Lucky high rollers hit bottom line
High-rolling gamblers who can win or lose $7 million to $8m at a time helped to take the shine off SkyCity Entertainment Group's profit for the first half of the 2013 financial year.
But the casino operator says while it may have been "less lucky" in the six-month period, it saw growth in its core businesses, and the result was satisfactory given that 2012 was a tough act to follow.
SkyCity announced a net profit of $66.3m for the six months to December, down 15 per cent on the same time the previous year when the country played host to the Rugby World Cup.
Reported revenue was $487.3m, down 1.3 per cent on last year.
However, if greater than average losses in its high rollers Horizon business in Auckland and Darwin were taken out, the company made a normalised net profit of $74.4m for the period, down 3.5 per cent. Normalised revenue was $495.7m, up 1.4 per cent.
Horizon had a theoretical win rate of 1.06 per cent in the half-year, compared with 1.64 per cent in the previous corresponding period, resulting in a difference of $8.4m. The average is 1.35 per cent.
"With the size of bets we take you're not always going to get that theoretical average over a six-month period," chief executive Nigel Morrison said. Horizon clients were high net worth individuals who mostly played the card game Baccarat. "You might be surprised that they are very relaxed about losing $7m to $8m."
The company did not book higher than average wins, and "conversely when we're unlucky we prefer not to book those losses. That's why we normalise our results," he said.
SkyCity also pointed out that if the $4.7m benefit from the Rugby World Cup on the 2012 interim result were taken out, the latest normalised $74.4m profit figure would represent a lift of 2.9 per cent.
The company said highlights for the year included a 72 per cent rise in turnover in the Horizon business to $2.9 billion.
It had also opened its new Lagoon Resort, Spa and Horizon business in Darwin, where it saw a 13.4 per cent growth in normalised revenue.
The Australian economy generally was challenging and revenues at its Adelaide business were flat for the period, it said. In December, SkyCity reached a deal with the South Australian Government for a $350m redevelopment of the Adelaide Casino, involving a six-star hotel, bars, restaurants and retail, and VIP areas, including Horizon suites and salons.
In New Zealand, it acquired the remaining 40 per cent of the Queenstown casino it did not already own, and sold its 50 per cent interest in Christchurch Casinos.
SKYCITY ANXIOUS FOR CONVENTION CENTRE RULING
SkyCity chief executive Nigel Morrison says the company needs to hear soon whether it will get the nod to build a controversial national convention centre in Auckland.
The casino operator said yesterday it remained willing to invest up to $350 million in the New Zealand International Convention Centre, and was happy to wait for the auditor-general's report into the Government's initial call for expressions of interest in the project.
SkyCity has proposed building the convention centre in return for more poker machines in its casino and an extension of its gambling licences.
Auditor-General Lyn Provost launched an investigation in June into the Government's decision to choose SkyCity over other bidders. The Government has seen a draft of the report but a final release date has yet to be set.
Morrison said the company hoped the report would be out within the next month, and that it would get an answer on the project by the end of the year.
In the meantime it was paying interest on the purchase of land banked for the convention centre, plus other costs. "We just can't sit here; it's costing us the best part of $5m a year."