Sharechat Logo

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

Wednesday 14th August 2019

Text too small?

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)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

FMA says ANZ should have reported Hisco house sale in financial statements
ANALYSIS: Another new head for Xero's American dream
Jetstar losing money on regional NZ services, watching market 'closely'
A2 Milk says rising environmental costs not a 'big risk'
Cavalier Corp shares fall 16% as it announces write-down
Twyford's choice: NZTA or Super Fund for Auckland light rail
Auckland Airport boss upbeat about future but warns against complacency
NZ Shareholders' Association to oppose Stride's directors' fee bump
Sky TV cans dividend, writes off $670m ahead of rights battle
Ebos shares hit record on promise of increased earnings

IRG See IRG research reports