Operator News
New Zealand – Investigation over junkets creating uncertain times for SkyCity
By Phil - 14 August 2019
SkyCity Chief Executive Graeme Stephens has said the current level of uncertainty in Australia over junkets could filter through to New Zealand as legislators look to crack down on alleged misdemeanours by Australian operator Crown in the battle to win lucrative VIP gaming spend.
“We’re not quite sure what’s going to happen in the world of junkets,” he said. “It’s difficult to ignore the media and related responses in the case of Crown over the last few weeks. We’re not sure what that means for us, so that’s added another layer of uncertainty in a world which is inherently difficult to predict.”
Ironically it was lucky VIPs that dampened the company’s 12 month results to June 30. Whilst the company’s international VIP business was up 18 per cent, reaching a record $14.1bn, win rate came in at one per cent down from 1.32 per cent last year. As VIP players continued to win they were also convinced to keep on playing. Mr. Stephens said he was pleased with where SkyCity finished FY19, which was a positive year for the company despite a backdrop of a more challenging operating environment and some increased cost pressures across the business.
“SkyCity completed the financial year continuing the positive momentum we’ve managed to build over the last couple of years and our operating results were slightly ahead of expectations. When you adjust for the sale of our Darwin property and legislative changes increasing our effective tax rate, normalised NPAT for FY19 was up 7.5 per cent relative to the previous corresponding period.
“Our combined New Zealand properties grew their earnings by 2.5 per cent during FY19, while our International Business had a good year, achieving turnover of $14.1bn.”
“The successful sale of both Darwin and a long-term concession over our main site car parks in Auckland will release around $450m, which will allow us to repay debt and return some capital to shareholders via a share buy-back. We will continue with our share buy-back until the end of 2019 with Board approval to acquire up to five per cent of total shares on the NZX,” Mr Stephens said.
SkyCity Auckland achieved record EBITDA in FY19 of $267.9m up 2.8 per cent on the prior year. Gaming revenue was up five per cent driven by strong performance in gaming machines and increased casino visitation.
SkyCity Hamilton experienced flat earnings of $26.9m, off a record previous corresponding period, with solid electronic gaming machine (EGM) performance and improved food and beverage contribution. Hamilton remains capacity constrained, with insufficient EGMs during peak periods limiting our ability to sustain the above-trend growth achieved over previous periods. SkyCity has an application with the Gambling Commission to replace three blackjack tables for 60 EGMs in Hamilton. A public hearing to consider this application is due for November 2019.
Mr Stephens said SkyCity continues to evaluate the potential for further development opportunities in both Hamilton and Queenstown. “We own undeveloped freehold land in Hamilton adjacent to our casino which could accommodate an hotel. We are keen to invest more in the Waikato region, but we still have work to do to ensure the project is feasible for the business and acceptable to SkyCity shareholders,’’ Mr Stephens says.
SkyCity’s combined Queenstown properties grew earnings by 12.5 per cent to $2.3m driven by increased visits from local premium customers.
“We have acquired a hectare of lakefront land with panoramic views of the Remarkables and Lake Wakatipu,” says Mr Stephens. “Premium accommodation in Queenstown remains undersupplied despite the prominence of high-value tourists − a significant opportunity exists for SkyCity to provide an integrated gaming/lodging offering for VIP/premium customers given the popularity of the location. However, our plans ultimately hinge on getting the required regulatory change.’’
