TSOGO Sun on Monday reported a rise in first-half earnings driven by solid growth in its gaming and hotel divisions’ revenues.

Africa’s biggest hotels and casino operator said diluted headline earnings per share rose 40% to 69.9c for the six months ended September.

The company benefited from a particularly strong September trading month for its gaming and hotel divisions and the consolidation of the Formula 1 hotel business, it said.

Income was 4.8% higher at R4.8bn. An interim dividend of 24c per share was declared, up 20% on a year ago.

The hotel industry is on the up after being hard hit by a combination of overcapacity in the domestic market and a drop in demand from leisure and business travellers in the past two years.

According to hospitality consultants STR Global, overall industry occupancies for the six months ended September 30 improved to 57.7%, from 53.7% in 2011.

Tsogo CEO Marcel von Aulock said while the hotel industry in South Africa was still experiencing the dual impact of depressed demand and oversupply, some recovery had been achieved.

“In 2010, the industry reached a real low, which was a combination of oversupply and a complete lack of demand from the recession and that’s been recovering. Our occupancies are up by 2.5 to 3 percentage points, the industry has also recovered so we’re definitely seeing more demand than there was two years ago,” Mr von Aulock said.

Tsogo, which has more than 90 hotels on the continent, said overall revenue for its South African hotels division increased 17% on the prior period to R910m. This was assisted by the inclusion of Formula 1, 54 on Bath and Southern Sun Hyde Park, which offset the closure of Southern Sun Grayston.

Earnings before interest, taxes, depreciation, amortisation and rent (ebitdar) improved 27% to R272m.

Tsogo’s offshore hotels division achieved total revenue of R179m, representing a 17% improvement on the prior period, mainly driven by the weakening of the rand against the dollar and the euro.

Overall revenue for its gaming division increased 8% on the prior period to R3.7bn, while ebitdar improved 12% to R1.5bn at an increased margin of 40.2%.

According to Kagiso Asset Management equity analyst Rubin Renecke, the results were solid as the recovery seen in trading conditions during the prior six-month period continued into the first half of the company’s financial year.

“Both gaming and hotels experienced year-on-year growth over the period, with an 8% and 17% increase in revenue respectively. The inclusion of Tsogo’s recent acquisitions boosted hotel revenues (as) the local industry continues to struggle with oversupply and weak demand,” he said.

Mr von Aulock said while continued improvement in trading performance across the group’s operations during the first half of the year remained encouraging, the sustainability was uncertain due to the inconsistent monthly results in the period.

“September was a very strong trading month across the board. It is touch and go every month as to how strong the growth is on the previous month,” he said.

Mr von Aulock added, however, that the group remained highly cash generative and had significant opportunities to invest in its growth strategy.


Source: BD Live – Zeenad Moorad