Southern Sun Limited · JSE:SSU

Southern Sun — Tsogo Sun Holdings — FY2014 Earnings Presentation

52 slides from Southern Sun's earnings presentation, May 2014

  1. Slide 1: Presentation to Analysts and Investors

    Presentation to: Analysts and Investors May 2014

  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: Group Structure

    Group Structure Public 41.3% 39.6% 19.1% 100% 100% 3

  4. Slide 4: Gaming Portfolio

    Gaming Portfolio Gauteng KZN Y MONTECASINO SUNCOAST Y ©) Gold Reef City GOLDEN HORSE SILVERSTAR BLACKROCK Western Cape THE CALEDON a) Y GARDEN ROUTE MgkKONOS Mpumalanga 7] EMNOTWENI THE RIDGE Eastern Cape NZ HEMINGWAYS CASINO Y TSOGO SUN GAMING Free State 4 GOLDFIELDS © TSOGO SUN

  5. Slide 5: Hotel Portfolio

    Yy Hotel Portfolio 1s0cn SUN HOTELS Luxury Each hotel offers guests world-class style, unparalleled service and accommodation and signature touches that define luxury travel. \) AY A\ | A | BEVERLY HILLS With products and services that meet the needs of tomorrow's savvy global travellers, whether tr

  6. Slide 6: 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  John Davidson  Jamie Wilson  Malcolm Wyman  Rex Tomli

  7. Slide 7: 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

  8. Slide 8: Segmental Analysis

    @MTSOGO SUN Segmental Analysis

  9. Slide 9: Group – Revenue and Ebitdar (Rm)

    Group – Revenue and Ebitdar (Rm) F’13 F’14 Restated(1) % Change Revenue Gaming 8 110 7 648 6 Net gaming win 6 819 6 525 5 Other 1 291 1 123 15 Hotels SA 2 153 1 937 11 Hotels Offshore 550 361 52 Corporate (intra-group-elimination) (46) (36) (28) Total Group 10 767 9 910 9 Ebitdar Gaming 3 281 3 138

  10. Slide 10: Tsogo Sun Segmental (Rm)

    Tsogo Sun Segmental (Rm) Income Ebitdar(1) Ebitdar Margin % % Change F’13 % Change F’13 (3) F’14 F’13 on F’13 F’14 Restated on F’13 F’14 Restated(3) Montecasino 2 415 2 266 7 1 088 1 026 6 45.1 45.3 Suncoast 1 517 1 440 5 717 692 4 47.2 48.1 Gold Reef City 1 298 1 218 7 514 479 7 39.6 39.3 Silversta

  11. Slide 11: Gaming

    Key Strategic Issues Gaming 11

  12. Slide 12: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Montecasino ● Additional 700 gaming positions approved. 103 slot machines added during F’2014 ● Palazzo Hotel undergoing a R60m refurbishment ● Entertainment offerings continuously improved including tenant refurbishment ● Boktown, Teatro and events continue to attrac

  13. Slide 13: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming Monte Circle and Signature Square 13

  14. Slide 14: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Office development around Montecasino  Planning in progress  Phased over 5 years  Total plan R2bn ● TSH share R400m plus potential new hotel Monte Circle Signature Square 14

  15. Slide 15: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Silverstar ● Additional 400 gaming positions approved ● R560m redevelopment including additional dining options, outdoor events area, cinemas, ten-pin bowling alley, laser tag games, expanded casino offering, parking, redecoration of the interior and Privé and the CSI

  16. Slide 16: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Gold Reef City ● Additional 400 gaming positions approved ● R630m refurbishment and expansion including casino offering, cinemas, additional food and beverage outlets and improved access systems at the Theme Park with an improved linkage to the casino complex, upgrade

  17. Slide 17: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Suncoast ● Application to KZN Gaming Board for an additional 900 machines and 16 tables ● R1.5bn – R1.8bn expansion (including a R100m CSI contribution) including additional casino space and new Privé, 22,000sqm destination retail and additional restaurants, multifunc

  18. Slide 18: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Emnotweni ● Expanded casino floor, additional covered parking and conference and events area completed in December 2013 ● Restaurants and link to mall scheduled for completion during May 2014 18

  19. Slide 19: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Western Cape ● 40% of the SunWest International Property Limited and Worcester Casino Proprietary Limited to be acquired (from Sun International Limited and Grand Parade Investments) for R2.185 million ● Subject to the fulfilment of conditions precedent which includes

  20. Slide 20: Key Strategic Issues - Gaming

    Key Strategic Issues - Gaming  Mpumalanga B-BEEE condition of licence ● Regulators seek to impose the achievement and maintenance of a prescribed BBBEE rating as a condition of licence ● Other gaming boards, including Western Cape, have indicated that they will take guidance from the outcome of the

  21. Slide 21: Gaming Win (Rm)

    Gaming Win (Rm) F’14 F’13 % Change Gaming win 6 819 6 525 5 Tables 1 542 1 349 14 Slots 5 277 5 176 2 Drop/hold % – tables 22.0 21.3 0.7pp Handle/win % – slots 5.2 5.3 (0.1)pp F’14 F’13 % Change Gauteng 3 631 3 434 6 KwaZulu-Natal 1 801 1 735 4 Mpumalanga 580 570 2 Western Cape 402 396 2 Other 405 3

  22. Slide 22: Gauteng Gaming Tax Revenues

    Gauteng Gaming Tax Revenues Gold Reef Silver- Growth in Gaming win (%) Gauteng Montecasino 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) * 2009

  23. Slide 23: 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 2013 5.3 6.9 (1.6) 7.3 6 mo

  24. Slide 24: Other Gaming Tax Revenues

    Other Gaming Tax Revenues Growth in Gaming win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 6 months to September 2013 5.3 4.7 2.1 6 months to March 2014 0.4 0.1 (2.5) 12 months to March 2014 2.8 2.4 (0.2) Western Cape Caledon Mykonos Garden Route 6 months to September 2013 5.2 4.3 (1.3) 4

  25. Slide 25: Hotels

    Key Strategic Issues Hotels 25

  26. Slide 26: 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

  27. Slide 27: Owned and Managed

    Owned and Managed Hotels Rooms Owned Managed Luxury 6 1 113 410 703 Owned includes leased hotels and Full Service 20 4 260 3 723 537 associates Select Service 27 4 908 3 612 1 296 Portfolio as at 31 March 2014. Post Budget 23 1 690 1 690 - year end 4 hotels and 986 rooms Timeshare & Resorts 7 1 161

  28. Slide 28: 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'

  29. Slide 29: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Transient Corporate business remains weak  Occupancy reduced 0.2pp to 63.9% for F’14 on the prior year ● Non-repeat of major events (e.g. BRICS in Durban in March) ● Significant refurbishments at GC Milpark and SS Waterfront ● Sun 1 due to the weakness

  30. Slide 30: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Cullinan ● Southern Sun Hotel Interests (Pty) Ltd (“SSHI”), a group subsidiary, concluded agreements with Liberty Group Limited (“Liberty”) for  A 10% increase in the group’s equity interest in The Cullinan Hotel (Pty) Ltd (“Cullinan”) to 60%  The acq

  31. Slide 31: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Cullinan ● Illustrative impact if deal had been effective 1 April 2013 *  Revenue R269m 2.5%  Ebitdar R106m 2.5%  Adjusted earnings R5m 0.3%  Deal funded through debt and cash  986 rooms ± R960k per room  Major refurbishments ● GC Milpark complete

  32. Slide 32: Key Strategic Issues : Hotels – South Africa

    Key Strategic Issues : Hotels – South Africa  Sun 1 (formerly Hotel Formula 1) ● Rebranded Sun 1 effective 1 October 2013 ● Continued refurbishment of the portfolio ● F’2014 Ebitdar flat on F’2013 32

  33. Slide 33: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Offshore hotels trading weaker in US$ (occupancies F’14 : 66.6%, F’13 : 70.1%) ● Impacted by construction related disruption at SS Maputo and a weaker Seychelles and Zambia market  Currency positive impact to trading due to Rand weakness against US$ and Eu

  34. Slide 34: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Southern Sun Ikoyi ● Impact of the transaction effective 29 June 2013  Revenue R132m 1.3%  Ebitdar R55m 1.4%  Adjusted earnings R33m 2.0%  Deal funded through US$ debt and cash  United Arab Emirates ● Southern Sun Abu Dhabi opened under management cont

  35. Slide 35: Key Strategic Issues : Hotels – Offshore

    Key Strategic Issues : Hotels – Offshore  Redefine BDL ● 25% interest in Redefine BDL acquired effective 1 May 2014 for R145m ● Leading independent hotel management company in the United Kingdom with approximately 60 hotels under management ● Acquisition provides access to additional management exp

  36. Slide 36: Financial Overview

    reat {Pt a eee ee ‘ BB © TSOGO SUN Financial Overview

  37. Slide 37: Group – Income Statement (Rm)

    Group – Income Statement (Rm) F’13 F’14 Restated(2) % Change Group income 10 767 9 910 9 Net gaming win 6 819 6 525 5 Revenue Rooms 2 221 1 914 16 F&B 1 063 869 22 Other 664 602 10 Ebitdar 4 214 3 886 8 Gaming 3 281 3 138 5 Hotels – SA 737 613(2) 20 – Offshore(1) 153 93 65 Forex gains 33 37 (11) Cor

  38. Slide 38: Group – Income Statement

    Group – Income Statement Group Revenue by Nature (%) Slots 49 Tables 14 Rooms 21 F&B 10 Other 6 Total Hotel Ebitdar F’14 F’13 Hotels SA 737 613 Hotels Gaming 184 145 Hotels Offshore 186 130 Ebitdar 1 107 888 Group Ebitdar (%) 26 23 38

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

    Group – Income Statement (Rm) F’14 F’13 % Change Ebitdar 4 214 3 886 8 LTI costs (150) (234) 36 Property rentals (221) (193) (15) Amortisation & depreciation (648) (608) (7) Exceptional items (73) (19) * Net finance costs (373) (385) 3 Associates and JVs - 6 * Tax (776) (701) (11) Non-controlling in

  40. Slide 40: Adjusted HEPS (Rm)

    Adjusted HEPS (Rm) F’13 F’14 Restated(1) % change Attributable earnings 1 877 1 627(1) 15 Capital asset disposal losses/(profits) 2 (1) Impairment of PPE 14 9 FV adjustment to associate 6 - Impairment of SSME goodwill - 16 Headline earnings 1 899 1 651(1) 15 Transaction costs 8 7 CBS loan impairment

  41. Slide 41: Group Cash Flow (Rm)

    Group Cash Flow (Rm) F’14 F’13 Restated(1) Ebitdar per income statement 4 214 3 886 Property rentals (221) (193) Ebitda 3 993 3 693 Working capital adjusted for non-cash and exceptional items (229) 113(1) Dividend income from associates 3 3 Cash generated from operations 3 767 3 809 Interest paid (n

  42. Slide 42: Investment Activities (Rm)

    Investment Activities (Rm) F’14 F’13 Investment activities 1 643 639 Acquisition of DAV/AWM/Suncoast minority 406 - Acquisition of SS Ikoyi – equity 505 - Acquisition of Affirmed Investments minorities 14 - Investments in cinemas 20 - Millennium contingency settlement - 58 SS Hyde Park 67 65 Monte C

  43. Slide 43: Interest Bearing Debt (Rm)

    Interest Bearing Debt (Rm) F’14 F’13 Non-controlling interests funding - 32 External debt (US$ based) 639 - External debt (Rand based) 5 515 4 298 Gross IBD 6 154 4 330 Cash on hand (1 715) (750) Net IBD 4 439 3 580 Dividend of R659m (60c per share) declared May 2014, to be paid June 2014 Dividend o

  44. Slide 44: Strategic Priorities

    © TSOGO SUN Strategic Priorities

  45. Slide 45: Strategic Priorities

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

  46. Slide 46: 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 46

  47. Slide 47: Future Prospects

    Future Prospects

  48. Slide 48: Future Prospects

    Future Prospects  Group ● Strong cash generation ● Growth opportunities still being pursued ● Re-launched loyalty programmes ● Maximise brand value ● Employee engagement programme ● Food and beverage focus 48

  49. Slide 49: 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  Tax – national/provincial  Total smoking ban remains a risk ● Western Cape metropole  Still an opportunity ● M

  50. Slide 50: Future Prospects

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

  51. Slide 51: Thank you

    > ay, ‘ MUM, > Wii” Thank you @YTSOGO SUN

  52. Slide 52: Y TSOGO SUN

    Y TSOGO SUN

Tsogo Sun Holdings — FY2014 Earnings Presentation on 6ix