August 7, 2018 / 9:44 PM / 14 days ago

UPDATE 2-NZ's SkyCity posts record FY profit as Chinese betters splurge

* FY18 net profit driven by recovery international business

* Forecasts slightly lower profit in FY19 due to higher tax burden

* To focus on catering to Chinese clients - CEO (Recasts, adds CEO comments, updates stock)

By Charlotte Greenfield

Aug 8 (Reuters) - New Zealand casino operator SkyCity Entertainment Group posted a record underlying profit in the 2018 financial year on Wednesday, spurred by a rebound in its international business and renewed focus on its Chinese clients.

The Auckland-headquartered firm’s normalized net profit for the year ended June 30 was NZ$169.9 million ($114.43 million), up 10 percent from NZ$153.8 million in the previous year. Revenue (excluding GST) rose nearly 7 percent to NZ$998.6 million.

Shares in Sky City closed 2.5 percent higher at an almost one-month high of NZ$4.09.

Turnover in the company’s international business jumped 39.2 percent, recovering from the chill cast over the industry the previous year by a crackdown by Beijing on casino marketing and capital ouflows.

“I think there’s a bit of a rising tide. More Chinese traveling, more in the casinos generally,” said Chief Executive Graeme Stephens in an interview, adding that SkyCity had also focused on using more junket operators to draw in clients.

Stephens said the company was increasingly focused on catering to its Chinese clients, both in its dedicated international business as well as its hospitality and general casino operations.

The firm was ramping up its use of Chinese language, as well the ability to use of Chinese apps for translation and payment at its facilites.

“We think it’s a market that’s going to do more and more for us over the years so we’re tailoring a lot...to make sure we’ve got relevant offerings,” said Stephens.

He added that rising trade tensions and the looming possibility of a slowdown in China’s economy was on his radar bit he did not think it was a significant risk to SkyCity.

“There are a lot of wealthy Chinese, a lot of them are still going to travel, New Zealand is still growing in popularity,” said Stephens.

SkyCity expects to achieve modest growth in normalised core earnings in 2019 financial year, driven by likely growth in Auckland and its international business.

However, due to an increase in the effective tax rate, the casino operator expects underlying group net profit after tax to be slightly lower than in 2018.

INTERNATIONAL CONVENTION CENTRE

The construction of SkyCity’s International Convention Centre was still on track to be completed by the end of 2019 as flagged earlier in the year, Stephens said, though any bad weather could see the end date pushed back.

The convention centre is one of two major Fletcher Building Ltd projects where delays and cost over-runs have hurt New Zealand’s biggest builder, and losses from the jobs prompted it to wind down its commercial construction unit.

Stephens said that SkyCity was “comfortable with the contractual arrangements” but that the firm wanted to signal to investors that there was a “reasonable prosect” of litigation or settlements over the contract.

“The chances of it being clean-cut are probably quite remote...(we’ve) got a partner in this who’s clearly losing a lot of money so they’re going to have to do everything they can and we’ll have to make sure that we’re loking after our interets.”

Fletcher did not immediately respond to a request for comment. ($1 = 1.4848 New Zealand dollars) (Reporting by Charlotte Greenfield in WELLINGTON and Aditya Soni in BENGALURU; Editing by Tom Brown and Gopakumar Warrier)

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