Skycity Entertainment Group Ltd (ASX: SKC) reported its half-year results for the period ending 31st December 2018 this morning. Normalised earnings matched earlier guidance, but there is more to the story…
Skycity is a casino and entertainment provider with complexes in Auckland, Hamilton, Queenstown and Adelaide. At some or all of these locations it also has hotels, restaurants, bars and conference facilities. On the ASX, Skycity’s key peer is Crown Resorts Ltd (ASX: CWN), the casino and gaming operator.
The 5 Key Points
- Reported revenue grew 1% to NZ$460.2 million
- Reported profit after tax fell 18.9% to NZ$68.8 million
- Normalised revenue grew 10.9% to NZ$598 million
- Normalised net profit grew 11.4% to NZ$97 million
- Reported earnings per share fell 11.5%
Normalised or Reported?
The difference in Skycity’s normalised and reported figures is a result of the actual win rate versus the expected win rate in the International Business sector. The expected win rate amongst punters was 1.35%, versus an actual win rate of 0.98% for 1H19.
Normalised profits are the assumed profits from the expected win rate, but the reported figures are the ones that really matter to investors. These are the profits that shareholders, as owners of the company, have a claim to.
Dividend
SkyCity announced an interim dividend of NZ$0.10 per share, with a payment date of 15th March 2019.
Skycity’s Outlook
Skycity says they are expecting “significant capital” to be received from asset sales during FY19, leading to a large cash surplus. They also noted they are evaluating future growth investments in Auckland, Hamilton and Queenstown. However, their Darwin operation has officially been treated as a discontinued operation since 8th November 2018.
Investors should note that share buy-backs are being planned for up to 5% of total shares during 2019. So far in the second half of its 2019 financial year Skycity advised it has had a slow start, with year-to-date trading below expectations.
There are growth opportunities for Skycity to pursue but for me, it’s too cyclical. Results from 1H19 are likely to disappoint investors.
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