The SKYCITY Entertainment Group Limited (ASX: SKC) share price will be on watch on Friday after the accommodation and casino operator reported its first-half FY 2018 results.
On the top line SKYCITY Entertainment posted reported revenue of NZ$554.7 million for the first-half, a 4% increase compared to the prior corresponding period. Normalised revenue came in at NZ$545 million, up 3.6% on the H1 FY 2017.
Normalised revenue sets the International Business (IB) win rate to a theoretical win rate of 1.35%, whereas the company achieved an IB win rate of 1.55% during the half.
The main driver of this growth was the SKYCITY Auckland business and its IB segment. In the first-half SKYCITY Auckland delivered a 2.1% increase in total revenue to NZ$289.9 million and the IB segment achieved total normalised revenue of NZ$64.8 million, up 9.4% on the first-half of FY 2017. Elsewhere, all of the company's other sites posted revenue growth except for SKYCITY Darwin which saw revenue fall 0.4% to A$62 million due to competitive pressures.
Thanks largely to cost efficiencies and operating leverage, the company reported a 6.8% increase in earnings before interest, tax, depreciation, and amortisation (EBITDA) to NZ$180.6 million and an 11.6% jump in reported net profit after tax to NZ$93.5 million. This ultimately led to earnings per share coming in at 13.9 New Zealand cents.
Once again, the main driver of this profit growth was SKYCITY Auckland. It posted earnings before interest and tax of $105.8 million during the half, up 4.8% on the record prior corresponding period. According to management, marketing and promotional initiatives helped offset the impact of reduced premium gaming activity in the second-quarter and the required changes to its smoking decks.
Outlook.
Looking ahead, management believes the company is on-track to deliver modest growth in EBITDA in FY 2018. It has pointed to growth in combined NZ properties, improved performance in combined Australian properties, and on-going recovery in IB as the key drivers of second-half growth. In respect to the latter, management has indicated that forward bookings for the Chinese New Year period have been positive and it continues to target NZ$10 billion in segment turnover for FY 2018.
Should you invest?
I think this was a reasonably solid result from SKYCITY Entertainment and could make it well worth a closer look alongside other tourism-themed shares such as Star Entertainment Group Ltd (ASX: SGR), Sealink Travel Group Ltd (ASX: SLK), and Crown Resorts Ltd (ASX: CWN).
