Sky City posts vastly increased after-taxprofit

The turnover of Sky City Entertainment's international business, or high rollers, was up almost 70% in the second half of its trading year. Photo: Getty Images
The turnover of Sky City Entertainment's international business, or high rollers, was up almost 70% in the second half of its trading year. Photo: Getty Images
Casino operator Sky City Entertainment has posted a hugely improved reported after-tax profit of $169.5million, as its three New Zealand operations delivered higher returns than its two Australian casinos.

High-rolling international gamblers were credited for Sky City ending its trading year on a high.

For its full year to June, revenue for Sky City rose 7.3% to $1.09billion and earnings before interests, tax, depreciation and amortisation rose 5.6% to $338million, while its reported after-tax profit rose by 277% to $169.5 million, although last year's result was slashed by a hefty $105 million writedown of Darwin casino's value at the time, the 2017 profit coming in at $40million.

The writedown came from a surprise Northern Territory Government decision to remove the cap on gaming machine numbers, which subsequently rose by 75% in Darwin.

Sky City will pay a final 10c dividend, taking the annual dividend to 20c.

Forsyth Barr broker Suzanne Kinnaird said international business, or high rollers, was the ''stellar'' result within the operation, being up 10% in the first half but rising by 68% in the second-half trading, or by $7.5billion in turnover.

New Zealand's only listed casino company said its international VIP business of high roller gamblers had recovered strongly from a challenging 2017 financial year, hurt by Chinese restrictions on funds transfers and reduced visits by big-spending customers, BusinessDesk reported.

''The international business was the key standout ... with a stellar second half for turnover, ahead of our expectations,'' Mrs Kinnaird said.

Sky City chief executive Graeme Stephens said there was a strong finish in May and June, with the international business in particular leading the charge, The New Zealand Herald reported.

However, Mrs Kinnaird said Darwin casino ''disappointed'' expectations after the Keno jackpot was won three times, against no wins a year ago, which meant a decline to Ebitda, she said.

Craigs Investment Partners broker Peter McIntyre noted at Darwin, Sky City had received a number of bids above book value and final bids were expected ''in the next couple of weeks''.

Mrs Kinnaird also said the Darwin sale was ''nearing conclusion'', saying indicative bids were above the $A195million book value of the casino.

Mr Mcintyre described the overall result as ''solid'', having been driven by a good fourth quarter from international business.

''But there was also a stronger-than-expected print from Auckland and Adelaide's electronic gaming machines, and a good second-half performance in Hamilton and Queenstown,'' Mr McIntyre said.

International business turnover rose almost 39.2% to $11.9billion, of which Auckland's share rose 36.9% from last year to $8.2billion.

The ''actual win'' percentage in international business rose from 1.27% last year to 1.32% for 2018.

Auckland's revenue rose 3.2% to $584.6million, Hamilton was up 2.2% to $60.7million, Queenstown rose 9.2% to $13million, Adelaide rose 0.5% to $A148.9million and Darwin was 1.6% up, to $A114.1million.

Sky City said at Queenstown Wharf, which had recently reduced its operating hours, its improved performance was driven by increased visits, especially from premium customers and tourists.

Mrs Kinnaird said Sky City had provided first-time guidance for 2019, indicating ''modest growth'' in Ebitda, potentially around 3.5%, but she expected after-tax profit to be slightly down due to higher tax rates, following legislative changes.

A ''sight delay'' had been flagged in capital expenditure on Sky City's international convention centre in Auckland, with completion still expected in December next year and ''in line'' with its budget.

Mr McIntyre said the expenditure and year end debt were lower than expected, but appeared due to payment deferrals on the convention centre.

Sky City had committed debt facilities of $1.1billion at year-end, with $474million currently drawn.

He said Sky City expected further growth in Auckland casino trading and international business during 2019, although that would be offset by higher corporate costs.

simon.hartley@odt.co.nz

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