Investor update presentation November 2016
Content Update on Q3 2016 financial performance 3-8 Recap on ATG Evolution 9-10 Update on hospitality strategic business unit 11-14 Update on online travel and E-Commerce 15-17 2
Section 1 Update on Q3 2016 financial performance
(SAR million) Sector performance impacted by general macroeconomic environment and government austerity measures (SAR Million) (SAR million) (SAR million) Revenue of government segment Revenue of corporate segment Revenue of retail segment 3,100 3,000 2,900 2,800 2,700 3,044 2,783 1400 1300 1200 1100 1,305 1,130 2,120 2,080 2,040 2,097 2,092 2,600 Sep. 2015 Sep. 2016 Net revenue from government sector Performance of government sector is impacted by government austerity measures 1000 Sep. 2015 Sep. 2016 Net revenue from corporate sector Corporate revenue declined reflecting the economic slowdown 2,000 Sep. 2015 Sep. 2016 Net revenue from retail sector Retail sales relatively flat due to significant contribution from E- commerce business unit E-commerce contribution to retail revenue 500 422 400 300 277 200 100 76 0 Q1 2016 H1 2016 9months 2016 Notwithstanding the challenging macroeconomic environment for retail sector, E-commerce revenues have shown significant growth inline with ATG s strategic focus 4
ATG financial performance showed resilience in the midst economic slowdown Highlights of the income statement In SAR million Q3 2016 Q3 2015 Sep. 2016 Sep. 2015 Comments Revenue 1,823 1,907 6,005 6,446 ATG top line declined of about -4%, from core ticketing segment -15%, however tourism & COGS GP GPM (1,498) 325 18% (1,519) 388 20% (4,830) 1,175 20% (5,063) 1,384 21% transportations/others revenue grew by 52% & 29% respectively due to contribution from e-commerce business and that is mainly from Almosafer along with Hanay car rental. Selling exp (60) (64) (186) (203) Admin exp (86) (101) (278) (289) Other operating income 57 58 134 119 Other income (expense) (26) 1 (44) (1) EBIT 213 278 747 990 EBIT margin 12% 15% 12% 15% Interest (15) (5) (33) (11) zakat (8) (4) (28) (25) Minority (1) (4) (4) (7) Net income 188 265 682 946 Net income margin 10% 14% 11% 15% Gross margin declined to 18% with +/- 2% fluctuation which is considered normal in the business, given that the contribution from government sector is less. Selling expenses and administrative expenses decreased compared to last year by -6% and -15% respectively, as a result of cost rationalization plan. Other operating income mainly consist of incentives received from airlines and GDSs (i.e. Amadeus, Galileo) Net profit declined for the period of about -29% but the Normalized net profit decline is -24% after excluding the impact impairment loss recorded on equity investment and impairment loss on intangible assets and gain/loss on PPEs. Ticketing business declined as a main contributor to the top line while tourism and leisure businesses grew due to the strong performance of e-commerce initiatives 5
(SAR million) (SAR million) Tourism segments contributed positive performance driven by e-commerce revenue Net revenue by business segment Comments/outlook 7,000 6,000 5,000 4,000 3,000 2,000 46 122 5,359 232 303 123 125 6,091 5,636 Ticketing currently contributes close to 73% of ATG s net revenue The contribution from the hospitality segment, primarily in Makkah, is expected to start 2017 1,000 0 Sep. 2014 Sep. 2015 Sep. 2016 Travel and tourism services Cargo Transportation and others Net revenue by client Comments/outlook 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 232 169 128 1,865 1,508 1,923 1,127 1,305 1,130 2,765 3,044 2,783 Sep. 2014 Sep. 2015 Sep. 2016 Revenues from government declined by - 9%, whereas revenues from corporate declined by -13% and retail relatively flat growth of 0%. ATG is looking to increase its market share in the retail segment Govt Corporates Retail Travel agency Ticketing services contribution is lower on yearly basis because of government austerity measures in favor of tourism and transportation as online business and acquisitions in 2015 started to perform 6
The successful closing of Thakher acquisition has significantly increased the total assets and equity Highlights of ATG balance sheet Assets Liabilities and shareholders equity 10,500 9,765 9,765 9,000 8,421 1,737 Cash and bank 700 1301 Accrued liabilities 7,500 6,000 4,500 5,474 6,201 1,463 611 Trade receivable Pre payment & other assets 475 1,831 35 Trade payables Other liabilities Bank debts Minority interest 3,000 5,954 Fixed assets 5,423 Shareholder s equity 1,500 0 2013 2014 2015 Sep. 2016 Sep. 2016 The vast majority of ATG s assets are in working capital related to its core operations of flight tickets and more importantly to its investments in the hospitality segment in Makkah 7
Cash flow has been impacted significantly due to economic condition Highlights of cash flow statement In SAR million 2013 2014 2015 Sep. 2015 Sep. 2016 Comments Net profit for the year Cash from change in working capital Net Cash flow from operating activities 943 1,214 2,157 1,119 44 1,163 1,162 332 1,493 946 (314) 632 692 (972) (281) During the 9 months of 2016 most of corporates/government clients utilized the advances resulting in negative cash flow from operating activities Cash flow used in investing activities (net) (370) (735) (2,422) (1,743) (351) Cash flow from financing activities 26 (42) 984 1,118 372 Dividend paid (443) (545) (5) - - The majority of investments is related to the acquisition of the Wadi.com and capitalization of Sheraton hotel Increase/decrease in cash 1,370 (158) 50 6 (260) Cash at beginning 747 2,117 1,959 1,959 2,009 Cash in hand 2,117 1,959 2009 (17) (13) Increase in working capital requirements attributed to the growing receivables from government accounts 8
Section 2 Recap on ATG Evolution
Associated Brands Strategies ATG started as a retail travel agency, and has evolved into a synergistically diversifies travel and tourism group ATG Strategic evolution (1979-Current) ATG Evolution Organic Expansion Offer basic travel and tourism services and organically expand retail footprint Horizontal Consolidation Focus on becoming a full TMC and pursue horizontal consolidation Vertical Integration Expand into Hajj & Umrah through targeted vertical integration Synergistic Diversification Diversify the portfolio focusing on opportunities to benefit from synergies In 1979, ATG started as a classic retail travel agency company focused on basic travel and tourism booking services; until 2000, ATG has focused on organically expanding its retail footprint Between 2000 and 2012, ATG focused on consolidation and horizontal integration where it made a number of acquisitions of like for like competitors 1979 2000 2000 2012 2012 2015 2015 - Current Between 2012 and 2015, ATG primarily focused expand its hajj and umrah offerings through vertical integration into the destination management and hospitality industry segments; moreover, during this time, ATG expanded its global footprint by entering the UK travel management market Since 2015, ATG has focused on diversifying its portfolio of businesses in a synergistic manner; its has aggressively focused the OTA space, and expanded its hospitality offerings by both entering into hospitality operations, and re-focusing its rental car and 10
Section 3 Update on hospitality strategic business unit
A key growth area that seen considerable investment is hospitality area; here, ATG is focused on 3 activity area Hospitality Activity Areas Activity Area Description Brands 1 2 Asset Ownership Asset Management This activity area is focused on asset development for hospitality use Key objective behind asset ownership is to maximize cash flow from the asset and to improve overall asset value. ATG has invested heavily in hospitality assets with key investments including venture in Thakher and Muthmera Asset management is focused on protecting asset owner interests through ensuring that asset operators perform in accordance with legal and commercial agreements ATG performs this activity through its Equinox subsidiary, which is regarded as one of the very few professional asset management companies in the middle east 3 Asset Operations Asset operations is focused on developing asset revenues through daily use of the hotel asset Through its exclusive partnership with Choice Hotels, the 2 nd largest hotel company in the world, ATG has a best in-class hotel operations capability and plethora of brands to pffer hospitality asset owners 12
ATG has invested on a well located projects to complete its vertical integration strategy ATG developed and acquired different hospitality properties to fuel growth Tower Name Prince Majed Rd Hotel Movenipick City star Hotel Sheraton Hotel Property use Hotel Hotel Hotel Location Prince Majed Rd, Jeddah Madina Rd, Jeddah In front of Holy mosque, Makkah No. of rooms/suits 200 228 422 Expected operating income p.a (SAR mn) 20 25 70 Expected delivery Q4 2017 Delivered Q1 2017 Expected market value (SAR mn) 200 260 1,500 (1) The expected operating income is from the serviced apartment + service charges (1) Prince Majed Rd Hotel Movenpick City Star Hotel Sheraton Hotel ATG board approved a selling serviced apartments strategy from Sheraton hotel with an expected revenue of SAR1,200mn to recover a significant amount of the invested capital 13
with a large portfolio of hospitality assets Muthmerah has developed residential and commercial towers Tower Name 3 rd Ring Road Masafi Hotel Beer Balela Albawaba 1 & 2 Sheabquresh Hotel Property use Offices Hotel Hotel Retail Hotel Distance from Haram 4 KM 0.3KM 0.3KM NA 0.45KM No of rooms (residential) / GLA (office and retail) 31,300 sqm 192 547 8,298 sqm 491 Expected Rental income p.a (SAR mn) 15 9 25 3 15 Expected delivery Delivered Delivered Delivered Delivered Q1 2017 Expected market value (SAR mn) 300 160 500 33 300 3 rd Ring Road Masafi Hotel Beer Balela Hotel Al Bawaba Shebalquresh Note: Muthmerah owns 3 parcels of land that have been under compulsory purchase order by the government which their book value is over SAR 410 million 14
Section 3 Update on online travel and E-commerce
10 months only, the newly established Tajawal has become a leading OTA in the GCC Within ca. 10 Months ~ 35k Sessions/day ~ $130k Gross Sales / day ~ 13% Marketing Cost/Sales Ratio ~ 19% Mobile App Share ~ 250 Orders/Day ~ $515 Average order value ~ 400k App Installs 64k+ Monthly Active Users 80 70 60 50 40 30 20 10 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Number of Orders (thousands) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 5,000 Monthly flight sales (USD thousands) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Tajawal reflects the latest global developments and insights and is showing strong growth in first few months 16
Almosafer is a locally grown hotel booking tool offering more than 500,000 hotels around the globe through Mobile Tablet apps Est. 1,200,000 22% 1.2 Million 2016 Full-Year Est 1.5 Million 475K 500,000 230M SAR through Q3 2016 300% 120,000 17