Business model – Tsogo Sun alternative gaming

FOOTPRINT

      as at 31 March 2018       Group revenue   
contribution   
%(1)
  Group revenue   
contribution   
%(1)
 
Tsogo Sun operated Galaxy
EBT sites
Galaxy
casino site
Galaxy
ISO site
Vukani
sites
Vukani
machines
Gauteng     4     –   151  698              
Eastern Cape     6     –   113  963              
Western Cape     –     –   191  891              
KwaZulu-Natal     4(2)   –   228  1 030              
Limpopo     2     –   136  775              
Mpumalanga     2     1   102  546              
North West     2     –   77  498              
Free State     –     –   82  333              
Free State     –   (3) –   33  160              
Total 2018     20      1   1 113  5 894       4      5     
(1) Group revenue and Ebitdar contribution included from 20 November 2017
(2) Operating as an ISO (40 LPM) site and paper bingo as at 31 March 2018
(3) The acquisition of the Grand Oasis Casino in Kuruman was subject to the approval of the Northern Cape Gambling Board and was not included at 31 March 2018. Approval was received post-year end and the casino acquired on 15 June 2018

KEY FEATURES

Galaxy Bingo

Galaxy offers bingo through EBTs and paper bingo games and operates the Grand Oasis Casino located in Kuruman, Northern Cape. During each of the 2017 and 2018 financial years four new bingo sites opened with an additional site opening in Tzaneen post-year end during April 2018. As at 31 March 2018 Galaxy operated 2 900 EBTs, 168 slot machines and 200 LPMs under ISO licences. As at 31 March 2018 four bingo sites were operational in KwaZulu-Natal but they could only operate LPMs under ISO licences and paper-based bingo. Post-year end two sites have already been converted to EBTs and the balance will follow during 2018. There are an additional three licences in KwaZulu-Natal that are not yet operational. Numerous court cases that may impact the EBT licences in KwaZulu-Natal, Eastern Cape and North West remain pending.

Empowerment shareholding is at a site level which provides access to the licences and the group holds interests of between 29% and 100% in each site and runs the operations of all sites.

The bingo sites and the associated food and beverage outlets operate mainly in leased premises in shopping centres where visibility and convenient access are important.

The majority of the EBTs are leased, due mainly to uncertainties in the initial period of the industry, and these will be replaced with owned machines where appropriate.

Vukani

Vukani offers LPM gaming services and manages almost 5 900 LPMs at in excess of 1 100 third-party sites throughout all the provinces of the country. The sites are located in pubs, bars, clubs, hotels, taverns and bookmakers and the group provides the sites with access to LPMs with a full support structure. The sites are monitored by a national central electronic monitoring system to maintain a well-regulated gaming industry for site owners and their customers.

Growth is achieved through the roll out of additional sites and the optimisation of existing sites in terms of location and product mix. There are significant barriers to entry, including the stringent requirements and time delays in obtaining the necessary licences and a limited number of licences are available for each province.

(1) Opened in April 2018, post-31 March 2018
(2) Operating as an ISO (40LPM site)
(3) Operating as an ISO (40 LPM site) with paper bingo as at 31 March 2018
(4) Electronic bingo rolled out post-31 March 2018
(5) Not included as at 31 March 2018. Included from 15 June 2018