SkyCity's profit dips as high rollers win more than epected

SkyCity's annual profit dips as high rollers win more than expected

By Rebecca Howard

Aug. 14 (BusinessDesk) - SkyCity Entertainment Group’s full year net profit dipped as it faced a bigger tax bill and ended up paying more than expected to lucky high rollers but underlying earnings beat expectations.

The company reported net profit fell 14.7 percent to $144.6 million in the 12 months ended June 30 due to a casino win rate in international business of 1.00 percent, below the theoretical win rate of 1.35 percent.

Profit was also dented by a $6.5 million increase in effective tax rate and it reaped just nine months of earnings from the Darwin property before it was sold.

Also, "our operations in Auckland and Adelaide continue to face disruption from surrounding development. The wider economic and tourism conditions have not been buoyant," said chair Rob Campbell.

Casino operators prefer to use normalised profit, which uses the theoretical win rate to eliminate the 'luck' factor from the international business and strip out structural differences between periods. On that basis, SkyCity's profit rose 1.9 percent to $173 million and earnings before interest, tax, depreciation and amortisation were up 1.3 percent at $342.7 million.

The difference is most apparent in the international business - largely wealthy players from overseas - which delivered turnover of $14.1 billion up 18.9 percent, with normalised ebitda of $41.7 million. Reported ebitda - which shows the actual experience - tumbled 91 percent to $3 million due to that low casino win rate.

Forsyth Barr analysts had expected normalised net profit of $164.5 million, below the actual outcome.

The board declared a final dividend of 10 cents a share, bringing the total to 20 cents a share. The record date is Aug. 30 for payment on Sept. 13.

The stock opened at $3.98 today, down 0.8 percent, and has gained 12 percent so far this year.

"Our outlook for FY20 is more cautious than prior periods. However, we continue to expect growth on a like-for-like basis and will be working hard to achieve this,” said chief executive officer Graeme Stephens.

He said that reflected both the local and global economic environments. Domestically, business confidence has slumped since the Labour-led coalition government was established, with companies scaling back investment intentions in the face of shrinking profitability, while trade tensions between the US and China continue to threaten the global economy.

SkyCity Auckland normalised ebitda increased 2.8 percent to $267.9 million despite a more challenging operating environment.

The company said it is currently investing more than $700 million within the SkyCity Auckland precinct with the development of the New Zealand International Convention Centre, an adjacent laneway, over 1,300 additional car-parking spaces and the new 300-room, 5-star Horizon Hotel – all due for completion in 2020.

SkyCity Hamilton achieved ebitda of $26.9 million, consistent with the prior period. Adelaide casino's ebitda was $22.3 million, up slightly on a like-for-like basis after adjusting for A$1.7 million of staff restructuring costs.

The combined Queenstown properties grew earnings by 13 percent to $2.3 million driven by increased visits from premium customers and operating leverage.

(BusinessDesk)

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