SKYCITY shares opened at NZ$3.83 this morning four percent down on its peak price for the year of NZ$3.99 on Tuesday the day after releasing a weaker net result than the market expected.
The company’s net profit for the year was $82.2 million (US$54.5 million) down over $10 million from the same period the previous year, despite its reporting an increase in normalized earnings and an increased normalized profit – both up by about eleven percent.
One analyst said today that the result was of “lower quality” than the market was expecting. This was because of a combination of factors revealed in the results announcement.
The company has been trying to talk up its prospects prior to the half-year results announcement with a statement to the NZX on 29 January that it expected to report better “than-expected growth in normalized earnings” for the period to 31 December 2018 “primarily due to a favorable performance in Auckland and strong growth in the International Business.”
As a result, the company’s share price rose 5.3 percent between 29 January and 13 February, but fell yesterday after it reported a lower net profit, and was expecting “challenging economic conditions” in the second half year with trading slightly below expectations.
The opening of the company’s much-vaunted International Convention Centre has been put back a further six months (on top of earlier delays) after the company decided to remove flammable cladding similar to that used in the Grenfell Tower in London. That will cost $25 million.
SKYCITY is also spending $50 million ($33 million) to buy back up to five percent of its own shares (which if completed would costs a total of $130 million) and is considering a return of capital to shareholders once the sale of its casino in Darwin and of car parking rights in Adelaide and Auckland are completed. (Total gains from asset sales would be approximately $420 million.
The company has bought land for a luxury hotel development in Queenstown and is currently looking for a hotel partner. The lease on one of its two casino premises in Queenstown is due to expire soon, and the other property is not favored for further development.
S&P Global Ratings has said it is satisfied that if these transactions proceed SKYCITY will be able to maintain its current BBB- rating.