Sky City 1H profit falls 11% as Adelaide weighs

Sky City Entertainment Group, New Zealand's only listed casino company, posted an 11 percent decline in first-half profit as it got less benefit than expected from high roller customers and disruption from the redevelopment of the Adelaide casino weighed on earnings.

Profit fell to $54.6 million, or 9.3 cents per share, in the six months ended Dec. 31, from $61.1 million, or 10.4 cents, the year earlier, the Auckland-based company said in a statement. That's below the $69.3 million expected by Forsyth Barr and the $68.8 million forecast by First NZ Capital. Revenue rose 6.6 percent to $450.7 million.

Sky City, which has four casinos in New Zealand and two in Australia, benefited from an improved performance at its flagship Auckland casino, following investment in the gaming facilities, restaurants and hotel suites. However earnings fell at Adelaide casino as a A$50 million redevelopment reduced visitation and increased costs.

"A favourable macro outlook for the next few months in Auckland, with a large pipeline of events, in addition to Chinese New Year celebrations starting in late February, should underpin performance for the remainder of FY15," the company said in presentation notes. "Adelaide (is) starting to show early signs of recovery after completion of the redevelopment."

Sky City said its international business, which caters to big-spending VIP customers, didn't do as well as expected in the first half, with an average actual win rate of 1.04 percent, below the theoretical win rate of 1.35 percent and the 1.28 percent rate for the year earlier period. However the VIP unit recovered in January to pull the win rate back above 1.5 percent for the seven month period, it said.

Shares in Sky City fell 1.3 percent to $3.85 and have gained 6.9 percent in the past 12 months, lagging behind the NZX 50 Index's 19 percent advance.

The company will pay a first-half dividend of 10 cents per share on April 2, in line with a policy for annual payments of at least 20 cents.

In the first half, Sky City's Auckland business increased earnings before interest and tax by 9.5 percent to $88.9 million as revenue rose 9.7 percent to $234.1 million and expenses gained 11 percent to $121.8 million.

Ebit at the company's Adelaide unit slumped 74 percent to $3.7 million as revenue fell 3.2 percent to $77.3 million and expenses increased 8.8 percent to $65.9 million.

Sky City, which is seeking government funding to fund a cost blowout for its planned Auckland convention centre, said today "constructive discussions" were continuing. The centre, originally expected to cost $402 million, is now estimated to cost $470 million to $530 million.

The company said a higher New Zealand dollar over the period had dented its Australian earnings.