Southern Sun Limited · JSE:SSU
Southern Sun — Tsogo Sun Hotels — Investor Presentation (November 2019)
45 slides from Southern Sun's investor presentation, November 2019
Slide 1: Investor Presentation November 2019
Investor Presentation November 2019
Slide 2: Disclaimer
DISCLAIMER Certain statements in this document may constitute ‘forward looking statements’. Such forward looking statements reflect the company’s beliefs and expectations and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance o
Slide 3: Group Structure
Group Structure Public 49 % 51% 100% 59% HOTEL OPERATIONS Offshore South Africa • Owned, managed and • Owned and leased hotels • SA REIT leased hotels • Manco • UK Investments 3
Slide 4: Board of Directors
Board of Directors Executive Directors • Marcel von Aulock – CEO • Laurelle McDonald – CFO Non-Executive Directors • Johnny Copelyn – Chairman • Rob Nicolella Independent Non-Executive Directors • Mohamed Ahmed – Lead Independent • Chris Gina • Moretlo Molefi • Jabulani Ngcobo • Cornelia September 4
Slide 5: Economy, Full Service, Luxury Operated Portfolio
ECONOMY FULL SERVICE LUXURY Operated Portfolio 5
Slide 6: Portfolio by rooms
Portfolio by rooms Portfolio by number of rooms, brand and region (excluding RBH and IHL in the UK) Land / building Tsogo Third Owned Sun party Brand Freehold Leases HPF Total Gaming Owner Total Internally managed Luxury Portfolio 164 - - 164 246 695 1 105 Southern Sun 301 1 468 2 221 3 990 714 - 4
Slide 7: Group Financial Structure
Group Financial Structure Hotel Ownership • Freehold title or Land/building lease: • 27 hotels are run for the group’s account • The 27 individual hotel income statements contribute to group revenues and expenses • Internal management fees are paid to Manco which eliminate on consolidation • Rent is
Slide 8: Group Financial Structure
Group Financial Structure Hotel Ownership • Hospitality Property Fund • Managed by third-party owners • The 12 hotels managed by external parties remain investment properties on the group balance sheet • The rental income earned by HPF from these 12 hotels are reflected as rental income in the group
Slide 9: Group Financial Structure
Group Financial Structure Hotel Ownership • Tsogo Sun Gaming • 16 hotels owned by Tsogo Sun Gaming and run for their account • Managed by Tsogo Sun Hotels with the management fee income recognised in Manco • Third-party owned • 13 hotels owned by third parties and run for their account • Managed by
Slide 10: Financial Overview
Financial Overview
Slide 11: Income Statement - H1 F'20 vs H1 F'19 Pro forma (Rm)
Income Statement - H1 F’20 vs H1 F’19 Pro forma (Rm) H1 F’19 H1 F’20 Pro forma % Change Income 2 080 2 030 2 Rooms revenue 1 303 1 271 3 Food & beverage revenue 501 480 4 Property rental income 137 137 - Other income 139 142 (2) Owned Stats F’20 H1 F’19 H1 Ebitdar 559 577 (3) Occupancy (%) 59.1 59.1
Slide 12: Income Statement - H1 F'20 vs H1 F'19 Pro forma cont. (Rm)
Income Statement - H1 F’20 vs H1 F’19 Pro forma cont. (Rm) H1 F’19 H1 F’20 Pro forma % Change Profit before interest and taxation (b/f) 320 199 61 Net finance costs (179) (112) (60) Net finance costs (130) (112) (16) Net finance costs – IFRS16 (49) - * Associates and JVs 21 21 - Income tax expense (
Slide 13: Reconciliation to Adjusted Headline Earnings (Rm)
Reconciliation to Adjusted Headline Earnings (Rm) H1 F’20 H1 F’19 Pro forma % Gross Net Gross Net change Attributable earnings 54 40 35 Loss on disposal of PP&E 1 1 - - Fair value adjustment of investment property - - 119 119 NCI effect of fair value adjustment - - - (49) Headline earnings 55 110 (5
Slide 14: Divisional Contribution (Rm)
Divisional Contribution (Rm) H1 F’20 H1 F’19 Pro forma Tsogo Tsogo Hotels Hotels Sun Hotels Hotels Sun SA Offshore HPF Hotels SA Offshore HPF Hotels Ebitdar 182 70 307 559 186 74 317 577 Property rental (99) (7) - (106) (92) (12) - (104) LTI (7) - - (7) (7) - - (7) Ebitda 76 63 307 446 87 62 317 466
Slide 15: Indicative Consolidation of HPF into TGO (Rm)
Indicative Consolidation of HPF into TGO (Rm) H1 F’20 H1 F’19(1) Tsogo Tsogo HPF Sun HPF Sun Statutory Hotels Statutory Hotels Rooms revenue - 612 - 596 Food & beverage revenue - 153 - 142 Other revenue - 26 - 27 Rental income 330 128 339 128 3rd party 123 123 123 123 Tsogo Sun 207 5 216 5 Overheads
Slide 16: Income Statement - Reconciliation to F'19 H1 Pro forma (Rm)
Income Statement - Reconciliation to F’19 H1 Pro forma (Rm) H1 F’19 H1 F’19 Pro forma Actual Change Income 2 030 2 030 - Ebitdar 577 577 - LTI expense/(credit) (7) 9 (16)(1) Property & equipment rentals (104) (104) - Amortisation & depreciation (147) (147) - Exceptional items (120) (120) - Net finan
Slide 17: Segmental Analysis (Rm)
Segmental Analysis (Rm) Revenue Ebitdar Ebitdar margin % H1 F’20 H1 F’19 H1 F’20 H1 F’19 H1 F’20 H1 F’19 Actual Actual Actual Actual Actual Actual Manco 127 129 64 71 50.4 55.0 Rental income 123 123 123 123 100.0 100.0 Internally managed 1 600 1 544 302 309 18.9 20.0 Coastal 875 825 157 141 17.9 17.
Slide 18: Cash flow (Rm)
Cash flow (Rm) H1 H1 F’20 F’19 Ebitdar per income statement 559 577 Property & equipment rentals (excluding IFRS16) (87) (84) Move in working capital adjusted for non-cash and exceptional items 30 48 Dividend income from associates 13 5 Cash generated from operations 515 546 Net finance costs paid (
Slide 19: Cash flow cont. (Rm)
Cash flow cont. (Rm) H1 H1 F’20 F’19 Free cash flow (b/f) 127 96 Dividends paid to NCI (159) (195) Disposal proceeds - 1 Investment activities – expansion capex (211) (62) Loans and investments (41) - Net cash surplus (284) (160) Currency 5 13 Move in net IBD (279) (147) Opening net IBD (including g
Slide 20: Investment Activities (Rm)
Investment Activities (Rm) H1 H1 F’20 F’19 Investment activities 211 62 Southern Sun Pretoria HPF 200 - Riverside Conference Centre TGO 11 - StayEasy Maputo TGO - 52 Hi Hotels brand TGO - 10 Maintenance capex 202 162 Hotel major refurbishments: Southern Sun Ridgeway Lusaka TGO 59 - Southern Sun Cape
Slide 21: Interest Bearing Debt (Rm)
Interest Bearing Debt (Rm) H1 H1 F’20 F’19 External debt – Offshore (US$ based) TGO 1 279 1 216 Internal debt – Group treasury TGO - 2 492 Bank overdrafts TGO - 161 Prepaid borrowing costs TGO (3) (7) External debt (Rand based)(1) HPF 2 334 1 957 Prepaid borrowing costs HPF (2) (3) Gross IBD 3 608 5
Slide 22: Hotel Operations / Hospitality Property Fund
HOTEL OPERATIONS HOSPITALITY PROPERTY FUND 22
Slide 23: Operated Hotels Portfolio and Statistics
Operated Hotels Portfolio and Statistics Hotels Rooms Owned Managed Portfolio as at 30 September 2019 Luxury 6 1 105 164 941 Portfolio has been aligned to brand architecture Full Service 44 9 215 7 443 1 772 Owned includes leased hotels and Economy 30 2 991 2 741 250 associates Timeshare & Res
Slide 24: UK Investments
UK Investments RBH Hotels UK • Tsogo Sun Hotels owns 26.4% plus board and committee representation • Manages over 45 hotels in the UK under multi brands including Crowne Plaza, Holiday Inn, Holiday Inn Express, Best Western, Westin, Hilton, Marriott, Aloft Best Western Beamish House International Ho
Slide 25: Future Opportunities: Occupancy
Future Opportunities Organic growth is the biggest opportunity • 10% occupancy = R450m revenue per annum • R100 ARR = R260m revenue per annum • Occupancy and rate tend to move in tandem through yielding SA System-wide Rooms Sold Occupancy 3600 85.0 3400 80.0 3200 3126 3116 75.0 Rooms Sold ('000) Occ
Slide 26: Future Opportunities: New brand in Hi Hotels
Future Opportunities New brand in Hi Hotels • Modular build process • First hotel with 123 keys scheduled to open at Montecasino during February 2020 • Aim to build more than 10 hotels if suitable sites obtained 26
Slide 27: Future Opportunities: Internal operational and cost focus
Future Opportunities Internal operational and cost focus remains • Information Technology • Streamline operations and improve purchasing • Web & Channels • Important transaction and information resource for the market • New booking engine implemented during June 2019 • Marketing • Tsogo Sun Hotels b
Slide 28: Medium Term Strategy
Medium Term Strategy • Manage and optimise the portfolio • Address tenure issues • 3 Sandton hotels extended for another 20 years on HPF-style leases • Work on accessing new nodes and segments • Including unlocking banked land • Manage portfolio disposals where required 28
Slide 29: Risks
Risks • Economic environment is the primary growth opportunity and main risk to the group’s performance • Other key risks include: • Security of tenure of leases and management agreements • Sustained increase in administered costs above inflation and revenue growth • Low barriers to entry resulting
Slide 30: Sum of Parts Valuation
Sum of Parts Valuation • R4.0bn market value @ R3.75 per TGO share 100% 59% HOTEL OPERATIONS Offshore South Africa • Valuable African assets • Valuable core assets • TGO owns 342m HPF • UK Investments – plus land shares R520m book value • Manco • 14.6% yield • Maia • R2.6bn market value @ R7.60 per
Slide 31: Hotel Operations / Hospitality Property Fund
HOTEL OPERATIONS HOSPITALITY PROPERTY FUND 31
Slide 32: Shareholding Structure
SHAREHOLDING STRUCTURE Public 59.2% 40.8% Distribution of shareholder % Shareholding Collective investment schemes 21% Foundations & charities 8% Retirement benefits 5% Retail shareholders 1% Assurance companies 1% Other 5% 32
Slide 33: Management and Board
MANAGEMENT AND BOARD as at 30 September 2019 Board of Directors • Executive Directors • Mara de Lima - CEO • Riaan Erasmus - CFO • Non-Executive Directors • Marcel von Aulock - Chairman • Mohamed Ahmed * • Chris Gina • Laurelle McDonald • Moretlo Molefi • Jabulani Ngcobo • Rob Nicolella • Cornelia S
Slide 34: Hotel Brand Portfolio
HOTEL BRAND PORTFOLIO Luxury Full Service Economy 34
Slide 35: Hotels Portfolio and Statistics
HOTELS PORTFOLIO AND STATISTICS 30 September 2019 Hotels Keys Luxury 4 926 Full Service 27 6 248 Economy 23 2 070 Total 54 9 244 35
Slide 36: Portfolio and Comparative Trading
PORTFOLIO AND COMPARATIVE TRADING F2019 F2020 F2019 Full year H1 Rent H1 Rent Rent Rooms Occ. % ARR Rev PAR (Rm) (Rm) (Rm) Western Cape Region 2,381 55.7% 1,498 835 109 84 312 Gauteng Region 3,259 59.1% 1,010 597 109 138 267 Rest of South Africa 2,096 67.8% 988 670 89 91 186 Sub-total 7,736 60.4% 1,
Slide 37: Western Cape Region | Trading and Rent
WESTERN CAPE REGION | TRADING AND RENT (Rm) F20 F19 F19 H1 H1 Full Year Rooms Occ. % ARR RevPAR Rent Rent Rent Western Cape Region 2,381 55.7% 1,498 835 109 84 312 Westin Cape Town 483 39 24 105 Southern Sun - Waterfront 537 23 22 67 Southern Sun - The Cullinan 394 22 21 58 Radisson Blu Waterfront 1
Slide 38: Gauteng Region | Trading and Rent
GAUTENG REGION | TRADING AND RENT (Rm) F20 F19 F19 H1 H1 Full Year Rooms Occ. % ARR RevPAR Rent Rent Rent Gauteng Region 3,259 59.1% 1,010 597 109 138 267 Birchwood Hotel & Conference Centre 665 24 38 71 Holiday Inn Sandton 301 12 8 19 Crowne Plaza Rosebank 318 11 12 21 Radisson Blu Gautrain 220 13
Slide 39: Rest of SA | Trading and Rent
REST OF SA | TRADING AND RENT (Rm) F20 F19 F19 H1 H1 Full Year Rooms Occ. % ARR RevPAR Rent Rent Rent Rest of South Africa 2,096 67.8% 988 670 89 91 186 Garden Court South Beach 414 16 16 38 Garden Court - PE King's Beach 280 10 10 20 Garden Court - Umhlanga 204 7 9 19 Garden Court Polokwane 180 11
Slide 40: Hotels Portfolio and Statistics
HOTELS PORTFOLIO AND STATISTICS HPF : Trading Information (excluding SUN1) Occupancy Average Room Rate Revpar F20 F19 %Δ Relative F20 F19 %Δ Relative F20 F19 %Δ Relative Act Act on PY GI Act Act on PY GI Act Act on PY GI Western Cape 55.7% 51.8% 7.7% 103.0 1,498 1,333 12.4% 103.6 835 690 21.0% 106.7
Slide 41: Income Statement
INCOME STATEMENT (Rm) 6 months 6 months Change on to to prior year Sept 2019 Sept 2018 % Rental Income 335 345 (2.9) Other income 2 0 100.0 Net operating costs (30) (28) (7.1) EBITDAR 307 317 (3.2) Net finance costs (92) (80) (15.0) Profit before tax & adjustments 215 237 (9.3) Fair value on interes
Slide 42: Cash Flow Statement
CASH FLOW STATEMENT 6 months 6 months to to Sept 2019 Sept 2018 Ebitdar per the income statement 307 317 Working capital adjusted for non-cash 18 38 and exceptional items Cash generated from operations 325 355 Net finance costs (92) (80) Maintenance capex (117) (100) Acquisition of SS Pretoria (200)
Slide 43: Interest Bearing Debt
INTEREST BEARING DEBT (Rm) as at as at Sept 2019 Sept 2018 Bank Facilities 1,372 1,047 Corporate Bonds (notes) 960 890 Gross Interest bearing debt 2,332 1,937 Cash on hand (27) (116) Net Interest bearing debt 2,305 1,821 Loan to Value 18.9% 15.8% Weighted average cost of debt 9.2% 9.5% 43
Slide 44: Property Valuations
PROPERTY VALUATIONS • HPF’s policy is to value its investment properties annually. • In the prior six months, HPF revalued its investment property for the purpose of the potential casino acquisition, as is required by the JSE’s Listing Requirements. • HPF’s Board believe there are currently no indic
Slide 45: Thank you
Thank you
Tsogo Sun Hotels — Investor Presentation (November 2019) on 6ix