Southern Sun Limited · JSE:SSU

Southern Sun — Tsogo Sun Holdings — Investor Presentation (May 2019)

66 slides from Southern Sun's investor presentation, May 2019

  1. Slide 1: Tsogo Sun Holdings Investor Presentation May 2019

    Tsogo Sun Holdings Investor Presentation May 2019

  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: Tsogo Sun Hotels

    TSOGO SUN HOTELS 3

  4. Slide 4: Unbundling of the Tsogo Sun Hotels Group

    Unbundling of the Tsogo Sun Hotels Group  Tsogo Sun Holdings (“TSH”) will distribute its entire interest in Tsogo Sun Hotels Limited (“THL”) in an unbundling ratio of 1 THL share for every TSH share held to shareholders in terms of a s46 “unbundling transaction” per the Income Tax Act  The THL unb

  5. Slide 5: Tsogo Sun Hotels Structure – Post Unbundling

    Tsogo Sun Hotels Structure – Post Unbundling Public 49 % 51% 100% 59% +25% HOTEL OPERATIONS EUROPE Offshore South Africa • Owned, managed • Owned and leased • Existing entity and and leased hotels hotels debt structure • Manco • SA REIT 5

  6. Slide 6: Tsogo Sun Hotels – Board

    Tsogo Sun Hotels – Board  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  Jabu

  7. Slide 7: Operated Portfolio

    Tsogo Sun Hotels – Operated Portfolio Deluxe Full Service Select Service Budget Note : 4 Hotels operated under IHG brands 7

  8. Slide 8: Tsogo Sun Hotels – Rooms

    Tsogo Sun Hotels – Rooms Portfolio by number of rooms, brand and region (excluding RBL and IHL in the UK) Land / building Tsogo Third Sun party Brand Freehold Leases HPF Gaming Owner Total Internally managed Deluxe Portfolio 164 - - 246 695 1 105 Southern Sun 301 1 708 1 981 714 - 4 704 Sun Square -

  9. Slide 9: Tsogo Sun Hotels Financial Overview

    TSOGO SUN HOTELS FINANCIAL OVERVIEW 9

  10. Slide 10: Tsogo Sun Hotels – Segmental Analysis (Rm)

    Tsogo Sun Hotels – Segmental Analysis (Rm) Revenue Ebitdar Ebitdar margin % F’19 F’18 F’17 F’19 F’18 F’17 F’19 F’18 F’17 Actual Actual Actual Actual Actual Actual Actual Actual Actual Manco 289 286 209 155 168 115 53.8 58.9 55.1 Rental income 347 402 299 347 402 299 100.0 100.0 100.0 Internally mana

  11. Slide 11: Tsogo Sun Hotels – Income Statement (Rm)

    Tsogo Sun Hotels – Income Statement (Rm) F’18 F’19 Restated(1) % Change Income 4 389 4 364 1 Rooms revenue 2 732 2 687 2 Food & beverage revenue 990 969 2 Property rental income 357 416 (14) Other income 310 292 6 Ebitdar 1 491 1 590 (6) LTI expense/(credit) (4) 7 * Property rentals (208) (189) (10)

  12. Slide 12: Tsogo Sun Hotels – Adjusted HEPS (Rm)

    Tsogo Sun Hotels – Adjusted HEPS (Rm) F’19 F’18 Restated(1) % Gross Net Gross Net change Attributable earnings (98) 495 * Loss on disposal of PP&E 3 2 - - Impairment of PP&E 94 68 - - Fair value adjustment of investment property 445 263 187 111 Associate headline adjustments (net) 10 (14) Headline e

  13. Slide 13: Income Statement: Reconciliation to Pre-Listing Statement Proforma

    Tsogo Sun Hotels – Income Statement : Reconciliation to Pre-Listing Statement Proforma (Rm) F’19 Proforma(1) F’19 Change Income 4 389 4 389 - Ebitdar 1 488 1 491 (3)(2) LTI expense (13) (4) (9)(2) Property rentals (208) (208) - Amortisation & depreciation (306) (306) - Exceptional items (581) (581)

  14. Slide 14: Tsogo Sun Hotels – Cash flow (Rm)

    Tsogo Sun Hotels – Cash flow (Rm) F’19 F’18 Actual Restated(1) Ebitdar per income statement 1 491 1 590 LTI (4) 7 Property rentals (208) (178) Move in working capital adjusted for non-cash and exceptional items 32 (146) Dividend income from associates 11 22 Cash generated from operations 1 322 1 295

  15. Slide 15: Tsogo Sun Hotels – Investment Activities (Rm)

    Tsogo Sun Hotels – Investment Activities (Rm) F’19 F’18 Investment activities 62 450 SunSquare and SE Cape Town FF&E - 34 Sandton Eye - 271 SE Maputo 52 145 Hi Hotels 10 - Maintenance capex 384 248 Hotel major refurbishments 119 16 Other maintenance capex 265 232 Total investment spend 446 698 15

  16. Slide 16: Tsogo Sun Hotels – Interest Bearing Debt (Rm)

    Tsogo Sun Hotels – Interest Bearing Debt (Rm) F’19 F’18 External debt (US$ based) 1 224 969 External debt HPF (Rand based) 1 959 1 952 Internal debt group treasury - 2 440 Bank overdrafts 191 132 Prepaid borrowing costs (8) (11) Gross IBD 3 366 5 482 Cash on hand (403) (357) Net IBD 2 963 5 125 Cost

  17. Slide 17: Hotel Operations, Europe, Hospitality Property Fund

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 17

  18. Slide 18: Operated Hotels Portfolio and Statistics

    Tsogo Sun Hotels – Operated Hotels Portfolio and Statistics Hotels Rooms Owned Managed Luxury 6 1 105 164 941  Portfolio as at 31 March 2019 Full Service 25 5 386 4 423 963  Owned includes leased hotels Select Service 27 5 079 3 988 1 091 and associates Budget 22 1 741 1 741 - Timeshare & Resorts

  19. Slide 19: South African Hotels Trading

    Tsogo Sun Hotels – South African Hotels Trading  System-wide occupancy decreased 1.2pp to 63.5% on the prior year  System-wide average room rate increased 2% on the prior year  KZN performance was in line with the prior year, with poor association business offset by good public sector support  C

  20. Slide 20: Offshore Hotels Trading

    Tsogo Sun Hotels – Offshore Hotels Trading  Offshore hotels trading remains under pressure with occupancies down 2.1pp on the prior year to 54.7% and average room rates down 7% in US$ and 2% in Rand  Forex gain for F’19 R6m (F’18 R1m) on cash and monetary items  Lusaka – the hotel is currently un

  21. Slide 21: Future Opportunities – Occupancy

    Tsogo Sun Hotels – Future Opportunities  Organic growth is the biggest opportunity • 10% occupancy = R450m revenue • R100 ARR = R260m revenue • Occupancy and rate tend to move in tandem through yielding SA System-wide Rooms Sold Occupancy 3600 85.0 3400 80.0 Rooms Sold ('000) 3126 Occupancy (%) 320

  22. Slide 22: Future Opportunities – Hi Hotels

    Tsogo Sun Hotels – Future Opportunities  New brand in Hi Hotels • Modular build process • First hotel with 123 keys scheduled to open at Montecasino during December 2019 • Aim to build more than 10 hotels if suitable sites obtained 22

  23. Slide 23: Future Opportunities – Operational and Cost Focus

    Tsogo Sun Hotels – 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 during June 2019 • Marketing  Tsogo Sun

  24. Slide 24: Hotel Operations, Europe, Hospitality Property Fund

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 24

  25. Slide 25: HPF Group Structure

    Tsogo Sun Hotels – HPF Group Structure Public 59.2% 40.8% Leases TENANT/ HOTEL PROPERTY OWNER HOTEL OPERATOR 25

  26. Slide 26: HPF Hotel Portfolio

    Tsogo Sun Hotels – HPF Hotel Portfolio Luxury Upscale Midscale Economy 26

  27. Slide 27: HPF Hotels Portfolio and Statistics

    Tsogo Sun Hotels – HPF Hotels Portfolio and Statistics Hotels Rooms  Portfolio as at 31 March 2019 Luxury 4 926 Upscale 8 2 216 Midscale 22 4 354 Budget 19 1 508 Total 53 9 004 Statistics F’19 F’18 % Change  On a like-for-like basis for the year Occupancy (%) 61.1 62.9 (1.8)pp ended 31 March 2019,

  28. Slide 28: HPF Indicative Consolidation of HPF into TSH

    Tsogo Sun Hotels – HPF Indicative Consolidation of HPF into TSH HPF Tsogo Sun Statutory Hotels Rooms revenue - 1 312 Food & beverage revenue - 303 Other revenue - 59 Rental income 830 357 3rd party 347 347 Tsogo Sun 483 10 Overheads (53) (1 157) Hotel trading related - (1 104) HPF central (53) (53)

  29. Slide 29: Hotel Operations, Europe, Hospitality Property Fund

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 29

  30. Slide 30: Europe – RBH Hotels

    Tsogo Sun Hotels – Europe  RBH Hotels • TSH owns 25% plus board and committee representation • Manages 39 hotels (5 718 rooms) in the UK • Manages under multi brands including Best Western Beamish House Crowne Plaza, Holiday Inn, Holiday Inn Express, Best Western, Westin, Hilton, Marriott, Aloft Ho

  31. Slide 31: Europe – International Hotel Properties

    Tsogo Sun Hotels – Europe  International Hotel Properties • Tsogo Sun Hotels owns 25.9% plus board representation • RDI Reit own 74.1% • Currently has GBP117m (R2.1bn) in hotel assets (1 143 rooms)  4 Travel Lodges – leased to Travel Lodge  4 Holiday Inn Express hotels (Dunstable, Hampton by Hilt

  32. Slide 32: Tsogo Sun Hotels – Risks

    Tsogo Sun Hotels – Risks  Annexure 15 in the Pre-listing Statement sets out the principal 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

  33. Slide 33: Tsogo Sun Gaming

    TSOGO SUN GAMING 33

  34. Slide 34: Tsogo Sun Gaming – Group Structure Post Unbundling

    Tsogo Sun Gaming – Group Structure Post Unbundling Public 49 % 51% 100% 100% 100% CASINOS 34

  35. Slide 35: Tsogo Sun Gaming – Board

    Tsogo Sun Gaming – Board  Board of Directors • Executive Directors  Jacques Booysen – Group CEO (to be replaced by Chris du Toit)  Rob Huddy – Group CFO • Non-Executive Directors  Johnny Copelyn – Chairman  Yunis Shaik – RemCo Chairman • Independent Non-Executive Directors  Marcel Golding  Ma

  36. Slide 36: Tsogo Sun Gaming Financial Overview

    TSOGO SUN GAMING FINANCIAL OVERVIEW 36

  37. Slide 37: Tsogo Sun Gaming – Segmental Analysis (Rm)

    Tsogo Sun Gaming – Segmental Analysis (Rm) Income Ebitdar(1) Ebitdar Margin % F’18 F’18 F’18 F’19 Restated(2) % Change F’19 Restated(2) % Change F’19 Restated(2) Montecasino 2 714 2 625 3.4 1 175 1 135 3.5 43.3 43.3 Suncoast 1 734 1 681 3.1 720 752 (4.2) 41.5 44.7 Gold Reef City 1 477 1 497 (1.3) 55

  38. Slide 38: Group – Income Statement (Rm)

    Tsogo Sun Group – Income Statement (Rm) F’18 F’19 Restated(1) % Change Continuing operations Income 11 619 9 842 18 Net gaming win 9 821 8 124 21 Rooms revenue 490 473 4 Food & beverage revenue 648 592 9 Other revenue 433 520 (17) Property rental income 137 133 3 Other income 90 - * Ebitdar 4 072 3

  39. Slide 39: Group – Income Statement (Rm) continued

    Tsogo Sun Group – Income Statement (Rm) F’18 F’19 Restated(1) % Change Continuing operations Profit for the year from continuing operations b/f 1 681 1 498 12 (Loss)/profit from discontinued operations (59) 660 * Profit for the year b/f 1 622 2 158 (25) Non-controlling interests – continuing operati

  40. Slide 40: Group – Adjusted HEPS (Rm)

    Tsogo Sun Group – Adjusted HEPS (Rm) F’19 F’18 Restated(1) % Gross Net Gross Net change Attributable earnings 1 562 1 971 Continuing operations – Gaming 1 640 1 477 11 Discontinued operations – Hotels (78) 494 * (Gain)/loss on disposal of PPE (1) (1) 2 2 Impairment of PP&E 21 16 68 63 Fair value adj

  41. Slide 41: Group – Cash Flow (Rm)

    Tsogo Sun Group – Cash Flow (Rm) F’19 F’18 Actual Restated (1) Continuing operations Ebitdar per income statement 4 072 3 681 Property rentals (132) (93) Move in working capital adjusted for non-cash and exceptional items (83) (379) Dividend income from associates 8 2 Cash flow from discontinued ope

  42. Slide 42: Gaming – Investment Activities (Rm)

    Tsogo Sun Gaming – Investment Activities (Rm) F’19 F’18 Investment activities 958 2 126 Suncoast expansion 758 291 Gold Reef City redevelopment 6 19 Mykonos land - 30 Monte Circle and Monte Place 29 26 Gameco acquisition - 1 733 Galaxy site developments and machine acquisitions 76 24 Vukani intellec

  43. Slide 43: Gaming – Interest Bearing Debt (Rm)

    Tsogo Sun Gaming – Interest Bearing Debt (Rm) F’19 F’18 External debt 11 605 8 274 Bank overdrafts 1 929 1 575 Prepaid borrowing costs (10) (16) Gross IBD 13 524 9 833 Cash on hand (2 541) (2 421) Net IBD 10 983 7 412 Cost of net debt ― pre tax 9.7% 9.8% ― post tax 7.0% 7.1% Dividend of R745m (70c p

  44. Slide 44: Casinos

    Y TSOGO SUN | 100% | 100% Y TSOGO SUN Gada CASINOS ©WTSOGO SUN | 100% 44

  45. Slide 45: Gaming – Casino Portfolio

    Tsogo Sun Gaming – Casino Portfolio Gauteng KZN Western Cape Mpumalanga Eastern Cape Free State 100% 100% 100% 100% 65% 100% 100% 100% 100% 100% 100% 100% 100% 45

  46. Slide 46: Gaming – Casino Gaming Win (Rm)

    Tsogo Sun Gaming – Casino Gaming Win (Rm) F’19 F’18 % Change Gaming win 7 494 7 357 2 Tables 1 912 1 822 5 Slots 5 582 5 535 1 Win/drop % – tables 20.6 20.9 (0.3)pp Hold/handle % – slots 4.9 5.0 (0.1)pp F’19 F’18 % Change Gauteng 3 955 3 878 2 KwaZulu-Natal 2 081 2 022 3 Mpumalanga 569 572 (1) Weste

  47. Slide 47: Gauteng Casino Gaming Tax Revenues

    Tsogo Sun Gaming – Gauteng Casino Gaming Tax Revenues Growth in Gaming Win (%) Gauteng Montecasino Gold Reef City Silverstar 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 12.6 200

  48. Slide 48: KZN Casino Gaming Tax Revenues

    Tsogo Sun Gaming – KZN Casino Gaming Tax Revenues Growth in Gaming Win (%) KwaZulu-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 20

  49. Slide 49: Other Casino Gaming Tax Revenues

    Tsogo Sun Gaming – Other Casino Gaming Tax Revenues Growth in Gaming win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 6 months to September 2018 (1.8) 3.0 (7.5) 6 months to March 2019 2.8 - 3.5 12 months to March 2019 0.5 1.4 (2.1) Western Cape Caledon Mykonos Garden Route 6 months to Sept

  50. Slide 50: Casino Regulatory Matters

    Tsogo Sun Gaming – Casino Regulatory Matters  B-BBEE condition of licence  Regulation regarding the maximum number of casino licences nationally  Gambling tax  Gauteng gaming taxes  National Gambling Amendment Bill  Smoking regulations  Illegal gambling 50

  51. Slide 51: Casino Future Opportunities – Suncoast Redevelopment

    Tsogo Sun Gaming – Casino Future Opportunities  Suncoast redevelopment • Expansion comprising a new Privé, refurbishment of the existing main floor, new restaurants, structured parking, a Barnyard theatre and the Dome venue completed with the Privé opening on 1 August 2018 and the remainder of the

  52. Slide 52: Casino Future Opportunities – Western Cape Metropole

    Tsogo Sun Gaming – Casino Future Opportunities  Western Cape Metropole • The Sun International and Tsogo Sun legal proceedings were stayed pending the publication of legislation permitting relocation • The Western Cape Provincial Treasury published a draft Bill and regulations to permit the relocat

  53. Slide 53: Casino Future Opportunities – Monte Circle and Hi Hotels

    Tsogo Sun Gaming – Casino Future Opportunities  Monte Circle and Monte Place • Construction of building D at Monte Circle commenced during April 2018 • R29m spent during F’19 with R13m to be spent on building D and R61m to be spent on Buildings E and F during F’20 and beyond • Additional phases wil

  54. Slide 54: Casino Future Opportunities – Organic Growth

    Tsogo Sun Gaming – Casino Future Opportunities  Organic growth is the biggest opportunity • 1% gaming win – R92m revenue and approximately R69m Ebitdar  Gaming positions licensed but not currently displayed as at 31 March 2019 Slots Tables Montecasino 616 5 Gold Reef City 330 4 Suncoast 507 9 Silv

  55. Slide 55: Casino Future Opportunities – Cost Focus and Cash Flow

    Tsogo Sun Gaming – Casino Future Opportunities  Internal operational and cost focus continues • Operational efficiency without impacting the guest experience • Central office  Maximum value at minimum cost  Centralisation only where efficiencies improved  Major refurbishment and expansion projec

  56. Slide 56: Bingo

    ©WTSOGO SUN 100% Y TSOGO SUN GAMING | 100% GAMING * ENTERTAINMENT. | 100% 56

  57. Slide 57: Bingo Gaming Win by Province

    Tsogo Sun Gaming – Bingo Gaming Win by Province F’18 F’19 F’18 Illustrative Actual Actual full year Gauteng 282 98 272 North West 58 19 51 Limpopo 75 15 26 Mpumalanga 55 13 19 Eastern Cape 197 63 147 Kwa-Zulu Natal 89 26 65 Northern Cape(2) 22 - 23 778(1) 234 603 Note: (1) Full year gaming win grew

  58. Slide 58: Bingo Footprint as at March 2019

    Tsogo Sun Gaming – Bingo Footprint as at 31 March 2019 Bingo ISO (40 licenses not Bingo Casino LPM site) yet rolled out Gauteng 4 Eastern Cape 6 North West 2 Limpopo 3(1) Mpumalanga 2 1 Kwa-Zulu Natal 4(2)(3) 3 Northern Cape 1(4) 21 1 1 3 Number of machines 3 060(5) 168 40 Notes: (1) An EBT site was

  59. Slide 59: Bingo Regulatory/Legal Matters

    Tsogo Sun Casinos – Bingo Regulatory/Legal Matters  Litigation against Electronic Bingo • KwaZulu-Natal • Eastern Cape • North West  Litigation relating to the validity of bingo licenses • KwaZulu-Natal  Gaming Tax  National Gambling Amendment Bill  Smoking regulations  Illegal gambling 59

  60. Slide 60: Bingo Future Opportunities

    Tsogo Sun Gaming – Bingo Future Opportunities  Additional site opened during April 2019 (Pinetown)  2 undeveloped licenses in KwaZulu-Natal  Growth of electronic bingo in KwaZulu-Natal  Growth in profitability in new sites  Expansions and redevelopment of existing sites (5 projects in F’20)  I

  61. Slide 61: Vukani

    ©WTSOGO SUN 100% Y TSOGO SUN GAMING 100% Galary | 100% 61

  62. Slide 62: Vukani Gaming Win by Province

    Tsogo Sun Gaming – Vukani Gaming Win by Province F’18 F’19 F’18 Illustrative Actual Actual(1) full year Mpumalanga 144 48 134 Eastern Cape 205 73 187 Kwa-Zulu Natal 293 104 268 Limpopo 200 69 180 Western Cape 419 148 398 Gauteng 142 47 127 North West 68 19 51 Free State 57 18 48 Northern Cape 21 7 2

  63. Slide 63: Vukani Footprint as at 31 March

    Tsogo Sun Gaming – Vukani Footprint as at 31 March 2019 2018 Sites Machines Sites Machines Mpumalanga 117 589 102 546 Eastern Cape 102 895 113 963 Kwa-Zulu Natal 244 1 086 228 1 030 Limpopo 143 857 136 775 Western Cape 194 895 191 891 Gauteng 146 693 151 698 North West 79 534 77 498 Free State 90 37

  64. Slide 64: Vukani Future Opportunities

    Tsogo Sun Gaming – Vukani Future Opportunities  Growth dependent on continued rollout of LPM sites (net of sites closed) and improved gaming offering (product and sites)  Limited number of licences per province with significant barriers to entry 64

  65. Slide 65: Tsogo Sun Gaming – Risks

    Tsogo Sun Gaming – Risks  Economic environment is the primary growth opportunity and main risk to the group’s performance  Other key risks include: • Regulatory uncertainty including:  Relocation of licences  Smoking regulations  Additional taxes • Proliferation of illegal gambling • Sustained

  66. Slide 66: Thank You

    THANK YOU

Tsogo Sun Holdings — Investor Presentation (May 2019) on 6ix