South Africa’s leading casino operator, Tsogo Sun, released its full year report this week, and announced a 4% rise in profit for the year. However, Tsogo Sun also said that it expects to take a significantly hard hit – R54 million worth – in its core profits. This is due to a higher rate of value added tax that was introduced in April this year. The government raised the VAT rate by 1% to a hefty 15%.
The chief executive officer of Tsogo Sun, Jacques Booysen, said that the high VAT was unfortunately a cost that the business would need to absorb.
“That is a R54 million annual impact on our numbers,” he said.
In Gauteng, land-based casinos are obligated to pay a 9% provincial government gaming tax. However, bad news for casino operators is that this amount is set to rise, and it will no doubt affect Tsogo Sun as well. According to the group’s CEO, the new tax could impact Tsogo Sun’s Earnings Before Interest, Tax, Depreciation, Amortization and Property Rentals (EBITDAR) by up to R134 million. He also believes that the earnings impact could be R100 million.
If one adds to all of that the weak state of the South African economy and the other countries where Tsogo Sun operates, and the CEO believes that trading will remain under pressure.
Key highlights from the Tsogo Sun full year report were as follows:
• Income for Tsogo Sun’s casino arm dipped 1%. The group puts this down to the competition triggered by Time Square Casino, opened by its chief rival, Sun International.
• EBITDAR for the year ending in March 2018, climbed to R5.3 billion.
• Earnings were boosted by the purchase of the gaming businesses Galaxy Bingo and Vukani Slots
• Trading for hotels owned by Tsogo Sun remained flat. Occupanies were slightly up compared to the same time last year.
• Revenue dropped by 11% to R565 million in Tsogo Sun’s offshore hotel divisn.
• A final dividend share of 70c was announced.