Hotel and leisure conglomerate Sun International [JSE:SUI] announced on Monday that it will exit Nigeria.
In its results announcement for the year to end-June 2016, Sun International said its hotel and casino complex Federal Palace continues to operate in a difficult environment with the Nigerian economy facing a number of crises including the low oil price, Boko Haram and a weakening naira. The country also has still not recovered from the significant impact the Ebola epidemic had on the business.
In addition to problems faced by the country, there are a number of issues specific to the local Nigerian partners in the Federal Palace and these have further exacerbated matters, Sun International said.
Sun International, which had invested more than $50m in its Nigerian operations, said continued setbacks in Nigeria – including the ongoing shareholder dispute – have frustrated all attempts to develop and improve the property.
It also lamented the fact that its employees at the Tourist Company of Nigeria, in which it holds a 49.3% stake, had been put at risk.
“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.”
Sun International, however, said it expects the exit to be a protracted process, given the challenges it faces and to ensure it receives fair value for its investment.
In the review period the occupancy of Federal Palace at 41.6% was 6.8% below last year’s figure, with the average room rate up 3.8%.
The company said that despite all efforts to keep costs as low as possible, earnings before interest, tax, depreciation and amortisation (Ebitda) declined 58%.
Sun International said the Nigerian debt has always been, and remains, ringfenced to the Federal Palace, without recourse to the group balance sheet.
Other South African companies which have pulled out or made their intentions clear to exit the country, which is battling its worst economic crisis in decades, include Woolworths, Truworths and Tiger Brands, while MTN took a knock from a massively reduced fine of $1.7bn. After months of deliberations, Nigeria agreed in June to cut the fine initially demanded by almost 70% after MTN threatened to shut down its operations in the West African nation.
Overall the group posted a 15% increase in revenue to R12.2bn and a 20% decrease in diluted adjusted headline earnings per share to 628 cents. The hotel and gaming group declared a final gross cash dividend of 135c per share.
Sun International shares were trading 0.63% down at R91.51 by 11:14.
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