SkyCity down on revenue, earnings expectations

SkyCity Entertainment shares were sold down yesterday after the company disappointed investors with a lower than expected profit announcement.

Craigs Investment Partners broker Chris Timms said he had been looking for revenue and operating earnings in line with the 2012 result, on the back of growth in international and non-gaming revenue, despite a reduction in local gaming after the Rugby World Cup boost in 2012.

As it turned out, SkyCity delivered normalised revenue of $948 million for the year ended June, compared with $951 million for the previous corresponding period (pcp). Operating earnings for the period were $302.8 million against $310.6 million for the pcp. An unchanged dividend of 10c per share would be paid.

SkyCity chief executive Nigel Morrison told a briefing a group of 20 Asian gamblers, who left without paying debts of $2.4 million, were getting some of the blame for a drop in SkyCity's profits.

It is thought the group had also ripped off other casinos.

The group had been active at other casinos but none that SkyCity owned.

''These guys have also done this at other properties. It's a fact of doing business in this space.''

SkyCity had increased its criminal surveillance after being scammed, hiring a top casino crime-buster, Mr Morrison said.

None of them had been a particularly large player, but SkyCity had been unable to get back from the group the money owed.

Chief financial officer James Burrell said the group was in the property in the first half of the financial year. SkyCity was working hard to recover the money but so far had not been successful.

Mr Timms said within the divisions, Auckland and Hamilton were weak, Adelaide was moderate and Darwin was positive.

International performed well in turns of turnover and Auckland recovered below theoretical win rates from the first half.

''That being said, the lower margin and riskier nature of this business was also evident with a $2.7 million provision being made predominantly to cover a group that visited the casino and who have not honoured their debts,'' Mr Timms said.

An increase in the New Zealand dollar against the Australian currency neutralised some of the gains from Australia when converted into New Zealand dollars, something that would further drag on reported performance if current spot rates continued to hold, Mr Timms said.

Group capital expenditure of $123 million was lower than expected. SkyCity noted the Hamilton hotel project was on hold pending further feasibility studies.

The total capital expenditure between 2014 and 2019 associated with Auckland and Adelaide had been put at $780 million.

The company had reiterated that banking facility capacity and operating cash flows could meet those requirements and the current dividend policy was sustainable, he said.

 

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