SkyCity Auckland was the brightest star in the sky for the casino operator in first-half trading to December, outshining a disappointing performance by its VIP segment in Australia.
The casino operator’s net profit for the six months ending in December was $83.8 million, that’s up 18 per cent on last year’s record $71 million.
SkyCity Auckland, which accounts for the lion’s share of the company’s profits, was up 12 percent in the second quarter, as the New Zealand company reaped the reward from record tourism levels in the country.
It’s also enjoying concessions granted by the government for its efforts in building a convention centre in the city.
The company said at an earnings call last week that the New Zealand International Conference Centre and Hobson St hotel projects were both on schedule to be completed at the beginning of 2019.
VIP Segment Disappoints
“The main drivers of the first half performance were solid growth in our combined New Zealand properties, with Auckland trading improving significantly in 2017 the second quarter,” said the company in an official statement.
“SkyCity Auckland, which accounted for approximately 80 per cent of group ebitda in the interim period, is expected to continue to deliver modest growth during the second half of the 2017 financial year on the previous corresponding period, driven by favourable macroeconomic drivers, new major events and ongoing initiatives to drive visitation.”
Australian properties, however, underperformed, which the company blamed on challenging trading conditions in Darwin and a weakened Australian dollar, as well as the anti-corruption crackdown in Beijing.
Turnover in the high roller business was down 39 percent to $4.4 billion, suggesting that recent developments in China have taken their toll.
The Australian casino sector may have initially been a benefactor of Chinese President Xi Jinping’s anti-corruption drive, launched in 2014. Concerned about capital flight and the amount of corrupt Communist Party officials laundering their ill-gotten gains through Macau and its junket operators, Jinping sought to smash the junket industry and severely limit the cash flow into the gambling hub.
Macau’s loss was Australia’s gain, but a subsequent slowing of the Chinese economy, the devaluing of the yuan and restrictions on transferring funds imposed by Beijing on its citizens have contributed to the demise of the early boom in VIP play.
Meanwhile, the arrest in China, in October, of 18 Crown Resorts employees accused of marketing the the company’s services to Chinese high-rollers, has resulted in antipodean casino operators stepping back pursuing marketing efforts to China directly.
The company says it expects second-half activity to be weaker in its international business due to reduced visits VIP customers, although trading had been favourable over the Chinese New Year period.