RED DEER, AB, May 13 /CNW/ - Gamehost Income Fund (the "Fund) (TSX.V: GH.UN)
Management and Trustees of Gamehost Income Fund (the "Fund") are pleased to report results for the three months ended March 31, 2008 (the "Quarter"). Results for the Quarter will contrast what investors have come to expect from the Fund each quarter. Lower results for the Quarter were anticipated by management. The mid-December 2007 opening of a new casino in Calgary and province wide non-smoking legislation affecting all but First Nations gaming operations came into effect January 1, 2008. These two events had an unfavourable impact on Q1 2008 results of the Fund.
Revenues for the Quarter totaled $13.3 million down 5.3% from the $14.1 million posted in Q1 2007 and down 10.6% from the previous quarter when revenue totaled $14.9 million. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Quarter totaled $6.3 million down 10.1% from $7.0 million recorded in Q1 2007 and down 13.9% from $7.3 million in the previous quarter. EBITDA margins for the Quarter remain the highest in the industry at 47.2% despite falling 2.5% when compared to 49.7% a year earlier. Compared to the previous quarter, EBITDA margins were lower by 1.8% from 49.0%. The first quarter is behind us and so now is the initial customer response to a non-smoking reality and new competition.
Some things go together like peanut butter and Jam. Operating results for the Quarter indicate that smoking and gaming are two such things. Well, you can't have a peanut butter and jam sandwich at school any more (allergies) and you can no longer smoke at our casinos (the law). Results for the Quarter reflect the impact of Alberta's new Tobacco Reduction Act that became effective January 1, 2008. The Act prohibits smoking within a specified distance from the windows, doorways and air intakes of public places to protect indoor air quality. The adverse impact on profits caused by non-smoking legislation have been felt in varying degrees by all gaming facility operators in the province that are not operating on First Nation reserves.
People react to change, but they adjust. Our longer term direct experience at Boomtown Casino in Ft. McMurray shows us that the adverse impact of non-smoking can be erased in a relatively brief period. The City of Ft. McMurray implemented a non-smoking bylaw September 1, 2007 ahead of Alberta's province wide smoking ban. Now, seven months later, Boomtown Casino has regained all volume lost from the start of the smoking ban and in March 2008 set a new record for slot cash play.
If we've learned anything from our experience at Boomtown, it's that the non-smoking issue can be overcome in a relatively brief period. We see the impact of non-smoking diminishing over time and in fact providing longer term growth potential. The larger non-smoking demographic segment of the population can now associate social occasional gaming with a healthy breathing environment. This will undoubtedly open our doors to a growing body of entertainment seekers.
First press released on April 10, 2008, Trust Units of the Fund were split 3 for 1 and began trading on a post split basis effective April 21, 2008. Trustees of the Fund believe the move to split the Fund's units will lead to more liquidity in trading of the Fund's units and encourage a wider retail investor base by lowering the entry price for the Fund units. An announcement that the Fund had received conditional approval by the Toronto Stock Exchange ("TSX") for graduation to the TSX from the smaller TSX Venture Exchange ("TSXV") was made at the same time. Trustees approved the move to the larger exchange believing it would increase national and international awareness of the Fund and attract interest in the Fund from a significantly larger investor base. In the same press release the Fund announced that it would be increasing the regular monthly cash distribution rate by 10%. Impact of the smoking ban and additional competition all tallied, the Fund's $0.0667 per unit (post split) regular monthly cash distribution continued to produce a healthy surplus of distributable cash through the Quarter. Trustees of the Fund approved the increase to $0.0733 per unit (post split) believing the new rate of distribution to be sustainable in the long term. These three announcements added up to one big move in the market as units of the Fund rose sharply on active trading following the news.
Work on the new Stampede Casino is progressing on schedule for a June 2008 opening in time for the "Greatest Outdoor Show on Earth", Calgary's famed ten day rodeo and summer fair. The Fund's 20% Participating Interest in this new joint venture will add a new growth leg to the Fund. Located on the expansion grounds at the Calgary Exhibition & Stampede the new Stampede Casino is the anchor project to a master redevelopment plan that will eventually include an office tower, hotels and a walking promenade fronted by retail shops and restaurants. The new Stampede Casino, at the entrance to Stampede Park, will immediately have access to the highest volume of foot traffic in the city as the exhibition grounds host millions of people annually at the fair, trade shows and sporting events.
Unusually strong shoulder season commodity prices for natural gas may be signaling we've seen the bottom in the economic slow down that has affected Grande Prairie since mid 2006. A number of large financings recently in the oil and gas sector provide evidence that optimism is prevailing for a recovery towards the end of 2008. Even Grande Prairie's forestry sector should take some comfort in believing they have seen the worst of their fortunes already. A conversion to ticket in/ticket out ("TITO") slot machines in mid-March 2008 at Great Northern Casino in Grande Prairie will speed the recovery at our own operations.
Ft. McMurray continues to thrive in a bubble of its own. Strong commodity prices for oil and world wide interest in the oil sands continue to fuel high levels of activity throughout the area.
The high growth area surrounding the Deerfoot Joint Venture will see the opening of significant commercial office space and a new limited service hotel before the end of the year. We view both of these events as very positive news as they will add foot traffic to our Deerfoot Joint Venture property.
The opening of the new Stampede Casino is a highly anticipated event for the high profile Calgary Exhibition & Stampede. We are very excited about this new venture and the long term potential of the property.
We expected Q1 2008 to be a tough one and that the impact of non-smoking and new competition would hit hardest at the outset. If this is as bad as it gets, then the rest of the year looks encouraging. We wouldn't trade places with anyone right now. We are right where we want to be, doing business in arguably the best economic area of North America, with significant growth on the horizon.
Interim Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
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three months ended March 31
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2008 2007
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Revenue
Hotel - rooming $ 2,070,375 $ 2,237,296
Table games 1,910,284 2,083,808
Slot machines 5,183,454 5,485,784
Food & beverage services 2,895,744 3,079,031
Lease and rental 84,160 79,659
Other 1,188,988 1,117,697
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13,333,005 14,083,275
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Expenses
Cost of goods sold 912,770 1,015,767
Human resources 3,470,949 3,529,000
Marketing and promotions 552,055 464,041
Operating 1,523,371 1,521,766
Corporate and general administration 574,077 548,420
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7,033,222 7,078,994
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Earnings before the following: 6,299,783 7,004,281
Interest charges 303,496 264,212
Future income taxes 23,867 -
Amortization of property, plant and
equipment 501,458 553,700
Earnings allocation to minority interest 2,678,620 3,028,888
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Net earnings and comprehensive income
(note 6) $ 2,792,342 $ 3,157,481
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Earnings per unit, basic and fully diluted
(post 3 for 1 split) $ 0.259 $ 0.293
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See accompanying notes to financial statements
This press 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. Actual results may not be consistent with these forward-looking statements.
The Fund is an unincorporated open-ended limited purpose trust established under the laws of the Province of Alberta. The Fund's activities are currently confined to the Province of Alberta, Canada. Operations include the Boomtown Casino in Ft. McMurray, the Great Northern Casino, Service Plus Inns & Suites and a strip mall all located in Grande Prairie. The Fund is also a 40% joint venture partner in the Deerfoot Inn & Casino in Calgary and a 20% joint venture partner in the new Stampede Casino in Calgary.
Complete consolidated interim financial statements and MD&A for the three months ended March 31, 2008 will be available March 13, 2008 on the company's website at www.gamehost.ca and on SEDAR at www.sedar.com.
%SEDAR: 00019487E