SkyCity Entertainment, New Zealand’s largest casino operator, is expecting a substantial drop in profits in the period June to December 2013. The casino group, which operates four casinos in New Zealand as well as two in Australia, has reported to the NZX that it is expecting normalised after-tax profits of between NZ$65 million to NZ$68 million, down NZD$4-7 million on the same period last year.
The fall in profits has been attributed to a substantial rise in the value of the NZD against the AUD, the increase of about 18% thought to be costing the operator around NZD$3 million. The NZD recently reached a five-year high of AUD$92.57 and this, combined with a strengthening of the local economy and a slowdown in Australia, has been reported as impacting significantly on earnings. NZD$1 was buying AUD$0.78 at this time last year.
The group, which is New Zealand’s only listed casino operator, is due to start listing on the S&P-ASX200 index after December 20, 2013, with some analysts suggesting that the NZD and AUD could soon be trading dollar for dollar.
The company has reported that it is expecting a “modest” increase in profits from its flagship Auckland Casino, but that performances elsewhere were predicted to be mixed, the company describing them as “challenging”. SkyCity has said its casino in Hamilton would post “softer” earnings, while its casino in Adelaide is experiencing a difficult trading environment and cost pressures continue to impact on operations in Darwin. SkyCity sold its Christchurch casino in December 2012.
However, CEO Nigel Morrison has painted the situation in a positive light, suggesting that the stronger NZD made the company more attractive to Australian investors. In addition, he said that the company’s proposed $400 million development of the Adelaide Casino had become more affordable.
“We’ve got a significant investment profile planned in South Australia, in Adelaide, where we’re looking at spending AUD$400 million. On one hand that becomes $NZ400 million instead of $NZ440 million, so there’s swings and roundabouts but there’s not much we can do about the currency,” he said.