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SkyCity posts flat annual profit

New Zealand hotel and casino operator SkyCity Entertainment Group has reported flat normalised earnings and profit in full year financial results released on Wednesday.

However the company is emphasising that its major construction projects in Auckland and Adelaide are coming to an end in calendar 2020 and improved earnings will result from lower capex and continuing tight control of costs.

Chief Executive Graeme Stephens told AGB that after those projects were completed the company “would reposition to a new normal with a likely 5 percent after tax yield at the current share price.”

Normalised profit after tax (NPAT) in the year to June rose by 1.9 percent to $173 million (USD112 million) and EBITDA was up just 1.3 percent to $342.7 million ($223 million) as the company reported “a more challenging operating environment and one-off impacts to its profitability.”

Local media have focused on the reported profit result which dropped 14.7 per cent to NZ$146.6 million ($95 million) and the 4 percent drop in EBITDA  to $298 million ($194 million) due to the sale of the Darwin casino during the year and a lower win rate in International Business.

Normalised revenue was $1.119 million, up 1.6 percent with normalised net profit of $173 million up 1.9 percent.  Normalised earnings per share were steady at 25.6cps (25.4cps in the previous year.)

Turnover in International Business reached $14.1 billion, a record for the company and up 18.9 percent on the previous year, although the win rate was just 1.0 percent compared to a theoretical rate of 1.35 percent which had contributed to lower reported profits.

Chief Executive Graeme Stephens called it a solid result. “We have continued the positive momentum of the last couple of years and our operating results were slightly ahead of expectations.”

He noted that the success was still largely a New Zealand story. “Our combined New Zealand properties grew their earnings by 2.5 percent during FY19 while EBITDA in Adelaide was down 6.8 percent to disruption from building works on the site.

The sale of the Darwin casino and the sale of the concession on the company’s main site car parks in Auckland had released around NZ$450 million, which the company will use to repay debt and fund on market share buy backs.

SkyCity is maintaining a final dividend of 10cps taking the total dividend to 20cps, the same as in previous years.

Company shares listed on the NZX closed yesterday at $3.97 down four cents on the previous day’s close.

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