Reef Casino Caned By Punters, Losses
Sydney Morning Herald
Sunday October 13, 1996
Cairns casino operator Reef Casino Trust has suffered a shock $5.9-million loss in the three months to September because of a significant shortfall in rental revenues and abnormal gaming losses.
Reef's directors said in a statement the trust made a loss in the first quarter instead of a budgeted profit of $900,000 and had breached the interest cover covenant required under its finance facility. Reef, which is chaired by the Australian Olympic Committee president, Mr John Coates, will hold talks with the trust's financiers to seek a waiver on the covenant.
The revelation, after the market closed last Friday, is likely to rock Reef's units. The units had improved recently to close last week at 52c each after plumbing 43c in September following its disappointing $26.8 million net operating loss for its first five months of operation.
Directors said that $4 million of the first quarter loss was incurred in August when the casino's gross gaming revenue was affected by abnormal junket gaming losses. Such one-off profits and losses were "part and parcel" of the business, they said.
Although hotel revenue approached budget in the first quarter of 1997, casino revenue was below estimates.
A breakdown showed that instead of budgeted $6.29 million in rental revenues for the quarter there was a $511,000 shortfall. Casino revenue was $11.31 million versus a budgeted $18.89 million while hotel revenue was virtually on target at $4.33 million.
One encouraging sign was that the Reef Hotel Casino complex had 390,000 visitors through the doors compared with the 350,000 expected.
To help the trust's financial position Reef has struck a deal with the lessee of the hotel to supplement revenue in the light of lower trading than expected in the first eight months of operations.
Touraust Corp, the holding company of the hotel operator, Australis Hotels, has agreed to guarantee a contribution to the trust of up to $850,000, for this financial year, irrespective of the results from the operations of the hotel and food and beverage.
This commitment compares with a budgeted contribution from Australis of $1.28 million.
Reef said the guaranteed contribution would be achieved, if necessary, by both Reef Corporate Services and Australis Hotels forgoing fees to which they were entitled.
The opening of Reef Hotel Casino coincided with a disappointing period for tourism in Cairns.
© 1996 Sydney Morning Herald
