Page 24 - Integrated Annual Report

OPERATIONAL OVERVIEW(CONTINUED)
22
INTEGRATED ANNUAL REPORT 2021
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
Palazzo Hotel
lenders until 31 March 2022 are:
• a fixed margin ratchet of 58bps from 31 May 2021 until 30 August 2021;
• a tiered margin ratchet of between 27bps and 66bps (with the determination thereof being based on net leverage) from 31 August 2021 until 31 March 2022;
• Interest of approximately R400 million which was rolled up to support liquidity will be settled by 31 August 2021;
• a reasonable minimum financial results performance requirement for the quarter ending 30 June 2021, which has been met;
• no material part of the business shall be locked down for 30 days cumulatively; and
• no dividends to be declared until Tsogo Sun Gaming’s financial performance returns to being within its original financial covenants.
Tsogo Sun Gaming has done well to reduce net interest bearing debt and guarantees from the unsustainable R11.8 billion reported for the interim period, to R10.9 billion at 31 March 2021 (R11.4 billion at 31 March 2020). Its focus remains on reducing its medium to long-term debt levels, thereby reducing risk and funding costs.
Debt reduction should accordingly be accelerated during 2022, provided that there are no further setbacks relating to the imposition of regulatory restrictions (like the lockdown of the businesses from 28 June 2021).
Casinos:
The casino division experienced a very difficult 2021 financial year.
The division focused on improving the structure and efficiency of its business while reducing its operating expenses, which focus was critical in enabling the
Suncoast Casino
division to generate the positive cash required to assist Tsogo Sun Gaming in reducing its significant debt burden. The results achieved ensured the continued support of Tsogo Sun Gaming’s lenders which assisted in the survival and recovery of its business.
With the cost savings achieved and natural attrition, Tsogo Sun Gaming has to date managed to contain retrenchments to a minimum, despite continued trading restrictions. It is, however, not sustainable for the business (or its staff) to continue trading these limited hours in the long term without significantly reducing its staff complement. It is hoped that once the third wave has passed and casinos reopen, the ongoing curfews that have been imposed will be lifted so that the casino division can retain its staff.
Gold Reef City Theme Park was also restructured during the year and now boasts an additional 13 rides. The pricing structure has been changed to one price for all tickets, tickets are available online and the theme park will only be open on selected days of the week.
Theatres, cinemas and restaurants (and consequently tenanting income) remain challenging, with alcohol bans, curfews and social distancing requirements. The casino hotels made an EBITDA loss for the year.
Technological development will continue during the next financial year to position the casino division for the long term.
Bingo:
The bingo division faced the same restrictive environment as that of the casino division, but purely due to the smaller scale and lower overheads of bingo versus casinos, the bingo division was better placed to cope with this.
LPMs (Limited Pay Out Machines):
The LPM division continued to be the top performing division for the year.