Sun International on verge of shedding Nigerian asset
Gaming and hospitality group says it has received a number of offers for TCN stake
Sun International said on Monday it would proceed with a plan to sell its investment in Nigeria.
The gaming and hospitality group wants to exit Nigeria amid a shareholder dispute in Tourist Company of Nigeria (TCN), in which Sun International bought a 49% interest in 2006. TCN owns and operates the five-star Federal Palace Hotel in Lagos.
Sun International wanted to exit TCN after a dispute with the Ibru family, a fellow shareholder in TNC. The fight involves members of the Ibru family wanting to oust Goodie Ibru, the company’s chair. The dispute prompted various parties including Sun International and Nigeria’s Securities Exchange Commission (SEC) to appoint Deloitte to investigate.
“We understand the Deloitte investigation has been completed with the report having been delivered to the SEC of Nigeria. We have received a number of unsolicited offers from third parties expressing an interest to acquire our shareholding and outstanding loan amount in TCN,” Sun International said in its results for the six months ended June 30.
Sun International said it would shortly appoint advisers to start with a formal disposal process after the resolution of the SEC investigation.
In the six months the Federal Palace Hotel underperformed, incurring a R3m adjusted earnings before interest, tax, depreciation and amortisation (ebitda) loss.
Overall the market reacted positively to Sun International’s results, with its share price surging 10.93% to close at R43.15, cutting its decline in 2019 so far to 31.5%.
Sun International’s group adjusted headline earnings increased from R115m to R172m, while adjusted headline earnings per share increased by 30% to 136c per share.
The company reduced its SA debt from R9.2bn at December 31 to R8.8bn.
Sun International said Sun City experienced difficult trading conditions, with income down by 6%.
“Trading for the period was volatile with a difficult start to the year following the December hailstorm. Trading improved in May and June. However, the outlook remains uncertain. Occupancy for the period was at 61%, down 10% on the prior year with the average room rate down 2%, to R1 807.”
Sun City’s gaming income was down 3% at R241m.
“We will shortly commence with a comprehensive review of Sun City’s operations to achieve operational efficiency and to enhance the guest experience,” Sun International said.
The company said the Time Square precinct in Pretoria, which became fully operational in April 2018, increased income by 15%.
Income from Latin America operations was up 17% and adjusted ebitda up by 6%.
“In Latam [Latin America], we anticipate an improved performance from our operations in the second half with both Chile and Peru’s GDP growing at 3%. We believe there are good growth opportunities in Latam which we will continue to explore, notably in the online space given that several countries are regulating this industry,” Sun International CEO Anthony Leeming.
He said the company did not expect trading conditions to improve in the short term because of the subdued economic conditions in SA and the uncertain international environment.