AFRICAN SUN LIMITED

              ANALYST BRIEFING




                                                         1
WEDNESD...
AFRICAN SUN LIMITED
                 Open for Business In Africa




                                               2
WEDN...
GLOBAL TOURISM TRENDS
    • In light of the Global Financial Crisis global tourism for 2008 marginally
    increased by 2%...
GLOBAL ECONOMIC SLOWDOWN
IMPLICATIONS
•   Decrease in discretionary spending on leisure products
•   Decline in activity i...
DECLINE IN SHARE PRICES OF HOTEL COMPANIES IN
EUROPE




                                                5
GLOBAL ECONOMIC SLOWDOWN
IMPLICATIONS ON ASL
•   Projected GDP growth for Africa has declined to less than 4%
•   Delays i...
ARRIVAL TRENDS INTO SOUTHERN
AFRICA
SOUTH AFRICA
  Arrivals into South Africa went down in response to the impact of the
 ...
ARRIVAL TRENDS INTO SOUTHERN
AFRICA
ZIMBABWE

  Despite the negative publicity that the country continued to receive

  th...
ARRIVAL TRENDS INTO WESTERN
AFRICA
GHANA

• The foreign arrivals into Holiday Inn Accra Airport mainly came from
  Europe ...
UPDATE ON STRATEGIC
        GOALS




                      10
RECAP OF STRATEGIC GOALS

•   To grow rooms in Africa under African Sun management from the current 2
    500 to 8 500 by ...
PROGRESS ON STRATEGIC GOALS:
PIPELINE PROJECTS
•   The Group still committed to achieving 8 500 rooms by 2012.

•   Curren...
PROGRESS ON STRATEGIC GOALS: HR
AND HTA UPDATE
•   The Group has embarked on an aggressive recruitment drive as it seeks
 ...
PROGRESS ON STRATEGIC GOALS:
MARKET CAPITALISATION
•   The temporary suspension of the ZSE ended on the 19th of February
 ...
PROGRESS ON STRATEGIC GOALS: MARKET
CAPITALISATION
                              ASL         EXTRAPOLATION  CITY          ...
PROGRESS ON STRATEGIC GOALS:
BRAND LEADERSHIP
•   ASL is open for business in Africa.
•   Brand growth making good progres...
PROGRESS ON STRATEGIC GOALS:
BRAND LEADERSHIP
•   In addition, ASL own brands will be used
    to establish Brand leadersh...
PROGRESS ON STRATEGIC GOALS:
              DUAL LISTING

•   The Group is investigating the possibility of placing 20% of ...
FINANCIAL PERFORMANCE
BUSINESS MODEL
 2002            2009
ZIMBABWE BUSINESS
      MODEL
Occupancies decline…
RevPar growing …
ADR stabilises….
Operating costs improve….
GROUP PERFORMANCE
GROUP FINANCIAL HIGHLIGHTS


REVENUE             $13.6 million
OCCUPANCY           29%
REVPAR              $28
ADR        ...
SEGMENT REPORTING

    REGION                 REVENUE ($)
    SOUTHERN AFRICA        13 185 938
    WESTERN AFRICA        ...
SUMMARY OF KPI’s
        COUNTRY       REVPAR    ADR   OCCUPANCY

                       US$      US$      %

       ZIMBA...
YIELD COMPARISON
•   From 12 October 2008, the Zimbabwe Tourism Authority (ZTA)
    issued hotel prices denominated in Uni...
LIQUIDITY
•   Liquidity was a serious challenge during the period under review
    as the Group had to predominantly rely ...
CHALLENGES IN FINANCIAL
REPORTING
•    The last quarter of 2008 was riddled by:
    •    Chronic hyperinflation,
    •    ...
OUTLOOK: FUNDING

 •   Negotiations underway to raise hard currency
     capital primarily to fund the various hotel proje...
OUTLOOK: FORWARD BOOKINGS

    Resort                                March       In system 
                              ...
CHANNEL MANAGEMENT

   PACRO 30 - 40 % of total bookings




   WEBSITE 20% of total bookings




   GDS 15% of total book...
OUTLOOK: EFFECT OF
CAPITALISATION IN THE GROUP
  •   The Group is in need of funding to finance the expansion drive.
  •  ...
OUTLOOK: 2010 FIFA WORLD CUP
•   The hosting of the 2010 Soccer World Cup by South Africa will result
    in a number of b...
OUTLOOK: 2010 FIFA WORLD CUP
 •   Event will act as a stimulus for national branding of
     Zimbabwe as a destination
 • ...
OUTLOOK: PIPELINE OPENINGS
The Kingdom, Lagos
OUTLOOK
DIVIDEND DECLARATION



  •   In light of the current operating environment, the
      company’s subdued performan...
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African Sun Analyst Briefing 24 June 2009

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The Group is still committed to achieving 8,500 rooms by 2012. Currently, 7,011 additional rooms are in the pipeline and are at various stages of completion. It is expected that 577 rooms will be added to rooms under management within the next 12 months as follows:

Holiday Inn Kano 200 rooms
Holiday Inn Arusha 199 rooms
Holiday Inn Gaborone 164 rooms
Royal Chundu Lodge 14 rooms

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African Sun Analyst Briefing 24 June 2009

  1. 1. AFRICAN SUN LIMITED ANALYST BRIEFING 1 WEDNESDAY 24 JUNE 2009 Obudu Mountain Resort, Nigeria
  2. 2. AFRICAN SUN LIMITED Open for Business In Africa 2 WEDNESDAY 24 JUNE 2009
  3. 3. GLOBAL TOURISM TRENDS • In light of the Global Financial Crisis global tourism for 2008 marginally increased by 2% compared to the 7% increase of 2007. • Europe experienced a stagnation in arrivals. • The Middle East surged by 11%. • Americas recorded a growth of 4%. • Africa recorded a growth of 4% • Asia and Pacific recorded a growth of 2% UNWTO: World Tourism Barometer, Volume 7 ,No 1 January 2009 3
  4. 4. GLOBAL ECONOMIC SLOWDOWN IMPLICATIONS • Decrease in discretionary spending on leisure products • Decline in activity is accelerating • Increase in domestic travel and short haul international travel • Hotel pipelines are shrinking • Hardening of capital markets • Significant fall in Occupancies and RevPar • Hotel stocks declined significantly in Europe by 51% • Marked decrease in capital expenditure
  5. 5. DECLINE IN SHARE PRICES OF HOTEL COMPANIES IN EUROPE 5
  6. 6. GLOBAL ECONOMIC SLOWDOWN IMPLICATIONS ON ASL • Projected GDP growth for Africa has declined to less than 4% • Delays in hotel pipeline • Delays in new openings • Lack of funding for developers in Greenfield/new projects • Hardening of capital markets • Foreign Direct Investment into Africa has reduced significantly
  7. 7. ARRIVAL TRENDS INTO SOUTHERN AFRICA SOUTH AFRICA Arrivals into South Africa went down in response to the impact of the global financial crisis. For the third quarter of 2008, arrivals growth decreased from 9% for the same period in 2007, to 1%. Current information suggests that arrivals into SA have declined by 15%. According to STR Global (February 2009) RevPar declined as shown below: City RevPar ($) Decline (%) Sandton 61 (33.6%) Cape Town 70 (30.8%) Port Elizabeth 41 (23.8%) Prospects of a gradual increase in arrivals are still high with the Confederations Cup and the 2010 World Cup, though the impact of global recession are still visible.
  8. 8. ARRIVAL TRENDS INTO SOUTHERN AFRICA ZIMBABWE Despite the negative publicity that the country continued to receive there was growth in arrivals from the following countries compared with 2008: Taiwan 10% Malaysia 29% France 5% Mozambique 100% Malawi 16%
  9. 9. ARRIVAL TRENDS INTO WESTERN AFRICA GHANA • The foreign arrivals into Holiday Inn Accra Airport mainly came from Europe which contributed 93% of all the international arrivals. NIGERIA • Of the total arrivals into African Sun hotels in Nigeria 17 678 which accounts for 98% is made up of local arrivals for the six months to March 2009.
  10. 10. UPDATE ON STRATEGIC GOALS 10
  11. 11. RECAP OF STRATEGIC GOALS • To grow rooms in Africa under African Sun management from the current 2 500 to 8 500 by 2012. • To become an employer of choice by providing competitive remuneration, an enabling and winning environment driven by personal learning and development. • To achieve a market capitalisation of US$1 billion • To establish brand leadership where we dominate other brands and become the benchmark for other players • To seek a dual listing on a major bourse by 2012
  12. 12. PROGRESS ON STRATEGIC GOALS: PIPELINE PROJECTS • The Group still committed to achieving 8 500 rooms by 2012. • Currently, 7 011 additional rooms are in the pipeline and are at various stages of completion • It is expected that 577 rooms will be added to rooms under management within the next 12 months as follows: • Holiday Inn Kano 200 rooms • Holiday Inn Arusha 199 rooms • Holiday Inn Gaborone 164 rooms • Royal Chundu Lodge 14 rooms
  13. 13. PROGRESS ON STRATEGIC GOALS: HR AND HTA UPDATE • The Group has embarked on an aggressive recruitment drive as it seeks – To attract the best skills – Have appropriate skills as it advances the pipeline • The Group endeavours to retain the best skills and is in the process of realigning people to the business model • 220 people within the Group have been enrolled under the following programmes : – TOPP – Apprentice cooks – Technical apprentices – Graduate Development Programmes • HTA continues to emphasize the “How May I Serve You” philosophy and the African Sun Way. • A training kitchen was established at Elephant Hills Resort aimed at training apprentice cooks.
  14. 14. PROGRESS ON STRATEGIC GOALS: MARKET CAPITALISATION • The temporary suspension of the ZSE ended on the 19th of February 2009 and the ASL share price opened at 10 cents . • The bourse is now trading in United States Dollars • Current market capitalization at $ 138 million based on the share price as at 24 June 2009 of 20 cents.
  15. 15. PROGRESS ON STRATEGIC GOALS: MARKET CAPITALISATION ASL  EXTRAPOLATION  CITY  ASL ‐ 2012 CURRENT AT 48% OCC LODGE ROOMS 2 926 2 926 4 773 8 500 OCCUPANCIES (%) 29% 48% 82% 63% NET PROFIT ($) 0.5m 20 m 22 m ?? EBITDA ($) 1.1m 25 m 33.9 m ?? MARKET CAPITALISATION  138m ?? 300 m 1 billion ($) • ASL has a current market capitalisation of $138 million with a 29% occupancy. • ASL has both City hotels and resorts and has operations in 4 different countries. • City Lodge is a purely South African player and specialises in city hotels only. • Given an EBITDA multiple of 12 ASL should have a market capitalisation of $300 million by 2010. • Based on current activity any 1% improvement in occupancy will result in a $1.26million increase in EBITDA. • For ASL there is room for improvement and the US$1 billion market capitalisation is achievable.
  16. 16. PROGRESS ON STRATEGIC GOALS: BRAND LEADERSHIP • ASL is open for business in Africa. • Brand growth making good progress • Launched first African Sun mid-range city brand, Amber Tinapa, Nigeria in December 2008 • ASL largest operator of Intercontinental Hotels Group (IHG) brands in Africa • Adding 4 more IHG branded properties in Botswana, South Africa, Tanzania and Nigeria
  17. 17. PROGRESS ON STRATEGIC GOALS: BRAND LEADERSHIP • In addition, ASL own brands will be used to establish Brand leadership. • Brands roll out at advanced stage as follows: Mulberry – Nigeria Amber (focus on mid market city hotels in line with business strategy)- Zambia, South Africa, Mozambique, Beitbridge MyPlace – Ghana, Nigeria,South Africa and Zambia The Kingdom – Lagos Nigeria
  18. 18. PROGRESS ON STRATEGIC GOALS: DUAL LISTING • The Group is investigating the possibility of placing 20% of the Group’s shares on the Africa Board. • Work is still on course to list the company on a major bourse.
  19. 19. FINANCIAL PERFORMANCE
  20. 20. BUSINESS MODEL 2002 2009
  21. 21. ZIMBABWE BUSINESS MODEL
  22. 22. Occupancies decline…
  23. 23. RevPar growing …
  24. 24. ADR stabilises….
  25. 25. Operating costs improve….
  26. 26. GROUP PERFORMANCE
  27. 27. GROUP FINANCIAL HIGHLIGHTS REVENUE $13.6 million OCCUPANCY 29% REVPAR $28 ADR $96 EBITDA $1.1 million PROFIT BEFORE TAX $0.5 million
  28. 28. SEGMENT REPORTING REGION REVENUE ($) SOUTHERN AFRICA  13 185 938 WESTERN AFRICA 433 795 TOTAL 13 619 733 REGION OPERATING PROFIT ($) SOUTHERN AFRICA  272 807 WESTERN AFRICA 216 898   TOTAL 489 705
  29. 29. SUMMARY OF KPI’s COUNTRY REVPAR  ADR OCCUPANCY US$ US$ % ZIMBABWE 17 64 27% SOUTH AFRICA 49 122 40% NIGERIA 28 137 20% GHANA 116 178 65% GROUP AVERAGES 28 96 29% BENCHMARKS 98 140 70%
  30. 30. YIELD COMPARISON • From 12 October 2008, the Zimbabwe Tourism Authority (ZTA) issued hotel prices denominated in United States Dollars, this resulted in the ADR coming up to $85. • RevPar for Zimbabwe and Nigeria is still below regional benchmarks. • Holiday Inn Accra Airport is currently performing above the benchmark in respect of RevPar and ADR. • The forecasted ADR and RevPar for ASL Zimbabwe’s is $90 and $40 respectively, this is in line with South African benchmarks which are $116 for ADR and $85 for RevPar.
  31. 31. LIQUIDITY • Liquidity was a serious challenge during the period under review as the Group had to predominantly rely on internally generated resources. • However the group managed to end the period with a favourable cash position of $1.3million. • A $1 million debenture investment in Ghana was made to facilitate the management contract for the Holiday Inn Accra Airport. • Long-term borrowings surged by $0.67 million to address refurbishment of regional properties and to service management contract investments • Short-term borrowings increased by $0.4 million to address working capital. • Capital expenditure remained suppressed due to the operating environment to increase by $0.5 million
  32. 32. CHALLENGES IN FINANCIAL REPORTING • The last quarter of 2008 was riddled by: • Chronic hyperinflation, • Multiple exchange rates and • Unbearable input costs • This rendered financial reporting in Zimbabwe dollar meaningless. • Unavailability of CPI from the relevant authorities • Economy unofficially dollarised by October 2008 • Group’s approach to dollarisation of financials (refer to press release)
  33. 33. OUTLOOK: FUNDING • Negotiations underway to raise hard currency capital primarily to fund the various hotel projects in the pipeline and refurbish Zimbabwe properties
  34. 34. OUTLOOK: FORWARD BOOKINGS Resort March  In system  Occupancies bookings  The Victoria Falls Hotel 11% 48% The Kingdom Hotel at Victoria Falls 9% 18% Caribbea Bay Resort 9% 20% Elephant Hills Resort 6% 7% • In system bookings are from July – Sept 2009 • The Group was mainly sustained by city hotels in the first six months as resort properties occupancies were depressed. • Resort hotels are expected to improve as shown in the table above especially in the Victoria Falls area
  35. 35. CHANNEL MANAGEMENT PACRO 30 - 40 % of total bookings WEBSITE 20% of total bookings GDS 15% of total bookings TPI 5 - 7 % of total bookings
  36. 36. OUTLOOK: EFFECT OF CAPITALISATION IN THE GROUP • The Group is in need of funding to finance the expansion drive. • Such funding will result in : Increased room nights from current to 8 500 An increase on EBITDA margin from the current 8% to about 33%. Significant surges in Revenues • Funds are also required for the refurbishment of Zimbabwean properties
  37. 37. OUTLOOK: 2010 FIFA WORLD CUP • The hosting of the 2010 Soccer World Cup by South Africa will result in a number of benefits to our South African Hotels as well as indirectly to Zimbabwe. • Rooms demand for the 2010 FIFA World Cup projected at 50 000 rooms • To date FIFA has signed deals for 31 926 rooms representing 64% of the total rooms required. • This creates a deficit of 18 074 rooms. • A simple analogy to the benefits that accrued to Germany for hosting the 2006 FIFA World Cup: • Growth in the tourist industry was 3% above the world average • Growth in inbound tourist arrivals was still experienced in 2007 after the World Cup. • Germany is now perceived as a safe destination after successfully hosting the 2006 FIFA World Cup
  38. 38. OUTLOOK: 2010 FIFA WORLD CUP • Event will act as a stimulus for national branding of Zimbabwe as a destination • Opportunity to reach new distribution channels through new tour operators including MATCH • Opportunity to create new packages that will be sold through the Soccer bodies in the qualifying countries – trickle down effects to entourages that travel with the teams • Teams are only allowed in South Africa 10 days before kick off – Opportunity for Zimbabwe to be used as a venue for acclimatisation • Opportunities for future plans to market Zimbabwe as a destination beyond 2010 to qualifying countries and others
  39. 39. OUTLOOK: PIPELINE OPENINGS The Kingdom, Lagos
  40. 40. OUTLOOK DIVIDEND DECLARATION • In light of the current operating environment, the company’s subdued performance and the need to conserve cash, the Board has resolved not to declare an interim dividend.

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