SkyCity announces buyback
AUCKLAND: SkyCity Entertainment Group investors could get a boost this year, with the company saying it will buy back 5% of its shares on the NZX over the course of 2019.
The buyback, starting next week, would be worth $135 million at the current share price.
SkyCity’s announcement came as it reported an 11.4% fall in firsthalf net profit to $82.8 million even as revenue was up 1% at $460.2 million.
Like those of other casino operators worldwide, SkyCity’s results are complicated by an accounting convention under which it reports both actual and ‘‘normalised’’ earnings.
The latter takes the volatile earnings from international highrollers — rich foreigners who tend to fly in, often in a private jet, play baccarat madly and fly out again — and applies a theoretical 1.35% ‘‘win rate’’ to the amount of money the casino makes from them.
Because the highrollers actually only gave SkyCity’s casinos 0.98% of their winnings in the six months ended December 31, the company’s ‘‘normalised’’ theoretical figures look a lot healthier than their reported ones. Normalised profit was up 11.4% at $97 million, and revenue rose 10.9% to $598 million.
Josh Wilson, senior portfolio manager for NZ Funds, said stock markets normally reacted positively to news of a share buyback.
The move likely showed the influence of the company’s chairman Rob Campbell, he said.
A former union organiser, anarchist bookshop owner and also chairman of Tourism Holdings, Summerset Group and WEL Networks, Mr Campbell joined SkyCity just over a year ago. He had a reputation for making sure a company’s capital was allocated to its highestreturning asset, Mr Wilson said.
The buyback was a surprise given SkyCity’s ambitious building projects at its Auckland and Adelaide casinos. But it would also be a signal to the market that it was not expecting the projects to blow out financially.
Delays at SkyCity’s Fletcher Buildingled International Convention Centre and Horizon Hotel developments have been wellsignalled.
Contractual completion deadlines have come and gone for both projects, with the hotel now expected to be finished ‘‘within 12 months’’ and the convention centre to open in the second half of 2020, SkyCity said.
It also said that all aluminium composite panels (ACP) on the convention centre facade will need to be replaced, adding an additional $25 million to the cost of the project. Highlyflammable ACP panels led to the devastating Grenfell Tower fire in London in 2017.
The shares fell 2.5% to $3.83, giving up some of their recent gains since the company flagged the higher ‘‘normalised’’ earnings at the end of last month. — BusinessDesk