Great Canadian Gaming Announces Second Quarter 2019 Results
COQUITLAM, BC, Aug. 13, 2019 /CNW/ - Great Canadian Gaming Corporation [TSX:GC] ("Great Canadian," or "the Company") today announced its financial results for the three month period ended June 30, 2019 (the "second quarter").
SECOND QUARTER 2019 HIGHLIGHTS
- On June 27, 2019, the Company sold all the shares of its wholly-owned subsidiary, Great American Gaming Corporation ("Great American"), which represented the Company's U.S. region, for proceeds of US$56.0 million ($73.4 million in Canadian dollars), resulting in a gain of $47.0 million in Canadian dollars (or $0.80 per common share in the second quarter), net of associated income taxes.
- Revenues(1) of $354.4 million in the second quarter, an increase of 20% when compared to the same period in the prior year.
- Adjusted EBITDA(1)(2)(3) of $153.7 million in the second quarter, which included a $20.5 million positive impact from IFRS 16 adoption. Adjusted EBITDA of $122.7 million in the same prior year period.
- Shareholders' net earnings from continuing operations(1)(3) of $48.0 million or $0.81 per common share in the second quarter, which included the negative impact from IFRS 16 adoption of $2.2 million or $0.04 per common share. Shareholders' net earnings from continuing operations(1) of $40.6 million or $0.66 per common share in the same prior year period.
- On April 24, 2019, Great Canadian announced that it has completed agreements with the Ontario Lottery and Gaming Corporation ("OLG") and the owners of Ajax Downs racetrack to continue operations at Casino Ajax beyond the opening of the Company's new Pickering Casino Resort. The Company will operate Casino Ajax up to March 31, 2026, plus an extension at the Company's option for an additional 12 year term.
- During the second quarter, the Company purchased for cancellation 472,900 common shares at a weighted-average price per share of $42.12 under the normal course issuer bid ("NCIB") that expired on July 2, 2019. The Company received approval from the TSX and renewed the NCIB on July 3, 2019, which expires on July 2, 2020.
"The second quarter ended with the successful completion of the sale of Great American, which now allows Great Canadian to focus on its core growth markets as we continue to execute on our operational and development plans for 2019 and beyond," stated Rod Baker, the Company's Chief Executive Officer. "This includes the upcoming launch of the new world-class casino resort in Pickering, Ontario, which will be called Pickering Casino Resort. The casino building, including related food and beverage amenities, are expected to complete by the end of the first quarter of 2020. We also launched expanded gaming at Elements Casino Mohawk on May 10, 2019 – the gaming facility now features 1,500 slot machines and 60 table games. In addition, we worked diligently with OLG to extend operations at Casino Ajax beyond the opening of Pickering Casino Resort, allowing this gaming and horse racing facility - that was previously expected to close - to continue making economic contributions to the community it serves."
_____________________________________ |
|
(1) |
Excluded results of the U.S. region, which have been presented as discontinued operations. |
(2) |
Adjusted EBITDA is a non-IFRS measure, as described in the disclaimer section of this press release, and excludes discontinued operations. |
(3) |
2019 financial results reflect the adoption of IFRS 16, Leases ("IFRS 16"), as described in the Financial Review section of this press |
FINANCIAL REVIEW
Revenues increased during the second quarter of 2019, when compared to the same period in the prior year, which was primarily attributable to a full quarter of operations from the West GTA Gaming Bundle (acquired by the Company on May 1, 2018), new revenues from the introduction of table games at Woodbine, and expanded gaming capacity at Elements Casino Mohawk. Revenues also increased from the East Gaming Bundle due to the additional revenues from Shorelines Casino Peterborough, which opened on October 15, 2018 and continuation of Shorelines Slots at Kawartha Downs, which re-opened under agreed terms on December 19, 2018. Revenues increased in the B.C. region for the quarter ended June 30, 2019 when compared to the same prior year period, primarily from Hard Rock Casino Vancouver, which experienced a labour disruption in the prior year that resulted in limited gaming and hospitality offerings for a portion of 2018.
Adjusted EBITDA increased during the second quarter, when compared to the same period in the prior year, mainly due to the accounting impact of IFRS 16, the new lease accounting standard adopted on January 1, 2019. The increase in Adjusted EBITDA was also attributable to the above mentioned increased revenues in the Ontario region, partially offset by increased operating costs related to expanded gaming in Ontario. Readers are cautioned that the financial results for the comparative period in 2018 have not been adjusted for IFRS 16.
Shareholders' net earnings from continuing operations increased during the second quarter, when compared to the same period in the prior year, due to an increase in Adjusted EBITDA, and decreases in share-based compensation and business acquisition, restructuring and other costs, partially offset by an increase in income taxes and the net effect of adopting IFRS 16.
Implementation of IFRS 16:
IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all material leases.
The following are the key changes in the second quarter, when compared to the same quarter in 2018, due to adoption of IFRS 16:
- As at June 30, 2019, the Company had right-of-use assets of $1,010.2 and lease liabilities, including current portion, of $975.2, which primarily consist of the Company's property leases.
- Adjusted EBITDA was increased by $20.5 million due to certain lease payments, previously recognized as "property, marketing and administration" expense, being recorded against lease liabilities.
- Amortization expense was increased by $13.1 due to amortization of right-of-use assets, and interest and financing costs, net, was increased by $13.1 due to interest accretion on lease liabilities.
- Net earnings was decreased by $4.9 million and Shareholders' net earnings was decreased by $2.2 million.
See Great Canadian's Condensed Interim Consolidated Financial Statements and Management's Discussion & Analysis for the three and six months ended June 30, 2019 for further information.
OUTLOOK
"2019 is a year of significant capital expenditures as we build our infrastructure in Ontario to execute our strategic plan. We have already accomplished several major milestones in the first half of the year, including the new building addition at Great Blue Heron Casino, as well as the previously mentioned gaming expansion at Elements Casino Mohawk. For the remainder of 2019, we continue to work towards completing several developments in Ontario, particularly at Elements Casino Flamboro and Elements Casino Grand River, which will include expanded gaming and new food and beverage offerings. As we unveil the completed projects in the coming months and years, we expect to see the fruition of our investments in Ontario for many years to come."
"Great Canadian continues to apply a disciplined approach to use of capital and to explore opportunities that will improve our business and increase value to our shareholders. As at June 30, 2019, the Company remains in a strong financial position with cash of $407.6 million, available capacity of $397.0 million on the Senior Secured Credit Facilities, available capacity of $859.8 million on OTG's revolving and capital expenditures credit facilities, and $137.5 million on the revolving credit facility of OGWGLP, subject to compliance with the related financial covenants," concluded Mr. Baker.
CONFERENCE CALL
Great Canadian will host a conference call for investors and analysts today, August 13, 2019, at 2:00 PM Pacific Time in order to review the financial results for the quarter ended June 30, 2019. To participate in the conference call, please dial 416-764-8688, 778-383-7413, or toll free at 1-888-390-0546. Questions will be reserved for analysts and institutional investors. Interested parties may also access the call via the Investor Relations section of the Company's website, www.gcgaming.com. Investors using the website should allow 15 minutes for the registration and installation of any necessary software. A replay of the call will also be available at www.gcgaming.com.
ABOUT GREAT CANADIAN GAMING CORPORATION
Founded in 1982, Great Canadian Gaming Corporation is a B.C. based company that operates 25 gaming, entertainment and hospitality facilities in Ontario, British Columbia, New Brunswick, and Nova Scotia. Fundamental to the Company's culture is its commitment to social responsibility. "PROUD of our people, our business, our community" is Great Canadian's brand that unifies the Company's community, volunteering and social responsibility efforts. Under the PROUD program, Great Canadian annually supports over 1,400 charitable and non-profit organizations across Canada. In each Canadian gaming jurisdiction, a significant portion of gross gaming revenue from gaming facilities is retained by our crown partners on behalf of their provincial government for the purpose of supporting programs like healthcare, education and social services.
Please refer to the Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis at www.gcgaming.com or www.sedar.com (available on August 14, 2019) for detailed financial information and analysis.
GREAT CANADIAN GAMING CORPORATION
Financial Highlights
(Unaudited - Expressed in millions of Canadian dollars, except for per share information)
The financial results below are unaudited and prepared by management. Expressed in millions of Canadian dollars, except for per share information.
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2019(1) |
2018(2) |
% Chg |
2019(1) |
2018(2) |
% Chg |
||||||
Revenues |
$ |
354.4 |
$ |
295.2 |
20% |
$ |
657.2 |
$ |
515.7 |
27% |
|
Human resources |
107.3 |
85.2 |
26% |
213.3 |
154.6 |
38% |
|||||
Property, marketing and administration |
94.1 |
88.0 |
7% |
182.1 |
152.2 |
20% |
|||||
Share of profit of equity investment(3) |
(0.7) |
(0.7) |
0% |
(1.3) |
(1.3) |
0% |
|||||
200.7 |
172.5 |
16% |
394.1 |
305.5 |
29% |
||||||
Adjusted EBITDA |
$ |
153.7 |
$ |
122.7 |
25% |
$ |
263.1 |
$ |
210.2 |
25% |
|
Human resources as a % of Revenues |
30.3% |
28.9% |
32.5% |
30.0% |
|||||||
Adjusted EBITDA as a % of Revenues |
43.4% |
41.6% |
40.0% |
40.8% |
|||||||
Less: |
|||||||||||
Amortization |
36.8 |
20.9 |
74.2 |
37.0 |
|||||||
Share-based compensation |
0.7 |
4.7 |
4.4 |
6.9 |
|||||||
Interest and financing costs, net |
22.6 |
12.8 |
44.8 |
21.7 |
|||||||
Business acquisition, restructuring and other(3) |
2.6 |
6.9 |
4.5 |
12.4 |
|||||||
Gain on sale of land |
- |
- |
(6.6) |
- |
|||||||
Foreign exchange gain |
(0.1) |
(0.3) |
(0.4) |
(0.9) |
|||||||
Income taxes |
17.7 |
15.1 |
28.6 |
26.0 |
|||||||
Net earnings from continuing operations |
$ |
73.4 |
$ |
62.6 |
17% |
$ |
113.6 |
$ |
107.1 |
6% |
|
Net earnings attributable to discontinued operations(2) |
$ |
48.8 |
$ |
1.4 |
$ |
50.4 |
$ |
2.2 |
|||
Net earnings |
$ |
122.2 |
$ |
64.0 |
91% |
$ |
164.0 |
$ |
109.3 |
50% |
|
Net earnings from continuing operations attributable to: |
|||||||||||
Shareholders of the company |
$ |
48.0 |
$ |
40.6 |
$ |
79.0 |
$ |
69.0 |
|||
Non-controlling interests |
25.4 |
22.0 |
34.6 |
38.1 |
|||||||
$ |
73.4 |
$ |
62.6 |
17% |
$ |
113.6 |
$ |
107.1 |
6% |
||
Net earnings attributable to: |
|||||||||||
Shareholders of the company |
$ |
96.8 |
$ |
42.0 |
$ |
129.4 |
$ |
71.2 |
|||
Non-controlling interests |
25.4 |
22.0 |
34.6 |
38.1 |
|||||||
$ |
122.2 |
$ |
64.0 |
91% |
$ |
164.0 |
$ |
109.3 |
50% |
||
Shareholders' net earnings per common share from continuing operations |
|||||||||||
Basic |
$ |
0.81 |
$ |
0.66 |
$ |
1.34 |
$ |
1.13 |
|||
Diluted |
$ |
0.79 |
$ |
0.64 |
$ |
1.30 |
$ |
1.09 |
|||
Shareholders' net earnings per common share |
|||||||||||
Basic |
$ |
1.64 |
$ |
0.69 |
$ |
2.20 |
$ |
1.17 |
|||
Diluted |
$ |
1.59 |
$ |
0.66 |
$ |
2.13 |
$ |
1.13 |
|||
Weighted average number of common shares (in thousands) |
|||||||||||
Basic |
59,097 |
61,116 |
58,932 |
61,043 |
|||||||
Diluted |
60,747 |
63,671 |
60,868 |
63,259 |
|||||||
June 30, |
December 31, |
||||||||||
2019 |
2018 |
||||||||||
Cash |
$ |
407.6 |
$ |
336.8 |
21% |
||||||
Total assets |
$ |
2,748.1 |
$ |
1,601.8 |
72% |
||||||
Long-term debt |
$ |
666.1 |
$ |
631.6 |
5% |
||||||
(1) |
2019 financial results reflect the adoption of IFRS 16, as described in the Financial Review section of this press release. Comparative |
(2) |
The results of the U.S. region, including proceeds from the disposition of Great American, have been presented as discontinued |
(3) |
In calculating Adjusted EBITDA for the three and six months ended June 30, 2018, "share of profit of equity investment" does not include |
DISCLAIMER
This press release contains certain "forward-looking information" or statements within the meaning of applicable securities legislation. Forward-looking information is based on the Company's current expectations, estimates, projections and assumptions that were made by the Company in light of historical trends and other factors. Forward-looking statements are frequently but not always identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "targeted", "planned", "possible" or similar expressions or statements that events, conditions or results "will", "may", "could" or "should" occur or be achieved. All information or statements, other than statements of historical fact, are forward-looking information, including statements that address expectations, estimates or projections about the future, the Company's strategy for growth and objectives, expected future expenditures, costs, operating and financial results, expected impact of future commitments, the impact of conditions imposed on certain VIP players, the impact of unionization activities and labour organization, the Company's position on its claim against the British Columbia Lottery Corporation ("BCLC") with respect to the collection of marketing contributions, the Company's beliefs about the outcome of its notices of objection and subsequent appeals challenging the Canada Revenue Agency's reassessments and its tax position on its facility development commission prevailing, the Company's expected facility investment commission amounts and the Company's projected future investments to obtain facility investment commission, the terms and expected benefits of the normal course issuer bid, the Company's expected share of BC horse racing industry revenue in future years, the Company and its affiliates meeting threshold revenue growth amounts in the Ontario gaming industry in future years, the Company's projected timeline for future development, and expectations and implications of changes in legislation and government policies, volatile gaming holds, the effects of competition in the market and potential difficulties in employee retention and recruitment. Such forward-looking information is not a guarantee of future performance and may involve a number of risks and uncertainties.
Although forward-looking information is based on information and assumptions that the Company believes are current, reasonable and complete, they are subject to unknown risks, uncertainties, and a number of factors that could cause actual results to vary materially from those expressed or implied by such forward-looking information. Such factors may include, but are not limited to: compliance with the terms of new operational services agreements with lottery corporations; changes to gaming laws and regulations that may impact the operational services agreements; pending, proposed or unanticipated regulatory or policy changes (including those related to anti-money laundering legislation or policy that may impact VIP play), volatile gaming holds, the effects of competition in the market; the development of properties in Ontario and transitioning of operations to the Company and affiliates; the Company's ability to obtain and renew required business licenses, leases, and operational services agreements; unanticipated fines, sanctions and suspensions imposed on the Company by its regulators; impact of global liquidity and credit availability; actual and possible reassessments of the Company's prior tax filings by tax authorities; the results of the Company's notices of objection and subsequent appeals challenging reassessments received by the Canada Revenue Agency; the Company's tax position on its facility development commission prevailing; the results of the Company's litigation with BCLC; adverse tourism trends and further decreases in levels of travel, leisure and consumer spending; competition from established competitors and new entrants in the gaming business; dependence on key personnel; the timing and results of collective bargaining negotiations and potential labour disruption; adverse changes in the Company's labour relations; the Company's ability to manage its capital projects and its expanding operations in jurisdictions where it operates; the risk that systems, procedures and controls may not be adequate to meet regulatory requirements or to support current and expanding operations; potential undisclosed liabilities and capital expenditures associated with acquisitions; negative connotations linked to the gaming industry; the risk associated with partnership relationships; First Nations rights with respect to some land on which the Company conducts operations; future or current legal proceedings; construction disruptions; financial covenants associated with credit facilities and long-term debt; credit, liquidity and market risks associated with our financial instruments; interest and exchange rate fluctuations; demand for new products and services; fluctuations in operating results; economic uncertainty and financial market volatility; technology dependence; privacy breaches or data theft; integration of acquired properties in Ontario; and changes to anti-money laundering procedures and protocols including additional requirements for determining source of funds. The Company cautions that this list of factors is not exhaustive. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. These factors and other risks and uncertainties are discussed in the Company's continuous disclosure documents filed with the Canadian securities regulatory authorities from time to time, including in the "Risk Factors" section of the Company's Annual Information Form for fiscal 2017, and as identified in the Company's disclosure record on SEDAR at www.sedar.com.
The forward-looking information in documents incorporated by reference speaks only as of the date of those documents. The Company believes that the expectations reflected in forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct. Readers are cautioned not to place undue reliance on the forward-looking information. The Company undertakes no obligation to revise forward-looking information to reflect subsequent events or circumstances except as required by law. The forward-looking information contained herein is made as of the date hereof, is subject to change after such date, and is expressly qualified in its entirety by cautionary statements in this press release.
The Company has included non-International Financial Reporting Standards ("non-IFRS") measures in this press release. Adjusted EBITDA, as defined by the Company, means earnings before interest and financing costs (net of interest income), income taxes, depreciation and amortization, share-based compensation, business acquisition, restructuring and other, gain on sale of land, and foreign exchange gain. Adjusted EBITDA is derived from the Condensed Interim Consolidated Statements of Earnings and Other Comprehensive Income, and can be computed as revenues less human resources expenses and property, marketing and administration expenses plus the share of profit of equity investments relating to principal operating entities. Unless otherwise noted, Adjusted EBITDA for the current and comparative periods exclude the results of discontinued operations. The Company believes Adjusted EBITDA is a useful measure because it provides information to management about the operating and financial performance of the Company and its ability to generate operating cash flow to fund future working capital needs, service outstanding debt, and fund future capital expenditures. Adjusted EBITDA is also used by investors and analysts for the purpose of valuing the Company. Items of note may vary from time to time and in this press release include pre-opening costs, restructuring severance costs, impairment reversal of long-lived assets, facility development commission revenues previously deferred at Casino Nanaimo, other and the related income taxes thereon.
Readers are cautioned that these non-IFRS definitions are not recognized measures under International Financial Reporting Standards ("IFRS"), do not have standardized meanings prescribed by IFRS, and should not be construed to be alternatives to net earnings determined in accordance with IFRS or as indicators of performance or liquidity or cash flows. The Company's method of calculating these measures may differ from methods used by other entities and accordingly our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions. The Company uses these measures because it believes they provide useful information to both management and investors with respect to the operating and financial performance of the Company.
ON BEHALF OF
GREAT CANADIAN GAMING CORPORATION
"Original Signed By Rod N. Baker"
_____________________
Rod N. Baker
Chief Executive Officer
GREAT CANADIAN GAMING CORPORATION [TSX:GC]
95 Schooner Street
Coquitlam, BC
V3K 7A8
(604) 303-1000
Website: www.gcgaming.com
SOURCE Great Canadian Gaming Corporation
For enquiries: [email protected], or Ms. Tanya Ruskowski, Executive Assistant to the Chief Executive Officer and the President, Strategic Growth & Chief Compliance Officer, (604) 303-1000; For media enquiries: Mr. Chuck Keeling, Vice-President, Stakeholder Relations and Responsible Gaming, (604) 247-4197
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