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UPDATE 2-SkyCity H1 profit slips as fewer Asian high-rollers visit
February 8, 2017 / 10:25 PM / 10 months ago

UPDATE 2-SkyCity H1 profit slips as fewer Asian high-rollers visit

* H1 underlying profit down 2 pct to NZ$83.7 mln

* International business revenue slumps 39 pct

* Revenues hit by fewer VIP customers, China crackdown

* Shares up 4 pct on strong growth in Auckland (Adds analyst comment, shares)

By Swati Pandey

SYDNEY, Feb 9 (Reuters) - New Zealand casino operator SkyCity Entertainment Group Ltd said on Thursday underlying profit for the first half slipped 2 percent and revenues from international business suffered following a crackdown on gaming by China.

Normalised or underlying profit fell to NZ$83.7 million ($60.9 million) for the six months-ended Dec. 31 while revenues dropped over 6 percent to NZ$525.8 million, dragged lower by its international business.

International high-roller business revenue slumped nearly 39 percent to NZ$4.4 billion and activity is expected to be weaker in the second half as well “due to fewer visits from larger customers and recent developments in China,” the company said.

Eighteen employees of Australian rival Crown Resorts were detained for several days by Chinese authorities for alleged gambling crimes late last year.

No charges were laid against them, but the detentions also hurt SkyCity’s ability to attract Asian high-rollers who had been behind the casino’s recent strong performance.

SkyCity, which has six casinos in five locations in New Zealand and Australia, does not have an office in China or any China-based employees. However, it does engage independent contractors in China who help manage customer relationships.

Typically, about half of its total group turnover in the international business is from Chinese customers.

The company’s business in Queenstown, renowned for its picturesque location set against the dramatic Southern Alps, suffered a more than 7 percent fall in total revenues.

The casino company got some respite from “solid growth” in its domestic properties, with Auckland improving significantly due to both higher footfalls and customer spend per visit.

Shares in the company have already lost more than 7 percent of their value so far this year on concerns about SkyCity’s ability to lure Chinese high-rollers.

On Thursday, they were up about 4 percent at NZ$3.89 each.

“The underlying Auckland business, which is their real driver, had a pretty strong second quarter which was a bit of a relief for investors,” said Jeremy Simpson, analyst at Forsyth Barr.

“Although for the second half, growth is expected to be modest.”

Sky City owns and operates casinos, restaurants, hotels and convention centres in Auckland, Hamilton and Queenstown in New Zealand and in Adelaide and Darwin in Australia.

Until recently, dairy was the backbone of New Zealand’s economy, representing about 25 percent of exports. But dairy prices have dropped sharply due to China’s economic slowdown and global oversupply. Tourism, meanwhile, has continued to grow strongly.

$1 = 1.3772 New Zealand dollars Reporting by Swati Pandey; Editing by Lisa Shumaker and Stephen Coates

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