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HCI consolidates its hold with Sactwu deal

Empowerment conglomerate increases stake in Tsogo Sun

Empowerment conglomerate Hosken Consolidated Investments (HCI), which has investments ranging from media to mining, is consolidating its holding in gaming and leisure group Tsogo Sun.

HCI will take over the holding of the Southern African Clothing and Textile Workers Union (Sactwu) in a deal that will see it take control of a further 18-million shares for R408m. The move further increases its hold over a group in which it already held 51.18% of its shares.

Tsogo Sun has holdings in gaming, hotel and entertainment assets, operates in eight countries and has a portfolio of 110 hotels comprising 18,752 hotel rooms.

HCI said it did the deal because it saw an opportunity to increase its holding at a favourable valuation. “The acquisition represents an opportunity for HCI to meaningfully increase its interest in Tsogo Sun at an attractive price.”

Tsogo Sun has lost a third of its value over the past two years but has seen a 21% increase in revenue to R7.7bn, and a 14% rise in earnings before, interest, tax, amortisation and rentals (ebitdar) to R2.5bn for the half-year to end-September.

Its results were boosted by its “alternative gaming” Vukani, a limited payout machines provider and Galaxy, which operates electronic bingo terminals. It bought Vukani and Galaxy from HCI’s subsidiary Niveus for R4.65m in late 2016.

The increase in earnings came after a difficult period for the hospitality industry. Despite this, PwC’s Hotels outlook: 2018–2022 Positioning for future growth report, noted that the sector was well positioned for growth.

“Foreign tourism rose 2.4% in 2017, building on its 12.8% increase in 2016. During the past two years, the number of foreign overnight visitors to SA rose by a cumulative 1.39m.”

The report stated that the gains in 2017 were “particularly impressive” as this was achieved without any boost from a weak rand.

The overall outlook for both the domestic and foreign tourism market looked promising. It projected the number of foreign overnight visitors to SA to increase at an estimated 3.6% compound annual rate to 12.3-million in 2022 from 10.29-million in 2017.

It also saw local tourism growing from 5.71-million in 2017 to 7.2-million in 2022.

Although PwC expected the overall number of available rooms to increase from 62,000 in 2017 to 64,900 in 2022, it did not expect it to keep up with demand, as “guest nights” were projected to “grow a bit faster than room supply” for the period.


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