[bsa_pro_ad_space id=1 link=same] [bsa_pro_ad_space id=2]

Skip to Content

Supplier News

South Africa – Tsogo Sun sets sights on the UK following flat first half

By - 28 November 2016

South Africa’s biggest casino operator Tsogo Sun Holdings, with 14 casinos in six provinces, will expand internationally, most probably in the UK hotel sector, after reporting flat operating profits in the first half of its fiscal year.

Tsogo Sun reported revenue of R6.3b (US $445.4m) for the six months ending September 30. This was up eight per cent from the same period last year. Operating profit was flat at R1.58b while net income rose six per cent to R869m. The vast majority of its GGR was earned by its three casinos in Gauteng; Gold Reef, Montecasino and Silver Star.

Gaming win was up three per cent to just under R3.7b, as slots win rose one per cent to R2.74b and table games increased 12 per cent to R938m.

Chief Executive officer Marcel von Aulock said: “Trading during the first half of the financial year remained volatile and reflected continued pressure on the consumer due to the macro-economic environment and weak sentiment. Year-on-year growth was, however, achieved in both casino and hotel revenues and the trading results were positively impacted by various expansionary projects, including the acquisition of the Holiday Inn Sandton and Crowne Plaza Rosebank hotel businesses in March 2016, and ultimately the consolidation of the Hospitality Property Fund from September 2016, which saw the title of those properties as well as 13 additional third party operated hotels added to the group’s portfolio, including the Westin Cape Town, Radisson Foreshore, Radisson Gautrain and Birchwood Hotel and Conference Centre amongst others.”

In addition, the group acquired a 20 per cent stake in the Grand West and Worcester casinos in the Western Cape in April 2016. The group continued to allocate capital in terms of its growth strategy and accordingly has spent R1.3bn during the period, including the aforementioned Grand West and Worcester casinos. The group continued with the planning for the expansion of the Suncoast Casino and Entertainment World with construction commencing during November 2016 and two years to completion. The investment of R2.1bn will include a 22 000m2 destination retail mall, additional restaurants and entertainment offerings, additional parking and an expansion of the casino floor to incorporate an additional 900 gaming machines and 16 gaming tables.

Mr. von Aulock added: “The high-end privé market continued to perform well, albeit with volatility in win percentages from month to month and the main floor business remaining under pressure. Gauteng recorded growth in provincial gaming win of 3.8 per cent for the six months. Gaming win growth of 3.9 per cent was achieved at Montecasino and 12 per cent at Gold Reef City with a reduction at Silverstar of 1.9 per cent. Gold Reef City was positively impacted during the current year by the refurbishment and expansion work which was completed in October 2015 and growth at Silverstar continues to disappoint.”

Tsogo Sun also said that it would buy Trematon Capital Investments for R190m ($13m) to take over ownership of a casino that it already operates. The deal will be completed via Trematon’s wholly owned subsidiary Club Mykonos Langebaan Proprietary Limited, which owns the West Coast casino license already operated by Tsogo at the Mykonos Casino.

“The casino has proven to be an excellent investment for the group but it is not managed by Trematon and, as such, is a passive investment in which the group has limited opportunities to add significant value and realised returns are mainly in the form of dividends,” Trematon said.

Tsogo Sun confirmed it would purchase more hotel properties via its International Hotel Properties Limited investment arm in which it holds a 25 per cent stake. It already owns eight hotels in the UK.
In an interview with Reuters, Mr. von Aulock said: “We’ve put about 500 million rand into the UK market, which is doing quite well for us and I think we’re going to put in more money. Quite frankly with Brexit and all the uncertainty, and the collapse of the pound, actually gives opportunity. Those UK hotel assets just got a whole lot cheaper in rands.”

Share via
Copy link