VIP gamblers hammer SkyCity

Evan Davies: 'Sometimes you win, sometimes you lose.' Picture / Brett Phibbs

SkyCity Entertainment expects to post a lower profit this year after it made big payouts to high-rolling gamblers at its Auckland casino.

New Zealand's biggest casino owner said yesterday it expected its profit for this financial year to be between $100 million and $110 million - down from $120.1 million in the year to June 30.

Shares in SkyCity dropped 23c in early trading yesterday but closed down 6c at $5.12.

Its share price had dropped over several days this week from $5.39 on Monday.

Chief executive Evan Davies said weaker economic conditions, a possible tax alteration due to the stronger New Zealand dollar and pay-outs in its VIP area in Auckland were factors in the earnings update.

The results from VIP commission table games in Auckland were $9.1 million lower than expected so far this year.

"Sometimes you win, sometimes you lose and you hope you win more often than not - and the maths says that you will," said Davies.

"But sometimes you do lose and this time we lost."

He said the loss was because of more than one payout.

The "vast majority" of commission players - a select group of high rollers - were from overseas, said Davies, and numbered in "the hundreds rather than the thousands" annually.

Deustsche Bank analyst Mark Wilson said VIP play had an "inherent volatility" and the market should focus on the tax and economic issues in the earnings update.

Wilson said the "underlying downgrade" in profit is likely to be 5 per cent - with the possible tax change expected to cost the company about $2 million and the weaker trading conditions around $4 million.

Last month , a Thomson Financial survey of analysts' SkyCity forecasts predicted a 1.4 per cent fall in its profit this year to $118.3 million.

Davies said at SkyCity's annual result announcement in August that weaker economic and trading conditions had affected the Auckland casino at the end of the last financial year.

The company's announcement said those conditions had continued into the first half of this financial year.

"Revenues are down on expectations," said Davies, citing "things that have immediate impact on people's pockets" such as petrol prices.

Davies said the strengthening of the New Zealand dollar against the Australian dollar had the potential to push up SkyCity's tax rate by 2 percentage points this financial year.

The projected profit range assumed that the higher - 30 per cent - tax rate would apply, said Davies.