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TSOGO RIDES CASINO WAVE AT SUNCOAST

RESULTS from Tsogo Sun, the casino and hotels group controlled by empowerment giant Hosken Consolidated Investments (HCI), suggests the tables are turning for the local casino sector.

On Wednesday Tsogo, owner of Montecasino in Johannesburg and SunCoast in Durban, reported a stronger second-half showing from its portfolio of casino properties, with revenue up 7% to R8.9bn and earnings before interest, tax, depreciation, amortisation, and rentals (ebitdar) up 5% to R3.4bn for the year to end-March.

Cash flows were up 14% to R4.4bn, while free cash flow climbed 8% to R1.95bn.

Opportune Investments CEO Chris Logan said the results were commendable for a firm so geared to the local economy.

Tsogo CEO Marcel von Aulock said the final quarter of the financial year was particularly sprightly. “Our ebitdar from gaming was up only 2% at the interim stage, so we outdid our own expectations. We actually saw double-digit growth in the last quarter.”

Trading since financial year end had also seen double-digit growth, he said.

The star performer for Tsogo was the Suncoast casino, which pushed up revenues 7.5% to R1.7bn and ebitdar 8% to R791m. The casino operated on a margin of 46.5%, making it comfortably the most profitable in Tsogo’s portfolio.

Interestingly, Tsogo has opted to revamp Suncoast to the tune of R2.1bn — including additional casino space and a new Privé, 20,000m² of retail and restaurant space, as well as a multistorey parkade. Construction will start shortly on a two-year building programme.

Tsogo’s biggest casino, Montecasino, also performed well — reporting revenue up 6.5% to R2.7bn. Montecasino, which has undergone extensive refurbishment, still managed an encouraging ebitdar margin of close to 45%.

Revenue for Tsogo’s South African hotel division jumped 9% to R2.7bn, with increases in occupancies and average room rates. The international hotel division pumped up revenue 25% to R691m — the increase mainly due to contributions from the Southern Sun Maputo, which was closed for refurbishment in the previous financial year.

While the dividend was increased 12% to 67c per share, a more significant vote of confidence in prospects was Tsogo’s extensive capital expenditure and investments during the financial year — which topped R1.9bn.

Aside from embarking on the huge Suncoast revamp, the company also completed the refurbishment and expansion of the Gold Reef City Casino, and is acquiring a 20% stake in Sun International-controlled gaming operations SunWest and the Worcester Casino.

Tsogo also acquired 55% of the Hospitality Property Fund B-linked units and will take a controlling stake in Hospitality Property Fund by reversing in 10 hotel assets. A stake of 25% was also acquired in the International Hotel Group, a property fund focused on hotel opportunities in the UK and Europe.

Looking ahead, Von Aulock cautioned that although Tsogo was encouraged by the strong performance — particularly in the fourth quarter of the financial year — the sustainability of this performance would depend on how the economy performed. “Nevertheless, we are highly cash generative, and continue to invest in future growth.”

Source: BDLive – Marc Hasenfuss