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African Sun Limited HY2013 results presentation

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African Sun Limited HY2013 results presentation

African Sun Limited HY2013 results presentation

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  • 1. AFRICAN SUN LIMITED F13 H1 Results Presentation
  • 2. AGENDA 1. Strategy and Operations Review Group CEO – Dr Shingi Munyeza 2. Financial Review Group Finance Director – Nigel Mangwiro 3. Outlook Group CEO – Dr Shingi Munyeza
  • 3. STRATEGIC REVIEW
  • 4. To be the benchmark hotel operator wherever we operate STRATEGIC DIRECTION VISION We exist to create value for all our stakeholders through the deployment of our intellectual property and service skills in a professional, predictable and consistent manner MISSION
  • 5. STRATEGIC INTENT 1. We aim to consistently achieve a minimum of 20% Return On Equity 2. We seek to be in the top 3 measured by RGI in markets and locations where we operate 3. We aim to ensure that our management contracts and leases are bankable with a sustainable long term return 4. We target growth centres driven by natural resources, tourism attractiveness and economic growth 5. We aim to create a bench in our talent development for sustainability, succession and growth * RGI – Revenue Generation Index
  • 6. FURTHER STRATEGIC INITIATIVES BEING PURSUED TO SUSTAIN PROFITABILITY AND GROWTH TRAJECTORY  Continuous evaluation of hotel portfolio performance with the view of further value addition and where imperative, disposals will be considered.  Continuous cost alignment measures with a view to achieving our target operating costs to revenue ratio of 50%.  Reducing the average cost debt, for both short and long term, to not more than 10% (currently 16% p.a).  Achieving gearing of 23% by end of 2013 (currently stands at 40%).
  • 7. MARKET DEVELOPMENTS AND SCENARIOS
  • 8. DESTINATIONS AND DESTINATION MARKETS: GLOBAL ECONOMIC OUTLOOK GLOBAL SCENARIOS Copyright Chantell Ilbury & Clem Sunter, mindofafox.com
  • 9. DESTINATIONS AND DESTINATION MARKETS: ZIMBABWE ECONOMIC OUTLOOK ABOUT TO TAKE OFF AUTOBANN GRIDLOCK Resorts Up as tourists increase! More Hotels please! Slow Recovery in Resorts, City Hotels still main driver City Hotels stronger, Resorts recovery gradual HOLDING PATTERN 40% 10% 30% 20% -VE ECONOMIC INTEGRATION +VE ECONOMIC INTEGRATION Mining Contribution Agricultural Productivity Securitization of land Tenure Sanctions Peace Transition Accepted Election Indigenization Transparency -26% Current account to GDP 25% Export To GDP INTERNAL CONFLICT (Politics) INTERNAL HARMONY (Politics) Zimbabwe Scenarios 5 YEAR VIEW ABOUT TO TAKE OFF AUTOBANN GRIDLOCK
  • 10. FOREIGN ARRIVAL TRENDS OUR ZIMBABWE HOTELS Source Market H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 CAGR Since 2009 AFRICA 4,832 11,874 16,044 14,697 14 311 40% EUROPE 6,244 8,566 10,695 11,900 13 460 35% AMERICA’S 2,608 3,140 4,447 5,407 7 676 57% AUSTRALIA & OCEANIA 451 654 1,224 1,458 1 487 49% ASIA 2,708 3,969 5,235 4,856 6 536 29% TOTAL 16,843 28,203 37,645 38,318 43 470 49% Y.O.Y GROWTH 67% 33% 2% 13% AFRICA , EUROPE and AMERICA still biggest contributors , with AFRICA growing fasted at CAGR of 68% since 2009
  • 11. ARRIVAL TRENDS – KEY SOURCE MARKETS OUR ZIMBABWE HOTELS ABOUT TO TAKE OFF GRIDLOCK Source Market H1. 2009 H1. 2010 H1. 2011 H1.2012 H1.2013 2013/12 CAGR South Africa 2,924 8,034 11,961 10,471 10,309 -2% 63% United Kingdom 700 981 1,751 1,518 1,899 +25% 43% France 1,352 1,876 2,027 2,260 2,046 -9% 13% Germany 797 1,407 1,279 1,424 2,302 +61% 47% Italy 826 1,172 1,092 1,124 789 -30% -1% Spain 263 450 326 808 815 +1% 52% USA 2,281 2,670 3,446 4,176 6,535 +56% 47% Australia 405 587 1,146 1,350 1,315 -3% 56% China 283 1,049 1,404 1,797 1,640 -9% 120% India 216 212 621 359 535 +49% 37% Japan 1,294 1,092 1,923 1,842 2,880 +56% 31% Canada 280 388 862 965 1,041 +8% 68% S/Korea 427 735 491 350 809 +131% 22% Russia 83 178 181 259 277 +7% 58% Total 12,131 20,831 28,510 28,703 33,192 +16% 43% AFRICA , EUROPE and AMERICA still biggest contributors , with AFRICA growing fastest at CAGR of 68% since 2009
  • 12. MARKET DEVELOPMENTS: GROWTH IN INTERNATIONAL ARRIVALS INTO OUR HOTELS H1.2013  Growth in international tourism consistently at 3%  Foreign arrival into our hotels went up 13% year on year, with Americas registering the highest growth of 42%  Americas and Africa dominating growth, with Europe almost stagnant due the crisis  Domestic market slumped by 6% due to persistent liquidity pressures and limited capacity due to ongoing refurbishment  Resuscitated flights into Victoria Falls to increase room nights in to our hotels for F13 going forward
  • 13. FINANCIAL REVIEW
  • 14. H1, 2013 PERFORMANCE HIGHLIGHTS INDICATORS UP!
  • 15. EBITDA GROWTH SUSTAINED…  Revenue up 1.6%: – driven by a 6% ADR growth, – diluted by volumes decline of 6% from reduced capacity at hotels under refurbishment and drop in local business  EBITDA up 65% to US$3.59 million, from savings realized of 5.2% in COS, and 3.7% in Operating Expenses.  Interest expense up due to increase in short-term loans and the effective cost of borrowing to 22%, from 18%.  EPS and PBT down, as interest dilutes EBITDA and other income[once-off] drops completely. ABOUT TO TAKE OFF GRIDLOCK Profitability growth underpinned by further cost savings, but diluted by higher Interest charges US$ millions H1.13 H1.12 ▲ Revenue 26,603 26,193 +1.6% Cost of Sales 7,606 8,025 - 5.2% Gross Profit 18,996 18,168 +4.6% Operating Expenses 15,408 15,999 -3.7% EBITDA 3,588 2,169 +65% EBITDA margin % 13 8 +5 pp Other Key Indicators Finance Costs 1,547 840 +84% Other Income 1,716 -100% Profit Before Tax 1,234 1,497 -18% EPS 0.11c 0.12c -8.7%
  • 16. H1, 2013 PERFORMANCE BY HOTEL INDICATORS UP! ABOUT TO TAKE OFF GRIDLOCK Hotel Occ RevPar Revenue Gross Profit Expenses EBITDA 2013 EBITDA 2012 ▲ % Crown Plaza Monomotapa 61% 70 3,683 2,516 1,563 862 393 119% Holiday Inn HRE 71% 69 3,669 2,621 1,407 1,214 809 50% Holiday Inn BYO 55% 51 2,518 1,846 1,179 667 280 138% Amber Hotel Mutare 52% 48 1,463 1,002 453 549 340 61% Beitbrigde Express Hotel 43% 28 805 558 477 81 83 -2% Elephant Hills Resort 35% 21 3,477 2,380 1,986 394 188 110% The Kingdom Hotel 38% 33 3,461 2,444 2,015 429 172 149% The Victoria Falls Hotel [50%] 51% 97 2,405 1,816 985 831 1,203 -31% Hwange Safari Lodge 21% 15 698 469 377 92 58 59% Troutbeck Inn Resort 53% 45 1,454 996 581 415 203 104% Carribea Bay Resort 42% 34 1,124 736 663 73 (11) -764% Great Zimbabwe Hotel 50% 38 714 480 348 132 106 25% Casino Division n/a n/a 807 807 781 26 327 -92% Vacations n/a n/a 166 166 222 -56 -26 115% PCC 31% 40 159 159 -98 257 342 -25% Sub-Total 47% 44 26,603 18,996 12,939 5,966 4,467 33%
  • 17. SIGNIFICANTLY IMPROVED FINANCIAL PERFORMANCE SINCE 2009 AS A RESULT OF TURNAROUND STRATEGY EBIDTA increase continued following turnaround in 2011 and underpinned by a well developed revenue generation base and cost efficiencies. Cash generated on the increase, in line with EBIDTA. Revenue CAGR of 23% pa since 2009, tappers of in H1,2013 Solid increase in Gross profit as Revenue Increased. Revenue and Gross Profit Trends (US$’000s) EBITDA and Cash Generated Trends (US$’000s)
  • 18. REVPAR GROWTH LARGELY DRIVEN BY OCCUPANCY GROWTH UP TO 2011, NOW BEING SPURRED BY GROWTH IN ADR RevPAR CAGR of 17% pa since 2009, driven by ADR and OCC growth in City Hotels. RevPAR growth tapered off in H1,2013 due in part to rooms out being refurbished and the contraction suffered on domestic business . RevPAR and ADR Trends (US$) OCCUPANCY Trends: City vs Resort Hotels (US$)$’000s)
  • 19. STRONG GROWTH IN LONG-TERM ASSETS MAR F13 SEP F12 US$m US$m Assets Long term assets 48,617 45,801 Current assets 12,746 14,516 Total assets 61,363 60,317 Equity and liabilities Shareholders equity 24,569 23,983 Non-current liabilities 11,419 10,547 Current liabilities 25,375 25,787 Total equity and liabilities 61,363 60,317  6% increase in assets arising from; – US$2.0m investment in long-term assets attributable to the on-going refurbishment and Capital work in progress. – US$0.4m profit from associate.  12% drop in current assets following; – Repayment of long term loan. – Partial repayment of short term loans. – Refurbishment costs.  Non current liabilities made up of: – Long-term loan US$6.996m. – Deferred tax liability US$4.423m.  Current liabilities include US$9.89m short-term loans and US$2.5 million current portion of long term loans.  Gearing, at 40% and to reduce as operations improve and debt is reduced.
  • 20. CAPITAL STRUCTURE HEALTH BORROWINGS ABOUT TO TAKE OFF GRIDLOCK US$ millions H1.13 FY2012 H1.12 Non Current 6,996 6443 6837 Current Current Portion 2,500 2,500 1,500 Overdrafts 659 2,396 Bankers Acceptances 11,031 8,739 8,754 Cash and Bank Balances 3,259 4,607 5,557 Net Debt 16,127 15,486 11627 Average Cost. 16% 15% 15% Gearing 40% 39% 38% Profitability growth diluted by higher Interest charges as average cost and level of borrowings increased. Plans to restructure and retire short term debt significantly advanced.
  • 21.  EV - $46.8m assuming multiple of 6x and EBIDTA of $7.8m maintainable.  Less: -$7.0m Net debt after anticipated debt reduction  Implied MV- 39.8m, excludes Dawn Intrinsic value.  Implied MV/ share - ca 4.8c MANAGEMENT VIEW AFRICAN SUN INTRINSIC VALUE TO INCREASE AS DEBT IS REDUCED  Sector EBIDTA multiple - 7.81 x.  EBIDTA maintainable - at least $7.8m going forward  Debt at $19.0 m to reduce to $10.0m or less with continuing debt reduction plans.  Dawn intrinsic value excluded from valuation
  • 22. OUTLOOK
  • 23. 2013 FOCUS  Balance sheet restructuring - reduce net debt to below $7million by year end, down from $16.13m.  Asset quality – capital expenditure targeting hotel refurbishment will continue  Cost alignment and efficiency – focus will be on reducing costs while improving efficiencies  Accessibility – Improve accessibility of our hotels to the global market through installation eRes, a seamless platform to manage bookings and payments online  African Sun is well positioned to benefit from the recovery of the tourism sector
  • 24. 2013 OUTLOOK TOWARDS A STRONG, CONSISTENT AND PREDICTABLE BUSINESS MODEL  Our new business model towards a sustained - re- entry into the lucrative Ghana market and new management contracts in Nigeria envisaged.  UNWTO to offer a unique opportunity to sell the Vic Falls and Zimbabwe as a destination.  Foreign arrivals into our hotels to grow by at least 10%.  Revenue to grow by at 8%, with EBITDA margin forecast at 12%.  Impact of 2013 elections :  Violent and Contested Outcome- current growth trends will persist  Peaceful and Accepted - growth trajectory higher, with current growth patterns expected to double
  • 25. WELL ESTABLISHED HOTEL BRANDS UNDER THE AFRICAN SUN PORTFOLIO OF HOTELS
  • 26. QUESTIONS AND ANSWERS