Le Lézard
Classified in: Tourism and vacations, Business, Covid-19 virus
Subject: ERN

Great Canadian Gaming Announces Second Quarter 2020 Results


TORONTO, Aug. 12, 2020 /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, 2020 (the "second quarter").

SECOND QUARTER 2020 UPDATES

"We had a full quarter of business closure as a result of the temporary suspensions since March 16, 2020 in response to the pandemic. While we have taken actions to significantly reduce our operating expenses during the closure period, our second quarter results were negatively impacted materially by the closures. Since the closure of our 25 operations across the country almost five months ago, we worked closely with key stakeholders such as our Provincial Crown corporations and regulators to ensure our plans properly address provincial health authorities' guidance and recommendations as provincial economies reopen," stated Rod Baker, the Company's Chief Executive Officer. "Certain provinces have now approved casinos to reopen as part of their phased reopening plans, and we are working diligently on determining the reopening timelines and dates as we complete the necessary health and safety enhancements outlined in our plans."

FINANCIAL REVIEW

The temporary closures of the Company's operations resulted in a decrease in revenues, expenses, Adjusted EBITDA1, Free Cash Flow1, and cash flows when compared to the same period in the prior year. 

During the second quarter, the Company took measures to significantly reduce its operating expenses to mitigate the decline in revenues from the gaming facility closures. Human resource expenses in the second quarter primarily consisted of costs related to remaining personnel required to support the business during the closure period. For the three months ended June 30, 2020, approximately half of the property, marketing and administration expenses were related to direct property operating costs, including property taxes, insurance, utilities and maintenance, with the remaining half related to administration costs, including licenses, subscriptions and professional fees.

Revenues and Adjusted EBITDA for the second quarter were $62.8 million and $31.8 million, respectively. Revenues for the second quarter primarily consisted of the Ontario bundles' annual entitlement of service provider fees for permitted capital expenditures recognized in full in the second quarter and continued service provider base fixed fees under the respective casino operating agreements, which resulted in a positive Adjusted EBITDA. Adjusted EBITDA was also positively impacted by $20.9 million in lease payments which are no longer recognized as operating expenses in Adjusted EBITDA due to the implementation of IFRS 16, the new lease accounting standard adopted in the prior year.

The Company recognized negative cash flows in the second quarter due to the temporary suspension of operations. In the second quarter, the Company had negative of $123.4 million, which was consisted of Adjusted EBITDA of $31.8 million, as previously discussed, less changes in non-cash working capital of $22.2 million, capital expenditures of $98.6 million, substantially all of which was in Ontario, payment of lease liabilities of $20.9 million, and interest paid of $13.5 million. The Company funded the negative Free Cash Flow of $123.4 million by borrowing an additional $60.7 million on its credit facilities for capital expenditures in Ontario and the remainder from available cash balances.

The Company had cash outflow of $383.7 million for the second quarter. Prior to the end of the first quarter of 2020, the Company drew $325.0 million on the revolving portion of the Senior Secured Credit Facilities to ensure it had sufficient liquidity available, which was repaid in full during the second quarter of 2020. Other cash outflows for the second quarter included payments to satisfy working capital obligations, payment of lease liabilities and capital expenditures, as discussed above.

Shareholders' net loss from continuing operations was $31.4 million in the second quarter due to the above mentioned facility closures, which had a negative impact on revenues.

_________________________

1 Adjusted EBITDA and Free Cash Flow are non-IFRS measures, as described in the disclaimer section of this press release, and excludes discontinued operations

OUTLOOK

"Since the temporary closures took effect, we have ensured that each of our operating agreements remain in good standing with our Provincial Crown corporations. Once we reopen, we expect our businesses will slowly recover, with the pace of recovery governed by our guests as they adjust to the new environment and gain confidence with our safety measures. In addition, we expect limitations on guest capacity and ancillary amenities to be in place for an extended period of time. However, as confidence levels increase, capacity restrictions ease, and patrons become more familiar with the new guest experience, we expect the business will further recover."

"Following the Government of Ontario's lifted restrictions on non-critical construction projects starting May 19, 2020, we have restarted certain key capital projects in Ontario with appropriate workplace safety measures in place. We continue to reassess the impact to the timelines for the completion of these projects, in particular, the developments at Pickering Casino Resort and Casino Woodbine."

"During the second quarter, we worked with our banking partners to complete amendments to each of our credit agreements to temporarily waive certain financial and other covenants. As at June 30, 2020, Great Canadian continues to remain in stable capital and liquidity position with a cash balance of $498.2 million and $1,106.7 million of available undrawn credit on its credit facilities, subject to applicable covenants, which further demonstrates the Company's ability to successfully navigate through this challenging period, provided the ongoing support from our banking partners," concluded Mr. Baker.

CONFERENCE CALL

Great Canadian will host a conference call for investors and analysts today, August 12, 2020, at 2:00 PM Pacific Time in order to review the financial results for the quarter ended June 30, 2020.  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 an Ontario 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 12, 2020) for detailed financial information and analysis.

GREAT CANADIAN GAMING CORPORATION
Financial Highlights
(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,



2020

2019

% Chg


2020

2019

% Chg

Revenues


$

62.8

$

354.4

(82%)


$

336.6

$

657.2

(49%)










Human resources


11.9

107.3

(89%)


107.8

213.3

(49%)

Property, marketing and administration


19.8

94.1

(79%)


95.2

182.1

(48%)

Share of profit of equity investment


(0.7)

(0.7)

0%


(1.2)

(1.3)

8%



31.0

200.7

(85%)


201.8

394.1

(49%)

Adjusted EBITDA


$

31.8

$

153.7

(79%)


$

134.8

$

263.1

(49%)

Changes in non-cash working capital


(22.2)

(0.9)



(39.9)

(2.7)


Capital expenditures, net of related accounts payable

(98.6)

(82.9)

19%


(183.3)

(147.9)

24%

Payment of lease liabilities


(20.9)

(19.9)

5%


(42.3)

(39.8)

6%

Interest paid


(13.5)

(10.3)

31%


(29.3)

(18.6)

58%

Income taxes paid


-

(36.5)

(100%)


(14.2)

(53.7)

(74%)

Free Cash Flow 


$

(123.4)

$

3.2



$

(174.2)

$

0.4











Cash flow information









Cash generated by operating activities

5.1

113.4



69.2

204.1


Cash used in investing activities


(97.8)

(15.9)



(180.0)

(65.0)


Cash (used in) generated by financing activities

(290.8)

6.3



279.3

(68.1)


Effect of foreign exchange on cash


(0.2)

(0.2)



-

(0.2)


Cash (outflow) inflow


$

(383.7)

$

103.6



$

168.5

$

70.8











Net (loss) earnings information:









Net (loss) earnings from continuing operations

$

(36.4)

$

73.4



$

(7.9)

$

113.6


Net earnings attributable to discontinued operations

-

48.8



-

50.4


Net (loss) earnings 


$

(36.4)

$

122.2



$

(7.9)

$

164.0











Net (loss) earnings from continuing operations attributable to: 






Shareholders of the company


$

(31.4)

$

48.0



$

(12.2)

$

79.0


Non-controlling interests


(5.0)

25.4



4.3

34.6




$

(36.4)

$

73.4



$

(7.9)

$

113.6











Net (loss) earnings attributable to: 









Shareholders of the company


$

(31.4)

$

96.8



$

(12.2)

$

129.4


Non-controlling interests


(5.0)

25.4



4.3

34.6




$

(36.4)

$

122.2



$

(7.9)

$

164.0











Shareholders' net (loss) earnings per common share from continuing operations 



Basic


$

(0.57)

$

0.81



$

(0.22)

$

1.34


Diluted


$

(0.57)

$

0.79



$

(0.22)

$

1.30











Shareholders' net (loss) earnings per common share







Basic


$

(0.57)

$

1.64



$

(0.22)

$

2.20


Diluted


$

(0.57)

$

1.59



$

(0.22)

$

2.13











Weighted average number of common shares (in thousands)







Basic


55,316

59,097



55,299

58,932


Diluted


55,316

60,747



55,299

60,868











Balance sheet information:






June 30,

December 31,








2020

2019

% Chg

Cash 






$

498.2

$

329.7

51%

Total assets






$

3,124.7

$

2,851.9

10%

Long-term debt






$

1,236.1

$

869.8

42%

 

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 Company's expected ability to obtain banking waivers, the impact of the COVID-19 pandemic on the Company's operations, the impact of conditions imposed on certain high limit players, the impact of unionization activities and labour organization, 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 determination and calculation of the Company's expected facility investment commission amounts in respect of its British Columbia facilities 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 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 high limit play), volatile gaming holds, the effects of competition in the market; the development of properties in Ontario; 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; impairment of the Company's ability to obtain banking waivers; 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; temporary business interruption and closure of the Company's facilities due to COVID-19; effects of COVID-19 physical distancing measures in reopened facilities; adverse tourism trends and further decreases in levels of travel, leisure and consumer spending; adverse changes in public opinion and acceptance of gambling;  competition from established competitors and new entrants in the gaming business; dependence on key personnel; the Company's ability to successfully integrate new 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; changes to anti-money laundering procedures and protocols including additional requirements for determining source of funds; unusual weather or natural disasters could adversely affect the Company's operations and financial results; and disease outbreaks.  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 2019, 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 (loss) gain.  Adjusted EBITDA is derived from the Condensed Interim Consolidated Statements of (Loss) Earnings and Other Comprehensive (Loss) 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. As a result of the temporary suspension of operations, which began on March 16, 2020, the Company has reported Free Cash Flow as an additional measure of its operating performance, particularly to monitor the Company's non-discretionary cash requirements during this closure period. Free Cash Flow can be computed as Adjusted EBITDA less the following items derived from the Condensed Interim Consolidated Statements of Cash Flows: changes in non-cash working capital, capital expenditures, net of related accounts payable, payment of lease liabilities, interest paid and income taxes paid.

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]
39 Wynford Drive
North York, ON
M3C 3K5
Website: www.gcgaming.com

SOURCE Great Canadian Gaming Corporation


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