SkyCity trims FY guidance to 'low $140 millions' on Adelaide

BUSINESSDESK: SkyCity Entertainment Group, the casino operator in talks with the government to build a convention centre in Auckland, has cut its full-year earnings forecast to the "low $140 millions" on softer trading conditions in South Australia.

The casino operator predicted full-year profit in the "high $140 millions" at its first-half results announcement in February, but has pared back expectations due to softer trading conditions, especially in Adelaide, it said.

That would still be higher than 2011's full-year profit of $130.9m.

"There is no doubt the retail environment in Australia at this time is challenging and particularly so for Adelaide," it said.

"Revenue growth in our Adelaide property has slowed the, the NZD/AUD exchange rate has firmed and accordingly EBITDA (earnings before interest, tax, depreciation and amortisation) in the second half is now anticipated to be down on the prior period."

SkyCity boosted its first-half earnings on the back of a strong performance at its Auckland operation, and the company expects to achieve "high single-digit EBITDA growth in this second half" from the casino, based on strong growth in its international business.

It expects second-half earnings at its Darwin property will be flat compared to the same period a year earlier.

It flagged "good growth" at its Hamilton and Queenstown properties, but said its Christchurch casino won't meet the same second-half earnings as last year.

The company is in negotiations with the New Zealand government to build a $350m international convention centre big enough to hold global-sized events, something the country lacks.

The details are under wraps because of commercial sensitivity, but the government is offering to extend SkyCity's gaming licence, letting it lift its number of pokie machines, in return for the company footing the bill for the centre's construction and operation.

Earlier this year, brokerage Goldman Sachs estimated SkyCity would need 350 to 500 extra machines to profit from the deal, generating as much as $46m of revenue in the first full year of operation.

A 2009 report for the former Auckland City Council by the Ministry of Economic Development said the convention centre would run on an operational breakeven basis, generating $17.7m in revenue, with costs and overheads of some $16.6m.

The full-year result will be released on Aug. 15.

SkyCity's shares fell 0.5% to $3.90 in trading yesterday, and have gained 14% this year.

The stock is rated "outperform", based on the consensus research of nine analysts compiled by Reuters.