Africa's biggest casino operator, Tsogo Sun Gaming, declared a bumper annual dividend on Thursday as it raked in higher earnings post-Covid and expands its hotel footprint, despite its income being dented by load shedding.
In its financial results for the year ended March 31, 2023, the group reported that headline earnings amounted to R1.6 billion compared to R1.2bn the prior year.
It declared a final gross cash dividend of 57 cents per share from distributable reserves. Last year the dividend was 19c per share.
However, Tsogo Sun Gaming said the cost of diesel and the adverse effect on income due to high levels of load shedding, especially in January and February 2023, knocked the group’s expected year-end position and margins.
“The cost of diesel and other consequential losses due to high levels of load shedding eroded margins in the second half of the year.
“Stages 5 and 6 of load shedding impacted revenue, with customers being increasingly more reluctant to travel at night,” it said.
Tsogo Sun Gaming said its casino business achieved strong earnings before interest, taxes, depreciation and amortisation (Ebitda) despite a shortfall of income that was evident post the Covid-19 pandemic.
“As a result of unprecedented levels of load shedding, high fuel and food prices, and increased interest rates, revenue is expected to remain under pressure in the short term. What is of concern is whether generators can sustain the workload as the pressure of load shedding mounts,” it said.
Casino precincts continued the implementation of green energy solutions, with Montecasino scheduled to complete its 4.3MW rooftop solar installation by July 2023, which will be one of the largest of its kind in South Africa.
“Expansion of the existing solar plants at Silverstar and Garden Route casino is already under way, scheduled for conclusion by August 2023. A new installation generating approximately 1.5MW is planned for Gold Reef City and should be completed by November 2023,” it said.
The group also plans to ramp up its hotel offering.
“The management of all the hotels is now in-house, and Tsogo Sun plans to improve and expand its hotel offering. The Silverstar hotel has been expanded from 43 to 55 rooms from April 2023, and a complete refurbishment of the two hotels at Gold Reef City Casino and Theme Park has been completed and includes new world-class conference facilities,” it said.
The group also said it had taken up an approximate 10% shareholding in City Lodge.
Meanwhile, food and beverage income continued to recover this year, while the improvement of trading of restaurant tenants had resulted in the recovery and stabilisation of tenanting income.
Tsogo Sun Gaming reported that Galaxy Bingo’s trading was also negatively impacted by the severe load shedding, especially where shopping centre nodes endured the darkness for extended hours during the evenings.
“With lower income, coupled with salary and rental cost increases, as well as the cost of diesel and generator maintenance, it was inevitable that margins would take strain during the year,” it said.
Looking ahead, Tsogo Sun Gaming said after the setback of higher levels of load shedding, which impacted income and the cost base, particularly during January and February 2023, the group was expediting its investment in solar projects and additional generator capacity.
BUSINESS REPORT