Southern Sun Limited · JSE:SSU

Southern Sun — Tsogo Sun Holdings — Investor Presentation (November 2018)

54 slides from Southern Sun's investor presentation, November 2018

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

    TSOGO SUN HOLDINGS ANALYSTS & FUND MANAGERS PRESENTATION November 2018

  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

    Public 47.2 % 52.8% 100% 100% 100% 100% 100% 50+% 25+% CASINOS ALTERNATIVE GAMING HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 3

  4. Slide 4: TSH Board of Directors

     TSH Board of Directors ● Executive Directors  Jacques Booysen – 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 Sh

  5. Slide 5: Group Executive Committee

     Group Executive Committee ● Corporate ● Casino Gaming  Jacques Booysen – Group CEO  Glenn Joseph – COO Gaming  Rob Huddy – Group CFO  Greg Lunga – FD Gaming  Vusi Dlamini – Group HR Director ● Alternative Gaming  Laurelle McDonald – Corporate Finance and  Chris du Toit – COO Alternative Gam

  6. Slide 6: Financial Overview

    © TsOGO SUN FINANCIAL OVERVIEW

  7. Slide 7: Income and Ebitdar by operation H1 F'19

    Income Ebitdar(1) Ebitdar Margin % H1 F’19 H1 F’18 % Change H1 F’19 H1 F’18 % Change H1 F’19 H1 F’18 Casino gaming Montecasino 1 329 1 265 5 562 524 7 42.3 41.4 Suncoast 832 821 1 339 357 (5) 40.7 43.5 Gold Reef City 736 734 - 268 262 2 36.4 35.7 Silverstar 355 336 6 106 96 10 30.0 28.7 Golden Horse

  8. Slide 8: Income statement H1 F'19

    H1 F’19 H1 F’18 % Change Income 7 701 6 385 21 Net gaming win 4 792 3 564 35 Revenue Rooms 1 517 1 475 3 Food & beverage 793 747 6 Property rental income 202 221 (9) Other 397 378 5 Ebitdar 2 500 2 198 14 LTI expense 25 49 (49) Property rentals (169) (128) (32) Amortisation & depreciation (529) (441

  9. Slide 9: Group income by nature and hotel Ebitdar

    Total Hotel Ebitdar (Rm) Group Income by Nature % H1 F’19 H1 F’18 H1 F’19 H1 F’18 Hotels SA 504 550 Slots 50 42 Core business 392 403 Tables 12 13 Liberty hotels 10 17 HPF(1) 102 130 Rooms 20 23 Hotels Gaming 87 83 F&B 10 12 Hotels Offshore(2) 71 47 Rental income 3 4 Ebitdar 662 680 Other 5 6 % of G

  10. Slide 10: Headline and adjusted earnings reconciliation

    H1 F’19 H1 F’18 % Gross Net Gross Net change Attributable earnings 746 1 010 (26) PP&E disposal losses - - 5 4 Impairment of PP&E 3 2 1 - Fair value adjustment on investment property 119 71 - - Associate headline adjustments (net) (1) (5) Headline earnings 818 1 009 (19) Pre-opening expenses 1 - 21

  11. Slide 11: Cash flow and net interest-bearing debt

    H1 F’19 H1 F’18 Ebitdar per income statement 2 500 2 198 Property rentals (169) (128) Ebitda 2 331 2 070 Working capital adjusted for non-cash and exceptional items including dividend income 63 (265) Dividend income 50 54 Cash generated from operations 2 444 1 859 Finance costs (net) (599) (568) Tax

  12. Slide 12: Investment activities

    H1 F’19 H1 F’18 Investment activities 651 531 Suncoast expansion 519 99 Mykonos land - 30 Monte Circle and Monte Place 14 10 SunSquare and SE Cape Town FF&E - 30 Sandton Eye - 271 SE Maputo 52 84 Vukani expansion 46 - Other including loan recoveries 20 7 Maintenance capex 481 407 Gaming equipment 17

  13. Slide 13: Debt and cost of debt

    H1 F’19 H1 F’18 External debt (US$ based) 1 216 1 050 External debt (Rand based) 11 045 9 254 External debt HPF (Rand based) 1 957 2 132 Bank overdrafts 2 268 2 210 Prepaid borrowing costs (19) (27) Gross IBD 16 467 14 619 Cash on hand (3 163) (2 747) Net IBD 13 304 11 872 Cost of debt – pre tax 9.3

  14. Slide 14: Tsogo Sun Casino Gaming

    s¢ @ § ° x Oo ie. eZ a 4 oO ©YTSOGO SUN

  15. Slide 15: Gaming: Casinos

    GAMING CASINOS ALTERNATIVE GAMING 15

  16. Slide 16: Casino portfolio by province

    Gauteng KZN Western Cape Mpumalanga Eastern Cape Free State 100% 100% 100% 100% 65% 100% 100% 100% 100% 100% 100% 100% 100% 16

  17. Slide 17: Gaming win

    H1 F’19 H1 F’18 % Change Gaming win 3 667 3 564 3 Tables 946 854 11 Slots 2 721 2 710 - Win/drop % – tables 20.7 19.9 0.8pp Hold/handle % – slots 4.9 5.1 (0.2)pp H1 F’19 H1 F’18 % Change Gauteng 1 958 1 879 4 KwaZulu-Natal 1 003 980 2 Mpumalanga 278 285 (2) Western Cape 251 247 2 Other 177 173 2 3 6

  18. Slide 18: Growth in gaming win: Gauteng

    Growth in Gaming Win (%) Gauteng Montecasino Gold Reef City Silverstar Calendar years 2000 25.0 (4.9) 2001 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 2.0 (3.6) 0.6 2011 4.1 7.8 8.8 0.5 201

  19. Slide 19: 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

  20. Slide 20: Growth in gaming win by province

    Growth in Gaming win (%) Province Unit Unit Unit Mpumalanga Ridge Emnotweni 3 months to September 2018 (1.4) (0.8) (4.6) 6 months to September 2018 (1.8) 3.0 (7.5) Western Cape Caledon Mykonos Garden Route 3 months to September 2018 1.5 7.8 (3.2) 7.6 6 months to September 2018 1.5 1.3 (1.6) 6.1 East

  21. Slide 21: Regulatory issues

     B-BBEE condition of licence  Regulation regarding the maximum number of casino licences nationally  National Gambling Amendment Bill  Gauteng gaming taxes  Smoking regulations  Illegal gambling 21

  22. Slide 22: Suncoast redevelopment

     Suncoast redevelopment ● Expansion comprises a new Privé, refurbishment of the existing main floor, new restaurants, structured parking, a Barnyard theatre and the Dome venue at a cost estimated at R1.6bn ● Construction continues with the completion of the Privé in August 2018 and the scheduled co

  23. Slide 23: Western Cape Metropole

     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 relocation of two casinos within Curtesy Google the Me

  24. Slide 24: Monte Circle and Monte Place

     Monte Circle and Monte Place ● Construction of building C at Monte Circle completed and construction of building K at Monte Place commenced during April 2018 ● R26m spent during F’18 and R10m spent on building C during H1 F’19 and R32m to be spent on Building K during H1 F’19 ● Additional phases w

  25. Slide 25: Gaming positions licensed but not displayed

     Gaming positions licensed but not currently displayed(1) Slots Tables Montecasino 575 6 Gold Reef City 330 4 Suncoast 763 7 Silverstar 200 - The Ridge 64 2 Golden Horse - 2 Hemingways 43 - Emnotweni 75 1 Mykonos - 3 Caledon 52 - 2 102 25 (1) As at 30 September 2018 25

  26. Slide 26: Gaming: Alternative Gaming

    GAMING CASINOS ALTERNATIVE GAMING 26

  27. Slide 27: Vukani gaming win by province

     Gaming win by province (Rm) H1 F’19 H1 F’18 % Actual Illustrative Change Mpumalanga 72 67 7 Eastern Cape 101 88 14 Kwa-Zulu Natal 143 129 12 Limpopo 97 86 13 Western Cape 207 196 6 Gauteng 69 62 10 North West 32 24 34 Free State 27 24 13 Northern Cape 11 10 8 759 686 11 27

  28. Slide 28: Vukani footprint

     Footprint as at 30 September 2018 Sites Machines Mpumalanga 116 592 Eastern Cape 109 916 Kwa-Zulu Natal 235 1 058 Limpopo 142 837 Western Cape 199 905 Gauteng 146 686 North West 75 535 Free State 86 356 Northern Cape 31 148 1 139 6 033 28

  29. Slide 29: Galaxy gaming win by province

     Gaming win by province (Rm) H1 F’19 H1 F’18 % Actual Illustrative Change Gauteng 136 137 (1) North West 28 25 13 Limpopo 36 6 * Mpumalanga 26 4 * Eastern Cape 94 63 48 Kwa-Zulu Natal 41 30 39 Northern Cape 12 16(1) (23) 373 281 33 Note: (1) Includes Kuruman Casino for 6 months 29

  30. Slide 30: Galaxy footprint

     Footprint as at 30 September 2018 Bingo ISO (40 licences 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 Northern Cape 1(3) 20 1 1 3 Number of machines 3 060 168 40 Notes: (1) New site opened in April 2018 (2) One si

  31. Slide 31: Galaxy: litigation and regulatory issues

     Galaxy ● Litigation against Electronic Bingo  KwaZulu-Natal  Eastern Cape  North West ● Litigation relating to the validity of bingo licenses  KwaZulu-Natal ● Smoking regulations ● Illegal gambling 31

  32. Slide 32: Vukani and Galaxy growth drivers

     Vukani ● 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  Galaxy ● 3 undeveloped licences in KwaZulu-Natal ● Rollout of electronic bingo at one mo

  33. Slide 33: Tsogo Sun Hotels

    TSOGO SUN HOTELS © TSOGO SUN

  34. Slide 34: Hotel Operations

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 34

  35. Slide 35: Hotel brand segments

    Luxury Full Service Select Service Budget 35

  36. Slide 36: Hotel portfolio and owned stats

    Hotels Rooms Owned Managed Luxury 6 1 105 410 695  Portfolio as at 30 September 2018 Full Service 25 5 386 5 386 -  Owned includes leased hotels Select Service 27 5 079 4 563 516 and associates Budget 22 1 741 1 741 - Timeshare & Resorts 6 992 138 854  Excludes hotels managed by 3rd parties: Sout

  37. Slide 37: System-wide occupancy and room rate

     System-wide occupancy decreased 2.0pp to 62.0% on the prior period  System-wide average room rate increased 3% on the prior period  The majority of the portfolio has been refurbished and is in very good condition 37

  38. Slide 38: Offshore hotels trading

     Offshore hotels trading remains under pressure with occupancies up 3.0pp on the prior year to 56.8% and average room rates down 5% in US$ and in Rand ● Remains impacted by weaker corporate markets attributable to the negative impact of commodity prices  Forex gains for H1 F’19 R3m (H1 F’18 R2m) o

  39. Slide 39: StayEasy Maputo and SS Nairobi

     StayEasy Maputo ● Capital cost of 125 key hotel US$16.5m ● 50 year land lease on a shopping development at zero cost ● Construction completed and hotel opened in April 2018  SS Nairobi ● Existing lease terminates November 2020 ● Landlord has agreed to a 12.5% reduction in rent until July 2019 ● L

  40. Slide 40: Expansion in existing territories

     Expansion in the territories the group already operates in ● Management agreements for a 150 key Southern Sun in Accra, Ghana, and a 128 key Garden Court in Kitwe Zambia concluded ● Garden Court Kitwe opened during August 2018 Garden Court Freedom Park Kitwe Zambia ● Construction has commenced in

  41. Slide 41: Hospitality Property Fund

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 41

  42. Slide 42: HPF ownership and structure

    Public 59.2% 40.8% Leases TENANT/ HOTEL PROPERTY OWNER HOTEL OPERATOR 42

  43. Slide 43: HPF hotel categories

    Luxury Upscale Midscale Economy 43

  44. Slide 44: HPF portfolio and statistics

    Hotels Rooms  Portfolio as at 30 September Luxury 3 749 2018 Upscale 12 3 227 Midscale 19 3 519 Budget 19 1 508 Total 53 9 003 Statistics H1 F’19 H1 F’18 % Change  On a like-for-like basis for the half year ended 30 September Occupancy (%) 59.7 61.4 (1.7)pp 2018, including acquired Average room ra

  45. Slide 45: HPF statutory versus Tsogo Sun group

    HPF Tsogo Sun Statutory Group Rooms revenue - 723 Food & beverage revenue - 170 Other revenue - 32 Rental income 345 135 3rd party 129 129 Tsogo Sun 216 6 Overheads (28) (678) Hotel trading related - (650) HPF central (28) (28) Ebitdar 317 382 Depreciation on owner occupied properties - (45) Finance

  46. Slide 46: Hospitality Europe

    HOTEL OPERATIONS HOSPITALITY EUROPE PROPERTY FUND 46

  47. Slide 47: UK hotel management investment (25%)

     TSH owns 25% plus board and committee representation  Manages 64 hotels (9 148 rooms) in the UK  Manages under multi brands including Crowne Plaza, Holiday Inn, Holiday Inn Express, Best Western, Westin, Best Western Beamish House Hilton, Marriott, Aloft Holiday Inn Camden Lock 47

  48. Slide 48: International Hotel Properties

     TSH owns 25.9% plus board representation  RDI Reit (previously Redefine International) own 74.1%  TSH intends to increase stake to 50%  Currently has GBP118m (R2.2bn) in hotel assets (1 135 rooms) ● 4 Travel Lodges – leased to Travel Lodge Hampton by Hilton Gatwick ● 4 Holiday Inn Express hotel

  49. Slide 49: Future Prospects

    FUTURE PROSPECTS

  50. Slide 50: Group outlook

     Group ● Strong cash generation ● Growth opportunities will be pursued if compelling but debt levels higher ● Upside potential from any economic recovery is significant ● Focus on driving revenue and cost control remain to protect margins ● REIT structure for gaming assets and unbundling of REIT di

  51. Slide 51: Casino Gaming outlook

     Casino 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 the final major pr

  52. Slide 52: Alternative Gaming outlook

     Alternative Gaming ● Continued rollout of licensed sites ● Potential for new site licences ● Electronic bingo in KwaZulu-Natal ● Expansion and redevelopment of existing sites ● Regulatory/legal issues remain a threat 52

  53. Slide 53: Hotels outlook

     Hotels ● Occupancy and rate still under pressure until transient Corporate demand recovers ● Focus on customer satisfaction, brand awareness, distribution through channels and Web and yield enhancement ● Opportunistic in SA – land bank, acquire leases, new builds and acquisitions ● Continued pursu

  54. Slide 54: Thank You

    THANK YOU

Tsogo Sun Holdings — Investor Presentation (November 2018) on 6ix