Gambling on more punters

"The sector is not in a bad place," says Tsogo Sun group chief executive Marcel von Aulock. "We have weathered the recession quite well, maintained employment levels and, particularly in Tsogo's case, are well placed for a recovery in both the hotel and gaming sectors," he says

Peermont group chief executive Anthony Puttergill agrees. "The casino business is still healthy." However, he cautions that the superior returns to shareholders before the global economic crisis struck are unlikely to be repeated for some time.

Acting Sun International chief executive Garth Collins is more cautious: "Margins remain under pressure and efficient and energetic management is constantly required in order to yield acceptable returns for shareholders and other stakeholders."

Puttergill agrees that the sector remains under pressure. "Faced with rapidly rising energy, labour, food and beverage prices, as well as taxation increases, the the business continues to chase efficiencies and increase its customer base to offset rising costs and effectively maintain margins," he says.

Delivering satisfactory results for investors while keeping management and staff motivated in a tough operating business and regulatory environment has been a great challenge for the Peermont group this past year, says Puttergill.

Collins identifies the proposed taxes and a challenge to GrandWest's exclusivity in the Cape Metropole as Sun International's greatest difficulties the group has faced over the past year.

Puttergill also notes the threat of the new taxes will hurt Peermont's margins. He cautions regulators on imposing further taxation and more burdensome compliance codes or other administrative requirements on an already highly regulated business.

"If we are to foster further incremental growth and stimulate investment both in infrastructure and in people, it is likely to come from a stable gaming licensing, regulatory and business environment," he says.

Von Aulock agrees, saying the business is extremely well run and regulated. "The only change that is necessary in my view is for government and regulators to engage meaningfully with the operators in formulating and implementing gambling policy and regulation," he says.

Despite these qualms, SA casinos shouldn't have any problem measuring up to the international standards.

"The SA casino business compares very favourably with those in the rest of the world," says Von Aulock. "Our entertainment offerings are of the highest standard, and the business is professionally run."

Puttergill agrees that the quality of product and service on offer compare well with most jurisdictions internationally. However, he notes that the rate of growth is not as exciting as it is in certain jurisdictions such as Macau and Singapore. "Africa is holding up relatively well in comparison with Europe and certain regional casino markets in North America," he says.

Both Von Aulock and Collins single out the National Responsible Gambling Programme, which is funded on a voluntary basis by the gambling industry, as being highly regarded internationally.

"We are strengthening the Peermont balance sheet to position the company for growth in a number of identified areas and projects. This we're doing while maintaining the positive revenue and Ebitda [earnings before interest, tax, depreciation and amortisation] growth momentum built up in 2012," says Puttergill. He says the company will be installing the Bally gaming system - a form of slot machine technology - at all properties during 2013.

Von Aulock says he still believes that Tsogo Sun's biggest opportunity is to maximise the benefits from its existing asset base. "We have wonderful properties, brands and people. And every step taken to ensure these are efficiently focused and operated is of enormous benefit to our financial performance," he says.

Collins sums up Sun International's goals in a list of its top five priorities: actively driving revenue growth; managing costs; resolving the issue of GrandWest's exclusivity; finding solutions for under-performing units; and delivering on the company's growth strategy.

Source: Financial Mail via I-Net Bridge