Southern Sun Limited · JSE:SSU

Southern Sun — Tsogo Sun Holdings — FY2013 Earnings Presentation

46 slides from Southern Sun's earnings presentation, May 2013

1. Slide 1: Presentation to Analysts and Investors

   Presentation to: Analysts and Investors May 2013

2. Slide 2: Group Structure

   Group Structure Public 41.3% 39.6% 19.1% 100% 100% 2

3. Slide 3: Gaming Portfolio

   Gaming Portfolio Gauteng KZN Western Cape Mpumalanga Eastern Cape Free State 3

4. Slide 4: Hotel Portfolio

   Hotel Portfolio Ultra Deluxe Deluxe Premier Economy Plus/ Economy Budget 4

5. Slide 5: 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)  Jabu Mabuza (Deputy Chairman)  Marcel Golding  Elias Mphande  Meyer Kahn (resigned w.e.f. 31 March 2013)  Graham Mack

6. Slide 6: 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  Rob Collins – Chief Marketing Officer  Vusi Dlamini – Group HR Director ● Hotels  Laurelle Fick – Corporate Finance

7. Slide 7: Segmental Analysis

   egmental Analysis _ OTHE (TSOGO SUN

8. Slide 8: Group – Revenue and Ebitdar (Rm)

   Group – Revenue and Ebitdar (Rm) F’13 F’12 % Change Revenue Gaming 7 648 7 113 8 Net gaming win 6 525 6 111 7 Other 1 123 1 002 12 Hotels SA 1 937 1 625 19 Hotels Offshore 361 324 11 Corporate (intra-group-elimination) (36) (31) * Total Group 9 910 9 031 10 Ebitdar Gaming 3 138 2 886 9 Hotels SA 615

9. Slide 9: Tsogo Sun Segmental (Rm)

   Tsogo Sun Segmental (Rm) Income Ebitdar Ebitdar Margin F’13 F’12 F’13 F’12 F’13 F’12 Montecasino 2 266 2 107 1 026 901 45.3 42.8 Suncoast 1 440 1 313 692 634 48.1 48.3 Gold Reef City 1 218 1 162 479 462 39.3 39.8 Silverstar 602 557 237 207 39.4 37.2 The Ridge 387 357 187 171 48.3 47.9 Emnotweni 319

10. Slide 10: Gaming

    Key Strategic Issues Gaming 10

11. Slide 11: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Expansion programme for Gauteng casino properties ● R150m paid to the Gauteng Gambling Board for charitable or social infrastructural developments ● Commitment to spend R750m on expansion and redevelopment of Silverstar casino and refurbishment and expansion of the Go

12. Slide 12: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Silverstar ● Additional 400 gaming positions approved ● Need improved offering for the target market ● R480m redevelopment including additional dining options, outdoor events area, cinemas, ten-pin bowling alley, laser tag games, expanded casino offering and parking ●

13. Slide 13: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Gold Reef City ● Additional 400 gaming positions approved ● R270m refurbishment and expansion including casino offering, cinemas and additional restaurants at the casino and additional food and beverage outlets and improved access systems at the Theme Park with an imp

14. Slide 14: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Suncoast ● Additional 120 slots and 14 tables approved ● 120 slots and 6 tables installed, balance on council approval of interior building plans ● Acquisition of minorities  Agreement reached with 89% of outstanding shareholders in Durban Add- Ventures Ltd and 100%

15. Slide 15: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Hemingways ● New investment of R400m  Expand hotel by 41 rooms  New Pavilion conference and banquet area  New and expanded casino floor ● Work largely completed and R329m spent by end March 2013 ● Residual payments due will be made in F’14 15

16. Slide 16: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Emnotweni ● Expansion programme with spend of R200m  Casino refurbishment including additional positions  Conference and events area  Restaurants  Additional parking 16

17. Slide 17: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Blackrock ● KwaZulu-Natal Gambling Board granted application for additional 50 slot machines and 3 tables ● CSI contribution of R2m ● Expansion of Garden Court Blackrock by an additional 40 rooms  Other Units ● Good Ebitdar growth at The Ridge, Emnotweni, Garden Rout

18. Slide 18: Gaming Win (Rm)

    Gaming Win (Rm) F’13 F’12 % Change Gaming win Tables 1 349 1 336 1.0 Slots 5 176 4 775 8.4 6 525 6 111 6.8 Drop/hold % – tables 21.3 22.9 Handle/win % – slots 5.3 5.4 F’13 F’12 % Change Gauteng 3 434 3 259 5.4 KwaZulu-Natal 1 735 1 590 9.1 Mpumalanga 570 527 8.2 Western Cape 396 367 7.9 Other 390 36

19. Slide 19: Gauteng Gaming Tax Revenues

    Gauteng Gaming Tax Revenues Monte- Gold Reef Silver- Growth in Gaming win (%) Gauteng 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) * 20

20. Slide 20: KZN Gaming Tax Revenues

    KZN Gaming Tax Revenues KwaZulu- Growth in Gaming win (%) Natal Suncoast Golden 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 12 months to March 2013 9.8

21. Slide 21: Other Gaming Tax Revenues

    Other Gaming Tax Revenues Growth in Gaming win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 12 months to March 2013 7.6 6.9 8.4 6 months to September 2012 9.7 10.9 10.1 6 months to March 2013 5.7 3.1 6.9 Western Cape The Caledon Mykonos Garden Route 12 months to March 2013 5.5 3.9 12.0 8.7

22. Slide 22: Hotels

    Key Strategic Issues Hotels 22

23. Slide 23: Hotels – Portfolio Philosophy

    Hotels – Portfolio Philosophy Land Buildings Operations Management Brand  Ideally own all components ● Tsogo Sun Hotels strategic advantage in scale ● More capital intensive but allows substantially higher return on effort ● Retains control of the assets providing extended tenure and resilience  L

24. Slide 24: Owned and Managed

    Owned and Managed Hotels Rooms Owned Managed Deluxe 6 1 113 410 703 Premier 19 4 191 3 513 678 Owned includes leased hotels and Economy/Economy Plus 29 5 120 3 824 1 296 associates Budget (F1) 23 1 690 1 690 - Timeshare & Resorts 7 1 161 307 854 South Africa 84 13 275 9 744 3 531 Offshore 8 1 072 74

25. Slide 25: 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'

26. Slide 26: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Good growth in Corporate Key accounts, Government, Leisure and Sports segments  Transient Corporate and Group & Convention business remains weak  Occupancy improvement of 3.2pp for the year  Average room rates remain constrained with growth of 5% for

27. Slide 27: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Acquisitions still present an opportunity ● Principles when pursuing acquisitions  Must fit core group product  Must be a long-term viable business  Cheap relative to replacement cost is not good enough ● Hotel Formula 1  Occupancy improved to 67.1%

28. Slide 28: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Africa hotels strong in US$ (occupancies F’13 : 70.1%, F’12 : 72.2%)  Currency positive impact to trading due to Rand weakness against US$ and Euro exchange rates  Forex gain for F’13 R37m (F’12 R13m) on cash and monetary items denominated in US$ and Euro

29. Slide 29: Ikoyi Hotels Limited

    Ikoyi Hotels Limited  195 rooms and suites  All day dining  Capacity for expansion  Includes Golden Gate  Debt US$20m – TSH guarantee  Equity US$50m – 75%  F’13 Ebitdar – US$7.5m 29

30. Slide 30: Ikoyi Hotels Limited

    Ikoyi Hotels Limited @TsOGO SUN

31. Slide 31: Financial Overview

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32. Slide 32: Group – Income Statement (Rm)

    Group – Income Statement (Rm) F’13 F’12 % Change Group income 9 910 9 031 10 Net gaming win 6 525 6 111 7 Revenue Rooms 1 914 1 615 19 F&B 869 752 16 Other 602 553 9 Ebitdar 3 888 3 501 11 Gaming 3 138 2 886 9 Hotels – SA 615 512 20 – Offshore(1) 93 88 6 Forex 37 13 * Corporate 5 2 * Ebitdar margin

33. Slide 33: Group – Income Statement (Rm)

    Group – Income Statement (Rm) F’13 F’12 % Change Ebitdar 3 888 3 501 11 LTI costs (234) (55) * Property rentals (193) (190) (2) Amortisation & depreciation (608) (623) 2 Exceptional items (19) 385 * Net finance costs (385) (420) 8 Associates and JVs 6 10 * Tax ― normal (701) (679) (3) – STC - (82) *

34. Slide 34: Adjusted HEPS (Rm)

    Adjusted HEPS (Rm) F’13 F’12 % change Attributable earnings 1 629 1 717 (5) Capital asset disposal profits (1) (2) FV adjustment to F1 - (179) Impairment of SSME goodwill 16 - JV Impairment (Masa) - 2 Impairment of Emnotweni arena (PPE) 9 - Headline earnings 1 653 1 538 7 Transaction costs – DAV/AWM

35. Slide 35: Group Cash Flow (Rm)

    Group Cash Flow (Rm) F’13 F’12 Ebitdar per income statement 3 888 3 501 Property rentals (193) (190) Ebitda 3 695 3 311 Move in working capital adjusted for non-cash items 54 85 Dividends income from associates 3 5 Cash generated from operations 3 752 3 401 Interest paid (net) (399) (455) Taxation –

36. Slide 36: Investment Activities (Rm)

    Investment Activities (Rm) F’13 F’12 Actual Actual Investments/Loans Acquisition of Ripple Effect/Suncoast minority - (510) Ripple Effect minority loan assumed on acquisition - 99 Formula 1 acquisition - (300) Millennium contingency settlement (58) (24) Expansion capex (580) (299) Hemingways bid/ ex

37. Slide 37: Interest Bearing Debt (Rm)

    Interest Bearing Debt (Rm) F’13 F’12 Non-controlling interests funding 32 32 Preference funding - 1 000 External debt (amortising and bullet) 4 298 4 595 Gross IBD 4 330 5 627 Cash on hand (750) (1 443) Net IBD 3 580 4 184 Dividend of R560m (51c per share) declared May 2013, to be paid June 2013 Div

38. Slide 38: Strategic Priorities

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39. Slide 39: Strategic Priorities

    Strategic Priorities  Sustainability ● Beneficiaries  Current shareholding and CSI programs are effective ● Financial stability  Strong cash flow, low gearing and adequate facilities  Own most of our assets ● Product relevance  Adequate maintenance capex provided  Strong development skills in-

40. Slide 40: Strategic Priorities

    Strategic Priorities  Growth ● Organic  Significant focus on getting more out of our existing businesses  Continued cost focus  CRM/BI focus ● Inorganic  New projects 40

41. Slide 41: Future Prospects

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42. Slide 42: Future Prospects

    Future Prospects  Group ● Strong cash generation ● Growth opportunities still being pursued ● Re-launch loyalty programmes ● Maximise brand value ● Implement Tsogo Academy 42

43. Slide 43: Future Prospects

    Future Prospects  Gaming ● Gaming win growth – medium term outlook positive  Need consumers to get wealthier and, more importantly, feel wealthier  Regulatory issues remain a threat  Tax – national/provincial ● Site developments  Emnotweni  Silverstar  Gold Reef City Theme Park  Suncoast  B

44. Slide 44: Future Prospects

    Future Prospects  Hotels ● Occupancy and rate still under pressure until transient Corporate and Group and Convention demand recovers ● Focus on customer satisfaction and brand awareness ● Opportunistic in SA – Land bank, acquire leases, new builds and acquisitions ● Continued pursuit of offshore e

45. Slide 45: Thank you

    Thank you © TSOGO SUN

46. Slide 46: Y TSOGO SUN

    Y TSOGO SUN

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