Southern Sun Limited · JSE:SSU

Southern Sun — Tsogo Sun Holdings — Investor Presentation (May 2016)

57 slides from Southern Sun's investor presentation, May 2016

  1. Slide 1: Presentation to Analysts and Investors

    Presentation to: Analysts and Investors May 2016

  2. 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

  3. Slide 3: Key Indicators

    Key Indicators Ebitdar Adjusted Dividends Income Ebitdar Margin HEPS per share 12.3 billion 4.5 billion 37.0% 196.5 cents 98 cents 8% 8% 0.2p.p 12% 10% 1st Half 7% 1st Half 6% 2nd Half 9% 2nd Half 9% 3

  4. Slide 4: Group Structure

    Group Structure Public 47.6% 52.4% 100% 100% 4

  5. Slide 5: Gaming Portfolio

    Gaming Portfolio 100% 100% 100% 100% 65% 100% 100% 100% 100% 100% 25% 100% 98% 70% 5

  6. Slide 6: Hotel Portfolio

    Hotel Portfolio TSOGO SUN HOTELS Luxury Each hotel offers guests world-class style, unparalleled service and accommodation and signature touches that define luxury travel. AA A | A AY . With products and services that meet the needs of tomorrow's savvy global travellers, whether Full Service travell

  7. Slide 7: Management and Board

    Management and Board  TSH Board of Directors ● Executive Directors  Marcel von Aulock – Group CEO  Rob Huddy – Group CFO ● Non-Executive Directors  Johnny Copelyn (Chairman)  Marcel Golding  Busi Mabuza  Elias Mphande  Rex Tomlinson  Jabu Ngcobo  Yunis Shaik 7

  8. Slide 8: Management and Board

    Management and Board  Group Executive Committee ● Corporate ● Gaming  Marcel von Aulock – Group CEO  Jacques Booysen – MD Gaming  Rob Huddy – Group CFO  Greg Lunga – FD Gaming  Noeleen Bruton – Marketing Director ● Hotels  Vusi Dlamini – Group HR Director  Richard Weilers – COO and MD Offsho

  9. Slide 9: Segmental Analysis

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  10. Slide 10: Group – Income and Ebitdar (Rm)

    Group – Income and Ebitdar (Rm) Six months ended Six months ended Year ended 30 September 31 March 31 March F’16 F’15 % Change F’16 F’15 % Change F’16 F’15 % Change Income Gaming 4 310 4 071 6 4 590 4 264 8 8 900 8 335 7 Net gaming win 3 562 3 428 4 3 799 3 548 7 7 361 6 976 6 Other 748 643 16 791 7

  11. Slide 11: Tsogo Sun Segmental (Rm)

    Tsogo Sun Segmental (Rm) Income Ebitdar(1) Ebitdar Margin % F’16 F’15 % Change F’16 F’15 % Change F’16 F’15 Montecasino 2 674 2 510 7 1 194 1 133 5 44.7 45.1 Suncoast 1 701 1 581 8 791 732 8 46.5 46.3 Gold Reef City 1 380 1 270 9 525 479 10 38.1 37.7 Silverstar 735 676 9 254 248 3 34.6 36.7 The Ridg

  12. Slide 12: Gaming

    Key Strategic Issues Gaming 12

  13. Slide 13: Gaming Win (Rm)

    Gaming Win (Rm) F’16 F’15 % Change Gaming win 7 361 6 976 6 Tables 1 750 1 573 11 Slots 5 611 5 403 4 Drop/hold % – tables 21.5 21.8 (0.3)pp Handle/win % – slots 5.0 5.2 (0.2)pp F’16 F’15 % Change Gauteng 3 903 3 682 6 KwaZulu-Natal 2 014 1 873 8 Mpumalanga 591 611 (3) Western Cape 481 431 12 Other

  14. Slide 14: Gauteng Gaming Tax Revenues

    Gauteng Gaming Tax Revenues Gold Reef Silver- Growth in Gaming win (%) Gauteng Monte-casino City star Calendar years 2000 Monte vs Sundome 25.0 (4.9) 2001 Other casinos opened 5.8 20.9 2002 13.9 16.5 2003 11.0 9.6 2004 18.9 15.5 2005 11.1 13.2 2006 14.9 14.5 2007 13.1 12.6 2008 7.8 (6.8) (1.0) * 200

  15. Slide 15: Gauteng Gaming Tax Revenues

    Gauteng Gaming Tax Revenues 140 Relative Growth (2008 = 100) Gauteng Total Industry / Tsogo Sun vs Non Tsogo Sun 135 130 125 120 Total Industry 115 110 Tsogo Sun 105 Non-Tsogo 100 95 90 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 Relative Growth (2008 = 100) Gauteng Total Industry / Montecasino

  16. Slide 16: Gauteng Gaming Tax Revenues

    Gauteng Gaming Tax Revenues Relative Growth (2008 = 100) Gauteng Total Industry / Gold Reef vs Non Tsogo Sun 140 135 130 125 120 Total Industry 115 Non-Tsogo 110 105 Goldreef City 100 95 90 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 Relative Growth (2008 = 100) Gauteng Total Industry / Silvers

  17. Slide 17: KZN Gaming Tax Revenues

    KZN Gaming Tax Revenues KwaZulu- Golden Growth in Gaming win (%) Natal Suncoast Horse Blackrock Calendar years 2004 24.5 37.3 2005 24.7 22.5 2006 16.2 15.1 2007 19.6 15.6 2008 6.9 8.3 2009 4.6 5.0 1.4 5.5 2010 4.4 4.6 4.1 10.1 2011 7.3 5.3 9.2 10.8 2012 10.0 10.8 8.9 11.6 2013 5.3 6.9 (1.6) 7.3 2014

  18. Slide 18: KZN Gaming Tax Revenues

    KZN Gaming Tax Revenues 160 Relative Growth (2008 = 100) KZN Total Industry / Tsogo Sun vs Non Tsogo Sun 150 140 Total Industry 130 Tsogo Sun 120 Non-Tsogo 110 100 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 Relative Growth (2008 = 100) KZN Total Industry / Suncoast vs Non Tsogo Sun 160 150 140

  19. Slide 19: KZN Gaming Tax Revenues

    KZN Gaming Tax Revenues Relative Growth (2008 = 100) KZN Total Industry / Golden Horse vs Non Tsogo Sun 160 150 140 Total Industry 130 Non-Tsogo 120 Golden Horse 110 100 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 Relative Growth (2008 = 100) KZN Total Industry / Blackrock vs Non Tsogo Sun 180

  20. Slide 20: Other Gaming Tax Revenues

    Other Gaming Tax Revenues Growth in Gaming win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 6 months to September 2015 (5.0) (8.7) 0.7 6 months to March 2016 (0.6) (6.0) 3.5 12 months to March 2016 (2.8) (7.4) 2.2 Western Cape Caledon Mykonos Garden Route 6 months to September 2015 3.3 13.

  21. Slide 21: Key Strategic Issues – Gaming

    Key Strategic Issues – Gaming  SunWest and Worcester Casinos ● Previous deal cancelled due to excessive competition commission delays ● Deal restructured at a 20% equity stake  10% from Sun International (“SI”) and Grand Parade Investments (“GPI”) each or 20% from Sun International  R1.35bn with

  22. Slide 22: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Western Cape ● Potential to bid for the relocation of one of the smaller casino in the Western Cape to the Cape metropole remains an opportunity for the group should the provincial authorities allow such a process ● Sun International launched court action to set aside

  23. Slide 23: Key Strategic Issues – Gaming

    Key Strategic Issues – Gaming  Gauteng Gaming Taxes ● The Gauteng Provincial Government published a proposed revision of the casino tax regime for comment in January 2016 where the current fixed rate will be replaced with a sliding scale with a maximum marginal rate of 15% ● The impact on the group

  24. Slide 24: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  B-BEEE condition of licence ● Regulators seek to impose the achievement and maintenance of a prescribed BBBEE rating as a condition of licence ● Given the nature of the recent revised draft codes whereas TSH could drop from Level 2 to Level 7, the issue is more releva

  25. Slide 25: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Mpumalanga 4th licence ● Mpumalanga Gambling Board withdrew the RFP on 25 July 2013 on the basis that the RFP did not clearly stipulate the MGB’s intentions in respect of shareholding and profit entitlement by black persons within the province ● A revised bid was subm

  26. Slide 26: Key Strategic Issues – Gaming

    Key Strategic Issues – Gaming  National Gambling Policy ● DTI published a draft policy in May 2015 for comment including a proposal that the North West Province be allocated an additional licence ● DTI published a notice of the intention to increase the number of licences to 41 in October 2015 ● CA

  27. Slide 27: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Montecasino ● Additional 700 gaming positions approved. 106 slot machines and one baccarat table added in F’15 and 53 slot machines added in F’16  An additional approximately 50 slot machines can be added on the existing gaming floor ● Construction continues on offic

  28. Slide 28: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Silverstar ● Redevelopment including additional 400 gaming positions (316 slot machines and 6 tables) completed during October 2014 ● Substantial increase in footfall ● Gaming win growth below expectations at 6.4%, impacted by poor win percentages ● Slots handle and t

  29. Slide 29: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Gold Reef City ● R640m refurbishment and expansion including casino offering, Privé expansion, cinemas, additional food and beverage outlets, ten pin bowling alley and improved access systems at the Theme Park with an improved linkage to the casino complex, upgrade of

  30. Slide 30: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Suncoast ● Additional 900 machines and 16 tables approved ● Following a reassessment of the Durban retail market, the investment has been reduced to R2.1bn and will include additional casino space and new Privé, 20 000sqm destination retail and additional restaurants,

  31. Slide 31: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Golden Horse ● Refurbishments of the Privé and the Derby Lounge completed in May 2015 and the main floor refurbishment completed in October 2015  Mykonos ● Refurbishment of the casino floor completed in August 2015  Blackrock Minorities ● Agreement has been reached

  32. Slide 32: Hotels

    Key Strategic Issues Hotels 32

  33. Slide 33: Owned and Managed Portfolio and Statistics

    Owned and Managed Portfolio and Statistics Hotels Rooms Owned Managed Luxury 6 1 113 410 703 Owned includes leased hotels and Full Service 23 5 015 4 396 619 associates Select Service 26 4 777 3 930 847 Portfolio as at 31 March 2016 Budget 22 1 661 1 661 - Excludes Redefine BDL portfolio Timeshare &

  34. Slide 34: SA System-Wide Rooms Sold Annual History

    SA System-Wide Rooms Sold Annual History 76.0% 3 250 000 74.0% 3 050 000 72.0% 2 850 000 70.0% 2 650 000 68.0% 2 450 000 66.0% 2 250 000 64.0% 2 050 000 62.0% 1 850 000 60.0% 1 650 000 58.0% 56.0% 1 450 000 54.0% 1 250 000 F'94 F'95 F'96 F'97 F'98 F'99 F'00 F'01 F'02 F'03 F'04 F'05 F'06 F'07 F'08 F'

  35. Slide 35: Key Strategic Issues – Hotels

    Key Strategic Issues – Hotels Land Buildings Operations Management Brand PropCo OpCo  Portfolio Philosophy ● Ideally own all components  Strategic advantage in scale in South Africa  More capital intensive but allows substantially higher return on effort  Retains control of the assets providing

  36. Slide 36: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Hospitality Property Fund (“HPF”) ● 55% of the HPF B-linked units acquired for R252m ● Reconstitution of the capital structure into a single class of share  Swap ratio 3.5 B shares to 1 A share ● Acquire controlling stake (>50%) through the introductio

  37. Slide 37: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Occupancy increased 1.0pp to 62.9% on the prior year ● Industry occupancies impacted by the visa regulations which constrained growth  Average room rate growth of 9% on the prior year  Group trading at RevPar premiums to the market in 3, 4 and 5 star

  38. Slide 38: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Major refurbishments ● Riverside Sun completed. Hotel closed from May 2015 to August 2015 ● Sabi River Sun completed. Hotel closed from June 2015 to September 2015 ● GC Marine Parade completed ● Sandton Sun completed ● GC Kings Beach completed ● GC Polo

  39. Slide 39: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Redefine BDL ● Invested £8.7m in 2014 in the independent hotel manager in the UK ● £1.7m dividends have been received  International Hotel Group ● Acquired 25% of equity for £14m (R315m) between September 2015 and March 2016 ● Formed by major shareholders

  40. Slide 40: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Offshore hotels trading improved on the prior year by 0.8pp at 53.9% occupancy ● Prior year impacted by Ebola and closure of SS Maputo for refurbishment ● Remains impacted by security concerns and weaker market attributable to the negative impact of commodi

  41. Slide 41: Financial Overview

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  42. Slide 42: Group – Income Statement (Rm)

    Group – Income Statement (Rm) F’16 F’15 % Change Income 12 283 11 343 8 Net gaming win 7 361 6 976 6 Revenue Rooms 2 784 2 453 13 F&B 1 353 1 203 12 Other 785 711 10 Ebitdar 4 543 4 223 8 Gaming 3 429 3 265 5 Hotels – SA 920 830 11 – Offshore(1) 192 137 40 Forex losses (23) (21) * Corporate 25 12 *

  43. Slide 43: Group – Income Statement

    Group – Income Statement Group Income by Nature % F’16 F’15 Slots 46 48 Tables 14 14 Rooms 23 22 F&B 11 10 Other 6 6 Total Hotel Ebitdar F’16 F’15 Hotels SA 920 830 Hotels Gaming 191 172 (1) Hotels Offshore 192 137 Ebitdar 1 303 1 139 % of Group Ebitdar 29% 27% (1) Pre-forex 43

  44. Slide 44: Group – Income Statement (Rm)

    Group – Income Statement (Rm) F’16 F’15 % Change Ebitdar 4 543 4 223 8 LTI expense (46) (95) 52 Property rentals (219) (210) (4) Amortisation & depreciation (812) (733) (11) Exceptional items (58) (143) 59 Net finance costs (857) (681) (26) Associates and JVs 29 25 16 Taxation (774) (680) (14) Non-c

  45. Slide 45: Adjusted HEPS (Rm)

    Adjusted HEPS (Rm) F’16 F’15 % change Attributable earnings 1 788 1 672 7 Capital asset disposal losses 4 3 Impairment of capital assets 15 7 Gain on disposal of investment property (7) - Headline earnings 1 800 1 682 7 Transaction costs 26 2 Pre-opening expenses 9 11 Impairment of loans (Queens) 4

  46. Slide 46: Group Cash Flow (Rm)

    Group Cash Flow (Rm) F’16 F’15 Ebitdar per income statement 4 543 4 223 Property rentals (219) (210) Ebitda 4 324 4 013 Working capital adjusted for non-cash and exceptional items 68 (145) Dividend income from associates 35 7 Cash generated from operations 4 427 3 875 Interest paid (net) (801) (715)

  47. Slide 47: Investment Activities (Rm)

    Investment Activities (Rm) F’16 F’15 Investment activities 962 2 045 Gold Reef City redevelopment 256 142 Silverstar redevelopment 28 321 Suncoast expansion 47 141 Emnotweni expansion 2 18 Monte Circle and Monte Place 27 6 Hemingways bid/ expansion costs - 6 Blackrock expansion - 3 Acquisition of Li

  48. Slide 48: Interest Bearing Debt (Rm)

    Interest Bearing Debt (Rm) F’16 F’15 External debt (US$ based) 1 100 788 External debt (Rand based) 8 663 9 350 Bank overdrafts 2 013 2 165 Prepaid borrowing costs (36) (44) Gross IBD 11 740 12 259 Cash on hand (2 492) (3 048) Net IBD 9 248 9 211 Dividend of R299m (31c per share) declared November 2

  49. Slide 49: Strategic Priorities

    © TSOGO SUN Strategic Priorities

  50. Slide 50: Strategic Priorities

    Strategic Priorities  Sustainability ● Beneficiaries  Current shareholding and Corporate Social Investment and Enterprise Development programmes are effective ● Financial stability  Strong cash flow, judicious use of gearing and adequate facilities  Own most of our assets ● Product relevance  A

  51. Slide 51: Strategic Priorities

    Strategic Priorities  Growth ● Organic  Significant focus on getting more out of our existing businesses  Continued cost focus  Systems and values ● Inorganic  New projects 51

  52. Slide 52: Future Prospects

    ©YTSOGO SUN Future Prospects

  53. Slide 53: Future Prospects

    Future Prospects  Group ● Strong cash generation ● Growth opportunities still being pursued but debt levels higher ● Upside potential from any economic recovery is significant ● Focus on costs remains to protect margins ● Reit structure aims to unlock third business segment for the group and enhanc

  54. Slide 54: Future Prospects

    Future Prospects  Gaming ● Gaming win growth – medium term outlook uncertain  Need consumers to get wealthier and, more importantly, feel wealthier  Regulatory issues remain a threat ● Western Cape metropole  Still an opportunity ● Mpumalanga fourth casino licence  Likely to be a protracted pro

  55. Slide 55: Future Prospects

    Future Prospects  Hotels ● Occupancy and rate still under pressure until transient Corporate demand recovers  Government austerity likely to continue to affect volumes – but is in the base ● Focus on customer satisfaction, brand awareness, distribution through channels and Web and enhancement of B

  56. Slide 56: Thank you

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  57. Slide 57: Tsogo Sun

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Tsogo Sun Holdings — Investor Presentation (May 2016) on 6ix