Sky City winner - and loser

By SIMON HENDERY

Casino operator Sky City had a day of wins and losses yesterday.

It announced a record profit - only to see its share price fall amid concern about its investment in troubled Force Corporation and its decision not to announce a share split.

The healthy profit was sweetened by the company's winning the supreme award in the annual New Zealand Tourism Awards.

But on the same day, Sky City also had to face a four-hour strike by staff, who marched noisily around the Auckland casino complaining about "basement wages".

Sky's June full-year profit, after non-recurring items, was $68.3 million, up from $60.3 million last year.

A one-off $1.8 million settlement with Inland Revenue, over a dispute about deductibility of expenses incurred before the Auckland casino opened in 1996, boosted this year's profit to $70.1 million.

The company reiterated that it was committed to its 50.2 per cent investment in cinema and property company Force Corporation, which yesterday announced a $47 million full-year loss after being hit by a troubled joint-venture investment in Argentina.

Sky City managing director Evan Davies, who also chairs the Force board, said that despite uncertainty over its Argentinian investment, Force's New Zealand operations were trading well.

Although some analysts believe Sky City should cut its losses and refuse to spend any more money bailing out Force, Mr Davies said Sky still saw potential synergies between the companies.

It intends underwriting a $30 million capital-raising deal by Force provided certain criteria are met.

Mr Davies said the level of concern in the market over the Force investment was not justified given the small size of the business, relative to Sky City.

While commentators had speculated that Sky would use yesterday's announcement to unveil a share split - taking the stock's value back below the psychologically significant $10 barrier - Mr Davies said a split was not on the cards, although it remained an option.

Of Sky City's record result, Mr Davies said the company had managed to achieve earnings growth at the same time as it expanded its operations.

During the year Sky City spent $A15 million ($18.3 million) revamping its newly acquired Adelaide casino, opened Queenstown's second casino, began building a $53 million casino complex in Hamilton, bought into Force and lifted its stake in Australian bookmaker Canbet.

"We expect the benefits of Sky City's expansion to be realised this financial year and beyond as we begin to generate additional revenues and earnings from businesses like SkyCity Adelaide," Mr Davies said.

The group's total revenue increased 49 per cent during the year to $437 million, $318 million of which came from the Auckland casino, hotel and entertainment operation.

The mainstay of the business, gambling income from Auckland, continued to be a winner. Table game revenue was up 14 per cent and poker Machine revenue up 8 per cent.

Sky Alpine Queenstown Casino generated $3 million in revenue in its first seven months, but this was "significantly below expectations". The company was seeking ways to improve profitability, Mr Davies said.

This financial year would be one of consolidation for the group, he said.

It would restructure and integrate Force into its operation, complete the Hamilton casino and begin building a conference centre across the road from its Auckland complex.

The company this month gained Casino Control Authority approval to open a new gaming floor at the Auckland casino.

Sky City shareholders will receive an end-of-year dividend of 35c on October 5, taking the company's full-year dividend payout to 63c, up from 56c last year.

Sky City shares dropped 30c shortly after the result announcement, but rallied during the day to close 5c down at $11.05.