FIRST CUT: SkyCity 1H earnings rise 18% on improvement in Auckland casino trading

Thursday 9th February 2017

SkyCity Entertainment Group, New Zealand's only listed casino company, posted an 18 percent lift in first-half profit as improved trading at its key Auckland casino offset a weaker performance from its Australian and high-roller businesses, while the year-earlier profit was hit by writedowns.

Net profit rose to $83.8 million, or 12.7 cents per share, in the six months ended Dec. 31, from $71 million, or 12 cents, a year earlier, the Auckland-based company said in a statement. The year-earlier earnings included a $2.8 million write-down of its Hamilton hotel project costs and $7.6 million write-off of its Auckland property to make way for a convention centre.

In the latest period, revenue slid 5.8 percent to $533.1 million.

SkyCity, which has four casinos in New Zealand and two in Australia, posted a 5.1 percent gain in earnings before interest, tax and depreciation and amortisation (ebitda) at its Auckland casino, which accounts for the bulk of its earnings. However, its Australian business, which includes casinos in Darwin and Adelaide, reported a 9.5 percent earnings drop. Its international business, the term it uses for 'high roller' gamblers, was hurt by Chinese restrictions on funds transfers and reduced visits by big-spending customers, with earnings down by more than two-thirds.

"The main drivers of the 1H17 performance were solid growth in our combined New Zealand properties, with Auckland trading improving significantly in 2Q17, offset by reduced turnover in our international business, continued competitive and economic pressures in Darwin and a weaker Australian dollar," the company said.

"SkyCity Auckland, which accounted for approximately 80 percent of group ebitda in the interim period, is expected to continue to deliver modest growth during the second half of FY17 on the previous corresponding period, driven by favourable macroeconomic drivers, new major events and ongoing initiatives to drive visitation."

However, SkyCity said challenging trading conditions would persist in Darwin during the second half due to a soft local economy and increased gaming machine numbers in pubs and clubs, while Adelaide would likely remain stable. Second-half activity was likely to be weaker in its international business due to reduced visits from larger VIP customers, although trading had been favourable over the Chinese New Year period to date, it said.

The company will pay a first-half dividend of 10 cents a share on March 17, down from 10.5 cents a year earlier.

The shares last traded at $3.74, and have slid 4.8 percent so far this year.

BusinessDesk.co.nz

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