Sun International earnings growth capped by Nigerian forex fallout

Sun International informed shareholders today that it expects its headline earnings per share to increase by 73% and 98%, but the devaluation of the Nigerian naira hampered this growth.

In accordance with JSE listings requirements, the company told its shareholders today that Sun International’s basic earnings per share and headline earnings per share for the six-month period ended 30 June 2023 are expected to increase significantly. 

During the six months, SunBet generated record income and is well on its way to achieving the aggressive growth targets set for this business, the company said. 

“Our hotels and resorts had an exceptional first half on the back of an excellent performance in the second half of last year,” the company said.

“Urban casinos continued to show income growth while Sun Slots operations came under pressure due to the impact of ongoing load-shedding.” 

Sun International said it expects the following changes to its earnings for the period ended 30 June 2023 –

• Basic earnings per share are expected to be between 161 cents per share and 180 cents per share, representing an increase of 71% and 92% compared to the prior corresponding period.
• Headline earnings per share are expected to be between 161 cents per share and 184 cents per share, representing an increase of between 73% and 98% compared to the prior corresponding period 
• Adjusted headline earnings per share are expected to be between 190 cents per share and 199 cents per share, representing an increase of between 7% and 12% compared to the prior corresponding period

The company said the primary difference between headline earnings and adjusted headline earnings relates to two factors:

• An increase in the estimated redemption value of the SunWest put option liability of R21 million
• The impact of the devaluation of the naira resulted in a net accounting adjustment of R39 million on consolidation of the external shareholder loans, which are US dollar-denominated. 

The company’s net debt to adjusted EBITDA ratio for the business as of 30 June 2023 remained at 1.8x, compared to the bank covenant of 3.25x, while the net debt amount remained at approximately the same levels as at 31 December 2022. 

This was despite the company paying a final dividend during the review period of R632 million for the year ended 31 December 2022 and experiencing a heightened interest rate environment, it said. 

This is evidence of the company’s strong cash generation and its prudent allocation of capital, Sun International said.

The company is currently finalising its financial results for the six-month period ended 30 June 2023, which are expected to be released on or about Monday, 11 September 2023.