SkyCity posts record profit on VIP action

TAGs: Australia, New Zealand, skycity entertainment group

skycity-record-profitsCasino operator SkyCity Entertainment Group posted double-digit profit gains in its most recent fiscal year thanks to another record performance at its Auckland property.

For the 12 months ending June 30, SkyCity reported revenue rising 9% to NZD 1.1b (US $790.5m), earnings up 8% to $334m and net profit after tax up 13% to a record $145.7m. SkyCity operates four casinos in New Zealand and two in Australia.

SkyCity breaks out its so-called International Business (IB) aka Asian high rollers as separate figures from its individual property results, and last year’s IB was a record-breaker. Group-wide turnover was up nearly one-third to $12.4b and average win rate improved 0.13 points to 1.49%, better than the company’s theoretical win rate of 1.35%.

So-called ‘normalized’ IB earnings – so named because they smooth out the wild variables so prevalent in the VIP gambling game – were up 26.6% to $33.5m. The figures would have been even more stellar but for marginally higher commissions and higher bad debt provisions.

The company’s flagship Auckland property turned in a record performance for the second straight year, with revenue (IB not included) up 7% to $557.5m and earnings up 10% to $251m thanks to strong gains in its gaming machines business. The property has now turned in 10 consecutive quarters of year-on-year earnings growth.

SkyCity Hamilton also enjoyed solid gaming revenue growth, while the two Queenstown properties had a record year thanks to “significant” IB growth and better cost controls.

In Australia, the Adelaide property managed to post a 19% earnings gain despite a 1% revenue decline. But while the IB business was healthy, local gaming revenue fell 4.3% and boosting local appeal will be a key focus for the coming fiscal year.

SkyCity Darwin continues to struggle, with local gaming revenue soft and weaker demand in the hotel, food and beverage categories.

SkyCity’s interim CEO John Mortensen celebrated a successful FY16, which would have been even more successful were it not for a spate of reduced activity in May and June to close out the year. The company expects its New Zealand properties will continue to shine in FY17, while predicting continued struggles in Australia.

The planned $300m expansion of the Adelaide casino is expected to begin main construction works in H2 2017 with a targeted completion date of early 2020.


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