RED DEER, AB, Nov. 13 /CNW/ - Gamehost Income Fund (the "Fund) (TSX.V: GH.UN)
Much has changed in the world since our last interim report. Fallout from the subprime mortgage debacle in the United States and the resulting credit collapse has now spilled into stock exchanges the world over. The unwinding of leveraged positions as companies and lenders look to shore up their balance sheets and investors moving to the safety of cash has put excessive pressure on stock valuations. Is it over done? Time will tell, but one thing is for sure, well performing companies with prudent management and solid balance sheets have been swept up in the flood.
In our last interim report we had already begun to discuss this changing economic reality. Given the rising global and local headwinds, management and trustees of Gamehost Income Fund (the "Fund") are very pleased with results for the three months ended September 30, 2008 (the "Quarter"). Northern properties have shown surprising resilience, while Calgary property performance has been tempered by a more competitive landscape. Results include, for the first time, a complete quarter of operations from the new Stampede Casino.
Revenues for the Quarter totaled $14.4 million up marginally by 0.7% from the $14.3 million posted in Q3 2007 but up 6.2% from the previous quarter when revenue totaled $13.5 million. The new Stampede Casino together with Boomtown Casino gave enough to offset year over year declines at other Fund properties.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Quarter totaled $6.2 million down 10.2% from $6.9 million recorded in Q3 2007 and down marginally by 1.5% to the previous quarter's $6.3 million. EBITDA margins for the Quarter declined to 43.3% off 5.2% from one year earlier and down 3.7% from the previous quarter. The Stampede Casino took some luster off EBITDA margin performance which is to be expected with a startup property.
Fallout created by the collapse of the USA subprime mortgage industry is having a profound impact on many organizations' ability to raise or renew required capital. In this regard the Fund is in an enviable position. The Fund has relatively little debt all placed with Canadian chartered banks. The International Monetary Fund rates the Canadian banking system to be in the strongest financial position of all the world's banking systems. The Fund's total combined debt is secured by 'brick and mortar' assets and real estate that produce strong cash flow. The bulk of this debt is committed for periods ranging from three to five years in the future. Furthermore, the Fund is benefiting from continued pressure on the Bank of Canada to lower interest rates with all the Fund's debt being tied to variable lending rates.
The Fund made consistent payments of $0.0733 per unit throughout the Quarter. The Fund has maintained a conservative payout ratio on regular monthly distributions. For the nine months ended September 30, 2008 (the "Period") the Fund's payout ratio on Standardized Distributable Cash sits at 84.1%. We remain confident in the Fund's ability to sustain current levels of distributions to unit holders.
Boomtown Casino and Service Plus Inns & Suites continued to put up impressive results into November of 2008. To the end of Q3 2008 Boomtown Casino posted year over year growth of 8% and narrowly missed achieving record revenue for the Quarter. In Grande Prairie, despite significant added room capacity in the area, Service Plus Inns & Suites hotel is proving that premier location and more effective management can go head to head with those that choose to compete on price alone. Average Daily Rates (ADR) for the hotel have remained steady and the property continues to hold an overweight share of the market. Our Great Northern Casino too, showed signs of life during the Quarter. Our Grande Prairie casino had struggled following the introduction of non-smoking and depressed natural gas prices at the beginning of the year. With the recovery of natural gas prices mid year activity was picking up in the oil patch and the benefits were being realized in the Casino.
Interim Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
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nine months ended three months ended
September 30 September 30
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2008 2007 2008 2007
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Revenue
Hotel - rooming $ 6,324,696 $ 6,549,214 $ 2,264,988 $ 2,267,709
Table games 6,081,266 6,009,878 2,320,675 1,928,139
Slot machines 16,265,480 17,392,196 5,544,712 5,954,327
Food & beverage
services 8,722,125 8,939,773 2,924,634 2,841,052
Lease and rental 243,297 238,977 79,592 79,659
Other 3,619,024 3,578,116 1,243,508 1,208,995
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41,255,888 42,708,154 14,378,109 14,279,881
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Expenses
Cost of goods sold 2,796,062 2,940,278 963,868 923,099
Human resources 10,876,563 10,838,714 3,895,583 3,614,256
Marketing and
promotions 1,981,504 1,609,508 756,920 558,835
Operating 5,171,745 4,749,883 2,010,841 1,677,935
Corporate and
general
administration 1,577,348 1,526,540 522,150 573,138
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22,403,222 21,664,923 8,149,362 7,347,263
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Earnings before the
following: 18,852,666 21,043,231 6,228,747 6,932,618
Interest charges 1,042,349 832,365 380,828 283,231
Future income
taxes (recoveries) (54,135) 2,336,319 43,089 2,336,319
Amortization of
property, plant
and equipment 1,621,182 1,661,101 618,730 553,700
Amortization of
licenses - 3,500,000 - 3,500,000
Earnings
allocation to
minority interest 7,952,814 6,224,587 2,539,149 126,986
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Net earnings and
comprehensive
income $ 8,290,456 $ 6,488,859 $ 2,646,951 $ 132,382
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Earnings per unit,
basic and fully
diluted $ 0.770 $ 0.602 $ 0.246 $ 0.012
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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 June 30, 2008 will be available August 14, 2008 on the company's website at www.gamehost.ca and on SEDAR at www.sedar.com.
%SEDAR: 00019487E