SkyCity (ASX:SKC) share price climbs despite 33% FY21 profit drop

A fall in profits isn't enough to detract SkyCity investors following its FY21 result…

| More on:
crown casino, casino shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The SkyCity Entertainment Group Limited (ASX: SKC) share price is on the rise in lunchtime trade on Wednesday.

This follows the gaming and entertainment company releasing its FY21 annual report. At the time of writing, SkyCity shares are up 3.34% to $3.09.

SkyCity share price gains despite earnings hit

Here are the highlights from the Group's results:

What happened in FY21 for SkyCity

The SkyCity share price is moving higher on Wednesday after releasing its annual report. Fair warning to any investors planning to peruse its document, it is spread across two parts with a total of 291 pages. As such, it is probably fair to say it is not exactly 'light reading'.

The report shows it was certainly a challenging financial year for the company. Throughout FY2021, SkyCity suffered impacts from restrictions due to the pandemic.

This resulted in the temporary closure of SkyCity Auckland and SkyCity Adelaide. However, conditions improved enough for the company to declare a final dividend payment after having suspended its dividends from FY20.

According to the release, SkyCity pulled in $951.9 million in revenue during the year — representing a 15.4% reduction from FY20.

It appears investors had braced for poorer performance during the period, with the SkyCity share price rising today.

The extent of impacts from closures and the New Zealand International Convention Centre fire are demonstrated by the company's normalised results.

For example, on a normalised basis, SkyCity reported a 36.3% increase to its earnings after adjustments. This compares to a 33.7% fall in earnings without accounting for adjustments.

Furthermore, the board advised it intends to progressively increase dividends over time as earnings grow.

What did management say?

Commenting on the result, the Chair and CEO, Rob Campbell and Michael Ahearne, said:

Despite the ongoing disruption and volatility, SkyCity has maintained a strong financial position over the period, delivered credible operating performance when open and protected the health and wellbeing of our people.

Critically, the SkyCity Board and management team recognise the importance of protecting our casino licences and enhancing our social licence to operate. Moreover, maintaining a strong balance sheet, meeting the interests of all stakeholders and keeping a disciplined allocation of capital to provide appropriate risk-adjusted returns to shareholders over the long term remain key priorities.

Additionally, regarding the company's outlook, management said:

In terms of outlook for FY22, given the current unpredictable operating environment and uncertain near-term outlook due to COVID-19, SkyCity is unable to provide detailed earnings guidance at this time, but this will remain under regular review. Our performance over the next year will be underpinned by the ongoing recovery of local gaming, optimising SkyCity Adelaide post-expansion and robust cost control across all activities

What's next for SkyCity?

As stated by management, SkyCity has not provided guidance for the year ahead due to the pandemic. However, the results discussed the outlook more broadly.

The New Zealand gaming businesses are expected to perform well once there are no restrictions. Meanwhile, businesses with exposure to tourism are expected to experience an ongoing impact.

Furthermore, SkyCity committed to a 60% to 90% payout policy for dividends.

SkyCity share price snapshot

Despite the challenging environment, the SkyCity share price has performed strongly in the past year. At the time of writing, shares have gained 33% over the past 12 months. For context, the S&P/ASX 200 Index (ASX: XJO) gained 22%.

As a result of its solid share price performance, SkyCity now holds a market capitalisation of $2.34 billion.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Successful group of people applauding in a business meeting and looking very happy.
Share Gainers

2 ASX 200 shares rising on big news

What's getting investors excited today? Let's find out.

Read more »

Share Market News

5 things to watch on the ASX 200 on Thursday

It looks set to be a good day for Aussie investors.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares had a day to forget this hump day.

Read more »

A man with arms spread yells as he plunges into a swimming pool.
Share Fallers

BrainChip shares are tanking 11% as an industry titan is scorched

BrainChip's headache could be coming from 15,000 kilometres away.

Read more »

A cute young girl stands with her chest thrust out as she zips up the zip of a shiny pink jacket she is wearing.
BNPL shares

Would you be crazy to buy Zip shares at $2.90?

Zip shares have rocketed 904% in a year. Is it too late to buy?

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them.
52-Week Highs

These 16 ASX 200 shares are hitting new 52-week highs today even as the market sinks

Do you own any of these lucky stocks?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Bapcor, Boss Energy, Challenger, and Rio Tinto shares are falling today

These shares are having a tough time on hump day. Why are investors hitting sell?

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Share Gainers

Why Bank of Queensland, EBR Systems, Evolution Mining, and Peninsula Energy shares are rising

These shares are having a good time on hump day. But why?

Read more »