Winners chip away SkyCity’s profit
Group cites payouts to high rollers and larger tax bill for 14.7% dip in result
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 per cent to $144.6 million in the 12 months ended June 30 due to a casino win rate in international business of 1.00 per cent, below the theoretical win rate of 1.35 per cent.
Profit was also dented by a $6.5m 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 chairman 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 per cent to $173m and earnings before interest, tax, depreciation and amortisation were up 1.3 per cent at $342.7m.
The difference is most apparent in the international business — largely wealthy players from overseas — which delivered turnover of $14.1 billion up 18.9 per cent, with normalised ebitda of $41.7m.
Reported ebitda — which shows
the actual experience — tumbled 91 per cent to $3m due to that low casino win rate. Forsyth Barr analysts had expected normalised net profit of $164.5m, 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 August 30 for payment on September 13.
The stock opened at $3.98 yesterday, down 0.8 per cent, and has gained 12 per cent 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 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 per cent to $267.9m despite a more challenging operating environment.
The company said it is currently investing more than $700m within the SkyCity Auckland precinct with the development of the New Zealand International Convention Centre, an adjacent laneway, over 1300 additional car-parking spaces and the new 300-room, 5-star Horizon Hotel — all due for completion in 2020.
On the NZICC, Stephens indicated some potential date change, pointing out the business was now officially stating completion as potentially being in late 2020 “but we don’t know. There’s no doubt the building is progressing and you have seen that but trying to get it down to the month is still challenging.”
“We have not made final commitments to conferences in October and November [next year],” he said. “If you don’t do October or November, it’s quite naturally in December and January. So then it would be February when we have a greater degree of confidence. None of the conferences are confirmed but we’re in discussions with organisers,” he said.
SkyCity Hamilton achieved ebitda of $26.9m, consistent with the prior period. Adelaide casino’s ebitda was $22.3m, up slightly on a like-for-like basis after adjusting for A$1.7m ($1.79m) of staff restructuring costs.
The combined Queenstown properties grew earnings by 13 per cent to $2.3m driven by increased visits from premium customers and operating leverage.
Our outlook for FY20 is more cautious than prior periods. However, we continue to expect growth. Graeme Stephens (above), SkyCity chief executive