Profit drop 'acceptable' - SkyCity

SkyCity Entertainment Group’s boss Nigel Morrison says a $11.2 million drop in full-year net profit is “acceptable” after last year’s record result.

The hotel and casino operator this morning revealed a net profit of $127.3m for the year ended June 30, 2013 -- down on last year’s $138.5 million, which was bolstered by a $4.7 million contribution from the Rugby World Cup.

The result was below First NZ Capital's forecast $129.2 million.

This year’s profit was without a full year’s contribution from Christchurch Casino after  Sky City sold its 50% stake in December for $80 million.

Appreciation of the New Zealand dollar against the Australian dollar in the second half of the year reduced the strong performance fo the Australian businesses.

An additional interest costs of $1.6 million was incurred in relation to holding land in Auckland for the New Zealand International Conventional Centre.

“While on the face of it, the headline normalised net profit may be perceived as somewhat disappointing, I think when you take into account the growth in our international business, the high win rate in the second half, the success of Darwin, the strengthening NZ dollar and given we are comparing to the RWC year, on balance it is an acceptable result,” Mr Morrison says.

Inking an agreement with the New Zealand Government to build a $402 million international convention centre in Auckland, in exchange for extra slot machines and a 27-year extension to its exclusive licence, was a highlight of the year.

Other highlights included ongoing strong growth in the company’s international business including strong performance in Darwin after the  new Lagoon resort and Horizon suites had opened.

In Australia, Sky City also got the go-ahead for an A$300 million-plus expansion of its Adelaide casino operations, which will see it create the city's first six-star boutique hotel

“The 2013 year was a significant year for SkyCity as we concluded agreements with governments in New Zealand and South Australia that will underpin the foundations of our long term future growth,” Mr Morrison says.

“The progress we have made in Auckland and Adelaide means that SkyCity is well positioned for the future with secure long-term gaming licences and additional and more competitive gaming product secured in our largest businesses.”

SkyCity boosted its full-year, fully tax-paid  dividend by 25% to 10 cents per share. Payments for the full year were 20 cents, up from 17 cents last year.

Shares in SkyCity [NZX: SKC] opened at $4.10 this morning but have fallen to $3.90.

In Auckland, the company's biggest operation, normalised earnings before interest, tax, depreciation and amortisation fell 1% to $210 million after adjusting for a $6 million Rugby World Cup benefit in 2012. Normalised EBITDA fell 1.3% in the second half from a year earlier.

"It was always going to be challenging to outperform Auckland's 2012 result," Mr Morrison says. "The full year result reflects unpredictable consumer spending, particularly in the third quart of 2013,  during Auckland's long summer."

Normalised revenue in Hamilton was unchanged at $52 million while Queenstown Casino recorded normalised earnings of $1.4 million, also unchanged from a year earlier.

Darwin's revenue climbed 13% to A$133.5 million and Adelaide's was unchanged at A$160.4 million.

-additional reporting BusinessDesk

gbond@nbr.co.nz