Tsogo deals well with rival
Revenue loss of R200m expected at casinos could be due to rival Sun International’s new Time Square
Gaming and leisure giant Tsogo Sun, which owns three casinos in competitive Gauteng, is dealing well with the opening of rival Sun International’s new Time Square casino in Menlyn near Pretoria.
Gaming and leisure giant Tsogo Sun, which owns three casinos in the competitive Gauteng province, is dealing well with the opening of rival Sun International’s new Time Square casino in Menlyn near Pretoria.
Time Square, which opened in April, is the second-largest casino in SA and was expected to markedly shuffle casino market shares in Gauteng.
Speaking at the release of the year to March results on Wednesday, Tsogo CEO Marcel von Aulock said the company’s Gauteng casinos — comprising Montecasino, Gold Reef City and Silverstar — had felt the effect of the Time Square opening.
“But it’s been less than we anticipated. The initial opening is always busy and then things tend to stabilise.”
The company’s Gauteng casinos were expected to take a R200m hit in the new financial year, he said. “But April was a tough month for the industry… so it’s difficult to know whether the revenue loss was caused by trading conditions or the opening of Time Square.”
Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said it was too early to quantify the effect that the opening of the new Menlyn casino would have on the existing Gauteng casinos. He said a revenue loss of R200m would represent only around 4% of Tsogo’s Gauteng-based casino revenues.
Tosgo’s individual casino performances, which ranged from a 7% best increase and 4% worst fall in revenue, reflected the prevailing tough trading conditions in which consumer discretionary spending has been curbed markedly.
Total revenue for Tsogo’s gaming division increased 3% to R9.1bn with gaming win growth only 2% to almost R7.5bn.
The Gauteng casinos gaming win rose 2% to almost R4bn.
Montecasino — the biggest casino property in Tsogo’s portfolio — increased revenue 1% to almost R2.7bn with earnings before interest, tax, depreciation, amortisation and rental (ebitdar) up marginally at about R1.2bn. The ebitdar margin was 44.4%, only slightly down from last year’s 44.7%.
Gold Reef City increased revenues and ebitdar 5% to R1.45bn and R549m respectively, while Silverstar saw static revenues at R735m and ebitdar dropping 2% to R248m.
Tsogo’s SunCoast casino in Durban performed solidly with revenue and ebitdar up 2% to more than R1.7bn and R791m respectively. SunCoast’s ebitdar margin of 46.8% was the highest in the casino portfolio.
Von Aulock said a weak economy in SA and many of the commodity-focused countries in which Tsogo operated meant trading was expected to remain under pressure. “Our gaming and hotel focus leave us highly geared towards both the South African consumer and corporate markets. However, the high level of operational gearing presents significant growth potential to the group should these sectors of the economy improve in the future.”