SUSTAINING GROWTH G ROUP S TRUCTURE C OMPANY P ROFILE U PDATE O N T - - PowerPoint PPT Presentation

2017 Full Year Results Presentation SUSTAINING GROWTH

GROUP STRUCTURE

COMPANY PROFILE – UPDATE ON THE NEW BUSINESS MODEL

• African Sun Limited is a leading hotel investment Company in Zimbabwe.
• The Company currently leases and operates eleven hotels and two Casinos.
• In 2015 the Group streamlined and exited all foreign operations for sustainability.
• 1 122 employees as at 31 December 2017 from 1 460 in 2015.
• The hotels are operated under two divisions, which are:

Hotels under Management and; Owner Managed Operations.

• Continuing with a quest to grow Shareholder Value, anchored on the following FOUR

PILLARS:

• People
• Product
• Processes
• Promotion

AFRICAN SUN LIMITED NEW BUSINESS MODEL

Hotel Under Management

The Kingdom Victoria Falls Hwange Safari Lodge Monomotapa Harare

Hotels Under Franchise

Holiday Inn Bulawayo

Owner Branded Hotels

Carribea Bay Resort Great Zimbabwe Hotel

Partnership Hotel

The Victoria Falls Hotel

Sun Casino

Harare Charity Casino

Holiday Inn Mutare

Makasa Sun Casino Troutbeck Resort Elephant Hills Resort Holiday Inn Harare

Owner Managed Operations

ENVIRONMENTAL OVERVIEW – MACRO ENVIRONMENTAL CHALLENGES

PERSIST IN ZIMBABWE

• Shortages of foreign currency
• Tax amnesty on penalties and interest proposed in the 2018 budget yet to

become law.

• The liquidity and cash challenges though persistent, have been mitigated by use
• f plastic money.
• Export incentive at 5% is appreciated, however a higher percentage could

counter input driven inflation.

• Local input costs on key basics have gone up 17% from 2015 levels.
• International tourist arrivals grew by 7% in 2017, whilst Africa’s tourist arrivals

grew by 8%.

MARKET DEVELOPMENTS – ALL SET FOR INCREASED ARRIVALS

• The Victoria Falls Airport now has the capacity to handle 1.5 million

passengers per annum, tripling its previous capacity.

• R.G Mugabe International Airport will soon undergo an upgrade to increase

its capacity from the current 2.5 million passengers.

• Construction of the Beitbridge – Chirundu Highway project will see business

travellers on the rise due to this economic activity. Post completion it will rekindle Around Zimbabwe Bus Tours as well regional and domestic self drive.

• Eastern Highlands destination is increasingly becoming popular with new

activities of the Skyline and Skywalk in Nyanga.

• 2018 elections set to benefit all hotels particularly the city hotels.
• Foreign Arrivals expected during and after the General Elections as the later

will coincide with our peak season.

MARKET DEVELOPMENT – OCUPANCIES TO BE SPURRED BY DOMESTIC

DEMAND

• Anticipated growth from improved economic activities.
• Kariba, Hwange and Victoria Falls pronounced Special Economic Zones as

Tourism hubs.

• Additional 300 mega watts from Kariba now awaiting commissioning from

the President, this is set to improve productivity across all economic sectors.

• The Ministry of Hospitality and Tourism, Zimbabwe Tourism Authority and

industry are working on initiatives to boost domestic tourism.

FOREIGN ARRIVAL TRENDS – AMERICAS AND ASIA SHOW GOOD

POTENTIAL

Source Market 2013 2014 2015 2016 2017 2017/16 Variance AFRICA 30,371 30,288 33,140 25,640 25,615

• EUROPE

26,609 28,109 20,799 22,479 28,588 17% AMERICA’S 14,823 17,875 11,329 10,241 14,894 45% AUSTRALIA & OCEANIA 4,162 3,733 2,589 3,694 4,547 27% ASIA 14,053 15,930 8,162 14,675 20,180 38% TOTAL 90,108 95,935 76,020 78,728 93,823 19% Y.O.Y GROWTH 5%

• 21%

4% 19%

• An increase of 19% was recorded on foreign arrivals in line with the international tourism

trends.

• Initiatives pronounced by AU in respect of open skies is set to spur the growth in African

Arrivals

MARKET SEGMENT PERFOMANCE – THE DOMESTIC MARKET BASE

BUSINESS DRIVER

• Domestic room nights went up by 17% however the contribution was watered down by the

international which grew by 29%.

• The international market remain strong.
• Regional market depressed due to the weak rand during the better part of the year, however

situation reversing.

• To invest in foreign market representation to increase foreign revenue for the Victoria Falls

properties.

GREAT ZIMBABWE HOTEL

• In consultation with our landlord, plans are at an advanced stage to rebuild and

refashion the hotel in the medium to long term.

• To build a modern Conference Centre.

CARIBBEA BAY RESORT

• The hotel has already undergone significant external refurbishments and

attention has now moved to the interior, Mock up Room concepts and artistic impressions completed.

PRODUCT IMPROVEMENT PLANS – PROGRESSIVE PHASED REFURBISHMENT

OF HOTELS

CARIBBEA BAY RESORT REFURB IN PICTURES- REVAMPED EXTERIOR

BEFORE AFTER

HOLIDAY INN MUTARE

• Hotel successfully rebranded effective 1 July 2017.
• Hotel to be fully brand compliant by 1 July 2018.
• Mock up rooms completed and refurbishment of one floor currently in progress.
• Lifts should be commissioned by 1 July 2018.
• We acknowledge the investment which the landlord has done on this property.

HOLIDAY INN HARARE AND BULAWAYO

• Installation of new elevators at both hotels was completed in 2017.
• We acknowledge the investment which the landlord has done on these properties.
• The hotels

remained brand compliant according to IHG brand standards and assessments thereof in 2017, going forward brand updates will be undertaken to maintain the same.

PRODUCT IMPROVEMENT PLAN – HOTELS UNDER FRANCHISE

HOLIDAY INN MUTARE - PROPOSED NEW LOOK AS PER CURRENT MOCK UP

ROOM

• Increased conferencing capacity at The Kingdom at Victoria Falls by 400.
• Exterior painting for Elephant Hills Resort and The Kingdom at Victoria

Falls.

• Refurbishment of the public areas for Monomotapa Hotel.
• Continuous brand upgrades in 2018.

LEGACY MANAGED HOTELS PRODUCT IMPROVEMENT PLANS

THE KINGDOM AT VICTORIA FALLS

MARKET SHARE ANALYSIS

Destinations Market Fair Share A ctual Market Share Variance Victoria Falls Elephant Hills Resort 25% 18%

• 7%

The Kingdom 26% 23%

• 3%

The Victoria Falls Hotel 37% 39% 2% Hwange Hwange Safari Lodge 51% 56% 5% Harare Holiday Inn Harare 13% 16% 3% Monomotapa Hotel 15% 14%

• 1%

Nyanga Troutbeck Resort 43% 56% 13% Mutare Holiday Inn Mutare 41% 51% 10% Kariba Caribbea Bay Resort 17% 20% 3% Masvingo Great Zimbabwe Hotel 10% 11% 1% Bulawayo Holiday Inn Bulawayo 40% 45% 5%

.

FINANCIAL REVIEW

TROUTBECK RESORT

FULL YEAR 2017 PERFORMANCE HIGHLIGHTS – REVENUE UP 19%

INTEREST $1.05M [+ 39% ]

CASH GENERATED FROM OPERATIONS $7.47M

ABOUT TO TAKE OFF GRIDLOCK

• Revenue

increased by 19% spurred by growth in occupancy to 52% from 44%

• EBITDA

up 53% to US$8.37 million (margin – 16%) from US$5.48 million (margin 13%) from improved revenues and cost management.

• Operating profit grew by 20% to

US$6.91 million (margin- 13%) impact of the improved EBITDA.

• Profit for the year marginally

increased to US$4.82 million.

US$ million 2017 2016 Var ▲ Revenue 51.82 43.60 8.22 19% EBITDA 8.37 5.48 2.89 53% EBITDA Margin 16% 13% 3 pp Operating profit 6.91 5.72 1.19 20% Operating margin 13% 13% 0 pp PBT from operations 5.86 4.96 0.90 18% Finance costs (net) (1.05) (0.75) (0.40) 39% Profit for the period 4.82 4.81 0.01 0%

INCOME STATEMENT – EBITDA UP 53%

ABOUT TO TAKE OFF

• Significant growth in profit before tax on a like for like as the lean

structure prove efficient

• Earnings from normal operations (excluding disposal of a subsidiary in

the prior year) up 106% to US$6.22 million from US$3.02 million

US$ million 2017 2016 ▲ Profit before tax 5.86 4.96 18% Adjustment for non recurring items Other once off

• (0.36)
• Profit on disposal of a subsidiary
• (1.18)
• FCTR recycled from other OCI
• (0.76)
• Other expenses

0.36 0.36

• Adjusted profit before tax

6.22 3.02 106%

PROFIT BEFORE TAX – SIGNIFICANT GROWTH

REVENUE ANALYSIS – FOREIGN REVENUE CONTRIBUTION

INCREASED 2 PERCENTAGE POINTS

• Foreign revenue expected to be on the increase in line with global tourism

and our initiatives

• Target is to increase foreign contribution to 50%, we still have capacity to

grow in our Victoria Falls properties

• Domestic revenue increased by 16% in 2017, however diluted by 23%

increase in foreign with high yields

REVENUE ANALYSIS – ROOMS REVENUE DOMINANCE

• Food and beverage set to benefit from 2018 activities which include improved

economic activities, increase of arrivals in the country and elections

• Casino business now responding positively to use of plastic money and other

electronic payment platforms

GROUP KEY STATISTICS – REVPAR IMPROVEMENT

• Occupancy grew by 8 percentage points
• ADR maintained at US$93 to stimulate domestic demand which then increased by 17%
• RevPAR responded to increase in occupancy to post US$48 from US$41 last year.

DiVISIONAL PERFOMANCE ANNALYSIS

• All divisions on a growth trajectory.
• Occupancy growth coming from both local and foreign arrivals.
• Franchised hotels and The Victoria Falls Hotel recorded real growth, whilst the improvement in Managed

Division and Own Brands was a mixture of recovery from 2016 and real growth.

• Casinos negatively affected by the liquidity challenges prevailing in the economy,

however we expect a response to new modes of payment. REVENUE (US$000) PROFIT /(LOSS) BEFORE TAX (US$000) EBITDA (US$000) Dec 17 Dec 16 Growth Dec 17 Dec 16 Growth Dec 17 Dec 16 Growth Managed Division 26,172 21,119 24% 929 (1,118) 183% 1,594 (16) 9950% Franchised Division 14,481 13,036 11% 1,168 740 58% 1,941 1,667 16% Own Brands 3,542 2,767 28% 361 38 852% 475 156 204% The Victoria Falls Hotel @50% 7,451 6,303 18% 2,982 1,959 52% 2,901 2,180 33% Other business segments 181 379

• 52%

419 3,345

• 87%

1,353 1,449

• 7%

Total hotels and casinos 51,827 43,604 19% 5,859 4,965 18% 8,264 5,437 52%

PERFOMANCE BY DIVISION – OVERALL REVPAR INCREASED BY 17%

• All hotels managed to grow RevPAR with

Elephant Hills Resort registering the highest growth of 34% to US$40.

DIVIDEND DECLARATION

I

• On 8 March 2018, the Board declared a final dividend of US$600 655 being

US$0.000697 per share (0.0697 cents per share) for the year ended 31 December 2017.

• Declared from current year profits and also taking into account capital

commitments.

• Sign of predictability and sustainability going forward.

BALANCE SHEET AND CASHFLOW

KINGS CLUB – THE KINGDOM AT VICTORIA FALLS

STATEMENT OF FINANCIAL POSITION – SIGNIFICANT TURNAROUND ON THE

WORKING CAPITAL POSITION

FY17 Actual FY16 Actual US$m US$m

Assets Non Current assets

21.87 21.62

Current assets

16.36 12.00

Total assets

38.74 33.62

Equity and liabilities Shareholders equity

11.51 6.66

Non-current liabilities

9.51 8.36

Current liabilities

17.72 18.60

Equity and liabilities

41.15 33.62 Total Debt 6.21 8.27 Gearing

• 23%

34%

• Total assets grew by 15% mainly due to the

increase in cash and cash equivalents

• This is in response to strong performance
• Increase in non-current liabilities due to the

restructuring of borrowings.

• Bank borrowings declined by 25% due to

the repayments. All payments were made from operating cashflows

• Net current liabilities improved to US$

0.84m from US$5.59m from prior year.

• Equity improved by 73% to US$11.51

million, impact of total comprehensive income posted during the year.

BANK DEBT DOWN 72% FROM DECEMBER 2013

• 25% bank debt reduction

from December 2016 financed by cashflows from operating activities.

• Financing costs expected

to reduce going forward as the company makes scheduled debt repayments.

• The effective cost of

borrowings has declined to 9.84% from 10.19% as a result of the debt restructuring.

ABOUT TO TAKE OFF GRIDLOCK

• Improved cash flow before

working capital changes

• f

55% was impacted by a 53% increase in EBITDA.

• Increase in PPE investment

emanated from normal replacements refurbishment

• f CBR and HIM.

US$ million 2017 2016 ▲ Cash flows Cash flow before working capital changes 9.65 6.24 55% Change in working capital (1.20) (2.96)

• 59%

Finance costs (0.98) (1.11)

• 25%

Cash generated from operations 8.45 3.28 158% Investments in PPE (net) (1.95) (0.91) 113% Cash (used in) / generated from financing activities (2.06) 1.15

• 279%

Net increase in cash and cash equivalents 3.46 2.41 44% Cash and cash equivalents at the end of the year 8.36 4.88 71%

ABRIDGED CASHFLOW STATEMENT

OUTLOOK

• Our hotel operations are expected to benefit from key activities in 2018,

which include elections, infrastructure development and other government projects.

• The Victoria Falls Airport completion has been a major boost to our

performance in 2017 and we expect further benefits in 2018 from increased airline capacity into the destination

• The other key factors expected to drive business in 2018 are;
• ICT improvements – improved revenue management and booking

platforms

• Product improvement through refurbishment of hotels.
• Training and service excellence will continue as people are our key

resource

• Our traditional tour and series business will continue to grow international

arrivals augmented by the local conferencing and domestic tourism initiatives.

PREMIER BRAND UNDER MANAGEMENT FRANCHISE BRAND STAND-ALONE BRANDS CASINO BRANDS

OUR BRANDS

QUESTION AND ANSWER