Declares a final dividend of 40c per share.

Johannesburg, May 17 (I-Net Bridge) – Hotel and gaming group Tsogo Sun (TSH) on Thursday reported a 36% increase in adjusted earnings to R1.3 billion for the year ended March.

Adjusted headline earnings per share for the year were up 12% to 121.5 cents.
The group declared a final gross cash dividend of 40 cents per share in respect of the company’s year-end, bringing the total dividend for the year to 60 cents, an increase of 20% on the dividend declared in respect of the previous year.

The results represent the first full twelve months of trading for the combined group following the successful merger with Gold Reef on 24 February 2011. Total income at R9 billion ended 39% higher than the prior year, assisted by the inclusion of R2.2 billion incremental income from Gold Reef as well as satisfactory organic growth. Both casino win and hotel occupancy showed accelerated year on year growth, particularly in the second six months of the year.

Earnings before interest, income tax, depreciation, amortisation, property rentals, long-term incentives and exceptional items (EBITDAR) increased by 41% to R3.5 billion.

“On a like-for-like basis (factoring a full 12 months, as opposed to one month, of Gold Reef’s trading into the group’s financial results for the year ended 31 March 2011) income and EBITDAR increased by 5% and 7% respectively, a satisfactory performance considering the impact of the 2010 FIFA World Cup (“World Cup”) in the prior period. The overall group EBITDAR margin of 38.8% is 0.6pp above the prior year marking the first margin growth achieved since the recession began in 2008,” the group reported.

Gaming experienced revenue growth throughout the financial year with accelerated revenue growth across many of the group’s casinos during the second six months. Particularly noteworthy are the results of Montecasino and Gold Reef City casinos in Gauteng, which recorded gaming win growth of 8.4% and 11.3% respectively for the year. Silverstar casino recorded a decline of 1.1% for the same period; disappointing results as the casino awaits the redevelopment spend that will improve its customer offering. In KwaZulu-Natal, the Suncoast Casino and Entertainment World reflected growth of 5.8% in gaming win, and Golden Horse casino and Blackrock casino reflected growth of 11.6% and 13.7% respectively, showing strong demand in their relevant catchment areas.

With national hotel occupancies at 57% for the year, South Africa is still experiencing the dual impact of depressed demand and over supply. Although the group’s hotels are likewise affected, a significant occupancy and rate premium is being realised through the strong sales and distribution channels as well as the superior product and service quality available within the group.

Showing some recovery, the group’s occupancies in South Africa improved to 60.9% (2011: 58.4%). Average Room Rates in the South African operations declined by 7% to R775, with the decline attributable to the higher achieved rates during the World Cup in the prior year. Overall revenue for hotels is ?at on the prior year at R1.6 billion. As a result, EBITDAR declined 9% to R512 million at a margin of 31.5%.

The offshore division of hotels reported total revenue of R324 million during the year, up 20% from the prior year, assisted by the inclusion of Southern Sun Nairobi as a leased hotel (previously managed) with effect from 1 August 2010. EBITDAR (pre-foreign exchange gains) of R88 million was achieved while the Rand weakness in the second half of the year positively impacted the translation of monetary items resulting in a R13 million foreign exchange gain.

CEO Marcel von Aulock commented: “The accelerated trading performance across the group’s operations in the second half of the year is encouraging although the sustainability thereof is uncertain. Nevertheless, the group remains highly cash generative and has significant opportunities to invest capital in its growth strategy. Our ability to do so will depend on the final outcome and impact of the numerous proposed regulatory and tax changes currently being considered by government. The optimal resolution of these will require successful interaction with various regulatory bodies including gaming boards, city councils, provincial authorities and national departments and we are engaging with all stakeholders.”

Source: Moneyweb – INet Bridge