ANALYSTS BRIEFINGANALYSTS BRIEFINGTuesday 24 June 2008Tuesday 24 June 2008

“From survival to growth”

GLOBAL TOURISM TRENDS

• Growth in global tourism retreated to 3% from 3.9% in the previous period. This was as a result of the slowdown in the USA economy, high fuel costs and a weaker US dollar.

• Europe and America fell below global average growth to 2.1% and 2.3% respectively.

• The Middle East, Asia & the Pacific and Africa experienced higher than average growth of 5.2%, 5,7% and 5.7% respectively.

• Continued strong expansion of emerging markets such as China, India, S. Korea and Brazil indicate that global tourism prospects remain encouraging in the medium term.

Source: UNWTO / World Travel & Tourism Council (WTTC)

ARRIVAL TRENDS INTO SOUTH AFRICA

● Tourist arrivals into South Africa increased significantly by 8.3% reaching the 9 million mark for the first time in the country’s history.

● SA tourism outgrew global tourism and prospects continue to be very promising.

● In the air markets the biggest rise was seen in visits from Asia and India recording increases of 12.9% and 16.9% respectively.

● Land arrivals from SADC countries have accounted for the majority of the arrivals since 2002 and have continued to show additional growth.

● Nigerian arrivals increased by 12.3%, Kenya by 14.7% and Angola by 10.2%.

Source: UNWTO / World Travel & Tourism Council (WTTC)

ARRIVAL TRENDS INTO ZIMBABWE

● Foreign arrivals into the country decreased by 47% compared to growth trend experienced in the previous period.

● Foreign arrivals into African Sun hotels marginally declined by 6%.

● Upon resolution of the current stalemate, tourism into the country is expected to rebound in keeping with the sub-region.

ARRIVAL TRENDS INTO AFRICAN SUN HOTELS ZIMBABWE

COUNTRY%

INCREASE COUNTRY%

INCREASE COUNTRY%

DECREASE

USA 7% Canada 51% Malaysia 97%

Australia 3% Italy 173% South America

86%

Russia 542% China 39% Indonesia 84%

South Korea 30% Malawi 300% Greece 32%

Botswana 42% DRC 100% New Zealand

23%

STRATEGIC OBJECTIVES

STRATEGIC OBJECTIVES

1. To grow rooms under management in Sub Saharan Africa to 4 000 in five years.

2. To build and maintain human capital through:i) training

ii) development

iii) alignment

iv) retention

3. To list African Sun Limited on a regional bourse in the next three years.

4. To grow ASL value to US$1 billion.

5. To build brand leadership.

CAPACITY GROWTH: OPERATIONS

LOCAL

● The Group is targeting to double rooms in Zimbabwe by the end of 2012.

● To date 487 rooms have been secured for 2009/2010 and an additional 1392 are in the pipeline.

● Fothergill Island – 36 lodges undergoing refurbishment, soft opening expected 1 July 2008.

REGIONAL

● 4000 rooms targeted for regional expansion by 2012.

● As at March 31 the following hotels have been added to the Group’s portfolio:

▪ The Lakes, Benoni, Johannesburg

▪ Obudu Country Resort, Nigeria

THE LAKES – SOUTH AFRICA

OBUDU COUNTRY RESORT - NIGERIA

POTENTIAL CATEGORY SUMMARY PER YEAR

  2008     2009     2010     2011     2012  

Category Local & Regional

Local

Regional

Sub Total

Local Regional Sub-Total Local Regional Sub-Total Local Regional Sub-Total Local Regional

Sub-Total

                               

A Existing 1,856 387 2,243 1,856 387 2,243 2,016 387 2,4032,01

6 387 2,4032,01

6 387 2,403

B Acquisition 0 243 243 0 243 243 0 243 243 0 243 243 0 243 243

C Secured 15 193 208 15 1,850 1,865 487 2,058 2,545 487 2,160 2,647 487 2,160 2,647

D Pipeline 0 72 72 232 3,652 3,884 432 5,848 6,280 992 6,418 7,4101,39

2 6,668 8,060

Total Rooms 1,871 895 2,766 2,103 6,132 8,235 2,935 8,536 11,4713,49

5 9,208 12,7033,89

5 9,458 13,353

Contribution % 68% 32% 100% 26% 74% 100% 26% 74% 100% 28% 72% 100% 29% 71% 100%

HUMAN CAPITALHUMAN CAPITAL

HUMAN CAPITAL

● At least 80% of staff have gone through training in various disciplines. These include in-house and structured courses affiliated with local tertiary institutions listed below:▪ Deputy General Management Programme 8 ▪ Graduate Development Programme 24 ▪ Advanced Hotel Management Diploma 9▪ HND Hotel & Tourism Management 9 ▪ Management Development Programme 10 ▪ Supervisory Development Programme 9 ▪ Apprentice Cooks 75 ▪ Technical Apprentices 24▪ Housekeeping, Front Office, F&B 36

The Group aims to develop and maintain the highest quality of skills for Zimbabwe and the region.

HUMAN CAPITAL

● Average length of service stands at 7 years throughout whilst average age is 35 years indicating:

▪ High degree of employment stability;▪ Experienced and trained staff;▪ Capacity to drive regional expansion.

● Staff turnover was 19% in the last 12 months to 31 March 2008, the bulk of which is junior staff against an international benchmark of 25%.

STRATEGIES TO MANAGE SKILLS CAPACITY

1. HTA growth plan

2. Training programmes continue to be enhanced.

3. Mentorship programme to reinforce Group DNA transfer from the top.

4. Reward strategy to be benchmarked to the sub-region.

5. “Brain drain to brain gain” – the Group has a database of 50 managers in the region to draw from to staff pipeline projects in the next 12 months.

6. Role profiling and brand alignment.

BRAND LEADERSHIPBRAND LEADERSHIP

BRAND ROLL-OUT STRATEGY

1. Develop own brands.

2. Extend footprint leveraging on own brand and existing own brand.

3. Own brand summary follows below.

5 STAR BOUTIQUE

5 STAR CITY

3 – 4 STAR RESORT BRAND

MID-RANGE CITY BRAND

LONG STAY BRAND

VALUE BRAND

FRANCHISE BRANDS

MARKET CAPITALISATIONMARKET CAPITALISATION

MARKET VALUEThe Group has as its target a market capitalization of

USD 1 billion value by the end of 2012

● Current Market Cap converts to US$119m (or $0.18/share) at OMIR.

● This imputes to an EBIDTA Multiple of 10 times, having converted profits at the average OMIR for the period.

● Companions in the industry operating a similar model as African Sun are valued at multiples of 17 (City Lodge) and 25 (Four Seasons) e.g.

● We view African Sun as both a hedge and growth stock.

● Hedge, because of the imbedded hedge from Exports and the residual stake in Real Estate (Dawn). Expansion into Africa, will increase hard currency earnings, and enhance quality of earnings by reducing concentration in a particular country.

● Growth, because of the regional expansion that is set to increase hard currency earnings footprint (at improved Revpars), and the immediate upside potential which will follow a Zimbabwe recovery

MARKET VALUE

● The Group’s strategy will be primary and growth cities in Africa, such as resources (oil and minerals) and leisure enclaves.

● Focus will be on the profitable core (Rooms and Food and beverage, conferencing, entertainment and allied activities), and any linkages that will anchor the profitable core

● A franchise business will be created from own brands, whilst leases and management contracts will be the anchor in the meantime.

● Ownership, whole or in part, of hotels will be considered in key strategic locations such as Cape Town, JHB, Accra, Lagos etc

● In order to gain entrance into other stabilised markets, growth through mergers and acquisitions will be pursued.

BUSINESS MODEL

2008

$119m

2009 2010 2011

US$1b

Ta

rge

t m

ark

et

cap

2012 2013

MIGRATION PATH

RO

OM

S

CASIN

OS

ENTERTAINMENT

AC

TIV

ITIE

S

FOO

D & BEVERAGE

DUAL LISTING

● To unlock value, raise additional capital for further expansion and bring about a cross section of African Investors making African Sun truly Pan-African, the Group is therefore considering a secondary/dual listing on a regional/international bourse in the next 3 - 5 years.

● Selection of appropriate stock exchange will be made after taking into account the Exchange’s accessibility, depth, liquidity and public profile of the Exchange.

● The following stock exchanges being considered:

▪ Johannesburg Stock Exchange▪ Botswana Stock Exchange▪ Mauritius Stock Exchange▪ London Stock Exchange

BUSINESS MODELBUSINESS MODEL

BUSINESS MODEL

A further synopsis of the business model and returns:

● Model type● Investment Approach● Returns● Zimbabwe - Inherent Potential

FranchiseNo investment by Franchisor

ManageManager makes 5% Equity Investment

OwnershipOwner owns 100%of the property

No investment bytenant – fixed lease

(8% ROIC)

No investment by tenant – variable lease

(25% of total sales)

Tenant owns FF&E –Fixed lease(8% ROIC)

OPERATING MODELS DISCUSSED

INVESTMENT STRATEGY● The following are typical investment approaches:

COREBuying and managing existing high quality, stabilised properties

COREBuying and managing existing high quality, stabilised properties

VALUE ADDNew developments/re-developments/

turn-around targets/repositioning and

taking risks in leasingAnd other locations

VALUE ADDNew developments/re-developments/

turn-around targets/repositioning and

taking risks in leasingAnd other locations

OPPORTUNISTICTypically involves

extremely high leverage in conjunction with a depressed market, a

depressed property or non-performing assets.

OPPORTUNISTICTypically involves

extremely high leverage in conjunction with a depressed market, a

depressed property or non-performing assets.

RISK RETURN MATRIX

PERFORMANCE METRICS

Indicator African Sun Regional

ADR (US$) 40 113

Occupancy(%) 47 75

RevPar(US$) 19 85

On average the Group/ country is achieving below the regional average in terms of ADR, occupancy and Revpar Indicating potential for improvement in yields that is imbedded in Zimbabwe operations. In South Africa, for example on average country ADR went up 20 % compared last year.

REGIONAL METRICS

Indicator 5 star 4 star 3 star

ADR (US$) 197 113 80

Occupancy (%) 73 70 69

RevPar (US$) 143 79 55

● The table above shows regional benchmarks of the categories of hotels which the Group operates.● It can be ascertained that the benchmarks are way ahead of what the Group is currently achieving, again an indication of the

potential that exists.● In fact upon a rebound, we anticipate that yields for Victoria Falls will improve, even to exceeding regional competitors.

PERFORMANCEPERFORMANCE

TRENDS IN REVENUE DRIVERS: GROUP OCCUPANCIES & SALES MIX

6 MONTHS TO 31 MARCH 2008

6 MONTHS TO 31 MARCH 2007

Average Occupancy 47% 38%

Foreign Mix (% of total rooms sold) 31% 40%

Contribution of foreign revenue to total revenue 58% 75%

● Average occupancy for the Group increased on the back of increased domestic volumes , albeit at constrained due to price controls.

● Foreign arrivals declined due to cancellations from foreigners due to the travel warnings issued by most of the source markets.

GROUP PERFORMANCE

● Revenue for the 6 months amounted to $97.8 trillion, an increase of 155 363% ahead of the increase in operating costs of 102 587% compared to the prior year.

● Local operations contributed 84% to Group revenue from 81% in the prior reporting period, whilst regional operations contributed 16% .

● Contribution from regional hotels is set to accelerate much faster with the addition of other properties, with The Lakes it increases to 25%, for example.

GROUP PERFORMANCE

● The Group posted an operating profit of $46 trillion, an increase of

370 467% despite the challenging trading environment.

● The surge is attributable to the Group’s cost containment and

procurement strategies, for example bulk purchasing, toll

manufacturing arrangements, elimination of the middle man and

negotiation of IHG franchise fees.

● Net profit amounted to $361.8 billion.

● However, the net profit margin declined to 19% from 23% achieved in

light.

FINANCIAL POSITION

● Non-current assets stood at $592 trillion in comparison to $10 trillion in the prior reporting period.

● The investment in Dawn Properties was valued at $405 trillion which is 68% of non-current assets and 48% of total assets.

● The market value of the Group’s shareholding in Dawn Properties however amounted to $900 trillion at 31 March 2008.

WORKING CAPITAL

● The Group generated $73 trillion from operating activities.● $12 trillion was used for various capital expenditure projects.● In spite of the price controls the Group closed the period in a

positive net cash position of $77.5 trillion.● The Group had debtors worth $169 trillion, this emanated mostly

from foreign debtors and repayments to suppliers so as to lock value where applicable.

● Inventory was valued at $20 trillion, but its replacement cost was higher than its book value due to bulk buying and negotiations done by the Group.

● Cash and cash equivalents were mainly from foreign currency balances.

PERFORMANCE UPDATE

Indicator African Sun Regional

ADR (US$) 52 113

Occupancy (%) 35 75

RevPar (US$) 18 85

Occupancy dipped due to cancellations which amounted to 9955 room nights, accounting for approximately 3% of capacity, and 12% of revenues. NIPC lifted price controls on the Industry effective May 2008 hence the slight improvement in ADR from US$40. The Group has remained cash neutral in spite of the cancellations.

DIVIDEND DECLARATION

● An Interim Dividend, number 17 of 5 564 cents (interim 2007:1869 cents) (final 2007:nil) per share payable out of the profits of the company for the six months ended 31 March 2008 has been declared.

● The dividend will be payable in the currency of Zimbabwe to shareholders registered in the books of the company at the close of business as at 11 July 2008.

● The share register will be closed from 12 July 2008 to 14 July 2008, both dates inclusive.

● Shareholders will be able to elect to receive a dividend wholly in cash or take a scrip dividend in the form of ordinary shares.

● The offer price will be determined by taking the closing price of the African Sun Limited shares on 31 March 2008, the day the dividend was declared.

● Dividend warrants will be posted and payments made to shareholders on or about 8 August 2008.

OUTLOOKOUTLOOK

OUTLOOK

● Additional hotels within the next 12 months:▪ Arusha

▪ Clear Essence & Wellness Centre

▪ Kano

▪ Pretoria

▪ Tzaneen

▪ Cape Town

▪ Lusaka

● World Cup Soccer Tournament 2010▪ Packaging of our properties and products

▪ New capacity in the sub-region

858 rooms

OUTLOOK

● Going Green Initiative▪ Environmentally friendly

▪ Cost savings in procurement and operations

● Funding▪ Funding at project level ongoing.

▪ Funding to adequately capitalise the Group.