Tsogo Sun Gaming, one of South Africa’s most prominent casino operators, witnessed a significant slump in its shares, dropping more than 5% on Thursday. This decline followed the release of the company’s lacklustre full-year results, which reported a notable fall in earnings and a substantial 30% cut in its final dividend.

Tsogo Sun Gaming, which owns prominent assets such as Montecasino and Gold Reef City, only saw a modest 2% increase in income to R11.5 billion for the year ending March. The company highlighted several factors contributing to its underwhelming performance, including the rising cost of diesel and the detrimental impact of load shedding on its operations. Additionally, the revenue was strained by limited discretionary spending among consumers and shifts in customer behaviour post-pandemic.

The benefits from solar energy installations across its portfolio did little to offset the surging electricity costs, which continue to rise above inflation rates. Adjusted core profit dropped by 2% to R3.9 billion, while adjusted headline earnings per share also decreased by 5% to 165c. The final dividend was notably lower at 40c, a 30% decrease from the previous year’s 57c, with the total annual dividend also down by 20% to 70c from 87c.

Market Response and Expert Analysis

In the afternoon trade, Tsogo Sun’s shares were down by 5.4% at R11.35, bringing its market valuation to just under R12 billion on the Johannesburg Stock Exchange (JSE). FNB portfolio manager Wayne McCurrie described the results as “disappointing,” expressing expectations for better performance from the company.

Despite solid results from casinos in Gauteng, Tsogo Sun faced challenges in other regions like KwaZulu-Natal and the Western Cape, where revenues were merely stable. Casinos in locations such as Emalahleni and Mbombela in Mpumalanga, Welkom in the Free State, and East London in the Eastern Cape experienced a challenging year, leading to a R50-million reduction in adjusted core profit.

Broader Industry Challenges and Future Outlook

The results have not come as a complete surprise to industry experts, who note that traditional casinos have been under pressure since the COVID-19 pandemic. Makwe Masilela of Makwe Fund Managers pointed out that increasing competition from sports betting and online gaming platforms is also impacting companies like Tsogo. He highlighted the growth in sports betting as particularly influential.

With the recent merger between Sun International and Peermont Group, there is an anticipation of more consolidations within the gaming sector as operators seek to unlock synergies and adapt to changing market conditions.

The downturn in Tsogo Sun Gaming’s performance, coupled with increasing competition and operational challenges, raises questions about the sustainability of large casino operators in a rapidly evolving market. Critics argue that the traditional gaming industry may need a significant overhaul to remain relevant as online platforms continue to draw away customers. This situation paints a concerning picture for stakeholders and could foreshadow further disruptions in South Africa’s gaming and hospitality sectors.

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