KEY POINTS:
SkyCity Entertainment Group has two bidders interested in its cinema business but a sale is still far from a done deal.
New chief Nigel Morrison yesterday confirmed two parties were at different stages of conducting due diligence but would not be drawn on a timeframe for the potential
sale.
The casino and hotel operator announced plans in May last year to sell off its cinema assets which include 69 SkyCity cinemas, a 67 per cent stake in Village Cinemas Fiji and a 50 per cent stake in Rialto Cinemas.
But the process has been delayed by takeover bids for the entire business and a search for a new CEO following the departure of Evan Davies in June last year.
At its half-year results last month, SkyCity confirmed takeover interest had fallen away and announced a $60 million write-down of its cinema assets to rejuvenate bidding interest. The move values the assets at around $50 million.
Morrison, who is in his third week with SkyCity, would not be drawn on the parties involved but said he agreed with the decision to divulge the value of the cinema assets.
"There was good rational for acquiring those assets several years ago. But as the board has already recognised they are not a core asset for us. Going forward it does make sense to divest that business," he said.
Instead, Morrison will focus his efforts on improving the group's key casino businesses in Auckland, Adelaide and Darwin.
"We have three very good urban monopoly casino licenses. We can run those businesses as well as anybody else can. The view in the financial community is that we haven't done that well. They are looking for us to manage our businesses better. I don't think that is necessarily about redundancies. It's more about making us an entertainment destination."
Morrison said he hoped to win back lost customers, particularly at its flagship Auckland casino, and grow internal revenues over the next 12 to 18 months before looking outside of the business for growth through acquisitions in Australia and Asia.
"Our shareholders have made it very clear we have a lot of work to do on our existing business. But we hope they would then be supportive of us looking to expand."
Morrison said it had already changed the management structure at the group's Adelaide casino - a business it last year considered selling.
He said there was strength in Western Australia coming out of the commodity boom, while the other Australian states were facing a slowdown.
Morrison said economic downturns were difficult for tourism businesses, particularly with the high New Zealand and Australian dollars but he believed SkyCity's entertainment focus would stand it in good stead with the local market.
"There is a softening spend on new homes and cars but people still want to be entertained."
SkyCity closed at $3.77 yesterday, down 11 cents.
NIGEL MORRISON
* Chief executive, SkyCity Entertainment Group.
* Age: 48.
* Born: Melbourne, Australia.
* Salary: $1.3 million plus annual performance incentive of up to $1.2 million and a further $1.2 million a year in share rights as a long-term incentive. Career: February 2007-February 2008 - Group chief financial officer for Galaxy Entertainment Group.
* 2000-2006 - Chief executive officer for Federal Group.
* 1997-2000 - Chief operating officer for Crown Ltd.
* 1993-1997 - Chief financial officer for Crown Ltd.
* Before 1993 - National gaming partner, corporate advisory, Ernst and Young, Australia.
