Operator News
South Africa – Tsogo Sun to continue investing despite weak economy
By Phil - 26 May 2017
South African hotel, gaming and entertainment group, Tsogo Sun has said it will continue to invest despite its gaming division suffering a setback in its revenue over the last year.
Acquisitions have helped drive an eight per cent increase in total income to R13.2bn for South African operator Tsogo Sun.
Total revenue for the gaming division increased by three per cent to R9.1bn with gaming win growth disappointing at only two per cent.
Chief Executive Marcel von Aulock said: “With a weak economy in South Africa and many of the commodity-focused countries in which we operate, trading is expected to remain under pressure. Our gaming and hotel focus leave the underlying operations of the group highly geared towards both the South African consumer and corporate markets. However, the high level of operational gearing presents significant growth potential to the group, should these sectors of the South African economy improve in the future.”
He added that Tsogo Sun would continue to invest, buying two hotel businesses from the Liberty Group and through the acquisition of Hospitality Property Fund. It will also invest an additional R1.3bn to expand the Suncoast Casino and Entertainment World in KwaZulu-Natal.
The construction began in 2016 but was delayed due to unexpected challenges. The development will start again in mid-June.
Mr. von Aulock said: “We have always been an acquisitive business. We are going to continue to look for possible acquisitions in the year ahead. It does not mean we are going to slow down now that the South African economy is growing at a slow pace. In business some of the best deals are bought in times of distress, possibly at a lesser price if compared to a price of a booming economy.”
Last year Tsogo Sun bought a 20 per cent share of SunWest International and Worcester Casino for R1.3bn.
Nolwandle Mthombeni, an analyst at Mergence Investment Managers, said Tsogo Sun’s result were ‘good.’
“However, the casino industry is facing severe headwinds, due to low consumer confidence, and this leads to less spending and hotel occupancies are also under pressure. So to see some growth, although low, is commendable and is a testament to management efforts,” he explained.
