SkyCity Entertainment Group's Auckland performance failed to impress analysts but they praised the Darwin operation and said overall the business had delivered on expectations by pushing up bottom-line profit when Rugby World Cup's one-off gains were excluded.
Nachi Moghe, Morningstar Research's senior equities analyst, said Auckland had under-performed in the December half-year even though the overall result was no surprise to him.
"The results seems more or less in line. Auckland was a slight disappointment. I was expecting ebitda, excluding RWC [Rugby World Cup], to be slightly higher. It came in slightly below. While revenue was okay, it looks like margins were somewhat pressured either due to higher expenditure or mix issues," Moghe said.
"Adelaide and Darwin were probably slightly better, especially Darwin. I think you are seeing the impact of the lagoon facility in Darwin driving visitations."
Jeremy Simpson, Forsyth Barr analyst, said overall, the half-year result was on target.
"Auckland looks slightly softer than we were expecting on the revenue line," Simpson said.
SkyCity reported Auckland's normalised revenue of $263.7 million for the half-year, $5.2 million or 1.9 per cent down on the previous half-year, which it attributed to the previous year's $10.7 million Rugby World Cup revenue impact and the new Bally gaming system which reduced the latest half-year revenue by about $9.7 million.
But even excluding Bally, SkyCity said Auckland's electronic gaming machine revenues were flat.
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Overall, the company made net after-tax profit of $74.4 million in the half year, up on last year's $72.3 million and declared a new dividend policy, promising to pay not less than 20c a share and not less than 80 per cent of annual normalised net profit after tax.
Without adjusting figures for Rugby World Cup, first-half profit fell 16 per cent on a lower win rate for its international business. Profit missed the $75.9 million forecast by First NZ Capital.
Nigel Morrison, chief executive, said the new dividend policy was subject to maintaining its investment grade credit rating and giving priority to funding major strategic projects.
He expressed enthusiasm for the A$350 million Adelaide expansion but sounded more reticent on Auckland. SkyCity had $500 million undrawn loan facilities "so plenty of capability for Adelaide and should it proceed, the New Zealand International Convention Centre".
But the company had carrying costs on the $40 million land it had bought, including a $1.4 million annual interest bill.
"We are holding these facilities that normally we would not do," he said.
The Philippines presented excellent opportunities.
"I worked in Macau and it feels like Macau 10 years ago," Morrison said of Manila.
"The Philippines is recognised as one of the most exciting new emerging gaming markets in Asia," he said.
"We are monitoring the competitive landscape and building relationships with key stakeholders in this developing market. It's an exciting area with a lot of population close to major gaming clientele, established for some time and everybody speaks English.
"The Philippines Government has issued four major licences for major properties over there."
James Burrell, chief financial officer, said Manila was close to China "and Chinese have an appetite for gaming".
Morrison said based on market conditions and current trading, the company would be disappointed if SkyCity did not declare net after-tax profit "in the $140 millions" for the June year.
Morrison said the highest bets placed were in the $7 million-$8 million range and people both won and lost these amounts.
Shares in the company closed up 1c yesterday at $4.01.
