Southern Sun Limited · JSE:SSU

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

67 slides from Southern Sun's investor presentation, November 2016

  1. Slide 1: Tsogo Sun Holdings Analysts & Fund Managers Presentation November 2016

    TSOGO SUN HOLDINGS ANALYSTS & FUND MANAGERS PRESENTATION NOVEMBER 2016 a

  2. Slide 2: Forward-looking statements 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 or achieveme

  3. Slide 3: Group structure: casinos, hotel operations, Hospitality Property Fund, Europe

    Public 47.6% 52.4% 100% 100% 100% 100% 50+% 25+% CASINOS HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 3

  4. Slide 4: TSH Board of Directors

     TSH Board of Directors ● Executive Directors  Marcel von Aulock – Group CEO  Rob Huddy – Group CFO ● Non-Executive Directors  Johnny Copelyn – Chairman  Marcel Golding  Mac Gani – Audit & Risk and Social & Ethics Chairman  Busi Mabuza – Lead Independent  Elias Mphande  Jabu Ngcobo  Yunis

  5. Slide 5: Group Executive Committee

     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  Laurelle McDonald – Corpo

  6. Slide 6: Tsogo Sun Gaming

    Zs TSOGO SUN GAMING

  7. Slide 7: Gaming ownership structure

    100% 100% 100% 100% 65% 100% 100% 100% 100% 100% 25% 100% 98%/100% 70%/100% 7

  8. Slide 8: Gaming win: tables, slots and by province

    H1 F’17 H1 F’16 % Change Gaming win 3 679 3 562 3 Tables 938 836 12 Slots 2 741 2 726 1 Drop/hold % – tables 21.7 21.6 0.1pp Handle/win % – slots 5.0 5.0 - H1 F’17 H1 F’16 % Change Gauteng 1 978 1 893 4 KwaZulu-Natal 1 005 976 3 Mpumalanga 288 285 1 Western Cape 233 223 4 Other 175 185 (5) 3 679 3 5

  9. Slide 9: Percentage growth on prior year

    800 700 9.8% 0.6% 12.1% 2.6% 3.9% 16.4% 4.5% 4.8% 2.0% -5.3% 600 500 400 300 200 100 - Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 2009 2010 2011 2012 2013 2014 2015 2016 Percentage growth on prior year 9

  10. Slide 10: Growth in Gaming Win (%) Gauteng

    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 2008 7.8 (6.8) (1.0) * 2009 (0.9) 0.5 (1.3) 7.4 2010 1.1

  11. Slide 11: Relative Growth Gauteng: Tsogo Sun vs Non Tsogo Sun

    160 Relative Growth (2008 = 100) Gauteng Total Industry / Tsogo Sun vs Non Tsogo Sun 150 140 130 Total Industry 120 Tsogo Sun 110 Non-Tsogo 100 90 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 C'2016 YTD Relative Growth (2008 = 100) Gauteng Total Industry / Montecasino vs Non Tsogo 160 Sun 150 14

  12. Slide 12: Relative Growth Gauteng: Goldreef City and Silverstar

    Relative Growth (2008 = 100) Gauteng Total Industry / Goldreef vs Non Tsogo Sun 160 150 140 130 Total Industry 120 Non-Tsogo 110 Goldreef City 100 90 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 C'2016 YTD Relative Growth (2008 = 100) Gauteng Total Industry / Silverstar vs Non Tsogo Sun 160 150

  13. Slide 13: Monthly percentage growth on prior year

    400 350 300 3.6% 9.9% 6.0% -0.8% -0.3% -3.7% 6.7% -4.9% 5.0% 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011 2012 2013 2014 2015 2016 Percentage growth on prior year 13

  14. Slide 14: Growth in Gaming Win (%) KwaZulu-Natal

    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 2013 5.3 6.9 (1.6) 7.3 2014 2.8 3.2 (1.6) 2.7 2015 7

  15. Slide 15: Relative Growth KZN: Tsogo Sun vs Non Tsogo Sun

    190 Relative Growth (2008 = 100) KZN Total Industry / Tsogo Sun vs Non Tsogo Sun 180 170 160 150 Total Industry 140 Tsogo Sun 130 Non-Tsogo 120 110 100 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 C'2016 YTD Relative Growth (2008 = 100) KZN Total Industry / Suncoast vs Non Tsogo Sun 190 180 170

  16. Slide 16: Relative Growth KZN: Golden Horse and Blackrock

    Relative Growth (2008 = 100) KZN Total Industry / Golden Horse vs Non Tsogo Sun 190 180 170 160 Total Industry 150 140 Non-Tsogo 130 Golden Horse 120 110 100 C'2009 C'2010 C'2011 C'2012 C'2013 C'2014 C'2015 C'2016 YTD Relative Growth (2008 = 100) KZN Total Industry / Blackrock vs Non Tsogo Sun 190 1

  17. Slide 17: Growth in Gaming Win (%) by province and unit

    Growth in Gaming Win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 3 months to September 2016 3.0 5.4 (1.0) 6 months to September 2016 2.6 (1.6) 4.0 Western Cape Caledon Mykonos Garden Route 3 months to September 2016 2.2 3.0 9.2 3.5 6 months to September 2016 0.8 3.3 5.9 6.0 Eastern Cape H

  18. Slide 18: Members and spend by gender and affiliation

    Members Spend Gender Male Female Male Female Black 57% 43% 63% 37% Platinum 49% 51% 48% 52% Gold 49% 51% 48% 52% Total 50% 50% 59% 41% Affiliation Members Spend African 26% 20% Asian/Indian 36% 39% White 38% 41% 18

  19. Slide 19: Slots and tables players by age

    2011 2016 Slots Players Age Members Spend Members Spend 18 – 34 24% 8% 24% 8% 35 – 54 44% 55% 42% 51% 55+ 32% 37% 34% 41% Tables Players Age 18 – 34 30% 18% 31% 20% 35 – 54 53% 65% 51% 64% 55+ 17% 17% 18% 16% 19

  20. Slide 20: Regulatory issues in gaming

     B-BBEE condition of licence  National gambling policy  Regulation regarding the maximum number of casino licences nationally  Gauteng gaming taxes 20

  21. Slide 21: Casino refurbishments during the past years

     Casino refurbishments during the past 5 years  Hemingways R400m  Emnotweni R210m  Silverstar R560m  Gold Reef City R483m  Golden Horse R44m  Mykonos R16m  Montecasino R123m  Gaming equipment continually refreshed with slot machine average age of 5 years  All Casino Management Systems are

  22. Slide 22: Gaming positions licensed but not displayed

     Gaming positions licenced but not currently displayed Slots Tables  Montecasino 401 6  Gold Reef City 170 4  Suncoast 750 13  Silverstar 75 -  The Ridge 58 2  Golden Horse - 1  Hemingways 43 -  Emnotweni 75 2  Mykonos - 3  Caledon 52 1 1 624 32 22

  23. Slide 23: SunWest and Worcester Casinos

     SunWest and Worcester Casinos ● Approval of the acquisition of the 20% interest by the WCGRB remains pending ● Purchase price was to be paid over 18 months to August 2018 ● Balance owing to Sun International at 30 September 2016 of R413m settled at a discounted amount of R393m during October 23

  24. Slide 24: Western Cape Metropole

     Western Cape Metropole ● Sun International launched court action to set aside the decision of the Western Cape Government to allow relocation of an outlying casino to the metropole ● The group launched court action to compel the Western Cape Government to allow the relocation ● Settlement negotiat

  25. Slide 25: Suncoast expansion

     Suncoast expansion ● Additional casino space 5 000 sqm including new Privé ● Destination retail and additional restaurants lettable area of approximately 20 000sqm ● Multi-storey parkade North East View – Casino & Mall ● Expansion cost estimated at R2.1bn (including R100m CSI) ● Detailed planning

  26. Slide 26: Suncoast expansion renderings: retail promenade

    Piazza View – New Retail Promenade View 3 – Casino & Retail Fast Food Court Walkway 26

  27. Slide 27: Suncoast expansion renderings: casino and Privé

    Non Smoking Casino & Privé Entrance Smoking Casino Privé Gaming Privé Bar 27

  28. Slide 28: Monte Circle and Monte Place

     Monte Circle and Monte Place ● Building A completed in November 2015 (Tsogo Sun commitment R29m) ● Construction of building B commenced in October 2015 (Tsogo Sun commitment R23m) ● Additional phases will be rolled out as tenanting proceeds 28

  29. Slide 29: Mykonos Casino and Blackrock Minorities

     Mykonos Casino ● Negotiations are underway for the acquisition of the West Coast Leisure minority interests (29.6%) for R190m in the form of a share buy-back ● The land adjacent to the casino will be acquired for R30m  Blackrock Minorities ● Agreement has been reached with the Tsogo Sun Newcastle

  30. Slide 30: Tsogo Sun Hotels

    TSOGO SUN HOTELS pay we ‘ys ‘

  31. Slide 31: Hotel Operations, Hospitality Property Fund, Europe

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 31

  32. Slide 32: Hotel ownership strategy: PropCo and OpCo

    Land Buildings Operations Management Brand PropCo OpCo  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 extended tenure and resilience ● Splitting business i

  33. Slide 33: Hotel Operations

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 33

  34. Slide 34: Group operated hotel portfolio

    GROUP OPERATED HOTEL PORTFOLIO Luxury MALIA Full Service Budget Select Service oon © southernSun BEVERLY HILLS y. t 4 ©) Southern Sun PALAZZO SQUARE “ dé i dé S SANDTON SUN ‘suv L Gann CROWNE PLAZA —| © stayeasy- fa Holiday Inn’ WHCORST y — y Q INTERCONTINENTAL. \nseseneeenatD © TSOGO SUN 34

  35. Slide 35: Owned hotel stats, South Africa and offshore

    Hotels Rooms Owned Managed Luxury 6 1 113 410 703 Full Service 23 5 015 5 015 - Owned includes leased hotels and Select Service 26 4 777 3 930 847 associates Budget 22 1 661 1 661 - Portfolio as at 30 September 2016 Timeshare & Resorts 7 1 161 307 854 Excludes Redefine BDL portfolio South Africa 84

  36. Slide 36: Rooms sold and occupancy

    76.0% 3 250 000 Rooms Sold Occupancy 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'97 F'08 F'94 F'95 F'96 F'98 F'99 F'00 F'01 F'02 F'03 F'04 F'05 F'06 F'07 F'09 F'10 F'11 F'12 F'

  37. Slide 37: Occupancy and average room rate growth

     Occupancy increased 0.5pp to 62.9% on the prior period  Average room rate growth of 7% on the prior period  The majority of the portfolio has been refurbished and is in very good condition 37

  38. Slide 38: Liberty Phase 2 and Cullinan

     Liberty Phase 2 ● Acquisition of the Garden Court Umhlanga and StayEasy Pietermaritzburg for R310m  Effective date of the transaction 1 October 2016  Cullinan ● Agreement reached with Liberty to acquire their 40% shareholding in Cullinan and all debt owing to Liberty for R1.03bn ● Payment schedu

  39. Slide 39: Offshore hotels trading and expansion

     Offshore hotels trading remains under pressure with occupancies down 3.4pp on the prior period to 54.6% ● Remains impacted by security concerns and weaker market attributable to the negative impact of commodity prices ● Currency negatively impact on trading due to Rand strength against US$ and Eur

  40. Slide 40: StayEasy Maputo

     StayEasy Maputo ● Capital cost US$16m ● 50 year land lease on a shopping development with Game, Woolworths, F&B etc – at zero cost ● 125 rooms ● Expected opening F’19 ● Subject to Mozambique Central Bank approval of funding 40

  41. Slide 41: Hospitality Property Fund

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 41

  42. Slide 42: Hospitality Property Fund

     Hospitality Property Fund ● 55% of the HPF B-linked units acquired for R252m in August 2015 ● Reconstitution of the capital structure into a single class of share completed in October 2016 ● Tsogo Sun acquired a controlling stake (50.6%) through the injection of hotel assets into HPF with the effe

  43. Slide 43: Hospitality Property Fund Portfolio

     Hospitality Property Fund Portfolio Hotels Rooms Tsogo Sun managed (including Holiday Inn and Crowne Plaza) 12 2 598 Marriott (including Westin and Protea) 7 1 253 Radisson Blu 2 397 Other 4 1 165 25 5 413 43

  44. Slide 44: HPF hotels: Westin, Arabella, African Pride

    Westin Westin Arabella African Pride Arabella African Pride 44

  45. Slide 45: HPF hotels: Mount Grace, Radisson Blu Foreshore

    Mount Grace African Pride Mount Grace African Pride Radisson Blu Foreshore Radisson Blu Foreshore 45

  46. Slide 46: HPF hotels: Radisson Blu Gautrain, Birchwood

    Radisson Blu Gautrain Radisson Blu Gautrain Birchwood Conference Centre Birchwood Conference Centre Birchwood Conference Centre 46

  47. Slide 47: Hospitality Europe

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 47

  48. Slide 48: International Hotel Group (private company, 25% owned)

     Private Company  TSH owns 25% plus board and committee representation  Manages ± 50 hotels in the UK  Manages under multi brands Best Western Beamish House including Crowne Plaza, Holiday Inn, Holiday Inn Express, Best Western, Westin, Hilton, Marriott, Aloft Holiday Inn Camden Lock 48

  49. Slide 49: Hotel property fund in UK (25% owned)

     TSH owns 25% plus board and committee representation  Listed on JSE and Luxembourg  Currently has GBP90m (R1.7bn) in hotel assets ● 4 Travel Lodges – leased to Travel Lodge ● 3 Holiday Inn Express hotels (Dunstable, South Hampton, Reading) ● Hampton by Hilton Gatwick Hampton by Hilton Gatwick 

  50. Slide 50: Financial Overview

    BR EINANCIAL OVERVIEW

  51. Slide 51: Income and Ebitdar by operation

    Income Ebitdar(1) Ebitdar Margin % % % H1 F’17 H1 F’16 Change H1 F’17 H1 F’16 Change H1 F’17 H1 F’16 Montecasino 1 337 1 315 2 593 579 3 44.4 44.0 Suncoast 839 827 1 385 374 3 45.9 45.2 Gold Reef City 714 638 12 265 229 16 37.1 36.0 Silverstar 360 363 (1) 119 125 (5) 33.1 34.5 Emnotweni 194 184 5 73

  52. Slide 52: Income statement H1 F'17

    H1 F’17 H1 F’16(1) % Change Income 6 294 5 851 8 Net gaming win 3 679 3 562 3 Revenue Rooms 1 450 1 290 12 F&B 686 640 7 Rental income 104 65 60 Other 375 294 27 Ebitdar 2 202 2 065 7 LTI (expense)/credit (98) 41 * Property rentals (134) (106) (26) Amortisation & depreciation (421) (409) (3) Excepti

  53. Slide 53: Group income by nature and hotel Ebitdar

    Group Income by Nature % H1 H1 Total Hotel Ebitdar F’17 F’16 H1 F’17 H1 F’16 Slots 44 47 Hotels SA 455 349 Tables 15 14 Core business 391 349 Rooms 23 22 Majormatic 35 - (1) F&B 11 11 HPF 29 - Rental income 2 1 Hotels Gaming 92 92 (2) Hotels Offshore 82 98 Other 5 5 Ebitdar 629 539 % of Group Ebitda

  54. Slide 54: Headline earnings and Adjusted HEPS

    % (1) H1 F’17 H1 F’16 change Attributable earnings 875 818 7 Capital asset disposal losses 2 - Impairment of capital assets 1 2 Fair value of HPF shares on acquisition (46) - Gain on bargain purchase price (HPF) (13) - Headline earnings 819 820 - Pre-opening expenses - 10 Impairment of loans, net of

  55. Slide 55: Cash flow and movement in net interest-bearing debt

    H1 F’17 H1 F’16 Ebitdar per income statement 2 202 2 065 Property rentals (134) (106) Ebitda 2 068 1 959 Working capital adjusted for non-cash and exceptional items (65) 70 Dividend income from associates 62 5 Cash generated from operations 2 065 2 034 Interest paid (net) (485) (394) Taxation paid (

  56. Slide 56: Investment activities and capex

    H1 F’17 F’16 F’15 Investment activities 704 962 2 045 SunWest and Worcester 480 - - Gold Reef City redevelopment 23 256 142 Silverstar redevelopment 2 28 321 Suncoast expansion 62 47 141 Emnotweni expansion - 2 18 Monte Circle and Monte Place 9 27 6 Acquisition of Liberty hotels - - 762 SunSquare an

  57. Slide 57: Debt and dividends

    H1 F’17 H1 F’16 External debt (US$ based) 1 133 836 External debt (Rand based) 9 231 9 286 External debt HPF (Rand based) 1 725 - Bank overdrafts 1 789 2 449 Prepaid borrowing costs (37) (40) Gross IBD 13 841 12 531 Cash on hand (2 312) (2 911) Net IBD 11 529 9 620 Dividend of R647m (67c per share)

  58. Slide 58: Strategic Priorities

    STRATEGIC ORI TES et A Sl

  59. Slide 59: Sustainability

     Sustainability ● Beneficiaries  Union based ownership is a positive  Corporate Social Investment programmes are impactful and meaningful  Enterprise Development programmes are excellent ● Financial stability  Strong cash flow, judicious use of gearing and adequate facilities  Own most of our

  60. Slide 60: Sustainability (cont)

     Sustainability (cont) ● Product relevance  Adequate maintenance capex provided  Strong development skills in-house  Proactive marketing of products and brands ● Regulatory compliance  Day to day compliance excellent  High awareness of potential regulatory risks 60

  61. Slide 61: Sustainability (cont): human resources

     Sustainability (cont) ● Human resources  Invest heavily in training and skills  Policy of “fairness” in remuneration and benefits, industrial relations and staff interactions  Engaged workforce  Empowerment ● Level 2 under the new codes ● 3rd most empowered on the JSE 61

  62. Slide 62: Growth: organic and inorganic

     Growth ● Organic  Significant focus on getting more out of our existing businesses  Continued cost focus  Focus on systems of financial and operational control ● Inorganic  New projects  Ability to execute complicated, regulated transactions 62

  63. Slide 63: Future Prospects

    fe FUTURE PROSPECTS

  64. Slide 64: Group outlook

     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 enhance shareholder val

  65. Slide 65: Gaming outlook

     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 ● Mpumalanga fourth casino licence ● Complete development activity  Suncoast is a key project 65

  66. Slide 66: Hotels outlook

     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 Best Available Rat

  67. Slide 67: Thank you

    \THANK YOU |

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