RECM & Calibre (RAC), spearheaded by asset managers Piet Viljoen and Jan van Niekerk, has timed its transformation from a diversified investment counter to a cash-spinning gaming company to perfection, with subsidiary Goldrush notching up record profits and paying a maiden dividend.
On Friday, RAC, which was listed 12 years ago, confirmed it will distribute its remaining holding in listed investment company Astoria to shareholders via a dividend in specie. Astoria still holds a number of RAC’s original investments, such as niche retailers Outdoor Holdings, diamond miner Trans Hex and private education business ISA Carstens. The group has also sold out of its remaining units in the RAC Flexible Value Prescient QI Hedge Fund.
This means RAC’s only remaining asset is its 58.8% stake in Goldrush, an alternative gaming company with operations spanning electronic bingo terminals (EBT), limited payout machines (LPMs) and sports betting. EBTs and LPMs, which both have bet limitations, are regarded as mini-casinos with the added advantage of being able to roll out sites quickly without incurring demanding development costs.
In the year to end-March, Goldrush pumped up revenue 52% to R1.39bn, with ebitda (earnings before interest, depreciation and amortisation) jumping 91% to R343m. RAC executive director Jan van Niekerk said this was a record level of profitability — beating the previous high of R242m by more than 40%. He added that the record profits were effectively achieved in 11 months of trading since Goldrush’s operations were closed in July 2021 under stricter Covid-19 regulations.
After-tax profits came in at R100m, allowing Goldrush to pay a maiden dividend totalling R30m.
The EBT segment generated 31% more revenue to R847m, which is still slightly behind the pre-Covid levels despite the number of terminal sites increasing 10%.
Van Niekerk said the EBT segment operated under various Covid-19 curfew restrictions until the end of 2021 — including switching off parts of the terminal fleet and restricting the numbers of patrons. He said effects were most severe on the busy weekend periods and during the summer holiday season.
But Van Niekerk said use of the bingo properties continued to improve in the new financial year, adding that Goldrush had the capacity to increase its EBTs from 4,270 to 5,000 in the next two years.
Goldrush’s performance more or less squares up with its larger gaming sector rivals, Tsogo Sun Gaming and Sun International. Tsogo’s EBT operations, which were also clawing back some of the business lost during the Covid-19 crisis, reported bingo revenue was up 49% in the year to end-March.
Goldrush’s LPMs pushed up revenue 60% to R367m, with Van Niekerk reporting that this segment’s favourable economics meant it would be the focus area for growth capital expenditure in the foreseeable future.
He said revenue was 7% ahead of pre-Covid levels of R342m. “It appears the proximity of this form of entertainment to Goldrush customers, together with small, intimate venues, led to the improvement.”
By way of comparison, Tsogo Sun reported a 55% gain in revenue in its LPMs business to almost R1.7bn, while Sun International’s SunSlots increased its top line from R886m to R1.2bn in the year to end-December.
Goldrush’s fledgling sports betting operations experienced a sprightly 51% increase in revenue to R174m, with Van Niekerk reporting two stores closed, three opened and another upgraded into a superstore format. The sports betting division now has 30 stores with 535 betting positions.
He said the strong recovery in sports betting trade led to previously marginal stores turning decisively profitable, and predicts that retail sports betting is likely to grow organically in the medium term, with four new store openings planned in the next two years.
Though Goldrush’s resilient performance yielded a maiden dividend, RAC is still not making distributions to shareholders. Van Niekerk said the priority was paying down debt and buying back the group’s own shares (which trade at a discount to the stated net asset value of R14.48 a share). Dividends would be considered once gearing was at lower levels. At the end of March, Goldrush carried debt of R656m and RAC funding liabilities of R250m.
In terms of possible acquisitions, Van Niekerk stressed any opportunities would need to offer a better return than rolling out more LPMs. Asked whether smaller urban casinos could be a potential acquisition target, Van Niekerk said Goldrush was keen to concentrate on its existing business. “At RAC level, however, it might make sense to have another gaming asset. But for now, there is nothing on the cards.”
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