Hotels keep Tsogo Sun in the black

South African hotel and casino operator Tsogo Sun reported an increase in full-year earnings in a results presentation on Wednesday, as new hotel acquisitions offset disappointing gaming earnings.

Adjusted headline earnings per share for the full-year ended 31 March rose 6% to 207.6 cents against 196.5 cents in the prior year. The group declared a final dividend of 70 cents, resulting in a total dividend per share for the year of 104 cents, up 6% on the prior year.

Gambling, which at R7.5bn contributed 57% of total income, grew 2% in the year to end-March from the previous year's R7.4 billion.

"The hotel industry in SA continues to experience a recovery from the dual impact of depressed demand and oversupply. Overall industry occupancies have improved to 65.2% in 2017 from 63.8% in 2016," Tsogo said in its results statement.

"Trading for the group's South African hotels for the year recorded a system-wide revenue per available room growth of 6% on the prior year due mainly to an increase in average room rates by 5% to R1 067."

Despite the uptick in earnings, CEO Marcel von Aulock applied a sobering note to investor expectations.
"With a weak economy in South Africa and many of the commodity focused countries in which we operate, trading is expected to remain under pressure," he said. Marcel was formerly the CFO of the hospitality and gaming behemoth.

"The group remains highly cash generative and is confident in achieving attractive returns from the growth strategy once the macro-economic environment improves," the company says.

Africa's biggest hotels and gambling operator, Tsogo Sun's portfolio comprises over 100 hotels with more than 14,600 hotel rooms across all sectors of the market, from luxury to budget in South Africa, Nigeria, Kenya, Tanzania, Zambia, Mozambique, the United Arab Emirates and the Seychelles; 14 premier gaming and entertainment destinations in six provinces of South Africa; theatres, cinemas, restaurants and bars; and over 280 conference and banqueting facilities, including the Sandton Convention Centre.

Tsogo Sun acquired a 50,6% stake in real estate investment fund Hospitality Property Fund in a deal that saw it sell 10 hotels worth R1,78 billion to the fund, and the company recently sold another 29 hotel assets worth R3.6 billion to Hospitality. Eager to add to its portfolio, Tsogo Sun has also acquired businesses from the Liberty Group in KwaZulu-Natal and a 20% share in the Grandwest and Worcester casinos in the Western Cape. It expects to complete the building of its 125 room Stay Easy hotel in Maputo in the current financial year for $16 million.