Disruption hinders SkyCity’s growth

Traffic disruption around SkyCity’s main casino in Auckland is making it tough to attract new customers who find it hard to get there, chief executive Graeme Stephens says.

But the casino operator was confident of turning around the fall in its ‘‘cream on top’’ VIP highrollers, and has seen a ‘‘renewed focus’’ at the construction site of its delayed convention centre.

The arrest of billionaire gaming mogul James Packer’s workers in China saw VIP spending at SkyCity drop by nearly a third this year, while a difficult economic environment in Australia’s Northern Territory led to a write down of its Darwin business by $102m.

This caused net profit after tax to fall 69 per cent to $44.9 million for the year to June 30, as revenue dipped 7 per cent to $1.02 billion.

Without the impairment, net profit after tax would have been up by 1.3 per cent, despite reduced international business and weak trading conditions in Australia.

SkyCity chief executive Graeme Stephens, who officially started in the top job in May, said the Darwin write down was ‘‘a bit of a red herring’’ which was the result of an underlying problem which had been coming for the last year or two.

Revenue from SkyCity's international business, what it calls its international VIP gamblers, dropped 30 per cent to $8.7b.

Regulatory changes in mid-2015 had seen the number of gaming machines at pubs and clubs in Darwin near SkyCity’s casino increase by 75 per cent.

Stephens said the more pressing issue for the casino was a bit of a slowdown in Auckland, which was about 80 per cent of its business.

It recorded record gaming revenue but year-on-year growth was more modest than it had been in previous years.

Stephens said regular customers were still coming, but disruption in the central business district caused by major projects such as the City Rail Link had made it ‘‘hard to get to’’ the casino.

SkyCity was working with Auckland Transport to keep a handle on transport trends.

‘‘It’s tough to get large growth with the disruption around us,’’ he said.

Revenue from SkyCity’s international business, what it calls its international VIP gamblers, dropped 30 per cent to $8.7b.

This was despite a strong Chinese New Year, and the result of increased restrictions on fund transfers and a reduction in larger customers following arrests at Crown casino.

Last year, 18 employees from Packer’s Crown Resorts casino in Australia were arrested in China facing possible charges of organising gambling activities for mainland nationals overseas.

Stephens said this had obviously been the catalyst for a big drop off in international business across the industry.

But the VIPs had always represented the ‘‘cream at the top’’ for SkyCity, and rises and falls were not going to change the entire company’s fortunes.

VIP gambling in 2016 had been a ‘‘massive step up’’, and this year’s reduction was more in line with where revenue had been in 2015. ‘‘Is it going to head back to 2016? ‘‘It will take some time. ‘‘But they’re going to continue looking for entertainment in casinos, and we’re a good product.’’

Stephens said delays to the expected completion of the International Convention Centre and Hobson Street hotel projects were not a game-changer because there had always been a buffer of time allowed for delays.

But since it had last month said there would be a delay to mid-2019 because of problems Fletcher Building had had with the project, Stephens said there had been a ‘‘renewed focus’’ at the site.

He would not rule out further possible delays, but said he was very comfortable with the contract.

‘‘We’re working with Fletchers to just get the thing delivered.

‘‘Time will tell.’’