Close

Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?

‘RESILIENT’ CASINO OPERATORS CAUTIOUSLY OPTIMISTIC

CASINO and gaming groups are expecting a busy festive season and are cautiously optimistic in their outlooks, despite an increasing regulatory burden and weak economic conditions.

The local market is dominated by Tsogo Sun, Sun International and Peermont, which together operate 35 of South Africa’s 38 licensed casinos. Only 40 licensed casinos are permitted in South Africa.

Finance Minister Pravin Gordhan announced in his February budget the introduction of a 1% national tax based on casinos’ gross gambling revenue, to be implemented in April next year. Currently, gambling revenue is taxed at provincial level.

The Casino Association of South Africa (CASA) has cautioned the government not to regard casinos as an easy target for additional tax revenue.

Chairman Jabu Mabuza says while casinos showed resilience in an unpromising environment, “compounding the economic challenges has been a growing enthusiasm on the part of policy makers for more stringent regulation and taxation of the industry”.

In terms of gross gambling revenue, “the biggest winner is government”, which receives 36%, or R4.7bn of the gross casino revenue, CASA says.

Margins squeezed

Analysts say the gaming industry is still operating in a tough environment and the projected tax increases will squeeze margins further.

Peermont Global CEO Anthony Puttergill says the festive season is traditionally busy for casinos.

Most Peermont casinos are expecting growth in visitor numbers and turnover, Mr Puttergill says.

But while hotel, casino and resort operator Peermont is pleased with recent performances, which showed record earnings, “we anticipate continued pressure on trading margins due to our increased investment in marketing and human resources, higher administered prices and an ever-increasing regulatory burden”, Mr Puttergill says.

Peermont intends to start development of the Thaba Moshate Hotel Casino and Convention Resort in Burgersfort in Limpopo next year, while “continuing to investigate hotel and casino projects in southern Africa”, he says.

Listed hotel and casino operator Tsogo Sun CEO Marcel von Aulock says the gaming industry “continues to reflect recovery from prior periods”.

Tsogo reported revenue growth of 10% for the six months ended September, and over the past 12 months its share price has risen 42%.

“December should be a good period for the leisure industry in South Africa and we remain reasonably optimistic in our outlook, although hotels in Durban in particular benefited substantially from the COP 17 conference in the prior year,” Mr von Aulock says, referring to the United Nations climate change talks in Durban in 2011.

Listed hotel and gaming group Sun International’s acting CEO, Garth Collins, says the group is positive that the end of year season “will be good, and ahead of last year”.

Trading conditions are improving, Mr Collins says.

New emerging markets

Sun International has looked to other emerging markets for growth, and has been actively looking for opportunities in South and Latin America.

Last month, the group entered an agreement with Newland International Properties, the developer of Trump Ocean Club International Hotel & Tower Panama, to buy the development’s casino.

Sun International’s Monticello operation in Chile has been a big contributor to its revenue growth, and the group aims to leverage the Panama and Monticello operation to further broaden its footprint in the region.

Empowerment gaming group Grand Parade Investments (GPI) CEO Alan Keet says despite the weak economy, he is “amazed by how resilient the gaming business is”, and it is also at times inversely correlated to external market conditions.

Mr Keet says December is the busiest and best time for GPI, and the group’s forecast to the end of June on its slots business “is looking very positive” and “slightly ahead of budget at the moment”.

GPI plans to start manufacturing limited payout machines locally within the next three to six months, as it targets a market set for significant growth.

Although 50,000 limited payout machines are allowed to be rolled out nationally, only about 7,500 had been installed nationally by the middle of this year.

Mr Keet says GPI has “a couple of things in the pipeline at the moment”, specifically on the slots business, although there are “other possible investments on the gaming side”.

While not actively looking for opportunities in Africa, besides the intention to export limited payout machines into the continent in the future, the group will consider opportunities if they arise.

“It’s a natural progression for South African companies to move further north,” Mr Keet says.

GPI is “positive” in its outlook and pleased with the group’s steady growth, although the group remains “careful about how we deploy our cash resources to make sure future growth materialises”.

Source: BDLive – Nick Hedley