SkyCity shares drop as casino profits forecast to plunge

Chief executive Evan Davies. Picture / Paul Estcourt

Shares in casino operator SkyCity fell 13c - or 3 per cent - to $4.22 yesterday after the company said the smoking ban could help to wipe up to $19 million from annual profit.

It cut its earnings guidance from $114 million-$119 million to $100 million-$103 million.

Chief executive Evan Davies said the business had begun to recover from the ban’s early impact - but "slower than we had expected".

SkyCity blamed three temporary factors for the cut in forecast profit: the smoking ban, problems with new "ticket technology" and a delay in finishing stage one of the Adelaide casino redevelopment.

The company originally thought the impact of the smoking ban would ease over 12 months - with a big drop in revenue for the first three or four months, then a slow recovery over the next eight to nine months.

It now says the recovery will take longer than 12 months.

Paul Glass, a principal at fund manager Brook Asset Management, said Brook sold out of SkyCity after forming a view that the smoking ban would be more of a problem than the company anticipated.

"It’s one of those events that must be quite difficult to forecast because you can look around and see the impacts in Australia - obviously that was reasonably severe," he said.

"You would expect a reasonable level of impact in New Zealand, but it’s the first time the company has been through it.

"I guess it turns out they were probably a bit optimistic."

Macquarie Equities investment director Arthur Lim said SkyCity had been giving free carparking to regular customers, which seemed to have failed to stimulate business.

SkyCity had expected a $10 million impact from the ban, but $20 million now looked likely.