SkyCity meets guidance with 8% gain in normalised profit

Wednesday 15th August 2012

SkyCity Entertainment Group, the casino company in talks with the government to build Auckland's convention centre, lifted annual profit by 8 percent, meeting guidance, on growth from New Zealand's largest city and a gain from the Rugby World Cup.

Normalised net profit, which strips out one-time items and adjusts for its theoretical win rate, rose to $141.4 million in the 12 months ended June 30, from $130.9 million a year earlier, the company said in a statement. Sales rose 8.4 percent to $950.7 million.

Earnings were in line with SkyCity's guidance in May for profit in the "low $140 millions" and just below the market consensus of analysts of $142.6 million. Reported net profit rose about 13 percent to $138.5 million.

The company's flagship Auckland casino and hotel complex benefited from "significant growth" in non-gaming revenue due to the RWC, lifting sales by 14 percent to $527.4 million, SkyCity said. Gaming revenue in Auckland rose 10 percent, which the company attributed to the success of its private gaming rooms.

"The four Horizon private gaming salons and seven suites have proven to be highly popular with international, mostly Asian Chinese customers," the casino operator said. "We have expanded our sales network in Asia to maintain growth in FY13 and beyond."

The Darwin casino and hotel boosted sales by 3.8 percent to A$117.9 million and earnings before interest, tax, depreciation and amortization by 1.2 percent to A$34.7 million. Darwin returned to growth in the second half of 2012 and the outlook for full-year 2013 is "positive," it said.

In Adelaide, sales rose 2.6 percent to A$160.8 million and ebitda edged up 1.9 percent to A$36.7 million.

SkyCity's Hamilton casino lifted sales by 8.8 percent to $52 million.

The Christchurch casino continues to face "challenging" trading conditions following the city's 2010 and 2011 earthquakes. Full-year sales fell 9.7 percent to $5.6 million and ebitda also fell 9.7 percent to $5.6 million, it said.

The recent release of the Christchurch Central Recovery Plan should provide "further clarity around the rebuild of the city, with the planned convention centre and other civic buildings within the proximity of the casino," it said.

The casino operator "aims to conclude negotiations with government on the New Zealand International Convention Centre development and expansion and regulatory reforms." Earlier this year it entered negotiations to build a $350 million international convention, the details of which are under wraps due to its commercial sensitivity.

The government is offering to extend SkyCity's gaming licence, letting it lift its number of pokie machines, in return for the company footing the bill for the centre's construction and operation. Brokerage Goldman Sachs estimated SkyCity would need 350 to 500 extra machines to profit from the deal, generating as much as $46 million of revenue in the first full year of operation.

The first six weeks of the financial year have "started well" with normalised revenue up more than 5 percent on the previous period. "The comparative period will be more challenging due to the rugby world cup 2011 impact in the full-year 2012,' it said.

It will pay a full year dividend of 8 cents a share, taking the full-year dividend to 17 cents. It will be paid on Oct.5.

Shares of SkyCity fell 0.8 percent to $3.55 and have gained almost 4 percent this year. The stock is rated 'outperform' based on the consensus of nine recommendations compiled by Reuters.

BusinessDesk.co.nz

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