaq listed parent Century Casinos reported that operating revenue increased slightly to R31.6 million for the second quarter of 2008.

But Century Casinos adds that the casino’s share of the Western Cape gaming revenue declined from 5% for the second quarter of 2007 to 4.7% for the second quarter of 2008.

Century Casinos notes that in June 2007, a competitor (Sun International) added 500 slot machines to its gaming floor - representing a 16% increase in gaming positions in the Western Cape. The net effect was that the Caledon Hotel, Spa and Casino’s net profits for the second quarter of 2008 was under $1.4 million – well off the R1.7 million earned in the previous quarter.

The Caledon Hotel, Spa and Casino’s net operating revenue was $8.3 million for the six months – slightly down on the same period last year ($8.8 million).

In rand terms, the performance from Caledon looks a little better – being R63 million net operating revenue for the six months ending June 2008. This matches the net operating revenue recorded in the same period in 2007.

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