Tsogo Sun cuts debt and grows online gaming as casino earnings decline

Key topics:Balance-sheet gains: Debt falls to R6.8bn; finance costs down 16%; leverage continues to improve.Online momentum: Betting revenue up 15%; EBITDA turns positive; LPM division grows 5%.Core pressure: Casino precinct EBITDA falls 4.4%; impairments rise; dividend cut amid shifting consumer spend.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Tsogo Sun has reported a mixed interim performance for the six months ended 30 September 2025, with disciplined debt reduction and strong gains in online betting offset by declining earnings in its core casino and hotel precincts. While headline earnings grew and group leverage improved, economic pressure on households continued to weigh on traditional gaming operations.Group income for the period declined marginally by 1% to R5.56 billion, down from R5.61 billion in the prior comparative period, though slightly above the R5.55 billion reported in the six months to March 2025. The results underline the shifting dynamics in South Africa’s gaming sector as land-based casinos battle shrinking discretionary spend and rising competition from online substitutes.Headline earnings growth and shareholder rKey topics:Record profit growth: Normalised HEPS up 23.4%, revenue climbs to R95.3bn, gross margin expands to 39.8%.Fintech acceleration: Flash throughput hits R60bn; FoneYam exceeds 2m customers; fintech revenue up 31%.Rising credit risk: Debtors’ costs surge 62%; speciality division weak; inventory and operating expenses climb.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.eturnsHeadline earnings grew 1% to R769 million, improving 8% on a sequential basis from March 2025—the first consecutive improvement since early 2023. Headline earnings per share rose to 73.9 cents.Tsogo Sun continued to return capital to shareholders, repurchasing and cancelling 9 million shares over the past two months, reducing issued shares to 1.03 billion. Management reiterated its intention to cut the issued share count to 1.00 billion, part of a broader value-accretive capital allocation strategy.Aggressive debt reduction strengthens the balance sheetA defining feature of the period was accelerated deleveraging. Net interest-bearing debt and guarantees declined to R6.80 billion, down R386 million from March 2025, despite significant outflows for dividends (R313 million) and interest (R295 million).Lower debt translated into improved financing metrics. Net finance costs (excluding leases) fell 16% to R294 million. The group’s net debt-to-adjusted EBITDA ratio improved to 2.01×, safely below its 3× covenant and inching toward the medium-term target of 1.8×.Online betting and LPMs provide growth momentumTsogo Sun’s online betting segment was a standout, marking a sharp turnaround. The division swung from negative adjusted EBITDA to positive territory from August 2025, supported by a 15% increase in net gaming revenue to R136 million. Adjusted EBITDA jumped 40% to R14 million.Management plans to accelerate investment in technology and skills to expand the online platform, even if this trims short-term profit margins, noting that online remains a key long-term growth driver.The LPM (Limited Payout Machine) division also delivered steady performance, with revenue up 4% and adjusted EBITDA increasing 5% to R283 million, contributing a solid 16% of group EBITDA.A significant long-term expansion opportunity also emerged with regulatory approval to develop a R1.29 billion casino in the Helderberg region of the Western Cape, to be built over two years.Core casino and hotel earnings under pressureThe group’s core casino and precinct operations—its largest business segment—reported continued revenue softness. Income fell 0.8% to R4.10 billion, while adjusted EBITDA declined 4.4% to R1.52 billion.Slot machine revenue in particular has come under strain as consumers cut discretionary spending and shift toward online casino-style games. Management said this pressure reflects weak economic growth, high living costs, and structural demand shifts in the gambling market.Higher impairments and lower dividendImpairments rose sharply to R107 million (from R48 million), including:R50 million in goodwill impairments, largely from Blackrock and The Caledon casinos.R43 million in PPE impairments relating to underperforming Bingo sites and casinos such as Hemingways and Goldfields.The group also disposed of 50 million City Lodge shares in October 2025 for R200 million—a sale that generated a R30 million cumulative loss.Tsogo Sun declared an interim dividend of 15 cents, a 50% reduction from last year, but framed the cut as a deliberate decision to prioritise debt reduction and share buy-backs.Regulatory risk escalatesThe group faces mounting regulatory headwinds. Proposed amendments to tobacco legislation—including a potential ban on dedicated smoking areas in casinos—are expected to hurt footfall, employment and tax contributions.The National Gambling Amendment Bill also poses challenges, imposing new requirements on land-based casinos while offering no relief to the LPM sector, and failing to allow traditional casino operators to offer regulated online casino products.OutlookTsogo Sun enters the second half of the year with momentum in online betting and LPMs, a strengthened balance sheet, and a clearer path to long-term leverage targets. But stabilising its core casino earnings—still the backbone of the group—remains the central strategic challenge amid a cost-of-living squeeze and intensifying online competition..Read the results in full by downloading the PDF below

Tsogo Sun cuts debt and grows online gaming as casino earnings decline

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