Casino and gaming/entertainment operator SKYCITY Entertainment Group Limited (ASX: SKC) reported a 4.6% drop in FY2014 first-half revenue to NZ$465.1 million compared to first-half 2013's NZ$487.3 million. Reported NPAT was NZ$61.1 million, down by 7.8% from NZ$66.3 million.
Casino performance
International business began to soften from Q2 2014 due to the timing of visits, though it is expected to show growth in Q3 2014.
Auckland casino, which has the largest revenue of all the company casinos both in Australia and New Zealand, had a 2.2% dip in half-year revenue to NZ$258 million compared to the prior corresponding period. Renovations and upgrades at the casino were said to have disrupted H1 non-gaming revenues.
Overall, the New Zealand casino's revenue was NZ$290 million, down 2.0% for the half year compared to the pcp.
The two casinos in Australia, Darwin and Adelaide, both saw gains, yet when combined their half-year revenue was only up 1.1% to NZ$199.5 million. A $350 million refurbishment of the Adelaide casino is ongoing, disrupting gaming, but international visitors numbers have been improving.
Weakening Aussie dollar
Another factor in lowering reported NPAT was the weakening of the Aussie dollar, which had a 13% change between H1 2013 exchange rates. Normalised NPAT was down by approximately NZ$2.4 million when Aussie dollar revenues were translated into NZ$ for reporting.
Index addition and financials
The company was added to the S&P ASX 200 Index (ASX: ^XJO) in December, an advance that investors know will give it more exposure to financial institutions and investment funds that have limitations on purchasing stocks outside of that index.
Looking back at past performance, over the past five years NPAT before abnormals has grown steadily each year, with a compound annual growth rate of 5.8%. Gross gearing is about 75%, but comparing the $518.2 million of long-term debt it had at 30 June 2013 with FY2013's $114.8 million NPAT, it's under five times, so it's not at such a concerning level as long as earnings are stable and growing.
Foolish takeaway
The casino and integrated resorts industry has seen some changes recently with the planned development of a second gambling venue in Sydney from Crown Resorts Ltd (ASX: CWN) and the QLD state government proposing to create new casino licenses as well as calling for the creation of a world-class integrated entertainment venue along the Brisbane River in the Brisbane CBD.
