Blockbuster boosts profit for SkyCity

Avatar helped raise SkyCity's cinema revenue by 164 per cent. Photo / Supplied

Capturing the revenue of blockbuster film Avatar was a boon for SkyCity Entertainment Group, which yesterday announced the Overseas Investment Office had consented to the sale settlement of its cinemas to Australian firm Amalgamated Holdings.

Cinema revenue was up 164 per cent on the previous half year to $6.6 million in first-half results released by the company yesterday.

The company said the sale settlement would go ahead tomorrow, and the sale of the cinemas, to be concluded by June 30, would contribute a $10 million gain to SkyCity's second-half result.

SkyCity chief executive Nigel Morrison, speaking at yesterday's results release, said the company was fortunate to capture the spike in revenue Avatar provided, just before the sale of its cinemas.

When asked if the company now regretted the decision to sell its cinemas, he said: "It's tough, and it's a fun business and they are great movies ... and 3D adds a whole new sizzle to the movie business."

But Morrison said Avatar was a one-in-10-year phenomenon.

He said cinemas were a challenging business to turn a profit from, and SkyCity and its shareholders were happy to be out of the movie game.

"It's a great business for the landlords," Morrison said.

SkyCity's results for the six months to December 31 saw net profit up 29.6 per cent to $71 million. Normalised net profit after tax was $68.4 million - up 23 per cent on the first half of last year.

Morrison said growth in New Zealand casinos had been "amazingly flat" - up by only 0.2 per cent.

"The economic environment in New Zealand remains challenging with increasing unemployment, a further contraction in pub and club gaming by 5 per cent compared to the same period last year, together with the first full period of PIDs implementation on all gaming machines in New Zealand," he said.

Player Information Systems (PIDs) were a requirement of the Labour Government's 2003 Gambling Act. A screen pops up every 25 to 30 minutes to remind gamblers how much time they have spent on a machine.

Morrison said the implementation of PIDs had cost Sky City over $20 million, and had an impact on the range of games the casinos had available for players.

"But over time this is becoming better and we'll get more of a range of games," he said.

Morrison said the Australian figures showed that the Federal Government's fiscal stimulus plan was no longer having any effect.

"Despite the more difficult economic environment, our Adelaide Casino continued to demonstrate steady revenue growth, up 5.3 per cent across all sectors of the business - machines, tables, and food and beverage."

He said the outlook for the second half of 2010 looked challenging for both SkyCity's Australian and New Zealand businesses.

"I think the view tends to be 2011 when you are going to see a recovery, not really in 2010."

He said SkyCity would focus less on attracting "whales" - international high-rollers who play hands of $150,000 and above - and concentrate more on attracting lesser high-rollers who play up to $100,000 a hand.

International business turnover increased by 18 per cent to $758 million in the latest results.

First NZ Capital analyst Rob Bode said SkyCity's result was solid, and reflected the trends most analysts had been expecting - flat performance in New Zealand and better results from Australia.

He said SkyCity had done well to cope with the effects of a smoking ban in its Darwin casino, while the development of a marble hall in its Adelaide casino looked positive. Gambling was a business that was "relatively resilient" to a recession, Bode said.

SkyCity shares closed up 6c at $3.19 yesterday.