Gamehost Income Fund (TSXV: GH.UN)
RED DEER, AB, Feb. 20 /CNW/ -
To our Unit holders,
The Alberta economy outpaced the rest of the country. Despite the many pressures resulting from a "hot" economy the Fund continued to deliver the highest quality services expected by our patrons. 2006 has been another banner year at Gamehost Income Fund. Financial performance at each of the Fund's retail, hotel and casino properties exceeded management's initial expectations. It is a pleasure to present the financial results for the twelve months ended December 31, 2006 (the "Period") and quarterly results for the three months ended December 31, 2006 (the "Quarter").
Row Your Boat
Consistent quarterly growth has been the Fund's hallmark since the startup in operations of the Fund in June 2003. Thirteen straight quarters of growth for anyone who's counting! Some might say we have merely ridden the wave of a strong energy sector to our success. While the energy industry has certainly been a catalyst, we have made our own contributions to the economic well being of the province. In doing so we have compounded what spin off benefits a strong energy sector provides. At the outset of operations in 2003 the Fund completed a major expansion of Great Northern Casino in Grande Prairie which has contributed steady annual growth and profitability. On November 21, 2005 management completed an ambitious joint venture construction project to build Deerfoot Inn & Casino in Calgary. On that date, the Fund hosted the opening of the province's first combined full service hotel, convention, casino and entertainment centre. It is arguably, the finest facility of its kind in the province. On completion of its first full calendar year of operations in 2006 Deerfoot Inn & Casino has shown enormous growth and great future potential. In the fall of 2005 management secured vacated space adjacent to our Boomtown Casino in Ft. McMurray. By March 2006 of the current Period the facility was completely refurbished and twice the original capacity. This facility is now well positioned to provide revenue growth into the foreseeable future. Briefly put, while the tide of the energy industry rose we picked up our paddle and pulled hard.
Winning Numbers
Revenues totaled $49.3 million and $13.5 million for the Period and Quarter. This compares to the same time frames one year earlier of $31.1 million and $9.4 million for year over year growth of 58.6% and 43.9% for the Period and Quarter respectively. Revenue growth for the Quarter versus Q3 2006 totaled $812 thousand or 6.4%.
Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $23.7 million and $6.3 million for the Period and Quarter. This compares to the same time frames one year earlier of $16.4 million and $4.2 million for year over year growth of 44.5% and 50.0% for the Period and Quarter respectively. EBITDA growth for the Quarter versus Q3 2006 totaled $154 thousand or 2.5%. If you are riding on Gamehost numbers you're riding a winner!
Best in the Class
Expressed as margin percentages, EBITDA was 48.0% and 47.0% of revenue respectively for the Period and Quarter. Compared to the same time frames one year earlier EBITDA was 53.1% and 46.0% of revenues for a year over year Period decline of 5.1 percentage points and an increase of 1.0 percentage points for the Quarter. Bonuses paid during the Quarter resulted in a decline of 1.8 percentage points in EBITDA margins versus Q3 2006 when EBITDA margins figured at 48.8%. Year over year declines in EBITDA as a percentage of revenue is largely due to the dilutive effect the new Deerfoot operations have on total operations. The Deerfoot property in general operates at lower overall margins due to higher components of lower margin food and entertainment offerings as compared to the Fund's other properties. Additionally, two large refurbishment projects of a non-capital nature for Great Northern Casino and Service Plus were undertaken during the Period. These expenses and some tactical adjustments made to salaries and wages also contributed to the Period decline in EBITDA margins. Management has done an excellent job of responding to inflationary pressures during the Period. Overall Fund margins remain the best in the North American gaming industry.
See You and Raise You
For the second time in the Fund's brief history Trustees approved a hike in the regular monthly distribution. At the startup of the Fund, distributions were set at $0.115 per unit. The first increase of $0.05 per unit to $0.12 per unit was effective January 2004 for the eighth distribution period of the Fund. The second increase of $0.03 per unit to $0.15 per unit was announced effective the thirty-fifth distribution period of the Fund in April of 2006. Can we do it again? It's your bet.
Merry Christmas or Happy New Year?
In past years significant growth in cash generated from operations has prompted Trustees to approve special year end distributions to unitholders. For the calendar years 2004 and 2005 special distributions of $0.28 per unit and $0.59 per unit respectively were made. Just prior to Christmas 2006 Trustees approved a $1.07 per unit special distribution to be paid in the New Year on January 15, 2007.
Distributions for 2006 total $2.78 per unit an increase of $0.75 per unit or 37% over total distributions of $2.03 per unit in 2005. Merry Christmas or Happy New Year? Both, we'd say.
Music Has Its Highs and Lows
In mid May 2006 Gamehost Income Fund units traded at an all time high of $41.00 per unit. Negative reaction to the Conservative Federal Finance Minister, Jim Flaherty's, "Tax Fairness Plan" announcement on October 31, 2006 saw the Fund units dip to $29.50 per unit. They are currently trading in the range of $34.50 per unit. It is yet to be seen if Mr. Flaherty's Conservative Tax Fairness Plan becomes law. Regardless of the final outcome, management of the Fund will continue to do what we have done from the outset. By developing or purchasing new opportunities in high potential markets and continuing sensible organic growth while evaluating all possible alternative strategies we will continue to provide the highest possible return to all unitholders. That still sounds like beautiful music.
Thanks a Lot
Before we turn our all of our attention to the coming year it is appropriate that we acknowledge those so instrumental in getting us to where we are. With the current labour shortage in Alberta we are most fortunate to have not just the best of available people resources; we have the best people period! Thank you to all of our employees who day in day out exemplify the word "service". And to our investors and supportive members of the investment community, thank you for your continued confidence.
To Infinity And Beyond
That may sound a bit out of reach, but we are already at a place in time well before we thought. Sentiment remains bullish for the Alberta economy in 2007 so we continue to look forward with optimism for great achievements. Now, if you'll pass us those paddles...
February 2, 2007
On behalf of Management and Trustees
Consolidated Balance Sheets
(Audited)
-------------------------------------------------------------------------
December 31, December 31,
2006 2005
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Assets
Current assets:
Cash and cash equivalents $ 8,055,044 $ 8,528,002
Accounts receivable 1,208,560 854,230
Current portion of notes receivable 28,645 26,450
Inventories 253,360 227,889
Prepaid expenses and deposits 321,962 359,906
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9,867,571 9,996,477
Note receivable 58,820 87,464
Property, plant and equipment (Note 6) 35,676,659 36,240,215
Licenses 3,500,000 3,500,000
Goodwill 42,579,216 42,579,216
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$ 91,682,266 $ 92,403,372
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Liabilities and unit holder equity
Current liabilities:
Accounts payable and accrued liabilities $ 2,224,290 $ 3,393,501
Term loans 10,397,157 14,092,035
Due to related parties 135,451 35,481
Unit holder distributions payable 8,583,738 4,995,454
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21,340,636 22,516,471
Class B limited partnership units 35,583,320 35,358,688
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56,923,956 57,875,159
Unit holders' equity 34,758,310 34,528,213
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$ 91,682,266 $ 92,403,372
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Consolidated Statements of Operations
(Audited)
-------------------------------------------------------------------------
(Un-audited)
twelve months three months
ended December 31 ended December 31
--------------------------- ---------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Revenue
Hotel - rooming $ 7,515,704 $ 4,041,755 $ 2,030,431 $ 1,176,106
Table games 6,949,878 4,595,892 1,855,177 1,341,509
Slot machines 20,309,591 14,130,394 5,238,639 4,089,723
Food and
beverage
services 10,253,216 5,537,074 3,186,757 1,973,083
Lease and rental 313,329 288,374 76,482 66,390
Other 3,951,920 2,492,027 1,097,650 727,125
------------- ------------- ------------- -------------
49,293,638 31,085,516 13,485,136 9,373,936
------------- ------------- ------------- -------------
Expenses
Cost of goods
sold 3,674,967 2,215,861 1,071,148 797,733
Human resources 12,833,921 7,137,017 3,501,499 2,460,518
Marketing and
promotions 1,540,423 812,727 481,366 296,725
Operating 5,753,629 3,330,383 1,632,108 1,154,715
Corporate and
general
administration 1,829,586 1,161,076 458,278 423,492
------------- ------------- ------------- -------------
25,632,526 14,657,064 7,144,399 5,133,183
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Earnings before
amortization and
income
allocation to
Class B
Limited Partners 23,661,112 16,428,452 6,340,737 4,240,753
Amortization 2,482,508 1,088,115 675,165 383,014
Interest charges 1,168,115 - 220,300 -
Income allocation
to Class B
Limited
Partners 9,797,270 7,812,935 2,666,041 1,888,775
------------- ------------- ------------- -------------
Net income $ 10,213,219 $ 7,527,402 $ 2,779,231 $ 1,968,964
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per
unit
(x) Weighted
average
and fully
diluted $ 2.844 $ 2.180 $ 0.774 $ 0.548
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(x) Based on Net income before Income allocation to Class B Limited
Partners against total units (all classes) issued and outstanding.
This release may contain forward-looking statements. Forward-looking statements may contain words such as "anticipates", "believes", "could", "expects", "indicates", "plans" or other similar expressions that suggest future outcomes or events. Use of these statements reflect reasonable assumptions made on the basis of management's current beliefs with information known by management at the time of writing. Many factors could cause actual results to differ from the results discussed in forward-looking statements.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.