SkyCity Entertainment Group's after-tax net profit has fallen nearly 70 per cent, from $145.7 million last year to $44.9m this year, due to problems with its Darwin casino property which has been written down in value.
The huge Auckland-headquartered business has just reported its full year result for the June 30, 2017 year showing reported net profit down 69.2 per cent. However, it said normalised net profit after tax was $154.6m, up 1.3 per cent.
"Reported NPAT was down 69.2 per cent to $44.9 million, primarily due to a A$95 million
impairment of Darwin goodwill following an annual impairment review. Reported
EBITDA was down 8.1 per cent to $307.0 million and reported revenue down 7.2 per cent to $1.02b," the company said.
Darwin is facing increased competition from pubs and clubs and a difficult economic environment in the Northern Territory, the company said.
Law changes meant gaming machines at other Darwin properties had risen 75 per cent since 2015, SkyCity Said.
SkyCity Auckland made $649m revenue, Adelaide A$169m, Darwin A$117m, Hamilton A$60m and Queenstown $18m. But reported group revenue fell from $1.10b last year to $1.02b this year. Reported group operating earnings also fell from $334m to $307m and declared earnings per share fell from 21c to 20c.
Graeme Stephens, SkyCity executive, told the Herald revenue was down because international business revenue had dropped 42 per cent and 2016 had been such a strong year.
"The market was expecting this sort of result," he said, although June trading conditions had been tougher than anticipated.
Darwin's writedown was "an accounting entry, neither here nor there, I'm not too fussed by that to be honest." The company wanted to extract more value out of Darwin "without putting more money into it and without selling it." Options include developing adjoining vacant land which the company owns but cannot develop until next year, Stephens said, indicating a hotel joint venture with a developer was one possibility.
Paul Turnbull of First NZ Capital said the result was slightly disappointing at an EBITDA level but SkyCity's guidance for 2018 was for only modest growth which he said suggested downgrades to consensus forecasts.
Chelsea Leadbetter of Forsyth Barr said the result was "modestly below our expectations". Hamilton had performed stronger than expected while Adelaide was weaker, she said.
No guidance or recent trading insight had been provided, she said.
Outlook statements indicate SkyCity is expecting modest growth in 2018, with growth in New Zealand and international business offset by weakness in Darwin and higher corporate costs, she said.
"SkyCity flagged disruption will continue to impact both Auckland and Adelaide in 2018 - not surprising given the development in progress," Leadbetter wrote.
Mark Lister, head of private wealth research at Craigs Investment Partners, said the result was "not terrible but certainly softer than expected. The company seems to have finished the year in a pretty sluggish fashion. The international business looks weaker than expected and not a lot to get excited about from the Australian operations either.
"Earnings per share are down 9 per cent, dividend down 5 per cent. The market is, unsurprisingly, a little disappointed and the share price has been sold off slightly," Lister said.
SkyCity was trading around $3.96 this morning.