Investor update presentation February 2017
Content Update on Q4 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 Q4 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 173 182 2,138 2,188 4,000 3,900 3,800 3,700 3,600 3,500 3,400 3,300 3,200 3,925 3,462 2015 2016 Net revenue from government sector Number of government clients Performance of government sector is impacted by government austerity measures 1700 1600 1500 1400 1300 1200 1,652 1,414 2015 2016 Net revenue from corporate sector Number of corporate clients Corporate revenue declined reflecting the economic slowdown 3,200 3,100 3,000 2,900 2,800 2,700 3,054 3,165 2015 2016 Net revenue from retail sector Retail sales grew due to significant contribution from E- commerce business unit 600 E-commerce contribution to retail revenue 567 500 422 400 300 240 200 100 66 0 Q1 2016 H1 2016 9months 2016 FY 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 Q4 2016 Q4 2015 FY 2016 FY 2015 Comments Revenue 2,036 2,185 8,041 8,631 ATG top line declined of about -7%, from core ticketing segment -18%, however tourism & COGS GP GPM (1,722) 314 15% (1,768) 417 19% (6,552) 1,489 19% (6,831) 1,800 21% transportations/others revenue grew by 48% & 29% respectively due to contribution from e-commerce business and that is mainly from Almosafer along with Hanay car rental. Selling exp (86) (74) (272) (277) Admin exp (118) (126) (396) (415) Other operating income 58 54 192 173 Other income (expense) (8) (37) (116) (58) EBIT 159 234 906 1,223 EBIT margin 8% 11% 11% 14% Interest (13) (7) (46) (19) zakat (2) (11) (30) (36) Minority 1 (0) (3) (7) Net income 145 215 826 1,162 Net income margin 7% 10% 10% 13% Gross margin declined to 19% 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 -2% and -4% 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 -26% 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 9,000 8,500 8,000 7,500 7,000 173 161 7,377 325 160 8,146 419 165 7,457 Ticketing currently contributes close to 72% of ATG s net revenue The contribution from the hospitality segment, primarily in Makkah, is expected to start 2017 6,500 2014 2015 2016 Travel and tourism services Cargo Transportation and others Net revenue by client Comments/outlook 10,000 8,000 6,000 4,000 2,000 251 207 289 2,374 2,803 2,876 1,560 1,652 1,414 3,570 3,925 3,462 Revenues from government declined by - 12%, whereas revenues from corporate declined by -14% and retail grew by 4%. ATG is looking to increase its market share in the retail segment 0 2014 2015 2016 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 9,376 9,376 9,000 7,500 6,000 4,500 5,474 6,201 8,421 1,250 1,536 562 Cash and bank Trade receivable Pre payment & other assets 739 1,526 479 1,088 34 Accrued liabilities Trade payables Other liabilities Bank debts Minority interest 3,000 6,028 Fixed assets 5,510 Shareholder s equity 1,500 0 2013 2014 2015 2016 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 2016 Comments Net profit for the year Cash from change in working capital 943 1,214 1,119 44 1,162 343 826 (709) During 2016, most of corporates/government clients utilized the advances resulting in negative cash flow from operating activities Net Cash flow from operating activities 2,157 1,163 1,505 118 Cash flow used in investing activities (net) (370) (735) (2,422) (474) Cash flow from financing activities 26 (42) 986 (372) The majority of investments is related to the acquisition of the Wadi.com and capitalization of Sheraton hotel Dividend paid (443) (545) - - Increase/decrease in cash 1,370 (158) 68 (728) Cash at beginning 747 2,117 1,959 2,009 Cash in hand 2,117 1,959 2009 1,250 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
Within 1 year only, Tajawal has become a leading OTA in the GCC 120 Number of Orders (thousands) Within ca. 1 Year ~ 50k Sessions/day ~ 300 Orders/Day 100 80 60 ~ $133k Gross Sales / day ~ $447 Average order value 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ~ 14% Marketing Cost/Sales Ratio ~ 535k App Installs 60,000 50,000 40,000 Monthly flight sales (USD thousands) ~ 16% Mobile App Share 2M+ Active Users 30,000 20,000 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 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 1,300,000 >20% 1.3 Million In 2016 1.5 Million >500K 500,000 313M SAR In 2016 +325% 120,000 17