Tsogo Sun unfazed by rival casinos
Its Time Square opening was ‘less disruptive than expected’
Increased competition in the key Gauteng casino market will not rattle gaming and leisure giant Tsogo Sun.
Speaking after the release of year-to-end-March results on Wednesday, CEO Jacques Booysen said the opening of the R3bn Time Square casino precinct in Menlyn by rival Sun International had been far less disruptive than initially anticipated.
Tsogo, which operates the Montecasino, Gold Reef City and Silverstar casinos in Gauteng, initially predicted an annual revenue loss of more than R200m, but the actual loss was R80m to R90m, Booysen said.
“We think they [Sun International] overestimated the market,” he said.
The local casino market has suffered stagnating revenue and squeezed margins in recent years as discretionary spending by cash-strapped consumers has waned.
Booysen said the local casino sector needed consumers “to get wealthier and, more importantly, feel wealthier”.
A breakdown of individual casino performance showed that Tsogo’s Montecasino (Fourways) and Silverstar (near Krugersdorp) had declines in revenue of 2.6% to R2.6bn and 6.6% to R686m respectively.
Montecasino’s earnings before interest, depreciation, amortisation and rental (ebitdar) dropped more than 5% to R1.2bn, while ebitdar for Silverstar dropped 14.4% to R212m. Tsogo’s Gold Reef City casino, which is further away from Time Square, had 3.3% increase in revenue to R1.54bn and a 3.5% gain in ebitdar to R549m.
Booysen pointed out that Gauteng-based casino properties collectively registered growth of 7.1% to R7.94bn in the 12 months to end-March 2018.
But he said that if the contribution of the new Time Square casino was stripped out, then the Gauteng gaming market crimped by 4.5%.
A breakdown of the Gauteng market in Tsogo’s investment presentation showed Tsogo-owned casinos overall experienced a drop in revenue of 2.8% to R3.9bn.
The group estimated Time Square’s revenue since opening in April 2017 at R992m.
Damon Buss, an analyst at Electus Asset management, said the less-than-expected revenue losses by mainly Montecasino (R69m) and Silverstar (R49m) was positive for Tsogo as the margins at these properties would be under less pressure.
While the “bricks and mortar” casinos are labouring under tough trading conditions, it appears Tsogo’s recent investment in alternative gaming formats such as electronic bingo terminals and limited payout machines are already paying off.
Tsogo’s Galaxy electronic bingo terminals operation has a footprint across Gauteng (four sites), the Eastern Cape (six), Limpopo (two), Mpumalanga (two), North West (two) and KwaZulu-Natal (four).
Booysen was optimistic for further growth in the electronic bingo terminals operations, pointing out that Galaxy had opened an additional site in Tzaneen after financial year-end.
There were still three undeveloped licences in KwaZulu-Natal, while there was also the possibility of new opportunities in the Western Cape and Free State, where electronic bingo terminals were not yet licensed.