Sky City today reported its full year results to 30 June with normalised earnings (ie adjusted for non-recurring items and with International business set to the theoretical win rate) of $141.4m – up 8% on the prior period. The final dividend was set at 8cps at the top end of the 60-70% of NPAT pay-out range and it will be 60% imputed but there is no dividend reinvestment scheme. The balance sheet appears strong with net debt back to $659m, considerably less than levels in the recent past and the company’s debt rating has been reconfirmed at investment grade of BBB-.
While Sky City’s other operations including those in Darwin and Adelaide in particular, are trading relatively well the outcome of the Auditor General’s Report on the tender process for the National Convention Centre (NCC) is clearly a looming cloud. This report is due in the next 1-2 months and the concessions that the company is seeking will be much in focus. While Sky City is prepared to commit funds in the order of $350m to the new NCC, the offset of seeking an early renewal of their gaming license beyond 2021, more gaming product and various changes to the regulations will become increasingly political. There is little doubt that the possible outcomes of this process have caused investors to be wary.
The first few weeks of the new financial year have begun satisfactorily for the company despite consumers continuing to be under pressure. The next update from the company will be at the annual meeting on 19th October and a key focus will be a progress update on the NCC. A favourable outcome for Sky City will improve investor sentiment.
Disclosure of Interest: Milford holds shares in Sky City on behalf of clients.