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Abridged Pre-listing Statement of Tsogo Sun Hotels Limited
Tsogo Sun Hotels Limited
(previously known as Southern Sun Hotels Proprietary Limited)
Incorporated in the Republic of South Africa
Registration Number 2002/006356/06
Share code: TGO ISIN: ZAE000272522
(“THL”)
ABRIDGED PRE-LISTING STATEMENT OF THL RELATING TO THE LISTING OF THL ON THE
MAIN BOARD OF THE JSE LIMITED
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT
LAWS OF SUCH JURISDICTION OR REQUIRE FURTHER ACTION FOR SUCH PURPOSE.
1. INTRODUCTION
This announcement should be read together with the announcement released by Tsogo Sun
Holdings Limited (“Tsogo Sun”) on SENS on Thursday, 23 May 2019 in relation to the proposed
unbundling (“Unbundling”) of Tsogo Sun’s hotel interests under one holding company (being THL)
and the listing of THL (“Listing”) in the “Hotels” sector on the Main Board of the securities
exchange operated by the JSE Limited (“JSE”).
The information contained in this Abridged Pre-listing Statement (“Abridged Pre-listing
Statement”) has been extracted, in summarised form, from the Pre-listing Statement issued by
THL on Thursday, 23 May 2019 (“Pre-listing Statement”). This Abridged Pre-listing Statement is
not a complete Pre-listing Statement and does not contain all the information that investors should
consider in relation to the Listing and Unbundling.
This Abridged Pre-listing Statement is not an invitation to subscribe for shares in THL, but is issued
in compliance with the Listings Requirements of the JSE (“Listings Requirements”) for the
purpose of providing information to the public with regard to the business and affairs of THL as at
the time of the Listing.
Capitalised words and expressions used in this announcement bear the same meaning as the
capitalised and defined words and expressions used in the Pre-listing Statement.
2. RATIONALE FOR THE UNBUNDLING AND LISTING OF THL
The hotels division of Tsogo Sun service a different customer base to the casinos division and are
subject to different demand and risk profiles, particularly in the regulatory sphere. The Tsogo Sun
Board is of the view that the separate listing of hotels and the unbundling of the hotel business to
Tsogo Sun Shareholders should unlock value for Tsogo Sun Shareholders.
3. OVERVIEW, STRATEGY AND FINANCIAL INFORMATION
3.1 Overview of THL
THL owns, leases and manages hotels in South Africa as well as several sub-Saharan
countries, the Seychelles and Abu Dhabi. The Tsogo Sun Group’s 59.2% interest in Hospitality
Property Fund Limited (“HPF”) held by THL will remain owned and consolidated by THL. THL
will also hold the Tsogo Sun Group’s minority investment in RBH Hotels UK Limited (“RBH”)
and International Hotel Properties Limited (“IHPL”), based in the United Kingdom. The hotels
that have been developed as part of the various casino complexes owned by the Tsogo Sun
Group will remain with Tsogo Sun but will be operated under a management agreement by
THL.
The THL Group today consists of a portfolio of 110 hotels of which 98 are internally managed
and 12 properties owned by HPF are leased to and operated by third party operators outside
of the THL Group, with a combined total of nearly 19,000 rooms.
THL’s key investment highlights include:
• a fully integrated business model across the hotels and leisure industries;
• a leading position in South Africa and a selective international presence; and
• a defined growth trajectory through organic portfolio optimisation and innovation, as
well as through well thought-out acquisitions in attractive geographies.
3.2 Strategy
The largest potential growth driver for the hotel business is a recovery of economic growth in
the economies in which the THL Group operates. This will lead to additional demand for
accommodation from business and leisure travellers and the opportunity to meaningfully
increase room rates and consequently, EBITDAR performance.
In addition, the THL Group seeks to access new hotel opportunities through a variety of
management contracts, new builds (on its own or via joint ventures), primarily within the
markets that the THL Group already operates.
3.3 Risks
Whilst hotels are free of the regulatory risks associated with gaming, there are a number of
risks prevalent in the industry. The three key risks over and above the economic environment
are highlighted below:
• Management contracts and leases introduce an element of security of tenure risk to the
THL Group’s portfolio. There is no guarantee that contracts will be renewed on similar
terms and conditions, if at all. Third-party owners may wish to try alternative operators
and many of the international branded groups are seeking a representation in South
Africa at almost any cost. The THL Group nonetheless seeks to defend and expand its
operations in all relevant markets.
• Administered costs have seen a sustained above-inflation increase over the past
number of years. These include property rates and the cost of heat, light and power.
Whilst the THL Group has undertaken numerous steps to reduce its electricity and
water consumption through employing efficient operating methodologies, the price per
unit of these utilities have increased dramatically and are worsened through the
requirement to fund generating capacity (diesel generators) during load shedding.
Municipalities have come under increasing pressure to raise independent funding and
this has led to substantially higher property rates being imposed on the THL Group’s
portfolio.
• There are low barriers to entry to the hotel market and a number of developers have
built hotels that the THL Group believes are unviable. Nevertheless, they get built and
this introduces an over-supply situation in various markets from time to time. Whilst
these hotels inevitably experience financial distress, the room stock, once built, does
not exit the market and it can take a substantial period of time for demand to catch up
to supply.
3.4 Selected financial information
The summarised information set out in the tables below have been extracted from the Historical
Financial Information of THL and have been reported on by the Company’s auditors,
PricewaterhouseCoopers Inc. Please refer to Annexure 1 of the Pre-listing Statement for the
full information, including a reconciliation of headline earnings and adjusted headline earning.
Summarised statement of profit or loss
(ZAR’m) Audited Reviewed Reviewed
FY2019 FY2018 FY2017
Revenue 4 389 4 364 4 143
Operating profit 392 1 803
898
(Loss)/profit before income tax (10) 1 437
472
Income tax expense (70) (21)
188
(Loss)/profit for the year (80) 1 416
661
(Loss)/profit attributable to:
Equity holders of the company (98) 495 890
Non-controlling interests 18 526
166
Headline earnings 245 390
592
Adjusted headline earnings (1) 277 369
337
EBITDAR (pre-exceptional items) 1 491 1 465
1 590
(1) The pro forma adjusted headline earning for the THL Group is R403 million for the year ended
31 March 2019 as set out in 3.5 below. The total pro forma adjustments amount to R126 million
after tax and include a reduction in net finance costs of R134 million, an increase in net
corporate recharge costs of R2 million and an increase in net IFRS2 share based payment
costs of R6 million.
Summarised statement of financial position
(ZAR’m) Audited Reviewed Reviewed
FY2019 FY2018 FY2017
Property, plant and equipment 7 684 7 462 7 621
Investment properties 4 881 5 101 4 843
Goodwill and intangible assets 404 396 393
Investment in associates and joint ventures 608 605 572
Non-current assets 99 150 175
Total assets 13 676 13 714 13 604
Net working capital 295 277 383
Net interest-bearing borrowings 2 963 2 684 3 665
Other non-current liabilities 488 3 343 3 590
Total shareholders’ equity 6 990 4 202 3 407
Non-controlling interests 2 939 3 209 2 559
Total equity and liabilities 13 676 13 714 13 604
The segmental analysis for FY2019, FY2018 and FY 2017
Income EBITDAR 1 EBITDAR margin (%)
(ZAR’m) 2019 2018 2017 2019 2018 2017 2019 2018 2017
Manco 289 286 209 155 168 115 53.8 58.9 55.1
Rental Income - 347 402 299 347 402 299 100.0 100.0 100.0
HPF
Internally 3 329 3 295 3 084 845 900 944 25.3 27.3 30.6
Managed
Coastal 1 907 1 902 1 735 497 536 578 26.0 28.2 33.3
Inland 1 150 1 124 1 090 254 263 268 22.0 23.4 24.6
Other 272 269 259 94 101 98 34.5 37.5 38.0
Offshore 605 565 634 144 120 107 23.9 21.2 16.9
Elimination of (181) (183) (83)
internal
management
fees
Total 4 389 4 364 4 143 1 491 1 590 1 465 33.9 36.4 35.3
1 Pre long-term incentives
3.5 Pro Forma Financial Information
The Pro Forma Financial Information presented below has been prepared for illustrative
purposes only and because of its nature may not fairly present the THL Group’s consolidated
financial position and consolidated results of operations.
The Pro forma Financial Information is based on the audited historical consolidated financial
information of the THL Group prior to the Listing and Unbundling as at and for the year ended
31 March 2019 as set out in Annexure 1 of the Pre-listing Statement.
The Pro forma Financial Information has been prepared using the accounting policies of THL
Group which comply with IFRS and are consistent with those applied in the Historical Financial
Information.
Before Pro Forma After % Change
the Listing and
Unbundling
EBITDAR (ZAR’m) (1) 1 491 1 488 (0.2)
Adjusted headline earnings (ZAR’m) 277 403 45.5
Per THL share
EPS (cents) (450.4) 2.6 100.6
Diluted EPS (cents) (450.4) 2.6 100.6
HEPS (cents) 1 126.1 34.8 (96.9)
Diluted HEPS (cents) 1 126.1 34.8 (96.9)
Adjusted HEPS (cents) 1 273.1 37.9 (97.0)
NAV (cents) 658.9 662.0 0.5
TNAV (cents) 635.9 639.0 0.5
Number of THL Shares in issue (m) 1 060.9 1 060.9
Weighted number of THL Shares in 21.8 1 060.9
issue (m)
Diluted weighted number of THL 21.8 1 064.3
Shares in issue (m)
(1) Pre long-term incentives
Notes:
1) The “Before” column sets out the EPS, diluted EPS, HEPS, adjusted HEPS, diluted HEPS,
NAV and TNAV per THL Group share as extracted from the Historical Financial Information
of the THL Group for the year ended 31 March 2019.
2) The “After the Listing and Unbundling” column sets out the EPS, diluted HEPS, HEPS,
adjusted HEPS, diluted EPS, NAV and TNAV per THL Group share assuming that the
Listing and Unbundling took place with effect from 1 April 2018 for pro forma consolidated
income statement purposes and 31 March 2019 for pro forma consolidated balance sheet
purposes.
3) Detailed notes to the pro forma financial effects are included with the pro forma income
statement and balance sheet presented in Annexure 3 of the Pre-listing Statement.
4. LISTING ON THE JSE
The JSE has agreed to the listing of the entire issued share capital of THL in the “Hotels” sector
on the Main Board of the JSE under the abbreviated name “THL”, share code “TGO” and ISIN
ZAE000272522 with effect from the commencement of business on Wednesday, 12 June 2019
(“Listing Date”).
5. UNBUNDLING
In terms of the Unbundling, Tsogo Sun will distribute its entire holding of THL Shares to its
shareholders as a distribution in specie in the ratio of one THL Share for every Tsogo Sun Share
held on the Unbundling Record Date, being 14 June 2019.
6. SHARE CAPITAL
As at the Listing Date, the authorised share capital of THL, will be 2 000 000 000 ordinary no par
value shares and as at the date of the Unbundling the issued share capital of THL will be 1 060 895
712 ordinary no par value shares. THL will have a stated capital of R4.6 billion.
All the ordinary shares in THL rank pari passu in all respects (there being no conversion or
exchange rights attaching thereto) and have equal rights to participate in capital, dividend and
profit distributions by THL.
7. THL DIRECTORS
The details of the executive directors of THL are provided below:
Name and Age Position Business Address Nationality
Qualifications
John Anthony Copelyn 68 Non-Executive Suite 801, 76 Regent South African
BA (Hons), BProc Chairman Road, Sea Point, Cape
Town, 8005
Marcel Nikolaus von 45 Chief Executive Palazzo Towers West, South African
Aulock Officer Montecasino Boulevard,
CA(SA) Fourways, Gauteng,
2055
Laurelle McDonald 36 Chief Financial Palazzo Towers West, South African
CA(SA) Officer Montecasino Boulevard,
Fourways, Gauteng,
2055
Mohamed Haroun 55 Lead Independent Palazzo Towers West, South African
Ahmed Non-Executive Montecasino Boulevard,
BCom (Accounting) Director Fourways, Gauteng,
2055
Sipho Christopher Gina 60 Independent Non- Palazzo Towers West, South African
Bachelor of Arts, MBA Executive Director Montecasino Boulevard,
Fourways, Gauteng,
2055
Moretlo Lynette Molefi 50 Independent Non- Palazzo Towers West, South African
B.Sc., MBChB Executive Director Montecasino Boulevard,
Fourways, Gauteng,
2055
Jabulani Geffrey 67 Independent Non- Palazzo Towers West, South African
Ngcobo Executive Director Montecasino Boulevard,
Fourways, Gauteng,
2055
James Robert Nicolella 50 Non-Executive Suite 801, 76 Regent South African
CA(SA), PLD Director Road, Sea Point, Cape
Town, 8005
8. THL SHARE INCENTIVE SCHEME
THL has adopted a share incentive scheme, namely the THL Share Appreciation Rights Plan (“THL
SAR Plan”), in which selected key senior employees of the THL Group are eligible to participate
with the goal to incentivise, motivate and retain these high calibre employees and recognise their
contributions to the THL Group.
The purpose of the THL SAR Plan is to provide awards of share appreciation rights to receive THL
Shares (“SARs”) equal to the increase in value of a certain number of THL Shares between the
award date and the exercise date of the SARs. The exercise price will be adjusted to take account
of dividends paid, as further explained in the Pre-listing Statement. The vesting of the SARs will
take place after 3 years, will be subject to continued employment and may be subject to
performance conditions. The THL SAR Plan makes provision for two types of awards, namely new
awards to assist in incentivising and retaining employees in the THL Group and replacement
awards.
Replacement awards are provided for as a result of the right provided to employees of the THL
Group on Unbundling to elect to exchange their rights held under the Tsogo Sun Long Term
Incentive Scheme for replacement awards under the THL SAR Plan. Going forward the
replacement awards will be regulated by the THL SAR Plan. The salient features of the THL SAR
Plan are set out in the Pre-listing Statement.
9. RECEIPT OF THL SHARES PURSUANT TO THE UNBUNDLING
A Tsogo Sun Shareholder holding Certificated Shares should pay special attention to the
provisions of the following paragraph.
For the purposes of the Unbundling, Tsogo Sun Shareholders will receive their THL Shares
pursuant to their respective Unbundling Entitlements in dematerialised form only. Accordingly, all
Certificated Shareholders must appoint a CSDP under the terms of the Financial Markets Act,
directly or through a Broker, to receive the dematerialised THL Shares on their behalf. Should a
Certificated Shareholder not appoint a CSDP under the terms of the Financial Markets Act, directly
or through a Broker, to receive THL Shares on such shareholder’s behalf, such shareholder will be
issued with a statement of allocation representing his THL Shares by the Transfer Secretaries.
Certificated THL Shareholders can instruct the Transfer Secretaries to transfer their THL Shares
represented by the statement of allocation to their appointed CSDP or can instruct the Transfer
Secretaries to issue them with a share certificate at any time post Unbundling. There are risks
associated with holding shares in Certificated form, including the risk of loss of or tainted scrip,
which is no longer covered by the JSE Guarantee Fund.
All THL Shareholders who elect to convert their Dematerialised THL Shares into Certificated THL
Shares will have to Dematerialise their Certificated THL Shares should they wish to trade them in
accordance with the rules of Strate.
Further details of the action to be taken in this regard is set out in the Pre-listing Statement.
10. SALIENT DATES RELATING TO THE UNBUNDLING AND LISTING
The salient dates relating to the Unbundling and the Listing are set out below:
2019
Abridged Pre-listing Statement published on SENS, on Thursday, 23 May
Pre-listing Statement made available to Tsogo Sun Shareholders at Thursday, 23 May
www.tsogosun.com/investors, on
Pre-listing Statement posted to Tsogo Sun Shareholders, on Monday, 27 May
Publication of finalisation information, on Tuesday, 4 June
Last day for certificated Tsogo Sun Shareholders to appoint a CSDP in Monday, 10 June
order to receive the THL Shares pursuant to the Unbundling on the
Settlement Date
Last day to trade for Tsogo Sun Shareholders to be entitled to Tuesday, 11 June
participate in the Unbundling
Listing of THL Shares on the JSE under the share code TGO and ISIN Wednesday, 12 June
ZAE000272522 expected at commencement of trade, on
Tsogo Sun Shares commence trading “ex” their entitlement to THL Wednesday, 12 June
Shares, on
Details of apportionment ratio released on SENS by 11h00, on Thursday, 13 June
Record Date for the Unbundling and issue of share certificates to Friday, 14 June
Certificated Shareholders
Accounts at CSDPs / Brokers updated on (Settlement Date) Tuesday, 18 June
Notes:
1. These dates and times are subject to change. Any material changes to the above dates will be
released on SENS and published in the South African press.
2. All times shown above are South African times.
3. Tsogo Sun Shares may not be Dematerialised or rematerialised between Wednesday, 12 June
2019 and Friday, 14 June 2019, both days inclusive.
4. Tsogo Sun Shareholders who trade Tsogo Sun Shares from Wednesday, 12 June 2019, trade
“ex” their entitlement to THL Shares.
5. All Certificated Shareholders must appoint a CSDP under the terms of the Financial Markets
Act, directly or through a Broker, by no later than Monday, 10 June 2019 to receive THL Shares
pursuant to the Unbundling on the Settlement Date.
11. FOREIGN SHAREHOLDERS
No action has been taken by Tsogo Sun or THL to obtain any approval, authorisation or exemption
to permit the distribution of the THL Shares or the possession or distribution of the Pre-listing
Statement (or any other publicity material relating to the THL Shares) in any jurisdictions other than
South Africa.
Tsogo Sun Shareholders in terms of the Unbundling who have registered addresses outside South
Africa and/or who are nationals, citizens or residents of countries other than South Africa (“Foreign
Shareholders”) or who are persons (including, without limitation, custodians, nominees and
trustees) who have a contractual or legal obligation to forward the Pre-listing Statement to a
jurisdiction outside South Africa, or who hold Tsogo Sun Shares for the account or benefit of any
such Foreign Shareholder and will therefore hold THL Shares in a similar manner and hence may
have an impact on Tsogo Sun Shareholders.
Foreign Shareholders are referred to the Pre-listing Statement for further detail regarding treatment
of Foreign Shareholders in connection with the Listing and Unbundling.
12. COPIES OF THE PRE-LISTING STATEMENT
Copies of the Pre-listing Statement may be obtained during normal business hours from Friday,
24 May 2019 from THL’s registered office at Palazzo Towers East, Montecasino Boulevard,
Fourways, Johannesburg and from the offices of the Financial advisor and sponsor, The Standard
Bank of South Africa Limited, at 30 Baker Street, Rosebank, Johannesburg. Copies of the Pre-
listing Statement will furthermore be available on the Tsogo Sun and THL websites at
www.tsogosun.com/gaming/investors and www.tsogosun.com/investors, respectively from 10:00
on Thursday, 23 May 2019.
Johannesburg
23 May 2019
Financial advisor and sponsor
The Standard Bank of South Africa Limited
Corporate law advisors
Taback and Associates Proprietary Limited
Independent reporting accountants and auditors
PricewaterhouseCoopers Inc.
Tax advisors
PricewaterhouseCoopers Inc.
Independent property valuer
Excellerate Real Estate Services Proprietary Limited (trading as JHI)
8
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