Government’s belt tightening hits Tsogo Sun
SOUTH Africa’s biggest hotel and gaming group, Tsogo Sun, had a tough six months. Its share price was 7% down by the close of trade on Thursday when results were released.
“The consumer is under more pressure than we anticipated at this stage,” said CEO Marcel von Aulock.
“Current trading is difficult. You’ve got to watch your costs, but we’re looking through that, and this is the time to acquire assets and build the business.” The group is in- cluded in the MSCI Global Emerging Market Indices, attracting buying from international tracker funds.
Tsogo Sun reported flat headline earnings a share for the interim period after buying several assets over the past six months at prices it would not have obtained four to five years ago. It spent nearly R7-billion on assets and refurbishments to bulk up for future growth.
This included a R2.8-billion buyback of 12% of its shares on the exit of long-term shareholder SABMiller.
Earnings before interest, tax- es, depreciation and amortisation (Ebitda) fell 2% while adjusted headline earnings a share were unchanged at 81c. Net profit was down 15% to R 743million.
Income rose just 4% to R 5.4billion as government, an important customer, is holding back on travel, and concerns over Ebola are affecting hotels in Africa. About 5% of total Tsogo Sun group business is outside South Africa, and about 20% of its hotel business is outside the country. The group recently bought a hotel in Nigeria.
“But South Africa remains the single-biggest opportunity for substantial organic growth,” Von Aulock said.
Performance was inconsistent among operators. Montecasino, the country’s most lucrative casino, had a very good second quarter. Gold Reef City had a tough period and East London was under pressure.
The group is buying a 40% stake in SunWest for R2.2-billion, expanding SunCoast for R1.8-billion and refurbishing Gold Reef City for R600-million. It declared an unchanged interim dividend of 29c a share. The shares closed at R28.84, up 2.21%, on Friday.