SkyCity Entertainment Group posted a 12 per cent lift in first-half profit on growth from its combined New Zealand properties, a recovery in the international business and stable performance in Australia. New Zealand's only listed casino company said it remains on track to achieve "modest" full-year growth.
Normalised net profit rose to $93.5 million, or 13.9 cents per share, in the six months ended December 31, from $83.8m, or 12.7 cents, a year earlier, the Auckland-based company said in a statement. Earnings before interest, tax, depreciation and amortisation rose 6.8 per cent to $180.6m, while revenue lifted 4 per cent to $554.7m.
The results "deliver growth on the prior year and are largely in-line with our expectations and previous market guidance.
We continue to make progress on our current strategic initiatives and the significant developments underway in Auckland and Adelaide position the company for earnings growth and creation of shareholder value over the medium-term," said chief executive Graeme Stephens.
Key to the result was a recovery in the International Business after a challenging prior year, SkyCity said. Turnover was up 9.4 per cent to $4.8 billion and normalised ebitda up 87 per cent to $14m.
"This performance was underpinned by an increased focus on key customers and a significant improvement in operating margins following an operational review during 2H17," said Stephens.
It continues to target $10b in International Business turnover for the full year.
SkyCity's Auckland casino, which accounts for the bulk of its earnings, continues to benefit from New Zealand's record tourism and migration, and additional gaming concessions that it won from the government in return for agreeing to build a convention centre for the city.
First-half earnings were in line with guidance, SkyCity said. Revenue, excluding the International Business, was up 2.1 per cent to $289.9m and ebitda, also excluding International Business, lifted 3.6 per cent to $131m versus the same period a year earlier.
SkyCity Hamilton had a 3.3 per cent lift in revenue to $30.6m and the combined Queenstown properties returned to growth during the period, but remain relatively immaterial to the group's results, it said.
In Australia, revenue lifted 1.3 per cent to A$78.1m ($84.1m) in Adelaide and SkyCity Darwin saw flat revenue at A$62m.
Regarding major growth projects in Auckland, it said the overall programme for the New Zealand International Convention Centre and Hobson Street hotel projects is well advanced and Fletcher Construction continues to target completion of the projects around the middle of 2019, which is a six-month delay from the contracted dates.
"We remain comfortable with our contractual arrangements, which provide for liquidated damages that should mitigate our losses through delay, but legal challenges from Fletcher Construction are possible," it said.
It expects its investment in the projects to be in-line with the original budget and said it has secured six international conferences for 2020, as it escalates its sales and marketing efforts.
In Australia, SkyCity said the expansion of the Adelaide Casino precinct continues to progress well following the signing of a Development Agreement with the South Australian Government in late July 2017 and the total budget expected for the project remains around A$330m.
It continues to look to leverage existing assets and strong market positions underpinned by long-term exclusive casino licences. "To this end, we have commenced master planning work for both our Auckland and Hamilton properties – we believe both properties present future opportunities for development which will create value for shareholders," it said.
Regarding the Darwin property, it continues to evaluate a range of options as part of a strategic review started in July 2017 following a write-down in its value.
"A full (or partial) sale of our interest in the property remains a possibility at the right price, but there is no urgent time pressure given that the property is profitable and cash generative – particularly with the recent stabilisation and slightly improved performance," it said.
The company will pay a 10 cent interim dividend on March 16.
Looking ahead, it said full-year growth will be underpinned by growth from its combined New Zealand properties, improved performance from its Australian properties and an ongoing recovery in its International Business. It noted, however, it will be "offset by higher corporate costs as the company continues to invest in technology and returns to a more normal period of executive remuneration and incentive payments."
The shares last traded at $4.03 and have risen 1.5 per cent over the past year.