GAMBLING: Sun Increases Cape Action
Recent Western Cape Business News
GAMING giant Sun International appears to have chosen an appropriate time to increase its shareholding in its Cape-based casinos.
Recently Sun International announced a deal where it would accumulate additional shares in the GrandWest casino in Cape Town and Golden Valley casino in Worcester from empowerment partner Grand Parade International (GPI).
When proposals are finalised Sun International will increase its stake in GrandWest from 59.74% to 69.8% and from 45% to 66.7% in Golden Valley.
The deal has been struck at a time when GrandWest appears to be showing signs of improving its operational performance after two difficult years when consumer spending in and around Cape Town dipped markedly.
In the year to end June GrandWest squeezed up revenue 4% to R1.65 billion and increased operating profits marginally to R625 million.
GrandWest remains by far the biggest profit generator in Sun International’s portfolio, earning more in operating profits than Carnival City (Gauteng) and Sibaya (Durban) combined.
Perhaps the biggest worry for Sun International in the Cape is the expiry late last year of its 10-year casino exclusivity in the Cape Metropole.
Currently the Provincial Government of the Western Cape is still considering whether to permit one of the casino licence holders in the Western Cape to relocate to the Cape Metropole.
No decision has been taken as yet (although many feel the additional tax revenue makes a second casino a ‘sure thing’). Sun International says there is insufficient information to assess the potential impact on GrandWest’s revenue and profitability.
Although much smaller than the GrandWest casino, the relatively new Golden Valley casino in Worcester is also showing an encouraging uptick in business levels.
The Golden Valley pushed revenue up to R123 million (last year R112 million) with operating profits up to R31 million (from R27 million last year).
Sun International’s other major Cape-based asset, the Table Bay Hotel, is not surprisingly - considering an over-supply of hotel rooms in Cape Town (see our story on Hospitality Property in this edition) – battling along.
The turnover drop at the Table Bay was down only 6.5% to R160 million, but operating profits dropped over 20% to R27 million as competitive pricing no doubt took its toll on margins.
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