Economic recovery resuscitates depressed demand for rooms.
Tsogo Sun Holdings (JSE:TSH), South Africa’s biggest hotel and leisure operator by market value, said sales will outpace inflation this year as an economic recovery resuscitates depressed demand for rooms.
Growth during April and May, the first two months of fiscal 2014, has been “slightly above inflation,” Chief Executive Officer Marcel von Aulock said in a phone interview today. It’s a continuation of last year’s gains, he said.
Annual inflation in April was 5.9%, while Africa’s biggest economy is forecast to grow at its slowest pace since 2009, as labor wage demands slows mining industry output. Tsogo is highly geared toward the South African consumer in gaming, and toward corporations through its hotels, with both segments still experiencing difficult economic conditions, the Johannesburg-based company said in a statement on Thursday.
“The results for the year continue to reflect the growth potential of the group should these sectors of the South African economy continue to improve,” it said.
Net income for the 12 months through March declined to R1.63 billion from R1.72 billion a year earlier. Revenue rose 10% to R9.9 billion with 6.8% growth in gaming win, 19% growth in hotel-rooms revenue and a 16% advance in food and beverage revenue.
Tsogo shares declined 0.7 percent to 24.80 rand at 11:16 a.m. in Johannesburg, giving the company a market value of 29.3 billion rand. The stock has gained 4.5 percent this year, compared with a 0.5 percent increase for competitor Sun International (JSE:SUI) Ltd.
Tsogo, partly controlled by brewer SABMiller plc (JSE:SAB)Plc, owns and manages 14,347 rooms in South Africa, other countries in the continent, the Seychelles and the Middle East after the recent termination of management contracts on hotels in Dubai, according to von Aulock. It’s investing $179 million in refurbishing casinos, hotels and expanding in Africa.
“We are focusing on countries where we already operate,” Von Aulock said. “Africa is not one homogeneous spot.”
Group adjusted headline earnings for the year rose 24 percent to 1.65 billion rand. The company said it will increase its dividend by 28 percent to 51 cents a share.
Source: Moneyweb: 2013 Bloomberg News – Kamlesh Bhuckory