Sky City profits boosted by Adelaide growth in year of two halves

Photo / The Aucklander

Strong growth from its Adelaide operations, along with an improved second half overall, helped Sky City Entertainment Group lift underlying full year net profit 13 percent to $115.3 million.

Chief executive Nigel Morrison said the performance of the Adelaide casino was mainly responsible for driving growth in revenue from Sky City's Australian casinos division, while revenue from New Zealand casinos was broadly flat.

"It's been a year for us of what I'd call back to basics," Morrison said in comments today on the result for the year to the end of June.

"We've had a significant tale of two halves."

The bottom line rise in the company's net profit was 131 percent, which included a $58.4m write down in the cinemas division for the 2008 financial year. Full year revenue was up 4.4 percent to $846.5m.

Morrison said shareholder risk had been diversified.

Ebitda (earnings before interest, tax, depreciation and amortisation) from Australian operations rose 20.3 percent in New Zealand dollar terms to $85.2m, while Auckland casino ebitda slipped 0.5 percent to $207.3m.

In Australian dollars, Adelaide casino's contribution lifted 42 percent to $A29.4m.

Auckland's performance was better in the second half, with ebitda lifting 4.6 percent from the second half of the previous year to $105.2m.

That increase was mainly driven by strong table games results and a focus on cost management, Mr Morrison said.

At the same time, Adelaide's ebitda gained 74.7 percent to $A15.2m.

Sky City was disappointed at not being able to increase its revenue from gaming machines in Auckland during the year, Morrison said.

Auckland gaming machine revenue was flat in the second half after contracting 3 percent in the first half. For the country as a whole, pokie revenue was down 5.2 percent for the year.

Increasing gaming machine revenue remained a core focus, said Morrison .

Challenging economic and tourism markets in New Zealand had made it difficult to increase earnings from the company's hotels and tourism-related businesses in Auckland, despite significantly increased occupancies in its 660 hotel rooms.

New Zealand Funds Management analyst Nick Dravitzki said Sky City's value mainly resided in the performance of the Auckland gaming floor, and once again it was pretty unimpressive.

The machines were a fixed installed cost and incremental revenue should drop to the bottom line, said Dravitzki.

With Sky City now facing the additional hurdle of pop-up information screens on all its gaming machines, it was hard to have confidence a turnaround in pokie performance was imminent.

While Adelaide had performed well, presumably driven by Australian government stimulus, if the stock traded up on the back of that it would be a case of the tail wagging the dog.

In April and May, Sky City raised $228m in new equity, while since the end of June 2008 it had retired $306m of debt.

Net debt was down 29 percent from $960m in June 2008 to $681m, while gross debt due within three years was down 31 percent to $581m.

Cinema ebitda rose 45.8 percent to $7m in the latest year.

Sky City shares were up 9c to $3.39 in mid-afternoon trading, having ranged between $2.52 and $3.85 in the past year.

- NZPA