SkyCity annual profit rises 13% on Auckland casino trading, high-roller gamblers

Wednesday 10th August 2016

SkyCity Entertainment Group, which has four casinos in New Zealand and two in Australia, posted a 13 percent gain in full-year profit on better trading at its key Auckland casino and record activity from high-roller gamblers.

Net profit rose to $145.7 million, or 24.3 cents per share, in the year ended June 30, from $128.7 million, or 22 cents, a year earlier, the Auckland-based company said in a statement. Revenue increased 9.1 percent to $1.1 billion.

SkyCity's New Zealand casinos are benefiting from the country's record tourism and migration, and its landmark Auckland complex got a boost from new gaming concessions, including additional gaming machines and cashless payment technology, that it won from the government in return for building a convention centre for the city. SkyCity's international business, the term it uses for high-roller gamblers, had record activity for the year.

"The continued momentum at SkyCity Auckland reflects the significant investment in the property over the past few years, initiatives to drive incremental visitation through customer segmentation and positive external factors which remain supportive of the business," interim chief executive John Mortensen said. "The property is also benefiting from the new gaming concessions that were activated in November 2015."

Excluding its international business, the company's Auckland unit, which accounts for 85 percent of the earnings before interest and tax, increased ebit by 8.2 percent to $195.2 million. At its other New Zealand businesses, which include one casino in Hamilton and two in Queenstown, ebit edged up 1 percent to $16.2 million.

In Australia, earnings at the company's Adelaide casino lifted 36 percent to $9.4 million, as better cost control improved margins. However earnings declined 16 percent to $22.5 million at the company's Darwin business which has suffered from reduced activity after the number of workers involved in the construction of the INPEX liquid petroleum plant wound down, and it said it was facing increased competition from pubs and clubs and impacted by higher gaming tax rates.

Still, SkyCity said its confident with the medium-to-long-term outlook for Darwin, which is in a strategic location close to Asia, and has applied to extend its casino licence for a further five years out to 2036 and appointed David Christian as general manager in June.

SkyCity's international business boosted ebit 25 percent to $37.3 million as it benefited from a new gaming salon in Adelaide, and new 'grand horizon' gaming salons in Auckland, which have been popular with Asian VIP customers and will help ease capacity constraints during peak periods such as Chinese New Year and Golden Week.

The company said there is potential for further significant growth in its international business over the medium term, and it intended to continue to "invest prudently in the business" to boost shareholder returns.

SkyCity said the second half of its financial year was below expectations, due to quieter trading in May and June.

In its New Zealand business, SkyCity expects macroeconomic, tourism and demographic drivers to remain supportive, and that Auckland will continue to benefit from new gaming concessions and recent investment in facilities.

Still, in Australia the broader macroeconomic environment is likely to remain challenging, with difficult trading conditions and competitive pressures expected to persist in Darwin, it said.

Its international business is expected to benefit from a continued strong Asian tourism outlook for New Zealand and Australia, with Auckland's VIP offering and growth potential enhanced following the opening of its 'grand horizon' salons, significant growth opportunity in Queenstown, and further growth potential in Adelaide underpinned by new salons and increased VIP visitation to Australia, the company said.

SkyCity will pay a final dividend of 10.5 cents per share on Sept. 16, taking its full-year dividend to 21 cents, up 1 cent per share on the year earlier. Its shares fell 2.7 percent to $5.

(BusinessDesk)

BusinessDesk.co.nz

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