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Sky City posts 23% drop in full-year profit

Sky City posts 23% drop in full-year profit, adds hotel to convention centre plan

By Jonathan Underhill

Aug. 13 (BusinessDesk) - SkyCity Entertainment Group, New Zealand’s only listed casino company, posted a 23 percent drop in full-year profit on the impact of the strong kiwi dollar and Adelaide redevelopment costs. It also added a five-star hotel to its convention centre development.

Profit fell to $98.5 million, or 17 cents a share, in the 12 months ended June 30, from $127.3 million, or 22.1 cents, a year earlier, the Auckland-based company said in a statement. Revenue fell 4.8 percent to $902.5 million. Profit missed a forecast of $114 million by brokerage First NZ Capital.

An improved performance at the company's flagship Auckland facilities and relatively steady returns from Darwin and Adelaide were masked by the impact on Australian earnings of a kiwi dollar that averaged 90.49 Australian cents in the latest year, up from an average cross rate of 80.03 cents in 2013. That shaved a theoretical $8.8 million from the value of earnings before interest, tax, depreciation and amortisation in Australia, and trimmed profit by $2.5 million on the same basis. Sky City's normalised revenue fell a more modest 1.9 percent to $927 million and profit fell 8.1 percent to $123 million on that basis.

"While general economic conditions have been buoyant in Auckland, conditions in Hamilton, South Australia and, to a lesser extent, Darwin have been more challenging," the company said in presentation notes, adding there were "overall disappointing results for Hamilton for the year."

The company achieved "growth across our core businesses, underpinned by strong Auckland and International Business performance with good and sustained momentum in the second half FY14," it said. This was masked by the strength of the kiwi dollar and "the ongoing disruption at the existing Adelaide Casino of the extensive construction works as we transform the property to take advantage of the reforms negotiated with the South Australian government."

The company struck a deal with the government to build a new convention centre for Auckland in exchange for increased gaming concessions. Today it announced that the New Zealand International Convention Centre complex would include a 300-bed hotel, a pedestrian laneway of bars, restaurants and boutique shopping on its property on Nelson and Hobson Streets.

Net debt stood at $659 million at June 30 and the company had $330 million of undrawn facilities. Average borrowing costs were 6.92 percent in 2014, down from 6.97 percent the previous year.

Capital spending over the next six years would be about $807 million to complete the NZICC master plan and the Adelaide redevelopment, it said. Options for funding including entering joint ventures on some capital projects, issuing capital notes or debt securities with some equity characteristics and the sale of non-core assets such as the Federal Street carpark, it said.

Sales in Auckland rose 3.3 percent to $533 million, led by a 6.7 percent gain in non-gaming revenue to $133.5 million and sales from gaming machines and tables that rose 2.2 percent to $399.8 million. Normalised Ebitda rose 3.9 percent to $217.9 million and the Ebitda margin widened to 40.9 percent from 40.6 percent.

Adelaide casino gaming revenue rose 5 percent to A$152 million while non-gaming sales fell 9 percent to A$14 million, lifting total sales to A$166 million. Normalised Ebitda fell 11 percent to A$33.8 million and the Ebitda margin shrank to 20.3 percent from 23.6 million. Darwin's gaming revenue fell 1.3 percent to A$101 million and non-gaming rose 2.9 percent to A$32 million, listing total sales to A$133 million. Normalised Ebitda fell 4.5 percent to $36.3 million and the Ebitda margin shrank to 27.3 percent from 28.5 percent.

Normalised Ebitda from Sky City's other New Zealand operations fell about 16 percent to $19 million, as a drop in sales from Hamilton offset gained in Queenstown and its international business.

Sky City will pay a final dividend of 10 cents a share, making 20 cents for the year, unchanged from 2013.

Separately, Sky City named Rob Hamilton, First NZ Capital's investment banking team leader, as chief financial officer.

The shares last traded at $3.55 and have declined 4.8 percent this year.


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