SkyCity half-year profits flat at $66.6m

Photo / Brendon O'Hagan

SkyCity Entertainment Group has increased its December half-yearly profit slightly, making $66.6 million normalised net profit after tax, up on its previous $66.4 million.

Group normalised revenue including gaming GST rose 9.2 per cent to $510.0 million for the half-year to December 31, 2014, the company told the NZX. Normalised EBITDA was up 3.1 per cent to $154.4 million and normalised and the NPAT of $66.6 million was only up marginally on the previous corresponding period.

"Overall, the strong results of Auckland and IB were curtailed by the poor result of Adelaide. SkyCity Auckland, our flagship property, was again the standout performer across the group, with normalised revenue up 17.2 per cent to $302.5 million and normalised EBITDA up 15 per cent from $108.1 million to $124.3 million. This strong growth continues the positive momentum exhibited during the second half of 2014,, with growth across all business segments, delivering four consecutive quarters of EBITDA growth, on previous corresponding period.

"SKYCITY's international business delivered record levels of activity during the period, with group turnover and normalised revenues up 83.6 per cent to $4.7 billion and $63.8 million respectively," the company just announced.

The result was in line with expectations from research analysts Adrian Allbon of Craigs Investment Partners and Mark Wilson of Deutsche Bank said in their interim results earning preview that the result would contain good and bad news.

"We are expecting the upcoming result to provide something for both the bulls and bears. For the bulls, we are expecting the result to provide further evidence Auckland is returning to a sustainable growth profile. Our estimate is Auckland Ebitda up 8 per cent to $117 million," they said.

Earnings from Hamilton would improve, due to better cost management and its economy picking up.

"For the bears, Adelaide is likely to disappoint again based on our estimate for its Ebitda to be down 21 per cent year on year to A$15 million as it travels through peak disruption and battles a soft macro environment. We also expect the underlying Adelaide performance coupled with incorporating a stronger New Zealand dollar-Australian dollar cross rate to be a source of net downgrade to consensus," they said.

They are looking for an update on progress on Adelaide and the NZ International Convention Centre, saying these projects are a window for judging future shareholder risk/reward at current valuation levels on SkyCity, which says it provides jobs for 6500 people here and in Australia.

"Unfortunately, with the NZICC discussions still a work-in-progress with the NZ Government, we are not expecting SkyCity to be able to provide a lot of clarity around any adjusts to the capital profile for this project," they said.

The analysts predict Adelaide will outstrip Auckland by 2020.

"Our bullish outlook is based on its tourism appeal (Barossa, golf), solid direct air access into China (Hong Kong), Singapore and Malaysia coupled with the transformation project creating an improved value proposition to capture a second tier market to Crown and Star with a broader gaming offer, high-end food and beverage and presidential style hotel rooms," they said.

See the full half year results announcement here: