South Africa-based casino group Sun International is pulling out of Nigeria after its earnings in the country dropped due to a poor economy.
It said leaving Nigeria due to a ‘long-standing family dispute’ between fellow shareholders and an investigation by the Economic and Financial Crimes Commission would be ‘protracted’ but that it would look for fair value for the investment it had made. It also outlined that the ‘ongoing shareholder dispute has frustrated all attempts to develop and improve the property.’
Earnings before interest, taxes, depreciation and amortization at its Nigerian properties dropped by 58 per cent in the last year to June with occupancy at its hotels down to 42 per cent.
Sun is also in the middle of a dispute with its partner in Nigeria; Tourist Company of Nigeria who it bought 49 per cent of 10 years ago.
Sun, who part owns the Federal Palace hotel in Lagos, said: “The Board has decided to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value. The Federal Palace continues to operate in a difficult environment with the Nigerian economy facing a number of crises including the low oil price. Five of our staff members who were detained by the Economic and Financial Crimes Commission earlier in the year have still not had their passports returned to them despite no charges being laid against the individuals, the company or Sun International. As a result of the current environment and issues facing the company the board has taken the decision to exit our investment in Nigeria. This is, however, expected to be a protracted process given the challenges we are facing and to ensure we receive fair value for our investment.”
The group’s overall results were propped up by its expansion into Latin America where revenue grew 40 per cent to R2.45bn.
Sun’s Latin American casinos accounted for a fifth of its total revenue. In Chile, Sun’s operations reported revenue growth of 6.6 per cent with EBIDTA increasing by 15 per cent due the Monticello casino not having to pay any management fees in 2016 against the previous year’s R83m. The group bought a 54.7 per cent equity interest in the Monticello Grand Casino in Chile to add to its 44.2 percent stake in the property in 2014.
Other highlights included taking a controlling stake in Grand Parade Investment’s slots business and the merger of its Latin American operations with Dreams.
In South Africa casino revenues were flat at R7bn but a 67 per cent increase in food and beverage sales to R807m saw overall revenues in South Africa increase by 11 per cent to R9.5bn.
However the operator lost R503m in the year to end-June due to purchasing costs and legal settlements. The main cost was a R675m pay off to Peermont who will cancel its objection for the casino licence in Morula to be transferred to a new casino, Time Square, in Menlyn Maine.