In morning trade the SKYCITY Entertainment Group Limited (ASX: SKC) share price has pushed higher following the release of its full-year results for FY 2018.
At the time of writing the casino and resorts operator's shares are up 3.5% to $3.76.
What happened in FY 2018?
For the 12 months ended June 30 SKYCITY produced a reported net profit after tax of NZ$169.5 million on revenue of NZ$1,096.8 million. This was a massive 277.9% and 7.3% increase, respectively, on the prior period.
It is worth noting that the significant jump in profit is because last year's reported result included a NZ$95 million impairment of goodwill for its Darwin casino.
On a normalised basis revenue was 7% higher year-on-year at NZ$1,100.8 million and net profit after tax was 10.4% higher at NZ$169.9 million.
As well as excluding one offs like its asset impairment from FY 2017, the normalised result sets its International Business (IB) win to a theoretical win rate of 1.35%. This is supposed to make it easier for investors to compare its year-on-year performance by taking the fluctuations of its IB business out of the equation. The IB win rate was 1.32% in FY 2018, up from 1.27% in FY 2017.
What were the drivers of this result?
A key driver of this solid result was its New Zealand business. The segment grew revenue (excluding IB) by 3.2% and earnings before interest, tax, depreciation, and amortisation (EBITDA) by 4% during the period. Management advised that its Auckland and Hamilton operations both achieved record earnings. Supporting this growth was its Queenstown business which performed well thanks to higher visitation, especially from its premium customers and tourists.
In Australia things were equally positive. Excluding IB, revenue climbed 2.4% and EBITDA rose 5.3%. Its Adelaide casino grew earnings despite construction disruption and its Darwin casino's performance improved after competitive pressures stabilised.
The IB segment had been a major drag on its performance in FY 2017 but pleasingly things improved this year. Normalised revenue rose 7% and normalised EBITDA increased 5.5% to a record high. In addition to this, EBITDA margins increased due to operating efficiencies and low bad debts.
This allowed the board to declare a 10 NZ cents per share final dividend, bringing its full-year dividend to 20 NZ cents. This is in-line with last year's payout.
Should you invest?
I thought that this was a solid result from SKYCITY and I was pleased to see all sides of its business pulling together for once.
Based on its reported earnings per share of 25.3 NZ cents (22.97 Australian cents), SKYCITY's shares are currently changing hands at 16x earnings.
This could make it a good option for investors, especially given that its shares are changing hands at a discount to rivals Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR).
Though, I would still pick gaming machine maker Aristocrat Leisure Limited (ASX: ALL) ahead of them all. I believe its industry leading machines and fast-growing digital business make it one of the best growth shares on the Australian share market.
