ANALYST BRIEFING
WEDNESDAY 3 DECEMBER
2008
GLOBAL TOURISM TRENDS
• Growth in global tourism for the first eight months of 2008 averaged a
3,7% compared to the same period last year. Annual growth in arrivals
globally is projected to be 3% compared to 3.9% in2007.
• The Middle East, Africa and Asia Pacific experienced higher growth rates at
5.2%, 5.9% and 5.7% respectively
• Mature markets, notably Europe and Americas falling behind at 2.3 % and
2.1% respectively.
• Asia and the Pacific’s growth of 5.7% was well behind its 2007 level, with
Oceania and North-East Asia suffering the brunt of the downturn in
demand.
• Source: UNWTO / World Travel & Tourism Council (WTTC)
GLOBAL TOURISM TRENDS
CONT’D
• The slow down in tourism growth is attributed to the uncertainty over that
global economic outlook driven mainly by the :
• current global financial crisis
• Rising food prices
• Currency fluctuations
• Climate change fears
• Continued economic expansion in emerging markets such as China, India
and Brazil should assist in mitigating impact of the slowdown
GLOBAL ECONOMIC SLOWDOWN
IMPLICATIONS
• Traffic to closer destinations, including domestic travel, is expected to be
favored as compared to long-haul travel.
• The decline in average length of stay as well as on expenditure is projected
to be more pronounced than in the overall volume.
• Price is becoming a key issue and destinations offering value for money
and with favorable exchange rates will have an advantage.
• Companies will concentrate on containment of cost in order to keep their
competitive edge thereby cutting back on business travel.
• Source: UNWTO / World Travel & Tourism Council (WTTC)
ARRIVAL TRENDS INTO ZIMBABWE
● Foreign arrivals into the country decreased by 58% compared to growth
trend experienced in the previous period.
● Foreign arrivals into African Sun hotels marginally declined by 15%,
resulting in a decrease in room nights of 6%.
● The country continued to experience negative publicity and travel
warnings due to the political impasse existing in the country. The credit
crunch also had an impact on travel which resulted in decline in arrivals
into Zimbabwe.
ARRIVAL TRENDS INTO AFRICAN
SUN HOTELS ZIMBABWE
COUNTRY
%
INCREASE
COUNTRY
%
% DECREASE
INCREASE COUNTRY
India
202%
Czech
Republic
28%
South
America
94%
Russia
111%
France
21%
Australia
24%
Taiwan
100%
Malawi
18%
Germany
19%
Japan
80%
USA
13%
United
kingdom
14%
Italy
59%
Canada
9%
Namibia
8%
ARRIVAL TRENDS INTO SOUTH
AFRICA
● The total arrivals growth slowed in the first eight months of the year from
11.9 percent in January to 6.3 percent in August.
● 75 percent of the visitors who came to South Africa in the first eight
months were from African land and air markets.
● Contribution to group turnover from South Africa Operations increased to
27% compared to 15% in the prior year. This increase was due to
increases in ADR of The Grace from USD $ 104 in 2007 to USD $ 142 in the
current year.
ARRIVAL TRENDS INTO NIGERIA
● Foreign arrivals into the Nigeria for 2008 expected to grow by 6%
compared to the year 2007.
● Nigeria’s economy benefited from high oil prices experienced in the first
half of 2008 and the resultant economic growth has translated directly
into increased hotel rates and occupancies.
● ASL assumed management of Obudu Mountain Resort, a leading leisure
facility in Cross River State in May 2008, with a mandate to restore the
resort to its full operational potential based on the hospitality expertise
and management given ASL
ARRIVAL TRENDS INTO GHANA
● Foreign arrivals into Ghana are expected to grow to 1,125,720 for the year
2008 from 1 062 000 in 2007. This is a 6% growth.
● Since the take over of Holiday Inn Accra by ASL in August 2008, the unit
has seen an average growth of 3% per month in occupancy.
● The hotel achieved REVPAR of US$124, 11% ahead of its competitive set
STRATEGIC GOALS
1. To grow rooms in Africa under African Sun management from the current
2,500 to 8,500 by 2012
2. To become an employer of choice by providing competitive remuneration,
an enabling and winning environment driven by personal learning and
development
3. To achieve a market capitalization of USD1billion
4. To establish brand leadership where we dominate other brands and
become the benchmark for other players
5. To seek a dual listing on a major bourse by 2012
PROGRESS ON STRATEGIC GOALS:
CAPACITY GROWTH
REGIONAL
LOCAL
• Amber Beitbridge – 200 rooms
• 8500 rooms targeted by 2012
Since July 2008 the following
hotels have been added to the
Group’s portfolio:
– Amber Tinapa – 243 rooms
– Holiday Inn Accra Airport168 rooms
– Utanga Lodge – 90 rooms
– Nike Resort Enugu –
245 Rooms
PIPELINE PROJECTS- ZIMBABWE
VS REST OF AFRICA
14,000
12,000
10,000
9,540
8,000
10,269
10,269
ROA
Zimbabwe
6,000
4,000
3,260
1,090
2,000
3,003
1,871
3,103
3,403
1,911
2008
2009
2010
2011
2012
PIPELINE PROJECTS
Projected openings for 2012:
•
Regional contributions will be as follows:
•
West Africa
35%
•
East Africa
7%
•
Southern Africa
33% (excluding Zimbabwe)
•
Zimbabwe
25%
PROGRESS ON STRATEGIC GOALS:
HR AND HTA UPDATE
• Role and Brand Profiling
• HTA Regional Growth Support Programme – HTA will constitute an integral
part of pre-opening teams to ensure that gap between new unit and the
African Sun Way of doing things is closed
• Development of Hospitality Training Academy Nigeria in 2009
• HTA on Existing Projects – HTA to focus on Service Revitalization
Programmes group wide through strategic alliances with industry leaders
in training such as Cornell University, Swiss Hotel School etc. Attention will
be paid to:
• Service Culture
• Quality Control
• How May I Serve You 2
• People and Brand Measurement
PROGRESS ON STRATEGIC GOALS:
BRAND LEADERSHIP
•
Introduction of own Mid Range Brand – Amber to both local and regional
market:
1. Amber Beitbridge
2. Amber Tinapa (Nigeria)
•
Expansion of Intercontinental Hotel Group (IHG) properties
1. Holiday Inn Accra Airport – performed 11% ahead of its peers in
its competitive set in the first few months of opening
PROGRESS ON STRATEGIC GOALS:
MARKET CAPITALIZATION
• Research conducted by Renaissance Capital Research has valued ASL at
US$0.54 per share (Market Capitalization of US$389 million compared to
the current US$114 million) assuming a confirmed rooms of 3500
including the existing rooms.
• According to this research, and taking into account the target of 8500
rooms, ASL value grows to US$762 million
FINANCIAL PERFORMANCE
ZIMBABWE
THE ZIMBABWEAN STORY
450,000
400,000
350,000
300,000
250,000
285,818
268,077
200,000
Local roomnights
344,156
150,000
215,211
248,970
245,505
186,174
188,292
210,937
57,000
57,000
63,000
53,000
2005
2006
2007
2008
155,697
100,000
50,000
111,000
88,000
1998
103,454
1999
32,000
30,000
22,000
17,000
19,000
2000
2001
2002
2003
2004
Foreign roomnights
TREND IN OCCUPANCIES AND MIX
12 MONTHS TO 30
SEPTEMBER 2008
12 MONTHS TO 31
SEPTEMBER 2007
Average Occupancy
41%
39%
Foreign Mix
(% of total rooms sold)
27%
34%
Contribution of foreign
revenue to total revenue
93%
51%
Average Daily Rate
USD 23
USD40
Revenue Per available
room night
USD 9
USD16
YIELD COMPARISON
•
•
•
•
•
Price controls in the financial year had ASL Zimbabwe reporting an ADR
of US$23 and a Revpar of US$9
From 12 October 2008, Zimbabwe hotel prices are denominated in US$ ,
this has resulted in the ADR coming up to US$77.
Looking forward- ASL Zimbabwe's ADR target is USD 80 with a REVPAR of
US$40.
Improvements are in line with South African benchmarks which are
US$ 116 ADR and US$85 Revpar.
Ideally our prices should be ahead of South African prices as our cost
structures are now 32% above South African costs.
SHIFT IN COST OF DOING
BUSINESS
• The cost of doing business in Zimbabwe has shifted in real terms . Inherent
features of the Zimbabwe business environment entail:
•
•
•
•
Price escalations in US dollar terms for food and basic commodities
Dynamic changes to modes of trading and payment systems
Spiraling rates of exchange and currency depreciation
An upturn in the demand for imported brands and the emergence of
middlemen
• Local commodity prices becoming increasingly less competitive than
those obtained in the region
PROCUREMENT ANALYSIS:
Price Trends For Strategic Commodities
100.00
90.00
80.00
Flour 50 kg
70.00
Rice 50kg
Cooking Oil 25lt
Sugar 50kg
60.00
Eggs 10tray
2 Ply Tissues 48 rolls
50.00
1 Ply Tissues 48 rolls
Mealie meal 50kg
40.00
Beef 10kg
Chickens 10kg
30.00
Bacon 10kg
Ham 10kg
Shampoo/body cream tube 30mlx 100
20.00
10.00
Jun-07
Feb-08
Current
PROCUREMENT ANALYSIS:
Price Trends For Strategic
Commodities
• The Graph illustrates the rate at which prices are escalating in US dollar
terms for strategic commodities.
• Actual cost of doing business has shifted upwards by 87% in Zimbabwe.
• An overall comparison of major expense line items indicated that landed
South African prices are at least 32% lower than Zimbabwean prices.
MITIGATING TACTICS
• ASL initiatives to counteract threats
•In order for African Sun to obtain leverage against the
challenges posed by the shift in the business model, the
Group will undertake the following initiatives:
Item
Strategy
1.
Embark on improved supply chain management
through strategic alliances and backward integration
2.
Adopt hybrid procurement model for imports and local
purchases premised on price competitiveness, supply
consistency and quality standards
3.
Close monitoring and surveillance of price
competitiveness through commodity and pricing
intelligence at hotel units
REST OF AFRICA
SUMMARY PERFORMANCE
Country
REVPAR
ADR
OCCUPANCY
USD
USD
USD
ZIMBABWE
9
23
41%
CURRENT
SOUTH AFRICA
63
106
59%
CURRENT
NIGERIA
12
120
60%
CURRENT
GHANA
124
193
64%
CURRENT
BENCHMARKS
98
140
70%
FUTURE
•South Africa Contributed 27% to total revenues up from 15% in prior year
•The impact of other regional operations will be felt in the coming year.
GROUP PERFORMANCE
PERFORMANCE METRICS
INCOME STATEMENT
2008
US$
REVENUE
OPERATING COSTS
2007
US$
26,318,780
21,614,000
(12,187,706)
(13,525,000)
%
change
21.77
(9.89)
PROFIT BEFORE TAXATION
14,066,544
7,956,000
76.80
NET PROFIT
10,645,165
7,953,000
33.85
OCCUPANCY
41%
40%
1%
EBDITA Margin
54%
37%
45%
•Increase in revenues of 21% is as a result of increase in room nights
contributed as follows: The Lakes: 151 rooms, Obudu and Holiday Inn
Accra management fees.
•The group employed various cost containment measures and strategies
which ensured that operating costs decreased by 9% compared to the
prior period. This significantly increased profit before tax and net profit.
PERFORMANCE METRICS
BALANCE SHEET
ASSETS
2008
US$
2007
US$
%
change
Non current assets
Current assets
32,600,596
6,377,563
27,641,526
4,261,234
17.94
49.66
Total assets
38,978,159
31,902,760
22.18
Equity
Liabilities
33,243,677
5,734,483
22,451,679
9,451,081
48.07
(39.32)
Equity and liabilities
38,978,160
31,902,760
22.18
•During the year non current assets were revalued by an independent valuer.
This affected the revaluation reserve hence an increase of 48%.
•Current assets increased significantly because of cash reserves of US $ 2
million (2007: US$ 1 million)
OUTLOOK
•
Funding
–
Negotiations underway to raise hard currency capital primarily to
fund the various hotel projects in the pipeline and refurbish
Zimbabwe properties
OUTLOOK
•
Growth
– Group continues to intensify expansion drive into Africa with a target
to increase for current 2500 to 8500 by 2012
– Group’s expansion strategy has witnessed the following additions to
the portfolio:
•
The Grace In Rosebank, 2004
•
The Lakes Hotel & Conference Centre, April 2008
•
Obudu Mountain Resort, Nigeria, May 2008
•
Holiday Inn Accra Airport, August 2008
OUTLOOK
CONT’D •
•
Management of the following in Nigeria commenced on 1 December
2008:
•
Nike Resort, Enugu, Nigeria – 215 Rooms
•
Hotel Tinapa, Calabar, Nigeria – 243 Rooms
•
Utanga Lodge, Cross River State, Nigeria – 90 Rooms
Additional 2009 Pipeline Projects approaching completion include:
•
Holiday Inn, Kano, Nigeria – 200 Rooms
•
Holiday Inn Arusha, Tanzania – 198 Rooms
•
Mongomo Hotel, Bata, Equatorial Guinea – 74 Rooms
•
Hotel 3 Augusto, Malabo, Equatorial Guinea – 45 Rooms
UPCOMING
OPENINGS
Holiday Inn Gaborone, Botswana
Holiday Inn Arusha, Tanzania
Chundu River Lodge,
Livingstone, Zambia
Amber Beitbridge
Holiday Inn Rustenburg, South Africa
OUTLOOK
CONT’D
•
Dividend Declaration
– Board of Directors declared a final dividend of Z$229.72c per share
– Dividend will be payable to shareholders in Zimbabwe Dollars on 11
February 2009
– Shareholders will be able to elect to receive a dividend wholly in
cash or take a scrip dividend in the form of ordinary shares
– All shareholders who fail to return their form of election by the set
deadline will receive their dividend in scrip