Hotels, gaming and entertainment group Sun International is expecting to report an increase in earnings for the half year to the end of June, boosted by its diversified operating portfolio that has embedded the company’s resilience amid a stronger performance from urban and resort hotels, Sunbet and urban casinos.
Shares in the company on the JSE lifted 2.3% to R42.77 in afternoon trade yesterday, maintaining its strong momentum in the past week, month and year-to-date periods.
This came as shareholders reacted positively to Sun International’s interim trading update in which it said it expected earnings for the June 2024 interim period to rise.
The company sees its headline earnings per share for the half-year period increasing from the same period last year by between 5.4% and 12.4% to a range between 182 cents and 194 cents per share.
Basic earnings per share were likely to come in much higher by between 88.9% and 102.3% from 171 cents last year, while adjusted headline earnings per share were projected to be firmer by between 4.5% and 11.6% to a threshold ranging from 206 cents to 220 cents per share.
Sun International explained that the difference between basic earnings per share and headline earnings per share for the period under review was constituted of the recognition of the second contingent consideration of R348 million relating to Dreams SA net of estimated taxes, expenses and the effect of time value of money.
“The primary difference between headline earnings per share and adjusted headline earnings per share relates to an increase in the estimated redemption value of the SunWest put option liability of R48m and transaction costs of R14m relating to the proposed Peermont acquisition,” it said.
Sun International will report its half-year financials on September 9, but highlighted that trading in the period under review had been robust.
It explained that this was due to the strength of its diversified operating model, resilience of its omnichannel portfolio and disciplined strategic execution.
“Sunbet has maintained its exceptional growth trajectory and is exceeding its targets. Urban casino income of our larger properties has continued to grow and protect margins,” the company said.
Sun International’s resorts and hotels had attained “robust growth in income” in addition to significantly improving its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin.
Sun Slots’ operations had also demonstrated resilience to the current trading environment.
The company was now in a strong financial position with its South Africa debt at R5.4 billion, down from R5.7bn as at December 31, 2023, after paying a final net dividend of R510m for the 2023 financial year as well as share buy-backs amounting to R141m.
Sun International’s South African debt to adjusted EBITDA and interest cover of 1.6 times and 6.0 times respectively were “well within our lenders’ covenants of less than 3.0 times and more than 3.0 times” respectively.
“This evidences the strong cash generation by the Sun International group as well as its prudent allocation of capital,” the company said.
BUSINESS REPORT